EBaum's files Chapter 11 for Webster sites

Will Astor//April 27, 2012//

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EBaum’s Webster Ventures LLC has asked for court protection from creditors.

The firm was founded in 2007 by the father-son duo of Neil and Eric Bauman, partially financed with proceeds from the $17.5 million sale of the eBaum’s World comedy-video website, which Eric started as a high school student.

EBaum’s Webster Ventures was formed to develop a 325-foot strip on the village of Webster’s main drag into an upscale destination for young professionals.

"We’d like to be involved in helping to bring the village up to the same level Schoen Place, Fairport and Pittsford have," Neil Bauman told the Rochester Business Journal in a 2007 interview.

Bauman, the venture’s managing partner, predicted in an interview this week that the Webster development would be on track to meet that goal in a matter of months, having recently begun to recover from setbacks that occurred with U.S. economic woes in 2008.

In the Chapter 11 petition-filed April 20 in U.S. Bankruptcy Court in Rochester-eBaum’s Webster Ventures lists assets of $4 million against debts of $3.25 million. It names two creditors-the County of Monroe Industrial Development Agency and Genesee Regional Bank.

The sole assets stated in the petition are the properties at 22, 24, 26-32, 34-38, 38-1/2, 40 and 44 E. Main St. in Webster, collectively valued at $4 million. A $3.25 million mortgage on those properties held by Genesee Regional Bank constitutes the only stated liability. The $4 million valuation is an estimate and would be subject to an appraisal, the petition states.

In 2008, eBaum’s Webster Ventures won tax breaks from COMIDA totaling more than $200,000 for the Webster project.

The bankruptcy petition cites COMIDA as having a security interest in the East Main Street properties but lists the agency’s financial stake in the project as zero.

COMIDA executive director Judy Seil declined to comment.

Publicly filed records show that Genesee Regional Bank commenced a foreclosure action against the firm in January and the court put the property into receivership in February.

As of the Chapter 11 filing date, the receiver, Riedman Development Corp., which had been operating the Webster project since February, returned control of it to eBaum’s Webster Ventures, Neil Bauman said this week, and he is again running the operation.

A Riedman Development Corp. official confirmed that the project had been returned to Bauman’s control.

EBaum’s Webster Ventures took out the Genesee Regional Bank loan in 2008 to finance the project’s construction, Bauman said. The loan went into default because the block, though partly filled with tenants, did not until recently generate revenues sufficient to meet expenses, a shortfall Bauman blamed on a depressed real estate market.

To keep the Webster project alive over the past few years, he and his son had borrowed from other real estate ventures to support it, eventually sinking some $3 million of their own money into it, Bauman said. Neil Bauman also opened a restaurant on the downtown Webster block, Prime Steakhouse, a separate venture that leases a building from eBaum’s Webster Ventures.

The Bauman family’s real estate holdings include property at East Main Street and North Clinton Avenue in downtown Rochester, where Neil Bauman’s father once ran a jewelry store. The downtown property had been marked for demolition to make way for the Renaissance Square project, proposed as a publicly financed redevelopment of the faded downtown corner.

Neil Bauman vocally opposed Renaissance Square, at one point using a billboard at Main and Clinton to denigrate the project, which has since been canceled, as a boondoggle. In 2010, Bauman opened a takeout and counter-service restaurant called Food at the site. His family still owns the building, but Food is managed by another party, Bauman said.

No more money can be wrung out of the family’s other ventures, Bauman said. Remaining net proceeds from the $17.5 million eBaum’s World sale are tied up in illiquid private-equity funds and unavailable for the next six years.

The $17.5 million sale, which consisted of cash and some $2 million in stock, was supposed to be a down payment on what was to have been a price of more than $50 million for the eBaum’s World website. The buyer, San Francisco-based Zvue Corp., never came through with more than token payments, Bauman said. His son continued to work for the site for a while but parted ways with Zvue after a legal battle in 2009.

Delisted by Nasdaq in 2009, Zvue shares (OTC: ZVUE.pk) are listed as an over-the-counter stock with zero value and no trading activity. The eBaum’s World website remains in operation under a third owner, Viumbe LLC, which bought it from Zvue and also runs two other websites that aggregate video.

In the Webster project, Bauman said, he had an opportunity some four months ago to move two key tenants-a state Off Track Betting Corp. operation and a sports bar and submarine sandwich shop-into a new building on the East Main Street strip. But there was a catch: The Webster development could not afford to put up the building and continue to make payments on the construction loan.

Bank officials were unwilling to let the loan payments slide, he said. Early this year, he and his son were able to borrow enough money to bring the interest-only construction loan payments up to date, but the bank further demanded a $100,000 reduction of the loan’s principal, which they could not come up with.

Genesee Regional Bank president and CEO Philip Pecora declined to comment.

The OTB facility has now signed a 10-year lease on its space in the new building. And Rubino’s Italian Subs and Sports Pub has moved into the building, Bauman said. Both are generating heavy traffic.

Those and other tenants have brought the project to 70 percent occupancy, a figure Bauman said is close but not quite at the 88 percent occupancy rate that would induce one of several potential lenders he is talking with to refinance the project.

While conceding that the Webster project’s turnaround is not guaranteed, Bauman said he is confident of refinancing and bringing it out of Chapter 11 within six months. To reach 88 percent occupancy, the development needs to lease 6,000 square feet remaining on the ground floor of the building whose upper story is occupied by the OTB parlor and Rubino’s. No tenant is yet in hand, but one will surface soon enough, Bauman believes.

"I’m passionate about this," he said. "It’s going to happen."