It’s Prime Time For This NYSE American Listed Opportunity Zone Fund
The Personal Consumption Expenditure (PCE) index rose by 6.3% year over year in April, as compared to 6.6% in March, and the small deceleration in the rate of inflation as measured by the PCE gave a rally-starved stock market a chance to cheer, if even for just a short while. Seven weeks of sheer downside pain gave way to an oversold bounce, last week, that offered some relief and a chance for investors to lighten up on stocks that are getting hammered by inflation and rising interest rates.
Just as the stock market is trying to get its sea legs again, Fed governor Christopher Waller came out with some hawkish commentary following a speech to the Institute for Monetary and Financial Stability in Frankfurt, Germany, last week. Stating that he would support rate hikes past “neutral” to fight inflation, and implying rate hikes for the balance of 2022.
At present, the Fed and the bond market define neutral as a 2.5% level for the Fed Funds Rate, whereas Waller is laying out a scenario of 4.5% based on successive 50-basis point hikes. That’s a long way up from the current 0.75%-1.0% Fed Funds Rate.
Waller went on to say “[i]n particular, I am not taking 50 basis-point hikes off the table until I see inflation coming down closer to our 2 percent target … and, by the end of this year, I support having the policy rate at a level above neutral so that it is reducing demand for products and labor, bringing it more in line with supply and thus helping rein in inflation.” If Mr. Waller is telegraphing a modified Fed policy, then I believe rental income tied to short-term interest rates is about to become ever more lucrative.
I bring this into view because aside from the energy sector providing an inflation hedge that is actually doing the job of providing income and capital appreciation, I believe the other primary choice for investors seeking inflation sensitive assets is that of income-producing rental properties—one option of which is Class-A multi-family residential properties situated in cities short on upscale housing within dedicated opportunity zones.
There are also some inflationary profits being generated in the non-energy commodity space, but not without volatility in the underlying price action that is fraught with headline risk. I also think the Fed must be seeing some very sticky inflationary pressures within their internal data to let Governor Waller go out and lay out the idea of extended rate increases into 2023. This is a radical departure from such a well-known dove within the Fed.
In my view this is yet another green light for investors to take decisive action to make serious adjustments in asset allocation to reflect an increased weighting in inflation and interest rate-sensitive income-producing real estate. Rents are rising and though the economy may endure a soft landing later this year, the stock market, in my opinion, may likely experience further multiple contractions resulting in lower equity valuations.
So, let’s jump to Plan A—investors who are taking action and have booked stock market gains in the last 180 days may consider reinvesting those gains into a tax-sheltered Qualified Opportunity Zone Fund (QOF).
Belpointe PREP, LLC (NYSE American: “OZ”) is such a QOF engaged in building and seeking acquisitions of multi-family residential Class A luxury apartment dwellings within opportunity zones (OZs) in cities like Nashville, TN, and Sarasota/St. Petersburg, FL.
While prices for everything are up, I think Waller and the Fed are essentially arguing that the U.S. economy can well withstand the current rate of inflation because of abundant job openings and because higher wages will win out as inflation cools later this year and into 2023. The Bureau of Labor Statistics reported that, as of the end of March, there were 5.6 million more job openings than there were available workers. A meaningful share of those job openings are in the very markets that Belpointe PREP is building and seeking to acquire properties in. There are always needs and wants, and I believe that while something like a new boat might hold the #1 spot on a bucket list of wants, everyone making a good wage or salary needs a safe, well-maintained residence, preferably loaded with amenities.
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 undertaking new construction with all its attendant risks. Belpointe PREP has cash and currency in the form of its equity “OZ” Class A units that can provide the kind of liquidity that some selling parties may desire.
Belpointe PREP (NYSE American: “OZ”) is the first and thus far only publicly listed QOF and it requires no paperwork or documentation to invest. Belpointe PREP provides investors with the ability to pair off 2021 year-end gains (as well as year-to-date 2022 gains), using a 180-day look-back window, and reinvest those capital gains to defer taxes, in addition to offering investors an opportunity for growth and income for the next five years, out to December 31, 2026, where all capital appreciation and the majority of pass-through income may be tax-free.
The window to shelter 2021 capital gains narrows with each passing day. There is still time to allocate year-end 2021 capital gains in all asset classes: stocks, bonds, real estate, sale of a business or a partial stake, precious metals, crypto profits, livestock, and collectibles; they all qualify and realized capital gains from any of them can be offset with like-kind dollar amount purchases of Belpointe PREP (NYSE American: “OZ”) Class A units.
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 firstname.lastname@example.org. Read the prospectus in its entirety before making an investment decision.
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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.
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