10-K: Belpointe PREP, LLC Reports Annual Results: Focus on Qualified Opportunity Zone Investments

Belpointe PREP, LLC files its annual report, highlighting its focus on commercial and mixed-use real estate within qualified opportunity zones and detailing its financial performance and investment activities for the year ended December 31, 2024.

Summary

• Belpointe PREP, LLC, a publicly traded qualified opportunity fund, released its annual report on Form 10-K for the fiscal year ended December 31, 2024.
• The company focuses on identifying, acquiring, developing, and managing commercial and mixed-use real estate within qualified opportunity zones.
• At least 90% of Belpointe PREP's assets consist of qualified opportunity zone property, allowing certain investors to benefit from favorable capital gains tax treatment.
• The company operates through two segments: Commercial and Mixed-use.
• As of December 31, 2024, the company had 3,664,173 Class A units outstanding.
• The NAV per Class A unit as of December 31, 2024, was $119.94.
• The company incurred a net loss of $23.9 million for the year ended December 31, 2024.
• The company has significant investments in properties located in Sarasota and St. Petersburg, Florida, and Nashville, Tennessee.
• The company has entered into construction loan agreements to fund the development of Aster & Links and Viv.
• The company is externally managed by Belpointe PREP Manager, LLC, an affiliate of Belpointe, LLC.

Sentiment

Score: 5

Explanation: The document presents a mixed sentiment. While the company highlights its unique position as a publicly traded qualified opportunity fund and its investments in various projects, it also reports a net loss and acknowledges various risks and uncertainties. The sentiment is neutral overall.

Positives

• The company is the only publicly traded qualified opportunity fund listed on a national securities exchange.
• The company has completed construction and began lease up at Aster & Links, a mixed-use luxury development in downtown Sarasota, Florida.
• The company has secured construction loans for the development of Aster & Links and Viv.
• The company has entered into an agreement with Sprouts Farmers Market to lease 23,000 square feet of retail space at Aster & Links.

Negatives

• The company incurred a net loss of $23.9 million for the year ended December 31, 2024.
• The company's Segment NOI decreased by $1.1 million in the Commercial segment and $1.1 million in the Mixed-use segment for the year ended December 31, 2024.
• The company recorded impairment charges of $0.8 million in relation to one of its real estate assets located in Nashville, Tennessee.
• The company is involved in a legal proceeding regarding a mortgage note on its property located at 497-501 Middle Turnpike, Storrs, Connecticut.

Risks

• The company's success is dependent on general market and economic conditions, as well as numerous other factors outside of its control.
• The company faces competition from various entities for investment opportunities.
• The company is subject to fraud risk, which could adversely affect its business, financial condition, and results of operations.
• The company's performance is subject to risks associated with the real estate industry.
• The company may incur significant debt, which may subject it to increased risk of loss and may reduce cash available for distributions.
• The company's access to sources of financing may be limited and thus its ability to grow its business and to maximize its returns may be adversely affected.
• There is no assurance that the company will continue to meet the requirements for treatment as a partnership or qualified opportunity fund.
• The tax treatment of an investment in the company's Class A units could be subject to potential legislative, judicial, or administrative changes or differing interpretations, possibly applied on a retroactive basis.

Future Outlook

The company expects market conditions for multifamily and mixed-use rental properties in its geographic regions to remain strong, but acknowledges uncertainty due to various economic factors.

Management Comments

• The document does not contain any direct quotes from management.

Industry Context

This announcement reflects the ongoing interest in qualified opportunity zones as a vehicle for real estate investment, particularly in commercial and mixed-use properties. The company's performance is subject to broader industry trends and economic conditions.

Comparison to Industry Standards

• The document does not contain any specific comparisons to industry standards.
• The document does not contain any specific comparisons to comparible companies.
• The document does not contain any specific comparisons to global benchmarks.

Corporate Governance

Legal Proceedings

• The Galinn Fund LLC filed a complaint in Connecticut State Superior Court naming CMC Storrs SPV, LLC as a defendant, alleging default under a mortgage note and seeking foreclosure and damages. The company disputes any liability in this litigation and is vigorously defending the matter.

Related Party Transactions

• The company entered into an agreement to borrow up to $3.0 million from Belpointe Development Holding, LLC, an affiliate of the Chief Executive Officer.
• The company incurred management fees to Belpointe PREP Manager, LLC, an affiliate of the Sponsor.
• The company incurred development fees to affiliates of the Sponsor.
• The company obtained insurance coverage through Belpointe Specialty Insurance, LLC, an entity in which certain immediate family members of the Chief Executive Officer have a passive indirect minority beneficial ownership interest.

Stakeholder Impact

• The company's financial performance and investment activities directly impact its shareholders, particularly those who invested to take advantage of the qualified opportunity zone tax benefits.
• The company's development projects impact the communities in which they are located, potentially creating jobs and improving local economies.
• The company's financial stability and ability to meet its obligations impact its creditors and lenders.

Next Steps

• The company will continue to manage its affairs to meet the requirements for classification as a partnership and qualified opportunity fund.
• The company will continue to monitor the potential impact of economic factors on its investments and operations.
• The company will continue to defend itself in the legal proceeding regarding the mortgage note on its property in Storrs, Connecticut.

Key Dates

Keywords

qualified opportunity fund, real estate, opportunity zone, Belpointe PREP, commercial real estate, mixed-use, investments, development, construction, financing