An age-old truth, well-known by gamblers, holds that you should never chase your losses. With Bally’s Chicago Casino, the city risks doing just that.
Bally’s promised to uplift Chicago’s economy, and, perhaps most importantly, improve the city’s overall financial situation. As then-Mayor Lori Lightfoot said in a video announcement, Chicago’s first casino was supposed to represent "a once-in-a-generation opportunity."
So far, it hasn’t. The temporary casino at Medinah Temple continues to fall far short of Lightfoot’s plan. Bally’s is underperforming, and neither the city, nor the police and firefighter's pension funds that were supposed to be bolstered by its revenue, can afford it.
Rather than focusing on attracting tourists and business travelers to Medinah, Bally’s is busing in Chicagoans from the South Side and Chinatown, the very type of predatory practice Bally’s said it would not do. There is a whiff of desperation here that should be no surprise. Bally’s temporary casino had the second-lowest revenue per visitor in the state in June. The only casino that performed worse? Bally’s Rock Island casino.
And we are still only talking about the temporary casino. The Chicagoland area has a well-developed market with existing casinos, sports betting venues and online gaming at social casinos. Bally's permanent casino will need to be best-in-class to succeed in this saturated market.
Bally’s recently trumpeted that it has secured funding to build the permanent casino in River West. The media generally covered it as a positive development. Yet the facts show otherwise. Bally’s didn’t go to a mainstream financial institution and secure a standard loan. Instead, it made a deal with a company called Gaming and Leisure Properties Inc. (GLPI). In exchange for up to $940 million, Bally’s must sell to GLPI the land where the Chicago casino will be developed and had to sell the property Bally’s owns at its casinos in Kansas City, Missouri and Shreveport, Louisiana along with making other financial commitments.
Buried in Bally’s announcement is the real news: GLPI will not only own the land under the Chicago casino, it will also own the entire casino, hotel building, and all the amenities. The city originally entered into an agreement and approved Bally’s as the developer and owner, but Bally’s is now just a "strategic stakeholder" according to its own press release. All that Bally’s will now own is the casino license and the equipment to operate the casino.
Bally’s will simply be leasing the casino for about $100 million annually altogether. This puts an extremely high leverage burden on the project, especially for Bally’s, which is one of the worst capitalized companies in gaming. This doesn’t bode well for the bet Chicago made on the casino’s future or the police and fire pension funds.
Lightfoot wears the jacket for this mess, which the current city administration now must deal with.
Bally's underperforming temporary casino, predatory marketing, bait-and-switch on the permanent casino, huge lease payments and weak corporate balance sheet all raise serious questions about the casino's future. I am not alone in that assessment. Bally’s investors have themselves written to its board raising doubts about the project.
Financial ratings firms Moody’s and Fitch have downgraded Bally’s since March, with S&P Global highlighting “development and execution risks” for the proposed permanent casino.
City Council must hold hearings to address both Bally’s material underperformance and the role of GLPI. We need to know who is going to be accountable for the casino moving forward. Bally’s needs to put its cards on the table, explain why the temporary casino is performing so badly and why Bally’s is now selling the casino site to an entity that was not part of the RFP process, is not a signatory to the agreement with the City of Chicago and is not approved by the Illinois Gaming Board.
The people of Chicago deserve better. This is too important to get wrong. It’s time for us to stop chasing our losses.
Ald. Anthony A. Beale represents the 9th Ward on the South Side.
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