Oheka Castle update: Down payment complete, prospective owner says

One of two prospective owners of Oheka Castle said Friday he and his business partner had completed a $7.2 million down payment required by a federal bankruptcy court judge to purchase the iconic Huntington mansion and hotel.

Paul Alflen, in a brief phone interview, said the down payment had been paid “in the escrow where it’s supposed to be.” He declined to elaborate.

Joseph Maniscalco, attorney for Oheka proprietor Kahn Property Owner, also said Friday that the down payment was made. 

Alflen, asked whether the federal bankruptcy court in Central Islip was aware of the payment, said, “They should already know that.” He referred additional questions to his attorneys.

Brian L. Gardner, the attorney for Alflen's company, Gold Coast Property & Estate Management LLC, did not respond to a request for comment.

Gold Coast's initial failure to make the 10% down payment last week threw a measure of uncertainty into the long-awaited deal to sell the castle, its hospitality operation and a potentially lucrative condominium development plan.

Gold Coast, led by principals Alflen and Ronald Browning, submitted a winning bid of $72 million during an Oct. 27 auction at a Manhattan hotel for the right to purchase Oheka. The company outbid six other entities.

Under the terms of the auction, Gold Coast was initially obligated to make a 10% down payment within 48 hours of the auction. Earlier, the firm had put down a $750,000 deposit to be an auction participant. 

Federal bankruptcy court Judge Louis Scarcella, during an Oct. 29 hearing in Central Islip, granted the firm an eight-day extension to make the down payment in two installments.

Gold Coast said then the payments would be completed by Friday. Scarcella scheduled a Nov. 17 hearing to confirm the payments.

Efforts by Newsday to confirm the down payment with court officials Friday were unsuccessful.

On Wednesday, Maniscalco told Newsday that he emailed the court’s clerk the night of Oct. 29 “when the wire hit,” or when he was notified that the first of two payments, for $4.25 million, had been paid.

Maniscalco said then that he would confirm the second payment on Friday. “I will email chambers and I’ll say, ‘Judge, $2.2 million has been put up,' and they’ll say, ‘Great.’ Nothing gets triggered unless they don’t pay it,” Maniscalco said.

Kahn Property Owner LLC filed for federal Chapter 11 bankruptcy protection last year to hold off a foreclosure sale. Power broker and developer Gary Melius, an Oheka owner who lives at the castle, said at the time the castle had been in foreclosure for a decade.

Court documents show Melius, 82, owes about $60 million to a secured creditor, and between $8 million and $10 million to unsecured creditors and for professional fees.

Oheka’s largest secured creditor, 135 W. Gate LLC, had objected to the extension granted to Gold Coast last week, citing possible violations of the bid procedure's timeline and questions about the winner’s lending institution.

Leslie Ann Berkoff, the attorney for 135 W. Gate, declined to comment Friday. She added the creditor, as a company, also declined to comment.

Last week, she told the court the timeline for delivering the 10% deposit was agreed upon in the bidding terms, which stated that change requests should be made before or during the auction.

She noted in court the institution backing Gold Coast's purchase of Oheka wasn't a recognizable bank name but an “internet website that has no meaning” where you "make your own" proof-of-credit note.

“We have real reasons to be concerned," she said in court last week, calling the financing plan a “house of cards.”

Scarcella had warned that if Gold Coast Property & Estate failed to deposit the remaining $2.2 million by Nov. 6, it would forfeit the entire down payment and the winning bidder would become 135 W. Gate by default, unless the judge further modifies the terms or grants additional extensions.

Newsday's Sam Kmack and Deborah S. Morris contributed to this story.