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Hip South Beach Hotel, The Shore Club, Abandons Plans to Convert
 to a Condo-hotel, Project Falls Apart After Ian Schrager Quit as
 CEO of Morgans Hotel Group, the Operator

By Douglas Hanks III, The Miami Herald
Knight Ridder/Tribune Business News

Aug. 10, 2005 - The Shore Club has abandoned plans to convert to a condo-hotel, a project that fell apart shortly after Ian Schrager quit as CEO of the company that runs the pricey and hip South Beach hotel.

Shore Club management has mostly kept mum about the change in plans, which Schrager blamed on a spat between majority owner Philip Pilevsky and Edward Scheetz, Schrager's successor as chief executive at Morgans Hotel Group.

The Shore Club halted condo-hotel sales in late July, and Schrager had told The Herald he was optimistic the dispute would be short-lived. But a July 29 letter sent to one of condo unit's prospective buyers describes a complete about-face.

"As you may know, approximately one year ago the Shore Club began to explore the possibility of converting a portion of the hotel to condominium ownership," wrote Sondra Myer, a vice president of Philips South Beach, a Pilevsky company. "Although interest was strong in the project, with reservations taken but no sales contracts signed, we have ultimately chosen to operate the property exclusively as a hotel."

Executives for the Shore Club, Pilevsky and Morgans Hotel Group either declined to comment Tuesday or didn't immediately return calls. Schrager said he received news of the canceled conversion from a letter similar to one that a buyer provided to The Herald.

The letter says the buyer's deposit would be returned with interest, and offers a free two-night stay at the $500-a-night hotel.

"It came as a surprise to me," said Schrager, who opened the Delano 10 years ago and was brought in by Pilevsky to run the Shore Club in 2002. "I was hopeful they would be able to work something out. I don't think they should have done it."

Schrager took center stage in launching the Shore Club's sales effort, in which 240 rooms would be sold off individually, with the owners able to use the units themselves or rent them out for a share of the profits. The sales were supposed to fund a $25-million renovation of the hotel which -- like the Delano, Ritz-Carlton South Beach and other pricey resorts -- competes for South Beach's wealthiest travelers. The upgrade would have transformed the hotel's 325 rooms into 240 larger units.

Schrager's departure as head of Morgans Hotel Group, the company he founded and which owns the Delano and manages the Shore Club, left the Shore Club without its top salesman or the cachet that Schrager's celebrity status (he once owned New York's celebrated Studio 54 nightclub) brought to the property.

While Schrager will remain a Morgans' consultant, he said Tuesday he had not been consulted about the Shore Club's decision to cancel the condo-hotel conversion. He added that he was clearing out of Morgans' headquarters in Manhattan to an office of his own.

Schrager said he left Morgans to focus on his own real estate ventures, both hotel and residential.

He said he will be in Miami Beach this week to tour the Riande Continental South Beach hotel, which he is considering buying. That would give him a 251-room South Beach hotel located right next to the Shore Club.


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