PART I – FINANCIAL INFORMATION Financial Statements (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 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 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 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 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 standards40 - 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 value76 - 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, Florida85 - As of September 30, 2023, the company has two development projects with an aggregate unfunded commitment of $116.0 million113 Management's Discussion and Analysis of Financial Condition and Results of Operations 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 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 2024130132 - 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 space135 - In April 2023, the company entered into a construction management agreement for the Viv project with a guaranteed maximum price (GMP) of $62.7 million136 - The portfolio includes multiple properties in Nashville, TN and Storrs, CT, which are slated for future multifamily development144147153 Results of Operations 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 tenants161 - 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 value165 Liquidity and Capital Resources 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 project174176 - 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, 2023175 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 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 report186 - 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 controls187 PART II – OTHER INFORMATION Legal Proceedings 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 threatened189 Risk Factors 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, 2022190 Unregistered Sales of Equity Securities and Use of Proceeds 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, 2023191 - As of September 30, 2023, the company has raised aggregate gross offering cash proceeds of $351.3 million from its public offerings197 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 |
BELPOINTE PREP(OZ) - 2023 Q3 - Quarterly Report