July 2013 RESIDENTIAL RESEARCH The Residences at Mandarin Oriental, Las Vegas 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 Park Towers comparable schemes in the Southern California, New York and Turnberry Place. 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 the western United States, its Upper-end residences, see Figure 1 below, are found in buyer profile and iconic status in Las Vegas. Finally, we Veer Towers, One Queensridge Place, Park Towers, describe changes in the character of Las Vegas and how Turnberry Place, Panorama Towers, The Martin 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 Sky Las Vegas 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.