When Lionsgate released the spoof Disaster Movie in North America in the last weekend of August, Don Starr, the founding partner and chairman of Grosvenor Park, was in his native Canada anxiously waiting for the opening.
Disaster Movie represented a departure for the 26-year-old financing company into single-picture full-financing through discrete fund Grosvenor Park Investments LLP.
The second such film, Defiance, directed by Ed Zwick and starring Daniel Craig and Jamie Bell, opens in the US on December 12 through Paramount Vantage.
For Starr, the new initiative is the latest in a long line of activities the company has taken on in response to shifts in the global industry. Starr founded Grosvenor Park in 1982 in Canada structuring tax-based investments largely in real estate transactions.
In 1985, when the Canadian government passed legislation to allow tax breaks in film, he became a leader in structuring tax deals for US producers in Canada. 'I was known as the king of runaway production,' he laughs. 'Some people in the US didn't like me that much, but the studios loved us because we had the best tax incentives in the world, a great labour force and a cheap dollar.'
In the late 1990s, Grosvenor Park expanded into the UK and became the first public operator of sale-and-leaseback tax financing partnerships, later moving into the equity partnership scheme business.
But after the closure of the equity schemes by the UK government in February 2004, with the increasing strength of the UK pound and Canadian dollar and the explosion in US state tax incentives, Starr and his partner Dan Taylor turned their sights to the US.
The company had already diversified from just tax in 2004 by embarking on super-gap debt finance deals for independents through its relationship with an alternative asset management firm. Within three months of starting this initiative, Starr and Taylor decided to move the company headquarters to Los Angeles.
'We had to be US-based,' says Starr. 'The volume of projects there is dramatically bigger. Los Angeles is the centre of the movie world and the decisions about production are made there. Everywhere else is just a location.'
In addition to the super-gap business, Starr says Grosvenor Park quickly became the largest operator of tax credit financing in the US working on both studio and independent titles such as Deja Vu (Louisiana), Underdog (Rhode Island), P.S. I Love You (New York) and Righteous Kill (Connecticut and Louisiana).
'In the last four or five years, US states have taken over,' explains Starr. 'It's cheaper to shoot in Los Angeles or Rhode Island than it is in Canada or the UK. After all, the tax-driven world is driven by the cost of production.'
On some of the films, such as P.S. I Love You, Grosvenor Park provides a combination of tax and gap finance. But while the company's core business is debt, and the tax and gap business are bank functions, Starr and Taylor began to realise that they were in a good position to get into the film ownership business. 'We get to see every deal out there, as a bank would,' said Starr, 'and since the credit crunch, we see even more projects. We were looking at projects as debt deals and then as possible equity deals.'
Grosvenor Park is, says Starr, 'treading lightly into equity' and the $52.5m it has sourced for its first two pictures comes from a variety of different investors. But in 2008, Starr and Taylor brought David Alper into the company as principal and COO with a focus on the single-picture equity financing business. Alper has a long Hollywood career, most recently running the single-picture financing business at Relativity Media (3:10 To Yuma, The Bank Job and The Forbidden Kingdom were among the titles) and before that as CEO and co-managing partner at Escape Artists.
'I like the thought of the synergy between lending and single-picture full-financing side,' Alper explains. 'Being the leading independent lender puts us in contact with the producers and talent reps and that gives us a real-life synergy for the equity financing.'
On Disaster Movie and Defiance, Grosvenor Park follows the traditional model whereby some 80% of the budget is covered through pre-sales, sales estimates and tax credit and the US represents the upside. In the case of Disaster Movie, a five-territory deal was struck with Alliance, and Summit was enlisted to handle remaining sales.
The film was shot in Shreveport, Louisiana. Lionsgate came in to handle the domestic distribution but financed its own p&a. ('We want the distributor to have some skin in the game,' says Starr). Defiance was shot in Lithuania, where there is no tax incentive system to tap into but there are considerable cost savings. Essential came in as sales agent and Vantage as domestic distributor.
'The idea is to do four to five movies a year on the equity side with budgets between $10m and $35m,' says Alper. 'We want to build a library of films here.'
Alper, says Starr, is a 'fantastic addition' to the company. 'We are clever dealmakers, tax guys. We know how to minimise risk, but we needed a film-maker on board who understands the inside of the business. I am only a well-informed amateur.'
'The fear among talent and talent reps when they are working with independents is that they are booking their clients' time and if the financing doesn't come through they have lost that time to sell,' says Alper. 'To them that's terrible. The important thing for us is credibility - providing the funds you say you are going to provide.'
Joining Starr, Taylor and Alper in the management committee are Joseph C Kaczorowski who joined as partner in charge of day to day operations in 2008 from his role as president of House Of Blues Entertainment, and Christian Halsey Solomon, the finance and sales veteran, who is a principal overseeing foreign sales estimates on all projects in which Grosvenor Park is involved.