July 2013 RESIDENTIAL RESEARCH

The Residences at Mandarin Oriental,

Analysis of project, market performance and influence

Coldwell Banker Premier Realty—Market IQ Residential Research

The Residences at Mandarin Oriental, Las Vegas

Summary PROJECT DETAILS

The Residences at Mandarin Oriental, Las Vegas is the only 225 Total Residential Homes project in Las Vegas that is considered super-prime. A mere handful of projects of this caliber exist in the United States, Designed by Kohn Pederson Fox Associates, placing The Residences at Mandarin Oriental, Las Vegas Kay Lange and Associates and Page + Steele Architects (“Mandarin Oriental”) amongst a set of elite global residences. 47 stories high

Luxury high-rise development is relatively new to Las Vegas Designer selected finish schemes and CityCenter, which includes Mandarin Oriental, marks the high-point in real estate development. Incorporating Home sizes range from 1,100 to 3,900 (approx) sq.ft. features from renowned architects and designers and catering to a wealthy buyer, Mandarin Oriental continues to command sale prices up to $790 per square-foot on strong The Luxury Condominium Market in Las Vegas sales volume. This by far exceeds the prices achieved in the majority of Las Vegas high-rise residences. The luxury high-rise condominium product, new to Las Vegas, has primarily been known as a large suburban area. These prices are achieved through flexible offerings by the A period of solid population and economic growth in the developer, lateral living through larger spaces, high-quality 1990’s, greater commute times, an international presence finishes, luxury brand affiliation, an array of world-class and increased catering to luxury demands, led to a new amenities and an outstanding service package. Further, it is interest in urban residential product. In the early 2000’s, part of a mixed-use, multi-faceted development which also several luxury high-rise buildings were delivered that benefits buyers at Mandarin Oriental. When viewed against initiated the trend. These buildings included comparable schemes in the Southern California, New York and . Both are located off of the Las Vegas and other global destinations containing super-prime Strip but are popular with buyers and investors. development, these elements constitute an exceptional value proposition inherent in the project. In the mid-2000’s a boom in high-rise luxury development took shape. With deliveries peaking in 2007, over 6,000 In the following text, we describe the market for luxury units were constructed. However, when segmented by condominiums in Las Vegas, the United States and the property quality, there were only a handful of projects in global super-prime segment. Additionally, we examine the the upper-end of the market. historical background and features of Mandarin Oriental, its influence on the market in United States, its Upper-end residences, see Figure 1 below, are found in buyer profile and iconic status in Las Vegas. Finally, we , , Park Towers, describe changes in the character of Las Vegas and how Turnberry Place, , and Sky Las Mandarin Oriental fits into that evolution. Vegas. However, few sales in these buildings exceed $500 per-square-foot and although well appointed, cannot be categorized as super-prime and don’t compete with an international cadre of ultra high-end developments.

Figure 1 The Residences at Las Vegas Luxury High-Rise Condominiums—High-End Market Segment Price Per-Square-Foot Ranges Mandarin Oriental Ranked by Average Price of Available Homes—Includes resale and sponsor offerings

$800 Veer One Queensridge Park Towers Place

$600 Turnberry Place $452* to $1738

The Martin $/sq.ft $388 to $754 $386 to $898 $400 $351 to $700 Panorama Towers $205 to $1086 $218 to $1080 $257 to $516

$200

$194 to $373/sq.ft

*Grey Shell Page 1 The Residences at Mandarin Oriental, Las Vegas

One Queensridge Place may be an exception, however its Third, the Las Vegas market and much of the west coast suburban location and architecture requires a more specific marketplaces, cater quite well to the wealthy. buyer profile. The average price per-square foot has been about $490. Mandarin Oriental is well positioned to be favored among these projects by the super-wealthy, the type of global Mandarin Oriental transcends the Las Vegas upper-end due traveler that has multiple residences, but little desire to to its uniqueness and its super-prime attributes in finishes, conform to small spaces. Mandarin Oriental excels in this amenities, service and location. As a result of product aspect. Current offerings include living spaces differentiation, average closing prices for initial contracts commensurate in size with single family homes which are were $1,147 per square-foot leading all others in the generally larger than most vertical developments. Closest marketplace. Mandarin Oriental was built with the idea of similarly positioned urban projects may be found in the Los bringing a world-class feature rich building to the market, a Angeles market and include Montage which is nearly sold market which extends outside of Las Vegas. out, which offer some larger units but is largely sold out, or Ritz-Carlton Residences at L.A. A Leap Higher Market Impact Mandarin Oriental is best viewed in a broader context than traditional stand-alone high-rise projects. The features of In the Las Vegas market, current availabilities are mostly Mandarin Oriental extend in multiple dimensions. First, confined to condominiums smaller than 1,500 square feet. Mandarin Oriental was built as part of a cohesive There is notable supply competition in condominiums community, CityCenter, a luxury, mixed-use, urban resort ranging from 600 to 1,500 square feet. The gap in the linked by art filled public spaces and walkways. The overall market is in larger offerings, shown in Figure 3 below, i.e. composition of CityCenter helps define the interest of condominiums ranging from 2,000 to 4,000 square feet. buyers. A variety of restaurants and high-end shopping experiences fulfill many requirements of urban living and Mandarin Oriental offerings are at the larger end of the unit the location’s proximity to the airport is extremely size spectrum catering to a different buyer profile. important. Mandarin Oriental appeals to a slightly more mature and highly affluent population accustomed to high quality Second, Mandarin Oriental is situated above the hotel’s finishes and serviced amenities. Given this profile, the guest rooms and greatly benefits from its connection with developer invested significant resources in delivering to the the luxury hotel brand. Mandarin Oriental has a reputation very high-end of expectations. for legendary, high level service. This provides comfort to buyers that the reliability of building systems and common Figure 3 areas will be maintained to the highest standards; Existing Inventory by Home Size Range preserving value.

Figure 2 Average Home Sizes in Key Condominium Markets in the Western United States

Source: Clark County Assessor, The Mark Company, Partners Trust, Coldwell Banker Premier Realty. Note: Las Vegas figures include available inventory. Los Angeles and San Francisco markets are samples of closed units.

Source: Clark County Assessor, Coldwell Banker Premier Realty. 2 The Residences at Mandarin Oriental, Las Vegas

As a result of the efforts to create a distinguished property In April 2012, anticipating increased market activity, and at the top end of the luxury market segment, Mandarin after the imposed price protection guarantees extended to Oriental achieved some of the highest sale prices in the Las original pre-construction sales contracts, the developer Vegas market. Initial closings took place in an unusually reduced prices to meet the market in two ways: strained economy for Las Vegas. However, the greatest price declines in the Las Vegas luxury condominium market 1. Provided 10% off previous closing prices took place in the 2008 and 2009 period, when sales 2. Additional 15% off in cash inducements including volumes fell to near nothing and prices dropped as much as lifestyle incentives or holding costs which are paid out 60%. Although pre-construction contract reservations over time. began much earlier, Mandarin Oriental closings took place after much of the market price declines had already These programs did incentivize buyers and help the project occurred in early 2010 and it was evident adjustments were gain momentum, further bolstered by greater optimism in necessary. To facilitate closings on the original contracts, the vertical living market segment. A combination of price CityCenter Residential extended a 30% price adjustment to resets, improving Las Vegas fundamentals and a desire for the original contract pricing. luxury living was the impetus to get a lot of buyers off of the fence. During the trough of residential pricing, no project escaped an adjustment period and Mandarin Oriental had also Even with a significant price reduction from the original adjusted their sales program, but not the ultimate promotion in 2006, Mandarin Oriental continues to mark deliverable, an ultra high-end residential experience. As a the high-point in closed real estate transactions…..and by result, the building maintained a superior presence in the no small margin. With over 70 closings in 2013 YTD, sales marketplace and has since made great strides in sales have ranged from around $300 per square-foot for grey velocities. shell to nearly $800 per square-foot for move in ready penthouse homes. The average price for Mandarin After stabilizing in 2010, the overall luxury high-rise market Oriental’s typical offering is in the $650 to $700 per square- began to rebound in 2012 and has since become a rather foot range. Figure 4 simply shows that while Mandarin sought after living option and this greatly includes Oriental is a component of the luxury residential market, it Mandarin Oriental. Buyers are seeing a lot of value surpasses it in terms of quality, positioning, service and embedded in these projects from a convenience and luxury value. perspective. Further, many buyers recognize that in some instances, current sale prices are very close to construction Despite being the top of the market, sales volumes have costs, signaling a long-term upside. been impressive, with nearly ten closings per month in 2013. Even more compelling is that this is occurring in a Coinciding with a rejuvenated Las Vegas residential market, project with an inventory of several $1 million plus the value of purchasing at Mandarin Oriental has been floorplans, taking an outsized percentage of the regional clarified greatly. CityCenter Residential’s focused plan for market and helping to deliver further international Mandarin Oriental has yielded significant traction. exposure. Figure 4 Sales Price Gap Las Vegas Luxury High-Rise Projects and The Residences at Mandarin Oriental Average Sale Prices 2013 YTD ($/sq.ft). Figure 5 Key Southern California and Las Vegas Prime Developments

Source: Associated project developers, Coldwell Banker Premier Realty. *One listing remains at Montage Residences. Prices include the resale market.

Source: Clark County Assessor, CityCenter Residential, Coldwell Banker Premier Realty. Note: Based on finished homes. 3 The Residences at Mandarin Oriental, Las Vegas

Figure 6 Sample Offerings of Global Super-prime Condominium Residences

Vancouver London The Erickson One Hyde Park* $1,754/sq.ft $11,240/sq.ft

Las Vegas Shanghai The Residences at Mandarin Oriental Tomson Riviera $1,556/sq.ft $4,409/sq.ft

Beverly Hills Hong Kong The Montage Residences Opus Hong Kong* $2,684/sq.ft $9,838/sq.ft

Los Angeles Singapore The Ritz-Carlton Residences at L.A Boulevard Vue $1,586/sq.ft $3,386/sq.ft

New York City 15 Central Park West $5,009/sq.ft*

*Closed sale, all others are asking prices. Source: Global Property Guide, Knight-Frank, The Mark Company, Partners Trust, Associated Project Developers, Coldwell Banker Premier

Although an iconic Las Vegas project, Mandarin Oriental is Points of Differentiation more appropriately compared to other, global developments that cater to the super-wealthy seeking The approach of the developer of The Residences at Mandarin large, home-like condominium residences perfectly located Oriental, Las Vegas was a clear message of differentiation from and well serviced. existing Las Vegas high-rise residences. Both CityCenter and Mandarin Oriental exist as an important contribution to modern, urban design. Mandarin Oriental has become the Las Vegas benchmark for other projects for quality and price. In this manner, In its debut, the project was positioned to be the market leader Mandarin Oriental has had a meaningful impact on the Las in terms of finishes, amenities, ancillary services and necessarily, Vegas market. Going forward, projects will assess price. themselves using Mandarin Oriental as the highest metric. The Residences delivered on the message with a rich set of attributes:

International Context: Key Global Comparisons Amenities and Services Hotel Services & Amenities Available to Residential Owners Super-prime, vertical residential development has existed in  Private residential entrance and lobby  Elevated pool and cabana retreat many forms and has largely been constructed in cities that  Owners’ lounge  Conference facilities and business center are international destinations. Mandarin Oriental is a new  Secured, private residential elevators  Fitness facility and yoga studio  Executive board-room entrant in this space, bringing a sought after lifestyle to the  Dining and retail  Owners’ recreation quarters region for the first time. In this regard, Mandarin Oriental  The Spa at Mandarin Oriental  Mandarin Oriental valet parking should be viewed in a wider lens than Las Vegas alone. services  Tea Lounge and Mandarin Bar  Mandarin Oriental door men services  Laundry and dry cleaning services  Mandarin Oriental concierge services  In-room dining  On-site management  Private catering

Mandarin Oriental residences, which are purchased from the developer, also include an exclusive membership in MGM Resorts International M life program, M life Curated Living. Residents are provided Platinum level membership, amenity benefits and earn rewards for every dollar spent at MGM Resorts properties.

A collaboration with the developer and architects at Kohn Pedersen Fox Associates, The Residences at Mandarin Oriental, Las Vegas is a striking addition to the Las Vegas skyline, raising the bar for developments in 21st century Las Vegas.

CityCenter was named “Best Project” for overall quality by Commercial Property Executive.

The Residences at Mandarin Oriental, Las Vegas is a Recipient of the ® LEED (Leadership in Energy and Environmental Design) Gold Certification from the U.S. Green Building Council. 4 The Residences at Mandarin Oriental, Las Vegas

Super-prime development has been part of a trend in major From the 1990’s through the early 2000’s, Las Vegas added cosmopolitan areas like Monaco, Singapore, Shanghai, a considerable amount of gourmet dining and world-class Moscow, London and Beverly Hills (some recent offerings shopping experiences (including Crystals at CityCenter) as are found in figure 6). These projects go beyond status and well as entertainment and cultural options such as the resonate at a higher emotional level than typical urban Smith Center for Performing Arts. The Smith Center brings offerings. Broadway shows, jazz, opera and dance to a world class entertainment facility. Cirque du Soleil performances, all With an affinity for design features by renowned architects located within locations on the , continue to and designers, combined with a high level of service, the be a hit with visitors. Outdoor recreation options, including global wealthy have sought out the few developments that boating, hiking, aviation and mountain climbing abound in have recognized this trend. the local area as well.

Visitors to Las Vegas are increasingly interested in non- Some of the residences being offered in the super-prime gaming activities. Food and drink revenues by some large market segment are customizable units, many of which are leisure and hospitality firms has expanded from about 25% found in grey shell. For this reason, it makes it difficult to of total revenues in the 1990’s to nearly 35% today. make side-by-side comparisons for the homes themselves. Average expenditures on sightseeing and shopping have However, many individuals’ desire the option of finished increased significantly as well.1 product or grey shell. Both are available at Mandarin Oriental. The possibility of a floor plate combination is CityCenter and Mandarin Oriental have been built with a available at Mandarin Oriental as well. broader experience in mind, one which may include

Figure 7 When compared to other global super-prime developments Household Moves to Clark County, NV as Measured by Customer Moves as a backdrop, including Mandarin Oriental projects in New

York, Boston and London, the value proposition comes increasingly into focus. If we view Mandarin Oriental within the context of the U.S, much of which is increasingly being recognized as a solid value play, Mandarin Oriental excels in this space. It competes well with other projects in the Western U.S and has little direct competition within Las Vegas.

Why Las Vegas?

Las Vegas has increasingly become a cosmopolitan city, drawing visitors and residents who may appreciate the well Source: Unite Van Lines -known Las Vegas nightlife and gaming, but also desire activities found in other major metropolitan areas. gaming, but also other activities, including dining, shopping, entertainment and public fine art. Mandarin Oriental appropriately caters to a lifestyle experience which ascends prior possibilities and has closed a significant gap in the market.

From the map in Figure 7, we observe a significant movement from heavily urbanized areas such as the northeast, and Las Vegas has always hosted moves from the Los Angeles area. Many of these individuals and households are accustomed to urban living and seek similar product in their new market.

