*1 CUNNINGHAM, THE OF Plaintiff-Appellant, TOWN TAX v. PROPERTY al., APPEAL Defendants-Appellees. BOARDet Fourth District No. 4—91—0357 31, 1992. Opinion January filed LUND, J., specially concurring. Grosser,

Frederic Champaign, M. for appellant. Burris, General, B. Attorney Springfield (Rosalyn Kaplan, Roland W. General, General, Morrissey, Attorney A. Solicitor and John Assistant counsel), Board. Chicago, appellee Property Burman, Griffin, Hodes, (Eugene L. Chicago Arvey, Costello Larry Jurgens, counsel), appellee Siegan, Jerome A. C. Carson *2 Company. Pirie &Scott opinion the of the court:

JUSTICE STEIGMANN delivered Plaintiff, from an order of the Cunningham, appeals the Town of court, of the affirming circuit a decision in concerning valuation of a mall (PTAB) shopping the assessed a Urbana, taxing is whether presented appeal Illinois. issue on the contract sale and rent when deter- authority price should consider the the of the rent does mining assessed valuation when financing of the reflect rates of the nature unique market transactions.

We affirm. Facts

I. (Carsons) developed the Company In Carson Pirie Scott of Lincoln center in Urbana with one its stores serv- Square shopping the and leased the In Carsons sold mall ing as anchor store. Although it ini- buyer. its from the space occupied by back the store for for million with a lease-back tially provision listed the property $6 $200,000 $250,000 eventually 10 to 15 Carsons year years, for per million back for lease $615,000-per-year sold the mall for with $9.3 up more cash arrangement, this Carsons received years. Under following in front, years. more rent the though pay even would in Carsons price, the for more than the market By selling re- akin to a loan. Carsons would effect extra cash somewhat received in to come. Most years the by paying higher this “loan” pay incurring Carsons, cash without surplus it received important sheets. debt on its balance determined Cunningham Town of assessor

Later the year, $3,100,000 ap- based an mall taxes at the value of the million, Carsons filed price. the sale value of praised market $9.3 Re- (Board Review County Board of complaint Champaign with the During prop- this appeal, view), affirmed the assessment. which on the $3,044,200, based $9.3 at a was assessed value erty changes in the since year for market price adjusted million sale Review, however, sale. The set the assessed value at $2,677,180, $8,600,000. on a fair market Carsons then based value appealed both decisions to the PTAB. inter- Cunningham,

At the PTAB which had hearing, Town vened conceded that 1987 sale proceedings, million, based, upon original which the assessment was exceeded fair agreed market value of the Both also parties rent of exceeded the true market rate to accommodate for the increased sale price. Though parties appraisals both submitted based on three (market all methods of property appraisal comparison, income cost potential, reconstruction), parties agreed both approach reflected the true market of a shop- best ping mall.

Two differences in their separated appraised values. First, estimation, as a matter of simply they arrived at substantially different appraised market values for 1987 under the income ap- proach. appraiser $5,830,000, Carsons’ the mall at valued while the $7,633,000 township’s appraiser valued the mall at on a based com- parison of the income that comparable properties produced.

The second difference focuses on the township appraiser’s consid- eration of the excess rent. appraiser ignored While Carsons’ the ex- cess rent rates, because it did not reflect market the township’s ap- *3 praiser considered the excess rent as additional income generated by $7,633,000, mall. Based on his appraisal of the township’s ap- praiser calculated that Carsons paid in excess rent over the market rate. this Capitalizing figure 20%, at a rate of the appraiser finally valued the mall at million for 1987. compared This with $8.59 appraiser’s Carsons’ assessed million capitalization value of at a rate of Both appraisers agreed 11%. that the value of the property increased about 5% in 1988.

