8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 5, 2008

Morgans Hotel Group Co.
(Exact name of registrant as specified in its charter)

Delaware	001-33738	16-1736884
(State or other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

475 Tenth Avenue New York, NY	10018
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code: (212) 277-4100

Not applicable

(Former name or former address if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02. Results of Operations and Financial Condition.

On November 5, 2008, Morgans Hotel Group Co. (the “Company”) issued a press release announcing its financial results for the quarter ended September 30, 2008. A copy of the press release is furnished as Exhibit 99.1 hereto and is hereby incorporated by reference into this Item 2.02.

The information contained in this current report on Form 8-K, including Exhibit 99.1, shall not be deemed “filed” with the Securities and Exchange Commission nor incorporated by reference in any registration statement filed by the Company under the Securities Act of 1933, as amended.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits.

Exhibit Number		Description
	99.1	Press Release dated November 5, 2008

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SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	MORGANS HOTEL GROUP CO.
Date: November 5, 2008	By:	/s/ Richard Szymanski
		Richard Szymanski
		Chief Financial Officer

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EXHIBIT INDEX

Exhibit Number		Description
	99.1	Press Release dated November 5, 2008

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EX-99.1

Exhibit 99.1

Contacts:
Richard Szymanski
Morgans Hotel Group
212.277.4188

Kate Finn
The Abernathy MacGregor Group
212.371.5999

MORGANS HOTEL GROUP REPORTS THIRD QUARTER 2008 RESULTS

NEW YORK, NY — November 5, 2008 — Morgans Hotel Group Co. (NASDAQ: MHGC) (“MHG”) today reported financial results for the third quarter ended September 30, 2008

Highlights

• Revenue per available room (“RevPAR”) for Owned Comparable Hotels¹ increased by 9.5% over the comparable period in 2007, compared to the domestic industry average decrease of 1.1%.

• RevPAR for System-Wide Comparable Hotels² increased by 1.9% (3.5% in constant dollars) over the comparable period in 2007.

• EBITDA margins at System-Wide Comparable Hotels increased by 90 basis points over the comparable period in 2007. MHG achieved a 1% reduction in operating expenses due to the implementation of plans put into effect in the first quarter of 2008 in anticipation of an economic slowdown.

• Adjusted EBITDA³ excluding hotels under renovation increased by 7.8% over the comparable period in 2007, a growth rate of 4.0 times the related RevPAR growth rate.

• A restructuring plan was implemented in October 2008 which is projected to result in approximately $10 million in annual cost savings including approximately $6 million in corporate expenses.

1	“Owned Comparable Hotels” includes all wholly-owned hotels operated by MHG except for hotels under renovation during the period or the relevant comparison period for the prior year and development projects. Owned Comparable Hotels for the third quarter of 2008 excludes Mondrian Los Angeles and Morgans, which were under renovation in the third quarter of 2008, and Royalton, which was under renovation in the third quarter of 2007.
2	“System-Wide Comparable Hotels” includes all hotels operated by MHG except for hotels under renovation during the period or the relevant comparison period for the prior year and development projects. System-Wide Comparable Hotels for the third quarter of 2008 excludes Mondrian Los Angeles and Morgans, which were under renovation in the third quarter of 2008, Royalton, which was under renovation in the third quarter of 2007, and the Hard Rock Hotel & Casino in Las Vegas (“Hard Rock”), which was added in February 2007 and under renovation/expansion in 2008.
3	Adjusted earnings before interest, taxes, depreciation and amortization, as further described below.

• In September 2008, MHG received a return of its $30 million deposit on the Echelon project in Las Vegas and eliminated approximately $41 million of future funding obligations for the project.

• MHG authorized a $30 million stock repurchase program on July 1, 2008, and completed the program in October 2008.

• MHG’s liquidity, as measured by cash and cash equivalents and availability under its revolving credit facility, was approximately $242.1 million at September 30, 2008.

