Financial Performance and Capital Raising - As of December 31, 2025, the company has raised aggregate gross offering cash proceeds of $368.6 million through its public offerings[24]. - The company issued 172,523 Class A units in connection with its Follow-on Offering for the year ended December 31, 2025[24]. - The current net asset value (NAV) of the company's Class A units as of December 31, 2025, is $116.17 per unit[25]. - The NAV per Class A unit is calculated quarterly and may fluctuate, with adjustments taking effect the first business day following public announcement[117]. - The determination of NAV may not comply with fair value standards under U.S. GAAP, potentially affecting the perceived value of Class A units[219]. - The ability to achieve investment objectives is reliant on proceeds from public offerings and financing from the Sponsor or its affiliates[110]. - The company may face challenges in raising sufficient proceeds from ongoing offerings, impacting the ability to fund existing projects and find new investments[115]. Investment Strategy and Focus - The company is focused on acquiring and managing commercial and mixed-use real estate within qualified opportunity zones, with at least 90% of its assets consisting of qualified opportunity zone property[26]. - The company's investment strategy includes the development and management of various property types, including multifamily, healthcare, and industrial projects[31]. - The company anticipates investing in a range of properties including multifamily, student housing, senior living, healthcare, and industrial projects located in qualified opportunity zones[115]. - The company intends to maintain its status as a Qualified Opportunity Fund to provide favorable tax treatment for its investors[39]. - The opportunity zone program provides tax incentives for investors to reinvest unrealized capital gains into qualified opportunity funds[34]. Management and Operational Structure - The company is externally managed by Belpointe PREP Manager, LLC, which oversees day-to-day operations and investment strategies[28]. - The company relies on its Manager for day-to-day operations and investment strategy implementation, with no employees of its own[105]. - The company has a management agreement that allows its Manager to execute acquisitions and dispositions consistent with its investment objectives[32]. - The Management Agreement with the Manager was not negotiated on an arm's length basis, potentially resulting in less favorable terms for the company[130]. - The company does not have an exclusive management arrangement with its Manager, allowing the Manager to engage in other activities that may conflict with the company's interests[131]. - Termination of the Management Agreement for unsatisfactory performance is difficult and costly, with the initial term lasting until December 31, 2025, and automatic renewals for three-year terms thereafter[132]. - The Manager is entitled to a termination fee equal to six times the annual management fee earned during the 12-month period prior to termination, which could impose a financial burden on the company[133]. Property Acquisitions and Developments - Aster & Links, a mixed-use luxury development in Sarasota, Florida, was acquired for a total of $25.6 million, including transaction costs[47]. - As of March 8, 2026, Aster & Links was over 67% leased, featuring 424 luxury residential units and approximately 51,000 square feet of retail space[50]. - The refinancing of Aster & Links was completed in September 2025 for approximately $204.1 million, expected to generate annual interest savings of several million dollars[49]. - VIV, located in St. Petersburg, Florida, was acquired for $12.1 million and was approximately 99.2% complete as of December 31, 2025, with over 37% leased by March 8, 2026[58]. - The 1000 First Construction Loan for VIV was established for up to $104.0 million, with $81.3 million drawn down as of December 31, 2025[65]. - The anticipated development at 497-501 Middle Turnpike in Connecticut includes approximately 261 apartment homes and an adjacent single-family home[72]. - The company acquired a 70.2% controlling interest in CMC Storrs SPV, LLC for an initial capital contribution of $3.8 million, later increasing to 100% ownership due to a forfeiture by a joint venture partner[70]. - 900 8th Avenue South was acquired for an aggregate purchase price of $19.7 million, inclusive of transaction costs[75]. - A fixed-rate loan of $10.0 million was secured for 900 8th Avenue South at an interest rate of 9.50% per annum, with maturity extended to July 2026[76]. - 1700 Main Street was acquired for $6.9 million and is anticipated to be redeveloped into approximately 187 apartment units with 6,000 square feet of retail space[81]. - 690/1106 Davidson Street was acquired for $21.0 million and is planned for redevelopment into a mixed-use residential community[84]. - 1400 