Greg McDonald has considered a few options for his vacant historic former Wendy's building in downtown Billings, and he’s found a plan that will preserve its past and boost the neighborhood’s future.

McDonald has formed a partnership with Billings developer Bill Honaker and A&E Architects for a $4.65 million overhaul of the three-story structure at 124 N. 29th St., most recently the home of a Wendy’s restaurant and its Montana franchise headquarters.

After gutting the building and improving the exterior to retain its historic, 1907 look, A&E will move into the main space, and two floors with 12 loft-style apartments will be available for rent.

“The biggest need for downtown is loft housing. We’re excited to get it going,” said McDonald, whose family has owned the building since 1978.

The partnership, called the 124 Group, is also seeking $700,000 in tax-increment financing, or TIF, from the city to help pay for some of the exterior work. This includes meeting newer building codes and bringing back the historic look of the building. The main entrance will be moved back to North 29th Street, the original front door for the YMCA, the building’s first tenant.

TIF money is a tool for economic development to improve blighted areas. The districts leverage the increase in property values from a set point (2008 in the case of downtown) for certain development costs that improve the overall neighborhood.

The downtown TIF board has already approved this project. The Billings City Council is scheduled to hear a presentation on the plan Monday.

The council is expected to vote Feb. 6 for final approval, according to Greg Krueger, development director for the Downtown Billings Alliance.

The 124 Group hopes to start construction following the City Council vote and finish by the end of 2017.

While popular among economic development professionals, TIF districts are under scrutiny. The Montana Legislature is considering up to 10 TIF reform bills, which could increase regulation on the districts or cut funding for development.

Krueger said those bills would not affect the McDonald building project, which he believes will inject life into downtown.

“These buildings were built to last 100 years. And we want them to last 100 more,” Krueger said.

The 7,934-square-foot main floor, which still has the Wendy’s kitchen intact, will become the headquarters for A&E, which has outgrown its current home at 608 N. 29th St.

The firm has 23 employees “crammed into that building,” principal Eric Simonsen said, and the Wendy’s space gives the firm space to add up to seven more workers.

“This, by far, has been the most appealing and attractive,” Simonsen said of the building project, which A&E is designing.

A&E has four partners: Simonsen, Rick Heldt, Chris Martison and Dusty Eaton. Billings-based Jones Construction is the main contractor.

The mezzanine, which housed additional seating and was once a running track for the YMCA, will house additional offices for A&E.

The second floor was last remodeled in 2002 and served for years as the corporate headquarters for Wendy’s of Montana. McDonald has continued using the space for his real-estate company.

The rarely visited third floor is already torn to the studs, a project McDonald said he launched a few years ago but never finished.

These upper two floors will each house six apartment spaces, including studios and one- and two-bedroom apartments. They will be roughly between 1,000 and 1,400 square feet each.

The building also has a basement that will be used mostly for tenant storage, including bike parking. McDonald also owns about 900 square feet of retail space next door, which will be renovated and available for rent.

The partners are working on securing tenant parking, which will likely include spaces inside the city’s Park One structure or private lots.

The YMCA occupied the building until the 1940s when the organization moved into its current home at at 402 N. 32nd St. About a decade later, Bennett’s Drugstore moved in and remodeled the building in its current layout.

McDonald’s father, the late Sam McDonald, bought the building in 1978 when he opened the state’s first Wendy’s restaurant. The McDonald family sold their 17 Montana franchises in December 2014 to a Spokane, Wash. group, which closed the downtown location three months later.

Since then, McDonald said he turned down an offer to sell to the developers of One Big Sky Center, a $165 million proposed multi-use project that would be across the street.

Another deal for a bookstore fell through. This House of Books instead opened a few blocks away at 224 N. Broadway.

Honaker, the developer, has worked on multiple other projects in Billings, including the Home2 Suites by Hilton hotel next to Albertsons and the Western Security Bank building downtown.

He said the McDonald project is a unique chance to restore a piece of the city’s frontier past.

“There’s not that many old buildings in Billings like this anymore,” Honaker said.