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February 16, 1995


Appeal from the Property Tax Appeal Board. Nos. 911576C3, 921238C3.

Rehearing Denied March 22, 1995.

The Honorable Justice Bowman delivered the opinion of the court: Doyle and Colwell, JJ. concur.

The opinion of the court was delivered by: Bowman

JUSTICE BOWMAN delivered the opinion of the court:

Petitioner, La Salle Partners, Inc., seeks administrative review of a decision by the Property Tax Appeal Board (PTAB). This court has jurisdiction of this direct appeal from the PTAB under section 16-195 of the Property Tax Code (35 ILCS 200/16-195 (West Supp. 1994)), which provides for direct appeal to the appellate court where a change in assessed valuation of $300,000 or more is sought. The decision by the PTAB which petitioner seeks to have reviewed increased the real estate tax assessments on two properties above the level set by the Lake County Board of Review (Board of Review).

In the appeal to the PTAB, petitioner alleged that the Board of Review overvalued the two subject properties for the years of 1991 and 1992, and sought a reduction in their assessments. Following a hearing, the PTAB decided instead to increase the assessments and this appeal followed, consolidating the challenges to both the 1991 and 1992 assessments.

In arguing for reversal of the PTAB's decision, petitioner offers three contentions: (1) the PTAB acted outside its statutory authority when it increased the assessments made by the Board of Review; (2) the proceedings before the PTAB were marred by a number of procedural irregularities; and (3) the PTAB's decision was against the manifest weight of the evidence.

The subject properties are two office buildings referred to, respectively, as Phase I and Phase III of the Parkway North Center. They are located in Deerfield, in an area commonly known as the Lake-Cook Road Corridor. Phase I is a five-story masonry office building of approximately 361,686 square feet. Phase I was constructed in 1986 and sits on an 11.23-acre site. It has a five-story atrium consisting of approximately 100,000 square feet, leaving a net rentable area of approximately 251,643 square feet. The Board of Review's assessment for Phase I indicated a market value of $21,906,782 in 1991 and $22,314,623 in 1992. Its sister building, Phase III, is also a five-story masonry office building. Phase III was constructed in 1990 and is situated on a 9.09-acre site. It contains approximately 268,400 square feet, with a net rentable area of approximately 250,045 square feet. The assessment for Phase III indicated a market value of $19,675,725 in 1991 and $20,042,027 in 1992. Petitioner's appeal to the PTAB challenged these assessments as being too high.

While petitioner's appeal to the PTAB was pending, The Deerfield Park District (Park District), a taxing district with a revenue interest in the property, filed a request to intervene in the appeal to the PTAB, which was granted. The request to intervene did not contain a copy of the resolution of the Park District's governing board authorizing the intervention, as required under PTAB Rule 1910.60(d). (Official Rules of the Property Tax Appeal Board ยง 1910.60(d).) There is no indication in the record that the governing board of the Park District ever authorized its intervention in petitioner's appeal to the PTAB. However, in the proceedings below, petitioner made no objection to the Park District's intervention.

The PTAB appeal proceeded to a hearing. The hearing consisted primarily of the testimony of Theodore Kowalski, called by petitioner, and Howard Richter, called by the Board of Review. Both witnesses are certified real estate appraisers, and the parties stipulated to their qualifications. In estimating the value of the properties, both appraisers used three standard approaches: the cost approach, the income approach, and the market approach. Each appraiser reconciled his valuations under the three approaches to arrive at a final estimated value for each building.

Theodore Kowalski, petitioner's appraiser, first estimated the buildings' value using the cost approach. The cost approach involves a determination of (1) the cost of the unimproved land on which the subject property is situated; and (2) the cost of constructing a new building on that land with proper adjustments for depreciation and obsolescence. Kowalski also estimated the properties' value using the income approach. This method requires comparison of the rental structure of the subject buildings with that of comparable properties. Kowalski relied on six comparable rentals, one of which was located in Deerfield, and five of which were located elsewhere.

Next, Kowalski estimated the properties' value using the market approach. Kowalski considered the degree of comparability between each subject property and other properties sold on the open market, with appropriate adjustments to account for differences. He used eight comparable sales, five of which were in Cook County, two in Lake County, and one in Du Page County. He stated that he chose sales outside the Lake-Cook Road corridor because he believed it was difficult to find arm's length transactions in that area. His appraisal did not consider the sale of the Premark building, located approximately 200 yards from the subject properties because, in his opinion, it was not an arm's length transaction. For both subject properties, he testified that he relied most heavily on the market approach in arriving at the final estimates of value. Reconciling all three approaches, Kowalski arrived at an estimated value of $16,500,000 for Phase I and a value of $15,000,000 for Phase III.

Howard Richter, the Board of Review's appraiser, used the same three approaches to valuation. Richter, however, chose to utilize comparable properties located in the immediate vicinity of the subject properties, because he considered the Lake-Cook Road Corridor to be unique in the Chicago metropolitan area. Using the cost approach, Richter analyzed vacant land sales from within the Lake-Cook Road corridor and made appropriate adjustments for the date of sale and market conditions. Richter found the cost approach to be the least appropriate method of valuation for buildings of this type. Richter also employed the income approach. He chose a number of comparable rental properties, all within two miles of the subject properties. He then calculated the effective rent of each property, including adjustments for factors such as concessions to tenants, vacancy, and collection losses.

Richter also valued the properties under the market approach. In reaching his final evaluations, he gave preference to the market approach because of the high degree of similarity between the comparable property sales he used and the subject properties. Richter looked at the sales of four properties, all located in the immediate Lake-Cook Road Corridor. He found the best indicator of value to be the sale of the Premark building, which was closest to the subject properties in location and had the most similar characteristics. Reconciling his ...

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