In Montauk, Big Money Moves In on a Surfers’ Paradise

MONTAUK, N.Y. — Ditch Plains Beach is the heart of the surf scene in Montauk, a two-mile stretch of dunes and sea at the tip of Long Island’s East End with views of sand cliffs to the east and west.

It is also where, on summer weekends, a group of longtime Montauk residents and vacationers gather to drink, smoke pot, toss Frisbees and dance till dark, as if staging their own mini Burning Man festival. The patch of beach where they congregate has a nickname among locals: Clown Town.

With its surfers and revelers, the scene recalls Montauk as it was more than two decades ago, before private equity executives, social media stars and other moneyed newcomers put their stamp on this formerly rustic beach town of dive bars and tackle shops. Those who settled in the area before real estate prices shot skyward now lament the passing of the scruffy outpost they used to know.

This summer, the major topic of conversation among many longtime Montauk residents and vacationers hasn’t been the waves, the weather or the problem of coastal erosion. Rather, they’ve been talking about the big house rising above Ditch Plains Beach. They wonder aloud about how big it will be once it’s completed. They speculate about who will live there.

The house is not the size of the mansion belonging to that fictional Long Islander Jay Gatsby, but it’s close. It looms over the public parking lot where the Ditch Witch food truck has served egg wraps and burritos since 1994. It looms over the surfers who ride the clean, consistent waves that break past the jetty. And it looms over Clown Town.

“It dominates the view from everywhere,” said John Madere, 67, a photographer and documentary filmmaker who has been surfing at Ditch Plains Beach for 15 years.

“It’s nice to look back at the shore from the water and see a pretty view,” he continued. “Now I’m seeing this house by some billionaire that’s just humongous.”

The house now under construction is part of a subdivision, Montauk Colony, made up of four roughly one-acre lots. Public records show that its owner is 40 Deforest Rd LLC, a limited liability corporation that shares the same New Jersey mailing address as Smith Management, a company formed by the investor Randall D. Smith. The L.L.C. paid $4.8 million for the lot in December 2020, records show. Mr. Smith is also a founder of Alden Global Capital, a hedge fund whose president is Heath Freeman, a Montauk resident.

Alden operates some 200 newspapers across the country, including The Chicago Tribune, The New York Daily News and The Denver Post, through MediaNews Group, a company in which it has a controlling stake. Journalists have decried Alden’s strategy of slashing costs at daily and weekly publications, referring to the company’s leaders “vulture capitalists.” The publicity-averse Mr. Freeman, who declined to comment for this article, said in a rare interview with The Washington Post in 2020 that Alden rescues local papers that would otherwise go out of business.

Since the start of the pandemic, when not busy overseeing Alden’s $630 million purchase of the Tribune Publishing newspaper chain, Mr. Freeman, who is in his 40s, has gone on another kind of spree centered on Hamptons hospitality businesses.

The East Hampton Star, the paper of record on the East End, has chronicled the activities of Mr. Freeman and a group of investors in taking over the leases of or buying venues including EHP Resort and Marina in East Hampton, the Harbor Bistro in East Hampton, the Inn Spot in Hampton Bays and the former Red Bar Brasserie in Southampton.

Mr. Freeman has also enlarged his footprint in Montauk, which is technically a hamlet in the town of East Hampton. He and his partners operate Buongiorno, an Italian-style bakery and espresso bar on Montauk’s South Embassy Street. In 2019, according to public records, Mr. Freeman bought a wood-shingled cottage along Ditch Plains Beach for $2.4 million. It lies a Frisbee throw from the house now under construction.

In addition, limited liability corporations that share a New Jersey address with Smith Management, the investment firm run by Mr. Freeman’s fellow Alden executive, bought two neighboring lots in the Montauk Colony subdivision, paying more than $12 million for them in 2021, according to public records. All told, Mr. Freeman and L.L.C.s affiliated with Alden and Smith Management have spent close to $20 million for a few acres of beachfront.

The fourth Montauk Colony lot is owned by an L.L.C. that shares an address with a Miami Beach home owned by David J. Miller, a partner at the investment firm Elliott Management, public records show.

Deep-pocketed finance companies and their top executives had moved in on this surfers’ paradise.

Before Montauk Colony came about, the acres overlooking Ditch Plains Beach were occupied by the East Deck Motel, a low-slung, bare-bones, family-run place with no phones in its rooms. For six decades, it was popular with fishermen and surfers, and many of the middle-aged people who regard themselves as part of Montauk’s old guard discovered the area while crashing there when they were in their 20s.

