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Authors: S Rajagopalan
Published by: Amity Research Centers
Published in: 2011

Abstract

In 2004, Deutsche Bank, the leading German investment bank with global presence, had financed the development of a casino-resort called ‘Cosmopolitan’ in Las Vegas, the internationally renowned city for gambling and associated entertainment, with a $60 million loan to Ian Bruce Eichner. Over the next four years, Deutsche Bank had lent a total of $760 million to Eichner towards the casino-resort. The global financial crisis of 2008 hit the US economy hard, and Las Vegas, in particular, was severely affected with a high rate of mortgage foreclosures. Eichner defaulted on the Deutsche Bank loan, and the bank, unable to find alternate investors, assumed ownership of the project. Deutsche Bank worked on making the Cosmopolitan a world-class casino-resort, hiring architects, engineers, and gambling experts to fulfill its vision. The cost of realising this vision came to $4 billion, making the Cosmopolitan the most expensive casino-resort ever in Las Vegas. Analysts estimated that it would take years, if not decades, for Deutsche Bank to recover its investment. The downturn in the Las Vegas gambling market and the Cosmopolitan’s lack of a customer base posed challenges. Deutsche Bank had envisaged its foray into the gambling business only as an investment, but questions remained whether it could make the Cosmopolitan project a profitable one. The case study discusses the background of Deutsche Bank, its venture into the Cosmopolitan project, and the challenges that the project posed to the bank.
Location:
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2011

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Abstract

In 2004, Deutsche Bank, the leading German investment bank with global presence, had financed the development of a casino-resort called ‘Cosmopolitan’ in Las Vegas, the internationally renowned city for gambling and associated entertainment, with a $60 million loan to Ian Bruce Eichner. Over the next four years, Deutsche Bank had lent a total of $760 million to Eichner towards the casino-resort. The global financial crisis of 2008 hit the US economy hard, and Las Vegas, in particular, was severely affected with a high rate of mortgage foreclosures. Eichner defaulted on the Deutsche Bank loan, and the bank, unable to find alternate investors, assumed ownership of the project. Deutsche Bank worked on making the Cosmopolitan a world-class casino-resort, hiring architects, engineers, and gambling experts to fulfill its vision. The cost of realising this vision came to $4 billion, making the Cosmopolitan the most expensive casino-resort ever in Las Vegas. Analysts estimated that it would take years, if not decades, for Deutsche Bank to recover its investment. The downturn in the Las Vegas gambling market and the Cosmopolitan’s lack of a customer base posed challenges. Deutsche Bank had envisaged its foray into the gambling business only as an investment, but questions remained whether it could make the Cosmopolitan project a profitable one. The case study discusses the background of Deutsche Bank, its venture into the Cosmopolitan project, and the challenges that the project posed to the bank.

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Location:
Industry:
Other setting(s):
2011

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