Attractions Will Boost Valley’s Tourism Sector By JONATHAN D. COLBURN Staff Reporter Tourist attractions in the Valley like Universal Studios Hollywood have reason to be fairly optimistic about the coming year as more people are expected to visit the Valley. LA Inc, the Convention and Visitors Bureau said that the Valley economy will also benefit from a good number of visitors drawn to other parts of the city to see several other cultural attractions. “We’re going to be really looking forward to the reopening of the Griffith Observatory (this) year,” said Christopher Heywood, corporate communications manager of LA Inc. “Like Universal Studios Hollywood, that can be considered a Valley product, kind of like the Autry National Center or the Zoo. The Valley will certainly benefit from seeing the Griffith Observatory open, especially since it’s been closed for a few years.” Other tourist attractions in the Valley could also benefit from the opening of the “Marvel Super Heroes: Live the Comics Live the Science.” exhibit which will open in March at the California Science Center. The attraction, Heywood said, will likely draw more families from Los Angeles’ key drive markets like San Francisco and San Diego. Visitors from those areas often stay in the Valley and visit other attractions. “The Metro Orange Line opening is a positive thing for the Valley, especially with international visitors, who have a keen interest in taking public transportation,” Heywood said. “When they visit Los Angeles, the subway is something they love to take. Now that it connects to the Orange Line it will push more visitors into the Valley.” New attractions this year will include the Bob Hope Memorial Garden that opened at the San Fernando Mission last July and the growing NoHo Arts District. Growth in Hotel Industry Expected; Agency to Focus on Valley Meetings By JONATHAN D. COLBURN Staff Reporter Hotel operators can look forward to another year of growth in 2006, although numbers won’t be climbing as impressively as in the past couple of years. In the Valley, occupancy rates through February were about 77.9 percent at the end of October, which represented about a 6 percent increase year over year, and average room rates were approximately $107.99, also a six percent increase. “We’ve been in a period of steady recovery for the last couple of years, and we are pleasantly surprised by some of the numbers, frankly,” said Chris Heywood, a corporate communications manager with LA Inc, the Convention and Visitors Bureau. “Moving ahead into 2006, based on the PKF lodging forecast we should basically see occupancy grow at about 2.6 percent, which is a nice percentage increase. Average daily room rates are going to be about the same, we don’t anticipate a major up-tick there.” LA Inc. will continue to focus much of its advertising campaigns on the 58 percent of leisure visitors that drive into the city, which means a presence in the San Francisco, San Diego and San Jose newspapers and other advertising. With a mind to increase meeting and convention business in the Valley, the group just finished its national sales meeting, which took place at the Warner Center Marriott and was attended by about 30 Valley sales professionals. LA Inc.’s direct line service manager, a relatively new position, will continue working to attract smaller meetings that typically book space at Valley hotels. PKF, a hospitality research company, is also tracking increased spa business at hotel properties, and noted that from 2003 to 2004 spa revenue grew 11.2 percent. While spas have been expanding in urban environments for the last few years, hotel companies like Marriott and Fairmont have started to brand and standardize their services, and that known spa brands are being brought into hotels for a competitive advantage. Hospital Executives Nervous as Seismic Deadline Nears By JONATHAN D. COLBURN Staff Reporter The coming year will bring hospitals one step closer to the Jan. 1 2008 deadline to meet state-mandated seismic safety requirements. Hospital administrators are worrying about whether they will meet their deadlines. Jan Emerson, spokeswoman for the California Hospital Association, said that although some hospitals have been granted five-year extensions in bringing certain buildings up to code, others need more time and more money to complete the work. “I think the legislature is getting to the point where they’re saying ‘you know, there’s got to be some assistance,” said Emerson. A study in the late ’90s, she said, showed that there were 900 hospital buildings that were at risk for collapse in an earthquake, but that more current research will show there are about 300 buildings in that category at lower risk than the others. The CHA is supporting a bill that would allow hospitals more time to bring those buildings up to code in exchange for meeting California’s 2030 seismic requirements 10 years earlier. “We’ve tried getting seismic legislation passed for the last five years, and every year it’s rising in terms of its priority within the