(UPDATES WITH BALLY’S STATEMENT)
Chicago Mayor Lori Lightfoot announced the three finalists vying for the city’s downtown casino license Tuesday, shortlisting Bally’s Corp. at the Tribune Site, Hard Rock at the ONE Central Site, and Rivers 78 at the Rivers 78 Site. The Rivers 78 proposal was submitted by Rush Street Gaming.
Two proposals did not advance: Rivers McCormick (also submitted by Rush Street) and Bally’s McCormick. Both called for casinos in an area that would have significantly impacted McCormick Plaza’s industry business — estimated by the state-created Metropolitan Pier and Exposition Authority to be $14 billion annually through 2034 — as it navigates a post-pandemic recovery.
“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,” Lightfoot said in a statement. “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.”
The city will enter negotiations with the three finalists, with the goal to enter a Host Community Agreement with one finalist to present to the Chicago City Council during the summer. Following city council approval, that operator then can submit an application to the Illinois Gaming Board for the downtown casino license.
All three finalists are already licensed by the IGB to conduct gaming in the state. Rush Street operates Rivers Casino in Des Plaines, which is less than 20 miles from downtown Chicago; Bally’s has a venue in Quad Cities near the Iowa state line; and Hard Rock currently operates a temporary venue in Rockford as it constructs a permanent casino near the Wisconsin border.
“We’re excited about the prospect of creating a new entertainment destination for the city of Chicago, and we’re humbled to be chosen for the next phase of the selection process,” the Hard Rock Chicago team said in a statement via email. “We look forward to a robust dialogue with city leaders about Hard Rock Chicago and what we bring to the table. Chicago is a global city that deserves a global operator.”
“We continue to believe we have the strongest bid and we’re glad to be a finalist. From the beginning we have been site agnostic, and intentionally put forward two very different sites in order to allow the City to ultimately decide. Of the three finalists, we believe that the Tribune site is the most attractive and has the highest revenue generation potential for the City,” said Chris Jewett, Vice President of Corporate Development, in a statement.
Chicago officials expect the downtown casino to generate approximately $800 million in annual gaming revenue at full maturation, which would result in approximately $200 million in local taxes that would go toward addressing budget shortfalls and pension obligations per state laws. The state would also receive approximately $200 million in taxes annually, nearly matching the 2021 overall state total of $248.7 million in receipts from nearly $1.2 billion in casino gaming revenue.
Bringing a casino to downtown Chicago has been an elusive goal over the past 30 years for mayoral administrations. Lightfoot, seeking reelection next February, has been able to push forward to realize that vision. Following the gaming expansion bill signed into law in June 2019 by Illinois Gov. JB Pritzker that awarded the downtown area a casino license and legalized sports wagering, Lightfoot’s administration in 2020 was able to successfully revise the tax rates for a potential downtown casino, which provided a viable path for potential operators.
Updated number crunching from Union Gaming
And then there were three. https://t.co/uUpRZHhvVA
— Chicago Tribune (@chicagotribune) March 22, 2022
Union Gaming Analytics offered an updated study for estimated operator revenue and annual tax revenue for the city following discussions with the groups submitting the five proposals. The three finalists, if their projects are completed in full, were the three highest projected revenue generators by year six of operation.
The study projected Bally’s Tribune proposal with a 500-room hotel would generate $191.6 million in tax revenue compared to $176.9 million with a 100-room hotel. Bally’s has also pledged an additional upfront payment of $25 million to the city if selected, though it is possible it may sweeten that offer considering its McCormick proposal included a $50 million additional upfront payment had it been selected.
Chicago Chief Financial Officer Jennie Bennett noted that Rush Street was also amenable to an upfront payment to the city during the negotiation process. Rush Street also expressed a willingness to forgo the reimbursement of $27 million in TIF funds.
If Rivers 78 goes forward with its plan to construct a 1,000-foot observation tower and hotel as part of its design, the revenue projection was $174.2 million compared to $146.5 million without. Hard Rock’s ONE Central proposal is estimated to produce $185.3 million in tax revenue in the sixth year of operation.
