Buyers are demanding significant price reductions due to crashing real estate market

MGM Mirage’s City Center, the $8.4 billion megaresort scheduled to open on the Las Vegas Strip the end of this year, is facing a revolt from some early buyers of its luxury condominiums, according to a report this week in The Wall Street Journal.

The buyers are demanding significant price reductions to more accurately reflect the collapse in real estate prices during the current recession. Others want their deposits back. They have hired a local law firm to take their case to MGM Mirage.

“It is simply not possible by any stretch of the imagination to close on the units at the contracted price,” Mark Connot, a partner with the Las Vegas-based law firm of Hutchinson & Steffen, which is representing some of the buyers, told theJournal. “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.”

City Center’s condos range from $600,000 for a smaller studio unit to more than $9 million for a penthouse. The problem for those who bought early is that they will take possession of units whose values are now far below what they agreed to pay. Many of the contracts were signed in 2006 and 2007 when Las Vegas was booming.

Of the development’s 2,440 residential units, 1,500 are under deposit, according to theJournal, which stated that deposits currently total $313 million.

How the dispute plays out has serious implications not only for City Center and MGM Mirage but also for the local real estate market, which has seen home prices fall by more than 30 percent over the last year.

Dennis Smith, president of Home Builders Research., a consultancy based in Las Vegas, told theJournal, “City Center is vital to everything we want to see happen in Vegas in the future. It will change the Strip. We don’t want to see thousands of empty condo units sitting there.”

MGM Mirage said it isn’t offering discounts to current buyers. A spokesman told theJournalit is too early to know how the units are valued in the current market.

The dispute is the latest of City Center’s troubles. The project, which is 50 percent owned by MGM Mirage and 50 percent by Dubai World, the investment arm of the Persian Gulf state, narrowly avoided bankruptcy earlier this year, and the partners only recently resolved a legal dispute.

The complex also includes 5,000 hotel rooms, a casino, a shopping mall and other attractions.