NEW YORK, April 25, 2011 /PRNewswire/ -- Morgans Hotel Group Co. (NASDAQ: MHGC) ("Morgans") today announced that it has entered into a definitive agreement to sell the Mondrian Los Angeles hotel for $137 million to an affiliate of Pebblebrook Hotel Trust.
Morgans will continue to operate the hotel under a 20-year management agreement with one 10-year extension option. The transaction is expected to close in the second quarter and is subject to satisfaction of customary closing conditions.
The sales price represents a value of approximately $580,000 per room. The transaction is expected to generate net proceeds of approximately $40 million after applying a portion of the proceeds from the sale along with approximately $6 million of cash in escrow to retire the $103.5 million of outstanding mortgage debt secured by the hotel.
Morgans separately announced on April 4 a definitive agreement to sell the Royalton and Morgans hotels in New York. Morgans expects to generate aggregate net proceeds of approximately $140 million from the sale of the three properties. Morgans intends to use these proceeds to further reduce debt and provide capital for growth.
Michael Gross, Chief Executive Officer of Morgans said, "This transaction further demonstrates the value of our real estate assets and our success in transitioning to an 'asset light' strategy. We are looking forward to a long and beneficial partnership with Pebblebrook as we continue to manage the hotel under the Mondrian brand with a long-term management agreement. The transaction proceeds will allow us to reduce our debt and fund the continued growth of our higher margin management business."
Gross continued, "The Mondrian name has significant potential, highlighted by the successful recent launch of the Mondrian SoHo in New York City. We believe this transaction and our 'asset light' model will allow us to increase our investment in the development of Morgans' key brands including Mondrian to accelerate their growth and expansion around the world."
Morgans has received a $5 million security deposit, which is non-refundable except in the event of a default by Morgans.
About Morgans Hotel Group
Morgans Hotel Group Co. (NASDAQ: MHGC) is widely credited as the creator of the first "boutique" hotel and a continuing leader of the hotel industry's boutique sector. Morgans Hotel Group operates and/or owns, or has ownership interests in, Morgans, Royalton and Hudson in New York, Delano and Shore Club in South Beach, Mondrian in Los Angeles, South Beach and New York, Clift in San Francisco, Ames in Boston, and Sanderson and St Martins Lane in London. Morgans Hotel Group also manages hotels in Isla Verde, Puerto Rico and Playa del Carmen, Mexico. Morgans Hotel Group has other property transactions in various stages of completion including a Delano in Cabo San Lucas, Mexico, a Delano in Turkey, a Mondrian in Doha, Qatar and a hotel in New York to be branded with one of MHG's existing brands. For more information please visit www.morganshotelgroup.com.
Forward-Looking and Cautionary Statements
This press release may contain certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements relate to, among other things, the operating performance of our investments and financing needs and prediction of certain future other events. Forward-looking statements are generally identifiable by use of forward-looking terminology such as "may," "expect," "anticipate," "estimate" "believe," "project," or other similar words or expressions. These forward-looking statements reflect our current views about future events and are subject to risks, uncertainties, assumptions and changes in circumstances that may cause our actual results or other future events to differ materially from those expressed in any forward-looking statement. Important risks and factors that could cause our actual results to differ materially from those expressed in any forward-looking statements include, but are not limited to economic, business, competitive market and regulatory conditions such as: a sustained downturn in economic and market conditions, particularly levels of spending in the business, travel and leisure industries; continued tightness in the global credit markets; general volatility of the capital markets and our ability to access the capital markets; our ability to refinance our current outstanding debt and to repay outstanding debt as such debt matures; our ability to protect the value of our name, image and brands and our intellectual property; risks related to natural disasters, such as earthquakes, volcanoes and hurricanes; hostilities, including future terrorist attacks, or fear of hostilities that affect travel; and other risk factors discussed in Morgans' Annual Report on Form 10-K for the fiscal year ended December 31, 2010, and other documents filed by Morgans with the Securities and Exchange Commission from time to time. All forward-looking statements in this press release are made as of the date hereof, based upon information known to management as of the date hereof, and Morgans assumes no obligations to update or revise any of its forward-looking statements even if experience or future changes show that indicated results or events will not be realized.
SOURCE Morgans Hotel Group Co.