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Sports Betting Will Drive Capital Back to Casinos, Vici CEO Says

Pandemic Causes Surge in Interest That Could Benefit US Venues Planning for Return of Visitors

Casino operators are looking to sports betting to bring good luck as gaming venues reopen for business.

There’s optimism flashing bright again in Las Vegas, evidenced by Vici Properties’ announcement this week that it agreed to acquire the Venetian Resort and Sands Expo and Convention Center for $4 billion.

Bolstering the reason for the deal was an unforeseen outcome of the pandemic: the boost casinos in the U.S. gambling capital and across the country have received from sports betting, which grew in popularity with entertainment-starved audiences during 2020.

Now that the economy appears to be rebounding, Ed Pitoniak, Vici’s CEO, sees the surge as powering a larger audience for in-person gambling and one that expands the opportunity for increased valuation and institutional ownership of casino properties.

“Where we think the greatest promise lies for us is in and around sports betting, both the online component and the in-property component,” Pitoniak told CoStar News in an interview. “Sports betting gives American gaming operators a chance to participate in one of the two great conversation topics in American society: One of those topics is weather, the other is sports.”

Nevada’s sports betting revenue in January of this year totaled $52.38 million, 160% more than the same month last year before the pandemic hit, according to the state’s Gaming Control Board. That has been the bright spot for Las Vegas casinos, which, though reopened since last summer, have been operating on a limited basis. All other major sources of betting revenue categories, including slots and table games in the same month, are still down from 17% to 74% over the same month a year ago.

Americans also have more money to spend, with the Commerce Department reporting Friday a 10% jump in personal income thanks to a new round of federal stimulus checks.

Tenant Pursues Sports Gambling

Publicly traded Vici is a real estate investment trust formed in 2017 as a spinoff from Caesars Entertainment. It owns 28 gaming facilities and four golf courses across the country.

The REIT will be adding to that total if its agreement to buy the Venetian, owned by Las Vegas Sands, is completed.

As part of the deal, funds managed by affiliates of Apollo Global Management are expected to acquire the operating company of the Venetian for $2.25 billion. It will lease back the properties from Vici.

Caesars is currently Vici’s largest tenant and is making a huge push into sports gambling. This past December, Caesars cleared the antitrust waiting period for its proposed $3.69 billion acquisition of William Hill, putting it one step closer to creating a U.S. sports betting behemoth.

London-based William Hill currently operates 113 race and sportsbooks in Nevada and has the state’s leading mobile sports betting app. In addition, the company runs racetracks in New Jersey and is licensed to operate sports betting in numerous casinos in states across the county. It also serves as the exclusive risk manager for the sports lottery in Delaware.

Vici Properties CEO Ed Pitoniak believes sports betting will help the gaming industry recover from the pandemic.

The breadth of market Caesars is developing is important to Pitoniak.

“Every time Caesars gets mentioned on ESPN, it is giving Caesars a share of voice, it is giving gaming a share of voice,” he said. “Share of voice drives share of mind. And when it comes to consumer discretionary spending — both of spending time and spending money — those who have the greatest share of mind tend to then generate a greater share of market.”

That kind of exposure should translate directly into increased value for Vici’s properties, Pitoniak argued.

“I think you can take as a fundamental real estate valuation principle that when a tenant becomes economically stronger, the landlord’s real estate becomes more valuable,” Pitoniak said.

It is no different for Vici than it is for industrial real giant Prologis, he added. Prologis benefits from having big-name tenants such as Amazon, UPS and FedEx.

With quality tenants, “anything that makes them fundamentally stronger, not only in the short term but over the longer term, is going to benefit the valuation of our real estate. That is the most compelling way in which we participate,” he said.

Potential for Growth

The upside to gaming already had begun to attract major investors in casino ownership before the pandemic. Late in 2019, Blackstone Real Estate Income Trust acquired the Bellagio real estate from MGM Resorts International for $4.25 billion in a sale-leaseback transaction. Blackstone followed that up just before the pandemic hit with the $4.6 billion buy of the MGM Grand Las Vegas and Mandalay Bay properties.

Mandalay Bay was allowed this week to return to operating 24 hours a day, seven days a week. Blackstone declined to comment to CoStar. However, Kathleen McCarthy, global co-head of Blackstone Real Estate, told an Investment Magazine Real Estate conference last week that it continues to see opportunities in hospitality and entertainment assets.

“We are already seeing that the hotels we own are essentially as occupied as we allow them to be,” McCarthy said. “This communicates to us that people want to get out and see the world and get out of their homes.”

“Experiential travel was one of our high conviction themes pre-COVID-19 and it remains so now,” she said.

If anything, the pandemic may have only paused what casino owners believe is coming: an exponential rise in sports betting. Circa Resort & Casino in Las Vegas delayed opening what is billed as the world’s largest sportsbook for nearly a year.

The three-story property finally opened in October. Its 1,000-seat auditorium faces the world’s largest TV screen, and the top floor is filled with media studios, where sports betting networks such as VSiN broadcast live shows.

Other casino operators too are starting to prepare for a return to business.

Fertitta Entertainment, the Houston-based owner of Landry’s restaurants and Golden Nugget casinos, struck a deal last month to merge with a special-purpose acquisition company called FAST Acquisition. The move will take a hospitality empire consisting of five casinos, 500 restaurants and more than $2 billion in owned real estate to the public markets. It is part of a strategy to pay down debt, potentially acquire distressed competitors and capitalize on the online gaming industry.

“What online gaming and sports betting are doing is putting a lot of wind in the sails of the gaming operator ecosystem,” Pitoniak said. “And that will likely lead to a lot of transaction activity, which we are very excited about.”

Casino owners will want to grow their property counts or optimize their portfolios, he said. The market could see some owners selling properties where they already have market penetration or that do not meet the criteria for the types of properties they would like to acquire.

“Once this cloud of COVID truly clears away from gaming, I think a number of real estate investors will look at the fact that our gaming tenants paid 100% of their rent in cash on time throughout the pandemic. And I think that will demonstrate to institutional real estate investors that this is truly institutional-quality real estate.”

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