$3.2 Billion Las Vegas Project Is OVG’s Latest Live Entertainment Bet
Oak View Group (OVG) recently announced plans to construct a $3.2 billion live entertainment district in Las Vegas. The 25-acre project, which has local support and is slated to open in 2026, will include a 20,000-seat arena, a 2,000-guest hotel, a casino and a theater. Building a “campus” around a new arena, in a market that already has five of them, may sound like a risky endeavor. But OVG CEO Tim Leiweke said, “If you look at where the future of live entertainment is going, where Las Vegas is headed [in terms of real estate development in the city] and the need for another world-class arena in Las Vegas, [we think] we’ve hit upon a good idea here.” Leiweke points to OVG’s track record. The company has built (or is in the process of building) 12 venues and has not “made a mistake yet,” he said.
JWS’ Take: Despite the apparent wealth of existing options, Leiweke sees an “increasing number of artists and live entertainment options available in Vegas” and a dearth of luxury venues. “Four [of the five in the city] are quite frankly old,” he said. T-Mobile Arena, opened in 2016, is the exception.
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OVG is planning to build a broader entertainment destination, with the new arena at the center of the project. Leiweke saw Las Vegas Sands Corp. founder Sheldon Adelson develop an empire in Las Vegas on the back of the traffic derived from his convention business and believes there is an opportunity to replicate the model around live entertainment (which is increasingly driving visitors to the city). “The ability to take a hotel, a casino, an arena and a theater, and incorporate that into one district and one [high-end, live entertainment] experience, and to have one entity who controls that, is an interesting proposition,” he said.
The concept of creating an inclusive live entertainment focused campus is not new. AEG successfully pieced one together in downtown Los Angeles (see: L.A. Live, Staples Center, Los Angeles Convention Center, Ritz-Carlton Residences at L.A. Live and JW Marriott L.A. Live), though each of those pieces were designed and developed as individual projects. Leiweke was formerly the president of AEG.
The Las Vegas campus will sit on a 66-acre plot several miles south of the Strip (think: other side of Harry Reid International Airport). The location may look like a negative, but Leiweke says it will be the “first property that anyone driving in on the 15, from Southern California, is going to pass. We’re [going to be] five minutes from the airport and [won’t] have the congestion that the other part of [Las Vegas Boulevard] has… The future of the Strip is this part of Las Vegas Boulevard,” he said. The proposed Brightline (a high-speed train that will connect Los Angeles and Las Vegas) station would run right by.
Leiweke noted that Allegiant Stadium’s location (also off the Strip) has not hampered its efforts to attract live entertainment, corporate sponsors or premium seat and suite holders.
The OVG CEO acknowledges his company is placing a bet on the future (of both Las Vegas and live entertainment). But he believes the opportunity to build “a district, that becomes the first true point of destination for live entertainment in a marketplace that services 50 million people a year,” is too great to pass up.
OVG will need to build a world-class arena to attract enough tours and artists to make the investment worthwhile. The developer has earmarked ~$1 billion for venue development. For perspective, UBS Arena and Climate Change Arena (both recent OVG projects) cost roughly the same.
Of course, UBS and Climate Change have NHL teams as tenants more than 40 nights/year. OVG will break ground in Las Vegas next summer without an NBA team committed to playing there.
The project is not predicated on a franchise relocating to Sin City. But Leiweke said if the NBA ever does choose to come, the arena would give the team a world-class venue to play in, “one that could generate tremendous revenue streams.”
Because there is no guarantee of an NBA team, the project must be built on concerts (the company has reportedly held preliminary conversations with Live Nation Entertainment) and other live-entertainment events. OVG doesn’t believe the MSG Sphere project currently under development will compete for shows. That venue is more likely to focus more on hosting residencies and developing programming specifically for that unique environment than the typical touring act.
There may be an opportunity for the new OVG arena to ink a large-scale pact with the UFC. “We have a good relationship with [the promotion] because of Silver Lake,” Leiweke noted. The private equity firm is an investor in both Endeavor Group Holdings (the UFC parent co.) and OVG.
The UFC is currently tied up with T-Mobile arena, but that deal expires “right around when our building [is scheduled to] open,” Leiweke said. “We believe if we give [the UFC] a voice in how we design the campus and incorporate what is important to them and their experience—and now they’re not just one night, they’re a week of activity leading up to big events”—there is a chance to earn their business. UFC declined to comment for our story.
Boxing, National Finals Rodeo and NCAA events could also find a home on the Las Vegas arena calendar. “There is plenty [of live entertainment] to go around without necessarily having an NBA team,” Leiweke said.
OVG’s expertise is in building arenas and has brought on experienced partners (Gensler and Populous) to help think through the district architecture. The plan is to also align with a hotel operator on the hotel and casino “design and more importantly, on operations, to build a truly unique, [high-end] experience,” Leiweke said.
Those partners will also help OVG to ensure the project remains economically viable. “We’re going to try and make some money on this,” Leiweke said. “This is driven by a rate of return.”
While OVG has been successful in the past, there are some additional challenges this time around. Inflation is going to have an impact on pricing, and as noted, competition exists in the marketplace. “But we’ve analyzed all that and when [we] consider our clout within the industry and the partners that we will bring on board, we are confident we can do this well and get a decent rate of return for the dollars and risk we’re going to put in,” Leiweke said. OVG is prepared to fund the arena portion of the project. It plans to bring on financial partners for the hotel, casino and amphitheater portion (figure: $2 billion for hotel/casino, $150-$200 million for theater).
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