Monday, August 31, 2009

Analyst: MGM Mirage Should Cut CityCenter Condo Prices In HALF

My Facebook friends may be aware that both Jon Ralston and I have unwisely tangled with a certain hysterical, ridiculous and flamboyant high-end real estate dealer who claims that the collapse of the Vegas condo market is all the media's fault. This extreme version of standard-issue scapegoating seems to arise from a theory that if the press only reported that everything was fine then, ergo, it would be thus. This gentleman does not believe that investors, residents, banks and buyers have nearly as much influence over the price of real estate as, say, Review-Journal real estate scribe Hubble Smith, and this morsel of "truth" is, to him, a major scandal. He keeps threatening to "go national" with this big cover-up -- these types always see the most illogical cover-ups, don't they? -- but generally he seems to be more likely to "go postal."

The motivation for journalists to singlehandedly destroy the economy, evidently, is that bad news increases newstand sales. Odd, that, since newspapers make very little off newsstand sales and most of their money on advertising and if people have no money they can't buy the stuff in the ads and the stores close and, well, the whole cycle is much too maddeningly, ruinously logical for this guy!

Alas, today the highly credible Bill Lerner of Union Gaming Group, which analyzes business trends using -- gasp! -- market data, came out with a new report. And it's all pretty bad news. Like this: "Quite simply, sales have been almost non-existent." And "We note that condo-hotel projects are seeing fewer than four units close each month, while condo projects fare even worse at fewer than two units per month."

Oh, and this: "Our data would suggest that MGM needs to cut pricing as much as 50% (or even more) in order to close units at CityCenter." (He does go on to say that they could probably get away with slicing the price 30 percent.)

Yowza. Actual data. I can't find a place to link to the report online, but it's 23 incredibly depressing pages that ought to come with a dose of cherry arsenic or a shotgun or a syringe of propofol or something.

Does the aforementioned real estate agent suggest journalists not report this stuff? Probably. If we do, that's a scandal!


mike_ch said...

I don't know what to say about these things, but I moved here in 05 and felt the town was sorely overpriced for property the moment I arrived. Some people's "death spiral" is other people's "putting things back down where they should be."

Then again, I'll note in general that in my sleepy hometown I never saw people so worked up over land values like I do here.

Charles in Richmond, VA said...

I've mentioned this before. When City Center was just an idea, MGM stated that the only way they could afford to build City Center was to borrow half the money and get the other half from selling condos at a projected price. If the price gets cut in half, then they will be 25% short on funding to complete the project.

Let's see, they need to sell at full price to complete the project's funding, BUT no one will buy them at full price. Sounds like the old Catch 22.

Anonymous said...

I've also seen the UG research and to me it seems more on point than Murren's CNBC interview where he talks about a 30% decrease.