Wynn to maintain control
Realty Income Corporation (RIC) is acquiring the real estate assets of the Encore Boston Harbor Resort in Massachusetts for $1.7bn. The deal, announced by RIC on Tuesday, marks the real estate investment trust’s first gaming industry acquisition.
rent starting at $100m each year
RIC has entered a long-term triple net lease agreement with Wynn Resorts. This will see Wynn continue to operate the property in return for paying rent starting at $100m each year. The casino operator also has to cover all of the property’s expenses, such as maintenance, building insurance, and real estate taxes.
The initial lease term is 30 years with a tenant renewal option at the end of that time. The acquisition still requires the relevant regulatory approvals before proceeding. RIC expects the transaction to close in the final quarter of this year.
An attractive investment opportunity
Encore Boston Harbor opened in June 2019 with a total development cost of $2.6bn. It offers five-star dining, hotel rooms, shopping, gambling, and entertainment. Not even five miles from downtown Boston, it is the sole property of its kind in the metropolitan area of the city.
In a statement released Tuesday, Realty Income CEO and president Sumit Roy commented on the acquisition, he said: “This transaction demonstrates our ability to utilize our platform and scale to acquire prime real estate assets across a variety of industries in alignment with our investment criteria.”
The press release for the acquisition outlines details regarding the property’s attractive risk-adjusted returns and growth potential. The current regional gaming market in the Boston area generates gross gaming revenue of about $2.6bn each year.
A popular approach
Wynn Resorts CEO Craig Billings said that the proceeds from the real estate sale will provide the company “with liquidity for several of our upcoming development projects and the potential to retire other debt.”
Other casino companies have entered similar sale-leaseback deals over the past few years. For instance, MGM Resorts International has done so with properties like the Bellagio, Aria, and the Vdara. These sales have formed part of the company’s asset-light strategy.