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Chicago flood not to effect RE values.

The impact of the Chicago River flood on real estate which was affected by the water will not be as devastating as some people might think, according to Charles G. Argianas, MAI and regional director for American Appraisal Associates' Real Estate Advisory Group (REAG).

In the short-term, the impact on a particular building will vary, and will create an artificial impact on its value. "For example, if a building loses rental income for a period of time because of the flood, this will affect a property's value but only temporarily," said Argianas. "If the floodwater forces buildings to close, it would not be surprising if building owners reviewed copies of their lease agreements to determine whether tenants are liable for rent when their properties are closed for repairs."

The buildings that will be the most affected will be those that are situated in the immediate area, especially those that have had ruined mechanical equipment. "For valuation purposes, capital expenditures on mechanical equipment, particularly when refitting is required, seldomly provide a commensurate |dollar for dollar' return, because buildings are expected to have adequate mechanical equipment," said Argianas

Furthermore, in the long-term, after tne cleanup has occurred and buildings are back in operation, Argianas stated there is no apparent reason that property values will suffer. Additionally, it will be difficult to prove that pre-World War II buildings which were especially hit hard by the flood will be less valuable in the future than newer high-rise structures.

The Real Estate Advisory Group, an operating unit of American Appraisal Associates, specializes in investment real estate appraisals for portfolio valuation, financial reporting, appraisal updates, market studies, and other purposes.
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Title Annotation:real estate
Publication:Real Estate Weekly
Date:Apr 29, 1992
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