Bally’s has closed a deal worth up to $500m (£423.3m/€488.1m) with a real estate private equity firm in Chicago, wherein the firm acquired the 30-acre Tribune Publishing Center site where Bally’s Chicago will be built.
As part of the deal, Bally’s will lease back the land from the real estate firm in a ground lease agreement. The agreement consists of an initial 99-year term, which will be followed by ten separate 20-year renewals.
In addition, the firm will invest up to $300m for Bally’s Chicago’s development through the deal.
“We are excited to be partnering with one of Chicago’s leading real estate private equity firm as we progress with building our $1.7bn flagship property in the Chicago market,” said Soo Kim, chair of Bally’s board. “We continue to demonstrate our commitment to delivering a world class entertainment facility that supports Chicago’s economy and community.”
The rental rate for the lease is set to yield an 8.5% annual capitalization rate for the firm, which will adjust to 7.0% after Bally’s receives specified entitlements and gaming approvals.
The deal also allows Bally’s to repurchase the land from the equity firm at a fixed capitalization rate from the fourth to the eighth year of the lease term. In addition, if certain elements of the deal are not met or if Bally’s defaults under the lease, Bally’s may have to reacquire the site.
“This transaction is an important step in our development plan for Bally’s Chicago as we continue to work towards opening the temporary casino in mid-2023,” said Bobby Lavan, chief financial officer at Bally’s.
“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.”