A few years ago, the chairman and several other top executives from The Mills Corp. were flying into Atlanta. They noticed an old steel manufacturing plant in Midtown, just north of downtown, and agreed it would make a good retail site. It was just casual conversation.

Acting on that idea, Atlanta-based Jacoby Development in 1998 offered the Arlington, Va.-based retail developer the chance to create a shopping center in that very spot. And Mills accepted.

Mills announced last November that it would develop the retail/entertainment component of the mixed-use project that Jacoby is planning on the 144-acre brownfield site, formerly home of the Atlantic Steel plant.

"We thought this was a fantastic location for urban development," says Susan Goyette, director of corporate communications at Mills. "And the overall master plan sets a precedent for urban development."

If it earns key approvals, Jacoby will redevelop the brownfield into 6 million sq. ft. of office space, at least 1,500 residential units, 800 hotel rooms and 1.5 million sq. ft. of retail/entertainment space. The initial retail phase is scheduled to open in late 2001.

Hurdles still ahead Before Jacoby can move forward, however, there is significant work ahead. The company must first clean up the contaminated industrial site. Perhaps a bigger hurdle is securing funding and obtaining regulatory approval for the construction of a bridge over the Downtown Connector (Interstate 75/85). The bridge, critical to the success of the project, would connect the development with the rest of Midtown, which is enjoying its own resurgence.

Atlanta Mayor Bill Campbell has called the Atlantic Steel project the "most important development announcement in 50 years in this city." The project is unique in that it holds importance for the rest of the country as an example of developments possible in other urban centers.

Larry Frank, a city planning professor at the Georgia Institute of Technology, says he is "optimistic that this project will become a national model."

Atlantic Steel is arguably the biggest and highest-profile of several new projects within the city. The wave of intown development is said to be different from what has preceded it.

The trend of suburban sprawl in Atlanta is finally reversing itself, experts say. Developers are instead planning mixed-use projects where people can live, work and shop without the use of automobiles.

Retail component important The Atlantic Steel project will offer its residents as well as other Midtown residents an alternative to driving to suburban shopping malls.

"The retail component provides services that are otherwise far away in the suburbs," Frank says.

Jacoby had discussions with several large retail developers before striking a deal with The Mills Corp., according to Jacoby spokesman John Bevilaqua. He says Mills had several advantages that set it apart from the others: more imagination, more capital, and stronger relationships with top retailers.

"We talked to different companies, and Mills was the most aggressive. They had the most vision about what the project could be," Bevilaqua says.

The vision is to create one of Mills' new entertainment and retail environments, called The Block. The first such center opened in November in Southern California, and Mills plans eventually to roll out the concept across the country. The Block calls for an open-air setting modeled after the country's great city blocks, like Times Square in New York City and Pier 39 in San Francisco. The stores are full-priced, and the tenant mix is heavily weighted toward entertainment.

With a tenant mix of 70% entertainment and 30% retail, The Block at Orange includes Vans Skate Park, the world's largest indoor skate park; Ron Jon Surf Shop, which plans to hold interactive activities and in-store concerts; a 30-screen movie theater complex; Cafe Tu Tu Tango and Wolfgang Puck Grand Cafe restaurants; and Virgin Records.

The Block at Midtown - the retail portion of the Atlantic Steel project - will have a similar retail mix, Goyette says.

In November, Mills announced three tenants for the Atlanta project: Virgin Records, Rainforest Cafe, and a new sports shop by Italian manufacturer Benetton. Goyette says Mills hopes to add a movie theater complex, a sporting goods shop, a health club and a home furnishings store to its tenant list for the Atlanta project.

Despite the similarity in retail mix, Atlanta's Block will not be a carbon copy of Southern California's Block. "No two Block concepts will be exactly alike," Goyette says. The Block at Midtown will be significantly larger than The Block at Orange, which has 811,000 sq. ft. of space.

Another difference is that The Block at Midtown will be attached to both residential and office space, so greater emphasis will be placed on leasing to convenience-oriented retailers, such as a pharmacy and an upscale grocery.

"There is a big residential component, so we want people to be able to walk to get items they need," she says. "We want to keep people there."

Pieces fall into place When Jacoby signed a deal with Mills, it secured just one piece in a very complex puzzle. But the others are slowly falling into place. Jacoby has found partners to develop the office and apartment components and is still negotiating with hotel chains.

Shortly after Mills gave its commitment, Atlanta-based Post Properties signed a letter of intent to build apartments on the site. Post has indicated that the Atlantic Steel project underscores its new commitment to developing intown. The company has promised to build 350 to 400 apartments initially, and to develop another 1,032 apartments in the future.

On the same day that Post announced its commitment to the Atlantic Steel project, Houston-based Hines signed on to develop the office component. The initial office development will be mid-rise buildings with retail on the lower floors. Total proposed office development, including a trio of high-rises, is about 6 million sq. ft.

Bevilaqua says Jacoby is close to a deal with a major hotel chain to add a conference center and 800 hotel rooms to the project.

Indeed, an important part of Jacoby's environmental plan for the Atlantic Steel site is making sure that the people who live and work there will shop there too. Mass transit and pedestrian walkways will satisfy the majority of travel needs.

Atlanta's pollution problems have largely been created by automobiles. So, this and other mixed-use developments aim to shorten drive times and even eliminate some automobile trips altogether.

"If we can reduce trip length, we can reduce pollution," explains Georgia Tech's Frank, who is a consultant on the project. "If we can shorten the trip enough, people won't drive at all."

So-called neo-traditional communities that encourage pedestrian travel, and that often include retail, are becoming increasingly popular.

But Jacoby's Atlantic Steel project is special because of its intown location, Frank points out. In an outlying area, if a developer builds a walking-oriented community, residents are still likely to do a substantial amount of driving because there are no other options.

"There is no transit and probably not much employment there," Frank says. "Developers have to start looking at infill. That is why the Atlantic Steel site was so compelling for me. It had both the how and the where."

EPA exemption needed Cleaning up the brownfield site and decreasing auto usage may not be green enough for the project to go forward. The Environmental Protection Agency must decide if the environmental benefits justify an exemption to the current ban on highway construction in Atlanta. The project needs the exemption in order to build the essential bridge.

The federal government has banned any funding for new highways in Atlanta because the city is currently in violation of the Clean Air Act and has no formal plans in place to correct the problem. The EPA's decision is expected later this spring.

The developers involved in the project argue that the exemption is warranted. In addition to improving air quality, mixed-use projects offer residents social and health benefits, explains Frank, who is conducting a study on the topic for the Centers for Disease Control and Prevention.

"If you can get the distances short enough and make the corridors interesting enough, people want to walk," he emphasizes, adding that in areas where shopping, working and living overlap, people feel more of a sense of community. "People are meeting each other, knowing each other a little more.

"There are still a lot of important decisions to be made," Frank says, "but I can say that Atlantic Steel has a lot of promise."

* Summer 2000: Environmental cleanup to be completed

* January 2000: Construction begins on retail/entertainment portion

* January 2000: Construction begins on first phase of residential component

* June 2000: Construction begins on first phase of office space