An Investment Primer For High Net Worth Investors Thinking Of Movie Finance

Alright, so you woke up one day, checked your Swiss Bank Account, called your family office planner, had breakfast with your private client service wealth manager, got your tax accountant on the phone, and between three of you, you decided to invest your proceeds from your latest company’s Merger or Acquisition not into some dubious hedge fund or start-up biotech venture, but into financing Hollywood films because you figure you need the State tax Credits, the Federal tax write-offs, as well as a nice hedge of revenues from a few movies.

Now, this may not ring too well initially with your hedge fund manager neighbors in Connecticut or your oil and gas investor friends in Bahrain or Dubai, but aren’t these the same guys who are financing Hollywood blockbusters? And the only question for you, how do you get in the game without feeling like the Uncle of the film school student who wrote his nephew a $1,000,000 check for a film that starred his theater department classmates and ended up as a free download on youtube.com?

So after doing your share of homework, here’s what you discover may be the opportunity to spice up your wealthy but boring life:

*Sergey Brin And Larry Page Of Google, Fred Smith, the CEO of Federal Express, Norman Waitt, the Co-Founder of Gateway Computers, Jeff Skoll Of Ebay, Todd Wagner and Marc Cuban (formerly of broadcast.com), Max Levchin and David Grodnick Of PAYPAL, Marc Turtletaub of The Money Store, Roger Marino Of EMC Corp, former Chicago bulls co-owner Jim Stern, Sidney Kimmel Of Jones Apparel Group, Minnesota Twins owner Bill Pohlad; Real Estate Developers Tom Rosenberg, Bob Yari; and, financiers Robert Sturm, Sheikh Waleed Al Ibrahim, Zeid Masri of SilverHaze Partners, Michael Singer, Mark Esses, David Larcher, Michael Goguen, Richard Landry, Michael Reilly, Rafael Fogel, and Philip Anschutz are just a handful of high net worth entrepreneurs who entered the motion picture finance and production business with successful results.

*There are various tradable state, federal, and international tax credit incentives that would offer a premium based on an equity position. Assuming there is a 10 million dollar budget film, where 50% of it is in equity, and 50% is through international distribution guarantees prior to release. Now assume there is a 20-25% tax credit on the entire amount of $10 million dollars, which will immediately translate into $2-2.5 million tax credit to an investor.

*Numerous hedge funds such as Reed, Conner & Birdwell (DISNEY), Legendary Fund (Warner Brothers), Melrose Fund (Paramount Pictures), Ingenious Media’s 700 Million dollar Float on London’s AIM, Benjamin Waisbren Investments, and a host of other funds and fund managers are entering the film finance arena.

*The explosion of international DVD, pay-per-view, home video, cable, megaplex theaters, the future of multi-lingual Internet video on demand downloads, and cross-market digital distribution including low-cost theatrical digital projection, the movie industry is accelerating at an unprecedented growth rate.

*The American Jobs Creation Act of 2004, which amends the Internal Revenue Code of 1986, was signed into law . The Act creates three tax incentives expressly applicable to motion pictures, one of which – § 181 of the Internal Revenue Code – is especially significant to independent film producers and their passive investors on qualifying films with budgets under $20 million dollars.

*The filmed and other entertainment sectors are constantly outperforming and beating analyst expectations with regards to growth, and are the only industries resistant to untimely global events and adverse economic conditions.

*Movie Investor returns may be more favorable and more liquid than holding direct equity positions in most public entertainment and other public companies, real estate investments, and other alternative investments.

*There is a huge demand, audience, and growing distribution structure for specialty independent, ,crime, horror, and other low budget films as exemplified by the success of such films as “Brokeback Mountain”, “Sideways”, “Capote”, “Garden State”, “Napolean Dynamite”, “Y Tu Mama Tambien”, “My Big Fat Greek Wedding”, “Memento”, “Crash” , “Saw 1 &2″, Friday The 13th”, “Halloween”, “Texas Chain Saw Massacre”, “Hostel” and “WOLF CREEK”, which was made for $800,000, bought for nearly 4 million dollars prior to its release by Dimension, as well as “Hustle and Flow” which was made for $2 million dollars and bought for $16 million by Paramount Pictures.

*Apart from large blockbusters such as “King Kong”, “Harry Potter”, and other large scale studio films, the majority of studio-produced films have been under performing at the box office. The films that have been successful for studios were all externally financed and or co-financed with studios, sold for 2-3 x their costs, and a majority of them retained foreign sales rights to maximize revenues.

So after looking at all the great benefits, how do you actually go about finding a deal or movie project where you are certain that half your money isn’t going to be used by a Hollywood producer as a down payment on a new mansion in Pacific Palisades?

