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CHICAGO`S UNION STATION, ON SOUTH Canal Street between Jackson and Adams Streets, is the last survivor of the half-dozen mighty and architecturally magnificent railroad terminals that graced the south and west entrances to the Loop during the railroad`s heyday here, but even it is a mere shadow of its original self.

Gone is the ornate, 90-foot-high concourse section between the existing headhouse, or main terminal building, and the Chicago River. Built in 1925 in conjunction with the headhouse structure, it was demolished in 1969 to make way for two skyscrapers.

Gone, too, are the 300 or so intercity passenger trains that arrived and departed daily during the mid-1940s, when rail travel was as popular as air travel is today. A handful of interurban trains operated by Amtrak remain, but rail traffic at the station now is mostly the mundane, suburban commuter variety.

And gone are the numerous concessions, upscale restaurants, hospital, police station, fire station and nursery that made Union Station virtually a city within a city.

Now, however, there are plans to restore much of the station`s former grandeur as the city`s premier rail facility, and to add major new retail and office components to the existing headhouse.

If completed as envisioned, the redeveloped terminal will once again become one of the most attractive rail passenger facilities in the country, says Kurt Weissheimer, managing director of real estate for the Chicago Union Station Co., an Amtrak subsidiary that owns and operates Union Station.

And with the addition of significant new amounts of office and retail space, the facility is likely to become a popular destination for Chicago residents and tourists and a major catalyst for additional real estate development west of the Loop between the South Branch of the Chicago River and the Kennedy Expressway, Weissheimer adds.

”We believe a revitalized Union Station will be a great asset to the city,” Weissheimer said. ”With the advent of high-speed trains on the horizon that will make travel to nearby cities by train competitive with the airlines and the growing number of residents and office workers in the West and South Loop neighborhoods, Union Station will again attract crowds of people around the clock, the way it did nearly a half-century ago.”

Chicago Union Station Co. has teamed up with U.S. Equities Realty Inc., one of the city`s top commercial real estate development and brokerage firms, and the Chicago architectural firm of Lucien Lagrange & Associates in putting together the redevelopment plan.

It calls for restoring the historic four-story headhouse at the base of the existing eight-story terminal building, constructing two 26-story grainite office towers over the existing headhouse and creating a two-level retail atrium around the station`s 115-foot-high, barrel-vaulted, skylighted waiting room. The waiting room, or Great Hall, as it is known, also is to be upgraded. The proposed office towers, each of which is to contain 640,000 square feet of office space, are the most ambitious components of the plan in light of Chicago`s currently overbuilt office market. They also are the most controversial, because some preservationists contend that the office buildings will unalterably mar the classical architectural character of Union Station`s headhouse.

Neither a major anchor tenant nor financing-both of which have been difficult for developers to obtain in today`s uneasy real estate climate-had been secured for the skyscarpers by midsummer, when U.S. Equities had hoped to have construction under way. Maxwell Communications, the British-based publishing giant, had been negotiating with U.S. Equities to become a major tenant, but the negotiations fell apart earlier this year, according to sources in the real estate industry.

U.S. Equities officials said, however, that they are confident that both prerequisites eventually will be obtained.

”We`re convinced that there are corporations out there that would love to have Union Station as their address, with its national identity and its role in both Chicago`s and the nation`s history,” said Ted A. Peterson, senior vice president in charge of property development for U.S. Equities.

”Moreover, the fact that the station is so accessible to the Loop, to the city`s expressway system and to the Metra commuter and Amtrak trains that run out of it is certain to attract a steady stream of office tenants.”

As for the concern of preservationists, Peterson said, the architects for the project have designed the office buildings in such a way that they will be compatible with the existing headhouse; in fact, the original plans for Union Station called for the construction of a 20-story office tower. Only four stories of office space eventually were built, however.

The four stories on top of the four-story headhouse, generally not considered to be architecturally significant, are to be demolished to make way for the new office towers.

The reason for preservationists` concern about the headhouse is that its design, along with that of the demolished concourse, was worked on by famed Chicago architect and city planner Daniel Burnham. Burnham died in the midst of the design work, and the job was completed by architects from the firm of Graham, Anderson, Probst & White. Nevertheless, the station is considered to be the product of Burnham`s vision.

Furthermore, though Union Station has never officially been accorded city landmark status, it`s considered architecturally significant. Architecture critics and historians point out that its classical styling has been challenged by few other major railroad terminals in the country.

Although the construction of the office buildings still remains something of a question mark, the renovation of the station`s existing passenger facilities, at a cost of $37 million, already has begun. The centerpiece of this phase of the redevelopment will be a renovated waiting room that, when completed, will look like an elegant plaza-garden reminiscent of a stately European villa, according to Weissheimer and U.S. Equities officials.

The planned retail atrium surrounding the waiting room is to consist of upward of 130,000 square feet of space for stores, boutiques and restaurants- about the amount of space found in a medium-size suburban shopping mall. However, Chicago Union Station Co. and U.S. Equities officials envision the retail atrium becoming, at least to a degree, a festive operation, similar to Quincy Marketplace around Faneuil Hall in Boston or Harborplace in Baltimore. As part of the renovation work, the developers also plan to provide direct access from Canal Street to the train platforms inside the station and to link the terminal, via underground pedway or walkway systems, to the Northwestern Atrium Center to the north and to the 311 South Wacker Drive Building under construction across the river to the south.

Completion of the renovation work and the addition of the retail atrium is scheduled for September, 1991. Chicago Union Station Co., with the help of U.S. Equities, says it is in the process of selecting suitable tenants for the retail operation, including an experienced restaurant operator who can provide fast-food services and a sit-down restaurant and cocktail lounge.

Some critics contend that the last thing downtown Chicago needs is another retail center to compete with State Street and North Michigan Avenue, but Weissheimer argues that Union Station is far enough from both of the city`s two premier retail shopping strips so as not to adversely affect them. He also said Union Station is ideally situated for a new major retail operation.

”Our research indicates a shortage of retail establishments immediately east and west of the the Chicago River in the West Loop,” he said.

”Consequently, new retail facilities at the station would provide a much-needed shopping center for the area.”

As for potential customers, Weissheimer points out that the retail atrium will be able to draw on the more than 23 million Metra commuters and 2.1 million Amtrak passengers who travel through the station each year, and that that there are some 65,000 office workers within a five-minute walk of the station.

When completed, the renovated waiting room and retail atrium ”could easily become the city`s most popular public space,” said Cheryl L. Stein, a vice president with U.S. Equities. ”It will be a place not only for travelers and daily commuters but a place where Chicagoans will be able to shop, dine, meet or just wander through.”

Stein and Peterson also envision the expansive waiting room being used for large catered affairs, the kind that sometime take place at the Field Museum of Natural History.

And, if the success of other train stations, such as the Musee D`Orsay in Paris and Union Station in Washington, D.C., both of which have been renovated and transformed in part into shopping centers, are any indication, Chicago`s Union Station promises to become a popular tourist attraction, Stein said.

She noted that after the renovation of Washington`s Union Station, in September, 1988, retail sales within the first nine months were nearly twice original projections. It is now projected that the D.C. station will attract 20 million tourists annually.

”Chicago Union Station has a leg up on Washington,” Stein said.

”Within a three-block radius, we have 10 million square feet of office tenants and new residents are continually moving into the West and South Loop areas. Consequently, Union Station here is sure to draw crowds both during the week and on weekends.”