Sitting in a Starbucks close to his Las Vegas Boulevard office, Tony Dennis scrawled the word "bailout" on a scrap of paper.
It was September 2008, the start of the great American credit crunch, and Las Vegas was the epicentre of all things wrong with real estate.
"Banks were getting a bailout, but who would bail us out if things went south?" Dennis wondered. As head of residential real estate for City Center, the world's largest privately financed realty project, there was a lot at stake.
The Canadian is responsible for selling luxury condos in a market with the highest foreclosure rate on the planet. The $8.4 billion (U.S.) project of condominiums, casinos, hotels and retail plazas is ambitious, even by lofty Vegas standards.
On a massive 27-hectare lot in downtown Vegas, the project is equivalent to building a city on top of a city. If there were a job description for "world's toughest job in real estate," Tony Dennis's picture would be below the headline.
"There were some tough days when you're just exhausted emotionally, physically and mentally," says Dennis, who grew up in Toronto. "Who knew that we would be caught up in this incredible web of negative events that would cause the economic problems that we're having?"
The implosion of the real estate market in Las Vegas has meant Dennis has done what once would seem unthinkable.
Last month, he announced he'd slash the prices of all his 2,440 condos by 30 per cent – not just for future buyers, but also for existing purchasers. For a developer with a project of this scale, it was an unprecedented move. And it's a cautionary tale of what can happen when condo markets get out of hand.
"When you buy an unfinished piece of property, circumstances can change, the world can change. And that's what just happened," says Janet Brashear, senior analyst at Bernstein Research in New York.
Analysts say City Center, a joint venture between MGM Mirage and Dubai World, the development arm of the government of Dubai, had to take drastic action or existing sales would not close.
"There was going to be little incentive to close without a discount, given that the market had changed," says Brashear.
When the project came to market in 2007, the timing could not have been worse. The great recession and credit crunch would burst the real estate bubble, wiping out demand for luxury, discretionary purchases such as vacation homes.
A dispute between MGM and Dubai World threatened to derail the project, which was on the brink of bankruptcy. (An agreement was reached earlier this year.) In between, there were construction deaths and a shareholder lawsuit over MGM's falling stock price. Shares hit a high of $74 in 2007 before plummeting to $1.81 in March. On Friday, after the casino giant announced a $955 million writedown of the project, shares closed at $9.27, down 4.7 per cent, on the New York Stock Exchange. Analysts still fear City Center's 6,000 rooms will flood the market, driving down hotel rates and cutting MGM's bottom line.
The project has been on the edge of ruin for so long, Dennis has seemingly been running on adrenalin and caffeine to stay ahead of the game. With a BlackBerry and a notebook at hand to jot down his thoughts, he can be found at Starbucks at 6 every morning. It is his only quiet time of the day.
"It's been difficult for everyone, and we've been trying to communicate with our buyers as best as possible," says Dennis. "But what we did was unprecedented. Developers don't typically give everyone a discount as a pre-emptive gift." What Dennis and company officials did was take more than $500 million off the table. It wasn't done lightly – Dennis had chaired a summer meeting of consultants, architects and real estate executives to discuss how to make City Center viable – but he knew that if he didn't give some kind of a discount, sales would not close. That would jeopardize the whole project.
The mood at that meeting contrasted starkly with events of two years earlier, when Dennis and his 130-person sales team had sold $1.6 billion worth of City Center real estate in just 12 months – more than the combined worth of Toronto's Four Seasons, Trump and Ritz Carlton projects.
Starchitects such as Daniel Libeskind, whose City Center retail mail is reminiscent of the Royal Ontario Museum's crystal, had been hired to attract luxury buyers. It worked.
The average cost of one of the 207 units at the sold-out Mandarin Oriental residences was $3.2 million, or a heady $1,600 per square foot. (The average new condo in Toronto sells for $474 per square foot.)
Bling was king, and Vegas was the capital of excess.
Today, one in every 47 homes exchanging hands in Vegas is a distress sale, the highest rate in the U.S. No wonder worried buyers lined up outside Dennis' office.
So far, he says, the discounting of suites has met with good response.
One Calgary purchaser upgraded from an $800,000 unit to a $1.2 million suite. Canadian sales, mostly to Vancouver and Calgary residents, have been about $40 million so far. A high-flying loonie and Canadians looking for a bargain in a good climate are also attracting attention, he says.
But City Center units will still be competing with a plethora of other real estate options for investors in a city awash with new condos.
Given the rocky economy, Brashear says that for some clients, no amount of discounting will work. "The buyer may not have the money and will simply have to walk away," she says.
It's Dennis' job to make sure they don't.
When MGM executives hired him to head up City Center's residential side, there arguably was nobody better prepared for selling luxury condo developments. Dennis, who comes from a family of builders based in Toronto, cut his teeth at top Canadian developers.
"Toronto has an incredible wealth of development talent," he says. "There are a lot of people who are really good at what they do, maybe the best in the world."
His luxury experience included work with the Four Seasons, and a stint with Minto, where he oversaw the development of the Prince Arthur condominiums in Yorkville, still considered a landmark luxury building. To sell the empty 10,000-square- foot penthouse, he threw a party for prospective buyers with a glamorous mix of people, including actor Christopher Plummer.
Toronto's Tony Dennis tasked with massive job of selling luxury condos
In Las Vegas, his 27,000-square-foot sales pavilion is modelled after one he first developed in Oakville in the 1990s for River Oaks homes.
"I wanted to give customers an experience. I figured they were driving through all these cookie-cutter subdivisions and just bought at the last one because they were too tired to go on," says Dennis.
The experience served him well when he was recruited by MGM. By the end of the year, the City Center casino will open, followed by closings on the condominiums.
And there might be some light at the end of the billion-dollar tunnel.
Median existing home prices in Las Vegas rose 0.7 per cent in June from the previous month; annual sales are up 63 per cent from a year ago as people hunt for bargains.
"There seems to be a sense that people are waiting for a recovery rather than waiting for the end," says Dennis. "It's not just a collection of buildings. It will be a true community, a diverse, artistic place where you can live, play and stay.
"I think it will be the catalyst for the renaissance of Las Vegas."
That isn't just marketing talk. Vegas needs City Center to work
Last month, MGM started to fill 12,000 jobs and got 160,000 applications. The unemployment rate is 13.2 per cent, and there is a lot of hope invested in the project.
"This is my space shuttle mission, my moon shot, it doesn't get bigger than this," says Dennis. "This is the job of a lifetime and we've been entrusted to bring this home."