Deputy Mayor Curtis McClinton recently approved a $560,000 low-interest loan to a group of investors who plan to restore the old Soldiers, Sailors, Marines and Airmen's Club, at 11th and L streets NW, and turn it into a small luxury hotel.

The loan will come from community block-grant funds that are normally used to provide jobs, low- and moderate-income housing and development in economically depressed areas of the city.

The 121-year-old building, which will be named the Morrison-Clark Inn after the two original owners of the property, was once the oldest club for servicemen in the District, serving young recruits as a home away from home through four wars and the intervening years of peace.

In April, after developers of the $5 million hotel project were unable to get a commercial loan, the city's Department of Housing and Community Development agreed to back the project with the $560,000 loan.

Paul Berger, the city's project manager for the loan agreement, said he felt the use of community block-grant money was justified for the 54-room hotel because "the rationale is that it will eliminate slums and blight in that area, and it will provide 61 permanent jobs for low- and moderate-income people."

Royce LaNier, president of DEC Development Corp., which will develop the project, and general partner of Mass and L Street Associates, which bought the property in April, said in a project report that the Morrison-Clark Inn will "satisfy the transient housing needs of a specific but growing market of individuals who seek unique hotel accommodations."

The new hotel, according to LaNier, will provide such extras as having hotel staff arrange limousine service and schedule business appointments for overnight guests. The hotel "will be finely decorated with traditional antiques and it will be service oriented," he said.

Some people connnected with the project predict it will cost more than $100 per night to stay in the hotel.

LaNier said he originally was unable to secure a commercial loan "because of the transitional nature of the area" where the hotel is located and because of high crime there. The former solders club is located where Massacusetts Avenue intersects L and 11th streets NW, not far from the Greyhound Bus terminal.

"We were turned down by a number of lenders, at least eight, and that doesn't count the ones who said, 'Are you kidding?' " said LaNier.

In April, the city agreed to loan Mass and L Street Associates $500,000 in block-grant funds at 10 percent annual interest.

The developers will not have to make a payment on the loan for 15 months. At that time, interest accrued over the 15-month period, or approximately $60,000, will be added to the original $500,000 loan, and a new $560,000 loan will be issued by the city. The interest will shrink to 6.5 percent during the first year and gradually increase to 12.5 percent for most of the 30-year payback period.

Berger said he expects HUD to approve use of the block-grant funds for the posh hotel within the next few days. LaNier said if all goes well, construction will begin the first week in August.

After the getting approval on the city loan, LaNier was able to get a $2.7 million loan from Capital Bank. An addition $1.8 million for the project will come from investors, according to Berger. But earlier this week, LaNier said he has no firm commitments from investors yet.

The hotel will include a two-story addition to an existing three-story wing, built in 1960, attached to the rear of the house. The front section of the house, built in 1864, will be fully restored and white paint will be stripped from the bricks.

"We plan to set up a room or display area in the hotel with memorabilia about the club," said LaNier.

The servicemen's club was operated by the Women's Army-Navy League from 1899, when it opened at 317 C St. NW, unitl 1980, when it closed. In 1923, the club moved to the house at 1015 L St. NW, and remained there until 1980, when the Department of Defense transferred the deed to the National YMCA.

Barbara Griffith, chairwoman of the Navy Wife Line Association, said the club "closed very quietly . . . . In the last few years of operation it only had one or two men there on any given night." The house needed many expensive repairs that the women's league could not affford, according to Griffith.