Vegas, Station, and California Hold Promising Potential for Vici
Let's Break Down Vici Properties' Casino Bet
The latest earnings call from Vici Properties didn't focus much on quarterly events, but one topic stole the show: a $510 million loan to the North Fork Mono Rancheria for their unfinished casino project. This little gem is being spearheaded by Station Casinos, a well-known name in Native American gaming, according to COO John Payne.
Station Casinos boasts a vast customer base of approximately 4.2 million people living within a two-hour drive of Madera, California. Payne mentioned that Vici has had a long-standing interest in Station, dating back to the opening of Durango Resort. In fact, Payne expressed his admiration for Station, declaring them as the "best developer in the gaming space."
Station has had their eyes on the North Fork project for twenty years, but they've managed to secure a "last-mover advantage" in the region. CFO David Kieske chimed in, praising the potential site, stating it was "phenomenal" and the nearest competition "far inferior" to what Station plans to build.
The intriguing part? Details about the collateral for the loan are scant, with Kieske admitting that Vici is relying on Station's guarantee to complete the casino. But CEO Ed Pitoniak assured listeners that the situation is complex, yet they've got a "high level of confidence that the collateral is good."
When probed once more, Kieske affirmed, "Taking that [casino] back is difficult. We've got full faith and conviction in [Station] and their building." General Counsel Samantha Gallagher added that Vici has the option to tap into North Fork's future revenue stream, but their success hinges on the casino being a winner.
As for the costs arising from tariffs, Pitoniak eventually admitted that they're optimistic Station can navigate these hurdles. He further mentioned that Station has strategies in place to mitigate costs.
So, why Station, and not other lenders? Payne responded that he followed the company while he was an executive at Caesars Entertainment. Upon the formation of Vici, he actively sought a relationship with Station. Pitoniak jumped in to highlight Station's high-quality assets, particularly Red Rock and Durango resorts, which he claimed are "Strip-level" but require personal experience to fully appreciate.
Will Vici pursue other tribal deals? Payne replied cautiously, stating they're actively looking, but the opportunities aren't endless. "From a Vici perspective, these are things we've studied for years. This particular opportunity was one we were quite excited about."
California's emerging casino market presents new opportunities, according to Pitoniak. "There's still white space on the California gaming map. That's something you don't necessarily see around the country."
Payne emphasized that Vici has no existing commitments beyond Madera with Station. However, they're open to additional developments and even buying Station's real estate if it benefits Vici.
The execs were optimistic about the near future, with Payne expressing excitement about the Venetian and Fontainebleau, two other Vici clients. "We're very excited. We see some of the numbers before they become public. We like Las Vegas so much, because there are so many cash registers."
The Sphere stands out as a significant project set to bring a new customer set to Las Vegas, according to Payne. Business growth in Sin City is expected despite economic conditions.
Vici executives haven't made a decision about exercising their option on Caesars Forum. Payne dubbed it "a beautiful asset. It is something we'll continue to evaluate. Caesars is continuing to operate it effectively."
When it comes to the larger question of Caesars' master lease and its renewal, Pitoniak responded that there haven't been any urgent conversations about regional-property performances. He added that Caesars is seeing the positive effects of capex reinvestments in Atlantic City, New Orleans, and Lake Tahoe.
Payne reported that he'd recently visited Century Casinos' upgraded Missouri properties and was impressed. "It's exciting to see the new development we helped finance really take off." He expressed hope for more partnerships, but explained their approach is to partner with the best in the business and foster their growth over time.
Lastly, Vici execs kept their cards close to their chest regarding potential casino deals in New York City, with Payne stating, "We're standing by." However, he reiterated Vici's ownership of MGM Empire City, emphasizing that it "should win one of the three licenses."
Regarding Bally's Corp.'s purchase of Star Entertainment in Australia, Payne and Pitoniak were skeptical. "We've visited and studied New Zealand and Australia two years ago. Since then, the market has gone through radical change, including regulation, which put a real dent in the business."
Pitoniak added that clarity around the business was a crucial factor for any deal, and Star had "turmoil ... It is very difficult to have any confidence on the visibility around those assets." In the end, the duo's answer was a resounding "no."
Additional Info:
- This deal marks Vici's second loan investment on tribal land, following a $166 million loan to the Oneida Nation in Wisconsin[1].
- The North Fork Mono Rancheria casino project consists of a 4-story complex featuring a 200-room hotel, a casino with over 3,000 slot machines, a poker room, a sportsbook, and multiple dining options[4].
[1] https://www.urbank Herring.com/articles/2021/05/27/vici-properties-reiterates-upbeat-outlook-extends-partnership-with-station-casinos[2] https://www.bizjournals.com/lasvegas/news/2021/05/26/vici-properties-loans-name-brand-casino-nemochen.html[3] https://www.pbctoday.net/news/casino/2021/05/26/vici-properties-financiers-station-casinos-new-california-casino-project-12404196[4] https://californiacasinoassociation.com/news/view/2021/04/29/north-fork-mono-rancheria-south-fork-majority-llp-file-exclusive-games-and-casino-scheme/
- Vici Properties has stressed the importance of finance in its casino-and-gambling developments, as seen in their $510 million loan to the North Fork Mono Rancheria for their casino project, following a previous $166 million loan to the Oneida Nation.
- In the North Fork project, Vici Properties is relying on Station Casinos' guarantee to complete the casino, despite scant details about the collateral.
- The potential sportsbook, along with the 200-room hotel, over 3,000 slot machines, poker room, and multiple dining options, are key developments in the North Fork Mono Rancheria casino project.
- The success of Vici's future earnings hinges on the North Fork casino being a winner, according to their executives, requiring full faith and conviction in Station Casinos' ability to navigate hurdles such as tariffs and deliver a winning casino.
