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Wynn Resorts sells Encore Harbor Casino to Realty Income Corporation

Wynn Resorts Limited has announced the successful sale of its Encore Boston Harbor casino resort to Realty Income Corporation. The sale of the group’s “largest private, single-phase development in the history of the Commonwealth of Massachusetts” went for $1.7 billion in cash “having received all necessary regulatory approvals”. Experts see it as the company divesting itself of some of its assets to make room for newer projects in order to be well-positioned for the future.

The transaction, which was a sales-leaseback, comes at a cash cap rate of 5.9%, says an official release from the group. Both parties agreed that for the lease, Wynn will pay $100 million over the next 30 years and an option to renew for another 30 years. The rent increase rate comes at 1.75% but begins to increase on an annual basis for the first ten years and for the following 20 years, at the greater of 1.75% and the Consumer Price Index (CPI) increase in the prior year.

According to Wynn’s official release, “The lease has an initial annual rent of $100 million for a term of thirty years with one thirty-year renewal option. The rent will escalate annually at a rate of 1.75% for the first ten years and the greater of 1.75% or CPI (capped at 2.5%) over the remaining initial lease term.”

With the sales leaseback, the casino company will continue operating the Encore Boston Harbor. This means the company is only selling the real estate and not the operational share of the company. In addition, the group plans to keep the 13-acres of land that bears the Encore brand name on Broadway, Everett as it earlier announced “plans to construct an expansion that is expected to include additional covered parking along with other non-gaming amenities.”

Wynn has said that the transaction has added to the group’s global liquidity to a tune of $4.4 billion. In view of its recent successful license renewal for its subsidiaries in Macau SAR and its plans for an integrated resort in Ras Al Khaimah, UAE, the sale will help to boost its financial standing to be able to accomplish these projects.

For Realty Income, this would be its first foray into owning gaming property as the developer already controls 11,700 real estate properties under long-term lease agreements.

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