Ruffin Didn’t Bid for Mirage Because He Wanted Real Estate, Too

Posted on: December 23, 2022, 04:53h. 

Last updated on: December 23, 2022, 07:10h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Billionaire Phil Ruffin didn’t make a run at the Mirage when MGM Resorts International (NYSE:MGM) was shopping the casino-resort. That’s because he wanted the land, not just the operating rights.

Ruffin
Phil Ruffin in a 2020 interview. He didn’t bid for Mirage because he wanted the real estate. (Image: Jeff Scheid/The Nevada Independent)

The Treasure Island owner made those remarks in an interview with the Las Vegas Advisor, noting he doesn’t like operating agreements.

The reason we didn’t bid on the Mirage is that you don’t get the ground and the building. All you get is the operational side,” he told the Las Vegas Advisor. “When we buy something, we want the ground and building and that’s been sold VICI Properties.”

VICI Properties (NYSE: VICI) acquired the property assets of the Mirage when it wrapped its purchase of MGM Growth Properties earlier this year. This week, the real estate investment trust (REIT) announced a new master lease with Hard Rock International on the venue. Hard Rock is operating the Mirage and will pay VICI $90 million annually for 25 years with three, 10-year tenant renewal options.

Hard Rock Paid Pretty Penny

About a year ago, MGM announced the sale of Mirage’s operating to Hard Rock — the gaming arm of the Seminole Tribe — for $1.075 billion.

The value of the land the integrated resort wasn’t revealed, simply because the property wasn’t for sale. But it’s likely that if the building and land were sold alongside the operating rights, the transaction price would have swelled to $2 billion or beyond.

“What Hard Rock has is an operating agreement, and we don’t like operating agreements. That’s why we didn’t bid. The [Seminoles] have a lot of money. They make a lot of money out of Florida, so they can afford to do whatever the hell they want to do,” added Ruffin in the Las Vegas Advisor interview.

While there’s something to be said for operating companies monetizing real estate assets — namely an upfront influx of capital — there are valid reasons supporting Ruffin’s way of doing things. Primarily, a casino operator can eventually own the land on which its venue resides, eliminating long-term obligations in the process. Conversely, buying operating rights without receiving a building and land creates long-term payments to a landlord for the buyer.

Ruffin’s Other Holdings

In addition to Treasure Island, Ruffin owns Circus Circus, for which he paid $825 million to MGM three years ago. He owns the land of both venues. He also holds a 50% interest in the non-gaming Trump International Hotel Las Vegas.

Speaking of Ruffin’s affinity for property ownership, the Circus Circus deal include a massive chunk of undeveloped Strip land. While plans for that acreage haven’t been revealed, there’s chatter that the land could eventually be a site for a Major League Baseball (MLB) stadium, which affords Ruffin the opportunity to draw substantial value from the parcel.

Worth an estimated $3.2 billion, Ruffin also owns the New Frontier Hotel and Casino, the Nassau Marriott, and the Greyhound Park as well as 13 hotels, among other commercial real estate holdings.