Apartments are in, condos are out in a Washington County developer's latest plans for the reuse of the old G.C. Murphy store on Fifth Avenue, Downtown.

Millcraft Industries now is looking to put upwards of 50 apartments in the old store with rents priced to attract Downtown workers earning $40,000 to $50,000 a year, Lucas Piatt, vice president of real estate, said yesterday.

"They will be some of the less expensive in town," he said.

The developer originally had planned a mix of condos and apartments at the site, but decided to go with all apartments to get federal historic tax credits to help lower the cost of the project. The tax credits can cover up to 20 percent of all renovation costs, but are not available for condominiums.

Millcraft has been struggling for months to find a way to renovate the Murphy store -- actually five separate buildings with varying floor plans -- at a reasonable cost. At one time, it faced a $12 million gap between its financing and the cost of the renovation.

Jerome Dettore, executive director of the city's Urban Redevelopment Authority, said yesterday that Millcraft and partner Ira Morgan have made progress in closing the gap.

"They've brought the gap down, but there's still work to be done," he said.

Mr. Piatt said he believes Millcraft has found the right balance in terms of cost and the mix of amenities, which would include street-level retail. The total cost of the renovation is now estimated at $30 million to $40 million, up from $21 million.

"It's still not beautiful as far as the economics go. We're not making a lot of money. We're doing something good for the city," he said.

The apartments would target people with incomes of $40,000 to $50,000 a year, including Downtown workers and recent college graduates.

The average apartment would feature about 1,100 square feet, with rents running "much less" than $1.50 a square foot, Mr. Piatt said. Most apartments would be 1¹/_2-- to two-bedroom units, although studios and three bedrooms also would be available.

"We feel the day we start moving forward, these units are going to be in high demand," Mr. Piatt said.

He said there is a chance the apartments at some point could be converted to condos. To get the historic tax credits, they must remain rentals for at least five years.

Millcraft and Mr. Morgan are expected to present their proposal to the URA board Dec. 14. They are seeking to develop 19 URA-owned properties in the Fifth and Forbes corridor, including the Murphy buildings.

Mr. Dettore said he likes the idea of doing all apartments in the Murphy's conversion.

"Frankly, I think it's better to have rental apartments," he said. "Our goal is to have them moderately priced. I think the market is stronger for rentals. I think it's better that they are rentals."

Gov. Ed Rendell has pledged $11 million in state funds for the renovation and a separate $50 million Forbes Village project, an 18-story high-rise on Forbes Avenue near Market Square featuring 150 to 200 apartments and condos and retail space.

Millcraft has asked for $18 million from the state for the projects, and Mr. Piatt said the parties are continuing discussions. Mr. Rendell has said in the past more money may be available as the projects advance.

However, Mr. Piatt said the developer's primary focus at this point is the Murphy's project, which he sees as the linchpin of the corridor. If the URA accepts the plan next month, Mr. Piatt hopes to begin work in six to eight months.

He said late Mayor Bob O'Connor's vision for the corridor included a "sustainable G.C. Murphy building. To take this and make it happen, I'm sure he would be honored.

"I guess it's really a trademark of Fifth and Forbes. So many people have looked at it and it has sat there so long, it's time to get it done," he said.