Kerrisdale Sends Letter to Board of Morgans Hotel, Defends Slate of Nominees for Board

Kerrisdale Capital Management, LLC("Kerrisdale"), a private investment management firm and beneficial owner ofmore than 3% of the shares of Morgans Hotel Group Co. ("Morgans" or the"Company") (NASDAQ: MHGC), today announced that it has delivered a letter tothe Company's Board of Directors responding to the Company's press releaseissued on March 19, 2014.The full text of the letter is included below:April 2, 2014Board of DirectorsMorgans Hotel Group Co.475 Tenth AvenueNew York, NY 10018To the Board of Directors:Kerrisdale Capital Management, LLC, together with its affiliates("Kerrisdale"), would like to refute certain statements made by the currentboard of directors (the "Board") of Morgans Hotel Group Co. ("Morgans" or the"Company") in its press release issued on March 19, 2014 (the "Press Release")responding to our notice nominating seven highly qualified director nomineesfor election to the Board at the 2014 Annual Meeting of Shareholders expectedto be held on May 14, 2014 (the "2014 Annual Meeting"). We welcome your response to our nomination notice.Our nominees are exceptionally qualified and possess the necessary skillsrequired to lead the Company. Three of our director nominees are industry veterans in the financial sector,who have respectively (i) managed a multibillion dollar distressed debt hedgefund for thirteen years and currently serves on multiple corporate boards,three of which are public companies, (ii) spent ten years at a multibilliondollar distressed, special situations and private equity fund as a managingdirector, as well as seven years as an attorney at a leading international lawfirm; and (iii) spent three years as a partner in a credit opportunities fundat one of the most prestigious private equity firms in the world and a partnerand portfolio manager for seven years at one of the most prestigiousdistressed debt funds in the world.Our final director nominee has more than fifteen years of experience in hotelbrokerage and third party hotel management. He has been the principal hotelbroker for over 150 hotel transactions, was named one of Real Estate NewJersey's Broker All-Stars, has been involved personally in the sale of over 50hotels in the last eighteen months, and is a graduate of the Cornell School ofHotel Administration.The directors selected by Kerrisdale are highly competent professionals withproven track records.  We have specifically avoided nominating individualswith deep operational expertise, because we do not intend to interfere withthe current operations of the Company.  We believe the current managersoriginally appointed by Yucaipa that have operated Morgans over the pastseveral years are the most fit to operate the Company.  To the extent the newBoard later determines that special expertise should be brought in tosupplement the Board, its members will reconstitute the Board as necessary toaccommodate such expertise.Kerrisdale's platform is simple: we are committed to initiating an explorationof strategic alternatives, including a serious consideration of sellingMorgans to the highest bidder.  Shareholders who prefer the noncommittalapproach of the current Board, whose platform consists of cutting a littleSG&A here, refinancing a little debt there, firing a few executives here andsuing a few creditors there, can vote for the current Board.  Shareholders whowant the Board to hire a highly qualified investment bank to solicit bids froma wide array of interested parties, and sell the company through a robust andprofessionally run sale process, should vote for Kerrisdale's slate ofdirectors.Finally, consider the current Board's celebration of its own accomplishments,which we re-print from the Press Release below: "In just nine months, this Board has overseen improved earnings, the significant reduction of a previously perilous corporate expense structure, important steps toward the resolution of costly litigation and the de-risking of a legacy balance sheet. These improvements are partially reflected in the approximately 52% increase in the price of Morgans' common stock since the announcement of the OTK slate last year. Additionally, the successful debt refinancing at Hudson and Delano South Beach on attractive terms provides the Company with improved liquidity and flexibility."We believe that Morgans' improved earnings are the result of theYucaipa-appointed management team, and are not a result of any actions of thecurrent Board. Reducing corporate expenses provides minimal value toshareholders, since an acquirer can reduce corporate expenses itself. Giventhat the current Board is responsible for Morgans' exposure to costlylitigation, we find it inappropriate that the Board celebrates resolving thecostly litigation that they themselves invited.  In terms of the de-risking ofa legacy balance sheet and refinancing of the Hudson and Delano mortgages, thecurrent Board has merely replaced lower-cost debt with higher-cost debt, whileincurring unnecessary refinancing fees.Furthermore, the approximate 52% increase in the stock price is in our opiniondue to the $7.50 unsolicited bid by Hyatt, and the subsequent $8.00unsolicited bid by Yucaipa, which together have created a floor for the stockprice. We therefore refute the Board's claim that the stock price increase isa result of its efforts.In order to successfully expand its key hotel brands, Morgans must overcomenumerous challenges, including attaining attractive financing, hiring localmanagerial talent, contracting real estate locations on a global scale, andmust do so while funding its own IT, legal and public company expenses. Inalmost every critical factor necessary for Morgans to succeed, awell-capitalized global hotel operator can achieve these outcomes cheaper,faster, and at far lower risk.If elected to the Board, our nominees will not only better representshareholders' interests than the current Board, but will reopen communicationsbetween the Board and Morgans' shareholders.  A new Board consisting ofKerrisdale's nominees will re-initiate conference calls after earningsreleases and make itself available for shareholder input and inquiries.It is time for a Board whose interests are directly aligned with allshareholders. We believe that our highly qualified director nominees are theappropriate candidates to lead the Company. We are confident that our nomineeswill provide effective, stockholder-aligned leadership of Morgans Hotel Group. Sincerely, Sahm Adrangi Chief Investment Officer Kerrisdale Capital Management, LLC