Elevated Risk From Volatile Geopolitical Landscape
I think there is a lot of truth in the famous saying “there’s no place like home” from The Wizard of Oz. This past week alone geopolitical headlines like: President Xi Jinping tightening his grip on China’s Communist Party; Ukraine and Russia accusing each other of readying the use of a dirty bomb; Europe on the brink of recession; protests in Iran and across the EU; North Korea firing missiles over Japan; the sudden resignation of Liz Truss in Britain; and Italy’s election of the country’s first far-right premier since World War II are, I believe, fueling wild market swings amid heightened uncertainty.
As all of this turmoil is happening abroad, the U.S. stock market is having a strong month of gains. Bond yields did an about-face after Tuesday’s S&P CoreLogic Case-Shiller 20-city house index showed prices continued to decelerate for a second straight month, even as household formation remains high.
But with the national average for 30-year fixed mortgage rates now hovering around 7.20%, affordability is forcing prospective buyers to the rental market, where I believe demand for Class A full-featured apartments in cities enjoying strong migration trends will remain a bullish investment proposition. These attributes are just some of the many reasons why Belpointe PREP, LLC (NYSE American: “OZ”) has made a number of investments in the state of Florida and in Nashville, Tennessee.
Inflation, in my opinion, is sticky and even if the Fed slows the pace of rate hikes, I think prices for energy, food, wages and professional services will remain elevated. Up until recently, I’ve been hearing about employers paying out large signing bonuses for new hires. I don’t think the those same employers are likely to just do an about-face and initiate widespread layoffs. The jobs data for September fell just short of expectations but was still pretty solid in my opinion, which I think will remain fresh in the minds of the Fed as we enter the holiday shopping season, where seasonal hiring typically takes place. I believe it just stands to reason that Fed policy will very likely remain hawkish until they see net hiring trends flatten out. And the Fed has little, if any, control over the price of food and energy.
As much as I think the market wants to believe that a Fed pivot is in the offering, in my view, it may be early 2023 before the Fed does indeed pause on rate increases. Against this backdrop, I believe that rents that are indexed to CPI or other inflation benchmarks can remain high. Our bullish view on the rental outlook seems to be supported by continued household formation, limited supply and stubborn inflation, as detailed above.
At Belpointe PREP, LLC (“Belpointe OZ”), our business model is built around acquiring, developing and owning multiple properties in select cities where our research shows there are strong migration and employment trends. Some of the other markets that we are looking at include Raleigh, Durham, and Charlotte, North Carolina.
Investors that have realized capital gains in the past six months from the sale of stocks, real estate, a business, collectibles, planes, boats, livestock, cryptocurrencies, precious metals, an interest in a partnership, or other varieties of assets may want to consider reinvesting those capital gains into a Qualified Opportunity Zone Fund (a “QOF”) such as Belpointe OZ, whose Class A units are listed in on the NYSE American under the symbol “OZ” and can be purchased in the open market. Plus, when purchasing Class A units in the market there is no minimum investment amount; you can purchase as little as one Class A unit. Thus, pairing off realized capital gains against a liquid tax shelter, where no taxes are due from capital gains realized in 2022 (as long as you continue to hold the investment) until December 31, 2026.
Time is running out. As of this writing, any realized capital gains going back to April 30, 2022, qualify for deferment, representing a 180-day lookback. Shelter your or your clients’ 2022 capital gains before the 180-day reinvestment period runs out. Every day the window narrows to shelter capital gains for 2022.
What’s more, because Belpointe OZ is a publicly traded QOF, transparency is higher than in that of many privately managed QOFs. In addition, while most other QOFs have limited or restrictive redemption features, Belpointe OZ unitholders can buy and sell Class A units in the open market.
Another key item, which I think is of huge importance, is that Class A unitholders of Belpointe OZ are not at risk of receiving and being liable for any future capital calls. Capital calls are an unfortunate feature many investors may regularly face in acquiring, developing and renovating private opportunity zone properties. Liquidity, no risk of capital calls and diversification put Belpointe OZ in the class of best-qualified opportunity zone funds, in my view.
Investing capital gains into a QOF, like Belpointe OZ, allows an investor to defer the tax payment on those capital gains through the earlier of tax year-end, December 31, 2026, or the date on which the investor sells their investment or experiences another type of inclusion event. Plus, all income and appreciation from the time one invests capital gains into a QOF through December 31, 2047, is potentially tax-free. We spell out how this alternative can work for you in our updated white paper.
Have questions about how Belpointe PREP, LLC (NYSE American: “OZ”) can provide opportunities for investment appreciation and income and help you or your clients to defer or eliminate capital gains tax obligations?
Call or email us and we’ll take the time to answer all of your questions about Belpointe PREP, LLC (NYSE American: “OZ”) and how reinvesting capital gains into a QOF can be utilized to offset tax obligations.
You can contact us at 203-883-1944 or IR@belpointeoz.com.
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 email@example.com. 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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