Exploring Investment Opportunities In Film And Luxury Development With Cristhian Andrews

Welcome to the Next Level Income show, where it's our goal to take your income, investments and your life to the next level. I'm your host, Chris Larson. You can get a free copy of our book@nextlevelincome.com book or just click on the book link. Today's show is sponsored by Money Insights and their investment optimizer strategy. In my book, I share how I use this strategy to invest my money in two places at one time. This is a strategy that have been used by the wealthy for generations for estate planning, minimizing taxes, preserving wealth, and increasing stability for their investments. And now they can help you develop a plan to build an emergency fund, pay for college fund a business plan for retirement, and even optimize your investments. You can find out More information@nextlevelincome.com banking I'm excited to have on today's show Christian Andrews. Christian is the founder, CEO and chief investment officer at Initiative Equity Partners, bringing his vast experience in business leadership and his expertise in the real estate industry. It stems from countless transactions investing in distressed promissory notes, wraparound mortgages, traditional fix and flips, and commercial partnership acquisitions. In addition, Christian currently sits on the board of Prolific Artists, a privately held institution with professors from Harvard, Juilliard, Yale. I mispronounced that a little bit. Juilliard, Yale, and nyu. Christian, welcome to the show today.

Thank you for having me, Chris. It's a pleasure.

Absolutely. Man, I really enjoyed our first conversation hearing your diverse background. I don't know, a lot of people probably don't know even a lot of my good friends. My mother was a music teacher and she went to Shenandoah Conservatory. So. Yeah, so it's really, it's really cool to have somebody with kind of an artistic background that is also, that has crossed over and blended their experience in the business world. So for our audience, maybe you could share kind of where you started and how you ended up where you are today.

Thank you for having me. So the beautiful thing is music is some way, specifically music theory is connected to a very analytical side of the brain, of thinking. And when you bridge that together to modeling, performance, discounted cash flows, and then you add anything that can go wrong, just like music and exploring possibilities in a theoretical standpoint, it's a very close bridge, but most people are just not aware of that. And so it's the same part of the brain I feel, it's the same strength. And so that kind of just obviously way way back then, that kind of just inspired me to take the next the next step of not being a broke musician in New York City. But yeah, it's been a pleasure to actually have music as the background film, which we're currently pursuing right now. And so it's very close. It's a closed world in terms of the analytical perspective and sort of almost the relationships are similar in terms of the fundamentals of relationships. So nothing's really different. It's just the end result that you hear. That's. That's the only difference to me, you know, that's. That's how it seems.

Yeah, no, it's interesting. And if you look at kind of, you know, I was a musician, I grew up playing string instruments, played the bass until I was in, in high school, and I kind of transitioned over into cycling. And I always thought it was interesting because you have, you have the structure of music. You know, we composed. I'd go to music camp over the summers and we compose things. And like you said, I see a lot of similarities. In one, when I was structuring my training schedules for cycling, you have this macro perspective and it depends upon the, really the cadence of the music. And the same thing, if you're training for a specific event, you have a different way of training, you have a different pattern that you follow. So I hear what you're saying and I see. Is that a saxophone behind you there?

That is actually a saxophone. Yeah, that is, that is. We now use it as a dust collector mostly. Yeah, no, it's, you know, and when you're tasked with creating a three part symphony and you have to divide it into three parts, much like Beethoven and the Mozart or famous film composer John Williams, it's structuring a business plan. Three parts. What are the possibilities? How can they differ? You know, so it's, it's building business plans is what you do every time you purchase real estate. You know, you gotta know the, where you're going and execute it and who are the people towards the team. And so it's just like I said, it's the same concepts. It's just not by yourself.

So before we touch on what you're doing today and kind of what you've been doing in the real estate world, Chris, um, talk about the transition. So talk. Tell me about. So we're. Did you, did you study music specifically and then move into business or when did that transition occur and what kind of sparked that?

