About a year ago, MGM Resorts International (NYSE: MGM) announced it was selling one of its casino resorts, the Mirage. Several billionaires were expected to bid on the casino, including Phil Ruffin. Interestingly, the billionaire did not bid.
During his interview with the Las Vegas Advisor, Phil explained why he did not bid for the Mirage. The billionaire said he was not interested in the operating rights but the whole package. This includes the land and the casino-resort building.
The Treasure Island owner noted that he did not like operating agreements. He explained that the bid for the Mirage did not include the land and the building. Phil also noted that the ground and the casino building belonged to VICI Properties.
VICI Properties bought the assets of the Mirage earlier this year when it completed the acquisition of the MGM Growth Properties. Earlier this week, Real Estate Investment Trust (REIT) announced a new lease with Hard Rock International on the Mirage.
Hard Rock is the company that won the bid to operate the Mirage. The casino operator is expected to pay VICI Properties $90 million yearly for 25 years. Hard Rock also has an option of renewing tenancy for ten years.
Hard Rock Paid a Lot of Money for the Operating Rights of the Mirage
Barely a year ago, MGM announced the sale of the operating rights of the Mirage to Hard Rock. The gaming arm of the Seminole Tribe bought the rights for $1.075 billion.
The value of the land and the building was not revealed (because it was not for sale). However, analysts predicted that the sale of the building, land, and operating rights would have shot to over $2 billion.
During an interview with Las Vegas Advisor, Phil explained that Hard Rock has an operating agreement with MGM. He noted that the Seminoles (the parent company of Hard Rock) had a lot of money and could do anything they wanted. Phil also said that the tribe makes a lot of money out of Florida, hence their move to buy operating rights for over $1 billion.
There is much to say about companies that buy casino operating rights. However, many other reasons support Phil`s way of doing business.
For instance, companies buying operating rights also have to spend a lot of upfront capital. While it is possible for a casino operator to own the ground a casino sits on eventually, the operator spends a lot of money as the initial capital and much more for a long period.
For example, Hard Rock paid over $1 billion for the operating rights of the Mirage. The casino operator will also continue paying $10 million yearly to the VICI Properties.
Phil`s Other Properties
Apart from Treasure Island, Phil also owns Circus Circus. The billionaire bought the casino resort from MGM three years ago for $825 million. Phil owns the land on which Circus Circus and Treasure Island sit.
There is an undeveloped piece of land at Circus Circus. While the development information of that acreage is not yet public, rumors suggest the site could be used for a Major League Baseball (MLB) stadium. This would give Phil a lot of much more money.
The Circus Circus owner also owns 50 percent of the Trump International Hotel Las Vegas, a non-gaming venue. Phil owns the New Frontier Hotel and Casino, Greyhound Park, Nassau Marriott, commercial real estate, and 13 hotels. He is worth around $3.2 billion.