New York’s legendary gay resort, Fire Island Pines, is floating on a sea of discontent. The drama all started last week when markatlarge broke the rumor that 80% of the commercial area in the Pines was up for sale. It seems that rumor only scratched the surface of the problems facing the owners. Fresh rumors surfaced last week about in-fighting, a seven-figure financial loss and a major shake up in the management team. Ever since a fire destroyed the two main buildings in the Pines’ commercial area, one owned by the LaFountaine family and the other owned by FIP Ventures, people have been concerned about the fate of the ‘Gay Mecca.’ While the LaFountaines have been flooding social media with the rebuilding activities of their structure, FIP Ventures has had very little to say about their plans. The FIP Ventures site where the Pavilion once stood lies devoid of any construction activity, in stark contrast to the LaFountaine building that is in full construction mode and expected to be completed by July 4, 2012.
Let’s start by giving some clarity to the chief rumor: It looks like the sale of the Fire Island Properties owned by FIP Ventures will not happen. The properties were being shopped around as far back as December according to Eric Von Kuersteiner, the prior owner, who was approached by an interested buyer seeking advice on the deal. Eric didn’t reveal the details of his conversation but told markatlarge that he feels the property without the Pavilion is not even worth the $10 million mortgage against it. Considering the purchase price was $20 million ($17 million plus capital and closing costs) just two years ago, it’s highly unlikely a majority of the 39 total investors will agree to sell the property at such a massive loss.
Mr. Von Kuersteiner believes the Pavilion will have to be rebuilt in order for the investors recoup their money, but FIP Ventures has champagne dreams on a Budweiser budget. Sources close to the investors confirmed that the insurance company paid $2.4 million that will be held by a bank and distributed as reconstruction progresses. The destroyed Pavilion had been rebuilt in 2007 on a tight budget for close to $2 million dollars mostly because Mr. Von Kuersteiner had the luxury of using his own construction company to keep the cost down.
A potential sale would also face further complications by a 60-year lease set to expire in approximately 12 years. FIP Ventures runs part of its business, the Canteen restaurant and the pool area, on leased land. In a “sweet heart deal,” as characterized by Mr. Von Kuersteiner, the original owner was given it for a nominal amount from the developer’s family. Once that lease expires it will quickly go up to market value or be sold, significantly increasing the operating expenses for anyone who does business on that land or lose 40% of its commercial property (5 lots total in the harbor: Pavilion, Canteen, Pool area, Hotel and Blue Whale, 2 are leased).
It would be hard to see the sale of the Fire Island property owned by FIP Ventures in the near future; rebuilding will seemingly be the only viable option. Back in January, FIP Ventures hired the high profile (and probably very expensive) architects Diller Scofidio + Renfro (DS+R) and a smaller architectural firm HWKN to work on a temporary structure for the 2012 season and a permanent structure for the following year. Both firms responded to email requests saying that they are still involved in the project. However, several people have questioned whether DS+R was actually hired or if it was a stunt to make the property look more attractive to a future investor. DS+R did not respond to a follow up request to confirm they have an actual contract with FIP Ventures to do the work. HWKN confirmed to markatlarge that they are working on designs for both the temporary and permanent structures. DS+R’s Charles Renfro, who spent many summers on Fire Island, told Out magazine the new building would be “provocative and distinctive enough for a spot that’s been a gay playground for decades.” One could expect based on Renfro’s sentimental attachment to Fire Island his rate would be at the low end.
Typically an architectural firm will get 5% to 20% of the cost of the project. If you do the math on the allegedly $2.4 million paid out by the insurance company, it doesn’t leave much money for a new structure. FIP Ventures could always put out prospects for more investors but it might be a tough sell. A source close to the investors said the properties lost close to $1 million in 2011 after FIP Ventures paid the $900,000 interest-only mortgage payments plus taxes and fees.
If that figure is true, then the properties did worse under the ownership of FIP Ventures compared to when it was run by Mr. Von Kuersteiner in 2009. According to figures published in the FIP Ventures prospectus, in 2009 the Fire Island properties made $1.5 million in profits on gross receipts of $3 million. The prospectus to investors went on to say that the assets were drastically underperforming and revenue could be increased 6 fold by more effectively utilizing the space and improving the property. If the sources’ accounts are true then that did not happen. This makes it very challenging at best to get additional investors for the properties.
One might look at the situation and say, “it’s the troubled economy finally catching up with the wealthy gays,” but party promoter Daniel Nardicio might beg to differ. Nardicio’s Friday night party, in the neighboring community of Cherry Grove, doubled its business in 2011. A majority of Nardicio patrons came from the Pines either by walking or via a water taxi. Nardicio is expecting to do even better business this year considering the only other building in the Pines (owned by the LaFountaine family) capable of hosting nighttime entertainment won’t be open untill the 4th of July. Nardicio is so confident about the 2012 season he has expanded his party to Saturday night, added an afternoon Tea Dance and is booking talent for shows on Saturday nights that include stars like Sandra Bernhard and Margaret Cho. And to ensure the boys of the Pines can get home quickly, Nardicio is paying the water taxi company to operate an extra hour to 3am.
It seems the improvements the investors made to the properties are not paying off as expected. Some of the changes include improving the Pavilion’s sound system and lighting, configuring the pool for outside dining, drinks and music, remodeling the Canteen that offered light food fare options and improving the quality of the food at the Blue Whale. The ever-finicky gay consumer, who is almost impossible to please, was never quite happy with what was considered the overall unfriendliness of the staff who were not quite as attractive as in years past. [Before you judge, check out the bona fide occupational qualification at straight-guy Mecca Hooters. And for you snobs, find me one pleasantly plum girl at the Soho House.]
With the alleged financial situation and management that seems to be driving people to its competition, a major change needs to happen. This might explain why Andrew Kirtzman and Seth Weissman are allegedly out from running the day-to-day operations and replaced by President and COO of Blesso Properties, Albert Price (Blesso Properties is a 50% owner of FIP Ventures whose president and founder is Matthew Blesso). Can the very straight Mr. Price take over the helm of a gay paradise and turn around its fortunes? That remains to be seen. It’s expected that an FIP Ventures investors meeting will be held soon and a press release will be issued with their future plans. Over the next week or so we might see how FIP Ventures plans to turn around this situation.
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