Lyrical-Antheus Management, L.P. (“LAM”) is owned by David Gefsky (25%), Eli Ungar
(25%) and the Jeffrey A. Keswin 2007 Perpetuity Trust (50%). Erica Keswin serves as the
trustee to the Jeffrey A. Keswin 2007 Perpetuity Trust.
LAM was organized in December 2004 for the purpose of providing investment
management services with respect to real estate related investments. The persons involved
in such investment management services are referred to herein as “supervised persons”
and include Jeffrey A. Keswin and Messrs. Gefsky and Ungar. With the exception of Jeffrey
A. Keswin, all supervised persons are employed by or are principals of MAC Property
Management, LLC (“MPM”). MPM is owned equally by David Gefsky and Eli Ungar, together
with their respective spouses. See Item 10 for additional information with respect to MPM.
LAM provides investment advisory services with respect to investments in residential and
commercial real estate. Investments consist of, but are not limited to, income-producing
residential real property located throughout the United States. LAM provides these services
to pooled investment vehicles organized as limited partnerships and limited liability
companies (referred to herein as “clients”). The term “investor” as used herein refers to an
individual or entity that invests in a client of LAM. LAM serves as the managing member of
each client’s general partner or manager (“LAM GPs”). The ownership of the LAM GPs is
identical to that of LAM.
LAM’s investment advice is limited to real estate related investments. Any client
restrictions or investment objectives are set forth in the client’s governing documents.
As of December 31, 2018, LAM managed $1,273.273,412 in assets on a discretionary basis.
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Clients pay LAM an annual management fee ranging from 1- 2% annually. For clients who
seek to invest in properties for development or redevelopment and disposition, the
management fee is 2% as follows: 1) during the commitment period, a percentage based on
total capital commitments and 2) after the commitment period, a percentage based on net
funded capital commitments (as defined in each client’s governing documents). For clients
who seek to invest in stabilized properties for management and long-term holding, the
management fee is 1% of net asset value. The management fee is directly debited from
clients quarterly in advance and may be negotiated with each investor at LAM’s discretion.
If a client terminates prior to the end of the quarter, LAM will not refund pre-paid
management fees to clients. In addition, the LAM GPs are eligible to receive performance
based compensation from clients.
In addition to the fees described above, each client typically pays expenses incurred in
connection with the investment, administration and management of its assets. Such
expenses include legal, accounting and other third-party costs, litigation expenses,
compensation of advisers, consultants and finders, travel costs, appraisal costs,
commitment fees, transfer or recording taxes, registration fees, real estate taxes, interest,
leasing fees, management fees and expenses. If an expense is incurred for the benefit of
more than one client, it is allocated pro rata in proportion to the relative amounts invested
or in a manner deemed to be fair and equitable.
Clients will incur other brokerage and transaction costs. The disclosure under Item 12
contains additional information with respect to such costs.
LAM, at its sole discretion, may enter into side letters or other similar arrangements with
certain investors that may waive or modify the application of any provision in the
respective governance agreement with respect to such investor. Such side letters may have
the effect of establishing or otherwise benefiting such investor in a manner more favorable
than the rights and benefits described in the applicable offering documents and governance
agreement. The same favorable rights and benefits may be extended, or not, to other
investors in accordance with each respective Funds’ offering materials. These rights and
benefits may include differing terms with respect to management fees, fee rebates, tax
considerations, capacity allowances, subscription privileges, redemption rights, placement
fees, minimum and maximum subscription amounts, investor eligibility requirements, co-
investment opportunities and other terms and conditions.
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As discussed under Item 5, clients pay an annual management fee to LAM and LAM GPs are
eligible to receive performance-based compensation from clients. LAM does not have an
incentive to favor accounts which pay performance fee since it does not advise clients that
are not subject to both an asset-based fee and performance-based compensation.
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LAM’s clients are pooled investment vehicles for which LAM GPs serve as the general
partner or managing members Clients may have investment minimums set forth in their
governing documents, which may be waived at LAM’s discretion.
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RISK OF LOSS
Analyses and Strategy
LAM provides investment advisory services with respect to investments in residential and
commercial real estate. LAM provides services to clients with two types investment
objectives: 1) seeks to generate return for clients through the purchase, development, re-
development, financing, management and disposition of multi-family residential and
commercial properties and 2) seeks to generate return for clients through the purchase
and management of stabilized multi-family residential and commercial properties.
When selecting investments, LAM considers, among other factors, geographic location,
including proximity to anchors such as hospitals and universities, and the opportunity to
create value due to distress or improper management. Prior to making an investment, LAM
conducts various forms of due diligence which may include environmental studies,
assessment reports, operating diligence regarding leases and bad debt, and financing
reviews.