The key that separates the successful film financiers vs. the newbie Oil magnates who come to Los Angeles with a pocketful of money and end up leaving with half a pocketful of money is called several things: structured finance, leverage, risk minimization, multiple exit strategies, tax credits, and the ethical consciousness of the filmmaker/producer.

What does that translate to you in a real world scenario. Lets say you want to finance 100% of a $1.5 million dollar low budget genre film whose worst case scenario is a DVD release and profits from international sales and perhaps some other equity sweeteners in the conversion of the securities that you subscribe for as part of the deal. Well, if you write a check for $1.5 million, and the film is shot in a state that has 30% in tax credits, you get back $450,000 in tax credits + under Section 181, you are able to write off that amount under Federal. So you are already making a nice return before the profits kick in. Then you figure you sell the film to 50 countries, and if you are really lucky, you sell the film for 3-4 times it cost to a studio at a swanky festival like Sundance, Toronto, Cannes, etc. Do this over 5-10 films and you can make a very profitable name for yourself among the Hollywood elite.

But lets really take this a step further and see how the bigger boys leverage film investing because they can get a bigger star which can translate in larger overseas sales. Lets say a filmmaker/producer has a $10 million film and you want in on the action. You would park $5 million in equity, receive an 20-30% tax credit on $10 million which will be $2-$3 million, the producer will get the biggest star he can, get a studio to kick in the other $5 million dollars, you wont worry about ever seeing a penny from the theatrical release because you know your DVD profits and international sales will cover your equity position. Make sense?

Now leverage this with different budgets, genres, stars, distribution, places where you can get high tax credits (Ie Puerto Rico is 40%), other exit strategies where you can find your shares on the London AIM, and you are on your new career path as a sophisticated and educated film financier. Off course, if you want to go even further and guarantee 100% of your capital, there are tricks to that as well.

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Investing in Toronto Condos

The Toronto Condos real estate market is growing and flourishing even in the midst of difficult economic circumstances. As the city of Toronto continues to grow, the demand for condominiums will continue to rise. Even now, the Toronto market is starting to heat up. Now is the right time to jump into the market and snatch up some of Toronto’s phenomenal deals while financing rates are at historic lows.

The city of Toronto is Canada’s most populous city, as well as the province of Ontario’s capital city. A cosmopolitan locale of explosive growth, Toronto condominiums are among the finest in the world. Construction on condominium buildings continues to surge in Toronto, with the best and newest condominiums being built all the time. Many different industries call Toronto home, and with these industries come the well paying jobs that continue to attract newcomers to Toronto in high numbers every year.

The variety, quality, and lasting value of Toronto condominiums make it a perfect place to invest in real estate. The high demand for housing spurred by an influx of over 1 million people over the past decade mean that your investment is guaranteed to generate a high level of return. Whether you’re investing through pre-construction sale, resale or assignment, the Toronto real estate market is a sure bet that the money you invest will yield solid returns.

High growth market, wide variety of investment opportunities, and historic lows on interest rates. If you are looking to make a wise purchase, now is the time to invest in Toronto condos!

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Acing That 100% Financing Application

100% financing mortgage loans allow you to cash out your home equity. Home equity is the value of your home less the debts associated with it. And since, in essence, that is your OWN money, then getting a 100% financing mortgage requires no down payment. Otherwise, it would seem to be a ridiculous set-up.

Funds gathered through a 100% financing mortgage can be used to pay off a debt, to purchase another property or even to remodel your house. Basically, by en-cashing the value of your home, you are helping yourself in addressing your more pressing financial responsibilities.

The Beauty of 100% financing

Although you are still required to pay application fees and points in a 100% financing mortgage, this type of loan has its own share of advantages. First, the fees (for instance application and closing fees) incurred can be deducted from your principal. Once again, it is essentially your own money that you are borrowing. Second, some costs associated with 100% financing are tax deductible in certain cases.

Thirdly, resorting to 100% financing allows you to enjoy a lower mortgage rate – Toronto or elsewhere – as compared to getting a second mortgage.

Qualifying for 100% financing

First, you need to have a good credit standing to qualify for 100% financing. Lenders should, first and foremost, be assured that you have the capacity to repay such a loan. Needless to say, to qualify for 100% financing, set your credit record straight.

Lenders will look at your debts: credit cards, student loans, among others. So if you want to increase your borrowing power, eliminate your debt. Show to your lender that you are capable of carefully managing your financing. Show them that you can prioritize paying off your debts. Clean up your record, so to speak.

