The six-year war for supremacy in the furniture industry ended Tuesday with a $1 billion deal that merges Las Vegas' massive World Market Center with two archrivals in High Point, N.C.
The new company, called International Market Centers, will hold 13 buildings in the two cities, with 10.6 million square feet of furniture showrooms. A second phase, expected to close within two months, would add five buildings and 900,000 square feet.
The ongoing struggle to sign tenants and lure buyers to visit that began when the World Market Center opened in mid-2005, coupled with a recession that hammered the furniture industry, had driven most of the complexes in the merger to their financial knees.
World Market Center had defaulted on the $556.3 million in loans covering two of its buildings as occupancy dropped and companies that signed new leases did so at lower rates. The $488 million loan on the third building came due later this year with no hope of repaying it.
Likewise, a number of the High Point buildings had gone into foreclosure or receivership.
International Market Centers CEO Robert Maricich, who held the same post with the World Market, said the debt would be reduced to an unspecified level. Investment firms Bain Capital Partners and Oaktree Capital management will wind up with "by far the majority ownership" in equal shares for putting up the $1 billion investment, according to Maricich, who did not give specifics.
New York-based Related Cos. and Network World Market Center, owned by the two original developers of the World Market, saw their previous half-ownership stakes greatly reduced. Bassett Furniture, a part owner of one of the High Point markets, will also hold limited equity.
"We think we can create efficient and effective platforms for the industry in both places going forward," said Maricich.
Between them, Las Vegas and High Point will have four markets a year that each draw tens of thousands of buyers. Besides furniture, Las Vegas has focused in the past couple of years on attracting mattress makers and companies in the gift and decor industries.
Except for the week-long markets, the Las Vegas buildings are largely dark the rest of the year.
"The strategy of the merger is brilliant," said Timothy Stump, a Charlotte, N.C.-based merger adviser who focuses on the furniture industry. "Now let's see how they execute."
But in a newsletter last month, Stump sounded a note of caution.
"We all know that our industry has too many markets, and the cost to exhibit is becoming prohibitive for many players," he wrote. "And with Singapore, South China and Shanghai markets growing, where will it end?"
However, Maricich said he believes buyers' needs to see new products in person will support U.S. markets into the future.
Kevin O'Connor, the chairman of the High Point Market Authority that runs the city's markets, believes "not much will change" for the industry. High Point has emerged as a national market and Las Vegas as oriented to the West, although Maricich said he has pushed for both a national and international presence.
Contact reporter Tim O'Reiley at email@example.com or 702-387-5290.