Recession or Not, Love Hotels in Japan Doing Booming Business

TOKYO—Found: A recession-proof industry. Love hotels. Operators prefer to call them Leisure hotels.

There are an extimated 25,000 of them throughout Japan, all of them surviving and many even thriving in the country’s worst recession in 60 years.

Steve Mansfield, CEO of New Perspectives, tells CNN the love hotel industry has proven “very resilient over the last six to nine months.” Mansfield’s company operates six properties.

One of them, the Bonita Hotel in Isawa, boasts a 257 percent occupancy rate. Rooms are rented by the hour. Full-day rentals are not uncommon.

Mansfield's company estimates the industry in Japan pulls in $40 billion a year in revenue.
He tells CNN, "It's a natural human desire. Even these days, on the weekend, every love hotel is full of people -- it's hard to get in.”

Mansfield says love hotels fill a need for privacy in a country where high population density often means couples have little time alone.

Rooms offer a broad assortment of features, including karaoke machines, PlayStation game consoles, DVD players, a variety of cosmetics, customized condoms and indoor-outdoor Jacuzzis.

Though required by law to have a front desk, most rooms can be rented and entered without talking to a clerk.

The days of Japanese being ashamed to enter love hotels are coming to an end, though, Mansfield said.

"Seventy-five percent of our guests are members of our points program," he said. "They carry our points cards, they collect points and they receive gifts. That's something people are very comfortable with, and I think that reflects the customers that we attract."

Takashi Yamamoto, who designs love hotels in Tokyo, agrees.

He tells CNN, "The bad image that love hotels had has faded over time. Also, customers started to raise their voices and became more selective about choosing hotels. In response, management has improved."

The flashiest love hotels are found in Osaka, including a Hello Kitty-themed hotel and one with a room featuring a merry-go-round.

Tokyo hotels tend to be tamer, focused on winning customers with amenities. The Style A Hotel, for example, offers a suite for $190 that includes a full-size Jacuzzi and a private sauna.

Though young couples make up the majority of customers, they are not the only ones. One man, who declined to be named, told CNN, "I go to love hotels when I'm drunk and don't feel like going home."

Whatever the reasons, the hotels have been doing well enough that Mansfield recently went to London, seeking investors to expand.

"Through our research we've worked out that 90 percent of owners have five or fewer hotels," he says.

Mansfield estimates there is plenty of room for expansion in this unheralded industry in Japan.

Los Angeles Medical Office Market Outperforms Nation

LOS ANGELES, CA--Marcus & Millichap Real EState Investment Services reports medical office properties in the Los Angeles metro continue to perform favorably, despite the nationwide recession, and healthcare reform bodes well for the sector’s future performance.

Unlike other asset types, medical office properties continue to garner investor demand by exhibiting considerable resistance to the economic downturn.

Medical office vacancy in Los Angeles is currently 8.7 percent, while traditional offi ce vacancy in the metro is 11.5 percent.

By comparison, the U.S. averages for medical offi ce and traditional offi ce vacancy rates were 11.7 percent and 15.2 percent, respectively, in the fi rst quarter. Much of the medical offi ce sector’s resilience can be attributed to the positive state of the healthcare industry.

While nonfarm employment in Los Angeles is forecast to weaken further in 2009, demand for medical offi ce space will get a boost from growth in the education and health services industry, where employers are expected to add almost 10,000 positions by year end.

The United States as a whole is also projected to record growth in education and health services employment this year, starting with a 0.4 percent expansion in the fi rst quarter.

During the same period, education and health services firms in Los Angeles created more than 7,000 jobs for an increase of 1.4 percent.

These gains point to continued demand for medical space; however, as the recession wanes and the unemployed return to work, healthcare requirements will grow, further strengthening the medical office market.

A further boost to the medical office sector may come from the new administration’s healthcare reform efforts to broaden medical coverage and access.

Los Angeles has one of the highest uninsured rates in the nation, with more than 25 percent of the population lacking health coverage, compared to 16 percent nationwide.

With 75 percent of the metro‘s inhabitants covered, there is approximately 4.2 square feet of medical offi ce space per insured individual. An increase in the insured rate to even 90 percent of the population by 2013 would necessitate roughly 8 million square feet of additional medical office space, using the current ratio.

