Bally's, Oak Street Seal $500M Sale-Leaseback for Chicago Casino Site

Oak Street Real Estate Capital has purchased the 30-acre site of the former Chicago Tribune publishing center for $200M in a sale-leaseback deal with Bally’s that will help fund a $1.7B casino, hotel and entertainment complex the gaming giant plans to build on the site.

The complex, Chicago’s first casino, was approved by the city in May.

Oak Street will provide $300M to fund the development, as well as a 99-year ground lease on the site, which is located near the intersection of Chicago and Halsted Street, according to a report in the Chicago Tribune. The deal includes 10 optional 20-year renewals on the lease.

The project is under construction, with a temporary casino planning to open in a former Bloomingdales store at 600 Wabash Ave. by the middle of next year while construction on the overall development continues through its scheduled completion date in 2026. The Wabash site currently is the vacant Medinah Temple.

The initial rental rate on the property will yield Oak Street an 8.5% annual capitalization rate, adjusting to 7% as the casino receives gaming approvals. The rent rate is subject to CPI increases, the companies said in a release.

Bally’s has the option to repurchase the land in years four through eight of the lease term. If the gaming giant doesn’t achieve certain milestones, like obtaining a gaming license, or default on the lease, Oak Street may require Bally’s to repurchase the land.

“With this new real estate partnership, Bally’s has ample liquidity on hand to fund Bally’s Chicago without needing to access the capital markets,” said Bobby Lavan, Bally’s CFO, in a statement.

Liquidity has been an issue for Bally’s: in its Q3 2022 earnings statement, the company reported $3.4B in debt and only $165M in cash on hand. The transaction with Oak Street is the third sale-leaseback deal for Bally’s this year.

In June, Bally’s sold the property and buildings of its two Rhode Island casinos—the Twin River Lincoln Casino Resort and the Tiverton Casino & Hotel—to Pennsylvania-based Gaming & Leisure Properties in a $1B sale-leaseback transaction.

In April, Bally’s sold two properties in Illinois and Colorado to Gaming & Leisure Properties in a $150M sale-leaseback deal.

On the waterfront site in the city’s River West neighborhood, Bally’s will build a casino encompassing 3,400 slot machines and 170 table games, as well as 10 food and beverage venues. Plans also call for a 500-room hotel with a rooftop bar; a 65K SF entertainment center; a 20K SF exhibition hall; and an outdoor music venue.

Bally’s deal with the city required the company to pay the city $40M at the contract signing, with $4M in yearly payments and an anticipated $200M in tax revenue annually. Bally’s also agreed to make $74M in infrastructure improvements in the River West district.