Hechinger Enterprises has agreed to repay a $3.2 million federal loan by channeling the money into a special fund to be used for revitalization of a Northeast Washington community.

The innovative plan, approved by HUD and endorsed by the D.C. government, is designed to support economic development in the city and will be implemented through the Community Foundation of Greater Washington.

Hechinger Enterprises is a real estate development corporation that operates independently of Hechinger Co., the chain of do-it-yourself home center stores. Its projects include the Hechinger Mall, which opened last year in Northeast Washington.

Financing for construction of the 40-store mall included a $3.2 million Urban Development Action Grant loan from HUD. Repayments of the UDAG loan will be made to the Community Foundation's Northeast Urban Revitalization Fund.

The Hechinger plan is the first of its type and would permit the holder of a UDAG loan to use scheduled repayments to leverage private-sector funds, said John Hechinger Jr., vice president for real estate development at Hechinger Enterprises. In effect, the community will benefit twice from the same UDAG loan that Hechinger Enterprises received last year.

The concept of using the repayments as leverage for further economic development in the community was proposed to HUD and District officials because it is a "needed service to the community," John Hechinger Jr. said.

"The whole concept of the mall itself is to be an anchor for economic development and a magnet for the H Street corridor," Hechinger added. Hechinger Mall, which was built at a cost of approximately $13 million, has been successful in accomplishing the company's initial aim, according to Hechinger.

However, Hechinger pointed out, the area still lacks the diversity of commerce found in other communities.

The special fund being made available by Hechinger Enterprises will receive payments totaling $3.2 million during the 20-year life of the loan. During the initial three years, repayments will be earmarked for an advisory fund. Thereafter, loan installments will be designated for "furtherance of minority business development and other economic revitalization activities in the H Street NE Urban Renewal Area."

The Greater Washington Community Foundation will match the Hechinger repayments annually, its president, Lawrence Stinchcomb, said.