Bain, Oaktree lead $1bn US showroom recap

Bain Capital Partners and Oaktree Capital Management, two of the largest private equity firms in the world, have united to form a large furniture showroom company.

International Market Centers  (IMC) was formed after the pair led an investor group in the recapitalisation of a series of showrooms in Las Vegas and High Point, North Carolina.

According to an announcement on the tie-up this week, funds managed by Bain and Oaktree have been used to back IMC, which will initially own 13 buildings, equal to more than 10.6 million square feet of exhibition space.

Details of how IMC’s ownership is split were not divulged in the announcement. However, according to multiple reports, Bain and Oaktree acquired a majority position in the new company. Their investment diluted various individual asset ownership positions of the assets’ previous owners including furniture retailer Bassett Furniture Industries.

Bain’s and Oaktree’s investment comes via a series of significant recapitalisations of the Las Vegas and High Point assets. The assets had been subject to various loan defaults and some were in receivership after the debt behind them had defaulted. For example, $556.3 million of the debt against the Las Vegas properties was already in default while a further $448 million loan is expected to mature later this year. A similar situation and fate faced the North Carolina assets.

In its announcement, IMC said: “Through a series of transactions, all assets in the portfolio have been recapitalized with significant equity investments, providing for long term stability and creating a growth platform for the industry.”

The formation of the IMC marks a significant moment for the US furniture showroom sector. Against a backdrop of poor consumer spending, activity by exhibitors and retailers, typical occupiers of such real estate, has been diminishing.

The launch of IMC also marks the latest foray into real estate-heavy businesses by a private equity giant.

While Oaktree does have dedicated real estate funds, it is unclear whether the firm invested in the deal from its real estate or distressed-for-control funds. Bain is one of a number of private equity firms to have invested in real estate-intensive sectors via its private equity funds.

Others to invest in real estate-heavy assets through their traditional buyout private equity funds include buyout titans TPG Capital and Kohlberg Kravis Roberts. The latter of those this year started to grow its own dedicated real estate platform, partly to enable it to better understand and manage real estate assets that form part of wider buyout deals. In March, KKR hired Ralph Rosenberg, a former Goldman Sachs Whitehall Street Funds veteran, to lead and grow this capability.