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From the Frontier to an Isle of Treasure Billionaire Phil Ruffin parlayed an aging casino resort into ownership of the Treasure Island Las Vegas last year, and still has hundreds of millions to spare. Here’s how he did it. Thursday, April 01, 2010 Glenn Haussman

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It’s all about being on the right side of the deal. And in Phil Ruffin’s case, he has managed to parlay a pair of Sin City deals into the start of a financial war chest while also gobbling up a massive mega casino.

Thanks to a lot of savvy and a little luck, Ruffin parlayed an antiquated casino property into a modern, relatively recently reinvented resort. And, in addition to now owning Treasure Island, he also managed to pocket an additional $500 million in the process. Not too shabby.

But to get the full story, we have to go back to 2007. In Las Vegas, it was a time when dealmakers and financiers were feeling unstoppable. Cheap cash was free-flowing and investors were scooping up land and announcing projects the size of which the world had never seen before. $1 -$2 billion projects had been the norm, but now developers were bragging they’d build properties costing $5 billion or more.

Ruffin, the owner of the Frontier, an old school property across from where Wynn Las Vegas now towers, had plans to raze the historic hotel to build a gleaming new resort he dubbed The Montreaux. Fate, however, played a hand, and the Israeli-based company El Ad, who had recently bought New York’s famed Plaza Hotel, swooped in with an irresistible offer for the property: $1.2 billion. The deal was the richest land sale in Las Vegas history, paying Ruffin an astounding $32 million an acre. The previous year, prime Strip-front land was selling at a paltry(!) $17 million.

Shortly thereafter, the world tanked and El Ad’s plans for a $5 billion resort complex based on The Plaza NY faltered and fell apart, as did numerous other projects. For his part, Ruffin tried his hardest to sit on the sidelines, but the allure of the casino business was too hard to resist.
“We made that big sale and we sat on $1.2 billion in cash for a year and we tried to play the Wall Street game,” Ruffin told Hotel Interactive in an exclusive interview. It’s hard to place a $1.2 billion at $1 million or so at a time. I didn’t like that business of Wall Street and I wanted to get back into the game. The idea to make 6 – 8 percent playing that money game wasn’t appealing - you make money, we made $80 million - but it’s not fun.”

By the start of 2009, the Great Recession had fully infected Las Vegas. All but one of the $5 billion-plus projects was still under construction – the $8.5 billion City Center – but developers MGM MIRAGE Corp. were quickly running out of cash and were on the precipice of seeing the company financially collapse. They needed to sell something fast. And that something was Treasure Island.

“When I got word MGM MIRAGE might need some money I contacted [Chairman of the Board and Chief Executive Officer of MGM Mirage] Jim Murren and we had a meeting,” said Ruffin. Before long, he had a handshake deal for the 3,000-room resort with casino kingpin Kirk Kerkorian – the company’s largest stockholder – for $500 million plus the assumption of $275 million in notes.

Ruffin was seen as a White Knight. MGM MIRAGE had the cash they needed to keep CityCenter under construction and Ruffin scooped up a property that just a year earlier had seen a $92 million renovation. Talk about a great deal!

“It was pretty good value,” Ruffin said. “The rate of return was 10 percent in bad times and a hell of a lot more than that in good times. MGM MIRAGE had said publicly if I hadn’t helped they’d be in real trouble. We helped them and they helped us. They are good company to work with and have cooperated in every way they can. They are a very good company and very good people. Murren is a class act and Kerkorian is world class.”

Now the goal is to keep filling rooms at the highest rate possible. The Las Vegas market in general seems to have stabilized and occupancy is solidifying. In fact, Ruffin said the resort was at 100 percent occupancy all last week. But he is looking to increase the rate in order to really drive profits. To do that he’s getting some outside help from K Hotels, an organization that markets independent hotels.

“We looked at we needed and that was to have someone or something out there that could help us reach international clients,” said Don Voss, Vice President of Hotel Sales and Marketing with Treasure Island. “When we left MGM MIRAGE we lost all that support and this was a good fit because they go after our target demographic.”

Lara Weiss, the Managing Director with K Hotels, said it’s all about adding knowledgeable people already entrenched in places where it’s not practical or affordable for Treasure Island (TI) to be.

“What they don’t have is someone in London or Australia or New York selling groups globally. They needed help with better-rated business and they don’t want to have more people on property and that is something we can give them,” said Weiss.

Ruffin is also making some other changes to TI. He ended leases with third-party restaurants in order to control his own outlets, added a poker room and debuted a new spa named after his wife Oleksandra. Later this month he debuts the 13,000-square-foot Gilley’s Saloon, Dance Hall & Bar-B-Que. It was a stalwart of the Frontier property and a concept Ruffin loved so much he continued to pay franchise fees even though it had closed when the resort was imploded.

Meanwhile, other Las Vegas companies are on the ropes and Ruffin indicates he might be looking to spend more of the $1.2 billion he has left. “We still have cash remaining and we’re still looking for the right opportunity, probably another gaming opportunity,” said Ruffin.