A listing for a newly built Southampton home boasts of “dramatic floor-to-ceiling windows” and “park-like grounds” with lush landscaping just a block from the ocean, The Real Deal reported. What the $13.4 million listing doesn’t mention: The owner’s equity interest was wiped away in a foreclosure in February, and now his lender wants permission to kick him out and sell the home in a bankruptcy auction. The lender, an entity apparently tied to Miami-based distressed investor Lakeport Capital, claims that one of the home’s former owners, Mark Gallagher, is trespassing by continuing to live there after the foreclosure. The 10,000-square-foot Cape Cod-style home, which is actively listed, has been thrust into the convoluted world of bankruptcy, adding to Gallagher’s growing legal battles surrounding the shiny new mansion. In February 2020, hard-money lender 5 Arch Funding Corp. provided Gallagher with $5.8 million in financing for the project, consisting of a $3.3 million senior loan and a $2.5 million building loan. The consolidated loan was personally guaranteed by Gallagher and his wife, Nicole. The next year, creditors and lenders began coming after the couple. Blue Sky Ltd., an anonymous company based in the Cayman Islands that acquired the debt, alleged that the Gallaghers had defaulted in October 2021 and initiated a Uniform Commercial Code foreclosure. On Feb. 17, Blue Sky won the auction with a credit bid using its existing debt. As a result, it took over the equity interests in the LLC that owned the home. Late last month, the new owner filed for bankruptcy, allowing the LLC to restructure, and hired David Goldwasser as the restructuring officer. The bankruptcy petition lists Jean-Marc Orlando, founder of Lakeport, as the sole owner of the debtor entity. The petition claims the property has $12.3 million in liens, which is close to its value. In a separate lawsuit in federal court, Mark Gallagher is seeking a temporary restraining order to stop the new owner from removing him from the property. His attorney alleges the interest rate used for the secured loan is higher than 25 percent and criminally usurious.
