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As filed with the U.S. Securities and Exchange Commission on April 13, 2023.

 

Registration No. 333-[●]

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

FORM S-11

 

FOR REGISTRATION STATEMENT Under The Securities Act of 1933
of securities of certain real estate companies

 

 

 

Belpointe PREP, LLC

(Exact name of registrant as specified in governing instruments)

 

 

 

255 Glenville Road

Greenwich, Connecticut 06831

(203) 883-1944

(Address, including zip code, and telephone number,

including area code, of registrant’s principal executive offices)

 

 

 

Brandon E. Lacoff

Chief Executive Officer

Belpointe PREP, LLC

255 Glenville Road

Greenwich, Connecticut 06831

(203) 883-1944

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

 

with a copy to:

Vanessa J. Schoenthaler

Saul Ewing LLP

1270 Avenue of the Americas, Suite 2005

New York, New York 10020

(212) 980-7208

 

 

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective.

 

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box: ☒

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box. ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

  Large accelerated filer   Accelerated filer  
  Non-accelerated filer   Smaller reporting company  
        Emerging growth company  

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.

 

Pursuant to Rule 429 under the Securities Act, the prospectus included in this registration statement is a combined prospectus which relates to this registration statement and the registration statement on Form S-11 (File No. 333-255424), declared effective on September 30, 2021, related to the offering of up to $750,000,000 of the registrant’s Class A units, of which $403,643,800 remains unsold. This registration statement shall also constitute a post-effective amendment to the earlier registration statement. Such post-effective amendment shall hereafter become effective concurrently with the effectiveness of this registration statement in accordance with Section 8(c) of the Securities Act.

 

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 

 

 

 
 

 

The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

Subject to completion

Preliminary Prospectus Dated April 13, 2023

 

 

Belpointe PREP, LLC
Up to $750,000,000 of Class A units

 

Belpointe PREP, LLC is a Delaware limited liability company and the only qualified opportunity fund listed on a national securities exchange. We are focused on identifying, acquiring, developing or redeveloping and managing commercial real estate located within “qualified opportunity zones.” At least 90% of our assets consist of qualified opportunity zone property. We qualified as a “qualified opportunity fund” beginning with our taxable year ended December 31, 2020. Because we are a qualified opportunity fund certain of our investors are eligible for favorable capital gains tax treatment on their investments. Our initial investments consist of and are expected to continue to consist of properties located in qualified opportunity zones for the development or redevelopment of multifamily, student housing, senior living, healthcare, industrial, self-storage, hospitality, office, mixed-use, data centers and solar projects (collectively, the “qualified opportunity zone investments”) located throughout the United States and its territories. We also anticipate identifying, acquiring, developing or redeveloping and managing a wide range of commercial real estate assets located throughout the United States and its territories, including, but not limited to, real estate-related assets, such as commercial real estate loans and mortgages, and debt and equity securities issued by other real estate-related companies, as well as making private equity acquisitions and investments, and opportunistic acquisitions of other qualified opportunity funds and qualified opportunity zone businesses, with the goal of increasing distributions and capital appreciation. As of the date of this prospectus, we have made 15 investments. We are not a mutual fund and do not intend to register as an investment company under the Investment Company Act of 1940, as amended.

 

We have entered into a non-exclusive dealer manager agreement (the “Dealer Manager Agreement”) with Emerson Equity LLC (“Emerson”), a registered broker-dealer and member of the Financial Industry Regulatory Authority (“FINRA”), pursuant to which we may offer and sell up to $750,000,000 of our Class A units on a continuous “best efforts” basis through Emerson, or one or more additional dealer managers that we may engage from time to time (together with Emerson, each a “Dealer Manager” and, collectively, the “Dealer Managers”). Our Dealer Managers will enter into participating dealer agreements and wholesale agreements with other broker-dealers that are members of FINRA, referred to as “selling group members,” to authorize those broker-dealers to solicit offers to purchase our Class A units. We may offer and sell our Class A units by any method deemed to be an “at the market” offering pursuant to Rule 415(a)(4) under the Securities Act of 1933, as amended (the “Securities Act”), including by sales made directly to investors or through other agents. We may also enter into select non-exclusive wholesale agreements directly with wholesale broker-dealers that are members of FINRA to assist us with the offer and sale of Class A units through certain registered investment advisors (“RIAs”) and RIA platforms. In addition, we may enter into client introduction agreements directly with RIAs and financial planners to assist us with introductions to certain of their clients and customers. We will not pay RIAs, RIA platforms or financial planners any commissions, we may, however, pay due diligence fees for bona fide due diligence expenses incurred in conjunction with reviewing our offering materials. We will file a separate prospectus amendment or supplement, to the extent required by applicable law, naming any additional Dealer Managers, wholesale broker-dealers or other agents designated by us in this offering and setting forth the terms of any agreements with, and discounts, commissions or concessions allowed or reallowed or payable by us to, such additional Dealer Managers, wholesale broker-dealers or agents.

 

There is no minimum offering amount of Class A units that we or our Dealer Managers must sell in this offering prior to conducting an initial closing and we plan to undertake closings on a rolling basis. Upon closings we will immediately use the net offering proceeds for the purposes described in this prospectus. See “Plan of Distribution” and “Estimated Use of Proceeds.”

 

Our Class A units are listed on the NYSE American under the symbol “OZ.” On April 12, 2023, the last reported sale price of our Class A units on the NYSE American was $93.70 per Class A unit.

 

ii
 

 

We are an “emerging growth company” under the federal securities laws and will be subject to reduced reporting requirements. Investing in our Class A units involves a high degree of risk. You should purchase our Class A units only if you can afford a complete loss of your investment. See “Risk Factors” beginning on page 24. These risks include, among others:

 

  We have a limited operating history, and the prior performance of our Sponsor or other real estate investment opportunities sponsored by our Sponsor may not predict our future results.
     
  This is a “best efforts” offering. If we are unable to raise substantial funds in this offering, we may not be able to invest in a diverse portfolio of commercial real estate, real estate related and private equity assets and investments, and the value of your Class A units may fluctuate more widely with the performance of specific assets.
     
  We will be treated as a partnership for U.S. federal income tax purposes, so you will receive a Schedule K-1 to IRS Form 1065, which could increase the complexity of your tax circumstances.
     
  If we fail to qualify as a partnership for U.S. federal income tax purposes and no relief provisions apply, we would be subject to entity level U.S. federal income tax and, as a result, our cash available for distributions and the value of our Class A units could materially decrease.
     
  If the IRS contests the U.S. federal income tax positions we take, the value of our Class A units may be adversely impacted, and the cost of any IRS contest will reduce cash available for distribution to holders of our Class A units.
     
  The “qualified opportunity zone” provisions of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), providing the favorable capital gains treatment to certain of our investors were enacted as part of the Tax Cuts and Jobs Act at the end of 2017 and are untested.
     
  There can be no assurance that we will continue to meet the requirements for classification as a qualified opportunity fund.
     
  We depend on our Manager to select our investments and conduct our operations. We will pay fees and expenses to our Manager and its affiliates that were not determined on an arm’s length basis, and therefore we do not have the benefit of arm’s length negotiations of the type normally conducted between unrelated parties. These fees increase your risk of loss.
     
  Our Manager’s executive officers and key investment and asset management professionals are also officers, directors, managers and key professionals of our Sponsor and its affiliates. As a result, they will face conflicts of interest, including time constraints, allocation of investment opportunities and significant conflicts created by our Manager’s compensation arrangements with us and other affiliates of our Sponsor.
     
  Our Manager holds our Class M unit, which has greater voting rights than our Class A units and Class B units on certain matters. Accordingly, our Manager will be able to determine the outcome of all matters on which a holder of our Class M unit has a vote.
     
  Our Sponsor currently sponsors and may in the future sponsor other companies that compete with us.
     
  We do not have an exclusive management arrangement with our Manager.
     
  We may change our investment strategy and guidelines without Member consent, which could result in investments that are different from those described in this prospectus.
     
  Our Manager will calculate our NAV within approximately 60 days of the last day of each quarter, using valuation methodologies that involve significant judgments, assumptions and opinions in the application of both observable and unobservable attributes that may or may not prove to be correct. As a result, our NAV may not accurately reflect the actual prices at which our assets and investments, including related liabilities, could be liquidated on any given day.
     
  Real estate investments are subject to general industry downturns as well as downturns in specific geographic regions. We cannot predict occupancy levels for a particular property or whether any tenant or mortgage or other real estate related loan borrower will remain solvent. We also cannot predict the future value of our investments. Accordingly, we cannot guarantee that you will receive cash distributions from or appreciation of your investment in our Class A units.
     
  While our goal is to pay distributions from cash flow from operations, we may use other sources to fund distributions, including, without limitation, the sale of assets, borrowings, offering proceeds, cash advances by our Manager, cash resulting from a waiver of fees or reimbursements due to our Manager or the issuance of additional securities. We will only fund distributions by a return of capital following the sale of assets, unless otherwise determined by our Manager in its discretion. We have not established a limit on the amount of offering proceeds we may use to fund distributions.
     
  If we pay distributions from sources other than cash flow from operations, we may have less funds available for investments and your overall return may be reduced. Likewise, funding distributions from the sale of additional securities will dilute your interest in us on a percentage basis and may impact the value of your investment especially if we sell these securities at prices less than the price you paid for your Class A units.
     
  We may employ leverage in order to provide more funds available for investment, while leverage presents opportunities for increasing our total returns, it may increase losses as well.

 

Neither the Securities and Exchange Commission nor any other state securities regulator has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

 

The date of this prospectus is April 13, 2023

 

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TABLE OF CONTENTS

 

About This Prospectus 1
Questions and Answers About This Offering 2
Prospectus Summary 13
Risk Factors 24
Cautionary Note Regarding Forward-Looking Statements 47
Estimated Use of Proceeds 49
Capitalization 50
Investment Objective and Strategies 51
Market for Our Class A Units and Related Information 64
Management’s Discussion and Analysis of Financial Condition and Results of Operations 65
Management 79
Management Compensation 90
Conflicts of Interest 92
Net Asset Value Calculation and Valuation Policies 94
Prior Performance Summary 96
Security Ownership of Certain Beneficial Owners and Management 98
Certain Relationships and Related Person Transactions 99
Description of Our Units 102
Description of our Operating Agreement 104
Description of the Operating Agreements of our Operating Companies 110
Material U.S. Federal Income Tax Considerations 112
Plan of Distribution 122
Reports to Holders of our Class A Units 124
Legal Matters 125
Experts 125
Where You Can Find More Information 126
Index to Financial Statements F-1
Appendix A: Prior Performance Tables A-1
Appendix B: Form of Subscription Agreement B-1

 

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About This Prospectus

 

Please carefully read the information in this prospectus and any accompanying prospectus supplements, which we refer to collectively as the “prospectus.” You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with different information. This prospectus may only be used where it is legal to sell these securities. You should not assume that the information contained in this prospectus is accurate as of any date later than the date hereof or such other dates as are stated herein or as of the respective dates of any documents or other information incorporated herein by reference.

 

This prospectus is part of a registration statement that we filed with the Securities and Exchange Commission (“SEC”), using a continuous offering process. Periodically, as we make material investments, update our quarterly net asset value (“NAV”) amount, or other material developments occur, we will provide a prospectus supplement that may add, update or change information contained in this prospectus. Any statement that we make in this prospectus will be modified or superseded by any inconsistent statement made by us in a subsequent prospectus supplement. The registration statement we filed with the SEC includes exhibits that provide more detailed descriptions of the matters discussed in this prospectus. You should read this prospectus and the related exhibits filed with the SEC and any prospectus supplement, together with additional information contained in our annual reports, quarterly reports and other reports and information statements that we will file periodically with the SEC. See the section entitled “Where You Can Find More Information” below for further details.

 

The prospectus and all supplements and reports that we have filed or will file in the future can be read at the SEC website, www.sec.gov. Our website at www.belpointeoz.com will contain additional information about our business, but the contents of the website are not incorporated by reference in or otherwise a part of this prospectus. From time to time, we may use our website as a distribution channel for material company information.

 

1

 

 

Questions and Answers About This Offering

 

Q: What is Belpointe PREP, LLC?
   
A: We are a Delaware limited liability company formed on January 24, 2020. We are focused on identifying, acquiring, developing or redeveloping and managing commercial real estate located within qualified opportunity zones. At least 90% of our assets consist of qualified opportunity zone property. We qualified as a qualified opportunity fund beginning with our taxable year ended December 31, 2020. Because we are a qualified opportunity fund certain of our investors are eligible for favorable capital gains tax treatment on their investments. We are externally managed by our manager, Belpointe PREP Manager, LLC, a Delaware limited liability company (our “Manager”). Our Manager is an affiliate of Belpointe, LLC, our sponsor (our “Sponsor”).
   
Q: Who is Belpointe, LLC?
   
A: Belpointe, LLC, is our Sponsor and an affiliate of our Manager. Belpointe, LLC, a leading investment firm based in Greenwich, Connecticut, operates a family office making private investments and oversees its businesses, such as wealth management, legal and real estate services. Belpointe, LLC’s senior executives have substantial experience in the acquisition, development and ownership of real estate and, as of December 31, 2022, its affiliates have facilitated or originated 13 real estate assets with aggregate purchase prices and construction costs of approximately $400 million. Belpointe’s financial management division also currently manages over $3 billion in public securities. For additional details regarding Belpointe, LLC’s acquisition, development and ownership of real estate see “Prior Performance Summary.”
   
Q: What types of assets will you acquire?
   
A: Our initial investments consist of and are expected to continue to consist of properties located in qualified opportunity zones for the development or redevelopment of multifamily, student housing, senior living, healthcare, industrial, self-storage, hospitality, office, mixed-use, data centers and solar projects (collectively, the “qualified opportunity zone investments”) located throughout the United States and its territories. We also anticipate identifying, acquiring, developing or redeveloping and managing a wide range of commercial real estate properties located throughout the United States and its territories, including, but not limited to, real estate-related assets, such as commercial real estate loans and mortgages, and debt and equity securities issued by other real estate-related companies, as well as making private equity acquisitions and investments, and opportunistic acquisitions of other qualified opportunity funds and qualified opportunity zone businesses, with the goal of increasing distributions and capital appreciation. As of the date of this prospectus, we have made 15 investments. All of our assets are and will continue to be held by, and all of our operations are and will continue to be conducted through, one or more operating companies (each an “Operating Company” and together the “Operating Companies”), either directly or indirectly through subsidiaries. As of the date of this prospectus we have two Operating Companies, Belpointe PREP OC, LLC and Belpointe PREP TN OC, LLC.
   
Q: Why should I invest in Belpointe PREP, LLC?
   
A: We believe that our innovative investment platform has the ability to disrupt the real estate investment industry through the unique combination of potential economic benefits that it offers holders of our Class A units, including: (i) multiple potential capital gains tax benefits; (ii) potential qualified business income tax benefits; (iii) significantly reduced fees payable to our Manager; (iv) no capital calls; (v) no investor servicing fees; (vi) significantly lower carried interest payable to our Manager; (vii) potential for liquidity events; and (viii) low minimum investment requirements, all of which should result in greater investment returns to holders of our Class A units than those generated by private real estate funds, real estate investment trusts (“REITs”), Delaware statutory trusts (“DSTs”) and other traditional real estate investment platforms.
   
  We use multiple investment platform structures to deploy capital, which we anticipate will give us access to higher quality investment opportunities and better execution of our investment strategies than less diverse investment models. See “Investment Objectives and Strategy—Joint Venture and Other Co-Ownership Arrangements.” We also greatly benefit from the resources provided by our Sponsor, its vertically integrated real estate platform and the experience of its principals.
   
  Set forth below are some of the key benefits that we believe distinguish us from more private real estate funds, REITs, DSTs and other traditional real estate investment platforms:

 

  Capital Gains Tax Deferral – An eligible investor may defer recognition of capital gains (short-term or long-term) resulting from the sale or exchange of capital assets (or business assets the gain on the sale of which is treated as capital gain) by reinvesting those gains into our Class A units within a period of 180 days generally beginning on the date of the sale or exchange (the “Deferred Capital Gains”). See “Material U.S. Federal Income Tax Considerations–Tax Treatment of Qualified Opportunity Funds–Tax Treatment of Electing Opportunity Zone Investors” for a discussion of reinvestment periods that may apply to gains attributable to investments in REITs, partnerships and other flow-through investments. Deferred Capital Gains are recognized on the earlier of December 31, 2026 or the date on which an inclusion event occurs, such as the date on which the investor sells its Class A units.
     
  Capital Gains Tax Exemption –An eligible investor may elect to increase the tax basis of the Class A units held by that investor to the fair market value of the Class A units, and similarly may elect to exclude gains from sales of non-inventory assets by us, if the investor holds our Class A units for a period of ten years or more prior to the date of sale, up to December 31, 2047 (after which time this benefit will no longer be available). Provided these requirements are met, for U.S. federal income tax purposes, an eligible investor will not be required to pay federal income tax on a sale of our Class A units.

 

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  No Depreciation Recapture – An eligible investor who elects to increase the tax basis of our Class A units to the fair market value of our Class A units on the date of their sale or exchange, if the investor has held our Class A units for a period of ten years or more, up to December 31, 2047 (after which time this benefit will no longer be available), will not recognize depreciation recapture (excluding inventory gains) as a result of a sale of our Class A units.
     
  20% Qualified Business Income Deduction – Individual investors and some trust and estate investors are entitled to a deduction of up to 20% of their allocable share of our “qualified business income” for taxable years ending on or before December 31, 2025, subject to certain limitations. See “Material U.S. Federal Income Tax Considerations.”
     
  Significantly Reduced Management Fees – Our Manager is paid annual management fees of only 0.75% of our net asset value (“NAV”), which is significantly less than the management fees of 1.5%-2.1% typically charged by other private real estate funds, REITs, DSTs and other traditional real estate investment platforms.
     
  No Capital Calls – Investors will not be required to make capital contributions beyond the purchase price of their Class A units, unlike private real estate funds and other traditional real estate investment platforms.
     
  No Investor Servicing Fees – We will not charge investor servicing fees, typically charged for other real estate investments offered through broker dealer platforms, which can add up to as much as 0.6% of invested capital on an annual basis.
     
  Significantly Lower Carried Interest – Our Manager holds 100% of our Class B units, which entitle our Manager to 5% of any gain recognized by or distributed to the Company or recognized or distributed from our Operating Companies or any subsidiary. This ownership interest will result in a “carried interest” to our Manager that is significantly lower than the carried interest of 15%-25% typically earned by external managers of private real estate funds, REITs, DSTs and other traditional real estate investment platforms.
     
  Ability to Use Equity as Transaction Consideration – We intend to make private equity acquisitions and investments, and opportunistic acquisitions of other qualified opportunity funds and qualified opportunity zone businesses using our equity as transaction consideration, thereby preserving cash for other investing activities.
     
  Greater Diversification – We hold a larger and more diversified portfolio of real estate and real estate-related assets than most other qualified opportunity zone real estate investment platforms. Greater diversification offers investors in our Class A units the potential to achieve greater returns at a lower risk.
     
  Public Company Transparency – We are a reporting company subject to the periodic and current reporting requirements of the federal securities laws, requiring us to file, among other things, annual and quarterly reports (including financial statements, financial statement schedules and exhibits) and current reports disclosing material events. As a result, unlike private real estate investment platforms, investors in our Class A units will have access to regular updates regarding our performance.
     
  Public Market Liquidity – Our Class A units are listed on the NYSE American (“NYSE”) under the symbol “OZ.” As a result, we are the only qualified opportunity fund listed on a national securities exchange. Having our Class A units listed for trading on NYSE provides holders of our Class A units with liquidity in respect of their investment and greater control over the timing of purchases and sales of their Class A units.
     
  Minimal Investment Requirements – We have set a minimum investment threshold of $10,000, which we expect will allow for a broader base of investors to participate in our offering than would otherwise be able to participate in more private real estate funds, REITs, DSTs and other traditional real estate investment platforms.
     
  Real Estate Development Expertise – Our Manager employs a highly qualified team with extensive real estate development and construction management experience, thereby providing us with knowledge, relationships and internal development expertise that we believe far exceeds what many other real estate investment platforms can offer their investors.
     
  Multiple Investment Platforms – In order to maximize our development opportunities, we anticipate entering into joint ventures in a variety of forms, including: (i) franchise platforms with affiliated development companies in specific regional markets; (ii) programmatic platforms with established regional developers with which we will have an exclusive relationship to engage in multiple regional investments; and (iii) traditional local joint venture partnerships for one-off developments.

 

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Q: What is a “qualified opportunity zone”?
   
A: The opportunity zone program is a new community development program established by Congress in the Tax Cuts and Jobs Act of 2017 to encourage new long-term investments in low-income urban and rural communities nationwide. The opportunity zone program provides a tax incentive for investors to re-invest their eligible capital gains into qualified opportunity funds dedicated to investing in “qualified opportunity zones.” Qualified opportunity zones are census tracts identified and nominated by the chief executives of every state and territory of the United States (e.g., governors) and designated by the Secretary of the Treasury.
   
  To be designated as a qualified opportunity zone, the nominated census tract must have either been: (i) a qualified low-income community; or (ii) a census tract that was contiguous with a nominated qualified low-income community if the median family income of the tract does not exceed 125% of that contiguous, nominated qualified low-income community.
   
  Qualified low-income communities included census tracts that have at least one of the following criteria: (i) a poverty rate of at least 20%; (ii) a median family income below 80% of the greater of the statewide or metropolitan area median family income if located in a metropolitan area; or (iii) a median family income below 80% of the median statewide family income if located outside a metropolitan area. In addition, designated targeted populations may be treated as low-income communities.
   
  As of December 31, 2022, there were more than 8,700 qualified opportunity zones throughout the United States and its territories.

 

Q: What is a “qualified opportunity fund”?
   
A: A “qualified opportunity fund” is generally defined as an investment vehicle that is taxed as a corporation or partnership for U.S. federal income tax purposes and organized to invest in, and at least 90% of its assets consist of, qualified opportunity zone property (the “90% Asset Test”).
   
  A qualified opportunity fund must determine whether it meets the 90% Asset Test on each of (i) the last day of the first six-month period of its taxable year, and (ii) the last day of its taxable year (each a “Test Date”). A qualified opportunity fund may apply the 90% Asset Test without taking into account investments received in the 6-month period preceding the Test Date provided those investments (i) are received (a) solely in exchange for stock by a qualified opportunity fund that is a corporation, or (b) as a contribution by a qualified opportunity fund that is a partnership, and (ii) held continuously from the fifth business day after the exchange or contribution, as applicable, through the Test Date in cash, cash equivalents or debt instruments with a term of 18 months or less.
   
  Subject to a one-time six-month cure period, for each month following a Test Date in which a qualified opportunity fund fails to meet the 90% Asset Test it will incur a penalty equal to (a) the excess of 90% of the fund’s aggregate assets over the aggregate amount of qualified opportunity zone property held by the fund, multiplied by (b) the short-term federal interest rate plus 3%. However, notwithstanding a qualified opportunity fund’s failure to meet the 90% Asset Test, no penalty will be imposed if the fund demonstrates that its failure is due to reasonable cause.
   
  We initially qualified as a qualified opportunity fund beginning with our taxable year ended December 31, 2020. We intend to manage our affairs so that we continue to meet the requirements for classification as a “qualified opportunity fund,” pursuant to Section 1400Z-2 of the Internal Revenue Code of 1986, as amended, and the related regulations issued by the U.S. Department of the Treasury and U.S. Internal Revenue Service (the “IRS”) on December 19, 2019, together with the correcting amendments issued on April 6, 2020, additional relief issued on January 13, 2021 and further correcting amendments issued on August 5, 2021 (collectively the “Opportunity Zone Regulations”).
   
Q: What tax advantages arise from investing in a qualified opportunity fund?
   
A:

An eligible investor may defer recognition of capital gains (short-term or long-term) resulting from the sale or exchange of capital assets (or business assets the gain on the sale of which is treated as capital gain) by reinvesting those gains into a qualified opportunity fund, such as by acquiring our Class A units, within a period of 180 days generally beginning on the date of the sale or exchange (the “Deferred Capital Gains”). See “Material U.S. Federal Income Tax Considerations–Tax Treatment of Qualified Opportunity Funds–Tax Treatment of Electing Opportunity Zone Investors” for a discussion of reinvestment periods that may apply to gains attributable to investments in REITs, partnerships and other flow-through investments). Deferred Capital Gains are recognized on the earlier of December 31, 2026, or the date on which an inclusion event occurs, such as the date on which the investor sells its qualified opportunity fund investment.

   
  An eligible investor may elect to increase the tax basis of Class A units held by that investor to the fair market value of the Class A units, and similarly may elect to exclude gains from sales of non-inventory assets by us, if the investor holds our Class A units for a period of ten years or more prior to the date of sale, up to December 31, 2047. Provided these requirements are met, for U.S. federal income tax purposes, an eligible investor will not be required to pay federal income tax on a sale of our Class A units. This benefit is not available with respect to sales after December 31, 2047.
   
  It is important for an investor seeking to avail itself of the Deferred Capital Gains benefits described in this prospectus to be aware that early disposition of our Class A units, failures by us to comply with rules applicable to qualified opportunity funds, or subsequent changes in the tax laws or the adoption of new regulations could cause you to lose any anticipated tax benefits. As a result, you are urged to consult with your own tax advisors regarding: (i) procedures you will need to follow to defer capital gains through investing in a qualified opportunity fund; (ii) tax consequences of purchasing, owning or disposing of our Class A units, including the federal, state and local tax consequences of investing capital gains in our Class A units; (iii) tax consequences associated with our election to qualify as a partnership for U.S. federal income tax purposes and our election to qualify as a qualified opportunity fund; and (iv) tax consequences associated with potential changes in the interpretation of existing tax laws or the adoption of new laws or regulations.

 

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Q: Which gains are eligible for deferral?
   
A:

Any gains treated as capital gains (short-term or long-term) for U.S. federal income tax purposes that result from the sale or exchange of capital assets (or business assets the gain on the sale of which is treated as capital gain) are eligible for deferral by reinvestment in a qualified opportunity fund within a period of 180 days of the sale or exchange. Accordingly, any gain that a taxpayer is required to include in its computation of capital gain, including capital gain from an actual or deemed sale or exchange, is eligible to be deferred and will be deferred to the extent identified on Form 8949, Sales and Other Dispositions of Capital Assets, as discussed below. It is important to note, however, that any cash investments not so identified as deferrals of capital gains, made either independently or in conjunction with cash identified as derived from capital gains, will not be eligible for the qualified opportunity fund tax benefits described herein.

   
Q: Who can defer?
   
A: All individuals and entities that recognize capital gains for U.S. federal income tax purposes are eligible to elect to defer. This includes natural persons as well as entities such as corporations, regulated investment companies, REITs, partnerships and other pass-through entities (including, certain common trust funds, qualified settlement funds, and disputed ownership funds).
   
Q: How do taxpayers make deferral elections?
   
A: Taxpayers will make deferral elections on Form 8949, Sales and Other Dispositions of Capital Assets, which will need to be attached to their U.S. federal income tax returns for the taxable year in which the capital gain would have been recognized had it not been deferred. In addition, Form 8997, Initial and Annual Statement of Qualified Opportunity Fund (QOF) Investments, requires eligible taxpayers holding a qualified opportunity fund investment at any point during the tax year to report: (i) qualified opportunity fund investments holdings at the beginning and end of the tax year; (ii) current tax year capital gains deferred by investing in a qualified opportunity fund; and (iii) qualified opportunity fund investments disposed of during the tax year.
   
Q: Are there other filing requirements related to deferral elections?
   
A:

Generally, no, assuming the taxpayer provides all required information on Form 8949, Sales and Other Dispositions of Capital Assets, and 8997, Initial and Annual Statement of Qualified Opportunity Fund (QOF) Investments. However, taxpayers may receive a Letter 6502, Reporting Qualified Opportunity Fund (QOF) Investments, or a Letter 6503, Annual Reporting of Qualified Opportunity Fund (QOF) Investments, if they have not properly followed the instructions for Form 8997, Initial and Annual Statement of Qualified Opportunity Fund (QOF) Investments, and the IRS is missing information, the taxpayer entered invalid information, or the requirements to maintain a qualifying investment have not been followed. Taxpayers who receive a Letter 6502, Reporting Qualified Opportunity Fund (QOF) Investments, or a Letter 6503, Annual Reporting of Qualified Opportunity Fund (QOF) Investments, may need to file an amended return or an administrative adjustment request with a properly completed Form 8997, Initial and Annual Statement of Qualified Opportunity Fund (QOF) Investments.

