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What changed in Belpointe PREP, LLC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Belpointe PREP, LLC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+181 added−254 removedSource: 10-K (2024-03-29) vs 10-K (2023-03-31)

Top changes in Belpointe PREP, LLC's 2023 10-K

181 paragraphs added · 254 removed · 105 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

3 edited+27 added−129 removed1 unchanged
Biggest changeWe, our Manager and our Sponsor are a party to an employee and cost sharing agreement (the “Employee and Cost Sharing Agreement”) pursuant to which our Sponsor provides our Manager with access to portfolio management, asset valuation, risk management and asset management services, as well as administration services addressing legal, compliance, investor relations and information technologies necessary for the performance by our Manager of its duties under the Management Agreement.
Biggest changeOur Employee and Cost Sharing Agreement Pursuant to the Employee and Cost Sharing Agreement, our Sponsor provides our Manager with access to portfolio management, asset valuation, risk management and asset management services, as well as administration services addressing legal, compliance, investor relations and information technologies necessary for the performance by our Manager of its duties under the Management Agreement, and our Sponsor or one or more of its affiliates is entitled to receive expense reimbursements and our Manager’s allocable share of employment costs incurred by the Sponsor.
Subject to the limitations set forth in our Amended and Restated Limited Liability Company Operating Agreement (our “Operating Agreement”), a team of investment and asset management professionals, acting through our Manager, makes all decisions regarding the origination, selection, evaluation, structuring, acquisition, financing and development of our commercial real estate properties, real estate-related assets, including commercial real estate loans and mortgages, and debt and equity securities issued by other real estate-related companies, as well as private equity acquisitions and investments, and opportunistic acquisitions of other qualified opportunity funds and qualified opportunity zone businesses.
Our Management Agreement Pursuant to the terms of the Management Agreement, a team of investment and asset management professionals, acting through our Manager, makes all decisions regarding the origination, selection, evaluation, structuring, acquisition, financing and development of our commercial real estate properties, real estate-related assets, including commercial real estate loans and mortgages, and debt and equity securities issued by other real estate-related companies, as well as private equity acquisitions and investments, and opportunistic acquisitions of other qualified opportunity funds and qualified opportunity zone businesses, subject to the limitations in our operating agreement.
Our Manager We are externally managed by our Manager, Belpointe PREP Manager, LLC, and, pursuant to the terms of a management agreement between us, our Operating Companies and our Manager (the “Management Agreement”), our Manager manages our day-to-day operations, implements our investment objectives and strategy and performs certain services for us, subject to oversight by our board of directors (our “Board”).
Item 1. “Business—Qualified Opportunity Zone Program .” 82 Our Relationship with our Manager and Sponsor We are externally managed by our Manager, which is responsible for managing our day-to-day operations, implementing our investment objectives and strategy and performing certain services for us, subject to oversight by our Board and the limitations set forth in our Operating Agreement.
Removed
In this Annual Report on Form 10-K (this “Form 10-K”), unless context otherwise requires, references to “we,” “us,” “our,” “Belpointe” or the “Company” refer to Belpointe PREP, LLC, a Delaware limited liability company, its operating companies, Belpointe PREP OC, LLC, a Delaware limited company, and Belpointe PREP TN OC, LLC, a Delaware limited company (each an “Operating Company” and, together, the “Operating Companies”), and each of the Operating Companies’ subsidiaries, taken together.
Added
Our Manager is an affiliate of our Sponsor and is indirectly owned by our Chief Executive Officer and beneficially owned by certain immediate family members of our Chief Executive Officer.
Removed
Overview of Our Business and Operations We are the only publicly traded qualified opportunity fund listed on a national securities exchange. We are a Delaware limited liability company formed on January 24, 2020, and intend to operate in a manner that will allow us to qualify as a partnership for U.S. federal income tax purposes.
Added
Pursuant to the terms of the Management Agreement, our Manager is responsible for, among other things: ● serving as our investment and financial manager with respect to originating, underwriting, acquiring, and managing our investment portfolio; ● structuring the terms and conditions of our acquisitions, sales and joint ventures; and ● retaining, for and on our behalf, services related to, among other things, our Primary Offering, and any other offerings that we may conduct, the development, operation and management of our investments, calculation of our NAV, administrative, accounting, tax, legal and investor relations services, financing services, and services related to property management, leasing, development and construction.
Removed
We are focused on identifying, acquiring, developing or redeveloping and managing commercial real estate located within qualified opportunity zones. At least 90% of our assets consist of qualified opportunity zone property. We qualified as a qualified opportunity fund beginning with our taxable year ended December 31, 2020.
Added
The initial term of the Management Agreement continues through December 31, 2025, and may only be terminated (i) for “cause,” (ii) upon the bankruptcy of our Manager, or (iii) upon a material breach of the Management Agreement by our Manager.
Removed
Because we are a qualified opportunity fund certain of our investors are eligible for favorable capital gains tax treatment on their investments.
Added
“Cause” is defined in the Management Agreement to mean fraud or willful malfeasance, gross negligence, the commission of a felony or a material violation of applicable law, in each case that has or could reasonably be expected to have a material adverse effect on us.
Removed
All of our assets are and will continue to be held by, and all of our operations are and will continue to be conducted through, one or more of our Operating Companies, either directly or indirectly through their subsidiaries.
Added
Following the initial term, the Management Agreement will automatically renew for an unlimited number of three-year terms unless we elect not to renew it by providing our Manager with 180 days’ prior notice.
Removed
We are externally managed by Belpointe PREP Manager, LLC (our “Manager”), which is an affiliate of our sponsor, Belpointe, LLC (our “Sponsor”). On September 30, 2021, the U.S.
Added
Upon any termination or non-renewal of the Management Agreement by us or any termination of the Management Agreement by our Manager for our breach of the Management Agreement, our Manager will be entitled to receive its prorated management fee through the expiration or termination date and will be paid a termination fee equal to six times the annual management fee earned by our Manager during the 12-month period ended as of the last day of the quarter immediately preceding the termination date.
Removed
Securities and Exchange Commission (the “SEC”) declared effective our registration statement on Form S-11, as amended (File No. 333-255424) (the “Registration Statement”), registering a continuous primary offering of up to $750,000,000 in our Class A units (the “Primary Offering”).
Added
In addition, upon any termination or non-renewal of the Management Agreement, our Manager will continue to hold our Class B units. Upon termination or non-renewal of the Management Agreement, our Manager will cooperate with us and take all reasonable steps requested by us to assist our Board in making an orderly transition of the management function.
Removed
From the period of October 7, 2021, the date of the first closing held in connection with our Primary Offering, through December 31, 2021, we issued 2,132,039 Class A units in our Primary Offering, raising net offering proceeds of $212.6 million.
Added
Management Fee, Class B Units and Expense Reimbursement As compensation for its services under the Management Agreement, we pay our Manager a quarterly management fee at an annualized rate of 0.75%. The management fee is based on our NAV at the end of each fiscal quarter.
Removed
For the year ended December 31, 2022, we issued 141,300 Class A units in connection with our Primary Offering, raising net offering proceeds of $13.5 million. Together with the gross proceeds raised by Belpointe REIT, Inc. (“Belpointe REIT”) in its prior offerings, as of December 31, 2022, we have raised aggregate gross offering cash proceeds of $346.3 million.
Added
During the years ended December 31, 2023, and 2022, we incurred management fees due to our Manager of $2.7 million and $2.6 million, respectively. As additional compensation for its services under the Management Agreement, we issued our Manager 100,000 Class B units, representing all of our issued and outstanding Class B units.
Removed
See “—Our Transactions with Belpointe REIT, Inc.” for additional details regarding our transaction with Belpointe REIT. Our Transactions with Belpointe REIT, Inc.
Added
The Class B units entitle our Manager to 5% of any gain recognized by or distributed to us or recognized by or distributed from our Operating Companies or any subsidiary.
Removed
During the year ended December 31, 2021, pursuant to the terms of an Agreement and Plan of Merger (the “Merger Agreement”), we conducted an offer to exchange (the “Offer”) each outstanding share of common stock (the “Common Stock”), of Belpointe REIT validly tendered in the Offer for 1.05 of our Class A units, with any fractional Class A units rounded up to the nearest whole unit (the “Transaction Consideration”).
Added
As a result, any time we recognize an operating gain (excluding depreciation) or receive a distribution, whether from continuing operations, net sale proceeds, refinancing transactions or otherwise, our Manager is entitled to receive 5% of the aggregate amount of such gain or distribution, regardless of whether the holders of our Class A units have received a return of their capital.
Removed
The Offer was completed on September 14, 2021. 5 Table Of Contents Following the Offer, and in accordance with the terms of the Merger Agreement, Belpointe REIT converted from a corporation into a limited liability company (the “Conversion”) named BREIT, LLC (“BREIT”).
Added
The allocation and distribution rights that our Manager is entitled to with respect to its Class B units may not be amended, altered or repealed, and the number of authorized Class B Units may not be increased or decreased, without the consent of our Manager.
Removed
In the Conversion each outstanding share of Common Stock was converted into a limited liability company interest (an “Interest”) in BREIT. The Conversion was completed on October 1, 2021. Following the Conversion, and in accordance with the terms of the Merger Agreement, BREIT merged with and into BREIT Merger, LLC (“BREIT Merger”), our wholly owned subsidiary (the “Merger”).
Added
During the years ended December 31, 2023 and 2022, we did not make any Class B unit allocations or distributions to our Manager. 83 Pursuant to the Management Agreement, we reimburse our Manager and its affiliates, including our Sponsor, for actual fees and expenses incurred in connection with our Primary Offering, the Offer and Merger, the selection, origination, acquisition and management of our investments, and for out-of-pocket expenses paid to third parties in connection with providing services to us.
Removed
In the Merger, each outstanding Interest was converted into the right to receive the Transaction Consideration. The Merger was completed on October 12, 2021.
Added
Expenses reimbursable are payable at the election of the recipient in cash, by issuance of our Class A units at the then-current NAV, or through some combination of the foregoing. For additional details regarding the Offer and the Merger see, Item 7.
Removed
Prior to and in connection with the Offer and Merger, we entered into a series of loan transactions with Belpointe REIT, whereby Belpointe REIT advanced us an aggregate of $74.0 million evidenced by a series of secured promissory notes (the “Secured Notes”) bearing interest at a rate of 0.14%, due and payable on December 31, 2021, and secured by all of our assets.
Added
“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Our Transactions with Belpointe REIT, Inc.” During the years ended December 31, 2023, and 2022, our Manager and its affiliates, including our Sponsor, incurred $2.9 million, and $2.9 million, respectively, for fees and expenses on our behalf.
Removed
Upon consummation of the Merger, BREIT Merger acquired the Secured Notes as successor in interest to Belpointe REIT and, effective October 12, 2021, we entered into a Release and Cancellation of Indebtedness agreement with BREIT Merger pursuant to the terms of which BREIT Merger cancelled the Secured Notes and discharged us from all obligations to repay the principal and any accrued interest on the Secured Notes.
Added
For additional details regarding our Employee and Cost Sharing Agreement, see Item 1. “Business—Human Capital .” During the both years ended December 31, 2023, and 2022, our Sponsor and its affiliates incurred $1.8 million for fees, expenses and employment costs on our behalf.
Removed
Our Sponsor Our Sponsor, Belpointe, LLC, a leading investment firm based in Greenwich, Connecticut, operates a family office making private investments and oversees its businesses, such as wealth management, legal and real estate services.
Added
Development Fees Pursuant to the terms of development agreements that we enter into with affiliates of our Sponsor, such affiliates are entitled to receive (i) development fees on each project in an amount that is usual and customary for comparable services rendered to similar projects in the geographic market of the project, and (ii) reimbursements for their expenses, such as employee compensation and other overhead expenses incurred in connection with the project.
Removed
Our Sponsor’s senior executives have substantial experience in the acquisition, development and ownership of real estate and, as of December 31, 2022, its affiliates have facilitated or originated 13 real estate assets with aggregate purchase prices and construction costs of approximately $400 million. Our Sponsor’s financial management division also currently manages over $3 billion in public securities.
Added
In connection with our acquisitions of 902-1020 First and 900 8th Avenue South, a development fee of 4.5% of total project costs will be charged throughout the course of each project (the “Development Fee”), of which one half was due at the close of each acquisition.
Removed
Our Investment Objectives and Investment Strategy Our primary investment objectives are: ● to preserve, protect and return your capital contribution; ● to pay attractive and consistent cash distributions; ● to grow net cash from operations so that an increasing amount of cash flow is available for distributions to investors over the long term; and ● to realize growth in the value of our investments.