For a complete copy of the company's report, please contact Stacey Corso, stacey.corso@marcusmillichap.com

Beazer Homes Agrees to Pay $53M to Settle Mortgage Fraud Charges

WASHINGTON, DC – In the most blatant case of mortgage fraud disclosed to date, Atlanta-based Beazer Homes USA Inc. has agreed to pay a total $53 million to settle a U.S. Dept. of Justice lawsuit.

The suit could have triggered criminal prosecution against the 41-year-old homebuilder and possibly put it out of business, sources in a position to know tell Real Estate Channel.

The Justice Dept. says Beazer will pay $5 million to the federal government and up to $48 million to victimized homeowners.

"We deeply regret these matters and have used what we have learned to strengthen our control and compliance culture," says Beazer Chief Executive Ian J. McCarthy (top right photo).

The company, which calls itself the 10th largest homebuilder in the U.S., closed its mortgage unit in February 2008. The federal fraud investigation has been going on since 2007.
The company, founded in London in 1968, operates in 16 states.

Beazer Homes has been listed on the New York Stock Exchange since 1994 under the ticker symbol BZH.

The settlement is tied to an agreement with federal prosecutors in North Carolina that will allow the company to avoid criminal prosecution on the mortgage-fraud charges, and on other accounting-fraud charges related to the manipulation of company earnings.

In a separate action, the Securities and Exchange Commission has filed civil charges against Michael T. Rand, Beazer's former chief accounting officer. Rand is accused of conducting a fraudulent earnings scheme and hiding his wrongdoing from outside auditors and other company accountants.

The New York Times and The Washington Post report separately that In the mortgage fraud case, prosecutors said Beazer ignored income requirements in making loans to unqualified buyers, and sought to hide from the Federal Housing Administration that some company branches had excessive default rates on their loans.

Prosecutors in North Carolina also said Beazer charged home buyers interest "discount points" at closing but kept the money and didn't reduce interest rates on the loans, the newspapers report.

The homebuilder provided buyers with cash gifts so they could come up with minimum down payments, only to add the gift price onto the purchase price of the house, according to the Justice Dept.

When home sales slowed in 2006, Beazer tapped into a reserve for land development and house construction and improperly boosted its slumping earnings, the agency says.

In the end, the SEC said, Beazer understated the company's income in SEC filings by $63 million between fiscal years 2000 through 2005.

In addition, the company overstated its income and understated losses by a total of $47 million in fiscal year 2006 and the first two quarters of fiscal year 2007.

Expansion of SBA’s latest initiative could have dramatic impact on Small Businesses, National Economy, says Chris Hurn

ALTAMONTE SPRINGS, Fla. - The U.S. Small Business Administration’s helpful decision recently to extend its SBA-504 lending program ---which helps small business owners who want to acquire or develop their own facilities---doesn’t go far enough, says Chris Hurn, (top right photo) chief executive officer of Mercantile Capital Corporation in Altamonte Springs.

Hurn’s analysis, which he published at www.504Experts.com, is getting some major media traction, including a lengthy interview in the New York Times.

The most recent SBA initiative---announced last February and put into effect recently---extends the SBA’s 504 lending program to include refinancing.

Hurn gives the SBA credit for extending the 504 loan program. But the SBA initiative requires businesses to use new funds for expansion purposes only.

“That’s the kink,” Hurn said. “How many small businesses are in an expansion mode in this economy?” he asked.

Billions of dollars worth of potential small business loans go unfunded every year, Hurn said.

“That money needs to be in the marketplace to have any positive effect on small business growth. The $255 million,” Hurn said.

The numbers back Hurn’s proposition: SBA 504 loans are down 41.5 percent this fiscal year and the total dollar amount funded has dropped 42.5 percent from last year.

“The SBA is moving in the right direction, but the positive impact on small business growth in the U.S. would be explosive if SBA would lift its restriction to small business expansion and open the door to true refinancing,” Hurn added.

For more information, contact:

Chris Hurn, Chief Executive Officer, Mercantile Capital Corporation, 407-786-5040
Shannon Marks, President, Mercantile Capital Corporation, 407-786-5040
Larry Vershel, Larry Vershel Communications, 407-644-4142