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The Billionaire Throwback

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AP
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Observations from Las Vegas:

-Airport traffic is down, but car traffic from California is rising.

-The smoke from the California fires has reached the Strip, making the sky hazy.

-I see more people playing slots than I did last February. The Las Vegas Review-Journal reports that penny slots are the hottest machines on the floor, and casinos with $1 slots are replacing them with one-cent one-armed bandits.

-I had to wait in line 20 minutes to check-in at the Wynn, where I stayed in a Tower suite for $189. Crowded. But will people ever be willing to go back to paying $400 a night here?

In the middle of all this is a 73-year-old billionaire entrepreneur from Kansas with a taste for Ming jade. Phil Ruffin is old school Las Vegas, in the sense that he's an individual, not a conglomerate, who owns a major hotel and casino. Ruffin bought Treasure Island from a cash-starved MGM Mirage last spring for $755 million (they gave him a $20 million discount when he funded the whole thing in cash). How much is Treasure Island worth? "Probably a billion or more," he says.

Two years ago Ruffin sold land on the Strip at the top of the market, getting a record per-acre price for a lot that went for $1.24 billion. He says he sold because he knew the crash was coming. Building a casino on the land would've cost him $2.7 billion. “We didn’t think we could make the cash flow," Ruffin explains, so he cancelled the project, paid everybody off, and waited a year until a buyer came along.

Now he's bought back in at the bottom of the market.

"Assets like this don't come on the market every day."

He prizes Treasure Island's location, history, and 3,000 rooms. Ruffin says business is slow and room rates are down "substantially", but 2010 looks better. He's let go 500 of the 3,000 employees, but no more layoffs are planned. "Even with the worst scenarios, it's about a 10 percent return on my money...and it'll probably go to 20 percent in the next 24 months."

The key to succeeding here is to have good cash flow and little debt, which seems to be Ruffin's style. Also his style, collecting valuable jade and ivory from the Ming Dynasty. He showed me a 30,000 year old mammoth tusk which was intricately carved. "It took a hundred years to do that." Select pieces are being used to decorate Treasure Island.

Plus: MGM Mirage's CEO 'Playing Offense'

But to get a 20 percent return on his investment, Ruffin says it's critical that Vegas gets back the thousands of conventions lost this year. "Why not come to Vegas for $100 dollars a night rather than Chicago at $300?" Much of the business from government and the financial industry went away after President Obama suggested in February that Las Vegas was not the place to go for anyone receiving bailout. "He shouldn't have said that," Ruffin says. "That was not right."

Meantime, the Strip remains riddled with stalled or bankrupt projects, and the land Ruffin sold in 2007 is still mostly vacant. When I asked him if he was still looking to buy something here, he answered, "Maybe, it depends...right now the price that you'd wanna pay would probably not be advantageous to the seller." But Phil Ruffin is a patient man.

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