Phil Ruffin buys Las Vegas casino at a bargain price
The sale of Treasure Island Hotel Casino in Las Vegas might have been surprising, but it could be only the first of many.
MGM Mirage, which is struggling to fund CityCenter and control debt, some of which comes due in 2010, sold the iconic property on the Las Vegas Strip for $775 million to Phil Ruffin, the former owner of the New Frontier. Ruffin is known for buying properties at bargain-basement prices-he purchased the New Frontier for $170 million and then sold it for $1.24 billion to the ELAD Group in mid-2007. While some would question whether Ruffin got a good deal for Treasure Island, he’s satisfied.
“I probably didn’t buy at the bottom of the market,” Ruffin told the Las Vegas Sun. “But I’m close.”
For MGM Mirage, the deal was made for several reasons. MGM Mirage Chairman and CEO Jim Murren says the sale will allow the company to reduce debt and fund CityCenter.
Ruffin will pay $500 million in cash and $275 million in a short-term note at 10 percent interest, with $100 million due 175 days from closing and $175 million due 24 months from closing. MGM Mirage will take back the note to avoid going into public financing. It is expected that Ruffin can easily repay the note through cash flow at the property, which should remain, in that case, debt-free.
Treasure Island was originally built by Steve Wynn and Mirage Resorts. It was his second casino on the Las Vegas Strip, opening in 1993. Originally containing a pirate theme, it was given a $100 million renovation, complete with a more hip, adult theme several years ago by MGM Mirage, which acquired the property when it bought Mirage Resorts in 2000. Now called “TI,” the vintage pirate ship battle was changed to the “Sirens of TI,” a sexy show on the pirate ships featuring scantily clad women.
Wynn called Ruffin’s deal “bulletproof,” and said it was a good deal for all concerned.
“Now we’ve got one guy who is only worried about Treasure Island,” he told the Las Vegas Review Journal. “That’s good for Treasure Island and good for the Treasure Island employees.”
Wynn believes it’s a trend that will continue and is a positive for the city.
“The unbundling of Las Vegas is going to be a positive thing. I didn’t think bundling, or consolidation as it was politely referred to, was good,” he said.
The transaction is just the first of what could become a flood of sales of non-strategic assets owned by MGM Mirage and other large gaming companies currently under financial pressure.