Morgans Hotel in Hard Rock and Hard Place

Morgans Hotel(MHGC Quote) has lined up a development partner to build a luxury condo project next to its Hard Rock Hotel and Casino in Las Vegas, industry sources say.

If the right deal is announced, it could help spark the stock, which has fallen by a third since the spring and hit a 52-week low of $11.94 last week.

But building the right project on that land remains a challenge since the high-end Vegas condo market has calmed down from the go-go frenzy of a year ago.

Morgans, a trendy-hotel operator founded by hip-lodging king Ian Schrager, announced in May that it would purchase the popular Hard Rock Casino and the neighboring 23 acres of land for $770 million.

The large amount of leverage required by the deal spurred worries about the company's liquidity, sending the stock spiraling downward.

Morgans has said it plans to bring in partners to fund two-thirds of the equity before the deal closes in early 2007. The company also plans to either sell or develop the land next to the hotel, which currently houses a low-rent apartment building.

But no announcements have been made, and some have feared that Morgans paid too much for the excess land at a time when the Vegas residential market is slowing.

Bringing Back Buyers

Las Vegas real estate sources say Morgans is planning a luxury condo project very similar to the $1.2 billion project that Hard Rock founder Peter Morton scrapped before selling the site to Morgans.