Visions of luxury market dominance undoubtedly danced in the heads of MGM Mirage officials a few years ago when they announced plans for the CityCenter resort and entertainment complex. Recessions have a way of ruining the best plans.
After navigating a lawsuit from its 50/50 partner in the project, Dubai World, MGM secured financing to complete the $8.5 billion project. (The budget was $9.2 billion but tightened after MGM Mirage and Dubai World settled.)
Now MGM Mirage faces backlash for refusing to lower the prices of CityCenter condos. Some people who paid deposits two years ago want prices reduced to reflect declining housing values.
Nevada leads the nation in foreclosures. The economic malaise has siphoned upwards of 35% off home values and nearly 70% off condos around town. In March, Standard & Poor's reported that home prices fell 32.5% between January 2008 and January 2009.
MGM Mirage maintains that CityCenter condos are one-of-a-kind, thus the premium pricing. The company has sold slightly more than half of the project's 2,400 condos, which range in per-unit price from several hundred thousand dollars to several million dollars.
The big issue will be filling the remaining units. About this time last year, the Las Vegas hotel-condo market began losing steam, deflated by weakened demand.
In published reports, MGM Mirage officials have said it's too early to start cutting prices, largely because the economy could rebound in the coming months.
That decision is fraught with risk: The recession could end and condo prices could start rebounding, or the economic malaise could continue to make it a struggle to fill empty units that could've sold for less.
Some money is better than no money, right?