The Sad Saga Of The Point Breeze -September/October 2011
by: Jason Graziadei
There is an architect’s rendering of the hotel complex in all its imagined glory stripped across the site’s masthead, with a detailed description of a “private club where every wish is acknowledged and an enclave of 29 condominium residences.”
Today, Matthews’ pipe-dream looms boarded up and empty on Easton Street. The property is in the control of a limited-liability company created by the bank which extended him an ill-advised $40 million construction loan to fund the project. Weeds are growing up around the property, and no-trespassing signs hang from the entrances.
The building is just a shell of the ambitious vision still depicted on the Point Breeze website. Exterior construction was essentially finished when work on the project came to an abrupt halt as the markets crashed in 2008, but the interior of the building remains vastly unfinished.
More than a year has passed since TD Bank seized control of the Point Breeze from Matthews during a foreclosure auction, yet there are no indications that the bank has found an entity willing to meet its asking price of $12 million to buy the property and revive the historic hotel.
Just blocks away from Nantucket Island Resorts’ White Elephant hotel and across the street from its White Elephant Residences, Matthews’ Point Breeze has been dubbed the island’s own “white elephant” – a stark reminder of the real-estate speculation on Nantucket that preceded the economic collapse in 2008, when so many bit off more than they could chew. The implosion of the Point Breeze project is perhaps Nantucket’s most glaring example of the consequences of that overly-ambitious era of easy money, when more than $1 billion in real estate changed hands in consecutive years on the island.
In April, the Planning Board wrote to TD Bank’s local attorney, Arthur Reade, asking the questions so many had wondered about as the Point Breeze continued to gather dust over the past year. What was the plan? The time frame? How much longer would the hotel project remain vacant?
“The board wants a clear understanding of the current owner’s efforts in regard to this iconic downtown property,” chairman Barry Rector wrote.
Last month, Reade responded to the inquiry. TD Bank’s holding company, 77 Easton Street LLC, had hired a firm to market the property, he wrote. It hopes a buyer will complete the Point Breeze project with its original intended use as a hotel. Contractors and consultants had been retained to keep the building secure and in a condition that will allow the LLC to keep its town permits active, he informed them.
In an interview last month, Reade was somewhat more direct. In fact, he cut right to the chase.
“The bank has one interest and one interest only, and that is unloading it,” he said. “The banks have no interest in completing the project for their own account. They lend money, they don’t develop real estate.”
The Danvers, Mass. based firm hired by TD Bank to market the Point Breeze, O’Connell Hospitality Group, has the property listed on its website as a “Nantucket Hotel, 33-rooms, partially completed ... Asking $12 million.”
Nantucket Planning Department director Andrew Vorce has been around long enough to have witnessed the full arc of the Point Breeze project’s journey, from aging family-friendly hotel prior to Matthews’ purchase of the property, to a pie-in-the-sky plan for a luxury club with underground parking, swimming pools, a spa and tennis courts, to its current state of disrepair. The demise of Matthews’ project didn’t surprise him.
“I think it was built on a financial model that clearly was not going to work,” Vorce said. “With the 28 rooms, I don’t think that instantly translates over to a profitable hotel.”
Vorce outlined the hurdles any potential buyer of the Point Breeze would face – even after a multi-million-dollar acquisition from TD Bank.
“You’ve got permitting challenges to deal with, probably to get more rooms to make it worth-while, plus you’ve got the reconstruction costs,” Vorce said. Building codes have also changed since the structure went up three years ago.
There have been several phone inquiries at the Planning Department about the Point Breeze, and Vorce has escorted a Florida resident down to Easton Street for a site visit. He’s heard rumors of plans to convert the building into a multi-family residence or an elder-care facility. Wendy Schmidt’s ReMain Nantucket even scouted the Point Breeze property for its music-school project before deciding to focus its efforts on a Centre Street inn instead.
But a buyer willing to take on the challenge has yet to materialize, and the once-stately property continues to languish as another summer season comes to a close.
How did it come to this?
In the first half of the 20th century, the Point Breeze was a symbol of comfortable wealth, a grand old Nantucket hotel where affluent New Yorkers and Bostonians spent a few weeks each summer away from the hustle and bustle of city life.
Construction began in 1890, and was completed by the fall of 1891. It was named the Point Breeze to advertise its prestigious location at the bottom of Brant Point and the balmy sea breezes that blew across its porches on summer days.
The hotel was three stories tall, with a four-story turret and 40 rooms. It was one of the first hotels on the island to boast its own phones and electricity.
But the decades ahead would not be kind to the Point Breeze. In 1925, a devastating fire that started in the kitchen burned nearly half of the hotel to the ground. Then, in 1933, the property was purchased at auction by the Nantucket Institution for Savings (the predecessor of Nantucket Bank) and was closed for several years.
The Point Breeze reopened in June of 1936, and was named the Gordon Folger. It enjoyed a prosperous but uneventful four decades, and was purchased by the Bowman Family for $250,000 in 1972. The Gonnella family restored the hotel’s original “Point Breeze” name when they bought the property in 1997 for $3.2 million.
Eight years later, Matthews entered the picture and purchased the Point Breeze from the Gonnellas for $3.7 million.
“I’ve gone out of my way not to do any deals on Nantucket because I don’t want to be working where we vacation,” Matthews, who has long owned a summer home on Cliff Road where he’s hosted a reception for Bill and Hilary Clinton, and a group of Tibetan monks, among other notable guests, told The Inquirer and Mirror in 2005. “But this was too tempting.”