After this hearing evidence, the PTAB found for Carsons and re valued the assessment to Carsons’ according appraisal. On administra review, tive the circuit court remanded the case to the PTAB di with rections that it consider the effect of the Illinois Court’s Supreme recent decision in Kankakee County Property Board Review v. Tax Appeal 1, 762, Board 131 2d (1989), Ill. 544 N.E.2d filed after the PTAB remand, had rendered its decision. the PTAB reaffirmed On its prior distinguished County decision and from the present case because government involved rent subsidies for apartment buildings. The circuit court affirmed and the Town of Cunningham appeals.

II. Of Review Standard findings PTAB’s as accept that must argue Defendants we if the PTAB’s con prima facie only correct and that we can reverse In weight support, the manifest of the evidence. against clusions are Tax Appeal Board Review v. Lake cite they 1129, and Gas Re 605, (1989), 192 Ill. 3d 548 N.E.2d App. Department search Institute v. Revenue 154 Ill. 3d (1987), App. 430, cases, 141. does appeal 507 N.E.2d unlike those In property. to determine the correct value of the mall require us PTAB stead, it to address the factors that requires appropriate us value. ad should consider when determines we PTAB’s giving any dress this without deference to the legal question the matter. 14-15, 2d at conclusions Ill. Lake 768; N.E.2d at 192 Ill. 3d at 548 N.E.2d App. Research, Gas 1134-35; 433, 154 Ill. 3d at 507 N.E.2d at 143. App. III. Contract Rent And Price Used To Determine

Market Rent And Price For Tax Assessments The requires taxing Revenue Act authority assess real estate taxes at one-third the fair of the subject cash value (Ill. 120, par. 501(1).) Rev. Stat. ch. The Illinois Su “ preme Court has held that “fair cash value” means ‘what the prop erty would at a sale is bring voluntary ready, willing where owner so, to able sell but not to do and the compelled buyer ready, willing and but not forced so to do ***.’” (Springfield buy able to Marine Bank v. Property (1970), 44 Ill. 2d ex rel. v. Wil 334, 336, 256 N.E.2d quoting People McGaughey son 494, 496, 367 Ill. (1937), 6.) The appraisals presented to the PTAB focused on determining fair market value of the sub ject through valuation, the three focusing specifi methods of on the cally approach approach best reflected what the market would bear for commercial property. present requires case us address whether the assess

ment should consider the actual contract contract sale and the do not reflect the rent when they market values because of the partic ular nature of the financing in the sales In Springfield Ma contract. rine Bank, the supreme court held that value of “[i]n *4 the property, rental may course be a relevant factor. [Cita it cannot controlling factor, be the particularly where tion.] it is admittedly misleading as to the fair cash value of the property Bank, involved.” (Springfield Marine 430-31, 44 at 256 Ill. 2d N.E.2d 764

at not 336.) The court further held that the actual rent did reflect the had the in 1952 the market value because fixed rent and substantially (Springfield had increased in since then. value Bank, at at the 336.) 44 Ill. 2d N.E.2d Marine the actual rent. held the assessment should not consider court that Bank, at 336. Marine 44 Ill. 2d 256 N.E.2d at Springfield holding by PTAB has the Marine Bank Springfield misconstrued is irrele standing it as for the that contract rent viewing proposition instance, the For determining vant when market value PTAB, the two similar cases before owner independent factually but more than government-subsidized building received apartment the (See market for similar nonsubsidized apartments. rate 7-8, 764-65; N.E.2d County, 131 Ill. 2d at Lake v. 172 Ill. 3d (1988), App. Review of 853, the the fell 85.) Although rent tenants below rates, the rent market inflated actual above government subsidies that Springfield rates. PTAB ruled in those cases Marine market the rate nonsubsidized comparable, Bank dictated that market than the ac the tax assessment rather apartments should determine 15-16, 2d at tual, contract See 131 111. rent. 856-57, 527 768-69; 172 111. 3d at App. N.E.2d at Lake 87. N.E.2d at later, the and, the District Court Illinois Appellate

