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Hard Rock hotel owner reducing ownership stake

LAS VEGAS, Nevada -- Morgans Hotel Group Co. of New York, co-owner and manager of the Hard Rock hotel-casino in Las Vegas, Monday said it plans to reduce its ownership stake in the Paradise Road property. Morgans made the disclosure as its companywide first quarter loss widened as revenue slumped amid recessionary pressures.

Reuters reported that as part of its attempt to reduce exposure in Las Vegas, the company said it expects to cut its ownership in the Hard Rock to 14 percent by the end of 2009. It had about a 20 percent stake at the beginning of this year.

Morgans' partner in the property is DLJ Merchant Banking Partners, a private equity investment affiliate of Credit Suisse.

"We have not entered into any future funding commitments at Hard Rock since February 2008 and have no intention to do so," a company executive said during the call.

Speaking of the new units it plans to open in the fourth quarter of 2009, or early 2010, the company said all projects are fully financed.

The company lost $10.6 million or 36 cents per share on revenue of $54.3 million during the quarter ended March 31, compared to a loss of $7.5 million or 23 cents per share on revenue of $80.7 million in the same quarter of 2008. The company has properties around the nation and in London.

Fred Kleisner, president and CEO, said in a statement: "In an increasingly difficult environment, we continued to manage our cost structure and balance sheet in a proactive and aggressive manner to preserve shareholder value. We implemented an additional $10 million in annualized cost savings in the first quarter of 2009 and ended the first quarter with over $87 million in cash on hand. We are confident that we are taking all the right steps to get us through this challenging period, while at the same time maintaining our unique brand experience so that we are well positioned for growth when the economy turns around."

Morgans' Hard Rock brand was hit hard like the rest of the company's properties. Hotel room occupancy for the Hard Rock fell from 94 percent in the 2008 quarter to 89.3 percent in the 2009 period, while revenue per available room slid from $173.34 to $120.55.

The Hard Rock last month opened its new and expanded Joint Concert Hall and added approximately 65,000 square feet of meeting space. The north tower with 490 rooms is scheduled to open this summer and the casino expansion and south tower with 374 rooms is projected to open in late 2009 or early 2010, Morgans said.

Copyright © Las Vegas Sun. Inc. Republished with permission.

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