UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For
the quarterly period ended |
or
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the transition period from ____ to ____ |
Commission
File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address or principal executive offices)
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |
| ☒ | Smaller reporting company | |||
| Emerging growth company |
| If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
☐
As of May 6, 2022, the registrant had Class A units, Class B units and Class M unit outstanding.
TABLE OF CONTENTS
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (this “Form 10-Q”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which reflect the current views of Belpointe PREP, LLC (together with its subsidiaries, the “Company,” “we,” “us,” or “our”) with respect to, among other things, our future results of operations and financial performance. In some cases, you can identify forward-looking statements by words such as “anticipate,” “approximately,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “outlook,” “plan,” “potential,” “predict,” “seek,” “should,” “will,” and “would” or the negative of these words or other comparable words or statements that do not relate to historical or factual matters. By their nature, forward-looking statements speak only as of the date they are made, are not statements of historical fact or guarantees of future performance and are subject to risks, uncertainties, assumptions or changes in circumstances that are difficult to predict or quantify, including those risks described under Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021, a copy of which may be accessed here, and, in particular, the risks and uncertainties created by the COVID-19 pandemic, escalating conflict between Russia and Ukraine, rising inflation rates, supply chain disruptions, labor shortages, general economic uncertainty, potential changes in the laws that we are subject to, and the projected impact of these and other events on our business, results of operations and financial performance.
We caution you that the risks, uncertainties and other factors referenced above may not contain all of the risks, uncertainties and other factors that are important to you. There may be other factors that cause our actual results to differ materially from any forward-looking statements, including factors discussed in Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Form 10-Q, as such factors may be updated from time to time in our periodic filings with the SEC, which are accessible on the SEC’s website at www.sec.gov. You should evaluate all forward-looking statements made in this Form 10-Q in the context of these risks and uncertainties. In addition, we cannot assure you that we will realize the results, benefits or developments that we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our business in the way expected. In light of the significant uncertainties inherent in these forward-looking statements, the inclusion of this information should not be regarded as a representation by us or any other person that our plans, strategies and objectives, which we consider to be reasonable, will be achieved. All forward-looking statements in this Form 10-Q apply only as of the date made and are expressly qualified in their entirety by the cautionary statements included in this Form 10-Q and in other filings we make with the SEC. We undertake no obligation to publicly update or revise any forward-looking statements to reflect subsequent events or circumstances, except as required by law.
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
Belpointe PREP, LLC
Consolidated Balance Sheets
(in thousands, except unit and per unit data)
| March 31, 2022 | December 31, 2021 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Real estate | ||||||||
| Land | $ | $ | ||||||
| Building and improvements | ||||||||
| Intangible assets | ||||||||
| Real estate under construction | ||||||||
| Total real estate | ||||||||
| Accumulated depreciation and amortization | ( | ) | ( | ) | ||||
| Real estate, net | ||||||||
| Cash and cash equivalents | ||||||||
| Loan receivable from affiliate | ||||||||
| Loans receivable from third parties | ||||||||
| Subscriptions receivable | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities | ||||||||
| Debt, net | $ | $ | ||||||
| Due to affiliates | ||||||||
| Below-market rent liabilities, net | ||||||||
| Accounts payable | ||||||||
| Accrued expenses and other liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Members’ Capital | ||||||||
| Class A units, units authorized, units issued and outstanding at March 31, 2022 and December 31, 2021 | ||||||||
| Class B units, units authorized, units issued and outstanding at March 31, 2022 and December 31, 2021 | ||||||||
| Class M units, unit authorized, unit issued and outstanding at March 31, 2022 and December 31, 2021 | ||||||||
| Total members’ capital excluding noncontrolling interest | ||||||||
| Noncontrolling interest | ||||||||
| Total members’ capital | ||||||||
| Total liabilities and members’ capital | $ | $ | ||||||
See accompanying notes to consolidated financial statements.
| 1 |
Belpointe PREP, LLC
Consolidated Statements of Operations (Unaudited)
(in thousands, except unit and per unit data)
| Three Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Revenue | ||||||||
| Rental revenue | $ | $ | ||||||
| Total revenue | ||||||||
| Expenses | ||||||||
| Property expenses | ||||||||
| General and administrative | ||||||||
| Depreciation and amortization expense | ||||||||
| Total expenses | ||||||||
| Other income (loss) | ||||||||
| Interest income | ||||||||
| Other income (expense) | ( | ) | ( | ) | ||||
| Total other income (loss) | ( | ) | ||||||
| Net loss | ( | ) | ( | ) | ||||
| Net (income) loss attributable to noncontrolling interest | ( | ) | ||||||
| Net loss attributable to Belpointe PREP, LLC | $ | ( | ) | $ | ( | ) | ||
| Loss per Class A unit (basic and diluted) | ||||||||
| Net loss per unit | $ | ( | ) | $ | ( | ) | ||
| Weighted-average units outstanding | ||||||||
See accompanying notes to consolidated financial statements.
| 2 |
Belpointe PREP, LLC
Consolidated Statements of Changes in Members’ Capital (Deficit) (Unaudited)
(in thousands, except unit and per unit data)
| Class A units | Class B units | Class M unit | Total Members’ Capital Excluding Noncontrolling | Noncontrolling | Total Members’ | |||||||||||||||||||||||||
| Units | Amount | Units | Amount | Units | Amount | Interest | Interest | Capital | ||||||||||||||||||||||
| Balance at January 1, 2022 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Activity for the three months ended March 31, 2022 | ||||||||||||||||||||||||||||||
| Offering costs | — | ( | ) | — | — | ( | ) | ( | ) | |||||||||||||||||||||
| Net (loss) income | — | ( | ) | — | — | ( | ) | ( | ) | |||||||||||||||||||||
| Balance at March 31, 2022 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Class A units | Class B units | Class M unit | Total Members’ Deficit Excluding Noncontrolling | Noncontrolling | Total Members’ | |||||||||||||||||||||||||
| Units | Amount | Units | Amount | Units | Amount | Interest | Interest | Deficit | ||||||||||||||||||||||
| Balance at January 1, 2021 | $ | ( | ) | $ | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||
| Activity for the three months ended March 31, 2021 | ||||||||||||||||||||||||||||||
| Contribution from noncontrolling interest | — | — | — | |||||||||||||||||||||||||||
| Net loss | — | ( | ) | — | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||
| Balance at March 31, 2021 | $ | ( | ) | $ | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||
See accompanying notes to consolidated financial statements.
| 3 |
Belpointe PREP, LLC
Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
| Three Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Cash flows from operating activities | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to net loss | ||||||||
| Depreciation and amortization | ||||||||
| Accretion of rent-related intangibles and deferred rental revenue | ( | ) | ( | ) | ||||
| Increase (decrease) in due to affiliates | ( | ) | ||||||
| Increase in other assets | ( | ) | ||||||
| (Decrease) increase in accounts payable | ( | ) | ||||||
| Increase in accrued expenses and other liabilities | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities | ||||||||
| Funding of loans receivable | ( | ) | ||||||
| Development of real estate | ( | ) | ( | ) | ||||
| Acquisitions of real estate | ( | ) | ( | ) | ||||
| Other investing activity | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities | ||||||||
| Proceeds from subscriptions receivable | ||||||||
| Payment of offering costs | ( | ) | ||||||
| Other financing activities, net | ||||||||
| Short-term loan from affiliate | ||||||||
| Net cash provided by financing activities | ||||||||
| Net (decrease) increase in cash and cash equivalents and restricted cash | ( | ) | ||||||
| Cash and cash equivalents and restricted cash, beginning of period | ||||||||
| Cash and cash equivalents and restricted cash, end of period | $ | $ | ||||||
| Cash paid during the period for interest, net of amount capitalized | $ | $ | ||||||
See accompanying notes to consolidated financial statements.
| 4 |
BELPOINTE PREP, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Organization, Business Purpose and Capitalization
Organization and Business Purpose
Belpointe PREP, LLC (together with its subsidiaries, the “Company,” “we,” “us,” or “our”) was formed on January 24, 2020 as a Delaware limited liability company. We operate in a manner that allows us to qualify as a partnership for U.S. federal income tax purposes. We are focused on identifying, acquiring, developing or redeveloping and managing commercial real estate located within “qualified opportunity zones.” At least 90% of our assets consist of qualified opportunity zone property, which enables us to be classified as a “qualified opportunity fund” as defined in the U.S. Internal Revenue Code of 1986, as amended (the “Code”). We qualified as a qualified opportunity fund beginning with our taxable year ended December 31, 2020.
