Bally’s Chicago: A Minority Investment Opportunity
Bally’s is fulfilling its pledge from 2022 to have 25% of its Chicago casino owned by women or minorities.
Bally’s continues to build out its permanent casino in Chicago. © Neal Kharawala Unsplash
Key Facts:
- Bally’s wants to sell $250 million of its Chicago casino to minority investors.
- Bally’s hopes to open its $1.3 billion casino in the windy city in 2026.
- The Host Community Agreement between Bally’s and Chicago required a 25% minority investment in the new resort.
- The investment is limited to women, people of color, or companies owned by them.
Bally’s announcedthis week that it will begin offering up to a 25% equity stake in its massive new Chicago resort. With more than 3400 slots and 170 table games, along with 500 hotel rooms in a 34-story tower and a 3000-seat entertainment venue.
The property will sit in a coveted 30-acre space along the Chicago River that was once home to the Chicago Tribune newspaper.
The company fought both in Chicago’s infamous backroom political scene and in the courts before finally being awarded the sole license for a casino in the city in 2022. The Host Community Agreement that helped seal the deal required the company to sell a quarter of the casino resort to women or minorities or to companies controlled by women or minorities.
The City of Chicago’s Qualified Investor Criteria defines minorities as Black, Hispanic, Indian, Asian, Arabic, or any other group that the city finds to have suffered from racial prejudice or racial bias.
Also of note, the HCA will require that 60% of the workforce at the new resort be minorities and that slightly less than half of those should be women, with another 10% of jobs earmarked for disabled people and veterans.
A Potential Tough Sell
Loop Capital, which is handling the equity sale, has its work cut out for it, though. While investments start as low as $250, Bally’s temporary casino, located in the Medina Temple building downtown and opened in September 2023, has failed to live up to expectations.
It posted revenue of only $124 million in its first 12 months vs. the city’s lofty projection of over $200 million.
While the 15 other casinos in the state are a problem, the closest one to the riverfront property is about 16 miles away. The real competition for the resort will be the 19,000 Video Gaming Terminals found in almost every restaurant, gas station, and liquor store in the state. Chicago’s Cook County hosts more than 8,000 of them alone.
While the minority investment opportunity will be only in the Chicago property, Bally’s as a whole has found itself in a precarious financial position. It attempts to build out not only this resort but also raise funds for its new Las Vegas property, which was the former Tropicana Casino site on the Las Vegas strip.
It will soon host the Oakland A’s baseball team in a new stadium along with a brand new Bally’s Las Vegas Casino. The company has been selling much of its real estate holdings to REIT investment firms to help provide funding, which it then leases back.
We are excited to partner in Bally’s Chicago marquee development project, which will be the flagship of Bally’s platform and an iconic addition to the Chicago skyline.– Peter Carlino Chairman GLPI Bally’s Press Release
This includes not only properties in Biloxi, Rhode Island, Lake Tahoe, and Kansas City but also the real estate involved in the Chicago complex. The company announced in July of 2024 that it would sell the land and new casino project for $940 million in construction funding and a $20 million per year lease back of the completed buildings.
In all, once some of the other casino real estate was sold off, the company raised more than $2 billion in just this one funding agreement with Gaming and Leisure Properties (GLPI).
While certainly a windfall for Bally’s and a final answer to where funding for such an ambitious project would come from, it does leave potential minority investors with some questions. Bally’s was bought out by its largest shareholder, Standard General, in a 4.6 billion-dollar deal announced in July.
With its new owners liquidating assets and raising capital to help pay for the buyout and potentially funding not one but two massive new casino projects, what happens if the permanent Chicago casino also opens to only about 60% of projected revenue, as the Medina temporary project did?
With GLPI apparently owning all real estate assets, what will potential investments be backed by, just operating revenues? And, of course, with an initial opening date almost 20 months out, what will the macroeconomic climate look like? That is if there aren’t any further revisions to the opening date that push it into 2027.
Is Bally’s on Shaky Ground with This Investment?
While these risks are spelled out in the prospectus, along with Bally’s intention but not the obligation to pay out dividends to potential investors, it remains to be seen how many women or people of color line up to roll the dice on this novel investment.
As Bally’s navigates financial challenges and investor skepticism, its Chicago project could set a precedent for inclusive ownership models in inner-city casino projects. The coming months will reveal if this bold gamble pays off.