Added
In connection with our acquisition of 1991 Main Street, on March 29, 2022, we commenced construction on one of our properties located in Sarasota, Florida, and in connection therewith, due to an increase in scope of work, we agreed to increase the development fee payable to an affiliate of our Sponsor under the terms of our existing development management agreement from 4.0% to 4.25%.
Removed
We cannot assure you that we will achieve our investment objectives. See Item 1A.
Added
In addition, again due to the increase in scope of work, as well as due to increases in construction costs, we revised our construction budget.
Removed
“Risk Factors.” 6 Table Of Contents Our initial investments consist of and are expected to continue to consist of properties located in qualified opportunity zones for the development or redevelopment of multifamily, student housing, senior living, healthcare, industrial, self-storage, hospitality, office, mixed-use, data centers and solar projects located throughout the United States and its territories.
Added
As a result of the increase in development fees and revisions to our construction budget, we incurred an additional upfront development fee of $2.5 million, which is included in Real estate under construction in our consolidated balance sheets. The remaining development fee will be earned throughout the project in accordance with the terms of the development management agreement.
Removed
We also anticipate identifying, acquiring, developing or redeveloping and managing a wide range of commercial real estate properties located throughout the United States and its territories, including, but not limited to, real estate-related assets, such as commercial real estate loans and mortgages, and debt and equity securities issued by other real estate-related companies, as well as making private equity acquisitions and investments, and opportunistic acquisitions of other qualified opportunity funds and qualified opportunity zone businesses, with the goal of increasing distributions and capital appreciation.
Added
The development company receiving the Development Fee is indirectly owned by our Chief Executive Officer and beneficially owned by certain immediate family members of our Chief Executive Officer. For additional details regarding our acquisitions of 1991 Main Street, 902-1020 First, and 900 8th Avenue South see, Item 7.
Removed
Our investment guidelines delegate to our Manager discretion and authority to execute acquisitions and dispositions of investments (including the reinvestment of capital basis and gains), provided such investments are consistent with our investment objectives and strategy and our investment guidelines.
Added
“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Our Investments—Investments in Multifamily and Mixed-Use Rental Properties. ” During the year ended December 31, 2023, we incurred $5.9 million for development fees, and we incurred $1.7 million for employee reimbursement expenditures relating to projects under development.
Removed
Our Manager’s investment committee will periodically review our portfolio of assets and investments, our investment objectives and strategy and our investment guidelines to determine whether they remain in the best interests of our members and may recommend changes to our Board as it deems appropriate.
Added
During the year ended December 31, 2022, we incurred $4.3 million for development fees, and we incurred $1.5 million for employee reimbursement expenditures relating to projects under development.
Removed
We may, at any time and without member approval, cease to be a qualified opportunity fund and acquire assets that do not qualify as qualified opportunity zone investments. Furthermore, there are no prohibitions in our Operating Agreement on the amount or percentage of assets that may be invested in a single property.
Added
Director Independence Our Class A units are listed on the NYSE American under the symbol “OZ.” Pursuant to NYSE American’s corporate governance requirements, a majority of a listed company’s board of directors must be made up of independent directors.
Removed
Qualified Opportunity Zone Program The opportunity zone program is a community development program established by the Tax Cuts and Jobs Act of 2017 to encourage new long-term investment in low-income urban and rural communities nationwide.
Added
Under the NYSE American corporate governance requirements, a director is “independent” if the director is not an executive officer or employee of the company and the company’s board of directors affirmatively determines that the director does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.
Removed
The opportunity zone program provides a tax incentive for investors to re-invest their unrealized capital gains into qualified opportunity funds dedicated to investing in “qualified opportunity zones.” Qualified opportunity zones are census tracts identified and nominated by the chief executives of every state and territory of the United States ( e.g ., state governors) and designated by the Secretary of the Treasury.
Added
Our Board has determined that Dean Drulias, Timothy Oberweger, Shawn Orser and Ronald Young, Jr. are independent directors under the NYSE American corporate governance requirements.
Removed
There are more than 8,700 qualified opportunity zones throughout the United States and its territories.
Removed
A “qualified opportunity fund” is generally defined as an investment vehicle that is taxed as a corporation or partnership for U.S. federal income tax purposes and organized to invest in, and at least 90% of its assets consist of, qualified opportunity zone property (the “90% Asset Test”).
Removed
A qualified opportunity fund must determine whether it meets the 90% Asset Test on each of (i) the last day of the first six-month period of its taxable year, and (ii) the last day of its taxable year (each a “Test Date”).
Removed
The opportunity zone regulations allow a qualified opportunity fund to apply the 90% Asset Test without taking into account any investments received in the 6-month period preceding the Test Date, provided those investments are (i) received (a) solely in exchange for stock by a qualified opportunity fund that is a corporation, or (b) as a contribution by a qualified opportunity fund that is a partnership, and (ii) held continuously from the fifth business day after the exchange or contribution, as applicable, through the Test Date in cash, cash equivalents or debt instruments with a term of 18 months or less.
Removed
Subject to a one-time six-month cure period, for each month following a Test Date in which a qualified opportunity fund fails to meet the 90% Asset Test it will incur a penalty equal to (a) the excess of 90% of the fund’s aggregate assets over the aggregate amount of qualified opportunity zone property held by the fund, multiplied by (b) the short-term federal interest rate plus 3%.
Removed
However, notwithstanding a qualified opportunity fund’s failure to meet the 90% Asset Test, no penalty will be imposed if the fund demonstrates that its failure is due to reasonable cause. We initially qualified as a qualified opportunity fund beginning with our taxable year ended December 31, 2020.
Removed
An eligible investor may defer recognition of capital gains (short-term or long-term) resulting from the sale or exchange of capital assets (or business assets the gain on the sale of which is treated as capital gain) by reinvesting those gains into a qualified opportunity fund within a period of 180 days generally beginning on the date of the sale or exchange (the “Deferred Capital Gains”).
Removed
The 180-day period generally begins on the day on which the gains would be recognized for U.S. federal income tax purposes had they not been reinvested into a qualified opportunity fund.
Removed
Deferred Capital Gains are recognized on the earlier of December 31, 2026 or the date on which an inclusion event occurs, such as the date on which the investor sells its qualified opportunity fund investment. 7 Table Of Contents All individuals and entities that recognize capital gains for U.S. federal income tax purposes are eligible to elect to defer their capital gains by investing in a qualified opportunity fund within the applicable 180-day period.
Removed
This includes natural persons as well as entities such as corporations, regulated investment companies, real estate investment trusts (“REITs”), partnerships and other pass-through entities (including, certain common trust funds, qualified settlement funds, and disputed ownership funds).
Removed
Eligible investors must make deferral elections on Form 8949, Sales and Other Dispositions of Capital Assets , which will need to be attached to their U.S. federal income tax returns for the taxable year in which the capital gain would have been recognized had it not been deferred.
Removed
In addition, Form 8997, Initial and Annual Statement of Qualified Opportunity Fund (QOF) Investments , requires eligible investors holding a qualified opportunity fund investment at any point during the tax year to report: (i) qualified opportunity fund investments holdings at the beginning and end of the tax year; (ii) current tax year capital gains deferred by investing in a qualified opportunity fund; and (iii) qualified opportunity fund investments disposed of during the tax year.
Removed
Eligible investors who have not properly followed the instructions for Form 8997, Initial and Annual Statement of Qualified Opportunity Fund (QOF) Investments , may receive a Letter 6502, Reporting Qualified Opportunity Fund (QOF) Investments , or a Letter 6503, Annual Reporting of Qualified Opportunity Fund (QOF) Investments , from the Internal Revenue Service (“IRS”) if the IRS is missing information, the investor entered invalid information, or the requirements to maintain a qualifying investment have not been followed.
Removed
Eligible investors who receive a Letter 6502, Reporting Qualified Opportunity Fund (QOF) Investments , or a Letter 6503, Annual Reporting of Qualified Opportunity Fund (QOF) Investments , may need to file an amended return or an administrative adjustment request with a properly completed Form 8997, Initial and Annual Statement of Qualified Opportunity Fund (QOF) Investments .
Removed
An eligible investor may elect to increase the tax basis with respect to its qualified opportunity fund investment interest to the fair market value of the investment interest, and similarly may elect to exclude from income gains from sales of non-inventory assets by the qualified opportunity fund, if the investor holds the qualified opportunity fund investment interest for a period of ten years or more prior to the date of sale, up to December 31, 2047.
Removed
Provided these requirements are met, for U.S. federal income tax purposes an eligible investor will not be required to pay federal income tax on a sale of its qualified opportunity fund investment interest. This benefit will not be available with respect to sales or exchanges after December 31, 2047.
Removed
Our Investments As of the date of this Form 10-K, our investment portfolio consisted of the following multifamily and mixed-use rental properties: 1991 Main Street – Sarasota, Florida – 1991 Main Street (“1991 Main”) is a 5.13-acre site which was originally acquired for an aggregate purchase price of $20.7 million, inclusive of transaction costs and deferred financing fees.
Removed
A portion of the aggregate purchase of 1991 Main was funded by a $10.8 million secured loan from First Foundation Bank (the “Acquisition Loan”), which we repaid in full on April 22, 2022.
Removed
We currently anticipate that 1991 Main will be developed into a 424-apartment home community consisting of one-bedroom, two-bedroom and three-bedroom apartments, and four-bedroom townhome-style penthouse apartments, as well as six guest suite apartments, with approximately 51,000 square feet of retail space located on the first level. 1991 Main will consist of two high-rise buildings with 7 stories in the front and 10 stories in the rear, and over 900 parking spaces consisting of garage and surface parking.
Removed
Each building will include a clubroom, fitness room, center courtyard with heated saltwater pool and roof top amenities including a community room and a private dining area for private events as well as outdoor grills and seating. In addition, each building will have its own leasing office located at the entry lobby.
Removed
During the year ended December 31, 2022, we entered into a construction management agreement for the development of 1991 Main. The construction management agreement contains terms and conditions that are customary for a project of this type and will be subject to a guaranteed maximum price (a “GMP”).
Removed
We currently anticipate that the remaining funding for construction and soft costs associated with the development will be a minimum of $218.9 million, inclusive of the GMP, and are building to an estimated unlevered yield of greater than 6%. The development is currently under construction, and we expect initial occupancies to occur in the first half of 2024.
Removed
Construction is expected to be completed by the end of 2024. 1991 Main is located within the historic downtown Sarasota at the intersection of Main Street and Links Avenue, has a Walk Score ® ranking of 90 out of 100, and is located in a high foot traffic area next to a number of popular retail establishments. 1900 Fruitville Road – Sarasota Florida – 1900 Fruitville Road (“1900 Fruitville”) is a 1.2-acre site, consisting of a retail building and parking lot, which we acquired for an aggregate purchase price of $4.7 million, inclusive of transaction costs.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

45 edited+3 added−4 removed360 unchanged
Biggest changeWe are an “emerging growth company,” as defined in the Jump Start Our Business Startups Act of 2012 (“JOBS Act”). As an emerging growth company, we have elected to take advantage of certain exemptions from various reporting and disclosure requirements that are applicable to public companies that are not emerging growth companies.
Biggest changeWe are not required to comply with certain reporting and disclosure requirements that are applicable to other public companies. We are an “emerging growth company,” as defined in the Jump Start Our Business Startups Act of 2012 (“JOBS Act”).
Our investment guidelines delegate to our Manager discretion and authority to execute acquisitions and dispositions of investments (including the reinvestment of capital basis and gains) in commercial real estate properties, real estate-related assets, including commercial real estate loans and mortgages, and debt and equity securities issued by other real estate-related companies, as well as private equity acquisitions and investments, and opportunistic acquisitions of other qualified opportunity funds and qualified opportunity zone businesses, provided such investments are consistent with our investment objectives and strategy and our investment guidelines.
Our investment guidelines delegate to our Manager discretion and authority to execute acquisitions and dispositions of investments (including the reinvestment of capital basis and gains) in commercial real estate properties, real estate-related assets, including commercial real estate loans and mortgages, and debt and equity securities issued by other real estate-related companies, as well as private equity acquisitions and investments, and opportunistic acquisitions of other qualified opportunity funds and qualified opportunity zone businesses, provided such investments are consistent with our investment objectives and strategy and our investment guidelines.