We commenced principal operations on October 28, 2020. All of our assets are held by, and all of our operations are conducted through, one or more operating companies (each an “Operating Company” and together, our “Operating Companies”), either directly or indirectly through their subsidiaries. We are externally managed by Belpointe PREP Manager, LLC (our “Manager”), an affiliate of our sponsor, Belpointe, LLC (our “Sponsor”). Subject to the oversight of our board of directors (our “Board”), our Manager is responsible for managing our affairs on a day-to-day basis and for identifying and making acquisitions and investments on our behalf.
Capitalization
We are offering Class A units in our ongoing initial public offering (our “Primary Offering”) directly to investors and not through any underwriters, dealer-managers or other agents who would be paid commissions by us or any of our affiliates. In the future, however, we may engage the services of one or more underwriters, dealer-managers or other offering participants to participate in our Primary Offering or in other public offerings that we may conduct. The amount of selling commissions, deal manager fees or other offering fees that we or our investors would pay to such underwriters, dealer managers or other offering participants will depend on the terms of their engagement. Our Primary Offering is a “best efforts” offering and we undertake closings on a rolling basis.
We set our Primary Offering price at $ per Class A unit. No later than the first quarter following the December 31, 2022 year end, and every quarter thereafter, we plan to calculate our net asset value (“NAV”) within approximately 60 days of the last day of each quarter (the “Determination Date”). If our NAV increases above or decreases below the price per Class A unit as stated in our prospectus, we will adjust the Primary Offering price, effective as of the first business day following its public announcement. The adjusted Primary Offering price will be equal to our adjusted NAV as of the Determination Date (rounded to the nearest dollar) divided by the number of Class A Units outstanding on the Determination Date.
Note 2 – Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared on the accrual basis of accounting and conform to accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and Article 8 of Regulation S-X of the rules and regulations of the U.S. Securities and Exchange Commission.
In the opinion of management, all adjustments considered necessary for a fair presentation of our financial position, results of operations and cash flows have been included and are of a normal and recurring nature. The consolidated financial statements as of March 31, 2022, and for the three months ended March 31, 2022 and 2021 are unaudited and may not include year-end adjustments necessary to make them comparable to audited results. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of and for the year ended December 31, 2021 included in our Annual Report on Form 10-K. The operating results for interim periods are not necessarily indicative of operating results for any other interim period or for the entire year.
Basis of Consolidation
The accompanying unaudited consolidated financial statements reflect all of our accounts, including those of our controlled subsidiaries. The portion of members’ capital (deficit) in controlled subsidiaries that are not attributable, directly or indirectly, to us are presented in noncontrolling interest. All significant intercompany accounts and transactions have been eliminated.
| 5 |
We have evaluated our economic interest in entities to determine if they are deemed to be variable interest entities (“VIEs”) and whether the entities should be consolidated. An entity is a VIE if it has any one of the following characteristics: (i) the entity does not have enough equity at risk to finance its activities without additional subordinated financial support; (ii) the at-risk equity holders, as a group, lack the characteristics of a controlling financial interest; or (iii) the entity is structured with non-substantive voting rights. The distinction between a VIE and other entities is based on the nature and amount of the equity investment and the rights and obligations of the equity investors. Fixed price purchase and renewal options within a lease, as well as certain decision-making rights within a loan or joint-venture agreement, can cause us to consider an entity a VIE. Limited partnerships and other similar entities that operate as a partnership will be considered VIEs unless the limited partners hold substantive kick-out rights or participation rights.
Significant judgment is required to determine whether a VIE should be consolidated. We review all agreements and contractual arrangements to determine whether (i) we or another party have any variable interests in an entity, (ii) the entity is considered a VIE, and (iii) which variable interest holder, if any, is the primary beneficiary of the VIE. Determination of the primary beneficiary is based on whether a party (a) has the power to direct the activities that most significantly impact the economic performance of the VIE, and (b) has the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE.
The following table presents the financial data of the consolidated VIEs included in the consolidated balance sheets as of March 31, 2022 and December 31, 2021, respectively (amounts in thousands):
| March 31, 2022 | December 31, 2021 | |||||||
| (unaudited) | ||||||||
| Assets | ||||||||
| Real estate | ||||||||
| Land | $ | $ | ||||||
| Building and improvements | ||||||||
| Intangible assets | ||||||||
| Real estate under construction | ||||||||
| Total real estate | ||||||||
| Accumulated depreciation and amortization | ( | ) | ( | ) | ||||
| Real estate, net | ||||||||
| Cash and cash equivalents | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities | ||||||||
| Debt, net | $ | $ | ||||||
| Due to affiliates | ||||||||
| Accounts payable | ||||||||
| Accrued expenses and other liabilities | ||||||||
| Total liabilities | $ | $ | ||||||
An interest in a VIE requires reconsideration when an event occurs that was not originally contemplated. At each reporting period we will reassess whether there are any events that require us to reconsider our determination of whether an entity is a VIE and whether it should be consolidated.
Emerging Growth Company Status
We are an “emerging growth company,” as defined in the Jump Start Our Business Startups Act of 2012 (“JOBS Act”). Under Section 107 of the JOBS Act, emerging growth companies are permitted to use an extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the “Securities Act”), for complying with new or revised accounting standards that have different effective dates for public and private companies. We have elected to use the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that we (i) are no longer an emerging growth company, or (ii) affirmatively and irrevocably opt out of the extended transition period provided in Section 7(a)(2)(B). By electing to extend the transition period for complying with new or revised accounting standards, these consolidated financial statements may not be comparable to the consolidated financial statements of companies that comply with public company effective dates.
| 6 |
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the unaudited consolidated financial statements and the accompanying notes. Actual results could materially differ from those estimates.
Restricted Cash
Restricted cash consists of amounts required to be reserved pursuant to lender agreements for debt service. The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the consolidated balance sheets to the unaudited consolidated statements of cash flows (amounts in thousands):
| March 31, 2022 | December 31, 2021 | |||||||
| (unaudited) | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash (1) | ||||||||
| Total cash and cash equivalents and restricted cash | $ | $ | ||||||
| (1) |
Risks and Uncertainties
The spread of COVID-19 has caused significant disruptions to the U.S. and global economy and normal business operations worldwide, and has, among other things, created ongoing disruptions in global supply chains, impacted job markets and adversely affected a number of industries. With vaccines now more widely available the global economy has started to reopen and restrictions previously imposed by governmental and other authorities to contain the spread of the virus, such as business closures and limitations on travel, as well as responses by businesses and individuals to reduce the risk of exposure to infection, including through reduced travel, cancellation of in-person events, and implementation of work-at-home policies, have begun to ease. Nevertheless, the recovery remains uneven and is subject to setbacks. As a result, COVID-19 continues to present material uncertainty and risk with respect to our future performance and financial results, including the potential to negatively impact our costs of operations, our financing arrangements, the value of our investments, and the laws, regulations, and government and regulatory policies applicable to us. We are closely monitoring the potential impact of COVID-19 on all aspects of our business.
