Part I Financial Statements (Unaudited) 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 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 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 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 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, LLC2425 - 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 insurance50 - 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 million717273 - 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, 2024100101 Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) 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 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 loan115118119 - 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 million126129 - 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 development137138142 - 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 Turnpike133134145 Results of Operations 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 2023149 - 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 asset152154 Liquidity and Capital Resources 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 service156 - 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) project159162 - 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 loans162 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 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 effective172 - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls173 Part II – Other Information Legal Proceedings 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, 2024174 Risk Factors 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 reported175 Unregistered Sales of Equity Securities and Use of Proceeds 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 units177178 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 reimbursements185187
BELPOINTE PREP(OZ) - 2024 Q1 - Quarterly Report