As with any asset valuation protocol, the conclusions reached by our Manager or any third-party firm that we engage to prepare or assist with preparing the NAV of our Class A units will involve significant judgments, assumptions, and opinions in the application of both observable and unobservable attributes that may or may not prove to be correct.
As with any asset valuation protocol, the conclusions reached by our Manager or any third-party firm that we engage to prepare or assist with preparing the NAV of our Class A units will involve significant judgments, assumptions, and opinions in the application of both observable and unobservable attributes that may or may not prove to be correct.
It is important to note that the determination of our NAV will not be based on, nor is it intended to comply with, fair value standards under U.S. GAAP, and our NAV may not be indicative of the price that we would receive for our assets at current market conditions.
It is important to note that the determination of our NAV will not be based on, nor is it intended to comply with, fair value standards under U.S. GAAP, and our NAV may not be indicative of the price that we would receive for our assets at current market conditions.
The Class M unit does not represent an economic interest in the Company. If we internalize our management functions, your interest in us could be diluted, and we could incur other significant costs associated with being self-managed. We are externally managed by our Manager, who is an affiliate of our Sponsor.
The Class M unit does not represent an economic interest in the Company. 22 If we internalize our management functions, your interest in us could be diluted, and we could incur other significant costs associated with being self-managed. We are externally managed by our Manager, who is an affiliate of our Sponsor.
Upon any termination or non-renewal of the Management Agreement by us or any termination of the Management Agreement by our Manager for our breach of the Management Agreement, our Manager will be entitled to receive its prorated management fee through the expiration or termination date and will be paid a termination fee equal to six times the annual management fee earned by our Manager during the 12-month period ended as of the last day of the quarter immediately preceding the termination date (the “Termination Fee”); however, if less than 12 months have elapsed as of the termination date, the Termination Fee will be calculated by annualizing the management fee earned during the most recently completed quarter prior to the termination date. 19 Table Of Contents In addition, upon any termination or non-renewal of the Management Agreement, our Manager will continue to hold 100% of our Class B units, which entitle our Manager to 5% of any gain recognized by or distributed to the Company or recognized by or distributed from the Operating Companies or any subsidiary.
Upon any termination or non-renewal of the Management Agreement by us or any termination of the Management Agreement by our Manager for our breach of the Management Agreement, our Manager will be entitled to receive its prorated management fee through the expiration or termination date and will be paid a termination fee equal to six times the annual management fee earned by our Manager during the 12-month period ended as of the last day of the quarter immediately preceding the termination date (the “Termination Fee”); however, if less than 12 months have elapsed as of the termination date, the Termination Fee will be calculated by annualizing the management fee earned during the most recently completed quarter prior to the termination date. 19 In addition, upon any termination or non-renewal of the Management Agreement, our Manager will continue to hold 100% of our Class B units, which entitle our Manager to 5% of any gain recognized by or distributed to the Company or recognized by or distributed from the Operating Companies or any subsidiary.
Such development and redevelopment activities entail risks that could adversely impact our financial condition and results of operations, including: ● construction costs, which may exceed our original estimates due to increases in materials, labor or other costs, which could make the project less profitable; ● permitting or construction delays, which may result in increased debt service expense and increased project costs, as well as deferred revenue; ● supply chain issues or other unavailability of raw materials when needed, which may result in project delays, stoppages or interruptions, which could make the project less profitable; ● federal, state and local grants to complete certain highways, interchange, bridge projects or other public improvements may not be available, which could increase costs and make the project less profitable; ● availability and timely receipt of zoning and other regulatory approvals to develop or redevelop our properties for a particular use or with respect to a particular improvement; ● claims for warranty, product liability and construction defects after a property has been built; ● claims for injuries that occur in the course of construction activities; ● poor performance or nonperformance by, or disputes with, any of our contractors, subcontractors or other third parties on whom we will rely; ● health and safety incidents and site accidents; ● unforeseen engineering, environmental or geological problems, which may result in delays or increased costs; 30 Table Of Contents ● labor shortages, slowdowns or interruptions; ● compliance with environmental planning and protection regulations and related legal proceedings; ● liabilities, expenses or project delays, stoppages or interruptions as a result of challenges by third parties in legal proceedings; ● delay or inability to acquire property, rights of way or easements that may result in delays or increased costs; ● acts of war, cyberattacks or terrorism; and ● weather-related and geological interference, including landslides, earthquakes, floods, drought, wildfires and other events, which may result in delays or increased costs.
Such development and redevelopment activities entail risks that could adversely impact our financial condition and results of operations, including: ● construction costs, which may exceed our original estimates due to increases in materials, labor or other costs, which could make the project less profitable; ● permitting or construction delays, which may result in increased debt service expense and increased project costs, as well as deferred revenue; ● supply chain issues or other unavailability of raw materials when needed, which may result in project delays, stoppages or interruptions, which could make the project less profitable; ● federal, state and local grants to complete certain highways, interchange, bridge projects or other public improvements may not be available, which could increase costs and make the project less profitable; ● availability and timely receipt of zoning and other regulatory approvals to develop or redevelop our properties for a particular use or with respect to a particular improvement; ● claims for warranty, product liability and construction defects after a property has been built; ● claims for injuries that occur in the course of construction activities; ● poor performance or nonperformance by, or disputes with, any of our contractors, subcontractors or other third parties on whom we will rely; ● health and safety incidents and site accidents; ● unforeseen engineering, environmental or geological problems, which may result in delays or increased costs; 29 ● labor shortages, slowdowns or interruptions; ● compliance with environmental planning and protection regulations and related legal proceedings; ● liabilities, expenses or project delays, stoppages or interruptions as a result of challenges by third parties in legal proceedings; ● delay or inability to acquire property, rights of way or easements that may result in delays or increased costs; ● acts of war, cyberattacks or terrorism; and ● weather-related and geological interference, including landslides, earthquakes, floods, drought, wildfires and other events, which may result in delays or increased costs.
An inactive market may also impair our ability to raise capital by selling Class A units and may impair our ability to make opportunistic acquisitions of other qualified opportunity funds and qualified opportunity zone businesses using our Class A units as consideration. 15 Table Of Contents If we are unable to raise sufficient proceeds in our ongoing Primary Offering, and any other offerings that we may conduct, we may not be able to fund all of our existing projects or find additional suitable investments, and, as a result, we may not be able to achieve our investment objectives or pay distributions.
An inactive market may also impair our ability to raise capital by selling Class A units and may impair our ability to make opportunistic acquisitions of other qualified opportunity funds and qualified opportunity zone businesses using our Class A units as consideration. 15 If we are unable to raise sufficient proceeds in our ongoing Primary Offering, and any other offerings that we may conduct, we may not be able to fund all of our existing projects or find additional suitable investments, and, as a result, we may not be able to achieve our investment objectives or pay distributions.
As a result, we and our members, record holders and beneficial owners of our units will not be able to pursue litigation in federal or state court against the Company or our Sponsor, Manager or any of our directors, officers, or other agents, and instead will be required to pursue such claims through a final and binding arbitration proceeding. 21 Table Of Contents Our Operating Agreement provides that such arbitration proceedings would generally be conducted in accordance with the rules and policies of the American Arbitration Association.
As a result, we and our members, record holders and beneficial owners of our units will not be able to pursue litigation in federal or state court against the Company or our Sponsor, Manager or any of our directors, officers, or other agents, and instead will be required to pursue such claims through a final and binding arbitration proceeding. 21 Our Operating Agreement provides that such arbitration proceedings would generally be conducted in accordance with the rules and policies of the American Arbitration Association.
Our adjusted NAV per Class A unit will be equal to our adjusted NAV as of the Determination Date (rounded to the nearest dollar) divided by the number of Class A units outstanding on the Determination Date. 16 Table Of Contents Valuations and appraisals of our real estate and real estate assets are estimates of fair value and may not necessarily correspond to realizable value, in addition it may be difficult to reflect, fully and accurately, material events that impact our NAV.
Our adjusted NAV per Class A unit will be equal to our adjusted NAV as of the Determination Date (rounded to the nearest dollar) divided by the number of Class A units outstanding on the Determination Date. 16 Valuations and appraisals of our real estate and real estate assets are estimates of fair value and may not necessarily correspond to realizable value, in addition it may be difficult to reflect, fully and accurately, material events that impact our NAV.
Without this exposure, you may be at a greater risk of loss because our Sponsor does not have as much to lose from a decrease in the value of our Class A units as a sponsor who makes a more significant equity investment would. 17 Table Of Contents Our Sponsor currently sponsors and will in the future sponsor other investment programs some of which may compete with us.
Without this exposure, you may be at a greater risk of loss because our Sponsor does not have as much to lose from a decrease in the value of our Class A units as a sponsor who makes a more significant equity investment would. 17 Our Sponsor currently sponsors and will in the future sponsor other investment programs some of which may compete with us.
Risks Related our Assets and Investments Our success is dependent on general market and economic conditions as well as numerous other factors outside of our control.
Risks Related to our Assets and Investments Our success is dependent on general market and economic conditions as well as numerous other factors outside of our control.
In addition, our Manager and our Sponsor only have limited assets and our recourse against our Manager or our Sponsor if our Manager does not fulfill its obligations under the Management Agreement will be limited to our termination of the Management Agreement. 18 Table Of Contents If our Sponsor fails to retain its key personnel, we may not be able to achieve our anticipated level of growth and our business could suffer.
In addition, our Manager and our Sponsor only have limited assets and our recourse against our Manager or our Sponsor if our Manager does not fulfill its obligations under the Management Agreement will be limited to our termination of the Management Agreement. 18 If our Sponsor fails to retain its key personnel, we may not be able to achieve our anticipated level of growth and our business could suffer.
As of the year ended December 31, 2022, we had 17 qualified opportunity zone investments in three states and are primarily reliant on the proceeds derived from our public offerings and any financing that might be provided by our Sponsor or its affiliates to fund our operations.
As of the year ended December 31, 2023, we had 17 qualified opportunity zone investments in three states and are primarily reliant on the proceeds derived from our public offerings and any financing that might be provided by our Sponsor or its affiliates to fund our operations.
Some additional risks and conflicts related to our joint venture investments (including joint venture investments with our Manager, Sponsor and members of the Belpointe SP Group) include: ● the joint venture partner may have economic or other interests that are inconsistent with our interests, including interests relating to the financing, management, operation, leasing or sale of the assets purchased by such joint venture; 26 Table Of Contents ● tax, Investment Company Act and other regulatory requirements applicable to the joint venture partner may cause it to want to take actions contrary to our interests; ● the joint venture partner may have joint control of the joint venture even in cases where its economic stake in the joint venture is significantly less than ours; ● under the joint venture arrangement, neither we nor the joint venture partner will be in a position to unilaterally control the joint venture, and deadlocks may occur.
Some additional risks and conflicts related to our joint venture investments (including joint venture investments with our Manager, Sponsor and members of the Belpointe SP Group) include: ● the joint venture partner may have economic or other interests that are inconsistent with our interests, including interests relating to the financing, management, operation, leasing or sale of the assets purchased by such joint venture; 25 ● tax, Investment Company Act and other regulatory requirements applicable to the joint venture partner may cause it to want to take actions contrary to our interests; ● the joint venture partner may have joint control of the joint venture even in cases where its economic stake in the joint venture is significantly less than ours; ● under the joint venture arrangement, neither we nor the joint venture partner will be in a position to unilaterally control the joint venture, and deadlocks may occur.
Accordingly, you should consult with your own accountant or other tax advisers concerning the tax consequences of your specific tax circumstances prior to acquiring, holding or disposing of any of our Class A units. 42 Table Of Contents We do not expect to be able to furnish definitive Schedule K-1s to IRS Form 1065 to each holder of our Class A units prior to the deadline for filing U.S. income tax returns, which means that holders of our Class A units who are U.S. taxpayers should anticipate the need to file annually a request for an extension of the due date of their income tax returns.
Accordingly, you should consult with your own accountant or other tax advisers concerning the tax consequences of your specific tax circumstances prior to acquiring, holding or disposing of any of our Class A units. 41 We do not expect to be able to furnish definitive Schedule K-1s to IRS Form 1065 to each holder of our Class A units prior to the deadline for filing U.S. income tax returns, which means that holders of our Class A units who are U.S. taxpayers should anticipate the need to file annually a request for an extension of the due date of their income tax returns.
Our Manager may use complex strategies or enter into costly transactions that are difficult or impossible to unwind by the time they are reviewed by our Board, which could result in investment returns that are below expectations or that result in losses, and which would materially and adversely affect our business operations and results. 20 Table Of Contents We may change our investment strategy and guidelines without member consent.
