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þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware (State or other jurisdiction of incorporation or organization) | 16-1736884 (I.R.S. Employer Identification No.) | |
475 Tenth Avenue New York, New York (Address of principal executive offices) | 10018 (Zip Code) |
(Registrant’s telephone number, including area code)
Title of Each Class | Name of Each Exchange on Which Registered | |
Common Stock, $0.01 par value | The NASDAQ Stock Market LLC |
None
Large accelerated filero | Accelerated filerþ | Non-accelerated filero | Smaller reporting companyo | |||
(Do not check if a smaller reporting company) |
to be held in 2010 are incorporated by reference into Part III of this report.
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Exhibit 10.8 | ||||||||
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Exhibit 10.33 | ||||||||
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Exhibit 10.64 | ||||||||
Exhibit 21.1 | ||||||||
Exhibit 31.1 | ||||||||
Exhibit 31.2 | ||||||||
Exhibit 32.1 | ||||||||
Exhibit 32.2 |
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• | a sustained downturn in economic and market conditions, particularly levels of spending in the business, travel and leisure industries; |
• | continued tightness in the global credit markets; |
• | general volatility of the capital markets and our ability to access the capital markets; |
• | our ability to refinance our current outstanding debt and to repay outstanding debt as such debt matures; |
• | the impact of financial and other covenants in our Amended Revolving Credit Facility (defined below) and other debt instruments that limit our ability to borrow and restrict our operations; |
• | our ability to protect the value of our name, image and brands and our intellectual property; |
• | risks related to natural disasters, such as earthquakes and hurricanes; |
• | hostilities, including future terrorist attacks, or fear of hostilities that affect travel; |
• | risks related to our international operations, such as global economic conditions, political or economic instability, compliance with foreign regulations and satisfaction of international business and workplace requirements; |
• | our ability to timely fund the renovations and capital improvements necessary to maintain our properties at the quality of the Morgans Hotel Group brand; |
• | our ability to adjust in a timely manner to any increases in fixed costs, such as taxes and insurance, or reductions in revenues; |
• | risks associated with the acquisition, development and integration of properties; |
• | the risks of conducting business through joint venture entities over which we may not have full control; |
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• | our ability to perform under management agreements and to resolve any disputes with owners of properties that we manage but do not wholly own; |
• | the impact of any material litigation; | ||
• | the loss of key members of our senior management; |
• | changes in the competitive environment in our industry and the markets where we invest; |
• | the seasonal nature of the hospitality business; |
• | ownership of a substantial block of our common stock by a small number of outside investors and the ability of such investors to influence key decisions; |
• | the impact of any dividend payments or accruals on our preferred securities on our cash flow and the value of our common stock; and |
• | other risks discussed in this Annual Report on Form 10-K in the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Result of Operations.” |
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ITEM 1. | BUSINESS |
• | seven hotels that we own and manage, or the Owned Hotels — Morgans, Royalton and Hudson in New York, Delano in South Beach, Miami (“Delano South Beach”), Mondrian in Los Angeles (“Mondrian Los Angeles”), Clift in San Francisco (which we lease under a long-term lease that is treated as a financing) and Mondrian in Scottsdale (“Mondrian Scottsdale”), comprising approximately 2,100 rooms. Mondrian Scottsdale is in foreclosure proceedings and the management agreement has been terminated with an effective termination date of March 16, 2010; |
• | a 50% interest in two hotels in London, St Martins Lane and Sanderson, comprising approximately 350 rooms, which we manage; |
• | a 50% interest in Mondrian in South Beach, Miami (“Mondrian South Beach”), which is a hotel condominium project that opened in December 2008, comprising approximately 330 rooms, which we manage; |
• | a 7% interest in the 300-room Shore Club in South Beach, Miami which we manage; |
• | a 12.8% interest in the Hard Rock Hotel and Casino in Las Vegas (“Hard Rock”), which we manage; and |
• | a 35% interest in the 114-room Ames in Boston, which we manage. |
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• | deleted the financial covenant requiring us to maintain certain leverage ratios; | ||
• | revised the fixed charge coverage ratio (defined generally as the ratio of consolidated EBITDA excluding Mondrian Scottsdale’s EBITDA for the periods ending June 30, 2009 and September 30, 2009 and Clift’s EBITDA for all periods to consolidated interest expense excluding Mondrian Scottsdale’s interest expense for the periods ending June 30, 2009 and September 30, 2009 and Clift’s interest expense for all periods) that we are required to maintain for each four-quarter period to no less than 0.90 to 1.00 from the previous fixed charge coverage ratio of no less than 1.75 to 1.00; | ||
• | limits defaults relating to bankruptcy and judgments to certain events involving us, Morgans Group and our subsidiaries that are parties to the Amended Revolving Credit Facility; | ||
• | prohibits capital expenditures with respect to any hotels owned by us, the borrowers, or subsidiaries, other than maintenance capital expenditures for any hotel not exceeding 4% of the annual gross revenues of such hotel and certain other exceptions; | ||
• | revises certain provisions related to permitted indebtedness, including, among other things, deleting certain provisions permitting unsecured indebtedness and indebtedness for the acquisition or expansion of hotels; | ||
• | prohibits repurchase of our common equity interests by us or Morgans Group; | ||
• | imposes certain limits on any secured swap agreements entered into after the effective date of the Amended Revolving Credit Facility; and | ||
• | provided for a waiver of any default or event of default, to the extent that a default or event of default existed for failure to comply with any financial covenant under our revolving credit facility before it was amended as of June 30, 2009 and/or for the four fiscal quarters ended June 30, 2009. |
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• | the sale of all or substantially all of our assets to a third party; |
• | the acquisition (including by merger, consolidation or other business combination) by us of a third party where the equity investment by us is $100 million or greater; | ||
• | the acquisition (including by merger, consolidation or other business combination) of us by a third party; or |
• | any change in the size of our board of directors to a number below 7 or above 9. |
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• | Property Management System— Our property management system provides management solutions to improve operations and profitability for a global hotel organization. Our property management system is designed for comprehensive guest management by, among other things, allowing the user to track and retrieve information pertaining to guests, groups and company accounts. Additional features of this system allow the user to extract information on a customized basis from its customer database. We believe that this increases the possibility of maximizing revenue by allowing us to efficiently respond and cater to guest demands and trends and decreases expenses by centralizing the information database in an easy to use format. |
• | Central Reservations System— Our central reservations system and related distribution and reservations services provide hotel reservations-related services and technology. |
• | Central Reservations Office— Our central reservations office provides contact management solutions. It is managed by a third-party out of its facility in New Brunswick, Canada. |
• | Sales and Catering— Our sales and catering system is a strategic tool specifically designed to maximize the effectiveness of the sales process, increase revenues and efficiency, and reduce costs. |
• | Revenue Management— Our revenue management system is a proprietary system which provides hospitality focused pricing and revenue optimization solutions. |
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• | Accounting and Reporting— Our accounting and reporting is performed under The Uniform System of Accounts for the Lodging Industry and utilizes a widely used international accounting system that allows for customizing and analyzing data while ensuring consistent controls. |
• | Customer Relationship Management— Our customer relationship management system is designed specifically for the hospitality industry and provides personalized guest recognition, high service quality, improved guest satisfaction and loyalty, which we believe results in increased revenues. This centralized database tracks guest sales history and guest preferences to provide our staff in our hotels and sales agents with a method of efficiently responding to and targeting guest needs. |
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• | Corporate Governance Guidelines; |
• | Business Code of Conduct; |
• | Code of Ethics; |
• | Charter of the Audit Committee; |
• | Charter of the Compensation Committee; and |
• | Charter of the Corporate Governance and Nominating Committee. |
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ITEM 1A. | RISK FACTORS |
• | requiring us to use a substantial portion of our funds from operations to make required payments on principal and interest, which will reduce funds available for operations and capital expenditures, future business opportunities and other purposes; |
• | making us more vulnerable to economic and industry downturns, such as the one we are currently experiencing, and reducing our flexibility in responding to changing business and economic conditions; |
• | limiting our ability to borrow more money for operations, capital or to finance development projects or acquisitions in the future; and |
• | requiring us to dispose of properties in order to make required payments of interest and principal. |
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• | global economic conditions, such as the current economic downturn; |
• | political or economic instability; | ||
• | changes in governmental regulation; |
• | trade restrictions; |
• | foreign currency controls; |
• | difficulties and costs of staffing and managing operations in certain foreign countries; |
• | work stoppages or other changes in labor conditions; |
• | taxes; |
• | payments terms; and |
• | seasonal reductions in business activity in some parts of the world. |
• | construction cost overruns and delays; |
• | exposure under completion and related guarantees; |
• | uncertainties as to market demand or a loss of market demand after capital improvements have begun; | ||
• | disruption in service and room availability causing reduced demand, occupancy and rates; and |
• | possible environmental problems. |
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• | coordinating sales, distribution and marketing functions; |
• | integrating information systems; |
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• | preserving the important licensing, distribution, marketing, customer, labor, and other relationships of a new hotel; |
• | costs relating to the opening, operation and promotion of new hotel properties that are substantially greater than those incurred in other geographic areas; and |
• | converting hotels to our brand. |
• | we may be unable to obtain, or face delays in obtaining, necessary zoning, land-use, building, occupancy, and other required governmental permits and authorizations, which could result in increased development or re-development costs and/or lower than expected sales; |
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• | the downturn in market conditions for residences, which has partially been the result of the reduction in credit availability and the worsening of pricing terms, has affected and may continue to affect our ability to sell residential units at a profit or at the price levels originally anticipated; |
• | local residential real estate market conditions, such as the current oversupply and reduction in demand, may result in reduced or fluctuating sales; |
• | cost overruns, including development or re-development costs that exceed our original estimates, could make completion of the project uneconomical; |
• | land, insurance and development or re-development costs continue to increase and may continue to increase in the future and we may be unable to attract rents, or sales prices that compensate for these increases in costs; |
• | development or re-development of condominium properties usually generate little or no cash flow until the project’s completion and the sale of a significant number of condominium units and may experience operating deficits after the date of completion and until such condominium units are sold; |
• | failure to achieve expected occupancy and/or rent levels at residential apartment properties within the projected time frame, if at all; and |
• | we may abandon development or re-development opportunities that we have already begun to explore, and we may fail to recover expenses already incurred in connection with exploring any such opportunities. |
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• | the risk that Mr. Chodorow or Chodorow Ventures LLC has economic or other interests or goals that are inconsistent with our interests and goals and that he may not take, or may veto, actions which may be in our best interests; |
• | the risk that a joint venture entity or Chodorow Ventures LLC may default on its obligations under the agreement or the leases with our hotels, or not renew those leases when they expire, and therefore we may not continue to receive its services; |
• | the risk that disputes between us and partners or co-venturers may result in litigation or arbitration that would increase our expenses and prevent our officers and/or directors from focusing their time and effort on our business; |
• | the risk that we may in certain circumstances be liable for the actions of our third party partners or co-venturers; and |
• | the risk that Chodorow Ventures LLC may become bankrupt and will be unable to continue to provide services to us. |
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• | increased competition from new supply or existing hotel properties in our markets, which would likely adversely affect occupancy and revenues at our hotels; | ||
• | dependence on business, commercial and leisure travelers and tourism; | ||
• | dependence on group and meeting/conference business; | ||
• | increases in energy costs, airline strikes or other factors that may affect travel patterns and reduce the number of business and commercial travelers and tourists; | ||
• | changes in laws and regulations, fiscal policies and zoning ordinances and the related costs of compliance with laws and regulations, fiscal policies and ordinances; and | ||
• | risks generally associated with the ownership of hotel properties and real estate. |
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• | a prohibition on stockholder action through written consents; |
• | a requirement that special meetings of stockholders be called by the Board of Directors; |
• | advance notice requirements for stockholder proposals and director nominations; |
• | limitations on the ability of stockholders to amend, alter or repeal the bylaws; and |
• | the authority of the Board of Directors to issue, without stockholder approval, preferred stock with such terms as the Board of Directors may determine and additional _______shares of our common stock. |
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• | the sale of all or substantially all of our assets to a third party; |
• | the acquisition (including by merger, consolidation or other business combination) by us of a third party where the equity investment by us is $100 million or greater; |
• | our acquisition by a third party; or |
• | any change in the size of our Board of Directors to a number below 7 or above 9. |
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• | 12,500,000 shares of common stock issuable upon exercise of the warrants we issued to the Investors, and up to 5,000,000 shares of common stock issuable upon exercise to the contingent warrants we issued to the Fund Manager in the Yucaipa investment, at exercise prices of $6.00 per share. The stock price at December 31, 2009 was $4.57; |
• | 7,858,755 shares of common stock issuable upon conversion of the Convertible Notes assuming a conversion rate corresponding to the maximum conversion rate of 45.5580 shares per $1,000 principal amount of the Convertible Notes; |
• | 1,659,279 shares of our common stock issuable upon exercise of outstanding options, of which options to purchase 1,210,361 shares were exercisable, at a weighted average exercise price of $19.06 per share. As of December 31, 2009, all of these options were underwater; |
• | 139,169 restricted stock units and 1,139,896 LTIP units outstanding exercisable for a total of 1,279,065 shares of our common stock; |
• | 1,126,163 restricted stock units and 878,763 LTIP units outstanding and subject to vesting requirements for a total of 2,004,926 shares of our common stock; and |
• | 512,085 shares of our common stock available for future grants under our equity incentive plans. |
• | entered into various over-the-counter derivative transactions or purchased or sold our common stock in secondary market transactions at or about the time of the pricing of the Convertible Notes; and | ||
• | may enter into, or may unwind, various over-the-counter derivatives or purchase or sell our common stock in secondary market transactions following the pricing of the Convertible Notes, including during any conversion reference period with respect to a conversion of Convertible Notes. |
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• | general industry and economic conditions, such as the current global economic downturn; |
• | general stock market volatility unrelated to our operating performance; |
• | announcements relating to significant corporate transactions; |
• | fluctuations in our quarterly and annual financial results; |
• | operating and stock price performance of companies that investors deem comparable to us; |
• | changes in government regulation or proposals relating thereto; and |
• | sales or the expectation of sales of a substantial number of shares of our common stock in the public market. |
ITEM 1B. | UNRESOLVED STAFF COMMENTS |
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ITEM 2. | PROPERTIES |
Twelve Months | ||||||||||||||||||||||||||||
Year | Interest | Number | Ended December 31, 2009 | |||||||||||||||||||||||||
Hotel | City | Opened | Owned | of Rooms | ADR(1) | Occupancy(2) | RevPAR(3) | Restaurants and Bars(4) | ||||||||||||||||||||
Morgans | New York | 1984 | 100 | % | 114 | $ | 245 | 87.0 | % | $ | 213 | Asia de Cuba | ||||||||||||||||
Royalton | New York | 1988 | 100 | % | 168 | 276 | 87.1 | % | 240 | Brasserie 44 Lobby Lounge Bar | ||||||||||||||||||
Hudson | New York | 2000 | (5 | ) | 831 | (5) | 200 | 83.8 | % | 168 | Hudson Bar Private Park Library Bar Sky Terrace | |||||||||||||||||
Delano South Beach | Miami | 1995 | 100 | % | 194 | 488 | 62.3 | % | 304 | Blue Door Blue Sea Rose Bar Pool Bar The Florida Room | ||||||||||||||||||
Mondrian Los Angeles | Los Angeles | 1996 | 100 | % | 237 | 264 | 63.4 | % | 168 | Asia de Cuba Skybar ADCB | ||||||||||||||||||
Clift | San Francisco | 2001 | (6 | ) | 372 | 201 | 65.5 | % | 131 | Asia de Cuba Redwood Room Living Room | ||||||||||||||||||
Mondrian Scottsdale | Scottsdale | 2006 | 100 | % | 189 | 132 | 40.8 | % | 54 | Asia de Cuba Skybar Red Bar | ||||||||||||||||||
St Martins Lane | London | 1999 | 50 | % | 204 | 323 | (7) | 74.4 | % | 240 | (7) | Asia de Cuba Light Bar Rum Bar Bungalow 8 | ||||||||||||||||
Sanderson | London | 2000 | 50 | % | 150 | 386 | (7) | 71.8 | % | 277 | (7) | Suka Long Bar Purple Bar | ||||||||||||||||
Shore Club | Miami | 2001 | 7 | % | 309 | 307 | 50.8 | % | 156 | Nobu Ago Skybar Redroom Rumbar Sandbar | ||||||||||||||||||
