You know the bargain $1 stores where everything is a dollar or less? We have those in Vegas in the residential areas. But TI (formerly Treasure Island) has installed the Vegas tourist version, the Everything $10 store. My shopping friends tell me many of the items are similar to what you find at the $1 stores, but that still makes this a huge bargain at $10 on the Strip.

Photo credit: Sarah Gerke

Phil Ruffin right now looks like the smartest person in Vegas.

He set a record for selling Strip acreage when he parted with the New Frontier in July 2007. That record would now be considered the top of the real estate market for Strip frontage. This is especially the case because the new owners swiftly closed and imploded the New Frontier to make room for a project now on hold because of the credit crunch.

Ruffin, however, did not leave Las Vegas, but retreated to a modest office near the airport. And he has just stepped back into the game in a big way with the purchase of Treasure Island for $500 million cash along with a mortgage that adds another $275 million.

Buying Treasure Island from cash hungry MGM-Mirage at under $1 billion would mark the new bargain on Strip properties, but when I met with Ruffin earlier this week at his office, he made a point of saying he does not think we have quite reached the bottom of the market yet.

Still, he seems pretty happy with his deal and offered one of the more candid interviews I have ever had with a resort owner about finances. For someone who says he lost millions on Freddie Mac preferreds and on Lehman Bros., he even seems to enjoy the irony that at the moment, a casino seems a safer place to put money.

I have always been a big fan of individual ownership on the Strip and think this is a great development for TI.

Some history: When Ruffin bought the New Frontier, the casino was mired in one of the nation's longest lasting labor actions. He quickly settled with the union and has been a sort of a local folk hero ever since while still managing to keep a low personal profile.

Richard Abowitz: Last time you bought a casino, it was in the middle of a major labor dispute.

Phil Ruffin: We did the Frontier about 10 years ago, and it was the worst labor dispute in United States history and it had lasted about 6 1/2 years. We brought back all the people. We paid back wages. We solved the problem and got the strikers off the Strip. And we turned it around. And the hotel did very well. The hotel went from a loser to a winner. And we were there for nine years, and then we tried to build a new resort.

Abowitz: Montreux?

Ruffin: Yes. It was a great concept, but the cost came out to $2.7 billion, and I did not think it could pencil out for me. And so it wasn't much of a decision for me to make.

Abowitz: But this was at a time when that would seem a normal amount to spend on a new Strip resort. The people who bought the land from you were planning a $5-billion hotel.

Ruffin: Yeah. You could go borrow 100% without much equity then. But the cost did not make much economic sense to me.

Abowitz: Well, what made you see that when no one else on the Strip seemed to come to that conclusion?

Ruffin: You could borrow all the money you wanted. We had the money. But it looked like it would be a marginal rate of return, if any. So I backed off and sold the property.

Abowitz: Were you aware being on top of a land bubble?

Ruffin: I didn't see how it could continue the way it was. Banks were falling over themselves to loan money. But I knew it was not going to work because I can't do Steve Wynn's numbers. And that's what I would have had to do to make the deal work. It did not make economic sense to me. I thought the banks were loaning way too much to people. I knew you could get in to big kinds of trouble in any kind of downturn with that kind of debt. So I just shut it down. I paid off the architects, and everybody and just walked away.

Abowitz: How many acres did you get with the Treasure Island purchase?

Ruffin: We got 20 acres of land on the Strip, and we have a joint venture on the 3 1/2 acres of the parking garage there too.

Abowitz: You missed running a casino?

Ruffin: We have a trading company too. But it is no fun investing in bonds. This is not what I do. I missed it. And I am good at it.  I try to stay focused on what I know. I don't anything about investing. I know how to run a casino and hotels. That is what I do. So we were looking for a casino.

Abowitz: Well, Tropicana is bankrupt. Hooters has been reported to be distressed. What made you pick TI?

Ruffin: Great location. I was not going to go into a distressed property again. Treasure Island has a great location, good cash flow and management. There is no reason to change anything. If it is successful, then I will let it work.

Abowitz: Had you spent a lot of time at TI?

Ruffin: No. Only been in it twice. But I had my eye on it for many years. It is a better location than I had. It has a lot of features that I like.

Abowitz: When did you think the bottom had come and it was time to make the offer to MGM-Mirage?

Ruffin: We haven't exactly hit the bottom yet, but we are close. I like the tier they (TI) are in. They aren't high-end; a lot of places are trying for that little niche up there. We are going to a broader scope of people.

Abowitz: What was MGM-Mirage's response when you went to them? Did you go with an offer?

Abowitz: Just the two of you?

Ruffin: Jim Murren was there, but of course Kirk is the boss. He was very helpful doing this deal. He was a gentleman. And Jim Murren was a class act. The fact that they could use the money and I had the cash and did not have to go through banks made it work. I have a full-time trader now to handle our money. Running casinos is what I do.

Photo credit: Sarah Gerke