Oheka Castle owner skips $27.9M payment, refinances mortgage
The owner of one of Long Island's most lavish wedding palaces did not make the final, balloon payment on the property's $27.9 million mortgage when it came due in August.
Oheka Castle Hotel & Estate's owner, Gary Melius, said he is negotiating with the loan's special servicer to delay the mortgage deadline by as much as five years. The servicer has offered a three-year extension, Melius said Wednesday.
“I'm in the midst of refinancing,” he said. Of the balloon payment, he said, “They allowed me not to pay it while we work out new terms.”
Melius said the missed balloon payment is merely “a technical default.”
A spokesman for the servicer, Texas-based C-III Asset Management, declined to comment Wednesday.
Oheka, the former Otto Kahn estate, has hosted the weddings of such celebrities as Kevin Jonas of the Jonas Brothers, and its suites rent for as much as $1,095 a night.
The French-style castle — one of the nation's largest private residences — had fallen into disrepair before Melius bought it in 1984, sold it and then bought it back again. Melius estimated he has spent $37 million restoring it.
The Huntington property was appraised at $43.8 million in 2007, according to Trepp, which provides data on commercial mortgages. Morningstar Credit Ratings now pegs its value at about $30 million.
Melius disputed the Morningstar valuation: “It's like having the Hope diamond, what do you appraise it next to?”
Wednesday, a report in The Wall Street Journal about Oheka's mortgage prompted a flurry of calls from worried brides, Melius said.
He reassured them that their events will proceed as planned. The venue gets about 90 percent of its revenue from events, not its 32 hotel rooms, Melius said.
Oheka Castle is a “unique” and “beautiful” venue, but it faces a “tough market” for refinancing, said Steve Rushmore, president and founder of HVS, a Mineola-based hospitality consultant.
Restaurants and catering halls, Rushmore said, are “considered pretty high-risk by most lenders.”
A Bloomberg commercial loan report on the property said Oheka's income declined steadily from 2007 through 2011.
In 2007, Oheka reported revenues of $3.16 million, according to Bloomberg. By 2011, its revenues had fallen to less than $2.24 million, the data provider reported.
Melius said the Bloomberg report is not accurate. Last year's revenues exceeded $3.6 million, and this year's are on track to be the best in its history, “closer to the $4 million mark,” he said.