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twitterCityCenter reduces condo prices 30 percent
MGM Mirage planning one-on-one meetings with buyers
Published Monday, Oct. 5, 2009 | 1:57 p.m.
Updated Monday, Oct. 5, 2009 | 6:29 p.m.
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CityCenter has reduced prices of its condos by 30 percent in an effort to satisfy concerns from condominium buyers who signed purchase contracts for the units more than two years ago, when the real estate market was booming.
"We believe that in this economic climate this price reduction is an appropriate step to take on behalf of our buyers as to provide them greater flexibility in closing on their residences," Bobby Baldwin, president and CEO of CityCenter, said in a statement.
Some buyers who had complained about condo prices months ago said they felt rebuffed by CityCenter's managing partner, MGM Mirage, which had declined to discuss potential price reductions until more recently. In response, the company has argued that, with the real estate market in flux, it would be premature to change prices many months before buyers close escrow.
Lower prices may help some buyers obtain financing for their units, though some buyers have said that closing on reduced-price units will be difficult given that banks are reluctant to finance luxury condos. Other buyers, whose finances have slumped in the economy, say they are looking for a way out of their contracts.
An attorney representing multiple groups of buyers unhappy with their condo purchases at CityCenter said the discount won't be enough.
"There might be a few people who close at the 30 percent discount," Las Vegas attorney Mark Connot said. Many more are no longer able to afford the condos in today's economy, won't be able to finance them or won't want to close because they have been turned off by a combination of factors including the sour real estate market in Las Vegas and documented building problems in at least one of the towers.
Prices at MGM Mirage's Signature condo-hotel towers are selling for as low as 20 percent of their pre-recession prices, Connot said.
"Whether MGM wants to use that as a comparison or not, what's out there for comparison nowadays are foreclosed units," he said.
A real estate broker who has sold units at Veer and Vdara said buyers' mixed reactions to today's news reflect a split in the real estate market.
Clients who bought condos in CityCenter's 670-unit Veer towers are happy because they realize that the discounted prices are less than the average cost to build the units, broker Aaron Auxier said.
On the other hand, buyers of the 1,500-unit Vdara remain dissatisfied, as discounts don't solve the bigger problem that banks are unwilling to finance mortgages for condo-hotels, he said.
MGM Mirage recently offered Vdara buyers the option of exchanging their units for condos at Veer, which might be less expensive and easier to finance.
Condo-hotels are operated like hotels in that owners can rent them nightly, sharing the proceeds with hotel management. They're a greater default risk for banks than traditional condos because they aren't typically occupied by owners and because the rental proceeds are uncertain.
Developers seeking a profitable means to finance expensive resorts during the boom years built thousands of condo-hotel units along the Strip compared with only 1,300 traditional condos.
A buyer of a Mandarin Oriental condo said he is "optimistic" about the discount relative to the quality of the Mandarin Oriental brand and the limited number of available units.
The discount will knock about $900,000 off the $2.9 million he originally agreed to pay for one of 227 condos atop the 400-room Mandarin Oriental hotel.
"Do I wish it was a 50 percent discount? Yes," said the buyer, who declined to be named because of forthcoming discussions with MGM Mirage. "Do I believe it's a great product with long-term value? Yes."
MGM Mirage is scheduling one-on-one meetings with buyers to discuss the discounts, which will take effect at closing "subject to the terms and conditions of a fully executed addendum to the purchase and sale agreement," the company said in a statement.
MGM Mirage executives have said they are exploring other initiatives besides discounts to help buyers close escrow but haven't yet detailed those plans.
Buyers at CityCenter's Mandarin hotel and condo tower will begin the process of closing escrow on their units in January, MGM Mirage officials said today. Closings at Veer, a pair of condo towers, will begin in February and closings at Vdara, a condo-hotel building, will start in March.
MGM Mirage isn't expecting to make much from condo sales at CityCenter. The project's $8.5 billion budget assumes condo sales of only $250 million – a negligible amount relative to the $2.6 billion worth of condos the company hoped to sell before the recession. The company hoped to use those sales to offset CityCenter's cost, boosting profit for owners MGM Mirage and Dubai World.
CityCenter has sold at least 55 percent of its roughly 2,400 condo and condo-hotel units. Buyers began signing purchase contracts for the units in January 2007. Condo units that once sold for $1,000 to $2,000 per square foot are now selling for well under $1,000 per square foot, though MGM Mirage has touted CityCenter as a unique brand that will command a premium price in Las Vegas.
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My money says: A 30 per cent discount is a joke! they're bluffing! After this 30 per cent cut, they need to cut another 40 per cent, meaning, they have to cut at least 50-60 per cent to get buyers.
