Exploring Investment Opportunities In Film And Luxury Development With Cristhian Andrews

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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, yes, it's really cool to have somebody with kind of an artistic background 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 the same part of the brain, I feel it's the same strength. And so that kind of just obviously way back then, that kind of just inspired me to take the next step of not being a broke musician. But 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, nothing's really different. It's just the end result that you hear, that's the only difference. To me, you know, 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 high school and I kind of transitioned over into cycling. And I always thought it was interesting because you have the structure of music 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 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. We now use it as dust collector, mostly. Yeah. No, it's when you're tasked with creating three part symphony and you have to divide it into three parts, much like Beethoven and 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 building business plans is what you do every time you purchase real estate. You know, you gotta know 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, talk about the transition. So tell me about. Did you study music specifically and then move into business or when did that transition occur and what kind of spark that.

Yeah, I did. I actually got. So I was studying music in New York City and I got sucked into film from a gig. A friend had this documentary that was going to Cannes Film Festival and I just pretty much jumped shipped and I'm like, okay, put those grades on hold and just went all in on film. And one thing led to another and then I started getting to the film industry. And they don't tell you in the film industry, it's that it's like, it's partnership, commercial real estate. I see it, it's on the. You can't fund a $20 million picture by yourself. 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, IR XIR distributions, it's the same thing. But in order to get into that world, obviously it's a closed club. No one's gonna let you in unless you really have a solid foundation of relationships. And so I got a little bit producing side, directing side, and really the business side and understand that. And that's when I actually came into contact with equity splits and all that good stuff and syndicated deals. And pretty much it's 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 year.

That's amazing.

So that's our investors. So that is a form of diversification, that you're just relying on human behavior. 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 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 invest 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. You know, as Warren Buffett says, is there a mode around it, you know, can this be destroyed by anything else? And also, you know, you want to look at hopefully that sector that has some sort of free cash flow, 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 a lot of that cash flow, you know, with someone like Tesla, for example, which is the talk of tier, you know, that free cash.

Does not exist, so they might as well burn money.

Right, Exactly. You know, I got sucked into it and I was lucky enough to have a mentor that sort of gave me that advice very, 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 run that fund like that, you have to actually have really solid relationships with all the A Lister stars. 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. How does that work? So you say, hey, 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 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 pulling it all together. Is it similar 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 really do that unless it's your own. Right. So like I said, unless you're making your movie, the Chris Next Level Income movie, 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 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 projected 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 is kind of what's be a $1 billion picture. And you know, 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, you know, combined with 200 other ones, it's power. You, you know, 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 a very interesting world. And I like that. I 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. 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 you 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, right? 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, 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 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, 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 Hangover Part 2 or a comedy just to escape a little bit, you know, what if I did that? What if I went to Vegas? But yeah, it's a great investment when invested, right. When invested in the right packages and the right films, the right people, the right fund manager as well. And like real estate, you know, who's the sponsor? Who's sponsoring this thing? What are the returns? What have you done? 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 relationships and other good stuff. And so, you know, it doesn't just stop at the monetary sector.

Yeah, 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? Any movies that you've been investoring 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, the Capitol picture, Brad Pitt picture. It's been great. I don't know what. Obviously it's a five year hold so we're going to see what the returns are. Like I said we're to 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 indie in the streaming world, but yeah, we'll see what happens with this one. And yeah, I'm excited. We are also investing on personal films, try to sell that into a fund as well. And so it really just depends where we are at that time. But I said a lot of market volatility right now, so it's good to just have that 20% and look for the next sector. I think the next sector is actually AI, like I said, I'm just petrified of very liberal policy that rent growth that actually don't benefit anyone. It's not, this is just benefiting landlords. Like I mentioned before, this is raising the standard of living and the beauty in which people live. And so it just scares me if any very extremist policy gets passed and because it just affects everything. And so 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. But all this mass migration is really just pumping up those Florida numbers. And with this new luxury fund, it's such a short term hold that it's in and out. We're not due to any of the volatility of the government controlling the business plan. And so at this time we're just focusing on that until maybe we'll see 24 months in where things stand, you know. And so that's the reason we're like we jumped to the curve and a partner of Mine, you know, we saw back 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. Layoffs will start next week and boom, next week they all started. And so right there and there we're like multifamily. I don't know about this because the government gets involved. Of course, it's always going to get involved. And that's when we on board with the luxury fund.