The procedures you will need to follow to defer your capital gains and the requirements related to maintaining a qualifying investment are highly technical and complex, accordingly, we recommend that you consult with your own tax advisor. You also should review the section of this prospectus entitled “Material U.S. Federal Income Tax Considerations.”

   
Q: Who will choose which investments you make?
   
A: Pursuant to our Amended and Restated Limited Liability Company Operating Agreement (our “operating agreement”), our board of directors (our “Board”), subject to certain exceptions, has delegated its authority to select investments to Belpointe PREP Manager, LLC, our Manager, which will make all of our investment decisions, subject to the oversight of our Board.
   
Q: What competitive advantages do you achieve through your relationship with the Sponsor?
   
A: The investment and operating platforms of Belpointe, LLC, our Sponsor and an affiliate of our Manager, Belpointe PREP Manager, LLC, are well established, allowing us to realize economies of scale and other benefits including, without limitation, the following:

 

  A Highly Experienced Management Team – Our Sponsor employs a highly experienced management team. Our Sponsor’s senior executives have substantial experience in the acquisition, development and ownership of real estate investments. These senior executives will provide stability in the management of our business and allow us to benefit from the industry knowledge and contacts that they have gained through numerous real estate investment cycles.
     
  Significant Real Estate Investment Experience – As of December 31, 2022, affiliates of our Sponsor and its affiliates have facilitated or originated 13 real estate assets in three prior real estate programs, with aggregate purchase prices and construction costs of approximately $400 million. See “Prior Performance Summary.”
     
  Extensive Market Knowledge and Industry Relationships – Our Sponsor, through its active and broad participation in real estate investment markets, benefits from market information that enables it to identify attractive commercial real estate investment opportunities and to make informed decisions with regard to the relative valuation of financial assets and capital allocation. We believe that our Sponsor’s extensive industry relationships with a wide variety of commercial real estate owners and operators, brokers and other intermediaries and third party commercial real estate debt originators will provide us with a competitive advantage in sourcing attractive investment opportunities to meet our investment objectives.

 

Q: Why should I invest in commercial real estate and real estate-related assets?
   
A: Our goal is to provide a professionally managed portfolio consisting primarily of commercial real estate properties located throughout the United States and its territories to investors who have historically had very limited access to such investments. We also anticipate acquiring other real estate-related assets, including, but not limited to, commercial real estate loans and mortgages, and debt and equity securities issued by other real estate-related companies, as well as making private equity acquisitions and investments, and opportunistic acquisitions of other qualified opportunity funds and qualified opportunity zone businesses. Allocating some portion of your portfolio to a direct investment in the types of assets and investments that we acquire may provide you with:

 

  a reasonably predictable and stable level of current income from the investment;

 

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  diversification of your portfolio, by investing in an asset class that historically has low correlation with the stock market generally; and
     
  the opportunity for capital appreciation.

 

Q: What kind of offering is this?
   
A:

We are offering up to $750,000,000 of our Class A units on a continuous “best efforts” basis by any method deemed to be an “at the market” offering pursuant to Rule 415(a)(4) under the Securities Act of 1933, as amended (the “Securities Act”), including by offers and sales made directly to investors or through other agents.

 

We have entered into a non-exclusive dealer manager agreement (the “Dealer Manager Agreement”) with Emerson Equity LLC (“Emerson”), a registered broker-dealer and member of the Financial Industry Regulatory Authority (“FINRA”), for the sale of our Class A units through Emerson. From time to time we may also engage one or more additional dealer managers to participate in our offering (together with Emerson, each a “Dealer Manager” and, collectively, the “Dealer Managers”). Our Dealer Managers will enter into participating dealer agreements and wholesale agreements with other broker-dealers that are members of FINRA, referred to as “selling group members,” to authorize those broker-dealers to solicit offers to purchase our Class A units. We will pay our Dealer Managers commissions of up to 0.25%, and the selling group members commissions ranging from 0.25% to 4.50%, of the principal amount of Class A unit sold in this offering.

 

We may also enter into select non-exclusive wholesale agreements directly with wholesale broker-dealers that are members of FINRA to assist us with the offer and sale of Class A units through certain registered investment advisors (“RIAs”) and RIA platforms. In addition, we may enter into client introduction agreements directly with RIAs and financial planners to assist us with introductions to certain of their clients and customers. We will not pay RIAs, RIA platforms or financial planners any commissions, we may, however, pay due diligence fees for bona fide due diligence expenses incurred in conjunction with reviewing our offering materials.

 

We will file a separate prospectus amendment or supplement, to the extent required by applicable law, naming any additional Dealer Managers, wholesale broker-dealers or other agents designated by us in this offering and setting forth the terms of any agreements with, and discounts, commissions or concessions allowed or reallowed or payable by us to, such additional Dealer Managers, wholesale broker-dealers or agents.

 

There is no minimum amount of Class A units that we must sell in this offering prior to conducting an initial closing. We plan to undertake closings on a rolling basis. Upon closings we will immediately use the net offering proceeds for the purposes described in this prospectus. See “Plan of Distribution” and “Estimated Use of Proceeds.”

   
Q: What is the purchase price for Class A units?
   
A:

Class A units may be purchased directly from us or through a broker-dealer that is a selling group member in any transaction deemed to be an “at the market” offering pursuant to Rule 415(a)(4) under the Securities Act. The purchase price for our Class A units will be the lesser of (i) the current NAV, and (ii) the average of the high and low sale prices of our Class A units on the NYSE during regular trading hours on the last trading day immediately preceding the investment date on which the NYSE was open for trading and trading in our Class A units occurred.

   
Q: When will the closing of the purchase of Class A units occur?
   
A: We plan to undertake closings on a rolling basis. Prospective investors will not have the right to withdraw or reconfirm their commitment prior to our accepting their subscription. A prospective investor will have no rights as a Member, including voting and distribution rights, until we accept their subscription agreement.

 

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Q: How will the NAV and NAV per Class A unit be calculated?
   
A: Our Manager will calculate our net asset value (“NAV”) within approximately 60 days of the last day of each quarter (the “the Determination Date”). Any adjustment to our NAV will take effect as of the first business day following its public announcement. Our adjusted NAV per Class A unit will be equal to our adjusted NAV as of the Determination Date (rounded to the nearest dollar) divided by the number of Class A units outstanding on the Determination Date. Our Manager may also engage a third party to prepare or assist with preparing the NAV of our Class A units.
   
  Where our Manager determines that an independent appraisal is necessary, including, without limitation, where our Manager is unsure of its ability to accurately determine the estimated values of our assets and investments, or where third-party market values for comparable assets and investments are either nonexistent or extremely inconsistent, our Manager may engage an appraiser that has expertise in appraising the types of assets and investments that we hold to act as our independent valuation expert. The independent valuation expert will not be responsible for, prepare or assist with preparing our NAV per Class A unit.
   
  It is important to note that the determination of our NAV will not be based on, nor is it intended to comply with, fair value standards under generally accepted accounting principles in the United States of America (“U.S. GAAP”), and our NAV may not be indicative of the price that we would receive for our assets at current market conditions. See “Net Asset Value Calculation and Valuation Policies” for additional details regarding the calculation of our NAV per Class A unit.
   
Q: How exact will the calculation of the quarterly NAV be?
   
A: Our goal is to provide a reasonable estimate of the market value of our Class A units within approximately 60 days of the last day of each quarter. Our assets and investments consist principally of commercial real estate properties located throughout the United States and its territories. We also anticipate acquiring real estate-related assets, including commercial real estate loans and mortgages, and debt and equity securities issued by other real estate-related companies, as well as make private equity acquisitions and investments, and opportunistic acquisitions of other qualified opportunity funds and qualified opportunity zone businesses. As with any asset valuation protocol, the conclusions reached by our Manager or any third-party firm that that our Manager engages to prepare or assist with preparing the NAV of our Class A units will involve significant judgments, assumptions and opinions in the application of both observable and unobservable attributes that may or may not prove to be correct. The use of different judgments or assumptions would likely result in different estimates of the value of our assets and investments and, consequently, our NAV. Moreover, although our Manager will calculate and provide our NAV on a quarterly basis, our NAV may fluctuate daily, accordingly the NAV in effect for any given fiscal quarter may not accurately reflect the amount that might otherwise be paid for your Class A units in a market transaction. Further, for any given fiscal quarter, our published NAV may not fully reflect certain material events to the extent that they are unknown or their financial impact on our assets or investments is not immediately quantifiable. However, to the extent quantifiable, if a material event occurs in between quarterly updates of our NAV that would cause our NAV per Class A unit to change by 10% or more from the last disclosed NAV, we will disclose the updated NAV per Class A unit and the reason for the change in a prospectus supplement as promptly as reasonably practicable.
   
  It is important to note that the determination of our NAV will not be based on, nor is it intended to comply with, fair value standards under U.S. GAAP, and our NAV may not be indicative of the price that we would receive for our assets at current market conditions. In addition, we do not represent, warrant or guarantee that: (i) you will be able to realize the NAV per Class A unit for your Class A units if you attempt to sell them; (ii) you will ultimately realize distributions per Class A unit equal to the NAV per Class A units you own upon liquidation of our assets and investments and settlement of our liabilities or a sale of our company; (iii) our Class A units will trade at their NAV per Class A unit on the NYSE; or (iv) a third party would offer the NAV per Class A unit in an arm’s-length transaction to purchase all or substantially all of our Class A units. See “Net Asset Value Calculation and Valuation Policies” for additional details regarding the calculation of our NAV per Class A unit.
   
Q: Will I be charged selling commissions or dealer-manager fees?
   
A: No, investors will not pay selling commissions and dealer-manager fees as part of the transaction price of each Class A unit sold in the offering. See “Plan of Distribution.”
   
Q: What fees and expenses will you pay to your Manager or any of its affiliates?
   
A: We pay our Manager a quarterly management fee at an annualized rate of 0.75%. The management fee is based on our NAV at the end of each quarter. Our Manager will calculate and we will announce our NAV within approximately 60 days of the last day of each quarter. In addition, our Manager, or an affiliate of our Manager, will be paid an annual property management oversight fee, to be paid by the individual subsidiaries of our Operating Companies, equal to 1.5% of the revenue generated by the applicable property.

 

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  We reimburse our Manager and its affiliates, including our Sponsor, as applicable, for all: (i) offering expenses incurred on our behalf; (ii) out-of-pocket expenses incurred in connection with the origination, selection, evaluation, structuring, acquisition, financing and development of our commercial real estate properties, real estate-related assets, including commercial real estate loans and mortgages, and debt and equity securities issued by other real estate-related companies, as well as private equity acquisitions and investments, and opportunistic acquisitions of other qualified opportunity funds and qualified opportunity zone businesses; and (iii) out-of-pocket expenses paid to third parties in connection with the provision of services to us.
   
  We also reimburse our Sponsor and Manager for our allocable share of the salaries, benefits, office and other overhead of personnel providing services to us. In addition, our Manager holds 100% of our Class B units, which entitle our Manager to 5% of any gain recognized by or distributed to the Company or recognized by or distributed from our Operating Companies or any subsidiary. As a result, any time we recognize an operating gain (excluding depreciation) or receive a distribution, whether from continuing operations, net sale proceeds, refinancing transactions or otherwise, our Manager is entitled to receive 5% of the aggregate amount of such gain or distribution, regardless of whether the holders of our Class A units have received a return of their capital. The allocation and distribution rights that our Manager is entitled to with respect to its Class B units may not be amended, altered or repealed, and the number of authorized Class B Units may not be increased or decreased, without the consent of our Manager. In addition, our Manager will continue to hold 100% of our Class B units even if we terminate or elect not to renew the management agreement. Accordingly, for so long as our Manager continues to hold our Class B units, it will be entitled to receive 5% of the aggregate amount of any operating gain (excluding depreciation) that we recognize or distribution that we receive. Our payment of fees and expenses and distribution of gains to our Manager pursuant to its Class B units will reduce the cash available for investments and distributions to holders of our Class A units and will directly impact our quarterly NAV.
   
  Fees payable and expenses reimbursable to our Manager and its affiliates, including our Sponsor, may be paid, at the election of the recipient, in cash, by issuance of our Class A units at the then-current NAV, or through some combination of the foregoing. See “Management Compensation” for additional details regarding the fees and expenses that will be paid and distributions that will be made to our Manager and its affiliates.
   
Q: Will you use leverage?
   
A: Yes, we may employ leverage in order to provide more funds available for investment. We believe that careful use of conservatively structured leverage will help us to achieve our diversification goals and potentially enhance the returns on our investments. Our targeted aggregate property-level leverage, excluding any debt at the Company level or on assets under development or redevelopment, after we have acquired a substantial portfolio of stabilized commercial real estate, is between 50-70% of the greater of the cost (before deducting depreciation or other non-cash reserves) or fair market value of our assets. During the period when we are acquiring, developing and redeveloping our investments, we may employ greater leverage on individual assets. An example of property-level leverage is a mortgage loan secured by an individual property or portfolio of properties incurred or assumed in connection with our acquisition of such property or portfolio of properties. An example of debt at the Company level is a line of credit obtained by us or our Operating Companies.
   
  Our Manager may from time to time modify our leverage policy in its discretion in light of then-current economic conditions, relative costs of debt and equity capital, market values of our assets, general conditions in the market for debt and equity securities, growth and acquisition opportunities or other factors. There is no limit on the amount we may borrow with respect to any individual property or portfolio. See “Investment Objectives and Strategy—Borrowing Policy.”
   
Q: What is your distribution policy?
   
A: We do not expect to pay any distributions until our investments are generating operating cash flow. Once we begin to pay distributions, we expect to pay them quarterly, in arrears, but may pay them less frequently as determined by us following consultation with our Manager. While we have the discretion to modify our distribution policy at any time, we currently anticipate working up to a target distribution rate of 6-8% per annum. Any distributions that we do pay will be at the discretion of our Manager, subject to Board oversight, and based on, among other factors, our present and projected future earnings, cash flow, capital needs and general financial condition, as well as any requirements of applicable law. In order to participate in any distribution that we do pay you must be a holder of record of our Class A units as of the date we set as the record date for such distribution, and as of the ex-date, if applicable. We have not established a minimum distribution level, and our operating agreement does not require that we pay distributions to the holders of our Class A units.
   
  Any distributions that we make will directly impact our NAV, by reducing the amount of our assets. Over the course of your investment, your distributions plus the change in NAV (either positive or negative) will produce your total return.

 

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Q: What will be the source of your distributions?
   
A: While our goal is to pay distributions from cash flow from operations, we may, at the discretion of our Manager, subject to Board oversight, use other sources to fund distributions, including, without limitation, the sale of assets, borrowings in anticipation of future operating cash flow, net proceeds from our public offerings, cash advances by our Manager, cash resulting from a waiver of fees or reimbursements due to our Manager or the issuance of additional securities. We will only fund distributions by a return of capital following the sale of assets, unless otherwise determined by our Manager in its discretion. Funding distributions from the sales of assets, borrowings, return of capital or proceeds of this offering will result in us having less funds available to acquire assets and investments, and will directly impact our NAV, by reducing the amount of our assets. As a result, the return you realize on your investment may be reduced. Doing so may also negatively impact our ability to generate cash flows. Likewise, funding distributions from the sale of additional securities will dilute your interest in us on a percentage basis and may impact the value of your investment especially if we sell these securities at prices less than the price you paid for your Class A units. We have not established a limit on the amount of offering proceeds we may use to fund distributions. We can provide no assurances that future cash flow will support payment of distributions or maintaining distributions at any particular level, if at all. We believe the likelihood that we pay distributions from sources other than cash flow from operations will be higher in the early stages of the offering.
   
Q: Will the distributions I receive be taxable as ordinary income?
   
A: Distributions that you receive will not generally be taxable, except to the extent they exceed the tax basis in your Class A units. However, you will be allocated a share of our and our subsidiaries’ income. Net income from our operations (rather than sales of properties held as capital assets) will generally be ordinary income. However, in taxable years ending on or before December 31, 2025, Section 199A of the U.S. Internal Revenue Code of 1986, as amended, referred to as the “qualified business income deduction,” generally entitles non-corporate and certain trust and estate taxpayers to deduct the lesser of (i) their combined qualified business income—up to 20% of qualified business income, plus 20% of qualified REIT dividends and “qualified publicly traded partnership income”—or (ii) 20% of the excess, if any, of taxable income over net capital gains.
   
  Distributions that you receive will reduce the tax basis of your investment, rather than result in current tax, until your tax basis is reduced to zero. Distributions made to you in excess of your tax basis in our Class A units will be treated as sales proceeds from the sale of Class A units for U.S. federal income tax purposes.
   
  The qualified business income deduction is subject to a series of complex definitions and limitations as to its availability. In addition, because each investor’s tax considerations will be different, particularly those investors investing capital gains, we recommend that you consult with your own tax advisor. You also should review the section of this prospectus entitled “Material U.S. Federal Income Tax Considerations.”
   
Q: Are there any risks involved in buying your Class A units?
   
A: Investing in our Class A units involves a high degree of risk. If we are unable to effectively manage the impact of these risks, we may not meet our investment objectives, and therefore, you should purchase our Class A units only if you can afford a complete loss of your investment. See “Risk Factors” for a description of the risks relating to this offering and an investment in our Class A units.
   
Q: What is the impact of being an “emerging growth company”?
   
  We are an “emerging growth company,” as defined in the Jump Start Our Business Startups Act of 2012 (“JOBS Act”). As an emerging growth company, we are eligible to take advantage of certain exemptions from various reporting and disclosure requirements that are applicable to public companies that are not emerging growth companies, and we have elected to take advantage of those exemptions. For so long as we remain an emerging growth company, we will not be required to:

 

  have an auditor attestation report on our internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”);
     
  submit certain executive compensation matters to Member advisory votes pursuant to the “say on frequency” and “say on pay” provisions (requiring a non-binding Member vote to approve compensation of certain executive officers) and the “say on golden parachute” provisions (requiring a non-binding Member vote to approve golden parachute arrangements for certain executive officers in connection with mergers and certain other business combinations) of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010; or
     
  disclose certain executive compensation related items, such as the correlation between executive compensation and performance and comparisons of the chief executive officer’s compensation to median employee compensation.

 

  In addition, the JOBS Act provides that an emerging growth company may take advantage of an extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies. This means that an emerging growth company can delay adopting certain accounting standards until such standards are otherwise applicable to private companies. We have elected to take advantage of the extended transition period. Since we will not be required to comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies, our financial statements may not be comparable to the financial statements of companies that comply with public company effective dates. If we were to subsequently elect to comply with these public company effective dates, such election would be irrevocable pursuant to Section 107 of the JOBS Act.

 

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  We will remain an emerging growth company for up to five years, or until the earliest of: (i) the last date of the fiscal year during which we had total annual gross revenues of $1.07 billion or more; (ii) the date on which we have, during the previous three-year period, issued more than $1.07 billion in non-convertible debt; or (iii) the date on which we are deemed to be a “large accelerated filer” as defined under Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
   
  We do not believe that being an emerging growth company will have a significant impact on our business or this offering. Also, even once we are no longer an emerging growth company, we still may not be subject to auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act unless we meet the definition of a large accelerated filer or an accelerated filer under Section 12b-2 of the Exchange Act. In addition, so long as we are externally managed by our Manager and we do not directly compensate our executive officers, or reimburse our Manager or its affiliates for the compensation paid to persons who serve as our executive officers, we will not include disclosures relating to executive compensation in our periodic reports or proxy statements and, as a result, will not be required to seek Member approval of executive compensation and golden parachute compensation arrangements pursuant to Sections 14A(a) and (b) of the Exchange Act.
   
Q: Are there Investment Company Act considerations?
   
A: We are engaged primarily in the business of investing in real estate and intend to conduct our operations such that neither we nor any of our subsidiaries are required to register as an “investment company” under the Investment Company Act of 1940, as amended (the “Investment Company Act”).
   
  Under Section 3(a)(1)(A) of the Investment Company Act a company is an investment company if it is, or holds itself out as being, engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities. A company is an investment company under Section 3(a)(1)(C) of the Investment Company Act, if it is engaged, or proposes to engage, in the business of investing, reinvesting, owning, holding or trading in securities and owns, or proposes to acquire, “investment securities” having a value exceeding 40% of the value of its total assets (exclusive of government securities and cash items) on an unconsolidated basis (the “40% Test”). The Investment Company Act defines investment securities generally as all securities except U.S. government securities and securities issued by “majority-owned subsidiaries” which are not themselves investment companies and are not relying on the exceptions from the definition of investment company provided by Section 3(c)(1) or 3(c)(7) of the Investment Company Act. The Investment Company Act further defines a majority-owned subsidiary of a person as a company 50% or more of the outstanding “voting securities” of which are owned by such person, or by another company which is a majority-owned subsidiary of such person, and voting securities as any security presently entitling the owner or holder thereof to vote for the election of directors of a company.
   
  All of our assets are and will continue to be held by, and all of our operations are and will continue to be conducted through one or more of our Operating Companies, either directly or indirectly through subsidiaries. To expand our investment portfolio, we will continue to enter into joint ventures, partnerships, co-tenancies and other co-ownership arrangements or participations with affiliates of our Sponsor and Manager, such as Belpointe SP, LLC, or its affiliates (collectively, the “Belpointe SP Group”), as well as independent developers and owners. We anticipate acquiring an interest in properties where a member of the Belpointe SP Group will act as general partner or co-general partner, manager or co-manager, developer or co-developer, or any of the foregoing. See “Investment Objectives and Strategy—Joint Venture and Other Co-Ownership Arrangements” for additional details regarding our joint ventures, partnerships, co-tenancies and other co-ownership arrangements.
   
  Neither we nor our Operating Companies nor any of the majority-owned subsidiaries of our Operating Companies will engage primarily or be held out as being engaged primarily in the business of investing, reinvesting or trading in securities. Rather, our initial investments consist of and are expected to continue to consist of commercial properties located in qualified opportunity zones, and future investments are expected to include a wide range of commercial real estate properties located throughout the United States and its territories, real estate-related assets, including commercial real estate loans and mortgages, and debt and equity securities issued by other real estate-related companies, as well as private equity acquisitions and investments, and opportunistic acquisitions of other qualified opportunity funds and qualified opportunity zone businesses. Accordingly, we believe that neither we nor our Operating Companies nor any of the majority-owned subsidiaries of our Operating Companies will be considered investment companies under Section 3(a)(1)(A) of the Investment Company Act.
   
  Further, we will hold our assets and conduct our operations such that we, our Operating Companies and most, if not all, of the majority-owned subsidiaries of our Operating Companies comply with the 40% Test and we will continuously monitor our holdings to confirm such compliance. We do not expect most, if any, of the majority-owned subsidiaries of our Operating Companies to rely on the exceptions provided by either Section 3(c)(1) or 3(c)(7) of the Investment Company Act. As such, interests in these subsidiaries (which are expected to constitute a substantial majority of our assets) generally will not constitute “investment securities.” Accordingly, we believe that neither we nor our Operating Companies nor most, if not all, of the majority-owned subsidiaries of our Operating Companies will be considered investment companies under Section 3(a)(1)(C) of the Investment Company Act. See “Investment Objectives and Strategy—Investment Company Act Considerations.”

 

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  If we, our Operating Companies or any of the majority-owned subsidiaries of our Operating Companies were to ever inadvertently fall within the definition of an “investment company,” we may rely on the exception provided by Section 3(c)(5)(C) of the Investment Company Act, which is available for entities primarily engaged in the business of purchasing or otherwise acquiring mortgages and other liens on and interests in real estate. Through a series of no-action letters the SEC has taken the position that this exception may be available if: at least 55% of an entity’s assets consist of “mortgages and other liens on and interests in real estate” and the remaining 45% of its assets consist primarily of “real estate-type interests;” with at least 80% of the entity’s total assets consisting of qualifying interests and real estate-type interests and no more than 20% of its total assets consisting of assets that have no relationship to real estate.
   
  Maintaining our exclusion from registration under the Investment Company Act will limit our ability to make certain investments. In addition, although we intend to continuously monitor our holdings, there can be no assurance that we, our Operating Companies or any of the subsidiaries of our Operating Companies will be able to maintain our exclusion from registration. A change in the value of any of our assets could negatively affect our ability to maintain our exclusion from registration and we may be unable to sell assets we would otherwise want to sell and may need to sell assets we would otherwise want to retain. In addition, we may have to acquire additional assets that we might not otherwise have acquired or may have to forego opportunities to acquire assets that we would otherwise want to acquire and would be important to our investment strategy.
   
  If we are required to register as an investment company under the Investment Company Act, we would become subject to substantial regulation with respect to our capital structure (including our ability to use borrowings), management, operations, transactions with affiliated persons (as defined in the Investment Company Act), and portfolio composition, including disclosure requirements and restrictions with respect to diversification and industry concentration, and other matters. Compliance with the Investment Company Act would, accordingly, limit our ability to make certain investments and require us to significantly restructure our business plan. If we were required to register as an investment company but failed to do so, we could be prohibited from engaging in our business, and criminal and civil actions could be brought against us. See “Risk Factors—Risks Related to This Offering and our Organizational Structure” for a discussion of the risks that we would face if we were required to register as an investment company under the Investment Company Act.
   
Q: How does a “best efforts” offering work?
   
A: This is a “best efforts” offering. A “best efforts” offering means that we and our Dealer Managers are only required to use our best efforts to sell our Class A units. When securities are offered to the public on a best efforts basis there is no firm commitment or obligation by any underwriter, Dealer Manager or other person to purchase any of the securities offered. Therefore, we cannot guarantee that any minimum number of our Class A units will be sold.
   
Q: How do I buy Class A units and what is the settlement process?
   
A: You may purchase Class A units in this offering directly from us or through a broker-dealer that is a selling group member.
   
  If you purchase Class A units directly from us, you will complete a subscription agreement like the one attached to this prospectus as Appendix B for a certain investment amount and pay for the Class A units at the time you subscribe. If we accept your subscription, your Class A units will be issued in book-entry form.
   
  If you purchase Class A units through a selling group member via subscription agreement, your broker-dealer or other investment professional will gather and send us the required information on your behalf and may facilitate your payment of the subscription amount. If we accept your subscription, your Class A units will be issued in book-entry form.
   
  If you purchase Class A units through a selling group member that is a Depository Trust Company (“DTC”) participant, you will provide your order information for Class A units to your broker-dealer, together with such other information as your broker-dealer may require. Your broker-dealer will ensure that your order is electronically placed with us and that we timely receive your subscription amount. There is no need to furnish us with a subscription agreement when you purchase your Class A units through a broker-dealer that offers DTC settlement, however, your broker-dealer may require additional documentation. If we accept your subscription, we will have immediate access to your subscription amount, and you will be credited with ownership of your Class A units on the second business day following the date we accept your subscription. Your Class A units will be issued to DTC in the name of Cede & Co., as its nominee. DTC will be the legal owner of the Class A units and you will be the beneficial owner. Your ownership of the Class A units should appear on the brokerage or other investment statements that you receive from your broker-dealer or custodian. See “Plan of Distribution.”

 

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Q: Is there any minimum investment required?
   
A: Yes. There is a minimum initial investment of at least $10,000 based, provided that our Manager has the discretion to accept smaller investments. There is no minimum investment requirement on additional purchases.
   
Q: May I make an investment through my IRA or other tax-deferred retirement account?
   
A: Yes, though the IRA or tax-deferred retirement account could be taxable on its investment. See “Material U.S. Federal Income Tax Considerations—Tax Treatment of Class A Unit Ownership by Tax-Exempt U.S. Holders” for a discussion of potential tax risks relating to such an investment.
   
Q: What will you do with the proceeds from your offering?
   
