86°F
weather icon Clear

Encore Boston Harbor sale to MGM a long shot, analysts say

Updated May 20, 2019 - 6:42 pm

Wynn Resorts Ltd. could be trying to shake off a baby sitter situation through the sale of Encore Boston Harbor, analysts say.

Wynn Resorts and MGM acknowledged in a joint statement Friday that the two companies have had preliminary talks about a possible sale of the yet-to-open, $2.6 billion, 671-room hotel-casino.

The possibility of Wynn Resorts selling Encore Boston Harbor is “head-scratching,” said Barry Jonas, an analyst with Atlanta-based SunTrust Robinson Humphrey Inc.

The company has spent about three years building the property, and spent the last 16 months trying to ensure its success after accusations of sexual misconduct by its former chairman and CEO, Steve Wynn sparked multiple investigations, jeopardizing the company’s Massachusetts gaming license. Steve Wynn has denied all accusations of harassment.

The company received the green light to keep its gaming license and to operate Encore Boston Harbor last month, but with several caveats — one of which being the appointment of a monitor by the Massachusetts Gaming Commission to oversee Wynn Resorts’ operations of the property for three years at the company’s expense.

“There’s no regulatory reason they’d have to sell,” Jonas said. “There’s this baby-sitter-type mentality with an unclear supervisory situation for a few years, that’s one possible reason why they’re exploring monetizing this.

David Katz, an equity analyst with the New York-based Jefferies Group, said this is “new territory” for the company.

“I’ve covered Wynn a very long time and they’ve never been a buyer of other properties or a seller of their own,” he told the Review-Journal.

Resort sales price

Jonas speculated that if a transaction occurs — a big if — the resort would sell for at least $2.6 billion and possibly as high as $3.5 billion, even though the property has no track record of financial results.

“Most of the investors we’ve spoke with are skeptical a transaction makes sense from a structural perspective,” Jonas said. “From a strategic perspective, you can argue MGM has been focused on best-in-class regional properties and Boston would fit in there. For Wynn, you can argue that ultimately their model is more high-end VIP in Las Vegas and Asia.”

Representatives of Wynn and MGM had no comment Monday on the analysts’ speculation.

Friday’s joint statement from the two companies did not address a prospective price of the transaction or how MGM would pay for any deal. MGM is in the midst of a cost and expense reduction strategy it calls MGM 2020 to improve cash flow by $300 million a year by 2021, resulting in the layoff of dozens of employees.

But Katz said it would be possible for MGM to finance the purchase if it completed the sale with its real estate investment trust, MGM Growth Properties.

The purchase would allow MGM to operate the hotel-casino while MGP would own the real estate, protecting MGM from taking on more debt.

“The resulting deconsolidation should be beneficial for MGM’s valuation, as we have indicated the consolidation of MGP into MGM has served thus far to trap value rather than capture it.” Katz said in a note.

Katz said a transaction between Wynn and MGM could be a negative to both companies’ stock prices. But he added that it’s difficult to reach any conclusions without knowing the terms of a deal.

“We consider the prospective sale of Encore Boston Harbor by Wynn to MGM as a modest negative for both stocks,” Katz said in a note to investors Monday. “While the numbers could work based on terms, we believe it could be strategically net negative and success would ultimately be determined by the market valuations.”

Additional obstacles

Even if the two companies came to an agreement, it’s possible a deal could be blocked by state regulations and host-community agreements Wynn has reached with the city of Everett and MGM with the city of Springfield, in western Massachusetts.

The state’s gaming laws prohibit a company from owning more than one casino resort in the state, so MGM would have to sell its MGM Springfield property that it opened in August in order to take over Encore Boston Harbor.

In addition, the companies would have to work through their respective host-community agreements to make a transaction work.

Everett City Councilor Michael J. McLaughlin, whose political jurisdiction includes the acreage where Encore Boston Harbor sits, told the Review-Journal Monday it’s still too early to make a determination on whether Everett would support a transaction.

A supporter of Wynn Resorts’ Boston Harbor plans since its host-community agreement was signed in 2013, McLaughlin said there are “too many moving parts” to determine yet if there would be support for MGM ownership.

