During its Q2 earnings call, VICI Properties, a prominent real estate investment trust (REIT), reported revenue of $1.1 billion, marking a 5% increase from the previous year. However, the most significant announcement came from COO John Payne, who revealed that VICI is collaborating with its largest tenant, Caesars Entertainment, on a potential NBA arena project in Las Vegas.
When analysts inquired about VICI’s relationships with Caesars and MGM—given Caesars’ impending privatization and MGM’s contemplation of a takeover offer—CEO Ed Pitoniak stated that dialogues with both entities have remained stable. He hinted that VICI is currently pursuing an exciting opportunity in Las Vegas before handing the discussion back to Payne. Founded in 2017 as a spin-off from Caesars amid its bankruptcy reorganization, VICI is now the largest casino REIT in the world, with total assets amounting to $48.3 billion at the end of Q2.
The land associated with VICI and Caesars encompasses about 40 acres in total, adjacent to three of Caesars’ properties: the Paris, Horseshoe, and Planet Hollywood. Payne mentioned that VICI, alongside Caesars’ COO Sean McBurney, is strategizing on potential arena plans for a new NBA team. "That's just an example of us working with one of our partners," he commented.
In March, NBA owners voted to consider Las Vegas as a potential site for expansion. This month, they gathered for further discussions during the league's Summer League tournament in Las Vegas, though no vote regarding expansion was finalized. NBA Commissioner Adam Silver expressed that the interest in a new team is "music to my ears."
Neither Caesars nor VICI offered comments for this report. The parcels of land mentioned by Payne hold potential for development but have previously been targeted for other projects, like a baseball stadium proposal two decades ago and the annual Formula One Las Vegas Grand Prix race.
The connection between Caesars and VICI is deeply rooted; Caesars operates eight properties on the Strip, all leased from VICI, with a total of 18 casinos leased nationwide. Despite recent struggles, with second-quarter results showing declines in revenue, adjusted EBITDA, and net income, the market perspective remains optimistic for Las Vegas. According to initial estimates, a franchise in the city could be valued between $7 billion and $10 billion, aligning with recent high valuations in the league. For reference, the Los Angeles Lakers sold for a record $10 billion last year.
Payne reiterated VICI's enthusiasm regarding Las Vegas, stating, "We continue to be really excited [about Las Vegas], and we continue to like how our tenants are operating their businesses and being creative."
Various investment groups have shown interest in a potential NBA franchise for Las Vegas. Silver noted that many interested parties have not yet made their intentions public, though confirmed public bids have been made by notable figures such as Bill Foley, Jerry Colangelo, and Earvin "Magic" Johnson.
However, constructing a new arena on the Strip presents its challenges. Past attempts to build arenas have stumbled over financial demands and zoning issues. The most recent casinos added to the Strip, Fontainebleau and Resorts World, incurred costs of $3.7 billion and $4.3 billion, respectively, with numerous delays. The Oakland Athletics’ proposed MLB stadium has seen costs rise sharply; it has moved from an initial $1.5 billion budget to over $2 billion. Still, the Hard Rock Las Vegas project, opening in late 2027, is progressing on schedule, utilizing some of the previous Mirage infrastructure.
Currently, the only facility on the Strip capable of hosting NBA games is T-Mobile Arena, co-owned by Foley, MGM Resorts, and Barry Diller. Diller put forth an $18 billion takeover offer on June 1, prompting MGM to form an independent committee to assess it. On the last Q1 call, MGM’s CEO Bill Hornbuckle mentioned the company's close involvement in arena discussions, though no related inquiries were made in the recent quarter. MGM opted not to comment on this matter.
