In early April, the city of Chicago will issue a request for proposals (RFP) to bring a “world-class casino resort” to the city. Mayor Lori Lightfoot says the project is a “tremendous opportunity” for the right operator.
In a March 4 news conference, Lightfoot said Chicago is ideally positioned to host a casino resort, based on location and population.
“It’s a world-class city, at the crossroads of a lot of different intersections. It’s within a five-hour drive of a lot of destination points in the Midwest and Upper Midwest, the heartland and the border states. A Chicago casino has been a long, long time coming.”
In fact, as a young attorney Lightfoot who was part of a blue-ribbon panel called by then Mayor Richard M. Daley to promote a Chicago casino. Daley suggested the casino should be government-owned in order to deal with “all the repercussions of gambling.”
“You don’t want a casino to hurt all your restaurants,” Daley said. “You want a casino only to be for a casino—not for food and beverages and everything else. You go in there for one reason: to gamble.”
Lightfoot departs from that view. “If you look at casinos that have come online in the last 10 years, the ones that have been really successful aren’t just a box. They’re really the whole package.
“It’s not just people putting coins in a machine or gathered around a table,” she said. “Gaming has evolved significantly over the last few decades. and we want to take full advantage of that trend.”
A summary of the RFI reported that most respondents share the same vision: a true integrated resort model with a hotel, food and beverage outlets, a “multipurpose space to be used for conventions, entertainment and events,” and a retail district as well as parking. Suggested land requirements ranged from just 10 acres to 100.
Global Operators Interested
In December, 11 companies responded to the city’s initial request for information (RFI) about a Windy City casino. On the list were some formidable names: MGM Resorts International, Wynn Resorts, Illinois-based Rush Street Gaming and Hard Rock International, owned by the Seminole Tribe of Florida.
A real estate investment trust, MGM Growth Properties, also participated, as did four real estate developers, a casino consultant and the Chicago Neighborhood Initiative.
Lightfoot told GGB News she was glad to see Vegas-caliber names. “We want an RFP that’s going to be attractive to the top gaming ventures in the world—my hope is that many of them will have Las Vegas addresses. For us, the sky’s the limit.”
She added, “We’re not putting our thumb on the scale for anyone, we just want someone who shares our vision about how tremendous an opportunity this is.”
A portion of tax revenues will be earmarked for the city’s pension system, “which is desperately needed,” Lightfoot said.
‘Built-In’ Customer Base
Some metropolitan casinos—in cities like Detroit, New Orleans and Baltimore, for example—have fallen short in terms of performance expectations. Asked why Chicago will be different, Lightfoot said, “Number one, we have an incredibly diverse and robust economy that’s different from almost every other city in the country. Year after year, we’re identified as one of the key destination points for tourists from across the country and the world. That gives us a head start … Chicago is a fertile ground (with) a built-in class of customers. We’re not generating that from scratch, we already have it, and this will just amplify existing strengths.”
The originally proposed tax rate has been whittled down from an effective rate in the 72 percent range to about 40 percent. According to Lightfoot’s Chief Financial Officer, Jennie Bennett, the initial tax structure “was clearly untenable,” and the revised rate “is supportive of financing a casino that will be viable in Chicago.”
Lightfoot added, “We want to set up the chosen operator for success, and we’re committed to partnering in a way that makes that happen.”
Grant Govertsen, Union Gaming principal and author of a study on the Chicago casino project called the city’s single license “among the best casino-resort development opportunities right now. Covid-19 casino shutdowns, financings to bolster balance sheets and industry teams putting development plans on ice resulted in the Chicago casino opportunity largely flying under the radar last year. Now the combination of available capital and attractive Chicago market metrics make the opportunity prime for a Las Vegas-style integrated resort.”
Govertsen told GGB News that three factors combine to make this a matchless opportunity. The first, clearly, was paring down the original high tax rate, which “left no meat on the bone, with 70 percent of every dollar going to taxes.”
Second was the addition of a backward-looking reconciliation payment, which replaces an upfront multimillion-dollar fee, allows the operator to spread the payment over a number of years, and bases the fee on revenues.
The third factor was the new “site-agnostic” approach.
“When we were retained to do the feasibility study, we got five specific sites within the city, and all of them were economically distressed; they probably wouldn’t have been first choice for any casino developer,” Govertsen said. “Now, whatever site a developer can get their hands on is fair game.”
That could mean a downtown casino, in a town that’s already highly built up, even congested. How will that work?
“It’s not like there are massive plots of land lying around in prime locations,” Govertsen acknowledged. “That could mean a more vertical project, like the Cosmopolitan—it’s on eight acres on the Las Vegas Strip, which is nothing. Or it could be something towards the convention center, McCormick Place, where you could get some crossover from the convention business. A casino developer would need to do some work there to find the right site. You want as exclusive a zone as possible, and I imagine a lot of developers would look centrally.”
In fact, eight of the 11 RFI respondents said the casino should be downtown or “near downtown.” And all of them “expect to leverage existing Chicago facilities such as existing hotels, convention centers, theaters, sports venues, and cultural and other attractions.”
Perhaps most importantly, as Govertsen observed, “Chicago is unserved or underserved in terms of gaming. The city has multiple millions of people, more than enough to support a large casino. The revenue potential is there.”
Lightfoot is all in for the project. “This could have such a catalytic effect on the economy of our city,” she said. “Believe me, I worked the phones, I really pitched folks to get this over the threshold. I certainly expended my own personal political capital, because I knew how important it was.”
Asked if the city could support two casino resorts, Lightfoot replied, “Listen, I love it. But getting just one from our state legislators had the gestation cycle of an elephant. One at a time.”