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In a new leaseback deal, Wynn Resorts is selling Encore Boston Harbor to help fund its $2 billion casino resort in the United Arab Emirates. The gaming company will sell the real estate assets of the casino to Realty Income (RI). A real estate investment trust (REIT) for $1.7 billion.
More importantly, Wynn will continue to operate the Massachusetts casino but pay rent to Realty Income for a team of 30 years.
The bigger picture on the sale of Encore Boston Harbor
During the company’s Q4 earnings call, Wynn CEO Craig Billings touched on the new resort project on Al Marjan Island in Ras Al Khaimah, UAE.
Billings said:
“[We] are thrilled about the project, which will further diversify our business while extending our brand to the Middle East and Europe.”
As of writing, $WYNN shares were trading at $94.83 per share, down 1.44% on the day.
Wynn will finance the $2 billion overseas project with 50% debt and 50% equity, of which Wynn’s portion will be 25% to 40%, according to Billings.
Regarding the sale of Encore Boston, Billings told analysts the deal is,
“Nothing more than a financing and capital structure decision.”
The move gives Wynn more financial flexibility to grow its business in the US and abroad. However, Billings made it clear the company does not plan to sell any of its assets in Las Vegas.
“Las Vegas is a very different market compared to regional markets,” Billings said.
He continued by saying:
“Additional market deleveraging in an economic downturn is more extreme, as we saw in 2009 and the need for continuous and sizable reinvestment in order to stay relevant is high. It is fundamental that we maintain consistent service levels and [capital expenditures] through the business cycle. I never want to be in a position where, in the midst of a downturn, we have to choose between our world-class service and escrowing rent or paying rent and investing in our property.”
Selling the Massachusetts casino
The $2.6 billion casino resort, Encore Boston Harbor, opened in 2019. Over the final three months of 2021, the company had lost $1.37 a share in the revenue of $1.05 billion.
According to Wynn,
“Operating revenues from Encore Boston Harbor were $204 million for the fourth quarter of 2021, a 96.4 percent increase from $103.9 million for the fourth quarter of 2020.”
By the end of last year, Wynn had $2.52 billion, cash equivalents, and debt of $11.93 billion.
Under the of the sale, Wynn will pay Realty Income $100 million in annual rent with an initial 30-year lease, with one 30-year tenant renewal option.