• With the completion of the redesigned Mondrian Los Angeles and Morgans properties in September 2008, MHG has no significant deferred capital requirements at its owned hotels.

• Mondrian South Beach is currently on schedule to open in time for the 2008/2009 winter season.

• The construction of Mondrian SoHo and Ames Boston and the expansion of Hard Rock are all currently on schedule to open in the latter half of 2009.

“Due to proactive cost saving initiatives and strong performance at our core properties, we delivered solid results in the third quarter, outperforming our peers despite the slowdown in the economy,” said Fred Kleisner, President and CEO of MHG. “RevPAR at Owned Comparable Hotels increased 9.5% for the quarter, compared to a domestic industry average decrease of 1.1% for the same period, demonstrating the strength of our underlying business model and brands. Additionally, we have built-in EBITDA growth for 2009 from recently completed renovations and four development and expansion projects, each of which has financing in place.”

“We are in a very strong position in terms of our balance sheet, cash and financial obligations. The company has significant liquidity available, is generating significant cash-flow with limited financial commitments and no significant near-term consolidated debt maturities. We are very confident in our ability to manage, and continue to expand, the business through the current downturn. We believe our unique assets, combined with effective cost saving initiatives, strong liquidity and built-in EBITDA growth, position us well for long-term value creation.”

Third Quarter Operating Results

RevPAR for MHG’s System-Wide Comparable Hotels was $246.65, an increase of 1.9% (3.5% in constant dollars) for the third quarter of 2008 over the comparable period in 2007. RevPAR at Owned Comparable Hotels increased by 9.5% to $237.91, led by Delano and Hudson.

EBITDA margins at System-Wide Comparable Hotels improved by 90 basis points as compared to the comparable period in 2007. MHG achieved this increase through a 1% reduction in comparable operating costs at these hotels due to the implementation of cost saving initiatives related to labor, marketing and other hotel level expenses.

Adjusted EBITDA excluding hotels under renovation increased by 7.8% from the comparable period in 2007 as a result of cost saving initiatives. Due to an estimated $4.0 million of EBITDA displacement at Mondrian LA, Morgans and Hard Rock, which were under renovation and classified as non-comparable hotels in the third quarter of 2008, Adjusted EBITDA decreased by 11.7% to $21.2 million.

During the quarter, MHG’s percentage ownership interest at Hard Rock, based on cash contributions, was reduced from 27.4% to 20.5%, resulting in a weighted average of 22.9% for the quarter and a lower proportionate share of both Adjusted Debt and Adjusted EBITDA. Had MHG’s percentage interest remained at the 2007 level of 33.3%, Adjusted EBITDA would have been approximately $1.0 million higher in the third quarter of 2008.

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MHG’s concentration in key international gateway cities such as New York, Miami and San Francisco drove RevPAR growth in excess of the U.S. industry average growth for the quarter. An increase in business from international guests offset declines in domestic travel.

MHG recorded a net loss of $9.0 million for the third quarter of 2008, compared to a net loss of $10.0 million in the comparable period in 2007.

Balance Sheet and Liquidity

As of September 30, 2008, consolidated debt excluding the Clift lease obligation was $648.9 million. MHG’s cash and cash equivalents balance at September 30, 2008 was $59.7 million. As of September 30, 2008, MHG’s liquidity, measured by cash and cash equivalents and availability under its revolving credit facility, was $242.1 million. As of September 30, 2008, there were no borrowings outstanding under MHG’s revolving credit facility, which is secured by three owned hotels — Delano, Royalton and Morgans. All of MHG’s long-term debt at September 30, 2008 was at fixed rates, either directly or as a result of hedging arrangements.

