Dear Shareholders, 2014 was a very busy and exciting year for Morgans Hotel Group. We successfully completed several key initiatives and made significant progress on a number of critical projects, which together, have improved our Company and created a stronger foundation from which to grow. The Board and management team have been focused on executing a significant turnaround, while also keeping a keen eye on the quality of our offerings to ensure that our guests continue to have great experiences at our unique properties. We are pleased with the progress we have made to date to address the legacy issues impacting the Company and to position us to succeed in the future. Highlights include: refinancing the debt secured by Hudson and Delano South Beach on favorable terms and repaying maturing debt which strengthened our balance sheet, reducing corporate and hotel operating costs, settling costly litigation, and terminating several unfavorable management contracts. As a result, Morgans has been able to further sharpen its asset-light, brand focused strategy. During the year we strategically added three attractive hotels: Mondrian London, Delano Las Vegas, and 10 Karaköy. Mondrian London opened in September and is the first Mondrian property outside of the U.S., underscoring the popularity and evolution of that brand; Delano Las Vegas, which also opened in September, is a licensed hotel operated by MGM Resorts; and 10 Karaköy, a Morgans Original franchised hotel located in one of Istanbul’s most lively and flourishing districts, opened in November. Each of these hotels has unique designs with distinctive food, beverage and entertainment offerings, and embodies the creative spirit and energy that defines our Company. During the year, we also made progress on our strategic review process, including successfully announcing the sale of our 90% controlling interest in The Light Group in December 2014. As part of the transaction, Morgans assumed control of the food and beverage offerings from The Light Group at Delano South Beach in January 2015, and we also retained our leasehold interests in the three restaurants at Mandalay Bay that will continue to be managed by The Light Group. The sale of our equity interest in The Light Group closed in January 2015 and, as a result, we received net proceeds of $32.8 million. We also made steady financial improvement in 2014. Adjusted EBITDA, excluding The Light Group, increased 10.9% over 2013 and RevPAR for system-wide comparable hotels increased approximately 3% in 2014 versus 2013. Furthermore, hotel operating margins increased 260 basis points in 2014 as compared to 2013 due to cost savings and operational efficiencies, which were implemented in 2014. We are confident that our brands will continue to maintain their competitive positioning in markets we serve, and that the three new hotels we introduced in 2014 and an additional hotel currently under development in Doha and expected to open later this year, will be strong additions to our portfolio and contribute to RevPAR growth in 2015. Overall it was a transformative year for Morgans Hotel Group. We are confident that we have the right brands in the right markets and the platform necessary to succeed. On behalf of the Board, I want to thank all of our shareholders for your support and commitment to Morgans Hotel Group. Sincerely, Jason T. Kalisman Interim Chief Executive Officer UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K (Mark One) _ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2014 or TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 001-33738 Morgans Hotel Group Co. (Exact name of registrant as specified in its charter) Delaware 16-1736884 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 475 Tenth Avenue New York, New York 10018 (Address of principal executive offices) (Zip Code) (212) 277-4100 (Registrant’s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Name of Each Exchange on Which Registered Common Stock, $0.01 par value The NASDAQ Stock Market LLC Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No _ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes No _ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes _ No Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes _ No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. _ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Large accelerated filer Accelerated filer _ Non-accelerated filer (Do not check if a smaller reporting company) Smaller reporting company Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No _ The aggregate market value of the registrant’s voting and non-voting common equity held by non-affiliates of the registrant was approximately $232,241,755, based on a closing sale price of $7.93 as reported on the NASDAQ Global Market on June 30, 2014. As of March 12, 2015, the registrant had issued and outstanding 34,426,667 shares of common stock, par value $0.01 per share. DOCUMENTS INCORPORATED BY REFERENCE Portions of Morgans Hotel Group Co.’s Proxy Statement in connection with its Annual Meeting of Stockholders to be held in 2015 are incorporated by reference into Part III of this report. INDEX Page PART I ITEM 1 BUSINESS ......................................................................................................................................................................... 5 ITEM 1A RISK FACTORS ............................................................................................................................................................. 14 ITEM 1B UNRESOLVED STAFF COMMENTS .......................................................................................................................... 32 ITEM 2 PROPERTIES .................................................................................................................................................................... 33 ITEM 3 LEGAL PROCEEDINGS .................................................................................................................................................. 38 ITEM 4 MINE SAFETY DISCLOSURES ...................................................................................................................................... 41 PART II ITEM 5 MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES ................................................................................................................................ 42 ITEM 6 SELECTED FINANCIAL DATA ..................................................................................................................................... 44 ITEM 7 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ............................................................................................................................................................................ 46 ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ................................................ 69 ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ................................................................................... 70 ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE ............................................................................................................................................................................ 70 ITEM 9A CONTROLS AND PROCEDURES ............................................................................................................................... 70 ITEM 9B OTHER INFORMATION ............................................................................................................................................... 72 PART III ITEM 10 DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE ........................................................