legislature,” Emerson said. “We still think some assistance is a big issue, and it’s getting close to the point where we’re going to have to take some action.” Also at issue for hospitals is the increasing money required for charity care. None of the bills currently in the legislature offer any kind of permanent solution for a problem that’s forcing some hospitals to close, Emerson said. There’s no indication, however, that 2006 will be the year in which the California finds a way to provide insurance to the 7 million residents going without it. Scott Reiner, CEO of Glendale Adventist Medical Center, said hospitals will continue struggling to fill all of their open positions from nursing to pharmacy departments. To address the nursing shortage in the state, the CHA is also sponsoring a bill that would place a tax on tobacco products and spend the resulting money on greatly expanding nursing education programs. Reiner added that finding money for capital expansions is also a major challenge. Hospitals in the Valley that have been able to expand or invest in new technology have had to rely heavily on philanthropy to do so. Glendale Adventist will be opening its new patient care tower (built with a heavy reliance on philanthropy) in 2009, increasing its number of licensed beds by 52 as patient volumes continue to rise. Reiner said that he, like hospital administrators across the state, is hoping to see some improvement in California’s Medi-Cal reimbursement rates. “There’s not enough money in the system,” said Reiner, “Maybe I shouldn’t say that, maybe there is enough money, but it’s not getting to the providers.” State Races to Dominate Local Political Scene By JONATHAN D. COLBURN Staff Reporter Valley residents will be choosing several different state representatives in the coming year, and one of the most contentious races will see City Councilman Alex Padilla squaring off against Assemblywoman Cindy Montanez to fill the State Senate seat currently occupied by Richard Alarcon. The race is expected to be very competitive. Each candidate has been a prot & #233;g & #233; of Alarcon, and each has spent much of the preceding months pulling in campaign donations and lining up supporters. Mayor Antonio Villaraigosa, whose endorsement would be extremely influential, has yet to declare his support for either. With news circulating that Padilla’s support within the City Council was starting to lose steam, he announced his departure from the position of Council President earlier than expected. In Assembly District 43, analysts are looking for a tough primary battle between three Democratic candidates looking to take over Dario Frommer’s seat. The district includes Glendale, Burbank, North Hollywood as well as parts of Silver Lake, Los Feliz and Griffith Park. A majority of the voters in the district come from Glendale and Burbank. Former Assemblyman Scott Wildman, Burbank School Board Member Paul Krekorian and Glendale City Councilman Frank Quintero will be battling it out in the Democratic primary. So far, Wildman and Krekorian are close in the polls, with Quintero trailing. In the meantime, Dario Frommer is planning to run for state controller later this year. Other Democratic candidates will likely be Sen. Joe Dunn of Santa Ana and John Chiang, chairman of the State Board of Equalization. City Controller Laura Chick had been mentioned as a likely candidate, but announced in early December that she would not be running. Likely Republican candidates include Sen. Abel Maldonado of Santa Maria and former Assemblyman Tony Strickland of Thousand Oaks. Candidates for the 41st Assembly District seat to be vacated by Fran Pavley are involved in what could be a strange race. Democrats Julia A. Brownley, Barry Groveman, Kelly Hayes-Raitt, Jonathan Levey and Louise Rishoff are all vying for the seat. Pavley has endorsed Rishoff and Sen. Sheila Kuehl has thrown her support behind school board member Brownley. Groveman, the mayor of Calabasas, has raised more money than all his opponents with $270,000, including a $100,000 loan that he made to the campaign. Levey, a law professor from Santa Monica and a political unknown, has also gotten a head start, raising $233,000. Financing Loosens Up While New Banks Proliferate in Area By SHELLY GARCIA Senior Reporter It remains to be seen whether money will be easy or cheap in 2006, but the places to get it are likely to be plentiful. Equity and venture capital funds are continuing to raise copious amounts of money, and new banks continue to open for those seeking debt financing. “I’m very bullish on private financings,” said Randy Churchill, director of business development at PricewaterhouseCoopers LLP. “What factors will contribute to that? I would say investor optimism and also the number of new funds that are either just closing or in fundraising mode.” After several years of shifting focus to companies with established track records and revenue streams, venture funds are once again looking at earlier stage companies. At the same time, memories of the dot.com bust, which left