From "The Motley Fool" Rebel Forces Attack MGM's CityCenter Death Star

By Matt Koppenheffer July 8, 2009 Comments (2)
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I have to imagine that MGM Mirage (NYSE: MGM) investors are hoping the Force is not with a group of CityCenter condo buyers rebelling over the state of the Las Vegas condo market.
MGM has enough on its plate as it is. It made Herculean efforts to ensure that the massive CityCenter project would be completed at all, and the company has had to work closely with banks such as Bank of America (NYSE: BAC) and JPMorgan Chase (NYSE: JPM) to keep its head above the swirling torrent of its debt load.

And that's not to mention the underlying tough conditions in the Las Vegas gaming market, nor stiff competition from the likes of Wynn (Nasdaq: WYNN) and Las Vegas Sands (NYSE: LVS).
But this most recent fracas, which The Wall Street Journal picked up on, is really about that good old feeling of buyer's remorse, which is not surprisingly magnified by the nosedive that the Vegas real estate market has taken.

In short, folks who agreed to pay top dollar for condos in the 67-acre CityCenter project are now grousing about the fact that the properties that they're going to take possession of will be worth a whole heck of a lot less than what they paid.

Vegas residents (like myself) have seen real estate prices valleywide take a major tumble over the past few years, so it's probably not hard for them to commiserate with the CityCenter condo buyers. At the same time, it's hard to root for these high rollers, since we know that we wouldn't be hearing a peep if market prices had doubled or tripled from where they made their purchase.
Of course it's a little more complicated for MGM than just saying, "Go suck an egg" to these disgruntled buyers. Many of the contracts signed in 2006 and 2007 were "friends and family" of MGM, which includes some of the whales that throw down big bucks in the MGM casinos. Ticking off those heavy hitters isn't in MGM's best interest, long term.

Additionally, with all of the hullabaloo surrounding CityCenter, having a building full of empty condos at launch time wouldn't be ideal, either.

In the end, the issue is probably more akin to a handful of dyspeptic Ewoks than a real threat to MGM. Long term, I'm far less concerned about MGM appeasing some angry condo customers and far more concerned about seeing the company take steps to stay on target ... stay on target ...