The Multi-Asset QOZB that Combines Entertainment and Real Estate

Todd Perlmutter and Seth Dunlap
Todd Perlmutter and Seth Dunlap

How can real estate and a unique entertainment product combine into a Qualified Opportunity Zone Business to deliver long-lasting social impact and job creation?

Todd Perlmutter is CEO of Hotbed Entertainment Group. He previously spent 19 years at Blue Man Group as senior music director. Seth Dunlap is HEG’s real estate and portfolio manager.

Click the play button below to listen to my conversation with Todd and Seth.

Episode Highlights

  • The path that Opportunity Zones opened for Hotbed Entertainment Group to bring a unique entertainment product and career infrastructure to New Orleans.
  • How Todd’s background and pay-it-forward mentality has influenced his Opportunity Zone investment strategy.
  • HEG’s anchor tenant, multi-asset, multiple revenue stream concept.
  • Incentives for historic preservation and how those can layer on top of Opportunity Zones to multiply a project’s impact.
  • Exit strategy options for multi-asset funds.
  • The challenges of being a QOZB with a unique product offering.

Featured on This Episode

Industry Spotlight: Hotbed Entertainment Group

Hotbed Entertainment Group

Hotbed Entertainment Group is an entertainment and real estate company who builds and operates vibrant world-class entertainment and hospitality destinations, creating hotbeds of creativity and community in each developing neighborhood they serve. HEG’s Omni Impact Opportunity Fund offers investors the open-ended growth opportunity of a high yield hospitality and entertainment operating business paired with the stability of a culturally significant real estate portfolio in major markets across the country.

Learn more about Hotbed Entertainment Group

About the Opportunity Zones Podcast

Hosted by OpportunityDb.com founder Jimmy Atkinson, the Opportunity Zones Podcast features guest interviews from fund managers, advisors, policymakers, tax professionals, and other foremost experts in opportunity zones.

Show Transcript

Jimmy: Welcome to the Opportunity Zones Podcast. I’m your host, Jimmy Atkinson. Most of the first wave of Opportunity Zone funds were focused purely on real estate, but we’re beginning to see more and more business funds get in the mix now. Joining me on the podcast today is Todd Perlmutter and Seth Dunlap from Hotbed Entertainment Group. And their OZ fund concept mixes real estate with live immersive entertainment in a unique way, leveraging Opportunity Zones to help them open up a new capital channel. Todd joins us from his office in New York City. And Seth joins us from his office in New Orleans. Todd and Seth, welcome to the show.

Todd: Thanks. Great to be here.

Seth: Yeah, thank you. Thanks for the time.

Jimmy: Absolutely. To get us started, why don’t you tell my listeners and me about Hotbed Entertainment Group? As I said in the intro, it’s a unique entertainment concept. Can you tell us a little bit more about it? What are you guys doing in the immersive music space exactly?

Todd: Yes, sure. Actually, it’s a full hospitality and entertainment concept where there’s a restaurant, a cafe, and a bar, and a music venue. And we have an anchor piece of immersive music entertainment. My history, and a couple of my partners, is at Blue Man Group. I worked there for 19 years, which was a great training ground for long-lasting entertainment concepts. And we came up with a new concept, which is really, really based on being close to music as opposed to sitting in a seat and seeing music happen on a stage, there’s a big separation with the PA and everything. This is a more intimate concept where you sit on the piano stool with the piano player, and you walk amongst the musicians performing. And that’s only, you know, that’s just one piece of the business model, but it’s the thing that we think will gather the most attention and bring the most people through the doors.

Jimmy: Good. So you mentioned you had some experience at Blue Man Group. What were some of the mistakes you saw from Blue Man Group or some of the missed opportunities, maybe would be a better way of posing the question, that you’re kind of rectifying with this new venture?

Todd: Well, one of the…probably the biggest one is that we’ll take the New York Blue Man Show, for instance. I mean, Blue Man was very successful and it was an amazing place to work for a long period of time. And I wouldn’t be here today if it wasn’t for that, you know, intense and amazing creative experience.

Jimmy: Of course.