Note 3 – Related Party Arrangements
Our Transaction with Norpointe, LLC
On
January 3, 2022, through an indirect wholly-owned subsidiary, we provided a commercial mortgage loan in the principal amount of $
Our Relationship with Our Manager and Sponsor
Our Manager and its affiliates, including our Sponsor, will receive fees or reimbursements in connection with our Primary Offering and the management of our investments.
| 7 |
The following table presents a summary of fees incurred on our behalf by, and expenses reimbursable to, our Manager and its affiliates, including our Sponsor, in accordance with the terms of the relevant agreements (amounts in thousands):
| Three Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| (unaudited) | (unaudited) | |||||||
| Amounts included in the Consolidated Statements of Operations | ||||||||
| Management fees | $ | $ | ||||||
| Insurance | ||||||||
| Costs incurred by our Manager and its affiliates (1) | ||||||||
| Director compensation | ||||||||
| $ | $ | |||||||
| Other capitalized costs | ||||||||
| Development fee and reimbursements (1) | $ | $ | ||||||
| Insurance (2) | ||||||||
| $ | $ | |||||||
| (1) | |
| (2) |
The following table presents a summary of amounts included in Due to affiliates in the consolidated balance sheets (amounts in thousands):
| March 31, 2022 | December 31, 2021 | |||||||
| (unaudited) | ||||||||
| Amounts Due to affiliates | ||||||||
| Insurance | $ | $ | ||||||
| Development fees | ||||||||
| Employee cost sharing and reimbursements (1) | ||||||||
| Management fees | ||||||||
| Director compensation | ||||||||
| Acquisition fee | ||||||||
| $ | $ | |||||||
| (1) |
Organizational, Primary Offering and Merger Expenses
Our Manager and its affiliates, including our Sponsor, will be reimbursed, as described in the following paragraph, for organizational and offering expenses incurred in connection with our organization and Primary Offering and for expenses incurred in connection with our exchange offer and second-step merger to acquire all of the issued and outstanding shares of common stock of Belpointe REIT, Inc. (collectively, the “Transaction”). We became liable to reimburse our Manager and its affiliates, including our Sponsor, when the first closing was held in connection with our Primary Offering, which occurred in October 2021.
There
were no organization or Primary Offering costs incurred by our Manager and its affiliates during the three months ended March 31, 2022.
During the three months ended March 31, 2021, our Manager and its affiliates, including our Sponsor, incurred organization and Primary
Offering expenses of $
Other Operating Expenses
Pursuant to a management agreement by and among the Company, Operating Companies and our Manager (the “Management Agreement”), we reimburse our Manager, Sponsor and their respective affiliates for actual expenses incurred on our behalf in connection with the selection, acquisition or origination of investments, whether or not we ultimately acquire or originate an investment. We also reimburse our Manager, Sponsor and their respective affiliates for out-of-pocket expenses paid to third parties in connection with providing services to the Company.
| 8 |
Pursuant
to an employee and cost sharing agreement by and among the Company, Operating Companies, our Manager and Sponsor, we reimburse our Sponsor
and Manager for expenses incurred for our allocable share of the salaries, benefits and overhead of personnel providing services to us.
During the three months ended March 31, 2022 and 2021, our Manager and its affiliates, including our Sponsor, have incurred operating
expenses of $
Management Fee
Subject to the oversight of our Board, our Manager is responsible for managing the Company’s affairs on a day-to-day basis and for the origination, selection, evaluation, structuring, acquisition, financing and development of our commercial real estate properties, real estate-related assets, including but not limited to commercial real estate loans, and debt and equity securities issued by other real estate-related companies, as well as private equity acquisitions and investments, and opportunistic acquisitions of other qualified opportunity funds and qualified opportunity zone businesses.
Pursuant
to the Management Agreement we will pay our Manager a quarterly management fee in arrears of one-fourth of
Development Fees
Affiliates of our Sponsor are entitled to receive (i) development fees on each project in an amount that is usual and customary for comparable services rendered to similar projects in the geographic market of the project, and (ii) reimbursements for their expenses, such as employee compensation and other overhead expenses incurred in connection with the project.
On
March 29, 2022, construction commenced on one of our properties located in Sarasota, Florida. As a result of revising the
budget upon commencement of construction, we incurred an additional upfront development fee of $
During
the three months ended March 31, 2022, we incurred employee reimbursement expenditures to our development managers of $
Acquisition Fees
We
will pay our Manager, Sponsor, or an affiliate of our Manager or Sponsor, an acquisition fee equal to
Our Transactions with Belpointe Specialty Insurance, LLC
Certain immediate family members of our Chief Executive Officer have a passive indirect minority beneficial ownership interest in Belpointe Specialty Insurance, LLC (“Belpointe Specialty Insurance”). Belpointe Specialty Insurance has acted as our broker in connection with the placement of insurance coverage for certain of our properties and operations. Belpointe Specialty Insurance earns brokerage commissions related to the brokerage services that it provides to us, which commissions vary, are based on a percentage of the premiums that we pay and are set by the insurer. We have also engaged Belpointe Specialty Insurance to provide us with contract insurance consulting services related to owner controlled insurance programs, for which we pay an administration fee.
During
the three months ended March 31, 2022, we obtained insurance premiums in the aggregate amount of $
Economic Dependency
Under various agreements we have engaged our Manager and its affiliates, including in certain cases our Sponsor, to provide certain services that are essential to the Company, including asset management services, asset acquisition and disposition services, supervision of our Primary Offering and any other offerings we conduct, as well as other administrative responsibilities for the Company, including, without limitation, accounting services and investor relations services. As a result of these relationships, we are dependent upon our Manager and its affiliates, including our Sponsor. In the event that these companies are unable to provide us with the services we have engaged them to provide, we would be required to find alternative service providers.
| 9 |
Note 4 – Real Estate, Net
Acquisitions of Real Estate During 2022
On
January 7, 2022, through an indirect wholly-owned subsidiary of our Operating Company, we completed the acquisition of a
Depreciation
expense was $
Real Estate Under Construction
The following table provides the activity of our Real estate under construction (amounts in thousands):
| March 31, 2022 | December 31, 2021 | |||||||
| (unaudited) | ||||||||
| Beginning balance | $ | $ | ||||||
| Capitalized costs (1) (2) (3) | ||||||||
| Land held for development (1) (4) | ||||||||
| Capitalized interest | ||||||||
| Acquisition of construction in progress | ||||||||
| $ | $ | |||||||
| (1) | |
| (2) | |
| (3) | |
| (4) |
Note 5 – Intangible Assets and Liabilities
Intangible assets and liabilities are summarized as follows (amounts in thousands):
| March 31, 2022 | December 31, 2021 | |||||||||||||||||||||||
| Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | |||||||||||||||||||
| (unaudited) | (unaudited) | (unaudited) | ||||||||||||||||||||||
| Finite-Lived Intangible Assets | ||||||||||||||||||||||||
| In-place leases | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Indefinite-Lived Intangible Assets | ||||||||||||||||||||||||
| Development rights | ||||||||||||||||||||||||
| Ground lease purchase option | ||||||||||||||||||||||||
| Total intangible assets | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Finite-Lived Intangible Liabilities | ||||||||||||||||||||||||
| Below-market leases | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||||||
| Total intangible liabilities | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||||||
| 10 |
In-place lease, development right and ground lease purchase option intangible assets, noted above, are included in Intangible assets on the consolidated balance sheets. Below-market lease liabilities, noted above, are included in Below-market rent liabilities, net on the consolidated balance sheets.