Hard Rock Hotel & Casino | Las Vegas | 2007 | 12.8 | % | 1,510 | 134 | 88.2 | % | 118 | Nobu Rare 120 Pink Taco Ago Mr. Lucky’s Espumosa Cafe Center Bar Luxe Bar Beach Bar | ||||||||||||||||||
Mondrian South Beach | Miami | 2008 | 50 | % | 328 | 222 | 62.0 | % | 137 | Asia de Cuba | ||||||||||||||||||
Ames (8) | Boston | 2009 | 35 | % | 114 | 175 | 33.4 | % | 58 | Woodward | ||||||||||||||||||
Total/Weighted Average | 4,720 | $ | 214 | 74.7 | % | $ | 155 |
(1) | Average daily rate, or ADR. | |
(2) | Average daily occupancy. | |
(3) | Revenue per available room, or RevPAR, is the product of ADR and average daily occupancy. RevPAR does not include food and beverage revenues or other hotel operations revenues such as telephone, parking and other guest services. | |
(4) | We operate the restaurants in Morgans, Delano South Beach, Mondrian Los Angeles, Clift, Sanderson and St Martins Lane as well as the bars in Delano South Beach, Sanderson, St Martins Lane and Mondrian South Beach through a joint venture arrangement with Chodorow Ventures LLC in which we own a 50% ownership interest. At December 31, 2009, we owned the restaurant at Mondrian Scottsdale and an affiliate of Chodorow Ventures LLC operated the restaurant through a license and management agreement. | |
(5) | We own 100% of Hudson, which is part of a property that is structured as a condominium, in which Hudson constitutes 96% of the square footage of the entire building. Hudson has a total of 920 rooms, including 89 SROs. SROs are single room dwelling units. Each SRO is for occupancy by a single eligible individual. The unit need not, but may, contain food preparation or sanitary facilities, or both. SROs remain from the prior ownership of the building and we are by statute required to maintain these long-term tenants, unless we get their consent, as long as they pay us their rent. | |
(6) | Clift is operated under a long-term lease, which is accounted for as a financing. | |
(7) | The currency translation is based on an exchange rate of 1 British pound = 1.57 U.S. dollars, which is an average monthly exchange rate provided by www.oanda.com for the last twelve months ended December 31, 2009. | |
(8) | Ames opened in November 2009 and all selected operating data presented is for the period the hotel was open. |
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Location | • 237 Madison Avenue, New York, New York | |
Guest Rooms | • 114, including 30 suites | |
Food and Beverage | • Asia de Cuba Restaurant with seating for 210 | |
Meetings Space | • Multi-service meeting facility consisting of one suite with capacity for 100 | |
Other Amenities | • Living Room — a guest lounge that includes a television, computer, magazines and books in one of the suites | |
• 24-hour concierge service |
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Year Ended December 31, | ||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
Selected Operating Information: | ||||||||||||||||||||
Occupancy | 87.0 | % | 81.1 | % | 86.4 | % | 85.0 | % | 83.4 | % | ||||||||||
ADR | $ | 245 | $ | 351 | $ | 342 | $ | 312 | $ | 295 | ||||||||||
RevPAR | $ | 213 | $ | 285 | $ | 296 | $ | 265 | $ | 246 | ||||||||||
Selected Financial Information (in thousands): | ||||||||||||||||||||
Room Revenue (1) | $ | 8,867 | $ | 8,813 | $ | 12,190 | $ | 10,931 | $ | 10,161 | ||||||||||
Total Revenue (1) | 17,159 | 19,109 | 24,124 | 22,219 | 21,805 | |||||||||||||||
Depreciation (1) | 2,805 | 1,481 | 1,201 | 1,354 | 1,485 | |||||||||||||||
Operating Income (1) | (2,328 | ) | 2,010 | 5,671 | 4,851 | 4,398 |
(1) | Morgans was closed for renovation for three months during 2008. |
Location | • 44 West 44th Street, New York, New York | |
Guest Rooms | • 168, including 27 suites | |
Food and Beverage | • Brasserie 44 Restaurant with seating for 100 | |
• Bar 44 with capacity for 100 | ||
• Lobby Lounge with capacity for 98 | ||
Meetings Space | • Multi-service meeting facilities consisting of three suites with total capacity for 150 | |
Other Amenities | • 37 working fireplaces and five foot round tubs in 41 guest rooms | |
• 24-hour concierge service |
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Year Ended December 31, | ||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
Selected Operating Information: | ||||||||||||||||||||
Occupancy | 87.1 | % | 88.0 | % | 84.7 | % | 87.4 | % | 86.2 | % | ||||||||||
ADR | $ | 276 | $ | 390 | $ | 384 | $ | 339 | $ | 316 | ||||||||||
RevPAR | $ | 240 | $ | 343 | $ | 326 | $ | 297 | $ | 272 | ||||||||||
Selected Financial Information (in thousands): | ||||||||||||||||||||
Room Revenue (1) | $ | 14,747 | $ | 21,090 | $ | 13,840 | $ | 18,307 | $ | 16,793 | ||||||||||
Total Revenue (1) | 20,375 | 27,891 | 18,290 | 24,211 | 22,239 | |||||||||||||||
Depreciation (1) | 5,552 | 4,095 | 2,328 | 1,813 | 2,097 | |||||||||||||||
Operating Income (1) | (3,581 | ) | 2,464 | 1,383 | 5,726 | 4,595 |
(1) | Royalton was closed for renovation for four months during 2007. |
Location | • 356 West 58th Street, New York, New York | |
Guest Rooms | • 831, including 43 suites | |
Food and Beverage | • Hudson Hall, new restaurant concept with an opening expected in the second quarter of 2010 | |
• Hudson Bar with capacity for 334 | ||
• Library Bar with capacity for 170 | ||
• Good Units, an exclusive venue for special functions, opened in February 2010 | ||
Meeting Space | • Multi-service meeting facilities, consisting of three executive board rooms, two suites and other facilities, with total capacity for 1,260 | |
Other Amenities | • 24-hour concierge service and business center | |
• Indoor/outdoor private park | ||
• Library with antique billiard tables and books | ||
• Sky Terrace, a private landscaped terrace and solarium | ||
• Fitness center |
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Year Ended December 31, | ||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
Selected Operating Information: | ||||||||||||||||||||
Occupancy | 83.8 | % | 90.7 | % | 91.8 | % | 87.6 | % | 85.3 | % | ||||||||||
ADR | $ | 200 | $ | 283 | $ | 284 | $ | 265 | $ | 247 | ||||||||||
RevPAR | $ | 168 | $ | 257 | $ | 261 | $ | 232 | $ | 211 | ||||||||||
Selected Financial Information (in thousands): | ||||||||||||||||||||
Room Revenue | $ | 49,853 | $ | 75,722 | $ | 76,610 | $ | 68,106 | $ | 61,673 | ||||||||||
Total Revenue | 65,663 | 97,789 | 101,271 | 88,083 | 80,893 | |||||||||||||||
Depreciation | 6,813 | 6,399 | 6,275 | 5,092 | 9,415 | |||||||||||||||
Operating Income | 6,329 | 32,885 | 36,800 | 33,807 | 24,756 |
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Location | • 1685 Collins Avenue, Miami Beach, Florida | |
Guest Rooms | • 194, including a penthouse, apartment, nine suites, three lofts and eight poolside bungalows and nine cabanas | |
Food and Beverage | • Blue Door Restaurant with seating for 210 | |
• Blue Sea Restaurant with seating for 18 | ||
• Rose Bar and lobby lounge with capacity for 334 | ||
• Pool Bar with capacity for 40 | ||
• The Florida Room lounge with capacity for 210 | ||
Meeting Space | • Multi-service meeting facilities, consisting of one executive boardroom and other facilities, with total capacity for 24 | |
Other Amenities | • Swimming pool and water salon | |
• Agua Spa and solarium | ||
• Billiards area | ||
• 24-hour concierge service |
Year Ended December 31, | ||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
Selected Operating Information: | ||||||||||||||||||||
Occupancy | 62.3 | % | 79.3 | % | 73.0 | % | 67.1 | % | 72.1 | % | ||||||||||
ADR | $ | 488 | $ | 540 | $ | 557 | $ | 505 | $ | 474 | ||||||||||
RevPAR | $ | 304 | $ | 428 | $ | 407 | $ | 338 | $ | 342 | ||||||||||
Selected Financial Information (in thousands): | ||||||||||||||||||||
Room Revenue | $ | 21,539 | $ | 30,417 | $ | 28,923 | $ | 23,961 | $ | 24,276 | ||||||||||
Total Revenue | 44,814 | 62,115 | 56,603 | 50,433 | 49,685 | |||||||||||||||
Depreciation | 4,646 | 5,776 | 3,858 | 2,203 | 3,272 | |||||||||||||||
Operating Income | 11,024 | 18,917 | 17,852 | 16,100 | 15,877 |
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Location | • 8440 West Sunset Boulevard, Los Angeles, California | |
Guest Rooms | • 237, including 183 suites | |
Food and Beverage | • Asia de Cuba Restaurant with seating for 225 | |
• ADCB lounge with seating for 32 | ||
• Skybar with capacity for 491 | ||
Meeting Space | • Multi-service meeting facilities, consisting of two executive boardrooms and one suite, with total capacity for 165 | |
Other Amenities | • Indoor/outdoor lobby | |
• Agua Spa | ||
• Heated swimming pool | ||
• Outdoor living room | ||
• 24-hour concierge service | ||
• Full service business center | ||
• 24-hour fitness center |
Year Ended December 31, | ||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
Selected Operating Information: | ||||||||||||||||||||
Occupancy | 63.4 | % | 52.0 | % | 76.5 | % | 79.1 | % | 79.5 | % | ||||||||||
ADR | $ | 264 | $ | 348 | $ | 327 | $ | 315 | $ | 301 | ||||||||||
RevPAR | $ | 167 | $ | 181 | $ | 250 | $ | 249 | $ | 239 | ||||||||||
Selected Financial Information (in thousands): | ||||||||||||||||||||
Room Revenue (1) | $ | 14,483 | $ | 15,715 | $ | 21,623 | $ | 21,579 | $ | 20,674 | ||||||||||
Total Revenue (1) | 31,266 | 33,408 | 44,443 | 43,978 | 43,494 | |||||||||||||||
Depreciation (1) | 5,239 | 3,373 | 2,182 | 1,727 | 2,238 | |||||||||||||||
Operating Income (1) | 4,049 | 4,920 | 14,429 | 15,873 | 14,925 |
(1) | Mondrian Los Angeles was under renovation for the majority of 2008. |
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Location | • 495 Geary Street, San Francisco, California | |
Guest Rooms | • 372, including 25 suites | |
Food and Beverage | • Asia de Cuba restaurant with seating for 139 | |
• Redwood Room bar with capacity for 124 | ||
• Living Room with capacity for 46 | ||
Meeting Space | • Multi-service meeting facilities, consisting of two executive boardrooms, one suite and other facilities, with total capacity for 403 | |
Other Amenities | • 24-hour concierge service | |
• 24-hour business center | ||
• 24-hour fitness center |
Year Ended December 31, | ||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
Selected Operating Information: | ||||||||||||||||||||
Occupancy | 65.5 | % | 74.8 | % | 74.3 | % | 70.6 | % | 68.7 | % | ||||||||||
ADR | $ | 201 | $ | 254 | $ | 259 | $ | 239 | $ | 221 | ||||||||||
RevPAR | $ | 131 | $ | 190 | $ | 192 | $ | 169 | $ | 152 | ||||||||||
Selected Financial Information (in thousands): | ||||||||||||||||||||
Room Revenue | $ | 17,700 | $ | 25,297 | $ | 25,497 | $ | 22,370 | $ | 20,098 | ||||||||||
Total Revenue | 30,702 | 42,066 | 43,337 | 38,686 | 35,565 | |||||||||||||||
Depreciation | 3,028 | 2,602 | 2,372 | 5,487 | 7,245 | |||||||||||||||
Operating (loss) income | (2,712 | ) | 5,041 | 4,383 | (12 | ) | (2,616 | ) |
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Location | • 7353 East Indian School Road, Scottsdale, Arizona | |
Guest Rooms | • 189, including 15 suites and 2 apartments | |
Food and Beverage | • An Italian restaurant, with seating, both indoors and outdoors, for 190 | |
• Skybar with capacity for 250 | ||
• Red Bar with capacity for 125 | ||
Meeting Space | • Multi-service meeting facilities, consisting of eight function rooms and a private reception area, with total capacity for 500 | |
Other Amenities | • Agua Spa | |
• Two swimming pools | ||
• 24-hour business center | ||
• 24-hour fitness center |
Year Ended | Year Ended | May 5, 2006 - | ||||||||||
December 31, | December 31, | December 31, | ||||||||||
2008 | 2007 | 2006 | ||||||||||
Selected Operating Information: | ||||||||||||
Occupancy | 40.8 | % | 56.0 | % | 44.0 | % | ||||||
ADR | $ | 132 | $ | 203 | $ | 162 | ||||||
RevPAR | $ | 54 | $ | 114 | $ | 71 | ||||||
Selected Financial Information (in thousands): | ||||||||||||
Room Revenue | $ | 3,713 | $ | 8,069 | $ | 3,317 | ||||||
Total Revenue | 7,594 | 16,736 | 5,503 | |||||||||
Depreciation | 1,174 | 2,945 | 967 | |||||||||
Operating Loss | (2,416 | ) | (3,468 | ) | (3,210 | ) |
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Location | • 45 St Martins Lane, London, United Kingdom | |
Guest Rooms | • 204, including 16 rooms with private patio gardens and a luxury penthouse and apartment | |
Food and Beverage | • Asia de Cuba restaurant with seating for 180 | |
• Rum Bar with capacity for 30 | ||
• Light Bar with capacity for 150 | ||
• Bungalow 8 private club with capacity for 200 | ||
Meeting Space | • Multi-service meeting facilities, consisting of one executive boardroom, three suites, including some outdoor function space, and other facilities, with total capacity for 450 | |
Other Amenities | • 24-hour concierge service | |
• Full service business center | ||
• 24-hour fitness center |
Year Ended December 31, | ||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
Selected Operating Information: | ||||||||||||||||||||
Occupancy | 74.4 | % | 75.0 | % | 77.1 | % | 78.2 | % | 73.6 | % | ||||||||||
ADR (1) | $ | 323 | $ | 420 | $ | 467 | $ | 399 | $ | 364 | ||||||||||
RevPAR (1) | $ | 240 | $ | 315 | $ | 360 | $ | 312 | $ | 267 | ||||||||||
Selected Financial Information (in thousands): (1) | ||||||||||||||||||||
Room Revenue | $ | 17,927 | $ | 19,900 | $ | 21,041 | $ | 19,807 | $ | 16,967 | ||||||||||
Total Revenue | 44,390 | 40,595 | 41,648 | 39,482 | 35,063 | |||||||||||||||
Depreciation | 4,155 | 4,072 | 3,442 | 3,200 | 3,975 | |||||||||||||||
Operating Income | 6,330 | 8,770 | 11,096 | 9,475 | 5,916 |
(1) | The currency translation is based on an exchange rate of 1 British pound 1.57 U.S. dollars, which is an average monthly exchange rate provided bywww.oanda.comfor the last 12 months ending December 31, 2009. |
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Location | • 50 Berners Street, London, United Kingdom | |
Guest Rooms | • 150, including seven with private terraces and 18 suites, including a penthouse and apartment | |
Food and Beverage | • Suka Restaurant with seating for 120 | |
• Long Bar and courtyard garden with capacity for 290 | ||
• Purple Bar with capacity for 45 | ||
Meeting Space | • Multi-service facilities, consisting of a penthouse boardroom and suites with total capacity for 80 | |
Other Amenities | • Courtyard Garden | |
• Billiard Room | ||
• Agua Spa | ||
• 24-hour concierge service | ||
• 24-hour business center | ||
• 24-hour fitness center |
Year Ended December 31, | ||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
Selected Operating Information: | ||||||||||||||||||||
Occupancy | 71.8 | % | 74.1 | % | 77.8 | % | 77.5 | % | 69.6 | % | ||||||||||
ADR (1) | $ | 386 | $ | 483 | $ | 539 | $ | 475 | $ | 443 | ||||||||||
RevPAR (1) | $ | 278 | $ | 358 | $ | 419 | $ | 368 | $ | 308 | ||||||||||
Selected Financial Information (in thousands): (1) | ||||||||||||||||||||
Room Revenue | $ | 15,233 | $ | 16,615 | $ | 18,006 | $ | 17,182 | $ | 14,386 | ||||||||||
Total Revenue | 34,174 | 31,546 | 33,860 | 33,308 | 29,213 | |||||||||||||||
Depreciation | 2,359 | 2,356 | 2,658 | 3,674 | 4,399 | |||||||||||||||
Operating Income | 4,050 | 5,575 | 6,461 | 4,990 | 1,640 |
(1) | The currency translation is based on an exchange rate of 1 British pound to 1.57 U.S. dollars, which is an average monthly exchange rate provided bywww.oanda.comfor the last 12 months ended December 31, 2009. |
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Location | • 1901 Collins Avenue, Miami Beach, Florida | |
Guest Rooms | • 309, including 67 suites and 7 bungalows | |
Food and Beverage | • Nobu Restaurant with seating for 120 | |
• Nobu Lounge with capacity for 140 | ||
• Ago Restaurant with seating for 275 | ||
• Skybar | ||
• Red Room with seating for 144 | ||
• Red Room Garden with capacity for 250 | ||
• Rum Bar with capacity for 415 | ||
• Sand Bar with capacity for 75 | ||
Meeting Space | • Multi-service meeting facilities, consisting of a 1,200 square foot ocean front meeting room, six executive boardrooms, one loft boardroom, and other facilities, with total capacity for 550 | |
Other Amenities | • Two elevated infinity edge pools (one Olympic size and one lap pool with hot tub) | |
• Spa @ Shore Club | ||
• Salon, jewelry shop, clothing shop and gift shop | ||
• Concierge service |
Year Ended December 31, | ||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
Selected Operating Information: | ||||||||||||||||||||
Occupancy | 50.8 | % | 64.2 | % | 65.1 | % | 65.7 | % | 63.6 | % | ||||||||||
ADR | $ | 307 | $ | 388 | $ | 436 | $ | 373 | $ | 349 | ||||||||||
RevPAR | $ | 156 | $ | 249 | $ | 284 | $ | 245 | $ | 222 | ||||||||||
Selected Financial Information (in thousands): | ||||||||||||||||||||
Room Revenue | $ | 17,562 | $ | 28,181 | $ | 32,006 | $ | 27,467 | $ | 24,922 | ||||||||||
Total Revenue | 27,430 | 43,291 | 48,759 | 42,423 | 39,726 | |||||||||||||||
Depreciation | 4,395 | 4,562 | 4,877 | 9,662 | 8,824 | |||||||||||||||
Operating (loss) income | (4,067 | ) | 8,305 | 8,386 | 1,102 | 2,004 |
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Location | • 4455 Paradise Road, Las Vegas | |
Guest Rooms | • Three hotel towers with 1,510 hotel rooms averaging approximately 500 square feet in size (including 450 suites, 9 penthouses, 10 pool villas and 8 spa villas) | |
Food and Beverage | • Nobu with seating for 300 | |
• Rare 120 with seating for 178 | ||
• Pink Taco with seating for 259 | ||
• Espumosa Café with seating for 35 | ||
• Mr. Lucky’s with seating for 200 | ||
• Ago with seating for 200 | ||
• Starbucks | ||
• Eight cocktail lounges, including two circular lounges, Luxe Bar and Center Bar, that are elevated and surrounded by the gaming floor | ||
Meeting Space | • 80,000 square-feet of banquet and meeting facilities | |
Other Amenities | • An approximately 60,000 square foot uniquely styled casino with 835 slot machines and 125 table games |
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• Poker Lounge with 18 tables and a 1,000 square foot connected bar | ||
• Vanity nightclub, with capacity for 1,400 | ||
• Recently renovated and expanded live music concert hall, The Joint, with capacity for 4,100 | ||
• Wasted Space rock n’ roll bar, with capacity for 500 | ||
• Beach Club, including a 300-foot long sand bottomed tropical theme outdoor swimming pool area, with a water slide, water fall, a running stream and underwater rock music. The expansion of the pool is expected to open in March 2010 | ||
• Approximately 21,000 square foot spa/salon/fitness center, called Reliquary | ||
• Rock Spa health club and fitness center | ||
• An approximately 3,600 square foot retail store, a jewelry store and a lingerie store | ||
• 24-hour concierge service | ||
• 24-hour room service |
For the Year | For the Year | For the Period | ||||||||||
Ended | Ended | from Feb. 2, 2007 | ||||||||||
Dec. 31, 2009 | Dec. 31, 2008 | to Dec. 31, 2007 | ||||||||||
Selected Operating Information: | ||||||||||||
Occupancy | 88.2 | % | 91.7 | % | 94.6 | % | ||||||
ADR | $ | 134 | $ | 186 | $ | 207 | ||||||
RevPAR | $ | 118 | $ | 171 | $ | 196 | ||||||
Selected Financial Information (in thousands): | ||||||||||||
Room Revenue | $ | 35,063 | $ | 39,008 | $ | 42,220 | ||||||
Total Revenue | 185,698 | 164,345 | 173,655 | |||||||||
Depreciation | 23,062 | 23,454 | 17,413 | |||||||||
Operating (loss) income (1) | (131,851 | ) | (202,895 | ) | 19,626 |
(1) | After impairment losses and pre-opening expenses incurred to expand the property. |
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Location | • 1100 West Avenue, Miami Beach, Florida | |
Guest Rooms | • 328, including studios, one-and two-bedroom apartments, and four tower suites | |
Food and Beverage | • Asia de Cuba restaurant with seating for 265 | |
• Sunset Lounge with capacity for 315 | ||
Meeting Space | • Multi-service meeting facilities, consisting of two studios, both with outdoor terraces, with total capacity for over 700 | |
Other Amenities | • Bayside swimming pool surrounded by lounge pillows | |
• Lush gardens and landscaped labyrinthine trails | ||
• 24-hour concierge service | ||
• 24-hour business center | ||
• 24-hour fitness center |
For the Year Ended | For the period from | |||||||
December 31, 2009 | Dec. 1, 2008-Dec. 31, 2008 | |||||||
Selected Operating Information: | ||||||||
Occupancy | 62.0 | % | 55.0 | % | ||||
ADR | $ | 221 | $ | 289 | ||||
RevPAR | $ | 137 | $ | 159 | ||||
Selected Financial Information (in thousands): | ||||||||
Room Revenue | $ | 11,864 | 1,020 | |||||
Total Revenue | 24,387 | $ | 69,105 | |||||
Depreciation | 108 | 53 | ||||||
Operating loss | (1,246 | ) | (6,417 | ) |
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Location | • 1 Court Street, Boston, Massachusetts | |
Guest Rooms | • 114, including 107 guest rooms, one apartment and six deluxe one-bedroom suites | |
Food and Beverage | • Woodward with seating for 160 | |
Meeting Space | • Multi-service meeting facilities with total capacity for over 50 | |
