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Because of the condo market softening, CityCenter was forced to lower its prices. Consequently, brand new condominiums are still available for sale. If you are looking for a condo on the strip, there has never been a better time to buy.

Related Posts:

CityCenter Funding Resolved

The Saga of CityCenter Continues

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Now it seems the lawsuits have come full circle. A group of six real estate agents in Las Vegas are suing Deutsche Bank (they foreclosed on the Cosmopolitan taking over the project from Ian Eichner, their Cosmopolitan unit Nevada Property 1 LLC is named in the suit), Prudential Americana Group, REALTORS the listing agency and Eichner’s 3700 Associates.

The lawsuit filed in Las Vegas district court is demanding the remaining third of their commissions for about 1,800 units the agents sold in the development. The suit also alleges that the delay in construction made it impossible to close the units.

Deutsche Bank has stated that they will vigorously defend themselves against the allegations in an emailed statement to Bloomberg.com.

Currently the Cosmopolitan is scheduled to open in September of 2010.

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MGM Mirage chief executive agreed stating “There’s no debate that the market has fallen dramatically in pricing since we initially priced these units.”

However, I absolutely agree with the contract buyers that they should had have their prices reduced to current market value, but because it makes good business sense on several levels. The foremost reason being there isn’t a bank in the country that will finance them at the prices they were originally purchased at. Another reason is because of who the buyers are. Several high end buyers frequent the MGM Mirage properties and are on their special clients list.

MGM Mirage came to the same conclusion earlier this month and has agreed to work with these buyers and the banks to get the units closed. The company has also stated that they are working with their customers and banks to get clients into their contracted units. It seems that MGM Mirage has finally seen the writing on the wall. The project is scheduled to open by the end of the year.

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Newport Lofts by Cherry Developments was seized by its lenders and the bank decided to try to sell the units themselves. A few other projects around the valley are doing the same thing, notably Streamline Tower located just a few blocks away in downtown Las Vegas and One Las Vegas located on the south side of Las Vegas Boulevard.

Newport Lofts is located in downtown Las Vegas at 300 Hoover street. There are 20 new lofts that will be auctioned off on August 29th at 3:00 pm. The auction company has taken a step forward and published the reserves for each unit (the least amount they will take to sell it, although the auctioneers stated the sellers have the option of taking a lesser amount).  Reserves range from $90,000 for a studio up to $450,000 for a penthouse. Auction financing will be provided with rated for owner occupied units at 5.55% APR and 80% financing for vacation home buyers or investors at 5.693% APR Prime lending. The open house begins on July 31st thru August 28 from four to eight pm on Fridays, noon to four pm on Saturday and Sunday.

Auction Fine Print

You are required to buy a bidder’s packet by mail for $10 or an On-Site Inspections in order to bid on the property. During registration your must also show in your possession a cashier’s check for $7,500 to $15,000 in order to be eligible to bid on a property (amount based on the property you are bidding on). Registration begins at 2 pm the day of the auction. If you buy a unit, you must present the balance of down payment 8% of the total purchase price by cashier’s or certified check by 4 pm 9/4 to Ticor Title.

Auction Vs Foreclosures

Are auctions the great deals that auctioneers would have you believe? That really depends on your bid. Since the reserves are published, buyers have a fighting chance of securing a good deal. However, the winning bid will have a buyer’s premium of 6% of the purchase price tacked on. So if your winning bid is $300,000, that’s an additional $18,000 tacked on top. What about the foreclosure market? As of this writing, there are 31 lofts for sale in Newport Lofts. Of those, 22 are short sales and the rest are regular bank owned foreclosures. What do you think will happen when those 22 foreclosures hit the market? Not to mention the other similar projects nearby. Something to think about before you decide to attend.

If you are thinking about buying a loft or condo in Las Vegas, call us at 702-493-8033 or use our email form below.

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Somehow, I don’t think the same buyers would have thought it was fair if the market had shot up and CityCenter demanded more money. As almost everyone in the country has found out of the last few years, there is no guarantee in the real estate market that the value will always go up. Mark Connot, a partner with Hutchinson & Steffen whose firm is representing a few CityCenter buyers had this to say:

It is simply not possible by any stretch of the imagination to close on the units at the contracted price.

I’m not a lawyer, but when you sign a contract it is binding…unless there are special circumstances. MGM Mirage has stated that they are not going to reduce prices for buyer in contract at this time. However, legal and morals aside, Mark is absolutely correct. These units will need to be appraised if the buyers are not paying cash. Given the current state of the market, I think buyers will find a hard time finding the necessary financing to complete their contract. Plus most contracts include an out clause if the buyer can not secure financing.  Whether the CityCenter contracts have that loophole, time will tell.

In the end, I think MGM Mirage will be forced by market conditions to make some kind of adjustments to get the units closed. Of course, this episode is just the latest of the troubles that have plagued the project. So given the market, do you think early buyers are entitled to massive price reduction?