During
the three months ended March 31, 2022 and 2021, amortization of in-place lease intangible assets was $
During
the three months ended March 31, 2022 and 2021, amortization of below-market lease liability was $
Note 6 – Loans Receivable
On
January 3, 2022, we provided a commercial mortgage loan in the principal amount of $
On
February 23, 2022, through an indirect wholly-owned subsidiary, we provided a commercial mortgage loan in the principal amount of $
Interest
income from the loans receivable for the three months ended March 31, 2022 was approximately $
Note 7 – Debt, Net
Debt,
net consists of one non-recourse mortgage loan held with an unrelated third party (the “Acquisition Loan”), which is guaranteed
by our Chief Executive Officer, and which is collateralized by the assignment of real property with a carrying value of $
Note 8 – Fair Value of Financial Instruments
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between marketplace participants at the measurement date under current market conditions (i.e., the exit price).
We categorize our financial instruments, based on the priority of the inputs to the valuation technique, into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.
Financial assets and liabilities recorded on the consolidated balance sheets are categorized based on the inputs to the valuation techniques as follows:
Level 1 – Quoted market prices in active markets for identical assets or liabilities.
Level 2 – Significant other observable inputs (e.g., quoted prices for similar items in active markets, quoted prices for identical or similar items in markets that are not active, inputs other than quoted prices that are observable such as interest rate and yield curves, and market-corroborated inputs).
Level 3 – Valuation generated from model-based techniques that use inputs that are significant and unobservable in the market. These unobservable assumptions reflect estimates of inputs that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow methodologies or similar techniques, which incorporate management’s own estimates of assumptions that market participants would use in pricing the instrument or valuations that require significant management judgment or estimation.
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The
carrying value of our loans receivable totaled $
We estimated that our other financial assets and liabilities had fair values that approximated their carrying values as of March 31, 2022 and December 31, 2021.
Note 9 – Members’ Capital (Deficit)
Our Amended and Restated Limited Liability Company Operating Agreement (our “Operating Agreement”) generally authorizes our Board to issue an unlimited number of units and options, rights, warrants and appreciation rights relating to such units for consideration or for no consideration and on the terms and conditions as determined by our Board, in its sole discretion, without the approval of any members. These additional securities may be used for a variety of purposes, including in future offerings to raise additional capital and acquisitions. Our Operating Agreement currently authorizes the issuance of an number of Class A units, Class B units and Class M unit. As of March 31, 2022 and December 31, 2021, there were Class A units, Class B units and Class M unit issued and outstanding.
As of December 31, 2021, there were units issued by the Company pursuant to subscription agreements which had not yet settled. All of these funds were received during January 2022.
Class A units
Upon payment in full of any consideration payable with respect to the initial issuance of our Class A units, the holder thereof will not be liable for any additional capital contributions to the Company. Holders of Class A units are not entitled to preemptive, redemption or conversion rights. Class A units are entitled to one vote per unit on all matters submitted to a vote of our members. Matters must generally be approved by a majority (or, in the case of election of directors, by a plurality) of the votes entitled to be cast.
Holders of Class A units share ratably in any distributions we make, subject to any statutory or contractual restrictions on distributions and to any restrictions on distributions imposed by the terms of any preferred units we issue.
Upon our dissolution, liquidation or winding up, after payment of all amounts required to be paid to creditors and holders of preferred units, if any, holders of Class A units are entitled to receive our remaining assets available for distribution.
Class B units
All of our Class B units are held by our Manager and were issued on September 14, 2021. Class B units are not entitled to preemptive, redemption or conversion rights. Class B units are entitled to one vote per unit on all matters submitted to a vote of our members. Matters must generally be approved by a majority (or, in the case of election of directors, by a plurality) of the votes entitled to be cast.
Holders
of our Class B units are entitled to share ratably as a class in
Upon our dissolution, liquidation or winding up, after payment of all amounts required to be paid to creditors and holders of preferred units, if any, holders of Class B units will be entitled to receive any accrual of gains or distributions otherwise distributable pursuant to the terms of the Class B units, regardless of whether the holders of our Class A Units have received a return of their capital.
Class M unit
The Class M unit is held by our Manager and was issued on September 14, 2021. The Class M unit is not entitled to preemptive, redemption or conversion rights. The Class M unit is entitled to that number of votes equal to the product obtained by multiplying (i) the sum of the aggregate number of outstanding Class A Units plus Class B units, by (ii) 10, on matters on which the Class M unit has a vote. Our Manager will continue to hold the Class M unit for so long as it remains our manager.
The holder of our Class M unit does not have any right to receive ordinary, special or liquidating distributions.
Preferred units
Under our Operating Agreement, our Board may from time to time establish and cause us to issue one or more classes or series of preferred units and set the designations, preferences, rights, powers and duties of such classes or series.
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Subscriptions Receivable
Subscriptions receivable consists of units that have been issued with subscriptions that have not yet settled. As of March 31, 2022 and December 31, 2021, there was and $ million, respectively, in subscriptions that had not yet settled. Subscriptions receivable are carried at cost which approximates fair value.
Basic and Diluted Loss Per Class A Unit (Unaudited)
For
the three months ended March 31, 2022, the basic and diluted weighted-average units outstanding was . For the three months March
31, 2022, net loss attributable to Class A units was $
For
the three months ended March 31, 2021, the basic and diluted weighted-average units outstanding was . For the three months March 31,
2021, net loss attributable to Class A units was $
Note 10 – Commitments and Contingencies
As of March 31, 2022, we are not subject to any material litigation nor are we aware of any material litigation threatened against us.
During
the three months ended March 31, 2022, we
entered into a construction management agreement in connection with the redevelopment of one of our commercial real estate properties.
As of March 31, 2022, we had an unfunded capital commitment of $
Note 11 – Subsequent Events
Management has evaluated subsequent events to determine if events or transactions occurring after the balance sheet date through the date the unaudited consolidated financial statements were available for issuance require potential adjustment to or disclosure in the unaudited consolidated financial statements and has concluded that all such events or transactions that would require recognition or disclosure have been recognized or disclosed.
Mortgage Loan Repayment
On
April 22, 2022, we repaid the $
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
In this Quarterly Report on Form 10-Q (this “Form 10-Q”), unless context otherwise requires, references to “we,” “us,” “our” “Belpointe” or the “Company” refer to Belpointe PREP, LLC, a Delaware limited liability company, its operating companies, Belpointe PREP OC, LLC, a Delaware limited liability company, and Belpointe PREP TN OC, LLC, a Delaware limited liability company (each an “Operating Company” and, together, the “Operating Companies”), and each of the Operating Companies’ subsidiaries, taken together.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and related notes appearing elsewhere in this Form 10-Q and our audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2021 (our “Annual Report”) filed with the U.S. Securities and Exchange Commission on March 11, 2022, a copy of which may be accessed here. As discussed in the section titled “Forward-Looking Statements,” the following discussion and analysis contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section entitled “Risk Factors” included our Annual Report.