Other Amenities | • 24-hour concierge service | |
• 24-hour business center | ||
• 24-hour fitness center |
For the period from | ||||
Nov. 19, 2009-Dec. 31, 2009 | ||||
Selected Operating Information: | ||||
Occupancy | 33.4 | % | ||
ADR | $ | 175 | ||
RevPAR | $ | 58 | ||
Selected Financial Information (in thousands): | ||||
Room Revenue | 223 | |||
Total Revenue | $ | 860 | ||
Depreciation | — | |||
Operating loss | (123 | ) |
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ITEM 3. | LEGAL PROCEEDINGS |
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ITEM 5. | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
Period | High | Low | ||||||
First Quarter 2008 | $ | 19.75 | $ | 12.67 | ||||
Second Quarter 2008 | $ | 15.56 | $ | 10.30 | ||||
Third Quarter 2008 | $ | 17.88 | $ | 10.00 | ||||
Fourth Quarter 2008 | $ | 10.73 | $ | 2.60 | ||||
First Quarter 2009 | $ | 5.15 | $ | 1.61 | ||||
Second Quarter 2009 | $ | 4.88 | $ | 3.35 | ||||
Third Quarter 2009 | $ | 6.21 | $ | 3.30 | ||||
Fourth Quarter 2009 | $ | 5.64 | $ | 3.10 |
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and S&P 500 Hotels Index From February 17, 2006 through December 31, 2009
2/17/2006 | 12/31/2006 | 12/31/2007 | 12/31/2008 | 12/31/2009 | ||||||||||||||||
Morgans Hotel Group Co. | $ | 100.00 | $ | 84.65 | $ | 96.40 | $ | 23.30 | $ | 22.85 | ||||||||||
S&P 500 Stock Index | 100.00 | 110.18 | 114.07 | 70.17 | 86.63 | |||||||||||||||
S&P 500 Hotels Index | 100.00 | 112.27 | 96.72 | 48.27 | 74.93 |
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ITEM 6. | SELECTED FINANCIAL INFORMATION |
Year Ended December 31, | ||||||||||||||||||||
2009 | 2008(1) | 2007(1) | 2006(1) | 2005(1) | ||||||||||||||||
(In thousands, except operating and per share data) | ||||||||||||||||||||
Statement of Operations Data: | ||||||||||||||||||||
Total hotel revenues | $ | 217,572 | $ | 296,167 | $ | 304,804 | $ | 273,114 | $ | 253,683 | ||||||||||
Total revenues | 232,645 | 314,467 | 322,985 | 281,883 | 263,162 | |||||||||||||||
Total hotel operating costs | 178,138 | 205,985 | 206,595 | 180,922 | 165,996 | |||||||||||||||
Corporate expenses, including stock compensation | 33,514 | 41,889 | 44,744 | 27,306 | 17,982 | |||||||||||||||
Depreciation and amortization | 30,797 | 27,733 | 21,719 | 19,112 | 26,215 | |||||||||||||||
Total operating costs and expenses | 267,026 | 299,862 | 276,286 | 228,957 | 210,193 | |||||||||||||||
Operating (loss) income | (34,381 | ) | 14,605 | 46,699 | 52,926 | 52,969 | ||||||||||||||
Interest expense, net | 50,469 | 45,440 | 41,812 | 51,564 | 72,257 | |||||||||||||||
Net loss | (99,724 | ) | (56,673 | ) | (15,073 | ) | (13,925 | ) | (30,216 | ) | ||||||||||
Preferred stock dividends and accretion | 1,746 | — | — | — | — | |||||||||||||||
Net loss attributable to common shareholders | (101,470 | ) | (56,673 | ) | (15,073 | ) | (13,925 | ) | (30,216 | ) | ||||||||||
Net loss per share attributable to common shareholders, basic and diluted | (3.38 | ) | (1.80 | ) | (0.45 | ) | (0.30 | ) | — | |||||||||||
Weighted average common shares outstanding | 30,017 | 31,413 | 33,239 | 33,492 | — | |||||||||||||||
Cash Flow Data: | ||||||||||||||||||||
Net cash (used in) provided by: | ||||||||||||||||||||
Operating activities | $ | (19,335 | ) | $ | 25,320 | $ | 45,619 | $ | 36,797 | $ | 19,870 | |||||||||
Investing activities | (36,449 | ) | (45,140 | ) | (100,375 | ) | (143,658 | ) | (20,251 | ) | ||||||||||
Financing activities | 76,122 | (52,715 | ) | 148,696 | 112,575 | 9,301 |
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As of December 31, | ||||||||||||||||||||
2009 | 2008(1) | 2007(1) | 2006(1) | 2005(1) | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Balance Sheet Data: | ||||||||||||||||||||
Cash and cash equivalents (2) | $ | 68,994 | $ | 48,656 | $ | 121,191 | $ | 27,251 | $ | 21,833 | ||||||||||
Restricted cash (2) | 21,109 | 19,737 | 25,621 | 23,282 | 32,754 | |||||||||||||||
Property and equipment, net (2) | 488,189 | 516,148 | 480,858 | 441,827 | 426,927 | |||||||||||||||
Assets of hotel held for non-sale disposition (2) | 23,977 | 42,531 | 60,252 | 55,418 | — | |||||||||||||||
Total assets | 838,238 | 855,464 | 943,578 | 758,006 | 606,275 | |||||||||||||||
Mortgage notes payable | 374,500 | 380,000 | 380,000 | 380,000 | 577,968 | |||||||||||||||
Mortgage notes payable of hotel held for non-sale disposition | 40,000 | 40,000 | 40,000 | 40,000 | — | |||||||||||||||
Financing and capital lease obligations | 325,013 | 297,179 | 309,199 | 135,870 | 81,664 | |||||||||||||||
Long-term debt and capital lease obligations | 739,013 | 717,179 | 713,737 | 553,197 | 659,632 | |||||||||||||||
Preferred stock | 48,564 | — | — | — | — | |||||||||||||||
Total MHGC stockholders’ equity (deficit) | 9,020 | 43,388 | 138,742 | 122,446 | (110,573 | ) | ||||||||||||||
Total equity (deficit) | 23,411 | 61,356 | 157,766 | 142,763 | (109,417 | ) |
(1) | We followed the guidance for a change in accounting principle under Statement of Financial Accounting Standard (“SFAS”) No. 154,Accounting Changes and Error Correction(which has been subsequently codified in Accounting Standards Codification (“ASC”) 250-10,Accounting Changes and Error Correction), to reflect the retrospective adoption of Financial Accounting Standards Board Staff Position No. 14-1, which was subsequently codified in ASC 470-20, and SFAS No. 160,Noncontrolling Interests in Consolidated Financial Statements — an amendment of Accounting Research Bulleting (ARB)No. 51, which has been subsequently codified in ASC 810-10, which were effective on January 1, 2009. In further discussion of this change in accounting principle, see note 2 to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K. | |
(2) | Balance sheet data has been adjusted to present Mondrian Scottsdale as a hotel held for non-sale disposition separately from our other assets and liabilities. For further discussion and information on this hotel held for non-sale disposition, see the consolidated balance sheet in the consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K. |
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ITEM 7. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
• | our Owned Hotels, consisting of Morgans, Royalton and Hudson in New York, Delano South Beach in Miami, South Beach, Mondrian Los Angeles in Los Angeles, Clift in San Francisco, and Mondrian Scottsdale in Scottsdale. As of December 31, 2009, Mondrian Scottsdale was in foreclosure proceedings and the operations have been reclassified on our consolidated financial statements to “hotel held for non-sale disposition”; |
• | our Joint Venture Hotels, consisting of our London hotels (Sanderson and St Martins Lane), Hard Rock in Las Vegas, Mondrian South Beach and Shore Club in South Beach, Miami, and Ames in Boston; |
• | our non-Morgans Hotel Group branded hotels which we manage independently, consisting of the San Juan Water and Beach Club in Isla Verde, Puerto Rico and Hotel Las Palapas in Playa del Carmen, Mexico; |
• | our investments in hotels under construction, such as Mondrian SoHo, and our investment in other proposed properties; |
• | our investment in certain joint venture food and beverage operations at our Owned Hotels and Joint Venture Hotels, discussed further below; |
• | our management company subsidiary, MHG Management Company; and |
• | the rights and obligations contributed to Morgans Group in the formation and structuring transactions described in note 1 to the Consolidated Financial Statements, included elsewhere in this report. |
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• | Sanderson— June 2018 (with one 10-year extension at our option); | ||
• | St Martins Lane— June 2018 (with one 10-year extension at our option); |
• | Shore Club— July 2022; |
• | Hard Rock— February 2027 (with two 10-year extensions); |
• | Mondrian South Beach— August 2026; and |
• | Ames— November 2024. |
• | occupancy; |
• | ADR; and |
• | RevPAR, which is the product of ADR and average daily occupancy; but does not include food and beverage revenue, other hotel operating revenue such as telephone, parking and other guest services, or management fee revenue. |
• | Rooms revenue.Occupancy and ADR are the major drivers of rooms revenue. |
• | Food and beverage revenue.Most of our food and beverage revenue is earned by our 50/50 restaurant joint ventures and is driven by occupancy of our hotels and the popularity of our bars and restaurants with our local customers. |
• | Other hotel revenue.Other hotel revenue, which consists of ancillary revenue such as telephone, parking, spa, entertainment and other guest services, is principally driven by hotel occupancy. |
• | Revenues of hotel held for non-sale disposition.Revenue of hotel held for non-sale disposition includes room revenue, food and beverage revenue and other hotel revenues for Mondrian Scottsdale, which is in foreclosure proceedings as discussed in note 2 to our consolidated financial statements. |
• | Management fee—related parties revenue and other income.We earn fees under our management agreements. These fees may include management fees as well as reimbursement for allocated chain services. Additionally, in 2008 we earned a branding fee related to the use of our Delano brand in connection with sales by our joint venture partner in the Delano Dubai development project of condominium units. |
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• | Rooms expense.Rooms expense includes the payroll and benefits for the front office, housekeeping, concierge and reservations departments and related expenses, such as laundry, rooms supplies, travel agent commissions and reservation expense. Like rooms revenue, occupancy is a major driver of rooms expense, which has a significant correlation with rooms revenue. |
• | Food and beverage expense.Similar to food and beverage revenue, occupancy of our hotels and the popularity of our restaurants and bars are the major drivers of food and beverage expense, which has a significant correlation with food and beverage revenue. |
• | Other departmental expense.Occupancy is the major driver of other departmental expense, which includes telephone and other expenses related to the generation of other hotel revenue. |
• | Operating expenses of hotel held for non-sale disposition.Operating expenses of hotel held for non-sale disposition includes rooms expenses, food and beverage expenses, other departmental expenses, hotel selling, general and administrative expenses, property taxes, insurance and other expenses for Mondrian Scottsdale, which is in foreclosure proceedings, as discussed in note 2 to our consolidated financial statements. |
• | Hotel selling, general and administrative expense.Hotel selling, general and administrative expense consist of administrative and general expenses, such as payroll and related costs, travel expenses and office rent, advertising and promotion expenses, comprising the payroll of the hotel sales teams, the global sales team and advertising, marketing and promotion expenses for our hotel properties, utility expense and repairs and maintenance expenses, comprising the ongoing costs to repair and maintain our hotel properties. |
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• | Property taxes, insurance and other.Property taxes, insurance and other consist primarily of insurance costs and property taxes. |
• | Corporate expenses, including stock compensation.Corporate expenses consist of the cost of our corporate office, net of any cost recoveries, which consists primarily of payroll and related costs, stock-based compensation expenses, office rent and legal and professional fees and costs associated with being a public company. |
• | Depreciation and amortization expense.Hotel properties are depreciated using the straight-line method over estimated useful lives of 39.5 years for buildings and five years for furniture, fixtures and equipment. |
• | Depreciation expense of hotel held for non-sale disposition.Total depreciation expense of hotel held for non-sale disposition includes depreciation expense for Mondrian Scottsdale, which is in foreclosure proceedings, as discussed in note 2 to our consolidated financial statements. Hotel properties are depreciated using the straight-line method over estimated useful lives of 39.5 years for buildings and five years for furniture, fixtures and equipment. |
• | Restructuring, development and disposal costsinclude costs incurred related to our restructuring initiatives implemented in 2008 and 2009, charges associated with disposals of assets as part of major renovation projects and the write-off of abandoned development projects resulting primarily from events generally outside management’s control such as the current tightness of the credit markets. These items do not relate to the ongoing operating performance of our assets. |
• | Impairment loss on hotel held for non-sale disposition.When certain triggering events occur, we periodically review each asset for possible impairment. If such asset is considered to be impaired, the impairment recognized is measured by the amount by which the carrying amount of the asset exceeds the estimated discounted future cash flows of the asset to estimate the fair value of the asset, taking into account the applicable assets expected cash flow from operations, holding period and net proceeds from the dispositions of the asset. For the years ended December 31, 2009 and 2008, management concluded that our investment in Mondrian Scottsdale was impaired. Impairment charges of $18.4 million and $13.4 million, respectively, are reflected in our consolidated financial statements for the years ended December 31, 2009 and 2008. |
• | Interest expense, net.Interest expense, net includes interest on our debt and amortization of financing costs and is presented net of interest income and interest capitalized. |
• | Interest expense of hotel held for non-sale disposition.Interest expense of hotel held for non-sale disposition includes interest on our non-recourse mortgage and mezzanine debt at Mondrian Scottsdale. |
• | Equity in (income) loss of unconsolidated joint ventures. Equity in (income) loss of unconsolidated joint ventures constitutes our share of the net profits and losses of our Joint Venture Hotels and our investments in hotels under development. Further, we and our joint venture partners review our Joint Venture Hotels for other-than-temporary declines in market value. In this analysis of fair value, we use discounted cash flow analysis to estimate the fair value of our investment taking into account expected cash flow from operations, holding period and net proceeds from the dispositions of the property. Any decline that is not expected to be recovered is considered other-than-temporary and an impairment charge is recorded as a reduction in the carrying value of the investment. As such, included in our equity in loss of unconsolidated joint ventures is our portion of the respective joint ventures impairment charges of $7.8 million for our investment in Mondrian South Beach and $17.2 million on our investment in Echelon Las Vegas. As of December 31, 2009, management concluded that there is no impairment loss in the value of the unconsolidated joint ventures that is determined to be other-than-temporary. |
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• | Impairment loss on development project.When certain triggering events occur, we periodically review each asset for possible impairment. If such asset is considered to be impaired, the impairment recognized is measured by the amount by which the carrying amount of the asset exceeds the estimated discounted future cash flows of the asset to estimate the fair value of the asset, taking into account the applicable assets expected cash flow from operations, holding period and net proceeds from the dispositions of the asset. For the year ended December 31, 2009, management concluded that our investment in the property across the street from Delano South Beach was impaired. An impairment charge of $11.9 million was recognized and is reflected in our consolidated financial statements for the year ended December 31, 2009. |
• | Other non-operating (income) expensesinclude costs associated with financings, litigation and settlement costs and other items that relate to the financing and investing activities associated with our assets and not to the ongoing operating performance of our assets, both consolidated and unconsolidated, as well as the change in fair market value of our warrants issued in connection with the Yucaipa transaction. |
• | Income tax (benefit) expense.All of our foreign subsidiaries are subject to local jurisdiction corporate income taxes. Income tax expense is reported at the applicable rate for the periods presented. We are subject to Federal and state income taxes. Income taxes for the years ended December 31, 2009, 2008 and 2007 were computed using our calculated effective tax rate. We also recorded net deferred taxes related to cumulative differences in the basis recorded for certain assets and liabilities. |
• | Noncontrolling interest.Noncontrolling interest constitutes our third-party food and beverage joint venture partner’s interest in the profits of the restaurant ventures at certain of our hotels as well as the percentage of membership units in Morgans Group, our operating company, owned by Residual Hotel Interest LLC, our former parent, as discussed in note 2 of our consolidated financial statements. |
• | Preferred stock dividends and accretion.Dividends attributable to our outstanding preferred stock and the accretion of the fair value discount on the issuance of the preferred stock are reflected as adjustments to our net loss to arrive at net loss attributable to common stockholders, as discussed in notes 3 and 11 of our consolidated financial statements. |
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2009 | 2008(2) | Changes ($) | Changes (%) | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Revenues: | ||||||||||||||||
Rooms | $ | 127,188 | $ | 177,054 | $ | (49,866 | ) | (28.2 | )% | |||||||
Food and beverage | 73,278 | 93,307 | (20,029 | ) | (21.5 | ) | ||||||||||
Other hotel | 9,512 | 12,018 | (2,506 | ) | (20.9 | ) | ||||||||||
Revenues of hotel held for non-sale disposition | 7,594 | 13,788 | (6,194 | ) | (44.9 | ) | ||||||||||
Total hotel revenues | 217,572 | 296,167 | (78,595 | ) | (26.5 | ) | ||||||||||
Management fee-related parties and other income | 15,073 | 18,300 | (3,227 | ) | (17.6 | ) | ||||||||||
Total revenues | 232,645 | 314,467 | (81,822 | ) | (26.0 | ) | ||||||||||
Operating Costs and Expenses: | ||||||||||||||||
Rooms | 41,602 | 47,083 | (5,481 | ) | (11.6 | ) | ||||||||||
Food and beverage | 56,492 | 67,223 | (10,731 | ) | (16.0 | ) | ||||||||||
Other departmental | 6,159 | 6,810 | (651 | ) | (9.6 | ) | ||||||||||
Hotel selling, general and administrative | 47,705 | 55,021 | (7,316 | ) | (13.3 | ) | ||||||||||
Property taxes, insurance and other | 17,599 | 16,387 | 1,212 | 7.4 | ||||||||||||
Hotel operating expenses of hotel held for non-sale disposition | 8,581 | 13,461 | (4,880 | ) | (36.3 | ) | ||||||||||
Total hotel operating expenses | 178,138 | 205,985 | (27,847 | ) | (13.5 | ) | ||||||||||
Corporate expenses, including stock compensation | 33,514 | 41,889 | (8,375 | ) | (20.0 | ) | ||||||||||
Depreciation and amortization | 29,623 | 24,912 | 4,711 | 18.9 | ||||||||||||
Depreciation of hotel held for non-sale disposition | 1,174 | 2,821 | (1,647 | ) | (58.4 | ) | ||||||||||
Restructuring, development and disposal costs | 6,100 | 10,825 | (4,725 | ) | (43.6 | ) | ||||||||||
Impairment loss on hotel held for non-sale disposition | 18,477 | 13,430 | 5,047 | 37.6 | ||||||||||||
Total operating costs and expenses | 267,026 | 299,862 | (32,836 | ) | (11.0 | ) | ||||||||||
Operating (loss) income | (31,681 | ) | 14,605 | (46,286 | ) | (1) | ||||||||||
Interest expense, net | 49,401 | 43,221 | 6,180 | 14.3 | ||||||||||||
Interest expense of hotel held for non-sale disposition | 1,068 | 2,219 | (1,151 | ) | (51.9 | ) | ||||||||||
Equity in loss of unconsolidated joint venture | 33,075 | 56,581 | (23,506 | ) | (41.5 | ) | ||||||||||
Impairment loss on development project | 11,913 | — | 11,913 | (1) | ||||||||||||
Other non-operating (income) expense | (2,032 | ) | 464 | (2,496 | ) | (1) | ||||||||||
Loss before income tax benefit | (127,806 | ) | (87,880 | ) | (39,926 | ) | (45.4 | ) | ||||||||
Income tax benefit | (26,201 | ) | (33,311 | ) | 7,110 | 21.3 | ||||||||||
Net loss | (101,605 | ) | (54,569 | ) | (47,036 | ) | (86.2 | ) | ||||||||
Net (income) loss attributable to non controlling interest | (1,881 | ) | 2,104 | (3,985 | ) | (1) | ||||||||||
Net loss | (99,724 | ) | (56,673 | ) | (43,051 | ) | (76.0 | ) | ||||||||
