Illinois’ tenth and final license has been gathering dust since 1997, entangled in litigation and regulatory problems. Three companies – none a household name – bid on it and the license was awarded to the lowest bidder: Midway. It’s one of several companies controlled by Neil Bluhm, a Chicago real estate developer, who’s been after this project for almost five years.
You don’t know his name yet – but you will. And if you’ve been to Water Tower Place in Chicago or Oak Brook Mall or Bloomingdale’s Four Seasons on the near North Side of the Windy City, that’s his work you’re admiring. He’s also developed Four Seasons properties are far-flung as Sydney and Milan.
He’s a busy man in the casino business, in fact, building two "slot parlors" (fancy-pants lingo for casinos) in Pennsylvania. Bluhm was awarded one of two casino licenses for the Philadelphia area, the other having gone to Foxwoods. Progress on Bluhm’s SugarHouse casino, however, has been stymied on several fronts, including archeological exploration on the site, which contains Native American artifacts and encompasses the site of fortifications built in 1777, after the city fell into British hands.
If that – and belated opposition by neighborhood groups – wasn’t enough, Donald Trump barged into the fray. He was one of the unsuccessful seekers of a Philadelphia casino deal and now he’s suing the Pennsylvania Gaming Control Board over its decision. That could further slow SugarHouse and buy time for Atlantic City, where Trump’s casinos have struggled with a foul economy.
Bluhm’s also got a foothold in Pittsburgh, where he’s finishing what used to be the Majestic Star casino. Majestic Star’s costs spiraled uncontrollably and then-owner Don Barden ran out of money, forcing work on the $780 million project to come to a screeching halt.
Enter Bluhm. In July, his Walton Street Capital Fund 6 offered to assume the reins of the project, provided that the Pennsylvania gambling regulators green-lighted the deal muy pronto. Various quasi-apocalyptic scenarios were floated to try and speed the approval process along but the Gaming Control Board refused to be hurried, not signing off until Aug. 14.
Mind you, the Keystone State has a ‘one-and-one-third’ rule that mandates that the majority owner of one casino cannot control more than 33.3% of another. While Bluhm will only own 1% of what is now "Rivers Casinos" directly, it shares an executive team with SugarHouse and is 74% owned by Walton Street, which Bluhm co-founded. Thus, by adhering to the letter of Pennsylvania law rather than its spirit, officials were able to steer not one but two of Pennsylvania’s biggest casinos into Bluhm’s embrace. (Coincidentally or otherwise, both Bluhm and Barden have been generous Democratic donors.)
While frowning upon the arrangement in principle, our own David McKee had this to say in its defense, in Stiffs & Georges, our business blog: "For all its back-room coziness, the Barden-to-Bluhm swap offers several advantages. Bluhm is already on the scene, he's licensed, he's got casino experience and access to capital, and he's somebody who can get big projects done."
He was also part of a consortium that took an unsuccessful run at acquiring the Riviera, in Las Vegas, back in early 2006. His casino experience includes management contracts (via his Falls Management Co.) at Niagara Fallsview Casino Resort and Casino Niagara, both in Ontario. He’s also the developer of Vicksburg’s newest casino, Riverwalk, a $100 million project that opened in November.
Since Chicago is Bluhm’s base of operations, it stood to reason that Midwest Gaming would be the frontrunner for that last Illinois license. Bluhm promised $272 million for the license itself, plus another $300 million paid out at the stately rate of $10 million a year. Rival suitor Waukegan Gaming offered $216 million while Canadian firm Trilliant Gaming flung $406 million in upfront money onto the table.
Trilliant’s proposed management team also boasted former MGM Grand President Alex Yemenidjian, as well as Joe Billhimer and Karen Sock, both of whom had presided over multiple Mississippi casinos. However, while Trilliant said its Rosemont location was "underserved," its own map showed a territory that overlapped with those of eight other riverboat casinos.
The final nail in Trilliant’s coffin was Rosemont itself, which The Associated Press described as "a Chicago suburb tainted by alleged mob connections that have again cost it a casino project." As for Waukegan Gaming, the Illinois Gaming Board disapproved of its "questionable associations and business dealings," as well as campaign donations to the mayor of Waukegan.
Bluhm’s outfit was deemed the most financially reliable and regulators also liked its proximity to O’Hare International Airport. The 50,000-square-foot Midwest Gaming project would be built in the suburb of Des Plaines, where the median household income is an above-average $57,000 – no small consideration if you’re a ‘locals’ casino. The city, in turn, will share a quarter of the taxes it collects with the 10 most depressed towns in Cook County.
Not everyone was a fan of the decision. Sniffed the Rev. Eugene Winkler, "We have become accustomed to the stench of gambling and its effects in Illinois. That's the problem we have grown used to. Corruption in government, pay-to-play, headline grabbers and behind-the-scenes operators, but real moral and ethical issues are at stake."
From what pulpit did the Rev. Winkler issue this jeremiad? A seat on the Illinois Gaming Board, that’s where.
