A patch of land high on a cliff overlooking the Pacific Ocean offers 18 award-winning holes of golf, a cluster of multimillion-dollar mansions, and a potential headache for its developer, Donald Trump.
Trump’s dealings at the Trump National Golf Club Los Angeles are being investigated by New York Attorney General Letitia James as part of her investigation into whether Trump exaggerated the value of his holdings to his lenders, insurers, and the Internal Revenue Service.
One of James’ claims is that Trump valued unsold lots at the property at $4.5 million, despite receiving an appraisal valuing the lots at $1.1 million.
That comes as no surprise given what Trump has claimed to Forbes over the years. Trump purchased the 261-acre property in 2002 for a reported $27 million after a landslide destroyed part of the golf course and the previous owners declared bankruptcy. He had grand plans for rebuilding the golf course and surrounding it with mansions. Trump stated in 2005 that he had 75 lots at the property and intended to sell 75 homes for $10 million each. Despite the nationwide real estate crash, things were going so well at Trump Los Angeles in 2009 that Trump’s chief financial officer, Allen Weisselberg, said buyers were snapping up houses for around $10 million and empty lots for $8 million.
And what about those ostensible sales? Lot buyers were never shelling out $8 million—or anything close to it—according to an analysis of property records. Trump sold two of his best lots for about $4 million each in 2007, near the peak of the real estate bubble, but he didn’t sell the rest until years later, for less than $2 million on average. There was also no $28 million mega-home sale. Trump built and sold a half-dozen houses at Trump Los Angeles, including four for between $3.2 million and $4.2 million and one for $7.2 million, according to property records. By far his most significant sale was in 2006, when billionaire Phil Ruffin, Trump’s close friend and business partner, paid $12.5 million for a mansion to kickstart sales at the property. Ruffin sold the property nine years later for a loss of $5.8 million.
The deception apparently extended beyond Forbes to Trump’s lenders and insurers, who received personal balance sheets from the Trump Organization. According to the New York attorney general, Trump’s 2012 balance sheet valued the property’s lots at $4.5 million each, despite the fact that a Trump-commissioned appraisal valued the lots at a quarter of that price. According to property records, Trump was never able to sell a single lot for $4.5 million, not even one of his largest parcels with the best ocean views. A Trump Los Angeles lot typically sells for $1.9 million.
The patch of 16 lots that Trump never attempted to sell has become a focal point of James’ investigation. Trump fought for years to get permission to build homes on the parcel, which was thought to be vulnerable to another landslide. Meanwhile, he obtained permission to use the area as a driving range and putting green for his golf course.
It would most likely take years and millions of dollars to make the land safe enough for residential development. So Trump devised a new way to profit from his troubled property: he used it to reduce his tax bill. In 2014, he reached an agreement with a local land trust. Trump donated a conservation easement over the tract, promising to keep it as green space rather than developing it. In exchange, he could deduct the value of the gift—which he had appraised at $25 million—on his taxes. Another perk: He got to keep using the property as a driving range for his paying customers. A good deal, even if the optics made his lawyer nervous.