As of September 30, 2008, MHG estimates that its total future commitments in 2008 and 2009 for development projects currently consist of approximately $30 million. These include approximately $10 million for Mondrian South Beach during the fourth quarter of 2008, $5 million of which has been funded to date, $11 million to fund the letter of credit posted for the Hard Rock expansion in 2009, and approximately $4 million for the creation of 30 new hotel rooms from the conversion of SRO (“Single Room Occupancy”) rental units at Hudson in 2009. With the re-launch of Mondrian Los Angeles and Morgans in September 2008, all major renovations have been completed and there are no significant deferred capital requirements at our owned hotels.

In October 2008, MHG completed its $30 million stock repurchase plan authorized on July 1, 2008 of which approximately $14.5 million was expended during the third quarter. In total, approximately 2.8 million shares were repurchased by the Company under this plan. As of November 5, 2008, there were approximately 29.4 million shares of MHG outstanding and approximately 1.0 million operating company units outstanding, which may be redeemed for common stock.

Development Activity

The following outlines MHG’s development projects currently under construction and the expected completion dates of the projects.

	2008		2009
Mondrian South Beach		x
Hard Rock Expansion				x
Mondrian SoHo				x
Ames Boston				x

MHG is also in the process of converting the first phase of approximately 30 SRO units at Hudson into additional hotel rooms which it expects to complete in the first half of 2009. MHG intends to pursue the conversion of the remaining 70 SRO units into hotel rooms over the next several years.

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2008 Outlook

The global economic environment has had an adverse impact on travel since the middle of September and it is difficult to predict future results. Through September 2008, the Company was on target to achieve its Adjusted EBITDA guidance of $106 million to $111 million for 2008. However due to the recent trends in the economy and the slowdown we have experienced in travel and demand in our markets, MHG is lowering its 2008 guidance as follows:

Owned Comparable Hotel RevPAR Growth:	1% to 3%
System-Wide Comparable Hotel RevPAR Growth:	0% to (2%)
Adjusted EBITDA:	$97 million to $100 million

The above annual amounts reflect approximately $12.0 to $15.0 million in estimated EBITDA displacement due to the renovations at Mondrian Los Angeles, Morgans and Hard Rock. As a result, MHG believes that the 2008 Adjusted EBITDA level is not indicative of the normalized “run rate” Adjusted EBITDA of the portfolio.

Although MHG is in the process of formulating its outlook for 2009, the following should be noted:

• Based on our historical performance, a 1% change in RevPAR is estimated to impact Adjusted EBITDA by approximately $2 million, before taking into account recent major expense reductions.

• Approximately $9.0 million of the estimated EBITDA displacement in 2008 related to the out of service rooms at Mondrian Los Angeles and Morgans. These renovations were completed in September 2008 and all rooms at these hotels have been fully renovated and are back in service.

• In October 2008, MHG implemented a restructuring plan which is projected to reduce operating costs by approximately $10 million annually. This is comprised of approximately $6 million in corporate expense reductions and approximately $4 million in hotel operating expense reductions.

Conference Call

MHG will host a conference call to discuss the third quarter financial results today at 5:00 PM Eastern time.

The call will be webcast live over the Internet at www.morganshotelgroup.com under the About Us, Investor Overview section. Participants should follow the instructions provided on the website for the download and installation of audio applications necessary to join the webcast.

The call can also be accessed live over the phone by dialing 800-683-1525 or 973-872-3197 for international callers; the password is 69508338. A replay of the call will be available two hours after the call and can be accessed by dialing 800-642-1687 or 706-645-9291 for international callers; the password is 69508338. The replay will be available from November 5, 2008 through November 12, 2008.

About Morgans Hotel Group

Morgans Hotel Group Co. (NASDAQ: MHGC) operates and owns, or has an ownership interest in, Morgans, Royalton and Hudson in New York, Delano and Shore Club in Miami, Mondrian in Los Angeles and Scottsdale, Clift in San Francisco, and Sanderson and St Martins Lane in London. MHG and an equity partner also own the Hard Rock Hotel & Casino in Las Vegas and related assets. MHG has other property transactions in various stages of completion, including projects in Miami Beach, Florida; Chicago, Illinois; SoHo, New York; Las Vegas, Nevada; Palm Springs, California; Boston, Massachusetts; and Dubai, UAE. For more information please visit www.morganshotelgroup.com.

