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  •   Lifting A Curtain Downtown

    By Anthony Faiola and Judith Evans
    Washington Post Staff Writers
    Monday, August 5, 1996; Page F12

    It's noontime on a summer Friday at Jaleo, a Spanish restaurant that serves as the unofficial city hall of the District's Pennsylvania Quarter.

    A man in a bright yellow shirt and aqua suspenders chats with his dining companion about crowds at the latest exhibit in a nearby art gallery. A woman in jeans, sitting on a teal chair in this restaurant filled with Flamenco art and the oily scent of tapas, complains about the dust from construction of the MCI Arena two blocks away.

    And at a corner table, dressed in decidedly un-Washington fashion with an open-collar white linen shirt and slick black blazer, sits a grinning Roberto Alvarez, co-owner of Jaleo. The popular eatery at Seventh and E streets NW had revenue of $2.7 million last year, compared with an average of $630,000 for Washington restaurants, but Alvarez's smile is more than a response to the restaurant's success, he says. He's also thinking of this neighborhood's revival.

    "It's had difficulty in developing a sense of identity," Alvarez said over the din of the packed restaurant. "The prospects here seemed to bounce back and forth. We wanted to create something that Washington didn't have -- a uniquely cosmopolitan place to work and live. . . . And, well, things are happening now. The arena. The opera house. Without us even realizing it, our vision is coming true."

    The Penn Quarter -- in the eastern end of downtown Washington bounded by Pennsylvania Avenue, H, Sixth and Ninth streets -- has for decades bounced between blight and boom. But today, although it still faces significant obstacles -- including overcoming crime and convincing D.C. residents that it is an entertainment, dining and residential alternative to Adams-Morgan, Dupont Circle or Georgetown -- the area is poised for rejuvenation, experts say.

    With the Washington Opera's plans to renovate the former Woodward & Lothrop department store into an opera house and performing arts center, plus the recent groundbreaking for the 20,000-seat MCI Arena -- the new home for the Washington Wizards and Washington Capitals -- business owners and developers are showing renewed interest in the neighborhood. Restaurants are opening and a new hotel, retail outlets and housing are planned.

    The comeback of the neighborhood, which suffered in the early 1990s after major department stores closed, is key to city and business leaders' plans to bring back entertainment and shopping to downtown Washington.

    Drawn by relatively low rents and an abundance of available space, pioneering businesses -- primarily theaters, art galleries and restaurants -- and luxury rental apartments have invested nearly $1.5 billion here in recent years, and the Quarter is starting to thrive as an entertainment and artistic center.

    The revival, however, is far from complete. Many storefronts stand boarded up and empty, and crime remains a concern for business owners and residents.

    But signs of new life abound. At 405 Eighth St., the owners of Jaleo recently opened a four-story restaurant, Cafe Atlantico. On the drawing board are more substantial projects: At Ninth and F streets, R. Donahue Peebles Cos. plans a new 200-room hotel. And the owners of the Lansburgh Building, whose apartments are 90 percent filled with renters paying $1,059 to $1,500 a month, are scouting sites in the community for more housing.

    "My project is driven much more by the environment already there -- business and tourist travel," said Peebles, who plans to renovate an office building at 900 F St. into a mid-priced hotel. "Pennsylvania Avenue -- stretching from the White House to Capitol Hill -- itself is probably one of the best commercial building locations in the city."

    Yet there are those who say this commercial development could destroy the flavor of the area. They worry that if the arena and opera house succeed in drawing hordes of people into the neighborhood, it could become a victim of its own success, and that galleries and other businesses could be driven out by higher rents.

    "They are trying to create an artificial environment that resembles something like [New York's] Greenwich Village," said Stephen S. Fuller, an economics professor at George Mason University in Fairfax, who tracks the regional economy. "If the arena has the desired effect followed by the opera house, it could create a redevelopment push against the galleries."

    Residents of the area, once populated by shop owners living above their small businesses and boarding houses, also are concerned that earlier plans to develop 1,200 units of high-density housing may be in jeopardy.

