Recently, the Sag Harbor Express sat down with a group of businessmen and women in Sag Harbor to discuss the changes they see going on in the village, the role communities should play in directing the course the business district takes in the future and the struggles of doing business here. The group included shopkeepers who own their building, shopkeepers who rent their space, and landlords. They are: Nada Barry, owner of the Wharf Shop and the space it is housed in; Tora Matsuoka and Jeff Resnick, co-owners of Sen and Phao restaurant who also own the Sen building and rent space in the Phao building; Charline Spektor, owner of BookHampton who rents space in all three villages on the South Fork; Hal Zwick, the former owner of BookHampton and the Paradise building and currently a commercial real estate broker on the East End; Herb Hellman, former owner of the building that houses Provisions and the now vacant storefronts recently occupied by Whalers Cleaners, the Ice Cream Club and Vincenzo’s Pizza; Robert Evjen, Sag Harbor Chamber of Commerce president, real estate broker and former owner of a Main Street business; David Brogna, co-owner of In Home as well as the building it’s in.
Express: We see a number of vacant storefronts on Main Street right now, and there’s been a lot of talk recently about how Sag Harbor is changing and higher end stores are coming in. So what’s wrong with letting the free market determine the future of Sag Harbor?
Herb Hellman: The term free market has to be defined. Its principles are what this country is built on. The real question to me is what is the role of government in a free market system? There is a real role for government. Government has to take care of the health, the safety, the environmental concerns, the welfare concerns, traffic, congestion — even in a historically designated section of the town to set the architectural patterns and standards for builders, for owners. But where does it stop? Once the government has fulfilled its mission of providing for the general welfare and safety and health of the community, at what point do we allow consumers to come in and say “I want a high end clothing store” or “I want a restaurant?”
The community can set the breadth of the commercial district. But having set the breadth of the commercial district, having set the maximum square footage for any use, having set the standards for cleanliness, for health — at that point should the government or municipality be free to say “Well, I like this coffee company versus that coffee company,” or “this restaurant versus a national restaurant?” If we say “I don’t like national tenants,” look around town. Capital One, they have 10,000 locations. Are they a national tenant? If you allow one national tenant in, why not another? The point being is at what point does the government’s or municipality’s jurisdiction and prerogative end and the consumer’s prerogative to get the best goods and services at the best prices, when does that take over? That’s the dilemma.
Express: Robert, you deal a lot with government here, how would you answer that?
Robert Evjen: I think it’s a fine line, or a balance the village is trying to maintain. I call it managed growth. Through the boards — zoning, ARB — they try to manage growth here in a way that maintains the character of the village while allowing some free market activities to go on. I would say there’s always a push and pull. A tug between national chains wanting to come in and the village looking at the impact overall. It’s a fine line.
Hal Zwick: In my work across all the villages from the commercial real estate perspective, basically it’s changed drastically over the past five years. Before the recession there was a major push of national retailers coming in and then things slowed down. In the last few years tenants have had more say and more flexibility. But there’s been a major change since last summer though, from September on, based on supply and demand. It’s what’s enforcing the marketplace now. There are about 25 national chains that want to come into the Hamptons. They put the Hamptons on hold during the recession. Now they want to come in. In East Hampton, where I do a lot of work, a lot of people are coming in, the landlords are in charge again and places are leasing.
When people call to say I’d like to come to see East Hampton or Southampton, I tell them the going rate on cost per square foot and they say, “No. Based on seasonality we can’t afford that.” So I say, “You can go to Bridgehampton or Sag Harbor and pay half of East Hampton.” They say, “We don’t feel Bridgehampton is a real walking town. And Sag harbor we love but our community, as far as our like retailers, are not there.” I think that’s wrong on their part and that’s been the case until now. But I think that will change in the next year or so.
Express: Charline, you have stores in all three villages, I think you would have an interesting take on it.
Charline Spektor: I have a different perspective from a community organizer sense. When you’re speaking about free market and local government you also have to talk about community involvement and how the community benefits. Government basically is a function of the community it’s in. It’s the function of the community to put the government in place. People have to make themselves heard when voting and when they’re choosing representatives. But the corollary to that is you get a community that allows national retailers to come in, and you lose the anchor to the community. I think that’s part of the concern that hasn’t been mentioned yet. Those people in — I don’t want to say mom and pop stores because that tends to underrate what they are – but local retailers. The local part is very important. It means all the dollars that are earned in that store go back into the community, and that doesn’t happen in national chains.