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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; risks associated with the acquisition, development and integration of properties; 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; the impact of any material litigation; the loss of key members of our senior management; 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 MHG’s Annual Report on Form 10-K for the fiscal year ended December 31, 2007, and other documents filed by MHG with the Securities and Exchange Commission from time to time. All forward-looking statements in this press release are made as of the date hereof, based upon information known to management as of the date hereof, and MHG 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.

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	Three Months						Nine Months
Income Statement	Ended Sept. 30,						Ended Sept. 30,
(In Thousands, except per share amounts)	2008			2007			2008			2007
Revenues :
Rooms	$	45,500		$	39,974		$	138,521		$	132,502
Food & beverage		23,269			24,222			76,392			76,572
Other hotel		3,134			3,182			9,957			10,425
Total hotel revenues		71,903			67,378			224,870			219,499
Management and other fees		5,799			4,720			14,887			13,691
Total revenues		77,702			72,098			239,757			233,190
Operating Costs and Expenses:
Rooms		12,097			11,061			37,162			36,044
Food & beverage		16,816			16,185			54,538			50,977
Other departmental		1,792			1,846			5,801			5,816
Hotel, selling, general and administrative		15,003			13,742			45,375			43,845
Property taxes, insurance and other		5,447			3,534			13,229			13,490
Total hotel operating expenses		51,155			46,368			156,105			150,172
Corporate expenses:
Stock based compensation		4,781			10,664			12,130			16,065
Other		7,575			7,450			22,872			20,664
Depreciation and amortization		7,587			5,055			19,696			14,739
Total operating costs and expenses		71,098			69,537			210,803			201,640
Operating income		6,604			2,561			28,954			31,550
Interest expense, net		10,222			10,690			31,053			32,504
Equity in loss of unconsolidated joint ventures		7,617			5,931			16,526			12,867
Minority interest in joint ventures		683			461			3,282			2,583
Other non-operating (income) loss		3,472			3,229			5,940			(888	)
Pre tax loss		(15,390	)		(17,750	)		(27,847	)		(15,516	)
Income taxes benefit		(6,109	)		(7,415	)		(10,621	)		(6,498	)
Net loss before minority interest		(9,281	)		(10,335	)		(17,226	)		(9,018	)
Minority interest		(284	)		(314	)		(520	)		(274	)
Net loss	$	(8,997	)	$	(10,021	)	$	(16,706	)	$	(8,744	)
Weighted aveage shares outstanding — diluted		31,231			34,068			31,953			32,771
Loss per share	$	(0.29	)	$	(0.29	)	$	(0.52	)	$	(0.27	)