Yeah, I did. I actually got. So I was studying music in New York City and I got sucked into film from, from a gig. A friend had this documentary that was going to camp in festival and you know, I just pretty much jump shipped and I'm like okay, put, put, put, put this, put, put those grades on hold and just went all in on film. And one thing led to another and, and then I started getting to the film industry. And it's, it's what they don't tell you in the film industry. It's that it's, it's like it's partnership, commercial real estate. I see it, it's on the, you know, it's, it's, you can't fund, you know, twenty million dollar picture by yourself. It's, it's a partnership thing. And sometimes on the fund level, just like private equity, real estate, you know, it's 5, 8, 3 year holds with multiple films, the same exact measures, IRR XIR distribution. So it's the same thing. But in order to get into that world, obviously it's a closed club, you know, no one's gonna let you in unless you really have a solid foundation of relationships. And so, you know, I got a little bit producing side, directing side and, and really the business side and understand that that's when I actually came into contact with equity splits and all that good stuff and syndicated deals and pretty much you need to diversify your income as a very good investor needs to know that 20% of the portfolio has to be sector specific. You can't have one more sector more than 20%. And so it's very important that you don't take those hits during volatile times. And so interestingly enough, if there is some catastrophe which we now experience with the pandemic, a lot of things change. Except streaming platforms which went up like 200% every single month.

That's amazing.

So that's our investors. So that is a form of diversification, that you're just relying on human behavior. You know, you want to be at a spot where, you know, human behavior will do the obvious. Sometimes humans are obvious. You know, it's like people are just going to be at home, you know, and sit and watch. So it's good to just have, like I said, not more than 20, and not rely just on one thing. And so I think film investors that just in film and real estate, commercial fund managers or syndicators that just invest in that one thing personally, like I said, Joe Biden passing rent control could really destroy a lot of personal portfolios. And so I think that's where diversification of really solid things of human behavior that won't get touched, as Warren Buffett says, is there A moat around it. Can this be destroyed by anything else? And also, you want to look at hopefully that sector that has some sort of free cash flow. What, you know, money available at any moment in time. And film has a lot of that, especially a streaming platform like Netflix and hbo. Lots of free cash flow. You won't find that a lot of that cash flow, you know, with someone like Tesla, for example, which is the talk of here, you know, that free cash does not exist.

So they're like burnt. They might as well burn money.

Right, exactly, exactly. So that's how, you know, I got sucked into it and, and I was lucky enough to have a mentor that sort of gave me that advice very early on and it just made sense. And here we are today.

Yeah. So tell us more about. So you started a fund that invested in films. Is that accurate?

Yeah, so I personally invested. I did not create a film fund. Now I personally invested.

Gotcha. Gotcha.

Yeah. So obviously to run that, a fund like that, you have to actually have really solid relationships with all the A lister stars. And that is mostly agents and managers. And so that's. Yeah, so you got the outside investors and you got the agents who have the relationship. So that's gotcha.

So how do you, how does that work? So you say, hey, I want to, I want to invest in a movie. Right. So a lot of people, you know, they come to me and they've never invested in a multifamily or any other type of real estate syndication. We walk them through it and we say, it's not really that complicated. It's not that different from going out and buying something yourself or just we're just pulling it all together. Is it similar in the, in the movie world?

Very similar. I mean, you don't. I would highly advise, especially in times like this, to not invest in single movies. You know, that's like a single family residential property. You don't, don't really do that unless it's your own. Right. So like I said, unless you're making your movie, the Chris next level income moving, you know, maybe your life story. Right. So like unless it's your movie, AKA your house, and you do that, but when you're investing, you're not going to invest in a single, multi. Single family home. So that's the same thing. It's just the IR is just not there. There's a lot of things against it. You do sensitivity analysis against it. And there's 101 things that can go wrong and most likely actually goes wrong. So in terms of how the market responds, the project, sale price. I mean, even you're familiar with Christopher Nolan Tenet, the new film. So we're talking about Christopher Nolan, legendary director here. And so again, the market just responds in different volatile times. Like this kind of would be a $1 billion picture. And it's not looking that way right now at the moment. So that's why I personally am against investing in one. So you actually want a group of assets, much like you don't invest in one unit. You buy 200 units at a time.

Yeah, it decreases risk. Exactly.