Everybody who initially signed or deposited, do not fall into this cheap trap!!! 30 per cent off initial (=overpriced) rate, is still a rip-off under current market conditions!!! Be aware of this trap, guys.....
I'd be nervous about owning or buying MGM stock right now. Losing the top half of the Harmon Tower and now losing 30% on your condo sales isn't good for the Income Statement. Maybe in the long run MGM will make money on these condos but I'd bet right now they're wondering how they'll move these condos and lease these commercial spaces. Oh sure, you can just cut the prices in half, but you still have a massive loan to pay back plus Dubai World to pay back. If MGM was thinking they'd be paying this back in 15-years they better plan on paying it back in 30-years. It's tough, back in 2005 when they were hammering out numbers and future projections it probably made sense to take this plunge, but the reality is now that you have to seriously wonder if MGM bit off more than it can chew. I want MGM to succeed just for the sake of Vegas and the people living here, but CityCenter has got to be one of the most overpriced pieces of real estate on Earth right now in the worst economy since 1929. I hope MGM pulls it off because a lot of lives here in the valley depends on MGM for jobs. Sure, somebody else could always come in and buy off the properties one by one (Treasure Island/Phill Ruffin) and everyone keeps their job, but the only thing that is certain in the next ten years is uncertainty. Good luck MGM, you're gonna need it.
This wont change any of the income projections in government budgets? With City Center flooding the market with discounts for the asking, how does anyone one that owns a condo in Las Vegas ever hope to sell one? They just have to lower the price further. The race to the new bottom begins.
Thanks harry. Hope and change is working out just fine.
How in the world would 30% reduction in the price of MGM's City Center condos justify its "raison d'e^tre" when the value of real estate in Las Vegas has actually dropped more than 50% in general ???
City Center is huge. Can you imagine owning a condo there, and trying to bring a large load of groceries, or other packages upstairs from the parking garage?
If you run searches for resale of brand new condo towers along the Strip, or at Panorama, they are re-selling for something like $225 to $250 per square foot. Anyone who closes escrow on one of these City Center condos will lose mucho dollars per square foot the minute escrow closes....plus for many of the condos the views will be lousy, just looking at another highrise building.
i wouldn't buy anything in that place until there is some sign of people starting to come back to vegas again and month after month it's been less people coming in at the airport.
The only option that would make sense for Vdara at CityCenter 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 City Center 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.
And again we see that Wall Street Super Heroes, Investment Bankers and former CEO's from other corporations, now new to the gaming industry, apparently don't get the point how to run a company in the gaming industry. Nobody's listening what the gamblers want, greed rules, and now? They're all free-falling.
I would not buy anything, not even MGM Mirage stocks unless they go down to 1.25 usd per share.
Greetings
Yeah, they reduced asking prices by 30% but look at how much potential sales revenue they "wrote down": 2.6 Billion to 250 Million. Isn't that just over 90%?!?!
Yikes! I'm with lvdjlv... Hope for the best, but don't expect it. Maybe this will be "The Mirage" of our era, but I'm doubtful. I just hope we'll eventually see improving tourism numbers once the national economy picks up, and perhaps City Center's opening will give those few tourists left with serious disposable income some good reason to come here and see this new spectacle.
This should be a wake-up call: to us, that our state is over dependent on gaming; to the casinos, that they can't dupe tourists into consuming overpriced goods any longer; and to tourists, that Vegas truly has changed... And hopefully, we'll soon change for the better again.
RealTraq data shows condo prices off from 40% to 60% depending upon the venue and location within the structure, with higher units with strip or mountain views going for more. The 30% offer from original list price is frankly a losing proposition for anyone into the sale at this point. You will be immediately upside down 20-30 percent on your equity. I dont think any lenders will cover this shortage, so the buyers either put up more cash or be forced to walk away from their downpayments. Frankly, unless you have a unit with a strip view, anything else within City Centetr sucks as either an investment or a destination residence. Unless, you got more money than brains, which I think there are still a few Hollywood idiots and Rag Headed shieks who think its the "place to be"! Not!
One more thought for the day. For those who think these units are investments with any return, forgetaboutit! Just check out the monthly HOA's for these units from $500 to over $1000 per month on top of PITI costs! Yikes! Hell no way these pencil out. Reports from the Trump Tower Condo hotel deal shows owners there screaming over the "mangement fees" and other costs associated with ownership making each unit owner in the rental pool losing money on every rental. I think I read that the Trump organization has allowed some owners out of their exclusive management deals and be permitted to rent/lease their units directly, thus saving the "management fees"! Myabe someone can post how many units at Trump failed to actually close. I read somewhere that the joint is only 50% sold.
My sister was looking into buying a condo near Scottsdale Az that came with a grand a month association fee.
