Let me start by saying I agree with most of the things you say and really enjoy your take on film and film finance. On this matter, while I think your logic is sound, I actually believe the inverse and I’m going to lump in the flailing stock market. Three years ago when we approached private equity, we’d often get this ridiculous look of “why should I invest in film, when their is free money to be made in real estate and the stock market. Guaranteed returns vs a highly speculative film investment”. Now with the struggles of real estate and the stock market and the loss of some consumer trust in both, especially with the recent Goldman manipulation, alternative investments such as film don’t seem quite so crazy. At least in the end there is an asset, unlike what the stock market has become. So, hopefully there’s some truth to that and regardless, it’s my spin.

Thanks again for this educational blog. It’s good to see someone opening dialogue on the “boring” parts of filmmaking when in fact it’s the engine, well I guess the fuel, of this industry. I’ll be at the film finance event you’re moderating tonight.

In this case, Jeff, I would trust your intellect more than the gut. I, too, have no hard facts to substantiate the following but observation and assumption. I feel that the most typical film investor is a different animal from the real estate investor. Let me Stanislavsky myself into the character of each.

As a real estate investor I deal with facts that I can trust. Granted, markets can go up and down and some of the most sophisticated developers have gone belly up by going overboard and guessing the market wrong. But if I don’t let my ego overtake my common sense, it is hard to lose money in real estate. Film? Why should I invest in film when there are so many far safer routes to take. I like bottom lines, a cottage by a lake, tranquil weekends.

As a film investor, I want a little more out of life than just predictable R.O.I. I value dealing with more interesting people, I like to challenge my soothsaying talents by examining a creative work and deciding how well it might do. I seek the thrill the unknown and the reward for having been bright. Oh, sure, I put money into real estate. It’s the only field in which I’ve really made any meaningful money – but God, how boring it can get and how many boring people one must deal with. Deep down, I believe that one day I’ll back another “Jaws” or “Driving Miss Daisy.”

To my way of thinking these represent the different types of investors in real estate and film and that is why I think there is no link between the two. One could probably research the history of the two markets and establish if, indeed, there has been a link. I would bet against the likelihood.

You have valid points, Phil & Scott, but I still think real estate and film investors are two different guys. That doesn’t mean they can’t inhabit the same body. Most of us are made up of different parts. We approach a classic statue with awe and reverence, practically wearing a Roman collar. An hour later we might help a sweet little old lady across the street and we have become a boy scout. And that evening we might take in a musical and sit up straight as our heart rate and blood pressure rises when the lead dancer, half-naked, flings her rear from side to side as we thought no human ever could.

Rajaratnam, who will be tried soon on something akin to insider trading, invested in a film or two at one time. He had a brother in production or some such connection. I doubt that he would ever have become a film investor if not for some family connection because hedge fund investing and film investing are world’s apart – and even when he did invest in film, psychologically, he would have used another part of his psyche.

Of course, my argument could be extended much further. There are probably divisions between film investors in comedies and dramas and action films and musicals. There are real estate investors who despise the word “creative.” They develop simple formulas which they follow successfully be it land for development or condo high rise or rentals, etc.

I’m in neither field now but every time I pass a magnificent office building at 111 St. Clair Ave. W., in Toronto, the wannabe developer in me scratches his head for ideas because it’s such a shame to see a building like this one sit empty for years. It was headquarters for Imperial Oil for some 20 years but they moved to Calgary about 7 years ago. The tax on the building would doubtlessly choke an elephant. It’s up for sale but no takers and they doubtlessly use it as a tax write-off but someone should do something bright with it……..

Jeff, I agree for a different reason. see my article here, relevant excerpt:

For example, real estate has lead the way in securitization. In the beginning, only Class-A commercial property was securitized. As technology and data progressed, more and more esoteric real estate properties, such as residential, and specialized property such as movie-theaters, were bundled together, or cross-collateralized. These assets were then split up into different risk classes. The film business has followed the same route. In the beginning, studio films were securitized. Now, with better data, any type of intellectual property can be securitized, including smaller and more risky assets.

more: http://hollywoodandwall.com/colony-capitals-founder-art-has-zero-downside/