Oheka Castle update: Winning bidder Gold Coast Property & Estate LLC gets an 8-day extension to make down payment

A federal bankruptcy court judge on Thursday granted an eight-day extension to the winning bidder of Oheka Castle to come up with its 10% down payment for the palatial Huntington landmark, over objections by the castle's largest creditor.

Gold Coast Property & Estate LLC, which made the top bid of $72 million to secure ownership of the castle at an auction Tuesday, was required to deliver 10% of that amount — $7.2 million — within 48 hours of the auction's close.

Before the auction, the company had put up a $750,000 deposit to participate in the bidding. But at a hearing Thursday, attorney Joseph Maniscalco asked Judge Louis Scarcella to give the company extra time to cover the balance. Maniscalco represents Kahn Property Owner LLC, the entity that owns the castle, and spoke on behalf of the winning bidder.

"The procedures provided it [the deposit] had to be put up within a certain period of time, so they just needed a little bit more time," Maniscalco told Newsday after the hearing.

Maniscalco said Gold Coast Property & Estate would wire $4.25 million into an account toward the deposit Thursday, and the remainder, $2.2 million, by next Friday, Nov. 6.

Creditor objects

135 W. Gate LLC, Oheka’s largest secured creditor, objected to the extension, 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, 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 the lending institution 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, calling the financing plan a “house of cards.”

Paul Alflen, a principal with Gold Coast Property & Estate, told Newsday after the judge's ruling: “I’m confident; everything is OK.”

According to Maniscalco, the company's opening bid was $72 million for the property, development rights and hospitality operations. Another bid was made by 135 W. Gate for just the property, offering $60 million. Last week, Scarcella allowed 135 W. Gate to use up to $61 million in credit to bid on the purchase of the castle.

During Thursday's proceedings, Scarcella warned that if Gold Coast Property & Estate fails to deposit the remaining $2.2 million by Nov. 6, it forfeits the entire down payment and the winning bidder becomes 135 W. Gate by default, unless the judge further modifies the terms or grants additional extensions.

Scrutiny over the wait

After a break, and before issuing his ruling, Scarcella questioned why Gold Coast Property & Estate would bid $72 million knowing the remainder of the 10% down payment would be required within days.

He noted that bid procedures allowed an adjustment before or during the auction and questioned why the developers waited until afterward to request an extension.

In making his ruling in support of the extension, he said it preserves “the sale process on the table.”

“There is no backup bid for the entire ball of wax,” Scarcella said.

Ronald Browning is a principal of Gold Coast Property & Estate, along with Alflen. The company outbid six other entities vying to purchase the iconic Gold Coast property at the auction, held in Manhattan and conducted by Concierge Auctions.

Kahn Property Owner LLC filed for federal Chapter 11 bankruptcy protection last year to hold off a foreclosure sale. Gary Melius, who has an ownership stake in Kahn Property Owner, said at the time the castle had been in foreclosure for a decade.

Court documents show Melius, 82, owes about $60 million to 135 W. Gate Drive LLC and between $8 million and $10 million to unsecured creditors and for professional fees.

All parties are due back in court Nov. 17.