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Saturday, Aug. 15, 2009 | 2 a.m.
Sun Archives
- Get 'em while they're cold (8-15-2009)
- CityCenter condo prices not bending to market (5-21-2009)
- CityCenter safe - for now (3-28-2009)
- Adaptation or ‘disaster’?: Depends on your view of the Harmon (2-8-2009)
- Condos struggle in icy market (2-6-2009)
Sun Topics
Sun Coverage
Buyers of CityCenter condos, grumbling about the drop in real estate values and other concerns, say MGM Mirage officials who were previously reluctant to discuss the issues are now reaching out to them. Buyers say they hope the talks lead to price reductions on existing sales contracts, which is their primary goal.
MGM Mirage officials, worried that some buyers will not want to close on their units, are also inviting customers to discuss their concerns about construction problems uncovered at CityCenter in recent months, potential discrepancies between the advertised and actual square footage of condo units as well as MGM Mirage’s plan to open some CityCenter amenities months after owners occupy their units, the owners say.
Buyers say MGM Mirage wants to fend off potential lawsuits by buyers attempting to back out of their contracts.
The escrow closing process will start in December and spill into next year. In response to word about polls and focus groups involving the buyers, MGM Mirage spokeswoman Yvette Monet would only say that the company “regularly communicates with CityCenter owners.”
Some buyers have sought price discounts from MGM Mirage on condos they purchased two years ago, when Las Vegas was booming. Others want out of their contracts, saying they can no longer afford to buy the units because of the poor economy and the lack of available financing.
During a conference call last week to discuss the company’s second quarter performance, CityCenter CEO Bobby Baldwin said the company is considering discounting condo prices and is mobilizing various financing tools to enable buyers to close.
Baldwin said the roughly 950 condo buyers at CityCenter are regularly polled about their attitudes toward the project.
“Most are very excited about what it is that we have developed there and look forward to purchase these units in some fashion,” Baldwin said. “Of course it’s all subject to financing and being treated properly as it relates to price.”
CityCenter broker Bob Hamrick said MGM Mirage and Dubai World, its partner in the project, will announce any readjusted prices by early September.
“We remain in the process of recalibrating prices to make it fair for existing owners and to make it compelling for further purchasers to buy,” Hamrick said.
CityCenter started selling units in January 2007, when the market was hot.
But the situation has changed, Hamrick said. “CityCenter remains a unique product that can’t be touched by anything else in Las Vegas,” he said, “but there are some realities we recognize, and we have to respond.”
Las Vegas attorney Mark Connot, who is representing some CityCenter condo buyers, said he’s glad MGM Mirage has recognized the decline in the price of real estate.
“I think a fair number of people have looked at this and say unless they get down to market value or close to it, people may walk,” Connot said.
Buyers say MGM Mirage’s more conciliatory approach stands in contrast with its stance in previous months, when efforts to seek price discounts were rebuffed by sales agents who refused to discuss the issue. Some buyers are seeking reductions of 30 percent to 50 percent.
Condo buyers have a Web site, citycentercondodepositgroup.blogspot.com/, to share information that could be used in future lawsuits and other complaints.
A similar Web site created by owners of condo units at MGM Mirage’s Signature towers has become a gathering place for unhappy Signature buyers, who have used information on the site to file or join lawsuits against the project and file complaints with law enforcement agencies.
Lowering condo prices could significantly reduce CityCenter’s return on investment from initial projections. The company’s revised $8.5 billion budget for CityCenter, which had peaked at $9 billion before the recession, assumes the company will collect only $250 million in condo sales proceeds on top of the $313 million in condo deposits collected from prospective buyers. MGM Mirage hoped to collect as much as $2.6 billion from condo sales. The company has sold about 55 percent of CityCenter’s roughly 2,440 condo and condo-hotel units. Based on contracted prices, the company has sold about $1.6 billion worth of condos.
Buyers will start closing on the units in December, beginning with the Mandarin hotel and condo tower, which opens Dec. 3, MGM Mirage’s Baldwin said last week. Units at Veer, the twin leaning towers fronting the CityCenter complex, are expected to begin the escrow process in January. Units at Vdara, the only condo-hotel tower on the site, are expected to begin that process in February, he said.
