Morgans Hotel Group Reports First Quarter 2013 Results

            Morgans Hotel Group Reports First Quarter 2013 Results

PR Newswire

NEW YORK, April 29, 2013

NEW YORK, April 29, 2013 /PRNewswire/ --Morgans Hotel Group Co. (NASDAQ:
MHGC) ("MHG" or the "Company") today reported financial results for the
quarter ended March 31, 2013. The Company will host a conference call to
review the results on Tuesday, April 30, 2013 at 9:00 am.

  oAdjusted EBITDA was $7.5 million in the first quarter of 2013, a $6.5
    million increase over the same period in 2012, due primarily to increases
    in EBITDA at the Company's fee-owned hotels, Delano South Beach and
    Hudson.
  oOperating margins at the Company's Owned Hotels, which includes Delano
    South Beach, Hudson and Clift, increased by over 1,000 basis points during
    the first quarter of 2013 as compared to the same period in 2012.
  oRevenue per available room ("RevPAR") for System-Wide Comparable Hotels
    increased by 17.0% in actual dollars, or 17.2% in constant dollars, during
    the first quarter of 2013 from the comparable period in 2012, the
    Company's highest RevPAR growth rate since the first quarter of 2007.
  oRevPAR for System-Wide Comparable Hotels located in the United States
    increased 19.2% during the first quarter of 2013 as compared to the same
    period in 2012.
  oOn March 30, 2013, the Company entered into agreements with affiliates of
    The Yucaipa Companies ("Yucaipa") pursuant to which, upon consummation of
    the contemplated transactions, the Company will exchange its ownership
    interests in Delano South Beach, The Light Group and its subsidiaries that
    hold three restaurant leases in Las Vegas for $6.5 million in cash and the
    surrender and cancellation of convertible debt, preferred securities and
    warrants to purchase MHG common shares and certain consent rights over
    certain major decisions held by Yucaipa. The Company will continue to
    operate Delano South Beach pursuant to a long-term management agreement.
    Additionally, the Company will launch a $100 million rights offering to
    its existing shareholders which, together with cash received in the
    exchange transaction, MHG projects will yield approximately $65.0 million
    of cash after using a portion of the net proceeds to retire its credit
    facility and related obligations (together with the exchange,
    collectively the "Deleveraging Transaction"). The Deleveraging Transaction
    is currently expected to close in the second quarter of 2013.

Michael Gross, CEO of the Company, said: "The strong first quarter results
underscore the significant progress we have made transforming our portfolio
and repositioning our hospitality offering to capitalize on the growth
opportunities ahead. With eight new hotels slated to open in the next three
years and a growing pipeline of deals in key destinations around the world, we
see a clear path to quickly increasing gross fees, EBITDA and cash flow. The
deleveraging asset exchange transaction and rights offering will significantly
reduce our debt and equity obligations and raise necessary capital for growth,
allowing us to accelerate our strategic development. We are very confident in
the future and look forward to building on the momentum of our recent results
to increase shareholder value in the years ahead."

First Quarter 2013 Operating Results

Adjusted EBITDA ^ for the first quarter of 2013 was $7.5 million as compared
to $1.0 million for the same period in 2012. This $6.5 million increase was
due primarily to strong performances at the Company's two fee-owned hotels,
Delano South Beach and Hudson, as well as an increase in management fees and
lower corporate expenses. EBITDA at Delano South Beach and Hudson increased
by $2.1 million and $2.8 million, respectively, in the first quarter of 2013
as compared to the same period in 2012.

RevPAR at System-Wide Comparable Hotels, which includes all MHG-branded hotels
with the exception of Hudson, which was under renovation during 2012, and
Delano Marrakech, which opened in September 2012, increased by 17.0% in actual
dollars, or 17.2% in constant dollars, in the first quarter of 2013 from the
comparable period in 2012. RevPAR for System-Wide Comparable Hotels located
in the United States increased 19.2% during the first quarter of 2013 as
compared to the same period in 2012.

RevPAR from System-Wide Comparable Hotels in the Northeastern United States,
which consist of Morgans, Royalton, Mondrian SoHo and Ames, increased by 21.8%
in the first quarter of 2013 as compared to the same period in 2012, driven
primarily by a 20.2% increase in occupancy. The region experienced strong
trends throughout the quarter which allowed the Company to successfully
execute its strategy to grow occupancy during the seasonably slowest period of
the year.

RevPAR at Hudson, the Company's non-comparable hotel located in New York City,
increased by 38.7% and, with 32 new hotel rooms opened during the quarter,
room revenues increased 42.5% during the first quarter of 2013 as compared to
the same period in 2012. Hudson's strong operating performance was also
positively impacted by the February 2013 opening of its new restaurant, Hudson
Common, a modern-day beer hall and burger joint featuring a wide selection of
local craft beers, inventive preparations of classic American fare and soda
shop-inspired specialty cocktails.

