December 21, 2012

Meals and reels

It’s an old-fashioned concept — dinner and a movie — but landlords are looking at it with newfound interest when they search for tenants to populate a retail center.

“In the past, it was luxurious to go to any movie theater, kind of like air travel in its infancy,” said Bill Miller of Miller Walker Retail Real Estate, which has helped landlords bring in movie theater tenants.“Now, it’s more of a commodity, and people are demanding more of a premium, first-class experience — and they’ll pay more for a better experience. It needs to be better than the 50-inch screen at home.”

The Washington region is seeing an increased number of high-end, food-centric and luxury movie theaters focused on independent films.

At least seven companies have opened or are planning future outposts of those concepts, which can boast such amenities as restaurants inside the theater, reserved seating and novel features like unlimited popcorn and reclining seats.

The new, more formidable theaters arrive at a time when the movie industry as a whole is suffering from sluggish ticket sales and increased competition from at-home options, including Netflix and Blu-ray Discs.

“In the past, it was luxurious to go to any movie theater, kind of like air travel in its infancy,” said Bill Miller of Miller Walker Retail Real Estate, which has helped landlords bring in movie theater tenants, including Silverspot, bound for Rock Spring Centre in Bethesda. “Now, it’s more of a commodity, and people are demanding more of a premium, first-class experience — and they’ll pay more for a better experience. It needs to be better than the 50-inch screen at home.”

The previews

Although there aren’t any high-end movie theater companies based the Washington area, the region seems to be drawing more interest than other cities from those types of tenants, according to real estate broker Lance Marine, who has worked with such tenants as Cobb Theatres LLC, which has a location in Leesburg.

“For the most part, this concept is relatively new,” Marine said. “I wouldn’t call these operators small, but you’ll see major chains with thousands of locations, and someone like Cobb only has 15 to 20 units.”

Alamo Drafthouse Cinema signed lease in Loudoun County because of the community’s appealing demographics, said chain founder Tim League. Additionally, the company has other Northern Virginia locations, which helps with the logistics. Alamo Drafthouse has a reputation as destination theater for movie geeks, with events such as director Q-and-A’s and film festivals.

“I’m a stickler for presentation,” League said. “I want to be that theater designed for movie fans by movie fans.”

The Angelika Film Center at the Mosiac District, a new mixed-use center in Merrifield, is the fifth for the national chain. The brand, owned by Reading International Inc., focuses on independent films, and the Washington area’s highly degreed population means more interest in the Angelika’s foreign and quirky, offbeat films, said Danielle Mouledoux, the company’s promotions and events manager.

Many of the other recent theater additions, including ShowPlace Icon Theatre, iPic Theaters and ArcLight Cinemas, share common amenities. Think stadium seating, pre-shows without advertisements, reserved seating and on-site restaurants for dining during, before or after a show.

“It’s synonymous with having two American Grills,” Marine said. “They have relatively the same menu, but you add some twists to offer a unique experience.”

The plotlines

Landlords seem to be flocking toward those theater concepts when deciding on a merchandising mix for shopping centers, particularly in town-center-styled developments like Rock Spring Centre and the Mosaic District.

“Every developer wants to have some sort of unique offering,” Marine said.”That’s why they’re dying to have, say, an Apple store, because they know there will be only so many in the region.”

But landlords still face some challenges with the new theaters. Restaurant tenants may see them as direct competitors because of their food offerings. Movie theater parking must also be more extensive than the layout of some conventional town centers.

And not every center can sustain a movie theater because of the regulations surrounding film distribution. In markets where there is already a major player, such as Tysons Corner, a new competitor can’t have access to films shown at the existing location.

Some landlords, however, aren’t dwelling on the restaurant rivalries, Marine said. Whether dollars are spent at the cinema or a restaurant, they still make their way to the developer in some fashion.

Furthermore, the eat-at-the-theater option allows couples with limited baby-sitting time, for instance, to shell out more money at the shopping center than they would spend on merely a movie and some popcorn.

And some theaters say their neighbors serve more as attractions than adversaries.

“Since the Target has opened, it’s been very bustling here,” the Angelika’s Mouledoux said. “We’ve really proven that there is a market in this neighborhood for a movie theater that provides this kind of experience.”

It’s showtime

Because most the area’s new, upscale theaters have yet to open, the concept is still relatively unproven in the market.

The Leesburg Cobb location, however, is one of the chain’s highest-performing venues, leading Cobb representatives to consider an expansion in the region.

While most movie theaters were down about 2 to 3 percent in ticket sales in 2011 nationally, Alamo Drafthouse revenue rose by those same percentages, said League, whose chain does not disclose exact figures. He believes 2012 will end up relatively flat because of a slow summer movie season, but Alamo continues to expand. League expects the company’s 12 locations to grow to about 20 by year’s end.

It remains to be seen whether the in-theater restaurant will appeal to Washington-area diners, but certain luxury amenities have shown promise already.

Reserved seating, for one, allows a shopping center visitor more time — and the reassurance of getting a good seat — while dining at nearby restaurants.

And despite Angelika’s indie roots, even big-draw films, such as the James Bond flick “Skyfall,” have been selling out far in advance, company managers said.

Attendance nationwide fell 4.2 percent to 1.28 billion people from 2010 to 2011, but nationwide revenue dropped only 3.5 percent to $10.2 billion, due to higher ticket prices.

Movie theaters say added amenities, like reserved seating and food selection, can help justify the ticket price hikes.

“Because first-run theaters are generally all able to secure licensing for popular films, ticket prices reflect an auditorium’s quality rather than the movie being exhibited,” read a November report by research company IBISWorld Inc. on the risks of the movie industry. “As movie theaters continue to switch to digital and 3-D projection systems, revenue increases because higher ticket prices can be justified. Advances in movie-making and projection technologies have helped to stimulate demand for cinematic screenings.”

Tickets at Angelika, for example, are $13 for reserved seating at nonmatinee shows. The theater also has alternative revenue streams, such as corporate and private events. Its parent company’s total worldwide revenue for 2011 was $245.8 million, up from $230 million in 2010.

League doesn’t worry too much about the industry’s future, though Alamo has moved to diversify. It started its own film distribution company more than a year ago.

“You can say the same things for the restaurant industry — anyone can cook a great meal and never leave the house,” League said. “There have been doomsday-sayers ever since the 1950s and the advent of television.”