Wynn Resorts on Wednesday said it has entered into a definitive agreement to sell all of the land and real estate assets of Encore Boston Harbor to Realty Income for $1.7bn in cash.
The transaction represents a 5.9% cap rate, the parties noted.
Wynn Resorts said in a statement it will continue to operate the property “at the five-star standard for which the company is renowned.”
Simultaneous with the closing of the transaction, Wynn Resorts and Realty Income will enter into a triple-net lease agreement for Encore Boston Harbor. The parties said the lease will have an initial total annual rent of $100m and an initial term of 30 years, with one, 30-year tenant renewal option.
Rent under the lease will escalate at 1.75% for the first 10 years of the lease and the greater of 1.75% and the CPI increase during the prior year (capped at 2.50%) over the remainder of the lease term, the two companies said.
Wynn will retain its 13-acre developable land assemblage on the east side of Broadway in Everett, Massachusetts. Wynn said it plans to construct an expansion on the parcel that is expected to include additional covered parking and other non-gaming amenities.
Wynn Resorts added it has secured an option to sell the related land and real estate assets of the expansion to Realty Income for up to $20m of additional rent, at a specified cap rate, for up to six years following the closing of the transaction.
The parties said the transaction is subject to customary closing conditions, including required regulatory approvals. It is expected to be completed during the fourth quarter of this year.
“Encore Boston Harbor is the premier gaming resort on the East Coast and the valuation we achieved in this sale reflects the property’s quality,” Craig Billings, CEO of Wynn Resorts, said in a statement. “Equally important, the bespoke structure and terms of the lease allow us to maintain a great deal of operating flexibility across economic cycles. The proceeds of the transaction also provide us with liquidity for several of our upcoming development projects and the potential to retire other debt.”
Kirkland & Ellis LLP and Latham & Watkins LLP acted as legal advisors to Wynn Resorts in connection with the transaction.
Wynn Resorts is traded on the Nasdaq Global Select Market and is part of the S&P 500 Index. Wynn Resorts owns and operates Wynn Las Vegas, Encore Boston Harbor, Wynn Macau and Wynn Palace, Cotai.
Wynn and Encore Las Vegas features 4,748 hotel rooms, suites and villas. Nearly 70% of the resort’s peak demand is powered by renewable energy. Encore Boston Harbor has 671 hotel rooms. Wynn Macau is a resort located in the Macau Special Administrative Region of the People's Republic of China with 1,010 rooms and suites. Wynn Palace is an integrated resort on the Cotai Strip in Macau, with 1,706 rooms, suites and villas.
