NEW YORK - June 4, 2007 - Morgans Hotel Group Co. today announced a new joint venture with M Development, a Chicago-based developer, to develop a Mondrian hotel in Chicago. Mondrian Chicago will be operated by MHG under a long-term management contract and is expected to open in 2010. The hotel is the fifth announced Mondrian, including Los Angeles, Scottsdale, and properties under development in Las Vegas and Miami.

The joint venture will develop Mondrian Chicago, which is currently expected to have 200 rooms, on the existing property of the Cedar Hotel at the highly desirable intersection of State, Rush and Cedar Streets. The property is located in the Gold Coast region of Chicago in close proximity to dining, nightlife, and high-end retail boutiques. In addition, given the property's prime location, many guest rooms will have views of Lake Michigan.

"Chicago is a key market for us to expand our brand," said Marc Gordon, Chief Investment Officer of MHG. "Like MHG's other distinctive Mondrian hotels, Mondrian Chicago will boast the luxury amenities, cutting-edge design and energetic atmosphere that we believe distinguish our properties in the marketplace. We are pleased to partner with M Development, a leading firm with a strong track record in Chicago and the Midwest."

"We are excited about our entry into this market and believe that this represents yet another example of how MHG can extract value from our distinguished brands by expanding to attractive markets," said Ed Scheetz, President and Chief Executive Officer of MHG. "Chicago was a priority target market for us and we are pleased to have secured this flagship location for the new Mondrian. We look forward to working with M Development to develop this signature hotel in the very heart of Chicago."

Mondrian Chicago is expected to have significant space for a restaurant, bar, meeting rooms and an exercise facility, and plans call for it to be uniquely set back further from the street than the adjacent buildings, in order to allow for outdoor food and beverage operations. In addition, the current masonry facade of the existing Cedar Hotel will be restored to preserve the building's distinctive architectural features.
MHG will have a 49% interest in the joint venture. Upon completion, MHG is expected to operate the hotel under a 20-year management contract with two 5-year extension options. The development project is subject to various conditions, including obtaining acceptable financing.

Morgans Hotel Group Co. (NASDAQ: MHGC - News), which is widely credited with establishing and developing the rapidly expanding boutique hotel sector, owns and operates Morgans, Royalton and Hudson in New York, Delano and The Shore Club in Miami, Mondrian in Los Angeles, Scottsdale and South Beach, Clift in San Francisco, and Sanderson and St Martins Lane in London. In February 2007, MHG and an equity partner acquired the Hard Rock Hotel & Casino in Las Vegas and related assets. MHG has other property transactions in various stages of completion including projects in Miami Beach, Florida, and Las Vegas, Nevada, and continues to vigorously pursue its strategy of developing unique properties at various price points in international gateway cities in the United States, Europe, South America, Asia and around the world. For more information please visit www.morganshotelgroup.com.

M Development, founded in 1991, focuses on developing and investing in luxury retail and hospitality in three specific Chicago submarkets; the Gold Coast, Lincoln Park and Bucktown. M Development is not commodity driven with respect to real estate ventures, each project is uniquely approached, and the company's success results from strategic vision and diligence in assessing specific opportunities. M Development's holdings include the Esquire Theater on Oak Street, the 3 Arts Club on N Dearborn Parkway and the Lincoln Park Hospital in Lincoln Park. Currently, M Development is beginning construction of a new Barneys New York flagship at the corner of Oak and Rush Street. For more information please email [email protected].

Statements contained in this press release which are not historical facts are forward-looking statements as the term is defined in the Private Securities Litigation Reform Act of 1995.