Digital Animation & Economic Development

Scope of WorkRO, MK, BG, SCG

Investors/Donors: 20+

Studios Visited: 30+

1.Capacity

2.Education

3.Film Financing

4.Digital Media Parks

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1. Capacity Findings

Capacity exceeded expectations

Many small studios

Local advertising dependency

Very high quality

Some large studios (70+ employees)

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1. Capacity Recommendations

“Production pipeline” R&D effort

Regional collaboration

International Promotion Campaign

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USAIDFROM THE AMERICAN PEOPLE2. Education Findings

Free Introductory Training (MK 3D@E-Schools)

Professional Fee-Based Training (Chiron, Belgrade)

On-the-Job Training (WorldwideFX)

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2. Education Recommendations

Replicate MK 3D @ E-Schools – BG

Expand Chiron program

Scholarship for women gender balance

Shared curricula:

E-Schools/Chiron/Universities

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3. Film Financing Findings

Government /Donor Agency Funding:

Most countries have existing film financing funds

Multiple donor agencies interested

Private Equity Investors:

Strong interest to invest in media projects

Plenty of capital, but no capacity to evaluate

3rd party expertise needed to evaluate deals

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3. Film Financing Recommendations

Secure $5M investment for film project

Identify promising and real opportunities

Identify other potential projects

3rd party financial analysis

Long Term: a targeted Digital Media Fund

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4. Digital Media Park Benefits

Professional space

Wired and full capacity

Collaboration/networking

Lower rent

Central services

Incorporated training

Rental of digital/film equipment

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4. Digital Media Parks Findings

Attractive to all studios

Large building inventories

University/Gov Partners

Example: IRIDE (RO) and MK

Venture capital exists to finance digital ventures

But no real estate equity to finance digital parks

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4. Digital Media Parks Recommendations

Support local teams: BG and SCG

Research properties Research funding for properties

Development Team guides local teams

Create an Eastern Europe Real Estate Fund and Regional Economic Development NGO

The for-profit Fund finances the self-sustained NGO

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4. $75 – 100 million Eastern Europe Real Estate

Fund

The Fund provides equity for economic development real estate projects and digital media parks:

Spreads risk and reduces risk

Cleans contamination

Clears title

Helps get permits/entitlements/land assembly

Mobilizes government assistance

With NGO partner, makes tough deals work

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4. $75 – 100 million Eastern Europe Real Estate

Fund

Concentrates Real Estate Expertise: Structures financial deals that work Manages government, NGO and private

relationship Attracts high-quality investment partners

Attracts International Capital to region

Creates Eastern Europe Economic Development NGO that is self-sustaining

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Eastern Europe Real Estate Development: The Challenge

Many private equity funds in region

But none are real estate focused

Great untapped opportunities for a dedicated real estate fund

Developers hindered by very high equity requirement (50% – 65%)

Fund as partner shares this equity requirement

Fund’s presence reduces future equity requirements

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Case Study: IRIDE Business Park

30,000 sq meter bldg dedicated to digital media Shared filming facilities and equipment Fully leased at construction 50% equity requirement is a burden on developer

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United States Experience

Real Estate Private Equity Funds for Economic Development

$0 in 1998 $3B in 2005

Institutional Investors (banks, insurance companies, pension funds)

US Pension Funds want intl real estate investments

Dramatic Impact on Economic Development Provides scarce equity

Provides expertise to developers

Cleans up contaminated property

Assists with governmental process and approvals

Funds self-sustaining regional NGO for economic development

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Real Estate Financing Recommendation

Create a $75M – $100M Eastern Europe Real Estate Fund

Converting old buildings and blighted factories/military sites

ULI Conference findings

Contaminated site/brownfield clean-up

Revitalizing & re-positioning dilapidated buildings

Housing Manufacturing

Offices Technology Parks

Business Parks Retail

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2 . Fund Sponsor and Regional Economic Development NGO

· Raises seed capital ($600,000 for Phase I and Phase II)· Manages creation of the Fund· Selects and hires the Fund Manager· Receives $600,000 back once Fund is closed · Hires staff - regional economic development assistance· Receives 20% of Fund Manager’s Fee annually ($400,000)· Financially self-sustaining from Fund Manager’s fee· Helps develop early stage projects

Project A

Re-positioning of dilapidated office buildings

3. Eastern Europe Real Estate Fund I· Raises $100M from Investors· Private-Sector Fund Manager· Makes investment decisions· Provides capacity to developers· Receives 2% annual management fee $2M/year· Invests the $100M ($1M – 20M in each project)· $100M investment plus profit is returned to

investors (target net returns to investors of 12% to 16%)

4. Investors

Project B

Digital Media Business Parks

Eastern Europe Real Estate FundThere is an opportunity to create a risk-adjusted market-rate-of-return private equity fund specializing in Eastern European real estate that could advance the digital media park and economic development agenda much more rapidly than those markets will evolve without such a market-driven catalyst.For the purposes of simplicity, the following example is for a $100 million fund.

1 . Fund Development Team (“Team”)

Project C

Re-positioning of older retail corridors

Project D

Clean-up of contaminated military sites or factories and creating

new business parks

PHASE I: Feasibility (4 months)· Economic Feasibility Study (Real Estate)· Develops parameters of Fund· Assists Sponsor with creating/structuring NGO

· Identifies potential Fund Managers

PHASE II: Building of the Fund (3 – 6 months)· Prepares RFP for selection of Fund Manager· Interviews Fund Managers· Reports recommendations to Sponsor

· Negotiates contract b/w Sponsor & Fund Manager

PHASE III: Capitalizing the Fund (6 – 12 months)· Assists with capitalizing the Fund

· Corporate Investors· Banks· Aid Agencies· Pension Funds· Insurance Companies

5. Real Estate Projects

Project E

Re-position abandon buildings for modern apartments or housing

$100M Investment

$2M

$4M

$10M $20M $5M

$10M $20M $40M

$1M $2M

$100M + Profit

$100M Investments $100M + Profit

$3M – 20M each

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