Risks
Real estate investments tend to be illiquid and are subject to varying degrees of risk. Real
estate values are effected by a number of factors including changes in the general economic
climate, local conditions (such as an oversupply of space or reduction in demand for space),
the quality and philosophy of management, competition based on rental rates,
attractiveness and location of properties, financial condition of tenants, buyers and sellers
of properties, quality maintenance, insurance and management services and changes in
operating costs. Real estate values are also affected by such factors as government
regulations (including those governing usage, improvements, zoning and taxes), interest
rate levels, the availability of financing and potential liability under changing
environmental laws. As a result of such factors, the value of the real estate investments can
be expected to fluctuate.
LAM’s clients and their subsidiaries borrow and use leverage to make investments. While
such leverage will increase the funds available for investment by clients, it will also
increase the risk of loss on a leveraged property.
LAM’s clients invest mainly in real estate and lack diversification. A lack of diversification
increases the impact a decrease in real estate market would have on clients.
Although LAM has taken measures to decrease the risks associated with a cybersecurity event, the
computer systems, networks and devices used by LAM and its service providers potentially can
be breached. A client could be negatively impacted as a result of a cybersecurity breach. A
cybersecurity breach could result in a failure to maintain the security, confidentiality or privacy of
sensitive data, including personal information of clients. A cybersecurity breach may also cause
disruptions and impact business operations potentially resulting in a financial loss to a client or
investor.
There is no assurance that the above is a complete description of all risks of an investment
or that there are no other risks that may exist now or that may arise in the future in
connection with an investment. Strategies and risks related to clients are described in
greater detail in each client’s governing documents and this description is qualified in its
entirety by those materials with respect to each client.
Investing in securities involves risk of loss that clients should be prepared to bear.
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AFFILIATIONS
LAM recommends to clients, or engages on a client’s behalf, related third party service
providers. A conflict of interest exists in engaging, initially and on an ongoing basis, or
recommending, such persons since it could appear that the third-party service providers
were chosen based on their relationship with LAM rather than on a client’s best interests.
LAM monitors this potential conflict of interest to ensure that the recommendation of third
party service providers is in the clients’ best interests. These relationships are described
below.
Messrs. Gefsky and Ungar, together with their spouses, own Silliman Group, LLC
(“Silliman”). Silliman is a construction company that is engaged by clients to perform
certain construction and/or construction management services. LAM’s clients reimburse
Silliman for these construction costs. LAM ensures that such services and costs are
comparable or more favorable than that which could be obtained from an unrelated party.
Silliman is a pass-through entity which performs renovation work exclusively for LAM’s
clients’ properties. It was established in order to avoid paying general contractor fees. It
does not generate any profit, but instead performs work at cost.
Messrs. Gefsky and Ungar, together with their spouses, own MPM, Algonquin
Management, LLC and Regent Park Management, LLC (collectively the “Property
Management Companies”). The Property Management Companies are engaged to
manage the rental activities with respect to clients’ real estate investments. LAM’s
clients pay a property management fee to the Property Management Companies based
on a percentage of rental income for such services. As stated in the clients’ PPMs, at no
time will the management fee charged by the management companies be in excess of
the market rate. The services and pricing available from third party property
managers are reviewed on an ongoing basis to ensure that the pricing and services
provided by the Property Management Companies are comparable to or more favorable
than that which could be obtained from an unrelated party.
It should be noted that both Silliman and MPM lease office space in properties that are
owned by LAM’s clients. LAM ensures that all such leases are at fair market rates.
LAM also has the financial industry affiliations described below.
Greg Guttman is an employee of MPM who also serves as sponsoring broker. A real
estate brokerage license is held in Mr. Guttman’s name and in the name of MPM. Such
licenses are held solely in connection with the leasing activities conducted by MPM. Mr.
Guttman and MPM are not engaged in the purchase or sale of real estate as licensed real
estate agents or brokers.
Mr. Keswin maintains an ownership interest in Lyrical Asset Management (“Lyrical”),
an SEC registered investment adviser. Lyrical provides investment advisory services to
separately managed accounts and an investment company which invest in publicly
traded securities. Mr. Keswin also has an ownership interest in Lyrical Partners, LP.
Lyrical Partners, LP is an exempt reporting adviser that manages investment funds
including funds of funds, private equity funds and hedge funds. Further, Mr. Keswin has
an ownership interest in Lytical Ventures LLC that advises ventures capital funds. LAM
does not believe that these situations create a conflict of interest with or harms clients
in any way.
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TRANSACTIONS AND PERSONAL TRADING
LAM enforces a Code of Ethics (the “Code”) to promote the highest levels of ethical conduct
among its supervised persons. The Code includes the following general principles: 1) the
duty at all times to place the interests of clients first, 2) the requirement to conduct
personal securities transactions in such a manner as to avoid any actual or potential
conflict of interest, and 3) the fundamental standard that LAM and its supervised persons
exercise independent, unbiased judgment in the investment decision-making process.
