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Yuri Rutman's Alternative deal is one of many innovative structured finance deals that offers a potentially high yield investment, tax credits, an immediate ROI of up to 140% before profits. It follows a disciplined and strategic risk minimization strategy and multiple exit scenarios catering towards high net worth investors, including recent sellers and ex-CEO’s of multi-billion dollar corporations, real estate developers, hedge fund managers, private equity funds, and alternative investors.
Yuri Rutman has formulated a proprietary hedging model for a number of films that’s part of a larger film fund. The primary investors of the deal are looking at the structure not as a “pie-in-the” sky vanity investment, but a sophisticated business model that has a long term growth strategy.
”There is a lot of international private equity right now that’s chasing entertainment and film Investments”, Rutman states. “But smart money can become dumb money very quickly if they don’t understand the risk modeling and hedging techniques that are mandatory to insure success”.
A whose who of prolific billionaires and other Hollywood investors include Fred Smith, the CEO of Federal Express, Norman Waitt, the Co-Founder of Gateway Computers, Jeff Skoll Of Ebay, Todd Wagner and Marc Cuban. 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 Steve Samuels ; and, financiers Robert Sturm, Sheikh Waleed Al Ibrahim, Michel Litvak, Zeid Masri of SilverHaze Partners, Michael Singer, Mark Esses, David Larcher, Michael Goguen, Richard Landry, Michael Reilly, Rafael Fogel, Philip Anschutz , and others, ”The capital investments and appetite for films are coming from Dubai, Bahrain, Chicago, Wall Street, Silicon Valley, Russia, Hong Kong, and even China”, Rutman adds. “Everyone wants to bankroll a successful movie or ten movies”.
The attraction to Rutman’s deal is based on 2 funds he is setting up that caters to both institutional capital and smaller private equity firms and high net worth investors that want a taste. On one $1 billion deal currently out to large hedge funds and global private equity investors, he is leveraging a principal protected strategy that guarantees institutional capital plus profits from the finance, co-finance, and distribution of 40-100 films.
On a smaller deal, investors are able to realize returns of up to 140% before profits from tradable tax credit incentives similar to what real estate syndicators and investors utilize from Federal Historic Preservation Credits and other incentives. “But its more fun in my opinion”, Rutman adds. “That’s why so many dot comers, billionaires, and real estate guys are financing films. The structure is almost like developing a large commercial real estate project. Except in this case they see their names as credited producers in movie theatres, tv, DVD’s, etc. And if a film gets into the Cannes Film Festival, Sundance, Toronto, etc, the international travel perks are also in the mix”.
Rutman has opened his doors to a variety of prospective investors who are coming to him directly or are being referred to the deal by their tax attorneys, wealth managers, private client services heads, or word of mouth.
In a typical film finance situation an investor puts up anywhere between 50-100% of the financing on a film’s budget depending on his tax credit needs as well as the size of the film. Most films under 2 million are 100% financed as is the case of successful movies like “SAW”, “NAPOLEAN DYNAMITE”, “WOLF CREEK”, and numerous others.
For his investment, and depending on where a film is shot, he is eligible for a tax credit on the entire amount. If he is putting up 100% of the budget on a $5 million dollar film, he is getting an immediate return of approximately $1 million dollars in tax credits if its shot in Illinois plus 100% deduction of his investment under Section 181 of Internal revenue Services. Some states offer 30%, Puerto Rico offers 40%.
Rutman’s model is based on 100% financed films under 2 million, and 50%-60% financed films over that, with the deficit being covered by distribution advances. “So in some instances, I can make a $5 million dollar film, put in $3 million, pre-sell $2 million, and an investor still gets tax credits on the $5 million, plus a 100% Section 181 write off on his entire investment, plus international profits, plus an option to convert his investment into public liquidity if I decide to do a reverse merger or an IPO on the London AIM. Multiply this by 5 or ten films in different budgets, genres, and tradable tax credits, and the potential for varying returns, distribution channels, markets, and long term library potential is enormous”.
The company is trying to redefine conscious alternative investments and feels its business model would be superior to a lot of competing film funds.
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