Contact Richard N. Velotta at rvelotta@reviewjournal.com or 702-477-3893. Follow @RickVelotta on Twitter. Contact Bailey Schulz at bschulz@reviewjournal.com or 702-383-0233. Follow @bailey_schulz on Twitter.

Don't miss the big stories. Like us on Facebook.
Business Videos
Daytime fireworks mark the opening of Encore Boston Harbor
The opening of the $2.6 billion Encore Boston Harbor in Everett, Mass. included a three-minute fireworks show launched by Fireworks by Grucci Sunday, June 23, 2019. (Rick Velotta/Las Vegas Review-Journal) @RickVelotta
Elaine Wynn talks about the opening of Encore Boston Harbor
Elaine Wynn, co-founder and largest shareholder of Wynn Resorts, talked during opening festivities of the $2.6 billion Encore Boston Harbor in Everett, Mass. Sunday, June 23, 2019. (K.M. Cannon/Las Vegas Review-Journal) @KMCannonPhoto
People line hours ahead of opening for Encore Boston Harbor
Guests arrive as much as 17 hours early for the 10 a.m. opening of the $2.6 billion, 671-room resort in Everett, Mass. Sunday, June 23, 2019. (K.M. Cannon/Las Vegas Review-Journal) @reviewjournal.com
Crews working 24/7 to complete Circa downtown - VIDEO
Owner Derek Stevens goal is to open the doors to the 1.25 million-square-foot project by December 2020. (Michael Quine/Las Vegas Review-Journal)
Golden Knights Marc-Andre Fleury sells Las Vegas home - VIDEO
Golden Knights goaltender Marc-Andre Fleury has sold his custom home Southern Highlands home in Las Vegas for $2.3 million.
Las Vegas Strip resorts slow to welcome Alexa, Google Home Hub
Alexa, where are you? Smart home and hospitality technology was big at CES in early January. Amazon and Google promoted their voice-activated speakers Alexa and Google Home Hub. Hospitality executives have called the speakers the industry’s future. Yet for all the hype, the revolution is unfolding at a cautious pace on the Strip as well as in other major U.S. hospitality markets. Hotels are focusing their consumer-facing technology investments on adding streaming capabilities, like Netflix, and enhancing their mobile apps, a December report by Hospitality Technology showed. Voice-enabled technology is 10th on that priority list.
What is MGM 2020
MGM Resorts International announced its MGM 2020 plan in January, The plan would improve cash flow by $200 million annually by the end of 2020 and an additional $100 million by the end of 2021. 1,070 jobs were cut as part of the cost-cutting initiative. 881 of those were Las Vegas employees, mostly in management or mid-management positions. Jim Murren
What is MGM 2020
MGM Resorts International announced its MGM 2020 plan in January, The plan would improve cash flow by $200 million annually by the end of 2020 and an additional $100 million by the end of 2021. 1,070 jobs were cut as part of the cost-cutting initiative. 881 of those were Las Vegas employees, mostly in management or mid-management positions. Jim Murren
Find next-level experience
One minute, you’re just trimming hedges and shooting the breeze with your neighbor. But then he brings up Vegas and you’re thinking about the incredible meals, world-class hotels, pools inside of pools and unparalleled entertainment. You’re thinking about iconic artist residencies like Aerosmith. Priorities take shape. Vegas first, lawn and everything else, second. Just like that, Vegas Changes Everything. (Visti Las Vegas/Youtube)
Vegas Changes Everything
A weekend getaway is nice for anyone, but a weekend getaway in Vegas ... that’s a next-level experience with shows, clubs, spas and more. With a chance to see iconic artist residencies like Gwen Stefani, you might just find yourself going from pushing your child on a swing, to pushing back a birthday party. See how Vegas Changes Everything. (Visit Las Vegas/YouTube)
How much do Las Vegas casino CEOs make?
Las Vegas gaming CEOs made anywhere between $1 million and $24 million last year, according to company filings with the U.S. Securities and Exchange Commission. ((Las Vegas Review-Journal)
30-year-old Rio needs a little TLC
Nearly 30 years after the Rio opened, the red and blue jewel that helped catapult Las Vegas to a new level with its buffet and nightclub has lost its status along with its shine.
The latest on the Drew Las Vegas - VIDEO
