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Aug 17, 2016 12:39 PMPublication: The Southampton Press

Still No Buyer For Hampton Bays Diner Building One Year After Closure

The Hampton Bays Diner
Aug 17, 2016 12:39 PM

A buyer for the shuttered Hampton Bays Diner building remains elusive more than a year after its former operators were ordered by a bankruptcy court to close the iconic West Montauk Highway restaurant.

Frank and Maria Vlahadamis of Hampton Bays, who ran the diner for 32 years, were forced to close in July 2015 after filing for bankruptcy. The court then demanded that they sell the building—the Vlahadamises own the structure but not the 1.9-acre property on which their diner once stood—in order to settle their debts, which amounted to $1.3 million at the time of their filing.

The building has since been put on the market by Paul Fetscher, president of Great American Brokerage in Long Beach, with an asking price of $1.25 million. Though several businesses, including CVS Pharmacy and the Moriches Bay Diner, have expressed an interest in buying the building, it has not yet been sold, according to Andrew J. Campanelli, of Campanelli and Associates in Merrick, the attorney representing the Vlahadamises.

Real estate experts said they are not surprised that the old diner building has not found a new owner yet, explaining that it is difficult to be successful in the restaurant business in the Hamptons, noting the seasonal nature of the area. But they also point to the unusual circumstances with this particular property, namely how the Vlahadamises own the building but not the land itself, meaning that the future buyer would have to invest $1.25 million in the building and then still pay more than $10,000 a month in rent to a landlord, Thomas Charos of Charos Properties Ltd. in Riverhead.

As part of a unique arrangement when they ran the diner, the Vlahadamises agreed to pay $10,000 a month in rent and also cover 78 percent of the annual property taxes on the property which, six years go, totaled about $17,500. However, that figure more than tripled to $60,000 in 2010—around the same time that the Vlahadamises stopped paying their taxes. According to town records, taxes on the property now total $64,000 per year.

The latest listing for the old diner notes that the buyer of the building can expect to pay “approximately $150,000 net per year” in rent to Mr. Charos—a posting that suggests that the new owner could also be expected to pay a fair share of the escalating property taxes.

Mr. Charos did not return calls seeking comment over the past two weeks.

Tony Cerio, an associate broker at Brown Harris Stevens of the Hamptons in Bridgehampton, said he has never heard of a commercial business being set up this way.

“I’ve heard of that with houses,” said Mr. Cerio, referring to the fact that the owners of the building would still have to pay rent and, possibly, taxes. “But I never heard of it with a commercial property. That’s new to me.”

Mr. Cerio explained that he knows of certain instances in East Hampton Town where a waterfront home might have been built on land that is owned by the town. Still, he said that such arrangements are uncommon, especially with commercial buildings, because the individual owning the building must put a lot at risk.

“Unless you have a really long-term lease, it would be crazy,” Mr. Cerio said of the Hampton Bays Diner situation.

Hal Zwick, a real estate salesman for Town & Country Hamptons in East Hampton Village and who specializes in commercial real estate, also labeled the arrangement between the Vlahadamises and Mr. Charos as odd. In most instances, Mr. Zwick explained, a landlord owns both the land and whatever structure is built on it—and the tenant pays rent. “Usually,” he said, “the land and the building are owned by one person.”

Mr. Cerio also speculated that another reason why the diner building has not been sold yet is because the Vlahadamises are not using a local real estate agent.

“That’s a big mistake that a lot of people do out here,” Mr. Cerio said. “It would be to their benefit to give it to a local agency. Number one, we have the availability to show it. If you think someone is going to come from 100 miles away to show a diner, you are mistaken.”

Great American Brokerage is located about 60 miles west of Hampton Bays and Mr. Fetscher, the company’s president, did not return calls seeking comment this week.

