, Newburyport, MA

December 17, 2007

Catering to the 'superwealthy'; Karp's downtown finds niche with America's elite

By Stephen Tait , Staff Writer

NANTUCKET - Inside Barry Thurston's bait and tackle shop in the downtown district here are the things one would expect to find in a shop three decades old: the fishing lures and knives, the rods and reels, the hats and sunglasses; products in a slight state of disarray that comes when product placement trends don't mean much to an owner.

But outside Thurston's store, the bait and tackle shop is surrounded by boutiques and art galleries, jewelry stores and even a massive Ralph Lauren store a couple of blocks away - stores with products placed just so, meant for well-bankrolled shoppers.

Thurston's shop is closing after 33 years, but the 65-year-old man, dressed on a recent afternoon in a maroon sweat shirt and khakis covered in the black stains of manual labor, says it isn't because of high rents or declining business. He wants to move on to something else, something he's yet to figure out.

More and more often, Nantucketers say the culture of the island is changing and continually turning more upscale, pushing out the middle-class working people like Thurston.

Thurston said he's noticed the change, particularly in the past decade or so.

"This place has gradually become a tourists' spot for the wealthy," he said. "It really started to change in the last 10 to 15 years here, when you see the big money really get here, the serious money, the billionaires."

Behind the scenes of this cultural change - either reacting to it or pushing it along, which one isn't exactly clear - is Stephen Karp, the president and chief executive officer of New England Development and the largest taxpayer on the island, a distinction he also holds in Newburyport.

Karp, a billionaire, owns about 75 percent to 80 percent of the retail buildings in the island's downtown district and about 90 percent of the lodging properties on the island, Nantucket Assessor Deborah Dilworth said.

And though Karp did not return phone calls over two weeks seeking comment on this story, interviews with residents, retail store owners, town officials and other Nantucketers reveal a management plan that is focused on making Nantucket the island it is today: a vacation destination for the world's jet set.

Going upscale

Inside David Place's Manor House Antiques, a small shop in the basement of a building on Centre Street in the business district, items are scattered about without order, creating a single, narrow pathway that allows customers to circle the store.

On a recent evening, Place sat behind a small counter, surfing the Internet and chatting with customers.

For 34 years, Place said he's operated antique shops on the island and has noticed many changes, including many spurred on by Karp. Asked about how much of an influence Karp is compared to other island developers and landowners, Place states quite simply: "He's the man."

During his three decades of business on the island, he says, "it has gotten busier, it has gotten nicer, it's cleaned up."

"But at the same time, it has lost its innocence," he said. "And that is what we are trying to maintain and bring back, and I think Karp is going the wrong direction. He wants everything to be upscale and sophisticated."

Place says it is clear to see Karp's push to attract the wealthy simply by checking the rates of the Wauwinet, a hotel that was one of Karp's first commericial property purchases in the mid-1990s. At the hotel during the summer, rooms range from $700 to $1,450 per night.

Dilworth, the assessor who has lived on the island since 1981, points to other aspects of the island as evidence.

She described a downtown that used to be home to a grocery store, a small five and dime shop, and other stores that provided staples for everyday living. Now, though, the downtown is a boutique-oriented district and losing its cohesion, she said.

"We've lost a lot of the local flavor downtown," Dilworth said. "There has been a lot of change on Main Street as far as going upscale."

Newburyport 'special' in Karp's eyes

Andrew Vorce, the town's planning director, said Karp's most recent project is an example of his quest to upscale Nantucket.

Karp is developing a plot of land called the Harbor House. He is building a hotel, conference center and residences where a series of modest townhouses used to sit, Vorce said.

Karp demolished those buildings and is constructing high-end places in their spot.

"It is mostly the same use, but it is a dramatic change from the existing buildings," Vorce said.

Vorce said that he and planners in his office have "had limited interaction with them" and discussions about potential development or plans are "very limited."

Still, he described working on the Harbor House permitting process with Karp and his people as a "positive" experience.

Vorce did say he has met with Karp socially, and Karp and his managers have come in to talk about "observations" and talk about the Harbor House.

"He considers both Nantucket and Newburyport as kind of special, and he manages them different than his mall areas," Vorce said, adding that Karp considers the two communities "premier" locations. "He wants the characteristics to both communities preserved. I think he very much recognizes the unique qualities."

Michael Sturgis, 52, who has known Karp since 1987 and worked for him for 10 years, said Karp is reacting to the change in demographics rather than pushing it along.

"Nantucket has become a wonderful haven for wealthy people during the summertime," he said, and Karp's business dealings "reflect the needs of that population."

Sturgis worked as the beverage manager at Karp's White Elephant hotel and has known Karp and his wife, Jill, for about 20 years. He says he still has a very close relationship with Karp, whom he describes as "one of the nicest people I know."

