Thompson Center Assessed Much Higher than Recent Purchase Price
The Thompson Center was sold in the summer of 2022 for $105 million. Since the subject property was owned by the State of Illinois prior to this sale, it was a property tax “exempt” entity, not subject to real estate taxation for tax years preceding the sale. Once the property sold to a “non-exempt” joint venture of Chicago real estate firms, Prime Group and Capri Investments Group, the property became subject to assessment and real estate taxation. The buyers plan to renovate the Thompson Center for Google as their primary tenant with plans for Google to occupy the property by 2026.
Cook County Assessor Fritz Kaegi assessed the property for the first time in 2023 at a fair market value of $222.8 million or $236/sq. ft. per the Assessor’s website. Michael W. Reschke, founder and Senior Vice President of The Prime Group has stated that “The best indication of value is what we paid for it”. Reschke said that the Thompson Center’s value at $236/sq. ft. cannot be fairly compared to downtown office building sales from before the pandemic which resulted in a remote office work market that has increased office vacancies and increased demand by businesses for lease concessions and dissuaded businesses from renewing their leases. As a result, property values have plummeted for downtown office buildings.
In the first sale of a large downtown office building located at 230 W. Monroe Street in September 2023, an Oregon investor paid about $72/sq. ft. for the 29-story, Class B office building. “Thompson Center assessed at more than double its 2022 sale price”, stated Reschke who added, “I think that empty office buildings with huge amounts of deferred maintenance like the Thompson Center trade for $50 to $70 a (square) foot. It is unfortunate that the assessor cannot look at the facts and be more reasonable. I don’t get it.” Reschke and his partner are currently appealing the Thompson Center’s 2023 assessment at the Cook County Assessor and the Cook County Board of Review levels.
In the past, the Assessor’s Office has not engaged in the practice of “sales-chasing” because it can insert bias into the process. The Assessor’s Office has publicly stated that the $105 million sale should be viewed as an unconventional transaction with buyers applying a $75 million valuation for the Thompson Center and contributed $30 million in cash which the buyers said was meant to be used to build out workspace in the revamped LaSalle Street tower. The Assessor’s Office valued the Thompson Center as a second-tier downtown office building and did not place emphasis on the recent 2022 sale of $105 million for its January 1, 2023 valuation of the subject property of $222.8 million.
The Assessor’s 2023 valuation of the subject property at $222,800,000 is excessive and is not indicative of a realistic fair market value of The Thompson Center as of January 1, 2023. The Assessor’s valuation does not take into account the decimated and depressed downturn office market in 2023, the recent purchase price at $105 million or the current condition of The Thompson which has significant physical deterioration and an 80% vacancy rate during 2023.