RevPAR from System-Wide Comparable Hotels in Miami increased 22.3% in the
first quarter of 2013 as compared to the same period in 2012, driven by a
13.5% increase in occupancy. The Company's fee-owned Miami hotel, Delano
South Beach, generated a 19.5% increase in RevPAR driven equally by a 9.7%
increase in occupancy and an 8.9% increase in average daily rate ("ADR")
during the first quarter of 2013 as compared to the same period in 2012.

The Company's two West Coast hotels generated 13.1% RevPAR growth in the first
quarter of 2013 as compared to the same period in 2012, led by Mondrian Los
Angeles. In London, RevPAR increased by 5.6%, or 6.8% in constant dollars,
during the first quarter of 2013, despite the difficult economic climate in
Europe.

Management fees increased by 17.7% in the first quarter of 2013 as compared to
the same period in 2012. Excluding non-recurring items, management fees
increased by 8.7%. Management fees for the first quarters of both 2013 and
2012 exclude operating results from The Light Group, which is classified as a
discontinued operation as the Company will have no continuing involvement with
this entity after the closing of the Deleveraging Transaction. 

Operating margins at the Company's Owned Hotels, which consist of Delano South
Beach, Hudson and Clift, increased over 1,000 basis points during the first
quarter of 2013 as compared to the same period in 2012.

Corporate expenses, which also exclude The Light Group corporate expenses,
decreased by $0.2 million, or 3.5%, during the first quarter of 2013 as
compared to the same period in 2012. The Company continues to actively
explore opportunities to reduce overhead costs and anticipates achieving
further reductions after the Deleveraging Transaction is completed primarily
due to a more simplified balance sheet leading to lower accounting, legal and
related costs.

Interest expense increased by $3.3 million, or 44.5%, during the first quarter
of 2013 as compared to the same period in 2012, primarily due to a higher debt
level and interest rate under the new Hudson mortgage loan, which was entered
into during late 2012, and increased borrowings under the Company's revolving
line of credit during the three months ended March 31, 2013 as compared to the
same period in 2012.

MHG recorded a net loss of $11.4 million for the first quarter of 2013
compared to a net loss of $14.3 million for the first quarter of 2012, due
primarily to improved operating results and margins at Delano South Beach and
Hudson, slightly offset by higher interest expense.

Deleveraging Transaction

On March 30, 2013, the Company entered into agreements under which MHG will
transfer its ownership interests in Delano South Beach and The Light Group
(including its obligations under $18 million in related promissory notes) to
Yucaipa in exchange for the cancellation of the following debt and equity
securities held by Yucaipa:

  o$88 million principal amount of the Company's 2.375% Senior Subordinated
    Convertible Notes due 2014;
  o75,000 shares of the Company's Series A Preferred Securities, with a face
    amount, including accrued and unpaid dividends, of $99 million; and
  oWarrants to acquire 12.5 million shares of the Company's common stock at
    $6.00 per share until April 2017.

The Deleveraging Transaction also eliminates certain consent rights Yucaipa
has over certain major decisions. The Company will continue to operate Delano
South Beach pursuant to a long-term management agreement.

In addition, MHG will also receive $6.5 million in cash for the Company's
leasehold interests in three restaurants at Mandalay Bay, Las Vegas that will
be operated by The Light Group, and Yucaipa will pay the Company's remaining
note obligations with respect to the acquisition of such leaseholds.

As part of the Deleveraging Transaction, the Company will also launch a $100
million rights offering for 16,666,666 shares of its common stock at a price
of $6.00 per share to its existing stockholders and holders of non-managing
membership interests in its operating company subsidiary. To ensure that the
Company raises the full $100 million target, Yucaipa has agreed to purchase
from the Company, at the rights offering subscription price (without any
discount or fees), all shares of MHG common stock not subscribed for by MHG
shareholders in the rights offering. Proceeds of the rights offering will be
used to retire the Company's credit facility secured by Delano South Beach
that, as of March 31, 2013, had $25 million of outstanding borrowing and a $10
million letter of credit drawn. The remaining cash proceeds, together with
cash received in the exchange transaction, are expected to total approximately
$65 million, and will be used to fund expansion of the business and for
working capital and general corporate purposes.

On April 1, 2013, director Jason Taubman Kalisman filed a purported derivative
action on behalf of the Company in the Delaware Chancery Court against the
seven other current members of the Company's Board of Directors and various
third-parties associated with The Yucaipa Companies LLC in connection with the
Deleveraging Transaction. OTK Associates, LLC, a shareholder of the Company,
later filed a motion to intervene as a plaintiff in action. Among other
things, the plaintiffs allege breach of fiduciary duties and seek various
forms of relief, including enjoining the Deleveraging Transaction,
invalidating the Board of Directors' decision to reschedule the Annual Meeting
and awarding the Company damages in an unspecified amount. The court has
scheduled a hearing on plaintiffs' motion for May 13, 2013.

The Deleveraging Transaction is currently expected to close in the second
quarter of 2013, subject to resolution of the lawsuit.