Todd: But one of the things that we noticed was in the New York Show, for instance, there was this extremely prime piece of real estate, and the business used it for about three hours a day. And our business model, we plan to use the real estate for at least 12 hours a day. So, you know, using the space for private events, using the space as a restaurant and a bar. And I think a key part of it was at Blue Man, people would come to the show and they would get so wound up and have this amazing experience and then want to talk to their friends about it, and like hang out and have more of a time with the experience.

And, you know, at Blue Man we just closed the doors and set people out to go to some other place. And our plan in this business is we have a facility that you can stay, you can stay after and have a bite, you can stay after and have a drink, you can stay after and see more live entertainment and keep the experience going. So it’s a…you know, we…I mean, Blue Man did great, but our plan is a little more of multiple revenue streams and a place where you can stay for longer than just a show. Come before the show, stay after the show, and be able to have people come and not just see the show. If they’ve seen the show, they could see it again or they could not, they could just go to the restaurant or just see the music afterwards.

Jimmy: Right. That sounds pretty neat. So, paint the picture for me a little bit more. If I’ve got a ticket to your show, what time am I getting there and what am I doing, and which rooms am I walking through, and then how late am I staying after the performance is over essentially?

Todd: Yeah, of course. Well, there’s a lot of options, which is nice, so you don’t always have to do the same thing. But there’s you can come early and have a drink, you can come early and have food. There’s the ticketed event which, you know, the restaurant and the bar is open to the public at all times. The ticketed event happens behind the restaurant. And there’s also some entertainment in the bar, you know, that’s open to the public as well. So you get your… You know, you come early and meet your friends, and you could have a drink or you can eat.

And then when you go to the ticketed event, the show experience is a multi-room experience where there’s performers, they interact with you and you walked amongst different size rooms with different kinds of music playing in them. And I think it’s that experience of being really, really close to the music. There’s one room that only 10 people can fit in. And it’s that moment where you’re so close to a performer that you get the goosebumps, you can really…you know, you can see the sweat on the cheek and you can really feel the power of the music.

And there’s another room that’s where you’re kind of with a big brass band and you dance with the band, and you kind of are part of the experience of, you know, playing in that environment. And throughout the show, other kind of variety performances happen and you’re taken on a journey. And we did a test of the show, we did a workshop of the show for some audiences just to make sure it worked and it was a huge success. I mean, I think that we…you know, we had this idea and we wanted to test it out. We tested it out and it was kind of just far better than any of our expectations. And that’s actually what led us to moving on. In fact, meeting Seth and Rosa came about because someone who had come to our…randomly had come to one of our test shows was blown away, told a friend who was the person that introduced us to Seth and Rosa.

Jimmy: That’s great. That sounds like a really neat, immersive experience. I’ll back up for a second here, I wanna… I’ll bring Seth in first to answer this question. I wanna get your background stories. How did you two get involved in this and basically, if you could tell us a little bit about your past?

Todd: Well, I’ll say how we… So we had this, me and two of my partners, you know, who both…both of my other partners, Jennie and Colin, worked at Blue Man as well. Jennie was an executive producer and the VP of creative development. And she was around kind of during the expansion of Blue Man from two shows to kind of a global phenomenon that it became. And, you know, she was very…a key part of that. And Colin was the GM of the New York Show and in charge of the creative developments artistic team. And this actually show concept was his original idea. And so, you know, we kind of basically, post-Blue Man, decided to put, you know, the A team together, or the best people that we worked with, work on this show and sort of follow, you know, in… Blue Man was such a great training ground, we sort of wanted to follow in the path. And the original idea was to open one show and then wait 12 to 18 months open another, wait 12 to 18 months and open another. Very similar to Blue Man.

And what happened was we met Seth and Rosa in New Orleans. And they were really interested in the concept. We became very, very, you know, pretty good friends through this, our original tenants-landlord relationship. So before the Opportunity Zone program, before we knew about it, we were going into just a regular tenant-landlord thing. We were going to be raising money locally in New Orleans, and putting our show up there.

