Mt. Vernon Triangle Edges Upward

By Dana Hedgpeth
Washington Post Staff Writer
Monday, April 3, 2006

For more than 20 years, George Sigalas and his brother, Anthony, have watched from the second floor of the brick building where they run a strip club at the southeast corner of Fifth and K streets NW as new condos, offices and retail have sprouted in downtown to their west and around Verizon Center to their south.

Now change has come to their block.

Directly across the street from their nightclub, called Louis' Rogue, cranes and dump trucks are working to build CityVista, a $215 million project that will feature 119 condominiums selling for $500 a square foot and a 58,000-square-foot Safeway supermarket. On the blocks around them other condominium and office projects with names like the Sonata, the DuMont and Madrigal Lofts are underway.

Altogether, about 120,000 square feet of retail, more than 1,700 apartments and condominiums and 234,000 square feet of offices are under construction in the neighborhood known as the Mount Vernon Triangle, making it one of the most active development areas in the District. And much more is planned.

"They say it's progress," said George Sigalas, 55, as a woman in a tropical bikini top and hot pink spandex shorts trotted by his seat near the bar on her way to the stage for a noon show one day last week. "There's no stopping it."

The District's downtown has become mostly built-out over the past few years, thanks to steady job growth and a drive by baby boomers and young professionals to move closer in. So developers are building new housing, retail and offices on land that is mostly home to parking lots, abandoned row houses and auto repair garages. The Mount Vernon Triangle, which is bounded by New York, New Jersey and Massachusetts avenues, is one of the last spots to develop in the central city.

"This area is finally taking off, and it's going to become a 24/7 neighborhood that's an extension of downtown," said Gerry Widdicombe, director of economic development for the Downtown Business Improvement District, which promotes development.

The new projects, which total more than $600 million, have been jump-started by city officials who have allowed for more dense development and offered tax abatement for housing construction, developers said.

"You had the progression of development coming from the Penn Quarter area, just below the Mount Vernon Triangle area, a change in zoning and a frothy residential market," said Charles "Sandy" Wilkes, chairman of the Wilkes Co. With his partner, Quadrangle Development Corp., Wilkes plans to build up to 2.2 million square feet of office, residential and retail space, plus a K-3 school for a nearby church, in the Mount Vernon Triangle over the next few years. "You have all the right ingredients."

Wilkes has two condominium projects underway in the neighborhood -- the Sonata and Madrigal Lofts. He said he's sold 85 percent of the 300 condominiums in the two buildings in the past six months, even with what some real estate agents and economists are saying is a slowdown in the real estate market.

Another developer, Peter N. Greenwald of Penzance Cos. is so confident that he's constructing an office building at 455 Massachusetts Ave. NW on what was mostly parking lots, without having a tenant in place.

"When we saw this opportunity come to us we jumped on it," said Greenwald, whose company bought the property in 2004 from another developer who had been assembling the lots. He is trying to attract financial service and media companies, law firms and associations to his 250,000-square-foot office building, which will be completed in late 2007. "This area is a bridge between downtown and Union Station and Capitol Hill," Greenwald said. "It's new, fresh and a little edgier."

The area wasn't always ripe for development.

In the 1950s and 1960s, it had many mom-and-pop retail shops, a Ford dealership and a meat store. One of the main attractions old-timers remember fondly is a wax museum at the site where the CityVista project is now being built. But by the mid-1980s, the area had become rundown as businesses moved outside the District.

"It was a depressed area when we came here," George Sigalas said. His father, a Greek immigrant, owned the Hickory House, a restaurant on Pennsylvania Avenue that sold "90 different deli sandwiches," including the pastrami and corned beef popular with tourists. Sigalas says that that property was taken by eminent domain for the revitalization of Pennsylvania Avenue, and the family moved the restaurant to the building at Fifth and K in 1983.

George said they paid $371,000 for the building where the gentleman's club is and $850,000 for another across the street a few years later. Real estate brokers said the properties may now be worth 10 times that much.

They tried to run a full-service restaurant, George said, but "the area just couldn't support it." So they turned it into a strip club.

"There were a lot of homeless people burning stuff in barrels in the winter when we moved here, parking lots and it had an element of crime. It got to the point where we lost business because people were afraid to come to the area."

As developers have bought land in the last few years, preservationists have earmarked buildings in the area that they believe should be saved from demolition. Some property owners, including the Sigalas brothers, say they are worried that historic designations could put restrictions on what developers can build and lessen what they'll get for their properties.

For now, the brothers have no deal to sell. They say they are waiting for the right offer -- and to see whether the prosperous new neighbors patronize their strip club.

"Once people are living in this area, it will be a viable business, but that's not until another two years," George Sigalas said.

Bud Holder doesn't plan on staying.

His father-in-law started the 6&K Auto Market, a used car lot at the corner of Sixth and K streets NW, 50 years ago, and he's helped run it for the last 37 years. But the business has declined in the last five to six years, he said, as developers have bought most of the neighborhood's parking lots, auto repair garages and abandoned buildings. Gone are the days 20 years ago when he sold 100 to 125 cars a month.

Holder welcomes all the new development, saying, "It's for the better." Like other landowners, he's finding that rapidly rising property taxes are making it more attractive to sell. In the last year, he said his property taxes on the small corner lot have gone from $9,000 a year to $28,000.

"I figure we're going to have to go eventually," Holder said from his dark-paneled office, looking out through bars on the windows to his tiny lot. "I'd like to get out soon," said Holder, 61. "This is prime real estate, right on K Street NW."

In the meantime, he's not buying many cars to sell. The other day there was just one car on the lot -- a gray 1998 Chevy Malibu with 23,000 miles. He'd sell it to you for $5,500.

Closings

· The U.S. Army picked two companies -- LCOR, a developer, and Weston Solutions Inc., an environmental services firm -- to build a $300 million training facility at Aberdeen Proving Ground where law enforcement officials will be able to train for anti-terrorism efforts. Both companies are based in Pennsylvania. The project will take two years to build.

· Brokers at Cassidy & Pinkard Inc. sold 2800 and 2900 Crystal Drive in Crystal City, two office buildings that total almost 330,000 square feet of space, to a privately held national real estate investment firm that Cassidy & Pinkard did not identify. It also sold 1945 Old Gallows Drive in Tysons Corner, a 163,800-square-foot office building, to an unnamed real estate adviser. The prices for the buildings were not disclosed.

Dana Hedgpeth covers commercial real estate and economic development. Her e-mail ishedgpethd@washpost.com.