New London — A three-alarm fire on State Street Wednesday severely damaged two downtown businesses and displaced about 20 residents, some of whom may have to wait weeks before their homes are repaired.

The fire was reported around 11 a.m. in the four-story building that houses Monica's State Street Diner at 138 State St. and Zambala Grocery at 128 State St. The entire building, with 17 apartments at 130 State St., has been condemned. Residents in an adjoining building at 140 State St., with seven units and several businesses, also were displaced for the night because they were without power.

Fire Chief Henry Kydd said inspectors with the fire marshal's office would continue their investigation this morning into the cause and origin of the fire. While the top floor and roof sustained fire and smoke damage, Kydd said, most of the damage below was from water from a broken pipe inside the building. Ceilings in the street-level businesses appeared to be partially collapsed, and firefighters were seen dragging submersible pumps to the basement.

Dakpa Gyaltsen, owner of Zambala, stepped over fallen ceiling tiles and took a quick peek inside his store Wednesday afternoon. He raised his hands in bewilderment and said he simply didn't know what to do next.

William Cornish, who owns the building, said his first priority would be making sure the tenants are all right.

"There's a lot of damage," Cornish said. "Right now I have to deal with insurance companies and contractors and put it back together."

Cornish said he has yet to assess the full extent of the damage but plans to work with the fire marshal's office to help give his tenants a better idea of when they can expect to get back into the building.

Many of the businesses on the block were closed for most of the day and surrounding streets were blocked off as firetrucks, ambulances and equipment from numerous surrounding towns arrived to help.

Kydd said firefighters' first task was to drag hoses up to the fourth floor where they encountered fire inside unit 4D. Flames already had spread through the walls and up to the roof. Firefighters tore into walls and cut through layers of roofing to reach hot spots, a laborious task. Wednesday's hot, humid weather didn't help the progress.

By early afternoon, city firefighters and those from surrounding towns had extinguished the blaze. Firefighters inside the building worked in shifts to reduce the risk of heat exhaustion and exposure to smoke and fumes. Two firefighters were transported to the hospital by ambulance: one for a leg injury and one for heat exhaustion.

Najuan Hamilton, 19, said he pulled the fire alarm when he "saw smoke coming from right above my bathroom, right above the toilet." Ellen Crichton, who was also in the building, said she called 911 when the fire alarms sounded.

Shariff Holder, who lives on the top floor, was watching the scene late-morning Wednesday from the sidewalk with his girlfriend, Lindsey Ducheneau, and their 12-week-old daughter, Jolee. Holder said that when he opened the door of his top-floor apartment, he saw smoke billowing in from the staircase. He said he went back in and grabbed the baby while Ducheneau took their dog, and they all went down the stairs.

Ducheneau said she was worried because they had left the baby's car seat in the apartment. She and her baby went to stay with her parents, Holder said.

By late afternoon, the American Red Cross had assisted residents from all of the units. Sue Rochester-Bolen, Emergency Services Manager for the Connecticut Charter Oak Chapter of the American Red Cross, said all of the residents were staying with family and friends.

Red Cross representatives were helping people get access to resources, such as food, clothing and supplies for infants.

Keith Hatch was one resident the Red Cross was helping. He said he exited via the fire escape, after another resident from the third floor alerted him that the building was on fire.

Later in the day, a firefighter escorted Hatch back into the building to help retrieve his medications. "Everything's soaked," he said of the apartment. "The ceiling is falling in."

A coordinator from HUD-Veterans Affairs Supportive Housing, a program that assists veterans with housing and services, came to help Hatch and discuss finding a new place to live.

Hatch, who is a disabled veteran, has lived at 130 State St. for two years. Now in need of a new home, he said he will have to start over on a limited budget.

Mayor Daryl Justin Finizio said city firefighters deserve credit for responding quickly and containing a fire that could have been much worse.

Fire departments from Waterford, City of Norwich, the Naval Submarine Base, Poquonnock Bridge, American Ambulance, Lawrence + Memorial, East Lyme and Mohegan Tribal Fire Department, among others, also responded.

William Cornish bought the 1868 Bacon Building in 2002 from Cabrini Inc., once the real-estate component of New London Development Corp., at an auction. He had renovated the building into studio and one-bedroom apartments, replaced a fire-damaged roof and installed a new sprinkler system among other improvements.

New London Landmarks archives indicate that steamship company manager Morris Bacon commissioned the building. Called Bacon's Marble Block, it once held a social club and then housed artists' studios.

Staff writer Kathleen Edgecomb and intern Kerry M. Flynn contributed to this report.

k.drelich@theday.com; g.smith@theday.com