No Better Time Than The Present To Build
TV is a wonderful way to make the world aware of how to invest in tax-sheltered real estate, especially when inflation is showing no signs of letting up anytime soon. Our ads on CNBC, Bloomberg and Fox Business continue to generate interest in Belpointe PREP (NYSE American: “OZ”) from CPAs, estate attorneys, tax planners, RIAs and individual investors seeking an opportunity to invest in real estate with a multitude of new tax benefits.
Our TV ad motto “instead of merely making money, why not consider building money?” is resonating with our audience looking to learn more about why Opportunity Zones were created, the communities they serve and the projects being developed. The White Paper gets into how our Qualified Opportunity Zone Fund (QOF) is structured and highlights some of the major features and benefits.
Just as Belpointe PREP is only one month into its listing on October 18th, our executive management team is wasting no time putting the partnership to work. We just announced the acquisition of an approximately 8-acre site, consisting of two industrial buildings and associated parking, located in Nashville, Tennessee (“Nashville No. 2”), for an aggregate purchase price of approximately $20,825,000, exclusive of transaction costs.
We currently anticipate that Nashville No. 2 will be redeveloped into an approximately 412-apartment home community consisting of one-bedroom, two-bedroom and three-bedroom apartments. We anticipate Nashville No. 2 will consist of two 7-story buildings with a 2-story approximately 533-space garage plus approximately 100 surface level parking spots, we anticipate the buildings will have a fitness center, game room, co-working spaces outdoor, heated, saltwater swimming pool, riverfront courtyards and rooftop terraces as well as a leasing office.
Belpointe PREP is pursuing investments in the southeast where we believe the net migration is strong, cost of living is reasonable and job markets is healthy. I look forward to bringing newer project and acquisition headlines to this blog, but wanted to share the news now that OZ is fully operational.
Inflation seems to be keeping investors on edge even as the stock market enjoys a season push into year-end. But red flags are out if the November inflation data mirrors that of October or, keeps heading north of the 6.2% print for last month.
Inflation has proven to not be simply transitory and there may be a tipping point when the bond market won’t be so cooperative as it has been the case of late. And who wants to play musical chairs with the stock market if and probably when the bond vigilantes may appear in the coming weeks? Not me.
Bond yields are creeping higher and fund flows seem to be seeking inflation-hedged income and making a path into commercial multi-family residential income producing real estate where owners can raise rents more quickly to adjust for inflation. Apartment landlords can input escalation clauses indexed to inflation that adjust rents higher during the course of an existing lease.
As a side note, Opportunity Zones are squarely in the political comfort zone as well, first sponsored by Senators Cory Booker (D-NJ) and Tim Scott (R-SC). There was broad bipartisan political support at the federal, state and local levels and, as far as we know, there is no language challenging the program or the tax benefits that it provides in any legislation proposed as part of the Biden economic plan.
Belpointe PREP is conducting a $750 million continuous offering of Class A units. Belpointe PREP (OZ) is focused on identifying, acquiring, developing, or redeveloping and managing commercial real estate located within qualified opportunity zones. Belpointe PREP qualified as a qualified opportunity fund beginning with its taxable year ending December 31, 2020.
I highly encourage all interested parties to download our latest and updated White Paper (see page 2) to familiarize yourself with the concept and purpose of why Opportunity Zones were created and what the societal goals are for such large-scale projects and undertakings.
Belpointe PREP’s 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, and more, located throughout the United States and its territories.
In our view, Qualified Opportunity Zone Fund investing is a public-private partnership striving to advance the quality of life for millions of less advantaged citizens and businesses in America’s biggest cities, smaller towns and areas within the U.S.
Some of the most compelling benefits to investing in OZ are:
- 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 by reinvesting those gains into Belpointe PREP’s Class A units within a period of 180 days of the sale or exchange (the “Deferred Capital Gains”). 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. (White Paper Page 2-3)
- Capital Gains Tax Exemption– An eligible investor may elect to receive an increase in basis with respect to Belpointe PREP’s Class A units equal to the fair market value of the Class A units on the date of their sale or exchange if the investor holds the Class A units for a period of ten years or more, up to December 31, 2047. Thus, for U.S. federal income tax purposes, an investor will not recognize capital gains as a result of an appreciation in Belpointe PREP’s Class A units.
- Capital Gains Reduction– An eligible investor may also receive an increase in basis equal to 10% of the Deferred Capital Gains if the investor holds Belpointe PREP’s Class A units for a period of five years.
The third point noted, about the basis of a QOF investment being increased by 10% if the investment is held for at least five years, is time sensitive. Investors have to own Class A units in OZ or equity interests any other QOF by December 31, 2021 in order to qualify for the 10% step-up basis benefit. (Ex: it is possible for an eligible investor to reinvest $100K of capital gains in OZ by Dec. 31, 2021, hold the investment for at least five years, and have the go-forward basis be $110K for purposes of calculating future capital gains) (White Paper Page 3)
Additional benefits to investing in OZ include:
- No Depreciation Recapture – An eligible investor who elects to receive an increase in basis with respect to Belpointe PREP’s Class A units equal to the fair market value of the Class A units on the date of their sale or exchange, if the investor has held the Class A units for a period of ten years or more, up to December 31, 2047, will not recognize depreciation recapture (excluding inventory gains) as a result of an appreciation in Belpointe PREP’s Class A units. (White Paper Page 5)
- Significantly Reduced Management Fees– Belpointe PREP’s manager is paid annual management fees of only 0.75% of its NAV, which is significantly less than the management fees of 1.5%-2.1% typically charged by other traditional private real estate funds, REITs 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 Belpointe PREP Class A units, unlike traditional private real estate funds and other real estate investment platforms.
