VICI Properties, a real estate investment trust, reported a total revenue of $1.1 billion for the second quarter of the year, marking a 5% increase compared to the previous year. During a recent analyst call, COO John Payne disclosed that VICI is collaborating with Caesars Entertainment to develop a potential new NBA arena in Las Vegas.
When asked about VICI's relationships with Caesars and MGM, particularly as Caesars prepares for a private transition and MGM considers a takeover, CEO Ed Pitoniak noted that those conversations remain consistent. He mentioned that VICI is currently engaged in discussions regarding an exciting opportunity in Las Vegas before handing the call over to Payne.
VICI, established in 2017 as a spin-off from Caesars amid its bankruptcy reorganization, now stands as the largest casino REIT globally. Ending the second quarter with total assets of $48.3 billion, VICI owns 50 acres linked to Caesars, which includes the Paris, Horseshoe, and Planet Hollywood properties. Payne indicated that, in collaboration with Caesars COO Sean McBurney, VICI is formulating a plan to situate the arena for the prospective NBA team.
In March, NBA owners voted to consider Las Vegas as a viable expansion site, with further discussions taking place during recent meetings held amid the league’s annual Summer League event, although no final vote on the expansion has been made. NBA Commissioner Adam Silver expressed enthusiasm about the potential for new teams, remarking that the interest in expansion was “music to my ears.”
VICI's land encompasses approximately 40 acres across different plots, which also includes space currently utilized for the Formula One Las Vegas Grand Prix race, and had previously been suggested as a possible site for an MLB stadium.
Caesars operates eight properties on the Strip, including the three mentioned in the arena proposal. All these properties are leased from VICI, which also leases a total of 18 casinos to Caesars across the nation. Despite Caesars experiencing a challenging year, with declines in revenue, adjusted EBITDA, and net income reported in the second quarter, optimism persists in Las Vegas regarding the NBA's potential move to the city. Early estimates suggest a franchise could command a price between $7 billion and $10 billion, positioning it at the high end of the market, especially after the Los Angeles Lakers' record $10 billion sale last year.
Payne expressed excitement during the call, stating, “We continue to be really excited about Las Vegas,” and continued to commend how tenants were managing their businesses creatively. Many investment groups have shown interest in acquiring an NBA franchise in Las Vegas, with Silver noting that the majority of interested parties have remained private. Public bids have surfaced from notable figures such as Golden Knights owner Bill Foley, ex-Phoenix Suns owner Jerry Colangelo, and NBA Hall of Famer Earvin “Magic” Johnson.
The construction of a new arena poses unique challenges. Numerous arena projects on the Strip have faltered due to cost and zoning issues. For instance, the last two casinos built on the Strip incurred costs of $3.7 billion and $4.3 billion, both facing significant delays and budget overruns. The Oakland Athletics' planned MLB stadium has seen its budget swell from $1.5 billion to over $2 billion, although they did secure $380 million in public financing.
Currently, T-Mobile Arena is the only venue on the Strip suitable for NBA games, co-owned by Foley, MGM Resorts, and Barry Diller, who recently made an $18 billion takeover offer for MGM. MGM has appointed an independent committee to assess this proposition. In a Q1 call, MGM CEO Bill Hornbuckle remarked upon their close involvement in arena discussions, but no inquiries were made on the matter during the recent quarter. MGM declined to comment further on these developments.