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	(In Actual Dollars)									(In Constant Dollars, if different)									(In Actual Dollars)									(In Constant Dollars, if different)
	Three Months									Three Months									Nine Months									Nine Months
	Ended Sept. 30,						%			Ended Sept. 30,						%			Ended Sept. 30,									Ended Sept. 30,
Hotel Operating Statistics	2008			2007			Change			2008			2007			Change			2008			2007			Change			2008			2007			Change
Hudson
Occupancy		95.7	%		94.1	%		1.7	%											91.2	%		91.4	%		-0.2	%
ADR	$	282.99		$	267.26			5.9	%										$	277.22		$	261.84			5.9	%
RevPAR	$	270.82		$	251.49			7.7	%										$	252.82		$	239.32			5.6	%
Delano
Occupancy		77.1	%		57.4	%		34.3	%											82.8	%		73.7	%		12.3	%
ADR	$	415.06		$	401.89			3.3	%										$	538.31		$	549.09			-2.0	%
RevPAR	$	320.01		$	230.68			38.7	%										$	445.72		$	404.68			10.1	%
Clift
Occupancy		86.3	%		81.0	%		6.5	%											77.8	%		73.2	%		6.3	%
ADR	$	250.49		$	257.68			-2.8	%										$	258.01		$	256.13			0.7	%
RevPAR	$	216.17		$	208.72			3.6	%										$	200.73		$	187.49			7.1	%
Mondrian Scottsdale
Occupancy		44.1	%		52.1	%		-15.4	%											55.4	%		59.1	%		-6.3	%
ADR	$	133.75		$	151.08			-11.5	%										$	201.52		$	198.18			1.7	%
RevPAR	$	58.98		$	78.71			-25.1	%										$	111.64		$	117.12			-4.7	%
Total Owned — Comparable
Occupancy		84.8	%		81.2	%		4.4	%											82.5	%		80.9	%		2.0	%
ADR	$	280.56		$	267.68			4.8	%										$	299.32		$	287.60			4.1	%
RevPAR	$	237.91		$	217.36			9.5	%										$	246.94		$	232.67			6.1	%
St. Martins Lane
Occupancy		71.9	%		78.2	%		-8.1	%		71.9	%		78.2	%		-8.1	%		75.4	%		77.4	%		-2.6	%		75.4	%		77.4	%		-2.6	%
ADR	$	442.14		$	460.07			-3.9	%	$	454.27		$	443.63			2.4	%	$	444.60		$	448.37			-0.8	%	$	444.60		$	439.73			1.1	%
RevPAR	$	317.90		$	359.77			-11.6	%	$	326.62		$	346.92			-5.9	%	$	335.23		$	347.04			-3.4	%	$	335.23		$	340.35			-1.5	%
Sanderson
Occupancy		72.0	%		81.6	%		-11.8	%		72.0	%		81.6	%		-11.8	%		74.3	%		77.4	%		-4.0	%		74.3	%		77.4	%		-4.0	%
ADR	$	505.04		$	536.55			-5.9	%	$	518.90		$	517.38			0.3	%	$	507.57		$	521.08			-2.6	%	$	507.57		$	511.04			-0.7	%
RevPAR	$	363.63		$	437.82			-16.9	%	$	373.61		$	422.18			-11.5	%	$	377.12		$	403.32			-6.5	%	$	377.12		$	395.54			-4.7	%
Shore Club
Occupancy		63.5	%		60.5	%		5.0	%											67.1	%		66.0	%		1.7	%
ADR	$	295.58		$	320.06			-7.6	%										$	393.18		$	426.81			-7.9	%
RevPAR	$	187.69		$	193.64			-3.1	%										$	263.82		$	281.69			-6.3	%
System-wide — Comparable
Occupancy		79.7	%		78.1	%		2.2	%		79.7	%		78.1	%		2.2	%		79.2	%		78.3	%		1.1	%		79.2	%		78.3	%		1.1	%
ADR	$	309.32		$	310.02			-0.2	%	$	311.17		$	307.15			1.3	%	$	336.33		$	334.15			0.7	%	$	336.33		$	332.69			1.1	%
RevPAR	$	246.65		$	242.00			1.9	%	$	248.13		$	239.76			3.5	%	$	266.37		$	261.64			1.8	%	$	266.30		$	260.40			2.3	%
Morgans
Occupancy		83.0	%		84.5	%		-1.8	%											78.5	%		85.7	%		-8.4	%
ADR	$	404.02		$	333.82			21.0	%										$	341.31		$	314.19			8.6	%
RevPAR	$	335.34		$	282.08			18.9	%										$	267.93		$	269.26			-0.5	%
Royalton
Occupancy		91.8	%																	87.2	%		86.9	%		0.3	%
ADR	$	383.22		$	—														$	385.57		$	328.92			17.2	%
RevPAR	$	351.80		$	—														$	336.22		$	285.83			17.6	%
Mondrian LA
Occupancy		61.4	%		81.2	%		-24.4	%											53.4	%		83.7	%		-36.2	%
ADR	$	353.72		$	333.71			6.0	%										$	352.60		$	324.34			8.7	%
RevPAR	$	217.18		$	270.97			-19.9	%										$	188.29		$	271.47			-30.6	%
Hard Rock (1) (2)
Occupancy		92.4	%		96.1	%		-3.9	%											93.6	%		95.4	%		-1.9	%
ADR	$	190.00		$	223.54			-15.0	%										$	197.39		$	220.92			-10.7	%
RevPAR	$	175.56		$	214.82			-18.3	%										$	184.76		$	210.76			-12.3	%