The rights offering is being made pursuant to a shelf registration statement
on Form S-3 that was previously filed with the Securities and Exchange
Commission and became effective on August 3, 2010. A prospectus supplement
relating to the rights offering will be filed with the Securities and Exchange
Commission at the appropriate time. Additional information regarding the
rights offering will be set forth in the prospectus supplement. This press
release shall not constitute an offer to sell or the solicitation of an offer
to buy any of the Company's securities, nor shall there be any sale of such
securities in any state or other jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or qualification
under the securities law of any such state or other jurisdiction.

Balance Sheet and Liquidity

MHG's total consolidated debt at March 31, 2013, excluding the Clift lease,
was $455.6 million, which includes $25.0 million outstanding on the Company's
revolving credit facility, which is classified as debt held for sale on the
Company's consolidated balance sheet, and $18.0 million of promissory notes
issued in connection with the Company's acquisition of The Light Group, which
is classified as debt of discontinued operations on the Company's consolidated
balance sheet.

Delano South Beach, which secures the Company's revolving credit facility, is
presented as assets held for sale on the Company's consolidated balance
sheets, as the Company will have continuing involvement with Delano South
Beach through a long-term management agreement following the closing of the
2013 Deleveraging Transaction. The Company has presented the operations of
The Light Group and its subsidiaries that hold the three Las Vegas restaurant
leases as discontinued operations in its consolidated financial statements, as
it will have no continuing involvement with these entities following the
closing of the Deleveraging Transaction.

At March 31, 2013, MHG had $6.3 million of cash and cash equivalents and $65.0
million available under its revolving credit facility. As of March 31, 2013,
total restricted cash held pursuant to certain debt or lease requirements was
$19.0 million.

At the closing of the Deleveraging Transaction, the Company will significantly
reduce its consolidated debt and preferred securities obligations. If the
closing of the Deleveraging Transaction had occurred on March 31, 2013, this
reduction would have amounted to approximately $230.0 million, consisting of
the elimination of $88.0 million of convertible notes, $18.0 million of The
Light Group promissory notes, $99.0 million of outstanding Series A preferred
securities and accrued and unpaid dividends, and the repayment of $25 million
outstanding under the Company's revolving credit facility. In addition,
proceeds of the rights offering, together with cash received in the exchange
transaction, are expected to generate approximately $65.0 million of cash
available to fund expansion of the business and for working capital and
general corporate purposes, after using a portion of the proceeds to retire
obligations under the Company's credit facility.

Upon the closing of the Deleveraging Transaction, the Company's debt maturity
profile will be significantly improved with $84.5 million of convertible notes
due in October 2014, $180.0 million of mortgage debt secured by Hudson due in
February 2014 with a one-year extension option and $50.0 million of trust
preferred notes due in 2036.

As of March 31, 2013, MHG had approximately $295.0 million of remaining
federal tax net operating loss carryforwards to offset future income,
including gains on asset sales. The Company expects to have approximately
$180 to $200 million in federal tax net operating losses remaining after the
completion of the Deleveraging Transaction, which includes the sale of Delano
South Beach. The Company's remaining fee-owned asset, Hudson, has a tax basis
of approximately $160.0 million.

Development

MHG currently has signed agreements for eight hotels that are scheduled to
open over the next three years, with three of these hotels scheduled to open
in early 2014 – Mondrian London, Mondrian Doha and Delano Las Vegas. In
addition, Mondrian Baha Mar and Delano Moscow are currently under construction
with projected openings in 2015. With a strong infrastructure in place, the
Company believes the cash flow to be generated from the new hotel agreements
signed could be as high as 90% of fees.

The Company has a strong pipeline of prospective deals with a number of
well-capitalized partners for hotels in key gateway cities and resort
destinations in Europe, the U.S., Latin America, and Asia.

Guidance

Looking ahead, based on the trends the Company is seeing in its markets, MHG
is increasing its projected RevPAR growth at System-wide Comparable Hotels to
8% to 10% in 2013 from its original growth projection of 6% to 8%. The
Company is not providing overall EBITDA guidance at this time. However, the
Company believes that it could potentially increase EBITDA at Hudson by $10
million in 2013 given the $6 million of EBITDA lost in 2012 due to rooms out
of service during renovations, the new SRO units and the new restaurant, and
that there is potential for further EBITDA growth at Hudson from the upgraded
room product.

Conference Call

MHG will host a conference call to discuss the first quarter financial results
on Tuesday, April 30, 2013 at 9:00 AM Eastern Time.

The call will be webcast live over the Internet and can be accessed at
www.morganshotelgroup.com under the About Us, Investor Overview section.
Participants should follow the instructions provided on the website for the
download and installation of audio applications necessary to join the webcast.

The call can also be accessed live over the phone by dialing (888) 802-8577 or
(973) 935-8754 for international callers; the conference ID is 35257761. A
replay of the call will be available two hours after the call and can be
accessed by dialing (800) 585-8367 or (404) 537-3406 for international
callers; the conference ID is 35257761. The replay will be available from
April 30, 2013 through May 7, 2013.

