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Kaegi's assessments confirm downtown landlords' fears
The Cook County assessor's office released its figures for a large swath of downtown Chicago. Homeowners should be happy, but landlords? Not so much.

Tuesday, September 21, 2021
Crain's Chicago Business
by Alby Gallun

 

Cityfront Place
Google Earth

Kaegi’s office assessed Cityfront Place, a 480-unit apartment tower on the Chicago River, at $227.9 million, up 137% from 2020.

CORRECTED

Owners of commercial buildings in downtown Chicago have been bracing for a punch to the gut from Cook County Assessor Fritz Kaegi. They knew it would hurt, but they didn’t know how much.

Many know now. Reassessment notices have been landing in the mailboxes of property owners in North Chicago Township, an area that covers downtown north of the Chicago River all the way up to Fullerton Avenue in Lincoln Park. While the total assessed value of residential property rose 15% from 2018, the last time the township was assessed, the total of non-residential assessments jumped 60%, according to data released by the assessor’s office today.

 


It’s a pattern familiar to anyone who has been following the assessor’s office the past two years. It should make North Chicago homeowners happy, but it could make many landlords mad.

 

 

Through the reassessment process, Kaegi’s office is reducing the property tax burden on residential taxpayers and placing more of it onto owners of apartments, office buildings and other commercial properties. Residential properties now account for 38% of all assessed value in North Chicago, down from 46% in 2018. Nonresidential properties represent 62%, up from 54% three years ago.

When he ran for office in 2018, Kaegi promised to shake up the assessor’s office, which had been accused of favoring commercial landlords—and their appeals attorneys—under his predecessor, Joe Berrios.

 

Contending that Berrios churned out inexplicably low assessments on commercial properties, Kaegi has tried to reform the office and produce more accurate—and usually higher—commercial assessments. He’s irked landlords, who say higher property taxes will scare off investors and businesses.

A few big buildings in downtown Chicago illustrate the how Kaegi is changing the city’s property tax math. His office estimates that a 1.2 million-square-foot office tower at 353 N. Clark St. in River North is worth $550.6 million, up 68% from $327.1 million in 2020, according to the assessor’s website. Yet, Kaegi’s value still may be low: The building sold for a lot more—$715 million—in 2014.

In Streeterville, Kaegi’s office assessed Cityfront Place, a 480-unit apartment tower on the Chicago River, at $227.9 million, up 137% from 2020. That’s well above $154.5 million, the price the property sold for last year.

The downtown commercial real estate market generally has flourished the past several years, so it’s perhaps not surprising that assessments would rise since the last go-around, especially for apartments, the strongest sector.

But Kaegi’s office has tried to adjust assessments to account for the coronavirus pandemic, which has been especially hard on hotels and retail properties. Vacancies on North Michigan Avenue have soared, and the famous retail strip faces an uncertain outlook as more people shop online.

Water Tower Place, the big vertical shopping mall at the north end of the Magnificent Mile, has lost several tenants over the past year or so, including Macy’s, its biggest. The assessor’s office valued Water Tower at $240.1 million this year, down slightly from $241.1 million in 2018.

 

 

The Waldorf Astoria hotel in the Gold Coast has struggled, too. Burdened with too much debt, the hotel sold last November to Morningstar founder Joe Mansueto for about $54 million, about half what the property sold for in 2015. Kaegi’s office valued the Waldorf Astoria at $59.3 million, up from $21 million in 2020.

Property owners often experience sticker shock when they open a reassessment notice, worried that they’ll be whacked by a big tax hike as a result. Though assessments are a key variable used to calculate property taxes, they aren’t the only one. An assessment increase doesn’t necessarily translate into a tax hike of the same percentage. In many cases, the tax hike is smaller. Sometimes a property’s assessment will rise, but its taxes will fall.

Landlords also have another county office on their side: the Cook County Board of Review. If an appeal of their assessment with the assessor’s office doesn’t yield a satisfactory result, they can appeal to the Board of Review, a second appellate body that has turned out to be much more sympathetic to landlords.

In the northern Cook County suburbs, the Board of Review in 2019 and 2020 slashed the assessed value of all commercial and industrial properties by 32% from the assessor’s total. Commercial property taxes still rose but not as much as many landlords feared.

Kaegi assesses properties on a three-year cycle, starting with the northern suburbs in 2019. His office assessed western and south suburban Cook County last year, moving on to the City of Chicago in 2021. Kaegi’s office has released assessed values for four of eight townships in the city, but it has yet to tackle South Chicago, which includes the Loop.

The description of the rise in assessed values for North Chicago has been changed in this version of the story to make clear that the 15% rise for residential and 60% rise for nonresidential properties represents a change in total assessed value for each category.


 



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