Huddle Up is a 3x weekly newsletter that breaks down the business and money behind sports. If you are not already a subscriber, sign up and join 100,000+ others who receive it directly in their inbox each week.

Today At A Glance:

Los Angeles Country Club is the host of this week’s US Open golf tournament, and it’s also one of the world’s most secretive golf clubs. So today’s newsletter breaks down everything you need to know, including why they don’t allow celebrity members, their sky-high initiation fees, their 1,000+ rule book, and the two laws that were implemented to help them save $80 million per year on taxes.

This newsletter is also available via podcast on Apple or Spotify. Enjoy!

This Newsletter is Sponsored By OKX!

OKX, the most trusted crypto exchange platform, has launched the OKX Collective — a unique metaverse environment in partnership with Manchester City.

This interactive environment allows you to interact with player avatars like Jack Grealish, Ruben Dias, Ilkay Gundogan, and Alex Greenwood. Fans will be able to gain exclusive access to unique experiences offered by OKX in partnership with Manchester City, including content, experiences, and all kinds of rewards like matchday tickets, 22/23 training gear, and even the chance to watch the team train in person.

So click the link below and start enjoying this game-changing experience today.

Check out OKX Collective Today

Friends,

The 123rd U.S. Open is in full swing this week in Southern California. The biggest purse in major championship golf history will be handed out — $20 million in total & $3.6 million to the winner — and it’s the first U.S. Open in Los Angeles in 75 years.

There are plenty of storylines to follow, too. We have everything from the recently announced PGA TOUR/LIV deal and Jay Monahan’s health-related absence, to Phil Mickelson’s quest for the career Grand Slam, and the ongoing battle between Jon Rahm and Scottie Scheffler for the World No. 1 ranking.

But the real story this week is the venue: Los Angeles Country Club.

LACC is situated on 320 acres in the heart of Los Angeles, California. It’s one of the world’s most exclusive clubs, with just 800 members and $250,000 initiation fees.

And despite being valued at roughly $8 billion today, two laws implemented in California more than 45 years ago allow LACC to save $80 million on taxes annually.

Los Angeles Country Club is as famous as it is secretive. The Southern California-based country club opened its doors in Beverly Hills more than 100 years ago, and its expansive clubhouse, tennis courts, and 36 holes of golf have only gotten better since.

But don’t expect to go online and find a bunch of pictures of the amenities at LACC.

That’s because the 800-member private club still mostly lives in the past and currently employs some of the strictest rules at any of the world’s top country clubs.

For example, all LACC members and guests must wear (tailored!) pants while on the golf course, even when temperatures reached 105°F during last year’s heat wave. And the club’s 1,000+ page handbook has plenty of other rules, too, like requiring a sport coat for all males above the age of 7 in the clubhouse after 6 pm or strictly prohibiting any dissemination of photographs or videos identifying LACC on social media.

Los Angeles Country Club Rules

• No shorts while playing golf (tailored pants only)

• Men must wear a sport coat in the clubhouse after 6 pm

• No changing shoes in the parking lot

• No clogs or flip-flops

• No headphones or earbuds

• No athletic clothes or apparel with slogans

• No photos or videos of the club on social media

• Members are responsible for all charges their guests incur

• No cash is used on the property outside of paying the caddies (no tipping)

And perhaps the craziest rule of them all, LACC members and visitors can only make phone calls from either A) their parked car or B) an enclosed phone booth in the locker room.

These strict rules and exclusivity don’t just impact Los Angeles Country Club members either; they are directly impacting the players this week too.

Take Rory McIlroy, for instance. He has played virtually every golf course you could imagine, and the 34-year-old says he hasn’t paid for a round of golf since he was 16 years old when he spent 250 euros at Spain’s Valderrama Golf Club in 2005.

But this week, McIlroy was left in the dark. He has never played LACC, so he had to prepare like the rest of us — by watching YouTube videos of the course online.

In fact, outside of Max Homa (Pac-12 Championship), Jon Rahm (Pac-12 Championship), Scottie Scheffler (Walker Cup), Collin Morikawa (Walker Cup), and Patrick Cantlay (played the course multiple times during his college career at UCLA), many of the world’s best players hadn’t played a round at LACC before this week.

And that’s precisely how LACC wants to keep it.

LACC is surrounded by some of the world’s most expensive real estate. Lionel Richie has a 17,000-square-foot home right off the 4th hole. The (now former) Playboy Mansion sits right off the 13th green. Celebrities like Sean “Diddy” Combs and Sean Parker (founder of Napster) also live in the area, and the iconic 123-room Spelling Manor that runs up against the 14th hole is currently listed for sale at $155 million.