Definitions

"System-Wide Comparable Hotels" includes all Morgans Hotel Group branded
hotels operated by MHG, except for hotels added or under major renovation
during the current or the prior year, development projects and discontinued
operations. System-Wide Comparable Hotels for the quarters ended March 31,
2013 and 2012 excludes Hudson, which was under renovation beginning in the
fourth quarter of 2011 and continuing throughout 2012, Delano Marrakech, which
opened in September 2012, and Hotel Las Palapas, which is not a Morgans Hotel
Group branded hotel and, as of April 1, 2013, was no longer managed by the
Company. 

"EBITDA" means earnings before interest, income taxes, depreciation and
amortization, as further defined below.

"Adjusted EBITDA" means adjusted earnings before interest, taxes, depreciation
and amortization as further defined below.

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 Delano in South Beach and
Marrakech, Mondrian in Los Angeles, South Beach and New York, Hudson in New
York, Morgans and Royalton in New York, Shore Club in South Beach, Clift in
San Francisco, Ames in Boston and Sanderson and St Martins Lane in London.
Morgans Hotel Group has ownership interests or owns several of these hotels.
Morgans Hotel Group has other property transactions in various stages of
completion, including Delano properties in Las Vegas, Nevada; Cesme, Turkey
and Moscow, Russia; Mondrian properties in London, England; Istanbul, Turkey;
Doha, Qatar and Baha Mar in Nassau, The Bahamas; and a Hudson in London,
England. Morgans Hotel Group also owns a 90% controlling interest in The Light
Group, a leading lifestyle food and beverage company. For more information
please visitwww.morganshotelgroup.com. 

Forward-Looking and Cautionary Statements

This press release may contain certain "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements relate to, among other things, the operating
performance of our investments and financing needs. Forward-looking statements
are generally identifiable by use of forward-looking terminology such as
"may," "will," "should," "potential," "intend," "expect," "endeavor," "seek,"
"anticipate," "estimate," "overestimate," "underestimate," "believe," "could,"
"project," "predict," "continue" or other similar words or expressions. These
forward-looking statements reflect our current views about future events and
are subject to risks, uncertainties, assumptions and changes in circumstances
that may cause our actual results to differ materially from those expressed in
any forward-looking statement. Important risks and factors that could cause
our actual results to differ materially from those expressed in any
forward-looking statements include, but are not limited to economic, business,
competitive market and regulatory conditions such as: a sustained downturn in
economic and market conditions, both in the U.S. and internationally,
particularly as it impacts demand for travel, hotels, dining and
entertainment; our levels of debt, our ability to refinance our current
outstanding debt, repay outstanding debt or make payments on guaranties as
they may become due, our ability to access the capital markets and the ability
of our joint ventures to do the foregoing; our history of losses; our ability
to compete in the "boutique" or "lifestyle" hotel segments of the hospitality
industry and changes in the competitive environment in our industry and the
markets where we invest; our ability to protect the value of our name, image
and brands and our intellectual property; risks related to natural disasters,
terrorist attacks, the threat of terrorist attacks and similar disasters;
risks related to the completion or failure to complete the Deleveraging
Transaction and related transactions; and other risk factors discussed in
Morgans Hotel Group's Annual Report on Form 10-K for the fiscal year ended
December 31, 2012, and other documents filed by Morgans Hotel Group with the
Securities and Exchange Commission from time to time. All forward-looking
statements in this press release are made as of the date hereof, based upon
information known to management as of the date hereof, and Morgans Hotel Group
assumes no obligations to update or revise any of its forward-looking
statements even if experience or future changes show that indicated results or
events will not be realized.



Income Statements
(In thousands, except per share amounts)
                                                      Three Months
                                                      Ended March 31,
                                                      2013      2012
                                                                (restated)
                                                                ^(1)
Revenues :
Rooms                                                 $      $    20,876
                                                      25,899
Food & beverage                                       16,437    15,099
Other hotel                                          1,116     1,261
               Total hotel revenues                   43,452    37,236
Management and other fees                             4,229     3,593
               Total revenues                         47,681    40,829
Operating Costs and Expenses :
Rooms                                                 9,004     7,666
Food & beverage                                       12,069    12,730
Other departmental                                    822       907
Hotel selling, general and administrative             10,003    9,486
Property taxes, insurance and other                   3,974     3,953
               Total hotel operating expenses         35,872    34,742
Corporate expenses :
               Stock based compensation               955       1,069
               Other                                  6,076     6,295
Depreciation and amortization                         5,180     4,236
Restructuring and disposal costs                      896       539
Development costs                                     820       1,668
               Total operating costs and expenses     49,799    48,549
               Operating loss                         (2,118)   (7,720)
Interest expense, net                                 10,743    7,437
Equity in loss of unconsolidated joint ventures       159       910
Gain on asset sales                                   (2,005)   (1,996)
Other non-operating expenses                          228       543
               Loss before income tax expense         (11,243)  (14,614)
               Income tax expense                    200       193
               Net loss from continuing operations    (11,443)  (14,807)
               (Loss) income from discontinued        (321)     70
               operations, net of tax
               Net loss                               (11,764)  (14,737)
               Net loss attributable to               347       456
               noncontrolling interest
               Net loss attributable to Morgans Hotel $       $  
               Group Co.                              (11,417) (14,281)
               Preferred stock dividends and          (2,913)   (2,650)
               accretion
               Net loss attributable to common        $       $  
               stockholders                           (14,330) (16,931)
               Loss per share:
               Basic and diluted from continuing      $     $    
               operations                             (0.43)   (0.55)
               Basic and diluted from discontinued    $     $     
               operations                             (0.01)   0.00
               Basic and diluted attributable to      $     $    
               common stockholders                    (0.44)   (0.55)
               Weighted average common shares         32,348    30,900
               outstanding - basic and diluted
(1) Restated to present the Company's ownership of The Light Group and the
Company's subsidiaries that

hold three Las Vegas restaurant leases as discontinued operations.





