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Goldman Sachs flirts with Japan's
love hotels
By William Sparrow
Japan's booming love-hotel industry is
rumored to have attracted the attention of Goldman
Sachs, the US-based heavyweight investment bank,
brokerage and financial management house.
Word on the street, according to CBS
MarketWatch, is that Goldman may be seeking to
purchase Japanese company UFJ Holdings' CMA's
commercial lending unit. UFJ's diverse holdings
via CMA's commercial lending unit center on real
estate and include golf courses, gaming parlors
and "love hotels" or "short stay" lodges that have
become a mainstay in Japanese culture, valued at
US$429 million. Goldman representatives refused to
comment on the rumored acquisition.
Many
people in Japan frequent the convenient, anonymous
and often lush facilities of Japan's bustling love
hotels. Sometimes it may be a romantic anniversary
celebrated at one of Tokyo's posh love hotels in
the trendy Maruyama-cho district in Shibuya, on
other times it may be a secret and shadowy
rendezvous of a couple seeking privacy that cannot
be afforded elsewhere.
Love hotels, which
rent out rooms to amorous couples by the hour,
rake in at least 4 trillion yen ($37 billion) a
year, slightly more than the gross domestic
product of Cuba, Asian Sex Gazette reported on
January 20. Taboo or not, such staggering figures
as these have not escaped international investors.
However, the industry does not come without
"negative fundamental" issues, least of which may
be the lack of a wholesome family image. Some cite
that the industry's purported connections to
Japan's Yakuza, a renowned international organized
crime syndicate, may deter investor confidence.
Popular support
"I would say
this would be a major step toward legitimizing
these great acquisitions in the capital markets,"
said Scott Delany, managing director of Hong
Kong-based private equity firm MHS Capital
Partners. "These are money makers. The yields on
these are 20-30%, usually," he told MarketWatch.
MHS, a major investment competitor for a
share of the love-hotel industry, started a $10
million pilot fund last April to invest in leisure
hotel properties, targeting net returns of at
least 20%. A dozen European, US and Asian
investors put up cash, including two unnamed
institutions. Last November, MHS announced that it
had acquired its first property in the Greater
Tokyo area. It aims to invest in up to four
love-hotel properties worth up to $4 million each,
and eventually hopes to tap international capital
markets for debt funding.
While the
Goldman investment might help to legitimize an
otherwise shadowy industry, there may be other
more important goals for the investment bank.
Goldman Sachs is one of the largest golf course
operators in Japan and in 2003 launched a
subsidiary, Accordia Golf, and UFJ/CMA's holdings
are likely appealing in this.
Love hotels,
then, may just be the icing on the cake for
Goldman, which may have more mainstream investment
and real estate aspirations in Japan. Legitimacy,
international investment and mainstream
recognition, though, could prove to be the
watershed for Japanese love hotels by putting them
on the menu of international investors.
(Reposted by permission of Asian Sex
Gazette
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