OZ Investing can be a Real Growth Catalyst
Ask anyone this past week about the economy, the market, the odds of a recession, interest rates or Fed policy and you’ll get as many responses as one could expect. Opinions are literally all over the place. I think the Fed got inflation entirely wrong for a long time, and the comeuppance for living in the state of a “transitory” inflation narrative may be one of the major—and very hard to quantify—factors that is now pulling on the economy, markets and sentiment.
This latest relief rally, which has the S&P up approximately 8% and the Nasdaq higher by approximately 11% off the June lows, has some of the smartest people in the forecasting business competing with the weathermen of the early 1970s for the title of “best of the worst” in terms of accuracy. In my opinion, the market is dealing with multiple macro and micro crosscurrents that may cause another six months of elevated volatility.
This is a real jump ball for thousands of advisors trying to discern the data and either add to or trim from market exposure. It is also raising anxiety in the real estate world over where mortgage rates will be six months from now and whether the Fed goes too far, putting home prices at further risk of losing material value. Add in the fluid geopolitical risks and it’s not hard to understand why Jerome Powell has embraced the safety of saying our decisions going forward will be “data dependent.”
If advisors and investors alike are looking for a catalyst to help with the decision-making process, then it might help to download and read up on all of the incredible tax benefits that investing in Opportunity Zones can provide.
The U.S. Treasury has certified 8,764 communities in all 50 states, the District of Columbia, and five U.S. territories as Opportunity Zones, where nearly 35 million people reside according to the U.S. Treasury. These Opportunity Zones represent communities in need of direct investment by private investors and where there is significant potential for income and growth
When investing in Opportunity Zones there are multiple qualified opportunity funds (“QOFs”) to choose from, but none are publicly listed and traded on a national securities exchange other than Belpointe PREP (NYSE American: “OZ”). And with Belpointe PREP there is no risk of future capital calls, as spelled out in Belpointe PREP’s prospectus and SEC filings. Most other QOFs are illiquid or require early exit fees and can require investors to add additional capital to cover unexpected costs in the projects that they sponsor. And we are fully aware that life happens, and plans change. As noted, if at any time an investor in Belpointe PREP (NYSE American: “OZ”) units needs access to their funds before December 31, 2026, they can simply look to sell the stock.
Belpointe PREP is building Class-A full-featured multi-family residential housing communities in markets that it believes have strong macroeconomic fundamentals, such as Nashville, TN, Tampa-St. Petersburg, FL, and Sarasota, FL.
In addition, Belpointe PREP’s management team is actively seeking to acquire other QOFs that have stabilized their properties, where there are some clear benefits to acquiring seasoned properties in lieu of new construction with all its attendant risks. Our acquisition team is actively looking for sellers of properties within Opportunity Zones. Belpointe PREP has cash and currency in the form of its Class A units “OZ” that provide the kind of liquidity that some selling parties may desire.
And the terms of investing in QOFs might just be extended. The two co-authors of the legislation that created Opportunity Zones—Senators Cory Booker (D-NJ) and Tim Scott (R-SC)—are trying to make investing in QOFs even more attractive for investors. As of early April, they introduced a bill called the Opportunity Zones Transparency, Extension, and Improvement Act (the “OZ Improvement Act”), The OZ Improvement Act is designed to enhance the spirit of the original legislation and the benefits for investors seeking to invest in QOFs. The bill has strong bipartisan support.
If and when the bill does pass, this will be exciting news for the Opportunity Zone movement and Belpointe PREP, LLC (NYSE American: “OZ”) in particular. Belpointe PREP, LLC (NYSE American: “OZ”) is a QOF that is developing and acquiring Class-A multi-family residential properties in some of the strongest job markets and in what we believe will be the fastest growing cities in the U.S.
In addition, sellers of properties that are sitting on capital gains and nervous about purchasing another like-kind property should also consider placing those capital gains into a QOF, like Belpointe PREP, LLC (NYSE American: “OZ”), which can defer the tax payment on capital gains out to December 31, 2026. The chance to invest in opportunity zones—a government-created program designed to incentivize investing in some of the most essential segments of the broader real estate universe—is a generational opportunity that provides a legal alternative to the 1031 like-kind exchange, with its requirement to buy another physical property within 180 days. We spell this alternative out in our updated white paper.
Moving real estate capital gains into a managed QOF, like Belpointe PREP (NYSE American: “OZ”), that includes tax benefits and the opportunity for tax-free growth and income, should have great appeal in the present environment among cash-rich sellers seeking a smart and potentially lucrative investment opportunity.
At Belpointe PREP (NYSE American: “OZ”), we’ve made it very easy to buy as much tax shelter as one needs, and with no penalty, if you want to add to or trim from your position at any time. In our view, with a stock market in full correction mode, liquid real estate funds targeting essential housing in markets with bullish migration trends coupled with tax benefits in this stubbornly high period of inflation is a compelling alternative.
Cody H. Laidlaw
255 Glenville Road
Greenwich, CT 06831
T: (203) 883-1944
Disclosure: Cody H. Laidlaw is the Chief Investor Relations Officer. 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 email@example.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.
©2022 Belpointe PREP, LLC. All rights reserved.