SBE Closes Purchase of Morgans Hotel Group

The transaction, valued at $805 million, more than doubles the number of hotels in the company’s portfolio.

By Scott Baltic, Contributing Editor

Los Angeles—In a transaction valued at $805 million, SBE, along with partners Yucaipa Cos. and Cain Hoy Enterprise, has completed the acquisition of Morgans Hotel Group, SBE announced late last week. The transaction more than doubles the number of hotels in SBE’s portfolio.

Sam Nazarian
Sam Nazarian, SBE

The expanded company, which will continue to operate under the SBE names, controls a total of 135 assets, an SBE spokesperson told Commercial Property Executive: 22 hotels and residences (residences are connected to hotels), 71 restaurants and 42 nightlife venues.

SBE Founder & CEO Sam Nazarian will retain all day-to-day management responsibilities and half of the common stock interests in SBE. The remaining half of the common stock and $150 million of newly issued preferred equity are shared equally between Cain Hoy and Yucaipa.

Cain Hoy CEO Jonathan Goldstein and Yucaipa founder Ron Burkle will join Nazarian on SBE’s board of directors.

The SBE announcement referenced debt financing provided by Security Benefit, but did not give further details.

The acquisition combines Morgans’ Delano and Mondrian brands, along with 13 domestic and international hotel management and franchise/licensing agreements, with SBE’s collection of hotel brands, including SLS hotels, The Redbury hotels and Hyde hotels. As part of the Morgans acquisition, SBE takes direct ownership of the 878-key Hudson Hotel in New York City, the 372-key Clift Hotel in San Francisco and the 194-key Delano Hotel in South Beach, Miami.

SBE’s restaurant brands include The Bazaar by José Andrés, Fi’lia by Michael Schwartz, Katsuya, Cleo, Umami Burger and Hyde Lounge.

“Cain Hoy and Yucaipa’s investment significantly improves SBE’s financial strength and provides us with the opportunity to invest funds to refresh the iconic Morgans-owned properties, Delano and Hudson,” Nazarian said in a prepared statement. “Equally important, it gives us the flexibility to pursue growth opportunities.”

SBE expects to open four hotels in 2017 (the MondrianDoha, Qatar; SLS Park Avenue New York; SLS Seattle; and Hyde Hotel and Residences, South Florida), which follow the recent openings of The Redbury in New York and SLS Brickell Hotel & Residences in Miami. A further nine hotels are scheduled to open within the next two years, bringing SBE’s portfolio to 35 hotel properties by the end of 2018.

Houlihan Lokey served as financial advisor and O’Melveny & Myers served as legal advisors to SBE on the transaction.

Image courtesy of SBE

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