Georgia's Sweetest Peaches: $225 million of tax credits for Medient
Medient has brilliant financial people who understand how to get films and related needs financed in unconventional mind- boggling ways. For example, Graham Bradstreet, executive president and head of structured finance, while in the United Kingdom with the Working Title Group of Companies developed innovative film financing that established him as one of the leading motion picture financiers in the world. He then developed the concept of insurance backed financing. Through ICE Media he raised in excess of $1 billion of insurance -backed funding that contributed to budgets of over $3 billion covering more than 100 movies.
Last year the hot item for Medient was going after state tax credits and grants for new film studios. States do everything they can to attract film production to their district. It is not only because of the pride, the free increased tourism and the free promotion that the state gets as a result. It's that the movie industry has a 5X multiplier for economic activity. For every dollar a production company spends about $5 more is generated by caterers, hotels, limousine companies, costume designers, clothing companies, etc....
"So we went on a road show in 2012 and met with mayors, governors, senators, congressmen and economic authorities," says Jake. "We created a multi-state bidding war for our property location. Georgia came up with the winning package for us. That led in a local bidding war between Atlanta and Effingham County, adjacent to Savannah and the southern coast of Georgia.
"As a result, in August of 2013 the Georgia court system irrevocably approved the following package. A 1,560 acre property the size of Central Park was leased to us that was appraised at $22.1 million for $10 million in lease payments. They provided 100% financing at zero % interest. At the end of the 20- year lease we buy the property for $100.
"On top of that no lease payment for the first two years. On top of that $1.25 million in cash for site improvement. On top of that $3 million cash from the state as we hit certain job targets. On top of that no property taxes for 20 years on the property; that is estimated by management to be worth between $30 million and $40 million. And on top of that another 30% tax credit for every dollar we spend making movies in the state of Georgia. So overall, the package is estimated to be worth $225 million over four years.
"On top of that we have negotiated a deal with Prime Focus, which is one of the very largest post film production firms in the world. It has over 4,500 employees; they've done all the special effects for films like Harry Potter. Probably almost every 3D movie you've seen- they've done. Prime Focus has guaranteed to Medient equipment, services and proprietary software which we value to be worth $40 million to be used in our Studioplex project.
"We have raised $62 million so far completely non-dilutive for shareholders by both the government in our truly private/public partnership and by our deal with Prime Focus, one of the biggest players in our industry. We think this is a great verification of our business model."
This early financial success has not gone unnoticed. In December entertainment mogul Charles Koppelman joined Medient's board of directors. He is currently Chairman and CEO of brand development firm CAK Entertainment Inc. which advises recording artists including Jennifer Lopez. Charles built the largest music library in the world, sold it to EMI Records and pocketed $300 million personally. When Martha Stewart got in trouble he was credited with saving her company.
Why was his joining the Medient board surprising? "Charles is only on the board of two other public companies besides Medient, (which on April 10th had a stock market value on slightly fewer than 400 million shares of roughly $4.8 million). One is slightly larger at $4 billion total stock market cap called Six Flags Entertainment Corp (NYSE:SIX). The second is a bit bigger at $62 billion market cap, the Las Vegas Sands Corp (NYSE:LVS)."
Why join this tiny tot?
"Charles believes in our potential to become that kind of company. We are really a game changer for the whole industry!
"We like to say we are going to do to Hollywood what the Japanese did to the motor industry. We're completely reengineering the way films are financed and produced, not just in America but on a global basis.
"Let's go back to Bob's story," says Jake. "It has a great ending. Bob's film has a $10 million budget. We are going to make that film for $7 million because we are using our own Studioplex production property and equipment.
Even if Bob's story is set in Manhattan we've got 1,560 acres to go build back lots, office space etc. to avoid all the expenses you could imagine of the cost of production actually in Manhattan versus Georgia."
One of the high tech sets will be able to change backdrops to create the illusions of all major cityscapes like Los Angeles, London, Mumbai or Tokyo within the Studioplex.
"If we do need a live shot of the Brooklyn Bridge we can send a camera crew out of there for three or four days -not a big deal. So we are going to make that $10 million film for $7 million. The State of Georgia will then give us a tax credit (which can be sold) on top of it. Add in foreign sales, and we should be able to complete the budget.
"Therefore, we recently acquired Atlas International Film GmbH, one of the oldest sales agencies in all of Europe. Therefore whatever we make in domestic film distribution - a penny or more- is 100% profit to the bottom line.
