Opportunity Zones In Top Growth Cities May Flourish

As the mid-point of 2024 approaches, it is a good time to do a lookback on how some of the early predictions for the multifamily residential market are playing out in this higher-for-longer interest rate environment. We at Belpointe PREP, LLC (“Belpointe OZ”) (NYSE American: “OZ”) believe that many of the same challenges that faced new home buyers back in January remain persistent in late May. It seems to us that home affordability hasn’t really improved, with home prices still elevated in the most desirable markets amid tight home inventories and mortgage rates that are at or near their highs of the year.

Some market experts are quick to point out the implications of these headwinds on frustrated buyers in the multifamily sector. “So, with multifamily residents staying put for longer, rents will remain elevated,” said Mary Le, an economist at Moody’s Analytics. Frank Grosch, senior vice president at AGM Financial Services, added “Occupancies will remain solid. The large number of units delivered in the past few years will continue to be absorbed at a steady pace.”

Looking specifically at the Sarasota-Bradenton region, where Belpointe OZ’s (NYSE American: “OZ”) first project sits, we believe the rental vacancy rates support a robust market for Class-A apartment development for years to come. Sarasota-North Port-Bradenton has a 5.4% rental vacancy, down 5.26% year-over-year.

We believe that the number of new multifamily starts in 2024 has been negatively impacted by a trifecta of issues that date back a little over a year ago. These include the collapse of four regional banks, which seem to have triggered more stringent lending standards and extended timelines with which to capitalize new projects, the 11 rate hikes by the Federal Reserve that has current lending rates highly elevated, in combination with higher equity contributions on the part of developers, and a struggling corporate office sector that likely stokes further reluctance by banks to lend at favorable terms.

If and when the Fed does begin to ease, we believe that prognosticators of the multifamily market space may see potential for an improved landscape for construction financing, further normalization of material and labor costs and more buy/sell transactions to occur. Until then, however, we propose that those projects that are currently being developed and completed stand to benefit from the slowing of new supply coming online. The bullish backdrop for multifamily fundamentals in the markets that Belpointe OZ is active in, is in our view, very solidly placed on what are healthy demographics and supply shortages that we think imply steady rent escalation and a continuation of higher home prices. Units of Belpointe OZ’s (NYSE American: “OZ”) are trading at an approximately 40% discount to net asset value (“NAV”) as two major projects are entering the lease up-phase and on their way to being stabilized assets.

For Belpointe OZ’s inaugural multifamily project in Sarasota, investors and future tenants can now preview and pre-lease the available units and floorplans on the  Aster & Links website, which displays the full-featured, Class A luxury apartment layouts with living spaces from 865 to 2,820 sq. feet, one-bed/one-bath to four-bed/three-and-a-half-bath and a wide array of options to fit the needs and wants of all future tenants. Below is a rendering of a 2,820 sq. foot two-level penthouse that will occupy the topmost floors of the Aster building.

Below we’ve included 2 photos of 1000 First Avenue North in St. Petersburg, Florida, another property in Belpointe OZ’s portfolio that is roughly 45% complete.

1000 First is being developed into a 15-story high-rise building named “Viv.” Viv will be comprised of two 11-story residential towers above a 4-story parking garage, featuring approximately 269-apartment homes consisting of studio, one-bedroom, two-bedroom and three-bedroom units, with approximately 15,500 square feet of retail space located on the first level.

We currently anticipate amenities at Viv will include a clubroom, fitness center, courtyard with a swimming pool, shared working space and a leasing office. Viv is located in the downtown district of St. Petersburg, one mile west of Tampa Bay and the downtown waterfront district and features direct access to downtown amenities, such as public parking, restaurants, museums, and cultural sites.

In our view, investors seeking a discounted real estate investment opportunity should consider exploiting the disparity between the current market price of Belpointe OZ’s (NYSE American: “OZ”) Class A units and its NAV, notwithstanding the tax benefits that Belpointe OZ, as a qualified opportunity zone fund, has to offer. What’s more, investors do not need capital gains to take advantage of the NAV-to-Class A unit price disparity. However, without investing capital gains investors will not qualify for any of the opportunity zone program tax benefits.

Belpointe OZ

255 Glenville Road

Greenwich, CT 06831

T: (203) 883-1944

E: IR@belpointeoz.com

The information in this communication is for illustrative, educational and informational purposes only and is subject to change. Nothing in this communication is or should be construed as an offer to sell or the solicitation of an offer to buy any securities. Offers may only be made by means of a prospectus.

Belpointe PREP, LLC (“Belpointe OZ”) has filed a registration statement (including a prospectus) with the SEC for the offering to which this communication relates. Prior to making an investment decision, you should read Belpointe OZ’s prospectus and the other documents that it has filed with the SEC in their entirety, and carefully consider its investment objectives and strategy, risk factors, fees and expenses and any tax consequences that may results from an investment in the offering. Copies of these documents can be obtained free of charge from www.sec.gov or investors.belpointeoz.com or from any broker-dealer participating in the offering.

The information in this communication should not be relied upon as investment or tax advice. You should consult with your own investment and tax advisers concerning the federal, state and local income tax consequences of purchasing, owning or disposing of securities in the offering, and of Belpointe OZ’s election to qualify as a partnership and qualified opportunity fund for federal income tax purposes. There is no guarantee that Belpointe OZ will continue to qualify as a partnership or qualified opportunity fund.

Past performance is not an indicator or a guarantee of future performance. An investment in the offering to which this communication relates involves a high degree of risk, including a complete loss of your investment, and may not be suitable for all investors. The price of Belpointe OZ’s securities will fluctuate in market value and may trade above or below net asset value. Brokerage commissions and expenses will reduce returns.

The offering to which this communication relates is being made on a best-efforts basis on behalf of Belpointe OZ through Emerson Equity, LLC, Member FINRA, SIPC, as managing broker-dealer.

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