By Helen Chernikoff
SAN DIEGO, Jan 26 (Reuters) – Boutique hotel owner and operator Morgans Hotel Group Co, which is struggling under a heavy debt load, is selling two of its New York City hotels, sources familiar with the matter said.
Jones Lang LaSalle Hotels is handling the sale of the Royalton and Morgans hotels for the company, the sources said. As of Nov. 30, Morgans had liabilities of $801.2 million. Its market cap is $282.2 million, according to Reuters data.
Bids for the two hotels are due next week, said the sources, who were not authorized to speak publicly about the matter.
Morgans could not be reached immediately for comment.
Jones Lang La Salle Hotels declined to comment.
Morgans has two mortgages coming due in October, on which it owes about $300 million combined, and would use some of the proceeds of any asset sale to refinance, said JMP Securities analyst Will Marks.
He puts the combined value of the Morgans hotel and the Royalton at about $150 million, at least 15 percent of the asset value of the company, which owns or has a joint venture interest in 13 hotels.
A sale would also help the company move toward adopting the business model so common among its larger peers, which prefer not to own hotels and instead generate revenue by collecting franchise and management fees.
‘You get the best return from being a management company, and they are an ownership company right now,’ Marks said.
The two hotels offer a buyer high-end assets in one of the most coveted urban locations, which are enjoying a surge in demand as business travel recovers.
Morgans is also under pressure from investors.
In November, Parag Vora of investment firm HG Vora Capital Management and his partner, private real estate investment company Highgate Hotels, said they wanted to discuss a wide range of strategic alternatives with the company.
Vora reported a 9.94 percent stake in Morgans in a filing with the U.S. Securities and Exchange Commission in November.
Morgans’ shares were up 4 percent at $9.70 in afternoon trading on the Nasdaq.
(Additional reporting by Abhishek Takle; Editing by Lisa Von Ahn, John Wallace and Steve Orlofsky)