The sales price represents a value of approximately $580,000 per room.
April 25, 2011 - Morgans Hotel Group Co. (NASDAQ: MHGC) 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 has received a $5 million security deposit, which is non-refundable except in the event of a default by Morgans.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.