Second, establish your capacity to pay. As with any form or credit, you need to show that you can pay your loan on a regular basis. Therefore, the need to get the best mortgage rate – Woodbridge or in any other part of Canada – is very important. This assures you of lesser amortizations.

Even in case of losing your job, you need to reassure your lenders that you can still pay the needed amortizations. Therefore, you need to have cash assets as well. You need to have savings and money market accounts. If you have these, then you will be more likely to get approved for a 100% financing mortgage.

With the many advantages of 100% financing, getting one is not always the best solution for you – given your unique circumstances. Therefore, before you make any final decision, check out your other financial options first. Shop for other mortgage products. Check out the internet for a wider choice of lenders. Should you need help, you can ask the experts in the field. They will be more than willing to help you out with this dilemma.

Once again, the primary goal of financing is to give you better terms and a friendlier interest rate. When a 100% financing mortgage cannot offer this, then maybe it is time for you to bring your business elsewhere.

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Presenting – St Aidan’s Church – Charity Comes Full Circle in Toronto’s Beach Neighbourhood

It’s ironic, just as I decided to do my first neighborhood portrait of Toronto, the Beach, my intended subject, was in the news a lot. For the entire month of January of 2007 newspapers, television stations and radio call-in shows were fascinated by one topic: the proposed Out of the Cold Program at St. Aidan’s Church at the eastern end of the Beach neighborhood.

The larger Out of the Cold network is an ecumenical project of a large number of Toronto-area religious communities, which open their doors to provide shelter, food and personal support for those in severe need in our City. These programs are coordinated so that there are always locations open during the winter months from November through April. Guests at overnight locations are served an evening meal, accommodated on mats and sleeping bags for the night, and served breakfast in the morning. Out of the Cold has been operating in Toronto since 1987 and originated from the efforts of Toronto social activist Sister Susan Moran and the students at St. Michael’s College School, who wanted to help the homeless.

At St. Aidan’s, the Out of the Cold program proposed to house 12 homeless men and women for 12 nights during the winter (all Monday nights) in an overnight drop-in program. Some residents in the area were concerned about the program and how it might affect children that are attending the day-care program at the Church, or whether it might have an impact on property values. The ensuing media coverage created quite a controversy, and some articles portrayed the Beach neighborhood in less than flattering terms.

By now I have personally spent about two months in the Beach, interacting with and interviewing a large number of non-profit organizations, volunteers, philanthropists and regular residents, and I have been nothing but amazed at the amount of community involvement, charity, neighborly assistance and humanitarian outreach that I have witnessed in the Beach. To mention just one example, I interviewed Arie Nerman, President of the Beach Hebrew Institute. His synagogue is part of the Beach Interfaith Outreach Program which hosts lunch drop-in programs for the less fortunate at five different houses of worship in the Beach every day from Monday to Friday for about seven years now. The spirit of helping the homeless is absolutely not new in the Beach. It was high time for me to visit St. Aidan’s and learn more about the Out of the Cold Program first hand.

I contacted the person in charge of the initiative: Father Stephen Kirkegaard, the priest of St. Aidan’s Anglican Church. His response was very welcoming and friendly, and he invited me to come in on Monday evening to see the Out of the Cold program in action. So right at 7 pm I showed up at St. Aidan’s, a beautiful church at Queen Street and Silverbirch Avenue that is going to celebrate its 100th anniversary this year. Several volunteers were posted throughout the hallways of the church and directed me into the basement where about 20 people were located, including guests of the Out of the Cold Program and volunteers. Two long tables were set up with food, and groups of people were sitting around tables, talking and playing cards. The atmosphere was quiet, pleasant and peaceful.

Right away I spotted Father Stephen; he was just in the middle of a euchre game with some of the guests and volunteers. He asked me to help myself to a bowl of soup and a drink and have a seat. I gladly accepted and helped myself to a hot steaming vegetable soup that on this day had been donated by the Quigley’s Pub and Bistro. The soup was flavoured with oregano and other interesting spices, and it was a delicious treat on a cold winter day.

After Father Stephen finished his euchre game we briefly went upstairs to discuss the plan for the interviews, and he explained that many of the guests who use this overnight homeless drop-in program are rather camera-shy and not very comfortable with the media. Also, there has been a lot of recent media attention, on some evenings there were seven over-night guests and 30 reporters. As a result many of the guests might understandably be experiencing a certain media fatigue.

I assured Father Stephen that I would completely respect the preferences of the guests and volunteers and only interview individuals who were comfortable with sharing their own story. The same would apply to photos: only individuals that would agree to have their picture taken would be photographed. This is a general policy that I apply in all my interviews.

