Shareholder letter may lead to Morgans Hotel Group proxy fight

Rambleside's Greg Cohen cites "serious concerns" about beleaguered company's direction

TRD MIAMI /
Feb.February 02, 2016 11:15 AM

From the New York website: Activist shareholder Gregory Cohen of Rambleside Holdings is looking to shake things up at Morgans Hotel Group, having sent a letter to the Morgans board this weekend expressing “serious concerns about the strategic direction of the company” and suggesting steps to reform the beleaguered hotel operator’s governance.

Cohen’s letter, addressed to Morgans chair Howard Lorber and others on the company’s board of directors, says the company “is now facing a crisis” that has seen its share price drop to $1.69 at the close of trading last week. The letter could kick off a proxy fight for control of Morgans — with Cohen, who owns just under 5 percent of the company’s common stock, backed by former Morgans CEO Fred Kleisner.

The correspondence mentions how Rambleside, the real estate investment firm helmed by Cohen, offered last year to buy two hotels owned by Morgans – including the the Delano Hotel in Miami Beach and the Hudson New York in Midtown – for $507 million, only for the offer to be “never meaningfully engaged with” by the company’s board of directors.

“It seems as if the board’s strategy is to let the business float along – without a plan – with no regard for shareholder value,” Cohen said in the letter.

The letter goes on to suggest the Morgans board host an investor conference call to update shareholders on its strategic plan and “explain why it has been unable to reach agreement with any industry partners” over a potential sale of the company.

One such deal, a merger with Sam Nazarian’s SBE Entertainment, broke down in November after a disagreement among Morgans board members Ron Burkle, a preferred equity holder in the company, and former interim CEO Jason Kalisman.

Morgans has been without a CEO since Kalisman’s departure last May, and the company has been plagued by shareholder infighting that has interfered with efforts to bring an entity-level sale or merger to fruition.

Cohen’s letter also suggests that Morgans “hire new independent financial and legal advisors” to help with finding “potential strategic partners,” and floats Kleisner — a former Starwood Hotels & Resorts executive who served as Morgans CEO from 2007 to 2011 — for the role of interim CEO.

Lorber declined to comment on the shareholder letter when reached for comment.

In New York, Morgans fought a high-profile battle last year with the Sapir Organization over management control of the Mondrian Soho hotel, which Sapir acquired at a foreclosure auction for $200 million last January.

Cohen, meanwhile, has played the role of activist shareholder before. A former shareholder in real estate investment trust New York REIT, he penned a letter to that company’s board last summer expressing concerns about New York REIT’s direction.


Related Articles

arrow_forward_ios
Faena Hotel Miami Beach and Eau Palm Beach (Faena, Eau Palm Beach)

Faena Hotel, Eau Palm Beach Resort among latest to lay off hundreds

Faena Hotel, Eau Palm Beach Resort among latest to lay off hundreds
Shelborne South Beach

Shelborne South Beach unit owners lose appeal contesting $30M in assessments

Shelborne South Beach unit owners lose appeal contesting $30M in assessments
From left: The Fontainebleau Miami Beach, Shore Club and Clevelander South Beach 

Record-breaking surge in Covid cases spells trouble for South Florida’s hotel market

Record-breaking surge in Covid cases spells trouble for South Florida’s hotel market
Clevelander South Beach

Party’s over: Clevelander South Beach closes after employee tests positive for Covid

Party’s over: Clevelander South Beach closes after employee tests positive for Covid
Lennox Miami Beach

Lennox Miami Beach hotel exec sues father-in-law for ousting him: lawsuit

Lennox Miami Beach hotel exec sues father-in-law for ousting him: lawsuit
citizenM founder Rattan Chadha, Russell Galbut and a rendering of 1212 Lincoln

CitizenM buys hotel portion of Crescent Heights’ 1212 Lincoln project

CitizenM buys hotel portion of Crescent Heights’ 1212 Lincoln project
1 Hotel South Beach (Credit: Google Maps)

Starwood Capital affiliate sues 1 Hotel & Homes South Beach condo association for trademark infringement

Starwood Capital affiliate sues 1 Hotel & Homes South Beach condo association for trademark infringement
Ziel Feldman and Richard Branson with renderings of the Shore Club (Credit: Getty Images)

The breakdown: Inside Virgin Hotels’ $330M vision for South Beach and how it vanished

The breakdown: Inside Virgin Hotels’ $330M vision for South Beach and how it vanished
arrow_forward_ios

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

Loading...