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Recently Crain’s published an article “Why some landlords shouldn’t gripe too much about the assessor’s new math.” In that article Crain’s conducted an analysis of the 50 biggest commercial property sales in Northern Cook County and compared them to the assessed values. They found that the assessed value of 11 properties exceed their sales prices; two were virtually identical; 6 were too difficult to analyze and the remaining were valued at a median of 19 percent below the sales price. In a subsequent Crain’s article “Kaegi: The embrace of a failed status quo makes no sense,” Mr. Kaegi reportedly sites the aforementioned analysis as evidence of the improving accuracy of assessments.
To me, Crain’s analysis would be analogous to looking at the income tax returns of Jeff Bezos and Warren Buffett, then concluding that based on their income taxes being low relative to their incomes, everybody should be happy with a reasonably fair income tax system. In the meantime, their secretaries are paying double the effective tax rate than they are!
Cook County has something like 120,000 commercial properties. By only analyzing the highest 50 sale prices, Crain’s is looking at less than a fraction of the top 1% while ignoring the bottom 99% of properties. Is it a mark of a good assessment process that the wealthiest, best connected and most powerful in the County have more modest assessments? What about everybody else?
Chicago Commercial Appraisal Group just completed an analysis of 50 smaller commercial properties. We looked at industrial buildings from 5,000 to 30,000 square feet that sold between June 1, 2017 and December 31, 2018, or within 18 months of the Assessor’s proposed values on January 1, 2019. The buildings were located in Elk Grove Village, Franklin Park, Melrose Park and Wheeling. Properties that were obvious REOs, sale-leasebacks, auction sales or non-arm’s-length transactions were excluded.
Our results were strikingly different from what Crain’s found for the very largest commercial properties. 78% of our small building sample set had property assessments that averaged 58% higher (median 44% higher) than their purchase price within 18 months prior to the assessment. In some cases, the assessments were over 200% higher than their recent purchase price. 18% of our data set had assessments that averaged 32% less (median 26% less) than their recent purchase price. Only 2% of the industrial properties were assessed within 5% either direction of their recent purchase price.
1/1/2019 Assessment Level Relative to Recent Purchase Price | ||||||||
Small Industrial Properties | ||||||||
% of | ||||||||
# Properties | Data Set | Median | Average | |||||
2 | 4% | w/in 5% | w/in 5% | |||||
9 | 18% | -26% | -32% | |||||
39 | 78% | 44% | 58% | |||||