HH: But how do you define national chains? Ares some national chains OK and some not? A bank, Corcoran Real Estate? J. Crew?
CS: I don’t think the community should take action to keep national chains from coming in, I think the community should take a look at the cost of having national chains come in.
RE: You go to Capital One or one of the other so-called “chains” in Sag Harbor, all the employees are local people. It’s almost like walking into a local store.
CS: In East Hampton we, meaning BookHampton, set up a program called “Come Home to Main Street.” We invited all the shops on Main Street to participate with us and promoted it up and down Long Island and Manhattan to get people from the holidays forward to shop on Main Street. Everybody thought it was a great idea, only J. Crew couldn’t participate and Ralph Lauren couldn’t and all the nationally owned stores couldn’t participate.
RE: I think American Express, a national chain, sponsored a small shopping day on Saturdays. Most of the shops in Sag Harbor did very well that day. Here’s another case, there’s no Am Ex office here, but they’re using the brand of a national chain to promote local shops.
CS: Shoppers were buying books but not necessarily from Am Ex. You couldn’t discern.
HH: How do you institutionalize that? You can lobby, citizen groups can actively seek certain features for the local community. But I think the discussion is what is the role of government to initialize that, to codify that? Or are you saying the individuals as a voice should be able to speak up, but not necessarily have that voice in legislation. Municipalities, trustees are actually making those decisions.
CS: I’m a landlord too, but not here in Sag Harbor. The responsibility of being a landlord has dissipated into the ether. People see a huge opportunity to make money and no one can blame them. As a landlord I have some fiduciary responsibility to other people. In the overall picture the question is whether landlords can back off and say we want to keep the village the way it is. I don’t think it’s a government issue.
David Brogna: When I was in East Hampton, I was on the CAC when they were doing the replanning years ago. The only thing you can do as a government is limit the size of the shop and signage. That’s what the government can do, the municipality can do. Limit the size. This is what I teach. I’m a professor at FIT. All those chains have a footprint they must go in. If they can’t get that square footage they’re not going to come in. It’s the math.
HZ: New York State law says we can’t prevent a chain from coming in, but they have to abide by local zoning and signage.
Express: Short of rent control, should the landlords be compelled in some way to allow for affordable uses of their building? And the question is, what does affordable mean?
CS: I think the question is “What does compel mean?”
HH: To keep the village beautiful and vibrant if I’m going to be able to rent the place for a substantial amount of money, I can refurbish it to make it as consumer and tenant friendly as possible. It’s a benefit to the community. If I’m not getting the rents for it, I can’t put the money into it. Also in Sag Harbor, as a building owner, the sewer tax is disproportionately skewed against the landlord. It’s the commercial community subsidizing the residential community.
HZ: If you bought a building that’s a hundred years old, the amount of money required to put into that building, it’s hundreds of thousands of dollars just to bring it to code .
CS: No one compelled you to do that. You thought it would be a better investment than giving your money to JP Morgan. So no sympathy.
HZ: I didn’t know what the investment would be until I started the project.
Nada Barry: It gets down to our values. I’ll back most of what Charline has said. Where do we come from as the landlord, where do we come from within our community? We vote in our elected officials. How much are we participating and trying to steer them toward what we personally feel.
Express: Do you see anything regretful about where Sag Harbor has gotten to at this point?
NB: That’s a tough question, but no, in a sense. Because as years go by, you have to grow and you have to change to be economically viable. You don’t want to be stagnant. Where I do regret is seeing the vacancies that exist. I don’t know yet what will go in there. I also regret in a sense that costs of things have escalated and we have lost our basic population that we used to have. We used to have a very different population to purchase things.
NB: Because all those people could sell their houses for a lot of money and move out of he area to the Carolinas to have a better lifestyle. For me we don’t have the “during the week” clients out here at all that we used to have. Now it’s down to summers and weekends, a change within the community for everybody as far as purchasing.
