Oheka Castle auction could be next month, operator and lawyer say

Gary Melius' yearslong battle with creditors over the landmark Oheka Castle in Huntington could soon be coming to an end. 

An auction of the historic property in the midst of bankruptcy proceedings is scheduled for Oct. 27, the attorney for the property told Newsday.

“I’m not thrilled, but there’s a time for everything,” said Melius, 82, the longtime castle operator. “I’m not upset. My debt is too heavy; I can’t carry it; I don’t have a choice.”

Kahn Property Owner LLC filed for federal Chapter 11 bankruptcy protection from creditors last year to hold off foreclosure. Melius, who bought the property in 1984 and continues to run it, has an ownership stake in an entity that controls Kahn Property Owner LLC, court filings show.

The entity updated plans to reorganize under federal bankruptcy code earlier this summer. On Sept. 3, Judge Louis A. Scarcella approved a hearing on the plan for next month, with creditors' acceptances or rejections due before, court records show.

Seeking a bidder

Oheka Castle carries a storied history, playing the backdrop in famous films and television series. It stood in for Xanadu in the opening scene of "Citizen Kane," and over the years was featured in television shows such as "Gossip Girl" and "Succession." Taylor Swift filmed the music video for "Blank Space" there in the fall of 2014. 

Joseph S. Maniscalco, the lawyer for the LLC, said the entity is moving toward a public auction of the real estate, development rights and hospitality operations of Oheka Castle.

Concierge Auctions will oversee the sale on Oct. 27, which will be held in person and virtually in New York City, Maniscalco said Friday.

Maniscalco said Melius owes about $60 million to investment firm Taconic Capital and anywhere between $8 million and $10 million to unsecured creditors and for professional fees.

Taconic Capital could not be reached for comment.

The hope is to get “$75 million or more” from the sale of the property at 135 W. Gate Dr., Maniscalco said. The property, built between 1914 and 1919, includes a catering hall and restaurant.

“This gives Gary the ability to finally pay off the debt because we believe the value of the castle is more than what the secured creditors are owed, and it gives him the ability to reorganize, and it gives him a successful bankruptcy,” Maniscalco said. “He will no longer own Oheka Castle. He will be selling Oheka Castle so that he can pay off the debt, so he can pay his creditors."

"Hopefully," he added, "it sells high enough that he walks away with some money.”

The judge has set an Oct. 13 deadline for creditors to vote to accept or reject the reorganization plan. A confirmation hearing, where objections will be considered, is scheduled later in the month, Maniscalco said.

Storied history

Melius purchased the castle in 1984 and restored it to its former glory, building it into a top wedding destination. He said in a phone interview that everything comes to an end.

Melius became a prominent political power broker, hosting fundraiser and Monday night poker parties at his vast estate. He was shot in the castle's parking lot in February 2014. The case remains unsolved.

Maniscalco said the property will be marketed to possible buyers on a “global scale.”

Prospective bidders must meet certain requirements: For example, they must put down a $750,000 refundable deposit in escrow and show they have the ability to close in 30 days, Maniscalco said. 

Maniscalco has said that catering events have proceeded uninterrupted.

By Deborah S. Morris

deborah.morris@newsday.comdsvmorris

Deborah Morris is a native Long Islander and covers the town of Huntington.