The US$1.7-billion sale and lease back of Encore Boston Harbor (pictured) in Massachusetts in the United States, announced on Wednesday by Wynn Resorts Ltd, was driven by “cost of capital” relative to other routes such as the bond markets, said the casino firm’s chief executive Craig Billings.
Wynn Resorts is the parent of Macau casino operator Wynn Macau Ltd.
Mr Billings said during the casino group’s fourth-quarter earnings call, that although the Boston deal was not expected to close until the end of the year, one possible use of some of the net proceeds was for “capital to deploy on attractive greenfield projects like our development in the United Arab Emirates (UAE),” in the Middle East, a scheme announced in late January.
The CEO also said some of the proceeds would go for development “adjacent to Encore Boston Harbor”.
The property, which opened in June 2019, was currently constrained by insufficient parking space “particularly at weekends”.
Some of the money raised from the sale and lease back would go on “construction of additional parking and complementary non-gaming amenities” at Boston Harbor, to help that venue produce “even higher levels of performance,” added the group’s CEO.
Regarding the UAE project, Mr Billings confirmed analyst commentary that it would be a US$2-billion scheme; that the group would manage the property in Ras Al Khaimah; and that it would be funded on a circa 50-50 debt-to-equity basis.
He added that Wynn Resorts was likely to have a “25 to 40 percent” interest in the scheme, though he did not clarify if that would be proportional for the investment and the equity components.
Though he did say the management contract would be “sitting on top” of the business model.
Mr Billings also noted that the process of getting gaming there would not be a “multi-year process for legalisation like we have seen in some other markets,” though he did not specify a time scale or mention other jurisdictions by name.
He reiterated however that Ras Al Khaimah already had a regulatory structure – modelled on “Singapore and Las Vegas” – to permit a casino at the resort.
He claimed that the UAE scheme would be “within an eight-hour flight” for “95 percent of the world’s population”.
Mr Billings noted: “This is the first transaction where Wynn Resorts is being paid for its know-how and service excellence via a management agreement. I expect it to provide a very high return on invested capital.”
The CEO was asked on the call whether it might be possible to replicate a resort management model in other markets. He said it might be, “if it’s a gateway city, has a limited number of licences, reasonable tax rates, and reasonable regulations.”
Vincent Zahn, a Wynn Resorts’ senior vice president as well as treasurer, said on the call that the group’s liquidity “remains very strong”, with global cash and revolver availability of US$3.6 billion as of December 31.
Approximately US$1.7 billion of that was available for the Macau operation, he said.
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