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SBE closes Morgans acquisition

SBE closed on Wednesday its US$805 million enterprise value acquisition of cash-strapped Morgans Hotel Group, New York City. The transaction more than doubles the number of hotels in SBE’s portfolio, to 22, with others in development.

Investor Ron Burkle’s Yucaipa Companies, Cain Hoy Enterprises and SBE on May 9 signed a deal to buy Morgans that was intended to close within six months, or by November 9. While delays persisted the deal closing now takes Morgans private.

As part of the acquisition, Yucaipa Companies converted preferred shares in Morgans into a 25% equity interest in SBE with Burkle taking a seat on the new board. Cain Hoy Enterprises also has a 25% equity stake and a board seat. Yucaipa and Cain Hoy together also own $150 million of newly issued preferred shares in SBE.

Nazarian, founder and chief executive of the Los Angeles-based company, holds the other 50% stake.

The acquisition brings to SBE 13 domestic and international hotel management and franchise/licensing agreements as well as high-profile brands Morgans, Delano and Mondrian into the “360-degree” hospitality company whose holdings besides hotels include residences, restaurants, entertainment, spa and nightlife venues in the U.S., Bahamas and London.

SBE's acquisition includes the Delano Hotel in Miami. Flickr via Chris Goldberg
SBE’s acquisition includes the Delano Hotel in Miami. Flickr via Chris Goldberg

Included in the acquisition is the 194-room Delano Hotel in Miami’s South Beach, the 878-room Hudson Hotel in New York City and the 372-room Clift Hotel in San Francisco.

“The acquisition of Morgans not only further expands our offering but brings the invaluable partnerships of Ron Burkle and Cain Hoy Enterprises,” said SBE CEO and founder Sam Nazarian. “SBE will now have a presence from San Francisco to Doha; Los Angeles to London – and brings its impressive history, talented team and culture of service and innovation to the SBE family. We couldn’t be more pleased about the transaction.”

SBE, which recently opened The Redbury in New York and SLS Brickell in Miami, expects to open four hotels in 2017, including a Mondrian in Doha, Qatar and SLS hotels in New York, Seattle and a hotel/residence combination in south Florida. An additional nine hotels are scheduled to open within the next two years.

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