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Will The Mondrian Soho Be No Mo'?

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  Site Where: 9 Crosby St [map], New York, NY, United States, 10013
June 3, 2013 at 11:30 AM | by | Comments (0)

On Friday, a letter sent to shareholders of Morgans Hotel Group detailed some frightening behind-the-scenes financials for the uber-trendy Mondrian Soho Hotel as well as other key Morgans properties.

To quickly get you up to speed, OTK Associates (one of the largest shareholders of the Morgans stock), has sued fellow board members to stop them from doing a deal with Ron Burkle’s Yucaipa company and from recapitalizing assets. It’s an extremely complicated situation but a Delaware court recently ruled in favor of OTK, who is now trying to replace the exist boardmembers with picks of their own.

In their recent letter to shareholders with their boardmember suggestions, OTK Associates revealed that foreclosure proceedings began in January for the Mondrian Soho. But that's not all:

In February 2013, the owner of Mondrian SoHo, a joint venture in which Morgans Group owns a 20% equity interest, gave notice purporting to terminate our subsidiary as manager of the hotel. It also filed a lawsuit against us seeking termination of the management agreement. We intend to vigorously defend our rights to continue managing the property under our management agreement and related agreements, but we cannot assure you that we will be successful.

Ouch.

But Judging from recent TripAdvisor reviews, things don't seem to be as dire. More than a few folks complained that there was no one there to greet them at the entrance or handle their bags and the design was impractical but overall, they dug the hotel and its location on the edge of Soho. And the hard-working general manager has been taking the time to graciously answer every single review--even this one which said, “Piet Mondrian would turn in his grave at the style of design that his name has been applied to here.”

Yet while the Mondrian Soho continues to hang in the balance, things are not looking good for other Morgans properties either. Back in mid-May, the owners of the Shore Club also foreclosed on the hotel. A sale of the 306-room hotel is expected to happen on June 25. Morgans, which has a minority ownership interest in the hotel, has announced they will continue to manage the property for the forseeable future. But that could change if the new owners want it to. Additionally, OTK Associates point out that the hotel group is in danger of losing the management contract at the Ames Boston although they did mention that Morgans and the hotel owner are discussing ways for the Ames to continue as Morgans property.

While Morgans may have made some missteps over the past few years, (they've lost money every quarter since 2007, according to Bloomberg News), the litigation between boardmembers at the top is not helping the situation. Which is such a shame because Morgans Hotels is one of the few design-forward boutique hotel brands out there. Sigh. It's just like the famous Cher Horowitz once said, "She's a full-on Monet. From far away, it's OK, but up close, it's a big old mess."

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