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Buying a property without changing the ownership
Billionaire Michael Dell saved about $1 million a year in property taxes by restructuring the 2006 purchase of a Santa Monica hotel to take advantage of arcane rules governing California’s Proposition 13. Here’s how it went down:
The original deal
A few months later
The result
The original deal
Dell, one of the world’s richest men, agrees to pay $200 million for the Fairmont Miramar Hotel in Santa Monica in 2006.
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Hotel purchase: Adding his wife, Susan, to the mix was a key element that helped Dell reduce his property tax bill. |
A few months later
The deal is reshuffled to avoid a legal change in ownership by buying the company that owns the hotel, rather than the Miramar itself. Dell brings in his wife, Susan, and a third entity controlled by investment managers Glenn Fuhrman and John Phelan.
The result
With no single entity owning more than 50%, the value of the hotel for tax purposes remains the same as the last time it sold, in 1999.
