Morgans Hotel in Hard Rock and Hard Place

The company paid $11 million an acre for the land, which many considered a lofty price. If Morgans is planning to offer units at $1,300 per square foot, around where Morton's planned condos started, it better have something very good to offer, because today's market will not as easily support high prices, brokers agree.

The Signature condos in Tower A at the MGM(MGM) Grand are currently reselling for about $1,000 to $1,300 per square foot, and they're directly on the Las Vegas Strip.

Meanwhile, depending on whom you believe among Wall Street analysts, Morgans' stock might currently reflect investors' assumptions that the company will be absorbing the entire Hard Rock hotel project upon closing of the sale early next year, with the exception of about $70 million of intellectual property rights it is expected to sell.

If Morgans announces the condo deal, investors might get some breathing room on liquidity issues.

But with Morgans also planning to build two hotels at the Echelon Place project that Boyd Gaming(BYD) plans to construct on the northern part of the Las Vegas Strip, the company has a lot on its plate for a $407 million market-cap hotelier.

And even if Morgans does grab two-thirds of the equity on the Hard Rock deal from outside investors, the company will still have an 8-times net-debt-to-adjusted-EBITDA ratio at the end of 2007, which is much higher than the below 5-times ratios for comparable public lodging companies, according to a recent report from Merrill Lynch analyst Amanda Bryant, who rates the stock a sell.

When Morgans went public at $20 in February, the company owned mostly boutique hotels in New York, Miami and Los Angeles. It remains to be seen whether the company can compete with the big boys in Vegas.

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