Morgans Hotel Group Co., a boutique hotelier, agreed to sell the Royalton and Morgans hotels in New York City to FelCor Lodging Trust Inc. for $140 million to help reduce debt.
The hotels were valued at about $500,000 per room, New York-based Morgans said in a statement today. The company, which expects $100 million in net proceeds from the sale, will continue to manage both properties under a 15-year agreement.
“This is a terrific outcome and an important continuation in our shift toward an ‘asset light’ business model, allowing us to focus on higher-margin management and branding opportunities,” Morgans Chief Executive Officer Michael Gross said in the statement.
Morgans has been seeking to cut debt and said it would use the proceeds from the sale to further reduce its load. The company in October won extensions for loans backed by its Hudson New York hotel in Manhattan and the Mondrian Los Angeles after paying down a portion of the money owed on the two properties.
The hotelier will pay $37.7 million in debt with the proceeds from the Royalton and Morgans sale. The transaction will terminate a credit line that had been backed by the properties and the Delano hotel in Miami, Morgans said.
FelCor, an Irving, Texas-based real estate investment trust, said in a separate statement that it expects to complete the deal in the second quarter. The Royalton and Morgans hotels will be the company’s first properties in New York.