Hotel mogul Sam Nazarian is buying a boutique hotel group in a deal that could bolster his reputation as king of chic nightlife.
Nazarian’s SBE Entertainment Group, based in Mid-Wilshire, has agreed to pick up New York-based Morgans Hotel Group for $82 million, plus the assumption of about $700 million in debt and preferred securities.
Nazarian, 40, said he saw the acquisition as a chance to take on celebrated hotel brands, including Mondrian and Delano, and inject expertise from SBE’s dining and drinking destinations.
“It is not often you find a platform that fits yours so well, especially a platform that fits the same ethos and DNA,” Nazarian said. “The opportunity we see is not necessarily fixing anything, but telling the story as we move forward.”
The deal had been in the works for more than a year, stalled by disagreements among Morgans’ investors. The terms priced the stock at $2.25 a share.
Nazarian, who began selling off hotel properties last year, said the acquisition supports his long-term goal of managing, rather than owning, the bulk of his portfolio.
“The plan has not changed. Our pipeline of managed assets is unbelievably strong,” he said.
He will pick up just three properties in the deal – the Delano Hotel in Miami’s South Beach, the Hudson Hotel in New York, and the Clift Hotel in San Francisco – and plans to hang on to them for their key locations. Meanwhile, SBE plans to flag 19 new hotels through 2019. In the past, Nazarian has slowly sold properties only after getting them firmly established.
Alan Reay, president of Irvine’s Atlas Hospitality Group, said management is the way to go for a company such as SBE.
“There’s a very big opportunity to manage these boutique hotels for third-party owners,” he said. “You can expand much quicker in that direction than by buying real estate.”
Nazarian traces it all back to Morgans’ founder Ian Schrager, who pioneered the boutique hotel concept in the mid-1980s and developed the high-end Edition and Public hotel brands.
“Guys like me got into the hotel business because of this amazing integration between hotel development, restaurants, design, and real estate,” Nazarian said. “I give him (Schrager) credit publicly and personally. He was the person who sparked my interest.”
New brand, same plan
SBE already runs the SLS, Hyde, and Redbury hotel brands, along with restaurants including the Bazaar by Jose Andres, Katsuya, and Umami Burger. Morgans’ portfolio would add 13 owned, operated, or licensed hotels in Los Angeles, San Francisco, Las Vegas, Miami, New York, London, and Istanbul.
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