For decades, there have been rumblings about building a casino in Chicago, the third-largest city in the nation and one of its largest tourist destinations. At longlast, this dream is becoming a realitym, and it is Bally’s Corporation that hasmanaged to pull off the coup, after Mayor Lori Lightfoot awarded the city’s sole casino license to the Rhode Island-based company. While it still has a few zoning and regulatory hurdles, the political process of approval is all but complete.
At a cost of $1.74bn, Bally's Chicago is to be constructed on the site of the old TribunePublishing Center, where for decades one ofthe city’s hometown papers was blasted out of industrial printing presses. This means it is well-connected: not only centrallylocated (abutting the North Loop andRiver North neighborhoods) but close to both the rail lines and the river (the casino will be accessible by water taxi). Due to be completed within four years, it will be a true downtown casino.
We spoke with Bally’s Chairman Soo Kim and Vice President of CorporateDevelopment Chris Jewett, who has been tasked with overseeing the construction of the Chicago project, to hear what we might expect from the upcoming project.
What is the attraction of constructing in the neighborhood you have chosen? What can one expect from the final product?
Soo Kim: There’s been gaming in Illinois and the surrounding states for a long time, and, for a long time, gaming has been prohibited in Cook County and Chicago City proper. As a result, all of that gaming revenue and activity has been pushed out; all the jobs associated with gaming were being pushed out of the city. What this property represents is an attempt from the city to, far from pushing it out, pull it back in: you won’t have to go to an exurb to play and you can actually tap into the surrounding areas, bringing people to what is actually one of the largest tourism cities in America.
Chris Jewett: Just to add a bit on the site and the project: we’re going to have up to 4,000 gaming positions mixed with slots
and tables. There are few unique aspects to the project too. There will be water taxi access from across the river. There is a lot
of outdoor space – about two acres. A river walk isgoing to extend over 2,000 feet and will be open to the general public. Additionally, there will be a 3,000-seat theater, or mixed-use events complex, which is unique to the area. Obviously, there
will be food and beverage offerings, but there will also two-story open air rooftop bar.
According to the Chicago Tribune, this is a $1.74bn project. How does one go about financing a project on this monumental scale?
Soo Kim: Our company has what is calleda land bank. A lot of rival operators have much more of their casino fleet which has
been leased back, which means they are just the operator of a property that is owned by these companies like VICI and Gaming Leisure Properties. We have not done that. We still own the vast majority of our properties – just as we purchased the land on which the Chicago property will sit – and we can tap into that landbank to generate real money that we can then invest into building new properties.
But the most important thing toremember is that this project will be built over four years. We have a plan to put upa temporary casino over 12 months, andthat will be located a mile from the mainproperty. This will allow us to start to build a customer database and build and operate an employee group that we can then move over to the permanent facility. The temporary
will be located in an existing building, so there’s very little work to do, and it will generate profits right from the start. Our plan
is to build the permanent facility over the next four years while operating the temporary facility through that time, with the moneys from that helping the profit as we construct the main site.
And then, remember, Bally’s itself generates $300m-$400m of operating profits; and that’s free cash, our cash earnings every year. If you think about a project that’s going to be built over four years, where we also have a contemporary facility continuing to contribute to our operating profits along the way, we believe that we can build this easily with internally generated funds over the next few years. But, if all of that fails, we actually have sufficient liquidity in a landbank that we can tap into to accelerate that spend if we so want.
So you have the approval of Mayor Lori Lightfoot, but it still needs to go through several rungs on the ladder to get approval from the City Council and the Illinois State Gaming Board. Are you concerned about this stage? Are you actively lobbying to ensure its passage?
Soo Kim: I think the political process is over. The first political process was being selected by the mayor. The mayor ran an extensive, multi-quarter process to solve this problem. Remember, when we talked about what this means for the city, we were talking about, not pushing out all of this activity that should be pulled back in. The city has been trying to do this for thirty years, so credit this mayor for actually having gone through the processes to solve it and bring in an operator to build it.
The second part of that political process was getting that approved through CityCouncil, and, ultimately, the final vote was 41-7. It was overwhelming. And I think that speaks for a political base for this ideathat is well beyond just even the mayor.
The City Council is behind bringing this to Cook County and the city of Chicago.
The final step is a regulatory one. We have to bring this to the Illinois State Gaming Board. We have one major advantage here which is that our company is already an operator in the state of Illinois – we operate a casino out on Rock Island, on the border with Iowa. They know who we are. Obviously, we need to walk with them through our project, but we are excited to do so and we’re confident that we should have no problems getting through the final hurdles.