"He is a billionaire, very wealthy," said Sturgis, who now owns his own restaurant, Cinco, an upscale tapas restaurant on Amelia Drive outside the downtown district. "But he is a very humble man."

Sturgis said that, like many, he would like things to be the way they were in 1981, when he first came to the island, "but I know it is not going to happen."

"That is not what it is today," he said.

As a businessman, Sturgis described Karp as someone who will take his time to analyze a project and properties for many months.

That is reflected in Newburyport, where Karp and his associates have said they are taking their time to develop plans for Waterside West, the 8-acre plot along the Merrimack River.

"He is a very shrewd businessman," Sturgis said.

Sturgis said that when Karp does make a decision, projects come together fast. For instance, when Karp renovated the White Elephant, a 66-room hotel and restaurant, it took from October to June.

"That is very hard to do, especially on this island," Sturgis said.

"He is a very patient person," he added. "But when he does make a decision to do a project, he does it very quickly."

Living among wealth

Chris Holgate, a 50-year-old scallop fisherman, stood on a small dock on a recent afternoon unloading the day's catch from the waters off of Nantucket. Holgate, who was born on Nantucket, still lives there year-round, but he says his breed is becoming more rare.

He says many of the natives have been forced to live on the mainland as the cost of living continues to rise. Many make daily commutes to the island.

The ferries are often packed with laborers carrying their toolboxes, and locals say there are about 100 trucks and vans belonging to electricians, plumbers, carpenters and others almost always parked at the Nantucket airport, waiting for the commuting laborers.

"There are a lot more rich people coming," Holgate said as he unloaded one of the 10 boxes of scallops of that day's catch. "It is getting too expensive for island people to live here. Many people are moving off island and commute here to work."

Whitey Wilauer, the chairman of the town's Board of Selectmen, said 300 to 500 people commute to the island every day in planes and on ferries.

"It is all off-island labor because the cost of living here is too high," he said.

For example, the average assessed value of a residential property on Nantucket is $1.16 million, and the average price of all residential property is $1.5 million, which includes seasonal homes.

"There are very complex economics that are happening here," Wilauer said.

Place, the antique store owner, said that as a result of the island attracting the wealthy, the middle and upper middle class families are no longer traveling to the island for vacation because it is too expensive.

"And that is what always fed this island," he said.

He said that, at the same time, fewer people in the working class can afford to live on the island year-round, forcing employers to turn to immigrant labor. But Place said the documents that allow immigrants to work on the island are only for a certain number of months each year, so they come in April and leave in the fall.

"For many years we were becoming more year-round," he said. "But we've become much more seasonable."

Meanwhile, Wilauer said the super rich don't necessarily add to the local economy since they fly in their own chefs, their own staff and host parties at their residences.

"They are not using our restaurants so much," Wilauer said. "It is putting a lot of stress on the local economy when Karp drives the price of local business up.

"He is shooting for a high-end clientele. I just don't know if that will work."

Jets and safety

During the 2004 presidential campaign, Sen. John Kerry flew into Nantucket on several occasions on a Boeing 757, just one example of what Nantucketers have for the super wealthy who use the island as a getaway.

Place calls the airport "very important" to the evolution of the island.

"It is an easy trip," he said. "There is a lot to be said for that."

Place said businessmen from throughout the East Coast - from New York, Philadelphia, and Washington, D.C. - see Nantucket as an easy destination.

Wilauer said the airport attracts "his and her corporate jets."

"We are very convenient for the new rich," he said. "We are getting people from all over the country."

Thurston was quick to point out that Newburyport may see similarities to what Nantucket is facing, but there are differences, specifically that the city is not isolated like Nantucket.

"I would guess Newburyport is going to be more expensive, but it's not going to be like this," Thurston said. "You can't just drive here like you can there."

Thurston, Wilauer and Place - among others - said the safe streets of the island also attract the super wealthy.

"It is safe for them," Wilauer said. "You aren't going to have any kidnapping here."

Place said women can wear expensive jewelry out to dinner and walk the dark streets of Nantucket with their husbands and not have to worry about getting harmed.

"There is a lot to be said for personal safety nowadays."

Some property owners on Nantucket Island

* Bill Belichick, Patriots football coach: several properties worth more than $1 million

* Dennis Kozlowski, former CEO of Tyco: selling oceanside home for about $19 million

* Tommy Hilfiger, clothing designer: home valued at more than $11 million; two other properties worth more than $1 million

* Chris Matthews, news personality, host of "Hardball" on MSNBC: home valued at more than $5 million

* Jack Welch, CEO of General Electric: home valued at more than $5 million; land valued at more than $4 million

* Stephen Karp, CEO of New England Development: home valued at more than $9 million

Source: Nantucket assessors' Web site

Note: Homes often sell for much more than assessed value.