Bally’s Corporation announced that it has closed a deal with a leading real estate private equity firm in Chicago. For $200 million, the investor acquired the nearly 30-acre Tribune Publishing Center site on which Bally’s Chicago would be built.
The name of the investor was not mentioned in the announcement.
Bali entered into a land lease agreement with the investor to lease back the land. The ground lease includes an initial term of 99 years, followed by ten separate 20-year renewals at Bally’s option.
As part of the transaction, with specified construction phases completed, at Bally’s request, the investor will finance up to an additional $300 million to develop Bally’s Chicago through a ground lease structure.
The initial lease rate under the ground lease is calculated to give the investor an annual capitalization rate of 8.5%, with an annual capitalization rate of 7.0% adjusted upon Bally’s receipt of certain development entitlements and game approvals. Rent is also subject to the role CPI Increases.
“We are excited to partner with one of Chicago’s leading real estate private equity firms as we progress building our flagship $1.7 billion property in the Chicago market,” said Sue Kim, Chairman of Bally’s. We continue to demonstrate our commitment to delivering a world-class entertainment facility that supports the economy and community of Chicago.”
“This transaction is an important step in our plan to develop Bally’s Chicago as we continue to work towards our temporary casino opening in mid-2023,” said Bobby Lavan, CFO of Bally’s. “With this new real estate partnership, Bally’s has ample cash on hand to fund Bally’s Chicago without The need to access the capital markets.”
Bally can buy back the land from the investor at a fixed capitalization rate over the four to eight years of the lease term. In addition, if certain milestones are not met or Bally defaults under the lease, the investor may require Bally to take back the land at a specified price.
Bally’s Chicago comes in at $1.7 billion.
Bally’s Chicago will include 3,400 slots and 170 table games. The project also provides Bally’s with the exclusive right to operate a temporary casino for up to three years while the permanent casino is constructed.