Deutsche Bank Lost in Las Vegas as Foreclosures force Lenders to Decorate

[marmar]

from Bloomberg:



Deutsche Bank Lost in Vegas as Defaults Make Lenders Decorators

By Jonathan Keehner and Bradley Keoun

June 23 (Bloomberg) -- Workers building the $3.5 billion Cosmopolitan Resort & Casino on the Las Vegas strip are getting used to their financiers from Deutsche Bank AG. Lately, the weekly visitors from 60 Wall Street have been critiquing plans that called for a black-and-white decor.

``They are considering changing the color palettes and finishes,'' said Travis Burton, a vice president for lead contractor Perini Corp., who outfits the bankers with safety vests and hard hats before touring the site.

Since January, when New York developer Ian Bruce Eichner defaulted on a $760 million loan, Frankfurt-based Deutsche Bank has been cutting Perini a monthly check for $70 million to continue construction, now in full swing with 2,800 workers on site and a dozen cranes towering overhead.

Deutsche Bank, which declined to comment about the Cosmopolitan, is one of a dozen investment banks that rode a five-year boom in commercial real estate by financing developers and landlords while profiting by packaging loans into securities. Then credit markets seized up in 2007, sticking banks and brokerage firms with commercial mortgages and bonds. The amount for large U.S. banks alone: $169 billion, according to Fitch Ratings Ltd. The resolution may take more than providing advice on drapes as the economy falters and mall vacancies increase.

``Wall Street banks have a lot of exposure to commercial real estate, and it's definitely a concern,'' said Ryan Lentell, an industry analyst at Chicago-based Morningstar Inc. ``They really pushed through lending and principal investing. The exposure has a lot to do with their problems.''

Tropicana Squeezed

Not far down the strip is the Tropicana Resort & Casino, whose parent filed for bankruptcy protection in May. Tropicana Entertainment LLC defaulted in April on a $1.3 billion syndicated credit line arranged by Zurich-based Credit Suisse Group to help finance the purchase of the casino in 2006, according to bankruptcy papers. Credit Suisse spokesman Duncan King declined to comment.

The economic slump that began in the U.S. housing market has spread to commercial real estate, Wachovia Corp. senior economist Mark Vitner wrote in a June 4 note. Retail vacancies in the first quarter were up 8 percent from a year earlier, he said. And he predicts average prices for U.S. commercial real estate may drop by 15 percent to 20 percent as demand for office and industrial space declines. ......(more)

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