Liquidity is the name of the game in the current economic environment, and Wynn Resorts (WYNN) – Get Free Report is being proactive with its properties.
The Las Vegas-based casino operator announced the completion of a planned sale of land and other real estate assets at its Encore Boston Harbor resort casino for $1.7 billion in cash to Realty Income Corp. (O) – Get Free Report
Wynn will continue to operate the Encore Boston Harbor five-star resort via a sale-leaseback arrangement with Realty Income, the San Diego real estate investment trust.
The lease is valued at $100 million annually for a 30-year term. Rent at the property will escalate at a 1.75% annual rate for the first 10 years of the lease.
While Wynn turns its property into a fresh infusion of capital, Realty Income adds to the more than 11,700 properties that it owns under long-term leases, including its first acquisition in the casino industry.
Wynn Chief Executive Craig Billings has said that the company would not do sale-leaseback deals on any of its properties on the Strip. He said that the situation in Las Vegas is “very different” from regional casino markets, the Las Vegas Review Journal reported.
“For now, we believe we will deliver far more long-term shareholder value by continuing to own our real estate in Las Vegas,” he said.
Vegas Casinos Making Moves
Discretionary spending could be on the chopping block for most Americans as the threat of recession, higher energy prices during the winter, and overall inflation eat into paychecks.
But that hasn’t stopped Las Vegas casino operators from making big moves on and off the Strip.
Vici Properties (VICI) – Get Free Report, which owns the underlying property that many Caesars Entertainment (CZR) – Get Free Report and MGM Resorts (MGM) – Get Free Report casinos sit on, also said it was spending big money this week.
Vici currently owns 50.1% of Mandalay Bay and the MGM Grand. Blackstone Real Estate Income Trust owns the remaining 49.9%.
Now, Vici will acquire Blackstone Real Estate’s 49.9% interest in the joint venture for some $1.27 billion cash. Vici also will assume Blackstone’s pro-rata share of the property-level debt.
The debt has a principal balance of $3 billion, matures in 2032, and bears interest at a fixed rate of 3.558% per year through March 2030.
“We’re excited to further our investment in MGM Grand Las Vegas and Mandalay Bay, two of the largest and highest-quality resorts in what we believe is the leisure and convention destination with the most compelling future demand outlook,” Vici Chief Executive Edward Pitoniak said.
Wynn’s Boston Property
Encore Harbor opened in 2019 at a total cost of $2.6 billion, marking one of Wynn’s biggest investments outside of Las Vegas as the company pushed into regional gambling.
The luxury resort features a 211,000 square foot casino, 671 hotel rooms, 16 dining and lounge venues, and over 70,000 square feet of ballroom and meeting spaces.
The facility sits along the Mystic River in Everett, Mass., 20 minutes north of Boston.
Wynn has said that its focus will be on higher-end clientele, especially in Las Vegas where it is a smaller rival compared with Caesars and MGM.
And the company made clear during its first-quarter earnings call that it’s continuing to invest in its Las Vegas properties.