A: We expect to use substantially all of the net proceeds from this offering (after paying or reimbursing our Manager and its affiliates, including our Sponsor, for offering expenses) to identify, acquire, develop or redevelop and manage a diversified portfolio of commercial real estate properties located throughout the United States and its territories in accordance with our investment objectives and strategy. We also anticipate acquiring other real estate-related assets, including, but not limited to, commercial real estate loans and mortgages, and debt and equity securities issued by other real estate-related companies, as well as make private equity acquisitions and investments, and opportunistic acquisitions of other qualified opportunity funds and qualified opportunity zone businesses. We make our investments through our wholly owned Operating Companies, either directly or indirectly through subsidiaries of our Operating Companies, some of which may have rights to receive preferred economic returns. We expect that any expenses or fees payable to our Manager for its services in connection with managing our daily affairs will be paid from cash flow from operations. If such fees and expenses are not paid from cash flow, they will reduce the cash available for investments and distributions and will directly impact our quarterly NAV. See “Management Compensation” for additional details regarding the fees that will be paid to our Manager and its affiliates.
   
Q: How long will this offering last?
   
A: We currently expect that this offering will remain open for investors until we raise the maximum amount being offered, unless terminated by us at an earlier time. We reserve the right to suspend or terminate this offering for any reason at any time.
   
Q: Will I be notified of how my investment is doing?
   
A: Yes, we will provide you with periodic updates on the performance of your investment in us, including:

 

  three quarterly reports;
     
  an annual report;
     
  current reports for specified material events;
     
  prospectus supplements if we have material information to disclose to you; and
     
  other reports that we may file or furnish to the Securities and Exchange Commission (“SEC”) from time to time.

 

  Depending on legal requirements, from time to time we may use our website, www.belpointeoz.com, as a distribution channel for material company information or provide this information to you via U.S. mail or other courier, electronic delivery, or some combination of the foregoing. Information about us will also be available on the SEC’s website at www.sec.gov.

 

Q:When will I get my detailed tax information?
  
A:Your Schedule K-1 to IRS Form 1065, if required, will be provided as soon as practicable after the end of each taxable year. Although we currently intend to distribute Schedule K-1s on or around 90 days after the end of our fiscal year, it may require a substantial period of time after the end of our fiscal year to obtain the requisite information from all lower-tier entities to enable us to prepare and deliver Schedule K-1s. For this reason, holders of Class A units who are U.S. taxpayers should anticipate the need to file annually with the IRS (and certain states) a request for an extension past the due date of their income tax return. See “Reports to Holders of our Class A units” for a discussion of the information that we will provide to the holders of our Class A units.
  
Q:Who can help answer my questions about the offering?
  
A:If you have more questions about the offering, or if you would like additional copies of this prospectus, you should contact us by email at IR@belpointeoz.com or by mail at:

 

Belpointe PREP, LLC

255 Glenville Road

Greenwich, CT 06831

 

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Prospectus Summary

 

This prospectus summary highlights certain information contained elsewhere in this prospectus. This is only a summary and it may not contain all information that is important to you. For a more complete understanding of this offering, you should read the entire prospectus carefully, including the “Risk Factors” and the financial statements. Unless otherwise stated in this prospectus:

 

  references to “we,” “us,” “our” or “Company” refer to Belpointe PREP, LLC, our Operating Companies and our Operating Companies’ subsidiaries, taken together, unless the context requires otherwise;
     
  references to “Belpointe PREP OC” refer to Belpointe PREP OC, LLC, our wholly owned subsidiary, together with its subsidiaries, unless the context requires otherwise;
     
  references to “Belpointe PREP TN OC” refer to Belpointe PREP TN OC, LLC, our wholly owned subsidiary, together with its subsidiaries, unless the context requires otherwise;
     
  references to our “Board” refer to the board of directors of Belpointe PREP, LLC;
     
  references to “Class A units” refer to units representing limited liability company interests in Belpointe PREP, LLC, that are designated as “Class A;”
     
  references to “Class B units” refer to units representing limited liability company interests in Belpointe PREP, LLC, that are designated as “Class B;”
     
  references to “Class M units” refer to units representing limited liability company interests in Belpointe PREP, LLC, that are designated as “Class M;”
     
  references to “units” refer to units representing limited liability company interests in Belpointe PREP, LLC, that may be designated as Class A units, Class B units, Class M units, preferred units or any other class or series designated by our Board;
     
  references to our “Manager” refer to Belpointe PREP Manager, LLC;
     
  references to a “Member” or our “Members” refer to holders of units representing limited liability company interests of Belpointe PREP, LLC;
     
  references to “NYSE” refer to NYSE American, LLC.
     
  references to our “operating agreement” refer to our Amended and Restated Limited Liability Company Operating Agreement, effective September 14, 2021, as may be amended, supplemented or restated from time to time;
     
  References to our “Operating Company” or “Operating Companies” refer to our wholly owned subsidiaries, including Belpointe PREP OC and Belpointe PREP TN OC, together with their respective subsidiaries, unless the context requires otherwise;
     
  references to our “Sponsor” refer to Belpointe, LLC;
     
  references to “qualified opportunity fund” refer to an investment vehicle formed pursuant to the requirements of the Tax Cuts and Jobs Act of 2017 for the purpose of investing in qualified opportunity zones and which holds at least 90% of its assets in qualified opportunity zone property;
     
  references to “qualified opportunity zones” refer to low-income communities designated as qualified opportunity zones throughout the United States;
     
  references to “qualified opportunity zone business” refer to a trade or business where: (i) substantially all of the tangible property owned or leased is qualified opportunity zone business property; (ii) at least 50% of the gross income is derived from and a substantial portion of the intangible property is used in the active conduct of a trade or business in a qualified opportunity zone; (iii) less than 5% of the average aggregate unadjusted bases of the property is attributable to nonqualified financial property (subject to a working capital safe harbor); and (iv) it is not engaged in a “sin business” (i.e., private or commercial golf course, country club, massage parlor, hot tub facility, suntan facility, racetrack or gambling facility, the sale of alcoholic beverages for consumption off premises);
     
  references to “qualified opportunity zone business property” refer to tangible property acquired by purchase or lease by a qualified opportunity fund and substantially all of the use of which is in a qualified opportunity zone during substantially all of the fund’s holding period or lease term;
     
  references to “qualified opportunity zone partnership interests” refer to newly issued capital or profits interests acquired solely in exchange for cash from an entity classified as a domestic partnership for U.S. federal income tax purposes, where the partnership’s trade or business is a qualified opportunity zone business at the time of acquisition and during substantially all of the holding period for the interests;

 

 

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  references to “qualified opportunity zone property” refer to: (i) qualified opportunity zone stock; (ii) qualified opportunity zone partnership interests; and (iii) qualified opportunity zone business property; and
     
  references to “qualified opportunity zone stock” refer to newly issued stock acquired solely in exchange for cash from an entity classified as a domestic corporation for U.S. federal income tax purposes, where the corporation’s trade or business is a qualified opportunity zone business at the time of acquisition and during substantially all of the holding period for the stock.

 

Belpointe PREP, LLC

 

Belpointe PREP, LLC is a Delaware limited liability company formed on January 24, 2020. We were formed to originate, invest in and manage a diversified portfolio of commercial real estate properties located throughout the United States and its territories, real estate-related assets, including commercial real estate loans and mortgages, and debt and equity securities issued by other real estate-related companies, as well as private equity acquisitions and investments and opportunistic acquisitions of other qualified opportunity funds and qualified opportunity zone businesses. All of our assets are and will continue to be held by, and all of our operations are and will continue to be conducted through, one or more of our Operating Companies, either directly or indirectly through subsidiaries. As of the date of this prospectus we have two Operating Companies, Belpointe PREP OC, LLC and Belpointe PREP TN OC, LLC. Our Manager is the manager of our Operating Companies. We are externally managed by our Manager, Belpointe PREP Manager, LLC, a Delaware limited liability company. Our Manager is an affiliate of Belpointe, LLC, our Sponsor.

 

We expect to use substantially all of the net proceeds from this offering to identify, acquire, develop or redevelop and manage a diversified portfolio of commercial real estate properties located throughout the United States and its territories in accordance with our investment objectives and strategy described below. We also anticipate acquiring other real estate-related assets, including, but not limited to, commercial real estate loans and mortgages, and debt and equity securities issued by other real estate-related companies, as well as make private equity acquisitions and investments, and opportunistic acquisitions of other qualified opportunity funds and qualified opportunity zone businesses. We make our investments through our wholly owned Operating Companies, either directly or indirectly through subsidiaries of our Operating Companies, some of which may have rights to receive preferred economic returns.

 

We currently intend to operate in a manner that will allow us to qualify as a partnership for U.S. federal income tax purposes. If our Manager determines that it is no longer in our best interests to continue as a partnership for U.S. federal income tax purposes, our Manager may elect to treat us as an association or as a publicly traded partnership taxable as a corporation for U.S. federal (and applicable state) income tax purposes. If we elect to be taxable as a corporation for U.S. federal (and applicable state) income tax purposes, we may also elect to qualify and be taxed as a real estate investment trust, or REIT.

 

Our office is located at 255 Glenville Road, Greenwich, CT 06831. Our telephone number is 203-883-1994. Information regarding our Company is also available on our website at www.belpointeoz.com. The contents of our website are not incorporated by reference in or otherwise a part of this prospectus.

 

Investment Objectives

 

Our primary investment objectives are:

 

  to preserve, protect and return your capital contribution;
     
  to pay attractive and consistent cash distributions;
     
  to grow net cash from operations so that an increasing amount of cash flow is available for distributions to investors over the long term; and
     
  to realize growth in the value of our investments.

 

We cannot assure you that we will achieve our investment objectives. See the “Risk Factors” section of this prospectus.

 

Investment Strategy

 

We are focused on identifying, acquiring, developing or redeveloping and managing commercial real estate located within qualified opportunity zones. At least 90% of our assets consist of qualified opportunity zone property. We qualified as a qualified opportunity fund beginning with our taxable year ended December 31, 2020. Because we are a qualified opportunity fund certain of our investors are eligible for favorable capital gains tax treatment on their investments.

 

Our initial investments consist of and are expected to continue to consist of properties located in qualified opportunity zones for the development or redevelopment of multifamily, student housing, senior living, healthcare, industrial, self-storage, hospitality, office, mixed-use, data centers and solar projects (collectively, the “qualified opportunity zone investments”) located throughout the United States and its territories. We also anticipate identifying, acquiring, developing or redeveloping and managing a wide range of commercial real estate properties located throughout the United States and its territories, including, but not limited to, real estate-related assets, such as commercial real estate loans and mortgages, and debt and equity securities issued by other real estate-related companies, as well as making private equity acquisitions and investments, and opportunistic acquisitions of other qualified opportunity funds and qualified opportunity zone businesses, with the goal of increasing distributions and capital appreciation. We cannot assure you that we will attain these objectives or that the value of our assets will not decrease.

 

 

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Our investment guidelines delegate to our Manager discretion and authority to execute acquisitions and dispositions of investments (including the reinvestment of capital basis and gains) in commercial real estate properties, real estate-related assets, including commercial real estate loans and mortgages, and debt and equity securities issued by other real estate-related companies, as well as private equity acquisitions and investments, and opportunistic acquisitions of other qualified opportunity funds and qualified opportunity zone businesses, provided such investments are consistent with our investment objectives and strategy and our investment guidelines. Our Manager’s investment committee also periodically reviews our portfolio of assets and investments, our investment objectives and strategy and our investment guidelines to determine whether they remain in the best interests of our Members and may recommend changes to our board of directors (our “Board”) as it deems appropriate. We may, at any time and without Member approval, cease to be a qualified opportunity fund and acquire assets that do not qualify as qualified opportunity zone investments. Furthermore, there are no prohibitions in our operating agreement on the amount or percentage of assets that may be invested in a single property.

 

Opportunity and Market Overview

 

We believe that our innovative investment platform has the ability to disrupt the real estate investment industry through the unique combination of potential economic benefits that it offers holders of our Class A units, including: (i) multiple potential capital gains tax benefits; (ii) potential qualified business income tax benefits; (iii) significantly reduced fees payable to our Manager; (iv) no capital calls; (v) no investor servicing fees; (vi) significantly lower carried interest payable to our Manager; (vii) the potential for liquidity events; and (viii) low minimum investment requirements, all of which should result in greater investment returns to holders of our Class A units than those generated by private real estate funds, real estate investment trusts (“REITs”), Delaware statutory trusts (“DSTs”) and other traditional real estate investment platforms.

 

We use multiple investment platform structures to deploy capital, which we anticipate will give us access to higher quality investment opportunities and better execution of our investment strategies than less diverse investment models. See “Investment Objectives and Strategy—Joint Venture and Other Co-Ownership Arrangements.” We also greatly benefit from the resources provided by our Sponsor, its vertically integrated real estate platform and the experience of its principals.

 

Set forth below are some of the key benefits that we believe distinguish us from more private real estate funds, REITs, DSTs and other traditional real estate investment platforms:

 

  Capital Gains Tax Deferral – An eligible investor may defer recognition of capital gains (short-term or long-term) resulting from the sale or exchange of capital assets (or business assets the gain on the sale of which is treated as capital gain) by reinvesting those gains into our Class A units within a period of 180 days generally beginning on the date of the sale or exchange (the “Deferred Capital Gains”). See “Material U.S. Federal Income Tax Considerations–Tax Treatment of Qualified Opportunity Funds–Tax Treatment of Electing Opportunity Zone Investors” for a discussion of reinvestment periods that may apply to gains attributable to investments in REITs, partnerships and other flow-through investments. Deferred Capital Gains are recognized on the earlier of December 31, 2026 or the date on which an inclusion event occurs, such as the date on which the investor sells its Class A units.
     
 

Capital Gains Tax Exemption – An eligible investor may elect to increase the tax basis of the Class A units held by that investor to the fair market value of the Class A units, and similarly may elect to exclude gains from sales of non-inventory assets by us, if the investor holds our Class A units for a period of ten years or more prior to the date of sale, up to December 31, 2047 (after which time this benefit will no longer be available). Provided these requirements are met, for U.S. federal income tax purposes, an eligible investor will not be required to pay federal income tax on a sale of our Class A units.

     
  No Depreciation Recapture – An eligible investor who elects to increase the tax basis of our Class A units to the fair market value of our Class A units on the date of their sale or exchange, if the investor has held our Class A units for a period of ten years or more, up to December 31, 2047 (after which time this benefit will no longer be available), will not recognize depreciation recapture (excluding inventory gains) as a result of a sale of our Class A units.
     
  20% Qualified Business Income Deduction – Individual investors and some trust and estate investors are entitled to a deduction of up to 20% of their allocable share of our “qualified business income” for taxable years ending on or before December 31, 2025, subject to certain limitations. See “Material U.S. Federal Income Tax Considerations.”
     
  Significantly Reduced Management Fees – Our Manager is paid annual management fees of only 0.75% of our NAV, which is significantly less than the management fees of 1.5%-2.1% typically charged by other private real estate funds, REITs, DSTs and other traditional real estate investment platforms.
     
  No Capital Calls – Investors will not be required to make capital contributions beyond the purchase price of their Class A units, unlike private real estate funds and other real estate investment platforms.
     
  No Investor Servicing Fees – We will not charge investor servicing fees, typically charged for other real estate investments offered through broker dealer platforms, which can add up to as much as 0.6% of invested capital on an annual basis.
     
  Significantly Lower Carried Interest – Our Manager holds 100% of our Class B units, which entitle our Manager to 5% of any gain recognized by or distributed to the Company or recognized or distributed from our Operating Companies or any subsidiary. This ownership interest will result in a “carried interest” to our Manager that is significantly lower than the carried interest of 15%-25% typically earned by external managers of private real estate funds, REITs, DSTs and other traditional real estate investment platforms.

 

 

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  Ability to Use Equity as Transaction Consideration – We intend to make private equity acquisitions and investments, and opportunistic acquisitions of other qualified opportunity funds and qualified opportunity zone businesses using our equity as transaction consideration, thereby preserving cash for other investing activities.
     
  Greater Diversification – We hold a larger and more diversified portfolio of real estate and real estate-related assets than most other qualified opportunity zone real estate investment platforms. Greater diversification offers investors in our Class A units the potential to achieve greater returns at a lower risk.
     
  Public Company Transparency – We are a reporting company subject to the periodic and current reporting requirements of the federal securities laws, requiring us to file, among other things, annual and quarterly reports (including financial statements, financial statement schedules and exhibits) and current reports disclosing material events. As a result, unlike private real estate investment platforms, investors in our Class A units will have access to regular updates regarding our performance.
     
  Public Market Liquidity – Our Class A units are listed on the NYSE under the symbol “OZ.” As a result, we are the only qualified opportunity fund listed on a national securities exchange. Having our Class A units listed for trading on NYSE provides holders of our Class A units with liquidity in respect of their investment and greater control over the timing of purchases and sales of their Class A units.
     
  Minimal Investment Requirements – We have set a minimum investment threshold of 100 Class A units, which we expect will allow for a broader base of investors to participate in our offering than would otherwise be able to participate in more private real estate funds, REITs, DSTs and other traditional real estate investment platforms.
     
  Development Expertise – Our Manager employs a highly qualified team with extensive real estate development and construction management experience, thereby providing us with knowledge, relationships and internal development expertise that we believe far exceeds what many other real estate investment platforms can offer their investors.
     
  Multiple Investment Platforms – In order to maximize our development opportunities, we anticipate entering into joint ventures in a variety of forms, including: (i) franchise platforms with affiliated development companies in specific regional markets; (ii) programmatic platforms with established regional developers with which we will have an exclusive relationship to engage in multiple regional investments; and (iii) traditional local joint venture partnerships for one-off developments.

 

We believe that we will be able to provide holders of our Class A units with compelling investment performance on a risk-adjusted basis through: (i) the application of our rigorous investment and underwriting standards; (ii) the geographic and asset class diversification of our investments; (iii) the expected tax benefits from an investment in our Company; and (iv) lower cost structure.

 

We are focused on the development or redevelopment of qualified opportunity zone investments in opportunity zones that have completed, or are engaged in, the revitalization process, which are expected to be located within 75 miles of metropolitan markets. Given the recent concentration of investment capital in increasingly larger deals in major metropolitan areas, we believe that there will be less competition for our targeted assets. Additionally, we believe that our focus on markets with favorable risk-return characteristics should enable us to achieve higher capital appreciation than would be achievable on similar deals in larger markets.

 

We expect to be able to manage the risks associated with developing or redeveloping and managing our investments better than other real estate investment companies due, in part, to our ability to access the resources of our Sponsor. Our Sponsor is a fully integrated, well capitalized real estate company that combines investment and asset management professionals with construction and development professionals, which we believe enables our Manager to better evaluate and manage our investments to reduce risk and increase potential returns for holders of our Class A units.

 

It is important to note, however, that real estate markets are often unpredictable and subject to change over time. Accordingly, changes may occur that could require us to modify our investment strategy in order to identify and acquire assets providing attractive risk-adjusted returns.

 

Our Manager

 

We are externally managed by our Manager, Belpointe PREP Manager, LLC, a Delaware limited liability company. Our Manager is an affiliate of Belpointe, LLC, our Sponsor.

 

 

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Our Manager manages our day-to-day operations, implements our investment objectives and strategy and performs certain services for us, subject to oversight by our Board. A team of investment and asset management professionals, acting through our Manager, makes all decisions regarding the origination, selection, evaluation, structuring, acquisition, financing and development of our commercial real estate properties, real estate-related assets, including commercial real estate loans and mortgages, and debt and equity securities issued by other real estate-related companies, as well as private equity acquisitions and investments, and opportunistic acquisitions of other qualified opportunity funds and qualified opportunity zone businesses, subject to the limitations in our operating agreement. Our Manager also provides portfolio management, marketing, investor relations, financial, accounting and other administrative services on our behalf with the goal of maximizing our operating cash flow and preserving our invested capital.

 

Our Management Agreement

 

We benefit from the personnel, relationships and experience of our Manager’s management team and other personnel of our Manager. Pursuant to the terms of a management agreement between our Manager, the Company and our Operating Companies, our Manager manages our day-to-day operations, implements our investment objectives and strategy and performs certain services for us, subject to oversight by our Board. Pursuant to the terms of an employee and cost sharing agreement between our Sponsor, our Manager, the Company and our Operating Companies, our Manager utilizes our Sponsor’s personnel, services and resources as necessary for our Manager to perform its obligations and responsibilities under the management agreement.

 

Pursuant to the management agreement, our Manager manages our day-to-day operations, implements our investment objectives and strategy and performs certain services for us, subject to oversight by our Board. A team of investment and asset management professionals, acting through our Manager, makes all decisions regarding the origination, selection, evaluation, structuring, acquisition, financing and development of our commercial real estate properties, real estate-related assets, including commercial real estate loans and mortgages, and debt and equity securities issued by other real estate-related companies, as well as private equity acquisitions and investments, and opportunistic acquisitions of other qualified opportunity funds and qualified opportunity zone businesses, subject to the limitations in our operating agreement. Our Manager also provides portfolio management, marketing, investor relations, financial, accounting and other administrative services on our behalf with the goal of maximizing our operating cash flow and preserving our invested capital.

 

The initial term of the management agreement commenced on October 28, 2020 and will continue through December 31, 2025, with an unlimited number of automatic three-year renewal terms commencing immediately upon completion of the initial term. For a detailed description of the management agreement’s termination provisions, see “Management—Our Management Agreement.”

 

Our Board of Directors

 

We operate under the direction of our Board, the members of which are accountable to us and our Members as fiduciaries. Our Board has retained our Manager to direct the management of our business and affairs, manage our day-to-day operations, and implement our investment objectives and strategy, subject to the Board’s oversight. The current members of the Board are Brandon Lacoff, Martin Lacoff, Dean Drulias, Timothy Oberweger, Shawn Orser and Ronald Young, Jr.

 

Our Board is divided into three classes. Brandon Lacoff and Dean Drulias are Class III directors, Martin Lacoff and Ronald Young Jr. are Class II directors and Shawn Orser and Timothy Oberweger are Class I directors. Each class of directors is elected for successive three-year terms ending at the annual meeting of the Members the third year after election and until his or her successor is duly elected and qualified. With respect to the election of directors, each candidate nominated for election to our Board must receive a plurality of the votes cast, in person or by proxy, in order to be elected, except that, for so long as our Class M unit remains outstanding, the holder of our Class M unit, voting separately as a class, has the right to elect one director. Brandon Lacoff is the Class M director.

 

Brandon Lacoff and Martin Lacoff are also executive officers of our Manager and serve on the investment committees of affiliates of our Manager, and Brandon Lacoff also serves as an executive officer and director of affiliates of our Manager and Sponsor. In order to ameliorate the risks created by conflicts of interest, our Board has created a conflicts committee comprised entirely of independent directors (the “Conflicts Committee”) to address any potential conflicts. Director independence is determined in accordance with the rules of the NYSE and the Exchange Act. An independent director is a person who is not an officer or employee of our Manager or its affiliates. The Conflicts Committee will act upon matters involving conflicts of interest, including transactions between the Company and our Manager. See “Conflicts of Interest.”

 

 

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Our Structure

 

We are owned by the holders of our Class A units, Class B units and Class M unit. Each Class A unit and each Class B unit entitles the holder thereof to one vote per unit. The Class M unit entitles the holder thereof to that number of votes equal to the product obtained by multiplying (i) the sum of aggregate number of outstanding Class A units plus Class B units, by (ii) 10, on matters on which the holder of our Class M unit has a vote. Our Manager will hold our Class M unit for so long as it remains our manager. Accordingly, our Manager will be able to determine the outcome of all matters on which the holder of our Class M unit has a vote. Such matters include certain mergers and acquisitions, certain amendments to our operating agreement and the election of one Class III director. The Class M unit does not represent an economic interest in the Company. For a detailed description of our units, see “Description of our Units.”

 

The following chart shows our current ownership structure and our relationship with Belpointe PREP Manager, LLC, our Manager, as of the commencement of this offering.

 

 

(1) Belpointe, LLC, our Sponsor, and its affiliate hold 207 Class A units, representing less than 1% of our issued and outstanding Class A units.
   
(2) Belpointe PREP Manager, LLC, our Manager, holds 100% of our Class B units and our Class M unit. The Class B units entitle our Manager to 5% of any gain recognized by or distributed to the Company or recognized or distributed from our Operating Companies or any subsidiary. In addition, our Manager will continue to hold 100% of our Class B units even if we terminate or elect not to renew the management agreement. The Class M unit does not represent an economic interest in the Company; however, the Class M unit enables our Manager to determine the outcome of all matters on which the holder of our Class M unit has a vote.

 

Management Compensation

 

We will pay our Manager and its affiliates the fees and expense reimbursements described below in connection with performing services for us. Neither our Manager nor its affiliates will receive any selling commissions or dealer-manager fees in connection with the offer and sale of our Class A units or disposition fees in connection with our investments. Fees payable and expenses reimbursable to our Manager and its affiliates, including our Sponsor, may be paid, at the election of the recipient, in cash, by issuance of our Class A units at the then-current NAV, or through some combination of the foregoing. See “Management Compensation” for a more detailed description of the fees and expenses payable to our Manager and its affiliates.

 

 

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Form of Compensation and Receipt   Determination of Amount   Estimated Amount
Offering Expenses – Manager or its Affiliates   We will reimburse our Manager and its affiliates, including our Sponsor, for all expenses incurred on our behalf in connection with the offering of our Class A units, which are initially expected to be approximately $4,500,000 and up to approximately 0.6% of gross offering proceeds if we raise the maximum offering amount. Offering expenses will include, without limitation, all legal, accounting, printing, mailing and filing fees and expenses, costs in connection with preparing sales materials, design and website expenses, fees and expenses of our escrow agent and transfer agent, due diligence fees paid to registered investment advisors or financial planners that we enter into client introduction agreements with, fees to attend retail seminars and reimbursements for customary travel, lodging, meals and entertainment expenses associated therewith.   The actual amount will vary depending on the number Class A units sold. Initially offering expenses are expected to be approximately $4,500,000 and may be up to approximately 0.6% of gross offering proceeds if we raise the maximum offering amount.
         
Management Fee – Manager   We pay our Manager a quarterly management fee at an annualized rate of 0.75%. The management fee is based on our NAV at the end of each quarter. Our Manager will calculate and we will announce our NAV within approximately 60 days of the last day of each quarter.   Actual amounts are dependent upon our NAV and, therefore, cannot be determined at this time.
         
Other Operating Expenses – Manager or its Affiliates  

We reimburse our Sponsor and our Manager for our allocable share of the salaries, benefits, office and other overhead of personnel providing services to us. We also reimburse our Manager for out-of-pocket expenses paid to third parties in connection with providing services to us.

 

In addition, we reimburse our Manager for out-of-pocket expenses incurred in connection with the origination, selection, evaluation, structuring, acquisition, financing and development of our commercial real estate properties, real estate-related assets, including commercial real estate loans and mortgages, and debt and equity securities issued by other real estate-related companies, as well as private equity acquisitions and investments, and opportunistic acquisitions of other qualified opportunity funds and qualified opportunity zone businesses (including expenses related to potential transactions that do not close), including, without limitation legal and accounting fees and expenses, costs of due diligence (including appraisals, surveys, engineering reports and environmental site assessments), travel and communications expenses and other closing costs and miscellaneous expenses related to the acquisition of our investments.

  Actual amounts are dependent upon actual expenses incurred and, therefore, cannot be determined at this time.

 

 

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Participation in Distributions – Manager   Our Manager holds 100% of our Class B units, which entitle our Manager to 5% of any gain recognized by or distributed to the Company or recognized or distributed from our Operating Companies or any subsidiary. As a result, any time we recognize operating gain (excluding depreciation) or receive a distribution, whether from continuing operations, net sale proceeds, refinancing transactions or otherwise, our Manager is entitled to receive 5% of the aggregate amount of such gain or distributions, regardless of whether the holders of our Class A units have received a return of their capital. The allocation and distribution rights that our Manager is entitled to with respect to its Class B units may not be amended, altered or repealed, and the number of authorized Class B Units may not be increased or decreased, without the consent of our Manager. In addition, our Manager will continue to hold 100% of our Class B units even if we terminate or elect not to renew the management agreement. Accordingly, for so long as our Manager continues to hold our Class B units, it will be entitled to receive 5% of the aggregate amount of any operating gain (excluding depreciation) that we recognize or distribution that we receive.   Actual amounts are dependent upon the results of our operations and, therefore, cannot be determined at this time.
         