Selected Hotel          ( In Actual                  ( In Constant Dollars, if
Operating Statistics   Dollars)                     different)
                        Three Months                 Three Months
                        Ended March 31,   %          Ended March 31,   %
                        2013     2012     Change     2013    2012      Change
BY REGION
Northeast Comparable
Hotels (1)
      Occupancy         82.1%    68.3%    20.2%
      ADR               $       $       1.3%
                        250.60   247.34
      RevPAR            $       $       21.8%
                        205.74   168.93
West Coast Comparable
Hotels (2)
      Occupancy         80.9%    73.3%    10.4%
      ADR               $       $       2.5%
                        251.95   245.90
      RevPAR            $       $       13.1%
                        203.83   180.24
Miami Comparable
Hotels (3)
      Occupancy         84.1%    74.1%    13.5%
      ADR               $       $       7.8%
                        429.58   398.62
      RevPAR            $       $       22.3%
                        361.28   295.38
United States
Comparable Hotels (4)
      Occupancy         82.5%    72.0%    14.6%
      ADR               $       $       4.0%
                        316.98   304.65
      RevPAR            $       $       19.2%
                        261.51   219.35
International
Comparable Hotels (5)
      Occupancy         74.8%    68.9%    8.6%       74.8%   68.9%     8.6%
      ADR               $       $       -2.7%      $       $        -1.6%
                        345.88   355.62              352.21  357.91
      RevPAR            $       $       5.6%       $       $        6.8%
                        258.72   245.02              263.45  246.60
System-wide Comparable
Hotels (6)
      Occupancy         81.3%    71.5%    13.7%      81.3%   71.5%     13.7%
      ADR               $       $       2.9%       $       $        3.1%
                        321.01   312.00              321.89  312.32
      RevPAR            $       $       17.0%      $       $        17.2%
                        260.98   223.08              261.70  223.31
      Northeast Comparable Hotels for the quarters ended March 31,2013 and
(1)   2012 consists of Morgans, Royalton and

      Mondrian SoHo in New York and Ames in Boston. Hudson is non-comparable
      during the periods presented, as

      Hudson was under major renovations beginning the fourth quarter of 2011
      and continuing throughout 2012.
(2)   West Coast Comparable Hotels for the quarters ended March 31, 2013 and
      2012 consists of Mondrian Los Angeles

      and Clift in San Francisco.
(3)   Miami Comparable Hotels for the quarters ended March 31, 2013 and 2012
      consists of Delano South Beach,

      Mondrian South Beach and Shore Club in South Beach, Florida.
      United States Comparable Hotels for the quarters ended March 31, 2013
(4)   and 2012 consists of Morgans, Royalton,

      Mondrian SoHo, Ames, Mondrian Los Angeles, Clift, Delano South Beach,
      Mondrian South Beach and Shore Club.

      Hudson is non-comparable during the periods presented, as Hudson was
      under renovation beginning in the fourth

      quarter of 2011 and continuing throughout 2012.
      International Comparable Hotels for the quarters ended March 31, 2013
(5)   and 2012 consists of Sanderson and St

      Martins Lane in London. Delano Marrakech is non-comparable for the
      periods presented, as MHG began managing

      it in September 2012 when the hotel opened. Additionally, Hotel Las
      Palapas in Mexico is non-comparable, as this

      hotel is not a Morgans Hotel Group branded hotel and MHG believes that
      the hotel operating data for this hotel does

      not provide a meaningful depiction of the performance of its branded
      hotels.
      System-Wide Comparable Hotels consist of all Morgans Hotel Group branded
(6)   hotels operated by MHG, except for

      hotels added or under major renovation during the current or the prior
      year, development projects and discontinued

      operations. System-Wide Comparable Hotels for the quarters ended March
      31, 2013 and 2012 excludes Hudson,

      which was undergoing renovations beginning in the fourth quarter of 2011
      and continuing throughout 2012, Delano

      Marrakech, which opened in September 2012, and Hotel Las Palapas, which
      is not a Morgans Hotel Group branded

      hotel, and as of April 1, 2013, was no longer managed by the Company.





