Morgans fighting bad deal it made in recession

Miami /
May.May 29, 2013 10:00 AM

The owner of the Delano South Beach, a boutique hotel in Miami, is fighting to get out of a bad deal it made during the height of the financial crisis so it can get significant amounts of new capital from lenders, according to the New York Times.

The Morgans Hotel Group, founded by developer Ian Schrager and Studio 54’s Steve Rubell, is spending tens of millions of dollars on lawyers and bankers to undo a transaction that landed it $72 million in late 2009 from investment firm the Yucaipa Companies.

Yucaipa gave the money through a private investment in public equity, or PIPE, in exchange for: as many as 12.5 million shares; the right to nominate a director; and veto power over a sale of the company or any of its assets as well as acquisitions worth more than $100 million.

Today, Yucaipa owns nearly 28 percent of Morgans, has bought $88 million of its debt and has its director, Michael J. Gross, in charge of the company. It also holds half of hundreds of millions of dollars of Morgans’ mortgage debt that is coming due in the next two years.

Now, Morgans is trying to undo its first bad deal with another complicated one, giving Yucaipa the Delano South Beach and its nightclub and food and beverage management business in exchange for cancellation of many options of the first deal.

The second transaction, though, is on hold after being successfully challenged in court by OTK Associates, an investment vehicle run by the Olshan and Taubman real estate families that owns 13.9 percent of Morgans.

Now, OTK, which voted for the 2009 transaction, is running a slate of seven directors to try to unseat the Morgans board at its June 14 annual meeting. [NYT] — Melanie Gray


Related Articles

arrow_forward_ios
Red South Beach at 3010 Collins Avenue, Tom Assouline and August “Gussie” Busch (Instagram/gussiebusch, Google Maps, Getty)
Busch family partners with Assouline Capital to buy Red South Beach hotel
Busch family partners with Assouline Capital to buy Red South Beach hotel
Electra America's Joe Lubeck with rendering of Southplace City Center (Electra America)
Electra America JV plans $1B mixed-use redevelopment of Southland Mall
Electra America JV plans $1B mixed-use redevelopment of Southland Mall
Allied Partners founder Eric Hadar and The Savoy Hotel & Beach Club at 425 Ocean Drive (Google Maps, Getty)
Investor seeks $50M for allegedly botched Ocean Drive hotel repairs
Investor seeks $50M for allegedly botched Ocean Drive hotel repairs
2100 Northwest Miami Court, 2101 Northwest First Avenue and 2127 Northwest First Avenue (Google Maps, Getty)
Another Wynwood dev site hits market asking above $30M
Another Wynwood dev site hits market asking above $30M
LM Restaurants' Lou Maoshakos and an aerial view of 1755 Southeast Third Court in Deerfield Beach (Facebook/LM Restaurants, Google Maps)
LM Restaurants plans waterfront eatery, hotel in Deerfield Beach
LM Restaurants plans waterfront eatery, hotel in Deerfield Beach
Rendering of the project at 1360 Collins Avenue (Getty)
Miami Beach OKs apartment building conversion to boutique hotel
Miami Beach OKs apartment building conversion to boutique hotel
From left: Steve Witkoff, Monroe Capital’s Theodore Koenig, and Alex Witkoff with the Shore Club
Shore Club to become Auberge: Witkoff, Monroe’s redevelopment approval stands
Shore Club to become Auberge: Witkoff, Monroe’s redevelopment approval stands
Highgate's Mehdi Khimji and Mahmood Khimji with 7401 Northwest 36th Street and 3501 Le Jeune Road (Highgate, Wyndham Hotels)
Highgate sells two Miami-Dade La Quinta Inn hotels for $33M
Highgate sells two Miami-Dade La Quinta Inn hotels for $33M
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...