Illinois gaming regulators voted unanimously Wednesday to grant findings of “preliminary suitability” to developers for new casinos in Waukegan and the southern suburbs of Cook County, bringing a selection process that has lasted more than two years closer to an end.
The four-member Illinois Gaming Board (IGB) chose Las Vegas-based Full House Resorts and its $400m American Place resort for a casino license in the city of Waukegan, while another $400m project submitted by Alabama-based Wind Creek Hospitality, a subsidiary of the Poarch Band of Creek Indians, was chosen for Cook County.
The IGB had planned to issue the Waukegan approval last month, but delayed its decision while a lawsuit filed by a losing bidder seeking a temporary injunction to stop the vote was being considered by a Cook County judge.
The Forest County Potawatomi Community sued Waukegan in 2019 after the city voted to eliminate its proposal.
Cook County Judge Cecilia Horan denied the Wisconsin tribe’s request on Tuesday saying the tribe lacked legal standing to delay the selection.
Both companies will face a final vote by the IGB on their licensure as soon as next month.
Dan Lee, CEO of Full House, told analysts during a third-quarter earnings conference call last month that the company has been working on a casino project in Illinois for years.
“We studied it and decided the one we like the best was Waukegan,” Lee said. “They also have legalized a casino in downtown Chicago, that’s really a big opportunity for somebody, and probably too big for our company.”
Lee described Waukegan as a great market that is not conveniently close to another casino. In a statement issued after the IGB's decision on Wednesday, Lee thanked regulators for selecting the company and said he expects to open a temporary casino by mid-2022.
The new Illinois casino will expand Full House’s footprint to six casinos in five states, including Mississippi, Colorado, Indiana and Nevada.
Chad Beynon, an analyst with Macquarie Research, described the Waukegan deal as “the most significant opportunity in company history.”
“Digging into the numbers, Full House originally forecasted $165m of annual gross gaming revenue but given the stronger-than-expected surge in broader results as well as elimination of potential competition in Arlington, 30 miles away, we believe this may be higher,” Beynon wrote in a research note.
Churchill Downs, which owns Arlington Park racetrack in Arlington, declined to apply for a casino license arguing the tax rate was too high for the track to achieve profitability through any future casino expansion.
The 326-acre racetrack, which opened in 1927, was sold in September to the National Football League’s Chicago Bears for $197.2m, with the sale scheduled to close in either late 2022 or early 2023.
“With a tax rate of 30 percent, we estimate that Full House could generate margins close to the U.S. average of 30 percent,” Beynon said. “That would result in EBITDA of $40m to $60m.”
In addition, Beynon wrote the access to Illinois brings exposure to online sports betting, as the state would offer another skin and the possibility of internet gaming launching in future, “which we would expect Full House to give the skin away for market access fees.”
Illinois Governor J.B. Pritzker, a Democrat, signed a massive capital spending bill into law in June 2019 that included major gaming reforms for the state, including up to six new casinos and the legalization of sports betting.
The developments have been targeted for communities in the state that have been economically disadvantaged for decades.
The IGB’s preliminary approval on Wednesday comes about a month after the Indiana Gaming Commission chose Churchill Downs over Full House and two other operators to develop a casino in the city of Terre Haute in Vigo County.
The final commission vote was 7-0 for Churchill Downs, which came after a 5-2 vote failed to award Full House the license. Full House already operates Rising Star Casino in Rising Sun, Indiana.