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NEWS MONEY SPORTS Wanted: Renters for ritzy downtown apartments LIFE AUTOS TRAVEL
L awrence J ournal -W orld - USA TODAY TUESDAY, AUGUST 16, 2016
MONEYLINE HOTEL OPERATOR CLAIMS PAYMENT DATA BREACH A hotel operator responsible for several high-profile hotels across the U.S. says it discovered a breach of its payment-processing systems that may affect hotels in several states and the District of Columbia. In a statement Monday, HEI Hotels & Resorts says 20 hotels representing brands including Marriott, Starwood, Sheraton and Westin were impacted. A list of hotels provided by HEI shows some properties were impacted by the malware as early as March of last year. APPLE EXPECTED TO PRODUCE A 10.5-INCH IPAD PRO Respected Apple analyst MingChi Kuo of KGI Securities says Apple may wait on upgrading its tablet line until next year. In his latest report, first spotted by “MacRumors,” Kuo says Apple plans to launch three new iPads next year. They will include a new 12.9-inch iPad Pro as well as a “low-cost” 9.7-inch iPad and 10.5-inch iPad Pro. The new 10.5inch model is said to be better suited for education, a particular area of interest to Apple.
SURPLUS OF LUXURY APARTMENTS Vacancies in luxury apartments outpace availability in lower price and midtier units. Apartment vacancy rates for:
Paul Davidson
1-2 star
3 star
4-5 star (luxury apartments)
@Pdavidsonusat USA TODAY
MARCIO JOSE SANCHEZ, AP
LONZA BUYS WEIGHT LOSS PILL SUPPLIER INTERHEALTH Switzerland-based phamaceutical supplier Lonza said Monday it had reached a deal to acquire Benicia, Calif.-based InterHealth Nutraceuticals. The deal is worth up to $300 million in cash, with a partial payment upfront and future payments tied to performance. InterHealth, which is owned by Kainos Capital, manufactures more than 15 ingredients targeted at areas such as weight loss, sports nutrition, diabetic health and pet care. Lonza said it expects to finalize the transaction in September. STOCKS HIT RECORD HIGHS AS OIL PRICES RALLY U.S. stocks hit record highs Monday as traders remained buoyant and oil prices ticked upward. The Dow Jones industrial average closed up about 60 points, or 0.3%, at 18,636.05. The Standard & Poor’s 500 index and the Nasdaq composite index also hit all-time highs. The S&P 500 rose 0.3% and hit a high of 2,190.15, and the Nasdaq jumped 0.6% to its record of 5,262.02.
DOW JONES INDUSTRIAL AVG. 18,700 18,650 18,600 18,550 18,500
4:00 p.m.
18,636
9:30 a.m.
18,576
Apartment building owners are struggling to rent many of the luxury units that have flooded downtowns across the country in recent years even as a relative shortage of multifamily homes in the suburbs has driven up rents. Since 2012, the nation’s supply of apartments has swelled 16.6% in central business districts and 13.5% in “secondary core” areas surrounding the downtowns but just 5.5% for midpriced suburban units, according to real estate research firm CoStar. The downtown building frenzy has been well-publicized as developers cater to Millennials, among other age groups, who have streamed into revitalized cities to be closer to amenities, nightlife and a car-free lifestyle. The CoStar data, however, shows that builders may be putting up too many apartments — most of which are at the high end of the market — in the urban hubs and not enough in outlying areas. Over the past four years, the vacancy rate in downtowns and adjacent districts has climbed from 3.4% to about 5.5%, CoStar figures show. Although new apartment complexes typically take some time to lease up, many units have been sitting empty longer than normal. Nationally, new apartments had
8%
7.7% 6.8%
6%
6.7%
6.0%
4%
3.7% 3.3% 2% March 2006
June 2016
SOURCE CoStar Portfolio Strategy GEORGE PETRAS, USA TODAY
an average 52% vacancy rate when they opened in the first quarter of 2013, and the rate for those dwellings fell to about 11% within 18 months. By contrast, new units opening in the first quarter of 2015 had a 72% vacancy rate that declined to 18% over a similar period. The higher vacancies were driven by luxury buildings in central business districts, CoStar Chief Economist Hans Nordby says.
