It seemed a little far-fetched more than two decades ago when city leaders started selling the concept of punching Phillips Avenue through to Falls Park.

The area could be home to stores and apartments, they said, leading a rejuvenation of the city's oldest area.

Standing in the way was a scrap-metal yard surrounded by years of neglect that gave skeptics plenty of reason to believe it was a potential trap for city money.

But the street opened in 2004 after bouts of legal and political wrangling and a fair share of controversy.

Now the promise of "Uptown" is taking shape.

Several historic buildings have been renovated. Businesses are leasing space and moving in. Nearly all of the initial 20 loft apartments in the Larson Square are rented.

And perhaps most significantly, a spring groundbreaking is planned on the nearly $40 million Arches. The project's two seven-story buildings will include 88 apartments and 60,000 square feet of retail and office space. A consortium of six local developers is spurring the Uptown metamorphosis in a three-block area from Fifth to Second streets along Phillips.

Their splashy, long-range plans call for more than a $100 million mixed-use project during the next eight to 10 years.

"Any time there is reinvestment in downtown, that is a very positive sign for the economy of Sioux Falls," said Dan Statema, executive director of Downtown Sioux Falls.

The development group includes Neil Schmid of Cirrus Commercial, Craig Lloyd and Roger Mack of Lloyd Cos., Jeff Hazard of Koch Hazard Architects and Les Kinstad and Norm Drake of Legacy Development.

Since unveiling their mega plan two years ago, the group began by renovating the former Tri-State Creamery and Larson Square buildings at the corner of Fourth Street and Main Avenue.

Tri-State Creamery, which has more than 10,000 square feet spread over two floors, is leased fully, with the Artist Playhouse and Brian Clark & Associates among its tenants, Schmid said.

Pizzeria to add flavor

And Larson Square, which has 30,000 square feet spread over three floors, already has leased 18 of 20 loft apartments. Meanwhile, A Taste of the Big Apple pizzeria is expected to open soon, taking 2,500 square feet. Further, the building's owners have a preliminary agreement to lease 6,000 square feet to a prospective office tenant, Schmid said.

"The Uptown at Falls Park group also is buying the former DeKalb building, 522 N. Main Ave., which most recently has been home to Youth Enrichment Services' Early Childhood and Headstart offices, he said. The real estate sale for that 13,000 square foot building is expected to close next month. YES expects to relocate to the old Sioux Falls Christian School on the city's east side, he said.

Schmid said the Uptown investors group expects to restore the historic facade of the DeKalb building and lease it for office or retail use.

The Uptown at Falls Park partnership also is eying a former railroad depot building at Fifth Street and Phillips Avenue that is currently home to Southeastern Behavioral Healthcare.

Sioux Falls leaders consider the Uptown development activity a boon for the city.

"They have improved the North Main area and, as they continue with the Arches development, it really brings interest and excitement," Mayor Dave Munson said.

Meanwhile, Mack, development director at Lloyd Cos., noted a growing interest across the nation in cities redeveloping their downtowns with mixed-use projects.

Gas prices called factor

"I think the increased in gas prices has increased interest in people being in urban areas where they can live, work and play," Mack said.

Steve Metli, the city's former planning director who first pitched the Phillips to the Falls idea in 1987, lives in one of the Larson Square lofts. He moved two blocks down the street to his new digs in May to take advantage of a more updated apartment in a quieter location.

Metli said he likes the amenities of downtown living, including being within walking distance of the Orpheum Theater Center and enjoying a view of the Big Sioux River and city skyline from his third-floor apartment window. "I am anxious for the Italian restaurant to get completed so I can have my own restaurant," he joked.

Metli is among the first wave of new downtown residents that officials expect will swell in coming years. About 1,200 people live downtown. Eventually, the area could have up to 12,000 residents, Schmid said.

The changing image of downtown's north end is perhaps best illustrated by the recent arrival of ADwerks, an advertising agency from a west-side location on Louise Avenue to 512 N. Main Ave. in the Uptown district. The rehabbed former Standard Oil garage building became available when Group II Architects was bought by TSP Inc.

"We had an opportunity to get into a really incredible building," Mathis said. "It is a great location. We are at the edge of downtown development that is being brought to live."

Mathis said he is excited about developers' plans for the Arches and subsequent new buildings.

"It has made what was an easily overloooked neighborhood into very attractive real estate," he said. "I have wanted to move my business to downtown for a long time."

Some see time to leave

Meanwhile, Crescent Electric district manager Pat Haschke sees the metamorphosis of north downtown as time for his business to head for new quarters. Since the early 1960s, Crescent Electric has been at 700 N. Main Ave.

The company plans to move to a warehouse building at Fourth Street and Benson Road in November.

"We need more space because of continued growth," Haschke said. "But also our wholesale operation doesn't fit in with upscale office, residential buildings and things that are going on in downtown. Looking towards the future, we felt this was a good time to exit the area."