The century-old Victorian at 225 Windmill Lane in Southampton Village looks like the Hamptons used to look. But locals fear it’s the harbinger of yet another transformation of the East End: into a high-end office park for hedge-fund managers who insist on bringing their work to the beach. Two months ago, the house became the Hamptons’ first hedge-fund “hotel.” Desks, complete with Bloomberg terminals and trading-execution software, are renting for $1,000 a month. Think of it as a cyber café for Wall Street elites. Already three funds have signed on. “Hedge-fund managers can work from anywhere, so why not near their summer homes?” says Linda Munn, a principal at the New York consultant Hedgepros. She says she has clients considering checking in.
The idea came to Brian Villante, CEO of Grace Financial, a Southampton-based broker for hedge-fund traders, from talking to his tech-support guy. “He was telling me about all the systems he was busy installing for hedge-fund managers at their beach houses. We figured some of those guys would like to have a real place to work to get away from the kids.” Hedge-fund heavies like Daniel Loeb of Third Point, Tom Sandell of Castlerigg, and Richard Perry of Perry Capital are said to be set up for vacation arbitrage. And the practice is spreading, even if most hedge-fund managers are shy about discussing it. “I don’t need my investors thinking I’m out here getting a tan on Monday afternoon instead of making them money from my midtown office,” says one trader. Joe Kalinowski, managing partner of JSK Capital Partners, points out the other major advantage to doing business in the Hamptons: clients. “Being out gives you access to an awful lot of wealthy individuals.” He now works out of the hotel.
Villante expects the hotel to be flashing a NO VACANCY sign by next summer. “What I’d really like to do is knock this house down and put up a 6,000-square-foot prefab office building,” he says. “If I could get the zoning approval, I’d have the bulldozers in and a contract out before you could blink.” The demand certainly exists. Devlin McNiff real-estate broker Stuart Epstein says a couple of hedge-funders he sold homes to are now looking for office space. “But it’s tough finding it. The Towns are very anti-growth when it comes to offices.”
“We just passed tighter zoning standards,” says Southampton Town councilwoman Nancy Graboski. “We don’t want the Hamptons to turn into another suburb.” Villante says that more offices wouldn’t necessarily do that. “I’d put up a façade in front of the new building that looks just like this house.”