Our Manager may use complex strategies or enter into costly transactions that are difficult or impossible to unwind by the time they are reviewed by our Board, which could result in investment returns that are below expectations or that result in losses, and which would materially and adversely affect our business operations and results. 20 We may change our investment strategy and guidelines without member consent.
Any changes to the U.S. federal tax laws and interpretations thereof may be applied prospectively or retroactively and could make it more difficult or impossible for us to meet the qualifying income exception or qualified opportunity fund requirements and accordingly adversely affect the tax consequences associated with an investment in our Class A units. 41 Table Of Contents If the IRS contests the U.S. federal income tax positions we take, the value our Class A units may be adversely impacted, and the cost of any IRS contest will reduce cash available for distributions.
Any changes to the U.S. federal tax laws and interpretations thereof may be applied prospectively or retroactively and could make it more difficult or impossible for us to meet the qualifying income exception or qualified opportunity fund requirements and accordingly adversely affect the tax consequences associated with an investment in our Class A units. 40 If the IRS contests the U.S. federal income tax positions we take, the value our Class A units may be adversely impacted, and the cost of any IRS contest will reduce cash available for distributions.
The following factors, among others, may adversely affect the real estate industry, including our properties, and could therefore adversely impact our financial condition and results of operations: ● interest rate fluctuations and lack of availability of financing; ● changes in national, regional or local economic, demographic or capital market conditions; ● persistent inflation; ● a lack of appropriate real estate investment opportunities, including appropriate qualified opportunity zone investment opportunities; ● disease outbreaks; ● acts of war, cyberattacks or terrorism; ● bank liquidity; ● increases in borrowing rates; ● changes in environmental and zoning laws; ● fluctuations in energy costs; ● overbuilding and increased competition for properties targeted by our investment strategy; ● future adverse national real estate trends, including increasing vacancy rates, declining rental rates and general deterioration of market conditions; ● changes in supply and demand fundamentals; ● limitations, reductions or eliminations of tax benefits; ● casualty or condemnation losses; ● bankruptcy, financial difficulty or lease default of a major tenant; ● regulatory limitations on rent; ● increased mortgage defaults and the availability of mortgage funds which may render the sale or refinancing of properties difficult or impracticable; ● changes in laws, regulations and fiscal policies, including increases in property taxes and limitations on rental rates; ● natural disasters, severe weather patterns and similar events. 29 Table Of Contents ● declines in consumer confidence and spending; and ● public perception that any of the above events may occur.
The following factors, among others, may adversely affect the real estate industry, including our properties, and could therefore adversely impact our financial condition and results of operations: ● interest rate fluctuations and lack of availability of financing; ● changes in national, regional or local economic, demographic or capital market conditions; ● persistent inflation; ● a lack of appropriate real estate investment opportunities, including appropriate qualified opportunity zone investment opportunities; ● disease outbreaks; ● acts of war, cyberattacks or terrorism; ● bank liquidity; ● increases in borrowing rates; ● changes in environmental and zoning laws; ● fluctuations in energy costs; ● overbuilding and increased competition for properties targeted by our investment strategy; ● future adverse national real estate trends, including increasing vacancy rates, declining rental rates and general deterioration of market conditions; ● changes in supply and demand fundamentals; ● limitations, reductions or eliminations of tax benefits; ● casualty or condemnation losses; ● bankruptcy, financial difficulty or lease default of a major tenant; ● regulatory limitations on rent; ● increased mortgage defaults and the availability of mortgage funds which may render the sale or refinancing of properties difficult or impracticable; ● changes in laws, regulations and fiscal policies, including increases in property taxes and limitations on rental rates; ● natural disasters, severe weather patterns and similar events. ● declines in consumer confidence and spending; and ● public perception that any of the above events may occur. 28 All of these factors are beyond our control.
If our NAV is calculated in a way that is not reflective of our actual NAV, then the purchase price of shares of our Class A units may not accurately reflect the value of our assets and investments, and your Class A units may be worth less than the purchase price paid. 36 Table Of Contents Risks Related to Sources of Financing and Hedging We may incur significant debt, which may subject us to increased risk of loss and may reduce cash available for distributions.
If our NAV is calculated in a way that is not reflective of our actual NAV, then the purchase price of shares of our Class A units may not accurately reflect the value of our assets and investments, and your Class A units may be worth less than the purchase price paid. 35 Risks Related to Sources of Financing and Hedging We may incur significant debt, which may subject us to increased risk of loss and may reduce cash available for distributions.
There can be no assurance that these events will not negatively impact our ability to obtain construction financing, complete our development or redevelopment activities on budget and on schedule or adversely affect our financial condition and results of operations. 28 Table Of Contents The market in which we participate is competitive and, if we do not compete effectively, our operating results could be harmed.
There can be no assurance that these events will not negatively impact our ability to obtain construction financing, complete our development or redevelopment activities on budget and on schedule or adversely affect our financial condition and results of operations. 27 The market in which we participate is competitive and, if we do not compete effectively, our operating results could be harmed.
We could also become subject to cross-default and acceleration rights and, with respect to collateralized debt, the posting of additional collateral and foreclosure rights upon default. 37 Table Of Contents Interest rate fluctuations could increase our financing costs and reduce our ability to generate income on our investments, each of which could lead to a significant decrease in our results of operations, cash flows and the market value of our investments.
We could also become subject to cross-default and acceleration rights and, with respect to collateralized debt, the posting of additional collateral and foreclosure rights upon default. 36 Interest rate fluctuations could increase our financing costs and reduce our ability to generate income on our investments, each of which could lead to a significant decrease in our results of operations, cash flows and the market value of our investments.
If we fail to raise su fficient proceeds from the sale of Class A units in our Primary Offering, and any other offerings that we may conduct, we may be unable to fund all of our existing projects or to make additional suitable investments.
If we fail to raise sufficient proceeds from the sale of Class A units in our Primary Offering, and any other offerings that we may conduct, we may be unable to fund all of our existing projects or to make additional suitable investments.
A worsening of economic conditions in U.S. markets and, in particular, the markets where we end up acquiring properties, could have an adverse effect on our business and could impair the value of our collateral. 32 Table Of Contents Actions of any joint venture partners that we may have in the future could reduce the returns on joint venture investments and decrease your overall investment return.
A worsening of economic conditions in U.S. markets and, in particular, the markets where we end up acquiring properties, could have an adverse effect on our business and could impair the value of our collateral. 31 Actions of any joint venture partners that we may have in the future could reduce the returns on joint venture investments and decrease your overall investment return.
Any such imperfect correlation may prevent us from achieving the intended hedge and expose us to risk of loss. 38 Table Of Contents Hedging instruments are often not traded on regulated exchanges or guaranteed by an exchange or its clearing house and involve risks and costs that could result in material losses.
Any such imperfect correlation may prevent us from achieving the intended hedge and expose us to risk of loss. 37 Hedging instruments are often not traded on regulated exchanges or guaranteed by an exchange or its clearing house and involve risks and costs that could result in material losses.
Therefore, our treatment as a corporation would result in a material reduction in cash flow and after-tax return to holders of our Class A units, likely causing a substantial reduction in the value of our Class A units. 40 Table Of Contents There can be no assurance that we will continue to meet the requirements for classification as a qualified opportunity fund.
Therefore, our treatment as a corporation would result in a material reduction in cash flow and after-tax return to holders of our Class A units, likely causing a substantial reduction in the value of our Class A units. 39 There can be no assurance that we will continue to meet the requirements for classification as a qualified opportunity fund.
Any interruption or deterioration in the performance of these third parties or failures of their information systems and technology could impair the quality of our operations and could affect our reputation and hence adversely affect our business. 27 Table Of Contents If our techniques for managing risk are ineffective, we may be exposed to unanticipated losses.
Any interruption or deterioration in the performance of these third parties or failures of their information systems and technology could impair the quality of our operations and could affect our reputation and hence adversely affect our business. 26 If our techniques for managing risk are ineffective, we may be exposed to unanticipated losses.
Also, to the extent we must pay unexpectedly large amounts for insurance, we could suffer reduced earnings that would result in lower distributions to you. 34 Table Of Contents Many of our investments are illiquid and we may not be able to vary our portfolio in response to changes in economic and other conditions.
Also, to the extent we must pay unexpectedly large amounts for insurance, we could suffer reduced earnings that would result in lower distributions to you. 33 Many of our investments are illiquid and we may not be able to vary our portfolio in response to changes in economic and other conditions.
However, to the extent that our Manager and its affiliates take actions that are more favorable to other entities than us, these actions could have a negative impact on our financial performance and, consequently, on distributions to the holders of our Class A units and the NAV of our Class A units. 35 Table Of Contents The interests of our Manager, and its affiliates may conflict with your interests.
However, to the extent that our Manager and its affiliates take actions that are more favorable to other entities than us, these actions could have a negative impact on our financial performance and, consequently, on distributions to the holders of our Class A units and the NAV of our Class A units. 34 The interests of our Manager, and its affiliates may conflict with your interests.
Accordingly, our approach to investing in properties utilizing leverage in order to accomplish our investment objectives may present more risks to investors than comparable real estate programs that do not utilize borrowing to the same degree. 39 Table Of Contents If we enter into financing arrangements involving balloon payment obligations, it may adversely affect our ability to make distributions.
Accordingly, our approach to investing in properties utilizing leverage in order to accomplish our investment objectives may present more risks to investors than comparable real estate programs that do not utilize borrowing to the same degree. 38 If we enter into financing arrangements involving balloon payment obligations, it may adversely affect our ability to make distributions.
A member of the Belpointe SP Group may act as the co-developer of projects with the joint venture partners and developers. 25 Table Of Contents ● Our Manager or a member of the Belpointe SP Group will enter into joint ventures with independent third-party experienced local developers to co-invest and co-develop on our behalf.
A member of the Belpointe SP Group may act as the co-developer of projects with the joint venture partners and developers. 24 ● Our Manager or a member of the Belpointe SP Group will enter into joint ventures with independent third-party experienced local developers to co-invest and co-develop on our behalf.
Risks Related to our Organizational Structure We have a limited operating history, and the prior performance of our Sponsor or other real estate investment opportunities sponsored by our Sponsor may not predict our future results. We are a recently formed company and have a limited operating history and we may not be able to achieve our investment objectives.
Risks Related to our Organizational Structure We have a limited operating history, and the prior performance of our Sponsor or other real estate investment opportunities sponsored by our Sponsor may not predict our future results. We have a limited operating history, and we may not be able to achieve our investment objectives.
Despite the fact that we are organized as a limited liability company under Delaware law, if we fail to meet any of the applicable requirements for classification as a partnership, we would be treated as a corporation pursuant to section 7704 of the Internal Revenue Code of 1986, as amended (the “Code”).
Despite the fact that we are organized as a limited liability company under Delaware law, if we fail to meet any of the applicable requirements for classification as a partnership, we would be treated as a corporation pursuant to section 7704 of the Code.
Any obligation of a holder of our Class A units to file amended income tax returns for the foregoing or any other reason, including any costs incurred in the preparation or filing of such returns, is the responsibility of each holder of our Class A units.
Any obligation of a holder of our Class A units to file amended income tax returns for the foregoing or any other reason, including any costs incurred in the preparation or filing of such returns, is the responsibility of each holder of our Class A units. Item 1B. Unresolved Staff Comments. None.
All of these factors are beyond our control. Moreover, certain significant expenditures associated with real estate (such as real estate taxes, maintenance costs and, where applicable, mortgage payments) have no relationship with, and thus do not diminish in proportion to, a reduction in income from the property.
Moreover, certain significant expenditures associated with real estate (such as real estate taxes, maintenance costs and, where applicable, mortgage payments) have no relationship with, and thus do not diminish in proportion to, a reduction in income from the property.
It is possible that actual costs and expenses associated with maintain our status as a publicly traded partnership and operating as an Exchange Act reporting company will be higher than we currently estimate and we may require additional capital or future earnings to cover these costs and expenses, which could materially and adversely affect our business, results of operations, financial condition, and cash flows. 23 Table Of Contents We are not required to comply with certain reporting and disclosure requirements that are applicable to other public companies.
It is possible that actual costs and expenses associated with maintain our status as a publicly traded partnership and operating as an Exchange Act reporting company will be higher than we currently estimate and we may require additional capital or future earnings to cover these costs and expenses, which could materially and adversely affect our business, results of operations, financial condition, and cash flows.
The recent failures of Silicon Valley Bank (SVB) and Signature Bank (SNY), actions by the U.S.