And so those 200 units have power because even though they may be $110,000 a door, which $10,000 house is not the best house, but $110,000 unit combined with 200 other ones, it's powered, you got leverage. Property values go up because it's producing income. So it's the same thing with the film. You got 15 or 20 films. They have lots of potential to really instigate this fomo, what you would call fear of missing out from the actual acquisition companies. So Netflix, hbo, Apple tv, Walmart plus Paramount plus all these streaming platforms, Hulu, just fighting for one another because they want that group of units. Right. And so that's pretty much that. Like I said, it's only relationship driven. Not anyone can just invest in that asset class, which is very interesting world. And I kind of like that. I kind of like that because you talk to any investor that invests in the stock market and some real estate, and you tell them you want to invest in film, they run away. And good reason. Right. But when you tell them, hold on, look at the returns of the last fund that sold to Netflix. And then on top of that, some can sell the picture. You could do a lease option with a set of films. So Universal Pictures owns the films, doesn't want to sell them to Netflix, and so leases them, then now becomes portfolio income, rents coming in, and then gives the opportunity to buy it at a seven given point in time to the streaming platform. So that's depending on, you know, the rights and all that good stuff. But yeah, there's a lot of strategic. And so investors are just missing out because humans are natural consumers of storytelling. We want. You want to connect. We are driven by people's stories that are connected to us, that have experienced the same suffering as us, that have experienced the same probably lack of father, lack of finances, lack of this, lack of that. You know, that. And so. And sometimes when we want to escape and we don't want to Go the drama route. We'll obviously put on a hangover part two or comedy just to escape a little bit, you know, what if I did that? What if I went to Vegas? But yeah, I think it's a, it's a great investment when invested, right. When invested in the right packages and right films, the right people, the right fund manager as well and like, like real estate, you know, who's the sponsor, who's sponsoring this thing, what are the returns, what have you done? You know, and also obviously there, aside from actual monetary compensation, there's also a lot of other compensation with being involved in more benefits, you know, so those benefits are always great for, you know, relationships and other good stuff. And so it doesn't just stop at the monetary sector.

Yeah, no, it's, you know, I tell people what we do in the real estate business. It's kind of like the Warren Buffett strategy. It's not sexy, just like Warren Buffett's not sexy. But movies are sexy, right? So any movies that you've been investor in that we would know of, Chris?

Yeah, a handful. Just a handful of them. I mean right now we just invested in this new fund, lots of Leo DiCaprio picture, Brad Pitt picture. It's been great. I don't know what, obviously it's a five year hold, so we're gonna see what the returns are. Like I said, we're a new world right now. The AI world, AI is growing and growing by day. So as things get automated, obviously that has a little bit of an effect in the, in the streaming world. But yeah, we'll see, we'll see what happens with this one. And yeah, I'm excited. We are also, you know, invest on personal films, try to sell that into a fund as well. And so it really just depends where we are at that time. We, I really the reason, that's why we started the new fund, the luxury fund, because it's in and out and we're seeing a mass migration of about 3,000 people moving to Florida from New Jersey, Connecticut, New Hampshire, New York. All this wealth just leaving states because of tax policies, most weather, of course, no one wants that six degrees. Christmas, it's too cold, too cold. But all this mass migration is really just pumping up those Florida numbers. And, and so at this time we're just focusing on that until, you know, maybe we'll see 24 months in, where things stand, you know, and so that's the reason or like we jumped at the curve and you know, we, a partner of mine, you know, we saw Back in February, we started seeing the numbers when Covid really kind of started. Not so much in the US but it started already. And we were just looking at any back door trying to see if there's any layoffs that were happening. And it's. We were, okay, layoffs will start next week. And boom, next week they all started. And so right there and there we're like, okay, multifamily. I don't know about this. And so that's when we board with the Luxury fund.

Yeah. And that's our goal, you know, that's our big mission at Next level income is financial education first. We have a initiative with a local group here in Asheville to help educate really younger underprivileged people that I think are the ones that are affected the most by this sort of thing. So let's flip to the other end of the spectrum and this is a pattern that I've seen happening. People moving from high tax, high cost urban areas like New York City, like San Francisco, to lower cost, higher quality living areas like the southeast. Florida is a great example. So you're looking to capture some of this value and this opportunity that you see, Chris, with your new Luxury fund. I love the name. So what do you guys, what's the model like? What are you targeting? I spent quite a bit of time in Florida, in South Florida specifically. I know we talked about that. I'd love to love to hear what you guys have going on down there.

Absolutely. Yeah. So one of the aspects that's most important to investors is obviously that the time value of money and when you lock it up for five years or three years, it's losing value. And then when you introduce Jerome Powell and we're going to have that, IR is not going to be as pretty when you got inflation attached to the five year hold. Right. And so in the interest of investors and this mass migration that's going on, I mean we also have lots of hedge funds and leaving the Connecticut and New York. And so a lot of the buyers of these luxury mansions that we're building are actual hedge fund managers and employees from there one aspect of it. So you get all this wealth going pouring into Florida and Miami obviously, who doesn't love Miami? And we're constructing some assets over there, trying to get good prices on those lots or demolishing some homes and building brand new ones at a waterfront or non waterfront. So usually last between six to eight months and then depending on the actual design, it may sell in that eighth month we finish or it may just in six months. But we actually don't want to sell before 12 months. We want long term capital.

Okay.