many investors soured on Internet companies, have now faded. And some of the new Web-based business models have provided strong returns to investors, opening the door for financing to these companies as well. All told, venture capital and equity funds are looking at a range of investments with new enthusiasm. There is also some evidence that the IPO market, which languished for most of 2005, is due to pick up. Meanwhile, new banks continue to open. Although some in the industry say that application approvals will slow as the California Dept. of Financial Institutions, which must green light new banks, seeks a new director, others wonder if a slowed rate of approvals may have more to do with the bottleneck created by a slew of applications. Many in the industry continue to believe that, especially in the Southern California area including the San Fernando Valley, the bank consolidation of the 1990s has created plenty of opportunity for new players. The one caveat is rising interest rates, which could dampen the outlook for loans. Office Rents Continue to Rise as Area Struggles with Space Issue By SHELLY GARCIA Senior Reporter With vacancy levels nearing the mid-single digits, a record of positive absorption that’s lasted now for many quarters, and virtually no new construction on the horizon, office tenants can expect to see rents rise considerably in 2006. Some might say the increases are overdue. The current asking rents, averaging $2.33 per square foot in the Valley, according to statistics compiled by Grubb & Ellis, have held relatively stable over the last year, even as vacancy rates continued to fall. But rents on newer buildings have already begun to rise, and there are more increases in store for next year. “In the past year, people have raised rents at least 5 percent,” said Tom Festa, a broker with Grubb & Ellis. “This year, with the shortage of space, you’re going to see at least a 7 percent or 8 percent increase, maybe 10 percent.” According to Grubb & Ellis, the current vacancy level in the Valley is 7.9 percent, and as the economy continues to expand, that level will continue to fall. At the same time, new construction, what there is, will lift prices further still. “Westlake Plaza East is asking $3.05. Those are record rents,” Festa said. “But construction prices are up, and if you want to be in a new building, you’re going to have to pay.” In many other respects, however, 2006 will look a lot like 2005. Rising interest rates and a lack of available land will likely create what David G. Mgrublian, CEO and managing director of IDS Real Estate Group called a “bump along year.” New development will be limited and restricted to infill properties, and acquiring those rare sites is likely to take more creativity than ever. Many developers have already moved to outlying areas and states to find suitable sites, and more will follow in 2006. Smaller industrial properties will continue to be in high demand as users seek out buildings that can be financed by SBA loans. Even with interest rates creeping up, buyers will still be able to own those properties at costs lower than the price of leasing, and brokers and others say the situation will continue until rates hit levels of 8 percent and higher, an increase likely to take several more years. Even residential real estate, and the highly anticipated bursting of the bubble, is likely to seem more like a slow, quiet fizz. Sales have slowed considerably in recent months, but to date, the median price of a home continues to rise, albeit at a far slower pace. Most say that prices will stabilize, and, in some markets, show some declines, but in general the housing shortage in the area will keep the fundamentals in the sector stable. Bleeding Eases as Manufacturing Undergoes Shakeout By JEFF WEISS Staff Reporter In the beleaguered local manufacturing sector, maintaining the status quo is about all most observers can ask for, and if one keeps such modest goals in mind, 2006 will be a reasonably upbeat year for the manufacturing industry. In recent years, the forces of globalization have battered the job market for manufacturing jobs, as numerous local firms have outsourced production jobs to Asia and Latin America, not to mention other states that offer tax breaks or lower business costs. But as the New Year begins, the bleeding seems to have subsisted and manufacturers that are staying on top of the industry trends are poised to have a solid year. “Overall business conditions are good, but again this only applies to those companies that are a little more advanced than your traditional mom and pop types of companies.” David Goodreau, the chairman of the Small Manufacturers Association said. “The companies that stay on top of technology and have more financial resources are tending to be the ones that are grabbing the biggest share of the opportunities available right and they’re also better positioned to take advantage of what’s going on within the global environment. The more agile a company is, the more contracts they are likely to