Town And Property Owner Settle Dispute Over Duryea's Development Potential In Montauk

The billionaire owner of the once shabby-chic Duryea’s Lobster Deck in Montauk has settled a lawsuit with East Hampton Town that will allow him to legalize the property’s “restaurant” and seek permission for expansions in the future—but also will ban cruise ships and ferry boats, and make way for upgrades to roads and septic systems at the property.

Attorneys for the town and Marc Rowan, the hedge fund investor who paid more than $6.3 million for the Duryea’s property in 2014, reached a settlement agreement in late January that will dispense with dueling legal challenges between the town and the corporation that Mr. Rowan owns the property under, in exchange for stipulations by both sides.

The settlement will dispense with longstanding conflicts over the various uses at the property, mostly brought about by changes made without permits by the politically connected former owner, Perry B. Duryea, the patriarch of the family and a longtime New York State assemblyman and senator.

It will allow Mr. Rowan to apply for an “expedited” site plan review by the Planning Board for a restaurant, which had technically not been legal at the site under vague allowances approved by the town’s zoning board in 1997.

The town will acknowledge that it has no authority or control over the property’s assets seaward of the high tide line on Fort Pond Bay, by virtue of rare state “patents” that were secured by the Duryeas decades ago, leaving only New York State with authority to oversee activity pertaining to the property’s large and newly refurbished pier.

But the pier also will be expressly barred from being used for the docking of cruise ships or ferries. The prospect of that future use was the subject of much rumor and debate in Montauk shortly after Mr. Rowan purchased the Duryea property—possibly because the investment fund that Mr. Rowan co-founded, Apollo Global Management, owned a substantial chunk of Norwegian Cruise Line at the time—even though his representatives immediately and vociferously denied that such a use had ever been discussed.

An attorney for Mr. Rowan, Michael G. Walsh, said on Monday that the settlement with the town does not mean that plans from 2015 to essentially raze all of the existing structures on the property and redevelop the entirety of the waterfront with a new restaurant and shops now will be revived—and the existing restaurant is not at risk.

“Duryea’s is going to be business as usual,” Mr. Walsh said. “We’re not doing any construction. There are no plans that I’m aware of for anything more. Marc hasn’t mentioned anything else, so I see it staying this way in the near future.”

The settlement expressly states, however, that none of its stipulations precludes Mr. Rowan from submitting applications “of any type” for changes to the property in the future.

The main stipulation on the part of Mr. Rowan’s corporation appears to be the pledge to install a costly nitrogen-reducing waste treatment system that will serve the entire property. Mr. Walsh said the system is expected to cost between $750,000 and $1 million and will be installed on the east side of Tuthill Road—though the specific location is still to be decided.

Town planners had previously taken the stance that siting the septic system, and a new parking lot for the restaurant, on the east side of Tuthill Road was not allowable, because that portion of the land, which is legally all one lot, is in a residential zone.

Mr. Rowan also will donate about three-tenths of an acre of land along the edge of Tuthill Pond, and half of the bottomlands of the pond itself, to the town, or to an agreed-upon environmental group, to allow public access to the pond—something that had been proposed in the original redevelopment plans.

The property owner also will pay for road and drainage improvements to address chronic flooding in the area near the small pond, according to the settlement documents.

The property currently contains the approximately 11,000-square-foot commercial building that is home to the restaurant area and seafood market, a gourmet food shop and other retail stores, and a wholesale ice house. There are also two residences on the property—a small cottage that sits nearly on the beach adjacent to the restaurant, and the larger former Duryea home across Tuthill Road from the restaurant deck. There is also a garage on the east side of Tuthill Road, traditionally used for storing vehicles and equipment for the ice house and seafood market.

Mr. Walsh said that all of the structures will remain largely as they are now, other than the waterfront cottage being converted from four small living quarters to a more traditional one-bedroom arrangement, which will be done through an application.

Mr. Rowan’s original plans had called for the Duryea home to be razed, and that section of the land used for sewage treatment and parking for the new restaurant. Town planners had said the residential portion of the property could not be used for parking or the septic system.

Duryea’s has evolved over the decades from a fish packing house to a retail seafood market to, effectively, a take-out restaurant where customers could bring their own wine and grab boiled lobsters and clams and eat them at a cluster of tables arranged along the rocky waterfront.

When Mr. Rowan took over, his restaurant operations group—which also runs nearby Arbor restaurant, and Lulu Kitchen in Sag Harbor—added waitstaff and the menu took a turn away from its rough-hewn past toward the posh and curated. It now features a $54 lobster Cobb salad, $37 tuna Nicoise and an $18 side of fries—which can be washed down with a bottle of 2004 Dom Perignon for $795 or a Methuselah of rose wine at about $1,300 for large groups ready to quaff the equivalent of eight bottles of wine.

The town’s head-butting with Mr. Rowan began shortly after he took over the property, when he began repairs to the pier, which had been badly damaged in Superstorm Sandy, without a natural resources permit from the town. The town issued a stop-work order, but the work continued. Mr. Rowan’s attorneys defended their position, spotlighting patents issued for the property by the state in the 1930s and 1970s that effectively gave the property owner complete control over the waterfront and underwater lands, which obligated them to maintain it according to state standards.

The owners also challenged a 1997 determination that the historic restaurant use had been a vaguely defined food service venture that did not qualify as a full-fledged restaurant. A restaurant would be a permitted use at the property, and Mr. Rowan’s representatives said they wanted to codify that, but the need for parking and upgraded septics posed more conflict.

The settlement will allow the property owner to apply for site plan approval for the full-fledged restaurant and locate the septics and parking elsewhere on the property.

Mr. Walsh said the impact of the decision on Duryea’s as it has operated since Mr. Rowan took over will be negligible. “They are still going to be serving lobsters,” he said.

Last summer, Mr. Rowan won a legal battle with the town over another property nearby. A state judge overruled the stance of town building inspectors that a property Mr. Rowan owns at 80 Firestone Road, immediately next door to the Montauket bar and restaurant, was inhibited from being redeveloped because a sloping ravine in the land constituted a “bluff” that triggered broad setbacks on the development of the three new homes Mr. Rowan had proposed.

East Hampton Town Supervisor Peter Van Scoyoc said he thinks that the settlement negotiated by Town Attorney Michael Sendlenski is reasonable and fair to both the town and the property owner. He said the Town Board was consulted about the details of the settlement negotiations throughout, but that the board has not voted on the specific settlement. As of Tuesday, he said he was not sure whether that would be required or not.

Mr. Van Scoyoc pointed to the environmental benefits of the nitrogen-reducing septic system over the older septics that building had been using and could have continued to use under its “pre-existing, nonconforming” designation under zoning.

“This is a very unique property, due to its former owner,” Mr. Van Scoyoc said, referring to Perry B. Duryea. “This puts to rest some of the jurisdictional issues and other questions about what he can and can’t do there. It puts to rest the cruise ship and ferry concerns there, which could have been out of the town’s control, and they had a failing septic system there, and they’ll be fixing the drainage issues at the bottom of the hill. It just cleans everything up.”