Time Is Running Out For Step-Up Basis Benefit
Hopefully by now, readers of this blog have had a chance to view our new TV ad on CNBC, Bloomberg and Fox Business
For those just getting acquainted with Opportunity Zones and Qualified Opportunity Zone Funds (QOFs), it’s important to note that this movement to gentrify areas that lack good housing, infrastructure and recreational assets has bipartisan political support at the federal, state and local levels. Opportunity Zones were first sponsored by Corey Booker (D-NJ) and Tim Scott (R-SC).
I highly encourage all interested parties to download our latest and updated White Paper by clicking here at (add link) 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. It is truly the epitome of the public-private partnership in action for the greater good of America’s biggest cities, smaller towns and areas within the U.S.
There are currently 8,700+ Qualified Opportunity Zones in all 50 states, District of Columbia and five U.S. territories. Any business or individual with capital gains from the sale of a capital asset can receive tax benefits for reinvesting those capital gains in Opportunity Zones through a QOF:
- The obligation to pay taxes on realized capital gains that are reinvested in an Opportunity Zone through a QOF is deferred until the earlier of the end of 2026 or when the investor sells its Opportunity Zone investment
- The basis of the QOF investment is increased by 10% if the investment is held for at least five years on or prior to the end of 2026
- Capital gains derived from the QOF investment are permanently excluded from capital gains tax, provided the investment is held for at least 10 years up to the end of 2047
The second point noted about “basis of the QOF investment is 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)
The recent listing of Belpointe PREP (Ticker Symbol: “OZ”) to the NYSE American makes the OZ partnership the only publicly listed QOF available to investors to date, providing for ease of purchase and public company liquidity. Purchasing Class A units in OZ is about as straight forward as it gets in this asset class, and we are excited to be first to market.
Again, 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.
In addition to the White Paper, I’ve provided a summary of highlighted benefits of Belpointe OZ, in a comprehensive list noted below:
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 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.
Click Here To Download The Latest White Paper Version: INVESTING IN OPPORTUNITY ZONES FOR TAX ADVANTAGES AND GROWTH
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. Investments via the market have no minimum.
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.
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 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 203-883-194 or IR@belpointeoz.com we are standing by.
To your success,
255 Glenville Road
Greenwich, CT 06831
T: (203) 883-1944
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 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.
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