Belpointe OZ Builds Out Key Florida Projects On Schedule

Much of the recent news cycle surrounding commercial real estate—particularly commercial office space—has emphasized the regional banking sector’s overexposure to the asset class, with many loans likely in need of refinancing at considerably higher interest rates and lower property valuations. At the same time, the force of inflation that has triggered 11 rate hikes since March 2022 continues trending lower, even as bond yields rose this past week, and mortgage rates topped 7% for the first time in 20 years.

Last week’s stress on the bond market was likely related to the Treasury’s auctioning off of $191 billion in debt to close out the month of August. This follows on the heels of $103 billion in Treasury sales during the first half of the month, so it’s been a very busy August for the Treasury as it builds its coffers following the recently passed legislation suspending the debt ceiling through January 1, 2025.

Persistent inflation and the remote labor market have been a ball and chain on the commercial real estate market, but both of these trends are, in our view, taking a turn for the better. On the inflation front, the annual rate of inflation over the past several months has been quite encouraging. The annual rate of inflation in the U.S. came in at 3.2% in July 2023; a tad higher than the 3.0% in June, but below forecasts of 3.3%.

Source: Trading Economics, United States Inflation Rate (last accessed: August 21, 2023).

Meanwhile, core inflation, which excludes food and energy, eased to 4.7% in July 2023 from 4.8% in June, and below expectations of 4.8%. We see this as good news for the Fed in that, assuming inflation stays at or continues to trend lower, it provides a base case for a change in monetary policy that could open the way for the Fed to begin lowering the Fed Funds Rate. In fact, this past week, it was reported that Goldman Sachs is predicting the Fed to begin cutting rates in May 2024. In our view this carries the premise that keeping rates higher for longer provides the level of insurance and confidence that the Fed needs to see so as to pivot on policy.

As to what it translates into in the commercial real estate market, Blackstone’s president, Jon Gray, commented in a Financial Times interview last month that better times lie ahead:

At the same time, TheRealDeal reported that Blackstone Real Estate Income Trust, posted its strongest month of returns in nearly a year in June 2023; recording a 0.96% return, marking the third straight month of positive returns for the fund.

Adding to the welcome tone of newfound confidence, The Wall Street Journal reported earlier this month:

“Brookfield Asset Management sees the best opportunities in more than a decade to buy commercial property at a discount … . [Chief Executive Bruce Flatt said:] ‘We’re in an environment with higher interest rates, higher inflation and tightening lender requirements, all of which create uncertainty and pockets of stress in real-estate markets, … [that] … will lead to the best environment we’ve seen since 2009 to execute on our longstanding investment strategy for real estate. …

…

There is real estate that doesn’t have good fundamentals, [bad retail and traditional office buildings in certain cities]. But 80% of it does have good fundamentals. The situation today is that given the increase in interest rates, if people were ill-prepared or unlucky with financing structures, that is where the opportunity is going to come.’ ”

Out of the many Opportunity Zones that we’ve looked at (and there are more than 8,700 of them designated by the government), we believe that there are less than 100 that are worth investing in. The development team at Belpointe PREP, LLC (“Belpointe OZ”) (NYSE American: OZ) is composed of executives with decades of experience in bringing projects online in the Class-A multi-family apartment sector.

Belpointe OZ announced, on May 31, 2023, its unaudited quarterly NAV as of the quarter ended March 31, 2023, of $351.7 million or $99.82 per Class A unit, as compared to the current market price of around $90 per unit as of August 18; a meaningful discount to NAV. With many sectors of the market in correction mode, it might prove to be an excellent opportunity to book some profits, especially in market leaders that have enjoyed huge runs year-to-date, and to shelter those capital gains in a qualified opportunity fund (“QOF”), like Belpointe OZ where the construction of two large-scale multi-family residential projects in Sarasota and St. Petersburg are making excellent progress towards completion 2024.

The Aster and Links website is now online. For more information click the image below

Click on the link below to review Belpointe OZ’s current properties in the various phases of conception of the project, remodel, ground-up construction, and acquisition.

From a tax planning standpoint, we think laddering capital gains tax deferment throughout the year by taking advantage of the QOF regulation’s rolling 180-day look-back period, can be very advantageous come the year-end. Most forms of capital gains qualify for tax deferment—stocks, bonds, mutual funds, ETFs, real estate, the sale of a business, trademarks, patents, cryptocurrencies, precious metals, collectibles, livestock, cars, aircraft, marine craft, etc. In the meantime, the potential growth and income from capital gains reinvested into a QOF have an opportunity to be compounded free of taxation as long as the QOF investment is held for at least 10 years through December 31, 2047.

Another key point: there is no limit on how much in realized capital gains one can reinvest into a QOF. QOFs, like Belpointe OZ, offer investors looking to shelter capital gains a viable opportunity. As part of the program structure, most taxable gains invested in a QOF are not recognized (on the federal level and in many states) until December 31, 2026 (due with the filing of the 2026 return in 2027), or until an investor’s interest in the QOF is sold or exchanged, whichever occurs first. The potential to compound growth and income thereafter within QOFs on a tax-free basis expires December 31, 2047.

On May 31, 2023, Belpointe OZ announced its unaudited quarterly NAV as of the quarter ended March 31, 2023, of $351.7 million or $99.82 per Class A unit, as compared to the current market price of around $90 per unit as of August 28; a meaningful discount to NAV. With many sectors of the market in correction mode, it might prove to be an excellent opportunity to book some profits, especially in market leaders that have enjoyed huge runs year-to-date, and to shelter those capital gains in a QOF, like Belpointe OZ where the construction of two large-scale multi-family Class A residential projects in Sarasota and St. Petersburg, Florida, are making excellent progress towards completion 2024.

A Viable Alternative to 1031 Tax-Free Exchanges

We’ve seen a pickup in interest from property owners about how Belpointe OZ might represent an attractive alternative to Internal Revenue Code Section 1031 like-kind exchanges. Investors that have sold real estate within the past 180 days and that may be under pressure to comply with Section 1031 regulations in order to complete a tax-free exchange, may want to avoid the inconvenience of having to identify a replacement property (and one or more alternative replacement properties, just in case a replacement property falls through) within 45 days of selling the original property, escrowing the sale proceeds with a 1031 qualified intermediary, and closing on a replacement property within 180 days of the sale of the original property. Instead, investors may want to consider investing capital gains from the sale of the original property into a QOF, like Belpointe OZ.

Attention Broker-Dealers: Here’s An Attractive Proposition For You

On May 17th, Belpointe OZ announced the commencement of an offering to raise up to $750 million in capital. This latest offering affords broker-dealers the opportunity to participate in the selling group, and Belpointe OZ has retained Emerson Equity LLC as dealer manager for the offering. Interested broker-dealers may contact us at IR@BelpointeOZ.com or call 203-883-1944 for further information.

Further, in its effort to disrupt the U.S. real estate industry, Belpointe OZ is charging among the lowest fees in the market, including:

• No investors servicing fees;
• No disposition fees;
• 0.75% annual management fee; and
• 5% carried interest.

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 www.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.

©2023 Belpointe PREP, LLC. All rights reserved.