Some buyers say that although discussions with MGM Mirage are a positive sign, they are leery about having to sign confidentiality agreements or make concessions in exchange for a potential price cut.
Owners and real estate watchers say these meetings might become confidential, case-by-case settlements that pre-empt arbitration proceedings that are typically required to resolve disputes over real estate purchases.
Some observers say MGM Mirage might cancel sales of condo-hotel units at Vdara, where owners can receive rental income on their condos by putting them into a rental pool, because of weak demand for condo-hotels and the unwillingness of banks to finance them. Most condo-hotel towers in Las Vegas have been hit with lawsuits by owners who are disappointed at the revenue they are earning from their units, in part because of high management and upkeep costs that they contend were not disclosed in advance.
The depressed economy and competition from other condo-hotels such as Signature, Trump and Palms Place may force MGM Mirage to convert Vdara into a resort hotel and consider condo sales down the road, real estate experts say. MGM Mirage could divert Vdara buyers to Veer, for example, they said.
Hamrick called any suggestions of Vdara being converted into a hotel just a rumor.
In Business Las Vegas reporter Brian Wargo contributed to this story.
6/5 pays bets - that the prices will be still too high.
All you brilliant people that bought a condo at City Center, GOOD LUCK trying to ever leave your little palace to go anywhere and then try to get back home!!
I don't get it. Can someone please tell me that there is some kind of secret entrance & exit for all these thousands of people to come and go during normal hours of the day so that they don't have to use the strip? Has anybody even bothered to notice that you can't even move on the strip right now? Unless you're rich enough to own a helicopter to come and go from your condo, I think you're all in for a big NIGHTMARE!
Oh well, I will be there to see this great disaster happen on opening day, but I will do it by foot. If I can even get near New York New York, I will park my car in there parking structure and then proceed walking north on the strip to see if I'm right and if my theory is correct.
REGISTER FOR THE BUYER WEBSITE
HTTP://WWW.CITYCENTERCONDODEPOSITGROUP.BLOGSPOT.COM
NOTE: THIS WEBSITE IS UNOFFICIAL AND HAS NO AFFILIATION WITH MGM
THere is most likely a private entrance to the condo building far, far away from the Strip as well as a private entrance for parking. Every hotel on the Strip has a private entrance away from the normal crowds.
Part 1 of 3:
The situation with the buyers at the MGM Mirage condos, who put down huge deposits, and are faced with being forced to close escrow or lose their deposits, when normal conditions precedent to an obligation to close have not been satisfied, like being able to get a mortgage loan at the contract price, is simply a travesty. The same thing happened at the Streamline Tower. The outright rip off of the buyer's deposits at the Spanish View Toweras just another examples.
The problems with condominium sales laws in Nevada need to be resolved the way they are in California:
Step 1: A developer can take "reservations" for sales of condos at a fixed price, and take deposits which are placed in escrow, under a California State-issued sales permit called a "Pink Report". However, if the buyer decides to cancel the deal for any reason, such as the building being finished late, or the building being known to have construction defects, or the financing market changing, or mortgage lenders refusing to lend on the building, under California law the escrow holder has to give the buyer their deposit money back no questions asked. Escrowing the deposit money is particularly important in circumstances like Spanish View, where the developer simply ripped off the deposits and never built the building.
Step 2: When the condominium building is close to complete, the developer gets a California State-issued "White Report" which is the permit to actually sell and close escrow on condos. In order to get the White Report, the developer has to post cash, an irrevocable letter of credit, or a surety bond with an escrow holder, to guarantee the buyers, their lenders and their HOA a way to recover damages if the condo building and other amenities, like landscaping, are not completed according to the plans and specs for the project. Only when the developer has his state-issued White Report, the developer can that buyers convert their Pink Report based "reservations" (as described above) into binding purchase contracts.At that point in time, instead of signing a binding contract, if a buyer has learned of construction defects in a high rise tower, such as Clark County's abysmal failure to properly inspect construction of certain high rise condo buildings, the buyer can simply "cancel his reservation" and get his money back rather than signing the binding purchase contract. Even with a White Report, where a buyer formally binds himself to purchase a condo, the buyer's deposits, by California law, must go into an escrow and not into the developer's pocket. At that point in time, the buyer's rights and expectations are still protected. Ultimately, when the developer has a certificate of occupancy for the condo tower, he can start closing escrows, and pull the buyers' deposit money out of escrow either because the buyer closes escrow, or because the buyer defaults.
