New NYSE American: OZ Listing As Only Public QOF
Champagne all around! Investors now have access to the only publicly listed Qualified Opportunity Zone Fund (QOF) available on the stock market being traded on the NYSE American exchange. Belpointe PREP (Ticker: “OZ”) debuted this past Monday, effectively completing the transaction from a REIT structure to a publicly traded partnership. It was a lot of work getting to this point, but worth every minute!
Inflation is trending higher, the Fed is pulling the punch bowl, sending bond yields higher and with the forthcoming Biden economic plan in some form, it’s a strong bet that individual and corporate income and capital gains taxes are going to be higher.
According to Briefing.com “The 5y5y forward rate increased five basis points to 2.41%, overtaking its high from May. The inflation gauge is now at its highest level in seven years.” And this number is well below the current rate of inflation at 5.4%.
If the Fed’s mandate to have inflation pegged at 2% annually, then they are faced with having to lift short-term interest rates sooner than later. What that means is multi-family housing properties whose leases are tied to CPI may see those leases adjust higher. This particular subset of the real estate market is what Belpointe OZ is targeting in its early days, either by way of new construction or strategic acquisition.
We have an updated White Paper for investors and clients that lays out the QOF structure and how the tax advantage features may impact Belpointe OZ investors. Download it by clicking here, review it and forward it to those who might consider the benefits of what this investment can offer in the way of capital gains tax-offsets, income and opportunity for appreciation with the added bonus of a step-up basis if purchased by December 31, 2021 and held for five years.
For those that haven’t had a chance to review the summary of highlighted benefits of Belpointe OZ, below is a comprehensive list:
Belpointe OZ is conducting a $750 million continuous offering of its Class A units. Belpointe OZ is focused on identifying, acquiring, developing or redeveloping and managing commercial real estate located within qualified opportunity zones.
Belpointe OZ qualified as a QOF beginning with its taxable year ended December 31, 2020. Because Belpointe OZ is a QOF, certain of its investors are eligible for favorable capital gains tax treatment on their investments.
Belpointe OZ’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, healthcare, industrial, self-storage, hospitality, office, mixed-use, data centers and solar projects located throughout the United States and its territories.
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 OZ’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.
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 OZ’s Class A units for a period of five years.
Capital Gains Tax Exemption – An eligible investor may elect to receive an increase in basis with respect to Belpointe OZ’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 OZ’s Class A units.
No Depreciation Recapture – An eligible investor who elects to receive an increase in basis with respect to Belpointe OZ’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 OZ’s Class A units.
Significantly Reduced Management Fees – Belpointe OZ’s manager is paid annual management fees of only 0.75% of its net asset value, 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 OZ Class A units, unlike traditional private real estate funds and other real estate investment platforms.
No Investor Servicing Fees – Belpointe OZ 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 an annual basis.
Significantly Lower Carried Interest – Belpointe OZ’s manager holds 100% of its Class B units, which entitle the manager to 5% of any gain recognized by or distributed to Belpointe OZ or recognized or distributed from Belpointe OZ’s operating companies or any subsidiary. This ownership interest will result in a “carried interest” to Belpointe OZ’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 OZ intends to make private equity acquisitions and investments, and opportunistic acquisitions of other QOFs and qualified opportunity zone businesses using its equity as transaction consideration, thereby preserving cash for other investing activities.
Greater Diversification – Belpointe OZ 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 OZ’s Class A units the potential to achieve greater returns at a lower risk.
Public Company Transparency – Belpointe OZ is a reporting company subject to the periodic and current reporting requirements of the federal securities laws, requiring it to file, among other things, annual and quarterly reports (including financial statements, financial statement schedules and exhibits) and current reports disclosing material events. As a result, unlike private real estate investment platforms, investors in Belpointe OZ’s Class A units will have access to regular updates regarding its performance.
Public Market Liquidity – Belpointe OZ’s Class A units are listed on the NYSE American under the symbol “OZ.” As a result, Belpointe OZ is the first and only QOF listed on a national securities exchange. Having its Class A units listed for trading on NYSE provides holders of Belpointe OZ’s Class A units with liquidity in respect of their investment and greater control over the timing of purchases and sales of their Class A units.
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.
Development Expertise – Belpointe OZ’s manager employs a highly qualified team with extensive real estate development and construction management experience, thereby providing Belpointe OZ with knowledge, relationships and internal development expertise that it believes far exceeds what many other real estate investment platforms can offer their investors.
Multiple Investment Platforms – In order to maximize its development opportunities, Belpointe OZ anticipates entering into joint ventures in a variety of forms, including: (i) franchise platforms with affiliated development companies in specific regional markets; (ii) programmatic platforms with established regional developers with which Belpointe OZ will have an exclusive relationship to engage in multiple regional investments; and (iii) traditional local joint venture partnerships for one-off developments.
With the new listing on NYSE and a short timetable to take full advantage of the step-up basis by year-end, 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.
If there are any questions that need answering, please don’t hesitate to email or call.
To your success,
255 Glenville Road
Greenwich, CT 06831
T: (203) 883-1944