Yeah. So short term, we're just gonna get hit with short term. Right. So we want our investors to take advantage of any bonus depreciation we can get on new itemized items in the property, any accelerated depreciation. We want long term capital gains and we want to also offset some of those gains by using a beautiful strategy called a deferred sales trust. I don't know if you're familiar with it.

Absolutely. We had, we had a gentleman on Brett Swartz talk about that on the show. Yeah, fantastic, Fantastic body of knowledge Brett has. So if anybody's interested in that, take a listen to that, that podcast there.

Definitely go to Brett Schwartz website and just go talk to him. So knowledgeable, such a cool guy. So, yeah, we're preparing for that. You know, we don't want to get hit by this restriction of 1031, which actually forces you make up a bad investment because there's a time limit, you know, other people's money involved. You can't, you need to really just buy low. That's when, the minute you make your money, when you, when you buy is when you make your money. And so acquiring something that's rushed, it's always going to be a bad idea. So a deferred sales trust is usually what we want and for our investors and for literally just anyone, anyone selling their business. I know that you have some listeners that are perhaps not in real estate, but they're business owners.

Absolutely.

You know, don't get, if you're gonna sell your business, don't get taxed. Do not get taxed. Avoid it.

Always. Yeah, always, Always options out there. And that's what, that's what I tell investors.

I want to make, you know, clear myself up here when I say don't get taxed for the general population. And you know, why not use the legal, you know, law that's there to actually, if you're a business or don't get taxed on your business at sales, sell that business through the first sales trust and then use that strategically to diversify into great investment. Really going to create passive income.

Absolutely, yeah. The three tenants, we help you make more money at next level income, we help you keep more money. We talk about tax strategy and then obviously we're talking about ways to grow the money like today, Chris. But yeah, that's the big thing. I mean, hey, use the laws that the government, that the IRS rules have been put in place. Keep as Much money as possible. You can always write a check to the US treasury if you feel so inclined. Always.

Always.

So. That's right. So if you feel like you're not paying your fair share, just pull out your checkbook and write it. Write a check to the US Treasury. That's what I always say to people that say, you know, we should pay more in taxes. I said, where's your check? Where's your checkbook? Write a check.

Here's the thing. There are about 6,029 pages of IRS code. Right. And only a certain number, anywhere between 10 and 15. There's only those 10 and 15 dedicated to raising your taxes, while the other remaining 6,000 are dedicated to lowering your taxes. And those 10 only talk about that. All gross income means any income generated from every source. That's all it talks about. And there's a diagram. But all the 6,000 are designed to lower your taxes, which means about 99% of the code is designed to save you money. People just are not inspired enough to save money for their children. I don't understand. Like, the code is there for you to take those exemptions file at the end of the year. It's all there.

Yeah. And the government wants. I mean, you know, you can look at it a couple different ways, and that's a great point. And I think one thing that I see as the irs, the government wants to incentivize private individuals like yourself, like us, to go out and invest our money in areas that are going to help. And housing is obviously a huge one. So some people may be saying, chris, well, you guys are building for these luxury products. So tell me, like, give me an example of the type of house, the size of the house, some of the amenities. I'm going to be like, I just built a house with my wife. My mouth's going to be watering. I'm sure listening to some of the stuff you put in here and like, the sale price. I'm curious, how's that look?

Absolutely. Yeah. So we strive for between the 3.5 to 4.5 million sale price.

Wow. Okay.

Yeah. Between 4,000 to 5,000 square feet. Obviously, building costs. If you're trying to build a property in Connecticut or New Jersey, there's just absolutely no way that you can build for any cheaper than 40% of the sale price per square foot. It can't happen in a lot of states. And Miami actually offers that opportunity where you can build something for 200, 250, 300 a square foot and sell for 900 square foot and so that's what that right there is where you see the like, forget sale price, forget square footage. What's the build price per square foot? And when you have that large of a gap, there's profit right there. Right. And then you have a tax friendly state on Florida which you know, long term capital gains is zero. So it actually, on the state level, so it's actually even perfect. And so try building in Connecticut or New Hampshire, you just can't. And then obviously, or Wyoming, there's just no market there. Literally in LA you're gonna get hit with a state capital gains tax, which by the way, the taxes are due at closing. Sometimes you're not going to do that at the end of the year. So it's really hard for other markets. And we see this type of asset class, if you really travel around the world, it just does not exist in the entire planet. I mean it doesn't even exist in the country with the benefits that Florida has. The next luxury market I see is obviously Los Angeles with this type of asset class selling for 800 1000, $2000 per square foot. You know, it's Los Angeles, but that comes with its things, you know. And so we are really just fortunate to have Miami and a city like this that has such a huge gap of build costs and sale costs and really benefits our investors at a partnership level. This is obviously a community, a tribe. Right. This is about a tribe together. Right?

