Now that Caesars Entertainment has finally unloaded the Rio after more than 10 years on the sales block, the attention turns toward Circus Circus, MGM Resorts International’s slightly awkward, unloved stepchild.
According to press reports, a suitor for the aging family-themed Strip hotel-casino has been found – billionaire businessman Phil Ruffin, who owns the TI and has a history with MGM Resorts. Back in 2009, Ruffin bailed MGM out of its recession/CityCenter-induced financial jam when he acquired TI – then known as Treasure Island – for $775 million. The company discounted the original deal by $20 million because Ruffin upped the cash payment by $100 million to $600 million.
He smiled at me as he left the Nevada Gaming Commission hearing 10 years ago and patted his coat pocket, saying he had the check and was on the way to the MGM corporate offices to hand it over in exchange for the keys to the property.
Now, Ruffin, 84, is in position to take another property off MGM’s hands. Bloomberg said over the weekend that talks between the parties over Circus Circus were underway, and the Las Vegas Review-Journal’s Bailey Schulz reported there was a handshake deal in place.
The underlying question is what is Ruffin’s endgame? The deal isn’t official until MGM files the appropriate paperwork with the Securities and Exchange Commission. Until that time, no one is talking. But speculation centers on other aspects.
We’re not just talking Circus Circus here.
The MGM-operated hotel-casino sits on 25 acres on the north end of the Las Vegas Strip and the casino’s adjoining recreational vehicle park takes up 37 acres. MGM also controls an 8-acre undeveloped site and 33 acres at the corner of Sahara Boulevard and the Strip currently used as the Las Vegas Festival Grounds.
That’s 103 contiguous acres – far larger than the 62 acres west of Interstate 15 that is being developed as Allegiant Stadium, the $2 billion future home of the soon-to-be relocated Las Vegas Raiders.
Ruffin owns TI outright. He is a self-made billionaire, with a current net worth of $2.8 billion according to Forbes. The Wichita, Kansas businessman made a fortune in real estate, but his biggest deal was selling the New Frontier in 2007 for $1.2 billion. He acquired the Las Vegas Strip casino in 1998 for $165 million, earning accolades for ending a six-and-a-half-year hotel workers’ strike against the property.
Today, he’s probably best known nationally as President Donald Trump’s business partner in the Trump International in Las Vegas. The future president was Ruffin’s best man at his wedding in 2008 to his wife, Oleksandra, a former Miss Ukraine.
“Anytime you are able to put together over 100 acres on the Strip, it creates an opportunity, at a minimum, to relaunch a property,” said Brendan Bussmann, a partner in Global Markets Advisors. “Should a Circus Circus transaction occur, you have a great ability to anchor the last corner of the Las Vegas Strip which is in close proximity to the Las Vegas Convention Center and create something special.”
We may not know the future of Circus Circus until the ad-hoc MGM board committee that was formed in January finishes its plan to unlock value in the company’s real estate holdings. Factoring into the equation with Circus Circus is MGM’s reported interest in a potential $7 billion sale and leaseback of the Bellagio and MGM Grand Las Vegas to real estate conglomerate Blackstone Group.
MGM Chairman and CEO Jim Murren said in July he was “increasingly optimistic” the committee would have answers “in early fall.”
The Rio’s $516.3 million sale to IC 3700 Flamingo Road Venture LLC, which is controlled by a principal of New York-based real estate firm Imperial Companies, may not be the end of the deal-making.
On Tuesday, Union Gaming Group analyst John DeCree told investors five Strip-area resorts are on the market, including the Cosmopolitan of Las Vegas and one other Caesars property – potentially Planet Hollywood – that might be sold once Reno-based Eldorado Resorts completes its $17.3 billion merger with Caesars next year.
DeCree told investors there is more to the current “late cycle mergers and acquisitions boom,” primarily an “appreciation in Las Vegas real estate, driven primarily by the casino real estate investment trusts.” He added that the public markets “are simply undervaluing Las Vegas Strip assets,” which has forced companies such as MGM and Caesars “to unlock value via private markets.”
The potential buying frenzy could lead to new Las Vegas Strip operators. Casino companies such as Rhode Island’s Twin Rivers, Colorado’s Century Casinos, and even Las Vegas-based Maverick Gaming, which is buying up casinos and card rooms in Washington, could be kicking the tires.
DeCree told investors there is also a large pool of high-profile buyers, including Boyd Gaming, Penn National Gaming, Houston billionaire Tilman Fertitta, and Ruffin.
“This could be a typical late-cycle trend as cheap capital hunts for safe, high-quality real estate to weather the feared impending economic recession,” DeCree wrote. “Or it could simply be that the buyer pool is recognizing the inevitable cap rate compression and looking to deploy capital before valuations run too far.”
Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at email@example.com. Follow @howardstutz on Twitter.