Part I [Financial Statements (Unaudited)](index=5&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) The company reported a net loss of $15.6 million for the nine months ended September 30, 2024, with assets growing to $495.7 million, primarily funded by new debt for real estate development [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) Total assets increased to $495.7 million as of September 30, 2024, driven by real estate growth and a significant rise in total debt to $144.1 million Consolidated Balance Sheets (in thousands) | Financial Item | September 30, 2024 (Unaudited, in thousands) | December 31, 2023 (in thousands) | | :--- | :--- | :--- | | **Assets** | | | | Real estate, net | $463,821 | $353,541 | | Cash and cash equivalents | $23,990 | $20,125 | | **Total Assets** | **$495,675** | **$382,117** | | **Liabilities** | | | | Debt, net | $144,135 | $19,678 | | **Total Liabilities** | **$184,705** | **$57,053** | | **Members' Capital** | | | | Total members' capital | $310,970 | $325,064 | | **Total Liabilities and Members' Capital** | **$495,675** | **$382,117** | [Consolidated Statements of Operations](index=6&type=section&id=Consolidated%20Statements%20of%20Operations) Net loss widened to $6.9 million in Q3 2024 and $15.6 million for the nine months, primarily due to increased interest and property expenses Consolidated Statements of Operations (in thousands) | Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $860 | $468 | $1,581 | $1,743 | | Total Expenses | $7,799 | $3,782 | $17,365 | $12,142 | | - Interest Expense | $3,331 | $0 | $5,757 | $0 | | - Property Expenses | $2,083 | $1,020 | $4,775 | $3,027 | | Net Loss | $(6,924) | $(3,302) | $(15,622) | $(10,180) | | Net Loss per Class A unit | $(1.90) | $(0.92) | $(4.30) | $(2.87) | [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash increased by $3.9 million for the nine months ended September 30, 2024, with $123.4 million from financing activities funding $110.8 million in real estate investments Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Nine Months Ended Sep 30, 2024 (in thousands) | Nine Months Ended Sep 30, 2023 (in thousands) | | :--- | :--- | :--- | | Net cash used in operating activities | $(8,710) | $(5,243) | | Net cash used in investing activities | $(110,785) | $(101,231) | | Net cash provided by financing activities | $123,425 | $1,189 | | **Net increase (decrease) in cash** | **$3,930** | **$(105,285)** | [Notes to Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes detail significant related-party transactions, a substantial increase in debt to **$151.1 million** for development, and **$83.8 million** in unfunded construction commitments - The company is focused on acquiring, developing, and managing commercial real estate within 'qualified opportunity zones' and is externally managed by Belpointe PREP Manager, LLC[26](index=26&type=chunk)[27](index=27&type=chunk) - The company has significant related-party transactions, including management fees, development fees, and reimbursements for operating and development costs paid to its Manager and affiliates. For the nine months ended Sep 30, 2024, these totaled over **$11.3 million** between operating expenses and capitalized costs[54](index=54&type=chunk) - Total debt increased significantly from **$23.1 million** at year-end 2023 to **$151.1 million** as of September 30, 2024, primarily from new construction and mezzanine loans to fund the Aster & Links and Viv projects[82](index=82&type=chunk) - As of September 30, 2024, the company had an aggregate unfunded commitment of **$83.8 million** related to its construction management agreements for the Viv and Aster & Links development projects[112](index=112&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses real estate development, noting the Aster & Links project's impact, increased debt for Viv, and sufficient liquidity for the next 12 months [Our Investments](index=27&type=section&id=Our%20Investments) The company's portfolio includes multifamily and mixed-use properties in Florida, Tennessee, and Connecticut, with key projects like the completed Aster & Links and the ongoing Viv development - **Aster & Links (Sarasota, FL):** A mixed-use luxury development with **424 residential units** and **51,000 sq. ft.** of retail space, with construction completed and lease-up initiated during the nine months ended September 30, 2024[125](index=125&type=chunk)[126](index=126&type=chunk) - **Viv (St. Petersburg, FL):** A 15-story high-rise development with **269 apartment units** and **15,500 sq. ft.** of retail, approximately **60% complete** as of September 30, 2024, with completion expected in the second half of 2025[137](index=137&type=chunk)[138](index=138&type=chunk) - **Nashville, TN Portfolio:** Includes several properties intended for redevelopment, such as **900 8th Avenue South** (**3.2 acres** approved for mixed-use) and multiple sites on Davidson Street (rezoned for high-density residential and commercial use)[153](index=153&type=chunk)[159](index=159&type=chunk)[160](index=160&type=chunk)[161](index=161&type=chunk) - **Storrs, CT Portfolio:** Includes multiple sites near the University of Connecticut, such as **497-501 Middle Turnpike** (planned **261-unit** community) and **1750 Storrs Road** (**19-acre** development site), targeting future multifamily development[149](index=149&type=chunk)[150](index=150&type=chunk)[163](index=163&type=chunk) [Results of Operations](index=33&type=section&id=Results%20of%20Operations) Rental revenue increased in Q3 2024 due to Aster & Links, but higher property and interest expenses resulted in a net loss of **$6.9 million** for the quarter and **$15.6 million** for the nine months Key Financial Changes (in thousands) | Metric | Q3 2024 vs Q3 2023 Change (in thousands) | 9M 2024 vs 9M 2023 Change (in thousands) | | :--- | :--- | :--- | | Rental Revenue | +$392 (+84%) | -$162 (-9%) | | Property Expenses | +$1,063 (+104%) | +$1,748 (+58%) | | Interest Expense | +$3,331 (+100%) | +$5,757 (+100%) | | General & Administrative | -$561 (-38%) | -$802 (-18%) | | Net Loss Attributable to Belpointe PREP | +$3,644 (+111%) | +$5,456 (+54%) | - The Q3 2024 increase in rental revenue and property expenses was primarily due to the Aster & Links project being placed into service and beginning its lease-up phase during the year[166](index=166&type=chunk)[168](index=168&type=chunk) - Interest expense emerged as a major cost in 2024, totaling **$3.3 million** in Q3 and **$5.8 million** for the nine-month period, following the company taking on significant construction and mezzanine debt[170](index=170&type=chunk)[171](index=171&type=chunk) [Liquidity and Capital Resources](index=36&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity, primarily from public offerings and debt financing, is deemed sufficient for the next 12 months, despite **$83.8 million** in unfunded capital commitments for development projects - The company believes its cash on-hand, proceeds from Public Offerings, and financing activities will be sufficient to meet liquidity and capital requirements for the next 12 months[179](index=179&type=chunk) - As of September 30, 2024, the company had unfunded capital commitments of **$17.8 million** for the Aster & Links project and **$66.0 million** for the Viv project[181](index=181&type=chunk)[183](index=183&type=chunk) Cash Flow Summary (in thousands) | Cash Flow Summary | Nine Months Ended Sep 30, 2024 (in thousands) | | :--- | :--- | | Net cash used in operating activities | $(8,710) | | Net cash used in investing activities | $(110,785) | | Net cash provided by financing activities | $123,425 | | **Net increase in cash** | **$3,930** | [Quantitative and Qualitative Disclosures About Market Risk](index=38&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, the registrant is not required to provide quantitative and qualitative disclosures about market risk - As a smaller reporting company, the registrant is not required to provide quantitative and qualitative disclosures about market risk[194](index=194&type=chunk) [Controls and Procedures](index=39&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of September 30, 2024, with no material changes in internal control over financial reporting during the quarter - Based on an evaluation, the principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective as of the end of the period[196](index=196&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[196](index=196&type=chunk) Part II – Other Information [Legal Proceedings](index=40&type=section&id=Item%201.%20Legal%20Proceedings) As of September 30, 2024, the company was not subject to any material legal proceedings or aware of any threatened litigation - The company is not currently subject to any material legal proceedings[198](index=198&type=chunk) [Risk Factors](index=40&type=section&id=Item%201A.%20Risk%20Factors) No material changes have been made to the risk factors disclosed in the company's 2023 Annual Report on Form 10-K - No material changes have been made to the risk factors disclosed in the company's 2023 Annual Report on Form 10-K[199](index=199&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=40&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company raised **$1.7 million** in gross proceeds from Class A unit offerings during the nine months ended September 30, 2024, with cumulative net proceeds of **$235.2 million** primarily used for real estate development - For the nine months ended September 30, 2024, the company sold Class A units for aggregate gross proceeds of **$1,711,020** through its public offerings[203](index=203&type=chunk)[207](index=207&type=chunk) Use of Net Offering Proceeds (in thousands) | Use of Net Offering Proceeds | Amount (in thousands) | | :--- | :--- | | Purchases and development of real estate | $180,594 | | Funding of loans receivable | $34,955 | | Working capital | $19,685 | | **Total** | **$235,234** |

Financial Information [Financial Statements (Unaudited)](index=5&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited consolidated financial statements for the period ended June 30, 2024. Total assets grew to $476.2 million, primarily driven by real estate development, funded by a significant increase in debt. The company reported a higher net loss of $8.7 million for the first six months of 2024 compared to $6.9 million in the prior year period, mainly due to increased property and interest expenses associated with its development projects [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) As of June 30, 2024, total assets increased to $476.2 million from $382.1 million at year-end 2023, driven by a substantial rise in 'Real estate under construction' and 'Building and improvements.' This growth was financed by a significant increase in total liabilities to $159.3 million from $57.1 million, primarily due to new debt obligations which rose to $119.9 million from $19.7 million | Balance Sheet Highlights (in thousands) | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | **Assets** | | | | Real estate, net | $434,158 | $353,541 | | Cash and cash equivalents | $24,740 | $20,125 | | **Total Assets** | **$476,155** | **$382,117** | | **Liabilities & Capital** | | | | Debt, net | $119,905 | $19,678 | | Total Liabilities | $159,255 | $57,053 | | Total Members' Capital | $316,900 | $325,064 | | **Total Liabilities and Members' Capital** | **$476,155** | **$382,117** | [Consolidated Statements of Operations](index=6&type=section&id=Consolidated%20Statements%20of%20Operations) For the second quarter of 2024, the company reported a net loss of $4.7 million, an increase from the $4.1 million loss in Q2 2023. For the six-month period, the net loss widened to $8.7 million in 2024 from $6.9 million in 2023. The larger loss was driven by a 51% decrease in rental revenue for the quarter and the incurrence of $1.7 million in interest expense, which was not present in the prior-year period | (in thousands, except per unit data) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $384 | $778 | $721 | $1,275 | | Total Expenses | $5,133 | $5,059 | $9,566 | $8,360 | | Net Loss | $(4,716) | $(4,071) | $(8,697) | $(6,878) | | Net Loss per Class A unit | $(1.30) | $(1.16) | $(2.40) | $(1.95) | [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2024, the company used $5.4 million in cash for operating activities and $79.3 million for investing activities, primarily for real estate development. These activities were funded by $96.3 million in cash provided by financing activities, which included proceeds from new term and construction loans. This contrasts with the same period in 2023, where financing activities only provided $0.2 million | Cash Flow Summary (in thousands) | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | $(5,383) | $(3,422) | | Net cash used in investing activities | $(79,315) | $(51,637) | | Net cash provided by financing activities | $96,283 | $185 | | **Net increase (decrease) in cash** | **$11,585** | **$(54,874)** | [Notes to Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail the company's focus on qualified opportunity zone properties, its ongoing public offerings, and significant related-party transactions, including management and development fees. Key disclosures cover new debt agreements, such as the $104.0 million construction loan for the 1000 First project and the $56.4 million mezzanine loan for the 1991 Main project. The company also reported unfunded construction commitments of $109.1 million as of June 30, 2024 - The company is focused on identifying, acquiring, developing, and managing commercial real estate located within 'qualified opportunity zones' and qualifies as a partnership and qualified opportunity fund for U.S. federal income tax purposes[25](index=25&type=chunk) - The company has ongoing public offerings to sell up to **$750 million** of Class A units, with the price based on the lesser of the current NAV or the market price