The recent failures of Silicon Valley Bank (“SVB”) and Signature Bank (“SNY”), actions by the U.S.
In addition, although we intend to continuously monitor our holdings, there can be no assurance that we, our Operating Companies or any of the subsidiaries of our Operating Companies will be able to maintain our exclusion from registration.
Maintaining our exclusion from registration under the Investment Company Act will limit our ability to make certain investments. In addition, although we intend to continuously monitor our holdings, there can be no assurance that we, our Operating Companies or any of the subsidiaries of our Operating Companies will be able to maintain our exclusion from registration.
As a result of the inherent limitations in the design of any system of controls, our disclosure controls and procedures and internal controls over financial reporting may not detect or prevent all misstatements and fraud, and we cannot assure you that there will not be significant deficiencies or material weaknesses in our disclosure controls and procedures and internal control over financial reporting in future periods.
However, any disclosure controls and procedures or internal controls over financial reporting that we put into place, no matter how well designed and operated, can only provide reasonable assurance of achieving their objectives. 23 As a result of the inherent limitations in the design of any system of controls, our disclosure controls and procedures and internal controls over financial reporting may not detect or prevent all misstatements and fraud, and we cannot assure you that there will not be significant deficiencies or material weaknesses in our disclosure controls and procedures and internal control over financial reporting in future periods.
Such trends may result in reduced revenue and lower resale value of properties. 31 Table Of Contents We may enter into long-term leases with tenants in certain properties, which may not result in fair market rental rates over time.
Such trends may result in reduced revenue and lower resale value of properties. 30 We may enter into long-term leases with tenants in certain properties, which may not result in fair market rental rates over time. We may enter into long-term leases with tenants of certain of our properties or include renewal options that specify a maximum rate increase.
We will engage primarily in the business of investing in real estate and to conduct our operations such that neither we nor any of our subsidiaries are required to register as an “investment company” under the Investment Company Act. 24 Table Of Contents Maintaining our exclusion from registration under the Investment Company Act will limit our ability to make certain investments.
Your investment returns may be reduced if we are required to register as an investment company under the Investment Company Act. We will engage primarily in the business of investing in real estate and to conduct our operations such that neither we nor any of our subsidiaries are required to register as an “investment company” under the Investment Company Act.
We believe that the exclusive forum selection provision in our Operating Agreement is enforceable under both federal and state law, including with respect to federal securities law claims, however, there is uncertainty as to its enforceability and it is possible that it may ultimately be determined to be unenforceable. 22 Table Of Contents Holders of our Class A units have limited voting rights and may be bound by a majority or supermajority vote or by a vote of the holder of our Class M unit, as applicable.
We believe that the exclusive forum selection provision in our Operating Agreement is enforceable under both federal and state law, including with respect to federal securities law claims, however, there is uncertainty as to its enforceability and it is possible that it may ultimately be determined to be unenforceable.
We are owned by the holders of our Class A units, Class B units and Class M unit. Each Class A unit and each Class B unit entitles the holder thereof to one vote per unit.
Each Class A unit and each Class B unit entitles the holder thereof to one vote per unit.
The costs of defending against claims of environmental liability, of complying with environmental regulatory requirements, of remediating any contaminated property or of paying personal injury or other damage claims could reduce the amounts available for distributions.
Any material expenditures, fines, penalties or damages we must pay will reduce our ability to make distributions and may reduce the value of your investment. 32 The costs of defending against claims of environmental liability, of complying with environmental regulatory requirements, of remediating any contaminated property or of paying personal injury or other damage claims could reduce the amounts available for distributions.
Activities of our tenants, the condition of properties at the time we buy them, operations in the vicinity of our properties, such as the presence of underground storage tanks, or activities of unrelated third parties may affect our properties. 33 Table Of Contents The presence of hazardous substances, or the failure to properly manage, insure, bond over, or remediate these substances, may hinder our ability to sell, rent or pledge such property as collateral for future borrowings.
The presence of hazardous substances, or the failure to properly manage, insure, bond over, or remediate these substances, may hinder our ability to sell, rent or pledge such property as collateral for future borrowings.
Removed
However, any disclosure controls and procedures or internal controls over financial reporting that we put into place, no matter how well designed and operated, can only provide reasonable assurance of achieving their objectives.
Added
Holders of our Class A units have limited voting rights and may be bound by a majority or supermajority vote or by a vote of the holder of our Class M unit, as applicable. We are owned by the holders of our Class A units, Class B units and Class M unit.
Removed
Your investment returns may be reduced if we are required to register as an investment company under the Investment Company Act.
Added
As an emerging growth company, we have elected to take advantage of certain exemptions from various reporting and disclosure requirements that are applicable to public companies that are not emerging growth companies.
Removed
We may enter into long-term leases with tenants of certain of our properties or include renewal options that specify a maximum rate increase.
Added
Activities of our tenants, the condition of properties at the time we buy them, operations in the vicinity of our properties, such as the presence of underground storage tanks, or activities of unrelated third parties may affect our properties.
Removed
Any material expenditures, fines, penalties or damages we must pay will reduce our ability to make distributions and may reduce the value of your investment.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed0 unchanged
Biggest changeItem 3. Legal Proceedings. From time to time we may be involved in various claims and legal actions arising in the ordinary course of business. As of December 31, 2022, neither we nor any of our subsidiaries were subject to any material legal proceedings.
Biggest changeItem 3. Legal Proceedings. From time to time we may be involved in various claims and legal actions arising in the ordinary course of business. As of December 31, 2023, neither we nor any of our subsidiaries were subject to any material legal proceedings. Item 4. Mine Safety Disclosures. Not applicable. 42 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

17 edited+10 added−2 removed10 unchanged
Biggest changeSecurities and Exchange Commission (the “SEC”) declared effective our registration statement on Form S-11, as amended (File No. 333-255424) (the “Registration Statement”), registering up to $750,000,000 of our Class A units on a continuous “best efforts” basis, as part of our ongoing initial public offering (the “Primary Offering”), at an initial price equal to $100.00 per Class A unit.
Biggest changeSecurities and Exchange Commission (the “SEC”) declared effective our initial registration statement on Form S-11, as amended (File No. 333-255424) (the “Primary Registration Statement”), registering a continuous primary offering of up to $750,000,000 in our Class A units (our “Primary Offering”).
See “ Part III—Item 13—Certain Relationships and Related Transactions, and Director Independence—Our Affiliate Transactions—Our Transaction with Norpointe, LLC ” for additional details regarding our transactions with Norpointe.
See “ Part III, Item 13—Certain Relationships and Related Transactions, and Director Independence—Our Affiliate Transactions—Our Transaction with Norpointe, LLC” for additional details regarding our transactions with Norpointe .
(2) Direct or indirect payments of $1.0 million have been made to others, including payments for legal, accounting, transfer agent, FINRA, and filing fees, as of December 31, 2022. (3) Includes all offering costs incurred by the Company in connection with any offer and sale of securities by the Company.
(2) Direct or indirect payments of $1.4 million have been made to others, including payments for legal, accounting, transfer agent, FINRA, and filing fees, as of December 31, 2023. (3) Includes all offering costs incurred by the Company in connection with any offer and sale of securities by the Company.
S ee “ Part III—Item 13—Certain Relationships and Related Transactions, and Director Independence—Our Affiliate Transactions ” for additional information regarding fees incurred on our behalf by, and expenses reimbursable to, our Manager and its affiliates.
See “ Part III, Item 13—Certain Relationships and Related Transactions, and Director Independence—Our Affiliate Transactions ” for additional information regarding fees incurred on our behalf by, and expenses reimbursable to, our Manager and its affiliates.
S ee “ Part III—Item 13—Certain Relationships and Related Transactions, and Director Independence—Our Affiliate Transactions ” for additional information regarding fees incurred on our behalf by, and expenses reimbursable to, our Manager and its affiliates.
See “ Part III, Item 13—Certain Relationships and Related Transactions, and Director Independence—Our Affiliate Transactions ” for additional information regarding fees incurred on our behalf by, and expenses reimbursable to, our Manager and its affiliates.
As of December 31, 2022, we have not sold any other equity securities that were not registered under the Securities Act.
As of December 31, 2023, we have not sold any other equity securities that were not registered under the Securities Act.
The offer and sale was exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), in reliance on Section 4(a)(2) thereof, as a transaction by an issuer not involving any public offering.
The offer and sale was exempt from the registration requirements of the Securities Act, in reliance on Section 4(a)(2) thereof, as a transaction by an issuer not involving any public offering.
Neither our Class B units nor our Class M unit are listed or traded on any established public trading market. Holders As of March 24, 2023, there were 47 holders of record of our Class A units, and one holder of record of each of our Class B units and Class M unit, respectively.
Neither our Class B units nor our Class M unit are listed or traded on any established public trading market. Holders As of March 22, 2024, there were 46 holders of record of our Class A units, and one holder of record of each of our Class B units and Class M unit, respectively.
(2) Includes direct or indirect payments of $5.8 million to directors, officers and affiliates as of December 31, 2022 predominantly for insurance premiums and employee reimbursement expenditures (pursuant primarily to our development management agreements).
(2) Includes direct or indirect payments of $10.0 million to directors, officers and affiliates as of December 31, 2023 predominantly for insurance premiums and employee reimbursement expenditures (pursuant primarily to our development management agreements).
(3) Includes direct or indirect payments of $4.6 million to directors, officers and affiliates as of December 31, 2022 for management fees, insurance premiums and employee cost sharing expenses (pursuant to our management agreement and employee and cost sharing agreement).
(3) Includes direct or indirect payments of $9.0 million to directors, officers and affiliates as of December 31, 2023 for management fees, insurance premiums and employee cost sharing expenses (pursuant to our Management Agreement and Employee and Cost Sharing Agreement).
(4) Includes direct or indirect payments of $1.3 million to others, including payments for legal, accounting, marketing, transfer agent and filing fees, as of December 31, 2022.
(4) Includes direct or indirect payments of $2.8 million to others, including payments for legal, accounting, marketing, transfer agent and filing fees, as of December 31, 2023.
From the period of October 7, 2021, the date of the first closing held in connection with our Primary Offering, through December 31, 2021, we issued 2,132,039 Class A units in our Primary Offering, raising net offering proceeds of $212.6 million.
From the period of October 7, 2021, the date of the first closing held in connection with our Primary Offering, through December 31, 2022, we issued 2,273,339 Class A units in our Primary Offering, raising net offering proceeds of $226.0 million.
Uses of net offering proceeds Funding of loans receivable (1) $ 34,955 Purchases and development of real estate (2) $ 29,559 Working capital (3) (4) 5,865 $ 70,379 (1) Includes direct payment of $30.0 million to Norpointe, an affiliate of our Chief Executive Officer.
Uses of net offering proceeds Funding of loans receivable (1) $ 34,955 Purchases and development of real estate (2) 152,701 Working capital (3) (4) 19,685 $ 207,341 (1) Includes direct payment of $30.0 million to Norpointe, an affiliate of our Chief Executive Officer.
The adjusted offering price will be equal to our adjusted NAV as of the Determination Date (rounded to the nearest dollar) divided by the number of Class A units outstanding on the Determination Date.
Our adjusted NAV will be equal to our adjusted NAV as of the Determination Date (rounded to the nearest dollar) divided by the number of Class A units outstanding on the Determination Date. As of December 31, 2023, our NAV per Class A units was $100.88.
We have not established a minimum distribution level, and our Operating Agreement does not require that we pay distributions to the holders of our Class A units. Use of Proceeds from Registered Sales of Securities On September 30, 2021, the U.S.
We have not established a minimum distribution level, and our Operating Agreement does not require that we pay distributions to the holders of our Class A units. Use of Proceeds from Registered Sales of Securities We are the successor in interest to Belpointe REIT, Inc., a Maryland corporation (“Belpointe REIT”), incorporated on June 19, 2018.
See “—Our Transactions with Belpointe REIT, Inc.” 44 Table Of Contents The following tables summarize certain information about the Primary Offering proceeds and our use of proceeds, including direct or indirect payments to our directors, officers, affiliates or to any person owning 10% or more of any class of our equity securities as of December 31, 2022: Offering proceeds Class A units sold 2,273,339 Gross offering proceeds $ 227,333,900 Selling commissions — Offering costs (1) (2) (3) 1,293,422 Net offering proceeds $ 226,040,478 (1) Includes $0.3 million of reimbursements to an affiliate for costs incurred on our behalf.