But LACC doesn’t care about these people. The club famously doesn’t accept celebrity applications, even if they purchase a $100 million home nearby. And say you aren’t a celebrity but still want to join; it’s not like the admissions process is much easier.

LACC requires potential members to go through a multi-year process, including finding a sponsor, interviewing with the membership committee, multiple letters of recommendation, and vetting your professional, professional, and social life.

And even if you pass all those tests and get offered membership at LACC. Well, then, your welcome present is a $250,000 initiation fee and another $25,000 in annual dues.

But the craziest part about LACC isn’t its Beverly Hills location, its incredibly detailed rulebook, or even its astronomical fees. No, the craziest part about the business behind LACC is a tax loophole that saves the club at least $80 million annually.

So, as I mentioned before, Los Angeles Country Club sits on 320 acres of prime real estate. That’s because the club is located smack dab in the middle of Beverly Hills between the famous roads of Sunset Blvd, Wilshire Blvd, and Santa Monica Blvd.

And this land is reportedly worth more than $8 billion, making it the second most valuable piece of real estate not developed for housing behind Central Park in NYC.

An $8 billion assessed value would typically mean hundreds of millions of dollars in property taxes alone. But LACC got lucky with two laws in the 1960s and 1970s.

First, California voters passed a ballot in 1960 that lowered the value at which officials were allowed to assess non-profit golf courses. And yes, LACC is owned by its members and registered as a non-profit, similar to other Los Angeles-based golf clubs like Bel Air Country Club, Brentwood Country Club, and Wilshire Country Club.

But 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 land triples in value, the property’s assessed value can only grow by 2 percent a year or the rate of inflation, whichever is lower.

Proposition 13 also capped property taxes at 1 percent of assessed value (versus the previous average of 2.67 percent).

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 pay only $220,000 in property taxes.

Los Angeles Country Club Tax Breakdown

• True value of the land: $8 billion-plus

• 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 insulate homeowners who are older, retired, and living on fixed income from payment shock when their property values increase dramatically in a short period.

But given the financial advantage 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.

If you enjoyed this breakdown, please consider sharing it with your friends. My team and I work hard to consistently create quality content, and every new subscriber helps.

Share

I hope everyone has a great weekend. We’ll talk on Monday.

Listen to the Joe Pomp Show on Apple or Spotify.

Interested in advertising with Huddle Up? Email me.

Your feedback helps me improve Huddle Up. How did you like today’s post?

Loved | Great | Good | Meh | Bad

Extra Credit: The Business & Money Behind This Year’s U.S. Open

So now that you’ve learned all the intimate details about one of the world’s most exclusive golf clubs, it’s time to learn about the numbers behind this year’s U.S. Open.

• Event Revenue: The U.S. Open typically generates about $165 million in revenue for the USGA, accounting for ~75% of the organization’s total annual revenue.

• TV Rights: Fox Sports previously owned the TV rights (12-year, $1.1 billion deal) for all USGA events. But Fox backed out of the deal in 2020, and the USGA transferred its media back to NBCUniversal in 2021. And according to the Associated Press, NBC paid “just under half of the rights fee through the rest of the contract,” and Fox paid $323.4 million to the USGA to terminate the contract.

• Ticket Prices: The USGA limited ticket sales for this year’s U.S. Open due to capacity limitations established by LACC, ultimately driving up secondary prices. For example, a general admission ticket costs between $125 (Monday) and $300 (Sunday), while luxury tickets like the Pacific Club cost $1,500+.

• Spectators: Given the limited capacity at LACC, the expected attendance for this week at the 2023 U.S. Open is 154,000 spectators (22,000 per day). For comparison, last year’s U.S. Open in Brookline was estimated to draw 175,000 spectators for the week (25,000 per day).

• Merchandise: The USGA merchandise business will do about 120,000 transactions this week, with about 100,000 hats sold for $25 to $65 alone (~$4.5M in sales).

• Concessions: Food and drinks at the U.S. Open aren’t as cheap as the Masters, but they aren’t that bad either. Beers will cost you $9.50 to $12.50, and there are plenty of snacks (i.e., pretzels, popcorn, and churros) for $7.00 each.

Want More Detailed Sports Business Breakdowns? Subscribe To JPS.

The Joe Pomp Show is a 3x weekly podcast where I break down the business and money behind sports. Think of it as the same high-quality work you read here, just deeper. There are also exclusive interviews with people like Dana White, Lance Armstrong, and Troy Aikman, and you’re guaranteed to learn something.

Listen on Apple

Listen on Spotify

Huddle Up is a 3x weekly newsletter that breaks down the business and money behind sports. If you are not already a subscriber, sign up and join 100,000+ others who receive it directly in their inbox each week.