Realty Income Announces $1.7 Billion Sale-Leaseback Of Encore Boston Harbor Through Partnership With Wynn Resorts

The sale-leaseback transaction with Wynn Resorts is expected to be executed at a 5.9% initial cap rate, includes an initial lease term of 30 years with annual rent growth of 1.75% for the first ten years and the greater of 1.75% or CPI (capped at 2.5%) over the remaining lease term. The lease also includes an additional 30-year option to renew upon expiration. Pending regulatory procedures, the company expects to close this transaction in the 4^th quarter of 2022.

"This transaction demonstrates our ability to utilize our platform and scale to acquire prime real estate assets across a variety of industries in alignment with our investment criteria," said Sumit Roy, Realty Income's President and Chief Executive Officer. "Our investment philosophy centers around generating favorable risk-adjusted returns by investing in strategically important properties with partners who are leaders in their respective industries. We are pleased to cultivate a new relationship with Wynn Resorts as we expand our universe of net lease investments."

Investment Rationale and Implications

Attractive risk-adjusted returns. The transaction is expected to generate immediate earnings accretion, healthy contractual rent growth, and long-term returns at favorable spreads to Realty Income's cost of capital.

Partnership with leading operator. Wynn Resorts is an S&P 500 company and one of the preeminent developers and operators of integrated resorts in the world, reflecting Realty Income's strategy of partnering with industry blue chips. Pro forma for proceeds from the transaction, Wynn is expected to maintain modest lease-adjusted US leverage (as measured by lease-adjusted net debt / EBITDAR) of approximately 4.5x and in alignment with 2022 analyst consensus EBITDA for the US properties and corporate.

Demonstrates growth profile of business model and benefits of size and scale. Realty Income's entry into the gaming industry illustrates the robust opportunities afforded to it through the global corporate sale-leaseback pipeline. As real estate partner to another of the world's leading companies, the transaction represents an external growth channel unconstrained by industry, property type or geography and in alignment with our investment criteria. Upon closing, Wynn is expected to represent less than 3.5% of Realty Income's annualized contractual rent.

Healthy industry and regional fundamentals. The existing Boston-area regional gaming market currently generates approximately $2.6 billion of gross gaming revenues annually. Encore, with EBITDA still ramping given its relative youth as an operating asset, is expected to grow with the overall market by appealing to underserved premium regional customers. Nationally, gaming revenues have recovered to pre-COVID levels and the two-year growth rate of gross gaming revenue in Massachusetts was double that of the overall industry in 4Q21.

Property Overview

• Encore is a LEED Platinum certified, premium super-regional resort and casino providing five-star dining, gaming, shopping and entertainment. Built in 2019 at a total cost of $2.6 billion, the asset is located along the Mystic River and less than five miles from downtown Boston. 5.6 million gaming age residents live within a 90-minute drive of the property.


• The property comprises more than 3.1 million total square feet of luxury amenities including slot machines, gaming tables, poker tables, 671 luxury hotel rooms and suites as well as a broad array of food and beverage outlets and large group meeting spaces.


• The property is uniquely positioned as the only integrated resort and casino located in the Boston metropolitan area. Additionally, Encore holds one of only two Class I gaming licenses that have been granted in Massachusetts.