Court rules in favor of lenders in bid to force Oheka Castle foreclosure

April 08, 2019 03:05PM

New York State Supreme Court Judge Elizabeth Emerson has moved the potential foreclosure of the historic Oheka Castle in Huntington one step closer by dismissing owner Gary Melius’ claim that lenders withheld escrow payments and did not participate in good faith discussions about a loan workout agreement, Long Island Business News reported. Emerson also appointed David Rosenberg, a senior partner at the Garden City-based law firm Rosenberg Fortuna & Laitman, to calculate the debt owed by Melius, a controversial Long Island real estate developer. LIBN estimated that debt could total more than $35 million, although Melius told Newsday that the figure is just $28 million. Melius, who survived an apparent assassination attempt in 2014, has been fighting for three years with lenders led by U.S. Bank and its Florida loan servicer LNR Partners. The latter initially claimed that Melius failed to pay two commercial mortgage-backed securities totaling $29.79 million. LNR began foreclosure proceedings in June 2016, but Melius then countersued for $10 million and sought to dismiss the foreclosure action. In January, Emerson appointed Jeffrey Kolessar, vice president of Philadelphia-based GF Management, to serve as Oheka Castle’s overseer. Oheka Castle, built in 1921 for late financier Otto Kahn, fell into disrepair before Melius bought it in 1984 and transformed it into a catering and event space. Today the Suffolk County property has 126 rooms, 450 windows and doors and 4,000 slate roof tiles, along with 3,000 trees and bushes. Musician Kevin Jonas and political operative Huma Abedin have both had weddings there. The court battle is expected to continue for another few months before the property can be turned over to U.S. Bank and LNR, who would sell it via an auction. Melius, however, is hoping to prevail. He told Newsday that he has plans to build 37 condos in Oheka Castle, pending the Town of Huntington’s approval. [LIBN]