MGM Mirage, which is building the CityCenter development in Las Vegas in a joint venture with Dubai World, has cut the price of homes.
MGM Mirage cuts price of Vegas homes
MGM Mirage, which is building the CityCenter development in Las Vegas in a joint venture with Dubai World, has cut the price of homes at the property and casino project. Las Vegas is one of the worst affected cities of the US property downturn, with prices falling 53 per cent in May since August 2006, according to a home price index released by Standard & Poor's and Case Shiller in June. MGM Mirage's chief executive, Jim Murren, told Bloomberg that the company was now re-pricing homes, of which there are 2,400, within the development. CityCenter includes several casinos, hotels, a new retail complex and office buildings across a 31-hectare site on the Las Vegas Strip. MGM is also in talks with banks to help buyers complete payments of their homes. "There's no debate that the market has fallen dramatically in pricing since we initially priced these units," said Mr Murren. "Customers are asking for 'a total marketing strategy for them', which includes financing." MGM Mirage struggled to finance the construction of the Dh31.2 billion (US$8.5bn) Citycenter earlier this year as it fell victim to the global shortage of credit, falling demand and a drop in gambling in the US. The financial woes prompted Infinity World, a unit of Dubai World, to file a lawsuit against its partner in March for allegedly committing a breach of its agreement to build the project after MGM admitted concerns about its ability to continue funding construction. But less than a week later, MGM said it would make a Dh734.6m debt payment to allow construction to continue. The payment covered a Dh367m payment that Dubai World was scheduled to make as part of its monthly obligation. Dubai World did not pay because of fears that MGM Mirage's financial situation would prevent it from meeting its future obligations to the project. At the time, Dubai World, which bought a 50 per cent stake in CityCentre in August 2007 for Dh9.9bn, described the move as a "sign of good faith" and said that the payment was "an acceptable, albeit temporary, solution to the liquidity issues MGM Mirage is facing". Dubai World is not the only UAE firm whose investments have been hit by the downturn in the US property sector. Emaar Properties, the country's largest property developer, said on Thursday that the slowdown in the US market forced it to writedown the complete book value of John Laing, which it bought in 2006 for Dh3.85bn, to Dh1.72bn "in order to be conservative in accounting for such an investment". "It's part of the US cycle, everybody's cash flows are being hit," said Miles Payne, a partner at Strutt and Parker, an international property consultancy based in Dubai. "And when you cut sales prices, it will have a negative impact on the balance sheets, whether it's here or in the US. But then that will be offset by lower construction costs. Also, companies here have problems on home soil to worry about. It's just the US is a very big market and it economy affects the world economy." When Dubai World took a stake in the project, MGM Mirage hoped it would give them access to wealthy clients looking to buy luxury homes at the project at premium prices.