Wise Japanese investors add love hotels, starlets to their portfolios
Nestled away in a traditional love hotel quarter in Tokyo's Uguisudani
district, Hotel P Door looks just like any other establishment in its
particular line of business.
A plague beneath the neon sign contains two prices, 4,600 yen for a
rest and 7,500 yen a stay, a giveaway that the hotel is dedicated to
amorous couples.
What makes Hotel P-Door stand out, according to Shukan Gendai,
is that some of its operating capital comes through Hope Alpha 2, a
fund that finances the love hotel's operations in return for payouts
of up to 8.4 percent annual interest.
Love hotels are among the many unusual businesses coming to the aid of
struggling investors in Japan who can look forward to interest of less
than 1 percent for any money they put into the bank. Hope Alpha 2 agrees.
"Normal hotel rooms only have a single customer a day, but with a love
hotel, you can get as many as three or four customers in the same room
every 24 hours. Love hotels are also built to be replaced every few
years, so construction costs are comparatively cheap. That allows for
profits unthinkable in lots of other types of businesses," Shuzo
Shinano tells Shukan Gendai. "We've paid out dividends on time and
will continue to do so from now on, too."
Others agree that love hotels can be a potentially lucrative investment.
"(Funds are) a somewhat shady business. You want to invest in an
industry that has a history and tradition of being a profitable
business. Love hotels are precisely that. You're not investing in the
hotel itself, but in the profits it makes, which means you can expect
a high return on your outlay," securities journalist Genichiro Tenkai
tells Shukan Gendai.
P-Door is currently accepting investors willing to foot at least
500,000 yen apiece and will continue doing so until Nov. 22. It
pledges an 8.4 percent payout for the first year over a five-year
investment and plans 12 percent plus from the second year on. Payouts
are made twice annually, in January and July, but Hope Alpha 2 warns
that dividends are entirely dependant on the hotel's business
performance and that principle investments are not guaranteed.
Love hotels aren't the only peculiar funds punters can choose to
invest their cash in. In 2003, the Shinjin Gurabia Aidoru Dai-Ichi Go
fund sought 50,000 yen investments in the careers of five young women
it hoped to manage into pinup queen stardom. Money collected was
supposed to fund the production of photo collections and DVDs
featuring the starlets, with profits split up amongst the investors,
which proved profitable for some.
Not every funny fund is a roaring success, though. Take the Ramen
Fund, which ended up getting those who invested 500,000 yen apiece
into a ramen theme park in Tokyo's Shibuya-ku doing their noodle. The
theme park promised annual returns of 10 percent, but went bust within
a year and speculators were lucky to at least receive their principle
outlays back.
Securities analyst Haruo Ueki warns that freaky funds like investing
in love hotels should only be pursued with caution.
"Investment funds don't guarantee the principle investment, so it's
important to look at past performance before committing. Love hotel
funds have maintained high dividend payouts, so they appear to be
pretty good, but don't forget things like fire or management problems
can arise in the place you've chosen to invest in. Something like that
happens and you can forget your dividend and the principle may be in
danger at times, too," Ueki tells Shukan Gendai. "It's really
important to look into whether the place you want to invest in is
risky or not. And don't forget some places won't let you pull out
after only a year. Whatever way, these funds should only be invested
in if you have money you can afford to lose."