DB: I have a question. Our business, everyone says, is summer based. But coming from being a buyer at Macy’s years ago, there was a percentage you wanted for your Christmas season and the rest of the year. Interestingly enough, my “Christmas season” which is August, is exactly where it should be in relationship to how others operate — 45 percent in those three months, 55 percent in the off season. Is your business skewed that way?
Tora Matsuoka: It’s 60/40 for us.
Jeff Resnick: The weather has a big impact.
HH: I listen to you talk about limiting the size of stores as a methodology of keeping the character of the community. In a way, the community itself is forcing the price increase. Through part of our zoning jurisdiction we set the village business district. By not allowing the growth of that business district, we are allowing residential growth. More people are coming in to buy existing homes or build new homes. You don’t have to be an economist to realize we have a greater residential supply and limited, stagnated or decreasing commercial supply and it will increase prices.
We are forcing the supply in relation to demand, skewing it and forcing price increases. If we allow more commercial development prices would come down.
HZ: It’s supply and demand.
NB: But your residential has changed. You have more than half the people who aren’t here all year. The houses are only partially occupied and that has changed completely in this village.
Express: We have the census which shows there were 958 households in the village in 2010, and 1051 10 years ago. Just in that short period of time, the village has lost population. Jeff you’ve been here a long time. Do you see greater peaks in the summer in your business than you did earlier?
JR: It’s definitely grown, but the weather is a big factor. This winter is a little better, it’s so mild and there’s been no major storms. I’ve seen an increase in winter traffic. I started Superica in ‘91 and I’ve seen an increase in year round traffic.
Express: Robert, you had a store on Main Street didn’t you?
RE: We did, where Charline is now, and I’m so pleased she’s made that space a success. I think it’s part of the fabric of Sag Harbor, just like Bay Street [Theatre], Java Nation. That’s what makes us who we are. It’s an interesting phenomenon. I ran into Hal who I think just rented the former pizza place, what’s interesting, if you can speak of that Hal, the person coming in is not a chain. Do you know why they wanted to come here?
HZ: It’s individuals from the city and Europe — two sisters. They had purchased a house out here, and love it and wanted a lifestyle change. Basically I describe it as a mini Barefoot Contessa with take out and baked goods.
RE: Why Sag Harbor? She probably could have gone anywhere.
HZ: It was basically where wet use was available on Main Street. Literally there’s no wet use if you want a restaurant. There are none in East Hampton now. This one is the only in Sag Harbor now available.
RE: There’s a transition in Sag Harbor. It’s a different kind of mom or pop, or sole proprietorship.
HZ: I received 50 calls for that spot because of its value as a wet use. It’s also a discussion on economics. The owner [of the Ice Cream Club and Vincenzo’s] had worked hard for 12 or 13 years in his business. He’s upset it won’t continue as the same business. But he took their offer for his family. He worked hard and wanted to reap the rewards.
Express: But why are there so many empty storefronts?
JR: If it’s reasonably priced, it’ll rent.
HR: It’s the wet use.
HH: I used to own that building. The rents exceeded the use the building was put to in the form of the drycleaners. The cleaners could only earn a certain amount of money and the rent was disproportionately high to what he could bring in. It’s a great space and a great building. Another tenant coming in could be more productive for those rents. The rents have to be a percentage of your gross sales or you don’t make it.
DB: 10 percent.
HH: Part of the reason is demand for space is great, but the uses to which the building are placed are not productive. Others will come in and pay those high rents, but no one wants them in.
RE: Paying 10 times more changes the character of the village then.
HH: I’d say the businesses are more responsive to demands of consumers.
Express: As a result there now is no longer a drycleaners and one less pizza place.
CS: The bookstore has a unique position because our goods are fixed. And when you have a bakery or a pizza place or drycleaner or anything else, you have the ability to escalate the price. In Europe you can’t bring the price down on books. In America you can’t bring the price up on books. BookHampton is always valued as a very significant part of the community. I think what [my husband] Jeremy [Nussbaum] and I recognize is the value of a bookstore in a community — a bookstore can be the center of a community, as can a toy store, a hardware store and a drug store. The community forms around them and they become anchors. That’s where the community has to work together including the landlords. Once you strip that out … in East Hampton 15 years ago there was an epidemic of too many antique stores. They were selling things no one needed. We thought bookstores matter, drugstores matter, hardware stores matter. The things that form the community. The community needs to step forward, including the landlords, and say this village or any village is formed by the shops in it. If you don’t say that, little shops go and after that, the landlords can’t rent anymore, because what was cute about Sag Harbor, and what was nice about East Hampton is gone. As soon as people don’t shop there J. Crew and all the national chains will go also.
