After two years of shareholder proxy battles, leadership
turnovers and lackluster performance, Morgans Hotel Group, which operates the
Mondrian and Hudson brands as well as its eponymous badge, appears to be
readying itself for an outright sale.
Morgans, which hired Morgan Stanley last May to explore a sale of the company, is still in the midst of a "strategic review process," said interim CEO Jason Kalisman during the company's fourth-quarter earnings call with analysts earlier this month.
"We
feel that the process has moved along significantly, and we are committed
to sharing news when we have something to announce," Kalisman said.
New York-based Morgans, which in 2013 appointed Kalisman while swapping out its board after years of losses, continues to sell off
assets that are either underperforming or not part of the company’s core hotel
business while tweaking its board membership.
Earlier this month, Morgans said it turned an operating
profit for 2014, though its net loss still widened on higher interest payments.
The company last year also opened the Mondrian London, the Delano Las Vegas and
Istanbul’s 10 Karokoy while refinancing the debt on New York’s Hudson and
Miami’s Delano South Beach properties.
Earlier this year, Morgans sold off its 90% stake in
nightclub and restaurant operator The Light Group to competitor Hakkasan Group
for $36 million. During the fourth-quarter earnings call, Kalisman called the sale of The
Light Group "an important step" in the company's strategic review.
The company as of earlier this month also was no longer a
minority owner of the New York’s Mondrian SoHo, a property that had fallen into
foreclosure and has since been acquired.
It also named to its board Howard Lorber, CEO of New
York-based residential brokerage Vector Group, and former Sunstone Hotel
Investors CEO Kenneth Cruse.
Whether such moves are enough for Morgans to make up for the
ground it lost during its leadership turmoil remains to be seen. Last year,
Morgans’ revenue was little changed at $235 million. And while revenue per
available room (RevPAR) was up 2.8%, that demand-growth rate trailed the
overall 8.7% RevPAR increase in the 25 largest U.S. markets, according to STR.
Founded when boutique-hotel progenitor Ian Schrager opened
the first Morgans hotel in New York in 1984, Morgans expanded with the opening
of New York’s Royalton in 1988 and subsequent openings of hotels in Miami, West
Hollywood, San Francisco, London and Boston. After Schrager sold his stake in
the company in 2005, however, it racked up more than $400 million in net losses
between 2006 and 2012, causing it to sell its stakes in properties such as the
Mondrian Los Angeles and its two London properties, Sanderson and St. Martins
Lane.
All the while, Morgans’ share price fell from a pre-recession
high of almost $25 to about $7, spurring the wholesale removal of Morgans’
board in June 2013 and the appointment of Kalisman as its interim CEO
three months later.