on the NYSE American[27](index=27&type=chunk)[29](index=29&type=chunk)[30](index=30&type=chunk) - In 2024, the company entered into several significant debt agreements, including a **$104.0M** construction loan, a **$10.0M** land loan, and a **$56.4M** mezzanine loan to fund its development projects[80](index=80&type=chunk)[81](index=81&type=chunk) - As of June 30, 2024, the company has an aggregate unfunded commitment of **$109.1 million** for its development projects at 1000 First Avenue North and 1991 Main Street[116](index=116&type=chunk) [Management's Discussion and Analysis (MD&A)](index=26&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses its position as the only publicly traded qualified opportunity fund and details its investment portfolio, which is concentrated in Florida, Tennessee, and Connecticut. The analysis of operations highlights increased net losses due to higher development-related expenses. The company outlines its liquidity strategy, relying on cash on hand, public offerings, and significant construction financing to meet its substantial capital commitments for ongoing projects [Business Overview and Outlook](index=27&type=section&id=Our%20Business%20Outlook) The company operates as the sole publicly traded qualified opportunity fund, focusing on developing commercial real estate. While market conditions in its operating areas are strong, management acknowledges significant uncertainties from factors like interest rates, inflation, and construction delays, which could impact future performance. The NAV per Class A unit was announced as $99.59 as of March 31, 2024 - The company is the only publicly traded qualified opportunity fund listed on a national securities exchange[121](index=121&type=chunk) - The NAV as of March 31, 2024 was **$99.59** per Class A unit[126](index=126&type=chunk) - Future performance is subject to uncertainty from factors including interest rates, inflation, construction delays, and supply chain disruptions[127](index=127&type=chunk) [Investment Portfolio](index=27&type=section&id=Our%20Investments) The company's investment portfolio consists of multifamily and mixed-use properties under development or held for future development, primarily in Sarasota and St. Petersburg, Florida; Nashville, Tennessee; and Storrs, Connecticut. Key projects include 'Aster & Links' (424 units, Sarasota), which is partially complete, and 'Viv' (269 units, St. Petersburg), with construction expected to finish in late 2025. These projects are supported by substantial construction and mezzanine loans - **Aster & Links (Sarasota, FL):** A 424-apartment development. During Q2 2024, **145 units** were completed. The remaining construction is expected to be finished by the end of 2024. The project is financed by a **$130.0M** construction loan and a **$56.4M** mezzanine loan[130](index=130&type=chunk)[133](index=133&type=chunk)[135](index=135&type=chunk) - **Viv (St. Petersburg, FL):** A 15-story high-rise with **269 apartments** and retail space. Construction is anticipated to be completed in the second half of 2025. A **$104.0M** construction loan was secured in June 2024 to fund development[143](index=143&type=chunk)[147](index=147&type=chunk) - **Nashville, TN Portfolio:** The company holds several sites, including 900 8th Avenue South and multiple properties on Davidson Street, for future mixed-use residential redevelopment. A new **$10.0M** land loan was secured for the 900 8th Avenue South property in June 2024[156](index=156&type=chunk)[157](index=157&type=chunk)[162](index=162&type=chunk) [Results of Operations](index=32&type=section&id=Results%20of%20Operations) Comparing Q2 2024 to Q2 2023, rental revenue fell 51% to $0.4 million, mainly due to lower non-cash intangible amortization. Total expenses increased slightly to $5.1 million, driven by a 44% rise in property expenses and new interest expenses of $1.7 million from development-related debt. This resulted in a higher net loss of $4.7 million for the quarter | (in thousands) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Rental revenue | $384 | $778 | $(394) | (51)% | | Property expenses | $1,429 | $989 | $440 | 44% | | Interest expense | $1,705 | $— | $1,705 | 100% | | Net loss | $(4,716) | $(4,071) | $(645) | 16% | - The decrease in rental revenue was primarily due to lower below-market rent intangible amortization as certain intangible liabilities became fully amortized after June 30, 2023[169](index=169&type=chunk) - The increase in property expenses was mainly due to general and administrative costs incurred at the Aster & Links project, which was not operational in the prior-year period[171](index=171&type=chunk) [Liquidity and Capital Resources](index=34&type=section&id=Liquidity%20and%20Capital%20Resources) The company's primary liquidity sources are cash on hand ($35.2 million including restricted cash at June 30, 2024), proceeds from public offerings, and debt financing. Significant capital is required for development, with unfunded commitments of $30.5 million for 1991 Main and $78.7 million for 1000 First. These will be funded through draws on its large construction loans and other available capital - As of June 30, 2024, cash, cash equivalents, and restricted cash totaled **$35.2 million**[192](index=192&type=chunk) - The company has significant unfunded capital commitments for its main development projects: **$30.5 million** for 1991 Main (Sarasota) and **$78.7 million** for 1000 First (St. Petersburg)[184](index=184&type=chunk)[185](index=185&type=chunk) - The company secured substantial financing to fund development, including a **$130.0M** construction loan and **$56.4M** mezzanine loan for 1991 Main, and a **$104.0M** construction loan for 1000 First[185](index=185&type=chunk)[186](index=186&type=chunk) - The company's leverage policy targets a **50-70%** loan-to-value ratio on its stabilized commercial real estate portfolio[190](index=190&type=chunk) Other Information [Controls and Procedures](index=39&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, with the participation of the CEO and CFO, evaluated the company's disclosure controls and procedures. They concluded that these controls were effective as of June 30, 2024, ensuring that required information is recorded and reported in a timely manner. There were no material changes to the company's internal control over financial reporting during the quarter - Based on an evaluation, the principal executive officer and principal financial officer concluded that disclosure controls and procedures were effective as of the end of the period[198](index=198&type=chunk) - There were no changes in internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[199](index=199&type=chunk) [Legal, Risk, and Equity Sales Information](index=39&type=section&id=Item%201.%20Legal%20Proceedings,%20Item%201A.%20Risk%20Factors,%20and%20Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section consolidates key disclosures from Part II. The company reports no material legal proceedings and no material changes to its previously disclosed risk factors. It provides details on its public offerings, having raised aggregate gross proceeds of $355.0 million as of June 30, 2024. The net proceeds are primarily allocated to the purchase and development of real estate - As of June 30, 2024, the company was not subject to any material legal proceedings[200](index=200&type=chunk) - There have been no material changes to the risk factors disclosed in the company's Annual Report for the year ended December 31, 2023[201](index=201&type=chunk) | Uses of Net Offering Proceeds (in thousands) | Amount | | :--- | :--- | | Purchases and development of real estate | $179,600 | | Funding of loans receivable | $34,955 | | Working capital | $19,685 | | **Total** | **$234,240** | - As of June 30, 2024, the company has raised aggregate gross offering cash proceeds of **$355.0 million** from its public offerings and those of its predecessor[208](index=208&type=chunk)

Part I [Financial Statements (Unaudited)](index=5&type=section&id=Item%201.%20Financial%20Statements) Q1 2024 net loss was $4.0 million, with total assets growing to $450.9 million, driven by real estate development and increased debt [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) Total assets grew to $450.9 million by March 31, 2024, primarily from real estate under construction and new debt, with a slight decrease in members' capital Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | **Assets** | | | | Real estate, net | $399,908 | $353,541 | | Cash and cash equivalents | $29,205 | $20,125 | | **Total Assets** | **$450,920** | **$382,117** | | **Liabilities** | | | | Debt, net | $86,922 | $19,678 | | Total Liabilities | $129,128 | $57,053 | | **Members' Capital** | | | | Total members' capital | $321,792 | $325,064 | | **Total Liabilities and Members' Capital** | **$450,920** | **$382,117** | [Consolidated Statements of Operations](index=6&type=section&id=Consolidated%20Statements%20of%20Operations) The company reported a net loss of $4.0 million in Q1 2024, up from $2.8 million in Q1 2023, due to decreased rental revenue, new interest expense, and an impairment charge Quarterly Operating Results (in thousands, except per unit data) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Rental Revenue | $337 | $497 | | Total Expenses | $4,433 | $3,301 | | Interest Expense | $721 | $0 | | Impairment of real estate | $595 | $0 | | Net Loss Attributable to Belpointe PREP | $(3,981) | $(2,810) | | Net Loss Per Class A Unit | $(1.10) | $(0.80) | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operations increased to $6.6 million in Q1 2024, with investing activities using $37.9 million, largely funded by $63.1 million from financing activities Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | $(6,628) | $(1,386) | | Net cash used in investing activities | $(37,865) | $(21,169) | | Net cash provided by (used in) financing activities | $63,084 | $(141) | | **Net increase (decrease) in cash** | **$18,591** | **$(22,696)** | [Notes to Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes detail the company's focus on opportunity zone real estate, related-party transactions, significant debt increases for the Sarasota project, and liquidity constraints impacting the St. Petersburg project - The company is focused on acquiring, developing, and managing commercial real estate in qualified opportunity zones and is externally managed by Belpointe PREP Manager, LLC[24](index=24&type=chunk)[25](index=25&type=chunk) - In Q1 2024, the company incurred **$1.7 million** in costs payable to its Manager and affiliates for management fees, cost reimbursements, and other services, and capitalized an additional **$1.6 million** for development fees and insurance[50](index=50&type=chunk) - In January 2024, the company entered into a **$56.4 million** mezzanine loan and has a **$130.0 million** construction loan for its 1991 Main Street project in Sarasota. As of March 31, 2024, total debt outstanding was **$91.9 million**[71](index=71&type=chunk)[72](index=72&type=chunk)[73](index=73&type=chunk) - The company has an aggregate unfunded commitment of **$77.3 million** for two development projects. It faces liquidity constraints that may force it to stop or delay construction on its 1000 First Avenue project in St. Petersburg if a new construction loan is not finalized by May 31, 2024[100](index=100&type=chunk)[101](index=101&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=24&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) MD&A discusses the company's real estate development focus, progress on key projects, Q1 net loss drivers including decreased revenue and new interest expenses, and liquidity challenges for the St. Petersburg project [Investment Portfolio](index=25&type=section&id=Our%20Investments) The company's portfolio focuses on multifamily and mixed-use developments in Florida and Tennessee, including key projects like 'Aster & Links' in Sarasota and 'Viv' in St. Petersburg - **1991 Main Street (Aster & Links), Sarasota, FL:** A **424-unit** apartment development with **51,000 sq. ft.** of retail. Construction is underway with initial occupancies expected in H1 2024. The project is funded by a **$130.0M** construction loan and a **$56.4M** mezzanine loan[115](index=115&type=chunk)[118](index=118&type=chunk)[119](index=119&type=chunk) - **1000 First Avenue North (Viv), St. Petersburg, FL:** A planned **15-story** high-rise with **269 apartments** and **15,500 sq. ft.