The Code stipulates that supervised persons are not permitted to use their knowledge of
proposed or actual recommendations or transactions to profit personally. The Code also
restricts the personal receipt of investment opportunities, perquisites, or gifts from
persons doing or seeking business with LAM that could call into question the supervised
person’s independent judgment.
Supervised persons are also prohibited from sharing non-public personal information of
clients or investors without permission and unless necessary to complete a transaction on
the client’s or investor's behalf.
Certain supervised persons have an ownership interest in clients directly, as investors, or
indirectly, as owners of the LAM GPs. Consequently, an incentive exists to favor clients
based on the amount of a supervised person’s interest. For example, an incentive could
exist to allocate limited investment opportunities to certain clients. LAM prohibits its
supervised persons from allocating trades or investment opportunities that favor any
particular client, group of clients or affiliated and proprietary accounts. In addition, the
nature and timing of investment decisions decreases the likelihood that clients would
compete for investment opportunities. See Item 12 for more information with respect to
the allocation of investment opportunities.
This summary is qualified in its entirety by LAM’s Code. Contact Susie Charendoff at (201)
541-8003 x7402 or
[email protected] to request a copy of the Code.
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LAM has the discretion to select the mortgage broker used to effect mortgage transactions
for financing real estate investments. When selecting mortgage brokers, LAM considers
mortgage brokers with a demonstrative experience in financing from various lenders and a
track record with loans of similar type and size. LAM also has the discretion to select real
estate brokers to affect the sale of real estate investments. In selecting a real estate broker,
LAM considers the market experience, track record and client-base of the broker. Although
obtaining the lowest fee is a factor in selecting or recommending a real estate broker, LAM
does not necessarily direct transactions to the broker that offers the lowest commissions.
LAM is committed to allocating potential transactions among its clients in a fair and
equitable manner. LAM typically forms pooled investment vehicles with similar investment
objectives on a sequential basis and generally does not make investments in a new client
until all prior clients are at least 70% invested. LAM may occasionally form joint ventures
between two or more clients to co-invest in an opportunity. LAM reviews that the
opportunity is appropriate for each client and each client receives the same terms and
conditions. In addition, certain of LAM’s clients were formed with the sole purpose of co-
investing with another client. These clients are managed as parallel funds and co-invest in
the same opportunities in pre-determined allocations. The nature and timing of investment
decisions, as described above, reduces the likelihood that clients would compete for
investment opportunities. In addition, LAM’s clients each have an advisory committee
which consists of independent investors. When a potential conflict of interest exists, LAM
may convene the client’s advisory committee to review the investment. Further, LAM
prohibits its supervised persons from allocating trades or investment opportunities that
favor any particular client, group of clients or affiliated and proprietary accounts.
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Client investments are reviewed on an annual basis by the supervised persons listed below.
These reviews take into account various factors, including, performance, budgets and
capital plans.
David Gefsky, Managing Member of Lyrical-Antheus Management GP, LLC
Eli Ungar, Managing Member of Lyrical-Antheus Management GP, LLC
Lyrical-Antheus Management GP, LLC serves as the general partner to LAM. For each client
investment, LAM receives information from the property manager with respect to periodic
physical reviews of investments, weekly reviews of leasing and rent rolls, and monthly
reviews of lease renewals, occupancy rates and financials. Significant changes in the
information provided by the property manager may trigger further review by LAM.
LAM provides written quarterly statements and annual audited financials to its clients’
investors.
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LAM does not receive any economic benefit from a non-client for providing investment
advisory services. In addition, LAM does not compensate any person for client referrals.
If an investment opportunity is too large for a client to invest in alone, LAM may seek other
investors to participate with the client in making the investment. LAM does not provide
investment advice or other advisory services to these other investors but may be entitled
to receive from them a performance fee based on the success of the investment. LAM
believes that this practice is in the best interests of clients, who would not otherwise be
able to participate in the investment opportunity, and does not create a conflict of interest.
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LAM has custody over clients’ funds and/or securities. LAM’s clients are audited by an
independent public accountant and annual audited financial statements are distributed to
the investors.
In the event that a qualified custodian sends quarterly, or more frequent, account
statements directly to clients or investors, such clients and investors should carefully
review those statements and compare them to any statements they receive from LAM.
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LAM accepts discretionary authority to manage its clients’ assets. This authority is set forth
in a client’s offering documents, investment advisory agreements, and/or other governing
documents. Such documents also set forth restrictions and constraints with respect to this
authority.
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LAM’s clients generally do not hold voting securities. In the event that a client holds voting
securities, LAM will adopt and implement written policies and procedures that are
reasonably designed to ensure that it votes client securities in the best interest of clients
and in a manner that is not a product of a material conflict of interest between LAM and the
client. LAM would disclose these policies and procedures to clients and describe to them
how to obtain information from LAM about how their securities were voted.
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