Condominium Office Building

Office Condominium Building
Over $239,000 in tax savings and refunds

Condominium Office Building

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Condominium Office Building

Highlights

Property Type: Office Condominium Building

Savings: Over $239,000 in tax savings and refunds

Location:  DuPage County, Illinois

Description:  36,000 square foot office condominium building

Key Results:

  • Reduced assessed market value of units well below sales prices of comparable units in the building
  • Obtained over $239,000 in tax savings and refunds

The Challenge

A real estate developer constructed a 36,000 square foot office building as a rental property. He decided to convert the property into an office condominium building and sold about 1/3rd of the units at high prices on a per square foot basis.  After experiencing difficulty selling the remaining units, the developer rented them out.

The Assessor chased the sales in the building. Sales chasings is the practice of valuing all units in a building based on a limited number of high price sales.  As a result, property taxes rose to about $4.25 psf while competing (non-condominium) office buildings typically paid about $2.00 to $3.00 psf.  This put the developer at a competitive disadvantage and he solicited Elliott & Associates for help.

Our Approach

Elliott & Associates researched the office condominium market in DuPage County.  Our team observed a thin market with limited sales to owner-occupants at high prices per square foot and about an 8-year supply of product given low sales velocities.  It was our view that sales of office condominium units to owner-occupants at high prices were speculative.  Buyers were few and far between and sales volumes were low.  In fact, only about 1/3rd of the units in the subject sold over a five-year period. Elliott further observed that office buildings held for rent traded at much lower prices per square foot than office condominium units sold to owner-occupants.

Our firm engaged an appraiser to value the subject and presented our research.  The appraiser conducted his own independent analysis and essentially agreed with Elliott’s valuation.  The appraiser valued the subject units at values similar to office buildings held for rent rather than office condominium units that sold in the then current market.

Results

Elliott filed tax appeals to the DuPage County Board of Review several years in a row.  The Board denied our appeals and we appealed to the Property Tax Appeal Board (PTAB).

Our firm eventually settled each of the PTAB cases by convincing the assessing officials that market values were close to the appraised values despite the limited high-priced sales within the building.  We argued that the units should be valued based on the income they generated rather than higher/speculative prices they might sell for some day.

All told, Elliott saved the client over $239,000 in taxes over a five-year period in the form of reduced tax bills and tax refunds. Taxes are now stabilized and competitive at around $2.25 psf.

It took several years to resolve these cases, but our team’s persistence and the client’s patience paid off.