** of retail. A construction management agreement is in place with a GMP of **$78.4 million**[126](index=126&type=chunk)[129](index=129&type=chunk) - **Nashville, TN Portfolio:** Includes several properties such as 900 8th Avenue South (approved for **300 residential units**) and multiple sites on Davidson Street, which have been rezoned for high-density mixed-use development[137](index=137&type=chunk)[138](index=138&type=chunk)[142](index=142&type=chunk) - **Storrs, CT Portfolio:** Includes multiple sites near the University of Connecticut, intended for future multifamily development, such as a planned **261-apartment** home community at 497-501 Middle Turnpike[133](index=133&type=chunk)[134](index=134&type=chunk)[145](index=145&type=chunk) [Results of Operations](index=30&type=section&id=Results%20of%20Operations) Q1 2024 net loss increased by 42% to $4.0 million, driven by decreased rental revenue, new interest expense, and a real estate impairment charge, partially offset by lower G&A expenses Comparison of Operations (in thousands) | Line Item | Q1 2024 | Q1 2023 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Rental revenue | $337 | $497 | $(160) | (32)% | | Property expenses | $1,263 | $1,018 | $245 | 24% | | General and administrative | $1,570 | $1,771 | $(201) | (11)% | | Interest expense | $721 | $— | $721 | 100% | | Impairment of real estate | $595 | $— | $595 | 100% | | **Net loss attributable to Belpointe PREP** | **$(3,981)** | **$(2,810)** | **$(1,171)** | **42%** | - The decrease in rental revenue was mainly due to lower below-market rent intangible amortization as certain liabilities were fully amortized after Q1 2023[149](index=149&type=chunk) - The increase in total expenses was driven by new interest expense from debt obligations and a **$0.6 million** impairment charge on a Nashville real estate asset[152](index=152&type=chunk)[154](index=154&type=chunk) [Liquidity and Capital Resources](index=31&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity sources include public offerings and debt financing, with significant unfunded commitments for development projects, and potential construction delays for the St. Petersburg project due to liquidity constraints - Primary capital needs are for funding investments, construction costs, operating expenses, and debt service[156](index=156&type=chunk) - The company has an unfunded capital commitment of **$51.0 million** for its 1991 Main (Sarasota) project and **$26.3 million** for its 1000 First (St. Petersburg) project[159](index=159&type=chunk)[162](index=162&type=chunk) - A potential liquidity issue exists for the 1000 First project. If a new construction loan is not finalized by May 31, 2024, the company will stop or delay construction due to liquidity constraints caused by reserve requirements on other loans[162](index=162&type=chunk) Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | $(6,628) | $(1,386) | | Net cash used in investing activities | $(37,865) | $(21,169) | | Net cash provided by (used in) financing activities | $63,084 | $(141) | [Controls and Procedures](index=34&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2024, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation as of the end of the reporting period, the principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective[172](index=172&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[173](index=173&type=chunk) Part II – Other Information [Legal Proceedings](index=35&type=section&id=Item%201.%20Legal%20Proceedings) As of March 31, 2024, the company reported no material legal proceedings or threats thereof against itself or its subsidiaries - The company reports no material legal proceedings as of March 31, 2024[174](index=174&type=chunk) [Risk Factors](index=35&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors from the Annual Report for the year ended December 31, 2023 have been reported - No material changes to risk factors from the Annual Report for the year ended December 31, 2023 have been reported[175](index=175&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=35&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company's ongoing public offerings raised **$233.5 million** in net proceeds by March 31, 2024, primarily used for real estate purchases and development, loans receivable, and working capital - The company is conducting a continuous "best efforts" public offering of up to **$750 million** of its Class A units[177](index=177&type=chunk)[178](index=178&type=chunk) Use of Net Offering Proceeds (in thousands) | Use of Proceeds | Amount | | :--- | :--- | | Purchases and development of real estate | $178,906 | | Funding of loans receivable | $34,955 | | Working capital | $19,685 | | **Total** | **$233,546** | - Direct or indirect payments to directors, officers, and affiliates from net offering proceeds totaled **$19.0 million** as of March 31, 2024, primarily for development fees, management fees, insurance, and employee reimbursements[185](index=185&type=chunk)[187](index=187&type=chunk)

[Part I - Business and Risk Factors](index=7&type=section&id=Part%20I) This section details the company's business as a publicly traded Qualified Opportunity Fund, its real estate investment strategy, associated operational and financial risks, and cybersecurity measures [Business Overview](index=7&type=section&id=Item%201.%20Business) Belpointe PREP, LLC operates as the sole publicly traded Qualified Opportunity Fund, focusing on acquiring and developing commercial real estate within qualified opportunity zones, primarily in Florida, Connecticut, and Tennessee - The company is the only publicly traded qualified opportunity fund listed on a national securities exchange, focusing on commercial real estate within qualified opportunity zones[27](index=27&type=chunk) - As of December 31, 2023, the company has raised aggregate gross offering cash proceeds of **$354.3 million** through its public offerings and prior offerings from its predecessor, Belpointe REIT[26](index=26&type=chunk) - The company is externally managed by Belpointe PREP Manager, LLC, an affiliate of its sponsor, Belpointe, LLC. The manager handles day-to-day operations and investment decisions[28](index=28&type=chunk)[29](index=29&type=chunk) - The company's primary investment objectives are to preserve capital, pay consistent cash distributions, grow net cash from operations, and realize growth in investment value[32](index=32&type=chunk) [Investment Portfolio](index=10&type=section&id=Investment%20Portfolio) The company's investment portfolio comprises significant multifamily and mixed-use development projects in Florida, Connecticut, and Tennessee, including Aster & Links and Viv Key Development Projects as of December 31, 2023 | Project Name & Location | Description | Status & Key Details | | :--- | :--- | :--- | | **Aster & Links (1991 Main St, Sarasota, FL)** | 424-apartment mixed-use with ~51,000 sq. ft. retail. | Under construction, initial occupancy expected H1 2024. Secured $130M construction loan and a subsequent $56.4M mezzanine loan. Sprouts Farmers Market signed as anchor retail tenant. | | **Viv (1000 First Ave North, St. Petersburg, FL)** | 15-story high-rise with 269 apartments and ~15,500 sq. ft. retail. | Under development with a GMP of $69.0 million. Located near Tropicana Field. | | **Nashville Properties (TN)** | Multiple sites including 900 8th Ave South and several on Davidson St. | Land assemblages acquired for future mixed-use residential development. Rezoning for higher density was successful in September 2023. | | **Storrs Properties (CT)** | Multiple sites including 497-501 Middle Turnpike and 1750 Storrs Road. | Land acquired for development of apartment communities near the University of Connecticut (UConn). | - The company secured a **$130.0 million** variable-rate construction loan for its Aster & Links project, maturing in May 2027. As of Dec 31, 2023, **$23.1 million** has been drawn[49](index=49&type=chunk) - In January 2024, the company secured a **$56.4 million** mezzanine loan for the Aster & Links project to reimburse costs and fund continued development[53](index=53&type=chunk) [Risk Factors](index=18&type=section&id=Item%201A.%20Risk%20Factors) The company faces substantial risks including limited operating history, reliance on its external Manager, real estate development challenges, significant debt, and the potential loss of its Qualified Opportunity Fund tax status - **Organizational Risks:** The company has a limited operating history and relies heavily on its Manager and Sponsor, whose interests may conflict with unitholders. The management agreement was not negotiated at arm's length and has a costly termination fee[102](index=102&type=chunk)[122](index=122&type=chunk)[125](index=125&type=chunk) - **Real Estate & Development Risks:** The company is subject to real estate industry downturns, with a majority of its current investments concentrated in Florida. Development projects face risks of cost overruns, delays, and failure to complete on budget[174](index=174&type=chunk)[177](index=177&type=chunk)[178](index=178&type=chunk) - **Financing Risks:** The company intends to use significant leverage (targeting **50-70%** at the property level), which increases the risk of loss. Fluctuating interest rates could increase financing costs, and debt agreements contain restrictive covenants that may limit operational flexibility[214](index=214&type=chunk)[216](index=216&type=chunk)[218](index=218&type=chunk) - **Tax Risks:** There is no assurance the company will continue to meet the requirements for treatment as a partnership or a Qualified Opportunity Fund. Failure to do so would result in entity-level taxation and the loss of tax benefits for investors[231](index=231&type=chunk)[236](index=236&type=chunk) [Cybersecurity](index=50&type=section&id=Item%201C.%20Cybersecurity) The company relies on its Sponsor's IT systems and cybersecurity policies, with Board oversight, and has not experienced material cyber incidents to date - The company relies on its Sponsor's IT systems and cybersecurity risk management policies, which are designed to address and mitigate cyber threats[248](index=248&type=chunk)[249](index=249&type=chunk) - The Board of Directors is responsible for overseeing cybersecurity risk, with the Manager providing regular updates[251](index=251&type=chunk) - As of the report date, the company has not been materially affected by any cybersecurity threats or incidents[250](index=250&type=chunk) [Part II - Market, Financials, and Controls](index=52&type=section&id=Part%20II) This section details the company's public trading market, financial performance including a net loss increase, liquidity, and the effectiveness of its internal controls and procedures [Market for Common Equity and Related Matters](index=52&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's Class A units trade on the NYSE American, with future distributions targeted at 6-8% annually, funded by public offering proceeds for real estate development - Class A units are traded on the NYSE American under the symbol "OZ." As of March 22, 2024, there were **46** holders of record[256](index=256&type=chunk)[257](index=257&type=chunk) - The company has not established a minimum distribution level and does not expect to pay distributions until there is sufficient operating cash flow. The long-term target annual distribution rate is **6-8%**[258](index=258&type=chunk) Use of Public Offering Proceeds (as of Dec 31, 2023, in thousands) | Category | Amount | | :--- | :--- | | **Offering Proceeds** | | | Gross offering proceeds | $235,266 | | Net offering proceeds | $233,535 | | **Uses of Net Proceeds** | | | Funding of loans receivable | $34,955 | | Purchases and development of real estate | $152,701 | | Working capital | $19,685 | | **Total Uses** | **$207,341** | [Management's Discussion and Analysis (MD&A)](index=55&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) The company reported an increased net loss of $14.4 million in 2023, driven by an impairment charge and higher expenses, with liquidity primarily from public offerings and debt financing significant development commitments Consolidated Results of Operations (in thousands) | | 2023 | 2022 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Total revenue | $2,254 | $1,391 | $863 | 62% | | Total expenses | $16,641 | $10,898 | $5,743 | 53% | | *Impairment of real estate* | *$4,060* | *$0* | *$4,060* | *100%* | | Net loss | ($14,362) | ($8,238) | ($6,124) | 74% | | Net loss attributable to Belpointe PREP, LLC | ($14,351) | ($7,683) | ($6,668) | 87% | - The increase in net loss for 2023 was primarily due to a **$4.1 million** impairment charge on a real estate asset in Nashville, Tennessee[295](index=295&type=chunk) - The company has significant unfunded capital commitments for its development projects, including **$61.8 million** for 1991 Main (Aster & Links) and **$40.3 million** for 1000 First (Viv) as of December 31, 2023[307](index=307&type=chunk)[312](index=312&type=chunk) Cash Flow Summary (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 | [Financial Statements and Supplementary Data](index=64&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) The 2023 financial statements show increased assets driven by real estate under construction, higher liabilities from new debt, a net loss of $14.4 million, and significant related-party fees Consolidated Balance Sheet Highlights (in thousands) | | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Real estate, net | $353,541 | $198,258 | | *Real estate under construction* | *$291,130* | *$133,898* | | Cash and cash equivalents | $20,125 | $143,467 | | **Total Assets** | **$382,117** | **$353,995** | | Debt, net | $19,678 | $0 | | **Total Liabilities** | **$57,053** | **$21,343** | | **Total Members' Capital** | **$325,064** | **$332,652** | Consolidated Statement of Operations Highlights (in thousands) | | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | | :--- | :--- | :--- | | Rental revenue | $2,254 | $1,391 | | Total expenses | $16,641 | $10,898 | | **Net loss** | **($14,362)** | **($8,238)** | | Loss per Class A unit | ($4.04) | ($2.25) | - Related party fees incurred in 2023 included **$2.7 million** in management fees and **$5.9 million** in development fees paid to affiliates of the Sponsor and Manager[407](index=407&type=chunk)[419](index=419&type=chunk) - As of December 31, 2023, the company had two development projects with aggregate unfunded construction commitments of **$102.1 million**[475](index=475&type=chunk) - Subsequent to year-end, on January 31, 2024, a subsidiary entered into a mezzanine loan agreement for up to **$56.4 million** to fund the continued development of the 1991 Main project[477](index=477&type=chunk) [Controls and Procedures](index=92&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that both disclosure controls and internal control over financial reporting were effective at a reasonable assurance level as of December 31, 2023 - Management concluded that as of December 31, 2023, the company's disclosure controls and procedures were effective at the reasonable assurance level[483](index=483&type=chunk) - Based on an assessment using the COSO framework, management determined that the company's internal control over financial reporting was effective as of December 31, 2023[486](index=486&type=chunk) [Part III - Governance and Compensation](index=93&type=section&id=Part%20III) This section outlines the company's corporate governance structure, executive compensation practices, beneficial ownership, related-party transactions, and principal accountant fees [Directors, Executive Officers and Corporate Governance](index=93&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) The company's governance structure includes a six-member Board with four independent directors, an Audit Committee, and an Executive Advisory Board, led by CEO Brandon E. Lacoff and CFO Martin Lacoff - The executive team includes Brandon E. Lacoff (CEO) and Martin Lacoff (CFO), who are son and father, respectively[491](index=491&type=chunk)[499](index=499&type=chunk) - The Board of Directors has six members, with four determined to be independent: Dean Drulias, Timothy Oberweger, Shawn Orser, and Ronald Young, Jr[491](index=491&type=chunk)[547](index=547&type=chunk) - The company has an Audit Committee composed of three independent directors: Timothy Oberweger, Shawn Orser (Chair), and Ronald Young Jr[506](index=506&type=chunk) [Executive Compensation](index=97&type=section&id=Item%2011.