Equity deal paying off for 11 year-old co.
In an economic downturn, cash is king.
That fact alone makes a flush company like Tom Pollack and Ivan Reitman’s Montecito Picture Co. an enviable commodity. But it is Montecito’s proven box office record, coupled with a unique business plan that makes the 11-year-old company even more significant.
In 2006, the pair raised $200 million to co-finance 10 films over a five-year period, a slate of modestly budgeted genre films like this weekend’s bromantic comedy “I Love You, Man” (though Montecito only produced “I Love You, Man,” which was fully financed by DreamWorks). Merrill Lynch and two hedge funds put up the equity portion of the revolving vehicle — dubbed Cold Spring Pictures — allowing Montecito to not only produce but to reap half the profits on such films as the breakout hit “Disturbia.”
“That was when the gettin’ was good,” says Pollack, the former uber-lawyer and chair of Universal Pictures who first met Reitman when he took the young Canadian director on as a client. “We would not be able to do this today.”
During the days not too long ago when private equity flowed into Hollywood, Montecito — named after the wealthy community near Santa Barbara where Reitman and Pollack both reside — wasn’t the only company to raise money to co-finance studio-ready product. Joel Silver’s Dark Castle and Ted Field’s Radar Pictures were among a handful of ambitious shingles to leverage similar sums for their respective slates, but most of these efforts have sputtered out of the gate and haven’t been able to refill their coffers like Montecito.
And unlike co-financing companies like Spyglass, Montecito acts as a pure profit-participant and doesn’t retain any ownership on the films it produces. That makes the company all the more appealing to the studios with which it does business.
These days, Paramount is the primary beneficiary of Montecito’s output and funds. But for nearly a decade, Montecito enjoyed a first-look deal with DreamWorks, where the shingle produced such low-budget earners as “Road Trip” and “Old School.” But when the DreamWorks-Paramount divorce went down in October, Montecito was one of the first shingles to migrate into the Paramount fold.
“We had a wonderful run at DreamWorks,” says Reitman, the director of such comedy classics as “Stripes” and “Meatballs” who plans on returning to his helming roots on an as-yet-determined comedy for Montecito. “We made five movies including some big hits. But even under their most ambitious plans, DreamWorks would be making 4-5 films a year. Because of our financing, we had a commitment to make at least two films a year. So, it just wasn’t feasible to go to the new DreamWorks. We decided to stay at Paramount.”
Furthermore, Montecito has 22 films in development, most of which are at the Melrose studio, as well as one film in production — the $25 million budgeted “Up in the Air,” which stars George Clooney and is directed by Reitman’s son, Jason.
“There’s no way that we wanted to give up all that development,” Reitman explains. “And (Par production prexy) Adam Goodman has stayed, which is very helpful.”
“Up in the Air” became the first film Par greenlit in the post-DreamWorks split, signaling the importance of its new ties with Montecito. By retaining Montecito as an inhouse producer, the studio enjoys access to needed co-financing. Paramount has been forced to rely upon co-financing deals after a $450 million slate-deal with Deutsche Bank fell apart last summer.
“The fact that we have money is very attractive to them,” Reitman says. “Our money is good, but we’d also like to see ourselves as value-added. We’re not coming in as business people with a load of cash in their pockets.”