During a recent analyst call, VICI Properties, a real estate investment trust, announced a total revenue of $1.1 billion for the second quarter, marking a 5% increase from the previous year. However, the highlight of the discussion came when COO John Payne revealed that the company is exploring a partnership with its major tenant, Caesars Entertainment, to develop a potential NBA arena in Las Vegas.
In response to inquiries about VICI’s relationships with both Caesars and MGM—given that Caesars is set to go private while MGM is considering a takeover offer—CEO Ed Pitoniak stated that interactions with both companies have not changed significantly. He mentioned that VICI is currently engaged in discussions about an exciting opportunity in Las Vegas before handing over the call to Payne.
Established in 2017 following Caesars’ bankruptcy reorganization, VICI is now the largest casino REIT globally, ending the second quarter with total assets valued at $48.3 billion. The company owns 50 acres of land adjacent to three Caesars properties—the Paris, Horseshoe, and Planet Hollywood—where plans for the new NBA arena are being discussed alongside Caesars COO Sean McBurney. "That’s just an example of us working with one of our partners," Payne commented during the call.
In March, NBA owners voted to consider Las Vegas as a potential site for expansion, with further meetings among owners happening this month in Las Vegas during the league's annual Summer League tournament. No decision was made about finalizing an expansion team, yet NBA Commissioner Adam Silver noted that the idea of adding a franchise to Las Vegas is "music to my ears."
While both VICI and Caesars declined requests for comments regarding the project, the land referenced by Payne spans about 40 acres, comprising several parcels. Parts of this land are utilized each year for events like the Formula One Las Vegas Grand Prix. Furthermore, it was previously considered as a possible location for a Major League Baseball stadium two decades ago.
The connection between Caesars and VICI is particularly strong, as Caesars operates eight properties on the Strip, including the three earmarked for the arena project; all these casinos are leased from VICI. Overall, Caesars leases 18 casinos from the REIT nationwide. Despite facing declines in its financial results for the second quarter—including a 26% drop in net income—optimism about the broader Las Vegas market persists. NBA expansion has long been anticipated, and reports suggest a potential Las Vegas franchise could be valued between $7 billion and $10 billion.
Payne expressed continued enthusiasm: "We continue to be really excited about Las Vegas and how our tenants are operating their businesses and being creative." Various investment groups have shown interest in establishing an NBA team in Las Vegas, and Silver indicated that many interested parties have yet to go public, although some known figures including Golden Knights owner Bill Foley and NBA Hall of Famer Magic Johnson have made bids.
Building a new arena in Las Vegas presents unique challenges, as many proposed projects historically fall through due to high costs and zoning regulations. Recent projects like the resorts Fontainebleau and Resorts World exceeded initial budgets significantly, with the Athletics’ planned MLB stadium costs climbing from $1.5 billion to over $2 billion. Securing public financing, like the $380 million obtained by the Athletics, is no assurance for an NBA arena.
Currently, T-Mobile Arena is the sole venue on the Strip capable of hosting NBA games. Co-owned by Foley, MGM Resorts, and Barry Diller, the arena is part of ongoing discussions following Diller's proposed takeover offer for MGM, which was valued at $18 billion as of June 1. MGM’s CEO, Bill Hornbuckle, noted during the company’s first quarter call that they are "intimately involved" in arena discussions, although no queries regarding this matter surfaced in the most recent quarter.
