With an October 25 deadline quickly approaching, Bally’s is expected to close on the purchase of the 30-acre Freedom Center in River West any day−another step closer to building its $1.74 billion casino complex in downtown Chicago. The property is owned by Dallas-based Nexstar Media Group, which owns the Chicago Tribune.
The Chicago City Council tilted toward Bally’s, voting 41-7, when the company announced it would make a $40 million upfront payment. The funds prevented a pre-election property tax increase and helped keep police and fire pensions solvent. The proposed casino is expected to generate $200 million in annual tax revenue for the city and transform the industrial site into an entertainment district.
Bally’s submitted its application for a Chicago casino license to the Illinois Gaming Board in August and requested amendment to its proposal with the Plan Commission in September. Bally’s plans to open a temporary, 800-position facility at the historic Medinah Temple by June 2023. The permanent casino, expected to open by 2026, will feature 3,400 slots and 173 table games, plus 10 dining venues, a 500-room hotel tower with a rooftop bar, 1,000-guest outdoor entertainment area and an outdoor green space.
The River North Residents Association has expressed opposition to the casino—the group represents 23,000 people who reside near the proposed site. The group is seeking significant adjustments to the plan, such as eliminating the outdoor performance area, to lessen the impact on the area.
The Freedom Center prints the Chicago Tribune, Wall Street Journal, New York Times, Chicago Sun-Times and other newspapers. It will be demolished as part of the casino development.
As the development continues to unfold, analysts, including Carlo Santarelli of Deutsche Bank, are bullish on the operator’s growth prospects moving forward.
Santarelli is placing a “Hold” rating on the stock (ticker symbol BALY) and a price target of $23 a share. The stock closed at $20.86 on October 12 and has been trading around $22.60. The 52-week low was $17.54 and the 52-week high was $52.34.
Though the movement has mostly been negative, Santorelli’s opinion has been anything but. He said in a call that he liked the diversity of Bally’s asset portfolio, both in terms of geographic distribution and differentiation of market niches.
“Bally’s is relatively well positioned within the peer group for whichever economic environment emerges in gaming over the near to medium term,”
Santarelli said.
He added that the company was “one of the better growth stories in the regional gaming sector,” both in terms of brick-and-mortar development and enlargement of its North American interactive product offerings.
“That said, we believe the financial leverage, the current financing environment as it pertains to the development pipeline, and execution risk in both the Casino and North American Interactive segments, in the current market climate, make for a challenging risk-reward,” Santarelli said. He added that 2023 and 2024 Wall Street-consensus forecasts were perilous and “negative revisions” could be coming in the near to medium term.
But Santorelli said he sees more upside than down in the stock, pointing to the company’s Chicago megaresort. He also lauded the aggression and value-focused nature of Bally’s merger-and-acquisition history, an environment that “could again heat up.”
Some of the diversity in Bally’s portfolio include Gamesys, one of the leading purveyors of British iGaming and bingo, responsible for £728 million in 2020 revenue. The International Interactive segment of Bally’s business is responsible for 45 percent of company revenue, with U.S. casinos making up the remaining 53 percent.
