Morgans Hotel Group CEO Michael Gross has stepped down as head of the boutique hotelier less than three months after the company's largest stockholder, OTK Associates, led an effort to vote out the company's board of directors, citing mismanagement.
Gross, who had been named Morgans CEO in March 2011, resigned on Aug. 30 "to pursue new opportunities," Morgans Hotel said in a filing with the Securities and Exchange Commission on Sept. 3.
Jason Kalisman, who became the company's chairman after the June removal of the former board and is a founding member of OTK Associates, will serve as interim CEO. Kalisman's experience includes stints with GEM Realty Capital and Goldman Sachs.
Gross's decision further clouds the direction of the company, which was founded when boutique-hotel progenitor Ian Schrager opened the first Morgans hotel in New York in 1984. A second New York hotel, the Royalton, opened in 1988, while hotels in Miami, West Hollywood, San Francisco, London and Boston followed.
Schrager sold Morgans in 2005 in order to found his eponymous hotel company, and Morgans was hit hard by the recession. The company racked up more than $400 million in net losses between 2006 and 2012, causing it to sell its stakes in properties like the Mondrian Los Angeles and its two London properties, Sanderson and St. Martins Lane. In each case, Morgans retained management of the hotel.
Regardless, with its stock price down, OTK, which owns about 14% of the company, by this year had engaged in a full-scale proxy battle, alleging that the company was too beholden to its largest creditor, Yucaipa Cos, an entity headed by supermarket magnate Ron Burkle and Gross' former employer.
The proxy battle heated up when the company announced this spring that it would sell its 194-room Delano Hotel Miami to Yucaipa as part of an effort to clean up its balance sheet. That plan was later rescinded prior to the mid-June board vote. Following the vote, Kerrisdale Capital Management, which owns 4.3% of the company, urged that the company be sold.
Gross, who was criticized by OTK for having no experience in leading a hotel company before being named Morgans Hotel's CEO two years ago, will receive a lump sum payment of $500,000 in addition to more than 58,000 shares that vest immediately and 25,000 that will vest in a year.
Morgans Hotel stock rose 1.5% Sept. 3, though is still about 8% below its price when the new board vote was announced in mid-June.