MGM Bankruptcy Watch, p.15

By Philip K. on June 3, 2009 11:01 AM | 0 Comments
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The real estate value in Vegas has dropped dramatically but CityCenter has refused to lower prices on it's yet to be complete condo.  The dilemma revolves around the buyers.  Many have put down payments of 20 to 30% on their million dollar plus condos, but the fair market value of their condos have dropped as much as an estimated 75%.  30 to 50% is probably the more likely estimate.  In that situation, most buyers would want to walk away from the deal preferably with their deposit.  

I don't have copies of these exact contracts, so I can't apply any legal analysis.  Something to keep in mind is that these property contracts are enforceable on the moment they're signed. If the condo owners signed any contract along with their easement money, which they probably did,  the landowner can sue for specific performance of the contract.  This assumes that the condos are complete and ready to be delivered by the contract date.  CityCenter is not yet complete.

CityCenter is in a tough bind, because if enough buyers walk away from their contracts then MGM might not have enough capital to finish their condos.  If they can't finish the condos, they'd have to return all of the deposits for failure to deliver the specified property.  If they lower the contract prices, they'd get hit in the gut.

MGM better start looking into its couches and hitting up their rich uncles, because they'd be far better off using borrowed money to complete the condos than have to make concessions to buyers.  The problem is their creditworthiness is already shot.

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