VICI Properties, a real estate investment trust, reported $1.1 billion in revenue for the second quarter, marking a 5% increase compared to the same period last year. However, the highlight of the earnings call was COO John Payne's announcement about VICI's collaboration with Caesars Entertainment on a potential new NBA arena project in Las Vegas.
When discussing VICI's relationship with Caesars and MGM, VICI CEO Ed Pitoniak stated that their discussions "haven't fundamentally changed,” despite Caesars preparing to go private and MGM considering a takeover offer. He later handed the call over to Payne, who elaborated on the exciting opportunity developing in Las Vegas.
Founded in 2017, VICI is the largest casino REIT, originating as a spin-off from Caesars during the latter's bankruptcy process. As of the end of the second quarter, VICI holds total assets of approximately $48.3 billion and owns 50 acres of land associated with Caesars, specifically behind the Paris, Horseshoe, and Planet Hollywood properties. Payne emphasized their ongoing plan, developed in conjunction with Caesars COO Sean McBurney, for the new arena, situated on this land.
In March, NBA owners voted to consider Las Vegas for expansion, and while they convened again recently during the Summer League, no vote on finalizing the expansion took place. NBA Commissioner Adam Silver expressed his enthusiasm about the interest in a Las Vegas team, calling it "music to my ears."
Caesars has not provided a comment regarding the project, and VICI did not respond to requests for clarification.
The area of land being considered for the arena extends approximately 40 acres across various plots, with additional buildable land adjacent to the casinos. Some portions of this land are utilized annually for events like the Formula One Las Vegas Grand Prix. Notably, this same area was once envisioned as a potential site for an MLB stadium two decades ago.
Caesars and VICI share a deep connection on the Strip; Caesars runs eight properties, including the three targeted for the arena project, all leased from VICI. Nationwide, Caesars leases 18 properties from the REIT.
Despite facing challenges, including a decline in year-over-year revenue, adjusted EBITDA, and net income in Q2, the outlook for the Las Vegas market remains optimistic. Interest in an NBA franchise is seen as inevitable, though confirmation has yet to materialize. Preliminary estimates have placed the expected franchise fee between $7 billion and $10 billion, with the Los Angeles Lakers setting a record valuation of $10 billion last year.
Payne spoke positively about VICI's role in 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."
Interest in a Las Vegas NBA franchise has also come from various investment groups. Silver revealed that most interested parties have not yet made public bids, although notable figures like Golden Knights owner Bill Foley and former Suns owner Jerry Colangelo have expressed interest.
Building a new arena on the Strip presents significant hurdles due to high costs and zoning issues. Previous arena projects have struggled to gain traction, with the last two casinos developed on the Strip—Fontainebleau and Resorts World—incurring substantial overruns and delays, costing $3.7 billion and $4.3 billion, respectively.
The Oakland Athletics’ MLB stadium project has seen projected costs climb from $1.5 billion to over $2 billion, partly funded by $380 million in public financing—although such funding is uncertain for an NBA arena. The upcoming Hard Rock Las Vegas, opening in late 2027, is utilizing existing infrastructure, easing some construction challenges.
Currently, the only Strip venue capable of hosting NBA games is T-Mobile Arena, co-owned by Foley, MGM Resorts, and Barry Diller, MGM's largest shareholder. Diller recently made an $18 billion takeover offer, prompting MGM to form an independent committee to review it. In a past earnings call, MGM CEO Bill Hornbuckle indicated the company’s involvement in arena discussions, but there were no inquiries about the arena during the latest earnings update. MGM also declined to comment on this development.