Both Second supreme following: Court the wrote the disagreed, and Supreme court proposition does not stand for Marine “Springfield from where it is different market contract rent irrelevant that, Rather, rent. held when is sub simply case lease, actual rental unfavorable the contract rent or ject an fair disregarded property’s income must be not income does reflect market when the actual rental *** actual earning income. When property’s capacity income-earning capacity reflect rental income does not may disregarded, taxing authority it property, may be in the open for comparable look to rents obtainable income-earning reflects the actual income truly market. Where however, ignored simply may of the be capacity property, open obtainable not coincide with rents it does 2d at 544 N.E.2d at County, 131 Ill. (Kankakee market.” 768.) contends

Plaintiff, Cunningham, Town that, Car- though paid by case in even to the present applies rent, tax should con- the market assessment not reflect sons does *5 argues sider it. It that the PTAB erred as a matter of law when it wrote that “it is fair to conclude a of reading from of only applicable consideration actual rents is to subsidized hous- ing argument cases.” At first blush is not without plaintiff’s appeal. Nevertheless, on although further we conclude that the decision study, in Kankakee in the context of firmly government based sub- housing, sidized that decision of legal principles prop- discusses basic valuation that direct us to of the circuit court erty affirm decision and PTAB. County,

In Kankakee that the court held assessor should have considered effect the contract had on the in government subsidy come-earning capacity (Kankakee of a of particular piece property. 19, County, 131 Ill. 2d at at 770.) supreme N.E.2d court noted that “the standard for the fair market of property price is the at which ready, willing and able and buyers sellers would agree.” 131 Ill. 2d at 544 N.E.2d citing Marine, with approval Springfield 44 Ill. 2d at N.E.2d at 334. case,

In this parties agree both that the actual rent paid by Carsons exceeded the market rental value of the The property. source rent, of this surplus however, itself, is not the real property or the specific use of the in the property (See community.

131 Ill. 2d at 544 N.E.2d at 770 consideration (restricting of the property’s use to housing).) subsidized The surplus paid by Carsons represented the cost of receiving a cash infusion mil of $3.3 lion in excess of the market value of the property from the buyer. However, property taxes should be based on the income-generating of capacity the bricks and mortar of the not property, any financing arrangements seller, of the particular which became the lessee and the new (See Springfield Marine, owner. 44 Ill. 2d at at 336 (“[I]t is the capacity earning income, rather than the in derived, come actually which reflects ‘fair cash value’ for taxation Therefore, purposes”).) the PTAB correctly held that of appraisal the mall should property not have included the actual rent by Carsons because that rent neither the substantially reflected actual in come potential nor the true market rent. agree We with the PTAB’s conclusion that “unlike the housing subsidized situation in Kankakee County, the additional income over economic or market rent is not due to the earning of capacity estate, the real but rather is due to the particular nature of the contract parties.” between the can explain

We our conclusion in another way: assume that Car- sons had not needed the extra million but as a decided financial to rather we can as-

strategy be lessee than an owner. initial sume that Carsons would have sold the at or about its million, addressing not listed of which case we would be $6 of sit- surplus hypothetical issue rent. difference between Carsons, strategies financial reality uation and is the condition to the itself. the notion relating reject factor We any upon can the mi- any way dependent that an assessed valuation be the sale financing arrangements croeconomics or particular occupant Accordingly,we affirm.

Affirmed.

McCullough, J., concurs. *6 LUND, concurring: specially JUSTICE opinion I to warn those who consider specially only concur fancy financing pretty miss the forest the trees. Some years Pirie in fiscal going Company was with Carson Scott and 1987. re- plan

There to concentrate on annual retailing. was business, while add- port liquidation catering and food discusses Seat ing department Donaldson’s stores. Minnesota-based major con- being Financing stores were also added. was specialty cern. $9,300,000 million to resulted

The increase in sale from $6 $400,000 in annual rent payments an increase almost $33,333 per If the at the rate years. annual was very liquidating come close to month, the would monthly payment interest rate. $3,300,000 carrying note a 9% 15-year but are nec- are complicated, The tax effects of such transactions considerations have little to do These corporate considerations. essary from, return of, the reasonable rental with the fair market value real estate investments.