Deutsche Bank in the Casino Business

With Las Vegas casino revenue down for five straight months, perhaps this is not the best time to enter the casino mogul business.  Unfortunately, Deutsche Bank has had little choice but to foreclose on the $3.5 billion Cosmopolitan Resort & Casino in Las Vegas.  The bank attempted to sell the unfinished complex after 3700 Associates LLC, led by Ian Bruce Eichner, defaulted on a $760 million construction loan in January.  Deutsche Bank is in talks with companies including MGM Mirage and Hilton Hotels to help run the 80,000 square foot casino.  Bringing in a partner would allow Deutsche Bank to avoid having to obtain a Nevada gaming license, which is apparently not an easy process.  Deutsche has continued to fund construction on the 8.5 acre development which includes two high-rise towers, three wedding chapels, a sandy beach overlooking the Strip and a deck featuring "European-style bathing."  I must admit that this place sounds great, albeit in a very over-the-top-what-happens-in-Vegas-stays-in-Vegas kind of way.  However, it is likely that the bankers will cut some glitzy corners in order to keep the project on budget.  The interesting question remains: What does a German bank know about building and operating a casino?  If you consider the stock market to be the largest casino in the world, perhaps there is hope for this project after all.  

Ian Bruce Eichner Facing Foreclosure Again, Sixteen Years After Prior Foreclosures

Ian Bruce Eichner is joining the swelling ranks of former real estate moguls forced to hand over the keys to trophy properties. According to the Wall Street Journal, the developer was in negotiations with Deutsche Bank over the Cosmopolitan Resort Casino, a property in the midst of construction on the Las Vegas Strip. Deutsche Bank is on the hook for around $1 billion on the unfinished project as the property mogul defaulted on his loans late last year. Mr. Eichner claimed in an interview following the default that the credit crisis was the root of his problems and that banks would eventually lend to him again. "It's probably pretty safe to say that somewhere in 2009 or 2010, Bruce Eichner will surface with another one, something. There's zero that will stick to my shoes." I do enjoy it when over-levered egomaniacs blame their misfortune on the credit crisis, rather than their brilliant strategy of just borrowing money without any plan to pay it back.
Those who have followed the commercial real estate market for some time may be experiencing a bit of deja vu. Haven't I heard this guy's name somewhere before? Yes! Mr. Eichner was forced to hand over the keys to a series of buildings in Manhattan sixteen years ago. Yet somehow lenders thought he had developed some skill in managing his finances in the interim. On the other hand, according to The New York Times, in an article written in 1994, Mr. Eichner was quoted as saying "I've built three million square feet in Manhattan and none of it came in on budget or on time." Apparently, Deutsche Bank thought that this philosophy qualified him for a $1 billion loan. Now the bank is faced with yet another defaulted loan to work out, in addition to the $5.8 billion it lent to Harry Macklowe. At this rate, Deutsche may become a very large property manager in the US. Mr. Eichner can continue to believe that lenders will eventually come back begging him to take their money. If I ran the Fed, I would permanently ban any bank who lent this guy money again from accessing the discount window or any other loans provided by the Fed. Furthermore, if I ran Deutsche, I'd make him pay off his debts by washing my dishes for the next sixteen years. But since I only run MockTheMarket, the best I can do is call him and his lenders "idiots" and move on to the next inane story of the day.