(1)	For comparison purposes, includes January 2007 when MHG did not operate the hotel.
(2)	As customary in the gaming industry, we present average occupancy and average daily rate for the Hard Rock including rooms provided on a complimentary basis which is not the practice in the lodging industry.

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Non-GAAP Financial Measures

EBITDA and Adjusted EBITDA

We believe that earnings before interest, income taxes, depreciation and amortization (EBITDA) is a useful financial metric to assess our operating performance before the impact of investing and financing transactions and income taxes. It also facilitates comparison between us and our competitors. Given the significant investments that we have made in the past in property, plant and equipment, depreciation and amortization expense comprises a meaningful portion of our cost structure. We believe that EBITDA will provide investors with a useful tool for assessing the comparability between periods because it eliminates depreciation and amortization expense attributable to capital expenditures.

We disclose Adjusted EBITDA because we believe it provides a meaningful comparison to our EBITDA as it excludes other non-operating (income) expenses that do not relate to the on-going performance of our assets and excludes the operating performance of assets in which we do not have a fee simple ownership interest. It also excludes stock-based compensation expense.

The use of EBITDA and Adjusted EBITDA has certain limitations. Our presentation of EBITDA and Adjusted EBITDA may be different from the presentation used by other companies and therefore comparability may be limited. Depreciation expense for various long-term assets, interest expense, income taxes and other items have been and will be incurred and are not reflected in the presentation of EBITDA or Adjusted EBITDA. Each of these items should also be considered in the overall evaluation of our results. Additionally, EBITDA and Adjusted EBITDA do not reflect capital expenditures and other investing activities and should not be considered as a measure of our liquidity. We compensate for these limitations by providing the relevant disclosure of our depreciation, interest and income tax expense, capital expenditures and other items both in our reconciliations to our GAAP financial measures and in our consolidated financial statements, all of which should be considered when evaluating our performance. The term EBITDA is not defined under accounting principles generally accepted in the United States, or U.S. GAAP, and EBITDA is not a measure of net income, operating income, operating performance or liquidity presented in accordance with U.S. GAAP. In addition, EBITDA is impacted by reorganization of businesses and other restructuring-related charges. When assessing our operating performance, you should not consider this data in isolation, or as a substitute for our net income, operating income or any other operating performance measure that is calculated in accordance with U.S. GAAP. In addition, our EBITDA may not be comparable to EBITDA or similarly titled measures utilized by other companies since such other companies may not calculate EBITDA in the same manner as we do.

Adjusted Debt

We disclose Adjusted Debt because we believe it provides a more meaningful comparison to our Adjusted EBITDA and is a useful tool to assess the value of MHG. Adjusted Debt is defined as long-term debt and capital lease obligations under U.S. GAAP less the lease obligation related to Clift.

