VICI Properties, a real estate investment trust, reported a total revenue of $1.1 billion for the second quarter of 2023, marking a 5% increase over the previous year. However, it was during a call with analysts that COO John Payne revealed VICI is collaborating with Caesars Entertainment on a prospective NBA arena project in Las Vegas.
In response to inquiries about VICI's relationships with Caesars and MGM, which are undergoing significant transitions—with Caesars moving toward privatization and MGM contemplating a takeover—CEO Ed Pitoniak stated that these discussions have remained consistent. He noted that VICI is currently engaged in promising talks concerning an opportunity in Las Vegas before handing the call back to Payne.
Founded in 2017 as a spinoff during Caesars' bankruptcy reorganization, VICI is now the world’s largest casino REIT. The company concluded the second quarter with total assets worth $48.3 billion and owns approximately 50 acres of land alongside Caesars, which includes three properties: Paris, Horseshoe, and Planet Hollywood. Alongside Caesars’ COO Sean McBurney, Payne is devising plans to potentially construct the arena for the new NBA team.
In March, NBA owners had voted to consider Las Vegas as a possible expansion location. Just this month, they gathered again in Las Vegas during the league's annual Summer League tournament, though they did not vote to finalize the expansion. NBA Commissioner Adam Silver remarked that the enthusiasm regarding the interest in an expansion team was “music to my ears.”
VICI and Caesars have a deeply interconnected relationship. Caesars operates eight properties on the Las Vegas Strip, all of which are leased from VICI, equating to a total of 18 casinos across the nation.
Despite challenges, Caesars reported declines in revenue, adjusted EBITDA, and net income for the second quarter and the first half of the year, with net income seeing a 26% drop in Q2 and a 15% decline across six months. Historically, while Caesars Palace has hosted significant sporting events, it has never owned an indoor, multi-sport facility designed for major professional sports teams in conjunction with its casino.
Amid these challenges, there remains a palpable sense of optimism about the Las Vegas market. Interest in NBA expansion has been growing for years, although confirmation has been hesitant to materialize. Some analysts anticipate that a Las Vegas franchise could be valued between $7 billion and $10 billion, coinciding with the NBA’s top market valuations, such as the Los Angeles Lakers, which recently sold for $10 billion.
Payne expressed enthusiasm about Las Vegas's potential and the inventive strategies of their tenants.
Numerous investment groups are considering a stake in a Las Vegas NBA franchise. Silver commented that most interested parties have yet to make their involvement public. Several well-known figures, including Golden Knights owner Bill Foley, former Suns owner Jerry Colangelo, and NBA Hall of Famer Earvin “Magic” Johnson, have announced public bids.
Nevertheless, constructing a new arena poses distinct challenges. Over the years, many proposed arena developments on the Strip have struggled due to cost escalations and zoning issues. The recent MLB stadium project for the Athletics has seen costs surge from $1.5 billion to over $2 billion, with $380 million in public financing secured, although this does not guarantee funding for an NBA arena.
Currently, the only venue on the Strip capable of hosting NBA games is the co-owned T-Mobile Arena, which is part-owned by Foley, MGM Resorts, and Barry Diller, MGM’s largest shareholder. Diller has also made a takeover bid with an estimated value of $18 billion, and MGM has initiated an independent committee to assess the offer. During the last earnings call, MGM CEO Bill Hornbuckle reported that they are actively engaged in discussions about the arena.
No comments were received from Caesars or MGM regarding the situation at this time.
