Shares digital

A risqué hotels group has failed in its efforts to raise £100 million for an Aim listing, blaming volatile market conditions for deterring institutional interest.

Japan Leisure Hotels, which will invest in ‘love hotels’, will join the junior market next Wednesday (16 January) two months later than planned and with just £3 million in new money.

The lack of cash has forced the group to pay for its first five hotels with shares. The properties, which trade under the Bonita brand, are aimed at couples in Japan who want to rent rooms by the hour. They are part of a 20,000-strong industry worth £16.5 billion a year, the company says.

Investment group New Perspective will manage the Bonita portfolio and subsequent acquisitions. Its co-founder Steve Mansfield says the fund raising problems should not alter Japan Leisure’s business development strategy beyond slowing down its acquisition plans. ‘Institutional investors didn’t object to the business concept,’ claimed Mansfield. ‘However, the financial markets had changed so much between starting and ending our roadshow late last year. With major investment banks taking huge write-offs, institutions were cautious about investing.’

Japan Leisure Hotels will seek to raise additional capital once it is trading on the stock market. The business will be valued at £22 million upon listing. It is considering the use of the first five Bonita hotels as leverage for debt to fund future acquisitions. Two investment groups will own nearly 89% of the company. One of the vehicles, Japan Leisure Investments LLC, will be liquidated this year. It holds 83% of stock.

New Perspective said one of the larger investors in the group would not be able to sell shares in the hotels business for at least a year. The other major investor is DKR Soundshore Oasis Holding Fund, an Asia-facing asset manager.

Shares says: Without a decent cash pile upon listing, Japan Leisure’s growth plans become higher risk. Wait for first details on hotel income before considering the shares.

by: Dan Coatsworth