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CHICAGO-These are sunny days for multifamily rental property owners in this market. A nearly decade-long failure of supply to keep with demand has made rent increases heftier, occupancies sky-high and sale prices of the few properties on the market to hit all-time highs.

The only cloud on the horizon is property taxes.

AMLI Residential Properties Trust reported second-quarter funds from operations of $0.65 per share, a 9.7% drop from the same time last year. While softening of markets such as Austin, TX hurt the bottom line, property taxes dampened the bottom line even in the strong multifamily market here.

“Other than the real estate tax increases, Chicago continues to put up good numbers for us,” says executive vice president Robert A. Aisner. “Our outlook is positive and steady.”

However, the tax hit on AMLI Residential’s nine communities, totaling 3,731 units, cannot be denied. The tax bills from Cook, DuPage, Kane and Lake counties added up to $1.17 million, a 23.3% increase over last year. That was the biggest line item that pushed total expenses up 8.3% over 2000.

The tax increases are in line with assessment boosts being seen in some of Chicago’s hottest neighborhoods, where a flurry of rehabs have pulled up the value of properties around them.

Property taxes represent 38% of the Chicago portfolio’s total expenses, compared to 32% for AMLI Residential’s entire portfolio, spread out in Dallas, Atlanta, Austin, Houston, Indianapolis and Kansas City.

“There is a slowdown in job growth,” Aisner cautions. “And there is some increased supply, albeit for a market like Chicago, not a tremendous supply.”

AMLI Residential is adding to that supply with its $82-million AMLI at Seven Bridges in southwest suburban Woodridge, which president and co-CEO Allan J. Sweet considers “a cross between a suburban project and a city in-fill. Although AMLI had hoped to acquire another joint venture project, an opportunity failed to materialize, he says. “It’s a better time to sell than to buy,” Sweet adds.

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