Overview
We are the first and only publicly traded qualified opportunity fund listed on a national securities exchange. We are a Delaware limited liability company formed on January 24, 2020, and we operate in a manner that will allow us to qualify as a partnership for U.S. federal income tax purposes. We are focused on identifying, acquiring, developing or redeveloping and managing commercial real estate located within qualified opportunity zones. At least 90% of our assets consist of qualified opportunity zone property. We qualified as a qualified opportunity fund beginning with our taxable year ended December 31, 2020. Because we are a qualified opportunity fund certain of our investors are eligible for favorable capital gains tax treatment on their investments.
All of our assets are held by, and all of our operations are conducted through, one or more of our Operating Companies, either directly or indirectly through their subsidiaries. We are externally managed by Belpointe PREP Manager, LLC (our “Manager”), which is an affiliate of our sponsor, Belpointe, LLC (our “Sponsor”).
On September 30, 2021, the U.S. Securities and Exchange Commission (the “SEC”) declared effective our registration statement on Form S-11, as amended (File No. 333-255424) (the “Registration Statement”), registering up to $750,000,000 in our Class A units on a continuous basis, as part of our ongoing initial public offering (the “Primary Offering”), at an initial price equal to $100.00 per Class A unit.
Our Transactions with Belpointe REIT, Inc.
During the year ended December 31, 2021, pursuant to the terms of an Agreement and Plan of Merger (the “Merger Agreement”), we conducted an offer to exchange (the “Offer”) each outstanding share of common stock (the “Common Stock”), of Belpointe REIT, Inc. (“Belpointe REIT”) validly tendered in the Offer for 1.05 of our Class A units, with any fractional Class A units rounded up to the nearest whole unit (the “Transaction Consideration”). The Offer was completed on September 14, 2021.
Following the Offer, and in accordance with the terms of the Merger Agreement, Belpointe REIT converted from a corporation into a limited liability company (the “Conversion”) named BREIT, LLC (“BREIT”). In the Conversion each outstanding share of Common Stock was converted into a limited liability company interest (an “Interest”) in BREIT. The Conversion was completed on October 1, 2021.
Following the Conversion, and in accordance with the terms of the Merger Agreement, BREIT merged with and into BREIT Merger, LLC (“BREIT Merger”), our wholly-owned subsidiary (the “Merger”). In the Merger, each outstanding Interest was converted into the right to receive the Transaction Consideration. The Merger was completed on October 12, 2021.
Prior to and in connection with the Offer and Merger, we entered into a series of loan transactions with Belpointe REIT, whereby Belpointe REIT advanced us an aggregate of $74.0 million evidenced by a series of secured promissory notes (the “Secured Notes”) bearing interest at a rate of 0.14%, due and payable on December 31, 2021, and secured by all of our assets. Upon consummation of the Merger, BREIT Merger acquired the Secured Notes as successor in interest to Belpointe REIT and, effective October 12, 2021, we entered into a Release and Cancellation of Indebtedness agreement with BREIT Merger pursuant to the terms of which BREIT Merger cancelled the Secured Notes and discharged us from all obligations to repay the principal and any accrued interest on the Secured Notes.
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COVID-19
COVID-19 has caused significant disruptions to the U.S. and global economy and normal business operations worldwide—creating ongoing global supply chain issues, negatively impacting job markets, and adversely affecting a number of industries—and there is continued uncertainty as to the duration of the economic impact caused by COVID-19, even with vaccines now available. While the global economy has started to reopen and restrictions previously imposed by governmental and other authorities to contain the spread of the virus, such as business closures and limitations on travel, as well as responses by businesses and individuals to reduce the risk of exposure to infection, including through reduced travel, cancellation of in-person events, and implementation of work-at-home policies, have begun to ease, the recovery nevertheless remains uneven and is subject to setbacks. Accordingly, COVID-19 continues to present material uncertainty and risk with respect to our future performance and financial results, including the potential to negatively impact our costs of operations, the value of any investments we make and the laws, regulations and governmental and regulatory policies applicable to us.
Given the evolving nature of the COVID-19 virus, the extent to which it may impact our future performance and financial results will depend on future developments which remain highly uncertain at this time and as a result we are unable to estimate the impact that COVID-19 may have on our future financial results at this time. Our Manager continuously reviews our investment and financing strategies for optimization and to reduce our risk in the face of the fluidity of this situation.
Our Investments
As of March 31, 2022, our investment portfolio consisted of 15 investments in three states. These investments include:
Investments in Multifamily and Mixed-Use Rental Properties
1700 Main Street – Sarasota, Florida – 1700 Main Street (“1700 Main”) is a 1.3-acre site, consisting of a former gas station, a three-story office building with parking lot and a three-story retail building, located in Sarasota, Florida, which we acquired for an aggregate purchase price of $6.9 million, inclusive of transaction costs. We currently anticipate that 1700 Main will be redeveloped into a 168-apartment home community consisting of one-bedroom, two-bedroom and three-bedroom apartments, with approximately 7,000 square feet of retail space located on the first two levels. We anticipate that 1700 Main will consist of a 10-story podium style building with a 3-story, 360-space garage and 7-stories of apartments above, including a clubroom, fitness center, courtyards with a swimming pool and rooftop terraces as well as a leasing office. The existing three-story office building will remain, and the new building will wrap around it.
1701-1710 Ringling Boulevard – Sarasota, Florida – 1701-1710 Ringling Boulevard (“1701-1710 Ringling”) is a 1.62-acre site, consisting of a six-story previously owner-occupied office building with parking lot, located in Sarasota, Florida, which we acquired for an aggregate purchase price of $7.0 million, inclusive of transaction costs. We currently anticipate that 1701-1710 Ringling will be renovated into a fully functioning office building, consisting of approximately 80,000 square feet of rentable space and approximately 128 parking spaces, with an existing tenant leasing back approximately 42,000 square feet for 20 years with several lease extensions.
902-1020 First Avenue North and 900 First Avenue North – St. Petersburg, Florida – 902-1020 First Avenue North (“902-1020 First”) consists of several parcels, comprising 1.6-acres of land, located in St. Petersburg, Florida, which we acquired for an aggregate purchase price of $12.1 million, inclusive of transaction costs. We currently anticipate that 902-1020 First will be developed into a high-rise apartment featuring approximately 266-apartment homes consisting of one-bedroom, two-bedroom and three-bedroom apartments, with approximately 22,100 square feet of retail space located on the first level and a four-level parking garage. We anticipate that 902-1020 First will consist of two 15-story high-rise buildings and will have a clubroom, fitness center, courtyard with a swimming pool, shared working space and a leasing office.
900 First Avenue North (“900 First”) is a parcel of land with a two-tenant retail building, located in St. Petersburg, Florida, which we acquired for an aggregate purchase price of $2.5 million, inclusive of transaction costs. We currently anticipate that 900 First will remain a two-tenant retail building and that we will take the additional development rights and add them to 902-1020 First.
1900 Fruitville Road – Sarasota Florida – 1900 Fruitville Road is a 1.205-acre site, consisting of a retail building and parking lot located in Sarasota, Florida, which we acquired for an aggregate purchase price of $4.7 million, inclusive of transaction costs. The sole tenant in the building vacated in January 2022 and the property will be used as a future development site.
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900 8th Avenue South – Nashville, Tennessee – 900 8th Avenue South (“900 8th Avenue South”) is a 3.17-acre land assemblage, consisting of a few small buildings, parking lots and open lots, located in Nashville, Tennessee, which we acquired for an aggregate purchase price of $19.7 million, inclusive of transaction costs.
