Precious little of the discussion during Vici Properties’ first-quarter-earnings call was devoted to first-quarter events. The company’s financial performance was upstaged by the disclosure of a $510 million loan to the North Fork Mono Rancheria to underwrite its in-progress casino. The project is being developed and managed by Station Casinos.
The deal is Vici’s first loan to a tribal gambling operator and COO John Payne talked up its virtues. Station is, he said, “an established leader in Native American gaming” and has 4.2 million potential customers within a two-hour drive of Madera, California.
“We’ve spent a lot of time over the years getting to know the operator,” Payne continued, especially since the opening of Durango Resort. “We’ve been incredibly impressed” by Station, said Payne, calling it “the best developer in the gaming space.”
Station studied the North Fork project for 20 years, but had a “last-mover advantage” in the region. CFO David Kieske interjected that the site was “phenomenal” and the nearest competition “far inferior” to what Station will build.
Neither Payne nor Kieske would address the question of how the loan was collateralized; Kieske admitted that Vici was relying on Station’s guarantee it would complete the casino. CEO Ed Pitoniak later took up the issue without prompting, saying the situation is complex and “we have a high level of confidence that the collateral is good.”
Returning to the issue again later, Kieske said, “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 an option on North Fork’s eventual revenue stream.
“This is all dependent on its operating successfully,” Pitoniak said, but the background of the deal is “giving us a lot of comfort.”
As for cost complexities posed by tariffs, Pitoniak eventually said, “We’re very confident in their ability to get in front of them.” Added Kieske, “They understand the magnitude of what they’re building,” to the extent of developing strategies to hedge costs.
Asked why Station had come to Vici instead of other lenders, Payne replied that he’d followed the company while he was an executive with Caesars Entertainment and, upon formation of Vici, had sought a relationship with Station. Pitoniak jumped in to say that Station’s quality of asset, especially Red Rock and Durango resort, is “Strip-level,” but has to be experienced to be fully appreciated.
Would Vici pursue other tribal deals? “It’s definitely something we continue to look at,” replied Payne, who cautioned that it’s not as though there are 20 pending opportunities. “From a Vici perspective, these are things we’ve studied for years. This particular opportunity was one we were quite excited about.”
Pitoniak resumed that the Golden State was a relatively new casino market. “There’s still white space on the California gaming map. That’s something you don’t necessarily see around the country.”
Payne noted that Vici has “no commitments” to Station beyond Madera. “It’s one transaction with them,” but Vici would be open to additional developments and even buying Station’s real estate “if it’s accretive.”
Both Pitoniak and Payne expressed high confidence in the near-term future. Asked what they were hearing from the Venetian and Fontainebleau, two other Vici clients, Payne replied, “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, in particular, “brings a new customer set to Las Vegas,” continued Payne, who said business will grow in Sin City despite any economic conditions.
Vici executives have not yet decided whether to exercise their option on Caesars Forum. Payne called it “a beautiful asset. It is something we’ll continue to evaluate. Caesars is continuing to operate it effectively.”
As to the larger question of Caesars’s master lease and its renewal, “I wouldn’t say there are any burning conversations around regional-property performances,” Pitoniak responded. He added that Caesars is seeing the positive effect of capex reinvestments in Atlantic City, New Orleans, and Lake Tahoe.
Payne reported that he’d just visited Century Casinos’ two upgraded properties in Missouri and was impressed. “It’s exciting to see the new development we helped finance really take off.” He continued that he hoped Vici would grow through additional partnerships, but that’s why they don’t have 100 tenants. Instead, the smaller-is-better approach (13 tenants and eight financiers) is to “find the best in the business and help them grow over time.”
Vici execs kept their options open regarding potential casino deals in New York City. Payne said, “We’re standing by.” He stressed Vici’s existing ownership of MGM Empire City, insisting that it “should win one of the three licenses.”
Payne and Pitoniak were even more definitive regarding involvement in Bally’s Corp.’s purchase of Star Entertainment in Australia. Payne said he and Kieske had 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 one key criterion for any deal was clarity around the business involved and Star had “turmoil … It is very difficult to have any confidence on the visibility around those assets.”
Said Payne, “The answer is no.”
