CITY, LANDLORD THREATEN SHUTDOWN OF MAGRUDER'S FLAGSHIP

Elliot Zwiebach

ROCKVILLE, Md. -- The high-volume flagship store of Magruder here is being threatened with eminent domain by the city.

According to Stanford Steppa, president of the 11-store operation, the city of Rockville -- in conjunction with the store's landlord, Federal Realty -- wants to upgrade the area surrounding the Magruder Town Center over the next three years by adding new stores with condominium apartments above them. He said the landlord has proposed that Magruder shut the location down for three years during the development process and then reopen in the new center, which would charge a higher rent.

"Closing for three years would have a major impact on the company and our customer base," Steppa said. "With 11 stores, some make money and others are marginal, and closing this particular store would have a very negative impact."

He declined to pinpoint the store's volume but said it is one of the company's highest-volume units. The 11 Magruder stores, located in Maryland, Virginia and Washington, D.C., reportedly do an annual volume of approximately $120 million.

Steppa said Magruder hopes to find an alternative location to move to rather than shutting down the store for three years. "We're an institution in this area, and all we want is to find another location to keep this store in business," he told SN.

That's not likely to happen, Neil Greenberger, a spokesman for the city of Rockville, told SN.

"The developers have made it clear it would not be feasible to do construction around the existing Magruder store, and there are no sites in the area for a replacement store," he explained.

"But Magruder is a part of Rockville, and while all negotiations start off contentious, we're hopeful that, when all the dirt clears and a new town center is built, Magruder will be a key anchor."

According to Greenberger, it is imperative for the city to raze the downtown center and the 60 acres that surround it, which are vacant for several city blocks around the Magruder strip center.

He said the city council hopes to settle the matter without invoking eminent domain. "We hope we don't have to go through legal proceedings," he explained.

If the matter does get that far, the four-member city council and the mayor would vote on whether to take legal action, Greenberger explained. However, no vote is scheduled at this time, he added.

Representatives of Federal Realty could not be reached for comment.

According to Steppa, Magruder invested millions of dollars in expanding the store three years ago from 20,000 square feet to 31,000 square feet, and signed a new 20-year lease in mid-2002, when its original 20-year lease expired -- just a few months before the landlord asked it to vacate the space until a new center is built.

Since then the city has threatened to use eminent domain to condemn the center, he said -- "a method that's usually used in blighted areas, and this is definitely not a blighted area," Steppa pointed out. "It's a very viable center with very happy tenants that has a fully loaded parking lot every day."