%20Executive%20Compensation) As an externally managed entity, the company does not directly compensate executive officers, who are paid by the Manager, while non-employee directors received $20,000 in cash compensation for 2023 - The company is externally managed and does not directly compensate its executive officers. Compensation is paid by the Manager[511](index=511&type=chunk) - For the year ended December 31, 2023, each non-employee director received **$20,000** in cash compensation for their service[512](index=512&type=chunk) [Security Ownership](index=97&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owner%20and%20Management%20and%20Related%20Stockholder%20Matters) CEO Brandon E. Lacoff beneficially owns all Class B and M units, granting him significant voting power, while Empirical Wealth Management is the sole external 5% Class A unitholder - CEO Brandon E. Lacoff beneficially owns **100%** of the Class B units and the single Class M unit through his role as manager of Belpointe PREP Manager, LLC[517](index=517&type=chunk)[518](index=518&type=chunk) - Empirical Wealth Management is the only external **5%** unitholder, beneficially owning approximately **8%** of the Class A units as of December 31, 2023[517](index=517&type=chunk)[519](index=519&type=chunk) [Certain Relationships and Related Transactions](index=98&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) The company engages in significant related-party transactions with its Manager, Sponsor, and affiliates, including $2.7 million in management fees and $5.9 million in development fees, and short-term loans from CEO-affiliated entities - The company pays its Manager a quarterly management fee equal to an annualized rate of **0.75%** of NAV. For 2023, this amounted to **$2.7 million**[539](index=539&type=chunk) - Affiliates of the Sponsor are entitled to development fees. In 2023, the company incurred **$5.9 million** in development fees and **$1.7 million** in related employee reimbursement expenditures[546](index=546&type=chunk) - The company engaged in short-term loans with affiliates of the CEO, including a **$1.5 million** loan from Belpointe Development Holding, LLC and a **$4.0 million** loan from Lacoff Holding II, LLC, both transacted in late 2023[531](index=531&type=chunk)[532](index=532&type=chunk) - The Manager holds **100,000** Class B units, entitling it to **5%** of any gain recognized or distributed by the company, regardless of whether Class A unitholders have received a return of capital[540](index=540&type=chunk) [Principal Accountant Fees and Services](index=102&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) The company incurred audit fees of $138,685 in 2023 and $134,575 in 2022 from Citrin Cooperman & Company, LLP, with all services pre-approved by the Audit Committee Accountant Fees (in USD) | Fee Type | 2023 | 2022 | | :--- | :--- | :--- | | Audit fees | $138,685 | $134,575 | | Tax fees | $0 | $0 | | **Total** | **$138,685** | **$134,575** |

PART I – FINANCIAL INFORMATION [Financial Statements (Unaudited)](index=5&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited consolidated financial statements for the period ended September 30, 2023, showing increased real estate under construction, decreased cash, and a widening net loss due to higher operating expenses and an impairment charge [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) As of September 30, 2023, total assets increased to $361.2 million, driven by a significant rise in real estate under construction, while cash and cash equivalents sharply decreased, and total liabilities rose Consolidated Balance Sheet Highlights (in thousands) | Account | September 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Assets** | | | | Real estate, net | $313,209 | $198,258 | | Real estate under construction | $250,432 | $133,898 | | Cash and cash equivalents | $15,743 | $143,467 | | Total assets | $361,227 | $353,995 | | **Liabilities & Capital** | | | | Total liabilities | $34,973 | $21,343 | | Total members' capital | $326,254 | $332,652 | | Total liabilities and members' capital | $361,227 | $353,995 | [Consolidated Statements of Operations](index=6&type=section&id=Consolidated%20Statements%20of%20Operations) The company reported a net loss of $10.2 million for the nine months ended September 30, 2023, a significant increase from the prior year, primarily due to higher property and G&A expenses and a $3.0 million real estate impairment charge Statement of Operations Summary (in thousands) | Metric | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Total revenue | $1,743 | $979 | | Total expenses | $12,142 | $7,611 | | Impairment of real estate | $2,961 | $— | | Net loss | $(10,180) | $(5,271) | | Net loss attributable to Belpointe PREP, LLC | $(10,174) | $(4,947) | | Loss per Class A unit (basic and diluted) | $(2.87) | $(1.45) | [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the nine months ended September 30, 2023, the company experienced a net decrease in cash of $105.3 million, driven by significant cash usage in investing activities for real estate development and operating activities, with limited cash provided by financing activities Cash Flow Summary (in thousands) | Activity | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(5,243) | $(4,483) | | Net cash used in investing activities | $(101,231) | $(62,950) | | Net cash provided by financing activities | $1,189 | $15,987 | | **Net decrease in cash** | **$(105,285)** | **$(51,446)** | [Notes to Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail accounting policies, real estate portfolio, related-party transactions, debt, and capital structure, including emerging growth company status, a new **$130.0 million** construction loan, a **$3.0 million** impairment charge, and **$116.0 million** in unfunded development commitments - The company is an "emerging growth company" and has elected to use the extended transition period for complying with new or revised accounting standards[40](index=40&type=chunk) - During the nine months ended September 30, 2023, the company recorded impairment charges of **$3.0 million** related to a real estate asset in Nashville, Tennessee, reducing its carrying value to fair market value[76](index=76&type=chunk) - On May 12, 2023, an indirect subsidiary entered into a variable-rate construction loan agreement for up to **$130.0 million** to fund the development of its 1991 Main Street property in Sarasota, Florida[85](index=85&type=chunk) - As of September 30, 2023, the company has two development projects with an aggregate unfunded commitment of **$116.0 million**[113](index=113&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial condition, operational results, and liquidity, focusing on its qualified opportunity fund status, investment portfolio, business outlook, and significant development commitments [Our Investments](index=28&type=section&id=Our%20Investments) The company's investment portfolio comprises multifamily and mixed-use rental properties in qualified opportunity zones, with key projects including the **424-apartment** "Aster & Links" in Sarasota and the **15-story**, **269 apartment units** "Viv" in St. Petersburg - The "Aster & Links" project in Sarasota, FL is a **424-apartment** development with **51,000 sq. ft.** of retail. Initial occupancies are expected in the first half of 2024, with construction completion by the end of 2024[130](index=130&type=chunk)[132](index=132&type=chunk) - The "Viv" project in St. Petersburg, FL is being developed into a **15-story** high-rise with **269 apartment units** and **15,500 sq. ft.** of retail space[135](index=135&type=chunk) - In April 2023, the company entered into a construction management agreement for the Viv project with a guaranteed maximum price (GMP) of **$62.7 million**[136](index=136&type=chunk) - The portfolio includes multiple properties in Nashville, TN and Storrs, CT, which are slated for future multifamily development[144](index=144&type=chunk)[147](index=147&type=chunk)[153](index=153&type=chunk) [Results of Operations](index=32&type=section&id=Results%20of%20Operations) For the nine months ended September 30, 2023, rental revenue increased 78% to $1.7 million, while total expenses grew 60% to $12.1 million, driven by higher G&A costs and a **$3.0 million** real estate impairment charge, leading to a more than doubled net loss Comparison of Operations (Nine Months Ended Sep 30, in thousands) | Metric | 2023 | 2022 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Rental revenue | $1,743 | $979 | $764 | 78% | | General and administrative | $4,469 | $3,908 | $561 | 14% | | Impairment of real estate | $2,961 | $— | $2,961 | 100% | | Interest income | $93 | $1,500 | $(1,407) | (94)% | | Net loss attributable to Belpointe PREP, LLC | $(10,174) | $(4,947) | $(5,227) | 106% | - The increase in rental revenue was primarily due to the acquisition of additional properties in 2022 and the acceleration of below-market lease intangibles from vacating tenants[161](index=161&type=chunk) - A **$3.0 million** impairment charge was recorded in 2023 for a real estate asset in Nashville, Tennessee, as its estimated fair market value was lower than its carrying value[165](index=165&type=chunk) [Liquidity and Capital Resources](index=35&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity needs are for investments and development, funded by offerings and debt, with unfunded capital commitments of **$78.8 million** and **$37.2 million** for key projects, supported by a **$130.0 million** construction loan - The company has unfunded capital commitments of **$78.8 million** for the 1991 Main project and **$37.2 million** for the 1000 First project[174](index=174&type=chunk)[176](index=176&type=chunk) - A variable-rate construction loan for up to **$130.0 million** was obtained to fund the development of 1991 Main, with less than **$0.1 million** drawn as of September 30, 2023[175](index=175&type=chunk) Cash Flow Summary (Nine Months Ended Sep 30, in thousands) | Activity | 2023 | 2022 | | :--- | :--- | :--- | | Cash flows used in operating activities | $(5,243) | $(4,483) | | Cash flows used in investing activities | $(101,231) | $(62,950) | | Cash flows provided by financing activities | $1,189 | $15,987 | | **Net decrease in cash** | **$(105,285)** | **$(51,446)** | [Controls and Procedures](index=37&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2023, with no material changes to internal control over financial reporting during the quarter - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[186](index=186&type=chunk) - There were no changes in internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal controls[187](index=187&type=chunk) PART II – OTHER INFORMATION [Legal Proceedings](index=38&type=section&id=Item%201.%20Legal%20Proceedings) As of September 30, 2023, the company and its subsidiaries were not involved in any material legal proceedings, nor was management aware of any threatened material legal actions - As of September 30, 2023, the company was not subject to any material legal proceedings, nor was it aware of any being threatened[189](index=189&type=chunk) [Risk Factors](index=38&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2022 - There have been no material changes to the risk factors disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2022[190](index=190&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=38&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q3 2023, the company did not sell unregistered equity securities, having raised **$351.3 million** in gross proceeds from public offerings, primarily allocating **$130.6 million** to real estate, **$35.0 million** to loans, and **$19.9 million** to working capital - The company did not sell any unregistered equity securities during the three months ended September 30, 2023[191](index=191&type=chunk) - As of September 30, 2023, the company has raised aggregate gross offering cash proceeds of **$351.3 million** from its public offerings[197](index=197&type=chunk) Use of Net Offering Proceeds (in thousands) | Use of Proceeds | Amount | | :--- | :--- | | Purchases and development of real estate | $130,564 | | Funding of loans receivable | $34,955 | | Working capital | $19,891 | | **Total Used** | **$185,410** |

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2023 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from______to _____ Commission File Number: 001-40911 Belpointe PREP, LLC (Exact name of registrant as specified in its charter) (State or other jurisdiction of (I.R ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____ to ____ Commission File Number: 001-40911 Belpointe PREP, LLC (Exact name of registrant as specified in its charter) Delaware 84-4412083 (State or other ...