And while that was happening, we found out, through one of our investors, that the building was in an Opportunity Zone. And upon doing some little bit of research, we had looked in other cities, too, Denver and Philly, and it turned out that every place we were looking at was in an Opportunity Zone. We needed a big space. We needed to… You know, and our business plan was kind of an ideal fit for the program. We needed a big space, we wanted to do a full build-out. It was a destination-oriented business. It didn’t have to be downtown. There was a social impact, we were delivering 100 to 150 jobs per location, you know, and the real estate side was gonna be adaptive reuse or historic preservation.

So we were like, “Oh, this is a kind of a perfect fit.” So what we did was we decided to change our business plan, to instead of just the standard tenant-landlord relationship, we partnered with Seth and Rosa to take care of the…to be our partners on the finance and real estate side. And we opened our Opportunity Zone fund, the Omni Impact Opportunity Fund, and we decided to open up, you know, we could still layer our openings and utilize the plan with multiple cities. And that’s how we got to Seth and Rosa.

Jimmy: No, that’s great. It’s good to get that background on how you guys all came together and kinda how you got into the OZ space too. I wanna hear from Seth. Let’s bring you on now, Seth, if you could tell me a little bit about your background and how you got involved? And if you could just tell me a little bit about your career story, I guess, and how you got to where you are today?

Seth: Sure. Yeah. You know, Todd touched on a little bit, you know, like, I guess, the way that these things tend to unfold was pretty natural and pretty organic in meeting Todd, Jenine, and Colin through a couple of degrees of separation. But, you know, as Todd mentioned, my wife and I were originally kind of landlord-tenant relationship with them. But we came about kind of a little bit different path. My wife and I are from the Midwest and we were kind of in the corporate world, if you will, for many years in kind of different capacities. And I worked for a number of different money managers out of Chicago and in New York. And so I had some background in kind of fund structure, fund distribution, raising capital for investable assets, if you will, investment products.

We kind of naturally just gravitated, over the years, down to New Orleans based on, you know, really our kind of more family history, I guess, than anything. We’ve always been interested in kind of the historic preservation and adaptive reuse process with historic real estate. And, you know, both of our parents were involved, or, you know, my parents and Rosa’s parents were involved in it in some way, shape or form over the years. And so we kind of grew up around the historic preservation process. And it was something that was a passion for us and that kind of had driven us, you know, all along the way to leave, you know, our old world, if you will, the corporate world, and really pursue our passion of getting into these types of projects.

And so when we first met Todd, Colin, and Jennie, we were immediately attracted to the concept for a number of different reasons. One, we thought it was innovative, we thought it was creative, the amount of talent and experience in the space with, you know, them really growing up through the Blue Man Group concept and program. But we just thought it was a very interesting way to approach entertainment, live entertainment. But really living in New Orleans, it resonated with us to a very kind of higher degree and from a very personal way just seeing the types of impact that it would create for, you know, the local musician, the arts, performing arts, food and beverage community.

We were really very just intrigued by the… We thought that the opportunity, if you will, provide for these types of talented individuals, which New Orleans is rich with them. And we saw a path and a lot like Todd, and maybe Todd will touch on a little bit as this conversation goes on, but we saw a path here, through this concept, to really bring something unique, creative, innovative to our neighborhood. We live in the neighborhood in which the facility that we’re talking about also is positioned. And we saw something really special that we could bring to the city, not to just offer a great product in entertainment value, but also just start to build infrastructure, some sort of professional career path for musicians and artists here in the city, which, you know, is always a challenge. And, you know, New Orleans is a very interesting city, and just like many other cities, it has its challenges. And so it was really a combination of that kind of innovation, but also just the structural impact it would have on the job market for musicians and artists here in the city. And so all that lined up very well.

And, you know, as Todd mentioned, you know, I think our backgrounds, the mix of all of our backgrounds, really came together and offered nice compliments when we were creating a fund that would house both, you know, the real estate and the operating business. You know, we all have experience that needs us to be able to be successful in this structure. And so as we stepped back at it, you know, and went through the process and stepped back and looked at the structure that we would need to participate in the Opportunity Zone space, it just really became kind of the natural next step. We all kind of had some abilities that would move this forward.

