Just as Wynn Resorts announced it was gearing up for a “flawless” grand opening of its $2.6 billion Encore Boston Harbor resort, the Boston Globe reports that the Las Vegas gaming colossus could be preparing to sell the property.
The news broke last week, with the Globe confirming on Friday that Wynn CEO Matt Maddox and MGM Resorts CEO Jim Murren recently met to “discuss a possible transaction.”
The meeting took place shortly after the Massachusetts Gaming Commission concluded an exhaustive 15-month probe into Wynn Resorts’ response to sexual harassment allegations against company founder and former CEO Steve Wynn. The explosive charges, which came to light in 2018 amid a hail of #MeToo scandals, forced the gaming mogul to step down from the company and sell his Wynn Resorts stock.
In a joint statement, Wynn Resorts and MGM acknowledged “conversations around the potential sale of Encore Boston Harbor.” The companies described the talks as “very preliminary and of the nature that publicly traded corporations like ours often engage in, and in fact when opportunities such as this are presented, we are required to explore. We cannot say today where these conversations will lead, however we can reaffirm our commitment to the communities where we operate today.”
Even as the CEOs conferred, Maddox issued a statement saying the opening of Encore Boston Harbor might be delayed a week or two past the announced opening of June 23. During a first-quarter earnings call, he said, “We’re going to make sure it’s flawless.” He added, “We may give ourselves another week, maybe not, but the property looks good.” He added, “We feel very confident that it will be the nicest integrated resort on the east coast.”
The 3-million-square-foot integrated resort sits along the Mystic River facing the Boston skyline. Besides a casino it has 671 hotel rooms.
Maddox said that 90 percent of the 5,000 employees have been signed up or offered positions. He noted that Wynn properties typically have higher expenses because they have higher service levels. He said the company expects to launch slowly and not reach full speed until possibly next year.
During the call, Maddox added that the company is still reviewing penalties levied against it by the Massachusetts Gaming Commission, the result of its lengthy investigation into the sexual harassment scandal, which concluded that some executives participated in a cover-up of Wynn’s alleged assaults against women. Commissioners fined the company $35 million and assessed a personal fine of $500,000 against Maddox. While he didn’t mention it on the call, the company is most concerned with a five-year provision that would require daily oversight by an appointed public monitor who would have almost carte blanche over operations of the property to ensure that the corporate changes instituted in the wake of the Steve Wynn scandal are carried out. That role hasn’t been fully defined nor is the relationship between the operator and the monitor.
Other conditions imposed by the MGC in its April 30 ruling includes the requirement that the company hire a personal coach to help Maddox become a better leader.
But Maddox’s comments during the call seemed to indicate that the company wouldn’t decide to withdraw from the Bay State, as some had speculated.
Maddox alluded to the ordeal when he told analysts, “Clearly the regulatory complexity we’ve been through has been a challenge.”
At one time, the troubles looked as if they would swamp the entire project as the five-member MGC subjected Maddox, several executives and board members to punishing cross-examination, asking what they did and didn’t know about the accusations against Wynn—and what they did about it.
But Maddox said that they’ve put it behind them and are ready to move forward.
“We are ready to move forward with the opening,” he said. “However, we are still reviewing the decision as it relates to some of the secondary and tertiary conditions imposed by the commission. We do not believe if we choose to appeal that that will impact our ability to open the project at the end of June. The regulatory process has consumed a great deal of resources at both the company and with the regulators; we are focused on opening this property within weeks.”
Clyde Barrow, casino specialist at the University of Texas Rio Grande Valley and former UMass professor, told the Globe, “I think probably Wynn Resorts wants to wash its hands of Massachusetts and move on.”
However, MGM could be a problematic suitor. Last August, it opened its $960 million MGM Springfield about 90 minutes from Boston; under Massachusetts law, no company can hold more than one casino license in the state. To buy Boston, MGM would have to relinquish its Western Massachusetts license and presumably sell the Springfield property, which has fallen short of revenue projections, including a 15 percent month-on-month drop in gaming revenues for April. In addition, any license transfer would require approval from the gaming commission.
A potential suitor for MGM Springfield could be Mohegan Sun, the Connecticut tribal operator that several times sought a license in Massachusetts, but commissioners may be wary of awarding a Massachusetts license to a direct competitor. Rodney Butler, the CEO of Foxwoods and chairman of the Mashantucket Pequot tribal council, said his tribe wasn’t interested in the property.
The communities of Springfield and Everett, home of Encore Boston, also would have a say. George Regan, spokesman for Everett Mayor Carlo DeMaria noted that the initial agreement prohibits Wynn from transferring its “rights or obligations” without “prior written authorization” of the city.
Springfield Mayor Domenic J. Sarno said MGM President Bill Hornbuckle informed him on Thursday of the sales talks, shortly before the Globe report broke.
“Bill reassured me of MGM’s commitment to Springfield and that if anything was to be entertained, and/or occurred, that myself and the Massachusetts Gaming Commission would have a big and ultimate say in what might or might not happen,” Sarno said.
All the talk may be just talk. In April 2018, Maddox dismissed previous speculation about a sale of Encore to MGM. At the time, he said, “Boston is not up for sale. I like that market. I found the land. I pursued that deal. I entered the agreement with the host community five years ago. I liked that market then. I like that market today.”
Whether he still likes the market or not, the resort is on a fast track to open, likely by the end of June. A less pressing question remains: that of later alcohol sales. Two weeks ago, Wynn asked to be allowed to serve alcohol until 4 a.m. in the gaming areas exclusively. Although the great majority of businesses in the Bay State stop serving alcohol at 2 a.m., a recently adopted state law allows an exception to be made for casinos—and only for areas where gambling is actively going on.
Currently the MGC is taking public comments on the proposal.
Boston Mayor Marty Walsh told the Boston Herald that he’s asked commissioners to just say no to later sales.
“I think at this point in time we should get the casino open, see how the 2 o’clock license works, if there’s a need, if there’s a desire, if there’s a concern that it hampers the business, then I think we should explore the opportunity of maybe going to 3 or 4 o’clock. But, right now, open it until 2, see what it looks like,” said the mayor.
MGM Springfield was the first casino to get the exemption.
Walsh said he’s concerned that people would drive to Everett just to drink late and added that the later sales would put “a lot of businesses in surrounding areas including Boston at a serious disadvantage.” The Massachusetts Restaurant Association has the same view.
