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Real Estate Gains During Market Meltdown

Investors Booking Profits During Market Meltdown Consider Capital Gains Tax-Sheltered Property

Another week of more of the same for stock investors. The prolonged war in Ukraine, widespread lockdowns in China, crude prices back up over $100/bbl, food commodity prices moving up and to the right and the Fed meeting in a panic room to address runaway inflation that they were in denial about for all of 2021.

The possible fallout from these perfect storm conditions is a market on the tips of the March lows and vulnerable to another leg down. Against this backdrop, investors may be looking at locking in long-term capital gains from the decade-long bull market and shifting portfolio weightings into positions that may provide stagflation resistance, one of which may be multi-family residential real estate.

Anecdotal evidence aside, check out the chart of the S&P 500 Real Estate Select Sector SPDR® ETF (NYSE ARCA: “XLRE”) and decide for yourself. As of April 26th, XLRE was trading within 3 points, or 5%, of its all-time high, meanwhile the S&P was off 12% and the Nasdaq was down 22%. The chart of the XLRE shows a bullish pattern within what appears to be a very resilient sector.

Further to this point, I believe that Belpointe PREP, LLC (NYSE American: “OZ”) is positioned in the sweet spot of the broader real estate investment space—multi-family residential real estate—namely Class A apartment communities located in qualified opportunity zones within markets enjoying strong labor and migration trends.

Belpointe PREP is building and acquiring multi-family residential Class A luxury apartment dwellings within qualified opportunity zones in cities like Nashville, TN, and Sarasota/St. Petersburg, FL. In addition, Belpointe’s executive management team is actively seeking to acquire other Qualified Opportunity Zone Funds (QOFs) or assets within other funds that are being considered for sale. We believe there are clear benefits to acquiring seasoned properties in lieu of undertaking new construction, and any and all referrals and inquiries can be directed to me.

For those just investigating qualified opportunity zone investing for the first time, Belpointe PREP (NYSE American: “OZ”) is the only publicly listed QOF and it requires no paperwork or documentation to invest, providing investors the ability to pair off 2021 year-end gains (as well as 2022 gains) and the opportunity for growth and income for the next five years, out to December 31, 2026, where all of the capital appreciation and the majority of pass-through income may be tax-free.

But there is more good news in the works: the two co-authors of the legislation that created qualified opportunity zones—Senator Cory Booker (D-NJ) and Senator Tim Scott (R-SC)—are looking to make investing into QOFs even more attractive for new investors. As of early April, they, their co-sponsors, and a number of co-sponsors in the House, introduced a bill called the Opportunity Zones Transparency, Extension, and Improvement Act (the “OZ Improvement Act”), which 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 and, I believe, should easily pass into law.

Below is a summary of the bill in its current form:

Enhanced Transparency

• QOF Reporting – The OZ Improvement Act would expand the reporting requirements of QOFs requiring them to provide the IRS with information about, among other things, the census tracks where their opportunity zone (OZ) investments are located, the amount of an OZ investment, and certain information designed to assess job creation and growth by OZ investments.

 QOZB Reporting – Qualified opportunity zone businesses (QOZBs) would be required to provide relevant reporting to their QOFs in order to enable the QOF comply with its reporting requirements.
 QOF Investor Reporting – Investors would also be required to include additional information on their annual Form 8997 filing with the IRS, such as the identity of the QOFs in which they have invested, and dates on which their investments were made and are disposed of; in my view not a big deal.
 Penalties for Late Reporting – The OZ Improvement Act also includes certain monetary penalties for QOFs and individual investors who fail to comply with their reporting obligations.
• Treasury Reporting to the Public – The OZ Improvement Act would require the Secretary of the Treasury to provide a comprehensive report on certain aggregated information, including things like the total number of QOFs and the total assets held by QOFs, as well as information about QOFs broader impact on job creation, poverty reduction and new business starts in OZs.

OZ Program Extensions

• Extension of Investment Period – The OZ Improvement Act would extend the capital gains investment deferral period through December 31, 2028.

• Basis Step-Up – When the Tax Cut and Jobs Act of 2017 first established opportunity zones, investors had two chances to receive a step-up in basis (i.e., a reduction in their deferred capital gains): the first required holding their OZ investment for a period of five years, up to December 31, 2026, to receive a step-up in basis equal to 10% of their deferred capital gains, and the second required holding their OZ investment for two additional years (seven years in total), up to December 31, 2026, to receive a second step-up in basis equal to 5% of their deferred capital gains (for a total step-up in basis of 15% of their deferred capital gains).

The OZ Improvement Act would lower the holding period for those investors eligible to receive the second step-up in basis (the additional 5%) from two additional years to one additional year (six years in total). In addition, if enacted as currently drafted, by virtue of extending the deferral period through December 31, 2028, investments made through December 31, 2022 and held for six years, up to December 31, 2028, would become eligible to receive each of the two steps-up in basis described above.

• QOF – QOF Investments – The OZ Improvement Act would allow QOFs to invest in other QOFs, in a “feeder fund” structure, provided there is only one QOF-to-QOF transaction and the feeder fund invests 95% of its assets into a QOF.
• State and Community Dynamism Fund – The OZ Improvement Act would create a $1B State and Community Dynamism Fund that would provide states and territories with technical assistance and financing support to drive capital to projects and businesses in underserved communities.
• Removal of Certain High Income OZ Tracts – The OZ Improvement Act would require an “early sunset” of certain census tracts with high median family income statistics.
• Designation of Certain Former Industrial Tracts as OZ Tracts – The OZ Improvement Act would allow for certain zero population tracts adjacent to OZs to also be designated as OZs. This addition is intended to allow for the limited expansion of OZs to adjacent tracts formerly used for an industrial purposes and containing a brownfield site (as determined by the EPA or appropriate State authority) and that need revitalization and often have trouble securing financing.
It is my understanding that many pass-through entities filed for extensions on their 2021 tax filings. Yesterday Belpointe PREP’s Class A units (NYSE American: “OZ”) were trading at, and at times slightly at a discount to, their stated NAV of $100 per Class A unit, while leading multi-family REIT stocks like AvalonBay Communities Inc. (NYSE: “AVB”) and Equity Residential (NYSE: “EQR”) are trading in excess of 3x of book value.
At Belpointe PREP, we’ve made it very easy to buy as much tax shelter as one needs, and with no penalty if you want to add or trim to 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
Belpointe OZ
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 or Alternatively, you may request Belpointe PREP send you the prospectus by calling (203) 883-1944 or emailing 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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