Selected Hotel Operating  ( In Actual                ( In Constant Dollars, if
Statistics                Dollars)                   different)
                          Three Months               Three Months
                          Ended March 31,  %         Ended March 31,   %
                          2013     2012    Change    2013    2012      Change
BY OWNERSHIP
Owned Comparable Hotels
(1)
        Occupancy         79.2%    72.8%   8.8%
        ADR               $       $      5.6%
                          373.74   353.87
        RevPAR            $       $      14.9%
                          296.00   257.62
Joint Venture Comparable
Hotels (2)
        Occupancy         84.9%    70.0%   21.3%
        ADR               $       $      2.9%
                          311.00   302.15
        RevPAR            $       $      24.8%
                          264.04   211.51
Managed Comparable Hotels
(3)
        Occupancy         79.0%    72.2%   9.4%      79.0%   72.2%     9.4%
        ADR               $       $      1.0%      $       $        1.5%
                          297.79   294.78            300.23  295.66
        RevPAR            $       $      10.5%     $       $        11.1%
                          235.25   212.83            237.18  213.47
System-wide Comparable
Hotels (4)
        Occupancy         81.3%    71.5%   13.7%     81.3%   71.5%     13.7%
        ADR               $       $      2.9%      $       $        3.1%
                          321.01   312.00            321.89  312.32
        RevPAR            $       $      17.0%     $       $        17.2%
                          260.98   223.08            261.70  223.31
Owned Hotels
Hudson (5)
        Occupancy         78.0%    60.0%   30.0%
        ADR               $       $      6.7%
                          178.03   166.84
        RevPAR            $       $      38.7%
                          138.86   100.10
Delano South Beach
        Occupancy         78.1%    71.2%   9.7%
        ADR               $       $      8.9%
                          644.13   591.37
        RevPAR            $       $      19.5%
                          503.07   421.06
Clift
        Occupancy         79.7%    73.7%   8.1%
        ADR               $       $      0.6%
                          235.60   234.22
        RevPAR            $       $      8.8%
                          187.77   172.62
        Owned Comparable Hotels for the quarters ended March 31, 2013 and 2012
(1)     consists of Delano South Beach and

        Clift in San Francisco. Hudson is non-comparable during the periods
        presented, as beginning in the fourth quarter

        2011 and continuing throughout 2012, this owned hotel was under
        renovation.
(2)     Joint Venture Comparable Hotels for the quarters ended March 31, 2013
        and 2012 consists of Mondrian South

        Beach, Shore Club, Mondrian SoHo, and Ames.
        Managed Comparable Hotels for the quarters ended March 31, 2013 and
(3)     2012 consists of Sanderson, St Martins

        Lane, Morgans, Royalton, and Mondrian Los Angeles. Managed hotels
        that are non-comparable for the periods

        presented are Delano Marrakech, which the Company began managing in
        September 2012 and Hotel Las Palapas,

        which is not a Morgans Hotel Group branded hotel.
        System-Wide Comparable Hotels consist of all Morgans Hotel Group
(4)     branded hotels operated by MHG, except for

        hotels added or under major renovation during the current or the prior
        year, development projects and discontinued

        operations. System-Wide Comparable Hotels for the quarters ended
        March 31, 2013 and 2012 excludes Hudson,

        which was undergoing renovations beginning in the fourth quarter of
        2011 and continuing throughout 2012, Delano

        Marrakech, which opened in September 2012, and Hotel Las Palapas,
        which is not a Morgans Hotel Group branded

        hotel, and as of April 1, 2013, was no longer managed by the Company.
(5)     Beginning in the fourth quarter of 2011 and continuing throughout
        2012, this owned hotel was under major renovation.



Non-GAAP Financial Measures

EBITDA and Adjusted EBITDA

We believe that earnings before interest, income taxes, depreciation and
amortization (EBITDA) is a useful financial metric to assess our operating
performance before the impact of investing and financing transactions and
income taxes. It also facilitates comparison between us and our competitors.
Given the significant investments that we and our joint ventures have made in
the past in property and equipment, depreciation and amortization expense
comprises a meaningful portion of our cost structure. We believe that EBITDA
will provide investors with a useful tool for assessing the comparability
between periods because it eliminates depreciation and amortization expense
attributable to capital expenditures.

The Company's management has historically used adjusted EBITDA (Adjusted
EBITDA) when evaluating the operating performance for the entire Company as
well as for individual properties or groups of properties because we believe
the Company's core business model is that of an owner and operator of hotels
and food and beverage venues, and the inclusion or exclusion of certain items
is necessary to provide the most accurate measure of on-going core operating
results and to evaluate comparative results period over period. As such,
Adjusted EBITDA excludes other non-operating expense (income) that does not
relate to the on-going performance of our assets and excludes the operating
performance of assets in which we do not have a direct or indirect fee simple
ownership interest. We exclude the following items from EBITDA to arrive at
Adjusted EBITDA:

  oOther non-operating expenses (income), such as costs associated with
    discontinued operations and previously owned hotels, both consolidated and
    unconsolidated, transaction costs related to business acquisitions,
    changes in the fair value of debt and equity instruments, miscellaneous
    litigation and settlement costs and other expenses that relate to the
    financing and investing activities of the Company;
  oRestructuring and disposal costs, which include expenses incurred related
    to the Company's corporate restructuring initiatives, such as professional
    fees, litigation and settlement costs, executive terminations and
    severance costs related to such restructuring initiatives, and losses on
    asset disposals as part of major renovation projects;
  oDevelopment costs, such as costs incurred related to development
    transaction costs, internal development payroll, costs and pre-opening
    expenses incurred related to new concepts at existing hotel and the
    development of new hotels, and the write-off of abandoned development
    projects previously capitalized;
  oImpairment loss on development projects and hotels and receivables from
    unconsolidated joint ventures. To the extent that economic conditions do
    not continue to improve, we may incur additional non-cash impairment
    charges related to assets under development, wholly-owned assets, or our
    investments in joint ventures. We believe these adjustments are necessary
    to provide the most accurate measure of core operating results as a means
    to evaluate comparative results;
  oEBITDA related to leased hotels to more accurately reflect the operating
    performance of assets in which we have a direct or indirect fee simple
    ownership interest;
  oEBITDA related to hotels and food and beverage entities reported as
    discontinued operations to more accurately reflect the operating
    performance of assets in which we expect to have an ongoing direct or
    indirect ownership interest;
  oStock-based compensation expense, as this is not necessarily an indication
    of the operating performance of our assets; and
  oGains recognized on asset sales, as we believe that including them in
    Adjusted EBITDA is not consistent with reflecting the ongoing performance
    of our assets. In addition, we believe material gains or losses from the
    net book value of disposed assets is not particularly meaningful given
    that the depreciated asset value on which the gains are calculated often
    does not reflect market value of the assets.

We also make an adjustment to EBITDA for hotels in which our percentage
ownership interest has changed to facilitate period-over-period comparisons
and to more accurately reflect the operating performance of assets based on
our actual ownership. In this respect, our method of calculating Adjusted
EBITDA may change from prior quarters, and calculations of Adjusted EBITDA
could continue to vary from quarter to quarter to reflect changing ownership
interests.

We believe Adjusted EBITDA provides management and our investors with a more
accurate financial metric by which to evaluate our performance as it
eliminates the impact of costs incurred related to investing and financing
transactions. Internally, the Company's management utilizes Adjusted EBITDA
to measure the performance of our core on-going operations and is used
extensively during our annual budgeting process. Management also uses
Adjusted EBITDA as a measure in determining the value of acquisitions,
expansion opportunities, and dispositions and borrowing capacity. Adjusted
EBITDA is a key metric which management evaluates prior to execution of any
strategic investing or financing opportunity.

The Company has historically reported Adjusted EBITDA to its investors and
believes that this continued inclusion of Adjusted EBITDA provides consistency
in its financial reporting and enables investors to perform more meaningful
comparisons of past, present and future operating results and to evaluate the
results of its core on-going operations.

The use of EBITDA and Adjusted EBITDA has certain limitations. Our
presentation of EBITDA and Adjusted EBITDA may be different from the
presentation used by other companies and therefore comparability may be
limited. Depreciation expense for various long-term assets, interest expense,
income taxes and other items have been and will be incurred and are not
reflected in the presentation of EBITDA or Adjusted EBITDA. Each of these
items should also be considered in the overall evaluation of our results.
Additionally, EBITDA and Adjusted EBITDA do not reflect capital expenditures
and other investing activities and should not be considered as a measure of
our liquidity. We compensate for these limitations by providing the relevant
disclosure of our depreciation, interest and income tax expense, capital
expenditures and other items in our reconciliations to our financial measures
under accounting principles generally accepted in the United States, or U.S.
GAAP, and/or in our consolidated financial statements, all of which should be
considered when evaluating our performance. The term EBITDA is not defined
under U.S. GAAP and EBITDA is not a measure of net income, operating income,
operating performance or liquidity presented in accordance with U.S. GAAP. In
addition, EBITDA is impacted by reorganization of businesses and other
restructuring-related charges. When assessing our operating performance, you
should not consider this data in isolation, or as a substitute for our net
income, operating income or any other operating performance measure that is
calculated in accordance with U.S. GAAP.

A reconciliation of net loss, the most directly comparable U.S. GAAP measure,
to EBITDA and Adjusted EBITDA for each of the respective periods indicated is
as follows:



EBITDA Reconciliation
(In thousands)                                   Three Months
                                                 Ended March 31,
                                                 2013          2012
Net loss attributable to Morgans Hotel Group     $        $    
Co.                                              (11,417)      (14,281)
Interest expense, net                            10,743        7,437
Interest expense, net, of discontinued           546           364
operations
Income tax expense                              200           193
Depreciation and amortization expense            5,180         4,236
Depreciation and amortization expense of         1,461         1,477
discontinued operations
Proportionate share of interest expense
from unconsolidated joint ventures              1,498         1,345
Proportionate share of depreciation expense
from unconsolidated joint ventures              708           942
Net loss attributable to noncontrolling          (347)         (456)
interest
Proportionate share of (loss) income from
unconsolidated joint
 ventures not recorded due to negative          (1,198)       (1,336)
investment balances
EBITDA                                          7,374         (79)
Add : Other non operating expense               228           543
Add : Other non operating expense of             70            -
discontinued operations
Add : Other non operating expense from
unconsolidated
 joint ventures                                 248           675
Add: Restructuring and disposal costs           896           539
Add: Development costs                          820           1,668
Less : EBITDA from Clift, a leased hotel         (1,134)       (1,467)
Add : Stock based compensation                   955           1,069
Less: Gain on asset sales                       (2,005)       (1,996)
Adjusted EBITDA                                 $       $       
                                                 7,452        952