Eli Segall recounts his tour of the Drew Las Vegas, formerly the Fontainebleau, on the Las Vegas Strip. (Michael Quine/Las Vegas Review-Journal)
Pinball Hall of Fame to move near south Strip
Operators of the Pinball Hall of Fame have been approved to build a new, larger arcade near the south edge of the Strip on Las Vegas Boulevard near Russel Road. (K.M. Cannon/Las Vegas Review-Journal) @KMCannonPhoto
National Hardware Show underway Las Vegas
The National Hardware Show kicked off Tuesday at the Las Vegas Convention Center (Mat Luschek / Review-Journal)
Caesars for sale?
Caesars Entertainment Corp. has been swept up in takeover speculation since the company’s share price tumbled last year amid disappointing earnings and concerns over a recession. Amid the decline, hedge funds scooped up shares. Billionaire activist investor Carl Icahn began buying shares of Caesars as early as January. Icahn acquired nearly 18 percent by mid-March. In February Icahn called on the Caesars board to study a sale as a way to boost shareholder value.
Las Vegas home prices
Las Vegas home prices grew fastest among major markets in February for the ninth straight month. But amid affordability concerns, the growth rate has slowed down. Southern Nevada prices in February were up 9.7% from a year earlier, according to the latest S&P CoreLogic Case-Shiller index. The last time Las Vegas' price growth fell below 10% was in September 2017, S&P Dow Jones Indices reported.
Free Parking Coming To Wynn
Free parking will come to the Wynn and Encore resorts on May 1, 2019. (Mat Luschek / Review-Journal)
Founding Venetian employees talk about 20 years at the Strip resort
The Venetian, which opened May 3, 1999, is celebrating 20 years on the Las Vegas Strip. Seven original employees talk about opening the luxury resort and working there for two decades. (K.M. Cannon/Las Vegas Review-Journal) @KMCannonPhoto
Circa aiming for December 2020 opening
The 1.25-million-square-foot property will have 44-stories and 777-rooms. It will also have a separate nine-story, 1,201-space parking garage.
Boxabl official explains the building concept
Boxabl business development manager Galiano Tiramani shows off a room built by his company. (Blake Apgar/Las Vegas Review-Journal)
TI/Mirage Tram reopens
The tram that shuttles guests between TI and Mirage reopened this week after being closed for much of 2018.
Las Vegas Convention Center expansion taking shape
Renderings and actual footage show how the Las Vegas Convention Center is evolving.
Former Starbucks CEO Howard Schultz at Las Vegas convention
Former Starbucks CEO and potential presidential candidate Howard Schultz spoke at the Epicor Insights user conference at Mandalay Bay Convention Center Wednesday, April 17, 2019. (K.M. Cannon/Las Vegas Review-Journal) @KMCannonPhoto
Drew Las Vegas to open in the second quarter of 2022
The 67-story Drew Las Vegas is slated to open in the second quarter of 2022 at the north end of the Las Vegas Strip. (Michael Quine/Las Vegas Review-Journal)
NAB Day 1 (Time Lapse)
NAB kicked off at the Las Vegas Convention Center on Monday, April 8, 2019. (Mat Luschek / Review-Journal)
National Association of Broadcasters Show shows 1mm thick 8K TV with 22.2 channel digital sound
Japan’s NHK Science & Technology Research Laboratories booth featured a 1mm thick 8K TV system used in conjunction with a 22.2 channel digital sound system at the National Association of Broadcasters Show at the Las Vegas Convention Center. (K.M. Cannon/Las Vegas Review-Journal) @KMCannonPhoto
Nevada shoppers react to Smith’s no longer accepting Visa credit cards
On March 1, Smith’s announced that it would no longer be accepting Visa credit cards at any of its 142 supermarkets, including the 45 in Nevada.
Massachusetts Gaming Commission asks how long Wynn executives knew about misconduct
Business reporter Rick Velotta gives an update on the adjudicatory hearing on the suitability of Wynn Resorts to retain its gaming license in Massachusetts.
Henderson app developer part of Startup in Residence
Henderson based developers of the app On Point Barricade are taking part in Startup in Residence, a North America program dedicated to pairing tech companies with governments. (K.M. Cannon/Las Vegas Review-Journal) @KMCannonPhoto
THE LATEST