Special to the Independent
Wynn Resorts has announced that it will be selling its Encore casino property in Everett to Realty Income Corporation, an international real estate investment trust, for $1.7 billion. According to a story in the Boston Globe, Realty Income will lease the casino space back to Wynn for $100 million per year. The deal is expected to close in the fourth quarter.
Realty Income Corporation invests in free-standing, single-tenant commercial properties in the United States, Spain, and the United Kingdom.
The company is organized in Maryland with its headquarters in San Diego, California. It specializes in what is known in the industry as sale lease-back transactions, of which the Encore deal will constitute another in its portfolio.
As of December 31, 2019, the company owned 6,483 properties totaling 106.3 million rentable square feet, with an average property size of 11,800 square feet per retail property and 237,668 square feet per industrial property.
The company’s largest tenants include major corporations such as Walgreens, 7-Eleven, Dollar General, FedEx, and Walmart/Sam’s Club.
The leases typically are what are known as NNN (triple net) leases in which the tenant, in this case Wynn/Encore, promises to pay all of the expenses of the property, including real estate taxes, building insurance, and maintenance. These expenses are in addition to the cost of rent and utilities.
The benefit for Wynn is that it will receive cash up-front for the sale, which it then can use for other purposes, including paying down debt or expansion plans. For Realty Income Corp., the rent it receives represents a guaranteed stream of cash income, with no overhead, for its up-front investment.
Wynn was approved by the Massachusetts Gaming Commission (MGC) for the casino license in 2014 and started transforming what had been brownfield land almost immediately by trucking away the contaminated soil to regulated disposal sites.
Seven Acre Park and public access to the Everett waterfront were the byproducts of the negotiations by Mayor Carlo DeMaria, who was able obtain these benefits in exchange for a one-acre site of City Line Park that was near the location of the casino.
Wynn eventually spent more than $2.6 billion in constructing the five-star hotel with world class retail and restaurant space, as well as casino areas.
According to Deanna Deveney, Director of Communications and Intergovernmental Affairs for Everett, “The sale pertains to the real estate only and Mayor Carlo DeMaria did consent to the real estate sale,” Deveney said.
Asked if the Community Host Agreements that provide Everett with tens of millions of dollars each year in revenue will still be honored, Deveney said, “There has been no change with respect to the gaming operations of the casino, and all those terms and conditions remain in place.” She noted that this sale actually “may generate more revenue for the City of Everett.”
In the Globe story, a Wynn official said that the sale will free up cash to reinvest in its proposed project across lower Broadway that would include two hotels, a parking garage for 2,300 cars, and an entertainment complex that could seat up to 999 attendees.
The scaled-down version of the proposed project was discussed at a recent MGC meeting at which Wynn officials said the new development will not be part of the casino, thereby excluding the new development from MGC oversight.
A meeting for public comment on the new project is planned for Monday February 28. The MGC will review its findings at its meeting in March.