win.” Additionally, Goodreau points out that the effects of workers comp reform will continue to kick in, in the coming year, giving manufacturers a much needed break from the increases that have plagued the industry in recent years. According to Daniel Blake, the director of California State University, Northridge’s, San Fernando Valley Economic Research Center, the two-pronged factor of the reduced workers’ comp costs, coupled with the renewed vigor of the local aerospace industry will lead to fewer job losses in 2006. “From a general perspective, things are down for the aerospace industry, in that we’re still looking for it to lose about 600 to 700 jobs in the next year,” Blake said. “But that’s much lower than it has been in the past in the past few years where there were 2,500 to 3,000 job losses yearly. In a sense, it’s good news.” Another trend to watch during the course of the year is consolidation within the sector. As competition within the industry becomes increasingly difficult, smaller firms have been getting bought out or are closing up shop. “Many small to medium-sized companies have not adapted to techniques that would help them compete. Subsequently, those companies continue to go out of business or get bought up,” Goodreau said. “Fewer companies are doing more jobs. However, there remains a lot of opportunities for the few companies that are striving to stay on top. We’re in the midst of a long term shakeup and there’s no doubt about it that the playing field is changing.” Business to Soar for Private Air Firms By JEFF WEISS Staff Reporter With the commercial aviation industry showing no signs of recovering from its woes and the economy continuing to expand, the local business aviation industry is expecting a good 2006. Additionally, the New Year promises an implementation of the long-awaiting Van Nuys Airport Master plan, which will inevitably alter the airport’s future for years to come. Ever since 9/11, the business aviation industry has been reaping the benefits of the commercial airlines’ troubles, as harried businesspeople are typically in no mood to put up with the long waits and scrutiny required to fly commercial. And at Van Nuys, companies like The Air Group, Clay Lacy Aviation, and Petersen Aviation and many others have been in growth mode capitalizing on the increased traffic. And experts expect this unprecedented growth to continue into the foreseeable future. “It’s no secret that the business aviation firms have been doing very well of late,” Brian J. Terwilliger the producer and director of One Six Right, a film about Van Nuys Airport, said. “Things have been on the rise ever since commercial aviation became so cumbersome, and I don’t see a change about to happen anytime soon. I believe this is a permanent alteration in the way people fly and it’s only going to continue to benefit the business aviation industry.” Another trend sure to impact the local business aviation industry is the gradual introduction of the next generation of private jets that are beginning to come onto the market. These jets are seen as lighter, faster, safer, and quieter than previous models and many expect businesspeople to switch to these new planes. “The new business jets are becoming quieter and quieter and more and more efficient,” Terwilliger said. “I think that they’ll lead to more people flying business aviation, the technology and the safety is becoming more and more attractive and if people can afford to do it, they’re willing to pay the cost. Business jets can get to airports that commercial planes can’t get to and businessmen love the convenience.” Also 2006 will mark the beginning of the official implementation of the Van Nuys Airport master plan, with the plan having been approved by the Los Angeles City Council in October and awaiting the Mayor’s signature. According to Stacy Geere, a spokesperson for the airport, the mayor is expected to approve the plan sometime this month. “In 2006, we’re looking forward to the opening of the new Los Angeles fire department operations facility. It was a $30 million dollar bond project to construct a brand new helicopter center at the airport,” Geere said. “We’re also looking forward to working on the new dedicated propeller area that will serve as a key element of the master plan. It will set aside acreage for small aircraft to have room at Van Nuys.” Tech Inroads in Hollywood By JEFF WEISS Staff Reporter While 2005 could be described as the year that Hollywood began to dip its toes in the waters of technology, 2006 will likely showcase the industry’s full scale immersion. Much hyped technologies such as video on demand will finally become a major player in the space, as companies rush to produce content capable of being shown at any time at the viewer’s discretion. Additionally, the consolidation that took place over 2005 will only continue to occur in 2006, as companies continue to purchase massive libraries of content to leverage these new technologies. “2006 will be the year of which the world of technology will meet the world of