Business Context and Reporting Period
This Form 8-K was filed by Belpointe PREP, LLC on February 13, 2024, reporting a material event that occurred on January 31, 2024. The Company is an emerging growth company with Class A units trading on NYSE American under the symbol "OZ."
Key Financial Metrics and Agreements
The filing details a new financing arrangement rather than periodic financial performance metrics. Key terms include:
- Mezzanine Loan Amount: Up to $56.3 million in principal.
- Interest Rate: 13.0% per annum.
- Maturity Date: May 12, 2027, with a one-year extension option.
- Collateral: Secured by the Company's investment in 1991 Main Street, Sarasota, Florida.
- Related Construction Loan: The Company previously entered into a Mortgage Loan Agreement with Bank OZK for up to $130.0 million.
- Financial Covenants: The Company must maintain liquid assets of no less than $20.0 million and net worth of no less than $130.0 million.
Material Changes
The primary material change is the entry into a Material Definitive Agreement (Mezzanine Loan Agreement) with Southern Realty Trust Holdings, LLC. Proceeds are designated to reimburse costs and fund the continued development of the 1991 Main Street project. Additionally, the Company executed a second modification agreement with Bank OZK to consent to the Mezzanine Loan and modify the existing Mortgage Loan Agreement.
Management Commentary, Risks, and Contingencies
In connection with the Mezzanine Loan, the Company provided three specific guarantees to the Lender:
- Debt Service and Carry Guaranty: Guarantees payment of interest, principal, and obligations under both the Mezzanine Loan and the $130.0 million Mortgage Loan, as well as operational costs for the property.
- Completion Guaranty: Guarantees the completion of work on 1991 Main Street.
- Carveout Guaranty: Indemnifies the Lender against losses from "bad acts," insolvency, environmental conditions, and violations of loan terms.
The Company also provided a customary environmental indemnity agreement to protect the Lender from environmental liabilities related to the property.
Investor Verification Checklist
- Verify the Company's current liquid assets and net worth to ensure compliance with the $20.0 million and $130.0 million covenants, respectively.
- Assess the development status and timeline of the 1991 Main Street project in Sarasota, Florida, given the completion guaranty.
- Review the terms of the existing $130.0 million construction loan with Bank OZK to understand the total debt service burden.
- Monitor the Company's ability to service the new 13.0% interest rate on the $56.3 million mezzanine loan.