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Wynn Reaches $1.7B Deal To Sell, Lease Back Encore Boston Harbor

Encore Boston Harbor
Bisnow/Cameron Sperance
Encore Boston Harbor

Wynn Resorts is cashing out from its massive Encore Boston Harbor project less than three years after opening the casino resort.

The company reached a sale-leaseback deal to sell Encore Boston Harbor's land and real estate assets for $1.7B to Realty Income, Wynn announced Tuesday. The gaming giant spent $2.6B developing the casino and hotel just over the border with Boston, which opened in 2019.

Under the terms of the deal, expected to close in the fourth quarter, Wynn would sign a 30-year, triple-net lease at an initial rent of $100M. That rent would increase throughout the term of the lease, starting at a 1.75% rate for the first 10 years.

Wynn would continue to operate the casino, and it would also retain its rights to the 13-acre development site on the east side of Broadway in Everett, where it plans to build additional amenities and parking for the casino.

The deal, which traded at a 5.9% cap rate, gives Wynn the option to sell the adjacent project to Realty Income for up to $20M.

"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,” Wynn CEO Craig Billings said in a release. “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.”

The gaming company, which trades on the Nasdaq as WYNN, announced the deal just after the market closed Tuesday, and its stock dropped by more than 2% in after-hours trading.

Realty Income, a San Diego-based REIT, owns nearly 11,000 commercial properties across the U.S., UK and Spain, with the majority of its assets in retail.

The 3M SF casino, which looms over the Mystic River in Everett, had originally been slated to carry the name of its developer, but that changed after Wynn Resorts CEO Steve Wynn was accused of sexual misconduct and stepped down from the company. The company had been rumored to be exploring a sale of the casino to multiple parties in 2018 and 2019, but no deal was finalized.

The Massachusetts Gaming Commission investigated the allegations against Wynn and levied a $35M fine in April 2019, but it allowed the company to retain its business license, and it opened the casino in June 2019.

Encore Boston Harbor's revenue came in below Wynn's estimates in its first six months of operation, bringing in $314M in gaming revenue between June 23 and the end of December 2019. Then the pandemic struck, and gaming revenue disappeared.

The casino temporarily closed in March 2020 and furloughed 3,000 employees. It then reopened in July 2020 but continued to lose tens of millions of dollars. It began to generate momentum after restrictions were lifted in April 2021, and it recorded its four best months in operation between August and November, the Boston Globe reported in December.

Wynn worked with Kirkland & Ellis LLP and Latham & Watkins LLP as legal advisers on the deal.

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