She decided against it but there was no shortage of stupid people already living there willing to pay the freight.
Whaz-dat-u-say, pimps got a crib sale goin' down at the project?
: )
"Movin on up" with Obama-nomics dawg.
: )
MGM is pathetic.
I'll be at the grand opening of city center in a ghost costume at the front entrance on LV blvd. to memorialize all the dead workers who died for MGM's future profits.
MGM is a bunch of scumbags.
I hope others will join me dressed as dead people.
realtybites..... How many times are you going to copy and paste that same comment? You've posted it 8 different times already.
The problem about CityCenter has been discused multi-fold. Like a cow chewing the same bunch of grass all over again for the 4th time.
Fact: The CityBoys in London maxed out the profits by selling these CDO's and other toxic products to other banks, driven by greed, in the hope to participate in the bubble that was going to burst sooner than later, eventually.
What happened next is obvious: Homeowners that did not qualify for a mortgage in the first place lost their homes. Stocks crashed and many people lost their jobs and their future. The CityBoys collected their last fast bonus before quitting their job for life.
What we have now is a disastrous situation: Too many casinos and projects upon completion, but not enoug money (gamblers) to be spent. No matter how you look at it, there are simply too many casinos and not enough gamblers around. And since these casinos have been financed on debts mostly, they will have difficulties making it. MGM is a trouble-company, whether you pay 70 or 50 per cent for your condo. Is it worth living there? No nature, all plastic, somewhere in the 56th floor, facing another high rise building in the desert? No thanks.
To all of those who are not so much familiar with the situation. It's not actually MGM's fault, nor Harrah's , nor the Real Estators of Las Vegas, nor the cityboys in London who just worked on their fat bonusses. It was the system. And it was chain reaction. The banks world wide tried to participate and get their piece of the action. The Realtors in Vegas enjoyed the business and the vendors of new homes were licking their fingers and making contracts, even to people that did not qualify for a mortgage. Even these home-owners should have known that they can never pay back their mortgage loan unless the home value goes up multifold. But it was clear that this was a big bubble.
Without these investment bankers to come to gamble for a weekend of fun and action, and without all these additional funds given to home owners by raising their home equity loand, there is simply not enough money flowing through the cash register anymore. CityCenter will have hundreds of unsold condos for a long period, together with these thousands of empty condos and houses in Vegas. That's a fact.
Why would anyone want to live in a high rise condo on the strip, ego much?
Well, I guess what they are doing is giving a 30% reduction for those who are already stuck buying. Probably mostly because they were suing MGM for a reduction. Yes I agree 30% is too low, but then - MGM probably figures these guys are stuck so not so much of an incentive is required.
As far as the new buyers, they are free to negotiate any prices at all.
I think Harley came up with a good nickname: "The Projects"..LOL..
If this means that speculators are going to go broke and out of town, that's a good thing.
1912: RMS TITANIC. 2009: MGM CITYCENTER
Is it possible that the recently-installed "sculpture" symbolizes lifeboats desperately fanning out in all directions, manned by condo buyers who will instantly be "underwater" if/when they close??
http://www.lasvegassun.com/news/2009/may...
One factor is the cheaper dollar. It may be 30 per cent cheaper to Americans, but it could be more like 40-50 per cent for foreigners whose country currency has gained value against the dollar. I wonder if they are setting up sales offices in Asia and the Middle East.
Ha! Remember when the Japanese bought up Rockerfeller Center, much of California, and practically all of Waikiki Beach? Then they got hosed when they had to unload assets in the '90's to correct their balance sheets. It would be kinda nice if we could pull this off one more time, with the Chinese being the patsies, this time around. I hear a lot of them are, indeed, buying residential properties in LV. But are they dumb enough to buy into the still hopelessly overpriced glut of Strip condos?
THUMPER: Nice post!!!
History will repeat itself. Foreigh businesses could justify purchasing a condo if it was intended as a way of entertaining their clients. There are may newly-minted wealthy individuals in Asia who would be interested in buying in key U.S. locales - SF, NY, LV. In spite of of its economic troubles LV is still a destination for many foreignera on par with our major metropolitan locations.
Thirty percent off?
Wow, it sounds like there has never been a better time in the real estate market to ... hang on to your cash and wait for the next huge discounts to come!
And yes, market-pumping liars, this applies to all housing in Las Vegas, not just Strip condos that have a fantastic view of ... another building of Strip condos. Deflation is here.
So city centre has reduced its prices! they should of reduced it to the ground when they had chance. I unfortunatley don't live in vegas i'm accross the pond in the uk but as a frequent visitor to your fabulous city i can't believe this white elephant got past the planning stages. Its too big, ugly and not what your great city is about. I for one have no intention in visiting the thing when im back over.