And I think, you know, we all thought about this space in the like-minded way that it kind of served the true intention program, which is having a long-lasting social impact with creating jobs, but also, you know, an interesting investment opportunity for investors looking to participate in the space.

Jimmy: Yeah, no, that’s great. And speaking of that, you know, long-lasting social impact and job creation, I wanna get back to Todd now. Todd, we spoke on the phone a couple of weeks ago, you were starting to tell me a little bit about your personal pay-it-forward story, as you referred to it. I think our listeners would be interested to learn more about your personal story. Would you mind sharing that with us?

Todd: Yeah, absolutely. I was a rock musician living in Boston in the early ’90s, which meant that I was oftentimes broke, or homeless, or maybe actually all the time broke and occasionally homeless. I think that’s probably more exact. And, you know, not for lack of talent, you know, I was pretty good. But, you know, it’s a tough business. And I was in a band that was signed and, you know, I had some opportunities, but they just didn’t last.

I got the job at Blue Man Group. And up until that time, I was literally if I got a check, I was cashing it at the bar. And I got the job at Blue Man Group and I opened a bank account for the first time. That’s pretty ground zero. But then I got a 401(k). And I got health insurance. And most importantly to me, I mean, the job changed my life for sure, but most importantly was I was offered a career path and stability. And it was… I mean, I had sort of accepted that, you know, being a musician might just make me a vagrant also, but this job I was a musician playing in a show and playing with a lot of other talented musicians and performers, and I had a career path. I eventually moved on from just being a musician to being… I produced our first record and I became music director and a music supervisor. And then the bulk of my career there, I was a creative director working on material for the show. And, you know, basically being an executive at the company.

And that, you know, I mean, for sure, it changed my life but in such a drastic way that I feel that it is…or it’s definitely like a passion of mine to be able to deliver that kind of opportunity to other musicians in these other cities. And, I mean, New Orleans in particular, the musicians are such a huge part of the fabric of the culture of that city. And it is still challenging to live there, be a musician and have a stable job. A lot of musicians there have to go on tour to make some money. And I think that this opportunity will, you know, be a great thing for a bunch of those musicians. And, you know, I would feel really great about being able to pass that on as Blue Man was so gracious to do for me.

Jimmy: No, that’s incredible. That’s a neat story and how it’s influenced your strategy going forward with setting up this new business and the Omni Impact Opportunity Fund. We talked a little bit about the business model and how you guys got into the OZ space already. But I wanna focus now on the Omni Impact Opportunity Fund specifically. What is the fund’s strategy exactly? And maybe you can talk about which sites you have identified so far and what your hopes for the fund are.

Seth: Yeah, I can touch on that. Yeah. So the Omni Impact Opportunity Fund, again, just the fund structure that we felt made sense to kind of capture everything that we were doing with this project, you know. And when we stopped and looked back at it, we just thought it was pretty powerful to be able to put together a fund where you can have the operating business which, you know, we believe in this program that the operating businesses, you know, offers the most amount of kind of open-ended growth opportunity, if you will, you know, based on just the benefits of the program, and looking out 10, 12, 15 years, from a long term investment standpoint. But, you know, coupling that with owning the real estate inside the fund just offers a really, you know, a multi-asset, kind of multi-revenue stream diversified fund that allows us to really kind of have a little bit of investable assets, you know, really for anybody in the space.

And so looking at it from that standpoint, we thought it just made the largest amount of impact and allowed us to kind of step back and have our longest-term vision for what we were trying to create here. And so, coupling those two things together, I think is unique. And, you know, early on in this program, you know, naturally people kind of gravitate to their expertise, and it’s been mostly real estate. But we’ve been very encouraged by the conversations around the operating business and the potential for operating businesses inside of this space, not only just from an investment standpoint, but also from the kind of the sustainable job creation standpoint.

