Even if you don’t pay much attention to the Las Vegas condo bust, you’ve probably heard something about MGM’s City centre development, an ambitious mega project conceived during the boom.
Due to the awful Vegas economy the project has almost gone totally bust, but somehow the money is still there to finish the job.
Anyway, early buyers who paid top dollar for this prime real estate want their money back. They want a do-over from having to committed to a purchase during the peak of the bubble (sniff).
WSJ: Some buyers who signed contracts are demanding significant price reductions, and have hired a law firm to take their grievances to the project’s principal developer, gambling company MGM Mirage. Others want their deposits back. Some are using a Web site, citycentercondodepositgroup.blogspot.com, to air their grievances.
So far, buyers have put down $313 million in deposits on 1,500 units in the 2,440-unit complex. Those who agreed to buy early on now fear they will take possession of condos whose market values are far below what they agreed to pay. Many of the contracts were signed in 2006 and 2007, when Vegas was booming.
“It is simply not possible by any stretch of the imagination to close on the units at the contracted price,” said Mark Connot, a partner with Hutchinson & Steffen, a Las Vegas law firm hired to represent a handful of buyers demanding price reductions. “Our position is they need to adjust the price to market value. And until that’s done I don’t think they will find any buyers.”
MGM Mirage said it isn’t offering discounts to current buyers, many of whom bought during a special promotion period for “friends and family” of MGM Mirage.
Well, the first thing we’ll say is that we hope nobody was duped by that “friends and family” mumbo jumbo. All that means is “first suckers.”
What’s notable is that the buyers don’t seem to have much of a legal argument to make. They’re just saying the market has tanked since they agreed to buy and they want their money back or a discount! It may be that MGM Mirage does eventually cut a deal, since realistically many will probably end up walking away from their deposits, or be forced to walk away if they can’t get financing.
Perhaps the buyers’ real strategy is not to use the law, but to engage in collective bargaining. If they can present a unified front, and scare the developers into thinking they’ll walk away en masse, then it just might work.
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