- No Investor Servicing Fees– Belpointe PREP 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 annual basis.
- Significantly Lower Carried Interest– Belpointe PREP’s manager holds 100% of its Class B units, which entitle the manager to 5% of any gain recognized by or distributed to Belpointe PREP or recognized or distributed from Belpointe PREP’s operating companies or any subsidiary. This ownership interest will result in a “carried interest” to Belpointe PREP’s manager that is significantly lower than the carried interest of 15%-25% typically earned by external managers of traditional private real estate funds, REITs and other traditional real estate investment platforms.
- Ability to Use Equity as Transaction Consideration– Belpointe PREP intends to make private equity acquisitions and investments, and opportunistic acquisitions of other qualified opportunity funds and qualified opportunity zone businesses using its equity as transaction consideration, thereby preserving cash for other investing activities.
- Greater Diversification– Belpointe PREP intends to 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 Belpointe PREP’s Class A units the potential to achieve greater returns at a lower risk.
- Minimal Investment Requirements– Belpointe OZ has set a minimum investment threshold of $10,000 for purchases via subscription agreement, which it expects will allow for a broader base of investors to participate in its offering than would otherwise be able to participate in more traditional private real estate funds, REITs and other traditional real estate investment platforms. Investments via the market have no minimum.
- Development Expertise– Belpointe PREP’s manager employs a highly qualified team with extensive real estate development and construction management experience, thereby providing Belpointe PREP with knowledge, relationships and internal development expertise that it believes far exceeds what many other real estate investment platforms can offer their investors.
With the year coming to a rapid close, I suggest making it a priority to take the time to consult with your RIA, CPA, CFA and estate planners to gain full control of how to maximize the benefits of Opportunity Zone Fund investing and Belpointe PREP (OZ) in particular.
Have questions about how Belpointe OZ can provide opportunities for investment appreciation, income and help you or your clients to Defer, Reduce or Eliminate Capital Gains Obligations?
Call or email us and we’ll take the time to answer all of your questions about Belpointe OZ and how reinvesting capital gains in a Qualified Opportunity Zone fund can be utilized to offset an investor’s tax obligation.
You can contact us at 203-883-1944 or IR@belpointeoz.com.
To your success,
Cody Laidlaw
Editor-in-Chief
Belpointe OZ
255 Glenville Road
Greenwich, CT 06831
T: (203) 883-1944
E: IR@belpointeoz.com
Disclosure: Cody H. Laidlaw is the Chief Investor Relations Officer of Belpointe PREP, LLC. Cody is also an investment advisor representative with Seaside Advisory Services, Inc. (d/b/a Seaside Financial & Insurance Services), a SEC registered investment adviser offering advisory accounts and services, and holds a long position in Belpointe PREP, LLC’s Class A units.
Important Information and Qualifications
Belpointe PREP, LLC (“Belpointe PREP”) has filed a registration statement (including a prospectus) with the U.S. Securities and Exchange Commission (SEC) for the offer and sale of up to $750,000,000 of Class A units representing limited liability interests in Belpointe PREP. You should read Belpointe PREP’s most recent prospectus and the other documents that it has filed with the SEC for more complete information about Belpointe PREP and the offering
Investing in Belpointe PREP’s Class A units involves a high degree of risk, including a complete loss of investment. Prior to making an investment decision, you should carefully consider Belpointe PREP’s investment objectives and strategy, risk factors, fees and expenses and any tax consequences that may results from an investment in Belpointe PREP’s Class A units. To view Belpointe PREP’s most recent prospectus containing this and other important information visit sec.gov or belpointeoz.com. Alternatively, you may request Belpointe PREP send you the prospectus by calling (203) 883-1944 or emailing claidlaw@belpointe.com. Read the prospectus in its entirety before making an investment decision.
This communication, including any links embedded herein, may not be distributed in any jurisdiction where it is unlawful to do so. Nothing in this communication is or should be construed as an offer to sell or solicitation of an offer to buy Belpointe PREP’s Class A units in any jurisdiction where it is unlawful to do so.
Neither Belpointe PREP nor any of its affiliates provide investment or tax advice and do not represent in any manner that the outcomes described herein will result in any particular tax consequence. Prospective investors should consult their own investment and tax advisers concerning the U.S. federal, state and local income tax consequences, as well as any tax consequences under the laws of any other taxing jurisdiction, in relation to their personal tax circumstances, which may vary for prospective investors in different tax situations.
This communication may contain estimates, projections and other forward-looking statements, typically identified by words and phrases such as “anticipate,” “estimate,” “believe,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict,” “seek,” “should,” “will,” “would,” “expect,” “objective,” “projection,” “forecast,” “goal,” “guidance,” “outlook,” “effort,” “target” or the negative of such words and other comparable terminology. However, the absence of these words does not mean that a statement is not forward-looking. Any forward-looking statements expressing an expectation or belief as to future events is expressed in good faith and believed to be reasonable at the time such forward-looking statement is made. However, these statements are not guarantees of future events and involve risks, uncertainties and other factors beyond Belpointe PREP’s control. Therefore, we caution you against relying on any of these forward-looking statements. Actual outcomes and results may differ materially from what is expressed in any forward-looking statement. Except as required by applicable law, including federal securities laws, Belpointe PREP does not intend to update any of the forward-looking statements to conform them to actual results or revised expectations.
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