So, you know, when you look at it, with our fund, we feel that we’re kind of checking all the boxes from not just an investable product, but also from the impact that we’re creating. And so, you know, owning the real estate and identifying markets where this concept will fit and where there’s a demand, but there’s also a talent pool to load a business like this that is driven by the talent and is only as good as the talent that is hired. You know, we look at this, that we’re kind of covering all the boxes. And so we’re looking at markets and we’re looking at real estate. We’re looking to adapt the existing real estate in each of these markets. And a lot of them, the property that we have under control or under contract right now is very historically significant, architecturally significant, to the neighborhood, to the state in some cases, even on the National Registry. And so that’s also property that’s been out of use. And so it hasn’t been open to the community for, you know, years and some cases decades.

And so to come in and to identify a historic structure, and to look at it in a way that’s just … you know, tear it down, build, you know, whatever the density that it allows for … and think about how can we create some sort of reuse for it that opens it up to the community, that will create sustainable jobs. And so, we have kind of two different stages of this fund, you know, we’re purchasing the real estate, we’re doing the, you know, the improvements and building out the buildings for the reuse for this concept. So we’re kind of creating jobs in that first phase, that real estate phase, the development phase, which most projects are in the OZ space right now.

But really, the long term sustainable jobs comes after we’ve done the real estate project. And that’s when we’re able to load in the business. And that’s when we’re able to create anywhere from about 100 to 150 jobs in each market. And those are the jobs, based on the success and the talent of the people in the team that we’ll be hiring and loading in, those are the jobs that will be sustainable for, we think, long after the benefits of this program have rolled off, long after that 10 year mark, where, you know, investors are now qualified for, you know, the elimination of gains on their original capital gain investment.

And so, we just think it’s just kind of an all-encompassing fund. It’s diversified, there’s multiple assets. With this real estate, there’s also multiple revenue streams. So with a lot of real estate that we have identified, you know, we’re the anchor tenant, the Hotbed Entertainment Group, the show, the bar, the restaurant, the venue, that’s the anchor tenant in this real estate. But in most cases, there’s other real estate development opportunities, so other revenue streams for this real estate as well which just further diversifies the fund, but also gives us the opportunity to kind of lead by example, hopefully, and start to attract other like-minded individuals or concepts that wanna kind of build on this creative community, you know, this infrastructure, the support that we’re building in these communities by loading in a destination entertainment business that is employing art, musician and food and beverage people.

So, you know, you have kind of multi-asset, you have multi-revenue streams with the real estate, with our concept being the anchor tenant, you know, it’s not just the ticket sale, the show, as Todd mentioned, I think we touched on, you know, there’s bar and restaurant, there’s other community and events and types of programmings that will go on. So the ticket sale is a really small portion or about 30% to 35% of the actual revenue stream. So we’re really building some multiple revenue streams here from the real estate to the operating business. And we feel that, you know, we can entice others to come and grow with us around us. And I think that’s really where you get the long-lasting impact.

And so, right now we have a number of cities identified. We have a few buildings. We’re kind of looking at this in a couple of phases. So right now, we have some very interesting properties identified obviously, New Orleans we mentioned but also two in Nevada, in Reno and Las Vegas. And we have some other markets where we’re exploring and have some conversations going on that could be potential for this type of concept as well. But right now, we’re focused kind of on these three markets getting off the ground, get the concept going, and getting kind of capital raised to buy the real estate, do the improvements and then load in the operating business.

Jimmy: Yeah, that makes sense. So New Orleans is kind of your starting base and plans to expand the sites you’ve identified in Reno, and in Las Vegas, and then you’ll see how the concept takes off from there. And the hope is to expand even further. No, that sounds great. You mentioned that the real estate has a historical preservation component to it. Are you guys taking advantage of historic tax credits at all? Just curious on that one.

Seth: We are where they qualify. So, you know, my wife and I are a little versed in that area and we’ve done some projects in the past in, you know, kind of how we arrived at some of this property to begin with. But yes, you know, where it’s available. And, you know, like in Nevada, for instance, there’s no state income tax. So, you know, there’s federal stuff available, but also some other types of programs that are going on in each of these states.

