• Expressions of Interest from Five Potential Strategic Buyers Underscore Current Opportunity to Create Shareholder Value
  • Substantial Uncertainty around Proposed Deleveraging Transaction Contributed to Determination to Pursue Strategic Alternatives

Morgans Hotel Group Co. (NASDAQ: MHGC) ("MHG" or the "Company") today reaffirmed that its slate of Board nominees is fully committed to initiating a process to explore strategic alternatives, including a sale of the Company, upon reelection at the Company's Annual Meeting of Stockholders onJune 14, 2013.

Michael Gross, Chief Executive Officer, said: "We had a deleveraging transaction in place to address looming and significant balance sheet issues and provide greater flexibility to maximize shareholder value. In light of OTK's self-serving and obstructive actions, there is now substantial uncertainty around that proposed deleveraging transaction. In addition, we have recently received expressions of interest from five major hospitality companies. Based on these circumstances in addition to important feedback from our investors, our slate of nominees has unanimously determined that it is a prudent time to pursue a process to explore strategic alternatives including a sale of the Company. We are committed to doing so on an expeditious basis after reelection to the Company's Board."

MHG's slate of director nominees is best positioned to pursue strategic alternatives and to maximize value for all shareholders. We donotbelieve that OTK Associates LLC ("OTK"), a dissident shareholder controlled by the Taubman and Olshan families that launched a proxy contest to attempt to seize control of the Company, would be willing to, or positioned to, seriously consider strategic alternatives if its director nominees are elected to the Company's board. There are a number of factors that support this including:

Combative Relationship with Largest Creditor and Holder of Important Consent Rights:OTK has gone out of its way to vilify The Yucaipa Companies, the Company's largest creditor, in legal filings and in the media. The Yucaipa Companies holds consent rights over a sale of the Company or substantially all of its assets under certain circumstances. This combative stance againstYucaipacould be a significant barrier to OTK's ability to pursue strategic alternatives to maximize value for shareholders.

Misaligned Cost Basis:OTK entered the Company' stock at an average cost of approximately$15.20per share, raising serious questions about whether it would support a sale of the Company or other strategic transaction at a value below$15.20per share. We are also concerned that OTK would not consider a sale or other value-maximizing alternative at a price that would publicly show a loss on its sole investment.

Filling Board Seats with Family:OTK intends to take control of the Board with three family heirs, a family employee, a short-seller and day-trader of the Company's stock and two other interdependent family friends. OTK has also publicly stated that its slate would potentially "step into management" to run the Company. This suggests OTK's goal is to run the Company as a family business, not to maximize value for all shareholders. Moreover, we do not believe OTK's slate of nominees could act independently of the interests of OTK and the Olshan and Taubman families.

MHG urges shareholders to vote the WHITE proxy card to ensure there is a Board in place that is committed to, and capable of, pursuing strategic alternatives and maximizing value forallshareholders.

There is no assurance that the process of exploring strategic alternatives, if our Board's director nominees are elected, will result in MHG changing its business plan, pursuing a particular strategic alternative or transaction or completing any such strategic alternative or transaction.

Morgans Hotel Group Co. (NASDAQ: MHGC) is widely credited as the creator of the first "boutique" hotel and a continuing leader of the hotel industry's boutique sector. Morgans Hotel Group operates Delano in South Beach, Mondrian in Los Angeles, New York, South Beach and London, Hudson in New York, Morgans and Royalton in New York, Clift in San Francisco, Shore Club in South Beach and Sanderson and St Martins Lane in London. Morgans Hotel Group has ownership interests or owns several of these hotels. Morgans Hotel Group also licenses a Delano in Las Vegas. Morgans Hotel Group has other hotels in various stages of development to be operated under management or franchise agreement, including a Mondrian property in Doha, Qatar and a Morgans Original in Istanbul, Turkey. Morgans Hotel Group also owns a 90% controlling interest in The Light Group, a leading lifestyle food and beverage company. For more information please visit www.morganshotelgroup.com.