One week after taking possession of the Freedom Center printing plant, Bally’s has secured the needed financing to supplant it with a $1.7 billion Chicago casino complex on the 30-acre site in River West.
Bally’s announced a deal Friday with Gaming and Leisure Properties, a Pennsylvania-based real estate investment trust, to provide $940 million to fund the construction of the permanent casino.
In addition, Bally’s has also finalized redesign of its planned 500-room hotel tower, which has been shifted from north of the casino to the south to avoid damaging city water pipes along the Chicago River, pending approval from the city’s planning department.
“We’ve been working hard in the background to restore the full hotel tower for Bally’s Chicago Casino and absolutely intend to meet the September 2026 opening date as planned,” George Papanier, president of Bally’s Corp., said in a news release Friday. “We are also happy to announce that Gaming & Leisure Properties Inc. has agreed to finance this entire development in a single phase to ultimately deliver a better project in a more efficient manner.”
The financing package and revised site plan should allay concerns expressed by analysts, investors and the city itself that Bally’s didn’t have the financial wherewithal to build the permanent casino.
In 2022, Rhode Island-based Bally’s won a heated competition to build Chicago’s first casino. The glitzy proposal included an exhibition hall, a 500-room hotel, a 3,000-seat theater, 10 restaurants and 4,000 gaming positions overlooking the Chicago River.
Bally’s Chicago launched a temporary facility at Medinah Temple in September, with plans to open the permanent casino by September 2026. But the odds against the casino complex being built as planned seemed to be increasing by the month this year.
In January, Bally’s announced that the hotel tower would need to be relocated from its designated spot at the north end of the site after it was determined that driving caissons into the ground might damage municipal water management infrastructure pipes.
The initial plan called for a 100-room hotel base near the Chicago River, with a gleaming 400-room tower built on top of it within five years of opening the permanent casino.
The new site plan by design firm HKS switches to a single-phase development and flips the casino layout, moving the 500-room hotel tower to the south of the entertainment complex, where it’s still on the river, but away from the infrastructure issues.
Soo Kim, chairman of Bally’s and founding partner of its largest shareholder, New York hedge fund Standard General, told the Tribune Friday that securing project-level financing for Chicago through a sale-leaseback of its properties has been in the cards for some time.
“We’re actually funding an amount that’s larger than originally anticipated, because we’re interested in completing the scope of the project,” Kim said. “It’s a sign of confidence that we are lining up the money to build out the more substantial project in one fell swoop.”
Gaming and Leisure Properties has a portfolio of 65 locations across 20 states, including several Bally’s properties. The business model entails buying, financing and owning the land, then leasing it back to gaming operators.
Bally’s expects to raise more than $2 billion through the transactions with Gaming and Leisure Properties, which include sale-leasebacks on the Bally’s Kansas City and Bally’s Shreveport properties for $395 million, the company said. Gaming and Leisure Properties also has a previously announced purchase option on Bally’s Lincoln Casino Resort in Rhode Island, which has been adjusted to a lower price of $735 million.
In November 2022, days after acquiring the Freedom Center site for $200 million, Bally’s executed a sale-leaseback on the property with Chicago-based Oak Street Real Estate Capital, raising up to $500 million to help build the permanent casino.
As part of the transaction, Gaming and Leisure Properties is also acquiring the Freedom Center site for $250 million before development begins.
Lance Vitanza, senior analyst in TD Cowen’s equity research group, called the financing and sale-leaseback deals a “very good outcome” for Bally’s and its investors.
“It should allay a lot of concerns about Bally’s asset mix, its leverage, its liquidity,” Vitanza said Friday. “To have GLPI coming in and sort of underwriting Bally’s business plan, at least for its domestic casinos, it’s really meaningful.”
Bally’s owns and operates 15 casinos across 10 states. It made its entree into Illinois in June 2021 with the $120 million acquisition of Jumer’s Casino & Hotel in Rock Island, which it renamed Bally’s Quad Cities.
Concerns about financing the Chicago casino project surfaced in February when Bally’s revealed it needed to bridge an $800 million funding gap to cover remaining costs to build the permanent Chicago casino as planned.
Some analysts suggested a tight credit market and Bally’s debt-heavy balance sheet might force the casino company to delay or downsize the permanent Chicago casino.
Even Chicago Mayor Brandon Johnson expressed doubts last month, saying it was “still to be determined” whether the full $1.7 billion entertainment complex would be built as planned.
The project took a major step toward that goal with Friday’s financing announcement.
“With keys to the property in hand, the new financing secured, a site plan that exceeds the original, and demolition set to start this summer, let there be no doubt that Bally’s Chicago Casino and Hotel will soon rise up along the Chicago River,” Papanier said.
The city issued a statement Friday morning echoing those sentiments in the wake of Bally’s financing and refreshed site plans.
“The City is pleased with this development concerning the financing and construction of Bally’s Permanent Chicago Casino,” Mayor Johnson said. “We look forward to reviewing the updated plans and proceeding through the review process with the Department of Planning and Development.”
Building what would be the state’s largest casino may be crucial to meeting the ambitious financial goals of both the city and Bally’s.
After a record-breaking May, revenue fell by 11% last month at the Bally’s Chicago temporary casino, which generated $10.4 million in adjusted gross receipts, according to data from the Illinois Gaming Board.
Bally’s Chicago admissions, however, were up 1% for June to nearly 120,000 visitors, ranking second behind Rivers Casino Des Plaines, which remains the busiest and top revenue-generating location among the state’s 15 casinos, according to the monthly data.
The temporary Bally’s facility celebrated its millionth visitor last month, gifting them with a cruise for two and $1,000.
Statewide casino revenue was down nearly 4% to $138 million in June, with more than a million visitors for the month, according to Gaming Board data.
Through the first six months of 2024, Bally’s Chicago generated $62.8 million in adjusted gross receipts and more than $6.8 million in local tax revenue at its temporary River North casino, according to Gaming Board data.
Bally’s was projected to generate $243 million in adjusted gross receipts and $35 million in gaming taxes for Chicago this year.
While the city could still see significant upside from Bally’s through the graduated wagering tax, which goes up as the casino’s cumulative annual revenue increases, long-term growth hinges on the planned permanent casino at the soon-to-be demolished Freedom Center printing plant site in River West.
Last year, Bally’s agreed to pay Tribune Publishing, owner of the Chicago Tribune and other newspapers, $150 million to vacate the 43-year-old Freedom Center by July 5 to break ground on the new casino complex. The Tribune shifted printing operations in May to the former Daily Herald facility in Schaumburg, which it purchased for an undisclosed price.
Bally’s took possession of the site last week, with trucks, trailers and the Brandenburg Industrial Service demolition company setting up shop to begin the process of reducing what was once the largest newspaper printing plant in North America to rubble.
Meanwhile, the Chicago Tribune opened its new newsroom this week in the historic Brooks Building at 223 W. Jackson Blvd. in the Loop, its fourth editorial home in six years since being booted from Tribune Tower in 2018.
While financing concerns about building the Chicago casino may have been assuaged Friday, Bally’s is still navigating some uncertainty in the wake of an ongoing buyout offer from its largest shareholder.
In March, hedge fund Standard General, which owns 26% of Bally’s, submitted an offer to buy out the rest of the stockholders at $15 per share, valuing the company at about $648 million. The Bally’s board formed a special committee and retained Macquarie Capital as its financial adviser to evaluate the offer and explore strategic alternatives.
Bally’s has not provided any updates on the status of the buyout offer since March.
The company’s stock gained more than 6% Friday, closing at $13.44 per share.
rchannick@chicagotribune.com
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