And so it’s been really, you know, from a standpoint, from a real estate perspective and historic preservation perspective, it’s been really encouraging as we’ve gone out to some other state where, you know, maybe the historic tax credits aren’t so prevalent based on their tax code and tax structure. But just the amount of incentives that we’ve seen and some high-level conversations that we’ve had to this point on what’s available for businesses like us, using the Opportunity Zone program to have the most amount of impact and long-lasting impact to ensure we’re successful. Because I think that, you know, locals, the community but also the local politicians and elected officials, you know, do see the target. You know, that kind of the job, the workforce target that we have, and the, you know, necessity, if you will, to create jobs in this space, to keep talent, you know, musicians and artists alike, excuse me, in the communities and in the neighborhood, but also doing that with, you know, a very significant or, you know, recognizable piece of property.

And so, it’s been very well received even in the states that don’t have the historic tax credits, if you will, that they are thinking about this in kind of a dynamic way and how to really just be welcoming to this type of project to make sure that these jobs are sustainable and remain there for the long term. And so, there’s plenty of benefits out there. That’s not really where we start. We always kind of look at that as icing on the cake, if you will. But there’s a lot of factors that go involved to make this successful. And each state, each city, each market that we’ve identified is different. And there’s some markets, you know, that I think have been great in communicating and being conducive to kind of all types of projects, but certainly, ones that are committed to kind of sustainable jobs over the long term.

Jimmy: Sure, yeah. And I understood, you know, historic tax preservation, that is kind of the icing on the cake, the HTC credits you can get. But yeah, anything you can do to help out with getting that capital stack in place is definitely a big help. I wanna talk about how the fund is structured. Can you go into that a little bit and what’s your exit strategy?

Seth: Yeah, absolutely. So, you know, we’ve thought about this quite a bit. And Todd will…you know, Todd will confirm we’ve had many, you know, conversations and a lot of them late-night conversations on how to do this. And, you know, me coming from kind of the fund world and seeing and working for different money managers and helping raise money with different types of investment products, you know, I kind of, you know, had my opinion starting. And Todd coming from the entertainment world and seeing those models and seeing kind of the Broadway model, if you will, take place in many different cases, we had a lot of good debates. And I think we, you know, at the end of the day, try to keep it as simple as possible. Simple for investors to understand and to see a path to invest in, but also just simple, which in simple I mean leaving open the most amount of exit strategies that we can through our structures.

And so inside the fund, as I mentioned, you know, we have the real estate owned on one side, if you will. We have a real estate portfolios, real estate portfolio companies, and then on the other side, the operating business, the operating business paying rent to the real estate. And then, you know, both of them paying cash flows back up to investors inside the fund. And so really, what that does for us, from an exit strategy, gives us lots of flexibility inside the fund while we’re operating it over the next, you know, like I said, 10, 15 years, you know, looking forward to what that exit strategy would look like. But it gives us a lot of flexibility on the back end. And it keeps us … compliant with, you know, I think all the benefits of the program that investors will be interested in. And most notably, again, that 10-year mark of elimination of gains on your initial investment.

So we think that our exit strategy could go a number of ways. It could be, you know, sold as one entire portfolio, one entire fund, to a large entertainment company, a large real estate company that invest in entertainment businesses, or just likes the real estate. It could be sold individually as the real estate portfolio company and the operating business separately. And we had a set up too, we can even drill down, you know, market by market and peel off individual assets, you know, depending on where we are in the cycle, where, you know, capital dollars are looking to invest and kind of what our valuations will be at that point and how much success we’ve had at that point.

So we think it leaves the door open, gives us many paths for kind of the most lucrative exit strategy for investors while maintaining, you know, the integrity of the business and the concept to keep that concept in place and those jobs in place, you know, far past the exit strategy for investors. So a way to kind of restructure and keep things rolling.

Jimmy: Sure. No, that’s smart, I think. Especially for multi-asset funds, you know, the exit strategy definitely needs to be carefully considered before you structure the fund and get going here. I know we were waiting on IRS regs for a long time before we were able to make some of these decisions, right?