PART I [Item 1. Business](index=6&type=section&id=Item%201.%20Business) Belpointe PREP, LLC is the sole publicly traded qualified opportunity fund, investing in commercial real estate within qualified opportunity zones, externally managed by Belpointe PREP Manager, LLC - Belpointe PREP, LLC is the only publicly traded qualified opportunity fund listed on a national securities exchange, focused on commercial real estate within qualified opportunity zones[20](index=20&type=chunk) - The company is externally managed by Belpointe PREP Manager, LLC, an affiliate of its sponsor, Belpointe, LLC[21](index=21&type=chunk)[28](index=28&type=chunk) - Primary investment objectives include preserving and returning capital, paying attractive cash distributions, growing net cash from operations, and realizing investment value growth[31](index=31&type=chunk) - The company targets aggregate property-level leverage of **50-70%** for stabilized commercial real estate, excluding corporate-level debt or assets under development[77](index=77&type=chunk) [Overview of Our Business and Operations](index=6&type=section&id=Overview%20of%20Our%20Business%20and%20Operations) The company, formed in 2020, operates as a Delaware LLC, focusing on commercial real estate in qualified opportunity zones - Belpointe PREP, LLC was formed on January 24, 2020, and operates as a Delaware limited liability company, intending to qualify as a partnership for U.S. federal income tax purposes[20](index=20&type=chunk) - The company focuses on identifying, acquiring, developing, or redeveloping and managing commercial real estate within qualified opportunity zones, with at least **90%** of its assets consisting of qualified opportunity zone property[20](index=20&type=chunk) - As of December 31, 2022, the company had raised aggregate gross offering cash proceeds of **$346.3 million**, including proceeds from Belpointe REIT, Inc.'s prior offerings[22](index=22&type=chunk) [Our Transactions with Belpointe REIT, Inc.](index=6&type=section&id=Our%20Transactions%20with%20Belpointe%20REIT%2C%20Inc.) Belpointe PREP completed an exchange offer for Belpointe REIT common stock in 2021, followed by a merger and cancellation of prior secured promissory notes - In 2021, Belpointe PREP completed an offer to exchange each outstanding share of Belpointe REIT common stock for **1.05 Class A units**[23](index=23&type=chunk) - Following the exchange offer, Belpointe REIT converted into BREIT, LLC, and subsequently merged into BREIT Merger, LLC, a wholly-owned subsidiary of Belpointe PREP[25](index=25&type=chunk)[26](index=26&type=chunk) - Prior to the merger, Belpointe REIT advanced Belpointe PREP **$74.0 million** via secured promissory notes, which were cancelled upon the merger's consummation[27](index=27&type=chunk) [Our Manager](index=7&type=section&id=Our%20Manager) Belpointe PREP is externally managed by Belpointe PREP Manager, LLC, an affiliate of its sponsor, responsible for daily operations and investment strategy - Belpointe PREP is externally managed by Belpointe PREP Manager, LLC, an affiliate of its sponsor, Belpointe, LLC[28](index=28&type=chunk) - The Manager is responsible for day-to-day operations, investment objectives, strategy implementation, and performing services under the Management Agreement, subject to Board oversight[28](index=28&type=chunk) - The Manager's team makes decisions on origination, selection, evaluation, structuring, acquisition, financing, and development of commercial real estate properties and related assets[28](index=28&type=chunk) [Our Sponsor](index=7&type=section&id=Our%20Sponsor) Belpointe, LLC, the company's sponsor, is an experienced investment firm with senior executives in real estate acquisition, development, and ownership - Belpointe, LLC, the company's sponsor, is a Greenwich, Connecticut-based investment firm with senior executives experienced in real estate acquisition, development, and ownership[30](index=30&type=chunk) - As of December 31, 2022, the Sponsor's affiliates have facilitated or originated **13 real estate assets** with aggregate purchase prices and construction costs of approximately **$400 million**[30](index=30&type=chunk) - The Sponsor's financial management division currently manages over **$3 billion** in public securities[30](index=30&type=chunk) [Our Investment Objectives and Investment Strategy](index=7&type=section&id=Our%20Investment%20Objectives%20and%20Investment%20Strategy) The company's primary investment objectives include capital preservation, consistent cash distributions, growth in operating cash flow, and investment value appreciation - Primary investment objectives include preserving and returning capital, paying attractive and consistent cash distributions, growing net cash from operations, and realizing growth in investment value[31](index=31&type=chunk) - Initial and expected investments are in properties located in qualified opportunity zones for the development or redevelopment of various commercial real estate types (multifamily, student housing, senior living, etc.) across the U.S. and its territories[32](index=32&type=chunk) - The Manager has discretion to execute acquisitions and dispositions consistent with investment objectives and strategy, and the company may cease to be a qualified opportunity fund without member approval[33](index=33&type=chunk) [Qualified Opportunity Zone Program](index=8&type=section&id=Qualified%20Opportunity%20Zone%20Program) The opportunity zone program offers tax incentives for reinvesting unrealized capital gains into qualified opportunity funds, requiring at least 90% asset investment in qualified property - The opportunity zone program, established by the Tax Cuts and Jobs Act of 2017, offers tax incentives for reinvesting unrealized capital gains into qualified opportunity funds[34](index=34&type=chunk) - A 'qualified opportunity fund' must invest at least **90%** of its assets in qualified opportunity zone property, tested semi-annually[36](index=36&type=chunk) - Investors can defer capital gains by reinvesting them into a qualified opportunity fund within **180 days**, with deferred gains recognized by December 31, 2026, or upon an inclusion event[40](index=40&type=chunk) - Holding a qualified opportunity fund investment for **ten years or more** allows investors to increase their tax basis to fair market value and exclude gains from sales of non-inventory assets by the fund, up to December 31, 2047[42](index=42&type=chunk) [Our Investments](index=9&type=section&id=Our%20Investments) The company's investment portfolio includes multifamily and mixed-use rental properties across Florida, Connecticut, and Tennessee, with several properties under development - The investment portfolio includes multifamily and mixed-use rental properties across Florida, Connecticut, and Tennessee[43](index=43&type=chunk)[47](index=47&type=chunk)[48](index=48&type=chunk)[52](index=52&type=chunk)[55](index=55&type=chunk)[59](index=59&type=chunk)[63](index=63&type=chunk)[67](index=67&type=chunk)[68](index=68&type=chunk)[69](index=69&type=chunk)[70](index=70&type=chunk)[71](index=71&type=chunk)[72](index=72&type=chunk) - Key developments include a **424-apartment** home community with retail space at 1991 Main Street, Sarasota, and a **269-apartment** high-rise with retail at 902-1020 First Avenue North, St. Petersburg[44](index=44&type=chunk)[48](index=48&type=chunk) - Several properties are under development or redevelopment, such as 1991 Main Street (expected completion by end of 2024), 1700 Main Street (on hold pending re-zoning), and various Nashville and Storrs sites[45](index=45&type=chunk)[63](index=63&type=chunk)[67](index=67&type=chunk)[69](index=69&type=chunk)[71](index=71&type=chunk) - The company acquired 1991 Main Street for **$20.7 million**, 1900 Fruitville Road for **$4.7 million**, 902-1020 First Avenue North for **$12.1 million**, and 900 8th Avenue South for **$19.7 million**, among others[43](index=43&type=chunk)[47](index=47&type=chunk)[48](index=48&type=chunk)[59](index=59&type=chunk) [Joint Venture and Other Co-Ownership Arrangements](index=14&type=section&id=Joint%20Venture%20and%20Other%20Co-Ownership%20Arrangements) The company engages in joint ventures with affiliates or third parties, leveraging capital and relationships to enhance returns and diversify investments - Each asset involves an affiliate of the Sponsor or Manager (Belpointe SP Group) or an independent third party as an Investment Partner, with Belpointe PREP generally acting as a passive investor[74](index=74&type=chunk) - Joint ventures leverage capital resources and industry relationships to achieve potentially greater returns, diversify investment opportunities, and increase market share[75](index=75&type=chunk) [Borrowing Policy](index=14&type=section&id=Borrowing%20Policy) The company utilizes leverage to increase investment funds, diversify its portfolio, and enhance returns, targeting **50-70%** property-level leverage for stabilized assets - The company intends to use leverage to increase funds available for investment, broaden its portfolio, and potentially enhance returns[76](index=76&type=chunk) - Targeted aggregate property-level leverage for stabilized commercial real estate is between **50-70%** of the greater of cost or fair market value[77](index=77&type=chunk) - The Manager may modify the leverage policy based on economic conditions, capital costs, market values, and growth opportunities, with no limit on borrowing for individual properties[78](index=78&type=chunk) [Disposition Policies](index=15&type=section&id=Disposition%20Policies) Investment holding periods vary based on market conditions, with the Manager developing exit strategies and performing hold-sell analyses to optimize returns - The holding period for investments varies based on factors like investment type, interest rates, and market conditions[79](index=79&type=chunk) - The Manager's investment committee develops exit strategies and performs hold-sell analyses to determine optimal holding periods for strong returns[79](index=79&type=chunk) - Dispositions may occur to distribute net sale proceeds to Class A unitholders or reinvest in other opportunities, considering factors like cash flow impact and qualified opportunity fund status[80](index=80&type=chunk) [Taxation of the Company](index=15&type=section&id=Taxation%20of%20the%20Company) The company intends to operate as a partnership for U.S. federal income tax purposes, generally avoiding entity-level taxation, provided it meets the 'Qualifying Income Exception' - The company intends to operate as a partnership for U.S. federal income tax purposes, meaning it is generally not a taxable entity[81](index=81&type=chunk)[82](index=82&type=chunk) - If the company is treated as a publicly traded partnership, it may be taxed as a corporation unless it meets the 'Qualifying Income Exception' (at least **90%** gross income from qualifying sources)[83](index=83&type=chunk) - The company's Class A units are listed on the NYSE American, and it intends to manage its affairs to meet the Qualifying Income Exception[83](index=83&type=chunk) [Government Regulation](index=15&type=section&id=Government%20Regulation) Company operations are subject to various federal, state, and local governmental regulations, including securities, tax, real property, environmental, and housing laws - Operations are subject to federal, state, and local governmental supervision and regulation, including securities, tax, real property, environmental, and housing laws[84](index=84&type=chunk) - Compliance with these laws is not expected to have a material adverse effect on the business or incur material expenditures[85](index=85&type=chunk) [Competition](index=16&type=section&id=Competition) The company faces significant competition for investment opportunities from various entities, many with greater financial and technical resources - The company faces competition for investment opportunities from various entities, including other qualified opportunity funds, REITs, pension funds, and private equity firms[86](index=86&type=chunk) - Many competitors have significantly more financial, technical, and marketing resources, potentially leading to higher acquisition prices or less ideal capital structures[87](index=87&type=chunk) - The company expects to leverage its Manager's access to the Sponsor's investment and operating platforms, including an experienced management team and industry network, as a competitive advantage[88](index=88&type=chunk) [Human Capital](index=16&type=section&id=Human%20Capital) As an externally managed company, Belpointe PREP has no employees, relying on its Manager and Sponsor's affiliates for all operational services - The company is externally managed and has no employees, relying on its Manager for day-to-day operations and investment strategy implementation[89](index=89&type=chunk) - Services are provided by employees of the Sponsor or its affiliates, under an Employee and Cost Sharing Agreement, for which the Manager receives expense reimbursements and a quarterly management fee[90](index=90&type=chunk) [Available Information](index=16&type=section&id=Available%20Information) SEC filings and company information are publicly available on the SEC's website and the company's website - SEC filings are available free of charge on the SEC's website (www.sec.gov) and the company's website (www.belpointeoz.com)[91](index=91&type=chunk) - The company's website may be used as a distribution channel for material company information, and investors should monitor it in addition to press releases and SEC filings[92](index=92&type=chunk) [Item 1A. Risk Factors](index=17&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks due to its limited operating history, reliance on public offerings, and the speculative nature of its real estate investments and external management structure - The company has a limited operating history and relies on public offerings and financing to fund operations, making investments speculative[94](index=94&type=chunk)[95](index=95&type=chunk)[96](index=96&type=chunk) - An active, liquid, and orderly market for Class A units may not be sustained, potentially reducing liquidity due to tax deferral incentives for long-term holders[97](index=97&type=chunk) - The company's ability to fund projects and achieve investment objectives depends on raising sufficient proceeds from offerings and finding suitable investments, which is challenging due to competition and market constraints[98](index=98&type=chunk)[99](index=99&type=chunk) - The company's NAV calculations are estimates based on significant judgments and assumptions, which may not reflect realizable value or comply with U.S. GAAP fair value standards[101](index=101&type=chunk)[103](index=103&type=chunk)[105](index=105&type=chunk) - Significant debt may increase the risk of loss, reduce cash available for distributions, and subject the company to restrictive covenants and interest rate fluctuations[205](index=205&type=chunk)[207](index=207&type=chunk)[209](index=209&type=chunk) - There is no assurance the company will continue to meet requirements for partnership tax treatment or qualified opportunity fund status, which could lead to