Morgans Hotel Refinances Debt – Analyst Blog

Morgans Hotel Group Co. (MHGC) announced recently that it has refinanced in full the existing mortgage debt secured by two hotels in London. The company enjoys a 50% ownership through a joint venture with an affiliate of Walton Street Capital in these two hotels. Morgans Hotel Group’s operates the two hotels – Sanderson and St Martins Lane in London under a long-term management contract.

 

Extended by Aareal Bank, the new credit facility is a GBP100 million loan without recourse to Morgans Hotel. This implies that the loan is secured by collateral, which is usually property, and if Morgans Hotel Group defaults, Aareal Bank can seize the collateral, but cannot seek any further compensation from the company.

 

The new loan extends the maturity period of its debt and expires in July 2015. The old one was scheduled to mature in November 2010. The refinancing also reduces the interest burden of the company by 100 basis points.

 

The company has secured the loan for the long-term expansion of Sanderson and St Martins Lane hotels, as the economy is recovering and perking up leisure demand as well. These hotels are experiencing a boost in RevPAR (revenue per available room) in recent quarters and reported a 14% increase in RevPAR (revenue per available room) in the first quarter of 2010.

 

Morgans Hotel Group’s primary competitors are Starwood Hotels & Resorts Worldwide Inc (HOT), Intercontinental Hotels Group plc (IHG) and Hyatt Hotels Corporation (H).

 

Based in New York City, Morgans Hotel Group is a leader in the boutique sector of the hotel industry. Morgans owns three New York properties, including the company’s first hotel, Morgans, as well as the Royalton and the Hudson. Morgans Hotel Group also owns the Mondrian in Los Angeles, the Delano in Miami and Clift in San Francisco.

 

Joint Venture hotels include, London hotels (Sanderson and St Martins Lane), Hard Rock in Las Vegas, Mondrian South Beach and Shore Club in South Beach, Miami, and Ames in Boston. Morgans Hotel Group also has various other property transactions in process, including projects in SoHo, New York and Palm Springs, California.