Seth: Yeah. And that’s kind of the point too, and as we were having those debates, you know, more and more regs came out. And, you know, what we’ve decided with our professionals and our team, our third-party teams that, you know, we’ve kind of contracted to help us figure this out on the accounting side and interpreted it from the regulation side, you know, there may or may not be more regulations or may or may not be more guidance, and there, you know, may or may not be a clear path on how you exit this. And so, we just think having the most amount of flexibility on, you know, the upfront structure allows us the greatest opportunity for investors to exit.

Again, the main thing is that we keep this concept rolling far after 10 years. And so the ability to have investors be compensated, you know, exit if they like, but to keep the concept rolling is really important to us.

Jimmy: Sure, sure. Your concept, the immersive live entertainment, being the main tenant for real estate, you know, that mix of not only business and real estate, but it’s a unique business concept, the immersive live entertainment. There’s really no comps for something like what you’re doing. Has that been a challenge for you guys so far in terms of putting together this fund and raising capital? And what other challenges have you encountered in the OZ space so far?

Todd: There’s a trend of immersive entertainment out there, but it’s not, you know, as widespread as some other things. But there’s a business in New York called the McKittrick Hotel which has a very similar model. It has an anchor tenant immersive show called “Sleep No More,” it has two restaurants and a bar that’s also an entertainment venue. It’s been running for eight or nine years. It’s something extremely successful. But it’s a… You know, it’s a little bit of an anomaly.

So yeah, educating people on what it is is kind of the, you know…that’s a little bit of a challenge because it is somewhat new. But, you know, the interesting thing about it is that… I mean, you know, after the experience of Blue Man, which Blue Man’s a very long-running show, and, you know, one of the things that we learned from being there is that you know, we have the opportunity to change it and make alterations. It’s not like a play that has a writer and a director and that’s it, you know. It’s a… I mean, this is our thing, we can change it and morph it and tickets are, you know, kind of a great thing to sell because you get seasonal trends, and you can deal with those things in different ways. And we have a lot of experience in that.

But the thing that we’re trying to educate people on is that if you were to invest in a film or a Broadway show, it’s kind of a passion play, you believe in it, you know, and it is somewhat of a gamble. But yet if it hits, it’s a huge upside, you know, but you could stand to lose all your money, you know. And so if you were going to invest in an entertainment thing, then you would wanna, you know, invest in something like with a team like ours, which has a long history of long-running entertainment. But one of kind of the best parts about it is that it’s really just a piece of the puzzle that’s getting people to the door. But this business also has the restaurant, and the bar, and the music venue, the other tenants, and the real estate. There’s no time is it a gamble like investing, you know, in a film or a Broadway show because you just have these amazing assets.

And we spent a lot of time, you know, kind of making sure that the real estate and these assets were fantastic and would have, you know, long-lasting viability and, you know, have worth. So that’s, I mean, that is… You know, that’s what we’re doing right now is educating people on to why if they haven’t invested in entertainment, that this is probably their best bet ever.

Jimmy: Right. It’s not a pure entertainment investment. It’s not a pure real estate plan. It’s not a pure business plan. It’s a combination of all of those assets, a lot of stuff you have to invest in when you invest in your fund. What types of investors are you looking for in that case? And maybe you can get into how much you’re looking to raise and what some of the minimums are?

Seth: Yeah. So, you know, I think and just kind of touching on some of the things that Todd mentioned, you know, maybe it’s a certain type of investor that we’re looking for. I think, as I mentioned earlier, you know, the natural gravitation early on in this program was real estate investors, you know, you had a project that you were doing, now it happens to be in an Opportunity Zone. Okay, I already understand this, I can wrap my head around it. So our education process has really been kind of what Todd mentioned of why we think it’s beneficial to have all of these in the same fund.