entity-level taxation and loss of investor tax benefits[222](index=222&type=chunk)[227](index=227&type=chunk) [Risks Related to our Organizational Structure](index=17&type=section&id=Risks%20Related%20to%20our%20Organizational%20Structure) The company's limited operating history, reliance on public offerings, and external management structure present significant organizational and financial risks - The company has a limited operating history and relies on public offerings and financing, increasing investment risk[94](index=94&type=chunk)[98](index=98&type=chunk) - An active, liquid market for Class A units may not be sustained due to tax incentives for long-term holding, potentially reducing liquidity[97](index=97&type=chunk) - NAV per Class A unit is an estimate based on significant judgments and may not reflect actual realizable value or U.S. GAAP standards[101](index=101&type=chunk)[103](index=103&type=chunk)[105](index=105&type=chunk) - The Management Agreement was not negotiated at arm's length, and its terms, including fees, may not be as favorable as with an unaffiliated third party[114](index=114&type=chunk) - Terminating the Management Agreement for unsatisfactory performance is difficult and costly, requiring a termination fee equal to **six times** the annual management fee[116](index=116&type=chunk)[117](index=117&type=chunk) - The company may change its investment strategy and guidelines without member consent, potentially leading to decertification as a qualified opportunity fund[122](index=122&type=chunk) - The Operating Agreement limits remedies for unitholders and mandates final and binding arbitration for certain claims, potentially restricting legal recourse[123](index=123&type=chunk)[125](index=125&type=chunk) - The Class M unit holder (Manager) has significant voting power, able to determine the outcome of certain mergers, acquisitions, and amendments to the Operating Agreement[133](index=133&type=chunk) - As an 'emerging growth company,' the company is exempt from certain reporting and disclosure requirements, which may make its financial statements less comparable to other public companies[136](index=136&type=chunk)[137](index=137&type=chunk) [Risks Related our Assets and Investments](index=31&type=section&id=Risks%20Related%20our%20Assets%20and%20Investments) Company activities and investments are vulnerable to adverse market, economic, political, or regulatory conditions, including real estate cyclicality and development risks - Company activities and investments are vulnerable to adverse changes in market, economic, political, or regulatory conditions, including rising interest rates, inflation, and banking system instability[160](index=160&type=chunk) - Recent disruptions in the U.S. banking system may hinder the ability to obtain construction financing, impacting project completion and financial results[161](index=161&type=chunk) - The real estate industry is cyclical, and a downturn, especially in concentrated geographic areas like Florida, could adversely affect investment performance and cash distributions[164](index=164&type=chunk)[167](index=167&type=chunk) - Development and redevelopment activities carry risks such as cost overruns, permitting delays, supply chain issues, and unforeseen problems, which can prevent project completion on budget and schedule[168](index=168&type=chunk)[170](index=170&type=chunk)[171](index=171&type=chunk) - Reliance on tenants for revenue means lease defaults or terminations could reduce net income and limit distributions, especially if properties have significant vacancies or inefficient alternative uses[174](index=174&type=chunk)[179](index=179&type=chunk) - Joint venture investments expose the company to risks like lack of sole decision-making authority, reliance on partners' financial condition, and potential disputes[152](index=152&type=chunk)[153](index=153&type=chunk) - Real estate investments are illiquid, limiting the ability to adjust the portfolio quickly in response to changing market conditions and potentially leading to losses if forced to liquidate[195](index=195&type=chunk) - Environmental liabilities, ADA compliance costs, and uninsured catastrophic losses could reduce cash available for distributions and the value of investments[187](index=187&type=chunk)[191](index=191&type=chunk)[193](index=193&type=chunk)[194](index=194&type=chunk) [Risks Related to Conflicts of Interest](index=39&type=section&id=Risks%20Related%20to%20Conflicts%20of%20Interest) Conflicts of interest exist due to shared leadership roles between the company, its Manager, and affiliates, impacting agreement terms and NAV calculations - Conflicts of interest exist between the company, its Manager, and affiliates, as executive officers also serve in leadership roles for the Manager and Sponsor[200](index=200&type=chunk)[201](index=201&type=chunk) - Agreements with the Manager and affiliates were not negotiated at arm's length, and their terms, including compensation, may not be as favorable to the company[200](index=200&type=chunk)[204](index=204&type=chunk) - Holders of Class A units lack the right to enforce obligations of the Sponsor, Manager, or affiliates under company agreements[202](index=202&type=chunk) - The Manager calculates the NAV, which determines its management fee, creating a potential conflict where the Manager might benefit from retaining assets to avoid NAV reduction, even if a sale would be better for unitholders[203](index=203&type=chunk) [Risks Related to Sources of Financing and Hedging](index=41&type=section&id=Risks%20Related%20to%20Sources%20of%20Financing%20and%20Hedging) Significant debt increases loss risk, imposes restrictive covenants, and exposes the company to interest rate fluctuations and hedging complexities - Incurring significant debt increases the risk of loss, potentially leading to insufficient cash flow for payments, acceleration of debt, or loss of assets to foreclosure[205](index=205&type=chunk)[208](index=208&type=chunk) - Lending facilities are likely to impose restrictive covenants that could limit the company's ability to incur additional debt, make investments, pay distributions, or engage in certain transactions[207](index=207&type=chunk) - Interest rate fluctuations can increase financing costs and reduce income, especially with floating-rate debt, potentially leading to operating losses[209](index=209&type=chunk)[210](index=210&type=chunk)[211](index=211&type=chunk) - Hedging strategies may be expensive, imperfectly correlated, or fail to protect against interest rate risks, potentially adversely affecting earnings and cash available for distributions[212](index=212&type=chunk)[213](index=213&type=chunk) - Bank credit facilities and repurchase agreements may require additional collateral or debt repayment if asset values decline, potentially reducing liquidity or forcing asset sales[217](index=217&type=chunk) - Balloon payment obligations in financing arrangements create uncertainty and depend on the ability to refinance or sell properties at maturity[219](index=219&type=chunk) [Risks Relating to U.S. Federal Taxation](index=44&type=section&id=Risks%20Relating%20to%20U.S.%20Federal%20Taxation) Failure to maintain partnership or qualified opportunity fund status could result in entity-level taxation and loss of investor tax benefits - Failure to maintain partnership classification for U.S. federal income tax purposes would subject the company to entity-level corporate tax, significantly reducing cash available for distributions and unit value[222](index=222&type=chunk)[225](index=225&type=chunk) - There is no assurance the company will continue to meet the requirements for classification as a qualified opportunity fund, which could lead to loss of tax benefits for Class A unitholders[227](index=227&type=chunk) - The tax treatment of Class A units is subject to potential legislative, judicial, or administrative changes, possibly applied retroactively, which could negatively impact the investment value[229](index=229&type=chunk) - Unitholders may be required to pay taxes on their share of taxable income even if they do not receive cash distributions, potentially resulting in out-of-pocket tax liabilities[232](index=232&type=chunk)[235](index=235&type=chunk) - Unitholders will likely be subject to state and local taxes and filing requirements in various jurisdictions where the company operates[233](index=233&type=chunk) - The complexity of Schedule K-1s and potential delays in their issuance may require unitholders to file extensions for their income tax returns[234](index=234&type=chunk)[236](index=236&type=chunk)[237](index=237&type=chunk) [Item 1B. Unresolved Staff Comments](index=48&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) There are no unresolved staff comments as of the reporting date - No unresolved staff comments[239](index=239&type=chunk) [Item 2. Properties](index=48&type=section&id=Item%202.%20Properties) The company's principal executive offices are located in Greenwich, Connecticut, in a space owned by an affiliate of its Sponsor - Principal executive offices are located at 255 Glenville Road, Greenwich, Connecticut, in a space owned by an affiliate of the Sponsor[240](index=240&type=chunk) - These facilities are considered suitable for business management[240](index=240&type=chunk) [Item 3. Legal Proceedings](index=48&type=section&id=Item%203.%20Legal%20Proceedings) As of December 31, 2022, neither the company nor its subsidiaries were subject to any material legal proceedings - No material legal proceedings against the company or its subsidiaries as of December 31, 2022[241](index=241&type=chunk) [Item 4. Mine Safety Disclosures](index=48&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[242](index=242&type=chunk) PART II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=49&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's Class A units are traded on the NYSE American, with a target annual distribution rate of **6-8%** once investments generate operating cash flow, funded by its Primary Offering - Class A units are traded on the NYSE American under the symbol "OZ" since October 18, 2021[244](index=244&type=chunk) - As of March 24, 2023, there were **47** holders of record for Class A units[245](index=245&type=chunk) - The company does not currently pay distributions but anticipates a target annual distribution rate of **6-8%** once investments generate operating cash flow[246](index=246&type=chunk) - Direct or indirect payments of **$5.8 million** were made to directors, officers, and affiliates for insurance premiums and employee reimbursement expenditures as of December 31, 2022[252](index=252&type=chunk) - The company issued **100,000 Class B units** and one Class M unit to its Manager in September 2021, exempt from registration, in consideration for services[256](index=256&type=chunk) [Market Information](index=49&type=section&id=Market%20Information) Class A units are traded on the NYSE American under the symbol "OZ" since October 2021, while Class B and M units are not publicly traded - Class A units are traded on the NYSE American under the symbol "OZ" since October 18, 2021[244](index=244&type=chunk) - Neither Class B nor Class M units are listed or traded on any public market[244](index=244&type=chunk) [Holders](index=49&type=section&id=Holders) As of March 24, 2023, there were **47** record holders of Class A units, and one holder each for Class B and Class M units - As of March 24, 2023, there were **47** holders of record of Class A units, and one holder each for Class B and Class M units[245](index=245&type=chunk)[8](index=8&type=chunk) [Distribution Policy](index=49&type=section&id=Distribution%20Policy) The company does not expect to pay distributions until investments generate operating cash flow, targeting an annual rate of **6-8%** thereafter - The company does not expect to pay distributions until investments generate operating cash flow[246](index=246&type=chunk) - Once distributions begin, they are expected to be paid quarterly, in arrears, with a target annual rate of **6-8%**[246](index=246&type=chunk) - The company has not established a minimum distribution level, and its Operating Agreement does not require distributions[246](index=246&type=chunk) [Use of Proceeds from Registered Sales of Securities](index=49&type=section&id=Use%20of%20Proceeds%20from%20Registered%20Sales%20of%20Securities) The company's continuous primary offering of up to **$750 million** in Class A units was declared effective in September 2021, with proceeds used for loans, real estate, and working capital - The company's registration statement for a continuous primary offering of up to **$750,000,000** in Class A units was declared effective on September 30, 2021[247](index=247&type=chunk) - The per Class A unit purchase price is adjusted quarterly based on the calculated net asset value (NAV)[247](index=247&type=chunk) - As of December 31, 2022, aggregate gross offering cash proceeds, including prior offerings by Belpointe REIT, Inc., totaled **$346.3 million**[248](index=248&type=chunk) Primary Offering Proceeds and Use of Proceeds (as of December 31, 2022) | Category | Amount (in millions) | | :--------------------------------- | :------------------- | | **Offering Proceeds** | | | Class A units sold | 2,273,339 | | Gross offering proceeds | $227.3 | | Selling commissions | — | | Offering costs | $1.3 | | Net offering proceeds | $226.0 | | **Uses of Net Offering Proceeds** | | | Funding of loans receivable | $35.0 | | Purchases and development of real estate | $29.6 | | Working capital | $5.9 | | Total Uses | $70.4 | [Unregistered Sales of Equity Securities](index=50&type=section&id=Unregistered%20Sales%20of%20Equity%20Securities) The company issued common units to the Sponsor and Class B and M units to the Manager, exempt from registration under Section 4(a)(2) of the Securities Act - In February 2020, **100 common units** were issued to the Sponsor for **$10,000**, exempt from registration under Section 4(a)(2) of the Securities Act[255](index=255&type=chunk) - In September 2021, all outstanding common units were reclassified into Class A units, and **100,000 Class B units** and one Class M unit were issued to the Manager for services rendered, also exempt under Section 4(a)(2)[256](index=256&type=chunk) [Item 6. [Reserved]](index=51&type=section&id=Item%206.