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Howard Stutz
 

MGM banking on CityCenter high-rises

8 December 2009

AS VEGAS, Nevada -- CityCenter residential officials believe last week's opening of the $8.5 billion project, coupled with a 30 percent price reduction implemented in October, will be enough of a catalyst to spur sales in the project's remaining high-rise condominiums.

It may have already begun.

Last week, 10 potential buyers laid claim to units inside the all-residential Veer Towers.

The sales figure might appear small and it was just one of CityCenter's three residential choices. But with about 1,100 of CityCenter's planned 2,400 high-rise condominiums still on the market, any positive news is a welcome change in the Strip's depressed luxury residential market.

The real test will come in January. Sales will begin closing on the condominiums in which potential buyers were required to put down 20 percent of the purchase prices that ranged from $500,000 for studio-sized units up to $9 million for the penthouse suites atop Mandarin Oriental.

"We've been waiting a long time for this on the sales side," said Tony Dennis, executive vice president of CityCenter's Residential Division for MGM Mirage, which owns half of and manages the 67-acre Strip development.

"There are different cycles in a project," Dennis said. "CityCenter is getting a tremendous amount of press and that gives us momentum and shows people that we're real."

Before the 30 percent price reduction, CityCenter hoped to realize $2.6 billion in sales from its condominiums. During its most recent earnings conference call, the company said buyers had reserved more than 1,300 units with a sale price of $1.6 billion.

The price reduction, however, could lower the total figure by some $780 million. MGM Mirage has already collected more than $300 million in deposits from CityCenter's condominium buyers.

Dennis said the opening of CityCenter allows sales representatives to take potential buyers into the perspective units, and not just show off model rooms inside the company's $24 million sales pavilion that opened almost two years ago.

"We now have the ability to take people into the towers. They can walk around and get a feel for the building," Dennis said.

Mandarin Oriental is 97 percent sold out. Veer Towers is about 67 percent reserved. The challenge is Vdara, CityCenter's hotel-condominium development. Owners can place their units into a rental program where they are leased as hotel rooms when not in use. Vdara and the owners would share in the revenues.

"The condo-hotel idea is pretty much dead," said Bruce Hiatt, the broker-owner of Luxury Realty Group. "People aren't sold on that product. You can't sell them like vacation properties. We've had some clients who bought into Vdara ask to switch over to Veer."

The challenge will be closing sales. Realtors said banks are not so quick to provide funding for high-rise purchases, although the current roster of high-rise real estate customers usually come in with cash.

Under Nevada law, buyers unable to close sales could lose up to 75 percent of their down payments.

Dennis said CityCenter is looking at potential seller financing possibilities, similar to a program the Palms began using to close sales on units inside its high-rise condominium tower.

"We're looking at everything that can be supportive to our buyers," Dennis said.

According to Hiatt, perspective high-rise buyers are looking more at foreclosure opportunities rather than new units as a way to get into the market with minimal costs. However, high-rise foreclosures may be declining.

"The number of foreclosures seem to be shrinking and I'm not sure if that's only because the banks are holding back on inventory," Hiatt said. "There are buyers in the pipeline but they are looking for the ultimate deal."

That fact could help CityCenter's residential sales.

With both the bankrupt Fontainebleau and foreclosed-upon Cosmopolitan seemingly dropping their condominium components, Hiatt said it could be seven to 10 years before any new high-rise condominiums are built along the Strip corridor. That would make the residential at CityCenter the last new projects in the market.

"When the public realizes that, it could be the turning point," Hiatt said. "There are a lot of potential customers on the sidelines waiting."

Units inside Mandarin Oriental will be the first to close starting next month. Dennis said the price points at the ultra-exclusive Mandarin set the benchmark at CityCenter.

"For buyers at Veer and Vdara, it gives you great comfort to know the price of what your neighbors are paying," Dennis said.

One Mandarin buyer, he said, is paying $3.1 million in cash for a 2,700-square-foot unit, which equates to just under $1,200 per square foot.

"Every neighborhood has its town center," Dennis said.

Contact reporter Howard Stutz at hstutz@reviewjournal.com or 702-477-3871.

***

CITYCENTER'S HIGH-RISE RESIDENTIAL PROPERTIES

MANDARIN ORIENTAL

Description: The upper floors of the 47-story Mandarin Oriental house 227 one-, two- and three-bedroom condominiums, ranging from 2,065 to 3,900 square feet. The residential units have a private entrance and are located above the 23rd floor Sky Lobby, which acts as a barrier between the 392 hotel rooms and the residences. The units are the most expensive residential offerings at CityCenter, with prices in the seven-figure category.

Sales: Through last week, 207 of the 227 units had been reserved.

Closings: Begin in January.

VEER TOWERS

Description: Veer Towers is the only purely residential development in CityCenter. Twin glass towers leaning in opposite directions (5 degrees from center) each house 335 residences. Veer offers studio, one-, two- and three-bedroom residences, ranging from 500 to 3,300 square feet. Prices start at $500,000.

Sales: Through last week, 454 of the 670 units were under contract.

Closings: Begin in February.

VDARA HOTEL AND TOWER

Description: Vdara is the only condo-hotel at CityCenter. The 1,495 residential units can be placed into a rental program where they are leased as hotel rooms when the owners are not using them. Vdara and the owners would share in the revenues. Vdara includes studio units, deluxe studios, one- and two-bedroom residences, and both single and two-story penthouses. Vdara's units range from 500 to 1,650 square feet. There will be approximately 250 corner-end suites featuring full panoramic views.

Sales: Through last week, more than 680 Vdara units were under contract.

Closings: Begin in March.

MGM banking on CityCenter high-rises is republished from Online.CasinoCity.com.