The former G.C. Murphy store had a decidedly retro look Wednesday with all the exposed brick, wire, and beams and the dripping water.

But Millcraft Industries is betting $40 million it will look nothing like that by next June. The Washington County developer threw a party in the old five-and-dime store on Wednesday to commemorate the formal ground-breaking for its Market Square Place project.

The $40 million development will transform the Murphy's store, the former Diamond Market and four other buildings into 46 apartments, 30,000 square feet of retail and restaurant space, and the new home of the Downtown YMCA.

Lucas Piatt, Millcraft vice president of real estate, said the project is on target for a mid-summer opening. Despite the recent economic turmoil, interest in the project has been high, he said. About 250 people are on a waiting list for the loft-style apartments, with rents ranging from $700 to $3,000 a month.

Millcraft also is negotiating with a national retailer to occupy 5,200 square feet on the first floor at Forbes Avenue and Market Square. Mr. Piatt would not name the retailer.

The project is being funded through a combination of historic and new market tax credits, $5 million in state assistance and private investment.