A comedy of errors is playing out in Chicago. After Mayor Lori Lightfoot (D) was reported by the Chicago Sun-Times to have gift-wrapped the winning bid for Bally’s Corp., Her Honor immediately backpedaled, saying, “We have a very specific process, and the process is there is an evaluation committee that’s been hard at work through this process. They will evaluate all the information that has been provided by the three finalists and they will give their recommendation to me.” Evidently Lightfoot didn’t trust her own process or was lying through her teeth, as reports leaked out later that day that Bally’s Chairman Soo Kim was flying to the Second City to be awarded the gaming concession.
The fait accompli went out over the wires yesterday morning, in an official press release in which Lightfoot said, “Following significant analyses and community input on all aspects of our three finalists for Chicago’s casino license, the selection committee and I have chosen Bally’s to move forward in the development of the City’s first integrated casino resort. We are confident that Bally’s Tribune Publishing Center development will shore up the City’s pension funds, create thousands of good-paying jobs, and lead to a bright financial future for our city.” Chimed in Kim, “We would like to thank Mayor Lightfoot and her office for conducting a tough, but fair, RFP process, and selecting Bally’s Chicago as the final bidder for the City’s casino,” Of course it’s “tough but fair” when you’re the winner. Hard Rock International and Rush Street Gaming‘s Neil Bluhm might disagree.
Nor was Lightfoot coy about why Bally’s got the nod. It had upped its upfront-money offer to $40 million a year, plus $4 million a year on top of tax payments. Lightfoot had clubbed casino applicants for more money like so many baby seals and Bally’s submitted. Other selection criteria were 60% minority hiring with a focus on underprivileged neighborhoods, crowdfunding for small investors so they can increase their equity “with non-recourse debt,” a temporary casino at crime-afflicted, empty Medinah Temple, smack in the heart of the North Side, and the support of local labor unions.
Although the city government has to ‘memorialize’ the agreement, that seems a done deal, with Walter Burnett and seven other aldermen quickly forming a chorus of praise. In a bit of kabuki theatre, the public still gets “a subject matter hearing for the special committee to ask questions about the selected finalist.” That’s mighty big of Lightfoot when it’s a done deal. In a little-noted side benefit, Bally’s also gets slot routes at O’Hare International Airport and Midway Airport, so this is a very george deal for them.
Alderman Brian Hopkins, a vigorous Bally’s detractor, seemed resigned to the inevitable. “The mayor does seem to manage to get 26 votes when she needs to. But this may be the time she doesn’t,” he told the Sun-Times. Grumbled Lightfoot ally Michael Scott Jr., “I know that we need to get it done. I just don’t like the way it’s getting done. You tell us to bake the cake, then you give us a cake already baked. That doesn’t make sense. You ask for a transparent process. You create a committee. The committee asks valid questions. Then you give us one option without answering these questions and without us vetting them? How can I vote ‘yes’ on that? I can’t.” Alderman Brendan Reilly bridled at Lightfoot’s threat of higher property taxes if she didn’t get her way, calling it “a false choice.” Even Lightfoot herself, when she was Police Board president, said a process “only has legitimacy if you follow it.”
Lightfoot, since then, has earned a reputation for riding roughshod over political opposition, culminating in what Crain’s Business called a “decision to shoehorn a proposed casino into a crowded River West neighborhood, despite enormous local opposition and despite the fact that viable alternate locations exist.” Crain‘s ticked off a number of ways in which the fix was in for Bally’s, culminating with the disclosure that the financial projections, in which Kim’s casino came in tops, were the handiwork of a city consultant (Union Gaming) which had previously helped Bally’s with a $696 million stock offering. Conflict of interest much? Lightfoot may also have cut a side deal with a state legislator to keep a casino, any casino, out of the Chinatown neighborhood. She definitely accepted a $600K campaign donation from Medinah Temple owner Albert Friedman right after the two McCormick Place bids were nixed. Yes, there’s some pay-to-play at work here.
Rush Street—whose Rivers 78 was dubbed “the Great Wall against Chinatown”—was disqualified despite a promise to create 425 more jobs than Bally’s plus “an escalator clause that actually could pay the city more than Bally’s if the Chicago casino turns out to be really popular.” Oh, and the selection was made after the much-touted selection committee had held all of—count ’em—one round of meetings, a criticism Lightfoot has imperially brushed aside, saying that things go on inside City Hall all the time to which the public is not privy (or words to that effect).