HZ: There are utilitarian reasons to come to the village, books, drugs, hardware. Once those evaporated, there was less and less traffic.
Express: We use East Hampton as the poster child for bad planning and evolution. The scenario you describe with Vincenzo’s and the drycleaners, it makes perfect sense to get what the market will bear. If they’re unable to pay what I’ll charge, someone else will. It’s a free market. What we have lost is a drycleaner and a pizza place, utility services in a community.
HZ: It’s the same rent, it was up to the seller of the business who would take the lease [at the Ice Cream Club and Vincenzo’s]. For personal reasons he sold with eight years left of the 20 year lease. It’s up to the seller of the business who would get it. The landlord had to approve i.t
HH: The cleaners is exactly the opposite situation. Which is [the Express’] point.
Express: The question is, is this the evolution of this village that is occurring? The base Nada had 20 years ago has disappeared. The reason they chose to cash in and sell their houses or because of the cost of living – they moved to a less expensive place. Is Sag Harbor on the same life arc as East Hampton?
NB: No, and yes.
Express: Is it inevitable that Sag Harbor becomes a luxury village?
TM: I don’t think so. When we went to the Sag Harbor Business Association meetings we talked about how Southampton and East Hampton had done studies, and many things were shown, but there was one element that was important to me. Jeff and I are restaurant owners, who both own and rent property. What made Sag Harbor and Bridgehampton more vibrant was the balance between wet and dry retail. It’s a very interesting phenomenon. The surf store across street comes up to us weekly in the summer and thanks us for being open. They do more sunglass sales after eight at night when you don’t need sunglasses than they do in the daytime. When later night businesses are open they keep people walking in the village. If there’s no theater or no wet retail what’s the point in being in a town after dark?
NB: We have benefited, those of us open late in summer. Some of us have been approached to sell our spaces for much more money, no doubt, than we’ll ever make as individuals. But because we have certain values or love this town we have refused to do it. The number of offers over 40 years, have been a few.
DB: Back to the other conversation about the stores and landlords talking. The community is really the important thing here. I tell this story. We’ll always hire local kids. One day one of the kids comes in and says “My mom bought that at Tanger.” I said “How much did your mom pay for that?” And his mom paid more there than we have it and you would’ve gotten your employee discounts. It’s not that they’ve been lost or moved. They’re not coming here first. You have to get the customer here first, it doesn’t’ matter landlord or store, then all those stores stay.
I never heard anything good about the drycleaner. But if people had gone there first, they would’ve had to be better. It was a last resort. It has to be the first resort.
HZ: Clothing was the first reason people went to Tanger. Then they started following for other things. Even local retailers, they’ll go to price check in Tanger and see customers there and get angry.
HH: There has to be a partnership between the community, the municipality and the landlords. They have to work together and they have to respect their distinct roles. The municipality can’t act like a landlord. Each has to respect their perspective and balance each other. What is the most significant reason the Hamptons has developed so well compared to other municipalities and areas — I was with Macy’s too, general council, and I did development work all over the country. What we did was all of Route 27 was designated highway business use. No retail clothing stores, no big box users, no bookstores. I owned a property across from King Kullen. Barnes and Noble bought that thinking they could get in. They tried. Southampton kept them out. I applauded it. By preventing sprawl along the highway that kept each village vibrant. Can you imagine what East Hampton, Southampton, Bridgehampton would look like if any use was permitted?
It’s a wonderful role for government. Then they’re working with the community. Then it comes to community groups, chambers of commerce, to create the kind of community they want. But each area has to respect their own jurisdiction.
Express – What you’re describing is three groups informally agreeing to behave in a certain way. How does that dynamic occur?
HH: Good leadership. I would say good communication, good chambers, community action groups. As a landlord, I have had many opportunities to rent to tenants I knew I’d have gotten good rents from — and they’d pay very high rents. But I’m a local guy, part of the community, I knew if I rented to this person I would’ve made a few extra dollars but when I walked down the street it would be awful.
