OZ

Business Context and Reporting Period

Company: Belpointe PREP, LLC (Ticker: OZ)
Filing Type: Form 10-K (Annual Report)
Reporting Period: Fiscal year ended December 31, 2024
Business Overview: The Company is the only publicly traded qualified opportunity fund listed on a national securities exchange. It is externally managed by Belpointe PREP Manager, LLC and focuses on acquiring, developing, and managing commercial and mixed-use real estate within qualified opportunity zones. As of December 31, 2024, the Company reported two segments: Commercial and Mixed-use.

Key Financial Metrics

Material Changes vs. Prior Period

• Net Loss Increase: Net loss increased by approximately $9.5 million year-over-year, primarily driven by a $10.0 million increase in interest expense due to new construction financing and a $2.1 million increase in depreciation and amortization following the placement of the "Aster & Links" project in service.
• Debt Expansion: Total debt increased significantly from $19.7 million to $177.0 million. This reflects the drawdown of construction loans for the "Aster & Links" (Sarasota) and "Viv" (St. Petersburg) projects, including a new $56.4 million mezzanine loan and a $104.0 million construction loan.
• Segment NOI Decline: Total Segment NOI turned negative at $(1.5) million compared to $0.8 million in 2023. The Mixed-use segment NOI decreased by $1.1 million as the newly completed "Aster & Links" property is in its initial lease-up phase, where expenses currently exceed stabilized rental revenue.
• Impairment Reduction: Real estate impairment charges decreased to $0.8 million from $4.1 million in 2023, related to a Nashville asset.

Guidance, Outlook, Risks, and Contingencies

Outlook and Capital Needs: The Company anticipates that cash on hand, proceeds from Public Offerings, and financing activities will be sufficient to meet liquidity requirements for the next 12 months. Management expects to work toward a target annual distribution rate of 6-8% once investments generate operating cash flow, though no distributions are currently expected. Construction on the "Viv" project is 72% complete with substantial completion anticipated in the second half of 2025.

Material Risks and Contingencies:

• Legal Proceedings: The Company is defending against a lawsuit filed by Galinn Fund LLC regarding a $3.0 million mortgage note executed by a former affiliate of a joint venture partner (CMC Storrs SPV, LLC). The Company disputes liability, alleging fraud by the individual who executed the note without authority.
• Interest Rate Risk: The Company holds variable-rate construction loans tied to SOFR. While interest rate caps have been purchased to mitigate exposure, rising rates increase financing costs.
• Development Risk: Significant capital is committed to ongoing developments. Delays or cost overruns could adversely affect financial condition. Unfunded capital commitments totaled approximately $60 million as of year-end.
• Liquidity and Funding: The Company relies on its ongoing Public Offering to raise capital. Failure to raise sufficient proceeds could limit the ability to fund projects or pay distributions.

Investor Verification Checklist

• Debt Covenants: Verify compliance with financial covenants requiring liquid assets of no less than $20.0 million and net worth of no less than $130.0 million.
• Construction Progress: Monitor the lease-up velocity and stabilization timeline for the "Aster & Links" and "Viv" projects to assess when Segment NOI may turn positive.
• Legal Status: Track the status of the Galinn Fund LLC litigation to determine potential liability exposure.
• Capital Raising: Review the pace of Class A unit issuances in the ongoing Public Offering to ensure sufficient funding for the $60 million in unfunded development commitments.
• Interest Rate Exposure: Confirm the effectiveness of interest rate caps in managing the cost of variable-rate debt in a rising rate environment.