Those of us who would have chosen ‘none of the above’ among the three finalists in a very flawed process find comfort in the Sun-Times editorial page, which notes that Lightfoot “may have selected an operator who is as green to the action as she is.” Remember, Bally’s owns 14 casinos and has built almost none of them. True, as the paper says, the Hard Rock proposal (above) was “half-baked” and “We can only hope having no casino there helps bury this ill-conceived plan” for $6.5 billion, taxpayer-funded One Central. But three wrongs don’t make a right.
One apolitical supporter of Lightfoot’s decision was gaming analyst Brendan Bussmann, who told CDC Gaming Reports, “I have always thought that the Tribune site was a good site for this opportunity, but they still face the NIMBY factor that will have to be overcome when the Council approves the recommendation from Mayor Lightfoot. While Chicago is a great city, there will continue to be challenges to make this work, as there is little room for error between the tax rate, operational environment and commitments to the city.” The timing is also felicitous as Chicago has been inundated with 1.3 million conventioneers last year and named America’s best city five years in a row by Condé Nast.
“As we are starting to see an increase in hotel occupancy, this news contributes to the light at the end of the tunnel,” enthused Illinois Hotel & Lodging Association CEO Michael Jacobson. But although the ostensible purpose of the casino is to capture tourist dollars, Lightfoot moved that particular goalpost, bloviating, “I want those line of Illinois license plates, that are queued up going to casinos in Indiana, to be coming right here.” Or were locals the real target clientele all along?
Bally’s, in its quarterly earnings call, without taking a victory lap, did obliquely address the question of how it was going to raise $1.7 billion for Bally’s Tribune. Basically it will rob Peter to pay Paul, selling casinos and leasing them back, using the real estate proceeds to fund its Chicago battlefront. The company still has to be licensed for the casino but that should be an easy layup, especially as regulators are already familiar with Bally’s through its Rock Island operation. On a personal note, we are going to miss the old Chicago Tribune publishing building as the missus left a permanent dent in one of the stairwells back in her Tribune days, when she was young and “being rowdy.” Such is the price of progress.
Caesars Rewards members, enjoy your stays at the Flamingo Las Vegas while you still can. Bloomberg confirms Wednesday’s speculation that Caesars Entertainment CEO Tom Reeg is shilling the 3,450-room casino-hotel … for a seemingly delusional $1 billion-plus. Sorry, but The Mirage this is not. Besides, Reeg has already whiffed on plum Planet Hollywood and the heavy hitters—Hard Rock, Tilman Fertitta, the San Manuel Band, Blackstone Group—have put their money elsewhere. Maybe low-rolling Siegel Group can be inveigled. After all, as Bloomberg puts it, “The casino has been offered to private equity firms and other operators, some of whom have been reluctant to buy an older property that needs a lot of maintenance.”
Says a reliable S&G source, “I’ve heard the property was assessed and didn’t come close to the asking price.” No surprise there. Hilton Grand Vacations was reportedly offered it and fled over the horizon. Besides, the value of the Flamingo plummets further once you take all those loyalty players (some of whom we know) out of there. Their affection for the Flamingo will surely be trumped by better offers at other Caesars Strip properties. Whatever Reeg gets for the place will just be a hangnail on Caesars’ $13.5 billion debt burden, a legacy of ‘El Diablo.’ A face-saving sale to Vici Properties, which has right of first refusal, seems like the way this is going to play out.
Jottings: There’s a big showdown coming in Atlantic City, where collective-bargaining agreements expire May 31. Employees—doubtless having taken note of recent revenue gains—want pay increases and big ones. Hard Rock Atlantic City and Ocean Casino Resort are making conciliatory gestures but others are poor-mouthing the labor force … Caesars Sportsbook is crafting a cinema-like sports book at Emagine Royal Oak theater in Michigan. It will provide “cinematic screens, sound systems, heated leather recliners, wifi and individual tables for customers to use when betting on Michigan sporting events.” … The Omaha Tribe of Nebraska is replacing its 17-year-old casino. It broke ground on Lucky 77, a $1.5 million project scheduled to open before year’s end.
Quote of the Day: “You can never grow if you cut back on service, which we rely on our team to provide. Companies that have experienced the Great Resignation have to step back and re-examine what their core values are—re-examine their business on a regular basis, find out what their team needs, and listen to them.”—Emerald Island Casino CEO Tim Brooks on labor retention.
Coming soon … 1Q22 financial results from Penn National Gaming, Golden Entertainment and DraftKings. Plus Cedric Cromwell goes to the slammer.
Thanks for explaining in detail how Bally’s Corp. received the Chicago casino license. The Medinah Temple is in River North and recently there have been some problems with crime in the area but this has affected many different parts of the city: south, west and north sides. Good luck to Bally’s Corp.