The sale of Treasure Island Hotel Casino in Las Vegas might have been surprising, but it could be the first sale 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 Chairman and CEO Jim Murren says the sale will enable 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. Opened in 1993, the resort was Wynn’s second on the Strip. Originally branded with 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 original pirate ship battle was changed to the “Sirens of TI,” a show on the ships featuring scantily clad women.

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, including Harrah’s Entertainment, Trump Entertainment and Station Casinos.

The problem for these selling companies is that there are few Phil Ruffins out there. Penn National Gaming is relatively debt free and sitting on hundreds of millions of dollars. Former Horseshoe Gaming owner Jack Binion is reportedly interested in getting back into the casino game. The Cordish Company, which has a racino in Indiana and developed the Seminole Hard Rock resorts in Florida, is also a potential buyer. And there are several unidentified companies and individuals who see gaming as an opportunity, but may not be willing to undergo the regulatory scrutiny necessary to buy into the industry.

By Casino Connection Staff