Together with the gross proceeds raised in Belpointe REIT, Inc.’s prior offerings, as of December 31, 2023, we have raised aggregate gross offering cash proceeds of $354.3 million. 43 The following tables summarize certain information about the Public Offering proceeds and our use of proceeds, including direct or indirect payments to our directors, officers, affiliates or to any person owning 10% or more of any class of our equity securities as of December 31, 2023: Offering proceeds Class A units sold 2,372,289 Gross offering proceeds $ 235,265,650 Selling commissions — Offering costs (1) (2) (3) 1,730,669 Net offering proceeds $ 233,534,981 (1) Includes $0.3 million of reimbursements to an affiliate for costs incurred on our behalf.
For the year ended December 31, 2022, we issued 141,300 Class A units in connection with our Primary Offering, raising net offering proceeds of $13.5 million. Together with the gross proceeds raised in Belpointe REIT, Inc.’s prior offerings, as of December 31, 2022, we have raised aggregate gross offering cash proceeds of $346.3 million.
For the year ended December 31, 2023, we issued 98,950 Class A units in connection with our Public Offerings, raising net offering proceeds of $7.5 million.
Removed
We plan to calculate our net asset value (“NAV”) of our Class A units on a quarterly basis. The per Class A unit purchase price will be adjusted within approximately 60 days of the last day of each quarter (the “Determination Date”).
Added
During the year ended December 31, 2021, we acquired all of the outstanding shares of common stock of Belpointe REIT in an exchange offer and related conversion and merger transaction. On September 30, 2021, the U.S.
Removed
If our NAV increases above or decreases below the price per Class A unit as stated in our prospectus we will adjust the offering price effective as of the first business day following its public announcement.
Added
On May 9, 2023, the SEC declared effective our follow-on registration statement on Form S-11, as amended (File No. 333-271262) (the “Follow-on Registration Statement”), registering the offer and sale of up to an additional $750,000,000 of our Class A units on a continuous “best efforts” basis by any method deemed to be an “at the market” offering pursuant to Rule 415(a)(4) under the Securities Act of 1933, as amended (the “Securities Act”), including by offers and sales made directly to investors or through one or more agents (our “Follow-on Offering” and, together with our Primary Offering, our “Public Offerings”).
Added
In connection with the Follow-on Registration Statement, we entered into a non-exclusive dealer manager agreement with Emerson Equity LLC (the “Dealer Manager”), a registered broker-dealer, for the sale of our Class A units through the Dealer Manager.
Added
The Dealer Manager will enter into participating dealer agreements and wholesale agreements with other broker-dealers, referred to as “selling group members,” to authorize those broker-dealers to solicit offers to purchase our Class A units.
Added
We will pay our Dealer Manager commissions of up to 0.25%, and the selling group members commissions ranging from 0.25% to 4.50%, of the principal amount of Class A unit sold in the Follow-on Offering. In addition, our Follow-on Registration Statement constitutes a post-effective amendment to our Primary Registration Statement, conforming our Primary Offering to our Follow-on Offering.
Added
The purchase price for Class A units in our Public Offerings is the lesser of (i) the current NAV of our Class A units, and (ii) the average of the high and low sale prices of our Class A units on the NYSE American during regular trading hours on the last trading day immediately preceding the investment date on which the NYSE American was open for trading and trading in our Class A units occurred.
Added
Our Manager calculates our NAV within approximately 60 days of the last day of each quarter (the “Determination Date”). Any adjustment to our NAV will take effect as of the first business day following the public announcement of our NAV.
Added
We file a prospectus supplement with the SEC disclosing quarterly determinations of our NAV per Class A unit.
Added
Additionally, if a material event occurs in between quarterly updates of NAV that would cause our NAV to change by 10% or more from the most recently disclosed NAV, we will disclose the updated price and the reason for the change in prospectus supplement as promptly as reasonably practicable.
Added
From the period of October 7, 2021, the date of the first closing held in connection with our Primary Offering, through December 31, 2022, we issued 2,273,339 Class A units in our Primary Offering, raising net offering proceeds of $226.0 million.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

39 edited+36 added−14 removed23 unchanged
Biggest changeResults of Operations Year Ended December 31, (amounts in thousands) 2022 2021 $ Change % Change Revenue Rental revenue $ 1,391 $ 997 $ 394 40 % Other income — — — 100 % Total revenue 1,391 997 394 40 % Expenses Property expenses 3,809 1,140 2,669 234 % General and administrative 5,798 2,924 2,874 98 % Depreciation and amortization expense 1,291 588 703 120 % Total expenses 10,898 4,652 6,246 134 % Other income (loss) Gain on redemption of equity investment — 251 (251 ) (100 )% Interest income 1,850 369 1,481 401 % Other income (expense) (469 ) (7 ) (462 ) 6600 % Total other income (loss) 1,381 613 768 125 % Loss before income taxes (8,126 ) (3,042 ) (5,084 ) 167 % Provision for income taxes (112 ) — (112 ) 100 % Net loss (8,238 ) (3,042 ) (5,196 ) 171 % Net loss (income) attributable to noncontrolling interests 555 (93 ) 648 (697 )% Net loss attributable to Belpointe PREP, LLC $ (7,683 ) $ (3,135 ) $ (4,548 ) 145 % 47 Table Of Contents Revenue Rental Revenue For the year ended December 31, 2022 as compared to the same period in 2021, rental revenue increased by $0.4 million.
Biggest changeResults of Operations The following table sets forth information regarding our consolidated results of operations during the years ended December 31, 2023 and 2022 (amounts in thousands): Year Ended December 31, 2023 2022 $ Change % Change Revenue Rental revenue $ 2,254 $ 1,391 $ 863 62 % Total revenue 2,254 1,391 863 62 % Expenses Property expenses 4,179 3,809 370 10 % General and administrative 6,335 5,798 537 9 % Depreciation and amortization 2,067 1,291 776 60 % Impairment of real estate 4,060 — 4,060 100 % Total expenses 16,641 10,898 5,743 53 % Other income Interest income 113 1,850 (1,737 ) (94 )% Other expense (87 ) (469 ) 382 (81 )% Total other income 26 1,381 (1,355 ) (98 )% Loss before income taxes (14,361 ) (8,126 ) (6,235 ) 77 % Provision for income taxes (1 ) (112 ) 111 (99 )% Net loss (14,362 ) (8,238 ) (6,124 ) 74 % Net income attributable to Belpointe PREP, LLC 11 555 (544 ) (98 )% Net loss attributable to Belpointe PREP, LLC $ (14,351 ) $ (7,683 ) $ (6,668 ) 87 % 46 Revenue Rental Revenue For the year ended December 31, 2023 as compared to the same period in 2022, rental revenue increased by $0.9 million.
For the year ended December 31, 2022, interest income was $1.9 million and is primarily related to interest of $0.7 million earned on the Norpointe Loan, $0.7 million earned on the Restructured Norpointe Loan, $0.2 million earned on the CMC Loan, and $0.2 million earned on the Visco Loan.
For the year ended December 31, 2022, interest income was $1.9 million and is primarily related to interest of $0.7 million earned on the Norpointe Loan, $0.7 million earned on the Restructured Norpointe Loan, $0.2 million earned on the CMC Loan, and $0.2 million on the Visco Loan.
The recent accounting changes that may potentially impact our business are described under “Recent Accounting Pronouncements” in “ Note 3 — Summary of Significant Accounting Policies. ” Off-Balance Sheet Arrangements We currently have no off-balance sheet arrangements that are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
The recent accounting changes that may potentially impact our business are described under “Recent Accounting Pronouncements” in “ Note 2 — Summary of Significant Accounting Policies .” Off-Balance Sheet Arrangements We currently have no off-balance sheet arrangements that are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Our actual results could differ from these estimates. Our significant accounting policies are described in “ Note 3 — Summary of Significant Accounting Policies. ” Many of these accounting policies require judgment and the use of estimates and assumptions when applying these policies in the preparation of our consolidated financial statements.
Our actual results could differ from these estimates. Our significant accounting policies are described in “ Note 2 — Summary of Significant Accounting Policies .” Many of these accounting policies require judgment and the use of estimates and assumptions when applying these policies in the preparation of our consolidated financial statements.
We expect to obtain the liquidity and capital resources that we need over the short and long-term from the proceeds of our Primary Offering and any future offerings that we may conduct, from the advancement of reimbursable fees and expenses by our Manager and its affiliates, including our Sponsor, from secured or unsecured financings from banks and other lenders and from any undistributed funds from operations.
We expect to obtain the liquidity and capital resources that we need over the short and long-term from the proceeds of our Public Offerings and any future offerings that we may conduct, from the advancement of reimbursable fees and expenses by our Manager and its affiliates, including our Sponsor, from secured or unsecured financings from banks and other lenders and from any undistributed funds from operations.
Further information regarding our commercial real estate loan transactions is provided in “ Note 8 – Loans Receivable ” in the Notes to Consolidated Financial Statements included elsewhere in this Form 10-K.
Further information regarding our commercial real estate loan transactions is provided in “ Note 7 – Loans Receivable ” in the Notes to Consolidated Financial Statements included elsewhere in this Form 10-K.
These outflows were partially offset by inflows from the repayment of the CMC and Restructured Norpointe Loans during the period as well as cash acquired as part of the acquisition of CMC ( Note 8 ).
These outflows were partially offset by inflows from the repayment of the CMC and Restructured Norpointe Loans during the period as well as cash acquired as part of the acquisition of CMC ( Note 7 ).
For additional details regarding our Primary Offering, see “ Part II, Item 5.
For additional details regarding our Public Offering, see “ Part II, Item 5.
On February 23, 2022, we lent approximately $5.0 million to Visco Propco, LLC (the “Visco Loan”), pursuant to the terms of a promissory note secured by a first lien deed of trust on certain real property located at 801 Visco Drive, Nashville, Tennessee 37210. On December 2, 2022, the Visco Loan was repaid in full.
On February 23, 2022, we lent approximately $5.0 million to Visco Propco, LLC (the “Visco Loan”), pursuant to the terms of a promissory note secured by a first lien deed of trust on certain real property located at 801 Visco Drive, Nashville, Tennessee 37210.
This increase primarily relates to losses allocated to noncontrolling interest holders on our CMC and 900 8th Avenue South investments based upon an allocation of each investment’s net assets at book value as if the investments were hypothetically liquidated at the end of each reporting period.
This decrease primarily relates to losses allocated to noncontrolling interest holders on our CMC and 900 8th Avenue South investments in the prior year period which was based upon an allocation of each investment’s net assets at book value as if the investments were hypothetically liquidated at the end of each reporting period.
On June 28, 2023, for purposes of complying with the qualified opportunity fund requirements under the Code and related Treasury Regulations, we restructured the Norpointe Loan (the “Restructured Norpointe Loan”). The Restructured Norpointe Loan was evidenced by a promissory note and was secured by a first mortgage lien on the Norpointe Property.
On June 28, 2022, for purposes of complying with the qualified opportunity fund requirements under the Internal Revenue Code of 1986, as amended, and related Treasury Regulations, we restructured the Norpointe Loan (the “Restructured Norpointe Loan”). The Restructured Norpointe Loan was evidenced by a promissory note and was secured by a first mortgage lien on the Norpointe Property.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities—Use of Proceeds from Registered Sales of Securities ” We currently anticipate that our available capital resources, including the proceeds from our Primary Offering and the proceeds from any construction or other loans that we may incur, when combined with cash flow generated from our operations, will be sufficient to meet our anticipated working capital and capital expenditure requirements over the next 12 months and beyond. 50 Table Of Contents Leverage We employ leverage in order to provide more funds available for investment.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities—Use of Proceeds from Registered Sales of Securities ” 49 We currently anticipate that our available capital resources, including the proceeds from our Public Offerings and the proceeds from any construction or other loans that we may incur, when combined with cash flow generated from our operations, will be sufficient to meet our anticipated working capital and capital expenditure requirements over the next 12 months and beyond.
Belpointe REIT’s deemed liquidation resulted in a taxable gain for the year ended October 1, 2021. In connection with the Conversion, we filed an extension for the time to file Belpointe REIT’s 2021 tax returns, however, we did not make an estimated payment at that time as we had not yet calculated Belpointe REIT’s 2021 tax liability.
In connection with the conversion, we filed an extension for the time to file Belpointe REIT’s 2021 tax returns, however, we did not make an estimated payment at that time as we had not yet calculated Belpointe REIT’s 2021 tax liability.
