Blight at the End of the Tunnel Nobody wants to use the space under Dupont Circle. Nobody wants to let go of it, either.

Nobody wants to use the space under Dupont Circle. Nobody wants to let go of it, either.

By all appearances, the failed retail project known as Dupont Down Under has been utterly abandoned. Two years ago, workers boarded off the last of the nine entryways to the two trolley tunnels beneath Dupont Circle, ending the city's attempt to emulate Atlanta's thriving subterranean food bazaar.

"After [they] closed up shop [in 1996], the entrances basically became public latrines," says John Ralls, an aide to Ward 2 Councilmember Jack Evans. "One night, somebody tripped and fell in one and really hurt themself."

Although Dupont Down Under took a spot alongside streetcars in the public memory, the dingy marketplace lives on in the courts, where three parties--a wily developer, Washington Sports Clubs, and the D.C. government--are engaged in a weird battle over a piece of real estate with no proven utility. The case is a tangle of clashing property claims, unfulfilled promises, and bankruptcy, but one thing is clear: It's easier to fight over the site than to develop it.

The project began as a sweetheart deal between the mayor's office and entrepreneur Geary Simon. Simon approached the city in 1992 with an unsolicited proposal to convert the old trolley tunnels into commercial space, featuring a food court, a supermarket, and a gym. Though Dupont Circle was one of the busiest growth areas in the city, Simon signed a lease for a mere $2,000 a month, extending for 20 years.

Nothing else about Dupont Down Under would go so simply. The project opened in February 1995, with no supermarket, no health club, and a stack of unpaid renovation bills. By then, the city had learned that Simon had some undisclosed business credentials: He had twice been convicted of real estate and insurance fraud, and he'd topped that off by being convicted of telephone fraud while serving time in Allenwood Penitentiary in Pennsylvania. Swamped with lawsuits from construction contractors and disgruntled food vendors, Simon shut down the space 15 months after it opened.

Six years later, the city still hasn't been able to get the property back.

In September 1996, with Simon months in arrears on his rent, the District moved to terminate his lease. By then, though, Simon had transferred the lease to United States First National FSHC, a company that had backed the Dupont Down Under project with a $1 million letter of credit--and that, unbeknown to D.C. officials, was owned by Simon himself. Before the city could revoke the lease, United States First National filed for Chapter 11 bankruptcy protection, which put any possible eviction proceedings on hold.

"Our argument was that the city had not properly terminated the lease prior to the time the entity filed for bankruptcy," says Paul Kiernan, Simon's lawyer. "Therefore, the lease itself would still be considered an asset of the estate that would be available to creditors in the bankruptcy."

To help pry the lease free, the District teamed up with one of Simon's former sublessees, the Washington Sports Clubs fitness chain. Washington Sports Clubs had joined Simon in the planning stages of the project, subleasing the entire eastern trolley tunnel for $12,000 per month. According to that deal, in the event that Simon defaulted on the main lease, the fitness company would retain its rights to its space--and would have the option of also taking over the west tunnel.

In March 2000, the District finally defeated Simon's gambit, when the bankruptcy court declared that the lease termination was valid. Simon promptly appealed, but on the basis of the bankruptcy court's decision, D.C. Superior Court granted the District immediate possession of the property. For the first time in three mayoral administrations, the city had the tunnels back in its hands.

At which point, Washington Sports Clubs, citing its old lease option, seized them for itself.

Washington Sports Clubs "has the ability to claim the lease based on a deal that was made prior to my arrival," says Michael Lorusso, deputy director of the city's Office of Property Management. "At any time, they can take [the complex] over, but they'd have to pay all the back rent."

But according to the lease terms, Lorusso says, Washington Sports Clubs is required to bring in a Class A retailer. "No Class A retailer would ever go down there," he says, "especially with only about 13 years left on the lease. That lease is of almost no value. They could renegotiate, but then the lease would be up for grabs to anyone."

Washington Sports Clubs seems set against opening up the lease. The fitness chain could still do what it was ostensibly doing when it leased the eastern tunnel in the first place: build a sports club there. But since 1993, the company has built two other clubs, a few blocks to the north and the south of Dupont Circle--fueling speculation that it never intended to inhabit the tunnel, but was simply attempting to block competitors such as Crunch Gym from moving into the neighborhood. "I don't know if [the original lease] was actually to build it," Kiernan says, "or to keep it off the market."

Either way, Washington Sports Clubs is sticking to its claim. "The city is obligated to lease it to us, and our intent is to finalize those discussions and to pursue this project," says Ian Portnoy, a lawyer representing Kalorama Sports Management Associates (KSMA), the entity under which Washington Sports Clubs is pursuing the matter. Portnoy declines to say what that project is or to comment on whether his organization has kept the tunnel vacant to spite its competitors. "KSMA has had a series of meetings with neighborhood groups to gauge interests and desires. However, that doesn't mean that if the neighborhood wants X that that is what KSMA will do."

Even while the District and Washington Sports Clubs grapple for the tunnels, Simon remains in the picture. Not only is he appealing the decision of the bankruptcy court, which could jeopardize the Superior Court's decision to return the tunnels to the District, he is also suing Washington Sports Clubs for nonpayment of rent--for the nine months between the bankruptcy court's ruling and the time he surrendered the property.

"I firmly believe that the [United States District Court] will uphold our position," says Simon. "Then it becomes an issue of when the District is able to return the property to us and whether I'll reopen it. But we'll have to wait until we get to that point before I figure out what I'm going to do." CP

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