CS: I think you hit on something important. When you say how to prevent Sag Harbor from being East Hampton. We have a wonderful landlord in East Hampton and couldn’t be happier. I think he’s civic minded, socially conscious and aware of the value of East Hampton and we are lucky. I think when we were on the other side of the street, we had the exact opposite experience. You can see what a mess it is over there, and our side and how wonderful [it is]. It’s very revealing. When a landlord feels part of the community then you get one that flourishes. When you have people come as outside investors and sit away from the neighborhood, it’s disastrous. It’s as simple as that. I don’t think the chamber of commerce is going to help.
DB: when we got our building Barry [the owner] said “I had a higher offer but we held out for you” because he had worked in it as a kid when it was a store and [he said] “You’re going to restore it to be a store again. I am sixth generation and I want a store back there, I want life back in that building.” That was his goal. [Macy’s chairman] Ed Finkelstein said, “We do what we do best. That’s what we do.” We as storeowners have to do what we can do best. I run the best store I can. Lisa [Field] from the Variety Store and I talk all the time. People come in to her and say, ‘When CVS comes in you’ll be out of business.” I told her this is what you say — “Do you think I’m that bad a merchant?” We do what we do best.
Express: What kind of businesses will thrive and what types will have the greatest challenges in the next five to 10 years. What is the community here? Is it different than it was 25 years ago? What is this community looking for?
DB: A men’s store.
NB: There’s no shoe store, which we used to have. If you have too many of the same shops you wonder how many of them are going to survive.
TM: Sag Harbor is a very unique town from the point of view of how it’s structured, all the building are small, you can see the water from Main Street, the yachts are here, this is a village.
HH: one question is the impact of [new condos being built at] Bulova and Bay [Theatre] Street leaving and the inevitability of Sag Harbor. It seems to me we’re sort of destined, unless we do what Charline says in a partnership way, for higher end uses.
Express: Is that good or bad?
HH: It’s neutral. It’s what the consumer wants. A store won’t survive if no one shops there. It’s the consumer that’s dictating what survives and what doesn’t survive.
Express: Is there an inevitability that we become higher end?
HZ: As someone involved in selling and leasing of commercial space, from what I’ve seen and calls I’m getting, it’s not necessarily the Ralph Laurens and Tiffany’s — they don’t feel they belong in Sag Harbor. But those smaller places with two or three stores in Manhattan, because rents are lower, those are the types more likely to come to Sag Harbor than very high-end chains.
HH: Government has set the limits of the size of stores in Sag Harbor. Space limits who can come in.
HZ: There’s been a reversal on that trend since the recession. Before people called and wanted 3,000 square feet. Now because of seasonability and overhead, 1,000 to 1,500 square feet is what people want from national chains. That’s a reversal, it’s because of the overhead and they can get inventory in easily, and because from September 15 to May 15 the only people in those very high end stores are the employees. I had a 1,500 square foot store available in East Hampton — 15 people wanted it and it got asking price.
HH: Tiffany’s or Cartier’s only need one flagship in the Hamptons.
CS: I think what’s working against our villages is the fact it’s very difficult to be a local person and open a business. It’s financial. You need money to start and you can’t find enough friends who want to use their credit card. Banks won’t give you a loan. How many local businesses submitted out of those 15?
CS: It’s hard for mom and pops to start. Where change is needed it’s when someone’s willing to say we will work with you in the first three years of the lease or work with you by pulling out of your adjusted gross. It’s important. But when people are real estate brokers and looking to make a commission on the rent, nothing personal, but it’s not in their interest to look and see how the landlord might subsidize a tenant.
Express: What is a mom and pop store? Have we redefined it?
TM: I think mom and pop has a negative conation. Jeff and I are working to open a New York City restaurant. There are 10 million people at any one time there. The business model there is a little different. Even though it slows a little in the summer, all of Manhattan doesn’t go on vacation. Restaurateurs say sales can take anywhere from a 10 to 20 percent dip. In the Hamptons we do 60 percent in summer months if we’re lucky. Sales from August to October, drop 75 percent. There’s a 50 percent drop the first month then there’s another 50 percent drop in that in the next month.