In 2008, with the opening of the Surf Lodge, a boutique hotel in Montauk, the change in the town’s identity became difficult to ignore. The Surf Lodge attracted the Hamptons party crowd and fedora-wearing Brooklyn hipsters, who were soon elbowed out by investment bankers and developers. The town’s self-image as the laid-back un-Hampton took another hit in 2013, when the East Deck was sold for $15 million. The ownership group, led by the Vitamin Water founder J. Darius Bikoff, planned to transform this piece of pre-gentrified Montauk into a members-only beach club.

Locals rose up against the plan with petitions and a letter-writing campaign to the town board. When Mr. Bikoff and his fellow investors backed off, the Ditch Plains crowd breathed a sigh of relief. There wouldn’t be another flashy night spot in Montauk, and their favorite beach would remain open to the public.

The East Deck was demolished in 2016, and the land was rezoned, allowing for the creation of Montauk Colony. The Corcoran Group, which represented the property, ran an ad showing an aerial view of the land with the slogan “If You Lived Here, You’d Be Surfing Right Now.” The ad also trumpeted two of the lots as suitable for homes of up to 6,000 square feet.

For several years, the lots found no takers. And so the surfers, surf-casters, beachcombers and denizens of Clown Town had a stretch of seaside paradise more or less to themselves. If the surfers sometimes found themselves competing for choice waves with billionaire wannabes, or else working as their surfing instructors, that seemed a small price to pay for their status as in-the-know regulars at one of the East Coast’s prime beaches.

Then came the pandemic — and with it, a new East End real estate boom. A construction crew appeared on the bluff and worked steadily through the summer months.

According to town records, the house will have six bedrooms and roughly 5,000 square feet of living space. In addition, the records show, it will have a 1,400-square-foot first-floor deck, a 350-square-foot second-story deck, an attached garage and a swimming pool in the yard. Occupying most of the lot, the structure seems to exemplify what developers call maximum coverage — squeezing as much home as possible on a patch of land.

The new house is fully in keeping with Montauk’s building code, according to the town’s director of planning, Jeremy Samuelson.

“There’s a broader question here for all of us who live in East Hampton,” Mr. Samuelson said. “That is, what do we think is an appropriate amount of coverage and massing for a single-family home on a given property.

“If we as a community are not satisfied with what current code allows,” he continued, “then we should work together to come up with amendments to the code that align with our shared values.”

Leonard Ackerman, a lawyer representing the L.L.C.s that bought three of the beachfront properties, said in a statement: “The owners are pleased these properties will be used for single-family homes rather than the sort of mega-development that the community understandably opposed, and that is why local officials have been supportive.”

Perhaps no one has been more displeased by the development than Lou Cortese, a retired business executive. On a recent afternoon, he stood on the upper deck of his beach house. It was as close as you can get to Ditch Plains Beach unless you lived across the street, in Montauk Colony.

“What a view that will be marred,” he said, looking at the house under construction.

Mr. Cortese, 72, was one of the people who publicly objected to the private resort plan after the sale of the East Deck Motel. When the land was rezoned, he was satisfied. He said his main complaint about the new house was its size, adding that he was concerned about the possibility that three more mansions would go up on the neighboring lots.

“What people didn’t foresee is what would happen if you build four airline terminals,” he said.

To the extent that there is an organized resistance to the large house — and the others that may be built beside it — Mr. Cortese is its leader. In June, he wrote a letter to the editor of The East Hampton Star describing the house as a “monstrosity.” The letter went on, in colorful language, to tell the owner: “You’ve ruined Ditch Plains Beach. It’s like you took a can of black paint and splashed it on the Mona Lisa.”

Mr. Cortese’s wife, Connie, has spent every summer of her life in Montauk. She said her grandfather bought a lot in Ditch Plains in 1938, when Montauk was windswept and isolated. At 71, Ms. Cortese, an abstract painter, still surfs. Mr. Cortese started coming to Montauk after he met and married her in the 1970s.

“Every summer, every year, a lot of the establishments that represented the old-time sleepy environment got sold,” he said. “And, yes, we have reached an inflection point. Is this going to become another Aspen? We’re pretty close to it.”

Mr. Cortese stepped off his deck and walked toward the beach, moving past the mostly built house, which sat tall on its pilings. It threw a shadow over the parking lot, where the Ditch Witch was open for business.