The question, of course, is how much of a price adjustment MGM will make to address current market reality.
To try and get an idea: CityCenter will contain about 2400 condos, and about 1500 of those units (about 63% of all units in CityCenter) will be condohotel units in Vdara. Just across the street MGM also operates the Signature condohotel towers. Let's look at a few recently sold units there to get an idea of where the market is currently at compared with when these units were originally sold:
135 E. Harmon Ave., Unit 2418: originally sold new for $510K in Jan 2007, sold June 2009 for $155K.
125 E. Harmon Ave., Unit 2504: originally sold new for $595K in July 2007, sold July 2009 for $156K.
125 E. Harmon Ave., Unit 3318: originally sold new for $690K in June 2007, sold May 2009 for $168K.
The list goes on and on like this.
For the three examples cited, "current market reality" as indicated by their recent sale prices works out to only 26% of what these units originally sold for. In addition, MGM priced units in CityCenter considerably higher than in Signature. So, does MGM plan to cut CityCenter prices by, say, 74% to address current market reality???
Part 2 of 3:
The California legislative framework for protecting consumers who buy new condominiums has worked very well for over 30 years. You never hear of a developer ripping off deposits and not finishing a building like happened at Spanish View Towers.
But, of course, here in the Banana Republic of Nevada, the state's consumer protection laws, on virtually all topics are abysmal for two reasons: (1) Pervasive control of the Legislature by sleazy business interests who want to preserve every opportunity possible to rip off all sorts of consumers and (2) a Republican philosophy that it is appropriate to allow businesses to cheat consumers.
And just to reinforce the picture of Nevada as a state designed by its Legislatures and Governors to promote the fleecing of consumers, to enhance the continued revenue stream of cash from sucker/consumers into the State's well connected businesses, take a look at the website of our Attorney General Catherine Cortez Masto, where she claims she cannot file lawsuits to protect consumers because the Legislature cut her budget to do so. See: http://ag.state.nv.us/org/bcp/cadinfo.ht... which says:
"The Nevada Consumer Affairs Division and its administrative duties have been temporarily eliminated by Assembly Bill 561 implementing the Governor's recommendation to the 2009 Nevada State Legislature.
The Nevada Consumer Affairs Division was the sole agency that could pursue deceptive trade via administrative enforcement seeking a resolution between the business and consumers, often pursuing mediation for consumer restitution. With its temporary elimination, the Consumer Affairs Division is no longer able to accept or process individual complaints.
While we would like to act on every piece of correspondence we receive, limitations of law, time and staff require us to focus our legal efforts on those cases that indicate a pattern of fraudulent activity that substantially affects the public interest. This means we cannot give legal advice, opinions or interpret Nevada law for individuals. Further, our capacity to address violations of the Nevada Deceptive Trade Practices Act (NRS, Chapter 598) is limited to substantial negative affects to the public interest."
there will be a way to get in from the west via harmon road.
it's clearly visible on the plans.
however, i just can't see how anyone would want to buy a unit at this place. i guess people think that somehow just because city center is open for business that it's going to make all the unemployed people in ohio, michigan, etc. pawn their stuff to come here and gamble.
city center is not a breath of life. it's a kiss of death because once those construction workers leave and take their spending money with them, this town will crater.
Part 3 of 3
New York has a long history of having powerful Attorneys General who both protect the average consumer and crack the whip against crooks on Wall Street when the Federal SEC and Justice Department fail to do so. New Yorkers from the 1950's to the 1970's now in Las Vegas all remember the beloved Attorney General of New York, Louis J. Lefkowitz, who kicked everyone's ash, Republican, Democrat, cheater-of-the-poor and cheater-on-Wall Street. Even conservative Republicans voted for him, because they knew his role as a powerful State Attorney General was very important in protecting them from "crooked Democrats" of which there were and still are many in New York's business community.
