The Trump International Hotel & Tower at 401 N. Wabash Ave.
A Cook County panel has slashed the assessed value of Donald Trump’s Chicago hotel, sparing the property from a potentially big tax hike in the process.
The county Board of Review cut the estimated value of the riverside hotel to $73 million, down 31% from Cook County Assessor Fritz Kaegi’s estimated value of $105.2 million, according to the assessor’s office.
Because the county uses assessed values to calculate property taxes, the reduction will result in a lower tax bill for the hotel than one based on the assessor’s valuation. Yet it’s not close to the lowball value the hotel’s tax attorneys put on the property, $26.7 million, which would have resulted in an even smaller tax hit. The attorneys had argued that Trump hotel’s value plunged due to the pandemic, which hit all downtown hotels hard.
Like many owners of large commercial properties in the county, the former president’s company, the Trump Organization, appealed the hotel’s assessment, first with Kaegi’s office and then with the Board of Review, a three-member panel where property owners can challenge the assessor’s valuations.
Landlords gripe that Kaegi, who was re-elected last night, has grossly overvalued commercial properties, unfairly shifting more of the property tax burden onto them. Kaegi defends his methodology, arguing that his assessments are much closer to the mark than those of his predecessor, Joseph Berrios.
But landlords have a friend in the Board of Review, which has granted major reductions in Kaegi’s assessments over the past few years, sparing them from big tax increases. This year is no exception.
The process for the Trump Tower Chicago fit the pattern. Last year, Kaegi’s office initially valued the 339-room luxury hotel in the Trump International Hotel & Tower at $168.2 million, up from $58.1 million in 2020, according to county records. The hotel’s attorneys appealed the assessment with Kaegi’s office, which lowered the property’s value to $105.1 million.
Unsatisfied with that outcome, the attorneys then appealed to the Board of Review, which reduced the value further, to $73 million, or about $215,000 a room. That value will be used to calculate the hotel’s final 2022 tax bill, which should come out in the next few weeks.
The hotel’s property taxes could still rise from 2021 because the board’s estimate represents a nearly 26% increase from the property’s prior value of $58.1 million. But the tax hit would be much bigger without the panel’s intervention.
It’s hard to estimate where the hotel’s taxes will settle as a result of the board’s reduction; too many other variables go into the tax calculation even to guess. The hotel’s property taxes totaled $3.2 million in 2020.
It’s also unclear if the Trump Organization will take the process further and file yet another appeal with the Illinois Property Tax Appeal Board, a step the company has taken in the past. One of the hotel’s attorneys, Patrick McNerney of Mayer Brown, declined to comment. Trump Organization representatives did not respond to an email.
Kaegi defended the process his office used to estimate the Trump property’s value.
The valuation is “consistent with market data and the value of similar property in the area,” he said in a statement. “Our publicly available data and third-party sources show the methodology we use to assess at market value means our work is more accurate and fair than before. For large commercial properties like this to seek appeal after appeal to lower their assessments only serves to put more tax burden on residents and small businesses. I’ll continue to speak out about these practices, which create inequity in the property tax system and need to be reformed.”
Whatever it’s worth today, the Trump hotel can’t be worth as much as it was several years ago. The hotel’s performance has lagged its competitors’ ever since Trump made his famous trip down the escalator to announce his presidential campaign in 2015. The hotel’s revenue fell 30% from 2015 to 2018, and one profit measure plunged 89% over the same period, according to financial documents filed with the assessor’s office.
Trump’s Chicago skyscraper, at 401 N. Wabash Ave., also includes residential condos, which are owned separately, and commercial space at the base of the building, which is owned by a Trump venture. When he developed the project, he planned to sell off all 339 hotel rooms as condominiums, but sales stalled during the financial crisis and he retained ownership of about 175 rooms.
The Board of Review used two primary methods to value the Trump hotel, said William O’Shields, chief deputy commissioner at the board. It estimated the property’s income based on market data and extrapolated a value based that estimate. The board also analyzed recent sales of hotel rooms in the building to come up with a value for the entire hotel. Both methods resulted in a value of about $73 million, O’Shields said.
Sale prices of rooms in the hotel vary because some units are bigger than others, but eight rooms have sold this year from $205,000 to $700,000, according to Redfin. Ten rooms sold last year for $125,000 to $715,000, Redfin data show.
Sale prices, however, aren’t a perfect measure because they typically include beds and other furniture and fixtures in a room. The county’s per-room estimate should generally be lower because it values just the room itself for assessment purposes.
The Board of Review also looks at recent sales of peer hotels for its assessment process, but that wasn’t a useful method for the Trump property because so few luxury hotels have changed hands since 2020, O’Shields said. The pandemic has depressed hotel values generally.
“None of the hotels have recovered to their pre-pandemic performance,” O’Shields said.
The Trump Organization also appealed the 2021 assessed value of the building’s commercial space, which has been largely vacant since the building opened in 2008. Kaegi’s office valued the 74,000-square-foot space at $21 million, but the Board of Review recently knocked its value down 19%, to $17.1 million, according to the assessor’s office.
Still, that’s up nearly 37% from the property’s prior value, so it’s possible, if not likely, that its tax bill could increase this year. Property taxes for the commercial space totaled $698,399 in 2021, according to the Cook County treasurer.
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