A white Chevrolet truck was conspicuous because of the coolers, beach chairs and surfboards piled high in its bed. A tall, thin, tanned man wearing a straw sombrero — John Kavanaugh, known locally as John the Chiropractor — was making trips from the truck to the beach, carrying supplies, including poles and a canopy, for the Clown Town crew.

Beyond the parking lot, Mr. Cortese ran into Toby Logue, 47, a beach regular who was dressed in red board shorts and no shirt, having just emerged from the water. The talk turned, inevitably, to the house.

“It’s out of scale,” Mr. Cortese said.

“It’s exactly to scale for East Hampton,” Mr. Logue countered. “He can do what he wants to do. That’s what makes America great.”

Mr. Cortese did a slow burn. “By the way, he’s a builder,” he said, referring to Mr. Logue.

In fact, Mr. Logue’s company built Mr. Cortese’s house 15 years ago.

“And you blocked the view of the house behind you, Lou,” Mr. Logue said.

Mr. Cortese conceded that the house under construction blocked his view, adding, “But this location is not the same with this house on it.” He tried to make a finer point about the character of Ditch Plains Beach, saying, “It changes the natural beauty, the vistas, the scenery.”

Down at the wooden benches, where a group of regulars were watching the surfers, opinions on the house tracked closer to Mr. Cortese’s view.

“People are shocked and appalled by it,” said John Chimples, 64, a film and television editor who has been coming to Montauk to surf since 1986. “But I was expecting it.”

Mike Avallone, another longtime beachgoer, said, “It changes everyone’s approach to Ditch.” Everyone, he added, “thinks it’s a spec house.”

Over the last 60 years, roughly 65 percent of the land in Montauk has been protected through the efforts of community leaders, local and state government, and Concerned Citizens of Montauk, an environmental group. But with real estate prices escalating, Montauk’s preservation-minded locals have found it difficult to come up with the cash to buy the available acres.

Peter Van Scoyoc, the East Hampton town supervisor, said the local government had made numerous attempts to buy the East Deck Motel. Under that plan, the building would have been razed and the land preserved. But the asking price was “well beyond the appraised value, more than which the town is not allowed to pay,” Mr. Van Scoyoc wrote in an email.

In interviews, others at the beach, including Mr. Logue, made the same point about the house now under construction. Why here? Why build a multimillion-dollar home close to a busy parking lot? The view from its rear deck will include the Clown Town crew, who recently hauled a huge bathtub onto the beach, filled it with ice and took turns taking ice baths.

With its sand cliffs and endless waves, Ditch Plains Beach, which helped start the local surfing craze in the 1960s, is the closest the East Coast gets to San Onofre or Surfrider. It’s a slice of California-style coastal geography formed by the glaciers at Long Island’s tip. That makes it unique in the area and known around the world.

“From Hither Hills State Park going west, there’s nothing but dunes,” said Greg Donohue, the erosion control director of the Montauk Point Lighthouse. “But on the eastern end, you have a seven-mile stretch of glacial bluffs. It starts at Ditch Plains.”

The concerns of Mr. Cortese and other Ditch Plains Beach regulars — that the raw beauty of the place will be ruined by development; that the carefree spirit of this unspoiled stretch may finally be overwhelmed by money — seemed to find symbolic focus in the large house. And yet the laid-back enclave of soul surfers and commercial fishermen they mythologize seems to exist largely in the past.

Just up the road is a trailer park where mobile homes have sold for $1 million. At Duryea’s, a seafood shack bought by the billionaire investor Marc Rowan, a lobster roll costs $49. Even the East Deck, before it closed, was charging $240 a night. And as surfers paddled out to catch a wave on a recent afternoon, a plane appeared overhead, trailed by a banner advertising Jean-Georges Vongerichten’s latest restaurant.

In its branding, Montauk Colony echoes Malibu Colony, the beach community near Los Angeles. Once a charmingly bedraggled surfer’s mecca, Malibu is now one of the most expensive and celebrity-studded communities in the world. This spring, Michael Eisner listed his compound on the Malibu bluffs for $225 million.

If Montauk becomes another Malibu, the roughly $30 million spent in recent years on the land overlooking Ditch Plains Beach may turn out to be a bargain for the L.L.C.s and executives affiliated with Alden, Smith Management and Elliott Management.

Gary DePersia, the Corcoran realtor representing Montauk Colony, said the last of the four lots sold in a bidding war last December. The first one went for $4.8 million, he said, and the last one fetched $8.1 million.

“I wish I had them back,” Mr. DePersia said. “I’d sell them for a lot more today. Montauk oceanfront — and any oceanfront in the Hamptons — is a very finite commodity.”

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