    The Washington Metropolitan Area Transit Authority (WMATA) has acknowledged it will seek an exemption from the Department of Planning's requirement that it build as many as 60 housing units as part of development of a 1.7-acre parcel adjacent to the arena. The city agency thinks housing would be unsuitable next to a sporting venue where about 200 games are to be played annually, a spokesman said.

    "We cooperated when the city wanted to build the MCI Arena here when some of our residents said they didn't want it," sighed Charles Docter, a lawyer who lives in a condominium at Market Square, one of two 13-story towers at Eighth Street and Pennsylvania Avenue.

    "It seems the city, with all its lip service to living downtown, seems to be getting together with WMATA to say they don't plan to build any more housing. It just isn't fair."

    Downtown's Struggles

    The history of the neighborhood illustrates the struggle of urban centers across the country that are trying to reinvent themselves to lure back residents and consumers lost long ago to the suburbs.

    During the late 1800s and early 1900s, downtown Washington flourished with a mix of residential and commercial establishments as a lack of transportation forced residents to live close to where they worked, historians said. Shopkeepers who sold furniture, carpeting and bedding lived in the apartments above their enterprises, said Barbara Franco, executive director of the Historical Society of Washington, D.C.

    But by the end of the Depression, the area between the White House and the Capitol, suffering from a poor economy and the migration of residents, was considered a slum dominated by small stores and a red-light district dubbed by one historian "Hooker's Division." The city's commercial center also began to drift toward F Street as Woodward & Lothrop moved from Pennsylvania Avenue.

    The 1930s and 1940s brought construction of federal office buildings downtown -- huge structures such as the Labor Department and Federal Trade Commission buildings -- as well as hotels and apartments. But as Franco said, "downtown became much less human and much less of a community."

    That prosperity was interrupted after the 1954 Supreme Court decision that opened up the public schools and other public accommodations to blacks. Whites started moving their families and businesses from the District to the suburbs. Development shifted to construction of office towers along Connecticut Avenue and K Street.

    Downtown's problems were exacerbated in 1968 by riots following the assassination of Martin Luther King Jr. On the night of King's death, the black business district -- from Seventh to 14th streets NW -- fell victim to rioting, looting and burning. Some of those destroyed storefronts remain empty to this day.

    Except for Hecht's department store, Seventh Street became a shell of its former self, continuing the decline that began after World War II.

    Then, in the early 1990s, came a turnaround with the arrival of arts-related businesses and theaters drawn by low rents and and nearby attractions such as the National Portrait Gallery, the National Building Museum and the Navy Memorial.

    The most significant was the Shakespeare Theatre's 1992 relocation to a 449-seat theater on Seventh Avenue NW from its former venue, the Folger's Shakespeare Theatre on Capitol Hill, which it had outgrown.

    With the addition of the Shakespeare to the existing theaters, including Ford's and, a bit farther off, the National and Warner, the neighborhood became known as Washington's theater district.

    A Shakespearean Role

    The Shakespeare Theatre immediately became crucial to the neighborhood because of the site it chose. Unlike the other theaters, it had located directly at the center of revitalization efforts, a few paces away from the Lansburgh Building. Packed houses -- the theater typically performs at 97 percent of capacity -- created new demand for restaurants, entertainment and shopping after matinees. The theater drew an audience of about 93,000 people during its 1992-93 season, and that increased to 110,000 people for the 1995-96 season, said Managing Director Sam Sweet.

    "I like to see us as a catalyst that helped bring people back to this neighborhood," Sweet said. "I have no doubt that once the opera house opens, you are going to see an even more lively community of arts businesses."

    Yet even before the Shakespeare Theatre set up shop here, there was a vigorous community of art galleries, including the Zenith and Artifactory, which opened in the 1970s and early 1980s. Today, more than a dozen galleries are located in the neighborhood, making it one of the largest concentrations of art sellers in Washington.

    The Pennsylvania Quarter still faces problems that, if not addressed, could jeopardize its commercial prospects. There is a sense that crime, and the location away from entertainment centers in Georgetown, Adams-Morgan and Dupont Circle, puts it at a long-term disadvantage in luring people to its restaurants and galleries. Also, some gallery owners, who typically cannot afford high rents, worry that they could be pushed out once the arena and opera house open.