Preferred stock dividends and accretion | (1,746 | ) | — | 1,746 | (1) | |||||||||||
Net loss attributable to common stockholders | (101,470 | ) | (56,673 | ) | (44,797 | ) | (79.0 | ) | ||||||||
(1) | Not meaningful. | |
(2) | We followed the guidance for a change in accounting principle under Statement of Financial Accounting Standard (“SFAS”) No. 154,Accounting Changes and Error Correction(which has been subsequently codified in Accounting Standards Codification (“ASC”) 250-10,Accounting Changes and Error Correction), to reflect the retrospective adoption of Financial Accounting Standards Board Staff Position No. 14-1, which was subsequently codified in ASC 470-20, and SFAS No. 160,Noncontrolling Interests in Consolidated Financial Statements — an amendment of Accounting Research Bulleting (ARB)No. 51, which has been subsequently codified in ASC 810-10 and which were effective on January 1, 2009. In further discussion of this change in accounting principle, see note 2 to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K. |
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2009 | 2008 | Change ($) | Change (%) | |||||||||||||
Occupancy | 77.1 | % | 85.2 | % | — | (9.5 | )% | |||||||||
ADR | $ | 239 | $ | 320 | $ | (81 | ) | (25.3 | )% | |||||||
RevPAR | $ | 184 | $ | 272 | $ | (88 | ) | (32.4 | )% |
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2009 | 2008 | Change ($) | Change (%) | |||||||||||||
Occupancy | 62.3 | % | 69.7 | % | — | (10.6 | )% | |||||||||
ADR | $ | 335 | $ | 382 | $ | (47 | ) | (12.3 | )% | |||||||
RevPAR | $ | 208 | $ | 266 | $ | (58 | ) | (21.8 | )% |
2009 | 2008 | Change ($) | Change (%) | |||||||||||||
Occupancy | 88.2 | % | 91.7 | % | — | (3.8 | )% | |||||||||
ADR | $ | 134 | $ | 186 | $ | (52 | ) | (28.0 | )% | |||||||
RevPAR | $ | 118 | $ | 171 | $ | (53 | ) | (31.0 | )% |
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2008(2) | 2007(2) | Changes ($) | Changes (%) | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Revenues: | ||||||||||||||||
Rooms | $ | 177,054 | $ | 178,683 | $ | (1,629 | ) | (0.9 | )% | |||||||
Food and beverage | 93,307 | 96,550 | (3,243 | ) | (3.4 | ) | ||||||||||
Other hotel | 12,018 | 12,835 | (817 | ) | (6.4 | ) | ||||||||||
Revenues of hotel held for non-sale disposition | 13,788 | 16,736 | (2,948 | ) | (17.6 | ) | ||||||||||
Total hotel revenues | 296,167 | 304,804 | (8,637 | ) | (2.8 | ) | ||||||||||
Management fee-related parties and other income | 18,300 | 18,181 | 119 | 0.7 | ||||||||||||
Total revenues | 314,467 | 322,985 | (8,518 | ) | (2.6 | ) | ||||||||||
Operating Costs and Expenses: | ||||||||||||||||
Rooms | 47,083 | 46,167 | 916 | 2.0 | ||||||||||||
Food and beverage | 67,223 | 64,250 | 2,973 | 4.6 | ||||||||||||
Other departmental | 6,810 | 7,127 | (317 | ) | (4.4 | ) | ||||||||||
Hotel selling, general and administrative | 55,021 | 54,431 | 590 | 1.1 | ||||||||||||
Property taxes, insurance and other | 16,387 | 17,346 | (959 | ) | (5.5 | ) | ||||||||||
Hotel operating expenses of hotel held for non-sale disposition | 13,461 | 17,274 | (3,813 | ) | (22.1 | ) | ||||||||||
Total hotel operating expenses | 205,985 | 206,595 | (610 | ) | (0.3 | ) | ||||||||||
Corporate expenses, including stock compensation | 41,889 | 44,744 | (2,855 | ) | (6.4 | ) | ||||||||||
Depreciation and amortization | 24,912 | 18,774 | 6,138 | 32.7 | ||||||||||||
Depreciation of hotel held for non-sale disposition | 2,821 | 2,945 | (124 | ) | (4.2 | ) | ||||||||||
Restructuring, development and disposal costs | 10,825 | 3,228 | 7,597 | (1) | ||||||||||||
Impairment loss on hotel held for non-sale disposition | 13,430 | — | 13,430 | (1) | ||||||||||||
Total operating costs and expenses | 299,862 | 276,286 | 23,576 | 8.5 | ||||||||||||
Operating (loss) income | 14,605 | 46,699 | (32,094 | ) | (68.7 | ) | ||||||||||
Interest expense, net | 43,221 | 38,423 | 4,798 | 12.5 | ||||||||||||
Interest expense of hotel held for non-sale disposition | 2,219 | 3,389 | (1,170 | ) | (34.5 | ) | ||||||||||
Equity in loss of unconsolidated joint venture | 56,581 | 24,580 | 32,001 | 130.2 | ||||||||||||
Other non-operating expenses | 464 | 1,531 | (1,067 | ) | (69.7 | ) | ||||||||||
Loss before income tax benefit | (87,880 | ) | (21,224 | ) | (66,656 | ) | (1) | |||||||||
Income tax benefit | (33,311 | ) | (9,249 | ) | (24,062 | ) | (1) | |||||||||
Net loss | (54,569 | ) | (11,975 | ) | (42,594 | ) | (1) | |||||||||
Net loss attributable to non controlling interest | 2,104 | 3,098 | (994 | ) | (32.1 | ) | ||||||||||
Net loss attributable to common stockholders | (56,673 | ) | (15,073 | ) | (41,600 | ) | (1) | |||||||||
(1) | Not meaningful. | |
(2) | We followed the guidance for a change in accounting principle under Statement of Financial Accounting Standard (“SFAS”) No. 154,Accounting Changes and Error Correction(which has been subsequently codified in Accounting Standards Codification (“ASC”) 250-10,Accounting Changes and Error Correction), to reflect the retrospective adoption of Financial Accounting Standards Board Staff Position No. 14-1, which was subsequently codified in ASC 470-20, and SFAS No. 160,Noncontrolling Interests in Consolidated Financial Statements — an amendment of Accounting Research Bulleting (ARB)No. 51, which has been subsequently codified in ASC 810-10 and which were effective on January 1, 2009. In further discussion of this change in accounting principle, see note 2 to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K. |
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2008 | 2007 | Change ($) | Change (%) | |||||||||||||
Occupancy | 80.6 | % | 80.9 | % | — | (0.4 | )% | |||||||||
ADR | $ | 302 | $ | 302 | $ | — | — | % | ||||||||
RevPAR | $ | 243 | $ | 245 | $ | (2 | ) | (0.8 | )% |
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2008 | 2007 | Change ($) | Change (%) | |||||||||||||
Occupancy | 69.4 | % | 71.7 | % | — | (3.2 | )% | |||||||||
ADR | $ | 419 | $ | 472 | $ | (53 | ) | (11.2 | )% | |||||||
RevPAR | $ | 290 | $ | 338 | $ | (48 | ) | (14.1 | )% |
Year ended | Period from | |||||||||||||||
December | Feb. 2, 2007 to | |||||||||||||||
2008 | Dec. 31, 2007 | Change ($) | Change (%) | |||||||||||||
Occupancy | 91.7 | % | 94.6 | % | — | (3.1 | )% | |||||||||
ADR | $ | 186 | $ | 207 | $ | (21 | ) | (10.1 | )% | |||||||
RevPAR | $ | 171 | $ | 196 | $ | (25 | ) | (12.8 | )% |
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• | deletes the financial covenant requiring us to maintain certain leverage ratios; | ||
• | revises the fixed charge coverage ratio (defined generally as the ratio of consolidated EBITDA excluding Mondrian Scottsdale’s EBITDA for the periods ending June 30, 2009 and September 30, 2009 and Clift’s EBITDA for all periods to consolidated interest expense excluding Mondrian Scottsdale’s interest expense for the periods ending June 30, 2009 and September 30, 2009 and Clift’s interest expense for all periods) that we are required to maintain for each four-quarter period to no less than 0.90 to 1.00 from the previous fixed charge coverage ratio of no less than 1.75 to 1.00. As of December 31, 2009, our fixed charge coverage ratio was 1.01x; | ||
• | limits defaults relating to bankruptcy and judgment to certain events involving us, Morgans Group and subsidiaries that are parties to the Amended Revolving Credit Facility; | ||
• | prohibits capital expenditures with respect to any hotels owned by us, the borrowers, or our subsidiaries, other than maintenance capital expenditures for any hotel not exceeding 4% of the annual gross revenues of such hotel and certain other exceptions; | ||
• | revises certain provisions related to permitted indebtedness, including, among other things, deleting certain provisions permitting unsecured indebtedness and indebtedness for the acquisition or expansion of hotels; | ||
• | prohibits repurchase of our common equity interests by us or Morgans Group; | ||
• | imposes certain limits on any secured swap agreements entered into after the effective date of the Amended Revolving Credit Facility; and | ||
• | provides for a waiver of any default or event of default, to the extent that a default or event of default existed for failure to comply with any financial covenant as of June 30, 2009 and/or for the four fiscal quarters ended June 30, 2009 under the revolving credit facility before it was amended. |
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Payments Due by Period | ||||||||||||||||||||
Less Than 1 | More Than | |||||||||||||||||||
Contractual Obligations | Total | Year | 1 to 3 Years | 3 to 5 Years | 5 Years | |||||||||||||||
(In thousands) | ||||||||||||||||||||
Mortgages | $ | 364,000 | $ | — | $ | 364,000 | $ | — | $ | — | ||||||||||
Promissory notes on property across the street from Delano South Beach | 10,500 | 10,500 | — | — | — | |||||||||||||||
Liability to subsidiary trust | 50,100 | — | — | — | 50,100 | |||||||||||||||
Convertible Notes | 172,500 | — | — | 172,500 | — | |||||||||||||||
Revolving credit facility | 23,508 | — | 23,508 | — | — | |||||||||||||||
Funding of outstanding letters of credit | — | — | — | — | — | |||||||||||||||
Interest on mortgage and notes payable | 136,410 | 18,662 | 17,729 | 8,697 | 91,322 | |||||||||||||||
Capitalized lease obligations including amounts representing interest | 127,144 | 488 | 1,466 | 489 | 124,701 | |||||||||||||||
Operating lease obligations | 31,451 | 1,080 | 2,233 | 2,380 | 25,758 | |||||||||||||||
Total | $ | 915,613 | $ | 30,730 | $ | 408,936 | $ | 184,066 | $ | 291,881 | ||||||||||
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First | Second | Third | Fourth | |||||||||||||
Quarter | Quarter | Quarter | Quarter | |||||||||||||
(in millions) | ||||||||||||||||
Room Revenues | ||||||||||||||||
2008 | $ | 43.0 | $ | 45.1 | $ | 44.5 | $ | 44.5 | ||||||||
2009 | $ | 26.8 | $ | 30.1 | $ | 32.1 | $ | 38.2 |
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• | Impairment of long-lived assets.When triggering events occur, we periodically review each property for possible impairment. Recoverability of such assets is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset, as determined by applying our operating budgets for future periods. If such assets are considered to be impaired, the impairment recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value. We estimated each property’s fair value using a discounted cash flow method taking into account each property’s expected cash flow from operations, holding period and net proceeds from the dispositions of the property. The factors we address in determining estimated net proceeds from disposition include anticipated operating cash flow in the year of disposition, terminal capitalization rate and selling price per room. Our judgment is required in determining the discount rate applied to estimated cash flows, the growth rate of the properties, the need for capital expenditures, as well as specific market and economic conditions. Additionally, the classification of these assets as held-for-sale requires the recording of these assets at our estimate of their fair value less estimated selling costs which can affect the amount of impairment recorded. As of December 31, 2009, management concluded that Mondrian Scottsdale was impaired and that the fair value was in excess of the property’s carrying value by approximately $18.4 million. Additionally, management concluded that the property across the street from Delano South Beach was impaired and that the fair value was in excess of the property’s carrying value by approximately $11.3 million. This impairment is reflected in our consolidated financial statements for the year ended December 31, 2009. As of December 31, 2009, management concluded that all other long-lived assets were not impaired. |
• | Impairment of goodwill.Goodwill represents the excess purchase price over the fair value of net assets attributable to business acquisitions and combinations. We test for impairment of goodwill at least annually and generally at year end. We will test for impairment more frequently if events or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount. In accordance with SFAS No. 142, which has been subsequently codified in ASC 350-20,Intangibles — Goodwill and Other, Goodwill, management identifies potential impairments by comparing the fair value of the reporting unit with its book value, including goodwill. If the fair value of the reporting unit exceeds the carrying amount, including goodwill, the asset is not impaired. Any excess of carrying value over the estimated fair value of goodwill would be recognized as an impairment loss in continuing operations. Management applies a discounted cash flow method to perform its annual goodwill fair value impairment test taking into account approved operating budgets with appropriate growth assumptions, holding period and proceeds from disposing of the property. In addition to the discounted cash flow analysis, management also considers external independent appraisals to estimate fair value. The analysis and appraisals used by management are consistent with those used by a market participant. Judgment is required in determining the discount rate applied to estimated cash flows, growth rate of the properties, the need for capital expenditures, as well as specific market and economic conditions. The discount rate and the cap rate were based on applicable public hotel studies and market indices. Given the current economic environment, management believes that the growth assumptions applied are reasonable. The Company has one reportable operating segment, which is its reporting unit under ASC 350-20; therefore management aggregates goodwill associated to all owned hotels when analyzing potential impairment. As of December 31, 2009, management concluded that no goodwill impairment existed as the implied fair value of the reporting unit was well in excess of its carrying value. Management does not believe it is reasonably likely that goodwill will become impaired in future periods, but will test before the 2010 year end if events or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount. |
• | Depreciation and amortization expense.Depreciation expense is based on the estimated useful life of our assets. The respective lives of the assets are based on a number of assumptions made by us, including the cost and timing of capital expenditures to maintain and refurbish our hotels, as well as specific market and economic conditions. Hotel properties and other completed real estate investments are depreciated using the straight-line method over estimated useful lives of 39.5 years for buildings and generally five years for furniture, fixtures and equipment. While our management believes its estimates are reasonable, a change in the estimated lives could affect depreciation expense and net income or the gain or loss on the sale of any of our hotels or other assets. We have not changed the estimated useful lives of any of our assets during the periods discussed and believe that the future useful lives of our assets will be consistent with historical trends and experience. |
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• | Derivative instruments and hedging activities.Derivative instruments and hedging activities require us to make judgments on the nature of our derivatives and their effectiveness as hedges. These judgments determine if the changes in fair value of the derivative instruments are reported as a component of interest expense in the consolidated/combined statements of operations or as a component of equity on the consolidated balance sheets. While we believe our judgments are reasonable, a change in a derivative’s fair value or effectiveness as a hedge could affect expenses, net income and equity. Management has concluded that the designation of our derivatives as an effective hedge or an ineffective hedge has not changed during 2008. Additionally, management determines fair value of our derivatives is in accordance with SFAS No. 157,Fair Value Measurements,which has been subsequently codified in ASC 820-10,Fair Value Measurements and Disclosures(“ASC 820-10”). The valuation of interest rate caps and interest rate swaps is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. To comply with the provisions of ASC 820-10, the Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees. Management believes that the valuation approach is acceptable and that our derivatives are properly stated at December 31, 2009. |
• | Consolidation Policy.We evaluate our variable interests in accordance with Financial Interpretation 46R, which has been subsequently codified in ASC 810-10,Consolidation(“ASC 810-10”) to determine if they are variable interests in variable interest entities. Certain food and beverage operations at five of our Owned Hotels are operated under 50/50 joint ventures. We believe that we are the primary beneficiary of the entities because we absorb the majority of the restaurant ventures’ expected losses and residual returns. Therefore, the restaurant ventures are consolidated in our financial statements with our partner’s share of the results of operations recorded as minority interest in the accompanying financial statements. We have evaluated the applicability of ASC 810-10 to our investments in certain Joint Venture Hotels and related food and beverage operations at certain Joint Venture Hotels. We have determined that these ventures do not meet the requirements of a variable interest entity or we are not the primary beneficiary and therefore, consolidation of these ventures is not required. We account for these investments using the equity method as we believe we do not exercise control over significant asset decisions such as buying, selling or financing nor are we the primary beneficiary of the entities. Under the equity method, we increase our investment in unconsolidated joint ventures for our proportionate share of net income and contributions and decrease our investment balance for our proportionate share of net loss and distributions. |
• | Stock-based Compensation.We have adopted the fair value method of accounting prescribed in SFAS No. 123 “Accounting for Stock Based Compensation” (as amended by SFAS No. 148 and SFAS 123(R)), which has subsequently been codified in ASC 718-10,Compensation, Stock Based Compensation(“ASC 718-10”) for equity-based compensation awards. ASC 718-10 requires an estimate of the fair value of the equity award at the time of grant rather than the intrinsic value method. For all fixed equity-based awards to employees and Directors, which have no vesting conditions other than time of service, the fair value of the equity award at the grant date will be amortized to compensation expense over the award’s vesting period on a straight-line basis. For performance-based compensation plans, we recognize compensation expense at such time when the performance hurdle is anticipated to be achieved over the performance period based upon the fair value at the date of grant. The fair value is determined based on the value of the Company’s common stock on the grant date of the award, or in the case of stock option awards, the Black-Scholes option pricing model. Management’s assumptions when applying the Black-Scholes model are derived based upon the risk profile and volatility of our common stock and our peer group. We believe that the assumptions that we have applied to stock-based compensation are reasonable and we will continue to review such assumptions quarterly and revise them as market conditions change and management deems necessary. |
• | Deferred income taxes and valuation allowance.We account for deferred taxes by recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance will be provided when it is more likely than not that some portion or all of the deferred tax assets will not be realized. Such valuation allowance will be estimated by management based on our projected future taxable income. The estimate of future taxable income is highly subjective. We have net operating loss for the tax year 2009 and anticipate that all or a major portion of the net operating loss will be utilized to offset any future gains on sale of assets. However, these assumptions may be inaccurate, and unanticipated events and circumstances may occur in the future. To the extent actual results differ from these estimates, our future results of operations may be affected. At December 31, 2009, we had a $27.8 million valuation allowance against our deferred tax assets. |
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ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
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ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
ITEM 9A. | CONTROLS AND PROCEDURES |
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Morgans Hotel Group Co.