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However it is not all bad news for the future of the project. A short time ago the bankruptcy court approved several of Fontainebleau’s first-day motions, providing partial access to $201 million in cash as well as payment of back wages. Fontainebleau has also asked for an expedited hearing on the matter.

But that’s not all. An unnamed lender has stepped forward to provide enough financing to finish the project if the banks involved will unfreeze current loans.  The bankruptcy judge Jay Cristol hearing the case is urging all parties involved to try to work a compromise.

Related:

• Condos Battling it Out

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Right now there is a condo developer being sued because the project failed. The developer, Terry Bean of Oregon bought an apartment complex with the intent of converting it into condos three years ago. At the time, he paid $35 million for it which would be right around the time the market peaked. Two Portland investors, Frank Dulcich and Richard Akerman claim that Mr. Bean held back critical evidence about the project and the state of the Las Vegas real estate market in early 2006.

Among other things, the plaintiffs argue, Bean never disclosed to them that the apartment complex they bought in early 2006 for $35 million had sold barely a year earlier for about half that much. Had the investors been warned of the escalating price tag, they would have realized they were buying into a real estate bubble, said Michael Esler, the Portland attorney representing investors.

It seems to me that since they were seasoned investors, they would have looked at the title report and saw what the property they were investing in had sold for. Some due diligence on their part would have went a long way.

Bean is claiming that they are looking to cover their losses by accusing him of wrongdoing, despite making money with him on previous deals. He has filed a counterclaims stating they are to blame for failing to provide additional funding for the project. The trial is projected to last about three weeks.

***UPDATE

Last week a confidential settlement was reached.

Related:

• Condo Projects Battling it Out

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Deutsche Bank, along with several other lenders were named in a lawsuit claiming that they violated financial obligations when they canceled an $800 million revolving credit facility needed to complete construction on the Fontainebleau resort.

Fontainebleau filed a suit last month, stating that they are not in default and accused the banks of trying to get out of their financial commitments (the loan was canceled on the grounds that the project had defaulted on unspecified loan requirements).

Deutsche Bank is also developing the Cosmopolitan resort on the strip after buying the property for a Billion dollars after it went into foreclosure. The amendment filed by the Fontainebleau alleges that Deutsche Bank is trying to minimize the competition with their project.

Meanwhile Irish based Harcourt Developments has filed a counter claim against Glen, Smith Glen Development, its principals and one of their spouses for fraud. Harcourt was an equity partner in the stalled Sullivan Square condo project. Harcourt is claiming that Glen, Smith Glen Development tried to induce them to fund construction of the project based on straw man condo sales.

Earlier this year, some of the original charges filed against Harcourt were dismissed. It seems that Sullivan Square will join the ranks of other Las Vegas dream projects.

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Only 10% of Streamline’s 275 units are sold. The rest are being actively sold as the reorganization plan works through the courts.

While bad news for the initial investors, this is great news for Las Vegas high rise condo buyers. One Las Vegas condos are being offered by Corus at approximately half of what they sold for new. Other projects have felt the pinch of buyers dropping out of escrow. Last month the Allure had an auction to sell 10 condos that fell out of escrow. They wouldn’t release the specific results of the auction, other than some minimum bides were not met.

Despite the lackluster result of the auction, high rise condos are selling. According to a report by Frank Nason of Residential Resources, high rise condos made up 4% of the properties sold in March. A total of 98 condos were sold. So where does this leave market? Well, if you’re a bargain hunter that is looking for a high rise, there hasn’t been a better time to buy.

Super low interest rates combined with a large supply of units means its a buyer’s market. If you’re thinking of buying a high rise condo, call me at 702-493-8033.

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Now all those issues are just water under the bridge. According to sources late Wednesday night MGM Mirage and Dubai World reached an agreement. There is a new revised partnership agreement has resolved the issues between Dubai World and MGM Mirage. Dubai World will reimburse MGM Mirage for the equity payments it was forced to make to lenders on behalf of the partnership during the litigation. Dubai World and MGM Mirage will fund the remaining $800 million in equity contributions to CityCenter through letters of credit.  The project is still on schedule to open in phases starting later this year. Roughly half of the high rise condos in CityCenter have been sold to date.

Related posts:

• MGM Still Scrambling to Save CityCenter
• The Saga of CityCenter Continues
• CityCenter Seeking Additional Financing
• CityCenter Loses some Condos

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MGM Mirage will be cutting it close. Some of their financial covenants are due to expire on April 29 and May 15. Should those defaults come about, MGM Mirage would be forced to file for Ch. 11 bankruptcy protection.

If this deal doesn’t go through, MGM Mirage may sell off other assets like the Beau Rivage in Mississippi or the MGM GRand in Detroit. MGM executives are firmly committed to completing CityCenter which is scheduled to open in October of this year. When completed, it will be the biggest LEED project in the state.

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Now despite the soft condo market, three banks are coming up with the $37 million in financing to finish the first phase of the development. The phase will have 113 condos and the sales office will be open in June of this year.