In the Bally’s proposal, special attention was paid to ESG issues, for instance guaranteeing that a strong proportion of the contracted businesses working on the project would be minority owned. What part did this play in Bally’s getting the license and is this a policy that is held across the board at the company?
Soo Kim: That’s an excellent question. Just soyou know, when the state of Illinois passedcasino licensing for the city of Chicago, they put these under-represented, minority-ownership guidelines right into the statute, which I think called for about20% ownership from these groups that are extraordinarily underrepresented.
As a company, Bally’s believes that everything we’re trying to do is to make money for our shareholders but we also feel we can make money the right way. Thesevalues that are increasingly importantto our society, we think are important toour company. We believe that the best companies reflect their customer bases, that the team members reflect this base, that the management reflects the team members, and that the management is reflected on the board. On our board itself, four out of nine directors are actually women and minorities. So we’re diverse from our customer base to our associate pools and on all the way to the top of the company. This matters to us. We just think it is good business.
And I think our corporate philosophy and the way in which we conduct business did help us in Chicago. What we were able to do was take this rule that the state gave us and say, you know what? We’re going to exceed these numbers. We thought that we could comfortably exceed them because we thought that there were enough qualified investors, there were enough qualified future team members, builders and suppliers.
I’ve said this many times: gaming is a public/private partnership. I’m not surprised that the regulatory bodies – whether it’s the city or the state – have somewhat imposed upon us these standards. What I want totell you is that we’ve embraced them, we’ve exceeded them, and we’ve said that this is good business. Ultimately, companies that are reflective of their customer base are good businesses. We have so many different casinos. We’re up to 14 across ten states. When we’re done with this round of acquisition and building, we’ll have 17 across 11 states. We’re in blue states, we’re in red states, and our company needs
to reflect all of those varying points of view. It’s something that is important to us, and it did give us an advantage in this process.
Chris Jewett: We sat through a handfulof special committee meetings, questioning from City Council, questions from the mayor in our evaluation, and every time we were questioned, Bally’s was reiterated as at the top over and over, not only just on these categories but on all the evaluation categories: we were at, tied at the top, or simply beyond in every metric. This was especially in these minority quota categories. Chicago is over 65% black and brown. We just have to be thoughtful about it. It was easier for us insome ways because our whole company is like this.
With Bally’s Chicago, you have the opportunity to be building a casino from the ground up. Will there be new digital features will be integrated in this project, one that has the potential to be completely state-of-the-art?
Soo Kim: The answer is absolutely. As many people in the business know, the company started with our very large Providence casino, and many of thefurther casinos we purchased. We areprobably one of the most acquisitive gaming companies out there. Whenyou acquire a casino, many times youare buying it as is. We’ve done therenovations, but for the most part, you are limited to what you can do.
This Chicago project is an exciting opportunity. For us to build a casino thatreflects all of what we know and have learned; to bring it to this city which is, again, the third largest in America and has more than 50 million tourists (which is in excess of Las Vegas) is very exciting.
There are many exciting ideas we have to make it experiential. Bally’s, remember, is the only casino company that is about
half physical casinos and about half online gaming. Most of the other ones are about 90% one way or another. They define themselves a certain way. We value both aspects of our business: we value the online but we like the experiential aspects of land based, those elements that you can only do physically.
I think you should see in the actual project that’s going to get built over the next three-plus years, the melding of online [mobile sports betting is legal in the state of Illinois], the Bally’s sports brand, as well as the gaming experiences, not to mention all of those things that accompany hotels and resorts (eating, lodging and entertainment), come together in a very exciting way. The melding is going to be more seamless than you see elsewhere because we own and value both sides
of the industry in this aspect.
Where will the Chicago location sit in the larger galaxy of Bally’s resorts across the nation?
Soo Kim:Obviously, Chicago will be our flagship destination. Chicago’s a wonderful city in the sense that it’s right in the middle of the country, and, I think, it reflects more of what the country stands for than some of the coastal cities. I think it’s an opportunity. Because we are across different jurisdictions, building one right in the middle is such anamazing opportunity to define what the new and reborn Bally’s company means. We’re going to take advantage of that. It’s a brand that everyone instantly recognizes. In fact, it’s a brand that was built in Chicago, and its re-establishment in Chicago is a way to solidify the brand in Americans’ minds as something that stands for entertainment and innovation.