Union Gaming Analytics projected that the revenue mix for the winning operator would be 60% originating from slot and EGD play, 39% from table games, and 1% from sports wagering. The annual adjusted gross revenue projected in year three of operations varied notably among the three finalists, with the study taking into account contingencies of each proposal.
Bally’s had the highest projected overall AGR at $816.1 million and also the largest locally driven AGR with $636.7 million. Hard Rock was estimated to generate $805.5 million, with nearly 25% coming from tourist and non-local sources. Union Gaming presented two totals for Rivers 78: $751.1 million with the observation tower and hotel, compared to $668.6 million without.
Finalists still have plenty of work remaining
NEW: Chicago’s drawn-out casino sweepstakes is down to three-of-a-kind, as Mayor Lori Lightfoot on Tuesday passed on a pair of proposals tied to McCormick Place — and extended her selection process by at least a few months. https://t.co/SqrfoIQvTI
— Chicago Sun-Times (@Suntimes) March 22, 2022
Of the three finalists, Hard Rock looks to have the most logistical hurdles when it comes to approvals needed for its full $1.7 billion project, including a P3 agreement for a public-private partnership should the state provide funding for the transit portion of ONE Central, as well as Illinois Department of Transportation approval for reconfiguring portions of DuSable Lake Shore Drive.
The city, however, noted that Hard Rock’s bid currently does not hinge on state funding because it is a phased proposal and not contingent on ONE Central going forward. Deputy Mayor Samir Mayekar pointed out the “south part of the parcel there would be a contained phase which wouldn’t be contingent on the two other districts that were proposed under ONE Central. … It would buy optionality if they choose to advance ONE Central but the proposal is not dependent on the entirety of ONE Central.”
Both Rush Street and Hard Rock must also deal with the potential revenue diversions of casino holdings near downtown Chicago. Rivers Casino in Des Plaines currently accounts for more than half the state’s table games revenue on a consistent basis, but the Union Gaming study found the differing tax rates at Des Plaines and downtown would not create more than a marginal difference in projected tax revenue for the city.
In addition to its Rockford property, Hard Rock also opened a casino in northern Indiana last year less than 35 miles from its proposed downtown location. The city expects to repatriate approximately $190 million in gaming revenue from Indiana with the downtown casino, more than half the $331 million forecast by the Union Gaming study when factoring in the racino in early stages of construction at Hawthorne Race Course and the casino to be built by Wind Creek in the south suburbs of Cook County.
Bally’s has no such concerns regarding gaming revenue diversions, but there is the possibility the company may be taken private at some point during the negotiating process with the city or later. Chairman Soo Kim, who is also the managing partner of Standard General LP — Bally’s largest shareholder — made a $1.6 billion takeover bid for the remaining 43 million shares available in January.
What doomed the McCormick proposals?
The two McCormick Place bids are out; Hard Rock, Rivers 78, and Bally's Tribune are in as finalists for Chicago's casino site. https://t.co/Pk0XAacSVY
— Crain's Chicago Business (@CrainsChicago) March 22, 2022
If there was one proposal among the five that looked to be facing an uphill climb from the start, it was Bally’s McCormick. There was opposition on two fronts to the casino being built at the truck marshaling yards from both the MPEA and local Alderwoman Sophia King.
The MPEA claims having the truck marshaling yards, which provides up to 700 trailer spaces during convention events, provides an important logistical advantage for its convention industry business. If Bally’s had to configure a new marshaling yard, the city’s report noted, it would “likely add execution risk and time to the casino project timeline.”
King, whose 4th Ward includes Bronzeville and the Lakefront, objected to the casino because the adjacent area was already approved by the Chicago City Council for a $4 billion redevelopment that included 4,800 homes, retail and office space, and research facilities on the site of the former Michael Reese Hospital.
The largest issue with the Rivers McCormick plan was an insufficient revenue stream for the MPEA for expansion purposes, despite Rivers being willing to absorb the $500 million price tag for deferred maintenance. Additionally, while Rivers could have opened a permanent venue as early as 2024, finding replacement space for the committed convention events at MPEA could have pushed back that timeline as far as 2029. The city did not find that to its liking considering the potential lost tax revenue of at least $400 million.
Photo: Shutterstock