Awesome. Yeah.

And the luxury builds, like I said, short term holds. And so we are not, by the way, we also offer 12% pref, which is not common. Most real estate private equity firms are 6 to 8%. And so we offer a non compounding, non cumulative 12% pref because it's such short term hold. We want 12% on your money right away before we as fund managers take anything. And so even if this deal goes south and doesn't sell for the, you know, we're going to give you your 12% right away and an 8515 split. You know, we don't, we're going to, you make all the money first before now we're able to sell higher, then that's when we, the split will change. That's an ir, but that's, that's, it's to protect the investors. And we know that we're, we're very vulnerable right now to what's going on in the country with any policies that can change. And so we saw, like I said, It's 20% of our sector, so we're going to take advantage of it. And when the time is right, we'll jump back into larger multifamily we need to see. And so it's very important that, you know, my tribe does not get affected by policies that are not business friendly, economically speaking. You know, so staying away from politics. And so that's literally the idea we had in March and we just saw those layoffs and this is not good.

Yeah. Well, Chris, before you share with the audience how they can get ahold of you, how they can check out your luxury fund, what kind of projects you're working on, or maybe even scheduling that time to meet you down in Miami, if you could go back in time and give your 25 year old self one piece of advice, it could be personal enrichment, business advice. What would that advice be?

That's very interesting. I'm gonna give this advice from a very analytical standpoint and I think that is having an understanding of benchmarking on your life. You know, we're talking about financial modeling. Financial model your life, you know, the same way we spend. And you spend a lot of time modeling, you know, discounted cash analysis. And what's it going to take to really hit these goals and these target irs. I think people should, I would give my. To model my life much earlier in that sense and stop wasting time on the thing. Not going to have an impact either on my happiness or my economic level. I think people have bad relationship with failure and bad relationships with money in the, in the instance that all money is bad, but money as you know, is freedom. And most importantly, and this is the example that I set that I wasn't really truly seen when I was 21 or 22. You know, I was, I'll tell you a little story. So I was, I was very. I was in college and I was in Union Square. Be no Union Square area in New York.

Yeah.

And I was on a bike, just biking around the area and there was a girl right in front of me and she was also on a bike and she. Out of nowhere, a cab just hit her and the bike crumbled and instantly she unfortunately actually died right at the scene. Paramedic then came, covered her body and I, you know, everyone gathered in a circle and I'm there and I was just, just right in front of her, behind her. And. And this really kind of had an impact on me and not only from the horrificness of the parents and her family, but also the cab driver's perspective on what he's gonna now his life just changes on that moment. You killed someone and These are obviously cab drivers who are also struggling to make ends meet. And so from a economic perspective, if you or I or anyone is driving is in the unfortunate position to hit someone on a bike. Most people don't have the actual economic stability to survive legal expenses in this country, you know, someone's going to jail, you can't defend yourself. And the average millionaire today does not have enough money to legally defend themselves. So what do you think? Do you got to raise your income? You know, you got to raise revenue sources, diversify things that you understand and things that and produce return. And so that's very important. It's not just for the safety of you. It's the safety of your family. It's the future, it's your legacy. And legacy is important. A lot of people don't see legacy as, you know, we're limited. We're here in the swine for a very limited time. I think legacy is very important that we can have on people. And you cannot have impact without money.

Absolutely. That's a great point. I just finished a book called Die with Zero and it talks a lot about that. If you haven't read it and you're listening, take a look at that book. Daiwa0. So Chris, I really enjoy this conversation. I wish we had more time. But if the audience wants to learn more about what you guys are doing, your background, your projects that you have going on with the Luxury Fund, what's the best way to get a hold of you?

Absolutely. So if you're interested in investing with us and partnering with us, our website is initiative equity partners.com and you'll find one of the tabs new Luxury fund there. Initiative equitypartners.com A little bit of our film site. Our website is Audacity, Audacity Innovative. You can check out some of our projects there as well. And yeah, we'd love to have anyone come speak to us. Reach out.

Awesome. Well, we'll have all that in the show notes if you're interested. Also have a link to our book which you can get for free. Really enjoyed your story, Chris. Enjoyed sharing more about what you guys are doing with Initiative Equity Partners and look forward to talking to you again soon.

Thank you so much, Chris. It's a pleasure.

Appreciate.