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A reconciliation of net income (loss), the most directly comparable U.S. GAAP measures, to EBITDA and Adjusted EBITDA for each of the respective periods indicated is as follows:

	Three Months						Nine Months
EBITDA Reconciliation	Ended Sept. 30,						Ended Sept. 30,
(In Thousands)	2008			2007			2008			2007
Net income (loss)	$	(8,997	)	$	(10,021	)	$	(16,706	)	$	(8,744	)
Interest expense, net		10,222			10,690			31,053			32,504
Income tax expense		(6,109	)		(7,415	)		(10,621	)		(6,498	)
Depreciation and amortization expense		7,587			5,055			19,696			14,739
Proportionate share of interest expense from unconsolidated joint ventures		9,080			11,316			21,393			24,626
Proportionate share of depreciation expense from unconsolidated joint ventures		2,119			2,221			8,252			6,528
Proportionate share of depreciation expense of consolidated joint ventures		(126	)		(228	)		(311	)		(444	)
Minority interest		(284	)		(314	)		(520	)		(274	)
EBITDA		13,492			11,304			52,236			62,437
Add : Other non operating expense (income)		3,472			3,229			5,940			(888	)
Add : Other non operating expense from unconsolidated joint ventures		2,103			799			6,336			3,229
Less : Clift		(2,620	)		(1,969	)		(6,074	)		(4,857	)
Add : Stock based compensation		4,781			10,664			12,130			16,065
Adjusted EBITDA	$	21,228		$	24,027		$	70,568		$	75,986

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	Three Months							Nine Months
Room Revenue Analysis	Ended Sept. 30,				%			Ended Sept. 30,				%
(In Thousands, except percentages)	2008		2007		Change			2008		2007		Change
Hudson	$	20,057	$	18,619		8	%	$	55,754	$	52,576		6	%
Delano		5,709		4,140		38	%		23,694		21,536		10	%
Clift		7,222		6,969		4	%		19,958		18,590		7	%
Mondrian Scottsdale		1,054		1,404		-25	%		5,931		6,203		-4	%
Total Owned — Comparable		34,042		31,132		9	%		105,337		98,905		7	%
Morgans		1,288		2,931		-56	%		5,480		8,304		-34	%
Royalton		5,434		—		n/m			15,479		7,733		100	%
Mondrian LA		4,737		5,911		-20	%		12,226		17,560		-30	%
Total Owned	$	45,501	$	39,974		14	%	$	138,522	$	132,502		5	%

	Three Months							Nine Months
Hotel Revenue Analysis	Ended Sept. 30,				%			Ended Sept. 30,				%
(In Thousands, except percentages)	2008		2007		Change			2008		2007		Change
Hudson	$	26,048	$	25,327		3	%	$	72,822	$	70,789		3	%
Delano		11,929		9,093		31	%		48,002		41,896		15	%
Clift		11,585		11,240		3	%		32,641		31,189		5	%
Mondrian Scottsdale		2,171		3,404		-36	%		11,735		12,579		-7	%
Total Owned — Comparable		51,733		49,064		5	%		165,200		156,453		6	%
Morgans		3,585		5,745		-38	%		13,215		16,900		-22	%
Royalton		6,766		—		n/m			20,499		10,286		99	%
Mondrian LA		9,819		12,569		-22	%		25,957		35,860		-28	%
Total Owned	$	71,903	$	67,378		7	%	$	224,871	$	219,499		2	%

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	Three Months									Nine Months
Hotel EBITDA Analysis	Ended Sept. 30,						%			Ended Sept. 30,					%
(In Thousands, except percentages)	2008			2007			Change			2008		2007			Change
Hudson	$	10,262		$	10,173			1	%	$	28,601	$	27,568			4	%
Delano		3,197			1,785			79	%		17,473		14,553			20	%
Clift		2,620			1,969			33	%		6,074		4,857			25	%
Mondrian Scottsdale — Owned		(633	)		(321	)		97	%		892		(476	)		n/m
Owned Comparable Hotels		15,446			13,606			14	%		53,040		46,502			14	%
St Martins Lane		1,728			1,974			-12	%		5,854		5,948			-2	%
Sanderson		1,234			1,594			-23	%		3,631		3,342			9	%
Shore Club		136			108			26	%		739		661			12	%
Joint Venture Comparable Hotels		3,098			3,676			-16	%		10,224		9,951			3	%
Total Comparable Hotels		18,544			17,282			7	%		63,264		56,453			12	%
Morgans		295			1,326			-78	%		2,021		3,691			-45	%
Royalton		1,704			—			n/m			4,554		2,582			76	%
Mondrian LA — Owned		2,734			4,867			-44	%		6,471		13,504			-52	%
Hard Rock — Joint Venture		2,329			4,696			-50	%		8,287		11,531			-28	%
Total Hotels	$	25,606		$	28,171			-9	%	$	84,597	$	87,761			-4	%