New York, NY 10018
/s/ BDO Seidman, LLP |
New York, New York
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ITEM 9B. | OTHER INFORMATION |
1. | Proposal 1 — Approval of Yucaipa Warrants. Stockholders approved the full exercise of warrants issued to the Investors and Fund Manager as part of the Yucaipa investment on October 15, 2009. The number of votes cast in favor and against the proposal, as well as the number of abstentions were as follows: |
In Favor | Against | Abstained | ||
20,333,717 | 3,030,867 | 4,698 |
2. | Proposal 2 — Approval of Amendment to Amended and Restated 2007 Omnibus Incentive Plan.Stockholders approved an amendment to our Amended and Restated 2007 Omnibus Incentive Plan to increase the number of shares reserved for issuance thereunder by 3,000,000 shares. The number of votes cast in favor and against the proposal, as well as the number of abstentions were as follows: |
In Favor | Against | Abstained | ||
13,360,437 | 9,006,877 | 1,001,968 |
ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE |
ITEM 11. | EXECUTIVE COMPENSATION |
ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE |
ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES |
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ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES |
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Consolidated Financial Statements: | ||||
F-1 | ||||
F-2 | ||||
F-3 | ||||
F-4 | ||||
F-5 | ||||
F-6 – F-44 |
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Morgans Hotel Group Co.:
March 12, 2010
F-1
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As of December 31, | ||||||||
2009 | 2008 | |||||||
ASSETS | ||||||||
Property and equipment, net | $ | 488,189 | $ | 516,148 | ||||
Goodwill | 73,698 | 73,698 | ||||||
Investments in and advances to unconsolidated joint ventures | 32,445 | 56,754 | ||||||
Investment in hotel held for non-sale disposition, net | 23,977 | 42,531 | ||||||
Cash and cash equivalents | 68,994 | 48,656 | ||||||
Restricted cash | 21,109 | 19,737 | ||||||
Accounts receivable, net | 6,531 | 6,555 | ||||||
Related party receivables | 9,522 | 7,851 | ||||||
Prepaid expenses and other assets | 10,862 | 8,671 | ||||||
Deferred tax asset, net | 83,980 | 61,005 | ||||||
Other, net | 18,931 | 13,858 | ||||||
Total assets | $ | 838,238 | $ | 855,464 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Long-term debt and capital lease obligations | $ | 699,013 | $ | 677,067 | ||||
Mortgage debt and capital lease obligation of hotel held for non-sale disposition | 40,000 | 40,112 | ||||||
Accounts payable and accrued liabilities | 30,325 | 25,889 | ||||||
Accounts payable and accrued liabilities of hotel held for non-sale disposition | 1,455 | 822 | ||||||
Distributions and losses in excess of investment in unconsolidated joint ventures | 2,740 | 14,563 | ||||||
Other liabilities | 41,294 | 35,655 | ||||||
Total liabilities | 814,827 | 794,108 | ||||||
Commitments and contingencies | ||||||||
Preferred stock, $.01 par value; liquidation preference $1,000 per share, 75,000,000 shares authorized and issued at December 31, 2009 | 48,564 | — | ||||||
Common stock, $.01 par value; 200,000,000 shares authorized; 36,277,495 shares issued at December 31, 2009 and December 31, 2008, respectively | 363 | 363 | ||||||
Additional paid-in capital | 247,728 | 241,057 | ||||||
Treasury stock, at cost, 6,594,864 and 6,758,303 shares of common stock at December 31, 2009 and 2008, respectively | (99,724 | ) | (102,394 | ) | ||||
Comprehensive income | (6,000 | ) | (13,949 | ) | ||||
Accumulated deficit | (181,911 | ) | (81,689 | ) | ||||
Total Morgans Hotel Group Co. stockholders’ equity | 9,020 | 43,388 | ||||||
Noncontrolling interest | 14,391 | 17,968 | ||||||
Total equity | 23,411 | 61,356 | ||||||
Total liabilities and stockholders’ equity | $ | 838,238 | $ | 855,464 | ||||
F-2
Table of Contents
Year Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Revenues: | ||||||||||||
Rooms | $ | 127,188 | $ | 177,054 | $ | 178,683 | ||||||
Food and beverage | 73,278 | 93,307 | 96,550 | |||||||||
Other hotel | 9,512 | 12,018 | 12,835 | |||||||||
Revenues of hotel held for non-sale disposition | 7,594 | 13,788 | 16,736 | |||||||||
Total hotel revenues | 217,572 | 296,167 | 304,804 | |||||||||
Management fee-related parties and other income | 15,073 | 18,300 | 18,181 | |||||||||
Total revenues | 232,645 | 314,467 | 322,985 | |||||||||
Operating Costs and Expenses: | ||||||||||||
Rooms | 41,602 | 47,083 | 46,167 | |||||||||
Food and beverage | 56,492 | 67,223 | 64,250 | |||||||||
Other departmental | 6,159 | 6,810 | 7,127 | |||||||||
Hotel selling, general and administrative | 47,705 | 55,021 | 54,431 | |||||||||
Property taxes, insurance and other | 17,599 | 16,387 | 17,346 | |||||||||
Hotel operating expenses of hotel held for non-sale disposition | 8,581 | 13,461 | 17,274 | |||||||||
Total hotel operating expenses | 178,138 | 205,985 | 206,595 | |||||||||
Corporate expenses, including stock compensation of $11.8 million, $15.9 million and $19.5 million, respectively | 33,514 | 41,889 | 44,744 | |||||||||
Depreciation and amortization | 29,623 | 24,912 | 18,774 | |||||||||
Depreciation of hotel held for non-sale disposition | 1,174 | 2,821 | 2,945 | |||||||||
Restructuring, development and disposal costs | 6,100 | 10,825 | 3,228 | |||||||||
Impairment loss on hotel held for non-sale disposition | 18,477 | 13,430 | — | |||||||||
Total operating costs and expenses | 267,026 | 299,862 | 276,286 | |||||||||
Operating (loss) income | (34,381 | ) | 14,605 | 46,699 | ||||||||
Interest expense, net | 49,401 | 43,221 | 38,423 | |||||||||
Interest expense of hotel held for non-sale disposition | 1,068 | 2,219 | 3,389 | |||||||||
Equity in loss of unconsolidated joint ventures | 33,075 | 56,581 | 24,580 | |||||||||
Impairment loss on development project | 11,913 | — | — | |||||||||
Other non-operating (income) expenses | (2,032 | ) | 464 | 1,531 | ||||||||
Loss before income tax expense | (127,806 | ) | (87,880 | ) | (21,224 | ) | ||||||
Income tax benefit | (26,201 | ) | (33,311 | ) | (9,249 | ) | ||||||
Net loss before (income) loss attributable to noncontrolling interest | (101,605 | ) | (54,569 | ) | (11,975 | ) | ||||||
Net (income) loss attributable to noncontrolling interest | (1,881 | ) | 2,104 | 3,098 | ||||||||
Net loss | (99,724 | ) | (56,673 | ) | (15,073 | ) | ||||||
Preferred stock dividends and accretion | (1,746 | ) | — | — | ||||||||
Net loss attributable to common stockholders | (101,470 | ) | (56,673 | ) | (15,073 | ) | ||||||
Other comprehensive loss: | ||||||||||||
Unrealized gain (loss) on valuation of swap/cap agreements, net of tax | 17,500 | (1,414 | ) | (6,396 | ) | |||||||
Reclassification of unrealized loss on settlement of swap/cap agreements, net of tax | (9,966 | ) | (4,464 | ) | (278 | ) | ||||||
Foreign currency translation gain (loss), net of tax | 415 | (300 | ) | 6 | ||||||||
Comprehensive loss | (93,521 | ) | (62,851 | ) | (21,741 | ) | ||||||
Loss per share attributable to common stockholders: | ||||||||||||
Basic and diluted | (3.38 | ) | (1.80 | ) | (0.45 | ) | ||||||
Weighted average number of common shares outstanding: | ||||||||||||
Basic and diluted | 30,017 | 31,413 | 33,239 |
F-3
Table of Contents
(in thousands)
Accumulated | ||||||||||||||||||||||||||||||||||||||||||||
Shares | Additional | Other | Morgans Hotel | Non- | ||||||||||||||||||||||||||||||||||||||||
Common | Preferred | Common | Preferred | Paid-in | Treasury | Comprehensive | Accumulated | Group Total | controlling | Total | ||||||||||||||||||||||||||||||||||
Shares | Shares | Stock | Stock | Capital | Stock | Income (Loss) | Deficit | Equity | Interest | Equity | ||||||||||||||||||||||||||||||||||
January 1, 2007 | 33,164 | — | $ | 335 | $ | — | $ | 138,840 | $ | (5,683 | ) | $ | (1,103 | ) | $ | (9,943 | ) | $ | 122,446 | $ | 20,317 | $ | 142,763 | |||||||||||||||||||||
Adjustment due to ASC 470-20 cumulative effect of accounting change | — | — | — | — | 9,035 | — | — | — | 9,035 | — | 9,035 | |||||||||||||||||||||||||||||||||
Net proceeds from stock offering | 2,778 | — | 28 | — | 58,865 | — | — | — | 58,893 | — | 58,893 | |||||||||||||||||||||||||||||||||
Net (loss) income | — | — | — | — | — | — | — | (15,073 | ) | (15,073 | ) | 3,097 | (11,976 | ) | ||||||||||||||||||||||||||||||
Foreign currency translation | — | — | — | — | — | — | 6 | — | 6 | — | 6 | |||||||||||||||||||||||||||||||||
Unrealized gain (loss) on valuation of swap/cap agreements, net of tax | — | — | — | — | — | — | (6,396 | ) | — | (6,396 | ) | — | (6,396 | ) | ||||||||||||||||||||||||||||||
Reclassification of unrealized loss on settlement of swap/cap agreements, net of tax | — | — | — | — | — | — | (278 | ) | — | (278 | ) | — | (278 | ) | ||||||||||||||||||||||||||||||
Cost of call options and warrants, net of tax | — | — | — | — | (111 | ) | — | — | — | (111 | ) | — | (111 | ) | ||||||||||||||||||||||||||||||
Repurchase of common shares | (2,784 | ) | — | — | — | — | (49,972 | ) | — | — | (49,972 | ) | — | (49,972 | ) | |||||||||||||||||||||||||||||
Stock-based compensation awards | — | — | — | — | 19,525 | — | — | — | 19,525 | — | 19,525 | |||||||||||||||||||||||||||||||||
Issuance of stock-based awards | 62 | — | — | — | (625 | ) | 1,294 | — | — | 669 | — | 669 | ||||||||||||||||||||||||||||||||
Noncontrolling interest distribution | — | — | — | — | — | — | — | — | — | (3,590 | ) | (3,590 | ) | |||||||||||||||||||||||||||||||
December 31, 2007 | 33,220 | — | $ | 363 | $ | — | $ | 225,529 | $ | (54,361 | ) | $ | (7,771 | ) | $ | (25,016 | ) | $ | 138,744 | $ | 19,824 | $ | 158,568 | |||||||||||||||||||||
Net (loss) income | — | — | — | — | — | — | — | (56,673 | ) | (56,673 | ) | 2,104 | (54,569 | ) | ||||||||||||||||||||||||||||||
Foreign currency translation | — | — | — | — | — | — | (300 | ) | — | (300 | ) | — | (300 | ) | ||||||||||||||||||||||||||||||
Unrealized gain (loss) on valuation of swap/cap agreements, net of tax | — | — | — | — | — | — | (1,414 | ) | — | (1,414 | ) | — | (1,414 | ) | ||||||||||||||||||||||||||||||
Reclassification of unrealized loss on settlement of swap/cap agreements, net of tax | — | — | — | — | — | — | (4,464 | ) | — | (4,464 | ) | — | (4,464 | ) | ||||||||||||||||||||||||||||||
Shares of membership units converted to common stock | 46 | — | — | — | 874 | — | — | — | 874 | (874 | ) | — | ||||||||||||||||||||||||||||||||
Repurchase of common shares | (3,951 | ) | — | — | — | — | (49,173 | ) | — | — | (49,173 | ) | — | (49,173 | ) | |||||||||||||||||||||||||||||
Stock-based compensation awards | — | — | — | — | 15,933 | — | — | — | 15,933 | — | 15,933 | |||||||||||||||||||||||||||||||||
Issuance of stock-based awards | 204 | — | — | — | (1,279 | ) | 1,140 | — | — | (139 | ) | — | (139 | ) | ||||||||||||||||||||||||||||||
Noncontrolling interest distribution | — | — | — | — | — | — | — | — | — | (3,086 | ) | (3,086 | ) | |||||||||||||||||||||||||||||||
December 31, 2008 | 29,519 | — | $ | 363 | $ | — | $ | 241,057 | $ | (102,394 | ) | $ | (13,949 | ) | $ | (81,689 | ) | $ | 43,388 | $ | 17,968 | $ | 61,356 | |||||||||||||||||||||
Net proceeds from preferred stock | — | 75 | — | 48,066 | (2,242 | ) | — | — | — | 45,824 | — | 45,824 | ||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | (99,724 | ) | (99,724 | ) | (1,881 | ) | (101,605 | ) | |||||||||||||||||||||||||||||
Accretion of discount on preferred stock | — | — | — | 498 | — | — | — | (498 | ) | — | — | — | ||||||||||||||||||||||||||||||||
Foreign currency translation | — | — | — | — | — | — | 415 | — | 415 | — | 415 | |||||||||||||||||||||||||||||||||
Unrealized gain (loss) on valuation of swap/cap agreements, net of tax | — | — | — | — | — | — | 17,500 | — | 17,500 | — | 17,500 | |||||||||||||||||||||||||||||||||
Reclassification of unrealized loss on settlement of swap/cap agreements, net of tax | — | — | — | — | — | — | (9,966 | ) | — | (9,966 | ) | — | (9,966 | ) | ||||||||||||||||||||||||||||||
Stock-based compensation awards | — | — | — | — | 11,763 | — | — | — | 11,763 | — | 11,763 | |||||||||||||||||||||||||||||||||
Issuance of stock-based awards | 164 | — | — | — | (2,850 | ) | 2,670 | — | — | (180 | ) | — | (180 | ) | ||||||||||||||||||||||||||||||
Noncontrolling interest distribution | — | — | — | — | — | — | — | — | — | (1,696 | ) | (1,696 | ) | |||||||||||||||||||||||||||||||
December 31, 2009 | 29,683 | 75 | $ | 363 | $ | 48,564 | $ | 247,728 | $ | (99,724 | ) | $ | (6,000 | ) | $ | (181,911 | ) | $ | 9,020 | $ | 14,391 | $ | 23,411 | |||||||||||||||||||||
F-4
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(in thousands)
Year Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Cash flows from operating activities: | ||||||||||||
Net loss | $ | (101,605 | ) | $ | (54,569 | ) | $ | (11,975 | ) | |||
Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | ||||||||||||
Depreciation | 28,942 | 24,192 | 18,164 | |||||||||
Amortization of other costs | 680 | 723 | 610 | |||||||||
Amortization of deferred financing costs | 4,603 | 2,685 | 1,908 | |||||||||
Amortization of discount on convertible notes | 2,276 | 2,276 | 474 | |||||||||
Stock-based compensation | 11,763 | 15,933 | 19,525 | |||||||||
Accretion of interest on capital lease obligation | 1,629 | 1,486 | 1,356 | |||||||||
Equity in losses from unconsolidated joint ventures | 33,075 | 56,581 | 24,580 | |||||||||
Impairment loss and loss on disposal of assets | 30,517 | 3,663 | 628 | |||||||||
Deferred income taxes | (26,965 | ) | (34,137 | ) | (12,962 | ) | ||||||
Change in value of interest rate caps and swaps, net | — | — | 3,018 | |||||||||
Change in value of warrants | (6,065 | ) | — | — | ||||||||
Changes in assets and liabilities: | ||||||||||||
Accounts receivable, net | 24 | 3,631 | (954 | ) | ||||||||
Related party receivables | (1,671 | ) | (4,478 | ) | (1,037 | ) | ||||||
Restricted cash | (1,893 | ) | (1,547 | ) | (2,187 | ) | ||||||
Prepaid expenses and other assets | (2,201 | ) | 1,315 | (3,381 | ) | |||||||
Accounts payable and accrued liabilities | 4,211 | (8,441 | ) | 9,596 | ||||||||
Other liabilities | 270 | (462 | ) | 573 | ||||||||
Hotel held for non-sale disposition | 3,075 | 16,469 | (2,317 | ) | ||||||||
Net cash (used in) provided by operating activities | (19,335 | ) | 25,320 | 45,619 | ||||||||
Cash flows from investing activities: | ||||||||||||
Additions to property and equipment | (13,023 | ) | (61,674 | ) | (57,821 | ) | ||||||
Withdrawals from (deposits into) capital improvement escrows, net | 521 | 7,430 | (152 | ) | ||||||||
Distributions and reimbursements from unconsolidated joint ventures | 6 | 42,123 | 11,770 | |||||||||
Investment in unconsolidated joint ventures | (23,953 | ) | (33,019 | ) | (54,172 | ) | ||||||
Net cash used in investing activities | (36,449 | ) | (45,140 | ) | (100,375 | ) | ||||||
Cash flows from financing activities: | ||||||||||||
Proceeds from long-term debt | 139,789 | — | 237,499 | |||||||||
Payments on long-term debt and capital lease obligations | (121,748 | ) | (162 | ) | (65,149 | ) | ||||||
Debt issuance costs | (10,364 | ) | (153 | ) | (5,504 | ) | ||||||
Cash paid in connection with vesting of stock based awards | (180 | ) | (139 | ) | 669 | |||||||
Distributions to holders of noncontrolling interests in consolidated subsidiaries | (1,696 | ) | (3,088 | ) | (3,591 | ) | ||||||
Net proceeds from issuance of common stock | — | — | 58,894 | |||||||||
Net proceeds from issuance of preferred stock and warrants | 70,321 | — | — | |||||||||
Repurchase of Company’s common stock | — | (49,173 | ) | (49,972 | ) | |||||||
Payments on convertible note hedge | — | — | (24,150 | ) | ||||||||
Net cash provided by (used in) financing activities | 76,122 | (52,715 | ) | 148,696 | ||||||||
Net increase (decrease) in cash and cash equivalents | 20,338 | (72,535 | ) | 93,940 | ||||||||
Cash and cash equivalents, beginning of period | 48,656 | 121,191 | 27,251 | |||||||||
Cash and cash equivalents, end of period | $ | 68,994 | $ | 48,656 | $ | 121,191 | ||||||
Supplemental disclosure of cash flow information: | ||||||||||||
Cash paid for interest, net of interest capitalized | $ | 41,743 | $ | 36,403 | $ | 37,411 | ||||||
Cash paid for taxes | $ | 636 | $ | 1,385 | $ | 1,506 |
F-5
Table of Contents
Number of | ||||||||||
Hotel Name | Location | Rooms | Ownership | |||||||
Delano South Beach | Miami Beach, FL | 194 | (1 | ) | ||||||
Hudson | New York, NY | 831 | (5 | ) | ||||||
Mondrian Los Angeles | Los Angeles, CA | 237 | (1 | ) | ||||||
Morgans | New York, NY | 114 | (1 | ) | ||||||
Royalton | New York, NY | 168 | (1 | ) | ||||||
Sanderson | London, England | 150 | (2 | ) | ||||||
St Martins Lane | London, England | 204 | (2 | ) | ||||||
Shore Club | Miami Beach, FL | 309 | (3 | ) | ||||||
Clift | San Francisco, CA | 372 | (4 | ) | ||||||
Mondrian Scottsdale | Scottsdale, AZ | 189 | (9 | ) | ||||||
Hard Rock Hotel & Casino | Las Vegas, NV | 1,510 | (6 | ) | ||||||
Mondrian South Beach | Miami Beach, FL | 328 | (2 | ) | ||||||
Ames | Boston, MA | 114 | (7 | ) | ||||||
Water and Beach Club Hotel | San Juan, PR | 78 | (8 | ) | ||||||
Hotel Las Palapas | Playa del Carmen, Mexico | 75 | (8 | ) |
(1) | Wholly-owned hotel. | |
(2) | Owned through a 50/50 unconsolidated joint venture. | |
(3) | Operated under a management contract, with an unconsolidated minority ownership interest of approximately 7%. |
F-6
Table of Contents
(4) | The hotel is operated under a long-term lease, which is accounted for as a financing. | |
(5) | The Company owns 100% of Hudson, which is part of a property that is structured as a condominium, in which Hudson constitutes 96% of the square footage of the entire building. | |
(6) | Operated under a management contract and owned through an unconsolidated joint venture, of which the Company owned approximately 12.8% at December 31, 2009 based on weighted cash contributions. See note 5. | |
(7) | Operated under a management contract, with an unconsolidated minority ownership interest of approximately 35%, at December 31, 2009. | |
(8) | Operated under a management contract. | |
