Deal Could be Helpful
Hopes Run High for Vegas-HP Combo
Larry Thomas -- Furniture Today, February 21, 2011
HIGH POINT - The possibility of a blockbuster real estate deal that would combine High Point's three largest showroom complexes and the World Market Center in Las Vegas has sent shockwaves through the industry, but many industry veterans think it could be a positive development for a beleaguered business.
The deal, which has been the subject of intense rumor and speculation in recent weeks, hasn't been confirmed by any of the principals.
But nearly all of the market exhibitors, retailers and sales representatives contacted by Furniture/Today in the past week said they're looking for positive outcomes from a transaction that could lead to fundamental changes in the way the industry sells its products to retailers.
Several said it could lead to lower rents for exhibitors - especially at the World Market Center - and more cohesive market dates. Plus, many said it would finally put an end to the sniping between the Las Vegas and High Point markets that was especially intense when the Vegas market was launched a few years ago.
"Mutual annihilation is not a good path," said retailer Keith Koenig, president of Fort Lauderdale, Fla.-based City Furniture. "My first inclination is that it would be better (for the industry.)"
AICO President Martin Ploy said he believes the new owners would be buying the showroom properties "with the goal of making both venues better."
"Exhibitors who may not currently be at both venues may realize a better deal by being at both shows," said Ploy, whose company has large showrooms in High Point and Las Vegas.
Since the Las Vegas Market debuted in July 2005, both markets have tweaked their show dates several times, and some of those moves have angered exhibitors and attendees. Common ownership of key showroom buildings in both cities should eliminate such issues, most agreed.
"I think if (the dates) are coordinated, you could draw more attendance to both," said Ed Myers, a veteran sales rep from Pennsylvania who also is a rep ambassador for the High Point Market.
Myers recalled that High Point's Premarket once overlapped the first two days of the Vegas market. He had to work at Premarket on Monday and then fly to Vegas for an appointment on Tuesday - hardly the ideal schedule.
"The dates of the shows seem to keep changing, and that makes it tougher for both exhibitors and retailers in terms of planning," added John DeFalco, senior vice president of sales and marketing at Primo International. "Having a single entity overseeing both venues would hopefully give the industry more cohesive show dates."
DeFalco and several others voiced concerns about the high cost of exhibiting in Las Vegas, and said they hoped a common ownership would work to lower those costs.
"I would hope they would also look at reducing rents (in Las Vegas)," said Stan Tremewan, a California-based sales rep for 28 years.
Tremewan said one company that he represents had its World Market Center lease expire recently, but the building management refused to renew it at a lower rent. As a result, the company pulled out of the market.
Yet, he is perplexed by the perception that the market center is essentially giving away space it can't otherwise fill.
"If I was a manufacturer that had a lease in Las Vegas, I'd want to make sure that my lease is valid and that they wouldn't convert the buildings into some other use," Tremewan said.
Jim Ziozis, president of importers Linon and Powell, warned that any new owner would be buying "marked down commercial real estate" and would do whatever it takes to increase its value - regardless of whether it benefitted the furniture industry.
"We should not think that they are doing this due to any sentiment for the home furnishings industry," said Ziozis, one of the few who didn't think common ownership would be a good idea. "They would do it to make money."
The value of showroom buildings in both cities has fallen precipitously in the past three years as the industry has struggled. The business downturn followed a showroom building boom that added millions of square feet of exhibit space in both cities in the late 1990s and early 2000s.
As a result, two of High Point's three largest showroom complexes - Showplace and Merchandise Mart Properties Inc. - defaulted on loans and were placed in receivership. And the World Market Center last year defaulted on loans for two of its three buildings and is having trouble refinancing the construction loan on the third.
"In my 35 years in this industry, the road is littered with ambitious real estate companies whose best-laid plans failed to shape the home furnishings market to their advantage," said Jeff Young, CEO of upholstery importer Schnadig. "If common ownership does come to pass ... it will be incumbent upon the owner to wipe the slate clean, carefully canvass a wide number of influential dealers and then tailor the two complexes to serve the dealers in the absolute most efficient manner possible."
Chris Lupo, president of upholstery and case goods importer Parker House, said he believes common ownership could be good for the industry, but is concerned that a lack of competition in High Point could cause rates to rise there.
The issue is of particular importance to Lupo because his California-based company made its High Point Market debut last April, signing a lease when rates were at or near the bottom.
"Part of the reason we went to High Point is because you had people lowering rates because there was some competition (among building owners)," said Lupo, whose company has been a Las Vegas exhibitor from day one.
Cooperation among High Point building owners, however, could have a positive side effect, said Ray Steele, co-founder of Gail's Accents and a longtime furniture executive.
"When it's all under one roof, there won't be any reason to try to move a vendor from one building to the other," he said. "I think it's going to be more centralized from the standpoint of leases."
Several market veterans said the competition between Las Vegas and High Point hasn't been all bad. If nothing else, it made High Point a better market and eliminated the complacent attitude that many say had evolved.
"The High Point mentality 10 years ago was everyone has to come here so we don't have to be that good," said Koenig, once a vocal critic of the High Point Market but now a staunch supporter.
He and others, however, said they doubt complacency would return under a common ownership because it would be in the owners' best interest to keep both venues humming.
"I don't think anybody is going to back an investment and try to make it worse," said retailer Jeff Seaman, CEO of Seffner, Fla.-based Rooms To Go. "Anybody investing in these buildings going forward would try to make the experience as good as possible."
Some even raised the possibility that a common ownership could lead to fewer markets - an unfulfilled wish of quite a few manufacturers and retailers for decades.
"Right now, we are over-marketed," said Gerry Borreggine, president of bedding producer Therapedic. "Maybe if the frequency was less, you could increase the breadth of the markets. They could become full six- or seven-day events."
That scenario would suit Clarence Smith, CEO of Atlanta- based Havertys, who said he thinks four markets a year in two different cities are unnecessary.
"The industry is struggling to be profitable as it is ... and we don't need the overhead of extra markets," Smith said. Several staff members contributed to this story.
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