entertainment,” Ali Mogharabi, an analyst for B. Riley & Company said. “You’re going to really see this trend pick up steam in the second half of the year, but it really started to pick up the pace a couple months ago with the debut of the iPod video. The VOD market hasn’t even emerged fully yet and that’s a big plus as it gives the content providers a means to more effectively market their content.” In the new year, many expect the traditional old media companies to capitalize on this new technology. Already, Disney through its ABC Network has made “Desperate Housewives,” and “Lost” available for download on the iPod. Additionally, Warner Bros. has gotten in on the act as it has teamed up with American Online to launch a broadband video network called In2Tv set to launch next year. The network will feature old Warner Bros. television shows such as “Welcome Back Kotter,” and “Growing Pains.” But the major players aren’t the only local firms that will likely capitalize on these new ways to leverage content. Chatsworth-based Image Entertainment Inc., has been quietly amassing a vast library of content and building up its subsidiary company Egami Media, which specializes in the distribution of digital content. Additionally, Burbank-based TVN Entertainment has entered into myriad agreements to provide video-on-demand programming for nearly ever major cable provider in the United States. Expect the levels of local production to remain high. In 2005, Film LA Inc., reported that the levels of local film and television production topped 2004’s numbers by five percent. And Steve Macdonald, Film LA’s president, has gone on record to say that 2006 also is shaping up to be another solid year. On the commercial end of the business, Steve Caplan, the executive vice president of the Association of Independent Commercial Producers, said that he expects 2006 to be another strong year for the industry, particularly if in the spring the state legislature passes a round of tax breaks designed to help stem runaway production. “We’re hopeful that 2006 will continue the positive trends that are underway in our industry, though there remain some areas of concern that will watch out for, including the way that new technologies such as TiVo and video iPods are going to affect the way that advertising is created,” Caplan said. “However, if the tax incentives bill passes it would certainly send a message that California wants to keep its share of production at home. We’re hopeful that it will happen in the next session.” 101 Tech Corridor Gains Attention; Surge in Deals Expected to Continue By JEFF WEISS Staff Reporter The boom in the wireless market and Internet-related businesses locally is expected to continue in 2006 as a good year is predicted for the 101 Tech Corridor. In the new year, many expect companies like Calabasas-based Strix Systems and Xirrus Inc. to continue making a name for themselves in the tech space. Strix Systems spent much of 2005 gaining large sums of venture capital funding and Xirrus is well-regarded in the industry thanks to a management team led by Dirk Gates, the former head of Xircom. Ben Kuo, the founder of well-known technology website, Socaltech.com, singled out both Xirrus and Strix as among some of the companies leading the pack locally. “Strix and Xirrus have been garnering a lot of attention as have companies like Inphi and Fulcrum Microsystems,” Kuo said. “They all seem to be making some progress in getting customers and Strix recently deployed a wireless network for the entire country of Macedonia.” Kuo also mentioned that another trend to watch for in 2006 is a continued interest of angel investors in tech firms locally. In particular, Kuo mentioned the emergence of the Westlake Village chapter of Keiretsu Forum. Indeed John Dilts, the chapter president of the Westlake Village, Santa Barbara and Los Angeles chapters of Keiretsu says that his organization has seen a lot of tech deals in the past year. And for 2006, he expects this surge to continue. “We’ve seen a sizable number of software deals including some very interesting game companies as well as enterprise software opportunities. Digital media seems to be a hot area that’s expanding as new technologies in that space are hitting the market,” Dilts said. “Software on demand and software as a service have created a lot of buzz. Instant access to software of all types seems to be a definite trend to watch. And we’ve seen a noticeable upswing in our technology deal flow lately and investor interest in the tech sector generally seems to be coming on strong as we head into 2006.” Also 2006 might turn out to be the year of the local search firm, as Kuo also singled out local firms like Encino-based ReachLocal and Agoura Hills-based Jambo for having gained a great deal of traction in this rapidly growing niche. Additionally, having purchased Santa Barbara-based Internet advertising firm, Fastclick for $214 million in 2005, Westlake Village-based ValueClick is also seemingly poised to capitalize on the booming Internet advertising market.