    "They're going to want to fill this neighborhood with bars and restaurants," said Dominick Cardella, 54, owner of Artifactory, which has sold Asian and African art for 24 years.

    For Cardella, who lives above his gallery, that might be a reason to close up shop. He said a higher level of street crime has made it tougher to do business.

    "I've been robbed twice in two months," Cardella said. "When I complain to the police, all I hear from them is that they don't have the funds to protect the businesses in this neighborhood. I'm reaching the point where it may not be worth it to run a gallery down here anymore."

    New Enterprises

    But others view the neighborhood as fertile ground for new enterprises. Roberto Alvarez, for instance, just opened Cafe Atlantico, the second restaurant in the neighborhood for him and his Jaleo partners, who include David Abramson, chairman of a Washington advertising firm. Cafe Atlantico was located in Adams-Morgan until April 1995.

    "I don't view this neighborhood as a risk anymore," Alvarez said. "We've proven that with Jaleo."

    Revenue at Jaleo, Alvarez said, has risen steadily since the restaurant opened, and profit margins are higher than they were at Cafe Atlantico in Adams-Morgan because the rents in the Penn Quarter are less expensive. When he opened Jaleo, he paid $28 a square foot, and the tab hasn't risen much since, he said. That compares with the $32 a square foot that Cafe Atlantico paid for its space in Adams-Morgan.

    Meanwhile, some developers are embarking on smaller-scale projects in anticipation of the opera house and the MCI Arena. At the former site of the 9:30 Club at 930 F St. NW, developers are moving ahead with a 160,000-square-foot office and retail center, said project architect Shalom Baranes.

    Demolition has begun on the interior of the four buildings that will comprise the nine-story center; the building facades will remain.

    "The arena under construction is generating a lot of activity," Baranes said. "The project had been dormant for six years, but there seems to be a different climate surrounding the market now."

    Boston-based Gunwyn Co., developer of the Lansburgh Building, is looking for sites on which to build more apartments, said President Peter Madson. Occupancy at the 385-unit complex on the corner of Seventh and E streets NW is about 90 percent. The former site of the famed department store, which closed in the 1970s, appears to be attracting both young and seasoned professionals.

    "We're looking for sites that are priced so that housing can be supported," Madson said. But he and other developers say construction of residential units requires some incentives -- such as lower-priced land -- because the projects typically don't generate enough profit after building costs are deducted.

    The General Services Administration, which took over the undeveloped parcels left from the defunct Pennsylvania Avenue Development Corp. (PADC), is bringing in consultants to analyze uses for the properties, said Bob Peck, the agency's commissioner of Public Building Service. One of the prime parcels is located on Seventh between E and F streets; the other is a row that houses artist lofts, known as the L'Droit building.

    Subsidies for Housing

    The PADC played an intricate role in developing 745 units that form the core of housing downtown by offering subsidies to make construction of the units more affordable for developers.

    The Market Square towers, located at Eighth Street and Pennsylvania Avenue, has 210 luxury condominiums, along with retail space, restaurants and offices. The Pennsylvania is a 150-unit apartment building at 601 Pennsylvania Ave. that was turned into a condominium complex six years ago.

    "It's so nice to build a community," Peck said. "We feel that the planning objectives for the Pennsylvania Quarter haven't gone away with the PADC."

    From the balcony of their apartment at the Pennsylvania, Missouri transplants Cecil and Virginia Heitmann can see the National Gallery of Art and other landmarks. The retired couple, who visited the District frequently when their son was in graduate school here, said now they can't imagine returning to the suburbs.

    "We didn't dream you could live in this kind of urban environment," said Virginia Heitmann. "It's just more fun. You get energized. You walk out here at lunchtime and there is every kind of accent. You see every kind of people. Everybody doesn't look the same."

    She added, "You won't find that in the suburbs."

    © Copyright 1996 The Washington Post Company

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