Putin Goes Under The Knife With The Fed On Deck

This is a big week, the Fed has acted on its rhetoric and raised short-term rates by half a percentage point, and, by the time this column hits everyone’s inbox, Vladimir Putin, according to the New York Post, will likely have undergone rumored cancer surgery with temporary power being handed to fellow FSK (the main successor agency to the KGB) henchman Nikolai Patrushev, who currently serves as secretary of the Security Council of Russia.

Patrushev has been described by some as more lethal than Putin in his regard for those under Russian attack, so I don’t think investors shouldn’t expect some sort of interim olive branch. In fact, I think quite the opposite is a more likely scenario. According to New Lines Magazine, “[t]he culmination of Patrushev’s decades-long public and behind-the-scenes agitation against the Western world is Russia’s ongoing invasion of Ukraine. … The West needs to take Patrushev at his word and prepare to counteract his worst KGB impulses. This will require thinking outside of the box. It may not only be Russia’s survival at stake.” (Source: https://newlinesmag.com/reportage/the-second-most-powerful-man-in-russia/)

That’s only one among many moving targets. Businesses are now caught in the middle of a volatile cost of capital cycle, with the bond market beckoning the Fed to man up and abandon incrementalism where history has shown such a policy to only exacerbate embedded inflationary pressures. The market seems to be sensing this more proactive measure as the yield on the benchmark 10-year Treasury Note cleared 3.0% while 30-year fixed-rate mortgages jumped to over 5.5%.

We live in very interesting times. While the Fed can stem the flow of lending with higher rates, they have no power over relieving the global supply chain of its bottlenecks, or the fear of a tactical bio/nuclear weapons attacks by a more desperate Russia whose war on Ukraine isn’t going according to plan. As each week brings more of the same, the market seems to become more frustrated.

To this point, the Dow, S&P, Nasdaq and Russell 2000 established new 52-week lows early Monday before a late-day snapback, a short-covering rally saved the market from another rout that gave the last day of April a black eye. With the Fed upping the ante to lift short-term rates, it can only improve business conditions for landlords of residential properties that can adjust their lease prices higher for those rental contracts pegged to cost-of-living indexes like the Consumer Price Index (CPI).

Against this backdrop, investors who booked stock market gains in the last 180 days may consider reinvesting those gains into a Qualified Opportunity Zone Fund (QOF) like Belpointe PREP, LLC.

Belpointe PREP (NYSE American: “OZ”) is positioned in what I believe is easily the sweet spot of the broader real estate investment sector. Belpointe PREP is building and acquiring multi-family residential Class A luxury apartment dwellings within OZs in cities like Nashville, TN, Sarasota/St. Petersburg, FL.

In addition, Belpointe PREP’s management team is actively seeking to acquire other QOFs that have stabilized their properties, and I believe there are some clear benefits to acquiring seasoned properties in lieu of new construction with all its attendant risks.

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 the 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—going back, as of this writing, to November 7, 2021. The major averages set new all-time highs in late December 2021, offering the potential to shelter dollar-for-dollar the last seven weeks of realized gains of 2021. Think about that!

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, designed to enhance the spirit of the original legislation and the benefits for investors seeking to invest into QOFs. The bill has strong bipartisan support and is currently in the committee stage in both the Senate and House.

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 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 the stubbornly high period of inflation may be a compelling alternative.

Cody H. Laidlaw
Editor-in-Chief
Belpointe OZ
255 Glenville Road
Greenwich, CT 06831
T: (203) 883-1944
E: IR@belpointeoz.com

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 claidlaw@belpointe.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.