After a grinding permitting gauntlet, he received approval to renovate and expand the hotel into a luxury condominium club including a new restaurant, spa and fitness center and outdoor pool. The second-phase approval – which was almost immediately appealed by a number of neighbors – allowed for the construction of 45 hotel units and 10 dwelling units spread out over several buildings, including a 17,000-square-foot hotel called The Maidstone, an underground parking garage with room for more than 100 cars, two outdoor tennis courts, a swimming pool and three-lane bowling alley in an historic former barn along one edge of the property. Much of the development was slated for property Matthews had not yet acquired. The Planning Board earlier this year voided the second-phase approval at TD Bank’s request.
The flamboyant Florida developer was making waves on Nantucket, but it was only another chapter in his turbulent rise to wealthy real estate mogul. By the time he purchased the Point Breeze in 2005, Matthews had already been associated with several scandals in Connecticut, including one involving its former governor, John G. Rowland, which eventually led to his resignation. Matthews was accused of using his friendship with Rowland to close a business deal, and later paid a $2,000 fine to settle the ethics-enforcement case. He was also embroiled in a controversy over a lost original copy of the Bill of Rights, which surfaced in 2003 when the late antiques dealer Wayne Pratt and Matthews attempted to sell the document to the National Constitution Centre in Philadelphia for $4 million. The two men had reportedly acquired the document in the 1990s for $200,000, but the copy belonged to the state of North Carolina, and was one of the 14 original Bills of Rights drafted in 1789 and distributed to the 13 states. It had been missing since 1865. The document was seized during an FBI sting and returned to North Carolina as Pratt relinquished his claim to the copy. But Matthews later filed a lawsuit in Pennsylvania seeking compensation, claiming it was seized illegally.
Matthews’ acquisition of the Point Breeze was just one of numerous luxury developments in the works on Nantucket at the time. The building industry was humming along at full bore, lining the pockets of island tradesmen and attracting hordes of contractors and construction companies from off-island looking to cash in on the boom.
Three years after Matthews acquired the property, the Point Breeze project seemed to be coming to fruition. Just weeks before the Lehman Brothers bankruptcy in September 2008 and the market crash that followed, Matthews was marketing the residential units at the Point Breeze starting at $1.45 million each, which included a club membership, valued at $250,000. In an interview at the construction site that month, Matthews boasted that he had sold half of the units, and was even contemplating taking eight off the market to keep for himself, friends and entertainers who would perform at the club.
“The idea is, it’s a pied a terre and there’s no allowance for buildout, and everything is included all the way down to the 500 thread- count Mascioni sheets,” Matthews said at the time. “Everything is turnkey.”
Construction crews that year had accelerated the completion of the Point Breeze’s grand ballroom so Matthews could host actor Jim Belushi and Grammy-winner Natalie Cole for performances during an invitation-only event to hype the development.
But the project was plagued with problems from the beginning. Former Nantucket building inspector Bernie Bartlett issued stop-work orders on several occasions for work being done outside the scope of the construction permit, and many of Matthews’ proposals generated intense neighborhood criticism on a number of fronts, including the intensity of use on the property, the location of the tennis courts, the runoff generated by dewatering pumps, and noise from the proposed bowling alley and golf carts used to transport luggage and supplies.
As 2008 came to a close with the American economy on its knees and the largest financial fraud in history exposed by the arrest of Bernard Madoff, the Easton Street property got very quiet. Construction ceased, and contractors who worked on the project began to file liens and law-suits against Matthews in Nantucket Superior Court over unpaid bills. After months of speculation on the fate of the development, representatives from TD Bank arrived on the island in June 2009 to initiate the foreclosure process. The bank employees quietly secured the property, installing new locks, nailing plywood over the doors and entrances, and placing no-trespassing signs around the perimeter of the building.
A scheduled foreclosure auction at the height of the summer in 2009 was put on hold when five subcontractors who worked on the project filed a Chapter 7 involuntary bankruptcy petition against Matthews. The companies claimed Matthews had misused the $40.5 million construction loan from TD Bank to finance not only the construction of the Point Breeze project, but also a Palm Beach, Fla. project known as the Palm House hotel, leaving them high and dry.
When the auction finally took place in February 2010, more than 100 people gathered in the Point Breeze’s ballroom to watch the grim spectacle. But the historic hotel garnered only a single bid – a $6 million offer from an unknown bidder in the crowd – before TD Bank set the bar at $22 million, which silenced the small handful of lawyers and others who had actually registered for the auction. The Point Breeze became just another bank-owned property, albeit one of the largest commercial structures on Nantucket.
The collapse was complete, and the normally flamboyant Matthews was nowhere to be found. Since the foreclosure, he has failed to respond to multiple interview requests, although sightings of both he and his wife Mia on the island have been reported from time to time. TD Bank also filed a foreclosure petition on Matthews’ Cliff Road home, prompting further silence from the former summer socialite. To date, the home has not been seized by the bank.
His financial troubles in Massachusetts were just the beginning, as similar issues arose with his projects in the Sunshine State. Matthews’ Florida project, the unfinished Palm House hotel, also went into foreclosure.
In August 2010, a Nantucket Superior Court judge issued the largest judgment in island history against Matthews, ordering him to pay more than $2 million to three subcontractors who worked on the failed Point Breeze.
Court records showed Matthews did not lift a finger to defend himself, or even file a response to the accusations against him. Nor did he hire an attorney for representation in the case.
More than year after the judgment, the contractors in the case are still seeking to collect from Matthews, and have been chasing his money in subsequent lawsuits that are still pending in Superior Court.
If anything is clear at this point, it is that the fate of the Point Breeze is still up in the air, even after years in limbo.
“I guess what I would like to see happen is that the building be completed and be put back into some sort of use,” Vorce said. “A hotel-type use is a good use for that property, and I think it’s needed for the island to have another full-service, operational hotel. But there are barriers right now to that, which include the asking price, the construction and the permitting hurdles, which can all stop a project in its tracks.”