Davidson Street was acquired for $16.4 million and is also planned for redevelopment into a mixed-use residential community[86]. Risks and Challenges - The company faces competition from various entities, including QOFs, REITs, and private equity funds, which may impact acquisition costs[102]. - The competitive market landscape includes various entities such as REITs and private equity funds, which may have more resources and lower costs of capital[177]. - Increased competition for investment opportunities could lead to higher acquisition prices, potentially resulting in lower returns on investments[178]. - The company may experience delays in deploying capital raised from public offerings due to market constraints and competition[116]. - Investors may not receive distributions comparable to other real estate investment alternatives, increasing investment risk[111]. - The company has limited experience managing a portfolio of assets necessary to maintain its qualification as a publicly traded partnership and qualified opportunity fund, which may hinder its operational capabilities[125]. - Joint ventures may introduce risks such as partner insolvency or conflicting business interests, potentially reducing investment returns[200]. - The company may face significant risks related to joint venture partners, including the possibility of bankruptcy or failure to fund capital contributions, which could impact profitability[166]. - The company is subject to fraud risk, which could lead to increased costs and operational disruptions[179]. - Operational risks may disrupt business and limit growth, particularly due to reliance on the Sponsor's financial and data processing systems[169]. - Uncertainty surrounding U.S. federal legislation and regulation could negatively impact the company's business and financial condition[175]. - The real estate industry is cyclical, and adverse economic conditions, such as interest rate fluctuations and persistent inflation, could negatively impact CMC's financial performance[182]. - Development and redevelopment activities may face risks such as construction cost overruns and permitting delays, potentially affecting financial outcomes[186]. - CMC's revenue depends on tenant stability; lease defaults could significantly reduce net income and distributions[195]. - The company expects to focus on acquiring qualified opportunity zone investments, which may carry risks associated with adverse economic conditions in those areas[199]. - The company is subject to various federal, state, and local environmental laws that may impose significant costs, potentially reducing net income and cash available for distributions[203]. - Environmental liabilities could result in substantial expenditures, fines, or penalties, which may further decrease cash available for distributions[206]. - Compliance with the Americans with Disabilities Act (ADA) may require significant expenditures, impacting net income and cash available for distributions[208]. - Uninsured losses or high insurance premiums could adversely affect cash flows and distributions[209]. - Many investments are illiquid, limiting the company's ability to respond to economic changes, which could negatively impact financial performance[210]. - Declines in market values of investments may adversely affect operations and credit availability, reducing earnings and cash available for distributions[211]. - Credit facility providers may require cash reserves, limiting the company's ability to leverage assets and potentially reducing return on equity[212]. Joint Ventures and Partnerships - The company plans to expand its investment portfolio through joint ventures and partnerships with affiliates, including Belpointe SP, LLC[162]. - The Belpointe SP Group will continue to acquire interests in properties, acting as general partner or co-general partner in joint ventures to acquire stabilized cash flow generating real estate-related assets[163]. - The company plans to establish exclusive programmatic joint ventures with experienced regional developers to co-invest and co-develop projects in specific regions of the United States[163]. - Joint venture investments may be adversely affected by reliance on the financial condition of joint venture partners and potential disputes, which could increase operational risks[166]. Management Fees and Costs - The management fee is set at an annualized rate of 0.75% based on the company's NAV, which is calculated by the Manager[219]. - The company will incur additional costs associated with maintaining its status as a publicly traded partnership, which may exceed current estimates and adversely affect its financial condition[151]. - The company is externally managed and may incur significant costs if it decides to internalize management functions, including potential termination fees equal to six times the annual management fee[150].
BELPOINTE PREP(OZ) - 2025 Q4 - Annual Report