Enjoy these images of Rivers McCormick while you can because you’ll never see them again. Chicago Mayor Lori Lightfoot has nixed McCormick Place as a potential site for a casino, setting Bally’s Corp. and especially Rush Street Gaming down a peg but not out of the game entirely. At the same time, Lightfoot kicked the casino-selection deadline into “early summer,” which flies in the face of her stated goal of having a Windy City casino up and running by 2025. “We have spent countless hours analyzing each proposal for Chicago’s casino license and have determined Bally’s Tribune, Hard Rock Chicago, and Rivers 78 best fit the core goals we want to achieve for the City’s first integrated casino-resort,” said Lightfoot, giving the short-answer version of her decision.
“Each proposal offers economic, employment, and equity-focused opportunities for Chicago, while simultaneously enhancing the City’s cultural, entertainment and architectural scenes with world-class amenities and design. Our teams look forward to heading into discussions with the finalists and getting one step closer to bringing this decades-long project to fruition.”
Chicago CFO Jennie Huang Bennett pinned the slow-moving Lightfoot’s latest delay on the community-input process. “If we had selected one site without having had further engagement within the community then, I think that would have been very difficult for us to hold to the values of transparency and community engagement that we do with every major development,” she told the (anti-casino) Chicago Sun-Times. But why was McCormick Place kiboshed? In part Lightfoot was responding to NIMBY pressure from Alderman Sophia King and partly ceding to opposition from site manager Metropolitan Pier & Exposition Authority. Also, Lightfoot wants a site that will deliver the most cashola for the city’s strapped pension funds. At $156 million (Bally’s) or $160 million (Bluhm) a year in projected tax revenue, neither McCormick project was rich enough for Lightfoot’s budget, particularly in light of the envisioned cost of expanding McCormick Place for it to remain a functioning convention center.
Bally’s says its proposal will generate $177 million-$192 million a year in taxes. Hard Rock splits the difference by pegging its jackpot at $185 million/year and now says it could execute the project without the state subsidy that partner Bob Dunn has been pursuing. As for Neil Bluhm, once considered the favorite, he’s got the lowball figure: $146.5 million-$174 million per annum, presumably more if he builds the butt-ugly observation tower he wants. A Union Gaming study gives Bally’s the edge at $192 million (by Year Six), followed by Hard Rock ($185 million) and Rush Street ($174 million). Without getting into the numbers, suffice it to say that Hard Rock wins the job-creation-promise contest. Both Bally’s and Hard Rock would get their temporary casino open by spring of 2023, while Bluhm would lag them by a full year. But Bally’s couldn’t open permanently until early 2026.
Hard Rock’s timeline for a temporary casino was premised on using part of McCormick Place, however, and the company now “will explore other [sites].” If City Hall its druthers, Hard Rock would settle on either the Sheraton Grand Hotel or Medinah Temple, the former circus venue where the Chicago Symphony Orchestra made many of its best-sounding recordings (despite the faint whiff of elephant poop). Bally’s has two advantages, according to Union Gaming: “Bally’s is the only bidder that does not already have a property in the Chicago market, and therefore is more likely to operate with independence in maximizing revenues.” Also, it would be willing to help expand Superior, Erie and Jefferson streets to ease traffic concerns. Mind you, Bally’s has never—ever—built anything remotely on this $1.75 billion scale, but that does not seem to be a criteria that Lightfoot is pondering.
Her Her Honor is more likely to balk at is fine print in the Bally’s contract with (much-touted) minority investors that they can be unilaterally bought out at a fixed price set by Bally’s itself. Expect such verbiage to be expediently expunged. While the game seems Bally’s to lose, Lightfoot is already under fire for supposedly juicing Bluhm in by choosing a selection committee of mayoral insiders. Alderman Byron Sigcho-Lopez said “the fix is in” to put Rivers 78 in his ward, where it is highly unpopular. “This seems like a rush job that the mayor is pushing … With chairs and vice-chairs who rarely deviate from the mayor’s decisions, we can expect the mayor to make this choice unilaterally without consultation.” Chicago residents will be able to have their voices heard in a series of town halls being held April 5-7. Whether that will make a difference remains to be seen.