The sudden spike in property taxes could also be to blame for the lack of interest in the property. Mr. Campanelli, the lawyer representing the Vlahadamises, said his clients believe that the town “deliberately” tried to close down the diner by raising taxes on the land, knowing that the Vlahadamises would be asked to cover the difference. He said the town targeted the diner after it started offering a “Hispanic Night” promotion to attract Latinos; town officials counter that the Vlahadamises were cited for illegally transforming their diner into a nightclub without the proper permits.

“The moment they started ‘Hispanic Night’ the town issued violations for everything they could possibly find,” Mr. Campanelli said.

The exchange prompted the Vlahadamises to sue the town in 2008, alleging that it was trying to push them out of business by unfairly raising taxes and issuing unnecessary violations. They are seeking between $6 million and $8 million in damages. A decision on that lawsuit, however, has been stayed until the building is sold and the bankruptcy proceedings closed.

Enzo Morabito, a broker at Douglas Elliman Real Estate in Westhampton Beach, noted that it is harder to sell a restaurant on the East End than any other commercial business, mostly because operators know of the inherent risks that come with opening in a seasonal community.

“It takes a special kind of restaurant to be successful on a year-round basis,” Mr. Morabito said, nodding to the seasonal nature of the East End, where many restaurants still close their doors during the winter months.

“Restaurants are in demand out here, but you need to be more careful because everyone wants to be in the restaurant business in the Hamptons,” Mr. Zwick added. “But half the people don’t have the experience or the finances to do it.”

Although the building has operated as a diner for decades, the future buyer does not have to operate a restaurant from the site. The land is zoned Hampton Bays Highway Business, which allows banks and retail shops in addition to restaurants. The zoning also permits churches, libraries and offices for state-recognized nonprofits.

The property’s prime location—it sits where Flanders Road and Montauk Highway bisect in the hamlet, and a stone’s throw from Sunrise Highway—prompted plenty of interest immediately following the closing of the diner last summer. In the first two months nearly four dozen people visited the site to inspect the property.

But interest has since waned in the building, most likely due to the unusual arrangement. Another obstacle is finding a qualified buyer, according to real estate experts. Mr. Zwick explained that part of his job is to vet potential tenants to make sure they have the experience and finances to survive the first two years as a restaurant, when they will most likely be struggling to survive.

“Everyone has a dream while sitting on their deck and having drinks in July and they say, ‘I want to open a restaurant,’” Mr. Zwick said. “But I always tell them to come back here on a Tuesday in February.”

Still, some still think that a restaurant will eventually replace the Hampton Bays Diner. They note that the hamlet has a good number of restaurants that are open year-round, suggesting that there could be a strong enough following to support a new eatery.

“That’s a perfect example of a town that’s picked up the ball,” Mr. Morabito said of Hampton Bays. “They have more of a year-round population than they do in Westhampton Beach.”

Others remain hopeful that the Vlahadamises will find a buyer soon.

“It’s a shame because that was a really cool landmark,” Mr. Morabito said of the old diner building. “Growing up, whenever you went to the Hamptons, you would stop at the diner.”

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I'd really like to see a Schmidts Market in this spot! We need a nice market in Hampton Bays. I think they would do really well.
By tranquility1985 (25), Hampton Bays on Aug 17, 16 2:03 PM
There was a Schmidt's in Hampton Bays for at least five years. They decided to leave.
By VOS (1241), WHB on Aug 17, 16 3:34 PM
1 member liked this comment
This comment has been removed because it is a duplicate, off-topic or contains inappropriate content.
By HamptonDad (236), Hampton Bays on Aug 17, 16 3:54 PM
I'd love to see a mega Hampton Coffee put in there! It would be awesome!
Mar 10, 19 4:59 PM appended by Peter S
By Peter S (4), Hampton Bays on Aug 17, 16 4:59 PM
Hooters would be nice. The closest one is 40miles away...In Connecticut...:)
By Toma Noku (616), Southampton on Aug 17, 16 5:41 PM
1 member liked this comment
Nurel has been trying to open his already built indoor farmer's market for about a year, schmidts can stay where they are. And it wasn't Hispanic Night that made the Diner a target for violations. It was a murder. And the Hispanic Night is now firmly entrenched at the Dream nightclub, also another notorious murder spot in HB.
By dfree (818), hampton bays on Aug 17, 16 7:02 PM
64K in taxes will scare small business owners away. Another zombie property in HB or we wait for a giant corporation to buy it up. I think town officials need to figure it out soon.
By harbor hound (31), southampton on Aug 17, 16 8:09 PM
Notice they won't allow comments on the below captioned article:

