NEW YORK – Morgans Hotel Group Co., the operator and 50% owner of the London joint venture that owns Sanderson and St Martins Lane, today announced that the joint venture partners have entered into a definitive agreement to sell the Sanderson and St Martins Lane hotels for 192 million pounds Sterling, or approximately $295 million, to Capital Hill Hotels Limited, a Middle Eastern investor with other global hotel holdings. The sales price for the two hotels represents a value of approximately 542,000 pounds, or $832,000, per room.
MHG will continue to operate the hotels under long-term management agreements. The terms of the management agreements, including extension options, have been extended to 2041 from 2027.
The joint venture partners will use the sales proceeds, along with cash in escrow, to retire the approximately 99.5 million pounds of outstanding mortgage debt, which is secured by the two hotels. MHG’s 50% portion of the net proceeds, after the repayment of debt and closing costs, is expected to be approximately $70 million. The Company intends to use the net proceeds to provide capital for growth.
Michael Gross, Chief Executive Officer of MHG said, “Our continued management of these two great London assets and the proceeds from the sale will help provide the foundation for continued growth of our management business and brands around the world. We are pleased that our team will be able to continue to build on the value and financial performance of Sanderson and St Martins Lane as well as the additional capital the new owner plans to invest to enhance these assets. We are very excited about the extension to our existing management agreements and we look forward to a long-term relationship with our new partner.”
The transaction is expected to close in the fourth quarter and is subject to satisfaction of customary closing conditions.