A Southern California investment firm that owns a small stake in Bally’s Corp. said the casino operator should sell its interest in the now-closed Tropicana Las Vegas because the company has “no ability to fund” any new development on the Strip.

The letter comes as Bally’s is carrying more than $3.6 billion in long-term debt and is facing an $800 million shortfall in its agreement to build a $1.7 billion casino resort in downtown Chicago — leading company Chairman Soo Kim, whose New York City-based Standard Growth hedge fund is the company’s largest stockholder, to offer a $15 per share buyout offer to take the company private. On Monday, Fitch Ratings Services downgraded portions of Bally’s debt to a negative rating — a potential default on its loan obligations —  due to the company’s “relatively high” debt, which could affect its ability to finance new developments.

The Tropicana is on track to be demolished later this year to make way for a $1.5 billion Major League Baseball stadium for the relocating Oakland Athletics. But the landlord has no plans to lower the rent of the land even after the buildings are gone.

K&F Growth Capital, which is headed by two longtime gaming industry venture capitalists, wants the Bally’s board to reject the March 12 buyout offer, which was 41 percent higher than the previous day’s closing price on the New York Stock Exchange. On Wednesday, Bally’s shares closed at $13.94.

In a letter released Tuesday, K&F Growth called Kim’s offer “self-serving and undervalued. It is counter to the best interests of all stakeholders, offering a fraction of the value otherwise attainable.”

A committee of Bally’s board members is evaluating Kim’s buyout offer. The company has declined to comment on the matter.

K&F is managed by Dan Fetters and Edward King, co-founding partners in Acies Acquisition Corp., a special purpose acquisition company that helped Las Vegas-based social gaming provider Playstudios go public in 2021. 

Former MGM Resorts International CEO Jim Murren and gaming industry analyst and investor Chris Grove were partners in Acies and are involved in a new fund Fetters and King created that focuses on gaming, sports betting and interactive entertainment companies. 

In an email, King declined to disclose K&F’s stake in Bally’s, saying it was “below the regulatory filing threshold” of 5 percent. 

With the closure of the Tropicana, Bally’s now operates 15 casinos nationally, including Bally’s Lake Tahoe. 

Bally’s has a long-term lease agreement on the 35-acre Tropicana site with real estate investment trust Gaming and Leisure Properties for $10.5 million a year. 

In an email response to questions from The Nevada Independent on Wednesday, Gaming and Leisure’s Chief Operating Officer Brandon Moore said, “We do not anticipate any changes to the ground rent obligations under the ground lease as a result of the closure, including any deferral or other adjustment.” 

Moore said Bally’s owns the Tropicana building and its contents, which the company plans to sell through an auction house.

Gaming and Leisure has committed $175 million toward the demolition of the Tropicana building, which Moore said was “more than enough to cover the demolition and removal” to clear the site before next April when construction on the stadium is expected to begin.

Last month, the Las Vegas Stadium Authority approved a community benefits agreement with the A’s for the 33,000-seat stadium. The agreement was established as part of the legislation approved last year that included $380 million in public financing for the stadium.

The team has still not said how its $1.2 billion private financing piece will be handled, although owner John Fisher told the San Francisco Chronicle in March that $200 million would come from debt, $500 million would come from his family and $500 million would come from yet-to-be-determined equity investors.

Bally’s is not obligated for any financing for the stadium, but company officials have previously said it would build amenities surrounding the ballpark, potentially including a new hotel-casino.

However, K&F Growth said a Las Vegas project “creates a cloud of uncertainty for the foreseeable future. Bally’s should immediately engage in exploratory discussions with potential operating partners and [acquirers].”

In their letter, Fetters and King said that Bally’s should also drop out of the bidding to build a New York City-area casino and sell the golf course associated with the site. They also want the company to sell several technology businesses associated with expanding its struggling sports betting operation.

Instead, they want Bally’s to focus on online casino gaming, which is currently legal in seven states. Bally’s has an exclusive contract in its home state of Rhode Island for an online casino.

“We cannot continue to throw good money after bad,” the K&F letter said. “Bally’s should curtail all online sports activity to a business that is purely an amenity offering and employ a holistic rethink of all online casino[s].”

In Chicago, where Bally’s is operating a temporary casino ahead of the planned resort that is expected to open in 2026 or 2027, K&F suggested the company find a development partner.