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LAS VEGAS-MGM Mirage said on Monday it has agreed to sell the Treasure Island casino-resort on the Las Vegas Strip for $775 million. The buyer is Witchita billionaire Phil Ruffin, who sold a 35-acre development site on the Strip last year for $1.24 billion. The Treasure Island deal is expected to close by the end of the second quarter of 2009.

Treasure Island has 2,885 guest rooms and suites, approximately 90,000 square feet of gaming space and several fine and casual dining outlets. It also is home to Mystere, the first permanent production in Las Vegas by Cirque du Soleil, and the Sirens of TI–its pirate battle attraction.

Ruffin describes the property as being in “pristine condition” and “ideally located in the heart of the Strip.” It wasn’t immediately clear how much land Ruffin would get along with the resort. In its annual report MGM Mirage lists its Mirage and Treasure Island properties as sharing a 102-acre property. An MGM executive was not immediately available Monday morning for comment.

The purchase price includes $500 million in cash and $275 million in secured notes bearing interest at 10% that must be paid off in two installments. The first installment, $100 million, is due 175 days from the closing while the remaining $175 million is due before the deals two-year anniversary. The notes, to be issued by Ruffin Acquisition, LLC, will be secured by the assets of TI and will be senior to any other financing.

MGM Mirage is controlled by Kirk Kerkorian, who owns slightly more than 50% of the company’s outstanding shares. Another major holder is Dubai World , which owns a 9.4% stake and last month was authorized by the state Gaming Commission to up its stake to as much as 20%.

Along with most other casino stocks, MGM Mirage’s share price has plummeted over the past year or so. It was trading at $12 Monday morning, down from the high $80s one year ago.

MGM Mirage acquired Treasure Island as part of the merger between MGM Grand Inc. and Mirage Resorts Inc. in May 2000. MGM Mirage says it expects to report “a substantial gain” on the sale.

“This transaction creates value to our stakeholders through significantly increased liquidity and enhanced financial flexibility,” MGM Mirage chairman/chief executive James J. Murren says in a prepared statement.

Last month, MGM Mirage acknowledged that it was actively exploring the sale of undeveloped land on the Las Vegas Strip and elsewhere as it looks to improve its liquidity position in these tough economic times. The announcement was specifically about non-core properties. No mention was made of selling off operating properties.

In May 2007, MGM Mirage paid two different owners $576 million, about $17 million per acre, for 33.5 contiguous acres adjacent to MGM’s Circus Circus hotel-casino property at the north end of the Las Vegas Strip. At the south end of the Las Vegas Strip, the company owns 20 acres immediately south of the Mandalay Bay resort and an additional 15 acres across the Strip from the Luxor, according to SEC filings. Off the Strip, the company owns 66 adjacent to Shadow Creek in North Las Vegas and 47 acres adjacent to Railroad Pass in Henderson, NV. Outside of Las Vegas, the company owns 125 acres adjacent to the Prim Valley Golf Club in Prim, NV, and, although not undeveloped, 116 acres straddling Interstate 15 in Jean, NV.

The company also has an interest in the $700-million M Resort, Spa and Casino under construction 11 miles south of the Strip. MGM Mirage became a partner in the M Resort development by way of a $160-million subordinated convertible note it provided in April 2007. MGM Mirage has the right to convert the note into a 50% equity interest in the development after 18 months of the note’s issuance if not previously repaid. M Resort developer Anthony Marnell told GlobeSt.com in August that MGM would indeed become a 50-50 partner in the project by the time November rolled around.

All told, MGM controls some 865 acres along the Las Vegas Strip with three miles of Strip frontage, making it the area’s largest landholder. Its largest current development project is Citycenter. Located between the Bellagio and Monte Carlo resorts and on track to open late next year, the $11-billion development will include a 4,000-room luxury hotel and casino, two 400-room non-gaming hotels, 2,900 condominium units and 500,000 square feet of commercial space. Dubai World is a 50-50 partner in the project.

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