Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: WEDNESDAY, May 26, 1993 TAG: 9305260078
SECTION: VIRGINIA PAGE: C1 EDITION: METRO
SOURCE: MARK MORRISON STAFF WRITER
DATELINE: BEDFORD LENGTH: Medium
\ David Herrick is surprisingly optimistic.
He contends that the Bedford Station restaurant, which opened to much fanfare in 1989, will remain open for business despite nearly three years of financial trouble and constant rumors of its demise.
The latest blow came last week when Dominion Bank filed a lawsuit against Herrick and his partner in the restaurant, Michael Macomson of Hickory, N.C.
The bank wants the unpaid balance of a loan it made to the two men in 1990, which was due to be paid back on April 30.
The loan amount was for $94,000. The unpaid balance is $61,008, according to the lawsuit filed in Bedford County Circuit Court.
In addition, court records show that the restaurant owes more than $130,000 in unpaid state and federal withholding taxes.
But Herrick says he is not overly concerned. "I think it'll all have a happy ending - at least I hope it does."
He says he is negotiating with three potential buyers who are interested in taking over the restaurant. All three buyers are in the Roanoke-Lynchburg market.
Herrick believes the sale could be final within the next month - and would allow him and Macomson to pay off their debt to Dominion and the restaurant's back taxes.
It also could enable the restaurant to remain open. The restaurant formerly was the Bedford train station operated by Norfolk and Western Railway.
However, if a buyer can't be found, Herrick isn't sure how much longer the restaurant could stay in business.
He estimates the restaurant's value at $300,000, but he says it has only recently started breaking even after months of operating at a deficit.
More than $500,000 was spent initially to convert the former passenger station into an eatery.
Much of that money was raised through an unusual limited partnership agreement with Bedford residents and other local investors.
The arrangement was similar to buying stock in the restaurant, says Herrick, who works as a stockbroker in Bedford. A share cost $500, and most investors bought two units.
About 300 shareholders reportedly bought into the restaurant.
Herrick and Macomson had promoted the limited partnerships as a way to finance the restaurant's renovation without having to go to a bank for financing.
It also would give the restaurant a ready base of guaranteed customers with a vested interest in its success.
However, less than a year after the restaurant opened, Herrick and Macomson took out loans with Dominion and with Investment Savings Bank, using the restaurant's equipment as part of their collateral.
The Dominion lawsuit does not target the equipment, which was valued by Herrick and Macomson at $222,600. Rather, the bank is going after their personal assets.
One reason for that may be that Investment Savings Bank has first claim on the equipment collateral, according to court records. It was not known whether the restaurant also has defaulted on that loan.
Then, a year after taking out those loans, the restaurant was hit by the Virginia Department of Taxation for failing to pay $34,000 in employee withholding taxes and sales taxes.
In 1992, the Internal Revenue Service filed action against the restaurant for an additional $98,000 in unpaid federal taxes.
Herrick says the back taxes are now part of a Chapter 11 reorganization that was filed by the restaurant last fall. He says he hopes to have the reorganization resolved when a buyer is found.
Herrick's partner, Macomson, also runs a restaurant that was converted from an old train depot in Hickory, N.C. Originally, he was to manage the Bedford Station, but he is no longer there on a day-to-day basis.
Macomson also operated Docksiders restaurant at Smith Mountain Lake before it closed in October, facing liens of more than $25,000 in unpaid state taxes.
by CNB