Morgans Hotel Group has signed definitive agreements to acquire the Hard Rock Hotel & Casino in Las Vegas, an adjacent 23-acre land parcel, and other related assets from Peter Morton for an aggregate purchase price of $770 million in cash.
The Hard Rock Hotel & Casino is a premier destination entertainment resort located on 16.7 acres situated strategically on Harmon Avenue, one of Las Vegas’ fastest growing entertainment corridors. It was built in 1995 and expanded in 1999. The property offers an energetic entertainment and gaming experience with the services and amenities associated with a boutique luxury resort hotel. The property has also been a popular music scene destination where such acts as the Rolling Stones, Coldplay, Alicia Keys, David Bowie, Snoop Dogg and Nine Inch Nails have all performed.
Features of the property include an 11-story Hard Rock Hotel tower with 647 guest rooms; a 30,000 square foot casino; a beach club with a swimming pool that was selected by the Travel Channel as one of “The Top 10 Pools” in the world; the Body English nightclub; “The Joint” concert hall; five restaurants, including the world famous Nobu; three cocktail lounges; several retail stores; and an 8,000 square foot spa, salon and fitness center.
The adjacent 23-acre land parcel, including a 544-unit apartment complex currently situated on the parcel will be held for further development. The acquisition includes the rights to use the “Hard Rock Hotel” and “Hard Rock Casino” trademarks in connection with casinos and hotel/casinos in specified locations, as well as certain other intellectual property such as merchandising and retail rights.
This transaction represents the third planned offering in the Las Vegas market by Morgans Hotel Group. The Company has already announced a joint-venture partnership with Boyd Gaming for their development project, Echelon Place, that will be anchored by two prominent MHG brands, Delano and Mondrian, which are expected to add a total of 1,600 rooms to the market in 2010.
W. Edward Scheetz, President and Chief Executive Officer of MHG, stated, “We are excited about adding the Hard Rock Hotel & Casino to our portfolio. Since Las Vegas is the largest hotel market in the U.S., it is key for our growth strategy. This transaction provides us with an immediate and highly-visible entry into this market.”
He continued, “The Hard Rock is already an extraordinary landmark and we are pleased to be able to acquire a property that has so much expansion potential. We believe we can further enhance it by applying MHG’s management infrastructure, marketing approach and reservations system. We also believe that the Hard Rock will complement our existing collection of brands, which have a distinctive nature, eminent design, dynamic and exciting atmosphere, celebrity guests and high-profile events, by targeting a younger demographic that still seeks a unique experience. This hotel, along with our established and renowned Delano and Mondrian brands, will allow us to dominate the Las Vegas market at multiple price points by offering the style, innovation, and service with which our brands are synonymous.”
MHG may bring in one or more joint venture partners to share in the investment in the existing assets. Although the Company may use some of the excess land for expansion, it is also considering selling or establishing a joint venture partnership to develop a significant portion of it. It is anticipated that the casino will be leased to a third-party licensed operator.
The acquisition will be financed with cash on hand and MHG’s corporate line of credit, as well as a $700 million credit facility from an affiliate of Credit Suisse. The transaction is subject to applicable regulatory approvals and other conditions, and is expected to close no later than the first quarter of 2007.
In connection with the transactions, Wachtell, Lipton, Rosen & Katz is acting as legal advisor to Morgans Hotel Group.