Invest in the catalog of the Grammy-winning rock band Cage The Elephant

Private Syndicates

Today, I want to talk to you about a brand new way investors like you can get access to some of the best music royalties investments we see. We’re talking about cash-generating catalogs of world-class artists, managed by the best in the business.

To do so, we’ve created a new kind of investment vehicle called Private Syndicates, that allow accredited investors the opportunity to buy an equity interest in individual catalogs.

Unlike Royalty Exchange auctions, Private Syndicates give investors like you the flexibility to take a position size in each catalog that best suits you. What’s more they allow more than one investor to participate in the same asset without losing out to a higher bidder.

Through these Private Syndicates, you’ll be able to buy equity interests directly in multi-million dollar, top-tier, income producing catalogs. The first of these syndicates involves a catalog with a target IRR of 12-15%. We believe our Private Syndicates can meet the income-generating needs of both individual investors with $10,000 to invest and hedge funds with a minimum position size of $1,000,000

Our First Private Syndicate

Our first Private Syndicate offers investors the chance to buy an equity interest in the composition copyright, and associated royalty income, of a music catalog spanning four studio album releases from a Grammy-winning American rock band. This includes Mechanical, Public Performance, Sync, and Print royalty streams, administered by the largest music publisher in the world by market share—Sony/ATV. It opened to a limited group of investors on June 1 and is filling up fast.

Full exec summary below… but here are the highlights:

Track Record

Investment Thesis #1: We leave the speculation to others. Instead, we invest in catalogs with a track record.

The catalog for our first Private Syndicate earned $314,685 in 2017. That’s up 15.1% from 2016. And the 5-year compound annual growth rate is 14%.*


Growth

Investment Thesis #2: It’s a bull market in music; a rising tide that lifts all boats. But, remarkable assets - like this catalog - will receive a disproportionate share of the benefits.

The cash produced by this catalog is growing… to the tune of 15% in 2017 over 2016. That outperforms the 10% growth the three major music publishers combined reported last year. Streaming royalties, which are driving the overall music business growth, boast a 5-year Compound Annual Growth Rate (CAGR) of 51%. Adding to the bullish case for this catalog is the fact that some federal mandated royalty rates are set to increase. One of the royalty streams included in this catalog (archaically named “Mechanical Royalties”) just won a federal mandate that will increase payout rates by 44% over the next five years.


Stability

Investment Thesis #3: Partnering with extraordinary managers. Outsized returns are possible only when remarkable artists/catalogs have great managers.

The catalog includes royalties spanning four studio albums by a Grammy-winning band in the prime of their career. With 5+ million monthly Spotify listeners and 201+ million YouTube views, this band is represented by the management company responsible for some of the top-selling acts of all time. When the band’s label suggested a greatest hits album, the lead singer replied, “We feel like we’re just getting started.”


Return

Investors in our Private Syndicate will get paid twice a year. We’re forecasting an average 12-15% return over 10 years, starting at just over 9% the first year and growing to 18% by year 10. These figures include the proceeds of an anticipated sale of the catalog and return of capital to shareholders after 10 years.

We’re proud to make this remarkable catalog available to accredited investors as our first Private Syndicate. And more of this caliber will soon follow.


It's important to understand that Private Syndicates work differently than the auctions you've seen on Royalty Exchange to date. Here are a few key differences:

  • First off, Private Syndicates aren't auctions. Rather than engaging in a bidding war to secure music royalty assets, the cost of the units in the Private Syndicate are known in advance.

  • The organizational structure of all of this is through the use of an SPV — special purpose vehicle. Essentially, we create an LLC that holds the music royalties in question. No other royalties will be owned by this LLC. It is specifically set up to hold this single catalog and direct royalty income to its shareholders.

  • Investors participate by purchasing units in that LLC. Unit-holders or shareholders are then entitled to their proportional share of income generated by the LLC.

  • Only accredited investors can participate in Private Syndicates. Accredited investors include anyone with over $1 million of investable assets outside of a primary residence. OR investors with an annual income of $200,000, or $300,000 for joint income, for the last two years. Accredited investors include individuals, banks, insurance companies, brokers, and trusts.\

Not all music catalogs are created equal. And, I can say without hesitation that among the top tier catalogs we’ve seen, this catalog offers investors the best income potential. Combined with the great management team behind these artists, we expect this investment can offer real appreciation as well.

Please read on for the full executive summary, investment terms, and a form to indicate your desired level of participation.

Best,

Matthew Smith, CEO @ Royalty Exchange

Offering is Officially Closed

The Investment

What You're Buying

An equity interest in the entity, CTE Royalties LLC, holding rights to payments associated with the composition copyright, and associated royalty income, of a music catalog spanning four studio album releases from the Grammy-winning American rock band Cage the Elephant (CTE). This represents 100% of the seller’s co-publishing stake in the catalog, which equals 40% of the total publishing copyright and related royalty income of the full catalog.

