Treasure Island selling for under $1 billion
If the goal of being a successful investor is to sell high and buy low, then Phil Ruffin looks like he is about to be the biggest winner in the current Vegas economic mess.
Ruffin sold the New Frontier and the land with it for $1.24 billion to the ELAD group at the high water mark of the Strip real estate boom/bubble in July 2007. By the end of that year, the old casino was gone: except for the sign. The new owners planned to build a massive $5-billion version of the famed Plaza Hotel in New York to replace the imploded New Frontier. Then, big surprise, financing dried up and the project was put on hold.
In fact, along with the metallic shell once meant to be Echelon, where the Stardust once bloomed, the New Frontier sign on an empty lot is one of those ugly reminders of how hard times came to Vegas and how quickly they hit. Both the sign and the empty metal shell were eyesores to Steve Wynn. Wynn opens his much anticipated Encore property a week from today. The look of recession in the neighborhood did not please Wynn, who has reportedly spent $2.3 billion creating his new resort. Wynn is famously fussy about details; he had the sign at the New Frontier removed by helping pay to get rid of it. According to an interview with an ELAD executive in the Las Vegas Sun:
The sign was taken by the request of Steve Wynn and we were happy to accommodate. The sign is being taken down by his design and development group -- we just gave them permission to come on the property.
Wynn, according to Norm Clarke in his Review-Journal column, was also willing to help pay to make the twisted metal of the suspended Echelon construction site less of an eyesore. But there is no word how owners Boyd Gaming replied to the offer.
Meanwhile, Kansan billionaire Ruffin may be surprising everyone by coming back to Vegas by taking some of the $1.24 billion he got for the New Frontier to purchase the much hotter Treasure Island from MGM-Mirage, a company that can use money around now as it finishes its six-tower, many-billions-of-dollars City Center project. According to today's Review-Journal, there is to be an announcement today that Ruffin will be acquiring the resort for $775 million ($500 million cash and $275 million in secured notes), a relative bargain even in this market, for the nearly 3,000-room resort built in 1993.
Before selling the New Frontier, Ruffin had been planning to replace the aging property with a resort themed around jazz called Montreux -- even hoping to bring the famed Montreux Jazz Festival for the opening and perhaps run an annual parallel festival. At the time, Ruffin said: "We don't really have a Strip casino that advertises good jazz music." And we still don't. I can't wait to see how the Sirens of TI look dancing to Hank Mobley.
Anyway, by investing so much money in the Strip, Ruffin has shown that an experienced operator such as himself still believes in the Vegas market in a big way. So, Phil Ruffin, in addition to buying a casino, will be giving Vegas a much needed vote of cash confidence.
Photo credit: Sarah Gerke
Good to see more casino news and less OJ-Angel stuff.
Posted by: Bobak | December 15, 2008 at 09:06 AM
I am not sure what the books show but to me it is crazy they took down the Frontier so early when it could still be running and generating cash.
I wonder how Wynn's business will do, The down turn has hit at all levels of tax bracket now so can such an expensive place work now?
Posted by: T | December 15, 2008 at 09:34 AM
Trust me, as someone who has seen the earnings reports out of TI, Ruffin isn't getting the bargain you say he is. It doesn't net in a year what the Bellagio or Wynn net in a bad quarter. He is going to have to do some work to make it pay for itself.
Posted by: scandalrag | December 15, 2008 at 03:35 PM
Maybe Ruffin can rebrand the TI as the New Frontier. Agree with a previous posters, in that the Frontier should still be operating.
Posted by: adam | December 15, 2008 at 10:41 PM
I don't TI succeeding as a standalone property. I'm pretty indifferent to it in general, but at least it works as part of the MGM "stable" much better than some of their other properties. As an MGM-Mirage player, it' never my first choice, but it's nice to have an affordable, clean option in a such a good location, unlike Excalibur or NY-NY or even Monte Carlo. I think Ruffin is underestimating the number of MGM-Mirage players who will abandon TI once they phase out of the Player's Club.
Posted by: Maurice Levy, Esq. | December 16, 2008 at 06:56 AM
Part of the TI's lack of appeal is how MGM treated it as part of its stable of properties. Bellagio, Mandalay, and MGM have always been the top-tier performers - albeit to different demographics - whereas Mirage and TI have been more of an afterthought.
With new ownership - and new offers to attract/retain players - TI can definitely make a turnaround. By paying only $500 million in cash, he should have enough in his war chest to position TI once Vegas comes out of its slump.
Posted by: Patrick | December 16, 2008 at 10:00 AM
How difficult would it be to ditch the pirates and introduce a bayou - New Orleans jazz theme?
Posted by: frankZ | December 16, 2008 at 05:44 PM
... and I was just wondering the other day if the Vegas strip has priced itself out of the market for the average American. Harrah's and MGM corp seem to control the strip, and want only the high rollers. Perhaps Ruffin will bring back the things that have always made Vegas popular. Reasonable payouts, modest limits, and cheap rooms. You must admit that's what the New Frontier was good at. Maybe TI will become the Newer Frontier.
Posted by: Tahoe Player | December 17, 2008 at 08:11 AM