Saturday, Aug. 15, 2009 | 2 a.m.
- 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)
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.