CTE Royalties LLC will have the right to collect income from the catalog’s Mechanical, Public Performance, Sync, and Print royalty streams for all studio albums created before July 31, 2017 (all songs on all four studio albums). CTE Royalties LLC will collect these royalties in partnership with the largest music publisher in the world by market share—Sony/ATV—which owns another 40% of the catalog and is the administrative entity supporting it.

The band is represented by one of the most powerful talent management agencies in the world—Q-Prime Inc.—alongside such best-selling acts as Metallica and Red Hot Chili Peppers. 

Included Catalog

Historical Earnings Summary*

2017 Revenue: $314,685 (15.1% growth over 2016) 

3-year Average Revenue: $264,071 

  • 5-year Compound Annual Growth Rate: 14%  
  • 3-year Compound Annual Growth Rate: 15% 


Catalog Six-Year Earnings

Top Earning Songs

As of 12/21/2017

Earnings by Royalty Type*


(Representing the 40% portion of the catalog CTE Royalties LLC Intends to purchase)

Six-Year Earning Breakdown

Earnings by Royalty Type 2017

As of 12/21/2017

Streaming

The growth of the music industry is driven by activity on streaming music platforms. Catalogs showing growth in streaming formats are in-line with the broader music industry’s growth trends.

Streaming earnings for the CTE catalog are up 55% year over year.* Streaming went from contributing 25% of overall catalog earnings in 2016, to 34% of total catalog earnings in 2017.

(Streaming-derived mechanical and public performance royalties combined, represents the 40% portion CTE Royalties LLC intends to purchase)

  • Streaming 5-year Compound Annual Growth Rate: 51%
  • Streaming 3-year Compound Annual Growth Rate: 61% 

Projected Returns*

We’re forecasting an average 12-15% return over 10 years... starting at just over 9% the first year and growing to 18% by year 10. These figures include the proceeds of an anticipated sale of the catalog and return of capital to shareholders ager 10 years.

Based on an analysis of the CTE catalog’s last five years CAGR, combined with industry projections for the growth of streaming activity, the statutory increase in mechanical royalty rates, and anticipated release of new music and tour.

INVESTMENT TERMS

Per Unit Cost

$3,835

Amount To Be Sold

$3,453,250

Eligibility

Accredited Investors as defined under Rule 506(c) of the Securities Act of 1933, as amended.

Lock-up Period

12 Months (per Regulation D)

Income Distribution Schedule

Income to be paid semi-annually.

Tax Treatment

Investors are expected to benefit from pass-through Amortization Benefit on the purchase. This will be done for investors via K-1.

*Past performance is not a guarantee of future results 




Private Syndicate Offering is Officially Closed

as of July 3, 2018




Documentation

     Download: Operating Agreement (PDF)

     Download: Subscription Agreement (PDF)

     Download: Private Placement Memorandum (PDF)

DISCLOSURES
THIS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES, AND NO OFFER WILL BE MADE EXCEPT PURSUANT TO A PRIVATE PLACEMENT MEMORANDUM PROVIDED BY US.
THIS SUMMARY CONTAINS STATEMENTS WHICH CONSTITUTE “FORWARD-LOOKING STATEMENTS.” THESE STATEMENTS APPEAR IN A
NUMBER OF PLACES IN THIS SUMMARY. THESE FORWARD-LOOKING STATEMENTS INCLUDE, BUT ARE NOT LIMITED TO, STATEMENTS REGARDING PLANS, INTENTIONS, BELIEFS, EXPECTATIONS, PROJECTIONS, ASSUMPTIONS, DESCRIPTIONS OF POTENTIAL FUTURE EVENTS, AS WELL AS OTHER STATEMENTS THAT ARE NOT HISTORICAL FACTS. THE COMPANY AND ROYALTY EXCHANGE USE WORDS IN THIS MEMORANDUM SUCH AS “ANTICIPATES,” “BELIEVES,” “PLANS,” “EXPECTS,” “PROJECTS,” “FUTURE,” “INTENDS” AND SIMILAR EXPRESSIONS TO IDENTIFY FORWARD-LOOKING STATEMENTS. ALTHOUGH THE COMPANY AND ROYALTY EXCHANGE BELIEVE THAT THE EXPECTATIONS REFLECTED IN THESE FORWARD-LOOKING STATEMENTS ARE BASED ON REASONABLE ASSUMPTIONS, YOU ARE CAUTIONED THAT FORWARD-LOOKING STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND INVOLVE RISKS AND UNCERTAINTIES. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE IN THE FORWARD-LOOKING STATEMENTS DUE TO VARIOUS FACTORS, INCLUDING THOSE DESCRIBED IN THE “RISK FACTORS” SECTION OF OUR PRIVATE PLACEMENT MEMORANDUM. FORWARD-LOOKING STATEMENTS SPEAK ONLY AS OF THE DATE OF THE DOCUMENT IN WHICH THEY ARE CONTAINED, AND THE COMPANY AND ROYALTY EXCHANGE DO NOT INTEND TO UPDATE OR REVISE ANY FORWARD- LOOKING STATEMENTS, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE.