Landlord says McDonald’s is blocking a landmark renovation

The owner of a landmark office building downtown had to deal last week with any landlord’s nightmare — a busted pipe that sent water gushing down several floors. But he said that’s not his biggest problem with the property.

Attorney Steven DeGraff wants to convert the old Delaware Building at 36 W. Randolph St. into residences, in line with a city government push for more housing in the Loop. But he said he’s being stymied by fast-food giant McDonald’s, which had a restaurant in the building until a couple of years ago.

McDonald’s still has a long-term lease for the first two floors. DeGraff said the Chicago-based company won’t agree to a design change he needs for the renovation.

DeGraff, with the law firm Much Shelist, said McDonald’s is being obstinate even though it has told him it will never re-open the location. At issue is about 93 square feet DeGraff said he needs to take from the shuttered restaurant space. He said it would provide a second entrance needed under fire codes if he converts the building to residential.

“They have their lease and they’ve said they’re never coming back. But they’ve rejected every proposal I’ve ever given them” for the second entrance, DeGraff said. “Their attitude is, ‘Buy me out.’”

A McDonald’s media representative had no comment; a real estate executive for the company could not be reached.

The building is eight stories and only about 32,000 square feet, its small floors and windows unappealing to many of today’s companies. It’s mostly vacant, but with a jeweler on the ground floor. DeGraff said that with a site near the James M. Nederlander Theatre, Petterino’s restaurant and Block 37, the building would work better as about 64 apartments. He estimated the work would cost about $15 million.

DeGraff, part of a partnership that owns the site, said McDonald’s pays only $1 a year in rent plus 39% of the building’s property taxes. He called it a “sweetheart deal” that dates from when the company owned the building decades ago.

The Italianate-style building with a cast-iron base was started shortly after the Chicago Fire of 1871 and is among the few remaining buildings of that era. It’s a Chicago landmark and listed on the National Register of Historic Places.

DeGraff said a new use would bring the building to life and add energy to the Loop. He said the water leak, which happened during the onslaught of subzero temperatures, was quickly stopped and that insurance-funded repairs are underway.

“I’m a steward for this site. It’s a great building, and it should be great for many years to come,” DeGraff said. “The ownership group is passionate about doing something with this building.”