In what is turning into a multimillion-dollar derby, May Department Stores Co. has emerged as the front-runner to acquire the former Merry-Go-Round headquarters in Joppa, offering $19 million for the 1 million-square-foot complex, $500,000 more than a bid by Gap Inc., according to documents filed yesterday in U.S. Bankruptcy Court.
The complex -- the last symbol of Merry-Go-Round Enterprises Inc., the pied piper of teen-age apparel that collapsed in February -- would be used as a distribution center by Hecht's, a fast-growing division of St. Louis-based May.
Hecht's already employs nearly 1,400 workers at its three distribution centers, all in the region. But the department store chain is running out of room.
"Our existing [space] is not adequate to meet our expansion," said Hecht's Senior Vice President Nancy Chistolini.
Gap, the trendy national retailer out of San Francisco, also wanted the Merry-Go-Round complex to meet its expansion needs. Gap offered $18.5 million for the center, which it would have used as a second East Coast distribution center to complement its 750,000-square-foot Edgewood facility.
But yesterday, reacting to the May proposal, Gap officials said they were withdrawing from the bidding, saying the court-appointed trustee overseeing the bankrupt Merry-Go-Round empire misled them in negotiations.
"It was our understanding we were exclusively negotiating with the trustee, but unbeknownst to us, the trustee was negotiating with another party," said Gap spokesman Mike Whisman.
"We had an agreement on several occasions with the trustee, which the trustee said was a final agreement [but] something always happened to change the terms. It became apparent we'd never get to the finish line, so we decided to walk away from it."
What happened to the terms was that May offered more money than Gap did.
"I have a duty to creditors to sell the property to get the most money as I can," said Deborah Hunt Devan, the court-appointed trustee overseeing the disposal of Merry-Go-Round's assets.
"For the moment, the May Co. bid has superseded the Gap's, but that doesn't mean it'll be the only bid."
Hecht's operates a 295,000-square-foot apparel distribution center in Baltimore, which it began leasing in September 1995 after the former tenant, retailer Woodward & Lothrop, went out of business.
In addition, the company runs a 789,000-square-foot apparel warehouse in Washington and a 406,000-square-foot center in Savage, which moves big-ticket merchandise, such as televisions, furniture and mattresses.
Hecht's would use the Merry-Go-Round complex to move more big-ticket items. Officials have yet to determine how many employees would be needed in Joppa to handle the company's growth.
Hecht's has nearly tripled in size since 1990, when it operated 24 department stores using two distribution centers.
Next week, when the company completes its acquisition of Strawbridge & Clothier, a Philadelphia-area retailer, Hecht's will be running 71 stores. Of those, eight are spread around the Baltimore area, 21 are in Washington and the rest are elsewhere along the East Coast.
Other potential bidders have expressed interest but have yet to come forward with a concrete offer for the Merry-Go-Round complex, an 800,000-square-foot warehouse with about 200,000 square feet of office space.
Should any other suitors want to vie for the site, they may appear at a bankruptcy hearing, tentatively set for July 23 to air objections to the auction procedures, which the trustee filed yesterday.
A court date to hold an auction is expected to be set in August. The trustee will preside over the auction and the bankruptcy judge will make the final decision, but the proceedings will come down to this: the highest price offered.
Pub Date: 7/10/96