Acquisition Fee – Manager or its Affiliates   We will pay our Manager, Sponsor, or an affiliate of our Manager or Sponsor, an acquisition fee equal to 1.5% of the total value of any acquisition transaction, including any acquisition through merger with another entity (but excluding any transactions in which our Sponsor, or an affiliate of our Manager or Sponsor, would otherwise receive a development fee).   Actual amounts are dependent upon the results of our operations and, therefore, cannot be determined at this time.
         
Property Management Oversight Fee – Manager or its Affiliates   In addition, our Manager, Sponsor or an affiliate of our Manager or Sponsor, will be paid an annual property management oversight fee, to be paid by the individual subsidiaries of our Operating Companies, equal to 1.5% of the revenue generated by the applicable property.   Actual amounts are dependent upon the results of our operations and, therefore, cannot be determined at this time.

 

Summary of Risk Factors

 

Investing in our Class A units involves a high degree of risk. You should carefully review the “Risk Factors” section of this prospectus, beginning on page 24, which contains a description discussion of the material risks that you should consider before you invest in our Class A units.

 

Conflicts of Interest

 

Our Manager and its affiliates will experience conflicts of interest in connection with the management of our business. Some of the material conflicts that our Manager and its affiliates may face include the following:

 

  Our Sponsor’s investment and asset management professionals acting on behalf of our Manager must determine which investment opportunities to recommend to us and other entities affiliated with our Sponsor. Our Sponsor has previously sponsored, as of the date of this prospectus, two real estate funds and a qualified opportunity fund with investment criteria similar to ours, and may in the future sponsor other real estate funds that may have similar investment criteria to ours.
     
  Our Sponsor’s investment and asset management professionals acting on behalf of our Manager will have to allocate their time among us, our Sponsor’s business and other programs and activities in which they are involved.
     
  The terms of our management agreement (including our Manager’s rights and obligations and the compensation payable to our Manager and its affiliates) were not negotiated through the benefit of arm’s length negotiations of the type normally conducted between unrelated parties.

 

We may in the future decide to internalize our management function and, should we elect to do so, we may acquire our Manager’s or its affiliates’, including our Sponsor’s, assets and personnel. We, our Operating Companies and our Manager have entered into a management agreement. The terms of the management agreement restrict us from hiring or soliciting any employee of our Manager or its affiliates, including our Sponsor, for a period of two years from termination of the management agreement. This restriction could make it difficult for us to internalize management without acquiring assets and personnel from our Manager and its affiliates, including our Sponsor, for consideration that would be negotiated at the time of any such acquisition. Such consideration could take many forms, including issuance of units or cash payments, which could result in the dilution of your interest in us or directly impact our NAV, by reducing the amount of our assets.

 

 

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Distribution Policy

 

We do not expect to pay any distributions until our investments are generating operating cash flow. Once we begin to pay distributions, we expect to pay them quarterly, in arrears, but may pay them less frequently as determined by us following consultation with our Manager. While we have the discretion to modify our distribution policy at any time, we currently anticipate working up to a target distribution rate of 6-8% per annum. Any distributions that we do pay will be at the discretion of our Manager, subject to Board oversight, and based on, among other factors, our present and projected future earnings, cash flow, capital needs and general financial condition, as well as any requirements of applicable law. In order to participate in any distribution that we do pay you must be a holder of record of our Class A units as of the date we set as the record date for such distribution, and as of the ex-date, if applicable. We have not established a minimum distribution level, and our operating agreement does not require that we pay distributions to the holders of our Class A units.

 

While our goal is to pay distributions from cash flow from operations, we may, at the discretion of our Manager, subject to Board oversight, use other sources to fund distributions, including, without limitation, the sale of assets, borrowings in anticipation of future operating cash flow, net proceeds from our public offerings, cash advances by our Manager, cash resulting from a waiver of fees or reimbursements due to our Manager or the issuance of additional securities. We will only fund distributions by a return of capital following the sale of assets, unless otherwise determined by our Manager in its discretion. Funding distributions from the sales of assets, borrowings, return of capital or proceeds of this offering will result in us having less funds available to acquire assets and investments, and will directly impact our NAV, by reducing the amount of our assets. As a result, the return you realize on your investment may be reduced. Doing so may also negatively impact our ability to generate cash flows. Likewise, funding distributions from the sale of additional securities will dilute your interest in us on a percentage basis and may impact the value of your investment especially if we sell these securities at prices less than the price you paid for your Class A units. We have not established a limit on the amount of offering proceeds we may use to fund distributions. We can provide no assurances that future cash flow will support payment of distributions or maintaining distributions at any particular level, if at all. We believe the likelihood that we pay distributions from sources other than cash flow from operations will be higher in the early stages of the offering.

 

Any distributions that we make will directly impact our NAV, by reducing the amount of our assets. Over the course of your investment, your distributions plus the change in NAV (either positive or negative) will produce your total return.

 

Borrowing Policy

 

We may employ leverage in order to provide more funds available for investment. We believe that careful use of conservatively structured leverage will help us to achieve our diversification goals and potentially enhance the returns on our investments. Our targeted aggregate property-level leverage, excluding any debt at the Company level or on assets under development or redevelopment, after we have acquired a substantial portfolio of stabilized commercial real estate, is between 50-70% of the greater of the cost (before deducting depreciation or other non-cash reserves) or fair market value of our assets. During the period when we are acquiring, developing and redeveloping our investments, we may employ greater leverage on individual assets. An example of property-level leverage is a mortgage loan secured by an individual property or portfolio of properties incurred or assumed in connection with our acquisition of such property or portfolio of properties. An example of debt at the Company level is a line of credit obtained by us or our Operating Companies.

 

Our Manager may from time to time modify our leverage policy in its discretion in light of then-current economic conditions, relative costs of debt and equity capital, market values of our assets, general conditions in the market for debt and equity securities, growth and acquisition opportunities or other factors. There is no limit on the amount we may borrow with respect to any individual property or portfolio. See “Investment Objectives and Strategy” for additional details regarding our leverage policies.

 

Valuation Policies

 

Our Manager will calculate our net asset value within approximately 60 days of the last day of each quarter (the “Determination Date”). Any adjustment to our NAV will take effect as of the first business day following its public announcement. Our adjusted NAV per Class A unit will be equal to our adjusted NAV as of the Determination Date (rounded to the nearest dollar) divided by the number of Class A units outstanding on the Determination Date. Our Manager may also engage a third party to prepare or assist with preparing the NAV of our Class A units.

 

Our NAV will be calculated using a process that may reflect some or all of the following components: (i) estimated values of each of our assets and investments, including related liabilities (but, in our discretion, may exclude deal-level carried interest allocations), based on: (a) market capitalization rates, comparable transaction information, interest rates, adjusted net operating income; (b) with respect to debt, default rates, discount rates and loss severity rates; (c) for commercial real estate properties that have development or value add plans, progress along such development or value add plans; and (d) in certain instances, reports of the underlying assets and investments by an independent valuation expert; (ii) the price of liquid assets for which third party market quotes are available; (iii) accruals of our periodic distributions; and (iv) estimated accruals of our operating revenues and expenses (excluding property management oversight fees).

 

Where our Manager determines that an independent appraisal is necessary, including, without limitation, where our Manager is unsure of its ability to accurately determine the estimated values of our assets and investments, or where third-party market values for comparable assets and investments are either nonexistent or extremely inconsistent, our Manager may engage an appraiser that has expertise in appraising the types of assets and investments that we hold to act as our independent valuation expert. See “Net Asset Value Calculation and Valuation Policies” for additional details on our valuation policies.

 

 

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Liquidity Opportunities

 

Our Class A units are listed on the NYSE under the symbol “OZ.” As a result of having our Class A units listed on NYSE, Belpointe PREP is the first qualified opportunity fund listed on a national securities exchange. Having our Class A units listed for trading on NYSE provides holders of our Class A units with liquidity in respect of their investment and greater control over the timing of purchases and sales of Class A units.

 

Tax Information

 

As a partnership, we will report our operating results, including income, gains, losses, deductions, and credits and adjustments to the carrying value of our assets and investments to the IRS annually on Form 1065 and provide a Schedule K-1 to each holder of our Class A units. Your Schedule K-1 will contain information regarding your allocable share of our items of income, gain, loss, deduction, credit and adjustments to the carrying value of our assets and investments. Schedule K-1s are usually complex, and you may find that preparing your own tax returns requires additional time. You may also find it necessary or advisable to engage the services of an accountant or other tax adviser, at your own cost and expense, to assist with the preparation of your tax returns.

 

In addition, it is possible that your income tax liability with respect your allocable share of our income for a particular taxable year, as reflected on your Schedule K-1, could exceed the amount of cash distributions, if any, that we make to you for that taxable year, thus giving rise to an out-of-pocket tax liability. Accordingly, you should consult with your own accountant or other tax advisers concerning the tax consequences of your specific tax circumstances prior to acquiring, holding or disposing of any of our Class A units.

 

Although we currently intend to distribute Schedule K-1s on or around 90 days after the end of our fiscal year, it may require a substantial period of time after the end of our fiscal year to obtain the requisite information from all lower-tier entities to enable us to prepare and deliver Schedule K-1s. For this reason, holders of Class A units who are U.S. taxpayers should anticipate the need to file annually with the IRS (and certain states) a request for an extension past the due date of their income tax return.

 

 

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Investment Company Act Considerations

 

We are engaged primarily in the business of investing in real estate and intend to conduct our operations such that neither we nor any of our subsidiaries are required to register as an “investment company” under the Investment Company Act of 1940, as amended (the “Investment Company Act”).

 

 Under Section 3(a)(1)(A) of the Investment Company Act a company is an investment company if it is, or holds itself out as being, engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities. A company is an investment company under Section 3(a)(1)(C) of the Investment Company Act, if it is engaged, or proposes to engage, in the business of investing, reinvesting, owning, holding or trading in securities and owns, or proposes to acquire, “investment securities” having a value exceeding 40% of the value of its total assets (exclusive of government securities and cash items) on an unconsolidated basis (the “40% Test”). The Investment Company Act defines investment securities generally as all securities except U.S. government securities and securities issued by “majority-owned subsidiaries” which are not themselves investment companies and are not relying on the exceptions from the definition of investment company provided by Section 3(c)(1) or 3(c)(7) of the Investment Company Act. The Investment Company Act further defines a majority-owned subsidiary of a person as a company 50% or more of the outstanding “voting securities” of which are owned by such person, or by another company which is a majority-owned subsidiary of such person, and voting securities as any security presently entitling the owner or holder thereof to vote for the election of directors of a company.

 

All of our assets are and will continue to be held by, and all of our operations are and will continue to be conducted through one or more of our Operating Companies, either directly or indirectly through subsidiaries. To expand our investment portfolio, we will continue to enter into joint ventures, partnerships, co-tenancies and other co-ownership arrangements or participations with affiliates of our Sponsor and Manager, such as Belpointe SP, LLC or its affiliates (collectively, the “Belpointe SP Group”), as well as independent developers and owners. We will frequently acquire an interest in a property where a member of the Belpointe SP Group will act as general partner or co-general partner, manager or co-manager, developer or co-developer, or any of the foregoing. See “Investment Objectives and Strategy—Joint Venture and Other Co-Ownership Arrangements” for additional details regarding our joint ventures, partnerships, co-tenancies and other co-ownership arrangements.

 

Neither we nor our Operating Companies nor any of the majority-owned subsidiaries of our Operating Companies will engage primarily or be held out as being engaged primarily in the business of investing, reinvesting or trading in securities. Rather, our initial investments consist of and are expected to continue to consist of commercial properties located in qualified opportunity zones, and future investments are expected to include a wide range of commercial real estate properties located throughout the United States and its territories, real estate-related assets, including commercial real estate loans and mortgages, and debt and equity securities issued by other real estate-related companies, as well as private equity acquisitions and investments, and opportunistic acquisitions of other qualified opportunity funds and qualified opportunity zone businesses. Accordingly, we believe that neither we nor our Operating Companies nor any of the majority-owned subsidiaries of our Operating Companies will be considered investment companies under Section 3(a)(1)(A) of the Investment Company Act.

 

Further, we will hold our assets and conduct our operations such that we, our Operating Companies and most, if not all, of the majority-owned subsidiaries of our Operating Companies comply with the 40% Test and we will continuously monitor our holdings to confirm such compliance. We do not expect most, if any, of the majority-owned subsidiaries of our Operating Companies to rely on the exceptions provided by either Section 3(c)(1) or 3(c)(7) of the Investment Company Act. As such, interests in these subsidiaries (which are expected to constitute a substantial majority of our assets) generally will not constitute “investment securities.” Accordingly, we believe that neither we nor our Operating Companies nor most, if not all, of the majority-owned subsidiaries of our Operating Companies will be considered investment companies under Section 3(a)(1)(C) of the Investment Company Act. See “Investment Objectives and Strategy—Investment Company Act Considerations.”

 

If we, our Operating Companies or any of the majority-owned subsidiaries of our Operating Companies were to ever inadvertently fall within the definition of an “investment company,” we may rely on the exception provided by Section 3(c)(5)(C) of the Investment Company Act, which is available for entities primarily engaged in the business of purchasing or otherwise acquiring mortgages and other liens on and interests in real estate. Through a series of no-action letters the SEC has taken the position that this exception may be available if: at least 55% of an entity’s assets consist of “mortgages and other liens on and interests in real estate” and the remaining 45% of its assets consist primarily of “real estate-type interests;” with at least 80% of the entity’s total assets consisting of qualifying interests and real estate-type interests and no more than 20% of its total assets consisting of assets that have no relationship to real estate.

 

Maintaining our exclusion from registration under the Investment Company Act will limit our ability to make certain investments. In addition, although we intend to continuously monitor our holdings, there can be no assurance that we, our Operating Companies or any of the subsidiaries of our Operating Companies will be able to maintain our exclusion from registration. A change in the value of any of our assets could negatively affect our ability to maintain our exclusion from registration and we may be unable to sell assets we would otherwise want to sell and may need to sell assets we would otherwise want to retain. In addition, we may have to acquire additional assets that we might not otherwise have acquired or may have to forego opportunities to acquire assets that we would otherwise want to acquire and would be important to our investment strategy.

 

If we are required to register as an investment company under the Investment Company Act, we would become subject to substantial regulation with respect to our capital structure (including our ability to use borrowings), management, operations, transactions with affiliated persons (as defined in the Investment Company Act), and portfolio composition, including disclosure requirements and restrictions with respect to diversification and industry concentration, and other matters. Compliance with the Investment Company Act would, accordingly, limit our ability to make certain investments and require us to significantly restructure our business plan. If we were required to register as an investment company but failed to do so, we could be prohibited from engaging in our business, and criminal and civil actions could be brought against us. See “Risk Factors—Risks Related to This Offering and our Organizational Structure” for a discussion of the risks that we would face if we were required to register as an investment company under the Investment Company Act.

 

 

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Risk Factors

 

An investment in our Class A units involves substantial risks. You should carefully consider the following material risks in addition to the other information contained in this prospectus before you decide to purchase our Class A units. The occurrence of any of the following risks might cause you to lose all or a significant part of your investment. The risks and uncertainties discussed below are not the only ones we face but do represent those risks and uncertainties that we believe are most significant to our business, operating results, prospects and financial condition. Some statements in this prospectus, including statements in the following risk factors, constitute forward-looking statements. Please refer to the section entitled “Statements Regarding Forward-Looking Information.”

 

Risks Related to This Offering and our Organizational Structure

 

We have a limited operating history, and the prior performance of our Sponsor or other real estate investment opportunities sponsored by our Sponsor may not predict our future results.

 

We are a recently formed company and have a limited operating history and we may not be able to achieve our investment objectives. As of the date of this prospectus, we have made 17 qualified opportunity zone investments in three states and are primarily reliant on the proceeds derived from our public offerings and any financing that might be provided by our Sponsor or its affiliates to fund our operations. We cannot assure you that the past experiences of our Sponsor or its affiliates will be sufficient to allow us to successfully achieve our investment objectives.

 

In addition, there can be no assurance that we will be able to successfully identify, make and realize any additional investments or generate returns for our investors. Furthermore, there can be no assurance that our investors will receive any distributions. These factors increase the risk that your investment may not generate returns comparable to other real estate investment alternatives.

 

We have only held our investments for a limited period of time, and you will not have the opportunity to evaluate our future investments before we make them, which makes your investment more speculative.

 

We have only held our investments for a limited period of time and are not able to provide you with any information to assist you in evaluating the merits of any specific properties or real estate-related investments that we may acquire, except for investments that may be described in one or more supplements to this prospectus or other filings that we make with the U.S. Securities and Exchange Commission (“SEC”). We will continue to seek to invest substantially all of the net offering proceeds from our offerings, after the payment of fees and expenses, in the acquisition of or investment in real estate and real estate-related assets, including commercial real estate loans and mortgages, and debt and equity securities issued by other real estate companies, as well as select private equity investments, and opportunistic acquisitions of other qualified opportunity funds and qualified opportunity zone businesses. However, because you will be unable to evaluate the economic merit of our investments before we make them, you will have to rely entirely on the ability of our Manager to select suitable and successful investment opportunities. There can be no assurance that our Manager will be successful in obtaining suitable investments or that, if such investments are made, our investment objectives will be achieved. Furthermore, our Manager will have broad discretion in selecting investments, and you will not have the opportunity to evaluate potential investments. These factors increase the risk that your investment may not generate returns comparable to other investment alternatives.

 

Our Class A units are listed on the NYSE, however, an active, liquid and orderly market for our Class A units may not be sustained.

 

Our Class A units are listed on the NYSE under the symbol “OZ,” however, an active, liquid and orderly market for our Class A units may not be sustained. Further, because we are a qualified opportunity fund, eligible investors may defer recognition of capital gains (short-term or long-term) resulting from the sale or exchange of capital assets (or business assets the gain on the sale of which is treated as capital gain) by reinvesting those gains into our Class A units within a period of 180 days generally beginning on the date of the sale or exchange (the “Deferred Capital Gains”). See “Material U.S. Federal Income Tax Considerations–Tax Treatment of Qualified Opportunity Funds–Tax Treatment of Electing Opportunity Zone Investors” for a discussion of reinvestment periods that may apply to gains attributable to investments in REITs, partnerships and other flow-through investments. Deferred Capital Gains are recognized on the earlier of December 31, 2026 or the date on which an inclusion event occurs, such as the date on which an investor sells their Class A units. Eligible investors may also elect to increase the tax basis of Class A units held by them to their fair market value on the date of sale or exchange if they hold our Class A units for a period of ten years or more, up to December 31, 2047. This benefit is not available with respect to sales or exchanges after December 31, 2047. Consequently, fewer Class A units may be actively traded in the public markets which would reduce the liquidity of the market for our Class A units. If an active market for our Class A units is not sustained, you may be unable to sell your Class A units at the time you desire to sell them, at a price at or above the price you paid for them, or without experiencing volatility in the price of our Class A units. An inactive market may also impair our ability to raise capital by selling Class A units and may impair our ability to make opportunistic acquisitions of other qualified opportunity funds and qualified opportunity zone businesses using our Class A units as consideration.

 

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If we are unable to raise sufficient proceeds in our offerings we may not be able to fund all of our existing projects or find additional suitable investments, and, as a result, we may not be able to achieve our investment objectives or pay distributions.

 

Our ability to achieve our investment objectives and to pay distributions depends, in part, on our ability to fund our existing projects and on the ability of our Manager to find additional suitable and successful investment opportunities for us. If we fail to raise sufficient proceeds from the sale of Class A units in our public offerings, we may be unable to fund all of our existing projects or to make additional suitable investments. At the same time, the more money we raise in our public offerings, the greater our challenge will be to invest all of the net offering proceeds in investments that meet our investment criteria. Our investments consist of and are expected to continue to consist of properties located in qualified opportunity zones for the development or redevelopment of multifamily, student housing, senior living, healthcare, industrial, self-storage, hospitality, office, mixed-use, data centers and solar projects (collectively, the “qualified opportunity zone investments”) located throughout the United States and its territories. We also anticipate identifying, acquiring, developing or redeveloping and managing a wide range of commercial real estate properties located throughout the United States and its territories, including, but not limited to, real estate-related assets, such as commercial real estate loans and mortgages, and debt and equity securities issued by other real estate-related companies, as well as making private equity acquisitions and investments, and opportunistic acquisitions of other qualified opportunity funds and qualified opportunity zone businesses, with the goal of increasing distributions and capital appreciation. We cannot assure you that our Manager will be successful in locating and obtaining additional suitable qualified opportunity zone investments or that, if our Manager makes additional qualified opportunity zone investments on our behalf, our objectives will be achieved. What’s more, increased competition from other opportunity zone funds as well as any prospective legislative or regulatory changes related to qualified opportunity zone investments, may make it more difficult for our Manager to make suitable qualified opportunity zone investments. If we, through our Manager, are unable to find suitable investments promptly, we may invest in short-term, investment-grade obligations or accounts in a manner that is consistent with our qualification as a publicly traded partnership and qualified opportunity fund. If we would continue to be unsuccessful in locating suitable investments, we may ultimately decide to liquidate. In the event we are unable to timely locate suitable investments, we may be unable or limited in our ability to pay distributions and we may not be able to meet our investment objectives.

 

Our ability to deploy the capital we raise in our public offerings may be constrained.

 

We may have difficulty identifying and purchasing additional suitable properties on attractive terms. Moreover, increased competition from other opportunity zone funds, a lack of suitable qualified opportunity zone investment opportunities or other market-related constraints, may also make it more difficult for our Manager to deploy the capital we raise in our public offerings. Therefore, there could be a delay between the time we receive net proceeds from the sale of our Class A units in our public offering and the time we invest the net proceeds. This could cause a substantial delay in the time it takes for your investment to realize its full potential return and could adversely affect our ability to pay regular distributions of cash flow from operations to you. If we fail to timely invest the net proceeds of our public offering, our results of operations and financial condition may be adversely affected.

 

Our NAV per Class A unit may change materially from our current NAV.

 

Our Manager will calculate the net asset value (“NAV”) of our Class A units on a quarterly basis. The per Class A unit purchase price will be adjusted within approximately 60 days of the last day of each quarter (the “Determination Date”). Our Manager will calculate our NAV as of the Determination Date (rounded to the nearest dollar) and any adjustment to our NAV will take effect as of the first business day following its public announcement. Our adjusted NAV per Class A unit will be equal to our adjusted NAV as of the Determination Date (rounded to the nearest dollar) divided by the number of Class A units outstanding on the Determination Date.

 

Valuations and appraisals of our real estate and real estate assets are estimates of fair value and may not necessarily correspond to realizable value, in addition it may be difficult to reflect, fully and accurately, material events that impact our NAV.

 

Our NAV will be calculated using a process that may reflect some or all of the following components: (i) estimated values of each of our assets and investments, including related liabilities (but may, in our discretion, exclude deal-level carried interest allocations), based on: (a) market capitalization rates, comparable transaction information, interest rates, adjusted net operating income; (b) with respect to debt, default rates, discount rates and loss severity rates; (c) for commercial real estate properties that have development or value add plans, progress along such development or value add plans; and (d) in certain instances, reports of the underlying assets and investments by an independent valuation expert; (ii) the price of liquid assets for which third party market quotes are available; (iii) accruals of our periodic distributions; and (iv) estimated accruals of our operating revenues and expenses (excluding property management oversight fees).

 

Our Manager may engage a third party to prepare or assist with preparing the NAV of our Class A units. In addition, where our Manager determines that an independent appraisal is necessary, including, without limitation, where our Manager is unsure of its ability to accurately determine the estimated values of our assets and investments, or where third party market values for comparable assets and investments are either nonexistent or extremely inconsistent, we may engage an appraiser that has expertise in appraising the types of assets and investments that we hold to act as our independent valuation expert. The independent valuation expert will not be responsible for, prepare or assist with preparing our NAV per Class A unit.

 

As with any asset valuation protocol, the conclusions reached by our Manager or any third-party firm that we engage to prepare or assist with preparing the NAV of our Class A units will involve significant judgments, assumptions and opinions in the application of both observable and unobservable attributes that may or may not prove to be correct. The use of different judgments or assumptions would likely result in different estimates of the value of our assets and investments and, consequently, our NAV. Moreover, although our Manager will calculate and provide our NAV on a quarterly basis, our NAV may fluctuate daily, accordingly the NAV in effect for any given fiscal quarter may not accurately reflect the amount that might otherwise be paid for your Class A units in a market transaction. Further, for any given fiscal quarter, our published NAV may not fully reflect certain material events to the extent that they are unknown or their financial impact on our assets or investments is not immediately quantifiable.

 

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Our goal is to provide a reasonable estimate of the market value of our Class A units within approximately 60 days of the last day of each quarter.

 

NAV calculations are not set by governmental or independent securities, financial or accounting rules or standards.

 

It is important to note that the determination of our NAV will not be based on, nor is it intended to comply with, fair value standards under U.S. GAAP, and our NAV may not be indicative of the price that we would receive for our assets at current market conditions. In addition, we do not represent, warrant or guarantee that: (i) you will be able to realize the NAV per Class A unit for your Class A units if you attempt to sell them; (ii) you will ultimately realize distributions per Class A unit equal to the NAV per Class A units you own upon liquidation of our assets and investments and settlement of our liabilities or a sale of our company; (iii) our Class A units will trade at their NAV per Class A unit on the NYSE; or (iv) a third party would offer the NAV per Class A unit in an arm’s-length transaction to purchase all or substantially all of our Class A units. Furthermore, any distributions that we make will directly impact our NAV, by reducing the amount of our assets. See “Net Asset Value Calculation and Valuation Policies” for additional details on our quarterly adjustments to our NAV per Class A unit.

 

Our Sponsor does not hold a significant amount of our equity, and therefore, may not be as strongly incentivized to avoid losses as a sponsor who holds a significant equity investment, and as a result you may be more likely to sustain a loss on your investment.

 

Our Sponsor, Belpointe, LLC, and an affiliate of our Sponsor have acquired 100 of our Class A units in connection with our formation for net proceeds to us of $10,000. Accordingly, our Sponsor will have very little exposure to a loss in the value of our Class A units. Without this exposure, you may be at a greater risk of loss because our Sponsor does not have as much to lose from a decrease in the value of our Class A units as a sponsor who makes a more significant equity investment would.

 

Our Sponsor currently sponsors and will in the future sponsor other investment programs some of which may compete with us.

 

Our Sponsor has previously sponsored two real estate funds and a qualified opportunity fund with investment criteria similar to ours. Our Sponsor and its affiliates will in the future sponsor other investment programs some of which may compete with us or have similar investment criteria to our own, and there are no limits or restrictions on the right of our Sponsor, or any of its affiliates, including our Manager, to engage in any other business or sponsor any other investment programs of any kind.

 

Our Manager and its affiliates have little or no experience managing a portfolio of assets in the manner necessary to maintain our qualification as a publicly traded partnership and qualified opportunity fund or our exclusion or exemption from registration under the Investment Company Act.

 

In order to maintain our qualification as a publicly traded partnership and qualified opportunity fund and our exclusion or exemption from registration under the Investment Company Act of 1940, as amended (the “Investment Company Act”), our assets and investments may be subject to certain restrictions that could limit our operations meaningfully. The publicly traded partnership rules and regulations, Opportunity Zone Regulations (as hereinafter defined) and exclusions and exemptions from registration under the Investment Company Act are highly technical and complex, and our failure to comply with the requirements and limitations imposed by these rules and regulations could prevent us from qualifying as a publicly traded partnership or qualified opportunity fund or could force us to pay unexpected taxes and penalties. Our Manager and its affiliates have little or no experience managing assets and investments in the manner necessary to maintain our qualification as a publicly traded partnership and qualified opportunity fund or our exclusion or exemption from registration under the Investment Company Act. This inexperience may hinder our ability to achieve our objectives, resulting in our failing to achieve or losing of our qualification as a publicly traded partnership or qualified opportunity fund or our exclusion or exemption from registration under the Investment Company Act. As a result, we cannot assure you that we will be able to successfully operate as a publicly traded partnership and qualified opportunity fund, comply with regulatory requirements applicable to publicly traded partnerships and qualified opportunity funds, maintain our exclusion or an exemption from registration under the Investment Company Act, or execute our business strategies.

