NEW YORK--(BUSINESS WIRE)--Aug. 8, 2006--Morgans Hotel Group Co. (NASDAQ: MHGC) ("MHG") today announced that it has formed a new joint venture that has purchased and will renovate an apartment building on Biscayne Bay in South Beach (Miami) into a hotel operated under MHG's Mondrian brand. The new luxury hotel is the fourth announced Mondrian, including Los Angeles, Scottsdale, and a property under development in Las Vegas, and will be operated by MHG under a long-term incentive management contract.

The 16-story property will be renovated to create MHG's distinctive lodging, dining and nightlife experience, and will include numerous other hotel amenities, such as a pool, spa, event and meeting space. The property fronts Biscayne Bay and offers spectacular views of the downtown Miami skyline, the Atlantic Ocean and South Beach. The hotel will have approximately 342 units comprised of studios, one and two-bedroom units, and four penthouse suites. In addition, given the property's prime location, Mondrian will offer a vast array of waterfront services, including private VIP boat slips for sailing and yachting and recreational activities for its guests.

"With our Miami Mondrian, we are expanding MHG's presence and the diversity of our brands in a market we know well and where we have had great success with Delano and The Shore Club," said Ed Scheetz, President and Chief Executive Officer. "The South Beach market is strong and continues to be an international destination of choice for savvy travelers who prefer the exclusivity and sophistication of our properties. When the renovations are completed, we expect Mondrian to be one of the most sought after properties in Miami Beach. We very much look forward to opening the hotel and to having an expanded presence in South Beach."

"This transaction is consistent with our strategy of expanding our brands in major business and leisure travel markets by entering into long-term partnerships to develop and manage our brands. It also exemplifies how our multiple brand strategy allows us to grow and operate several hotels, each with distinct offerings, in the same market. Given the close proximity of our three South Beach properties, MHG expects to benefit from cost savings, specifically labor efficiencies and other synergies," continued Mr. Scheetz.

The joint venture currently plans to pursue the sale of some or all of the new luxury units as condominiums, subject to market conditions, giving MHG's guests the opportunity to buy into the Mondrian experience. The joint venture anticipates that unit buyers will have the opportunity to place their units into a rental program. In addition to hotel management fees, MHG could also realize fees from the sale of condominium units.

Under the terms of the 50/50 joint venture agreement between MHG and an affiliate of Hudson Capital, a leading condominium company that develops landmark high-rise residences, the joint venture will acquire the existing building and land for a gross purchase price of $110 million. The joint venture expects to spend approximately $60 million on renovations. The joint venture will require an initial equity investment of $15 million from each of MHG and Hudson Capital and will receive financing of $124 million to be provided by Eurohypo AG, New York Branch, at a rate of LIBOR plus 300 basis points.

About Morgans Hotel Group

Morgans Hotel Group Co. (NASDAQ: MHGC) which is widely credited with establishing and developing the rapidly expanding boutique hotel sector, owns and operates Morgans, Royalton and Hudson in New York, Delano and The Shore Club in Miami, Mondrian in Los Angeles and Scottsdale, Clift in San Francisco, and Sanderson and St Martins Lane in London. MHG has other property transactions in various stages of completion including projects in Miami Beach, Florida, and Las Vegas, Nevada, and continues to vigorously pursue its strategy of developing unique properties at various price points in international gateway cities in the United States, Europe, South America, Asia and around the world. For more information please visit www.morganshotelgroup.com.

Forward-Looking and Cautionary Statements

Statements contained in this press release which are not historical facts are forward-looking statements as the term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by the use of words such as "expects," "plans," "estimates," "projects," "intends," "believes," "guidance," and similar expressions that do not relate to historical matters. These forward-looking statements are subject to risks and uncertainties which can cause actual results to differ materially from those currently anticipated, due to a number of factors which include, but are not limited to, downturns in economic and market conditions, particularly levels of spending in the business, travel and leisure industries; hostilities, including future terrorist attacks, or fear of hostilities that affect travel; risks related to natural disasters, such as earthquakes and hurricanes; the completion of transactions and the integration of properties with our existing business; the seasonal nature of the hospitality business; changes in the tastes of our customers; increases in real property tax rates; increases in interest rates and operating costs; general volatility of the capital markets and our ability to access the capital markets; and changes in the competitive environment in our industry and the markets where we invest, and other risk factors discussed in Morgans Hotel Group Co.'s Annual Report on Form 10-K and other documents filed by the Company with the Securities and Exchange Commission from time to time. All forward-looking statements in this press release are made as of today, based upon information known to management as of the date hereof, and the Company assumes no obligations to update or revise any of its forward-looking statements even if experience or future changes show that indicated results or events will not be realized.

    CONTACT: Joele Frank, Wilkinson Brimmer Katcher
             Judy Wilkinson / Eric Brielmann
             212-355-4449

    SOURCE: Morgans Hotel Group Co.