Yeah. So I want to touch on that here in a second. So you're in New York City, right?

New York, yeah.

Yeah. I can't remember if you're in Connecticut or not, but the rent controls, I talk to people about this. So I live in Asheville, North Carolina. It's a pretty liberal city as well, and we have some low income housing. And the one thing that, you know, I've seen, and this is my personal opinion, I'd love to get your thoughts on it. We started out five or so years ago buying workforce housing and people were concerned like, are you going to kick these residents out? We said no, we don't do that. We provide, you know, an improvement in the community. We provide a safer, better neighborhood, nicer place to live. People are willing to pay for that. What happens is you actually attract a better level resident or tenant and those that are dangerous or don't pay end up leaving. So it ends up having this positive effect on the community and a positive effect for investors. My personal thought has always been when you implement rent controls like they have in New York City, you artificially suppress that rent, which increases the gap between market rate units or properties and that rent, which I think that has a detrimental effect because it's like increasing the gap so big that some people can't cross it. What are your thoughts on that, Chris? And again, not to get too political, but you're just. From an economic perspective, what are your thoughts?

Economic perspective, Exactly. No politics in this. I mean, when you start increasing property taxes and you stop rent. Yeah, any, the most obvious thing is to withhold capex and not do a lot of reparations. We need that remaining capex for any cash flow, for any other emergencies, you know, just enough to keep the building surviving. And so, you know, paint starts chipping, this starts shipping. You're not going to take care of those new stoves and you know, faulty stove and you get. So it's like now you're actually affecting people because you put rent control and you continue to raise the taxes at 1.6% per year, whatever it is. So what do you think? It's actually going to have an effect on people. So sometimes really politicians don't really see the economic factor in that. I'm going to say this blanket statement, but there's not much financial literacy at the Congress level. They have money. Yeah. Financial advisors, power.

Right. Yeah. And that's our goal. That's our big mission at next level income is financial education. First. We have an 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. So 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's the model? 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 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 time value 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 to be then we're going to have that IR is not going to be as pretty when you got inflation attached to a 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 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 wealth going pouring in 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. Yeah. So short term we're just going to 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 gentlemen on Brett Swartz talk about that on the show.

Brett. Yeah, we worked.

Yeah, Fantastic. Fantastic body of knowledge Brett has. So if anybody's interested in that, take a listen to that podcast, definitely go.

To Brett Schwartz website and just go talk to him. So knowledgeable, such a cool guy. And so, yeah, we're preparing for that. We don't want to get hit by this restriction of 1031, which actually forces you to make up a bad investment because there's a time limit. I mean, the law of Parkinson says work expands to fill the time allowed. Good. It's like, okay, I made a new investment. But when there's government involved, when other people's money involved, you need to really just buy low. That's when you make your money. 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 and they put their business owners absolutely, you know, don't get. If you're gonna sell your business, don't get taxed. Do not get tax. Avoid always.