And so, you know, we’re looking for investors that, you know, one, obviously have active capital gains to invest in an OZ fund, but also that are really committed to not only just a great investment opportunity, but to the true intentions of this program, which is long-lasting social and community impact. And so that’s really, you know, as we mentioned earlier, those are our starting point and Todd’s personal experience that kind of arrived at this project. And so, to be able to overlay an OZ fund with this, we wanna stay true to kind of those intentions, which is attracting like-minded investors that see the benefit of both, a great investment opportunity, but really kind of seeing to the end or bringing to fruition, you know, the true intentions of the program, which is job creation and community development, capital flow to these communities.

So we want a patient investor, an investor that sees the benefits of the diversification of a multi-asset fund. But we also want an investor that really can be invested alongside with us for that long-lasting social impact. And I think, you know, as our conversations have gone on, you know, it’s been very well received. And I think, as we mentioned, again, as regulations have been… Our guidance has been rolled out, you know, I think the capital is starting to catch up with the opportunities that are being offered in this space and people are identifying more of the upside or the potential for exponential returns in the operating business.

And so we want an investor that recognizes that the operating businesses is just as, if not more lucrative than the actual real estate. The real estate we look at as kind of a stabilizing factor. It’s unique. It’s historic. It’s architecturally significant, and it’d be interesting in any type of portfolio. But all that combined is what offers the full investment experience and investor return if you will. So, someone that’s for the long haul, that sees the benefits of both, and that’s just really excited to have this type of product in their portfolio.

Jimmy: Yeah, that makes perfect sense to me. I say on this show, pretty frequently that, in my opinion, the best use case for opportunities on investing is business events investing. That’s where you’re gonna get those 10X or 100X returns potentially. I mean, of course, you could also lose all of your money, right? But, you know, real estate’s only gonna get you so far in terms of appreciation and capital gain.

Seth: Right. Oh, sorry. And I think that’s…you know, I think that’s a good point. And that was kind of where our debate washed out over the last six, eight months is that you know, coupling these together gives you that great amount of upside but offers that kind of stability and backdrop of part assets in the real estate. But, you know, at the end of the day, I think Todd touched on it briefly, you know, the concept is, you know, is a concept and, you know, this team is so talented and so created with their experience that we can really adapt and adjust in any market. They have many different ideas of different types of shows and concepts that can come down the pipeline over the next 5, 10, or 15 years.

But at the end of the day, you know, just to be quite frank and real about it, you know, we are owning the asset, we are restoring it, and we’re applying really kind of a gray box adaptive reuse in it and we’re building kind of a set inside of it, if you will. And so, you know, all things being equal, at the end of the day, it’s real estate that is gray-boxed and, you know, has potential, like I said, other types of tenants or other types of second-generation leases and things. So the real estate will always be there and I think that’s just what separates us maybe from some just funds that are just the operating business.

Jimmy: Sure. If any of our listeners are interested in getting in touch with you, where can they go to learn more about you and the Omni Impact Opportunity Fund and Hotbed?

Seth: Yeah, so you can email [email protected] com. Or either one of us, Todd or Seth, @hotbedmusical.com, not to make it too confusing. And the website is hotbedentertainmentgroup.com as well. So we’re happy to have any conversations to get more into the details and more what kind of the structure and kind of models look like. But yeah, [email protected] is the best way to reach us.

Jimmy: Great. And for our listeners, I’ll have show notes for this episode on the Opportunity Zone’s database website. You can find those show notes at opportunitydb.com/podcast. And there you’ll find links to all of the resources that Todd, and Seth, and I discussed on today’s show. And I’ll be sure to link those email addresses and those websites that Seth just mentioned as well. Well, Todd and Seth, this has been great. Thanks for joining me today. I appreciate your time and best of luck to you guys in raising capital and getting some of these projects underway.

Todd: Thank you.

Seth: Yeah, really appreciate it. Thanks for the time.

Jimmy Atkinson

Jimmy Atkinson

Hi, I'm Jimmy Atkinson... I founded OpportunityDb in August 2018. I'm a veteran Internet entrepreneur with a background in economics and Web marketing. I previously founded ETFdb.com. These days, I am passionate about impact investing and tax-advantaged investment opportunities. At the crossroads of these two ideals is the opportunity zones program, a place-based tax policy intended to economically transform some of the poorest areas of the United States with new real estate and business development.

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