(9) | As of December 31, 2009, this hotel was held for non-sale disposition as the lender has initiated foreclosure proceedings against the property and the management agreement has been terminated with an effective termination date of March 16, 2010. |
F-7
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F-8
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F-9
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F-10
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F-11
Table of Contents
Estimated | Estimated | |||||||||||||||
Fair Market | Fair Market | |||||||||||||||
Value at | Value at | |||||||||||||||
Type of | Maturity | Strike | December 31, | December 31, | ||||||||||||
Notional Amount | Instrument | Date | Rate | 2009 | 2008 | |||||||||||
$285,000 | Interest swap | July 9, 2010 | 5.04 | % | $ | (6,925 | ) | $ | (16,953 | ) | ||||||
$85,000 | Interest swap | July 15, 2010 | 4.91 | % | (2,075 | ) | (4,941 | ) | ||||||||
Fair value of derivative instruments designated as effective hedges | (9,000 | ) | (21,894 | ) | ||||||||||||
Fair value of derivative instruments not designated as hedges | — | 2 | ||||||||||||||
Total fair value of derivative instruments | $ | (9,000 | ) | $ | (21,892 | ) | ||||||||||
Total fair value included in other assets | $ | — | $ | 17 | ||||||||||||
Total fair value included in other liabilities | $ | (9,000 | ) | $ | (21,909 | ) | ||||||||||
F-12
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F-13
Table of Contents
2009 | 2008 | 2007 | ||||||||||
Investment in property across the street from Delano South Beach held for development | $ | 11,913 | $ | — | $ | — | ||||||
Investment in hotel held for non-sale disposition, net | 18,477 | 13,430 | — | |||||||||
Total Level 3 measurement impairment losses included in earnings | $ | 30,390 | $ | 13,430 | $ | — | ||||||
F-14
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F-15
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F-16
Table of Contents
December 31, 2008 | ||||||||||||
As Originally | Effect of | |||||||||||
Consolidated Balance Sheet | Reported | As Adjusted | Change | |||||||||
Deferred tax asset | $ | 66,279 | $ | 61,005 | $ | (5,274 | ) | |||||
Other, net | 14,490 | 13,963 | (527 | ) | ||||||||
Long term debt and capital lease obligations | 730,365 | 717,179 | (13,186 | ) | ||||||||
Additional paid-in capital | 232,022 | 241,056 | 9,034 | |||||||||
Accumulated deficit | (80,088 | ) | (81,689 | ) | (1,601 | ) | ||||||
Noncontrolling interest | 18,017 | 17,968 | (49 | ) |
Year Ended December 31, 2008 | Year Ended December 31, 2007 | |||||||||||||||||||||||
Consolidated Statement of | As Originally | As | Effect of | As Originally | As | Effect of | ||||||||||||||||||
Operations | Reported | Adjusted | Change | Reported | Adjusted | Change | ||||||||||||||||||
Interest expense, net | $ | 43,164 | $ | 45,440 | $ | (2,276 | ) | $ | 41,338 | $ | 41,812 | $ | (474 | ) | ||||||||||
Income tax benefit | (32,400 | ) | (33,311 | ) | 911 | (9,060 | ) | (9,249 | ) | 189 | ||||||||||||||
Net loss | (53,204 | ) | (54,569 | ) | (1,365 | ) | (11,690 | ) | (11,975 | ) | (285 | ) | ||||||||||||
Net loss attributable to noncontrolling interest | (2,145 | ) | (2,104 | ) | (41 | ) | (3,106 | ) | (3,097 | ) | (9 | ) | ||||||||||||
Net loss attributable to common stockholders | (55,349 | ) | (56,673 | ) | (1,324 | ) | (14,796 | ) | (15,072 | ) | (276 | ) | ||||||||||||
Loss per share attributable to common stockholders: | ||||||||||||||||||||||||
Basic and diluted | (1.76 | ) | (1.80 | ) | (0.04 | ) | (0.45 | ) | (0.45 | ) | — |
Year Ended December 31, 2008 | Year Ended December 31, 2007 | |||||||||||||||||||||||
Consolidated Statement of | As Originally | As | Effect of | As Originally | As | Effect of | ||||||||||||||||||
Cash Flows | Reported | Adjusted | Change | Reported | Adjusted | Change | ||||||||||||||||||
Net loss | $ | (53,204 | ) | $ | (54,569 | ) | $ | (1,365 | ) | $ | (11,690 | ) | $ | (11,975 | ) | $ | (285 | ) | ||||||
Amortization of discount on convertible debt | — | 2,276 | 2,276 | — | 474 | 474 | ||||||||||||||||||
Deferred tax benefit | (33,226 | ) | (34,137 | ) | (911 | ) | (12,772 | ) | (12,961 | ) | (189 | ) |
F-17
Table of Contents
Year Ended | Year Ended | Year Ended | ||||||||||
December 31, 2009 | December 31, 2008 | December 31, 2007 | ||||||||||
Numerator: | ||||||||||||
Net loss attributable to common shareholders | $ | (99,724 | ) | $ | (56,673 | ) | $ | (15,073 | ) | |||
Less: preferred stock dividends and accretion | 1,746 | — | — | |||||||||
Numerator for basic and diluted loss available to common stockholders | $ | (101,470 | ) | $ | (56,673 | ) | $ | (15,073 | ) | |||
Denominator: | ||||||||||||
Weighted average basic common shares outstanding | 30,017 | 31,413 | 33,239 | |||||||||
Effect of dilutive securities | — | — | — | |||||||||
Weighted average diluted common shares outstanding | 30,017 | 31,413 | 33,239 | |||||||||
Basic and diluted loss available to common stockholders per common share | $ | (3.38 | ) | $ | (1.80 | ) | $ | (0.45 | ) | |||
F-18
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As of | As of | |||||||
December 31, | December 31, | |||||||
2009 | 2008 | |||||||
Land | $ | 89,911 | $ | 93,912 | ||||
Building | 482,312 | 493,964 | ||||||
Furniture, fixtures and equipment | 114,609 | 107,147 | ||||||
Construction in progress | 2,763 | 9,761 | ||||||
Property subject to capital lease | 6,111 | 6,938 | ||||||
Subtotal | 695,706 | 711,722 | ||||||
Less accumulated depreciation | (184,851 | ) | (156,077 | ) | ||||
Property and equipment, net | 510,855 | 555,645 | ||||||
Less hotel held for non-sale disposition | (22,667 | ) | (39,497 | ) | ||||
Property and equipment, net | $ | 488,189 | $ | 516,148 | ||||
As of | As of | |||||||
December 31, | December 31, | |||||||
Entity | 2009 | 2008 | ||||||
Mondrian South Beach | $ | 10,745 | $ | 24,785 | ||||
Echelon Las Vegas | — | 17,198 | ||||||
Mondrian SoHo | 8,335 | 7,564 | ||||||
Boston Ames | 11,185 | 7,049 | ||||||
Other | 2,180 | 158 | ||||||
Total investments in and advances to unconsolidated joint ventures | $ | 32,445 | $ | 56,754 | ||||
As of | As of | |||||||
December 31, | December 31, | |||||||
Entity | 2009 | 2008 | ||||||
Morgans Hotel Group Europe Ltd. | $ | (1,604 | ) | $ | (2,689 | ) | ||
Restaurant Venture — SC London | (1,136 | ) | (811 | ) | ||||
Hard Rock Hotel & Casino | — | (11,063 | ) | |||||
Total losses from and distributions in excess of investment in unconsolidated joint ventures | $ | (2,740 | ) | $ | (14,563 | ) | ||
Year Ended | Year Ended | Year Ended | ||||||||||
December 31, | December 31, | December 31, | ||||||||||
2009 | 2008 | 2007 | ||||||||||
Morgans Hotel Group Europe Ltd. | $ | 1,966 | $ | (4,416 | ) | $ | 1,702 | |||||
Restaurant Venture — SC London | (326 | ) | 330 | (258 | ) | |||||||
Mondrian South Beach | (14,240 | ) | (3,626 | ) | (2,734 | ) | ||||||
Hard Rock Hotel & Casino | (3,000 | ) | (47,975 | ) | (22,106 | ) | ||||||
Ames | (45 | ) | — | — | ||||||||
Echelon Las Vegas | (17,440 | ) | (903 | ) | (1,193 | ) | ||||||
Other | 10 | 9 | 9 | |||||||||
Total | $ | (33,075 | ) | $ | (56,581 | ) | $ | (24,580 | ) | |||
F-19
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As of | As of | |||||||
December 31, | December 31, | |||||||
2009 | 2008 | |||||||
Property and equipment, net | $ | 141,571 | $ | 133,751 | ||||
Other assets | 9,467 | 6,209 | ||||||
Total assets | $ | 151,038 | $ | 139,960 | ||||
Other liabilities | 9,119 | 11,562 | ||||||
Debt | 159,672 | 148,589 | ||||||
Total deficit | (17,753 | ) | (20,191 | ) | ||||
Total liabilities and deficit | $ | 151,038 | $ | 139,960 | ||||
Company’s share of deficit | (8,877 | ) | (10,096 | ) | ||||
Capitalized costs and designer fee | 7,273 | 7,407 | ||||||
Total losses from and distributions in excess of investment in unconsolidated joint ventures | $ | (1,604 | ) | $ | (2,689 | ) | ||
F-20
Table of Contents
Year Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Hotel operating revenues | $ | 44,948 | $ | 57,500 | $ | 65,402 | ||||||
Hotel operating expenses | 27,872 | 36,003 | 38,362 | |||||||||
Depreciation and amortization | 6,127 | 7,092 | 7,342 | |||||||||
Operating income | 10,949 | 14,405 | 19,698 | |||||||||
Interest expense | 6,739 | 22,957 | 16,011 | |||||||||
Net income (loss) for period | 4,213 | (8,552 | ) | 3,687 | ||||||||
Other comprehensive loss | (1,763 | ) | (1,002 | ) | 11 | |||||||
Comprehensive income (loss) | $ | 2,450 | $ | (9,554 | ) | $ | 3,698 | |||||
Company’s share of net income (loss) | $ | 2,106 | $ | (4,276 | ) | $ | 1,843 | |||||
Company’s share of other comprehensive (loss) gain | (882 | ) | (500 | ) | 6 | |||||||
Company’s share of comprehensive gain (loss) | $ | 1,224 | $ | (4,776 | ) | $ | 1,849 | |||||
Other amortization | (140 | ) | (140 | ) | (141 | ) | ||||||
Amount recorded in equity in income (loss) | $ | 1,966 | $ | (4,416 | ) | $ | 1,702 | |||||
F-21
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As of | As of | |||||||
December 31, | December 31, | |||||||
2009 | 2008 | |||||||
Property and equipment, net | $ | 969 | $ | 1,214 | ||||
Other assets | 5,576 | 5,275 | ||||||
Total assets | $ | 6,545 | $ | 6,489 | ||||
Other liabilities | 3,067 | 2,686 | ||||||
Total equity | 3,478 | 3,803 | ||||||
Total liabilities and equity | $ | 6,545 | $ | 6,489 | ||||
Total losses from and distributions in excess of investment in unconsolidated joint ventures | $ | (1,136 | ) | $ | (811 | ) | ||
Year Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Operating revenues | $ | 19,600 | $ | 27,735 | $ | 30,750 | ||||||
Operating expenses | 19,881 | 26,570 | 31,053 | |||||||||
Depreciation | 371 | 505 | 435 | |||||||||
Net (loss) income | (652 | ) | 660 | (516 | ) | |||||||
Amount recorded in equity in (loss) income | $ | (326 | ) | $ | 330 | $ | (258 | ) | ||||
F-22
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As of | As of | |||||||
December 31, | December 31, | |||||||
2009 | 2008 | |||||||
Real estate, net | $ | 135,091 | $ | 167,414 | ||||
Other assets | 8,970 | 19,637 | ||||||
Total assets | $ | 144,061 | $ | 187,051 | ||||
Other liabilities | 26,630 | 29,549 | ||||||
Debt | 117,833 | 129,562 | ||||||
Total equity | (402 | ) | 27,940 | |||||
Total liabilities and equity | $ | 144,061 | $ | 187,051 | ||||
Company’s share of equity | (201 | ) | 13,970 | |||||
Noncontrolling interest | (70 | ) | — | |||||
Advance to joint venture in the form of mezzanine financing | 11,250 | 11,250 | ||||||
Capitalized costs/reimbursements | (234 | ) | (435 | ) | ||||
Company’s investment balance | $ | 10,745 | $ | 24,785 | ||||
Year Ended | Year Ended | Year Ended | ||||||||||
December 31, | December 31, | December 31, | ||||||||||
2009 | 2008 | 2007 | ||||||||||
Operating revenues | $ | 46,233 | $ | 69,105 | $ | 350 | ||||||
Operating expenses | 47,169 | 75,469 | 5,291 | |||||||||
Depreciation | 778 | 53 | 189 | |||||||||
Operating loss | (1,714 | ) | (6,417 | ) | (5,130 | ) | ||||||
Interest expense | 10,974 | 835 | 338 | |||||||||
Impairment loss | 15,500 | — | — | |||||||||
Noncontrolling interest | 292 | — | — | |||||||||
Net loss | (28,480 | ) | (7,252 | ) | (5,468 | ) | ||||||
Amount recorded in equity in loss | $ | (14,240 | ) | $ | (3,626 | ) | $ | (2,734 | ) | |||
F-23
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F-24
Table of Contents
As of | As of | |||||||
December 31, | December 31, | |||||||
2009 | 2008 | |||||||
Property and equipment, net | $ | 1,151,839 | $ | 784,127 | ||||
Asset held for sale | — | 95,160 | ||||||
Other assets | 149,243 | 283,667 | ||||||
Total assets | $ | 1,301,082 | $ | 1,162,954 | ||||
Other liabilities | 154,308 | 140,655 | ||||||
Debt | 1,210,874 | 1,083,813 | ||||||
Total equity | (64,100 | ) | (61,514 | ) | ||||
Total liabilities and equity | $ | 1,301,082 | $ | 1,162,954 | ||||
Company’s share of equity | — | (11,063 | ) | |||||
Total losses from and distributions in excess of investment in unconsolidated joint ventures | $ | — | $ | (11,063 | ) | |||
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Table of Contents
Period from | ||||||||||||
Year Ended | Year Ended | February 2, 2007 to | ||||||||||
December 31, | December 31, | December 31, | ||||||||||
2009 | 2008 | 2007 | ||||||||||
Operating revenues | $ | 161,554 | $ | 164,345 | $ | 173,655 | ||||||
Operating expenses | 161,623 | 155,149 | 140,699 | |||||||||
Depreciation and amortization | 23,062 | 23,454 | 17,413 | |||||||||
Operating (loss) income | (23,131 | ) | (14,258 | ) | 15,543 | |||||||
Interest expense | 79,241 | 77,280 | 84,136 | |||||||||
Impairment loss | 108,720 | 191,349 | 84,136 | |||||||||
Income tax benefit | — | (585 | ) | (2,277 | ) | |||||||
Net loss | (211,092 | ) | (282,302 | ) | (66,316 | ) | ||||||
Comprehensive gain (loss) | 14,883 | (17,168 | ) | (835 | ) | |||||||
Amount recorded in equity in loss | $ | (3,000 | ) | $ | (47,975 | ) | $ | (22,106 | ) | |||
F-26
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As of | As of | |||||||
December 31, | December 31, | |||||||
2009 | 2008 | |||||||
Interest swap liability (note 2) | 9,000 | $ | 21,909 | |||||
Designer fee payable | 13,866 | 13,175 | ||||||
Warrant liability (note 11) | 18,428 | — | ||||||
Other | — | 571 | ||||||
$ | 41,294 | $ | 35,655 | |||||
F-27
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As of | As of | Interest rate at | ||||||||||
December 31, | December 31, | December 31, | ||||||||||
Description | 2009 | 2008 | 2009 | |||||||||
Notes secured by Hudson and Mondrian (a) | $ | 364,000 | $ | 370,000 | LIBOR + 1.25% | |||||||
Clift debt (b) | 83,206 | 81,578 | 9.60 | % | ||||||||
Promissory notes (c) | 10,500 | 10,000 | 10.00 | % | ||||||||
Liability to subsidiary trust (d) | 50,100 | 50,100 | 8.68 | % | ||||||||
Revolving credit (e) | 23,508 | — | (f) | |||||||||
Convertible Notes, face value of $172.5 million (f) | 161,591 | 172,500 | 2.38 | % | ||||||||
Capital lease obligations (g) | 6,108 | 6,187 | (h) | |||||||||
Total long term debt | $ | 699,013 | $ | 730,365 | ||||||||
Note secured by hotel held for non-sale disposition (h) | 40,000 | 40,000 | LIBOR + 2.30% | |||||||||
(a) | Mortgage Agreement — Notes secured by Hudson and Mondrian Los Angeles |
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Table of Contents
(b) | Clift Debt |
Years 1 and 2 | $2.8 million per annum (completed in October 2006) | |
Years 3 to 10 | $6.0 million per annum | |
Thereafter | Increased at 5-year intervals by a formula tied to increases in the Consumer Price Index. At year 10, the increase has a maximum of 40% and a minimum of 20%. At each payment date thereafter, the maximum increase is 20% and the minimum is 10%. |
F-29
Table of Contents
(c) | Promissory Notes |
(d) | Liability to Subsidiary Trust Issuing Preferred Securities |
(e) | Revolving Credit Facility |
F-30
Table of Contents
• | deleted the financial covenant requiring the Company to maintain certain leverage ratios; | ||
• | revised the fixed charge coverage ratio (defined generally as the ratio of consolidated EBITDA excluding Mondrian Scottsdale’s EBITDA for the periods ending June 30, 2009 and September 30, 2009 and Clift’s EBITDA for all periods to consolidated interest expense excluding Mondrian Scottsdale’s interest expense for the periods ending June 30, 2009 and September 30, 2009 and Clift’s interest expense for all periods) that the Company is required to maintain for each four-quarter period to no less than 0.90 to 1.00 from the previous fixed charge coverage ratio of no less than 1.75 to 1.00. As of December 31, 2009, the Company’s fixed charge coverage ratio under the Amended Revolving Credit Facility was 1.01x; | ||
• | limits defaults relating to bankruptcy and judgments to certain events involving the Company, Morgans Group and subsidiaries that are parties to the Amended Revolving Credit Facility; | ||
• | prohibits capital expenditures with respect to any hotels owned by the Company, the borrowers, as defined, or subsidiaries, other than maintenance capital expenditures for any hotel not exceeding 4% of the annual gross revenues of such hotel and certain other exceptions; | ||
• | revised certain provisions related to permitted indebtedness, including, among other things, deleting certain provisions permitting unsecured indebtedness and indebtedness for the acquisition or expansion of hotels; | ||
• | prohibits repurchases of the Company’s common equity interests by the Company or Morgans Group; | ||
• | imposes certain limits on any secured swap agreements entered into after the effective date of the Amended Revolving Credit Facility; and | ||
• | provided for a waiver of any default or event of default, to the extent that a default or event of default existed for failure to comply with any financial covenant as of June 30, 2009 and/or for the four fiscal quarters ended June 30, 2009 under the Revolving Credit Facility before it was amended. |
F-31
Table of Contents
(f) | October 2007 Convertible Notes Offering |
F-32
Table of Contents
(g) | Capital Lease Obligations |
(h) | Mortgage Debt of Hotel Held for Non-Sale Disposition |
Amount | ||||||||||||
Representing | Principal Payments | |||||||||||
Capital Lease | Interest on | on Capital Lease | ||||||||||
Obligations and | Capital Lease | Obligations and | ||||||||||
Debt Payable | Obligations | Debt Payable | ||||||||||
2010 | $ | 10,988 | $ | 488 | $ | 10,500 | ||||||
2011 | 387,996 | 488 | 387,508 | |||||||||
2012 | 488 | 488 | — | |||||||||
2013 | 489 | 488 | 1 | |||||||||
2014 | 172,988 | 488 | 172,500 | |||||||||
Thereafter | �� | 174,800 | 35,388 | 139,412 | ||||||||
$ | 747,749 | $ | 37,828 | $ | 709,921 | |||||||
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Land | ||||||||
(See note 7) | Other | |||||||
2010 | $ | 266 | $ | 814 | ||||
2011 | 266 | 838 | ||||||
2012 | 266 | 863 | ||||||
2013 | 266 | 895 | ||||||
2014 | 266 | 953 | ||||||
Thereafter | 21,833 | 3,925 | ||||||
Total | $ | 23,163 | $ | 8,288 | ||||
F-34
Table of Contents
Year Ended | Year Ended | Year Ended | ||||||||||
December 31, | December 31, | December 31, | ||||||||||
2009 | 2008 | 2007 | ||||||||||
