California Apparel News

Want to find a Chinese apparel manufacturer without hopping on a jet for a body-numbing journey to Hong Kong or Shanghai?

Hooking up with an Asian clothing maker may be as easy as catching a flight to Las Vegas, where a new mart is being designed to house Hong Kong and Chinese manufacturers.

The 1 million-square-foot mart, tentatively called the Las Vegas International Business Mart, will open in two years and house 500 permanent showrooms with an average annual lease rate of $50,000. The mart’s occupants will be mostly Chinese hard goods, apparel and textile manufacturers, who already are signing up for the showrooms.

The program is already being expanded, at the request of the Chinese sponsors, to include an additional 400 to 500 companies that will occupy shared showrooms and support facilities. The program will be much like a typical time-share concept, with complete shared showrooms, offices and support facilities. The companies that utilize this plan will be classified as temporary occupants with stays that will average 60 days.

The mart project, expected to cost more than $200 million, is being put together by Vindex International Inc., a Beverly Hills company headed by engineer and businessman William W. DeVore, and Horizon Structured Solutions Ltd., a Hong Kong/China company headed by Teddy Cheng, one of China’s wealthiest businessmen.

The mart project will pour millions of dollars into Las Vegas’ economy. Nearly 3,000 Chinese people with above-average incomes are expected to move to the gambling capital to live in turnkey houses outfitted for them by the U.S./Chinese partners. Buyers coming to the mart will help fill the boomtown’s hotels.

“This is one of the largest projects Las Vegas has ever seen,” said DeVore, who has been working with Cheng for eight years to get this project off the ground. “There are [American] businessmen who go to China six times a year. They can save a lot of time this way by going to Las Vegas.”

Vindex and Horizon, joint partners in the mart, also plan to hold an annual trade show in Las Vegas similar to the Guangzhou Trade Fair, also known as the Canton Fair, which is one of China’s largest export commodities trade fairs.

DeVore and his partners already have committed $100 million in good-faith money to get the mart off the ground.

Vindex and Horizon executives have been meeting with the Nevada Development Authority to secure land south of the Mandalay Bay Resort & Casino on the Las Vegas Strip. They also have been conferring with major shopping mall developers about whether the developers would want to build or own all or part of the new mart, which will have two or three theaters with fashion show runways and a number of upscale Chinese restaurants. The complex will include direct satellite communications for teleconferencing between Las Vegas and China, enabling buyers to link up with Chinese factories.

One of the major components of the mart will be a streamlined trade financing system administered by Vindex that will primarily utilize purchase orders or open-line credit instead of letters of credit to secure merchandise, considerably reducing the interest paid on orders.

With the monetary backing of Horizon, which has $10 billion in funds committed by Asian and European banks, Vindex will help finance transactions made through the Las Vegas mart using purchase orders and openline credit. This trade finance program will be an integral part of the mart’s product purchase and finance program.

However, Vindex will work with importers’ factors and banks if they prefer.

“This has the possibility of reducing the aggregate costs by a third on purchase order financing,” said Douglas F. McRae, a director with Vindex who will soon be named president of the company. “On tri-party financing, the cost based on volume would be less than letters of credit and amendments that are normally part of the cost structure.”

In addition, the project will encompass several warehouses in free-trade zones, where Chinese manufacturers can stock samples and merchandise.

The warehouse district near the mart will eventually take advantage of a new international cargo airport that the Clark County Department of Aviation is proposing to build 45 miles southwest of Las Vegas on 6,000 acres in the Ivanpah Valley. However, the airport is not expected to be finished before 2015 or 2016.

While the plan sounds like a good way to do business with Chinese factories, some are skeptical.

“When you go over to Asia as a retailer or wholesaler, it is to work with the principals and be close to the source of manufacturing as opposed to going to a showroom with a rep who checks back with you eight hours later,” said Ed Redding, executive vice president of importing and sourcing at John Paul Richard Inc., a $100 million company in Calabasas, Calif., that imports much of its womenswear from Asia. “It may work for smaller operations that don’t have the resources to go overseas to visit a factory.”

The new Las Vegas apparel mart will add to the city’s new role as a mart-centric town. The first phase of the World Market Center, a 7.5 million- square-foot furniture mart, is being built in downtown Las Vegas and is scheduled to open in July 2005. The project, being built by Furniture Mart Enterprises, includes a convention center, a world-trade pavilion and a resort hotel.

DeVore chose Las Vegas instead of Los Angeles for his mart project because of the number of buyers who flock annually to the desert town to attend events such as MAGIC International, one of the largest biannual apparel shows in the country, and the World Shoe Association show, a megaevent for the footwear industry.

The area has a good telecommunications infrastructure and a comprehensive urban growth plan that includes an expandable transportation system.

The lack of any state income, inheritance, franchise, inventory or corporate taxes—and inexpensive land—played a key role, as well.

“Las Vegas is corporate friendly,” said De- Vore, noting that the escalating cost of workers’ compensation insurance in California was another deterrent.

Representatives from Stonefield Josephson Inc. in Santa Monica, Calif., are serving as the accountants and business consultants to Vindex and will take the lead role in planning both the trade finance program and the Las Vegas mart structure.

Bruce Berton, director of international business consulting at Stonefield Josephson, noted that Los Angeles just could not offer attractive enough incentives to get the new mart. “This is not true in Las Vegas,” he said.

However, Vindex and its Chinese partners are thinking of putting 25 to 50 Chinese manufacturers in showrooms at a mart-type setting in the Los Angeles Fashion District. “I think there is a real need to have a presence here in Los Angeles,” DeVore said.

The showrooms are only a smidgen of what Las Vegas will be gaining with the help of former Nevada Gov. Robert Miller, who is working as a consultant on the project. Miller’s law firm, Jones Vargas, will be the legal counsel for both the Las Vegas mart and the trade finance project.

Miller predicted several years ago that Las Vegas’ gambling industry would eventually plateau and the state would need to diversify. The desert city has nearly 500,000 residents, with 1.5 million people living in the total metropolitan area.

“Economic diversification is the key for Las Vegas,” said Tony Sanchez, a Jones Vargas attorney who is working on the project with Miller. “After 9/11, the casino industry here laid off 20,000 workers. We’ve come back slowly, but you can’t be a one-industry town.”