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Expropriated Retailers Had Value
by Ron Davis

The tenants of a Chicago-area shopping center will share in the monetary award from the confiscation of center property by eminent domain. But the sharing has been controversial.

The shopping center is Orland Park, and the tenants, five in all, had leased space there to operate stores offering various retail goods. But all that changed after the center owner accepted an offer of $2.75 million to allow the local government to acquire the center property.

That offer, however, acknowledged that with the settlement, some tenants might claim a portion of the $2.75 million. Still, the offer added, the center would be “exclusively liable and responsible for satisfying any and all of the…claims to the just compensation funds deposited” by local government.

The court approved the settlement agreement, and the local government followed up by depositing the $2.75 million with the county treasurer. Each of the five tenants reacted by claiming that it was entitled to recover “just compensation” from the center owner.

In response, the center owner contended that the market value of the tenant leaseholds was much lower than the tenants had assumed and that each tenant had suffered only a minimal loss—or no loss at all. Therefore, the center owner added, the tenants are not entitled to any of the $2.75 million. As proof of that reasoning, the center owner had hired an appraiser who, after investigation of the center premises, concluded that the leaseholds were of little or no value.

The tenants also hired appraisers, and their calculations of the market values of each of the five businesses ranged from a low of $78,102 to a high of $215,000.

The appraiser for the center owner reported much different values. Those values took into consideration such factors as costs that she estimated each tenant would incur if, for example, the tenants were to sublet each leasehold to a third party. Thus, for each sublet, she additionally deducted an estimated broker’s fee or leasing commission, as well as costs for cleaning and preparing each rental space for a new tenant.

As a result of those factors, her estimates of four of the properties had negative fair market values. The fifth property, she said, had a worth of only $8,300. She also described the shopping center as “functionally obsolescent.”

On appeal of those assessments and opinions, the trial court ruled that the value of the five tenant leaseholds is $657,144. That court explained that the conclusions of the center’s appraiser were inconsistent with the actual value of the property. In answer, the center owner appealed, claiming that the trial court’s ruling “is riddled with numerous errors.”

Despite the argument of the center owner, an Illinois appellate court affirmed the ruling of the lower court. Explained that court, “It is logical that the trial court’s acceptance of a particular appraisal will not be set aside unless it is the result of disqualification, fraud, bad faith, or fundamental mistake.”

(Appeal from the Circuit Court of Cook County, not reported in N.E.3d, 2015 IL App (1st) 130622-U, 2015 WL 4459076)

Decision: July 2015
Published: August 2015



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