Private Equity Fund Looks To Cash In, Hollywood-Style

Apr 26 2007 | 6:42pm ET

Real estate investor Tony Reynolds is looking to take a few high-net-worth and family office investors to the movies.

Reynolds is currently marketing his latest offering, the Select Film Fund, to these investors with hopes of attracting $1 billion. The Select Film Fund, which will invest in a total of 100 movies, is set to open at a theater near you in June.

Reynolds, the founder of Reynolds Family Homes, an urban affordable housing developer, and partner of a private equity real estate fund, Reynolds Opportunity Partners, thinks now is the time to get into the movie business.

“We have the real estate business and it’s going okay but the market is pretty much dead,” he said. “The money is drying up over there and is coming in here like you wouldn’t believe.”

The film fund will finance 10 different slates of 10 full-length feature films at an average of $10 million a clip. The fund will invest in low-risk and high-profit potential films such as “Are We There Yet?” and “Barbershop.” Instead of financing films only with major studios, the fund will also finance individual producers and directors.

“Initially, we’ve got a bunch of films in the $1.5 million to $2 million range but we have one film where it’s done on a green screen – it’s a ninja movie – and that one we’ll do more than $10 million,” said Reynolds, who is currently putting together a board of entertainment luminaries to vet film submissions from various sources. “We’ll be getting together about 12 times a year and we’re also going to be using Internet Movie Database and other matrix out there to determine what should or should not be coming in.”

Reynolds recently made three hires to help jumpstart his latest endeavor. Desiree Jellerette and K. Snyder have joined Reynolds to help source new opportunities from an office in Los Angeles, and David Areson, a former managing director of sales at Invesco and Citigroup, has been hired to market the fund from Greenwich, Conn. Jellerette has worked directly with famed directors Spike Lee and M. Night Shayamalan on feature films while Snyder has worked for his cousin, rapper and actor Will Smith, on the television show the "Fresh Prince of Bel-Air."

Reynolds claims that investors have been overwhelmingly supportive of his new venture.

“It’s just been incredible where we’ve got them approaching us!” he said. “Right now is a great time for us because real estate is down and the stock market is a wild ride so you’ve got a lot of high-net-worths who are looking for uncorrelated investments, and this is it.”

Media analyst William Kidd also shares Reynolds’ bullish view on Hollywood. Last year, the U.S. box office receipts totaled $9.5 billion, which ended a three-year slump that began in 2003, according to the Wedbush Morgan Securities analyst. This year, Kidd expects it to rise 5.2% to $9.98 billion, surpassing the record $9.54 billion set in 2004.

“The film business, if you go back to the late 80s and even the early 90s, was a fairly precarious business,” said Kidd. “Film economics totally changed with the DVD going from a risky proposition to something a lot less risky because DVDs have dramatically improved profitability. If there is an area where most studios overlook tends to be smaller pictures. The volatility of actual returns on smaller movies tends to be greater but more favorable than larger movies.”

The film fund, which has a five-to-10 year lockup, is targeting a 25% to 30% return. The minimum investment requirement is $250,000.

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