Hotel EBITDA Analysis (1)
(In thousands, except percentages)
                                              Three Months
                                              Ended March 31,          %
                                              2013         2012         Change
Delano South Beach                          $   7,109 $   5,052 41%
Clift                                         1,134        1,467        -23%
Shore Club                                    257          150          71%
Mondrian South Beach                         679          636          7%
Ames                                         (95)         (140)        32%
Mondrian SoHo - Joint Venture                 257          72           257%
             Owned and Joint Venture          9,341        7,237        29%
             Comparable Hotels (2)
St Martins Lane food and beverage (3)         108          (203)        153%
Sanderson food and beverage (3)               10           (354)        103%
             Sold Hotels                      118          (557)        121%
             Total System-Wide Comparable     9,459        6,680        42%
             Hotels
Hudson (4)                                    (780)        (3,533)      78%
                                                           .
             Total Hotels                    $   8,679 $   3,147 176%
(1) For joint venture hotels, represents MHG's share of the respective
hotels' EBITDA, after management fees.
(2) Reflects System-Wide Comparable Hotels that are owned or partially owned
by MHG.
(3) In November 2011, MHG and Walton Street, each 50/50 joint venture
partners, sold the joint venture entity

that owned the Sanderson and St Martins Lane hotels. Following the sale of
the joint venture entity, MHG

continues to own and operate the food and beverage venues at the hotels under
a lease agreement with the

hotel owner. Amounts presented represent the respective hotels' food and
beverage EBITDA, after

management fees.
(4) Beginning in the fourth quarter of 2011 and continuing throughout 2012,
Hudson was under renovation.





Owned Hotel Room Revenue Analysis
(In thousands, except percentages)
                                          Three Months
                                          Ended March 31,            %
                                          2013          2012          Change
Hudson (1)                                $   10,827  $   7,600  42%
Delano South Beach                       8,783         7,432         18%
Clift                                     6,289         5,844         8%
                   Total Owned Hotels     $   25,899  $   20,876  24%
Owned Hotel Revenue Analysis              Three Months
(In thousands, except percentages)        Ended March 31,            %
                                          2013          2012          Change
Hudson (1)                                $   12,954  $   9,540  36%
Delano South Beach                        16,089        14,036        15%
Clift                                     9,803         9,093         8%
                   Total Owned Hotels     $   38,846  $   32,669  19%
(4) Beginning in the fourth quarter of 2011 and continuing throughout 2012,
Hudson was under renovation.



Balance Sheets
(In thousands)
                                             March 31,       December 31,
                                             2013             2012
                                                              (restated) ^(1)
ASSETS:
Property and equipment, net                 $    227,814  $    228,314
Goodwill                                    42,957           42,957
Investments in and advances to               11,017           11,178
unconsolidated joint ventures
Assets held for sale                         90,176           91,204
Assets of discontinued operations, net       55,564           55,558
Cash and cash equivalents                   6,288            5,847
Restricted cash                             18,973           21,226
Accounts receivable, net                    9,286            10,664
Related party receivables                   5,196            5,686
Prepaid expenses and other assets           6,139            7,036
Deferred tax asset, net                     78,758           78,758
Other, net                                  31,454           32,727
Total assets                                $    583,622  $    591,155
LIABILITIES and STOCKHOLDERS' DEFICIT:
Debt and capital lease obligations, net     $    502,328  $    501,192
Debt of assets held for sale                 25,000           19,000
Debt of discontinued operations              18,014           17,951
Accounts payable and accrued liabilities    24,357           28,634
Accounts payable and accrued liabilities of  3,930            3,108
assets held for sale
Accounts payable and accrued liabilities of  4,439            2,885
discontinued operations
Deferred gain on asset sales                 139,434          141,401
Other liabilities                           14,327           14,301
Total liabilities                           731,829          728,472
Redeemable noncontrolling interest of        6,321            6,053
discontinued operations
Commitments and contingencies
Total Morgans Hotel Group Co. stockholders'  (160,247)        (149,436)
deficit
Noncontrolling interest                     5,719            6,066
Total stockholders' deficit                  (154,528)        (143,370)
Total liabilities, redeemable noncontrolling $    583,622  $    591,155
interest and stockholders' deficit
(1) Restated to present Delano South Beach as an asset held for sale and The
Light Group and the

Company's subsidiaries that hold three Las Vegas restaurant leases as
discontinued operations.



SOURCE Morgans Hotel Group Co.

Website: http://www.morganshotelgroup.com
Contact: Richard Szymanski, Morgans Hotel Group Co., 212.277.4188; Neil
Maitland, The Abernathy MacGregor Group, 212.371.5999
 
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