Chicago Mayor Cautious About Bally’s Permanent Casino Property
Posted on: June 10, 2024, 06:12h.
Last updated on: June 11, 2024, 09:17h.
Bally’s (NYSE: BALY) is coming off an impressive revenue showing in May at its temporary Chicago casino, and is slated to start construction on the permanent gaming venue at the Freedom Center in the River West section of the city next month. Mayor Brandon Johnson (D) says that project coming to fruition isn’t guaranteed, however.
In a recent interview with the Chicago Sun-Times editorial board, Johnson made comments suggesting that Bally’s has a lot on its plate, including attempting to solve an $800 million funding shortfall in the city. That need for financing is among the reasons why the mayor cannot definitively say whether or not the casino hotel will make it across the finish line.
“I wish I could say something definitive today. I know our team is working with ownership to figure it out like we figured out some of the other things that I’ve inherited. It just has to make absolute sense … I think that one’s still to be determined, to be perfectly frank with you,” Johnson told the Sun-Times editorial board.
Bally’s has a $500 million credit facility in place, and it’s used $250 million of that sum for land at the Freedom Center, which was the prior home of the Chicago Tribune.
Bally’s Takeover Bid Could Cloud Chicago Plans
Bally’s was awarded the lone Chicago casino permit in May 2022 by former Mayor Lori Lightfoot — a move that was widely criticized and which included allegations of corruption that some market observers believed quashed a competitive bidding process.
That’s not the end of Bally’s potential headwinds in the Wind City. Earlier this year, Standard General, the hedge fund controlled by Bally’s director Soo Kim, offered $15 a share to acquire the regional casino operator. The bid is still under consideration, but at least one investor cautioned that if the offer is accepted, it could jeopardize the Chicago project.
Kim claims otherwise, but following recent downgrades to Bally’s credit rating by all three major ratings agencies, access to financing is likely to come with higher interest rates. Those higher rates would create elevated interest expenses for Bally’s, putting a burden on the Chicago integrated resort to meet or exceed profit and revenue expectations.
If Bally’s commences construction as planned in July, the target date for opening is September 2026.
Other Issues Confounding Bally’s in Chicago
There’s another major issue Bally’s is contending with in the third-largest US city. There still isn’t a clear decision regarding where on the Freedom Center property the hotel will be located.
To the chagrin of both the city and the gaming company, it was revealed earlier this year that the original location of the hotel isn’t tenable because construction on that portion of the property would damage underground water pipes.
The hotel is an essential component in Bally’s Chicago casino and could command a significant percentage of the $1.34 billion the operator is legally bound to spend in the city. There’s still $1.1 billion left on that tab, according to the Sun-Times.
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Don't bet on Bally's!
In early December, Crain’s Chicago Business reported that authorities are looking at the bidding process that resulted in Bally’s winning the opportunity to construct a casino in Chicago. They further reported Chicago Alderman Brian Hopkins confirmed the federal investigation, claiming the entire project could be at risk of coming to a complete halt. Supposedly, the federal investigation is being spearheaded by the US Attorneys’ Offices. Chicago Inspector General Deborah Witzburg was reportedly running the city’s investigation. The article concluded by saying that a Bally’s spokesperson said the company was not aware of any active investigations. Really? That was reported in December. Are they still not aware?
Bally's (and others) apparently already forgot about the Chicago investigations reportedly going on about how Bally's was selected by the City of Chicago's leaders. Did the media also forget about that? Ask Chicago Inspector General Deborah Witzburg if she has forgotten about that. Not hardly.