Here in Nevada, our Attorney General is weak and her office is underfunded. If you comb the Nevada Supreme Court's appellate decisions under the two laws allegedly designed to protect consumers and small businesses from deceptive trade practices and unfair competition, N.R.S. 598 and 598A, you'll see that there have been only one or two times a significant prosecution by the Nevada Attorney General has reached the Supreme Court. And, of course in Nevada, the party appealing against the Attorney General is often a huge business or utility.
At this time of terrible financial peril for Nevada's residents, Nevada needs a well funded, aggressive Attorney General's office to protect its population from overreaching and unlawful conduct by condo developers, car dealers, home builders, employers who cheat their laid off employees out of unemployment and a host of other businesses who take money out of the pockets of the working class.
The way City Center was built, it is a short time investment and then an insurance claim.
The only question is; how many will die in the fire or collapse?
The whole property will be haunted by the contractors that died there. I ain't scared of liberals, but I'm scared of ghosts!!!
Great posts cynicalobserver. As an out-a-towner doing research on Las Vegas opportunities, invester beware! Maybe thats why prices seems so enticing. What to do? What to do?
They'll knock of a few thousand off the inflated prices but: that is all. This mess will end up in court where the condo buyers will lose.
Using Dawgdays #'s as comps, isn't MGM almost forced to make huge price concessions? Since the buyers still have the option to walk away if they forfeit their deposits, most surely would rather do that than be hundreds of thousands underwater on the day they move in.
One other question: are they still on track for a Nov/Dec opening? From the recent photos it seems they still have a lot of work left.
Buying a unit that sold for 595 for 156, That's a bargain. Buying a new unit discounted by 10% or whatever is still over paying when you can cross the street and buy 3 or 4 units for the same money. Kind of like time shares. If you want one, go to the resale market and save 60-80%. Depending on the monthly dues, the mid 100's price seems to be very attractive. Of course, if money is no object, some will opt for the trendy newest units. It sounds like one should never pay a deposit on an unfinished project. I can hear the hard sell now.....prices will increase substantially, once the project is built.....Yeah, right.
The only option that would make sense for Vdara is if its contract holders are given the option to transfer their deposits to purchase in Veer or Mandarin Oriental or otherwise refund their deposits in full. The reality is that it is nearly impossible to obtain financing on a condo-hotel unit. Those that end up closing will be very few. Price adjustments will spiral downward in an attempt to close more sales penalizing those that honor their contracts and further weakening property values of other units at CityCenter and other strip properties.
And from MGM Mirage's perspective, running a condo-hotel will prove to be a loss in the long run and is not a viable option for a successfully operating luxury hotel.
The condo-hotel concept was brought to Las Vegas by short term thinking on the behalf of the developer and will end up being a long term liability and ultimately a huge detriment to MGM Mirage.
Those executives that don't see this as the right thing to do, don't fully understand the condo-hotel concept and it's affect on cash flow and operations, as well as the long term negative consequence to CityCenter property values.
Interesting posts, guys.
But here is my question: Why in heaven's name would ANYONE buy a condo in a high rise building in Las Vegas? They can't even build one and two story homes without an abundance of construction defect issues! I had noticed when one of the new condo buildings was being built downtown, the base of the building barely went down the equivalent of one story. Back home when highrises were built, you had a good 2-3 story base to anchor the building into the ground!! And then to originally pay half a million for a maybe 1100 sq ft unit is ridiculous.
It is going to be interesting down the road 5-10 years when these buildings will actually have tenants.
I think it's safe to say CityCenter is doomed. How it ends will be the most interesting chapter.
What a freak'n disaster this whole project has been. Boy you think ANYONE learned their lesson in this mess?....I seriously doubt it !
Perhaps they should refine their marketing strategy like slot's of fun they would get more people to buy their condos. 25 cent craps, free cheap champaign, and 50 cent hot dogs. If they did that, then I would buy one
of their middle floor condos for $53,500. If they price it any higher, then
me, like so many others will pass. Then the condos will sit empty for at least 12-16 years.