"Southampton Village Sexual Assault And Home Invasion Suspect Faces Indictment"

I posted this before, and 27E took it down as inappropriate. Freedom of the Press, but only for the Press!
By HamptonDad (236), Hampton Bays on Aug 17, 16 9:17 PM
2 members liked this comment
Theres a handful of articles that we cannot comment on. Maybe theres too many nasty comments being made......
By toes in the water (884), southampton on Aug 18, 16 7:49 AM
Mr. Vlahadamis states that he thinks the Town "targeted" him by raising taxes EVERYONE's taxes in Hampton Bays dramatically increased due to the increase in the School Taxes - he wasn't targeted. The Town shifted 1/3 of my total fair market value from my house to the land. Vacant property values are allocated taxes for all services which makes no sense - but certainly not unique to Mr. Vlahadamis. And yes, HamptonDad it is shocking that the Editor not only has taken down comments, but the ability ...more
By HB Proud (889), Hampton Bays on Aug 17, 16 9:46 PM
The building and the property are not worth the asking price. This is what happens when a non local firm represents an owner. The return on investment just inst there after labor day when the crowds leave. It will sit for awhile unitl the price makes it worth the risk of the 6 off season months of little foot traffic.
By North Sea Citizen (568), North Sea on Aug 18, 16 6:39 AM
Sorry Toes in the Water, but "nasty" comments are and should be individually deleted. Mr. Shaw is now cherry picking which articles you can and cannot post to. He warned us that the comments were getting "ugly" as if a sexual assault and a gang attack is pretty. If the Press does not want comments, then just not allow them on any article, but don't cherry pick. I suspect this post will get deleted as soon as he see it.
By HB Proud (889), Hampton Bays on Aug 18, 16 9:18 AM
Okay, so, let me respond to this.

We recently changed our policy to eliminate comments on police stories. There are several reasons for that, but mostly it comes down to the fact that comments regularly violated our commenting policy, typically by going off topic. It also was pointed out that we were being inconsistent in which police stories we were allowing comments on and which we weren't--it was fair criticism. Finally, the comments on police stories are often unfair to those who are ...more
By Joseph Shaw, Executive Editor (206), Hampton Bays on Aug 18, 16 10:17 AM
Well said.
If anything, in my opinion the editors have shown remarkable restraint by often not removing offensive and off-topic comments. Requiring registration for all commentators, complete with address and contact information, would go a long way toward promoting more civilized comments, similar to the requirements for publishing a letter to the editor in the Press each week.

In particular, comments about those arrested or charged with a crime tend to be ...more
By PBR (4956), Southampton on Aug 18, 16 10:31 AM
This comment has been removed because it is a duplicate, off-topic or contains inappropriate content.
By HamptonDad (236), Hampton Bays on Aug 18, 16 7:44 PM
1 member liked this comment
Thank you for clarifying Mr Shaw. You have very good for reason for using your professional discretion regarding the commenting.
By toes in the water (884), southampton on Aug 18, 16 9:00 PM
It's a newspaper. They spend their work life looking for ugliness in order to get eyes onto the adverts. This paper is just lucky because it's more of a real estate advertiser with a few news stories and some letters to fill up some space. This "news" is simply an excuse to make money selling ad space
By even flow (1023), East Hampton on Aug 19, 16 6:24 AM
Mr. Shaw, thank you for your detailed explanation. Maybe your office can send out an email to the subscribers. For some of us, it seemed suspicious that the "tipping" point was the article where many of the comments were directed at the elected officials. Thank you again.
By HB Proud (889), Hampton Bays on Aug 18, 16 11:00 AM
See what a Democrat administrations can do to economic growth? Property taxes in Hampton Bays are insane and confiscatory. Zoning regulations are ridiculous and politically motivated. It is time for people to wake up and get these predators out of office.
By SHPredatorDept (72), Southampton on Aug 18, 16 11:19 AM
1 member liked this comment
Here we go off topic, but the math proves that the economy consistently performs better under Democratic administrations then Republican.