Truist Securities analyst Barry Jonas sat down with Boyd Gaming CFO Josh Hirsberg and Director of Finance Jake Mulcahy, although he was already feeling warm fuzzies toward Boyd on account of “consistent operating performance driving sizable [free cash flow] generation, deleverage and now capital returns.” Gas prices? What gas prices, might have been Boyd’s first answer, as Hirsberg and Mulcahy said the company had seen no material effect on customer spending—a situation that might change should the crisis persist. “In addition, mgmt has not seen any changes in customer behavior since the Ukraine conflict began.”
Said management’s priority is to maintain profit margins from 2021, and it thinks strong and consistent business is helping. “That said, last year’s all-time records in March-May will present a tough comp given significant pent-up demand then on top of stimulus spending.” Downtown represents the most significant potential upside (read: room for improvement), with other regions having returned to pre-Covid levels of biz.
Hawaii customers continue to come back in ever-greater numbers and the increase in the number of commercial flights has Boyd toying with the idea of dumping the charter bidness—and its attendant fuel costs. Boyd’s workforce, frankly, is decimated: 15,000 where there were 25,000 pre-pandemic. Job seekers might want to bypass Boyd, as it only plans to add 1,000-1,5000 positions over the next two years, in favor of an increasingly mechanized experience, even though “current labor levels are unable to satisfy all hotel demand and capture related gaming revenue.” Is Boyd stepping over dollars to pick up dimes?
Want george promotional offers? Tough luck. Boyd execs told Jonas there was “No going back” to the old days of promos. The “marketing spend could increase at some point down the road, but that would not be at the expense of EBITDA.” God forbid. One of the reasons for Boyd’s complacency is that it “did not express much concern on new or expected competitive supply.” At least shareholders can be happy, thanks to reinstated dividends and $500 million in 2022 stock buybacks.
Up until now, Station Casinos has played a flawless defensive game when it comes to fending off the Culinary Union. However, it may have finally goofed by stonewalling the federal judiciary, never a wise thing to do. The Culinary Union is asking the Nevada Gaming Control Board to investigate Station for “failing to adhering [sic] to federal labor law.” At issue is Station’s foot-dragging with regard to answering federal subpoenas.
Reads the Culinary letter, in part, *On October 25, 2021, in response to a motion by the NLRB’s General Counsel, NLRB Administrative Law Judge Tracy issued a finding that Station has engaged in contumacious conduct by failing to respond fully to a federal subpoena issued by the NLRB. This is a part of an ongoing complaint against Station Casinos and its property alleging that the company used the COVID-19 pandemic to undermine worker support for the union and that it unlawfully withdrew recognition from the union at Palace Station and Boulder Station.“
Aforesaid contumacity may have something to do with Station’s long losing streak vis-a-vis the National Labor Relations Board. The Board ruled in 2012 that Station “committed widespread violations” of law, oversaw a settlement that resulted in Culinary recognition at Palace Station, held that Station had improperly failed to recognize the Culinary at Green Valley Ranch and, in 2019, issued a finding that the Palace Station talks weren’t being conducted in good faith by Station. NLRB petitions to hold five Station properties in contempt of court are currently pending before the Ninth Circuit. (Three of the properties where the Culinary is dickering for a contract are defunct Fiesta Henderson, Fiesta Rancho and Texas Station, which may have something to do with Station’s disinclination to reopen them.)
The union is now appealing to the NGCB for sanctions, up to and including the revocation of Station’s license. It’s war to the knife and knife to the hilt … provided the Control Board opens a sleepy eyelid and decides there’s anything to see here. We don’t think it will want to inject itself into a labor dispute, although a Ninth Circuit ruling against Station might force its hand, albeit reluctantly.