CityCenter may or may not generate the buzz MGM hopes for, but if it does it probably won't come from Vdara.
We've been in Vegas, staying at the Vdara, since Sunday night, and below are some of our impressions of City Center and small tidbits that we've learned during the last few days
City Center mechanics
- City Center may not have 5,900 rooms after all, or at least not for a long time
- Vdara currently has 400 rooms open and will likely remain at this level until at least end of 1Q2010. Until MGM can figure out which buyers are going to close on the reserved condos, and which will back out, they can't really touch most of the rooms at this property
- Harmon, which (until recently) management recently assured investors would open in 2010, is now indefinitely postponed until at least 2011 or until demand comes back, whenever that may be
- Whatever condos don't close in early 2010 will not likely get sold off for another 12-24 months (ie whenever the market recovers)
- The Mandarin residential product, which is 93% reserved, should have the best closing rate. We would guess in the neighborhood of 70-75%
- For Vdara and Veer, a 60% closing rate would be optimistic. The issue for Veer is that they need to sell at least 50% of the inventory in order for their JV lender to offload the mortgages to Fannie/Freddie. Otherwise Veer is basically impossible to finance and will likely sit dark. We think that MGM will do whatever they can to push buyers from Vdara to Veer in order to reach that hurdle rate and just run Vdara like a regular hotel
- It's unlikely that MGM gets any distributions from condo sales
- Below is a quick outline of how condo proceeds will be distributed...if you do the math you will arrive at the same conclusion as us
- First in line: up to $250MM of the condo proceeds to go towards construction costs
- Second in line: the next $250MM of condo proceeds goes towards permanently reducing the City Center credit facility from $1.8BN to $1.55BN
- Third in line: Dubai World gets priority on the next $491MM of condo proceeds
- Last in line: After the $991MM of condo proceeds get distributed MGM can now get its distribution of what's left... our guess is that distribution doesn't come until the cows come home or the market recovers in 2011/2012
- At some point MGM will need to re-start Harmon, which should cost around $300MM, any proceeds from condo sales will like be largely offset by construction spend on Harmon which MGM will need to fund
Our CityCenter experience (actually Vdara):
Vdara is a newer but unfortunately, less cool, version of The Hotel. Given the ease of access, it appears to be more of a Bellagio adjunct than part of the CityCenter metropolis.
City Center feels like a cluster of separate properties rather than a cohesive resort. If you are staying at Vdara and want to see the rest of the resort its not very easy. To get to Aria you have to cross the "City Center highway" which is basically a 2 block walk across a maze of "highway" with no sidewalk or walking path. There is however, a convenient covered walkway connected to Bellagio (no accident, we surmise). To get to Mandarin you can take the covered walkway through Bellagio to the "City Center Tram" to Crystals, walk through Crystals and across the sky bridge to Mandarin. Alternatively, you can walk across City Center highway to Aria and risk getting run over, walk through Aria, and then walk two blocks to Mandarin. You get the point.
Vdara also only has one restaurant, Silk Road, which is quite tasty (all three meals) and a lobby bar & coffee station. The gym is nice and there is a convenient $15 resort fee added to your room rate which covers the cost of the gym. However, unless you are getting a treatment at the spa, you still have to pay $25 to access the tiny spa facilities containing only a locker room with showers, hot tub, steam room, and sauna. This is no Encore Spa so the likelihood of a $25 splurge is probably low.
The room is fairly nice - a la "The Hotel" at Mandalay Bay - but smaller with a useless kitchenette and no separate living room. The observant traveler will be able to tell MGM didn't spend big bucks on the fixtures here. Toilet paper holders seem to be having trouble staying on the wall and who needs a nightstand drawer that closes? It's the little things, folks.
