What is the Lazuli Capital Fund?

The Lazuli Capital Fund is an evergreen fund that invests in multiple Commercial Real Estate syndications and Private Equity funds on behalf of investors. The fund targets a net IRR of 13% to 15%.

How is the fund diversified?

We believe in diversification at a low cost. All investors are pooling their money together, and the fund invests on their behalf in some carefully selected syndications. All investors have access to the same blend of investments.

Could you describe the type of assets held in the fund?

The fund holds various asset classes, from multiple sponsors and locations. For example, the fund holds some debts and preferred equity, when the risk adjusted return is favorable. It holds some core, core+, or value add assets too. Finally, it invests in vertical developments, opportunistic investments, and even potentially a minor position in some more speculative assets.

We are targeting income, consistent ROI, and growth. Capital preservation is paramount, and risk adjusted return is boosted through well thought diversification.

How can I join the fund?

You can join the fund at any time. We are scaling our investments based on the investors’ interest, and some deals fill quickly. Do not wait the last minute to get your accreditation letter and wire your funds.

When joining later, what investment do I get access to?

When you join the Lazuli Capital Fund, you get access to the same blend of investments as the existing investors, even if you come later. In practice, your investment is going to be used to fund the next investment for the fund, and that will benefit all investors, you, and the previous investors too.

Distributions will be split between all investors, but because new investments funded by new investors will also generate distributions and returns, your overall performance will stay within bounds, with some added diversification as a bonus.

Do I need to be accredited?

Yes, as requirement to join the fund, you have to be accredited, and maintain your accreditation.

You can see the definition of accreditation from the SEC here .

What is the minimum investment?

The minimum investment in the fund is $50k, with $5k increments.

However, we understand that it is not accessible to most, and as investors ourselves, we are trying to make it as investor friendly as possible.

Therefore, we offer a limited number of $25k slots that get filled quickly. If you want to get started in the fund with only $25k, make sure to lock your slot as early as possible. These $25k slots get freed slowly as investors are increasing their investments to $50k or above.

Remember that when you invest more in the fund, the fees are more advantageous and it gets more profitable for you.

How often do you communicate with investors?

We send quarterly reports to all investors. These reports contain the performance of each syndication invested in, the composition of the fund, the risk profile, the details on the investment pool, and each expected IRRs, as well as the aggregated IRR.

We also send regular emails for new prospective investments, or when there are some major updates.

How often do you send distributions?

Distributions are sent every quarter, covering the distributions received by the fund in the previous quarter.

When investors make an investment in the fund, they become eligible for distribution in the next quarter. This is designed to provide fairness to existing investors, especially with significant distributions, like refinancing or exits, are planned.

For example, an investor joining in Q1, becomes eligible for the Q2 distributions, which will be distributed early Q3.

Quarterly distributions can be sent by ACH, or even better be auto-reinvested in the fund.

How can I withdraw money from the fund?

Unlike most other syndications, we provide multiple ways to withdraw funds.

We keep track of when each investor joined the fund, and they will have priority for withdrawal when the syndication invested when they joined exits or refinances.

For clarity, all investors have the same diversification in the fund. This tracking of investment time is only used to determine the withdrawal priority.

Also, during exits or refinances, any investor will have opportunities to withdraw money. We respect the First In First Out rule for investor withdrawals (FIFO) on a given priority list.

Finally, we offer another way to withdraw money from the fund after one year ownership, by enabling investors to sell their fund ownership to other investors. In this case, the sale price is agreed upon between the seller and buyer, and there is a 1% management fee to facilitate the sale.

How is my ownership calculated when I join or withdraw money?

When you join, your share of ownership is calculated based on the current overall Fund Fair Market Value (FMV). In other words, if the fund FMV is at $5m, and you invest $50k, you will have 1% ownership of the fund.

When you withdraw from the fund, the withdrawal amount is still based on your ownership of the fund. If later, the fund FMV is worth $6m, and you still have 1% of ownership, your ownership will be valued at $60k.

How is the Fair Market Value updated?

The Fair Market Value (FMV) is updated every quarter. It is conservatively and best-effort based on the performance of each syndication and their distributions. The manager reserves the right to increase or decrease the FMV of a given syndication if the market conditions change. We aggregate the FMV of each syndication to determine the overall fund FMV.

The FMV increase depends on the actual syndications in the fund. But to give an example, the FMV may increase by 2% to 2.5% per quarter (minus the distributions that are also quarterly paid to the investors).

When the syndication is refinanced or exited, the FMV is automatically adjusted to the actual value. Said differently, the FMV may conservatively increase by 10% per year, but the syndication may actually pay out to 20% at the very end. It pays more to stay in the fund until the syndication exits.

What are the fees?

There is an Asset Under Management (AUM) fee of at most 0.50% per year, paid quarterly. And there is a Profit Split/Carry of at most 10% paid on all distributions after the return of your capital.

These fees are based on your level of investment, and can be reduced down to 0.25% and 3% with a bigger commitment into the fund.

As an exemple: If you invest $50k, your AUM fee will be 0.50% per year (0.125% per quarter), so $62.50 for the first quarter. You will then receive all the distributions from the syndications, proceeds from refinancing and syndication sales. Once you received your initial $50k back (full return of capital), you will then receive 90% of the profits thereafter, and the remaining 10% of the profit will be paid to the manager. In other words, if you are not making any profit, the manager does not receive any carry. And you will receive 90% of the profits.

The fund page has more details on how to get lower fees, but here is a short version :

   $50k investment: 0.50% yearly AUM, 90/10 profit split/carry.

   $100k investment: 0.50% yearly AUM, 95/5 profit split/carry.

   $250k investment: 0.25% yearly AUM, 97/3 profit split/carry.

The more you invest in the fund, the lower your percentage fees.

There is also a 0.50% to 1% fund creation fees, assessed once for each investment. See the next question for more details on creation fees.

Why is there some fund creation fees?

Lazuli Capital is a fund created by investor for investors. Cost of creation of the funds, mostly lawyer fees and filing fees, have been prepaid by the managers.

Although, we did our best to reduce the cost as much as possible, it is non-zero. The fund creation fees are assessed until fully reimbursed. We expect this to just have a short term impact, and it corresponds roughly to the equivalent of less than 1 month of distribution for each investment.

When investing, you will participate in the fund creation fees, once per investment. These fees are set to 0.50% for investments made in 2021 and 2022, and 1% afterwards, until the fund creation fees have been fully reimbursed.

Said differently, when you invest $50k in 2021, $250 will go towards the reimbursement of the fund creation fees.

What are the best ways to take advantage of the fund?

In general:

– Investors who regularly invest in the fund will do better than investors who invest only once.

– Investors who stay in the fund longer will do better than investors who withdraw from the fund early.

What is the tax treatment for the fund?

The fund invests in multiple syndications and private equities, however our CPAs will produce a single schedule K-1 to each investors.

As some syndication K-1s might come late, investors should expect to file for a tax extension every year. However, it’s very easy . It’s really just a simple form to fill.

What about state tax filing?

We realize that state tax filing can create additional paperwork, headaches, and fees to individual investors, especially when multiple syndications are involved.

To leverage our economy of scale, we use composite state tax filing when possible on behalf of the investors, so they don’t need to file for state taxes.

How are profits being taxed?

Most profits are taxed as a passive capital gains. It is the same rate as stock capital gains, but counted separately. The fund will have some depreciation that will offset some of these gains, so you can expect some paper losses in some years. This depreciation will have to be recaptured later, with a tax rate 5% higher (capped at 25%).

The fund will invest in debt instruments that may be taxed as income. Overall, it should represent a small portion of the profits though.