“These new flashy, splashy downtown buildings — they have a vacancy problem,” Nordby says. “They are too expensive to rent” and there are too many of them. At the same time, he says, “There’s not much supply of new apartments in the suburbs.” As a result, since 2012, average rents have risen 12.3% in downtowns and 18% for midlevel suburban apartments, CoStar says. The city-suburb split is playing
Dinner and a movie taken to new level in growing trend Rick Jervis
18,450 MONDAY MARKETS INDEX
Nasdaq composite S&P 500 T-note, 10-year yield Oil, light sweet crude Euro (dollars per euro) Yen per dollar
CLOSE
CHG
5,262.02 2,190.15 1.56% $45.74 $1.1183 101.25
x 29.12 x 6.10 x 0.05 x 1.25 x 0.0019 y 0.02
SOURCES USA TODAY RESEARCH, MARKETWATCH.COM
USA SNAPSHOTS©
Competitive workplace
34%
of senior managers believe employees are more competitive with their co-workers than they were 10 years ago. 17% say less. SOURCE Office Team survey of 608 senior managers in North America JAE YANG AND KARL GELLES, USA TODAY
out in metro areas across the country, but it’s particularly acute in cities such as Los Angeles, Washington, D.C., and Chicago. In L.A., about 5,500 apartments have opened downtown the past 31⁄2 years, with typical rents of about $6,500 a month, and the district’s overall vacancy rate has climbed from 4.5% to 9.9%, according to CoStar data. In the suburbs, just 1,900 midtier units have been added since 2012, and vacancy has fallen to 2.8% from 3.7%. In suburbs such as Santa Monica, many landlords are requiring minimum credit scores of 700 and are willing to hold apartments with a security deposit for just several days, compared to a typical few weeks, says Jessica Sanders, client relations specialist for Pacific Listings, a website for apartment hunters. A shift may be underway. In recent years, more apartment complexes have gone up in the suburbs of cities such as Philadelphia, Washington, D.C. and Charlotte as investors make more financing available, says Stockton Williams, head of the Urban Land Institute’s Terwilliger Center for Housing. “Things are starting to change,” he says.
Alamo Drafthouse brews up winning combination @mrRjervis USA TODAY
59.58
JUSTIN LANE, EUROPEAN PRESSPHOTO AGENCY
In the past four years, the vacancy rate in downtowns and adjacent districts has climbed from 3.4% to about 5.5%, data show.
AUSTIN To reach the theaters at one Alamo Drafthouse Cinema here, moviegoers walk through a colorful, funhouse-like door frame. The walls are lined with vintage horror movie posters, and screen offerings range from blockbusters such as Star Trek Beyond and Jason Bourne to Swiss Army Man, an off-the-wall independent film starring a corpse. The menu includes pancetta mac & cheese and a Maker’s Mark Milk Punch Shake. Not exactly your average neighborhood multiplex. Despite the booming popularity of online streaming and home theaters, going out to the movies remains a robust industry, and Alamo Drafthouse is riding the wave. Last year, moviegoers in the U.S. and Canada spent a record $11.1 billion at the box office, up 8% from 2014, according to the Motion Picture Association of America. So far this year they’ve spent $7 billion, on track to surpass last year’s total. Theaters that offer a twist on the traditional night-at-themovies experience are part of a
RICK JERVIS, USA TODAY
Tim League opened the Alamo Drafthouse Cinema, serving in-theater food and drinks, with one screen in 1997. growing trend that is capturing a younger audience with unique programming and in-theater dining and cocktails, said Patrick Corcoran, vice president and chief communications officer of the National Association of Theatre Owners, which represents 600 theaters and 32,000 screens. The number of cinemas serving food and drinks in theaters is relatively small — less than 700 out of 5,700 theaters nationwide, he said. But it’s one of the fastestgrowing segments of the industry. “One of the keys for the industry is targeting your particular theater and location to the audi-
ence you have there,” Corcoran said. That concept “is being picked up faster and faster now.” Using an eclectic film lineup and in-theater dining, Alamo Drafthouse has grown to 25 theaters across the U.S. with $170 million in annual sales. The company’s latest theater-restaurant opens this month in New York City’s Brooklyn borough, and there are nine more theaters on the way in Arizona, California, Texas, Virginia and Missouri. Other theater chains such as Movie Tavern and Studio Movie Grill have thrived in the movieand-dinner concept, said Daniel
Loria, editorial director at Boxoffice Media. But for the past six years or so, Alamo Drafthouse has risen as one of the most recognizable of the chains, he said. “Cinema dining has really exploded in the U.S. the past few years,” Loria said. “The Alamo Drafthouse is one of the household names that has been able to brand itself. It’s really caught on.” Alamo opened in 1997 with a single-screen theater in Austin, said Tim League, founder and chief executive. On its first day, the theater screened a double feature of Raising Arizona and Spinal Tap to a packed house. On its second day, just three people showed up. “I was immediately hit with the idea that this might be a disaster,” League said. But League and wife Karrie persevered, serving up curated film selections, beer and food and gained a loyal following. More theaters opened, in Texas and across the U.S. In 2010, the company launched Drafthouse Films, distributing mostly foreign films and documentaries, which it screens in its theaters. The goal is to draw patrons to his theaters with Star Trek and other blockbusters and have them consider more offbeat films, League said. “We make most of our money from blockbusters, “ League said. “But we’re able to market some interesting, strange, smaller films for customers who are coming for the big tent movies.”