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Consolidated Hotel Adjusted EBITDA and Debt Analysis
(In Thousands)

	Adjusted EBITDA
	Twelve Months			Debt at
	Ended			Sept. 30,
Hotel	Sept. 30, 2008			2008
Morgans (1)	$	4,250		$	—
Royalton (1)		5,683			—
Hudson		44,108			250,000
Delano		22,342			—
Mondrian LA (1)		8,670			120,000
Mondrian Scottsdale		845			40,000
Management Fees		19,377			—
Corporate Expenses		(27,426	)		222,500
Other		—			16,363
Total	$	77,849		$	648,863

(1) Hotel was under renovation in the twelve months ended September 30, 2008 and had rooms out of service.

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Balance Sheet
(In Thousands)

	Sept. 30,		Dec. 31,
	2008		2007
Cash	$	59,683	$	122,712
Restricted cash		30,772		28,604
Property and equipment		569,742		535,609
Goodwill		73,698		73,698
Accounts receivable		15,716		13,755
Prepaid expenses and other assets		9,821		11,369
Investments in joint ventures		85,081		110,208
Other assets		44,401		47,168
Total assets	$	888,914	$	943,123
Long-term debt	$	648,863	$	649,107
Capital lease obligations — Clift		81,207		80,092
Accounts payable and accrued expenses		21,423		36,126
Other liabilities		25,809		27,979
Deferred income taxes
Total liabilities		777,302		793,304
Minority interests		19,030		19,833
Stockholders’ equity		92,582		129,986
Total liabilities and equity	$	888,914	$	943,123

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Adjusted Debt
(In Thousands)

A reconciliation of long-term debt and capital lease obligations, the most directly comparable U.S. GAAP measure, to Adjusted Debt is indicated as follows:

	Sept. 30,
	2008
Adjusted Debt — Consolidated
Long term debt and capital lease obligations	$	730,070
Less: Clift Capitalized Lease		(81,207	)
Adjusted Debt — Consolidated		648,863

Other Data
(In Thousands)
Proportionate Share of Debt — Joint Ventures
London	$	93,887
Shore Club		8,492
Mondrian South Beach		57,953
Hard Rock		192,294
Mondrian SoHo		19,842
Ames Boston		6,650
Proportionate share of debt — joint ventures		379,118
Investments in Non-Ebitda Producing Assets (1)
The Gale	$	19,873
Mondrian South Beach — represents equity investment of $24.2 million and proportionate share of debt of $58.0 million		82,163
Hard Rock — proportionate share of excess land, intellectual property rights and expansion costs		95,516
Equity investment in Echelon		18,851
Mondrian Soho — equity investment of $6.3 million and proportionate share of debt of $19.9 million		26,140
Ames Boston — equity investment of $6.8 million and proportionate share of total debt of $19.0 million		13,487
Mondrian Chicago — equity investment		2,292
Investments in Non-EBITDA Producing Assets	$	258,322

(1) The equity investments listed in the table represent the cash invested in the joint ventures. The following is the balance shown in the financial statements, which includes equity in income or losses of unconsolidated joint ventures:

	Amount
Mondrian South Beach		17,328
Hard Rock		21,116
Echelon		17,366
Mondrian SoHo		6,563
Ames Boston		7,049
Mondrian Chicago		2,471

14