VICI Properties, a prominent real estate investment trust, reported a total revenue of $1.1 billion for the second quarter of the year, marking a 5% increase from the previous year. However, the standout moment during the earnings call came when COO John Payne revealed that VICI is collaborating with its largest tenant, Caesars Entertainment, on a new NBA arena project in Las Vegas.
When questioned about VICI's partnerships with Caesars and MGM—as Caesars approaches a private ownership status and MGM considers a takeover bid—CEO Ed Pitoniak stated that the dynamics of these relationships have not changed significantly. He highlighted that VICI is currently discussing an exciting opportunity in Las Vegas before passing the conversation to Payne.
Established in 2017 after a spin-off from Caesars amid bankruptcy proceedings, VICI is the world's largest casino REIT, with total assets reaching $48.3 billion at the close of Q2. It controls 50 acres of land adjacent to three Caesars properties: the Paris, Horseshoe, and Planet Hollywood. Payne mentioned that they are working with Caesars COO Sean McBurney to create a plan for the arena, which could potentially host a new NBA team.
In March, NBA owners voted to consider Las Vegas for expansion, and discussions intensified during the league's Summer League event held this month, although no final decision was made. NBA Commissioner Adam Silver remarked that the interest surrounding an expansion team was something he welcomed.
Neither Caesars nor VICI provided comments in response to requests.
The land referenced by Payne consists of approximately 40 acres across various plots, with additional buildable land beside the existing casinos. Portions of this land have hosted the annual Formula One Las Vegas Grand Prix and were once considered for an MLB stadium decades ago.
Caesars operates eight properties on the Strip, including those involved in the arena plans, all leased from VICI. In total, Caesars leases 18 casinos from the REIT.
Despite facing significant declines in revenue, adjusted EBITDA, and net income in its latest Q2 financial report, optimism for the Las Vegas market endures. Reports suggest that a new NBA franchise could command a valuation between $7 billion and $10 billion—on par with the record $10 billion sale of the Los Angeles Lakers last year.
Payne expressed his enthusiasm for Las Vegas during the earnings call, highlighting the creative approaches of their tenants.
Interest in securing a Las Vegas NBA franchise has spurred various investment groups to make bids, with Silver noting that most interested parties have remained out of the public eye. Notable public bids have come from figures such as Bill Foley, Jerry Colangelo, and Earvin "Magic" Johnson, among others.
Nonetheless, constructing a new arena presents its unique challenges. Previous arena proposals on the Strip have stalled due to high costs and zoning issues. The last two casinos built there, Fontainebleau and Resorts World, faced extensive budget overruns and delays, costing $3.7 billion and $4.3 billion respectively. Meanwhile, the Oakland Athletics' stadium project costs have escalated from $1.5 billion to over $2 billion.
Currently, T-Mobile Arena stands as the only venue on the Strip capable of hosting NBA games, co-owned by Foley, MGM Resorts, and Barry Diller, who made an $18 billion takeover bid to MGM. The company has engaged an independent committee to assess this proposal; however, there were no inquiries regarding the arena during the latest earnings call.
MGM declined to comment on this matter.
