Valuing the real estate, analyzing comparable gas station sales, separating business value, and developing appraisal evidence suitable for Cook County property tax appeals and PTAB.
Explore the Valuation ProcessA gasoline service station is more than a building on a piece of land. It can also contain an operating business, specialized equipment and intangible business components.
For a property tax appeal, the appraiser must carefully consider what the market evidence actually represents and distinguish the value attributable to the taxable real estate from value associated with business operations.
Does the comparable sale or income stream primarily represent the value of the real estate, or does it also include value attributable to the operating business?
A gas station transaction may include several components. Careful analysis is necessary before relying on the sale as evidence of real estate value.
Land, building, canopy, site improvements and other improvements that constitute the real property.
Equipment, furnishings, inventory and other personal-property components that may be included in a transaction.
Operating business income, goodwill, franchise relationships, fuel contracts and other intangible business components.
A credible appraisal considers the applicability of the Sales Comparison, Income Capitalization and Cost Approaches. The approaches do not necessarily receive equal weight.
Gas stations can differ substantially in physical characteristics and market position. Simply averaging several sales may not produce a credible indication of value.
Comparable sales should be verified and analyzed for meaningful differences between the comparable property and the subject.
A gas station can be purchased as an operating business rather than simply as real estate. That distinction can materially affect the usefulness of a comparable sale.
Fuel volume and margins can influence the economics of the operating business independently of the underlying real estate.
Merchandise, food, beverages, lottery and other retail operations can contribute significant business income.
Franchise rights, fuel agreements, goodwill and other intangible assets may be included in a going-concern sale.
When a comparable transaction includes an operating business, the appraiser should investigate the transaction and determine whether the sale price provides reliable evidence of the value of the taxable real estate.
A commercial property owner may challenge an assessment through the applicable Cook County appeal process and, where appropriate, proceed to the Illinois Property Tax Appeal Board.
Review the property's assessment and physical characteristics.
Submit evidence supporting the requested reduction.
Develop market-supported evidence of fair cash value.
Present the evidence to the Illinois Property Tax Appeal Board.
PTAB recommends an appraisal for commercial and industrial appeals. When an appraisal is submitted as evidence, PTAB also states that the appraiser should be available to testify in person.
A strong appraisal should provide the underlying data, analysis and reasoning supporting the final opinion of value.
Illinois appellate decisions and PTAB decisions provide useful guidance regarding appraisal evidence, comparable sales, burden of proof and valuation of properties that may include business components.
384 Ill. App. 3d 472 (1st Dist. 2008)
The decision is important to commercial appraisal practice because it addresses the treatment of available comparable market evidence and the Sales Comparison Approach.
View Illinois Courts decision →2020 IL App (1st) 180994
Relevant to valuation of going-concern properties because the transaction involved real estate together with tangible and intangible components.
Read the case →PTAB's published procedures explain the evidence expected in property tax appeals and specifically recommend appraisals for commercial and industrial properties.
PTAB filing and evidence information →The Board of Review reviews evidence submitted in support of property tax appeals and has authority to confirm, revise, correct, alter or modify assessments as authorized by law.
Cook County Board of Review →Foreclosure and REO transactions deserve careful investigation. A distressed transaction may involve circumstances that differ from those assumed under a conventional market-value definition.
The appropriate question is not simply whether a sale was an REO sale, but whether the circumstances surrounding the transaction make it reliable evidence of market value.
A prior REO sale should be investigated and reported as part of the property's history. Whether it should be relied upon as a comparable indicator of value requires analysis of the actual transaction circumstances.
Gas station tax appeal assignments require an understanding of both commercial real estate valuation and the business components that can influence a transaction.
Appraisal assignments focused on commercial property tax appeals before the Cook County Board of Review and PTAB.
Experience with gas stations, retail, industrial, apartments, automotive facilities and other commercial property types.
Commercial appraisal experience and the MAI designation provide a foundation for complex valuation and litigation-support assignments.
If you are an attorney or property owner evaluating a Cook County gas station assessment, a market-supported appraisal can provide important evidence regarding the property's fair cash value.
Contact David Barros, MAI