NEW YORK, April 4, 2011 /PRNewswire/ -- Morgans Hotel Group Co. (NASDAQ: MHGC) ("Morgans") today announced that it has entered into a definitive agreement to sell the Royalton and Morgans hotels for $140 million to an affiliate of FelCor Lodging Trust, Incorporated.
MHGC will continue to operate the hotels under a 15-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 for the two hotels represents a value of approximately $500,000 per room. The hotels generated 3.8 million of EBITDA in 2010 before internal management fees. The transaction will generate approximately $100 million in net proceeds after the Company retires the $37.7 million outstanding under its revolving credit facility. The Company intends to use the net proceeds to further reduce debt and provide capital for growth. The hotels, along with the Delano hotel, are collateral for the revolving credit facility, which terminates upon the sale of any of the properties securing the facility. Upon termination of the facility the Delano hotel will be unencumbered.
Michael Gross, Chief Executive Officer of Morgans said, "This is a terrific outcome and an important continuation in our shift toward an 'asset light' business model, allowing us to focus on higher margin management and branding opportunities. This transaction highlights the unique locations and appeal of our brands and the value of our real estate assets. With a stronger balance sheet and a talented new management team, we are excited about the prospects to grow the company and increase shareholder value. We are pleased to continue to manage these hotels and look forward to a long-term relationship with FelCor."
The Company has received a $7 million security deposit, which is non-refundable except in the event of a default by the Company.
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.