PEABODY — The first test of new residential overlay zoning meant to spur a dense mix of housing and commercial uses in and around the Northshore Mall passed 10-0 by the City Council Thursday night.

And the special permit the council approved was certainly a mix: It’s a six-story building at 41 Cross St. that is nearly complete.

But as the finishing touches are put on the building by developer Peter Pantazelos of Prospect Hill Realty Trust, the council approved a mix of 18 apartments, including both market and affordable rate units; nine hotel rooms and a function facility on the top floor.

The five affordable studio/efficiency apartments that would be parceled out through a housing lottery. The other 13 apartments would be one-bedroom apartments. Developers removed a request to waive the required number of units under inclusionary zoning.

The hotel rooms are part of a quirk of the zoning, said the project’s attorney, Jason Panos. Because of the constrained size of the site and requirements for the number of units per acre under the new residential overlay, zoning allowed a maximum 18 dwelling units. And since zoning requires a commercial component, the developer put in hotel rooms.

When asked by City Council President Jon Turco if the developer would prefer if the nine hotel rooms could be converted into three apartments, Panos said the preference would be for 21 apartments, but that would require a future variance from the city’s zoning board.

The building, councilor-at-Large Dave Gravel said, had “odd duck uses,” but nowadays, “you have got to think out of the box.”

Councilors praised Pantazelos for the quality of his work.

“It is beautiful,” said Ward 4 Edward Charest. “I will support this because, again, this addresses the housing shortage that we have.”

“He has a reputation for producing high-quality development and he has been very successful for what he has done,” said Panos, noting Pantazelos has a history of mixed-use development, including the Daniella’s Cafe mixed use building in Tapleyville in Danvers.

Panos described the site, and said the property also has an existing two-story building with offices and the Alto Forno restaurant. It has 75 parking spaces, where 73 are required, and the developer has leased adjacent land at 39 Cross St. for an additional 30 spaces. Panos said the building meets all setback requirements.

Panos made the case that the building complies with the new residential overlay zoning for the area of Prospect and Cross Street. The area has a mix of uses, Panos said, including a nearby 300-apartment complex and the Northshore Mall.

Councilor-at-Large Anne Manning-Martin, who eventually voted in favor of the special permit, noted that the project has been before the ZBA three times.

“You have got quite a smorgasbord board of activity,” Manning-Martin said. She was concerned about setting a precedent for future developments.

“It has everything,” Manning-Martin said a future developer might say, “Why don’t we?”

Manning-Martin asked about the first time the building came before the zoning board, under a former owner and with Panos as the ZBA chairman. It was a three-story building, then. Panos no longer sits on the board.

Initially, the project was slated to be an office building, but when Pantazelos took it over, he had trouble finding tenants, Panos said. Eventually, Pantazelos decided to develop a hotel, since residential uses were not allowed in the regional business district.

“There was no residential allowed until you passed the residential overlay,” Panos said.

Staff writer Ethan Forman can be reached at 978-338-2673, by email at eforman@salemnews.com or on Twitter at @TannerSalemNews.