Father Stephen explained that it would be a better idea to interview one of the guests first because they might actually get tired and want to go to bed. Then I was going to interview some of the volunteers and finally I would sit down with Father Stephen himself to get to know the Out of the Cold Program through his words.

So we went back into the basement and I sat down with one of the guests who had agreed to speak to me. Franklin started to tell me his life story: until very recently he was a fairly successful business person in the United States. He is originally from Toronto and owned a logistics company and decided to move to the Southern US to qualify for the Champion’s Golf Tour. Things were going well for him; he had good relationships with his customers, and he was working with his golf coach on improving his game.

Then the unthinkable happened: two of his major clients filed for bankruptcy, and along the way Franklin lost $100,000 of his own savings to pay his suppliers. In addition he suffered a severe knee injury which spelled the end of his golfing career. Two emergency surgeries drained him of another $40,000. At the end of these events Franklin himself was bankrupt and penniless.

So he returned to Canada in October of 2006. At the beginning he stayed with his brother who has his own family. Space was getting too small, so Franklin had to look for another place to live and he found short-term shelter with a friend in High Park. Ever since his return he has been trying to look for work and has been applying for numerous jobs. He has been looking for jobs in the golf industry, or as a driver since he has a perfect driver’s abstract and no demerit points. So far Franklin has not had any luck in finding a job, and he thinks that this has to do with his age: he is turning 56 this year. Franklin is finding that many employers simply are not interested in hiring older workers, despite the fact that he is well-spoken, has many years of management and business experience and a range of marketable skills.

Because his short-term accommodation options had run out and Franklin had no money and no place to stay, he was looking at other alternatives. He heard about the Out of the Cold program and decided to find out more about it. Franklin has been coming to St. Aidan’s Church for the fourth week in a row now, and he really enjoys the drop-in program at St. Aidan’s because it is such a small program. He added that some of the other facilities have 40 to 60 overnight guests and very limited bathroom facilities, something that affected him recently when he suffered from a stomach flue.

Franklin added that the people at St. Aidan’s are great and the food is outstanding. He is really grateful to this organization for the help that they give to people in need and added that he has a lot of respect and admiration for Father Stephen. In addition, a lot of the volunteers are just regular people from the community. Franklin enjoys the interaction with the locals who dedicate their time to help. To educate me Franklin pulled a piece of paper from his pocket that listed all the various religious organizations that are participating in the Out of the Cold Program. Every night of the week three or four different houses of worship open their doors to people who need a roof over their head. The organizations include Christian churches from a variety of denominations, synagogues as well as mosques. Franklin added that he has been to a variety of the synagogues as well as to one of the mosques, and he found the people in all these organizations extremely hospitable, friendly and welcoming.

Our conversation touched on modern city living in general, and Franklin was wondering how many people are living on the edge, how many people might be one pay cheque away from being on the street themselves. Many people today are living beyond their means, financing their lifestyle with credit cards. It does not take much to upset the financial balance in these situations.

Franklin said that two years ago he would have laughed if someone had told him where he would be today. He added that he is drug and alcohol free and is very willing to work. Right now he is worried about his grown-up daughter who just finished her degree at Concordia University and now wants to go on towards a graduate degree. It pains him to not be able to help his daughter financially right now.

Franklin’s story touched me and shook me up at the same time. As a small business owner myself I know how quickly things can change when major clients shut down, relocate or get merged away. Franklin’s story was definitely not the typical homeless story that most of us might think of.

Franklin was ready to join some of the others in watching “Pirates of the Caribbean” which had started to play on the TV in St. Aidan’s community room, so I thanked him for his time and we said goodbye. I was also interested in some of the volunteers who make this program work. Robert Saxon is a professor at the Ontario College of Art and Design and teaches advertising. Two years ago he relocated to Toronto from Syracuse University. Robert was born in Memphis, Tennessee, and has lived in major cities all across the United States, including New York City, Los Angeles, San Francisco and Atlanta. About his new home town he says “Toronto is a great city, right up there with all the major cities. I love how safe Toronto is”. He continued to say that he now lives in the Beach and has fallen in love with this area: he is just 20 minutes away from downtown and really enjoys the distinct neighbourhood feel of the Beach.

Through his attendance at St. Aidan’s he has met a number of new friends, and that is also how he found out about the volunteer opportunities for the Out of the Cold Program. Robert considers himself very fortunate and feels he has not done enough community service throughout his life. He sums it up as “It’s time to give something back to the community”. As far as the homeless issue is concerned, he figured he could very easily be one of those people, it only takes a streak of bad luck to put you out onto the street.

