Are new assessments depressing real estate prices in Cook County?

The exponential boom in Chicago real estate prices, and ensuing massive profits, may be slowing down soon and significantly as the city plans to reassess commercial real estate, and owners and developers brace for higher assessments and higher taxes.

Crain’s recently pointed as evidence of that phenomenon to Origin Investment’s purchase of Monroe Aberdeen Place, a 120-unit apartment development in the West Loop, for $66 million. Although that means individual units are $555,000, making them among the most costly in the city, Crain’s says that Origin would have paid Michigan Avenue Real Estate Group much more for the property were it not anticipating a major hike in taxes. The building is only 2 years old.

Cook County Assessor Fritz Kaegi, who took the post in 2018, says that his aim is to reform the way commercial real estate is valued and to bring property taxes in line with the property’s value, which he says was underestimated by his predecessor, Joseph Berrios. In December, Kaegi unveiled a computerized “property tax estimator tool” that he says brings fairness and transparency to a process that was haphazard and undervalued commercial properties. 

Landlords and building owners say the increase is discouraging development and depressing real estate prices, as evidenced by the Monroe Aberdeen Place sale.

Kaegi has already completed a reassessment of commercial property in the northern suburbs, where the value of all real estate, commercial and residential, rose 15.6 percent in a year but commercial properties (which includes apartment buildings) rose 74 percent and will pick up 44 percent of the overall property tax load, a 10 percent increase over last year.

That result has property owners in other parts of the city leery of what’s to come, and thus less anxious to tap into what had been a boom market for several years.

Thus, Crain’s reported, Origin Investments would have paid much more than $66 million for Monroe Aberdeen Place were it not bracing for a tax hike that could be as much as 91 percent.