%20%5BReserved%5D) This item is reserved and contains no information - This item is reserved[257](index=257&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=52&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Belpointe PREP, LLC, a publicly traded qualified opportunity fund, reported a net loss of **$8.2 million** in 2022, driven by increased expenses, with liquidity from its Primary Offering and targeted **50-70%** leverage for stabilized assets - Belpointe PREP, LLC is the only publicly traded qualified opportunity fund, focused on commercial real estate within qualified opportunity zones[259](index=259&type=chunk)[260](index=260&type=chunk) - The company's liquidity and capital resources are primarily derived from its Primary Offering, future offerings, advances from its Manager and affiliates, and secured/unsecured financings[288](index=288&type=chunk) - Targeted aggregate property-level leverage for stabilized commercial real estate is between **50-70%** of the greater of cost or fair market value[291](index=291&type=chunk) Consolidated Statements of Operations (in thousands) | Metric | Year Ended Dec 31, 2022 | Year Ended Dec 31, 2021 | $ Change | % Change | | :------------------------------------- | :---------------------- | :---------------------- | :------- | :------- | | Rental revenue | $1,391 | $997 | $394 | 40% | | Total revenue | $1,391 | $997 | $394 | 40% | | 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% | | 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 attributable to noncontrolling interests | $555 | $(93) | $648 | (697)% | | Net loss attributable to Belpointe PREP, LLC | $(7,683) | $(3,135) | $(4,548) | 145% | Cash Flows (in thousands) | Category | For the Year Ended 2022 | For the Year Ended 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 | [Overview](index=52&type=section&id=Overview) Belpointe PREP, LLC is the sole publicly traded qualified opportunity fund, externally managed, and operates as a partnership for U.S. federal income tax purposes - Belpointe PREP, LLC is the only publicly traded qualified opportunity fund, investing in commercial real estate and related assets within qualified opportunity zones[259](index=259&type=chunk)[260](index=260&type=chunk) - The company operates as a partnership for U.S. federal income tax purposes and is externally managed by Belpointe PREP Manager, LLC[259](index=259&type=chunk)[261](index=261&type=chunk) - A continuous primary offering of up to **$750,000,000** in Class A units was declared effective on September 30, 2021[262](index=262&type=chunk) [Our Transactions with Belpointe REIT, Inc.](index=52&type=section&id=Our%20Transactions%20with%20Belpointe%20REIT%2C%20Inc.) In 2021, the company completed an exchange offer for Belpointe REIT common stock, followed by a merger and cancellation of **$74.0 million** in secured promissory notes - In 2021, the company completed an offer to exchange Belpointe REIT common stock for its Class A units, followed by Belpointe REIT's conversion to BREIT, LLC, and subsequent merger into a wholly-owned subsidiary[263](index=263&type=chunk)[264](index=264&type=chunk)[265](index=265&type=chunk) - Prior to the merger, Belpointe REIT advanced **$74.0 million** to the company via secured promissory notes, which were cancelled upon the merger's completion[266](index=266&type=chunk) [Our Business Outlook](index=53&type=section&id=Our%20Business%20Outlook) Market conditions for multifamily and mixed-use rental properties face uncertainty due to economic factors, posing risks to future performance - Market conditions for multifamily and mixed-use rental properties face uncertainty due to factors like unemployment rates, increasing interest rates, inflation, banking system instability, and supply chain disruptions[267](index=267&type=chunk) - These factors present material uncertainty and risk to future performance, including operational costs, financing arrangements, and investment values[267](index=267&type=chunk) - The Manager continuously reviews investment and financing strategies to optimize and reduce risk in response to evolving market conditions[268](index=268&type=chunk) [Results of Operations](index=53&type=section&id=Results%20of%20Operations) The company reported a net loss of **$8.2 million** in 2022, a **171%** increase from 2021, primarily due to higher property and general and administrative expenses Consolidated Statements of Operations (in thousands) | Metric | Year Ended Dec 31, 2022 | Year Ended Dec 31, 2021 | $ Change | % Change | | :------------------------------------- | :---------------------- | :---------------------- | :------- | :------- | | Rental revenue | $1,391 | $997 | $394 | 40% | | Total revenue | $1,391 | $997 | $394 | 40% | | 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% | | 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 attributable to noncontrolling interests | $555 | $(93) | $648 | (697)% | | Net loss attributable to Belpointe PREP, LLC | $(7,683) | $(3,135) | $(4,548) | 145% | [Revenue](index=54&type=section&id=Revenue) Rental revenue increased by **$0.4 million (40%)** in 2022, primarily due to new property acquisitions and full-year activity from prior acquisitions - Rental revenue increased by **$0.4 million (40%)** for the year ended December 31, 2022, compared to 2021[270](index=270&type=chunk) - This increase was primarily due to 2022 property acquisitions and a full year of activity from 2021 acquisitions, partially offset by a decrease from a tenant vacating 1900 Fruitville[270](index=270&type=chunk) [Expenses](index=54&type=section&id=Expenses) Total expenses increased by **$6.2 million (134%)** in 2022, driven by higher property, general and administrative, and depreciation expenses - Property expenses increased by **$2.7 million (234%)** in 2022, mainly due to management fees and the acquisition of additional properties[271](index=271&type=chunk)[272](index=272&type=chunk) - General and administrative expenses rose by **$2.9 million (98%)** in 2022, primarily from employee cost sharing, marketing, legal, audit, tax, and accounting fees, which became significant after the Primary Offering's first closing in October 2021[273](index=273&type=chunk) - Depreciation and amortization increased by **$0.7 million (120%)** in 2022, driven by the acquisition of operating properties in 2021 and 2022[274](index=274&type=chunk) [Other Income (Loss)](index=54&type=section&id=Other%20Income%20%28Loss%29) Interest income significantly increased by **$1.5 million (401%)** in 2022, while other income resulted in a **$0.4 million** loss due to misappropriated cash - A gain on redemption of equity investment of **$0.3 million** was recognized in 2021 related to CMC's redemption of BPOZ 497's preferred equity investment; no comparable activity in 2022[275](index=275&type=chunk) - Interest income increased by **$1.5 million (401%)** to **$1.9 million** in 2022, primarily from the Norpointe Loan (**$0.7M**), Restructured Norpointe Loan (**$0.7M**), CMC Loan (**$0.2M**), and Visco Loan (**$0.2M**)[278](index=278&type=chunk) - Other income (expense) resulted in a **$0.4 million** loss in 2022, mainly due to misappropriated cash from a CMC joint venture partner[281](index=281&type=chunk) [Provision for Income Taxes](index=55&type=section&id=Provision%20for%20Income%20Taxes) A **$0.1 million** provision for income taxes was incurred in 2022, related to taxes from the acquisition of Belpointe REIT - A provision for income taxes of **$0.1 million** was incurred in 2022, related to taxes (including penalties and interest) from the acquisition of Belpointe REIT[282](index=282&type=chunk) - Belpointe REIT's deemed liquidation upon conversion to BREIT resulted in a taxable gain for the year ended October 1, 2021[282](index=282&type=chunk) [Net Loss Attributable to Noncontrolling Interest](index=55&type=section&id=Net%20Loss%20Attributable%20to%20Noncontrolling%20Interest) Net loss attributable to noncontrolling interest increased by **$0.6 million** in 2022, primarily due to losses allocated in CMC and 900 8th Avenue South investments - Net loss attributable to noncontrolling interest increased by **$0.6 million** in 2022, primarily due to losses allocated to noncontrolling interest holders in CMC and 900 8th Avenue South investments[283](index=283&type=chunk) [Liquidity and Capital Resources](index=55&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity needs are primarily for investments, fees, and distributions, funded by its Primary Offering, future financings, and undistributed funds from operations - Primary liquidity needs are to fund investments (including construction), pay offering and operating fees/expenses, distributions, and interest on debt[284](index=284&type=chunk) - The company has no employees and thus no office or personnel expenses[285](index=285&type=chunk) - Reimbursable fees and expenses to the Manager and affiliates can be paid in cash, Class A units, or a combination[286](index=286&type=chunk) - As of December 31, 2022, the company had an unfunded capital commitment of **$144.3 million** under a construction management agreement for 1991 Main, with total remaining funding anticipated to be at least **$218.9 million**[287](index=287&type=chunk) - Liquidity sources include Primary Offering proceeds, future offerings, advances from Manager/affiliates, secured/unsecured financings, and undistributed funds from operations[288](index=288&type=chunk) [Leverage](index=57&type=section&id=Leverage) The company uses leverage to increase investment funds, diversify its portfolio, and enhance returns, targeting **50-70%** property-level leverage for stabilized assets - The company uses leverage to increase funds for investment, diversify its portfolio, and potentially enhance returns[290](index=290&type=chunk) - Targeted aggregate property-level leverage for stabilized commercial real estate is between **50-70%** of the greater of cost or fair market value[291](index=291&type=chunk) - The Manager has discretion to modify the leverage policy based on economic conditions, capital costs, market values, and growth opportunities, with no limit on borrowing for individual properties[292](index=292&type=chunk) [Cash Flows](index=58&type=section&id=Cash%20Flows) Cash and cash equivalents decreased by **$47.4 million** in 2022, primarily due to significant investing activities in real estate development and loans - Cash and cash equivalents and restricted cash totaled **$145.0 million** at December 31, 2022, down from **$192.3 million** in 2021[294](index=294&type=chunk) - Operating cash outflows in 2022 were mainly for management fees, employee cost sharing, marketing, legal, tax, and accounting fees, partially offset by interest income[295](index=295&type=chunk) - Investing cash outflows in 2022 were primarily for funding loans receivable, development properties, and real estate investments, partially offset by loan repayments[296](index=296&type=chunk) - Financing cash inflows in 2022 were mainly from Primary Offering proceeds, partially offset by debt repayment[296](index=296&type=chunk) Net Change in Cash and Cash Equivalents and Restricted Cash (in thousands) | Category | For the Year Ended 2022 | For the Year Ended 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 | [Critical Accounting Policies](index=58&type=section&id=Critical%20Accounting%20Policies) Consolidated financial statements are prepared in accordance with U.S. GAAP, requiring management estimates and assumptions that affect reported amounts - Consolidated financial statements are prepared in accordance with U.S. GAAP, requiring management estimates and assumptions that affect reported amounts[297](index=297&type=chunk) - Estimates are evaluated ongoingly based on historical experience and reasonable assumptions, with actual results potentially differing materially[297](index=297&type=chunk) [Off-Balance Sheet Arrangements](index=58&type=section&id=Off-Balance%20Sheet%20Arrangements) The company has no off-balance sheet arrangements expected to have a material current or future effect on its financial condition or results of operations - The company has no off-balance sheet arrangements likely to have a material current or future effect on its financial condition or results of operations[299](index=299&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures about Market Risk](index=58&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) As a smaller reporting company, Belpointe PREP, LLC is not required to provide the information for this item - As a smaller reporting company, the registrant is not required to provide information for this item[300](index=300&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=59&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the audited consolidated financial statements for 2022 and 2021, including balance sheets, statements of operations, changes in members' capital, and cash flows, with an unqualified auditor opinion - The consolidated financial statements for 2022 and 2021 were audited by Citrin Cooperman & Company, LLP, who issued an unqualified opinion[302](index=302&type=chunk) Consolidated Balance Sheets (in thousands) | Asset/Liability | Dec 31, 2022 | Dec 31, 2021 | | :-------------------------------- | :----------- | :----------- | | Land | $38,741 | $22,116 | | Building and improvements | $17,843 | $16,256 | | Intangible assets | $9,495 | $9,672 | | Real estate under construction | $133,898 | $76,882 | | Total real estate | $199,977 | $124,926 | | Accumulated depreciation and amortization | $(1,719) | $(629) | | Real estate, net | $198,258 | $124,297 | | Cash and cash equivalents | $143,467 | $192,131 | | Loans receivable from third parties | — | $3,462 | | Subscriptions receivable | — | $20,295 | | Other assets | $12,270 | $1,241 | | Total assets | $353,995 | $341,426 | | Debt, net | — | $10,790 | | Due to affiliates | $5,803 | $1,544 | | Lease liabilities | $7,126 | $2,000 | | Accounts payable | $1,686 | $1,352 | | Accrued expenses and other liabilities | $6,728 | $1,865 | | Total liabilities | $21,343 | $17,551 | | Total members' capital | $332,652 | $323,875 | Consolidated Statements of Operations (in thousands) | Metric | Year Ended Dec 31, 2022 | Year Ended Dec 31, 2021 | | :------------------------------------- | :---------------------- | :---------------------- | | Rental revenue | $1,391 | $997 | | Total revenue | $1,391 | $997 | | Total expenses | $10,898 | $4,652 | | Total other income (loss) | $1,381 | $613 | | Loss before income taxes | $(8,126) | $(3,042) | | Provision for income taxes | $(112) | — | | Net loss | $(8,238) | $(3,042) | | Net loss attributable to noncontrolling interests | $555 | $(93) | | Net loss attributable to Belpointe PREP, LLC | $(7,683) | $(3,135) | | Loss per Class A unit (basic and diluted) | $(2.25) | $(7.64) | Consolidated Statements of Cash Flows (in thousands) | Category | For the Year Ended 2022 | For the Year Ended 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 | | Cash and cash equivalents and restricted cash, beginning of year | $192,346 | $6,578 | | Cash and cash equivalents and restricted cash, end of year | $144,967 | $192,346 | [Report of Independent Registered Public Accounting Firm](index=60&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Citrin Cooperman & Company, LLP provided an unqualified opinion on the consolidated financial statements for the years ended December 31, 2022 and 2021 - Citrin Cooperman & Company, LLP provided an unqualified opinion on the consolidated financial statements for the years ended December 31, 2022 and 2021[302](index=302&type=chunk) - The audit was conducted in accordance with PCAOB standards, but an audit of internal control over financial reporting was not performed[304](index=304&type=chunk) [Consolidated Balance Sheets](index=61&type=section&id=Consolidated%20Balance%20Sheets) The consolidated balance sheets show total assets of **$354.0 million** and total members' capital of **$332.7 million** as of December 31, 2022 Consolidated Balance Sheets (in thousands) | Asset/Liability | Dec 31, 2022 | Dec 31, 2021 | | :-------------------------------- | :----------- | :----------- | | Land | $38,741 | $22,116 | | Building and improvements | $17,843 | $16,256 | | Intangible assets | $9,495 | $9,672 | | Real estate under construction | $133,898 | $76,882 | | Total real estate | $199,977 | $124,926 | | Accumulated depreciation and amortization | $(1,719) | $(629) | | Real estate, net | $198,258 | $124,297 | | Cash and cash equivalents | $143,467 | $192,131 | | Loans receivable from third parties | — | $3,462 | | Subscriptions receivable | — | $20,295 | | Other assets | $12,270 | $1,241 | | Total assets | $353,995 | $341,426 | | Debt, net | — | $10,790 | | Due to affiliates | $5,803 | $1,544 | | Lease liabilities | $7,126 | $2,000 | | Accounts payable | $1,686 | $1,352 | | Accrued expenses and other liabilities | $6,728 | $1,865 | | Total liabilities | $21,343 | $17,551 | | Total members' capital | $332,652 | $323,875 | [Consolidated Statements of Operations](index=62&type=section&id=Consolidated%20Statements%20of%20Operations) The consolidated statements of operations show a net loss of **$8.2 million** in 2022, a **171%** increase from the prior year Consolidated Statements of Operations (in thousands) | Metric | Year Ended Dec 31, 2022 | Year Ended Dec 31, 2021 | | :------------------------------------- | :---------------------- | :---------------------- | | Rental revenue | $1,391 | $997 | | Total revenue | $1,391 | $997 | | Total expenses | $10,898 | $4,652 | | Total other income (loss) | $1,381 | $613 | | Loss before income taxes | $(8,126) | $(3,042) | | Provision for income taxes | $(112) | — | | Net loss | $(8,238) | $(3,042) | | Net loss attributable to noncontrolling interests | $555 | $(93) | | Net loss attributable to Belpointe PREP, LLC | $(7,683) | $(3,135) | | Loss per Class A unit (basic and diluted) | $(2.25) | $(7.64) | [Consolidated Statements of Changes in Members' Capital (Deficit)](index=63&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Members%27%20Capital%20%28Deficit%29) Total members' capital increased to **$332.7 million** in 2022, reflecting unit issuances and noncontrolling interest contributions, offset by net loss Consolidated Statements of Changes in Members' Capital (Deficit) (in thousands) | Category | Dec 31, 2022 | Dec 31, 2021 | | :------------------------------------- | :----------- | :----------- | | Balance at beginning of year | $323,875 | $(102) | | Issuance of units | $14,130 | $213,204 | | Exchange of Belpointe REIT, Inc. shares | — | $114,361 | | Offering costs | $(648) | $(645) | | Net loss | $(8,238) | $(3,042) | | Noncontrolling interest contributions | $433 | $200 | | Noncontrolling interest acquisition | $3,100 | — | | Net loss (income) attributable to noncontrolling interests | $(555) | $93 | | Balance at end of year | $332,652 | $323,875 | [Consolidated Statements of Cash Flows](index=64&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Cash flows show a net decrease of **$47.4 million** in 2022, primarily due to investing activities, partially offset by financing proceeds Consolidated Statements of Cash Flows (in thousands) | Category | For the Year Ended 2022 | For the Year Ended 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 | | Cash and cash equivalents and restricted cash, beginning of year | $192,346 | $6,578 | | Cash and cash equivalents and restricted cash, end of year | $144,967 | $192,346 | [Notes to Consolidated Financial Statements](index=65&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) These notes provide detailed information on the company's organization, accounting policies, related party transactions, real estate acquisitions, and financial instruments [Note 1 – Organization, Business Purpose and Capitalization](index=65&type=section&id=Note%201%20%E2%80%93%20Organization%2C%20Business%20Purpose%20and%20Capitalization) Belpointe PREP, LLC was formed in 2020 as a Delaware LLC, intending to qualify as a partnership for U.S. federal income tax purposes and as a qualified opportunity fund - Belpointe PREP, LLC was formed on January 24, 2020, as a Delaware LLC, intending to qualify as a partnership for U.S. federal income tax purposes and as a qualified opportunity fund[320](index=320&type=chunk) - The company commenced principal operations on October 28, 2020, and is externally managed by Belpointe PREP Manager, LLC[321](index=321&type=chunk) - The Primary Offering price for Class A units is **$100.00**, adjusted quarterly based on the calculated net asset value (NAV)[323](index=323&type=chunk) [Note 2 – Exchange Offer, Conversion and Merger](index=65&type=section&id=Note%202%20%E2%80%93%20Exchange%20Offer%2C%20Conversion%20and%20Merger) In 2021, Belpointe PREP completed an exchange offer for Belpointe REIT common stock, followed by a merger and cancellation of **$74.0 million** in secured promissory notes - In 2021, Belpointe PREP conducted an offer to exchange Belpointe REIT common stock for **1.05 Class A units**, completing on September 14, 2021[324](index=324&type=chunk) - Belpointe REIT converted to BREIT, LLC, and then merged into BREIT Merger, LLC, a wholly-owned subsidiary of Belpointe PREP, by October 12, 2021[325](index=325&type=chunk)[326](index=326&type=chunk) - Prior to the merger, Belpointe REIT advanced **$74.0 million** to Belpointe PREP via secured promissory notes, which were cancelled upon the merger's consummation[328](index=328&type=chunk) Belpointe REIT Net Assets on Exchange Date (in thousands) | Category | Amount | | :-------------------------------- | :----- | | Total assets | $42,242 | | Total liabilities | $278 | | Total net assets | $41,964 | Class A Units Issued in Transaction (as of Dec 31, 2021) | Metric | Value | | :------------------------------------------------- | :---------- | | Belpointe REIT Common Stock exchanged | 1,190.123 | | Exchange ratio | 1.05 | | Belpointe PREP Class A units issued | 1,249,629 | | Additional Class A units for fractional rounding | 381 | | Total Belpointe PREP Class A units exchanged | 1,250,010 | | Belpointe PREP Class A unit price | $100.00 | | Total Class A units issued in connection with the Transaction | $125,001,000 | [Note 3 – Summary of Significant Accounting Policies](index=68&type=section&id=Note%203%20%E2%80%93%20Summary%20of%20Significant%20Accounting%20Policies) Financial statements are prepared in accordance with U.S. GAAP, consolidating controlled subsidiaries, and accounting for real estate acquisitions as asset acquisitions - Financial statements are prepared on an accrual basis in conformity with U.S. GAAP and SEC regulations[336](index=336&type=chunk) - The company consolidates all controlled subsidiaries, with noncontrolling interests reported separately[338](index=338&type=chunk) - As an 'emerging growth company,' the company elected an extended transition period for complying with new or revised accounting standards[343](index=343&type=chunk) - Real estate acquisitions are accounted for as asset acquisitions, with purchase price allocated to tangible and intangible assets based on fair values[346](index=346&type=chunk)[347](index=347&type=chunk) - Real estate is carried at cost less accumulated depreciation; project costs directly related to construction are capitalized[353](index=353&type=chunk)[354](index=354&type=chunk) - The company adopted ASC 842 (Leases) on January 1, 2022, recognizing a **$1.8 million** ROU operating asset and a **$1.2 million** corresponding lease liability for a ground lease[378](index=378&type=chunk)[381](index=381&type=chunk) - The company does not expect the adoption of ASU 2016-13 (Credit Losses) to have a material impact on its consolidated financial statements[385](index=385&type=chunk) [Note 4 – Leases](index=76&type=section&id=Note%204%20%E2%80%93%20Leases) As a lessor, the company leases rental properties under operating leases, and as a lessee, it reclassified a Sarasota ground lease to a finance lease - As a lessor, the company leases rental properties under operating leases, with revenues reported as Rental revenue, combining lease and non-lease components[386](index=386&type=chunk) - As a lessee, the company has a ground lease in Sarasota, Florida, reclassified from an operating lease to a finance lease as of December 29, 2022, with a finance lease liability of **$5.0 million**[396](index=396&type=chunk) Components of Lease Revenues (in thousands) | Category | Dec 31, 2022 | Dec 31, 2021 | | :------------------- | :----------- | :----------- | | Fixed lease revenues | $878 | $718 | | Variable lease revenues | $282 | $171 | | Total Lease revenues | $1,160 | $889 | Minimum Future Lease Payments (in thousands) | Year Ending Dec 31, | Amount | | :-------------------- | :----- | | 2023 | $958 | | 2024 | $758 | | 2025 | $1,246 | | 2026 | $1,153 | | 2027 | $1,139 | | Thereafter | $11,824 | | Total | $17,078 | Minimum Future Lease Payments (Lessee) (in thousands) | Year Ending Dec 31, | Amount | | :-------------------- | :----- | | 2023 | $5,158 | | 2024 | — | | 2025 | — | | 2026 | — | | 2027 | — | | Thereafter | — | | Total undiscounted cash flows | $5,158 | | Present value discount | $(137) | | Lease liability | $5,021 | [Note 5 – Related Party Arrangements](index=78&type=section&id=Note%205%20%E2%80%93%20Related%20Party%20Arrangements) The company engages in various related party transactions, including loans to affiliates, management fees, and development fees, with significant amounts due to affiliates - Prior to the merger, Belpointe REIT advanced **$74.0 million** to the company via secured promissory notes, which were cancelled upon the merger's consummation in October 2021[398](index=398&type=chunk) - The company acquired the 1991 Main Interest from BI Holding (an affiliate of the CEO) in November 2021, in satisfaction of BI Holding's obligations under a **$24.8 million** secured promissory note[399](index=399&type=chunk) - In January 2022, the company provided a **$30.0 million** commercial mortgage loan (Norpointe Loan) to Norpointe, LLC (an affiliate of the CEO), which was restructured and repaid in full by December 2022[400](index=400&type=chunk)[401](index=401&type=chunk) - The company incurred **$4.3 million** in development fees in 2022 and **$1.5 million** in 2021, with **$4.3 million** remaining due to affiliates as of December 31, 2022[416](index=416&type=chunk) - Belpointe Specialty Insurance, with indirect minority ownership by CEO's family members, earned **$0.5 million** in brokerage commissions and less than **$0.1 million** in administration fees in 2022 for insurance services[419](index=419&type=chunk)[420](index=420&type=chunk) Fees and Reimbursable Expenses to Manager and Affiliates (in thousands) | Category | Year Ended Dec 31, 2022 | Year Ended Dec 31, 2021 | | :------------------------------------- | :---------------------- | :---------------------- | | Management fees | $2,583 | $674 | | Costs incurred by Manager and affiliates | $2,349 | $1,618 | | Insurance | $419 | — | | Director compensation | $80 | $20 | | Total Operating Fees/Reimbursements | $5,431 | $2,312 | | Development fee and reimbursements | $5,649 | $1,994 | | Insurance (capitalized) | $1,631 | — | | Offering costs | — | $513 | | Acquisition fee | — | $38 | | Total Capitalized Costs | $7,280 | $2,545 | Amounts Due to Affiliates (in thousands) | Category | Dec 31, 2022 | Dec 31, 2021 | | :------------------------------------- | :----------- | :----------- | | Development fees | $4,256 | — | | Management fees | $661 | $634 | | Employee cost sharing and reimbursements | $866 | $852 | | Director compensation | $20 | $20 | | Acquisition fee | — | $38 | | Total Amounts Due | $5,803 | $1,544 | [Note 6 – Real Estate, Net](index=82&type=section&id=Note%206%20%E2%80%93%20Real%20Estate%2C%20Net) The company made several real estate acquisitions in 2022 and 2021, including sites in Connecticut, Florida, and Tennessee, increasing real estate under construction - In 2022, the company acquired a **1.1-acre** site in Mansfield, CT for **$0.3 million**, a **0.265-acre** site in Sarasota, FL for **$1.5 million**, and a **19-acre** site in Mansfield, CT for **$5.5 million**[422](index=422&type=chunk)[423](index=423&type=chunk)[426](index=426&type=chunk) - In June 2022, the company acquired a **70.2%** controlling interest in CMC Storrs SPV, LLC for an initial capital contribution of **$3.8 million**, consolidating the development project[424](index=424&type=chunk) - In December 2022, a **99%** controlling interest in a **5.9-acre** site in Nashville, TN (Nashville No. 4) was acquired for **$16.4 million**[427](index=427&type=chunk) - In 2021, key acquisitions included a **3.17-acre** site in Nashville, TN (900 8th Avenue South) for **$19.7 million**, a retail building in St. Petersburg, FL for **$2.5 million**, and an **8-acre** industrial site in Nashville, TN for **$21.0 million**[428](index=428&type=chunk)[430](index=430&type=chunk)[433](index=433&type=chunk) - The 1991 Main Interest was acquired in November 2021 for a gross purchase price of **$33.9 million**, with an assumed **$10.8 million** Acquisition Loan repaid in April 2022[436](index=436&type=chunk) Real Estate Under Construction Activity (in thousands) | Category | Dec 31, 2022 | Dec 31, 2021 | | :------------------------------------- | :----------- | :----------- | | Beginning balance | $76,882 | $15,101 | | Capitalized costs | $45,907 | $8,991 | | Land held for development | $10,958 | $48,085 | | Capitalized interest | $151 | $43 | | Acquisition of construction in progress | — | $4,662 | | Ending balance | $133,898 | $76,882 | [Note 7 – Intangible Assets and Liabilities](index=87&type=section&id=Note%207%20%E2%80%93%20Intangible%20Assets%20and%20Liabilities) The company holds finite-lived intangible assets like in-place leases and indefinite-lived development rights, alongside finite-lived below-market lease liabilities - Amortization of in-place lease intangible assets was **$0.6 million** in 2022 and **$0.4 million** in 2021[444](index=444&type=chunk) - Development rights of **$5.7 million** are indefinite-lived intangible assets[445](index=445&type=chunk) - Amortization of below-market lease liability was **$0.3 million** in 2022 and **$0.1 million** in 2021[448](index=448&type=chunk) Intangible Assets and Liabilities (in thousands) | Category | Gross Carrying Amount (2022) | Accumulated Amortization (2022) | Net Carrying Amount (2022) | Gross Carrying Amount (2021) | Accumulated Amortization (2021) | Net Carrying Amount (2021) | | :------------------------------------- | :--------------------------- | :------------------------------ | :------------------------- | :--------------------------- | :------------------------------ | :------------------------- | | **Finite-Lived Intangible Assets** | | | | | | | | In-place leases | $3,836 | $(791) | $3,045 | $2,941 | $(383) | $2,558 | | **Indefinite-Lived Intangible Assets** | | | | | | | | Development rights | $5,659 | — | $5,659 | $5,659 | — | $5,659 | | Ground lease purchase option | — | — | — | $1,072 | — | $1,072 | | Total intangible assets | $9,495 | $(791) | $8,704 | $9,672 | $(383) | $9,289 | | **Finite-Lived Intangible Liabilities** | | | | | | | | Below-market leases | $(2,517) | $411 | $(2,106) | $(2,159) | $159 | $(2,000) | | Total intangible liabilities | $(2,517) | $411 | $(2,