Treasure Island likely a domino standing alone

By Liz Benston

Monday, Dec. 22, 2008 | 2 a.m.

On the heels of last week’s announcement of the sale of Treasure Island, MGM Mirage officials are taking exception to rampant speculation about which company properties could be next.

“Nothing is or was ‘on the block,’” spokesman Alan Feldman said.

Although the company needs cash, it also needs the money generated by its casinos, which are still making at least 80 percent of their 2007 profits.

Insiders know few people have the cash to consummate a deal without capital from Wall Street, which is effectively closed to new projects and especially newcomers. Even fewer would be willing to undergo the process of obtaining a Nevada gaming license — the business equivalent of a strip-search.

But there’s a better reason why the term “for sale” doesn’t really apply to MGM Mirage or any other publicly traded casino companies.

As a rule, public companies have a duty to their shareholders to consider any and all legitimate offers. Because big companies are constantly getting offers (although mostly unreasonable offers, based on feedback from executives and real estate brokers), any property is technically available for purchase at any time.

That fact is unadvertised and often misunderstood.

There are still many reasons why MGM Mirage wouldn’t part with any of its properties.

Low-rent Circus Circus, for example, is valuable for its vast undeveloped acreage near the southwest corner of Sahara Avenue and Las Vegas Boulevard — land where the company intends to build a resort at some future date.

Its half-owned Borgata, Atlantic City’s highest revenue-generating property, recently boosted business by adding a hotel tower. This money comes at little cost to MGM Mirage, which is essentially a silent partner with resort operator Boyd Gaming.

There’s MGM Grand Detroit, the ritziest and most profitable casino in the region. The property is one of few casinos nationwide with increasing revenue amid the downturn.

It’s unlikely that Harrah’s Entertainment, the No. 2 Strip operator, would further discount any of its properties. They are already worth less in a depressed market and can generate more cash as part of the Harrah’s empire.

Another reason for treading carefully: Announcing a resort is for sale could be detrimental to a property, creating uncertainty for employees.

“We aren’t marketing any properties” for sale, MGM Mirage Chairman and Chief Executive Jim Murren said, although he wouldn’t “rule out” further transactions.

“You’d be surprised at how many people are out there looking for assets, even in this economy,” Murren said.

Harrah’s had a similar response.

“We have no current plans to sell any properties,” spokesman Gary Thompson said.

Still, the knowledge that companies are facing a cash crunch is enough for opportunists to make a move.

Public companies are required to disclose legitimate offers that are under consideration. The silence of these companies is an indication any offers they have received aren’t worth mentioning.

Companies and brokers are mostly filtering out the many potential buyers who will never get a second look.

Casino operator Phil Ruffin made a serious offer from the get-go — one he figured MGM Mirage would accept because of market conditions. He says it will be business as usual at Treasure Island and a buy-and-hold investment.

MGM Mirage wouldn’t sell any of its properties without first knowing a lot about the potential buyer. MGM Mirage knew, for example, that Ruffin didn’t need Wall Street financing.

Brokers say many of these would-be buyers are mostly talk and little action — primarily because they don’t realize the extensive disclosures involved in getting a casino license.

That’s a big turnoff to folks who prefer to keep their business affairs under wraps.