Deutsche Bank Foreclosing On Billion Dollar Casino

September 1st, 2008 | Tags: Foreclosures

It is not just the small fry anymore – foreclosures are now marching into billion dollar zones. Deutsche Bank is scheduled to foreclose on a $3.5 billion casino – Cosmopolitan Resort & Casino. The developer Ian Bruce Eichner took a loan of $760 on which he is defaulting.

Deutsche Bank is the largest of its kind in Germany. Since Eichner began defaulting in January the bank has been mulling over the matter of foreclosure and sale. Deutsche Bank is opening talks with MGM Mirage and Hilton Hotels Corporation to enable it to keep up operations in this 80,000 square feet casino.

Deutsche Bank has on its hands many foreclosed units and is biding its time waiting and watching the real estate market. With the general tendency of the economy it seems that hanging on to these will mean further loss. Among other units on its list are two high-rise towers, three wedding chapels, and a golden beach with a view of Las Vegas strip and a deck with European style bathing facilities. This development project is spread across 8.5 acres of prime land.

Analyst Matthew Clark of Keefe, Bruyette & Woods explains that Deutsche Bank wants to be busy with banking and not in “running a casino”. Scott Helfman of Deutsche Bank as well as Yvette Monet of MGM Mirage was not prepared to make comments. Robert Allegrini of Hilton also remained silent. A viable option will be for the bank to get a gaming licence. Alternatively it could bring in an operator with a licence and lease out the entire casino zone

Las Vegas is reeling under foreclosures combined with a slow economy and inflation. The revenue from the casino business slumped by 16% in May 2008 according to the findings of Nevada Gaming Commission.

MGM is owner of Bellagio casino and is moving ahead with plans to build a $11.2 billion CityCenter to surround the Cosmopolitan. This makes MGM a potential candidate for it. This was the opinion of Robert LaFleur who oversees gaming companies of Susquehanna Financial Group. MGM is the second largest casino company in the world.

Deutsche Bank had $22.6 billion of loans from real estate mortgage till 30th June as per company reports. It wrote down many investments and hedges. Earlier in 2008 it had foreclosed on New York office towers after its owner Harry Macklowe defaulted on $7 billion. The shares of the bank fell by 30% in this year making it eager to sell of units.