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

I wanna make, you know, clear myself up here when I say don't get taxed for the general population. And, you know, it's not that, you know, a lot of entrepreneurs or real estate or investors want to avoid tax. Instead, it's just different from a country like Sweden or Denmark, you know, where we see the actual effects of, of helping our community. I mean, I think you and I can both agree we want to give money to our government. Where we see benefits, we want to reap those benefits, whether it's education for our children, maternity leave, maternity leave, all this good stuff. And so when we see those things happening in our community, of course everyone will happily contribute. But when you have a lot of that money, just they don't tell you where it's going, first of all, they'll take it away from you first because they don't trust you. If you're a W2 employee, they don't trust you, so they'll take it away. And three, a lot of it is going to the military. I mean, that's just a fact. You know, this is a complete fact. And so why not use the legal, you know, law that's there to actually, if you're a business owner, 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. So if you feel like you're not paying your fair share, just pull out your checkbook and write a check to the US Treasury. That's what I always say to people that say we should pay more in taxes. I said, where's your checkbook? Write a check.

Here's the thing. There are about 6,029 pages of IRS code 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 exceptions 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, you know, I see is 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, the stuff you put in here and 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. Yeah, between 4,000 to 5,000 square feet. Obviously building cost. If you're trying to build 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 my actually offers that opportunity where you can build something for 200, 250, 300 square foot and sell for 900 square foot. And so right there is where you see the like, forget sale price, forget square footage. What's the build price per square foot? And you have that large of a gap. There's profit right there. Right. And then you have a tax friendly state in Florida which has, you know, long term capital gains is zero. So it actually, on the state level, 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 going to get hit with a state capital gains tax, which by the way, the taxes are due at closing. Sometimes, you know, you're not going to do that at the end of the year. So it's really hard for other markets. And we see, you know, 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 $801,000, $2,000 per square foot. It's Los Angeles, but that comes with its things. And so we are really just fortunate to have Miami in 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 community, a tribe. Right. This is about a tribe together. Right?

Awesome. Yeah.

And the luxury builds, like I said, short term holds. By the way, we also offer 12% pref, which is not common. Most real estate private equity firms are 6 to 8%. So we offer non compounding, non cumulative 12% pref because it's such a 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 it doesn't sell for the, you know, we're going to give you your 12% right away and an 8515 split. You make all the money first before, now we're able to sell higher, then that's when the split will change. That's right. And I are, but that's the investors. And we know that we're very vulnerable right now to what's going on in the country with any policies that can change. And so we saw an opportunity and 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 what's going on. And that's the problem. Like I said from a financial perspective of running a country, it's just there has the president needs to have some financial intelligence, literacy, just an understanding of business because this isn't about Amazon or Apple wants to service the consumers. We are the consumers of the country. We consume the country. And as an existing subscriber to the country, there has to be incredible business handling and management at the top level. And so the president, all those people, it's just you're running a business, you have capex, you have operating expenses and all these things. And so there's just no way that you can have any president without financial literacy run a country properly that also cares about people, it cares about minorities, it cares about policies, businesses. You know, the private sector is better than the public sector. And so it's very important that my tribe does not get affected by policies that are not business friendly, economically speaking. 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 going to give this advice from the very analytical standpoint that is having an understanding, benchmarking on your life. We're talking about financial modeling, financial model, your life the same way we spend and you spend a lot of time modeling discounted cash analysis and what's it going to take to really hit these goals and these target irs? I think I would give my 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 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. I'll tell you a little story. So I was in college and I was in Union Square be no Union Square area in New York. 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. Paramedics then came, covered her body and, you know, everyone gathered in a circle and I'm there and I was just, just right in front of her, behind her. 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 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 an economic perspective, you know, 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. Someone's going to jail if you can't defend yourself. And average millionaire today does not have enough money to legally defend themselves. So what do you do? You got to raise your income, you know, you got to raise revenue sources, diversifying things that you understand and things that. And produce a 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 we're limited here in this planet for a very limited time. I think legacy is very important, the impact 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, Die with Zero. So, Chris, I really enjoyed 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 ahold of you?

Absolutely. So if you're interested in investing with us and partnering with us, our website is initiativeequitypartners.com and you'll find one of the tabs new Luxury fund on there. Initiativeequitypartners.com a little bit of our film side. 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 Initiative Equity Partners and look forward to talking to you again soon.

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

Appreciate it.

Race.