Morgans Hotel Group (MHG) and its joint venture partner have entered a definitive agreement to sell the Sanderson and St Martins Lane hotels in London, UK, for £192m ($295m) to Capital Hill Hotels, a Middle East-based investor.

MHG will continue to operate the hotels under long-term management agreements, the terms of which have been extended from 2027 to 2041.

The sales proceeds will be used by the joint venture partners to retire £99.5m of outstanding mortgage debt secured by the two hotels.

MHG expects its portion of sale proceeds, after the repayment of debt and closing costs, to be approximately $70m.

The transaction will close in the fourth quarter of 2011.