Boomer, I really don't think they're after the slots-a-fun crowd. Not sure they want people running around with coupon books looking for the 99c shrimp cocktail. There will need to be some price adjustments to fit the current market. But that doesn't mean they need to go for the lowest rollers there are. There's plenty of places for them. Free everything won't pay the billions in debt service. Comments are common on building quality, footing depths, etc. When I worked in L.V. in the 1990's we did use building codes. I'm sure no engineer would sign plans on anything that he or she had any concerns about. I saw the footings on the Caesars Palace tower, 60 or 80 feet down, as I recall. Other than the MGM (Ballys) fire decades back, I can't think of any major disasters in any resort in Las Vegas.
Bakersfield...You're right...they've tried bringing in the "families" before...doesn't work,certainly doesn't pay anything at the hotel or at the tables.Frankly I hated it,tripping over strollers all the time.But this CITY CENTER was planned,and constructed before the bottom fell out,too late to scrape the plans. If you think about it, Las Vegas for the most part rode out the recessions in the past and always came out on top...not this time. It by far was something EVEN Vegas couldn't ride out.My point was I hope they learn a lesson from this in planning such massive projects again in the future.This goes for the housing market as well. You cannot build 10,000 homes without a solid buyer behind them.Those days are gone.Another lesson to learn. Vegas will survive I have no doubt.It will look the same on the surface...its underneath that will change.The days of enormous home sales...gone.The day of the $450k medium priced house...gone.
The economy will bounce back. Government spending created many jobs in the Great Depression, Hoover Dam for example. Some paint that as socialism, others as a wise public investment -- found a cool site; Balkingpoints ; incredible satellite view of earth
READERS PLEASE NOTE:
2009 Class Action Lawsuit
Filed against MGM-Mirage City Center Broker of Record Robert Hamrick et al
in the State of California.
Superior Court of California
County of Santa Clara
Filed: January 2009
case # 1-09-cv-133357
Against Robert Hamrick, Shayna Goldstein and Global Property Networks
*PLEASE ALSO BE ADVISED:
This Class Action Lawsuit deals specifically with the illegal sales of more than three hundred (300) condominiums in Las Vegas by City Center's Broker of Record Robert Hamrick and his agent Shayna Goldstein.
Bobby Baldwin, Hamrick and most egregiously, the MGM-Mirage City Center Board of Directors and their corporate lawyers (Snell and Wilmer) are fully aware, and have (since 2006) been fully aware of these illegalities and have done nothing to protect Buyers at City Center against their Broker of Record Robert Hamrick.
This is the same corporate procedure and strategy (deception) used in the 2008 Lanni resignation. MGM did nothing to inform Shareholders that their con-man Chairman of the Board, Terri Lanni had lied for years about his credentials. Only when Lanni's perpertration of resume fraud had been "outed" to the Las Vegas press by an independent corporate investigator DID MGM take action. Same deceptive drill here just a different day.
Buyers of the MGM City Center condos' should call FORWITH upon Jim Murren , Bobby Baldwin(whom we all know is holding a losing hand at CITYCENTER buts want the Buyers to take the hit for him) and demand out of their contract based on the legal fact that Hamrick sold property illegally and should not be representing them in the transaction as a legally licensed Nevada Broker.
Bobby Baldwin and the executives should come clean and cashier Hamrick for the illegalities by himself and Goldstein in the State of California where they have never held a California license yet sold hundreds of Las Vegas condominium properties
the web page to look at the case in California Superior Court in re: Hamrick is:
http://www.sccaseinfo.org/civil.htm
Boomer, Sounds like you and I agree. Let the low rollers have slots-a-fun, Circus Circus, etc. Nothing wrong with them, just a different crowd you and I (and many others) have outgrown. Let the high rollers have the Wynn, Venetian, etc. Again, fine places, just above my desire to spend. Too much of LV is marketed to the two extremes, those wanting a $30 room and those wanting nothing less than a $500 room. Maybe City Center can find a happy medium in between, This article being about condos, only the market will decide the prices. With downward pressure on surrounding properties, holding the line will be a tough sell. You are so right about the timing on the market being off for this project. A lot of money will be lost on this project. There will be deals to be had for those with the cash.
Dump the tickets.Get the coins clangin.Everything will be OK.