In one year, CityCenter will begin to close on the Condo/Hotel units and traditional Condo units sold during the past 2 years and the upcoming year. During that time, as we all know, the RE market in LV has collapsed, and more importantly, NO BANKS ARE LOANING ON CONDO HOTEL UNITS (see Trump LV). The value of the traditional condos are down at least 40% which means the unit owner must put down at least 50% to 60% of purchase price to close. Not likely.
Those who contracted these units years ago will never close. They will walk away. The last I heard they have sold less then 50% of the units (outside of the Mandarin Condos which are 100% sold...but not closed). You have to believe that sales are stalled at this time. They will be lucky to close 25% of what has been contracted to date.
I'm not sure if anyone has figured out what happens if they close on only 25% of the units in CityCenter. Trump closed on about 20%. What is the street expecting?
Despite the economy, there are plenty of very wealthy people out there (CEO's, doctors, attorneys, celebrities, athletes) who would be eager to snap these up so I don't think it will be an issue. I live in Orlando, but heck if I had the money and a job in Vegas I would buy one, they are awesome and right on the Vegas strip. If you have the $$$, you can wake up on the weekend to a great view, then roll out of bed for a bite to eat in a 5-star restaurant then stroll on over and watch the game on a 200 mega foot screen TV then play a little bit while getting free drinks all without leaving the building! Its like places in Manhattan, the economy can suck eggs and they will still sell for millions. With the real estate market in the toliet these are probably a steal right now.
The reason the CEO's and doctors etc. have money is because they don't overpay for properties like this. When CityCenter was launched in 2005, things were much different. They want about $1500 per suare foot for these units while the market will bear no more then $800 psf.
These units are not for the locals. They are for investors/flippers who want to make money.
By now most people looking to invest in condo/hotel units realize there's no money to be made. The high fees that the MGM charges to manage the properties leaves the investor with about 25% of the revenue from rental. After paying mortgage/insurance/electric/taxes on these units, an investor loses quite a bit of money every month.
Look at it this way... If they close on 25% of the properties, those investors would most likely try and flip the properties for a profit. If there are no takers then they will start dropping the price. If CityCenter doesn't drop the price of the unsold units to be inline with those being sold by the flippers, they can't compete. All of the investors need to get out of the way before CityCenter can sell anything. MGM needs to sell almost ALL of the units before they start closing or they will be left hold the bag.
If only 25% close they will have to come up with an additional $2.2Billion in cash or financing to cover total project cost plus carry the additional interest. Remember they continue to say that the project cost is $9.1 billion which is BS because the $9.1 is net of $3.o Bill in Condo sales.they will have to put the units in the rental pools to have enough people in the buildings to support the casino & F&B outlets.
Rentals are not an option for the units that do not sell. They can't can't put them in the pool of rooms because they are not permitted to do so. They would have to buy the units themselves, then put them in. This only works for the condo/hotel units. The traditional condo units are not for rent...they must be sold.
When the MGM was building the Signature towers, they could not sell the remaining 90 or so units in Tower 3. They held them for 2 years, unrented. In the end they just bought them and use them as corporate housing. They swore they would never buy them but they had no choice. They never would have sold. That was about a year ago when their stock was strong and the market was shaky. Now its collapsed.
This will become MGM's undoing and nobody's giving this issue enough attention.