By several measures, we estimate a return to positive net- migration to the Las Vegas metropolitan area. These metrics include driver’s license surrenders, household

1. Las Vegas Convention and Visitors Authority, Las Vegas Visitor Profile 2012. 5 The Residences at Mandarin Oriental, Las Vegas moves (measured by moving companies) and residential On the Horizon utility hookups. Migration patterns have mirrored our observations for second home buyers as well, including those Demand for homes in Las Vegas and to a large extent, the purchasers in our surveys of luxury condominiums. United States, had fallen precipitously during the 2007 through 2010 period. However, these price declines were There are several reasons we believe Mandarin Oriental can asymmetric, with older single family and garden style capture a greater share of sales for super-prime real estate in condominiums dropping the most from peak values. Newer, the U.S. As mentioned earlier, prices are commensurate with high quality developments have preserved much more equity other prime projects, yet it has a very high value proposition. and are now seeing gains. We view Mandarin Oriental in a Secondly, 2013 sales points towards significant momentum similar light to other prestigious projects in several within the project and this has not gone un-noticed. cosmopolitan cities and it exists as a major point of distinction from most regional projects. Figure 8 illustrates the rebound in visitors to Las Vegas, which surpassed pre-recession levels in 2012. Other drivers of the Another consideration is the lack of development on the Las Vegas economy, including gaming revenues and retail horizon. Few developers are moving forward on prime or sales, have clearly defined rebounds as well. super-prime development in the United States. Las Vegas has even more limiting factors due to the lack of financing for Positive migration, an improving business climate and a new projects. Therefore, the small competitive landscape strong second home market may all have an impact on insulates the project in the market for super-luxury Mandarin Oriental. Since Las Vegas is an international residences. destination, many foreign nationals are continuing to view real estate in Las Vegas. Current Offering Example This is particularly true for Canadians. In 2012, 23% of all U.S transactions by foreign investors and second home buyers were from Canada (NAR, 2013). In 2011, Canadians accounted Figure 8 Las Vegas Visitor Volume

Visitor Volume is Exceeding Pre-Recession Levels

Source: Las Vegas Convention and Visitors Authority. for 73% of foreign transactions in . Foreign interest and a continued draw from Southern California is bolstering the luxury residential market in Las Vegas.

When viewed against other international destinations, United States real estate is increasingly returning as a favored set of assets. Frothy housing markets in Australia, China and some Canadian cities continue to give investors and second home buyers pause for thought. Instead of placing monies in an elevated price trend, placing monies in a recovering area is a popular notion. 6

The Residences at Mandarin Oriental, Las Vegas

Further, on a relative value basis, many foreign buyers are finding that the project represents a comparably strong value against other high-caliber projects. These attributes all exist within the context of an overall improvement in U.S real estate and particularly Las Vegas.

The noteworthy design of the project, an appetite for luxury living that has been maintained despite a recession and improving regional economic conditions has positively influenced sales. Extreme luxury and relative value has clearly resonated with buyers. Recent contracts as well as vibrant 2013 closing activity paints an improved picture, and we believe CityCenter Residential’s product repositioning and focused marketing plan will continue to drive sales.

7 Residential Research

AUTHOR

John McClelland, Vice President, Research

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Coldwell Banker Premier Realty Strategic Services-Market IQ

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The information and opinions in this report are believed to be reliable and has been obtained from sources believed to be reliable. Coldwell Banker Premier Realty makes no representation as to the accuracy or completeness of such information.

The opinions expressed in the report constitute the judgment of the authors only and may not reflect the opinion of Coldwell Banker Premier Realty. This report is provided for informational purposes only and does not constitute investment advice.

Copyright © 2013 Coldwell Banker Premier Realty.

Coldwell Banker Premier has facilitated a multitude of residential transactions in Las Vegas. We draw on this experience and information obtained from local government, U.S Census, third party data purveyors and the Greater Las Vegas multiple listing service. The information is deemed reliable but is not guaranteed.

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