Current tax provision (benefit): | ||||||||||||
Federal | $ | — | $ | — | $ | 1,680 | ||||||
State and city | 269 | — | 997 | |||||||||
Foreign | 496 | 826 | 1,035 | |||||||||
765 | 826 | 3,712 | ||||||||||
Deferred tax provision (benefit): | ||||||||||||
Federal | (22,653 | ) | (23,334 | ) | (9,909 | ) | ||||||
State | (4,313 | ) | (10,803 | ) | (3,156 | ) | ||||||
Foreign | — | — | 104 | |||||||||
(26,966 | ) | (34,137 | ) | (12,961 | ) | |||||||
Total tax provision | $ | (26,201 | ) | $ | (33,311 | ) | $ | (9,249 | ) | |||
As of | As of | |||||||
December 31, | December 31, | |||||||
2009 | 2008 | |||||||
Goodwill | $ | (26,010 | ) | $ | (23,772 | ) | ||
Basis differential in property and equipment | (6,180 | ) | (20,008 | ) | ||||
Deferred costs and other | (56 | ) | (351 | ) | ||||
Unrealized gain on warrants | (2,561 | ) | — | |||||
Total deferred tax liability | (34,807 | ) | (44,131 | ) | ||||
�� | ||||||||
Stock compensation | 21,586 | 17,543 | ||||||
Derivative instruments | 3,800 | 8,753 | ||||||
Investment in unconsolidated subsidiaries | 42,074 | 29,996 | ||||||
Designer fee payable | 5,857 | 5,570 | ||||||
Other | 4,310 | 10 | ||||||
Foreign exchange losses | 1,164 | 200 | ||||||
Convertible bond | 13,774 | 14,807 | ||||||
Net operating loss | 54,058 | 28,257 | ||||||
Valuation allowance | (27,836 | ) | — | |||||
Total deferred tax asset | 118,787 | 105,136 | ||||||
Net deferred tax asset | $ | 83,980 | $ | 61,005 | ||||
F-35
Table of Contents
Year Ended | Year Ended | Year Ended | ||||||||||
December 31, | December 31, | December 31, | ||||||||||
2009 | 2008 | 2007 | ||||||||||
Federal statutory income tax rate | 35 | % | 35 | % | 34 | % | ||||||
State and city taxes, net of federal tax benefit | 7 | % | 7 | % | 6 | % | ||||||
Foreign tax benefits | — | — | -3 | % | ||||||||
Valuation allowance | -22 | % | — | — | ||||||||
Other including non deductible items | 1 | % | -6 | % | — | |||||||
Effective tax rate | 21 | % | 36 | % | 37 | % | ||||||
F-36
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F-37
Table of Contents
Weighted Average | ||||||||
Nonvested Shares | RSUs | Fair Value | ||||||
Nonvested at January 1, 2007 | 557,190 | $ | 19.64 | |||||
Granted | 524,748 | 13.74 | ||||||
Vested | (138,821 | ) | 18.81 | |||||
Forfeited | (109,282 | ) | 17.29 | |||||
Nonvested at December 31, 2008 | 833,835 | $ | 16.42 | |||||
Granted | 684,769 | 4.92 | ||||||
Vested | (312,907 | ) | 15.91 | |||||
Forfeited | (79,534 | ) | 16.40 | |||||
Nonvested at December 31, 2009 | 1,126,163 | $ | 10.09 | |||||
Outstanding at December 31, 2009 | 1,265,332 | $ | 10.44 | |||||
F-38
Table of Contents
Weighted Average | ||||||||
Nonvested Shares | LTIP Units | Fair Value | ||||||
Nonvested at January 1, 2008 | 682,171 | $ | 20.34 | |||||
Granted | 474,297 | 15.13 | ||||||
Vested | (415,250 | ) | 19.68 | |||||
Forfeited | (14,384 | ) | 16.98 | |||||
Nonvested at December 31, 2008 | 726,834 | $ | 17.33 | |||||
Granted | 465,232 | 3.81 | ||||||
Vested | (313,303 | ) | 18.01 | |||||
Forfeited | — | — | ||||||
Nonvested at December 31, 2009 | 878,763 | $ | 9.93 | |||||
Outstanding at December 31, 2009 | 2,018,659 | $ | 15.24 | |||||
F-39
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F-40
Table of Contents
Weighted Average | ||||||||||||||||
Weighted Average | Remaining | Aggregate Intrinsic | ||||||||||||||
Options | Shares | Exercise Price | Contractual Term | Value | ||||||||||||
(in years) | (in thousands) | |||||||||||||||
Outstanding at January 1, 2008 | 1,873,811 | $ | 19.61 | |||||||||||||
Granted | 344,217 | 15.42 | ||||||||||||||
Exercised | (7,085 | ) | 14.04 | |||||||||||||
Forfeited or Expired | (128,000 | ) | 18.62 | |||||||||||||
Outstanding at December 31, 2008 | 2,082,943 | $ | 18.92 | 7.89 | $ | — | ||||||||||
Granted | — | |||||||||||||||
Exercised | — | |||||||||||||||
Forfeited or Expired | (423,664 | ) | 19.85 | |||||||||||||
Outstanding at December 31, 2009 | 1,659,279 | $ | 18.68 | 7.25 | $ | — | ||||||||||
Exercisable at December 31, 2009 | 1,189,294 | $ | 19.06 | 6.96 | $ | — | ||||||||||
F-41
Table of Contents
• | the sale of substantially all of the Company’s assets to a third party; | ||
• | the acquisition by the Company of a third party where the equity investment by the Company is $100 million or greater; | ||
• | the acquisition of the Company by a third party; or | ||
• | any change in the size of the Company’s Board of Directors to a number below 7 or above 9. |
F-42
Table of Contents
Year Ended | Year Ended | Year Ended | ||||||||||
December 31, | December 31, | December 31, | ||||||||||
2009 | 2008 | 2007 | ||||||||||
Severance costs | $ | 2,013 | $ | 1,956 | $ | — | ||||||
Loss on asset disposal | 87 | 2,698 | 1,210 | |||||||||
Development costs | 4,000 | 6,171 | 2,018 | |||||||||
$ | 6,100 | $ | 10,825 | $ | 3,228 | |||||||
Year Ended | Year Ended | Year Ended | ||||||||||
December 31, | December 31, | December 31, | ||||||||||
2009 | 2008 | 2007 | ||||||||||
Gain on sale of London joint venture interest | $ | — | $ | — | $ | (6,058 | ) | |||||
Insurance proceeds | (329 | ) | (2,112 | ) | — | |||||||
Executive termination costs and severance costs | — | 353 | 3,437 | |||||||||
Litigation and settlement costs | 3,039 | 1,806 | 3,925 | |||||||||
Other | 1,324 | 418 | 227 | |||||||||
Unrealized gain on change in value of Yucaipa warrants (note 6) | (6,066 | ) | — | — | ||||||||
$ | (2,032 | ) | $ | 465 | $ | 1,531 | ||||||
F-43
Table of Contents
Three Months Ended | ||||||||||||||||
December 31, | September 30, | June 30, | March 31, | |||||||||||||
2009 | 2009 | 2009 | 2009 | |||||||||||||
Total revenues | $ | 64,312 | $ | 57,668 | $ | 56,387 | $ | 54,277 | ||||||||
Impairment loss on hotel held for non-sale disposition | (18,477 | ) | — | — | — | |||||||||||
Impairment loss on development project | — | (11,913 | ) | — | — | |||||||||||
Loss before income tax expense | (43,247 | ) | (48,823 | ) | (17,313 | ) | (18,423 | ) | ||||||||
Net loss attributable to common stockholders | (53,009 | ) | (27,817 | ) | (10,057 | ) | (10,587 | ) | ||||||||
Net loss per share — basic/diluted | (1.78 | ) | (0.94 | ) | (0.34 | ) | (0.36 | ) | ||||||||
Weighted-average shares outstanding — basic and diluted | 29,715 | 29,737 | 29,745 | 29,558 |
Three Months Ended(1) | ||||||||||||||||
December 31, | September 30, | June 30, | March 31, | |||||||||||||
2008 | 2008 | 2008 | 2008 | |||||||||||||
Total revenues | $ | 74,709 | $ | 77,701 | $ | 81,323 | $ | 80,734 | ||||||||
Impairment loss on hotel held for non-sale disposition | (13,430 | ) | — | — | — | |||||||||||
Loss before income tax expense | (61,606 | ) | (15,278 | ) | (674 | ) | (10,322 | ) | ||||||||
Net loss attributable to common stockholders | (38,972 | ) | (9,330 | ) | (1,061 | ) | (7,310 | ) | ||||||||
Net loss per share — basic/diluted | (1.32 | ) | (0.30 | ) | (0.03 | ) | (0.23 | ) | ||||||||
Weighted-average shares outstanding — basic and diluted | 29,498 | 31,231 | 32,191 | 32,292 |
(1) | The Company followed the guidance for a change in accounting principle under SFAS No. 154,Accounting Changes and Error Correction,(which has been subsequently codified in ASC 250-10,Accounting Changes and Error Correction), to reflect the retrospective adoption of Financial Accounting Standards Board Staff Position No. 14-1, which was subsequently codified in ASC 470-20, and SFAS No. 160,Noncontrolling Interests in Consolidated Financial Statements — an amendment of Accounting Research Bulleting (ARB)No. 51, which has been subsequently codified in ASC 810-10 and which were effective on January 1, 2009. In further discussion of this change in accounting principle, see note 2 to our consolidated financial statements. |
F-44
Table of Contents
Morgans Hotel Group Co. | ||||
By: | /s/Fred J. Kleisner | |||
Name: | Fred J. Kleisner | |||
Title: | Chief Executive Officer | |||
Signature | Title | Date | ||
/s/Fred J. Kleisner | Chief Executive Office and Director (Principal Executive Officer) | March 12, 2010 | ||
/s/Richard Szymanski | Chief Financial Officer and Secretary (Principal Financial and Accounting Officer) | March 12, 2010 | ||
/s/David T. Hamamoto | Chairman of the Board of Directors | March 12, 2010 | ||
/s/Robert Friedman | Director | March 12, 2010 | ||
/s/Michael Gross | Director | March 12, 2010 | ||
/s/Jeffrey M. Gault | Director | March 12, 2010 | ||
/s/Marc Gordon | Director, President | March 12, 2010 | ||
/s/Thomas L. Harrison | Director | March 12, 2010 | ||
/s/Edwin L. Knetzger, III | Director | March 12, 2010 | ||
/s/Michael D. Malone | Director | March 12, 2010 |
F-45
Table of Contents
Exhibit | ||||
Number | Description | |||
2.1 | Agreement and Plan of Merger, dated May 11, 2006, by and among Morgans Hotel Group Co., MHG HR Acquisition Corp., Hard Rock Hotel, Inc. and Peter Morton (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on May 17, 2006) | |||
2.2 | First Amendment to Agreement and Plan of Merger, dated as of January 31, 2007, by and between Morgans Hotel Group Co., MHG HR Acquisition Corp., Hard Rock Hotel, Inc., (solely with respect to Section 1.6 and Section 1.8 thereof) 510 Development Corporation and (solely with respect to Section 1.7 thereof) Peter A. Morton (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on February 6, 2007) | |||
3.1 | Amended and Restated Certificate of Incorporation of Morgans Hotel Group Co.(incorporated by reference to Exhibit 3.1 to Amendment No. 5 to the Company’s Registration Statement on Form S-1 (File No. 333-129277) filed on February 6, 2006) | |||
3.2 | Amended and Restated By-laws of Morgans Hotel Group Co. (incorporated by reference to Exhibit 3.2 to Amendment No. 5 to the Company’s Registration Statement on Form S-1 (File No. 333-129277) filed on February 6, 2006) | |||
3.3 | Certificate of Designations for Series A Preferred Securities (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on October 16, 2009) | |||
4.1 | Specimen Certificate of Common Stock of Morgans Hotel Group Co. (incorporated by reference to Exhibit 4.1 to Amendment No. 3 to the Company’s Registration Statement on Form S-1 (File No. 333-129277) filed on January 17, 2006) | |||
4.2 | Junior Subordinated Indenture, dated as of August 4, 2006, between Morgans Hotel Group Co., Morgans Group LLC and JPMorgan Chase Bank, National Association (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on August 11, 2006) | |||
4.3 | Amended and Restated Trust Agreement of MHG Capital Trust I, dated as of August 4, 2006, among Morgans Group LLC, JPMorgan Chase Bank, National Association, Chase Bank USA, National Association, and the Administrative Trustees Named Therein (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on August 11, 2006) | |||
4.4 | Stockholder Protection Rights Agreement, dated as of October 9, 2007, between Morgans Hotel Group Co. and Mellon Investor Services LLC, as Rights Agent (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K filed on October 10, 2007) | |||
4.5 | Amendment to the Stockholder Protection Rights Agreement, dated July 25, 2008, between the Company and Mellon Investor Services LLC, as Rights Agent (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K filed on July 30, 2008) | |||
4.6 | Amended and Restated Stockholder Protection Rights Agreement, dated as of October 1, 2009, between Morgans Hotel Group Co. and Mellon Investor Services LLC, as Rights Agent (including Forms of Rights Certificate and Assignment and of Election to Exercise as Exhibit A thereto and Form of Certificate of Designation and Terms of Participating Preferred Stock as Exhibit B thereto) (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K filed on October 2, 2009) | |||
4.7 | Amendment No. 1, dated as of October 15, 2009, to Amended and Restated Stockholder Protection Rights Agreement, dated as of October 1, 2009, between the Registrant and Mellon Investor Services LLC, as Rights Agent (incorporated by reference to Exhibit 4.4 to the Company’s Current Report on Form 8-K filed on October 16, 2009) |
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Exhibit | ||||
Number | Description | |||
4.8 | Indenture related to the Senior Subordinated Convertible Notes due 2014, dated as of October 17, 2007, by and among Morgans Hotel Group Co., Morgans Group LLC and The Bank of New York, as trustee (including form of 2.375% Senior Subordinated Convertible Note due 2014) (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K filed on October 17, 2007) | |||
4.9 | Supplemental Indenture, dated as of November 2, 2009, by and among Morgans Group LLC, the Company and The Bank of New York Mellon Trust Company, National Association (as successor to JPMorgan Chase Bank, National Association), as Trustee (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on November 4, 2009) | |||
4.10 | Registration Rights Agreement, dated as of October 17, 2007, between Morgans Hotel Group Co. and Merrill Lynch, Pierce, Fenner & Smith Incorporated (incorporated by reference to Exhibit 4.2 of the Company’s Current Report on Form 8-K filed on October 17, 2007) | |||
4.11 | Form of Warrant for Warrants issued under Securities Purchase Agreement to Yucaipa American Alliance Fund II, L.P. and Yucaipa American Alliance (Parallel) Fund II, L.P. (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on October 16, 2009) | |||
4.12 | Warrant, dated October 15, 2009, issued to Yucaipa American Alliance Fund II, LLC (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on October 16, 2009) | |||
4.13 | Warrant, dated October 15, 2009, issued to Yucaipa American Alliance Fund II, LLC (incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K filed on October 16, 2009) | |||
4.14 | Form of Amended Common Stock Purchase Warrants issued under Securities Purchase Agreement to Yucaipa American Alliance Fund II, L.P. and Yucaipa American Alliance (Parallel) Fund II, L.P. (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on December 14, 2009) | |||
4.15 | Amendment No. 1 to Common Stock Purchase Warrant issued under the Real Estate Fund Formation Agreement to Yucaipa American Alliance Fund II, LLC, dated as of December 11, 2009 (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on December 14, 2009) | |||
4.16 | Amendment No. 1 to Common Stock Purchase Warrant issued under the Real Estate Fund Formation Agreement to Yucaipa American Alliance Fund II, LLC, dated as of December 11, 2009 (incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K filed on December 14, 2009) | |||
10.1 | Amended and Restated Limited Liability Company Agreement of Morgans Group LLC (incorporated by reference to Exhibit 10.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2005) | |||
10.2 | Amendment No. 1 to Amended and Restated Limited Liability Company Agreement of Morgans Group LLC, dated as of April 4, 2008 (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2008) | |||
10.3 | Registration Rights Agreement, dated as of February 17, 2006, by and between Morgans Hotel Group Co. and NorthStar Partnership, L.P. (incorporated by reference to Exhibit 99.9 to the Company’s Statement on Schedule 13D filed on February 27, 2006) |
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Exhibit | ||||
Number | Description | |||
10.4 | Indemnification Agreement, dated as of February 17, 2006, by and among Morgans Hotel Group Co., Morgans Hotel Group LLC, NorthStar Partnership, L.P. and RSA Associates, L.P. (incorporated by reference to Exhibit 10.20 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2005) | |||
10.5 | Credit Agreement, dated as of October 6, 2006, by and among Morgans Group LLC, as Borrower, Beach Hotel Associates LLC, as Florida Borrower, Morgans Hotel Group Co., Wachovia Capital Markets, LLC, and Citigroup Global Markets Inc., as Joint Lead Arrangers and Joint Book Runners, Wachovia Bank, National Association, as Administrative Agent, Citigroup Global Markets Inc., as Syndication Agent, and the Financial Institutions Initially Signatory Thereto and their Assignees Pursuant to Section 13.5 Thereto, as Lenders (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on October 13, 2006) | |||
10.6 | Fifth Amendment to Credit Agreement; and Waiver Agreement dated as of August 5, 2009, by and among Morgans Group LLC, Beach Hotel Associates LLC, Morgans Holdings LLC and Royalton LLC, as Borrowers, Morgans Hotel Group Co., each of the Guarantors party thereto, each of the Lenders party thereto and Wachovia Bank, National Association, as Agent (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on August 6, 2009) | |||
10.7 | Loan and Security Agreement, dated as of October 6, 2006, between Henry Hudson Senior Mezz LLC and Wachovia Bank, National Association (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on October 13, 2006) | |||
10.8 | Forbearance and Waiver Agreement, dated as of October 14, 2009, among Henry Hudson Senior Mezz LLC, Morgans Group LLC and Concord Real Estate CDO 2006-1, Ltd.* | |||
10.9 | Deed of Trust, Security Agreement, Assignment of Rents and Fixture Filing, dated October 6, 2006, between Mondrian Holdings LLC, as Borrower, and First American Title Insurance Company, as Trustee for the benefit of Wachovia Bank, National Association, as Lender (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on October 13, 2006) | |||
10.10 | Agreement of Consolidation and Modification of Mortgage, Security Agreement, Assignment of Rents and Fixture Filing, dated October 6, 2006, between Henry Hudson Holdings LLC, as Borrower, and Wachovia Bank, National Association, as Lender (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 13, 2006) | |||
10.11 | Operating Agreement of Hudson Leaseco LLC, dated as of August 28, 2000, by and between Hudson Managing Member LLC and Chevron TCI, Inc. (incorporated by reference to Exhibit 10.9 to Amendment No. 1 to the Company’s Registration Statement on Form S-1 (File No. 333-129277) filed on December 7, 2005) | |||
10.12 | Lease, dated as of August 28, 2000, by and between Henry Hudson Holdings LLC and Hudson Leaseco LLC (incorporated by reference to Exhibit 10.10 to Amendment No. 1 to the Company’s Registration Statement on Form S-1 (File No. 333-129277) filed on December 7, 2005) | |||
