CRE N Illinois

Kaegi elicits mixed reactions at SIOR/AIRE/CCIM event

| Daniel Benassi, SIOR | Principal, Entre Commercial Realty and 2019 SIOR Chicago Chapter President

Kaegi elicits mixed reactions at SIOR AIRE CCIM event,ph01

New Cook County Assessor, Fritz Kaegi, is traveling around the county to articulate his new policies and platform, including a recent speech to a packed room at the May meeting of the Chicago Chapter of Society of Industrial and Office Realtors (SIOR), co-hosted with the Association of Industrial Real Estate Brokers (AIRE) and the Illinois chapter of CCIM. Attendees represented a mixed crowd of supporters, detractors and those who came simply to listen and learn.

What’s different in the Assessor’s Office?

Kaegi comes from a different background than previous assessors and is making policy and staffing changes that are equally new, according to his address at the meeting. One of Kaegi’s first steps as assessor was to make staff changes; he removed all but one of his predecessor’s top staffers on this first day on the job.

Subsequent staff additions have included deputy assessor – chief valuations officer Donald J. Meyer, the former head of commercial banking at Byline Bank; deputy assessor – chief data officer Robert Ross; chief of staff Sarah Garza Resnick, who worked for outgoing County Clerk David Orr; deputy assessor – chief administrative officer Annette C. Moore, from Chicago’s Civilian Office of Police Accountability; experts in geographic information systems (GIS) and others.

Prior to this election, Kaegi had not previously held elected office, a departure from past assessors. He holds an MBA from Stanford Graduate School of Business and, earlier in his career, spent five years in Russia as a financial analyst for a large mutual fund company. More recently, he was a portfolio manager for the Columbia Acorn family of funds, managing investments in 40 countries. Kaegi observed that he believes these experiences have given him an understanding of how logistics and transportation infrastructure affect commercial property values.

New policies, promises of transparency

Kaegi’s stated priorities include transparency and the end of the conflicts of interest that he states undercut confidence in the assessor’s office in the past.

One new policy prohibits professionals in the assessor’s office to assess their own properties or operate a side business related to appraisals and property taxes. Another new policy prohibits campaign donations from staff and reiterates his election pledge to not accept gifts from anyone conducting business with the office. Additionally, Kaegi has instituted a visitor’s log, a practice that requires visitors to sign in, and has dictated that the names of the law firms handling tax appeals will no longer be visible to assessor’s office personnel.

Also in support of transparency, the office of the assessor is publicly releasing a report on its assumptions whenever it assesses a township. On the commercial side, the assumptions are aimed at calculating the earning power of each property and encompassing more accurate cap rates, expenses and more.

According to Kaegi, the goal is to be upfront about the assumptions used in appraisals, thus creating a more predictable process, increasing trust in the outcomes and, ultimately, reducing the need for so many appeals. Cook County historically has seen 10 times more property tax appeals than other major counties, Kaegi noted, and property tax appeals have become routine for many commercial property owners and are regularly factored into project pro formas.

Technology, data and property valuation

Another change is intended to improve technological coordination. Following an objective assessment from the International Association of Assessing Officers (IAAO), the office is seeking to improve its use of technology and data, and to leverage its field staff more effectively.

According to Kaegi, an Illinois data modernization act under debate in Springfield would require investment property owners to provide the Cook County assessor’s office upfront with the same property earnings and expense information that is submitted during the appeals process. This drew mixed reactions and some targeted questions from the crowd at the SIOR/AIRE/CCIM event.

Were the data modernization act to be made law, the Cook County office of the assessor would anonymize property data to protect the owners’ personal information and use the database to inform future property assessments. The information would then serve as an alternative to manually assembling data from databases like CoStar and other industry resources.

The problem with the latter, currently common approach, said Kaegi, is that the resulting data is based on landlord surveys. As such, it is skewed toward institutional investment properties and property values in the central business district and it doesn’t necessarily reflect unique property characteristics such as high expenses.

As Kaegi stated at the SIOR/AIRE/CCIM meeting, having expense and income data built into the assessment process would provide a clearer picture of property values and would help cut down on the number of appeals. The approach is already used in 17 other states, noted Kaegi, and thus would bring Cook County in line with other assessor’s offices.

The bottom line

Moving forward, Kaegi plans to continue hiring more valuation team members, continue investing in data and technology, launch the office’s new website within a year and continue to follow through on the recommendations of the IAAO audit. As for the commercial real estate professionals in the audience, the jury is still out regarding the impact of Kaegi’s policies.

Transformation, transparency and data-driven decision making all sound good; however, the assessor’s office will need time to demonstrate consistent policies and positive outcomes. It’s safe to say that regardless of the outcome of Kaegi’s initiatives it will be a very bumpy road along the way.

About the Author

Dan Benassi, SIOR, is the 2019 President of the Chicago Chapter of the Society of Industrial and Office Realtors (SIOR). He is a Co-founder and Principal of Entre Commercial Realty, a full-service industrial/commercial real estate firm based in Arlington Heights, Illinois. Entre provides a wide range of real estate services including brokerage, property management and construction throughout the metro-Chicago area and nationally through its affiliates.