Robert added that he read a book once called “Travels with Charlie” which was written by a homeless person. The book eloquently told the story of a homeless man’s life on the street, and ever since Robert read the book he always gives money when he sees a homeless person. Ever since he started volunteering with the Out of the Cold Program he wishes he could do more. Getting involved in the community in an unselfish way has been an important step for him, he realized late in life that he wanted to give back to the community.

Just recently Robert’s daughter went away to university. She had not been able to reach him, so she asked him where he had been. He explained that he had been volunteering for the Out of the Cold program and his daughter said “That’s great”. Maybe she was also considering doing some volunteer work herself, and both father and daughter were surprised at their new found interest in community involvement.

Matt O’Gorman is another volunteer with the Out of the Cold Program. He has been living in the Beach since 1984 together with his wife and three children. Matt has always lived in Toronto and has an engineering background: he is currently working on a train signaling project in Shanghai and also gets to travel to this interesting place on business. His wife also volunteers with the program and helps to serve breakfast to the guests in the mornings. Their three sons attend different schools in the neighborhood and are very involved in hockey, lacrosse, karate and music.

In addition to volunteering for the Out of the Cold Program Matt also dedicates his time as a lacrosse coach and as a manager in the Greater Toronto Hockey League while his wife is a coach in the local soccer league. Matt added that volunteering is fun, he gets a lot out of it.

Originally he heard about the Out of the Cold Program through an article in the Beach Metro News. Then there was a community meeting at St. Aidan’s in November, and Matt added “It seemed like a no-brainer”. He felt he should be more involved in the community, and this project was just perfect for him. Now that he is thoroughly familiar with the program he feels it is a wonderful thing and great for the community.

Jennifer Baird has been a Beach resident for 15 years and was also looking to give back to the community. A friend told her about the Out of the Cold Program, and she said “Sign me up”. Once she realized that there was some initial controversy about the program she became even more determined to help. Jennifer explained that today there are so many volunteers in St. Aidan’s program (over 100) that each one only needs to come out once a month. There has been an amazing amount of neighborhood support for this initiative.

During the daytime Jennifer works in sales, and in the evening she participates in community choirs and spends time with family and friends. She wanted to make time for community involvement, and ever since she started she enjoys the interaction with the guests of the Out of the Cold Program. Jennifer added she was quite open-minded to begin with when she went into the project, but even so she was pleasantly surprised by the nature of the program.

As far as the program is concerned, Jennifer explained that whoever gets here first gets a spot for the night. Tonight for example the 12 spots were filled up by 4:30 pm. At that point the program has to turn people away. The Out of the Cold program at St. Aidan’s is extremely popular with guests since it serves some of the best food in the city; in addition it is a small program with only twelve spaces, an aspect that many guests enjoy. The quality of the food makes a huge difference.

Jennifer herself describes her responsibilities as “hanging out and talking to people”. As the hostess, she has to direct the guests, clean up and help with organization. She also gets to play cards with the guests. One thing that is important, according to Jennifer, is to have sensitivity to be able to tell when people do and do not want to talk. Her years in sales have helped her recognize that. Jennifer feels it is important to recognize that this project is about the guests and their needs. Tonight for example she was dead tired, and thought for a moment that she did not feel like going out any more. But once she came to St. Aidan’s she enjoyed herself and felt good that she had come out.

Last but not least I was able to talk to Father Stephen Kirkegaard himself. He explained that he was born in Montreal in a family with a Danish background. He added he is supposedly related to Søren Aabye Kierkegaard, the 19th century Danish philosopher and theologian, who is generally recognized as the first existentialist philosopher. He was brought up in a religious home, was baptized and attended Sunday school. But during his teen years he started to find the church boring.

As a child of the 1960s he went to India and studied transcendental meditation under Maharishi Mahesh Yogi. In his youth he travelled to Kenya and Zambia and also set up transcendental meditation centres. Today he is excited about Christian meditation, one of the great loves in his life. He enjoys teaching people how to be still and centered, an important skill in this hectic and frenetic life of ours. He adds “The heart is restless until it finds its rest in God”.

Interestingly, Father Stephen Kirkegaard was not always a man of God. For an entire decade of his life he was actually a businessman. He sold automated data processing services and was a sales training manager and a national training manager. Father Stephen values having been part of the business world since it is the compass of our culture of how we interpret the world. It certainly makes him understand his parishioners better.

After a prolonged absence from the Church, Father Steven’s interest in religion was rekindled in the 1980s. His fast-paced corporate life was based on a philosophy of working hard and playing hard, and he entered a serious life crisis: although he enjoyed a lot of outer success he was experiencing a deep spiritual poverty, even bankruptcy.

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