IPO Report: International Market Centers (IMC)

Francis Gaskins |

International Market Centers (IMC) which is structured as an internally-managed REIT, is the largest owner and operator of permanent business-to-business showroom space in North America for the home furniture industry and one of the largest owners and operators of permanent business-to-business showroom space for the home décor and gift industries. It is based in Las Vegas, NV.

Eleven other companies are scheduled for the week of May 4. The full IPO calendar is available at IPO Premium.

SEC Documents

Manager, Joint-managers: Barclays, Credit Suisse, Wells Fargo Securities, Deutsche Bank Securities, J.P. Morgan
Co-managers: KeyBanc Capital Markets, Raymond James

End of lockup (180 days): Wednesday, November 4, 2015
End of 25-day quiet period: Tuesday, June 2, 2015

IMC scheduled a $150 million IPO with a market capitalization of $645 million at a price range midpoint of $13 for Friday, May 8, 2015 on NYSE.

International Market Centers Summary

IMC, which is structured as an internally-managed REIT, is the largest owner and operator of permanent business-to-business showroom space in North America for the home furniture industry and one of the largest owners and operators of permanent business-to-business showroom space for the home décor and gift industries.

International Market Centers Valuation

Glossary

Valuation Ratios

Mrkt Cap (mm)

Price /Sls

Price /Erngs*

Price /BkVlue

Price /TanBV

% offered in IPO

International Market Centers (IMC)

$645

3.8

268.7

2.1

2.5

23%

     

*REITs usually show losses

   

International Market Centers Conclusion

Business showroom REIT

Neutral

Expects to pay 6%

Rev +7.2%

Price to book of 2.1

International Market Centers Business

IMC, which is structured as an internally-managed REIT, is the largest owner and operator of permanent business-to-business showroom space in North America for the home furniture industry and one of the largest owners and operators of permanent business-to-business showroom space for the home décor and gift industries.

International Market Centers Owns

IMC owns approximately 12.1 million gross square feet (10.0 million rentable square feet) of premier showroom space across 14 buildings in High Point, North Carolina and three buildings and three exhibition pavilions in Las Vegas, Nevada. Approximately 9.4 million rentable square feet of such showroom space is permanent showroom space and approximately 0.6 million rentable square feet is temporary showroom space.

International Market Centers Properties are Leased

IMC’s showrooms are leased by manufacturers and suppliers of home furniture (such as living room, dining room, and home office furniture bedroom furniture and mattresses), home décor products (such as rugs, lighting, wall art, pillows and bedding) and gift products (such as candles, stationery, floral, holiday and seasonal items and toys).

International Market Centers Hosts Markets

IMC hosts two Markets per year at each of its Properties. Markets are generally weeklong business-to-business trade gatherings in the home furniture, home décor and gift industries that enable manufacturers and suppliers to: (i) meet with their existing and prospective customers (a diverse group of retail outlets and interior design buyers); (ii) showcase their latest designs and products; (iii) discover new and emerging trends in their respective industry; and (iv) enter into sales agreements with their customers.

IMC’s Markets are the largest gatherings of manufacturers and suppliers (its tenants) and buyers (its tenants’ customers) in the home furniture industry. For the year ended December 31, 2014, IMC generated total revenues of $162.8 million, net loss of $29.6 million and Adjusted EBITDA of $82.0 million.

For the three months ended March 31, 2015, IMC generated total revenues of $42.1 million, net loss of $3.2 million and Adjusted EBITDA of $20.1 million. Adjusted EBITDA is not a measure of financial performance under GAAP.

IMC’s semi-annual Markets in both High Point and Las Vegas provide its tenants with an efficient and cost-effective means of interacting directly with their customers by providing their customers with a single location that offers access to a broad universe of manufacturers and suppliers as well as a diverse range of their products.

IMC believes this creates significant value for both its tenants and their customers in the U.S. home furniture industry, in the U.S. home décor industry and in the highly fragmented U.S. gift industry.

International Market Centers Markets

Furniture Today estimates that the U.S. home furniture industry generated approximately $96 billion in revenue in 2014 (including mattresses), and Home Accents Today estimates that the U.S. home décor industry generated approximately $61 billion in revenue in 2014.

In addition, according to IBISWorld, the U.S. gift industry generated approximately $19.4 billion in sales in 2014 at traditional gift retail stores, such as souvenir shops, greeting card shops, novelty shops, Christmas stores, balloon shops and curiosity shops (excluding sales at retail stores and outlets that are not primarily focused on gifts, such as florists, theme parks, hardware stores and garden stores).

The ability to physically assess IMC’s tenants’ merchandise is critical to purchasing decisions for buyers of home furniture, home décor and gift products, and such assessments cannot be replicated through other channels, such as online marketplaces.

IMC believes its business model is highly compelling because: (i) these Markets are essential to its tenants and their customers; (ii) the showroom space IMC owns would be expensive to replicate; and (iii) its industry-leading scale and operational capabilities allow it to provide high quality Market experiences and an attractive return-on-investment for its tenants.

International Market Centers Intellectual Property

None

International Market Centers Competition

IMC faces competition in the leasing of home furniture, home décor and gift showroom space. IMC competes on the basis of location, rental rates, Market experience, occupancy rate and other factors.

IMC operates within the home furniture (High Point and Las Vegas), home décor (High Point and Las Vegas) and gift (Las Vegas) industries.

The other U.S. Markets within these industries generally have different focus areas and product mixes.

For example, The Atlanta International Gift & Home Furnishings Market at AmericasMart, the Dallas Total Home & Gift Market at the Dallas Market Center and NY NOW are primarily home décor and gift Markets with some furniture exhibitors, while Tupelo, Mississippi operates purely as a home furniture Market and the International Casual Furniture & Accessories Market at the Merchandise Mart in Chicago, Illinois provides outdoor and casual furnishings.

Within this context, IMC’s Markets compete with different events and locations depending on the product category. IMC also faces competition from small regional market centers and tradeshows.

International Market Centers 5% Shareholders Pre-IPO

International Market Centers, LP             76.8%

International Market Centers Dividends

IMC intends to make a pro rata distribution with respect to the quarter during which this offering occurs, based on a distribution rate of $0.195 per share of its common stock for a full quarter. On an annualized basis, this would be $0.78 per share of its common stock, or an annualized distribution rate of 6.0%.

International Market Centers Use of Proceeds

IMC expects to receive $132 million from its IPO and use it for the following:

to pay approximately $125.5 million of principal and interest to terminate its second lien term loan facility and approximately $1.3 million of prepayment fees in connection therewith; and

to distribute an aggregate of $9.3 million to IMC LP (x) to pay aggregate fees of $5.3 million to Bain Capital and Oaktree in connection with the termination of the advisory agreement among IMC LP and Bain Capital and Oaktree, and (y) to make a concurrent distribution equal to $4.0 million to a minority limited partner of IMC LP required to be made under the limited partnership agreement of IMC LP upon payment of fees under the advisory agreement.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

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