Part of the sales strategy will be to contact the 90 former buyers of the first phase units, offering prices that start in low $500,000s, which is more in line with current pricing for luxury condos. The banks involved in the financing are Colonial Bank, Nevada State Bank and TierOne Bank. Mira Villa was roughly 60 percent plus complete before construction stopped.

Usually when projects are halted the communities are not completed. Another exception to this rule is the Cosmopolitan, located on the Las Vegas strip.

There is an interest list forming. If you would like to placed on it, call 702-493-8033 or contact us by email.

Related reading:

• Mira Villa Going Forward

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At the time construction had halted, three buildings were under construction. The first two buildings were 90% completed, housing 80 lofts. All that needed to be done  were the finishes and some landscaping. The third building is roughly 50% complete. The sale has split the project into two parcels. The southern parcel contains the partially completed buildings.

Vantage Lofts is located in the upper valley of Henderson on Gibson, just minutes from the I215 beltway. The area is primarily single family homes. The District and McDonald Highlands golf course community are located nearby as well.

I would be surprised given the location and the work already done if the project was not eventually completed…at least the first phase of 110 lofts. Roughly 60 of the 110 were sold prior to the project running out of steam.

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Then there were rumors of talks with Australian gambling company Crown Ltd, who recently bought the Cannery on Boulder Highway. Earlier this week, investment discussions between Colony Capital LLC a real estate private equity firm and MGM were terminated.

Now MGM Mirage is having a dispute with their development partner, Dubai World. Dubai World had sued MGM Mirage over the CityCenter project. However, Dubai World has put forth a proposal that calls for Dubai World, MGM Mirage and bank lenders to commit to the $3 billion needed to finish CityCenter. WIth revenues down and difficulty obtaining credit, this may be CityCenter’s best bet.

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The case ended up in the Eighth Judicial District Court of Judge Mark Denton. Earlier Judge Denton granted the defendants’ motion to dismiss for lack of jurisdiction on behalf of the individual Irish defendants, along with several of the causes of action in the plaintiff’s first amended complaint (Judge Denton threw out most of the original complaint in December of last year on a technicality). Allegations of conspiracy, negligence, intentional interference and consumer fraud were also dismissed with prejudice. However, he did not grant the motion to dismiss for lack of jurisdiction on behalf of Harcourt being operated by Irish defendants. So some of the causes of action in the amended complaint are being upheld including the crucial one, breach of contract.

Regardless of the outcome of the court case, its doubtful that Sullivan Square will be completed, at least in its original form. Should the case be won by the developer, considering the market downturn, Sullivan Square will not be able to retain the prices they had a few years ago. Buyers looking for a green condo will be forced to reconsider CityCenter.

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“We only have ten units available for sale through this special process,” said Sarah Prinsloo, Vice President of Sales and Marketing for Allure Las Vegas. “These luxury residences are part of a limited group of previously cancelled purchase contracts, wherein the buying parties forfeited a significant portion of their deposits when they cancelled. Thus, Allure’s developer is able to offer these units for sale again at great prices.”

Interested parties can preview the units the day of the auction, from 11:00 a.m. to 1:00 p.m. Buyers are required to put 15% down at the time of purchase. However, according to the auctioneers there is a 10% buyer’s premium attached. That’s pretty steep compared to the auctions held last year that ranged from 3% to 5%. The developer’s website states that new units are priced starting in the $200,000’s.

Last year, property auctions were all the rage. Auctioneers convinced overloaded developers that an auction was the answer to their prayers. The results were mixed. Quite a few communities that had them ended up with quite a few units left over.

If you would like to receive listings of the current Allure condos for sale or you are interested in attending the auction, call me at 702-493-8033.

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Earlier this month, the Las Vegas Review Journal reported that Manhattan West developer was not meeting with investors. CEO Alex Edelstein responded to the allegations stating that he would be happy to meet with any legitimate investors about the project. The whole was a he said, she said affair with the upshot being that they still did not have funding.

Several readers have written in, asking how they could get their deposits back. Regarding that there is some good news. You can contact the title company, Title One, at (702) 853-5850 to request the return of your deposit. It’s my understanding that they have sent out letters and some individuals have already received their deposits back.

If you are still interested in Manhattan West, check out their first project Manhattan. It is located on south Las Vegas boulevard and there is some resale activity. Call me at 702-493-8033 or send me an email if you would like to see what is available.

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Obviously there is a lot going on behind the scenes. Will Manhattan West become the latest casualty of the credit crisis? The odds are not in Gemstone’s favor. Even though the project offers some of the most unique features and floor plans in Las Vegas, that wasn’t enough.

Currently the project is about 80% completed and the signature Element House had been topped off in August of last year. What ultimately will become of the project is still up in the air.

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The rumor is Deutsche Bank would provide MGM Mirage with the additional funds they need for CityCenter. MGM Mirage would then either run the Cosmopolitan for them or the bank would trade the Cosmopolitan for a stake in CityCenter. Either way, it seems like a good deal for both parties if its true.

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