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LAS VEGAS, Nevada -- A much awaited 30 percent price reduction in CityCenter's luxury condominium offerings was announced Monday by developers of the $8.5 billion project.
The move comes as potential buyers of the 2,400 condominium units at three of CityCenter's projects threatened possible lawsuits against developers MGM Mirage and Dubai World. Prices that purchasers agreed upon a few years ago no longer reflect the current market, where sales of high-rise condominiums in Las Vegas have been on life-support.
The price reductions cover The Residences at Mandarin Oriental, Veer Towers and Vdara Condo Hotel.
"We believe that in this economic climate this price reduction is an appropriate step to take on behalf of our buyers so as to provide them greater flexibility in closing on their residences," said MGM Mirage chief design and construction officer Bobby Baldwin, who serves as the president and chief executive officer of CityCenter.
MGM Mirage Chairman and Chief Executive Officer Jim Murren hinted at a potential price reduction in interviews over the summer.
In quarterly financial statements, MGM Mirage said it expected earning $2.6 billion from condominium sales at CityCenter. The price reduction could lower that figure by some $780 million. MGM Mirage has already collected more than $300 million in deposits from CityCenter's condominium buyers.
About half of CityCenter's residential offerings are under contract with potential buyers who agreed to purchase prices from $500,000 for studio-sized units up to $9 million for the penthouse suites atop Mandarin Oriental.
Buyers were required to put down 20 percent of costs and, under Nevada law, could lose up to 75 percent of their down payments if they couldn't close the transactions.
Tony Dennis, executive vice president of the CityCenter Residential Division, said closings are scheduled to begin in January with buyers of the 227 units at Mandarin Oriental. Veer Towers, which has 670 units, are projected to begin closing in February. The 1,500-unit Vdara is expected to start closing sales in March.
Dennis said one-on-one meetings with buyers were being scheduled.
Real estate analysts said a 30 percent reduction might be enough of a break to jump-start sales.
CB Richard Ellis Senior Vice President John Knott said CityCenter's condominium reservations began at the peak of the high-rise market. He said MGM Mirage realized prices would have to be dropped if any closings were to take place.
"Given what is being delivered to the market, if someone is getting a $1 million condominium for $700,000, I think they will be happy," Knott said. "Over time, that value is going to come back. It's a challenging market right now."
MGM Mirage spokesman Alan Feldman said the price reductions cover all CityCenter condominium purchasers, including current and former MGM Mirage employees who participated in the early "friends and family" sales of the condominiums.
Union Gaming Group issued a report in August showing that high-rise condominium closings in Las Vegas were taking place at a rate of two units per month. The gaming analysis and research firm concluded MGM Mirage would have to cut the prices at CityCenter based on market conditions.
"As one might expect, our findings would certainly indicate a market that is anemic at best," Union Gaming Group principal Bill Lerner said at the time. He said a 30 percent price cut would help sales.
"The company will likely have some success at this magnitude relative to the consensus expectation of not creating any value from residential," Lerner said.
CityCenter will begin opening in phases starting Dec. 1 with Vdara, which is a nongaming hotel and condominium tower. The nongaming Mandarin Oriental, which has almost 400 hotel rooms, will open on Dec. 4. Aria, CityCenter's 4,004-room hotel-casino centerpiece development, will open Dec. 16.
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