The deal comes just two weeks after publicly traded Bally’s told investors it was nearing a final decision. Sale-leaseback agreement To help finance a $1.7 billion casino and entertainment complex that it plans to build on the current site of the Chicago Tribune’s Freedom Center printing plant. Barry’s statement said Oak Street owns the land where the casino complex is located and plans to “provide up to $300 million in additional funding” for the development of the project.
Bally’s acquired the site last week from Irving, Texas-based Nexstar Media Group.
Oak Street’s ownership of the property adds a new complication to Barry’s ongoing work to seek final approval for the new casino. The project requires approval from the Chicago Planning Commission and the Illinois Gaming Commission before the gambling company can proceed.
Officials at Mayor Lori Lightfoot’s office, which picked Bally’s and River West Site as the winning bidders to build the new casino earlier this year, recently learned that sale/leaseback negotiations were underway. Understanding who owns the property is an important consideration for city commissions in deciding whether to approve a real estate project.
The same applies to the Illinois Gaming Commission, which scrutinizes Oak Street and plans for Bally’s to fund large-scale projects as it considers whether to grant Bally’s a license to develop and operate the facility. Gaming USA editor Alan R. Woinski said in a report after Bally’s third-quarter earnings release that the company had just under $165 million in cash and 34 million dollars on its balance sheet. It claims to have over $100 million in debt.
Companies typically sell and lease back real estate to create liquidity for their business or to put capital into other investments. Oak Street’s acquisition of the property and a substantial commitment to help finance its construction will free up cash for Bally’s. This can be very important as interest rates rise rapidly and borrowing costs rise. “With this new real estate partnership, Bally’s will have sufficient liquidity on hand to fund Bally’s Chicago without the need to access the capital markets.
Bally’s, which is seeking final approval for its million-square-foot complex along the North Fork of the Chicago River, aims to open a temporary casino next year in the Medinah Temple building on the River North.
Bally’s has not disclosed how much it will pay in rent under the ground lease, but the annual return on investment in Oak Street (known as the capitalization rate) was initially 8.5%, and Bally’s has given certain approvals. It says it will drop to 7% a year if we get . According to a company statement, the project. Bally’s also has the option to repurchase the land “at property tax rates” between his four and eight years in the lease term, and if Bally’s fails to meet the terms of the lease, Oak Street will be “designated For a price” the land can be reacquired. the statement said.
Spokespeople for Oak Street and its New York-based parent company, Blue Owl Capital, declined to comment. Blue Owl was formed last year through the merger of two companies, the publicly traded so-called Blank His Check Company and the private His Other, which specializes in lending to equity investors.
Blue Owl acquired Oak Street for $950 million late last year. Oak Street was founded in 2009 by Northern Suburbs natives and financial industry professionals Mark Sahl and Jim Hennessy.
Helping to develop a casino from scratch sets it apart from the typical Oak Street deal. The company purchases large amounts of real estate from creditworthy companies such as First Midwest Bank, Sherwin-Williams, Motorola and Big Lots, signs long-term leases to rent them out, and delivers relatively strong and consistent yields. We are giving back to investors. Major municipal pension plans and other institutional investors hire them to invest their money, many of which generate an 8% monthly return on investment, according to Oak Street.