As part of our acquisition of 900 8th Avenue South, on February 24, 2021, an indirect wholly owned subsidiary of our Operating Company and an unaffiliated third party (the “JV Partner”) entered into a limited liability company agreement (the “LLC Agreement”) for BPOZ 900 Eighth QOZB, LLC (the “BPOZ 900 Eighth QOZB”), an indirect holding company for 900 8th Avenue South. Pursuant to the LLC Agreement, the JV Partner assigned the purchase and sale agreement for 900 8th Avenue South together with a previously paid property deposit of $0.4 million to BPOZ 900 Eighth QOZB in exchange for the JV Partner’s deemed initial capital contribution of $0.2 million and a promissory note (the “900 Eighth Promissory Note”) from 900 Eighth, LP, the direct holding company for 900 8th Avenue South, in the amount of $0.2 million. The 900 Eighth Promissory Note, which is included in Accrued expenses and other liabilities in the consolidated balance sheets, earned interest at the greater of (i) 1% per annum, or (ii) the short-term adjusted applicable federal rate for the current month for purposes of Section 1288(b) of the U.S. Internal Revenue Code of 1986, as amended, and matured upon receipt of construction permits which were received in April 2022.
We currently anticipate that 900 8th Avenue South will be redeveloped into an approximately 266-apartment home community consisting of one-bedroom, two-bedroom and three-bedroom apartments, with approximately 14,100 square feet of retail space located on the first level. We anticipate that 900 8th Avenue South will consist of a 7-story building with a 2-story approximately 400-space garage, a fitness center, courtyard with a swimming pool and rooftop terraces as well as a leasing office. As of the date of this Form 10-Q, we have completed the demolition of 900 8th Avenue South.
Storrs Road – Storrs, Connecticut – Storrs Road (“Storrs Road”) is a 9-acre parcel of land located in Storrs, Connecticut, which we acquired for an aggregate purchase price of $0.1 million, inclusive of transaction costs. We currently anticipate holding Storrs Road for future multifamily development.
Nashville No. 2 – Nashville, Tennessee – Our second investment in Nashville, Tennessee (“Nashville No. 2”) is an approximately 8-acre site, consisting of two industrial buildings and associated parking, which we acquired for an aggregate purchase price of $21.0 million, inclusive of transaction costs. We currently anticipate that Nashville No. 2 will be redeveloped into an approximately 412-apartment home community consisting of one-bedroom, two-bedroom and three-bedroom apartments. The buildings will have a fitness center, game room, co-working spaces, outdoor heated saltwater swimming pool, riverfront courtyards and rooftop terraces as well as a leasing office.
Nashville No. 3 – Nashville, Tennessee – Our third investment in Nashville, Tennessee (“Nashville No. 3”) is an approximately 1.66-acre site consisting of a single-story 10,000 square foot retail building and associated parking lot, which we acquired for an aggregate purchase price of $2.1 million, inclusive of transaction costs. Upon closing, the building was leased to the seller through November 2022, with the ability to continue month to month thereafter.
1991 Main Street – Sarasota, Florida – 1991 Main Street (“1991 Main”) is a 5.2-acre site located in Sarasota, Florida, which was originally acquired by Belpointe REIT for an aggregate purchase price of $20.7 million, inclusive of transaction costs and deferred financing fees. A portion of the aggregate purchase of 1991 Main was funded by a $10.8 million secured loan from First Foundation Bank (the “Acquisition Loan”).
In furtherance of the Merger, Belpointe REIT sold its interest in the holding company for 1991 Main (the “1991 Main Interest”) to Belpointe Investment Holding, LLC (“BI Holding”), an affiliate of our Chief Executive Officer. In connection with the transaction BI Holding assumed the Acquisition Loan and Belpointe REIT provided an additional $24.8 million loan to BI Holding, which loan was evidenced by a secured promissory note bearing interest at a rate of 5% per annum and due and payable at maturity on September 14, 2022 (the “BI Secured Note”). Upon consummation of the Merger, we acquired the BI Secured Note, as successor in interest to Belpointe REIT. Effective November 30, 2021, we acquired the 1991 Main Interest and assumed the Acquisition Loan from BI Holding in consideration of its payment to us of $0.3 million in interest that had accrued under the terms of the BI Secured Note through November 30, 2021, and in satisfaction of its remaining obligations under the BI Secured Note. On April 22, 2022 we repaid the Acquisition Loan in full.
We currently anticipate that 1991 Main will be redeveloped into an approximately 418-apartment home community consisting of one-bedroom, two-bedroom and three-bedroom apartments, and four-bedroom townhome-style penthouse apartments, with approximately 55,000 square feet of retail space located on the first level. We anticipate that 1991 Main will consist of two high-rise buildings with 7-stories in the front and 10-stories in the rear, and approximately 721 parking spaces including 590 from an existing parking garage, currently subject to a parking garage easement agreement, 104 new underground spaces, and 27 new street level spaces.
During the three months ended March 31, 2022, we entered into a construction management agreement for the redevelopment of 1991 Main. The construction management agreement contains terms and conditions that are customary for a project of this type and will be subject to guaranteed maximum price. We currently anticipate that the remaining funding for construction and soft costs associated with the redevelopment will be a minimum of $237.3 million, and are building to an unlevered yield of greater than 6%. The redevelopment is currently in its initial stages and expected to be completed by the first quarter of 2024.
901-909 Central Avenue North – St. Petersburg, Florida – 901-909 Central Avenue North is a 0.129-acre site consisting of a fully leased single-story 5,328 gross square foot retail/office building comprised of 4 units located in St. Petersburg, Florida, which we acquired for an aggregate purchase price of $2.6 million, inclusive of transaction costs.
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Cedar Swamp Road – Mansfield, Connecticut – Cedar Swamp Road is a 1.1-acre site located in Mansfield, Connecticut , which we acquired for a purchase price of $0.3 million, inclusive of transaction costs. We currently anticipate holding Cedar Swamp Road for future multifamily development.
Investments in Commercial Real Estate Loans
CMC Secured Loan – In furtherance of the Merger, on September 30, 2021, we provided a commercial mortgage loan in the principal amount of $3.5 million (the “CMC Loan”) to CMC Storrs SPV, LLC (“CMC”). CMC is the owner of certain real property located in Mansfield, Connecticut (the “CMC Property”). CMC used the proceeds from the CMC Loan to enter into a redemption agreement with BPOZ 497 Middle Holding, LLC (“BPOZ 497”), an indirect majority-owned subsidiary of Belpointe REIT, to redeem BPOZ 497’s preferred equity investment in CMC. The CMC Loan is evidenced by a promissory note (the “CMC Note”) bearing interest at a rate of 12.0% per annum, and due and payable at maturity, and is secured by a first mortgage lien on the CMC Property. On March 29, 2022, we entered into an amendment to the CMC Note to extend the maturity date to June 27, 2022.
Norpointe Secured Loan – On January 3, 2022, through an indirect wholly-owned subsidiary, we provided a commercial mortgage loan in the principal amount of $30.0 million (the “Norpointe Loan”) to Norpointe, LLC (“Norpointe”), an affiliate of our Chief Executive Officer. Norpointe is the owner of certain real property located at 41 Wolfpit Avenue, Norwalk, Connecticut 06851 (the “Norpointe Property”). The Norpointe Loan is evidenced by a promissory note bearing interest at a rate of 5.0% per annum, due and payable on December 31, 2022, and is secured by a first mortgage lien on the Norpointe Property. Given our excess cash on hand as of the year ended December 31, 2021, management viewed the Norpointe transaction as an opportunity to earn a strong rate of return on that cash by making a low risk—due to the low loan-to-value ratio and first priority mortgage interest—short-term loan rather than depositing the funds in a lower yielding account pending investment in future developments.