 

Concurrently with this offering, we are conducting an ongoing initial public offering of our Class A units. If our concurrent offering is completed, you will experience additional dilution.

 

Concurrently with this offering, by means of a separate prospectus, we are offering up to $750,000,000 of our Class A units on a continuous basis, as part of our ongoing initial public offering. In our concurrent offering we will also be offering our Class A units on a “best efforts” basis by any method deemed to be an “at the market” offering pursuant to Rule 415(a)(4) under the Securities Act. The completion of neither this offering nor our concurrent offering is contingent on the completion of the other, so it is possible that this offering is completed, and our concurrent offering is not, and vice versa. We cannot assure you that our concurrent offering will be completed on the terms described in the related prospectus, or at all, however, if our concurrent offering is completed, you will experience additional dilution.

 

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Any adverse changes in our Sponsor’s financial health, or our Sponsor’s or our relationship with our Manager or its affiliates could hinder our operating performance.

 

We, our Operating Companies, and our Manager have entered into a management agreement pursuant to which our Manager manages our day-to-day operations, implements our investment objectives and strategy and performs certain services for us, subject to oversight by our Board.

 

We, our Operating Companies, our Sponsor and our Manager have also entered into an employee and cost sharing agreement pursuant to which our Manager is provided with access to, among other things, our Sponsor’s and its affiliates’ portfolio management, asset valuation, risk management and asset management professionals and services as well as administration professionals and services addressing legal, compliance, investor relations and information technologies necessary for the performance by our Manager of its duties under the management agreement.

 

This team of investment, asset management and other professionals, acting through our Manager, makes all decisions regarding the origination, selection, evaluation, structuring, acquisition, financing and development of our commercial real estate properties, real estate-related assets, including commercial real estate loans and mortgages, and debt and equity securities issued by other real estate-related companies, as well as private equity acquisitions and investments, and opportunistic acquisitions of other qualified opportunity funds and qualified opportunity zone businesses, subject to the limitations in our operating agreement. Our Manager also provides portfolio management, marketing, investor relations, financial, accounting, and other administrative services on our behalf with the goal of maximizing our operating cash flow and preserving our invested capital. As such, our ability to achieve our investment objectives and to pay distributions to the holders of our Class A units is dependent in part on our Sponsor’s financial condition and our Sponsor’s and our relationship with our Manager. Any adverse changes in our Sponsor’s financial condition or our Sponsor’s or our relationship with our Manager could hinder our ability to successfully manage our operations and our portfolio of assets and investments.

 

In addition, our Manager and our Sponsor only have limited assets and our recourse against our Manager or our Sponsor if our Manager does not fulfill its obligations under the management agreement will be limited to our termination of the management agreement.

 

If our Sponsor fails to retain its key personnel, we may not be able to achieve our anticipated level of growth and our business could suffer.

 

Our future depends, in part, on our Sponsor’s ability to attract and retain key personnel. Our future also depends on the continued contributions of the executive officers and other key personnel of our Sponsor acting through our Manager, each of whom would be difficult to replace. In particular, each of Brandon Lacoff and Martin Lacoff is critical to the management of our business and operations and the development of our strategic direction. The loss of the services of Brandon Lacoff, Martin Lacoff or other executive officers or key personnel of our Sponsor and the process to replace any of our Sponsor’s key personnel would involve substantial time and expense and may significantly delay or prevent the achievement of our business objectives.

 

The management agreement with our Manager was not negotiated with an unaffiliated third party on an arm’s length basis and may not be as favorable to us as if it had been negotiated with an unaffiliated third party.

 

Our management agreement with our Manager was negotiated between related parties and its terms, including fees payable, may not be as favorable to us as if it had been negotiated with an unaffiliated third party. We will pay our Manager a management fee regardless of the performance of our investments. Our Manager’s entitlement to a management fee, which is not based upon performance metrics or goals, might reduce its incentive to devote its time and effort to seeking investments that provide attractive risk-adjusted returns for our portfolio. This in turn could hurt both our ability to pay distributions to holders of our Class A units and the market price of our Class A units.

 

We do not have an exclusive management arrangement with our Manager.

 

We do not have an exclusive management arrangement with our Manager. Accordingly, our Manager and its affiliates, including our Sponsor, can and will engage in other activities, including, without limitation, managing other investment programs sponsored or organized by our Sponsor and its affiliates. Further, nothing in our management agreement limits or restricts the right of any manager, director, officer, employee or equity holder of our Manager, or any of its affiliates, including our Sponsor, to engage in any other business or to render services of any kind to any other person or entity.

 

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Terminating the management agreement for unsatisfactory performance by our Manager or electing not to renew the management agreement may be difficult, and, even if we elect not to renew or terminate the management agreement, our Manager will continue to hold our Class B units.

 

Terminating the management agreement for unsatisfactory performance by our Manager is difficult and potentially costly. The initial term of the management agreement commenced on October 28, 2020 and will continue through December 31, 2025. We may only terminate the management agreement (i) for “cause,” (ii) upon the bankruptcy of our Manager, or (iii) upon a material breach of the management agreement by our Manager. “Cause” is defined in the management agreement to mean fraud or willful malfeasance, gross negligence, the commission of a felony or a material violation of applicable law, in each case that has or could reasonably be expected to have a material adverse effect on us. Following the initial term, the management agreement will automatically renew for an unlimited number of three-year terms unless we elect not to renew or terminate it by providing our Manager with 180 days’ prior notice. We will review and evaluate our Manager’s performance under the management agreement at least 180 days prior to each renewal term.

 

Upon any termination or non-renewal of the management agreement by us or any termination of the management agreement by our Manager for our breach of the management agreement, our Manager will be entitled to receive its prorated management fee through the expiration or termination date and will be paid a termination fee equal to six times the annual management fee earned by our Manager during the 12-month period ended as of the last day of the quarter immediately preceding the termination date (the “termination fee”); however, if less than 12 months have elapsed as of the termination date, the termination fee will be calculated by annualizing the management fee earned during the most recently completed quarter prior to the termination date.

 

In addition, upon any termination or non-renewal of the management agreement, our Manager will continue to hold 100% of our Class B units, which entitle our Manager to 5% of any gain recognized by or distributed to the Company or recognized by or distributed from the Operating Companies or any subsidiary. As a result, any time we recognize operating gain (excluding depreciation) or receive a distribution, whether from continuing operations, net sale proceeds, refinancing transactions or otherwise, our Manager is entitled to receive 5% of the aggregate amount of such gain or distribution, regardless of whether the holders of our Class A units have received a return of their capital. The allocation and distribution rights that our Manager is entitled to with respect to its Class B units may not be amended, altered or repealed, and the number of authorized Class B units may not be increased or decreased, without the consent of our Manager. Accordingly, for so long as our Manager continues to hold our Class B units, it will be entitled to receive 5% of the aggregate amount of any operating gain (excluding depreciation) that we recognize or distribution that we receive.

 

If we pay distributions from sources other than our cash flow from operations, we will have less funds available for investments and your overall return may be reduced. Likewise, funding distributions from the sale of additional securities will dilute your interest in us on a percentage basis and may impact the value of our Class A units.

 

While our goal is to pay distributions from cash flow from operations, we may, at the discretion of our Manager, subject to Board oversight, use other sources to fund distributions, including, without limitation, the sale of assets, borrowings in anticipation of future operating cash flow, net proceeds of our public offerings, cash advances by our Manager, cash resulting from a waiver of fees or reimbursements due to our Manager or the issuance of additional securities. We will only fund distributions by a return of capital following the sale of assets, unless otherwise determined by our Manager in its discretion. Funding distributions from the sales of assets, borrowings, return of capital or proceeds of this offering will result in us having less funds available to make investments. As a result, the return you realize on your investment may be reduced. Doing so may also negatively impact our ability to generate cash flows. Likewise, funding distributions from the sale of additional securities will dilute your interest in us on a percentage basis and may impact the value of our Class A units. We can provide no assurances that future cash flow will support payment of distributions or maintaining distributions at any level, if at all.

 

Your interest in us will be diluted if we issue additional units.

 

Under our operating agreement, we have authority to issue an unlimited number of additional units and options, rights, warrants and appreciation rights relating to such units. In particular, our Board is authorized to provide for the issuance of an unlimited amount of one or more classes or series of units and to fix the number of units, the relative powers, preferences and rights, and the qualifications, limitations or restrictions applicable to each class or series thereof by resolution authorizing the issuance of such class or series, without member approval. We may elect to issue and sell additional units in future private or public offerings or issue units to our Manager or its affiliates, including our Sponsor, in payment of outstanding fees and expenses. We will also seek opportunistic acquisitions of other qualified opportunity funds and qualified opportunity zone businesses using our equity as transaction consideration. Holders of our Class A units will not have preemptive rights to any units we issue in the future. To the extent we issue additional equity interests your percentage ownership interest in us would be diluted.

 

Our investment guidelines delegate broad discretion to our Manager and our Board will not approve each investment and financing decision made by our Manager.

 

Our investment guidelines delegate to our Manager discretion and authority to execute acquisitions and dispositions of investments (including the reinvestment of capital basis and gains) in commercial real estate properties, real estate-related assets, including commercial real estate loans and mortgages, and debt and equity securities issued by other real estate-related companies, as well as private equity acquisitions and investments, and opportunistic acquisitions of other qualified opportunity funds and qualified opportunity zone businesses, provided such investments are consistent with our investment objectives and strategy and our investment guidelines. Our Manager’s investment committee will periodically review our portfolio of assets and investments, our investment objectives and strategy and our investment guidelines to determine whether they remain in the best interests of our Members and may recommend changes to our Board as it deems appropriate. Our Board will not, and will not be required to, review all of our proposed investments. Our Manager may use complex strategies or enter into costly transactions that are difficult or impossible to unwind by the time they are reviewed by our Board, which could result in investment returns that are below expectations or that result in losses, and which would materially and adversely affect our business operations and results.

 

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We may change our investment strategy and guidelines without Member consent, which could result in investments that are different from those described in this prospectus.

 

Our investment guidelines delegate to our Manager discretion and authority to execute acquisitions and dispositions of investments (including the reinvestment of capital basis and gains) in commercial real estate properties, real estate-related assets, including commercial real estate loans and mortgages, and debt and equity securities issued by other real estate-related companies, as well as private equity acquisitions and investments, and opportunistic acquisitions of other qualified opportunity funds and qualified opportunity zone businesses, provided such investments are consistent with our investment objectives and strategy and our investment guidelines. Our Manager’s investment committee will also periodically review our portfolio of commercial real estate assets, our investment objectives and strategy and our investment guidelines to determine whether they remain in the best interests of our Members and may recommend changes to our Board as it deems appropriate. We may, at any time and without Member approval, change our investment strategy and guidelines or cease to be a qualified opportunity fund and acquire assets that do not qualify as qualified opportunity zone investments, which could result in investments that are different from those described in this prospectus or could result in voluntary or involuntary decertification as a qualified opportunity fund, further resulting in an inclusion event, and the recognition of any tax deferred on account of your investment. See “Material U.S. Federal Income Tax Considerations—Tax Treatment of Electing Opportunity Zone Investors” for additional details.

 

Our operating agreement contains provisions that substantially limit remedies available to holders of our units for actions that might otherwise result in liability for our officers, directors or Manager.

 

While our operating agreement provides that our officers and directors have fiduciary duties equivalent to those applicable to officers and directors of a Delaware corporation under the Delaware General Corporation Law, our operating agreement also provides that our officers and directors are liable to us or holders of our units for an act or omission only if such act or omission constitutes a breach of the duties owed to us or the holders of our units, as applicable, by any such officer or director and such breach is the result of (i) willful malfeasance, gross negligence, the commission of a felony or a material violation of law, in each case that has or could reasonably be expected to have a material adverse effect on us or (ii) fraud. Furthermore, our operating agreement provides that our Sponsor will not have any liability to us or any holder of our units for any act or omission and is indemnified in connection therewith.

 

Under our operating agreement, we, our Board and our Manager are each entitled to take actions or make decisions in our “sole discretion” or “discretion” or that we each deem “necessary or appropriate” or “necessary or advisable.” In those circumstances, we, our Board and our Manager are entitled to consider only such interests and factors as we each desire, including our own interests, and we have no duty or obligation (fiduciary or otherwise) to give any consideration to any interest of or factors affecting any others of us or any holder of the Company’s units, and neither we, our Board nor our Manager will be subject to any different standards imposed by our operating agreement, the Delaware Limited Liability Company Act or under any other law, rule or regulation or in equity, except that we each must act in good faith at all times. These modifications of fiduciary duties are expressly permitted by Delaware law. These modifications restrict the remedies available to the holders of our units for actions that, without such modifications, may constitute breaches of duty (including fiduciary duty).

 

Certain claims that may be brought against the Company or our Sponsor, Manager, directors, officers or other agents must be resolved by final and binding arbitration, which follows a different set of procedures and may be more restrictive than litigation.

 

Our operating agreement provides that all claims, controversies or disputes brought by or on behalf of one or more of our Members, record holders or beneficial owners of our units against the Company or our Sponsor, Manager or any of our directors, officers or other agents must be resolved by final and binding arbitration. As a result, we and our Members, record holders and beneficial owners of our units will not be able to pursue litigation in federal or state court against the Company or our Sponsor, Manager or any of our directors, officers, or other agents, and instead will be required to pursue such claims through a final and binding arbitration proceeding.

 

Our operating agreement provides that such arbitration proceedings would generally be conducted in accordance with the rules and policies of the American Arbitration Association. These rules and policies may provide significantly more limited rights than litigation in a federal or state court. In addition, our operating agreement provides that all arbitration proceedings will be closed to the public and confidential, that discovery will be limited to matters directly relevant to issues in the proceeding, and that the parties waive the right to a jury. Our operating agreement also generally provides that each party to an arbitration proceeding is required to bear its own expenses, including attorneys’ fees, that the arbitrator may not render an award that includes shifting of costs or expenses or, in a derivative case, award any portion of the Company’s award to any other party or other party’s attorneys and that all arbitrations must take place on an individual basis. The mandatory arbitration provisions of our operating agreement may discourage our Members, record holders or beneficial owners of our units from bringing, and attorneys from agreeing to represent such parties in, claims against the Company or our Sponsor, Manager or any of our directors, officers, or other agents. Any person or entity purchasing or otherwise acquiring or holding any interest in our units shall be deemed to have notice of and to have consented to our mandatory arbitration provisions.

 

The mandatory arbitration provisions of our operating agreement do not relieve us of our duties to comply with, and our Members, record holders and beneficial owners of our units cannot waive our compliance with, the federal securities laws and the rules and regulations thereunder. We believe that the mandatory arbitration provisions in our operating agreement are enforceable under both federal and state law, including with respect to federal securities law claims, however, there is uncertainty as to their enforceability and it is possible that they may ultimately be determined to be unenforceable.

 

Our operating agreement designates the United States District Court for the Southern District of New York or, if that court does not have jurisdiction, the state courts of New York located in the borough of Manhattan, City of New York, as the sole and exclusive forum for certain claims precluded from resolution pursuant to the mandatory arbitration provision of our operating agreement.

 

Our operating agreement provides that all claims, controversies or disputes brought by or on behalf of one or more of our Members, record holders or beneficial owners of our units against the Company or our Sponsor, Manager or any of our directors, officers or other agents that are precluded from resolution by mandatory arbitration, must be brought before the United States District Court for the Southern District of New York or, if that court does not have jurisdiction, the state courts of New York located in the borough of Manhattan, City of New York, as the sole and exclusive forum for such preclude claim.

 

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The portion of our exclusive forum selection provision designating the state courts of New York located in the borough of Manhattan, City of New York, as the exclusive forum for certain claims precluded from arbitration would not apply to claims brought to enforce a duty or liability created by the Exchange Act of 1934, as amended (the “Exchange Act”), as such claims fall under the exclusive jurisdiction of the federal courts, however the portion of our forum selection provision designating the United States District Court for the Southern District of New York would apply to any such claims. Our exclusive forum selection provision would apply to claims brought to enforce a duty or liability created by the Securities Act. The exclusive forum selection provision in our operating agreement may discourage our Members, record holders or beneficial owners of our units from bringing, and attorneys from agreeing to represent such parties in, claims against the Company or our Sponsor, Manager or any of our directors, officers or other agents. Any person or entity purchasing or otherwise acquiring or holding any interest in our units shall be deemed to have notice of and to have consented to our exclusive forum selection provision.

 

The exclusive forum selection provision of our operating agreement does not relieve us of our duties to comply with, and our Members, record holders and beneficial owners of our units cannot waive our compliance with, the federal securities laws and the rules and regulations thereunder. We believe that the exclusive forum selection provision in our operating agreement is enforceable under both federal and state law, including with respect to federal securities law claims, however, there is uncertainty as to its enforceability and it is possible that it may ultimately be determined to be unenforceable.

 

Holders of our Class A units have limited voting rights and may be bound by a majority or supermajority vote or by a vote of the holder of our Class M unit, as applicable.

 

We are owned by the holders of our Class A units, Class B units and Class M unit. Each Class A unit and each Class B unit entitles the holder thereof to one vote per unit. The Class M unit entitles the holder thereof to that number of votes equal to the product obtained by multiplying (i) the sum of aggregate number of outstanding Class A units plus Class B units, by (ii) 10, on matters on which the holder of our Class M unit has a vote.

 

The holders of our Class A units and Class B units have voting rights only with respect to certain matters, primarily relating to amendments to our operating agreement that would adversely change the rights of the Class A units or Class B units, as applicable, election of our directors (other than the Class M Director (as hereinafter defined)), removal of our directors for “cause” (other than the Class M Director), and our dissolution. Generally, matters to be voted on by the holders of our Class A units must be approved by a majority of the votes cast by all Class A units and Class B units, voting together as a single class, that are present in person or represented by proxy, although the vote to remove a director for “cause” requires a super-majority, four-fifths vote. If any vote occurs, you will be bound by the majority or supermajority vote, as applicable, even if you did not vote with the majority or supermajority.

 

Our Manager will hold our Class M unit for so long as it remains our manager. Accordingly, our Manager will be able to determine the outcome of all matters on which a holder of our Class M unit has a vote. Such matters include certain mergers and acquisitions, certain amendments to our operating agreement and the election of one Class III director (the “Class M Director”). The Class M unit does not represent an economic interest in the Company.

 

If we internalize our management functions, your interest in us could be diluted, and we could incur other significant costs associated with being self-managed.

 

We are externally managed by our Manager, who is an affiliate of our Sponsor. We may in the future decide to internalize our management function and, should we elect to do so, we may acquire our Manager’s or its affiliates’, including our Sponsor’s, assets and personnel. We, our Operating Companies, and our Manager have entered into a management agreement. The terms of the management agreement restrict us from hiring or soliciting any employee of our Manager or its affiliates, including our Sponsor, for a period of two years from termination of the management agreement. In addition, upon any termination or non-renewal of the management agreement by us our Manager will be entitled to receive its prorated management fee through the expiration or termination date and will be paid a termination fee equal to six times the annual management fee earned by our Manager during the 12-month period ended as of the last day of the quarter immediately preceding the termination date (the “termination fee”); however, if less than 12 months have elapsed as of the termination date, the termination fee will be calculated by annualizing the management fee earned during the most recently completed quarter prior to the termination date. These provisions could make it costly or difficult for us to internalize management without incurring termination fees or acquiring assets and personnel from our Manager and its affiliates, including our Sponsor, for consideration that would be negotiated at the time of any such acquisition. Any termination fees we incur would be paid in cash and any consideration we pay for acquiring assets and personnel could take many forms, including issuance of units or cash payments, which could directly impact our NAV, by reducing the amount of our assets, or result in the dilution of your interest in us. If we internalize management, we will no longer pay management fees to our Manager, however, our direct expenses, such as the compensation and benefits costs and expenses associated with having officers and other employees and consultants, would increase. In addition, we may issue equity awards to officers, employees and consultants, which awards would decrease our net income and funds from operations and may further dilute your investment.

 

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We will incur additional costs and expenses associated with maintaining our status as a publicly traded partnership and operating as an Exchange Act reporting company.

 

We will incur additional costs and expenses associated with maintaining our status as a publicly traded partnership and operating as an Exchange Act reporting company. Costs and expenses that we will incur, include, without limitation, those associated with the preparation and filing of annual and quarterly reports, federal and state tax returns, Schedule K-1 preparation and distribution, investor relations, registrar and transfer agent fees, director compensation, accounting and audit fees and incremental insurance costs, including director and officer liability insurance. It is possible that actual costs and expenses associated with maintain our status as a publicly traded partnership and operating as an Exchange Act reporting company will be higher than we currently estimate and we may require additional capital or future earnings to cover these costs and expenses, which could materially and adversely affect our business, results of operations, financial condition and cash flows.

 

We are not required to comply with certain reporting and disclosure requirements that are applicable to other public companies.

 

We are an “emerging growth company,” as defined in the Jump Start Our Business Startups Act of 2012 (“JOBS Act”). As an emerging growth company, we have elected to take advantage of certain exemptions from various reporting and disclosure requirements that are applicable to public companies that are not emerging growth companies. For so long as we remain an emerging growth company, we will not be required to:

 

  have an auditor attestation report on our internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”);
     
  submit certain executive compensation matters to Member advisory votes pursuant to the “say on frequency” and “say on pay” provisions (requiring a non-binding Member vote to approve compensation of certain executive officers) and the “say on golden parachute” provisions (requiring a non-binding Member vote to approve golden parachute arrangements for certain executive officers in connection with mergers and certain other business combinations) of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010; or
     
  disclose certain executive compensation related items, such as the correlation between executive compensation and performance and comparisons of the chief executive officer’s compensation to median employee compensation.

 

In addition, the JOBS Act provides that an emerging growth company may take advantage of an extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies. This means that an emerging growth company can delay adopting certain accounting standards until such standards are otherwise applicable to private companies. We have elected to take advantage of the extended transition period. Since we will not be required to comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies, our financial statements may not be comparable to the financial statements of companies that comply with public company effective dates. If we were to subsequently elect to comply with these public company effective dates, such election would be irrevocable pursuant to Section 107 of the JOBS Act.

 

We will remain an emerging growth company for up to five years, or until the earliest of (i) the last date of the fiscal year during which we had total annual gross revenues of $1.07 billion or more, (ii) the date on which we have, during the previous three-year period, issued more than $1.07 billion in non-convertible debt, or (iii) the date on which we are deemed to be a “large accelerated filer” as defined under Rule 12b-2 under the Exchange Act.

 

Also, even once we are no longer an emerging growth company, we still may not be subject to auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act unless we meet the definition of a large accelerated filer or an accelerated filer under Section 12b-2 of the Exchange Act. In addition, so long as we are externally managed by our Manager and we do not directly compensate our executive officers, or reimburse our Manager or its affiliates for the compensation paid to persons who serve as our executive officers, we do not expect to include disclosures relating to executive compensation in our periodic reports or proxy statements and, as a result, do not expect to be required to seek Member approval of executive compensation and golden parachute compensation arrangements pursuant to Sections 14A(a) and (b) of the Exchange Act. See “Plan of Operation—Emerging Growth Company.”

 

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If we fail to maintain effective disclosure controls and procedures or internal controls over financial reporting, we may not be able to accurately and timely make our required disclosures or report our financial results.

 

Effective disclosure controls and procedures and internal controls over financial reporting are necessary for us to provide reliable disclosures and financial reports, adequately detect and prevent misstatements and fraud, and operate successfully. If we cannot provide reliable disclosures and financial reports or detect and prevent misstatements and fraud, our reputation and operating results may be harmed.

 

We are continuing to develop and refine our disclosure controls and procedures and improve our internal controls over financial reporting. We have expended, and anticipate that we will continue to expend, significant resources in order to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting. However, any disclosure controls and procedures or internal controls over financial reporting that we put into place, no matter how well designed and operated, can only provide reasonable assurance of achieving their objectives.

 

As a result of the inherent limitations in the design of any system of controls, our disclosure controls and procedures and internal controls over financial reporting may not detect or prevent all misstatements and fraud, and we cannot assure you that there will not be significant deficiencies or material weaknesses in our disclosure controls and procedures and internal control over financial reporting in future periods. Moreover, for so long as we are an emerging growth company, we will not be required to have an auditor attestation report on our internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act and we cannot assure you that the systems and processes that we have put into place to evaluate and test our disclosure controls and procedures and internal controls over financial reporting so as to allow management to report on their effectiveness will be consistently adequate. If our disclosure controls and procedures and internal control over financial reporting prove to be ineffective and if we are not able to adequately remediate any deficiencies, investors may lose confidence in our disclosures and reported financial information, which could materially and adversely affect our business.

 

Your investment returns may be reduced if we are required to register as an investment company under the Investment Company Act.

 

We will engage primarily in the business of investing in real estate and to conduct our operations such that neither we nor any of our subsidiaries are required to register as an “investment company” under the Investment Company Act of 1940, as amended (the “Investment Company Act”). See “Questions and Answers About This Offering—Are there Investment Company Act considerations?”

 

Maintaining our exclusion from registration under the Investment Company Act will limit our ability to make certain investments. In addition, although we intend to continuously monitor our holdings, there can be no assurance that we, our Operating Companies or any of the subsidiaries of our Operating Companies will be able to maintain our exclusion from registration. A change in the value of any of our assets could negatively affect our ability to maintain our exclusion from registration and we may be unable to sell assets we would otherwise want to sell and may need to sell assets we would otherwise want to retain. In addition, we may have to acquire additional assets that we might not otherwise have acquired or may have to forego opportunities to acquire assets that we would otherwise want to acquire and would be important to our investment strategy.

 

If we are required to register as an investment company under the Investment Company Act, we would become subject to substantial regulation with respect to our capital structure (including our ability to use borrowings), management, operations, transactions with affiliated persons (as defined in the Investment Company Act), and portfolio composition, including disclosure requirements and restrictions with respect to diversification and industry concentration, and other matters. Compliance with the Investment Company Act would, accordingly, limit our ability to make certain investments and require us to significantly restructure our business plan. If we were required to register as an investment company but failed to do so, we could be prohibited from engaging in our business, and criminal and civil actions could be brought against us.

 

We enter into joint ventures, partnerships, co-tenancies and other co-ownership arrangements or participations with affiliates of our Sponsor and Manager, including Belpointe SP, LLC.

 

All of our assets are and will continue to be held by, and all of our operations are and will continue to be conducted through our Operating Companies, either directly or indirectly through subsidiaries. expand our investment portfolio, we will continue to enter into joint ventures, partnerships, co-tenancies and other co-ownership arrangements or participations with affiliates of our Sponsor and Manager, such as Belpointe SP, LLC (“Belpointe SP”), or its affiliates (together with Belpointe SP, the “Belpointe SP Group”), as well as independent developers and owners.

 

We have and will continue to acquire interests in properties where a member of the Belpointe SP Group will act as general partner or co-general partner, manager or co-manager, developer or co-developer, or any of the foregoing, all of which will be structured in one of the following formats:

 

  A member of the Belpointe SP Group will act as the general partner, co-general partner, manager, co-manager or as managing member of joint ventures in which our Operating Companies, directly or indirectly through subsidiaries, will participate as limited partners or non-managing members, to acquire stabilized, cash flow generating real estate assets that do not require renovation or development, real estate-related assets, including commercial real estate loans and mortgages, and debt and equity securities issued by other real estate companies, select private equity investments, and opportunistic acquisitions of other qualified opportunity funds and qualified opportunity zone businesses.
     
  A member of the Belpointe SP Group will act as the general partner, manager or managing member of joint ventures in which our Operating Companies, directly or indirectly through subsidiaries, will participate as limited partners or non-managing members, and a member of the Belpointe SP Group will act as the developer of the projects owned by the joint ventures.
     
