Bally’s Corporation (NYSE:BALY) announced on Monday that struck a deal to partner with a private investor on an up to $500M sale leaseback for future site of Bally’s Chicago.
Wells Fargo called Bally’s deal to enter into a lease agreement for the land on which its $1.7B Chicago casino will be built a positive step in addressing the financing overhang relating to the project.
Bally’s counterparty is an unnamed Chicago real estate private equity firm, and the casino operator will pay an initial 8.5% cap rate on the $200M of land, which will step down to 7.0% as construction milestones are completed. Bally’s (BALY) can request the investor provide up to $300M more in funding, also at a 7.0% cap rate. Wells Fargo estimates rent payments will be ~$15m in 2023 and $35M in 2024.
The lease is noted to be effective immediately, and has a unique provision stipulating that during year 4 to year 8, Bally’s (BALY) can repurchase the land at a fixed capitalization rate.
Analyst Daniel Politzer thinks that after the Chicago Casino is fully operational, Bally’s might repurchase the land and going to market for a full-scale property level sale/leaseback.
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