White Elephant

DEFINITION of 'White Elephant'

A white elephant is an investment whose cost of upkeep is not in line with how useful or valuable the item is. From an investment perspective, it refers to an unprofitable investment, property or business that is so expensive to operate and maintain that it is extremely difficult to actually make a profit.

BREAKING DOWN 'White Elephant'

The white elephant is an icon with roots in Siam or present day Thailand. Due to the rarity of these animals, they were automatically gifted to the reigning monarch, which is why the white elephant is on the red field of the national flag of Siam. The monarch would give the white elephant as a gift of either good or bad fortune. If he liked the recipient, he would gift land along with the elephant to help pay for the cost of the elephant. If he did not like you, he would not include land, turning the gift into a money pit.

Derived from Asia, the term white elephant is used to describe any investment, especially real estate, that is expensive to maintain, unprofitable and impossible to sell. It is used to describe an undesirable investment. Here's an example of how the phrase is used in context: The woman did not know the apartment building would be such a white elephant when she bought it.

Examples

Notable examples of white elephants include the Empire State Building, the Sprint Center and the Ryugyong Hotel.

The Empire State Building did not become profitable until the 1950s, more than 20 years after it was completed. Built against the backdrop of the Depression, it has never truly been an office building, the original plan for the building. In 2006, the rent was just $37 per square foot, which was below midtown New York’s average rental rate of $48 per square foot. Still, vacancy rates were at 18%.

Another more recent example is the Sprint Center owned by Kansas City. The Sprint Center opened in 2007 without a National Basketball Association or National Hockey League team. After five years, no major sports anchor team had signed on. The center cost $309 million.

Finally, there’s the Ryugyong Hotel. Originally intended to hold five revolving restaurants and over 3,000 hotel rooms, the Ryugyong Hotel stands 105 stories tall as a pyramid-shaped skyscraper in Pyongyang, North Korea. It is the tallest structure in North Korea. Developers began construction in 1987, but plans were halted in 1992 due to a lack of funds. Construction resumed in 2008. The grand opening was planned for 2012, the centenary of Kim Il-Sung's birth, but the hotel remains unfinished.

RELATED TERMS
  1. Hunting Elephants

    The practice of targeting large companies or customers.
  2. White Paper

    An informational document issued by a company to promote or highlight ...
  3. Gift

    Property, money or assets that one person transfers to another ...
  4. White Squire

    Very similar to a "white knight", but instead of purchasing a ...
  5. White Collar

    A working class that is known for earning high average salaries ...
  6. White Candlestick

    A point on a candle stick chart representing a day in which the ...
Related Articles
  1. Investing

    Why Sprint Stock Plunged 12% Last Week (S)

    Can Sprint dial the right number combinations to deliver long-term growth?
  2. Insights

    Can Sprint Keep Up With Its Competitors? (S, TMUS)

    Discover how Sprint is faring against the competition in the mobile phone industry and some of its plans and accolades that makes it a compelling competitor.
  3. Insights

    Sprint Slashes 2,500 Jobs, 7% of Staff, to Lower Costs

    Investors are worried at the implied lack of confidence in Sprint's current operating structure.
  4. Personal Finance

    Are Hotel Chains Too Big? (TRIP, HLT)

    In America, the six largest hotel chains dominate the industry and more likely than not you’ll end up staying at one on your next vacation.
  5. Insights

    Gift-Giving Etiquette

    Here's a look at how much you should spend and what you should give this holiday season.
  6. Personal Finance

    Navigating The Hotel Star System

    Three stars, four stars, gold star, who star? Sometimes the hotel star system can seem as wacky as a Dr. Seuss book.
  7. Markets

    Is This Eagle Rock Energy's Next Growth Project? (EROC, WLL)

    Eagle Rock Energy Partners (NASDAQ: EROC) spent the past year trying to turn itself around. This was after the master limited partnership realized its dual business model of upstream and midstream ...
  8. Insights

    The Republicans’ Commie Convention Hotel

    That’s right—the party of free enterprise is going to be partying up in a hotel owned by the taxpayers of Cuyahoga County.
  9. Markets

    Sprint Stock: Capital Structure Analysis (S)

    Learn about Sprint's capital structure and how trends in pricing impact the company's market capitalization and enterprise value.
  10. Personal Finance

    The Best Time to Book a Hotel for Vacations

    Knowing when to book your hotel room can help your vacation budget. Since there are lots of variables, it pays to do your homework to get the best deal.
RELATED FAQS
  1. How does the gifting process work with a deed transfer?

    My parents own a home that they would like to "gift" to my husband and me. The house is in my parents name and they want ... Read Answer >>
  2. How are Three White Soldiers patterns interpreted by analysts and traders?

    Understand the basics of the three white soldiers candlestick pattern and how this bullish reversal signal is interpreted ... Read Answer >>
  3. Who will pay taxes on my grandmother's home?

    I don't own a home, but I have the power of attorney for my grandmother who will be going into a nursing home. I've decided ... Read Answer >>
  4. How can I set financial goals for the future?

    I am in my late twenties, recently married, and live in New York City. My wife and I are both employed and are saving by ... Read Answer >>
  5. What is the lowest capitalization rate before an investment becomes unprofitable?

    Learn about different levels of profitability associated with investments featuring similar capitalization rates. Explore ... Read Answer >>
  6. In what ways can a portfolio be over-diversified?

    Learn how it is possible to over-diversify an investment portfolio, and find out what role opportunity cost plays in financial ... Read Answer >>
Hot Definitions
  1. Glass-Steagall Act

    An act the U.S. Congress passed in 1933 as the Banking Act, which prohibited commercial banks from participating in the investment ...
  2. Quantitative Trading

    Trading strategies based on quantitative analysis which rely on mathematical computations and number crunching to identify ...
  3. Bond Ladder

    A portfolio of fixed-income securities in which each security has a significantly different maturity date. The purpose of ...
  4. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  5. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  6. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
Trading Center