Multifamily Market Continues Trending Well

CoStar Group’s online rental marketplace website, Apartments.com, recently published its Multifamily Rent Growth Report (the “Growth Report”) for the second quarter of 2024 corroborating much of what this column has been stating for the past several weeks.

The Growth Report demonstrates that the U.S. multifamily market continued to experience robust demand throughout Q2 of 2024, with 170,000 units absorbed during the quarter, representing the highest number recorded since Q3 of 2021. To us, one of the facts that stood out the most in the Growth Report was that, even while 180,000 new units were delivered, Q2 still marked the smallest supply-demand gap recorded by CoStar in 11 quarters. What’s more, CoStar reported that Q2 was “the first quarter in which the vacancy rate has not risen in almost three years.” A finding which, in our view, builds on the base case that luxury apartment living is preferrable to urban fixer-upper homeownership in the most vibrant U.S. cities.

The Growth Report went on to find that absorption during Q2 “was led by 4&5-Star units, with just over 123,000 units in the quarter.” This falls right in line with Belpointe PREP, LLC’s thinking (“Belpointe OZ”) (NYSE American: “OZ”) on the subject, and is one of the main reasons Belpointe OZ has been aggressively building toward completion in Sarasota and St. Petersburg, Florida, where the timing to bring its new supply of Class-A, high-rise apartments—in these two cities of hotbed growth—is finally being realized, with the first residents being received in the Aster & Links (Sarasota) downtown community.

In what we view as yet another underappreciated trend, residential real estate brokerage firm RedFin recently reported that over one-third of renters in the U.S. have lived in the same apartment for more than five years. We’ve previously touched on how luxury apartments located within the heart of key downtown city districts that offer all the amenities of urban living are a growing lifestyle preference. In our view, elevated home prices and fewer listings in desirable neighborhoods are some of the main factors driving demand for full-featured apartment communities that offer high-end amenities and security. According to the National Association of REALTORS® 89% of metro markets recorded home price gains in the second quarter of 2024. There is no getting around the ratios of the extreme percentage of income one must commit to owning a home in today’s market. RedFin also reported the median price of a home “has more than doubled since 2012, and it has risen by more than 40% since 2019 … .” This has not been the case for most occupational incomes, especially when factoring inflation. As a rule of thumb, no more than 28% of gross income or 25% of net income should go towards a mortgage payment. As of March 2024, National Association of REALTORS® reported first-time homebuyers were allocating approximately 36.5% of their family income to mortgage payments. In our view, this leaves extraordinarily little room for margin.

But, even more to the point, in this new world of a broad remote workforce, we think renting is even more appealing as a lifestyle—keeping relocation optionality open while also having a fixed cost of high-end shelter. Successful New Yorkers in Manhattan have been living this way for decades—a hassle free, fully maintained, luxury-appointed, covered-parking residence in a prime location offering a chic city experience that has become a major trend in many U.S. cities. Belpoine OZ is making it happen in downtown Sarasota and downtown St. Petersburg, Florida.

As of May 31, 2024, Belpointe OZ, the only publicly traded qualified opportunity fund ("QOF”), announced its unaudited quarterly net asset value (“NAV”) as of March 31, 2024 of $361.66 million, or $99.59 per Class A unit. 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 QOF, has to offer.

Within two extremely well-located opportunity zones in Sarasota and St. Petersburg, Florida, Belpointe OZ is checking in new residents at its landmark Aster & Links community in downtown Sarasota, with plans to open its doors for new residents at its Viv luxury high-rise community in downtown St. Petersburg in 2025.

Investors and future tenants can now preview and lease the available units and floorplans on the updated Aster & Links website, which displays the luxurious 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. You can find out more about Belpointe PREP, LLC (NYSE American: “OZ”) at belpointeoz.com. Reach out to us with any questions regarding the specifics of investing in opportunity zones. Tech investors are enjoying generational wealth-building capital gains in the leading AI stocks. Perhaps consider sheltering those gains and potentially compounding them in a tax-deferred QOF that trades on the NYSE.

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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