The McDonald’s Fulton Market District headquarters building, which sold for $412.5 million, was appraised at a much lower value of $148.7 million. Nearby, the building that houses Google’s Midwest headquarters sold for $355 million, but is valued at only $135 million.
The appraisals, which were filed by attorneys hired to appeal the properties’ assessments, illustrate the odd way property tax assessments are handled in Cook County, Crain’s reported.
Commercial landlords with deep pockets have made a habit of paying appeals attorneys and appraisers to argue why a commercial property is worth much less than the assessed value, in an effort to lower the property tax bill.
Some of the techniques used to get a lower appraisal include increasing the building’s expenses and reducing a building’s estimated rents — a strategy used by appraisers for the McDonald’s and Google buildings, which were valued with below-market rents.
“There is a subset of the appraisal community that is all about arguing that a bacon double cheeseburger is really a side salad,” Cook County Assessor Fritz Kaegi told Crain’s.
Kaegi, who is finishing his third year as assessor, earned the position after his 2018 campaign against his predecessor Joseph Berrios. Berrios was criticized for his tendency to undervalue commercial properties, shifting more of the county’s property tax burden onto less wealthy homeowners.
While the assessments are only one variable used to calculate property taxes, they do lay the groundwork for what has become a zero-sum game. When one group of property owners is underassessed, another group has to pay more in taxes than they should, meaning if all of the owners of the city’s most expensive properties successfully appealed their appraised values, millions of dollars of taxes would be shifted onto other property owners.
Berrios was called out for accepting campaign donations from property tax appeals attorneys and getting too “chummy” with them. Kaegi, who doesn’t accept donations from appeals attorneys, is now facing criticism from commercial landlords arguing that his “overvalued” commercial property assessments are scaring off investors.
In West Chicago Township, an area that includes the Fulton Market District, Kaegi’s office increased residential assessments by 24 percent this year from 2018. The nonresidential assessments rose by 115 percent, making those properties account for 60 percent of the township’s tax base, compared to 46 percent in 2018.
While Kaegi hasn’t accused the appraisers, like those of the McDonald’s and Google buildings, of wrongdoing, he did say he noticed “some systematic behaviors that are concerning” to the Cook County Assessor’s office. He has asked the Illinois Department of Financial & Professional Regulation to investigate some appraisers who he believes may have violated professional standards.
“We are on the lookout for patterns of abusive behavior,” he said. “And we won’t hesitate to bring it to the attention of regulators when we see it.”
[Crain’s] — Victoria Pruitt
via The Real Deal Chicago
December 28, 2021 at 07:52PM