When you’re operating a business that has to drop that quickly — 50 percent in one month, 50 percent in another — the rent doesn’t go down like that. The point I’m trying to make is that to work in this broken model, you have to be a good operator. That almost conflicts with the idea of mom and pop. I don’t consider myself mom and pop – I like the word independent. My father, who I bought his shares out, he’s mom and pop. My dad woke up every morning at 5 a.m. for his business. The problem is, it’s not just about hard work anymore, it’s about smart work. Where he and I and our ideals clashed were where changes needed to be made and we couldn’t operate our business the same way as we did 20 years ago. Rents are twice as much, taxes are higher, it’s impossible to find great help. You can’t find 16 year old kids willing to work at $8 for 15 hours straight. It doesn’t exist. You can’t attract high end talent to live in the Hamptons and work long hours when they’ll be sitting around eight months a year wishing they were back in Manhattan..
RE: It’s also impossible to house help here in the summer.
NB: We have to hire locally and pay more money.
TM: Success in restaurants is based in consistency of food and product. That comes from having a well-trained staff that knows the product and interfaces well with guests. Our staff are the masters. If you fire them in September yes, you cut expenses back, but in May everyone is fighting to find help. We like to say that the labor pool out here is shallow and murky. All of a sudden you damage yourself. Only way to maintain it is you have to retain staff and stay open for the guests who want to eat sushi. From October 1 to May 1 – we could close the doors, sit outside and every guest that comes up we could give them $50 and tell them to walk away. But we do it because we love this community we want to be here we want to support it.
Express: Was it always this way?
NB: It used to be a much more even situation year round. You weren’t relying on weekend homeowners. In summer we’re also relying on foreigners. That’s interesting given the economy in Europe. We are very attached to it in the summer months. What happens there.
DG: I just got back and it doesn’t look good.
TM: The idea of mom and pop and I’m going to do it all myself doesn’t work. The term “independent” is a broader scope — the building owner, with independents and government. The independent paradigm is where it’s going and will continue to go.
CS: Whatever you call yourself — mom and pop – if you’re tied to your own business that’s what it is. Another part is how you function in the community. It’s important with restaurants in the community, who eats there and how those dollars are made. There are huge variables. Your restaurant is a destination and people are going there to spend money. That’s their intent. That also changes a community. If you have Paradise when it was Paradise originally, it was food the whole community was going to eat. People at six in the evening with strollers — mom and pop as a commitment to bring families into the neighborhood and a permanence.
RE: Can we talk about Bulova for a second — it will bring in 65 plus families – a large percentage of the residential population in the village. The demographics of the buyers might change the way the village looks.
NB: How many of those will be here year round versus the percentage of summer or weekends?
Express: How does Sag Harbor compare healthwise to the other villages?
CS: It really holds its own. Sag Harbor’s great and it gets better and better. Southampton is rocking in the negative sense. It’s tricky in Southampton. The whole area has atrophied. The population has aged out and the new population is not shopping in the village. From my perspective of book store owner, Sag Harbor is not driven by the theater. Sag Harbor just has a tremendous vibrancy and an outstanding school. We benefit from that enormously. I think the value to the bookstore in Sag Harbor is that the education is phenomenal here.
Express: Does that also play into the clientele?
HH: The school is huge and plays into it.
TM: Right now 15 kids from Pierson Middle School learning about Asian studies are in Sen and my chefs are showing them how to cut fish to produce food.
CS: We benefit from every one of those Intel kids.
HH: As I say, I do a lot of this work nationally. I think the Hamptons has done a brilliant job in preserving its character. People who have lived here and seen the changes that have taken place over 20 years are somewhat demoralized, but look at the rest of the country. This community has done a brilliant job to maintain its character and quality of life through local people taking a serious interest. As we talk, clearly I think the partnership between various constituencies and fostering communication between public, private and government is really all we can do to protect Sag Harbor without any one sector taking control.
In general the Hamptons, and Sag Harbor specifically, I think you have to applaud the towns of Southampton and East Hampton. They have done tremendous favors to their local villages with a highway business district that’s preventing sprawl. That’s done more to preserve the character of the village than anything.