Morgans to Operate Ames Hotel

Boston's Ames Building, Receiving a $75 million

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. October 14, 2008

BOSTON, MA, June 27, 2008. Morgans Hotel Group Co. (NASDAQ: MHGC) ("MHG"), Normandy Real Estate Partners ("Normandy"), one of the largest real estate owners and operators in the Boston to Washington, D.C. corridor, and local partner Ames Hotel Partners today announced a new joint venture to develop The Ames Hotel in Boston, MA. The Ames, located near Government Center, Boston Common and Faneuil Hall, will be operated by MHG under a long-term management contract and is expected to open in the third quarter of 2009. The Ames will represent a new addition to the MHG brand portfolio.

The project will redevelop a historic Byzantine and Romanesque-style office building known as The Ames Building, which was constructed in 1889 and is listed on the National Register of Historic Places. The building was Boston's first skyscraper and remains one of the tallest masonry buildings on the East Coast. The property is located just off Washington Street Mall and near the desirable residential neighborhood of Beacon Hill, and has significant outdoor space for food and beverage operations in a heavily trafficked pedestrian walkway. Upon completion of the project, The Ames is expected to have approximately 115 guest rooms, a restaurant, bar and exercise facility.

"The Ames marks our entry into Boston, a highly desirable market that matches MHG's target demographic for its metropolitan properties," said Marc Gordon, Chief Investment Officer of MHG. "This landmark building, conveniently located near Boston Common and other tourist destinations such as Faneuil Hall, made history as Boston's first skyscraper and, together with Normandy, we expect to make history again by introducing innovative design, surprising amenities, a compelling social scene, and a staff committed to always exceeding our guests' expectations. Work on the property is already underway and we look forward to bringing the MHG experience to one of the oldest cities in the U.S."

"A major element of MHG's growth strategy is the identification and development of new hotels in attractive, gateway cities," said Fred Kleisner, President and Chief Executive Officer of MHG. "Boston has been high on our list and we are thrilled to announce our plan to develop The Ames into a brand new MHG hotel in one of the most desirable locations in the city. The Ames will attract tastemakers of all ages who especially appreciate the vibe created by our hotels because they are passionate about their guest experience. From a financial perspective, we expect The Ames, once completed, to contribute quickly to MHG's EBITDA."

"We are extremely pleased to be partnering with MHG on this exciting project," said David Welsh, a founder and Managing Principal of Normandy. "We are more confident than ever that The Ames will become Boston's premier boutique hotel, befitting its treasured place in the city's history."

"Normandy appreciates the cooperation and role that both Mayor Menino and the Boston Redevelopment Authority continue to play in returning this landmark property to its former glory," said Justin D. Krebs, a Normandy Principal responsible for the firm's New England portfolio.

The total development budget for the project is approximately $75 million with MHG committing $10 million for a 35% interest in the joint venture. The project is expected to qualify for federal and state historic rehabilitation tax credits. Normandy has closed on a development loan from UBS for up to $46.5 million.