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,