Oheka Castle owner: 'Events will proceed as planned without disruption' after bankruptcy filing

The owner of Oheka Castle is assuring customers that everything is operating as usual as the famed landmark goes through a bankruptcy process.

Kahn Property Owner LLC, the entity that owns the property and whose manager is Gary Melius, filed for Chapter 11 bankruptcy protection from its creditors July 31 in federal court in Central Islip.

Kahn Property “hopes to be able to utilize this reorganization process to recapitalize” the castle with more money, states a joint news release from Oheka and its largest secured creditor, 135 W. Gate Drive LLC and the investment firm Taconic Capital, which is owed more than $50 million.

The release also states that the castle “remains fully operational, and all bookings, hotel accommodations, and events will proceed as planned without disruption.”

Melius on Thursday referred all questions to his Wantagh-based attorney, Joseph S. Maniscalco. Maniscalco didn't immediately respond to a request for comment.

Oheka owes $63.5 million to creditors and has assets of $92.8 million. The property had $57.27 in its checking account as of the bankruptcy filing.  

A spokesman for Taconic, in a statement emailed to Newsday on Thursday, said it “is committed to Oheka's long-term future. We have every expectation that guests will continue to receive the same high-quality experience that they have come to expect.”

Meanwhile, court documents shed light on what precipitated the bankruptcy filing.

On April 4, a State Supreme Court judge in Suffolk County ordered that Oheka be sold at auction to pay the $50.2 million owed to 135 W. Gate/Taconic plus interest of $6,747 per day and legal fees of $2.8 million. The auction was to be conducted Thursday by Garden City attorney David I. Rosenberg, who has been serving as foreclosure referee, the documents show.

A notice of sale for the property was filed with the Suffolk County Clerk on June 26.

In a separate action July 1 in the Appellate Division, 135 W. Gate Drive LLC/Taconic sought to stop a motion that would have prevented the sale auction.

Oheka’s financial woes began when Melius stopped making payments on the mortgage in November 2015 and lenders responded by suing to foreclose on the property, Newsday previously reported.

In 2019, a state Supreme Court justice sided with the lenders when they sought to foreclose on the castle, Newsday previously reported. The judge appointed a referee, Rosenberg, to calculate the property's debt and determine whether the lenders had acted properly in demanding full payment.

Melius won an appeal, but in August 2022, the lenders were granted a second summary judgment and won. Melius then appealed again.

Melius, in a phone interview Monday to confirm the bankruptcy filing, said it was made because he needed more time. “ ... because I want to wait until my appeal is heard again, I had one appeal with them already, I beat them once already, I’ve held them up for 10 years...” he said.

Jackie Costello, of Garden City, whose daughter Emma is planning to get married next summer at the castle, shared her concerns with Newsday TV earlier this week.

"Out of all the places that you could pick, you pick the one that might not be here next year. ... And we already have money put down and things reserved," Costello said.

Melius on Monday vowed that operations at the castle will continue uninterrupted.

“The weddings are all still on,” he said.

Newsday TV's Virginia Huie contributed to this story.