I Still Can't Get Over The Staggering Amount Of Money That The Land That LA Country Club Sits On Is Worth
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Shutterstock Images.Like millions of others I sat on the couch all afternoon yesterday like a lazy pos and watched the final round of the US Open.
I was rooting for Ricky Fowler to pull off his first major victory. For selfish reasons.
But after hearing about the grind that Wyndham Clark has endured, and him losing his mom, that changed and I was pulling for the guy who nobody had heard of before Thursday and who went off at +8500!
Our own Dan Rappaport did a wonderful job recapping the entire tournament -
I'm sure all the golf heads knew this before the tournament began, and that the NBC analysts mentioned it on Thursday or Friday, but as I was watching Sunday, and NBC kept showing the aerial views and how closely LA Country Club sat nestled up to some of the priciest real estate on planet Earth I couldn't help wondering how many billions of dollars that land has to be worth.
One of my favorite authors' podcasts was Malcolm Gladwell's Revisionist History from a few years ago. In one of his more popular episodes he discussed how many private golf courses there are in this country, in general and per capita. It's pretty insane when you really think about it. When you factor in the exclusivity and their prime locations it gets even more head-scratching.
I think his take that they should be "liberated" for the public good is a bit extreme, but it's a fair discussion topic.
My point in regards to LA Country Club though is if you had to guess off the top of your head how much the 325 acres that LA Country Club sits is worth, what would you guess?
Like the idiot I am when it comes to math and numbers, I figured one billion give or take a few hundred million was a fair estimate.
Not even close amigo.
Try $6-8 BILLION.
And that's not even the best part.
Thanks to all the people on Twitter who informed me how off target I was and for sending me this great info tweet from paisan Joe Pompliano a couple days ago I missed.
Los Angeles Country Club is one of the world's most exclusive golf clubs.
• $250,000 initiation fees
• No celebrities or social media posts
And they use a 45-year-old tax loophole to save $80 million annually.
Here's how it works:
LACC sits on 320 acres in the heart of LA.
It's one of the country's nicest (and strictest) country clubs.
They don't allow celebrities to join, and every new member is handed a 1,000+ page rulebook.
LACC Rules
• No shorts (tailored pants only)
• Sport coats in the clubhouse after 6 pm
• No changing shoes in the parking lot
• No headphones, earbuds, or athletic clothes
• No photos or videos of the club on social media
Members can also only make phone calls from their parked car or a phone booth in the locker room.
And the club is so exclusive that many of the world's best players are seeing it for the first time this week.
Rory McIlroy, for instance, hasn't paid for a round of golf in 20 years. But he had never played LACC before this week's US Open, so he says he prepared by watching videos of the course on YouTube.
Still, the craziest part about LACC isn't its $250,000 initiation fee or its 1,000+ page rulebook.
The craziest part about LACC is its real estate.
The 320-acre piece of land sits smack dab in the middle of Beverly Hills — between the famous roads of Sunset Blvd, Wilshire Blvd, and Santa Monica Blvd.
The land alone is reportedly worth $8 billion, making it the second most valuable piece of real estate (not developed for housing) behind Central Park in NYC.
But here's the craziest part…
An $8 billion assessed land value would typically mean hundreds of millions in property taxes alone.
But LACC only pays $220,000 in annual taxes.
This is because of two rules:
1. LACC is owned by its members and registered as a non-profit. So they benefited when California voters passed a ballot in 1960 that lowered the value at which officials were allowed to assess non-profit golf courses.
This non-profit rule also applies to other LA-based golf clubs, like Bel Air Country Club, Brentwood Country Club, and Wilshire Country Club.
2. Then, in 1978, voters passed Proposition 13. This new law rolled back the assessed land value to its 1975 level and more or less froze that value in time.
So even if the market value of the land tripled in value, the property's assessed value can only grow by 2% a year or the rate of inflation, whichever is lower.
And Proposition 13 also capped property taxes at 1% of assessed value (vs. the previous average of 2.67%).
So, in simple terms, Los Angeles Country Club would be paying about $80 million (1%) in annual property taxes because its land is worth $8 billion-plus.
But because of these two laws enacted more than 45 years ago, LACC’s land is currently assessed at just $22 million, and they only pay $220,000 in property taxes.
LACC Tax Breakdown (estimates)
• True value of the land: $8 billion
• Assessed value of the land: $22 million
• Annual property tax savings: $80 million
Now, Proposition 13 wasn’t put in place specifically for golf courses — its true purpose was to protect homeowners who are older, retired, and living on fixed income from payment shock when their property values dramatically increase over a short period of time.
But given the financial savings it has provided exclusive golf clubs over the years, it’s no wonder why Los Angeles Country Club wants to keep things exactly as they are.
After talking to my golf shark/attorney business partner Bobby, I got the tax explanation:
You see, while us regular folks dutifully pay our fair share, the Los Angeles Country Club has mastered the art of tax evasion through a rather nifty loophole. Brace yourselves, as we delve into the labyrinthine world of taxation and absurd legal tricks.
The Elusive 501(c)(7) Status:
Here's where things get interesting. The Los Angeles Country Club managed to acquire a coveted 501(c)(7) tax-exempt status. "What's that?" you ask. Well, my friend, it's a magical designation reserved for "social and recreational clubs" that serve the general public. Yes, you read that right – the general public.
Now, it's hard to imagine how an exclusive, members-only club that charges hefty fees could possibly serve the "general public." But hey, who are we to argue with the logic of the tax code? The Los Angeles Country Club has convinced the IRS that it provides a valuable public benefit. Perhaps they believe the sight of affluent individuals swinging golf clubs is a morale booster for the masses?
So, how does this tax loophole work in practice? Well, while the rest of us grapple with our tax returns, the Los Angeles Country Club twiddles its thumbs, basking in the warm glow of nearly zero tax liability. It's a loophole jackpot that saves the club millions of dollars in taxes each year. They're living proof that "the only certainties in life are death, taxes, and exemptions for the rich."
Personally, I am such a fan of the "sportscoats required after 6pm" rule that I'm willing to look the other way on this tax nonsense.
Not to go all-Francis on everybody but I think we need more places in society that require people to dress up in order to enter. (I have an entire rant blog ready to go one day on how ridiculous it is that people feel totally fine leaving the house in pajamas and workout clothes on a daily basis now but that's another blog).
I also love the fact that the LA Country Club prides itself on not allowing celebrities admission. Basically, they're the anti-SoHo House in the most celebrity-riddled location on the planet. Ballsy. You gotta respect that move. I can only imagine the kind of Purge level waspy motherfuckers that belong to this place.
Must be nice.