  A member of the Belpointe SP Group will act as the general partner, manager or managing member of joint ventures in which our Operating Companies, directly or indirectly through subsidiaries, will participate as limited partners or non-managing members. A member of the Belpointe SP Group will retain the services of a local developer to create a Belpointe satellite office, which will act as the developer for multiple joint venture projects within specific regions of the United States and its territories. These satellite offices will enable us to increase our presence and expertise in multiple regions.
     
  Our Manager or a member of the Belpointe SP Group will set up exclusive programmatic joint ventures with experienced regional developers to co-invest and co-develop in one or more projects within specific regions of the United States and its territories. A member of the Belpointe SP Group will act as the general partner, manager or managing member of the programmatic joint ventures with our Operating Companies, directly or indirectly through subsidiaries, participating as limited partners or non-managing members. These programmatic joint ventures will enable us to increase our presence and expertise in multiple regions.

 

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  Our Manager or a member of the Belpointe SP Group will enter into joint ventures with experienced local developers to co-invest and co-develop projects on a deal-by-deal basis. A member of the Belpointe SP Group will act as the general partner, manager or managing member of the joint ventures with our Operating Companies, directly or indirectly through subsidiaries, participating as limited partners or non-managing members. A member of the Belpointe SP Group may act as the co-developer of projects with the joint venture partners and developers.
     
  Our Manager or a member of the Belpointe SP Group will enter into joint ventures with independent third-party experienced local developers to co-invest and co-develop on our behalf. The joint venture partners and developers will typically act as the general partner or managing member for the joint ventures with our Operating Companies, directly or indirectly through subsidiaries, participating as the limited partners or non-managing members.

 

Any membership interests that members of the Belpointe SP Group hold in our joint venture investments in their capacity as a general partner, manager or managing member will be exempt from paying any promotes.

 

Under these joint venture arrangements, members of the Belpointe SP Group, their development affiliates and co-development partners will be entitled to receive project level fees, reimbursement by the joint ventures for fees and expenses, their promoted interest on a deal-by-deal basis and other fees. If a joint venture includes third party limited partners or non-managing members, in addition to a directly or indirectly owned subsidiary of one of our Operating Companies, the general partner, manager or managing member of that joint venture, including members of the Belpointe SP Group, will receive a promoted interest on capital invested by all limited partners or non-managing members, however the promoted interest on third-party limited partners’ or non-managing members’ capital may be different from the promoted interest on our capital. For a detailed description of our anticipated joint venture, partnerships, co-tenancies and other co-ownership arrangements, see “Investment Objectives and Strategies—Opportunity and Market Overview—Joint Venture and Other Co-Ownership Arrangements” for additional details regarding our joint ventures, partnerships, co-tenancies and other co-ownership arrangements.

 

We may make a substantial amount of joint venture investments, including with affiliates of our Manager and Sponsor, such as members of the Belpointe SP Group. Joint venture investments could be adversely affected by our lack of sole decision-making authority, our reliance on the financial condition of our joint venture partners and disputes between us and our joint venture partners.

 

We may co-invest in joint ventures with affiliates of our Manager and Sponsor, including members of the Belpointe SP Group, or third parties in partnerships or other entities that own real estate properties. We may acquire non-controlling interests in joint ventures. Even if we have some control in a joint venture, we would not be in a position to exercise sole decision-making authority regarding the joint venture. Investments in joint ventures may, under certain circumstances, involve risks not present were another party not involved, including the possibility that joint venture partners might become bankrupt, fail to fund their required capital contributions or commit fraud or other bad acts. Joint venture partners may have economic or other business interests or goals that are inconsistent with our business interests or goals and may be in a position to take actions contrary to our policies or objectives. Such investments may also have the potential risk of impasses on decisions, such as a sale, because neither we nor the joint venture partner would have full control over the joint venture. Disputes between us and joint venture partners may result in litigation or arbitration that would increase our expenses and prevent our officers and directors from focusing their time and effort on our business. Consequently, actions by or disputes with joint venture partners might result in subjecting properties owned by the joint venture to additional risk. In addition, we may in certain circumstances be liable for the actions of our joint venture partners.

 

If we have a right of first refusal to buy out a joint venture partner, we may be unable to finance such a buy-out if it becomes exercisable or we are required to purchase such interest at a time when it would not otherwise be in our best interest to do so. If our interest is subject to a buy/sell right, we may not have sufficient cash, available borrowing capacity or other capital resources to allow us to elect to purchase an interest of a joint venture partner subject to the buy/sell right, in which case we may be forced to sell our interest as the result of the exercise of such right when we would otherwise prefer to keep our interest. In some joint ventures we may be obligated to buy all or a portion of our joint venture partner’s interest in connection with a crystallization event, and we may be unable to finance such a buy-out when such crystallization event occurs, which may result in interest or other penalties accruing on the purchase price. If we buy our joint venture partner’s interest, we will have increased exposure in the underlying investment. The price we use to buy our joint venture partner’s interest or sell our interest is typically determined by negotiations between us and our joint venture partner and there is no assurance that such price will be representative of the value of the underlying property or equal to our then-current valuation of our interest in the joint venture that is used to calculate our NAV. Finally, we may not be able to sell our interest in a joint venture if we desire to exit the venture for any reason or if our interest is likewise subject to a right of first refusal of our joint venture partner, our ability to sell such interest may be adversely impacted by such right. Joint ownership arrangements with affiliates of our Manager and Sponsor, including members of the Belpointe SP Group, may also entail further conflicts of interest. Some additional risks and conflicts related to our joint venture investments (including joint venture investments with our Manager, Sponsor and members of the Belpointe SP Group) include:

 

  the joint venture partner may have economic or other interests that are inconsistent with our interests, including interests relating to the financing, management, operation, leasing or sale of the assets purchased by such joint venture;
     
  tax, Investment Company Act and other regulatory requirements applicable to the joint venture partner may cause it to want to take actions contrary to our interests;

 

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  the joint venture partner may have joint control of the joint venture even in cases where its economic stake in the joint venture is significantly less than ours;
     
  under the joint venture arrangement, neither we nor the joint venture partner will be in a position to unilaterally control the joint venture, and deadlocks may occur. Such deadlocks could adversely impact the operations and profitability of the joint venture, including as a result of the inability of the joint venture to act quickly in connection with a potential acquisition or disposition. In addition, depending on the governance structure of such joint venture partner, decisions of such vehicle may be subject to approval by individuals who are independent of us;
     
  under the joint venture arrangement, we and the joint venture partner may have a buy/sell right and, as a result of an impasse that triggers the exercise of such right, we may be forced to sell our investment in the joint venture, or buy the joint venture partner’s share of the joint venture at a time when it would not otherwise be in our best interest to do so; and
     
  our participation in investments in which a joint venture partner participates will be less than what our participation would have been had such other vehicle not participated, and because there may be no limit on the amount of capital that such joint venture partner can raise, the degree of our participation in such investments may decrease over time.

 

Furthermore, we may have conflicting fiduciary obligations if we acquire properties with our affiliates or other related entities; as a result, in any such transaction we may not have the benefit of arm’s-length negotiations of the type normally conducted between unrelated parties.

 

Operational risks may disrupt our business, result in losses or limit our growth.

 

We rely heavily on our Sponsor’s financial, accounting, communications and other data processing systems. Such systems may fail to operate properly or become disabled as a result of tampering or a breach of the network security systems or otherwise. In addition, such systems are from time to time subject to cyberattacks. Breaches of our Sponsor’s network security systems could involve attacks that are intended to obtain unauthorized access to our proprietary information or personal identifying information of holders of our Class A units, destroy data or disable, degrade or sabotage our systems, often through the introduction of computer viruses, cyberattacks and other means and could originate from a wide variety of sources, including unknown third parties outside of our Sponsor. Although our Sponsor takes various measures to ensure the integrity of such systems, there can be no assurance that these measures will provide protection. If such systems are compromised, do not operate properly or are disabled, we could suffer financial loss, a disruption of our businesses, liability to investors, regulatory intervention or reputational damage.

 

In addition, we rely on third-party service providers for certain aspects of our business, including for certain information systems, technology and administration. Any interruption or deterioration in the performance of these third parties or failures of their information systems and technology could impair the quality of our operations and could affect our reputation and hence adversely affect our business.

 

If our techniques for managing risk are ineffective, we may be exposed to unanticipated losses.

 

In order to manage the significant risks inherent in our business, we must maintain effective policies, procedures and systems that enable us to identify, monitor and control our exposure to market, operational, legal and reputational risks. Our risk management methods may prove to be ineffective due to their design or implementation or as a result of the lack of adequate, accurate or timely information. If our risk management efforts are ineffective, we could suffer losses or face litigation and sanctions or fines from regulators.

 

Our techniques for managing risks may not fully mitigate the risk exposure in all economic or market environments, or against all types of risk, including risks that we might fail to identify or anticipate. Any failures in our risk management techniques and strategies to accurately quantify such risk exposure could limit our ability to manage risks or to seek positive, risk-adjusted returns. In addition, any risk management failures could cause fund losses to be significantly greater than historical measures predict.

 

Risks Related our Assets and Investments

 

Our success is dependent on general market and economic conditions as well as numerous other factors outside of our control.

 

Our activities and investments may be adversely affected by changes in market, economic, political or regulatory conditions, such as fluctuations in real estate market prices, rising interest rates, availability of credit, credit defaults, rising inflation rates, supply chain disruptions, labor shortages, economic uncertainty, instability in the banking system, changes in laws (including laws relating to taxation of us or of our investments), and national and international political, environmental and socioeconomic circumstances (including disease outbreaks, wars, cyberattacks, terrorist acts or security operations), such as the escalating conflict between Russia and Ukraine and the severe economic sanctions and export controls imposed by the U.S. and other governments against Russia and Russian interests, as well as by numerous other factors outside of our control.

 

In addition, our financial condition may be adversely affected by an economic downturn, related to market, economic or political instability, or otherwise. A recession, slowdown or sustained downturn in the U.S. or global economy (or any particular segment thereof), inflationary pressures or the weakening of credit markets could adversely affect the value of our investments and our profitability, impede our ability to perform under or refinance our existing obligations, and impair our ability to effectively deploy our capital or effectively exit or realize upon investments on favorable terms.

 

It is not possible for us to predict whether or to what extent these factors may negatively impact economies around the world, including the U.S., and if any of the foregoing market, economic or political issues are not managed appropriately, they could impair our profitability or result in substantial or total losses to us in respect of certain investments, which losses may be exacerbated by our use of leverage.

 

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Recent disruptions in the U.S. and global banking systems may adversely affect our ability to obtain construction financing, which may negatively impact our ability to complete projects on budget and on schedule and, as a result, adversely affect our financial condition and results of operations.

 

The recent failures of Silicon Valley Bank (SVB) and Signature Bank (SNY), actions by the U.S. Department of the Treasury, the Federal Reserve and the FDIC in taking over SVB and SNY and protecting uninsured depositors, the Biden administration’s call for greater regulation over the U.S. banking system and market participants’ increasingly negative outlook on the operating environment for U.S. and global banks, may make it more difficult for us to obtain, or cause delays in our obtaining construction financing from banks. The full effects of SVB and SNY failures, and the subsequent failure of Credit Suisse, remain to be seen and may not be realized for some time. There can be no assurance that these events will not negatively impact our ability to obtain construction financing, complete our development or redevelopment activities on budget and on schedule or adversely affect our financial condition and results of operations.

 

The market in which we participate is competitive and, if we do not compete effectively, our operating results could be harmed.

 

We face competition from various entities for investment opportunities, including other qualified opportunity funds, REITs, Delaware statutory trusts, pension funds, insurance companies, private equity and other alternative investment funds and companies, partnerships and developers. In addition to third-party competitors, other programs sponsored by our Sponsor and its affiliates, especially those with investment strategies that are similar to our own, may compete with us for investment opportunities.

 

Most of our current or potential competitors have significantly more financial, technical, marketing and other resources than we do. Larger competitors may also enjoy significant advantages that result from, among other things, a lower cost of capital and enhanced operating efficiencies. In addition, the number of entities and the amount of funds competing for suitable investments may increase over time. Any such increase would result in greater demand for investment opportunities and could result in our acquiring assets and investments at higher prices or using less-than-ideal capital structures. If we pay higher prices for our assets and investments, our returns could be lower and the value of our assets and investments may not appreciate or may decrease significantly below the prices paid, and you may experience a lower than anticipated return on your investment.

 

Our performance is subject to risks associated with the real estate industry.

 

The real estate industry is cyclical in nature, and a deterioration of real estate fundamentals generally, and in the areas where our properties are located in particular, will have an adverse effect on the performance of our investments. The value of real estate assets and real estate-related investments can fluctuate for various reasons. The following factors, among others, may adversely affect the real estate industry, including our properties, and could therefore adversely impact our financial condition and results of operations:

 

  interest rate fluctuations and lack of availability of financing;
     
  changes in national, regional or local economic, demographic or capital market conditions;
     
  persistent inflation;
     
  a lack of appropriate real estate investment opportunities, including appropriate qualified opportunity zone investment opportunities;
     
  disease outbreaks;
     
  acts of war, cyberattacks or terrorism;
     
  bank liquidity;
     
  increases in borrowing rates;
     
  changes in environmental and zoning laws;
     
  fluctuations in energy costs;
     
  overbuilding and increased competition for properties targeted by our investment strategy;

 

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  future adverse national real estate trends, including increasing vacancy rates, declining rental rates and general deterioration of market conditions;
     
  changes in supply and demand fundamentals;
     
  limitations, reductions or eliminations of tax benefits;
     
  casualty or condemnation losses;
     
  bankruptcy, financial difficulty or lease default of a major tenant;
     
  regulatory limitations on rent;
     
  increased mortgage defaults and the availability of mortgage funds which may render the sale or refinancing of properties difficult or impracticable;
     
  changes in laws, regulations and fiscal policies, including increases in property taxes and limitations on rental rates;
     
  natural disasters, severe weather patterns and similar events.
     
  declines in consumer confidence and spending; and
     
  public perception that any of the above events may occur.

 

All of these factors are beyond our control. Moreover, certain significant expenditures associated with real estate (such as real estate taxes, maintenance costs and, where applicable, mortgage payments) have no relationship with, and thus do not diminish in proportion to, a reduction in income from the property. Any negative changes in these factors could impair our ability to meet our obligations and make distributions to holders of our Class A units and could adversely impact our ability to effectively achieve our investment objectives and reduce the overall returns on our investments.

 

Real estate investments are subject to general industry downturns as well as downturns in specific geographic regions. We cannot predict occupancy levels for a particular property or whether any tenant or mortgage or other real estate related loan borrower will remain solvent. We also cannot predict the future value of our investments. Accordingly, we cannot guarantee that you will receive cash distributions.

 

Real estate investments are subject to general downturns in the industry as well as downturns in specific geographic regions. For example, as of the date of this prospectus, a majority of our investments are located in Florida. Historically Florida has been at greater risk of acts of nature such as hurricanes and tropical storms and has been subject to more pronounced real estate downturns than other regions. Accordingly, our business, financial condition and results of operations may be particularly susceptible to downturns or changes in the local Florida economies where we operate. Moreover, we cannot predict occupancy levels for a particular property or whether any tenant or mortgage or other real estate related loan borrower will remain solvent. We also cannot predict the future value of our investments. Accordingly, we cannot guarantee that you will receive cash distributions.

 

There are significant risks associated with the development or redevelopment of our real estate investments that may prevent their completion on budget and on schedule and which may adversely affect our financial condition and results of operations.

 

We may engage in extensive development or redevelopment activities with respect to our real estate investments, including, without limitation, grading and installing roads, sidewalks, gutters, utility improvements (such as storm drains, water, gas, sewer, power and communications), landscaping and shared amenities (such as community buildings, neighborhood parks, trails and open spaces). Such development and redevelopment activities entail risks that could adversely impact our financial condition and results of operations, including:

 

  construction costs, which may exceed our original estimates due to increases in materials, labor or other costs, which could make the project less profitable;
     
  permitting or construction delays, which may result in increased debt service expense and increased project costs, as well as deferred revenue;
     
  supply chain issues or other unavailability of raw materials when needed, which may result in project delays, stoppages or interruptions, which could make the project less profitable;
     
  federal, state and local grants to complete certain highways, interchange, bridge projects or other public improvements may not be available, which could increase costs and make the project less profitable;
     
  availability and timely receipt of zoning and other regulatory approvals to develop or redevelop our properties for a particular use or with respect to a particular improvement;
     
  claims for warranty, product liability and construction defects after a property has been built;
     
  claims for injuries that occur in the course of construction activities;

 

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  poor performance or nonperformance by, or disputes with, any of our contractors, subcontractors or other third parties on whom we will rely;
     
  health and safety incidents and site accidents;
     
  unforeseen engineering, environmental or geological problems, which may result in delays or increased costs;
     
  labor shortages, stoppages, slowdowns or interruptions;
     
  compliance with environmental planning and protection regulations and related legal proceedings;
     
  liabilities, expenses or project delays, stoppages or interruptions as a result of challenges by third parties in legal proceedings;
     
  delay or inability to acquire property, rights of way or easements that may result in delays or increased costs;
     
  acts of war, cyberattacks or terrorism; and
     
  weather-related and geological interference, including landslides, earthquakes, floods, drought, wildfires and other events, which may result in delays or increased costs.

 

We cannot assure you that projects will be completed on schedule or that construction costs will not exceed budgeted amounts. Failure to complete development or redevelopment activities on budget or on schedule may adversely affect our financial condition and results of operations.

 

Our Manager’s due diligence may not reveal all factors or risks affecting an investment.

 

There can be no assurance that our Manager’s due diligence processes will uncover all relevant facts that would be material to an investment decision. Before making an investment, our Manager will assess the strength of the underlying asset and any other factors that it believes are material to the performance of the investment. In making the assessment and otherwise conducting customary due diligence, our Manager will rely on the resources available to it and, in some cases, investigations by third parties.

 

Actual rents we receive may be less than estimated, operating expenses may be higher than anticipated and we may experience a decline in rental rates from time to time, any of which could adversely affect our financial condition, results of operations and cash flow.

 

As a result of potential factors, including competitive pricing pressure in our markets, a general economic downturn and the desirability of our properties compared to other properties in our markets, we may be unable to realize our estimated market rents across the properties in our portfolio or operating expenses at properties in our portfolio may be higher than anticipated. In addition, depending on market rental rates at any given time as compared to expiring leases on properties in our portfolio, from time-to-time rental rates for expiring leases may be higher than starting rental rates for new leases. If we are unable to obtain sufficient rental rates across our portfolio, or operating expenses are higher than anticipated, our ability to generate cash flow growth will be negatively impacted.

 

Properties that have significant vacancies could be difficult to sell, which could diminish the return on these properties.

 

A property may incur vacancies either by the expiration of tenant leases or the continued default of tenants under their leases. If vacancies continue for a long period of time, we may suffer reduced revenues resulting in less cash available for distributions. In addition, the resale value of the property could be diminished because the market value of our properties will depend principally upon the value of the cash flow generated by the leases associated with that property. Such a reduction in the resale value of a property could also reduce the value of your investment.

 

Further, a decline in general economic conditions in the markets in which our investments are located or in the U.S. generally could lead to an increase in tenant defaults, lower rental rates and less demand for commercial real estate space in those markets. As a result of these trends, we may be more inclined to provide leasing incentives to our tenants in order to compete in a more competitive leasing environment. Such trends may result in reduced revenue and lower resale value of properties.

 

We may enter into long-term leases with tenants in certain properties, which may not result in fair market rental rates over time.

 

We may enter into long-term leases with tenants of certain of our properties or include renewal options that specify a maximum rate increase. These leases often provide for rent to increase over time; however, if we do not accurately judge the potential for increases in market rental rates, we may set the terms of these long-term leases at levels such that, even after contractual rent increases, the rent under our long-term leases is less than then-current market rates. Further, we may have no ability to terminate those leases or to adjust the rent to then-prevailing market rates. As a result, our cash available for distributions could be lower than if we did not enter into long-term leases.

 

Certain properties that we acquire may not have efficient alternative uses and we may have difficulty leasing them to new tenants or have to make significant capital expenditures to get them to do so.

 

Certain properties that we acquire may be difficult to lease to new tenants, should the current tenant terminate or choose not to renew its lease. These properties will generally have received significant tenant-specific improvements and only very specific tenants may be able to use such improvements, making the properties very difficult to re-lease in their current condition. Additionally, an interested tenant may demand that, as a condition of executing a lease for the property, we finance and construct significant improvements so that the tenant could use the property. This expense may decrease cash available for distribution, as we likely would have to (i) pay for the improvements up-front or (ii) finance the improvements at potentially unattractive terms.

 

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We will depend on tenants for our revenue, and lease defaults or terminations could reduce our net income and limit our ability to pay distributions.

 

The success of our investments materially depends on the financial stability of our tenants. A default or termination by a tenant on its lease payments to us would cause us to lose the revenue associated with such lease and require us to find an alternative source of revenue to meet mortgage payments and prevent a foreclosure if the property is subject to a mortgage. In the event of a tenant default or bankruptcy, we may experience delays in enforcing our rights as landlord and may incur substantial costs in protecting our investment and re-leasing our property. If a tenant defaults on or terminates a lease, we may be unable to lease the property for the rent previously received or sell the property without incurring a loss. These events could cause us to reduce the amount of distributions we pay.

 

If any of our significant tenants were adversely affected by a material business downturn or were to become bankrupt or insolvent, our results of operations could be adversely affected.

 

General and regional economic conditions may adversely affect our major tenants and potential tenants in our markets. Our major tenants may experience a material business downturn, which could potentially result in a failure to make timely rental payments or a default under their leases. In many cases, through tenant improvement allowances and other concessions, we will have made substantial up-front investments in the applicable leases that we may not be able to recover. In the event of a tenant default, we may experience delays in enforcing our rights and may also incur substantial costs to protect our investments.

 

The bankruptcy or insolvency of a major tenant or lease guarantor may adversely affect the income produced by our properties and may delay our efforts to collect past due balances under the relevant leases and could ultimately preclude collection of these sums altogether. If a lease is rejected by a tenant in bankruptcy, we would have only a general unsecured claim for damages that is limited in amount and which may only be paid to the extent that funds are available and in the same percentage as is paid to all other holders of unsecured claims.

 

If any of our significant tenants were to become bankrupt or insolvent, suffer a downturn in their business, default under their leases, fail to renew their leases or renew on terms less favorable to us than their current terms, our results of operations and cash flow could be adversely affected.

 

We expect to acquire primarily qualified opportunity zone investments, with a focus on markets with favorable risk-return characteristics. If our investments in these geographic areas experience adverse economic conditions, our investments may lose value and we may experience losses.

 

Our initial investments consist of and are expected to continue to consist of properties located in qualified opportunity zones for the development or redevelopment of multifamily, student housing, senior living, healthcare, industrial, self-storage, hospitality, office, mixed-use, data centers and solar projects located throughout the United States and its territories. These qualified opportunity zone investments will carry the risks associated with certain markets where we acquire properties. Consequently, we may experience losses as a result of being overly concentrated in certain geographic areas. A worsening of economic conditions in U.S. markets and, in particular, the markets where we end up acquiring properties, could have an adverse effect on our business and could impair the value of our collateral.

 

Actions of any joint venture partners that we may have in the future could reduce the returns on joint venture investments and decrease your overall investment return.

 

We enter into joint ventures to acquire properties and other assets and investments. We may also purchase and develop properties in joint ventures or in partnerships, co-tenancies or other co-ownership arrangements. Such investments may involve risks not otherwise present with other methods of investment, including, for example, the risks:

 

  that our co-venturer, co-tenant or partner in an investment could become insolvent or bankrupt;
     
  that our co-venturer, co-tenant or partner in an investment could engage in certain bad acts, such as fraud or intentional misrepresentation, intentional waste, willful misconduct, criminal acts, misappropriation of funds, that would increase our expenses or result in other liabilities to us;
     
  that such co-venturer, co-tenant or partner may at any time have economic or business interests or goals that are or that become inconsistent with our business interests or goals;
     
  that such co-venturer, co-tenant or partner may be delegated certain “day-to-day” property operating procedures;
     
  that such co-venturer, co-tenant or partner may be in a position to act contrary to our instructions or requests or contrary to our policies or objectives; or
     
  that disputes between us and our co-venturer, co-tenant or partner may result in litigation or arbitration that would increase our expenses and prevent our officers and directors from focusing their time and effort on our operations.

 

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Any of the above might subject an investment to liabilities in excess of those contemplated and thus reduce our returns on that investment and the value of your investment.

 

We intend to seek opportunistic acquisitions of other qualified opportunity funds and qualified opportunity zone businesses.

 

We intend to seek opportunistic acquisitions of other qualified opportunity funds and qualified opportunity zone businesses using our equity as transaction consideration. These acquisitions will involve significant challenges and risks, including, without limitation, regulatory complexities associated with integrating other qualified opportunity funds and qualified opportunity zone businesses into our organizational structure in a manner that is consistent with our qualification as a publicly traded partnership and qualified opportunity fund, new regulatory requirements and compliance risks that we may become subject to as a result of acquisitions, unforeseen or hidden liabilities or costs that may adversely affect our NAV following such acquisitions, and the risk that any of our proposed acquisitions do not close. Any of these challenges could disrupt our ongoing operations, increase our expenses and adversely affect our results of operations and financial condition.

 

Costs imposed pursuant to governmental laws and regulations may reduce our net income and the cash available for distributions.

 

Real property and the operations conducted on real property are subject to federal, state and local laws and regulations relating to protection of the environment and human health. We could be subject to liability in the form of fines, penalties or damages for noncompliance with these laws and regulations. These laws and regulations generally govern wastewater discharges, air emissions, the operation and removal of underground and above-ground storage tanks, the use, storage, treatment, transportation and disposal of solid and hazardous materials, the remediation of contamination associated with the release or disposal of solid and hazardous materials, the presence of toxic building materials and other health and safety-related concerns.

 

Some of these laws and regulations may impose joint and several liability on the tenants, owners or operators of real property for the costs to investigate or remediate contaminated properties, regardless of fault, whether the contamination occurred prior to purchase, or whether the acts causing the contamination were legal. Activities of our tenants, the condition of properties at the time we buy them, operations in the vicinity of our properties, such as the presence of underground storage tanks, or activities of unrelated third parties may affect our properties.

 

The presence of hazardous substances, or the failure to properly manage, insure, bond over, or remediate these substances, may hinder our ability to sell, rent or pledge such property as collateral for future borrowings. Any material expenditures, fines, penalties or damages we must pay will reduce our ability to make distributions and may reduce the value of your investment.

 

The costs of defending against claims of environmental liability, of complying with environmental regulatory requirements, of remediating any contaminated property or of paying personal injury or other damage claims could reduce the amounts available for distributions.

 

Under various federal, state and local environmental laws, ordinances and regulations, a current or previous real property owner or operator may be liable for the cost of removing or remediating hazardous or toxic substances on, under or in such property. These costs could be substantial. Such laws often impose liability whether or not the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. Environmental laws also may impose liens on property or restrictions on the manner in which property may be used or businesses may be operated, and these restrictions may require substantial expenditures or prevent us from entering into leases with prospective tenants that may be impacted by such laws. Environmental laws provide for sanctions for noncompliance and may be enforced by governmental agencies or, in certain circumstances, by private parties. Certain environmental laws and common law principles could be used to impose liability for the release of and exposure to hazardous substances, including asbestos-containing materials and lead-based paint. Third parties may seek recovery from real property owners or operators for personal injury or property damage associated with exposure to released hazardous substances and governments may seek recovery for natural resource damage. The costs of defending against claims of environmental liability, of complying with environmental regulatory requirements, of remediating any contaminated property, or of paying personal injury, property damage or natural resource damage claims could reduce the amounts available for distribution to you.

 

We expect that all of our properties will be subject to Phase I environmental assessments at the time they are acquired; however, such assessments may not provide complete environmental histories due, for example, to limited available information about prior operations at the properties or other gaps in information at the time we acquire the property. A Phase I environmental assessment is an initial environmental investigation to identify potential environmental liabilities associated with the current and past uses of a given property. If any of our properties were found to contain hazardous or toxic substances after our acquisition, the value of our investment could decrease below the amount paid for such investment.

