Japan's love hotels flirt with retail investors

By Aiko Wakao

TOKYO (Reuters) - An industry known for its privacy is flirting with the public, as Japanese love hotel funds look to entice retail investors with attractive returns.

Many of the hotels popular with secret lovers and young couples evading their parents at home look shabby compared with their heyday in the bubble economy of the 1980s.

But they hold out the promise of sweet returns for investment funds that renovate and securitize them for the debt market.

Following the example of offshore private equity firm MHS Capital Partners, whose love hotel fund raised $10 million (5 million pounds) from foreign institutional investors a few years ago, local fund managers are targeting individual investors.

Tokyo-based investment group Global Financial Support Co. (GFS) is launching the 11th and the last of its fund series this month with investments starting at 500,000 yen (2,078 pounds).

GFS's previous 10 love hotel funds have raised a total of 11.6 billion yen since 2004, offering average payouts of 8.4 percent annual interest with a five-year maturity.

That compares with less than 1 percent on most Japanese savings accounts.

GFS said it would offer a similar payout with the 11th fund.