Bloomberg News

Milestone Channels Goldman Strategy With Fund Focused on Hotels

June 20, 2011

June 21 (Bloomberg) -- Milestone Turnaround Management Co. plans to raise about 15 billion yen ($187 million) for Japanese hotel- and apparel-company investments patterned on strategies used by Goldman Sachs Group Inc. and Fast Retailing Co.

MTM, as the company is known, aims to attract higher- spending customers at resorts it buys by remodeling them, “similar to the way Hoshino Resort turns around inns and hotels jointly with Goldman,” said Keizo Hayase, president of the Tokyo-based fund. MTM is in talks about investing in several hotels and apparel companies, he said.

Hayase, who said his 9 billion yen first fund has returned 44 percent since its February 2007 start, plans to plow several billion yen into about 10 hotels on the island of Kyushu because its hot spring and mountain resorts are convenient to tourists from China and South Korea. The southwestern Japanese island has also attracted resort investments by RHJ International SA, Daiwa Securities SMBC Principal Investments and H.I.S. Co., Japan’s second-biggest travel agency.

“These opportunities are drawing investors’ interest,” Hayase, 52, said in an interview in Tokyo on June 16. MTM may also invest in trading companies and department stores to create businesses that operate like Fast Retailing’s Uniqlo, which designs the clothes it sells, he said.

Smaller Buyouts

Closely held Hoshino Resort Co. agreed with Goldman in 2005 to renovate about 50 ryokan, traditional Japanese-style resort inns, as part of a plan to invest about 30 billion yen over three years.

Buyouts in Japan worth between 5 billion yen and 30 billion yen each more than doubled last year to 20 from 8 in 2009, according to Japan Buy-out Research Institute Corp. Overall, buyouts dropped to 44 in 2010 from 59 in the previous year, according to the researcher.

Before starting MTM in 2005, Hayase spent two decades at Sumitomo Mitsui Banking Corp., including 2000 to 2002 at the Tokyo-based lender as head of a turnaround team.

MTM is targeting annual returns of more than 20 percent from its planned fund and will start raising the money this month, Hayase said.

His first fund booked gains by investing as part of a group that turned around Honma Golf Co., a sporting goods maker that filed for bankruptcy protection in 2005. It also turned around electronics retailer Laox Co., eventually selling its stake to Suning Appliance Co., the nation’s largest electronics retailer.

Mistakes

Hayase has also had to learn from his mistakes, he said.

Bobson Co., the Japanese jeans-maker Milestone bought in 2009, filed for bankruptcy protection in May after cash flow worsened because of the March 11 earthquake and tsunami, the nation’s worst disaster since World War II.

“We couldn’t reform Bobson alone, even as many people have a sense of crisis for the 9 trillion yen apparel industry, as the industry has made little progress in consolidation and still has low profitability,” Hayase said.

--With assistance from Naoko Fujimura in Tokyo. Editors: Dave McCombs, Nicholas Wadhams

To contact the reporter on this story: Shunichi Ozasa in Tokyo at sozasa@bloomberg.net

To contact the editor responsible for this story: Frank Longid at flongid@bloomberg.net


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