For 13 years, John Snipes has operated a small convenience store on U Street Northwest near the Lincoln Theatre, reaping the benefits of having hungry and thirsty moviegoers stop by his cozy shop on their way to or from the shows.

When developer Jeffrey Cohen and his two partners bought the theater last month and closed it for renovation, Snipes said he immediately felt the squeeze on his business, losing about one-third of his sales.

Snipes is one of several U Street small-business owners who complain they have been hurt by the closing of the Lincoln as well as earlier property acquisitions in the area by Cohen's group, the National Rehabilitation Hospital Associates (NRHA), over the last several years.

Cohen counters, however, that closing the "run-down" theater, which is scheduled to be reopened later this year, "is probably the best thing that has ever happened to the community."

The 60-year-old Lincoln, located at 1215 U St. NW, was the last of three once-flourishing movie houses on what was known as the U Street "Golden Strip," which had been Washington's leading black business and entertainment center during segregation. The nearby Booker T and the Republic both shut down in 1976 and have since been demolished. An apartment building stands where the Booker T once was and the Republic site is a vacant lot.

In recent years, the Lincoln had run a weekend show billed as "The All-Night Movie," featuring comedies, horror movies and Kung Fu films that attracted hundreds of patrons.

"The business was great when the all-night movie let out at about dawn ," said Anthony Sims, 22, a short-order cook at the Half-Dollar Carryout across the street from the Lincoln. "We would open at six o'clock in the morning and there would be a long line of people waiting to come in and buy breakfast."

Among leading businesses in the area that gained from the theater traffic is the popular Ben's Chili Bowl, a celebrated carryout.

Virginia Ali, co-owner of Ben's, said the disappearance of the moviegoers "certainly has had an impact. We certainly did get customers from the theater and we miss them."

In the last few years, Cohen, a wealthy District native with a background in banking and real estate, has acquired with his partners sites totaling about seven acres of land in the Shaw area, all located near a planned Metro subway station and the municipal building now under construction at 14th and U streets.

The NRHA partnership paid $11 million altogether for the properties, Cohen said, including $375,000 for the Lincoln.

Cohen said the group plans to reopen the theater by Thanksgiving as a non-profit cultural center that will present plays, musicals and movies for family-oriented audiences.

The NRHA was formed in 1978 when it bought the old Children's Hospital site behind the Lincoln, which occupies the entire block between 12th and 13th and V and W streets Northwest. The group later decided to build the facility on the grounds of the Washington Hospital Center.

Since 1978, the group has purchased land on which the old Thompson's Dairy was located between 11th and 12th and U and V streets Northwest, and two lots and an apartment building at the intersection of 12th and W streets Northwest. The NRHA also owns two buildings that housed the old Manhattan Laundry, on Florida Avenue NW between 13th and 14th streets. All of the buildings are vacant now, Cohen said.

He and his NRHA partners, architect Ted Mariani and Judith Jackson, plan to connect the vacant buildings and lots with a series of promenades and convert them into one large outdoor mall. It is to be called the Samuel C. Jackson Plaza, for the late U.S. Equal Employment Opportunity commissioner who co-founded the partnership. His wife, Judith, has replaced him in the NRHA.

For businessman Snipes, a past president of the Shaw Business and Professional Association, the time to rebuild could not come too soon. Yet, he is wary of developers. He said he fears he may be "developed out of the picture."

"It becomes kind of scary when you see all of these places closing down and you wonder what they're going to be replaced with," he said. "Will the change be for better or will it be worse? Somebody could come in with that big money and it's like anywhere else, competition can knock you off."

The NRHA plans to quell those kinds of fears by building the plaza in conjunction with two community groups, the Shaw Project Area Committee and the 14th and U Streets Coalition. Cohen said there is an agreement between his group and those organizations that "effectively means that they, the citizens as represented by these organizations, will own 50 percent of whatever we build up there."

He said the community will " buy the ground that we own from us at our cost and in turn will lease it back to us." Under this agreement, he said, "They own half the economic benefits of the development and we retain the tax benefits."

The arrangement was made to avoid opposition and respond to concerns in the community as well as "to encourage the government to help finance what we are doing. No bank will finance what we are doing," Cohen said.

Ibrahim Mumin, president of the Shaw PAC, said his group and the coalition have surveyed residents and found they "want the community to be made whole, with the social, cultural and economic amenities that people in Georgetown and other places have."

Among businesses they would prefer, he said, are a drug store, grocery store, convenience store, clothing store, gymnasium, restaurants and a hardware store. But the arrangement with NRHA is still in its preliminary stages, Mumin said.

Meanwhile, Snipes and other small-business owners said they can only wait and hope. "You have to be an optimist and you can't spend your money," Snipes said, " . . . when business is this slow."