Visco Secured Loan – On February 23, 2022, through an indirect wholly-owned subsidiary, we provided a commercial mortgage loan in the principal amount of $5.0 million (the “Visco Loan”) to Visco Propco, LLC (“Visco”). Visco is the owner of certain real property located at 801 Visco Drive, Nashville, Tennessee 37210 (the “Visco Property”). The Visco Loan is evidenced by a promissory note bearing interest at a rate of 6.0% per annum, due and payable on February 18, 2023, and is secured by a first lien deed of trust on the Visco Property.
Results of Operations
Revenue
Rental Revenue
For the three months ended March 31, 2022 and 2021, rental revenue totaled $0.3 million and $0.2 million, respectively, and was primarily derived from lease revenues. Rental revenue increased by $0.2 million for the three months ended March 31, 2022 as compared to the same period in 2021, primarily due to an increase in lease revenues as a result of properties acquired subsequent to March 31, 2021 as well as one property acquired during the first quarter of 2021.
Expenses
Property Expenses
For the three months ended March 31, 2022, property expenses totaled $0.9 million, and consisted of management fees, property expenses, real estate taxes, utilities and insurance expenses incurred in relation to our acquired investments. For the three months ended March 31, 2021, property expenses totaled $0.1 million, and consisted of property expenses, real estate taxes, utilities and insurance expenses incurred in relation to our acquired investments. Property expenses increased by $0.8 million for the three months ended March 31, 2022 as compared to the same period in 2021, primarily due to management fees incurred and properties acquired subsequent to March 31, 2021 as well as one property acquired during the first quarter of 2021.
General and Administrative
As a result of the commencement of the first closing in connection with our Offering, for the three months ended March 31, 2022, general and administrative expenses totaled $1.6 million, and primarily consisted of employee cost sharing expenses (pursuant to our management agreement and employee and cost sharing agreement), marketing expenses, legal, audit and accounting fees. For the three months ended March 31, 2021, general and administrative expenses totaled $0.1 million and primarily consisted of employee cost sharing expenses (pursuant to our management agreement and employee and cost sharing agreement).
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Depreciation and Amortization
For the three months ended March 31, 2022 and 2021, depreciation and amortization expense totaled $0.3 million and $0.1 million, respectively, and relates to depreciation and amortization incurred on properties acquired. Depreciation and amortization increased by $0.2 million for the three months ended March 31, 2022 as compared to the same period in 2021, primarily due to operating properties acquired during 2022 and 2021.
Other Income (Loss)
Interest Income
For the three months ended March 31, 2022, interest income was $0.5 million and is primarily related to interest earned on the Norpointe Loan of $0.4 million, interest earned on the CMC Note of $0.1 million, and interest earned on the Visco Loan of less than $0.1 million. For additional details regarding our commercial real estate loans, see “—Our Investments—Commercial Real Estate Loans.” There was no comparable activity for the three months ended March 31, 2021.
Other Income (Expense)
For the three months ended March 31, 2022, other income (expense) primarily relates to sales tax in connection with the 1991 Main parking garage easement agreement and interest expense on the 900 Eighth Promissory Note. For the three months ended March 31, 2021, other income (expense) relates to Belpointe PREP’s interest expense on the Secured Notes.
Net (income) loss attributable to noncontrolling interest
Net (income) loss attributable to noncontrolling interest represents the share of earnings generated in entities we consolidate in which we do not own 100% of the equity.
Liquidity and Capital Resources
Our primary needs for liquidity and capital resources are to fund our investments, including construction and development costs, pay our Primary Offering and operating fees and expenses, make distributions to the holders of our units and pay interest on any outstanding indebtedness that we incur.
Our Primary Offering and operating fees and expenses include, among other things, legal, audit and valuation fees and expenses, federal and state filing fees, SEC and FINRA filing fees, printing expenses, administrative fees, transfer agent fees, marketing and distribution fees, the management fee that we pay to our Manager, and fees and expenses related to acquiring, financing, appraising, and managing our commercial real estate properties. We do not have office or personnel expenses as we do not have any employees.
Where our Manager and its affiliates, including our Sponsor, have funded, and in the future if they continue to fund, our liquidity and capital resource needs by advancing us offering and operating fees and expenses, we reimburse our Manager and its affiliates, including our Sponsor, pursuant to the terms of our management agreement and employee and cost sharing agreement. Fees payable and expenses reimbursable to our Manager and its affiliates, including our Sponsor, may be paid, at the election of the recipient, in cash, by issuance of our Class A Units at the then-current NAV, or through some combination of the foregoing. During the three months ended March 31, 2022 and 2021, our Manager and its affiliates, including our Sponsor, incurred organization and Primary Offering expenses of zero and $0.4 million, respectively, on our behalf. During the three months ended March 31, 2022 and 2021, our Manager and its affiliates, including our Sponsor, incurred operating expenses of $0.5 million and $0.1 million, respectively, on our behalf.
A portion of the initial acquisition costs of 1991 Main were funded by an Acquisition Loan payable in consecutive monthly payments of interest only, with the outstanding principal balance plus any accrued and unpaid interest due and payable on May 6, 2022. The Acquisition Loan bore interest at a fixed rate of 4.75% per annum and was guaranteed by our Chief Executive Officer. As of March 31, 2022, the outstanding principal balance of the Acquisition Loan was $10.8 million, which outstanding principal balance was repaid in full on April 22, 2022. For additional details regarding our acquisition of 1991 Main and the Acquisition Loan, see “—Our Investments—Investments in Multifamily and Mixed-Use Rental Properties—1991 Main Street - Sarasota Florida.”
During the three months ended March 31, 2022, our indirect wholly owned subsidiary entered into a construction management agreement for the redevelopment of 1991 Main. The construction management agreement contains terms and conditions that are customary for a project of this type and will be subject to guaranteed maximum price. As of March 31, 2022, we had an unfunded capital commitment of $3.8 million under the terms of this agreement. We currently anticipate that the remaining funding for construction and soft costs associated with the redevelopment will be a minimum of $237.3 million.
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We expect to obtain the liquidity and capital resources that we need over the short and long-term from the proceeds of our Primary Offering and any future offerings that we may conduct, from the advancement of reimbursable fees and expenses by our Manager and its affiliates, including our Sponsor, from secured or unsecured financings from banks and other lenders and from any undistributed funds from operations. For additional details regarding our Primary Offering, see “Item 2. Unregistered Sales of Equity Securities and Use of Proceeds—Use of Proceeds from Registered Sales of Securities.”
We currently anticipate that our available capital resources, including the proceeds from our Primary Offering and the proceeds from any construction or other loans that we may incur, when combined with cash flow generated from our operations, will be sufficient to meet our anticipated working capital and capital expenditure requirements over the next 12 months and beyond.
Leverage
We employ leverage in order to provide more funds available for investment. We believe that careful use of conservatively structured leverage will help us to achieve our diversification goals and potentially enhance the returns on our investments.
Our targeted aggregate property-level leverage, excluding any debt at the Company level or on assets under development or redevelopment, after we have acquired a substantial portfolio of stabilized commercial real estate, is between 50-70% of the greater of the cost (before deducting depreciation or other non-cash reserves) or fair market value of our assets. During the period when we are acquiring, developing and redeveloping our investments, we may employ greater leverage on individual assets. An example of property-level leverage is a mortgage loan secured by an individual property or portfolio of properties incurred or assumed in connection with our acquisition of such property or portfolio of properties. An example of debt at the Company level is a line of credit obtained by us or our Operating Companies.
