MGM CityCenter, MGM Mirage’s 8.5 billion dollar showcase property in the heart of the Las Vegas Strip, announced earlier this month that it was likely they would be adjusting the prices downward on the three residential developments in the mixed use project: Veer, Vdara and The Mandarin Oriental. Reductions are being considered in the wake of the world’s economic recession and the local Las Vegas real estate market depreciation of up to50% on residential properties.
MGM opened sales at the CityCenter in January 2007, when the Las Vegas real estate market was red hot. Original purchasers have been seeking price reductions on the condominiums and condo hotel units they purchased two years ago, during the height of the Las Vegas boom.
According to Bob Hamrick, CityCenter’s Sales Manager, “CityCenter remains a unique product that can’t be touched by anything else in Las Vegas. But there are some realities we recognize, and we have to respond.” Any announced price reductions would be offered to original contract holders and to buyers purchasing between now and when the official price reductions are announced in early September of 2009. Rumors are flying that reductions could be anywhere between 20% and 40%.
MGM is also trying to find sources of private financing to help buyers close on their condos. With tighter federal guidelines and banks struggling under a glut of foreclosures, high rise and condo hotel loan programs from Las Vegas mortgage lenders have all but vanished, The few that remain are requiring 50% to 60% down payments and higher interest rates. The Mandarin Hotel is expected to start closing on luxury residential units in December of 2009. Units at Veer, the twin residential towers fronting the CityCenter complex, are expected to begin closing in January of 2010, and condo hotel units at Vdara are expected begin closing if February of 2009.
The next big question is not only how much of a reduction will be offered to MGM CityCenter buyers, but also how the reductions will affect the future of the Cosmopolitan Hotel and Casino next door. The Cosmopolitan, a condo hotel and hotel casino project, was taken over through foreclosure by Deutsche Bank last year, and sales were suspended. There are almost 2,000 current contract holders in the Cosmopolitan that are waiting to hear if the project will move forward with the proposed condo hotel program, or if the contracts will be voided and the units absorbed into the hotel room inventory. Sales in the Cosmopolitan commenced on February 14th in 2005, with over 900 units being reserved the first day in a record breaking frenzy.
Elsewhere on the Las Vegas Strip, real estate investors are snapping up units at fire sale prices in the beleaguered MGM Signature project. Owners of condo hotel units that originally sold from $400k to over $1M have become part of the Las Vegas foreclosures statistics due to high mortgage payments, declining values, and rental incomes below expectations. Current purchasers are taking advantage of prices starting in the mid $100s, or 33 cents on the dollar. Trump Tower is experiencing the same hardship, and there are some real bargains to be had on resale units. The Palms Place luxury condo hotel units, on the other hand, have fared much better due to high occupancy rates in the popular boutique venue. And in general, Las Vegas homes for sale inventories are way down from the same time last year as first time buyers and investors are drawn back into the market by affordable pricing.
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