 

Costs associated with complying with the Americans with Disabilities Act may decrease cash available for distributions.

 

Our properties may be subject to the Americans with Disabilities Act of 1990, as amended (the “ADA”). Under the ADA, all places of public accommodation are required to comply with federal requirements related to access and use by disabled persons. The ADA has separate compliance requirements for “public accommodations” and “commercial facilities” that generally require that buildings and services be made accessible and available to people with disabilities. The ADA’s requirements could require removal of access barriers and could result in the imposition of injunctive relief, monetary penalties or, in some cases, an award of damages. Any funds used for ADA compliance will reduce our net income and the amount of cash available for distributions to you.

 

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Uninsured losses relating to real property or excessively expensive premiums for insurance coverage could reduce our cash flows and amounts available for distributions.

 

There are types of losses, generally catastrophic in nature, such as losses due to wars, acts of terrorism, earthquakes, floods, hurricanes, pollution or environmental matters, that are uninsurable or not economically insurable, or may be insured subject to limitations, such as large deductibles or co-payments. Insurance risks associated with potential acts of terrorism could sharply increase the premiums we pay for coverage against property and casualty claims. Additionally, mortgage lenders in some cases insist that commercial property owners purchase coverage against terrorism as a condition for providing mortgage loans. Such insurance policies may not be available at reasonable costs, if at all, which could inhibit our ability to finance or refinance our properties. In such instances, we may be required to provide other financial support, either through financial assurances or self-insurance, to cover potential losses. We may not have adequate coverage for such losses. If any of our properties incurs a casualty loss that is not fully insured, the value of our assets will be reduced by any such uninsured or under insured loss, which may reduce the value of your investment. In addition, other than any working capital reserve or other reserves we may establish, we have no source of funding to repair or reconstruct any uninsured or under insured property. Also, to the extent we must pay unexpectedly large amounts for insurance, we could suffer reduced earnings that would result in lower distributions to you.

 

Many of our investments are illiquid and we may not be able to vary our portfolio in response to changes in economic and other conditions.

 

Many factors that are beyond our control affect the market for commercial real estate, real estate-related assets and private equity investments and could affect our ability to sell assets and investments for the price, on the terms or within the time frame that we desire. These factors include general economic conditions, the availability of financing, interest rates and other factors, including supply and demand. Because commercial real estate, real estate-related assets and private equity investments are relatively illiquid, we have a limited ability to vary our portfolio in response to changes in economic or other conditions. Further, before we can sell an investment on the terms we want, it may be necessary to expend funds to improve our investments. However, we can give no assurance that we will have the funds available to make such improvements. As a result, we expect many of our investments will be illiquid, and if we are required to liquidate all or a portion of our portfolio quickly, we may realize significantly less than the value at which we have previously recorded our investments and our ability to vary our portfolio in response to changes in economic and other conditions may be relatively limited, which could adversely affect our results of operations and financial condition.

 

Declines in the market values of our investments may adversely affect results of operations and credit availability, which may reduce earnings and, in turn, cash available for distributions.

 

A decline in the market value of our assets may adversely affect us particularly in instances where we have borrowed money based on the market value of those assets. If the market value of those assets decline, the lender may require us to post additional collateral to support the loan. If we were unable to post the additional collateral, we may have to sell assets at a time when we might not otherwise choose to do so. A reduction in credit available may reduce our earnings and, in turn, cash available for distributions.

 

Further, credit facility providers may require us to maintain a certain amount of cash reserves or to set aside unlevered assets sufficient to maintain a specified liquidity position, which would allow us to satisfy our collateral obligations. As a result, we may not be able to leverage our assets as fully as we would choose, which could reduce our return on equity. In the event that we are unable to meet these contractual obligations, our financial condition could deteriorate rapidly.

 

Market values of our investments may decline for a number of reasons, such as changes in prevailing market capitalization rates, increases in market vacancy, or decreases in market rents.

 

If we sell a property by providing financing to the purchaser, we will bear the risk of default by the purchaser, which could delay or reduce the cash available for distributions.

 

If we decide to sell any of our properties, we intend to use our best efforts to sell them for cash; however, in some instances, we may sell our properties by providing financing to purchasers. When we provide financing to a purchaser, we will bear the risk that the purchaser may default, which could reduce our cash available for distributions. Even in the absence of a purchaser default, the distribution of the proceeds of the sale to holders of our Class A units, or the reinvestment of the proceeds in other assets, will be delayed until the promissory note or other property we may accept upon a sale are actually paid, sold, refinanced or otherwise disposed.

 

Risks Related to Conflicts of Interest

 

There are conflicts of interest between us, our Manager and its affiliates.

 

Our executive officers, Brandon Lacoff and Martin Lacoff, are executive officers of our Manager and its affiliates, including our Sponsor. Prevailing market rates are determined by our Manager based on industry standards and expectations of what our Manager would be able to negotiate with a third party on an arm’s length basis. All of the agreements and arrangements between us and our Manager or its affiliates, including those relating to compensation, are not the result of arm’s length negotiations with an unaffiliated third party. Some of the conflicts inherent in our transactions with our Manager and its affiliates, and the limitations on our Manager and its affiliates adopted to address these conflicts, are described below. We, our Manager and its affiliates will try to balance our interests with their own. However, to the extent that our Manager and its affiliates take actions that are more favorable to other entities than us, these actions could have a negative impact on our financial performance and, consequently, on distributions to the holders of our Class A units and the NAV of our Class A units.

 

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The interests of our Manager, and its affiliates may conflict with your interests.

 

The management agreement provides our Manager with broad powers and authority which may result in one or more conflicts of interest between your interests and those of our Manager and its affiliates. This risk is increased by our Sponsor and our Manager being controlled by Brandon Lacoff and Martin Lacoff, who currently participate, and are expected to sponsor and participate, directly or indirectly, in other offerings by our Sponsor and its affiliates. Potential conflicts of interest include, but are not limited to, the following:

 

  our Sponsor, Manager, and their affiliates may continue to offer other real estate, real estate-related and private equity investment opportunities, including additional offerings similar to this offering, and may make investments in assets for their own respective accounts, whether or not competitive with our business;
     
  our Sponsor, Manager, and their affiliates will not be required to disgorge any profits, fees or other compensation they may receive from any other business they own or operate separately from us, and you will not be entitled to receive or share in any of the profits, returns, fees or other compensation from any other business owned or operated by our Sponsor, Manager or their affiliates;
     
  we may engage our Sponsor, Manager or their affiliates to perform services at prevailing market rates. Prevailing market rates are determined by our Manager based on industry standards and expectations of what our Sponsor and our Manager would be able to negotiate with a third party on an arm’s length basis; and
     
  our Sponsor, Manager and their affiliates are not required to devote all of their time and efforts to our business and affairs.

 

Holders of our Class A units will have no right to enforce the obligations of our Sponsor, Manager or any of their or our affiliates under the terms of any agreements with the Company.

 

Any agreements between the Company, on one hand, and our Sponsor, Manager or any of their or our affiliates, on the other, will not grant to the holders of our Class A units, separate and apart from the Company, the right to enforce the terms of such agreements or any obligations of our Sponsor, Manager or their or our affiliates in favor of the Company.

 

The management fee our Manager receives will be based on our NAV and our Manager is ultimately responsible for calculating our NAV.

 

We pay our Manager a quarterly management fee at an annualized rate of 0.75%. The management fee is based on our NAV, as calculated by our Manager at the end of each quarter. Our NAV will be announced within approximately 60 days of the last day of each quarter. Our NAV will be calculated using a process designed to produce a fair and accurate estimate of the price that would be received for our assets and investments in an arm’s-length transaction between a willing buyer and a willing seller in possession of all material information about our assets and investments. As with any asset valuation protocol, the conclusions reached by our Manager or any third-party firm that we engage to prepare or assist with preparing the NAV of our Class A units will involve significant judgments, assumptions and opinions in the application of both observable and unobservable attributes that may or may not prove to be correct. It is important to note that the determination of our NAV will not be based on, nor is it intended to comply with, fair value standards under U.S. GAAP, and our NAV may not be indicative of the price that we would receive for our assets at current market conditions. There can be no assurance that the judgments, assumptions and opinions used by our Manager to calculate our NAV, or the resulting NAV, will be the same as those judgments, assumptions and opinions that would be used, or the NAV that would be calculated, by an independent third-party firm. In addition, our Manager may benefit by us retaining ownership of our assets and investments in order to avoid a reduction in our NAV at times when the holders of our Class A units may be better served by the sale or disposition of our assets or investments. If our NAV is calculated in a way that is not reflective of our actual NAV, then the purchase price of shares of our Class A units may not accurately reflect the value of our assets and investments, and your Class A units may be worth less than the purchase price paid.

 

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Risks Related to Sources of Financing and Hedging

 

We may incur significant debt, which may subject us to increased risk of loss and may reduce cash available for distributions.

 

Subject to market conditions and availability, we may incur significant debt through bank credit facilities (including term loans and revolving facilities), repurchase agreements, warehouse facilities and structured financing arrangements, public and private debt issuances and derivative instruments, in addition to transaction or asset specific funding arrangements. The percentage of leverage we may employ will vary depending on our available capital, our ability to obtain and access financing arrangements with lenders, debt restrictions contained in those financing arrangements and the lenders’ and rating agencies’ estimate of the stability of our investment portfolio’s cash flow. Our targeted aggregate property-level leverage, excluding any debt at the corporate level or on assets under development or renovation, after we have acquired a substantial portfolio of stabilized properties, is between 50-70% of the greater of cost (before deducting depreciation or other non-cash reserves) or fair market value of our assets. Our targeted aggregate property-level leverage, excluding any debt at the Company level or on assets under development or redevelopment, after we have acquired a substantial portfolio of stabilized commercial real estate, is between 50-70% of the greater of the cost (before deducting depreciation or other non-cash reserves) or fair market value of our assets. During the period when we are acquiring, developing and redeveloping our investments, we may employ greater leverage on individual assets. Our Manager may from time to time modify our leverage policy in its discretion. Incurring substantial debt could subject us to many risks that, if realized, would materially and adversely affect us, including the risk that:

 

  our cash flow from operations may be insufficient to make required payments of principal of and interest on the debt or we may fail to comply with all of the other covenants contained in the debt, which is likely to result in (i) acceleration of such debt (and any other debt containing a cross-default or cross-acceleration provision) that we may be unable to repay from internal funds or to refinance on favorable terms, or at all, (ii) our inability to borrow unused amounts under our financing arrangements, even if we are current in payments on borrowings under those arrangements or pay distributions of excess cash flow held in reserve by such financing sources, or (iii) the loss of some or all of our assets to foreclosure or sale;
     
  our debt may increase our vulnerability to adverse economic and industry conditions with no assurance that investment yields will increase with higher financing costs;
     
  we may be required to dedicate a substantial portion of our cash flow from operations to payments on our debt, thereby reducing funds available for operations, future business opportunities, distributions to holders of our Class A units or other purposes; and
     
  we are not able to refinance debt that matures prior to the investment it was used to finance on favorable terms, or at all.

 

There can be no assurance that a leveraging strategy will be successful.

 

Any lending facilities will likely impose restrictive covenants.

 

Any lending facilities which we enter into would be expected to contain customary negative covenants and other financial and operating covenants that, among other things, may affect our ability to incur additional debt, make certain investments or acquisitions, reduce liquidity below certain levels, pay distributions, redeem debt or equity securities and impact our flexibility to determine our operating policies and investment strategies. For example, such loan documents may contain negative covenants that limit, among other things, our ability to distribute more than a certain amount of our net income or funds from operations to holders of our Class A units, employ leverage beyond certain amounts, sell assets, engage in mergers or consolidations, grant liens, and enter into transactions with affiliates (including amending the management agreement with our Manager in a material respect). If we fail to meet or satisfy any such covenants, we would likely be in default under these agreements, and the lenders could elect to declare outstanding amounts due and payable, terminate their commitments, require the posting of additional collateral and enforce their interests against existing collateral. We could also become subject to cross-default and acceleration rights and, with respect to collateralized debt, the posting of additional collateral and foreclosure rights upon default.

 

Interest rate fluctuations could increase our financing costs and reduce our ability to generate income on our investments, each of which could lead to a significant decrease in our results of operations, cash flows and the market value of our investments.

 

Our primary interest rate exposures will relate to the yield on our investments and the financing cost of our debt, as well as any interest rate derivatives that we utilize for hedging purposes. Changes in interest rates will affect our net interest income, which is the difference between the income we earn on our investments and the interest expense we incur in financing these investments. Interest rate fluctuations resulting in our interest expense exceeding income would result in operating losses for us. Changes in the level of interest rates also may affect our ability to invest in investments, the value of our investments and our ability to realize gains from the disposition of assets and investments.

 

To the extent that our financing costs will be determined by reference to floating rates, such as the Secured Overnight Financing Rate (SOFR) or a Treasury index, plus a margin, the amount of such costs will depend on a variety of factors, including, without limitation, (i) for collateralized debt, the value and liquidity of the collateral, and for non-collateralized debt, our credit, (ii) the level and movement of interest rates, and (iii) general market conditions and liquidity. In a period of rising interest rates, our interest expense on floating rate debt would increase, while any income we earn may not compensate for such increase in interest expense.

 

Our operating results will depend, in part, on differences between the income earned on our investments, net of credit losses, and our financing costs. For any period during which our investments are not match-funded, the income earned on such investments may respond more slowly to interest rate fluctuations than the cost of our borrowings. Consequently, changes in interest rates, particularly short-term interest rates, may immediately and significantly decrease our results of operations and cash flows and the market value of our investments.

 

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Hedging against interest rate exposure may adversely affect our earnings, limit our gains or result in losses, which could adversely affect cash available for distributions.

 

We may enter into interest rate swap agreements or pursue other interest rate hedging strategies. Our hedging activity will vary in scope based on the level of interest rates, the type and expected duration of portfolio investments held, and other changing market conditions. Interest rate hedging may fail to protect or could adversely affect us because, among other things:

 

  interest rate hedging can be expensive, particularly during periods of rising and volatile interest rates;
     
  available interest rate hedging may not correspond directly with the interest rate risk for which protection is sought;
     
  the duration of the hedge may not match the duration of the related liability or asset;
     
  the credit quality of the party owing money on the hedge may be downgraded to such an extent that it impairs our ability to sell or assign our side of the hedging transaction;
     
  the party owing money in the hedging transaction may default on its obligation to pay; and
     
  we may purchase a hedge that turns out not to be necessary (i.e., a hedge that is out of the money).

 

Any hedging activity we engage in may adversely affect our earnings, which could adversely affect cash available for distributions. Therefore, while we may enter into such transactions to seek to reduce interest rate risks, unanticipated changes in interest rates may result in poorer overall investment performance than if we had not engaged in any such hedging transactions. In addition, the degree of correlation between price movements of the instruments used in a hedging strategy and price movements in the portfolio positions being hedged or liabilities being hedged may vary materially. Moreover, for a variety of reasons, we may not seek to establish a perfect correlation between such hedging instruments and the portfolio holdings being hedged. Any such imperfect correlation may prevent us from achieving the intended hedge and expose us to risk of loss.

 

Hedging instruments are often not traded on regulated exchanges or guaranteed by an exchange or its clearing house and involve risks and costs that could result in material losses.

 

The cost of using hedging instruments increases as the period covered by the instrument increases and during periods of rising and volatile interest rates, we may increase our hedging activity and thus increase our hedging costs during periods when interest rates are volatile or rising and hedging costs have increased. In addition, hedging instruments involve risk since they are often not traded on regulated exchanges or guaranteed by an exchange or its clearing house. Consequently, there are no requirements with respect to record keeping, financial responsibility or segregation of customer funds and positions. Furthermore, the enforceability of agreements underlying hedging transactions may depend on compliance with applicable statutory and commodity and other regulatory requirements and, depending on the identity of the counterparty, applicable international requirements. The business failure of a hedging counterparty with whom we enter into a hedging transaction will most likely result in its default. Default by a party with whom we enter into a hedging transaction may result in the loss of unrealized profits and force us to cover our commitments, if any, at the then current market price.

 

Although generally we will seek to reserve the right to terminate our hedging positions, it may not always be possible to dispose of or close out a hedging position without the consent of the hedging counterparty and we may not be able to enter into an offsetting contract in order to cover our risk. We cannot assure you that a liquid secondary market will exist for hedging instruments purchased or sold, and we may be required to maintain a position until exercise or expiration, which could result in significant losses.

 

Any bank credit facilities and repurchase agreements that we may use in the future to finance our assets may require us to provide additional collateral or pay down debt.

 

We may utilize bank credit facilities, repurchase agreements (including term loans and revolving facilities) or guarantee arrangements to finance our assets if they become available on acceptable terms. Such financing arrangements, including any guarantees, would involve the risk that the market value of any investments pledged by us to the provider of the bank credit facility or repurchase agreement counterparty may decline in value, in which case the lender may require us to provide additional collateral or to repay all or a portion of the funds advanced. We may not have the funds available to repay our debt at that time, which would likely result in defaults unless we are able to raise the funds from alternative sources, which we may not be able to achieve on favorable terms or at all. Posting additional collateral would reduce our liquidity and limit our ability to leverage our assets. If we cannot meet these requirements, the lender could accelerate our indebtedness or enforce our guarantee, increase the interest rate on advanced funds and terminate our ability to borrow funds from it, which could materially and adversely affect our financial condition and ability to implement our investment strategy. In addition, if the lender files for bankruptcy or becomes insolvent, our loans and guarantees may become subject to bankruptcy or insolvency proceedings, thus depriving us, at least temporarily, of the benefit of these assets. Such an event could restrict our access to bank credit facilities and increase our cost of capital. The providers of bank credit facilities and repurchase agreement financing may also require us to maintain a certain amount of cash or set aside assets sufficient to maintain a specified liquidity position that would allow us to satisfy our collateral obligations. As a result, we may not be able to leverage our assets as fully as we would choose, which could reduce our return on assets. If we are unable to meet these collateral obligations, our financial condition and prospects could deteriorate rapidly.

 

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We may give full or partial guarantees to lenders of mortgage debt to the entities that own our properties.

 

When we give a guaranty on behalf of an entity that owns one of our properties, we will be responsible to the lender for satisfaction of the debt if it is not paid by such entity. If any mortgages contain cross-collateralization or cross-default provisions, there is a risk that more than one real property may be affected by a default. If any of our properties are foreclosed upon due to a default, our ability to make distributions will be adversely affected. Accordingly, our approach to investing in properties utilizing leverage in order to accomplish our investment objectives may present more risks to investors than comparable real estate programs that do not utilize borrowing to the same degree.

 

If we enter into financing arrangements involving balloon payment obligations, it may adversely affect our ability to make distributions.

 

Some of our financing arrangements may require us to make a lump-sum or “balloon” payment at maturity. Our ability to make a balloon payment is uncertain and may depend upon our ability to obtain replacement financing or our ability to sell particular properties. At the time the balloon payment is due, we may or may not be able to refinance the balloon payment on terms as favorable as the original loan or sell the particular property at a price sufficient to make the balloon payment. Such a refinancing would be dependent upon interest rates and lenders’ policies at the time of refinancing, economic conditions in general and the value of the underlying properties in particular. The effect of a refinancing or sale could affect the rate of return to the holders of our Class A units and the projected time of disposition of our assets.

 

Our access to sources of financing may be limited and thus our ability to grow our business and to maximize our returns may be adversely affected.

 

Subject to market conditions and availability, we may incur significant debt through bank credit facilities (including term loans and revolving facilities), repurchase agreements, warehouse facilities and structured financing arrangements, public and private debt issuances and derivative instruments, in addition to transaction or asset specific funding arrangements. We may also issue additional debt or equity securities to fund our growth.

 

Our access to sources of financing will depend upon a number of factors, over which we have little or no control, including:

 

  general economic or market conditions;
     
  the market’s view of the quality of our assets;
     
  the market’s perception of our growth potential; and
     
  our current and potential future earnings and cash distributions.

 

We will need to periodically access the capital and credit markets to raise cash to fund new investments. Unfavorable economic or market conditions may increase our funding costs, limit our access to the capital or credit markets or could result in a decision by potential lenders not to extend credit. An inability to successfully access the capital or credit markets could limit our ability to grow our business and fully execute our investment strategy and could decrease our earnings, if any. In addition, uncertainty in the capital and credit markets could adversely affect one or more private lenders and could cause one or more of our private lenders to be unwilling or unable to provide us with financing or to increase the costs of that financing. In addition, if regulatory capital requirements imposed on our private lenders change, they may be required to limit, or increase the cost of, financing they provide to us. In general, this could potentially increase our financing costs and reduce our liquidity or require us to sell assets at an inopportune time or price. No assurance can be given that we will be able to obtain any such financing on favorable terms or at all.

 

Risks Relating to U.S. Federal Taxation

 

There can be no assurance that we will continue to meet the requirements for treatment as a partnership. If we fail to maintain our classification as a partnership for U.S. federal income tax purposes and no relief provisions apply, we would be subject to entity level U.S. federal income tax and, as a result, our cash available for distributions and the value of our Class A units could materially decrease.

 

We have been treated as a partnership for U.S. federal income tax purposes since our tax year ended December 31, 2020. We intend to manage our affairs so that we continue to meet the requirement for classification as a partnership. The anticipated after-tax economic benefit of an investment in our Class A units depends in large part on our continued treatment as a partnership for federal income tax purposes. Despite the fact that we are organized as a limited liability company under Delaware law, if we fail to meet any of the applicable requirements for classification as a partnership, we would be treated as a corporation pursuant to section 7704 of the Internal Revenue Code of 1986, as amended (the “Code”). If we were treated as a corporation for federal income tax purposes, holders of our Class A units would lose the tax benefits associated with investing in a partnership. We would pay federal income tax on our taxable income at the corporate tax rate, which is currently a maximum of 21%, and would likely pay state and local income tax at varying rates. Our distributions would generally be taxed again as corporate dividends (to the extent of our current and accumulated earnings and profits), and no income, gains, losses, deductions or credits would flow through to holders of our units. Because a tax would be imposed on us as a corporation, our cash available for distributions would be substantially reduced. Therefore, our treatment as a corporation would result in a material reduction in cash flow and after-tax return to holders of our Class A units, likely causing a substantial reduction in the value of our Class A units. See “Material U.S. Federal Income Tax Considerations—Taxation of Belpointe PREP, LLC” 

 

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There can be no assurance that we will continue to meet the requirements for classification as a qualified opportunity fund.

 

We qualified as a “qualified opportunity fund” beginning with our taxable year ended December 31, 2020. We intend to manage our affairs so that we continue to meet the requirements for classification as a “qualified opportunity fund,” pursuant to Section 1400Z-2 of the Code, and the related regulations issued by the U.S. Department of the Treasury and U.S. Internal Revenue Service (the “IRS”) on December 19, 2019, together with the correcting amendments issued on April 6, 2020, additional relief issued on January 13, 2021 and further correcting amendments issued on August 5, 2021 (collectively the “Opportunity Zone Regulations”). However, qualified opportunity funds and the Opportunity Zone Regulations are relatively new and as yet untested, and our ability to be treated as a qualified opportunity fund and to operate in conformity with the requirements to continue to be treated as a qualified opportunity fund is subject to uncertainty. If we fail to continue to meet the requirements for classification as a qualified opportunity fund, holders of our Class A units would lose the tax benefits associated with investing in a qualified opportunity fund and the value of our Class A units would likely be adversely affected.

 

Investors must make appropriate timely investments and elections in order to take advantage of the benefits of investing in a qualified opportunity fund.

 

In order to receive the benefits of investing in a qualified opportunity fund, taxpayers must make deferral elections on Form 8949, Sales and Other Dispositions of Capital Assets, which will need to be attached to their U.S. federal income tax returns for the taxable year in which gain treated as capital gain (short-term or long-term) that result from the sale or exchange of capital assets would have been recognized had it not been deferred. In addition, Form 8997, Initial and Annual Statement of Qualified Opportunity Fund (QOF) Investments, requires eligible taxpayers holding a qualified opportunity fund investment at any point during the tax year to report: (i) qualified opportunity fund investments holdings at the beginning and end of the tax year; (ii) current tax year capital gains deferred by investing in a qualified opportunity fund; and (iii) qualified opportunity fund investments disposed of during the tax year.

 

Taxpayers may receive a Letter 6502, Reporting Qualified Opportunity Fund (QOF) Investments, or a Letter 6503, Annual Reporting of Qualified Opportunity Fund (QOF) Investments, if they have not properly followed the instructions for Form 8997, Initial and Annual Statement of Qualified Opportunity Fund (QOF) Investments, and the IRS is missing information, the taxpayer entered invalid information, or the requirements to maintain a qualifying investment have not been followed. Taxpayers who receive a Letter 6502, Reporting Qualified Opportunity Fund (QOF) Investments, or a Letter 6503, Annual Reporting of Qualified Opportunity Fund (QOF) Investments, may need to file an amended return or an administrative adjustment request with a properly completed Form 8997, Initial and Annual Statement of Qualified Opportunity Fund (QOF) Investments. The procedures that you will need to follow to defer your capital gains and the requirements related to maintaining a qualifying investment are highly technical and complex, accordingly, we recommend that you consult with your own tax advisor. You also should review the section of this prospectus entitled “Material U.S. Federal Income Tax Considerations.”

 

The tax treatment of an investment in our Class A units could be subject to potential legislative, judicial or administrative changes or differing interpretations, possibly applied on a retroactive basis.

 

The present U.S. federal income tax treatment of an investment in our Class A units may be modified by administrative, legislative or judicial interpretation at any time. From time to time, members of Congress propose and consider substantive changes to the existing U.S. federal income tax laws that would affect us, including a prior legislative proposal that would have eliminated the “qualifying income” exception upon which we intend to rely for our treatment as a partnership for U.S. federal income tax purposes. There can be no assurance that there will not be changes to U.S. federal income tax laws or the Department of Treasury’s or IRS’s interpretation of the qualifying income and qualified opportunity fund rules in a manner that could impact our ability to continue to qualify as a partnership or qualified opportunity fund in the future, which could negatively impact the value of an investment in our Class A units. Any changes to the U.S. federal tax laws and interpretations thereof may be applied prospectively or retroactively and could make it more difficult or impossible for us to meet the qualifying income exception or qualified opportunity fund requirements and accordingly adversely affect the tax consequences associated with an investment in our Class A units.

 

If the IRS contests the U.S. federal income tax positions we take, the value of our Class A units may be adversely impacted, and the cost of any IRS contest will reduce cash available for distributions.

 

The IRS may adopt positions that differ from the positions we have taken or may take on tax matters. It may be necessary to resort to administrative or court proceedings to sustain some or all of the positions we take. A court may not agree with some or all of the positions we take. Any contest with the IRS may materially and adversely impact the value of our Class A units. In addition, the costs of any contest with the IRS will be borne indirectly by the holders of our Class A units because the costs will reduce our cash available for distribution.

 

If the IRS makes audit adjustments to our income tax returns, the IRS (and some states) may assess and collect any taxes (including any applicable penalties and interest) resulting from such audit adjustments directly from us, in which case our cash available for distribution holders of our Class A units might be substantially reduced, and current and former holders of our Class A units may be required to indemnify us for any taxes (including applicable penalties and interest) resulting from audit adjustments paid on their behalf.

 

Even if you do not receive any cash distributions from us, you will be required to pay taxes on your share of our taxable income.

 

You will be required to pay U.S. federal income taxes and, in some cases, state and local income taxes, on your share of our taxable income, whether or not you receive cash distributions from us. For example, if we sell assets and reinvest the proceeds or use proceeds to repay existing debt, you may be allocated taxable income and gain resulting from the sale and our cash available for distribution would not increase. You may not receive cash distributions from us equal to your share of our taxable income or even equal to the actual tax due from you with respect to that income.

 

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You will likely be subject to state and local taxes and return filing requirements as a result of investing in our Class A units.

