UPDATED, Jan. 30, 2017, 1:00 p.m.: Boutique lodging company Morgans Hotel Group filed a breach of contract suit for up to $210 million alleging it lost a deal to manage a long stalled luxury hotel project in the Meatpacking District after the owner terminated the agreement and went with a new group of partners.
The Manhattan-based hotel company filed suit in Manhattan Supreme Court against LM Legacy Group, an affiliate of the Meilman family. Morgan claimed the owners failed to complete construction of the property in a timely manner and wrongfully terminated a 15-year management deal, among other things.
Morgans, which innovated the lifestyle hotel concept with the Mondrian and Royalton hotels in New York, alleged that it entered a deal with the Meilmans in 2008 to manage a 25-story, 158-room hotel at a Meilman-owned site at 412-420 West 15th Street. The property is right across from Chelsea Market.
Under the agreement, Morgans would operate its first Meatpacking District hotel as the flagship member of the Sanderson brand name in North America, according to court documents. Construction was originally scheduled to begin in December 2008, but was later pushed back until 2010.
According to the complaint, Morgans was given a right of first refusal with respect to any hotel constructed on the site, and in return Morgans was not allowed to open any new hotels under the Sanderson or Royalton names in the Meatpacking District or surrounding areas ranging from 24th Street in Chelsea south to Houston Street, and as far east as Fifth Avenue. Other restrictions applied for hotels under the Mondrian brand.
Morgans alleged that prior to September 2013, Legacy entered talks with outside firms to develop another hotel at the site. The suit does not name any specific entities.
A letter was allegedly sent from Legacy that month terminating the hotel management deal and declining to offer Morgans the right of first refusal.
The Real Deal reported that Boston-based Rockpoint Group and its operating partner Highgate Holdings entered an agreement with the Meilman family to operate a hotel on that site. The agreement includes a 99-year lease.
According to the Rockpoint web site, there are plans for a 247-room, four-star hotel at 412 West 14th and 415 West 15th streets with retail, food and beverage venues.
Morgans claims that it would have earned up to $39 million in fees during the term of the 15-year agreement, which had a renewal option for a total of 30 years, according to the complaint.
A spokesman for Morgans Hotel and a spokesperson for Meilman Family Real Estate did not return calls. Rockport officials were not immediately available. An attorney for Morgans was not immediately available.
In December 2016, Morgans and LM Legacy Group discontinued and settled the case out-of-court for an undisclosed sum.
This post was updated to include information on the case’s settlement.