Wednesday, March 2, 2011 | 9:10 a.m.
- Gaming regulators OK changes for casino at Hard Rock Hotel (2-24-2011)
- Company’s possible takeover of Hard Rock operations on Thursday agenda (2-22-2011)
- Crossing the line cost Hard Rock Hotel (2-20-2011)
- $650,000 settlement with Hard Rock Hotel gets OK (1-28-2011)
- Hard Rock International court filing cites ‘shocking acts’ in Las Vegas (1-7-2011)
- Hard Rock Hotel to pay $650,000 in settlement over drugs (12-30-2010)
- Hard Rock brand sues, cites Rehab behavior at Las Vegas hotel (9-23-2010)
- Privé close to receiving temporary liquor license (8-17-2009)
- Prive withdraws appeal of liquor license denial (8-14-2009)
- Third time a charm for Privé’s liquor license? (8-14-2009)
- Former Prive workers blast handling of tips (8-10-2009)
- Is the party over for Prive? (7-29-2009)
- Prive enlists lawyer with connections in fight for liquor license (7-29-2009)
Morgans Hotel Group Co. of New York, former manager of -- and investor in -- the Hard Rock Hotel in Las Vegas, is closing the books on its disastrous experience with the property.
The company today issued the first statement about its settlement with lenders over loan defaults -- a settlement that turned the property over to lender Brookfield Asset Management Inc. of New York effective Tuesday.
"Pursuant to the terms of the settlement, the Hard Rock joint venture's equity interests in the Hard Rock Hotel & Casino in Las Vegas have been transferred to the first mezzanine lender and Morgans' management agreement has been terminated," the company said in a statement.
Fred Kleisner, CEO of Morgans, said in a statement: "The Las Vegas market has faced significant headwinds since 2008 and as a result we consistently reduced our equity interest in the Hard Rock joint venture following our initial investment. This settlement agreement is the final step for Morgans to completely exit the Hard Rock investment and increase our focus on an asset-light strategy that further builds our Morgans brands in growing markets."
"With this agreement, Morgans has been released from any liability for the Hard Rock debt (which has been carried on Morgans' books as a component of investments in unconsolidated joint ventures at approximately $160 million), and from all of its guarantee obligations with regard to this property. As a result of the settlement, Morgans will also no longer be subject to gaming regulations, which previously imposed compliance costs and certain filing and suitability requirements on our stockholders over certain ownership levels, among other things," the company statement said.
Besides the debt defaults, Morgans and its investment partner in the Las Vegas Hard Rock, Credit Suisse Group AG, suffered from management problems that resulted in a $650,000 fine levied last year by Nevada regulators.
-- The property's president committed suicide.
-- The Hard Rock was sued after the girlfriend of Ed Scheetz, then CEO of Morgans, died of an overdose in Las Vegas.
-- The Hard Rock was sued by the owner of the international Hard Rock brand over claims the now-canceled Rehab shows on truTV were disparaging the Hard Rock brand's reputation.
The lawsuit involving Scheetz was settled -- the Hard Rock brand litigation remains active.
The biggest problem for the Hard Rock, however, was that it was carrying debt and other liabilities ($1.4 billion) at a level unmanageable during the worst recession in memory in Las Vegas.
Because of a hotel-casino building boom, Las Vegas has many unfilled hotel rooms and that was true at the Hard Rock in the fourth quarter.
In its quarterly earnings report Tuesday, Morgans said occupancy at the property in the quarter was 72.5 percent, down markedly from 84.2 percent during 2009's fourth quarter.
As a result, revenue per available room per day fell 9.7 percent to $86.03.
The bottom line for Morgans and Credit Suisse is that by the third quarter of 2010 their $500 million investment in the property had declined in value to a negative $143 million.