NEW YORK, April 25, 2011-- Morgans Hotel Group Co. (NASDAQ: MHGC) ("Morgans") today announced that it has entered into a definitive agreement to sell the Mondrian Los Angeles hotel for $137 million to an affiliate of Pebblebrook Hotel Trust.  

Morgans will continue to operate the hotel under a 20-year management agreement with one 10-year extension option. The transaction is expected to close in the second quarter and is subject to satisfaction of customary closing conditions.

The sales price represents a value of approximately $580,000 per room. The transaction is expected to generate net proceeds of approximately $40 million after applying a portion of the proceeds from the sale along with approximately $6 million of cash in escrow to retire the $103.5 million of outstanding mortgage debt secured by the hotel.

Morgans separately announced on April 4 a definitive agreement to sell the Royalton and Morgans hotels in New York. Morgans expects to generate aggregate net proceeds of approximately $140 million from the sale of the three properties. Morgans intends to use these proceeds to further reduce debt and provide capital for growth.

Michael Gross, Chief Executive Officer of Morgans said, "This transaction further demonstrates the value of our real estate assets and our success in transitioning to an 'asset light' strategy. We are looking forward to a long and beneficial partnership with Pebblebrook as we continue to manage the hotel under the Mondrian brand with a long-term management agreement. The transaction proceeds will allow us to reduce our debt and fund the continued growth of our higher margin management business."

Gross continued, "The Mondrian name has significant potential, highlighted by the successful recent launch of the Mondrian SoHo in New York City.  We believe this transaction and our 'asset light' model will allow us to increase our investment in the development of Morgans' key brands including Mondrian to accelerate their growth and expansion around the world."

Morgans has received a $5 million security deposit, which is non-refundable except in the event of a default by Morgans.  

About Morgans Hotel Group

Morgans Hotel Group Co. (NASDAQ: MHGC) is widely credited as the creator of the first "boutique" hotel and a continuing leader of the hotel industry's boutique sector.  Morgans Hotel Group operates and/or owns, or has ownership interests in, Morgans, Royalton and Hudson in New York, Delano and Shore Club in South Beach, Mondrian in Los Angeles, South Beach and New York, Clift in San Francisco, Ames in Boston, and Sanderson and St Martins Lane in London. Morgans Hotel Group also manages hotels in Isla Verde, Puerto Rico and Playa del Carmen, Mexico.  Morgans Hotel Group has other property transactions in various stages of completion including a Delano in Cabo San Lucas, Mexico, a Delano in Turkey, a Mondrian in Doha, Qatar and a hotel in New York to be branded with one of MHG's existing brands. For more information please visit www.morganshotelgroup.com.