Parts of Star Trek Beyond were filmed in Dubai (Youtube)
When scenes from the recent Star Wars and Star Trek movies were shot in the UAE, it was seen as a massive boon for the country’s film, tourism and hospitality industries. A more unlikely beneficiary has been the financial sector. According to Reza Dari, CEO of UAE-based Global Investment Bank Limited, the buzz created around the shooting of such Hollywood blockbusters in the emirates, and the UAE’s ongoing attempts to position itself as a global film production hub, have helped generate interest in the film industry from private investors.
GIBL says it’s banking on the niche to find value for potential high-net worth customers. Last year, the boutique investment firm first announced plans for a multi-million dollar International Film Fund to be domiciled out of the UAE. Dari revealed to Bloomberg Businessweek Middle East that the $300 million fund is in the final stages of regulatory approval and will be launched early in the second half of 2016.
Until recently, regional investment in Hollywood productions has been virtually non-existent, due to two reasons, says Dari. The first has been a perceived barrier to entry to Hollywood that’s deterred investors from the region, while the second is a lack of service for those interested in jumping the gate. “Innovative new come-to-market financial products that can help investors tap into film industry assets have so far been absent from bank offerings in the region,” Dari says.
Still, film funds aren’t an entirely new concept in the region. A number of media organisations including Abu Dhabi’s state-backed Image Nation and Qatar’s Alnoor, have launched similar funds in the past. However, GIBL’s fund will be the only one in the region open to both private and institutional investors, Dari says.
Central to the fund’s appeal is that it promises higher returns by receiving more than just shares of ticket revenues. Box office sales account for only a portion of a film’s gross, the majority of which comes from merchandising, commercial endorsements and other avenues. “We’re looking to own a film’s intellectual property,” says Dari. That, he says, will allow GIBL to extract the maximum possible returns from investing in an industry where expected blockbusters can quickly become box office blunders—this year’s Batman v Superman: Dawn of Justice, suffered the largest second week drop in ticket sales in history, but a combination of video on demand, online sales and merchandising will allow it to have a return of investment over 30 per cent, according to Forbes.
Securing a share in that kind of ROI is only possible with accessibility to the industry, which GIBL will have: A team of leading Hollywood experts will form a core part of its management team, “possessing a combined expertise of over a hundred years in the industry,” says Dari.
“If done right, a regional fund financing film industry productions can outpace returns that many other industries can provide,” he says. The film industry tends to outshine other asset classes in times of economic uncertainty, says Dari, a claim supported by the US’s National Association of Theatre Owners which found that box office attendance in the world’s biggest film market increased in six out of the last eight recessions. The fund’s potential to offer returns, even in tough times, means it is a much more attractive proposition than other classes, he says.
Generating interest in a financial product for the film industry has been more challenging than in other industries, says Dari. Investors in the region haven’t been quite sure how such an investment vehicle might work. “There hasn’t been a whole lot of exposure in the asset class in the region so far,” he says. But appetite for the fund has been whetted: Initially announced at a value of $100 million, the fund has grown in capitalisation threefold, says Dari.
At a minimum subscription “well north of $1 million,” the fund will be open to a select number of qualified investors, and because of its open-ended nature will also look to investors from beyond the Gulf Cooperation Council bloc to subscribe. Dari expects the fund, which will be open for subscription for six months until the end of 2016, to initially attract more investment from other parts of the world. “But as awareness grows, GCC investors will probably account for a much larger share of subscriptions,” he says.
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