There was no comparable activity for the year ended December 31, 2022. 48 Table Of Contents Interest Income On January 3, 2022, we lent $30.0 million (the “Norpointe Loan”) to Norpointe, LLC (“Norpointe”), an affiliate of our Chief Executive Officer, pursuant to the terms of a promissory note secured by a first mortgage lien on certain real property located at 41 Wolfpit Avenue, Norwalk, Connecticut 06851 (the “Norpointe Property”).
On January 3, 2022, we lent $30.0 million (the “Norpointe Loan”) to Norpointe, LLC (“Norpointe”), an affiliate of our Chief Executive Officer, pursuant to the terms of a promissory note secured by a first mortgage lien on certain real property located at 41 Wolfpit Avenue, Norwalk, Connecticut 06851 (the “Norpointe Property”).
We believe that careful use of conservatively structured leverage will help us to achieve our diversification goals and potentially enhance the returns on our investments.
Leverage We employ leverage in order to provide more funds available for investment. We believe that careful use of conservatively structured leverage will help us to achieve our diversification goals and potentially enhance the returns on our investments.
Cash flows provided by financing activities for the year ended December 31, 2021 primarily relate to net proceeds received from the Primary Offering and Secured Notes funded by Belpointe REIT. Critical Accounting Policies Our audited consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America.
Cash flows provided by financing activities for the year ended December 31, 2022 primarily relates to net proceeds received from the Primary Offering partially offset by the repayment of the Acquisition Loan. Critical Accounting Policies Our audited consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America.
Cash flows used in operating activities for the year ended December 31, 2021 primarily relates to operating properties acquired. Cash flows used in investing activities for the year ended December 31, 2022 relate primarily to funding of loans receivable in addition to funding costs for our development properties and investments in real estate.
For additional details regarding our development properties, see “ Part I, Item 1—Our Investments .” Cash flows used in investing activities for the year ended December 31, 2022 primarily relates to the funding of loans receivable in addition to funding costs for our development properties and investments in real estate.
General and administrative expenses for the year ended December 31, 2022 primarily consisted of employee cost sharing expenses (pursuant to our management agreement and employee and cost sharing agreement), marketing expenses, legal, audit, tax and accounting fees.
General and Administrative General and administrative expenses primarily consists of employee cost sharing expenses (pursuant to our Management Agreement and Employee and Cost Sharing Agreement), marketing expenses, legal, audit, tax and accounting fees.
Securities and Exchange Commission (the “SEC”) declared effective our registration statement on Form S-11, as amended (File No. 333-255424) (the “Registration Statement”), registering up to $750,000,000 of our Class A units on a continuous “best efforts” basis, as part of our ongoing initial public offering (the “Primary Offering”), at an initial price equal to $100.00 per Class A unit.
Securities and Exchange Commission (the “SEC”) declared effective our initial registration statement on Form S-11, as amended (File No. 333-255424) (the “Primary Registration Statement”), registering a continuous primary offering of up to $750,000,000 in our Class A units (our “Primary Offering”).
For additional details regarding our acquisition of 1991 Main, see “ —Our Investments—Investments in Multifamily and Mixed-Use Rental Properties—1991 Main Street - Sarasota Florida. ” The construction management agreement contains terms and conditions that are customary for a project of this type and will be subject to guaranteed maximum price.
For additional details regarding our 1991 Main investment, see “ Part I, Item 1—Our Investments—1991 Main Street – Sarasota, Florida (also known as “Aster & Links ”).” The construction management agreement contains terms and conditions that are customary for a project of this type and will be subject to guaranteed maximum price.
There were no organization or Primary Offering costs incurred by our Manager and its affiliates during the year ended December 31, 2022 . During the year ended December 31, 2021, our Manager and its affiliates, including our Sponsor, incurred organization and Primary Offering expenses of $0.6 million.
There were no organization or Public Offering costs incurred by our Manager and its affiliates during the years ended December 31, 2023 and 2022. During the years ended December 31, 2023 and 2022, our Manager and its affiliates, including our Sponsor, incurred operating expenses of $2.9 million and $2.9 million, respectively, on our behalf.
As of December 31, 2022, we had an unfunded capital commitment of $144.3 million under the terms of this agreement. We currently anticipate that the remaining funding for construction and soft costs associated with the development of 1991 Main will be a minimum of $218.9 million (inclusive of the aforementioned unfunded capital commitment).
As of the date of this Form 10-K, we currently anticipate that the remaining funding for construction and soft costs associated with the development of 1991 Main will be a minimum of $84.8 million (inclusive of the aforementioned unfunded capital commitment).
Other Income (Expense) On June 28, 2022, through an indirect majority-owned subsidiary of our Operating Company, we acquired a 70.2% controlling interest in CMC (the “CMC Interest”), for an initial capital contribution of $3.8 million.
On June 28, 2022, through an indirect majority-owned subsidiary of our Operating Company, we acquired a 70.2% controlling interest in CMC (the “CMC Interest”), for an initial capital contribution of $3.8 million. As part of the transaction two unaffiliated joint venture partners (the “CMC JV Partners”) were deemed to have made a combined initial capital contribution of $3.1 million.
Liquidity and Capital Resources Our primary needs for liquidity and capital resources are to fund our investments, including construction and development costs, pay our offering and operating fees and expenses, pay any distributions that we make to the holders of our units and pay interest on any outstanding indebtedness that we incur. 49 Table Of Contents Our offering and operating fees and expenses include, among other things, legal, audit and valuation fees and expenses, federal and state filing fees, SEC, FINRA and NYSE American filing fees, printing expenses, administrative fees, transfer agent fees, marketing and distribution fees, the management fee that we pay to our Manager, and fees and expenses related to acquiring, financing, appraising, and managing our commercial real estate properties.
Our offering and operating fees and expenses include, among other things, legal, audit and valuation fees and expenses, federal and state filing fees, SEC, FINRA and NYSE American filing fees, printing expenses, administrative fees, transfer agent fees, marketing and distribution fees, the management fee that we pay to our Manager, and fees and expenses related to acquiring, financing, appraising, and managing our commercial real estate properties.
As a result, the CMC JV Partner agreed to forfeit its interest in CMC as of March 24, 2023. Other income (expense) for the year ended December 31, 2022, primarily relates to a loss of $0.4 million recorded in connection with the misappropriated cash.
Other expense for the year ended December 31, 2022, primarily relates to a loss of $0.4 million recorded in connection with the misappropriated cash. Provision for Income Taxes For the year ended December 31, 2022, provision for income taxes relates to taxes incurred (including interest) in connection with our acquisition of Belpointe REIT.
During the years ended December 31, 2022 and 2021, our Manager and its affiliates, including our Sponsor, incurred operating expenses of $2.9 million and $1.3 million, respectively, on our behalf. During the year ended December 31, 2022, our indirect wholly owned subsidiary entered into a construction management agreement for the development of 1991 Main.
During the year ended December 31, 2022, our indirect wholly-owned subsidiary entered into a construction management agreement for the development of 1991 Main.
Depreciation and Amortization For the year ended December 31, 2022 as compared to the same period in 2021, depreciation and amortization increased by $0.7 million. This increase is primarily due to our acquisition of operating properties during 2022 and 2021.
For the year ended December 31, 2023 as compared to the same period in 2022, general and administrative expenses increased by $0.5 million. This increase is primarily due to higher allocation of costs incurred by our Manager and its affiliates to us, as well as dead deal costs incurred during the current year period.
There is no limit on the amount we may borrow with respect to any individual property or portfolio. 51 Table Of Contents Cash Flows The following table provides a breakdown of the net change in our cash and cash equivalents and restricted cash (amounts in thousands): For the Year Ended 2022 2021 Cash flows used in operating activities $ (6,651 ) $ (2,268 ) Cash flows used in investing activities (63,530 ) (43,365 ) Cash flows provided by financing activities 22,802 231,401 Net (decrease) increase in cash and cash equivalents and restricted cash $ (47,379 ) $ 185,768 As of December 31, 2022 and 2021, cash and cash equivalents and restricted cash totaled approximately $145.0 million and $192.3 million, respectively.
Cash Flows The following table provides a breakdown of the net change in our cash and cash equivalents and restricted cash (amounts in thousands): Years Ended December 31, 2023 2022 Cash flows used in operating activities $ (6,945 ) $ (6,651 ) Cash flows used in investing activities (145,123 ) (63,530 ) Cash flows provided by financing activities 30,686 22,802 Net decrease in cash and cash equivalents and restricted cash $ (121,382 ) $ (47,379 ) As of December 31, 2023 and 2022, cash and cash equivalents and restricted cash totaled approximately $23.6 million and $145.0 million, respectively.
General and Administrative For the year ended December 31, 2022 as compared to the same period in 2021, general and administrative expenses increased by $2.9 million.
These increases were partially offset by a lower marketing expenses. Depreciation and Amortization For the year ended December 31, 2023 as compared to the same period in 2022, depreciation and amortization increased by $0.8 million.
Provision for Income Taxes For the year ended December 31, 2022, provision for income taxes relates to taxes incurred (including penalties and interest) in connection with our acquisition of Belpointe REIT. As a result of the Conversion of Belpointe REIT into BREIT, Belpointe REIT was deemed to have been liquidated and its tax year ended on October 1, 2021.
As a result of the conversion of Belpointe REIT from a corporation into a limited liability company, Belpointe REIT was deemed to have been liquidated and its tax year ended on October 1, 2021. Belpointe REIT’s deemed liquidation resulted in a taxable gain for the year ended October 1, 2021.
Upon consummation of the Merger, BREIT Merger acquired the Secured Notes as successor in interest to Belpointe REIT and, effective October 12, 2021, we entered into a Release and Cancellation of Indebtedness agreement with BREIT Merger pursuant to the terms of which BREIT Merger cancelled the Secured Notes and discharged us from all obligations to repay the principal and any accrued interest on the Secured Notes. 46 Table Of Contents Our Business Outlook While market conditions for multifamily and mixed-use rental properties have remained strong over the past several quarters, future economic conditions and the demand for multifamily and mixed-use rental properties are, and the real estate industry in general is, subject to uncertainty as a result of a number of factors, including, among others, the rate of unemployment, increasing interest rates, higher rates of inflation, instability in the banking system, the availability of credit, financial market volatility, general economic uncertainty, increasing energy costs, supply chain disruptions and labor shortages.
Future economic conditions and the demand for multifamily and mixed-use rental properties are, and the real estate industry in general is, subject to uncertainty as a result of a number of factors, including, among others, the rate of rent growth, rate of new construction, rate of absorption, the rate of unemployment, increasing interest rates, higher rates of inflation, instability in the banking system, the availability of credit, financial market volatility, general economic uncertainty, increasing energy costs, supply chain disruptions and labor shortages.
Expenses Property Expenses For the year ended December 31, 2022, property expenses consisted of management fees, property operational expenses, real estate taxes, and utilities and insurance expenses incurred in relation to our 2022 and 2021 property acquisitions.
Additionally, the increase is related to acquisition of our 1400 Davidson investment in December 2022, whereby the year ended December 31, 2023 reflects a full year of amortization of below-market lease intangibles. Property Expenses Property expenses primarily consists of management fees, property operational expenses, real estate taxes, and utilities and insurance expenses incurred in relation to our operating properties.
Net Loss Attributable to Noncontrolling Interest Net loss attributable to noncontrolling interest represents the share of earnings generated in entities we consolidate in which we do not own 100% of the equity. For the year ended December 31, 2022 as compared to the same period in 2021, net losses attributable to noncontrolling interest increased by $0.6 million.
For the year ended December 31, 2023 as compared to the same period in 2022, net losses attributable to noncontrolling interests decreased by $0.5 million.
As part of the transaction two unaffiliated joint venture partners (the “CMC JV Partners”) were deemed to have made a combined initial capital contribution of $3.1 million. Following our acquisition of the CMC Interest, we discovered that one of the CMC JV Partners had misappropriated cash from the other CMC JV Partner’s cash account.
Following our acquisition of the CMC Interest, we discovered that one of the CMC JV Partners had misappropriated cash from the other CMC JV Partner’s cash account. As a result, the CMC JV Partner agreed to forfeit its interest in CMC as of March 24, 2023.
For the year ended December 31, 2021, property expenses consisted of property expenses, real estate taxes, and utilities and insurance expenses incurred in relation to our 2021 property acquisitions. For the year ended December 31, 2022, as compared to the same period in 2021, property expenses increased by $2.7 million.
For the year ended December 31, 2023, as compared to the same period in 2022, property expenses increased by $0.4 million. This increase is primarily due an increase in real estate tax expenses at certain investments and an increase in third-party property management fees.