The numbers are undeniable.
By Mr. Z (11847), North Sea on Aug 19, 16 8:30 PM
Sorry, hit "Like" by accident instead of "Reply". The truth is the taxes on this property have little to do with a democrat administration and lots to do with out of control school spending. Don't like your taxes get out and vote no on the next school budget.
By bird (829), Sag Harbor on Aug 23, 16 8:16 PM
Not a clue at all, eh?

By democratic rule, do you mean town, county, state?

If you own property in town you know that 2/3 of your tax bill are for schools. Neither Repubs or Dems have anything to do with that.

SO whats your point?
By But I'm a blank! (1283), Hampton Bays on Aug 23, 16 8:23 PM
Hampton Bays wants and needds a diner. A good diner. Ask anyone. We do not need a CVS or another chain store. The diner was iconic.
With decent food and only a few hundred feet from 27, it should be a goldmine.
Where is the Town on this? Can't they help? Personally I think the property taxes seem untenable. Think outside the box Schneiderman and Co as you seem more than willing to do for the rich in Tuckahoe!!!
By baywoman (165), southampton on Aug 18, 16 11:41 AM
Bring back the Crazy Dog!!
By johnj (1024), Westhampton on Aug 18, 16 3:25 PM
By toes in the water (884), southampton on Aug 18, 16 9:00 PM
That would be the BEST THING EVER!!!!
By Tay (35), Hampton Bays on May 10, 17 12:03 PM
I am so excited about this that I actually emailed the old co-owner. We'll see.....
By Tay (35), Hampton Bays on May 10, 17 12:09 PM
It's a hoot to watch the media justify censorship in an effort to make sure the ugliness of reality doesn't conflict with their manufacturing of reality
By even flow (1023), East Hampton on Aug 19, 16 6:15 AM
The reality is that "humanity" is ugly.

It just like to dress up in costumes to feel better.
By Mr. Z (11847), North Sea on Aug 19, 16 8:31 PM
Speaking of censorship, how about misrepresentation. The reason Mr. charos (the landlord mentioned in this article) has no comment is that over the last year, the reporter called him pumping him for the news story, the latest happenings of the Hb diner property yet major parts of what he wanted the public to know we're always left out- he's frustrated. That is all.
By jasmine (9), sh on Aug 19, 16 8:27 PM
The town should purchase this property and use it as a Justice Court and Town Hall.
By watchdog1 (543), Southampton on Aug 20, 16 3:05 PM
Yeah, that would be wonderful, taking viable commercial property in a great location off the tax rolls. Kind of like taking all the commercial properties along the beach in Hampton Bays and East Quogue and shutting them down - that's done wonders for the local economy.
By VOS (1241), WHB on Aug 22, 16 2:03 AM
This comment has been removed because it is a duplicate, off-topic or contains inappropriate content.
By HamptonDad (236), Hampton Bays on Aug 22, 16 10:55 AM
Lets see: 78% of $64K in taxes, $10K a month in rent, $1.25M for building financed over 30 years - that's somewhere in the neighborhood of $735/day before you turn the key to unlock the door. Very few businesses can manage that type of expense and for those that can, the current building would need major renovation or replacement so tack on another $300 to $500/day to finance that and you have a property that isn't going to sell any time soon.
By bird (829), Sag Harbor on Aug 23, 16 8:08 PM