Morgans Hotel Group Co. (MHGC) recently penned a 20-year management agreement with a Mondrian-branded hotel in Istanbul. The agreement has a 10-year extension option. The property will be owned by Bella Group. Per the deal, upon completion and inauguration in 2014, Morgans will continue to operate the hotel. The US hotelier will infuse approximately $10 million in the form of equity and key money and will enjoy a 20% ownership interest in the venture.
The 128-room property will strategically be located at the historical city area of Istanbul, Turkey. Given the fact that Istanbul serves as a gateway and an interconnector between Asia and Europe, we believe the property will be able to attract business and leisure travelers throughout the year. Geographically, Morgans’ development pipeline remains focused on Europe as its brands appear quite in harmony with the region.
This new deal represents the fourth management contract for a Mondrian-branded hotel in an international location. The property will be the seventh Mondrian in the company’s portfolio. Earlier this month, Morgans announced that it will open another Mondrian in London. Apart from Europe, the company is focusing on the Middle East as well as the key cities in South America and Asia. Morgans’ intention is validated by some other hotel management agreements for Mondrian-branded hotels in Doha, Qatar and Nassau, Bahamas that were signed this year.
MorgansHotel, which competes with the hotel giant Wyndham Worldwide Corporation (WYN), currently retains a Zacks #4 Rank that translates into a short-term Sell rating. However, we reiterate our long-term Neutral recommendation on the stock.
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