For additional details regarding the Offer, see Item 1. “Business—Our Transactions with Belpointe REIT, Inc.” Cash flows provided by financing activities for the year ended December 31, 2022 primarily relate to net proceeds received from the Primary Offering partially offset by the repayment of the Acquisition Loan.
Cash flows provided by financing activities for the year ended December 31, 2023 primarily relates to the net proceeds from 1991 Main Construction Loan, proceeds from our Primary Offering, and proceeds from our short-term loan from an affiliate.
Cash flows used in investing activities for the year ended December 31, 2021 primarily relates to properties acquired and property deposits paid, costs paid for our development properties and funding of a loan receivable, all of which were offset by CMC’s redemption of BPOZ 497’s preferred equity interest, the cash acquired in connection with the acquisition of the 1991 Main Interest and the Offer.
Cash flows used in investing activities for the year ended December 31, 2023 primarily relates to the funding of development properties.
As of the date of this Form 10-K, we have paid the outstanding income tax liability, including interest, and intend to seek an administrative waiver from the IRS with respect to the outstanding penalties.
As of the date of this Form 10-K, we have paid the outstanding income tax liability, including interest. 48 Net Loss Attributable to Noncontrolling Interests Net loss attributable to noncontrolling interests represents the share of earnings generated in entities we consolidate in which we do not own 100% of the equity.
Our Transactions with Belpointe REIT, Inc. During the year ended December 31, 2021, pursuant to the terms of an Agreement and Plan of Merger (the “Merger Agreement”), we conducted an offer to exchange (the “Offer”) each outstanding share of common stock (the “Common Stock”), of Belpointe REIT, Inc.
History and Development of the Company We are the successor in interest to Belpointe REIT, Inc., a Maryland corporation (“Belpointe REIT”), incorporated on June 19, 2018. During the year ended December 31, 2021, we acquired all of the outstanding shares of common stock of Belpointe REIT in an exchange offer and related conversion and merger transaction.
Removed
(“Belpointe REIT”) validly tendered in the Offer for 1.05 of our Class A units, with any fractional Class A units rounded up to the nearest whole unit (the “Transaction Consideration”). The Offer was completed on September 14, 2021.
Added
In connection with the Follow-on Registration Statement, we entered into a non-exclusive dealer manager agreement with Emerson Equity LLC (the “Dealer Manager”), a registered broker-dealer, for the sale of our Class A units through the Dealer Manager.
Removed
Following the Offer, and in accordance with the terms of the Merger Agreement, Belpointe REIT converted from a corporation into a limited liability company (the “Conversion”) named BREIT, LLC (“BREIT”). In the Conversion each outstanding share of Common Stock was converted into a limited liability company interest (an “Interest”) in BREIT. The Conversion was completed on October 1, 2021.
Added
The Dealer Manager will enter into participating dealer agreements and wholesale agreements with other broker-dealers, referred to as “selling group members,” to authorize those broker-dealers to solicit offers to purchase our Class A units.
Removed
Following the Conversion, and in accordance with the terms of the Merger Agreement, BREIT merged with and into BREIT Merger, LLC (“BREIT Merger”), our wholly-owned subsidiary (the “Merger”). In the Merger, each outstanding Interest was converted into the right to receive the Transaction Consideration. The Merger was completed on October 12, 2021.
Added
We will pay our Dealer Manager commissions of up to 0.25%, and the selling group members commissions ranging from 0.25% to 4.50%, of the principal amount of Class A unit sold in the Follow-on Offering. In addition, our Follow-on Registration Statement constitutes a post-effective amendment to our Primary Registration Statement, conforming our Primary Offering to our Follow-on Offering.
Removed
Prior to and in connection with the Offer and Merger (collectively, the “Transaction”), we entered into a series of loan transactions with Belpointe REIT, whereby Belpointe REIT advanced us an aggregate of $74.0 million evidenced by a series of secured promissory notes (the “Secured Notes”) bearing interest at an annual rate of 0.14%, due and payable on December 31, 2021, and secured by all of our assets.
Added
For the year ended December 31, 2023, we issued 98,950 Class A units in connection with our Public Offerings. Together with the gross proceeds raised by Belpointe REIT in its prior offerings, as of December 31, 2023, we have raised aggregate gross offering cash proceeds of $354.3 million. On September 30, 2021, the U.S.
Removed
This increase is primarily due to an increase in lease revenues as a result of our 2022 property acquisitions in addition to a full year of activity related to our 2021 property acquisitions, partially offset by a decrease in rental revenue as a result of the sole tenant vacating 1900 Fruitville.
Added
From the period of October 7, 2021, the date of the first closing held in connection with our Primary Offering, through December 31, 2022, we issued 2,273,339 Class A units in our Primary Offering, raising net offering proceeds of $226.0 million.
Removed
This increase is primarily due to management fees incurred following the Registration Statement covering our Primary Offering having been declared effective, and our acquisition of additional properties during 2022 and 2021. See “ Business—Overview of Our Business and Operations ” for additional details regarding our Primary Offering.
Added
On May 9, 2023, the SEC declared effective our follow-on registration statement on Form S-11, as amended (File No. 333-271262) (the “Follow-on Registration Statement”), registering the offer and sale of up to an additional $750,000,000 of our Class A units on a continuous “best efforts” basis by any method deemed to be an “at the market” offering pursuant to Rule 415(a)(4) under the Securities Act of 1933, as amended (the “Securities Act”), including by offers and sales made directly to investors or through one or more agents (our “Follow-on Offering” and, together with our Primary Offering, our “Public Offerings”).
Removed
We became liable for general and administrative expenses in October 2021, in connection with the first closing in our Primary Offering, and as such general and administrative expenses for the year ended December 31, 2021 primarily consisted of employee cost sharing expenses (pursuant to our management agreement and employee and cost sharing agreement).
Added
In connection with the Follow-on Registration Statement, we entered into a non-exclusive dealer manager agreement with Emerson Equity LLC (the “Dealer Manager”), a registered broker-dealer, for the sale of our Class A units through the Dealer Manager.
Removed
Other Income (Loss) Gain on Redemption of Equity Investment On September 30, 2021, we lent approximately $3.5 million to CMC (the “CMC Loan”), pursuant to the terms of a non-recourse promissory note secured by a Mortgage Deed and Security Agreement on a property owned by CMC located in Mansfield, Connecticut.
Added
The Dealer Manager will enter into participating dealer agreements and wholesale agreements with other broker-dealers, referred to as “selling group members,” to authorize those broker-dealers to solicit offers to purchase our Class A units.
Removed
CMC used the proceeds from the CMC Loan to enter into a Redemption Agreement with BPOZ 497 Middle Holding, LLC (“BPOZ 497”), an indirect majority-owned subsidiary of Belpointe REIT, to redeem BPOZ 497’s preferred equity investment in CMC in furtherance of our Transaction with Belpointe REIT.
Added
We will pay our Dealer Manager commissions of up to 0.25%, and the selling group members commissions ranging from 0.25% to 4.50%, of the principal amount of Class A unit sold in the Follow-on Offering. In addition, our Follow-on Registration Statement constitutes a post-effective amendment to our Primary Registration Statement, conforming our Primary Offering to our Follow-on Offering.
Removed
See “ —Our Transactions with Belpointe REIT, Inc. ” for additional details regarding the Transaction. On June 28, 2022, CMC repaid the CMC Loan in full. In connection with CMC’s redemption of BPOZ 497’s preferred equity investment, we recognized a gain on redemption of equity investment of $0.3 million for the year ended December 31, 2021.
Added
As of December 31, 2023, $1,264,724,350 remained unsold under our Public Offerings.
Removed
Effective September 14, 2021, Belpointe REIT lent $24.8 million to Belpointe Investment Holding, LLC (“BI Holding”), an affiliate of our Sponsor, pursuant to the terms of a secured promissory note (the “BI Secured Note”).
Added
The purchase price for Class A units in our Public Offerings is the lesser of (i) the NAV of our Class A units, and (ii) the average of the high and low sale prices of our Class A units on the NYSE American during regular trading hours on the last trading day immediately preceding the investment date on which the NYSE American was open for trading and trading in our Class A units occurred.
Removed
Interest accrued on the BI Secured Note at an annual rate of 5.0% and was repaid on November 30, 2021, in connection with our acquisition of 1991 Main.
Added
Our Manager calculates our NAV within approximately 60 days of the last day of each quarter, and any adjustments take effect as of the first business day following its public announcement.
Removed
For the year ended December 31, 2021, interest income was $0.4 million and is primarily related to interest of $0.3 million earned on the BI Secured Note, and $0.1 million earned on the CMC Loan.
Added
As of December 31, 2023, our NAV per Class A units was $100.88. 45 Our Business Outlook Despite expectations of the U.S. falling into recession in 2023, market conditions for multifamily and mixed-use rental properties remained strong over the past several quarters.
Removed
For the year ended December 31, 2021, Other income (expense) relates to primarily relates to sales tax in connection with the 1991 Main parking garage easement agreement and interest expense on the 900 Eighth Promissory Note.
Added
This increase is primarily related to the amortization of below-market lease intangibles. During the year ended December 31, 2023 one of our tenants vacated our 901-909 Central Avenue investment, therefore, we accelerated the unamortized below-market lease liability in connection with termination of the lease.
Added
This increase is primarily due to the acquisition of properties during the year ended December 31, 2022, and due to the acceleration of unamortized in-place lease intangible assets at our 901-909 Central Avenue investment as a result of three tenants vacating during the year ended December 31, 2023.
Added
Impairment of Real Estate During the year ended December 31, 2023, we recorded impairment charges of $4.1 million, in relation to one of our real estate assets located in Nashville, Tennessee, based on our conclusion that the estimated fair market value of the real estate asset was lower than the carrying value, and as a result, we reduced the carrying value to the fair market value. 47 Other income Interest Income On September 30, 2021, we lent approximately $3.5 million to CMC (the “CMC Loan”) pursuant to the terms of a secured promissory note bearing interest at an annual rate of 12.0% and due and payable on June 27, 2022.
Added
On June 28, 2022, the CMC Loan was repaid in full, including accrued interest of $0.3 million.
Added
On December 2, 2022, the Visco Loan was repaid in full, including accrued interest of $0.2 million.
Added
Other expense On July 10, 2023, our indirect majority-owned subsidiary (the “Mortgage Borrower”) entered into an interest rate cap agreement (the “1991 Main Interest Rate Cap”) as required under the terms of the variable rate construction loan agreement (the “1991 Main Construction Loan Agreement”) for up to $130.0 million in principal amount that the Mortgage Borrower previously entered into, on May 12, 2023, with Bank OZK, and which is secured by 1991 Main.
Added
During the year ended December 31, 2023, we recognized a net unrealized loss of $0.1 million on the 1991 Main Interest Rate Cap.
Added
See “ Part I, Item 1—Our Investments—1991 Main Street – Sarasota, Florida (also known as “Aster & Links”)—1991 Main Interest Rate Cap ” for additional information regarding our 1991 Main Construction Loan Agreement and 1991 Main Interest Rate Cap.
Added
Liquidity and Capital Resources Our primary needs for liquidity and capital resources are to fund our investments, including construction and development costs, pay our offering and operating fees and expenses, pay any distributions that we make to the holders of our units and pay interest on any outstanding indebtedness that we incur.
Added
As of December 31, 2023, we had an unfunded capital commitment of $61.8 million under the terms of this agreement.
Added
During the year ended December 31, 2023, our indirect majority-owned subsidiary (the “Mortgage Borrower”) entered into a variable-rate construction loan agreement for up to $130.0 million in principal amount (the “1991 Main Construction Loan”) to fund the development of 1991 Main.
Added
Advances under the construction loan bear interest at a per annum rate equal to the one-month term Secured Overnight Financing Rate (SOFR) plus 3.45%, subject to a minimum all-in per annum rate of 8.51%. The 1991 Main Construction Loan has an initial maturity date of May 12, 2027 and contains a one-year extension option, subject to certain restrictions.
Added
As of December 31, 2023, we have drawn down $23.1 million on the 1991 Main Construction Loan.
Added
As discussed in “ Part I, Item 1—Our Investments—1991 Main Street – Sarasota, Florida (also known as “Aster & Links”)—1991 Main Mezzanine Loan ”, on January 31, 2024, our indirect majority-owned subsidiary (the “Mezzanine Borrower”) entered into a mezzanine loan agreement for up to $56.4 million in principal amount (the “1991 Main Mezzanine Loan”).

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