 

In addition to federal income taxes, holders of our Class A units likely will be subject to other taxes, such as state and local income taxes, unincorporated business taxes and estate, inheritance, or intangible taxes that are imposed by the various jurisdictions in which we do business or own property now or in the future. Holders of our Class A units will likely be required to file state and local income tax returns and pay state and local income taxes in some or all of these various jurisdictions, even if they do not live in these jurisdictions. Further, holders of our Class A units may be subject to penalties for failure to comply with those requirements. It is the responsibility of the holders of our Class A units to file all federal, state, local and foreign tax returns.

 

You will receive a Schedule K-1 to IRS Form 1065, which could increase the complexity of your tax circumstances.

 

We will prepare and deliver a Schedule K-1 to IRS Form 1065 for each holder of our Class A units. Your Schedule K-1 will contain information regarding your allocable share of our items of income, gain, loss, deduction, credit and adjustments to the carrying value of our assets and investments. Schedule K-1s are usually complex, and you may find that preparing your own tax returns requires additional time. You may also find it necessary or advisable to engage the services of an accountant or other tax adviser, at your own cost and expense, to assist with the preparation of your tax returns.

 

In addition, it is possible that your income tax liability with respect your allocable share of our income for a particular taxable year, as reflected on your Schedule K-1, could exceed the amount of cash distributions, if any, that we make to you for that taxable year, thus giving rise to an out-of-pocket tax liability. Accordingly, you should consult with your own accountant or other tax advisers concerning the tax consequences of your specific tax circumstances prior to acquiring, holding or disposing of any of our Class A units.

 

We do not expect to be able to furnish definitive Schedule K-1s to IRS Form 1065 to each holder of our Class A units prior to the deadline for filing U.S. income tax returns, which means that holders of our Class A units who are U.S. taxpayers should anticipate the need to file annually a request for an extension of the due date of their income tax returns. In addition, it is possible that holders of our Class A units may be required to file amended income tax returns.

 

As a partnership, we will report our operating results, including income, gains, losses, deductions, and credits , and adjustments to the carrying value of our assets and investments, to the IRS annually on Form 1065 and provide a Schedule K-1 to each holder of our Class A units. Although we currently intend to distribute Schedule K-1s on or around 90 days after the end of our fiscal year, it may require a substantial period of time after the end of our fiscal year to obtain the requisite information from all lower-tier entities to enable us to prepare and deliver Schedule K-1s. For this reason, holders of Class A units should anticipate that they will need to file annually with the IRS (and certain states) a request for an extension past the original due date of their income tax return.

 

In addition, it is possible that a holder of our Class A units will be required to file amended income tax returns or report additional income on later-year tax returns as a result of adjustments to items on income tax returns of the Company or our Operating Companies. Any obligation of a holder of our Class A units to file amended income tax returns for the foregoing or any other reason, including any costs incurred in the preparation or filing of such returns, is the responsibility of each holder of our Class A units.

 

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Cautionary Note Regarding Forward-Looking Statements

 

We make statements in this prospectus that are forward-looking statements within the meaning of the federal securities laws. The words “believe,” “estimate,” “expect,” “anticipate,” “intend,” “plan,” “seek,” “may,” and similar expressions or statements regarding future periods are intended to identify forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause our actual results, performance or achievements, or industry results, to differ materially from any predictions of future results, performance or achievements that we express or imply in this prospectus or in the information incorporated by reference into this prospectus.

 

The forward-looking statements included in this prospectus are based upon our current expectations, plans, estimates, assumptions and beliefs that involve numerous risks and uncertainties. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking statements. Factors which could have a material adverse effect on our operations and future prospects include, but are not limited to:

 

  the impact of macroeconomic trends, such as the rate of unemployment, interest rates, the rate of inflation and the availability of credit;
     
  adverse developments in the availability of desirable investment opportunities whether due to competition, regulation or otherwise;
     
  general political, economic and competitive conditions in the United States;
     
  the level and volatility of prevailing interest rates and credit spreads;
     
  adverse changes in the real estate and real estate capital markets;
     
  the potential negative impact of recent instability in the operating environment for U.S. banks and financial institutions on our ability to obtain construction financing;
     
  difficulties or delays in completing our projects on budget and on schedule;
     
  difficulties or delays in raising sufficient proceeds in our ongoing public offerings to fund our existing or future projects;
     
  our ability to comply with the rules and regulations relating to investing in qualified opportunity zones;
     
  changes in the rules and regulations relating to the Tax Cuts and Jobs Act of 2017, including the qualified opportunity zone regulations and Section 199A of the Internal Revenue Code of 1986, as amended (the “Code”) and the regulations adopted thereunder;
     
  cyberattacks or breaches of our data security;
     
  changes in economic conditions generally and the real estate and securities markets specifically;
     
  geopolitical challenges and uncertainties (including wars and other forms of conflict, terrorist acts and security operations), such as the escalating conflict between Russia and Ukraine;
     
  rising inflation, supply chain disruptions, labor shortages and general economic uncertainty;
     
  public health crises, pandemics and epidemics, such as those caused by new strains of viruses such as H5N1 (avian flu), severe acute respiratory syndrome (SARS) and, most recently, the novel coronavirus (COVID-19);
     
  limited ability to dispose of assets because of the relative illiquidity of real estate investments;
     
  intense competition in the real estate market that may limit our ability to attract or retain tenants or re-lease space;
     
  defaults on or non-renewal of leases by tenants;
     
  increased operating costs;
     
  our failure to obtain necessary outside financing;
     
  decreased rental rates or increased vacancy rates;
     
  the risk associated with potential breach or expiration of a ground lease, if any;
     
  difficulties in identifying properties to acquire and in consummating, real estate acquisitions, developments, joint ventures and dispositions;

 

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  our failure to successfully operate acquired properties and operations;
     
  exposure to liability relating to environmental and health and safety matters;
     
  changes in real estate and zoning laws and increases in real property tax rates;
     
  our failure to maintain our status as a publicly traded partnership and qualified opportunity fund;
     
  failure of acquisitions to yield anticipated results;
     
  risks associated with derivatives or hedging activity;
     
  our level of debt and the terms and limitations imposed on us by our debt agreements;
     
  the need to invest additional equity in connection with debt refinancings as a result of reduced asset values;
     
  our ability to retain our executive officers and other key personnel of our Sponsor, Manager and their affiliates;
     
  expected rates of return provided to investors;
     
  the ability of our Sponsor, Manager and their affiliates to source, originate and service our investments, and the quality and performance of these investments;
     
  legislative or regulatory changes impacting our business or our investments;
     
  changes in business conditions and the market value of our investments, including changes in interest rates, prepayment risk, operator or borrower defaults or bankruptcy, and generally the increased risk of loss if our investments fail to perform as expected;
     
  our ability to implement effective conflicts of interest policies and procedures among the various real estate investment programs sponsored by our Sponsor;
     
  our compliance with applicable local, state and federal laws, including the Investment Advisers Act of 1940, as amended, the Investment Company Act of 1940, as amended, and other laws;
     
  difficulty in successfully managing our growth, including integrating new assets into our existing systems; and
     
  changes to accounting principles generally accepted in the United States of America, or policy changes from standard-setting bodies such as the Financial Accounting Standards Board, the SEC, the Internal Revenue Service, the NYSE American and other authorities that we are subject to.

 

Any of the assumptions underlying forward-looking statements could be inaccurate. You are cautioned not to place undue reliance on any forward-looking statements included in this prospectus. All forward-looking statements are made as of the date of this prospectus and the risk that actual results will differ materially from the expectations expressed in this prospectus will increase with the passage of time. Except as otherwise required by the federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements after the date of this prospectus, whether as a result of new information, future events, changed circumstances or any other reason. In light of the significant uncertainties inherent in the forward-looking statements included in this prospectus, including, without limitation, the risks described under “Risk Factors,” the inclusion of such forward-looking statements should not be regarded as a representation by us or any other person that the objectives and strategies set forth in this prospectus will be achieved.

 

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Estimated Use of Proceeds

 

We are offering up to $750,000,000 of our Class A units on a continuous “best efforts” basis by any method deemed to be an “at the market” offering pursuant to Rule 415(a)(4) under the Securities Act of 1933, as amended. We expect to use substantially all of the net proceeds from this offering (after paying for or reimbursing our Manager and its affiliates, including our Sponsor, for offering expenses) to identify, acquire, develop or redevelop and manage a diversified portfolio of commercial real estate properties located throughout the United States and its territories in accordance with our investment objectives and strategy. We also anticipate acquiring other real estate-related assets, including, but not limited to, commercial real estate loans and mortgages, and debt and equity securities issued by other real estate-related companies, as well as make private equity acquisitions and investments, and opportunistic acquisitions of other qualified opportunity funds and qualified opportunity zone businesses. Our goal is to pay distributions from cash flow from operations. However, at the discretion of our Manager, subject to Board oversight, we may use other sources to fund distributions, including, without limitation, net proceeds of this offering. We have not established a limit on the amount of offering proceeds we may use to fund distributions.

 

We have entered into a non-exclusive dealer manager agreement (the “Dealer Manager Agreement”) with Emerson Equity LLC (“Emerson”), a registered broker-dealer and member of the Financial Industry Regulatory Authority (“FINRA”), for the sale of our Class A units through Emerson. From time to time we may also engage one or more additional dealer managers to participate in our offering (together with Emerson, each a “Dealer Manager” and, collectively, the “Dealer Managers”). Our Dealer Managers will enter into participating dealer agreements and wholesale agreements with other broker-dealers that are members of FINRA, referred to as “selling group members,” to authorize those broker-dealers to solicit offers to purchase our Class A units. We may also enter into select non-exclusive wholesale agreements directly with wholesale broker-dealers that are members of FINRA to assist us with the offer and sale of Class A units through certain registered investment advisors (“RIAs”) and RIA platforms. In addition, we may enter into client introduction agreements directly with RIAs and financial planners to assist us with introductions to certain of their clients and customers.

 

We will file a separate prospectus amendment or supplement, to the extent required by applicable law, naming any additional Dealer Managers, wholesale broker-dealers or other agents designated by us in this offering and setting forth the terms of any agreements with, and discounts, commissions or concessions allowed or reallowed or payable by us to, such additional Dealer Managers, wholesale broker-dealers or agents.

 

There is no minimum offering amount of Class A units that we or our Dealer Managers must sell in this offering prior to conducting an initial closing and we plan to undertake closings on a rolling basis. Upon closings we will immediately use the net offering proceeds for the purposes described in this prospectus.

 

We will pay dealer manager commissions of up to 0.25%, and selling commissions ranging from 0.25% to 4.50%, of the principal amount of Class A unit sold in this offering. We will also pay Emerson a non-accountable expense allowance of $40,000, and pay on behalf of or reimburse Emerson for up to $20,000 in legal fees and all FINRA filing fees incurred in connection with the offering. We will not pay RIAs, RIA platforms or financial planners any commissions, we may, however, pay due diligence fees for bona fide due diligence expenses incurred in conjunction with reviewing our offering materials.

 

We will reimburse our Manager and its affiliates, including our Sponsor, for all expenses incurred on our behalf in connection with the offering of our Class A units, which are initially expected to be approximately $4,500,000, and up to approximately 0.6% of gross offering proceeds if we raise the maximum offering amount. Offering expenses will include, without limitation, all legal, accounting, printing, mailing and filing fees and expenses, costs in connection with preparing sales materials, design and website expenses, fees and expenses of our escrow agent and transfer agent, due diligence fees paid to registered investment advisors or financial planners that we enter into client introduction agreements with, fees to attend retail seminars and reimbursements for customary travel, lodging, meals and entertainment expenses associated therewith. Fees payable and expenses reimbursable to our Manager and its affiliates, including our Sponsor, may be paid, at the election of the recipient, in cash, by issuance of our Class A units at the then-current NAV, or through some combination of the foregoing. See “Management Compensation” for a more detailed description of the fees and expenses payable to our Manager and its affiliates.

 

Pending the use of any net proceeds we may invest in short-term, investment-grade obligations or accounts in a manner that is consistent with our qualification as a publicly traded partnership and qualified opportunity fund. Such short-term investments will not earn as high of a rate of return as we expect to earn from our commercial real estate properties, real estate-related assets, including commercial real estate loans and mortgages, and debt and equity securities issued by other real estate-related companies, as well as private equity acquisitions and investments, and opportunistic acquisitions of other qualified opportunity funds and qualified opportunity businesses.

 

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Capitalization

 

The following table sets forth our cash and cash equivalents and capitalization as of December 31, 2022 as follows:

 

  on an actual basis;
     
  on an as adjusted basis, giving effect to the sale and issuance by us of $750,000,000 of our Class A units in this offering, based on an assumed offering price of $100.00 per Class A unit, and after deducting estimated selling commissions and estimated offering expenses payable by us and giving effect to the use of proceeds described herein.

 

You should read the table below together with “Use of Proceeds,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Description of Our Units” and our audited consolidated financial statements and related notes appearing elsewhere in this prospectus.

 

   As of December 31, 2022 
   Actual   Pro Forma As Adjusted (1) 
Cash and cash equivalents  $143,467   $853,342 
Debt, net        
Members’ Capital          
Class A units, unlimited units authorized, 3,523,449 units issued and outstanding at December 31, 2022(2)   

329,482

    1,039,357 
Class B units, 100,000 units authorized,
100,000 units issued and outstanding at December 31, 2022
        
Class M unit, one unit authorized,
one unit issued and outstanding at December 31, 2022
        
Total members’ capital excluding noncontrolling interest   329,482    1,039,357 
Noncontrolling interest   3,170    3,170 
Total members’ capital   332,652    1,042,527 
Total capitalization  $332,652    1,042,527 

 

 

(1) Assumes the offering is fully subscribed, for which there can be no assurance, and total gross proceeds to the Company are $750,000,000.
   
(2) Reflects an assumed offering price of $100.00 per Class A unit. The number of Class A units issued and outstanding on a pro forma as adjusted basis, after giving effect to the sale and issuance by us of Class A units in this offering, will vary based on the price at which we sell our Class A units. We are offering our Class A units on a continuous “best efforts” basis in transactions that are deemed to be “at the market” offerings pursuant to Rule 415(a)(4) under the Securities Act of 1933, as amended. Investors who purchase Class A units in this offering at different times will likely pay different prices.

 

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Investment Objective and Strategies

 

Investment Objectives

 

Our primary investment objectives are:

 

  to preserve, protect and return your capital contribution;
     
  to pay attractive and consistent cash distributions;
     
  to grow net cash from operations so that an increasing amount of cash flow is available for distributions to investors over the long term; and
     
  to realize growth in the value of our investments.

 

We cannot assure you that we will achieve our investment objectives. See the “Risk Factors” section of this prospectus.

 

Investment Strategy

 

We are focused on identifying, acquiring, developing or redeveloping and managing commercial real estate located within qualified opportunity zones. At least 90% of our assets consist of qualified opportunity zone property. We qualified as a qualified opportunity fund beginning with our taxable year ended December 31, 2020. Because we are a qualified opportunity fund certain of our investors are eligible for favorable capital gains tax treatment on their investments.

 

Our initial investments consist of and are expected to continue to consist of properties located in qualified opportunity zones for the development or redevelopment of multifamily, student housing, senior living, healthcare, industrial, self-storage, hospitality, office, mixed-use, data centers and solar projects (collectively, the “qualified opportunity zone investments”) located throughout the United States and its territories. We also anticipate identifying, acquiring, developing or redeveloping and managing a wide range of commercial real estate properties located throughout the United States and its territories, including, but not limited to, real estate-related assets, such as commercial real estate loans and mortgages, and debt and equity securities issued by other real estate-related companies, as well as making private equity acquisitions and investments, and opportunistic acquisitions of other qualified opportunity funds and qualified opportunity zone businesses, with the goal of increasing distributions and capital appreciation. We cannot assure you that we will attain these objectives or that the value of our assets will not decrease.

 

Our investment guidelines delegate to our Manager discretion and authority to execute acquisitions and dispositions of investments (including the reinvestment of capital basis and gains) in commercial real estate properties located throughout the United States and its territories, real estate-related assets, including commercial real estate loans and mortgages, and debt and equity securities issued by other real estate-related companies, as well as private equity acquisitions and investments, and opportunistic acquisitions of other qualified opportunity funds and qualified opportunity zone businesses, provided such investments are consistent with our investment objectives and strategy and our investment guidelines. Our Manager’s investment committee will periodically review our portfolio of assets and investments, our investment objectives and strategy and our investment guidelines to determine whether they remain in the best interests of our Members and may recommend changes to our Board as it deems appropriate. We may, at any time and without Member approval, cease to be a qualified opportunity fund and acquire assets that do not qualify as qualified opportunity zone investments. Furthermore, there are no prohibitions in our operating agreement on the amount or percentage of assets that may be invested in a single property.

 

In executing on our investment strategy, we also greatly benefit from our Manager’s affiliation with our Sponsor given our Sponsor’s strong track record and extensive experience as a fund manager. These competitive advantages include, without limitation:

 

  Our Sponsor’s experience and reputation as a seasoned real estate investment fund manager, which has historically provided our Sponsor with access to a large investment pipeline similar to the types of investments that we target as well as to the type of key market data that we will use to underwrite and manage our investment portfolio;
     
  Our Sponsor’s network of relationships with financial institutions and other lenders which originate and distribute commercial real estate debt and other real estate-related products and finance the type of investments that we acquire;
     
  Our Sponsor’s acquisition experience, which includes identifying, evaluating and underwriting real estate deals in multifamily and mixed-use properties in various locations throughout the United States and under a variety of market conditions; and
     
  Our Sponsor’s asset management experience, which includes actively monitoring investments through critical property management, leasing, redevelopment and disposition activities.

 

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Investment Decisions and Asset Management

 

Within our investment strategy and guidelines, our Manager’s investment committee has discretion and authority with respect to the selection of specific investments and the acquisition and disposition of our assets. We believe that successful real estate investment requires implementation of strategies that permit favorable originations and purchases, effective asset management and timely disposition of those assets. Our Manager has developed a disciplined investment approach that combines the experience of its team of investment and asset management professionals with a structure that emphasizes thorough market research, stringent underwriting standards and an extensive down-side analysis of the risks of each investment. The approach also includes active and aggressive management of each asset acquired.

 

We believe that active management is critical to creating value. Our Manager will continually re-evaluate the exit strategy of each asset in response to the performance of the individual asset, market conditions and our overall portfolio objectives to determine the optimal time to sell or refinance the asset.

 

To execute our disciplined investment approach, a team of our Manager’s investment and asset management professionals will take responsibility for the business plan of each of our investments. The following practices summarize our investment approach:

 

  Market Research – The investment team will complete exhaustive market diligence on demographics, employment drivers, competing properties and capital market activity.
     
  Physical Research – The investment team will engage third party property condition, environmental, zoning and code compliance, and building systems assessments to identify prospective investment deferred maintenance items and to validate capital requirement assumptions.
     
  Underwriting Discipline – Our Manager will follow a tightly controlled and managed process to examine all elements of a potential investment, including, with respect to real property, its location, income-producing capacity, prospects for appreciation, potential for principal loss, tax considerations and liquidity. Only those assets meeting our investment guidelines will be accepted for inclusion in our portfolio. In an effort to keep an asset in compliance with those standards, our Manager’s underwriting team will remain involved through the investment life cycle of the asset and consult with the other internal professionals responsible for the asset.
     
  Asset Management – Prior to the purchase of an individual asset or portfolio, our Manager’s acquisition team will work in tandem with the asset management team to develop an asset business strategy. This is a forecast of the action items to be taken and the capital needed to implement the contemplated business plan in an attempt to achieve the anticipated returns. We review asset business strategies regularly to anticipate changes or opportunities in the market during a given phase of a real estate cycle.

 

Opportunity and Market Overview

 

We believe that our innovative investment platform has the ability to disrupt the real estate investment industry through the unique combination of potential economic benefits that it offers holders of our Class A units, including: (i) multiple potential capital gains tax benefits; (ii) potential qualified business income tax benefits; (iii) significantly reduced fees payable to our Manager; (iv) no capital calls; (v) no investor servicing fees; (vi) significantly lower carried interest payable to our Manager; (vii) potential for liquidity events; and (viii) low minimum investment requirements, all of which should result in greater investment returns to holders of our Class A units than those generated by private real estate funds, real estate investment trusts (“REITs”), Delaware statutory trusts (“DSTs”) and other traditional real estate investment platforms.

 

We use multiple investment platform structures to deploy capital, which we anticipate will give us access to higher quality investment opportunities and better execution of our investment strategies than less diverse investment models. See “Investment Objectives and Strategy—Joint Venture and Other Co-Ownership Arrangements.” We also greatly benefit from the resources provided by our Sponsor, its vertically integrated real estate platform and the experience of its principals.

 

Set forth below are some of the key benefits that we believe distinguish us from more private real estate funds, REITs, DSTs and other traditional real estate investment platforms:

 

  Capital Gains Tax Deferral – An eligible investor may defer recognition of capital gains (short-term or long-term) resulting from the sale or exchange of capital assets (or business assets the gain on the sale of which is treated as capital gain) by reinvesting those gains into our Class A units within a period of 180 days generally beginning on the date of the sale or exchange (the “Deferred Capital Gains”). See “Material U.S. Federal Income Tax Considerations–Tax Treatment of Qualified Opportunity Funds–Tax Treatment of Electing Opportunity Zone Investors” for a discussion of reinvestment periods that may apply to gains attributable to investments in REITs, partnerships and other flow-through investments. Deferred Capital Gains are recognized on the earlier of December 31, 2026 or the date on which an inclusion event occurs, such as the date on which the investor sells its Class A units.
     
  Capital Gains Tax Exemption – An eligible investor may elect to increase the tax basis of the Class A units held by that investor to the fair market value of the Class A units, and similarly may elect to exclude gains from sales of non-inventory assets by us, if the investor holds our Class A units for a period of ten years or more prior to the date of sale, up to December 31, 2047 (after which time this benefit will no longer be available). Provided these requirements are met, for U.S. federal income tax purposes, an eligible investor will not be required to pay federal income tax on a sale of our Class A units.
     
  No Depreciation Recapture – An eligible investor who elects to increase the tax basis of our Class A units to the fair market value of our Class A units on the date of their sale or exchange, if the investor has held our Class A units for a period of ten years or more, up to December 31, 2047 (after which time this benefit will no longer be available), will not recognize depreciation recapture (excluding inventory gains) as a result of a sale of our Class A units.

 

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  20% Qualified Business Income Deduction – Individual investors and some trust and estate investors are entitled to a deduction of up to 20% of their allocable share of our “qualified business income” for taxable years ending on or before December 31, 2025, subject to certain limitations. See “Material U.S. Federal Income Tax Considerations.”
     
  Significantly Reduced Management Fees – Our Manager is paid annual management fees of only 0.75% of our NAV, which is significantly less than the management fees of 1.5%-2.1% typically charged by other private real estate funds, REITs, DSTs and other traditional real estate investment platforms.
     
  No Capital Calls – Investors will not be required to make capital contributions beyond the purchase price of their Class A units, unlike private real estate funds and other real estate investment platforms.
     
  No Investor Servicing Fees – We will not charge investor servicing fees, typically charged for other real estate investments offered through broker dealer platforms, which can add up to as much as 0.6% of invested capital on an annual basis.
     
  Significantly Lower Carried Interest – Our Manager holds 100% of our Class B units, which entitle our Manager to 5% of any gain recognized by or distributed to the Company or recognized or distributed from our Operating Companies or any subsidiary. This ownership interest will result in a “carried interest” to our Manager that is significantly lower than the carried interest of 15%-25% typically earned by external managers of private real estate funds, REITs, DSTs and other traditional real estate investment platforms.
     
  Ability to Use Equity as Transaction Consideration – We intend to make private equity acquisitions and investments, and opportunistic acquisitions of other qualified opportunity funds and qualified opportunity zone businesses using our equity as transaction consideration, thereby preserving cash for other investing activities.
     
  Greater Diversification – We hold a larger and more diversified portfolio of real estate and real estate-related assets than most other qualified opportunity zone real estate investment platforms. Greater diversification offers investors in our Class A units the potential to achieve greater returns at a lower risk.
     
  Public Company Transparency – We are a reporting company subject to the periodic and current reporting requirements of the federal securities laws, requiring us to file, among other things, annual and quarterly reports (including financial statements, financial statement schedules and exhibits) and current reports disclosing material events. As a result, unlike private real estate investment platforms, investors in our Class A units will have access to regular updates regarding our performance.
     
  Public Market Liquidity – Our Class A units are listed on the NYSE under the symbol “OZ.” As a result, we are the first qualified opportunity fund listed on a national securities exchange. Having our Class A units listed for trading on NYSE provides holders of our Class A units with liquidity in respect of their investment and greater control over the timing of purchases and sales of their Class A units.
     
  Minimal Investment Requirements – We have set a minimum investment threshold of 100 Class A units, which we expect will allow for a broader base of investors to participate in our offering than would otherwise be able to participate in more private real estate funds, REITs, DSTs and other traditional real estate investment platforms.
     
  Development Expertise – Our Manager employs a highly qualified team with extensive real estate development and construction management experience, thereby providing us with knowledge, relationships and internal development expertise that we believe far exceeds what many other real estate investment platforms can offer their investors.
     
  Multiple Investment Platforms – In order to maximize our development opportunities, we anticipate entering into joint ventures in a variety of forms, including: (i) franchise platforms with affiliated development companies in specific regional markets; (ii) programmatic platforms with established regional developers with which we will have an exclusive relationship to engage in multiple regional investments; and (iii) traditional local joint venture partnerships for one-off developments.

 

We believe that we will be able to provide holders of our Class A units with compelling investment performance on a risk-adjusted basis through: (i) the application of our rigorous investment and underwriting standards; (ii) the geographic and asset class diversification of our investments; (iii) the expected tax benefits from an investment in our Company; and (iv) lower cost structure.

 

We are focused on the development or redevelopment of qualified opportunity zone investments in opportunity zones that have completed, or are engaged in, the revitalization process, which are expected to be located within 75 miles of metropolitan markets. Given the recent concentration of investment capital in increasingly larger deals in major metropolitan areas, we believe that there will be less competition for our targeted assets. Additionally, we believe that our focus on markets with favorable risk-return characteristics should enable us to achieve higher capital appreciation than would be achievable on similar deals in larger markets.

 

We expect to be able to manage the risks associated with developing or redeveloping and managing our investments better than other real estate investment companies due, in part, to our ability to access the resources of our Sponsor. Our Sponsor is a fully integrated, well capitalized real estate company that combines investment and asset management professionals with construction and development professionals, which we believe will enable our Manager to better evaluate and manage our investments to reduce risk and increase potential returns for holders of our Class A units.

 

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It is important to note, however, that real estate markets are often unpredictable and subject to change over time. Accordingly, changes may occur that could require us to modify our investment strategy in order to identify and acquire assets providing attractive risk-adjusted returns.

 

Targeted Investments

 

Prior to acquiring an asset, our Manager’s investment committee will perform an individual analysis of the asset to determine whether it meets our investment objectives and guidelines. Our Manager’s investment committee will use the information derived from the analysis in determining whether the asset is an appropriate investment for us.

 

We are focused on identifying, acquiring, developing or redeveloping and managing commercial real estate located within qualified opportunity zones. At least 90% of our assets consist of qualified opportunity zone property. We qualified as a qualified opportunity fund beginning with our taxable year ended December 31, 2020. Because we are a qualified opportunity fund certain of our investors are eligible for favorable capital gains tax treatment on their investments. Our initial investments consist of and are expected to continue to consist of properties located in qualified opportunity zones for the development or redevelopment of multifamily, student housing, senior living, healthcare, industrial, self-storage, hospitality, office, mixed-use, data centers and solar projects (collectively, the “qualified opportunity zone investments”) located throughout the United States and its territories.

 

We also anticipate identifying, acquiring, developing or redeveloping and managing a wide range of commercial real estate properties located throughout the United States and its territories, including, but not limited to, real estate-related assets, such as commercial real estate loans and mortgages, and debt and equity securities issued by other real estate-related companies, as well as making private equity acquisitions and investments, and opportunistic acquisitions of other qualified opportunity funds and qualified opportunity zone businesses, with the goal of increasing distributions and capital appreciation. As of the date of this prospectus, we have made 15 investments.