10.13 | Ground Lease, dated October 14, 2004, by and between Geary Hotel Holding, LLC and Clift Holdings, LLC (incorporated by reference to Exhibit 10.11 to Amendment No. 1 to the Company’s Registration Statement on Form S-1 (File No. 333-129277) filed on December 7, 2005) | |||
10.14 | Joint Venture Agreement, dated as of February 16, 2007, by and between Royalton Europe Holdings LLC and Walton MG London Investors V, L.L.C. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February 23, 2007) |
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Exhibit | ||||
Number | Description | |||
10.15 | Facility Agreement, dated as of November 24, 2005, by and among Ian Schrager London Limited (to be renamed Morgans Hotel Group London Limited), Citigroup Global Markets Limited, the Financial Institutions Listed in Schedule 1 thereto and Citibank International plc (incorporated by reference to Exhibit 10.19 to Amendment No. 1 to the Company’s Registration Statement on Form S-1 (File No. 333-129277) filed on December 7, 2005) | |||
10.16 | Lease, dated January 3, 1997, by and among Mrs. P. A. Allsopp, Messrs. M. E. R. Allsopp, W. P. Harriman and A. W. K. Merriam, and Burford (Covent Garden) Limited (incorporated by reference to Exhibit 10.12 to Amendment No. 1 to the Company’s Registration Statement on Form S-1 (File No. 333-129277) filed on December 7, 2005) | |||
10.17 | Purchase and Sale Agreement and Joint Escrow Instructions dated May 11, 2006, by and between Morgans Group LLC and PM Realty, LLC (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 17, 2006) | |||
10.18 | Purchase and Sale Agreement and Joint Escrow Instructions dated May 11, 2006, by and between Morgans Group LLC and Red, White and Blue Pictures, Inc. (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on May 17, 2006) | |||
10.19 | Purchase and Sale Agreement, dated May 11, 2006, by and between Morgans Group LLC and HR Condominium Investors (Vegas), L.L.C. (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on May 17, 2006) | |||
10.20 | Amended and Restated Contribution Agreement, dated December 2, 2006, by and between Morgans Hotel Group Co. and DLJ MB IV HRH, LLC (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on December 6, 2006) | |||
10.21 | First Mezzanine Loan Agreement, dated as of November 6, 2007, by and among HRHH Gaming Senior Mezz, LLC, as Gaming Mezz Borrower, HRHH JV Senior Mezz, LLC, as JV Borrower, and Column Financial, Inc., as Lender (incorporated by reference to Exhibit 10.26 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2007) | |||
10.22 | First Amended and Restated First Mezzanine Loan Agreement, dated as of December 24, 2009, between HRHH Gaming Senior Mezz, LLC and HRHH JV Senior Mezz, LLC, as borrowers, and Brookfield Financial, LLC — Series B, as Lender (incorporated by reference to Exhibit 10.2 to Hard Rock Hotel Holdings, LLC’s Current Report on Form 8-K filed on December 31, 2009) | |||
10.23 | Second Mezzanine Loan Agreement, dated as of November 6, 2007, by and HRHH Gaming Junior Mezz, LLC, as Gaming Mezz Borrower, HRHH JV Junior Mezz, LLC, as JV Borrower, and Column Financial, Inc., as Lender (incorporated by reference to Exhibit 10.27 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2007) | |||
10.24 | First Amended and Restated Second Mezzanine Loan Agreement, dated as of December 24, 2009, between HRHH Gaming Junior Mezz, LLC and HRHH JV Junior Mezz, LLC, as borrowers, and NRFC WA Holdings, LLC, as Lender (incorporated by reference to Exhibit 10.3 to Hard Rock Hotel Holdings, LLC’s Current Report on Form 8-K filed on December 31, 2009) | |||
10.25 | Third Mezzanine Loan Agreement, dated as of November 6, 2007, by and among HRHH Gaming Junior Mezz Two, LLC, as Gaming Mezz Borrower, and HRHH JV Junior Mezz Two, LLC, as JV Borrower, and Column Financial, Inc., as Lender (incorporated by reference to Exhibit 10.28 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2007) | |||
10.26 | First Amended and Restated Third Mezzanine Loan Agreement, dated as of December 24, 2009, between HRHH Gaming Junior Mezz Two, LLC and HRHH JV Junior Mezz Two, LLC, as borrowers, and Hard Rock Mezz Holdings LLC, as Lender (incorporated by reference to Exhibit 10.4 to Hard Rock Hotel Holdings, LLC’s Current Report on Form 8-K filed on December 31, 2009) |
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Exhibit | ||||
Number | Description | |||
10.27 | Modification and Ratification of Guaranties, dated as of November 6, 2007, by and among Morgans Group LLC, DLJ MB IV HRH, LLC, as Guarantors, and Column Financial, Inc., as Lender (incorporated by reference to Exhibit 10.29 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2007) | |||
10.28 | First Mezzanine Guaranty Agreement, dated as of November 6, 2007, by Morgans Group LLC and DLJ MB IV HRH, LLC, as Guarantors, jointly and severally, for the benefit of Column Financial, Inc., as Lender (incorporated by reference to Exhibit 10.30 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2007) | |||
10.29 | First Mezzanine Closing Guaranty of Completion, dated as of November 6, 2007, by Morgans Group LLC and DLJ MB IV HRH, LLC, as Guarantors, jointly and severally, for the benefit of Column Financial, Inc., as Lender (incorporated by reference to Exhibit 10.31 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2007) | |||
10.30 | First Modification and Ratification of Guaranties pursuant to the First Amended and Restated First Mezzanine Loan Agreement, dated as of December 24, 2009, by Morgans Group LLC and DLJ MB IV HRH, LLC, as Guarantors, for the benefit of Brookfield Financial, LLC — Series B, as Lender* | |||
10.31 | Second Mezzanine Guaranty Agreement, dated as of November 6, 2007, by Morgans Group LLC and DLJ MB IV HRH, LLC, as Guarantors, jointly and severally, for the benefit of Column Financial, Inc., as Lender (incorporated by reference to Exhibit 10.33 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2007) | |||
10.32 | Second Mezzanine Closing Guaranty of Completion, dated as of November 6, 2007, by Morgans Group LLC and DLJ MB IV HRH, LLC, as Guarantors, jointly and severally, for the benefit of Column Financial, Inc., as Lender (incorporated by reference to Exhibit 10.34 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2007) | |||
10.33 | First Modification and Ratification of Guaranties pursuant to the First Amended and Restated Second Mezzanine Loan Agreement, dated as of December 24, 2009, by Morgans Group LLC and DLJ MB IV HRH, LLC, as Guarantors, for the benefit of NRFC WA Holdings, LLC, as Lender* | |||
10.34 | Third Mezzanine Guaranty Agreement, dated as of November 6, 2007, by Morgans Group LLC and DLJ MB IV HRH, LLC, as Guarantors, jointly and severally, for the benefit of Column Financial, Inc., as Lender (incorporated by reference to Exhibit 10.36 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2007) | |||
10.35 | Third Mezzanine Closing Guaranty of Completion, dated as of November 6, 2007, by Morgans Group LLC and DLJ MB IV HRH, LLC, as Guarantors, jointly and severally, for the benefit of Column Financial, Inc., as Lender (incorporated by reference to Exhibit 10.37 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2007) | |||
10.36 | First Modification and Ratification of Guaranties pursuant to the First Amended and Restated Third Mezzanine Loan Agreement, dated as of December 24, 2009, by Morgans Group LLC and DLJ MB IV HRH, LLC, as Guarantors, for the benefit of Hard Rock Mezz Holdings LLC, as Lender* | |||
10.37 | Joint Venture Agreement, dated as of January 3, 2006, between Morgans/LV Investment LLC and Echelon Resorts Corporation (incorporated by reference to Exhibit 10.23 to Amendment No. 3 to the Company’s Registration Statement on Form S-1 (File No. 333-129277) filed on January 17, 2006) |
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Exhibit | ||||
Number | Description | |||
10.38 | First Amendment to Morgans Las Vegas, LLC Limited Liability Company Agreement, dated May 15, 2006, by and between Morgans/LV Investment LLC and Echelon Resorts Corporation (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on May 17, 2006) | |||
10.39 | Second Amendment to Morgans Las Vegas, LLC Limited Liability Company Agreement, dated June 30, 2008, by and between Morgans/LV Investment LLC and Echelon Resorts Corporation (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on July 1, 2008) | |||
10.40 | Third Amendment to Morgans Las Vegas, LLC Limited Liability Company Agreement, dated September 23, 2008, by and between Morgans/LV Investment LLC and Echelon Resorts Corporation (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on September 25, 2008) | |||
10.41 | Letter Agreement Re: Morgans Las Vegas, LLC, dated May 15, 2006, by and between Morgans/LV Investment LLC and Echelon Resorts Corporation (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed on May 17, 2006) | |||
10.42 | Commitment Letter from Column Financial, Inc., dated May 11, 2006 (incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed on May 17, 2006) | |||
10.43 | Agreement of Purchase and Sale, dated as of December 22, 2005, by and between James Hotel Scottsdale, LLC and Morgans Hotel Group LLC (incorporated by reference to Exhibit 10.21 to Amendment No. 2 to the Company’s Registration Statement on Form S-1 (File No. 333-129277) filed on January 3, 2006) | |||
10.44 | Loan Agreement, dated as of May 19, 2006, between MHG Scottsdale Holdings LLC and Greenwich Capital Financial Products, Inc. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 25, 2006) | |||
10.45 | Mezzanine Loan Agreement, dated as of May 19, 2006, between Mondrian Scottsdale Mezz Holding Company LLC and Greenwich Capital Financial Products, Inc. (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on May 25, 2006) | |||
10.46 | Purchase and Sale Agreement, dated as of August 8, 2006, between 1100 West Properties, LLC and 1100 West Realty, LLC (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006) | |||
10.47 | Operating Agreement of 1100 West Holdings, LLC dated August 8, 2006 (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006) | |||
10.48 | Loan Agreement, dated as of August 8, 2006, between 1100 West Properties, LLC, the Lenders party thereto, and Eurohypo AG, New York Branch (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006) | |||
10.49 | Amended and Restated Loan Agreement, dated as of November 25, 2008, between 1100 West Properties, LLC, as borrower, and Eurohypo AG, New York Branch, as administrative agent (incorporated by reference to Exhibit 10.44 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2008) | |||
10.50 | Amended and Restated Mezzanine Loan Agreement, dated as of November 25, 2008, between 1100 West Properties, LLC, as borrower, and Eurohypo AG, New York Branch, as administrative agent (incorporated by reference to Exhibit 10.45 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2008) |
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Exhibit | ||||
Number | Description | |||
10.51 | Joint Venture Agreement, dated as of September 7, 1999, by and between Ian Schrager Hotels LLC and Chodorow Ventures LLC (incorporated by reference to Exhibit 10.7 to Amendment No. 1 to the Company’s Registration Statement on Form S-1 (File No. 333-129277) filed on December 7, 2005) | |||
10.52 | Confirmation of OTC Convertible Note Hedge, dated October 11, 2007, between Morgans Hotel Group Co. and Merrill Lynch Financial Markets, Inc. (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on October 17, 2007) | |||
10.53 | Confirmation of OTC Convertible Note Hedge, dated October 11, 2007, between Morgans Hotel Group Co. and Citibank, N.A. (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed on October 17, 2007) | |||
10.54 | Amended and Restated Confirmation of OTC Warrant Transaction, dated October 11, 2007, between Morgans Hotel Group Co. and Merrill Lynch Financial Markets, Inc. (incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed on October 17, 2007) | |||
10.55 | Amended and Restated Confirmation of OTC Warrant Transaction, dated October 11, 2007, between Morgans Hotel Group Co. and Citibank, N.A. (incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K filed on October 17, 2007) | |||
10.56 | Securities Purchase Agreement, dated as of October 15, 2009, by and among the Registrant and Yucaipa American Alliance Fund II, L.P. and Yucaipa American Alliance (Parallel) Fund II, L.P. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 16, 2009) | |||
10.57 | Amendment No. 1 to Securities Purchase Agreement, dated as of December 11, 2009, by and among Morgans Hotel Group Co., Yucaipa American Alliance Fund II, L.P. and Yucaipa American Alliance (Parallel) Fund II, L.P. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 14, 2009) | |||
10.58 | Real Estate Fund Formation Agreement, dated as of October 15, 2009, by and between Yucaipa American Alliance Fund II, LLC and the Registrant (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on October 16, 2009) | |||
10.59 | Registration Rights Agreement, dated as of October 15, 2009, by and between the Registrant and Yucaipa American Alliance Fund II, L.P., Yucaipa American Alliance (Parallel) Fund II, L.P. and Yucaipa American Alliance Fund II, LLC (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on October 16, 2009) | |||
10.60 | Employment Agreement dated as of February 14, 2006, by and between W. Edward Scheetz and Morgans Hotel Group Co. (incorporated by reference to Exhibit 10.24 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2005)† | |||
10.61 | Separation Agreement and Release, dated as of September 19, 2007, between W. Edward Scheetz and Morgans Hotel Group, Inc. (incorporated by reference to Exhibit 99.1 of the Company’s Current Report on Form 8-K filed on September 20, 2007)† | |||
10.62 | Employment Agreement, effective as of December 10, 2007, by and between Morgans Hotel Group Co. and Fred J. Kleisner (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on December 14, 2007)† | |||
10.63 | Amendment No. 1 to Employment Agreement for Fred J. Kleisner, effective as of December 31, 2008, by and between Morgans Hotel Group Co. and Fred J. Kleisner (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on January 7, 2009)† |
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Exhibit | ||||
Number | Description | |||
10.64 | Amendment No. 2 to Employment Agreement for Fred J. Kleisner, effective as of April 21, 2009, by and between Morgans Hotel Group Co. and Fred J. Kleisner†* | |||
10.65 | Employment Agreement, dated as of February 14, 2006, by and between Marc Gordon and Morgans Hotel Group Co. (incorporated by reference to Exhibit 10.25 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2005)† | |||
10.66 | Amended and Restated Employment Agreement, effective as of April 1, 2008, by and between Morgans Hotel Group Co. and Marc Gordon (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 17, 2008)† | |||
10.67 | Employment Agreement, effective as of October 1, 2007, by and between Morgans Hotel Group Co. and Richard Szymanski (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on November 30, 2007)† | |||
10.68 | Amendment No. 1 to Employment Agreement for Richard Szymanski, effective as of December 31, 2008, by and between Morgans Hotel Group Co. and Richard Szymanski (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on January 7, 2009)† | |||
10.69 | Morgans Hotel Group Co. Amended and Restated 2007 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February 1, 2010)† | |||
10.70 | Morgans Hotel Group Co. Annual Bonus Plan (incorporated by reference to Exhibit 10.28 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2005)† | |||
10.71 | Form of Morgans Hotel Group Co. RSU Award Agreement (Directors) (incorporated by reference to Exhibit 10.61 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2008)† | |||
10.72 | Form of Morgans Hotel Group Co. RSU Award Agreement (Officers and Employees) (incorporated by reference to Exhibit 10.62 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2008)† | |||
10.73 | Form of Morgans Hotel Group Co. Stock Option Award Agreement (Directors) (incorporated by reference to Exhibit 10.63 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2008)† | |||
10.74 | Form of Morgans Hotel Group Co. Stock Option Award Agreement (Officers and Employees) (incorporated by reference to Exhibit 10.64 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2008)† | |||
10.75 | Form of Morgans Hotel Group Co. LTIP Unit Vesting Agreement (Directors) (incorporated by reference to Exhibit 10.65 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2008)† | |||
10.76 | Form of Morgans Hotel Group Co. LTIP Unit Vesting Agreement (Officers and Employees) (incorporated by reference to Exhibit 10.66 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2008)† | |||
14.1 | Code of Ethics (incorporated by reference to Exhibit 14.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2005) | |||
21.1 | Subsidiaries of the Registrant* | |||
24.1 | Power of attorney (included on the signature page hereof) |
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Exhibit | ||||
Number | Description | |||
31.1 | Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002* | |||
31.2 | Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002* | |||
32.1 | Certification by the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002* | |||
32.2 | Certification by the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002* | |||
99.1 | Consolidated financial statements of Hard Rock Hotel Holdings, LLC (incorporated by reference to “Item 8. Financial Statements and Supplementary Data” of the Annual Report on Form 10-K of Hard Rock Hotel Holdings, LLC for the year ended December 31, 2009, filed with the Securities Exchange Commission on March X, 2010) |
* | Filed herewith. | |
† | Denotes a management contract or compensatory plan, contract or arrangement. |
F-54