Our Manager may from time to time modify our leverage policy in its discretion in light of then-current economic conditions, relative costs of debt and equity capital, market values of our assets, general conditions in the market for debt and equity securities, growth and acquisition opportunities or other factors. There is no limit on the amount we may borrow with respect to any individual property or portfolio.
Cash Flows
The following table provides a breakdown of the net change in our cash and cash equivalents and restricted cash (amounts in thousands):
| Three Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Cash flows used in operating activities | $ | (1,770 | ) | $ | (87 | ) | ||
| Cash flows used in investing activities | (39,128 | ) | (3,405 | ) | ||||
| Cash flows provided by financing activities | 20,183 | 24,000 | ||||||
| Net (decrease) increase in cash and cash equivalents and restricted cash | $ | (20,715 | ) | $ | 20,508 | |||
As of March 31, 2022 and 2021, cash and cash equivalents and restricted cash totaled approximately $171.6 million and $27.1 million, respectively.
Cash flows used in operating activities for the three months ended March 31, 2022 primarily relates to the payment of management fees and employee cost sharing expenses as well as payments for legal, marketing, and accounting fees. These outflows were partially offset by interest received on our Norpointe Loan during the period. Cash flows used in operating activities for the three months ended March 31, 2021 primarily relates to operating properties acquired.
Cash flows used in investing activities for the three months ended March 31, 2022 relate primarily to funding of loans receivables in addition to funding costs for our development properties and investments in real estate. Cash flows used in investing activities for the three months ended March 31, 2021 primarily relates to one property acquired during the period as well as development costs incurred.
Cash flows provided by financing activities for the three months ended March 31, 2022 primarily relates to net proceeds received from the Primary Offering. Cash flows provided by financing activities for the three months ended March 31, 2021 relates to Secured Notes funded by Belpointe REIT.
| 19 |
Critical Accounting Policies
The unaudited consolidated financial statements in this Form 10-Q have been prepared in accordance with generally accepted accounting principles in the United States of America. The preparation of these unaudited consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates.
Our significant accounting policies are described in “Note 2 — Summary of Significant Accounting Policies,” in our unaudited consolidated financial statements in this Form 10-Q. There have been no changes to our significant accounting policies and estimates during the three months ended March 31, 2022 as compared to those disclosed in “Note 3 – Summary of Significant Accounting Policies” included in our Annual Report on Form 10-K for the year ended December 31, 2021 (our “Annual Report”), a copy of which may be accessed here.
Off-Balance Sheet Arrangements
We currently have no off-balance sheet arrangements that are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are a smaller reporting company, as defined in Item 10(f)(1) of Regulation S-K, as as a result are not required to provide the information required by this Item.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our periodic and current reports that we file with the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and implemented, can provide only reasonable and not absolute assurance of achieving the desired control objectives. In reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. In addition, the design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective controls system, misstatements due to error or fraud may occur and not be detected.
Our management, with the participation of our principal executive officer and principal financial officer, has evaluated, as of the end of the period covered by this Form 10-Q, the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based on such evaluation, our principal executive officer and principal financial officer have concluded that as of March 31, 2022, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control Over Financial Reporting
There have been no changes in our “internal control over financial reporting,” as defined in Rule 13a-15(f) of the Exchange Act, during the three months ended March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II – OTHER INFORMATION
Item 1. Legal Proceedings
From time to time we may be involved in various claims and legal actions arising in the ordinary course of business. As of March 31, 2022, neither we nor any of our subsidiaries were subject to any material legal proceedings nor were we aware of any material legal proceedings threatened against us or any of our subsidiaries.
Item 1A. Risk Factors
There have been no material changes to the risk factors disclosed in Part I, Item 1A under the heading “Risk Factors” in our Annual Report, a copy of which may be accessed here. You should carefully consider the risk factors set forth in our Annual Report and be aware that these risk factors and other information may not describe every risk facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or operating results.
| 20 |
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Unregistered Sales of Securities
In connection with our formation, on February 11, 2020, we issued 100 common units representing all of the issued and outstanding limited liability company interests of the Company to our Sponsor for an aggregate purchase price of $10,000.00. No sales commission or other consideration was paid in connection with the sale. The offer and sale was exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), in reliance on Section 4(a)(2) thereof, as a transaction by an issuer not involving any public offering. Effective October 30, 2020, our Sponsor sold one common unit to Belpointe Capital Management, LLC, an affiliate of our Sponsor, for an aggregate purchase price of $100.00, in reliance upon the exemption from registration set forth in Section 4(a)(1) of the Securities Act, as a transaction by a person other than an issuer, underwriter or dealer not involving any public offering.
Effective September 13, 2021, we (i) amended and restated our Limited Liability Company Operating Agreement, (ii) reclassified all of our outstanding common units into an equivalent number of Class A units, and (iii) issued 100,000 Class B units and one Class M unit to our Manager. The Class B units were issued in consideration of services rendered and to be rendered by the Manager pursuant to the terms of our management agreement, and the Class M unit was issued in furtherance of the power and authority delegated to the Manager under the terms of the management agreement. No sales commission or other consideration was paid in connection with the issuance of the Class B units or the Class M unit. The issuance of the Class B units and Class M unit was exempt from the registration requirements of the Securities Act, in reliance on Section 4(a)(2) thereof, as transactions by an issuer not involving any public offering.
As of March 31, 2022, we have not sold any other equity securities that were not registered under the Securities Act.
Use of Proceeds from Registered Sales of Securities
On September 30, 2021, the Registration Statement covering our Primary Offering of up to $750,000,000 of Class A units was declared effective by the SEC. We set our initial offering price at $100.00 per Class A unit. No later than the first quarter following the December 31, 2022 year end, and every quarter thereafter, we plan to calculate our net asset value (“NAV”) within approximately 60 days of the last day of each quarter (the “Determination Date”). If our NAV increases above or decreases below the price per Class A unit as stated in our prospectus we will adjust the offering price effective as of the first business day following its public announcement. The adjusted offering price will be equal to our adjusted NAV as of the Determination Date (rounded to the nearest dollar) divided by the number of Class A units outstanding on the Determination Date.
Our Board, taking into consideration factors such as the investments we hold and the timing of our ability to generate cash flows, may determine that it is appropriate for us to begin calculating NAV on a quarterly basis prior to the first quarter following the December 31, 2022 year end. We will file a prospectus supplement with the SEC if we determine to calculate NAV prior to the first quarter following the December 31, 2022 year end and prospectus supplements disclosing quarterly determinations of our NAV per Class A unit for each fiscal quarter thereafter. If a material event occurs in between quarterly updates of NAV that would cause our NAV to change by 10% or more from the most recently disclosed NAV, we will disclose the updated price and the reason for the change in prospectus supplement as promptly as reasonably practicable.
From the period of October 7, 2021, the date of the first closing held in connection with our Primary Offering, through December 31, 2021, we issued 2,132,039 Class A units in our Primary Offering, raising net offering proceeds of $212.6 million. For the three months ending March 31, 2022, we did not issue any Class A units in connection with our Primary Offering. Together with the gross proceeds raised in Belpointe REIT’s prior offerings, as of March 31, 2022, we have raised aggregate gross offering cash proceeds of $332.2 million.
The following tables summarize certain information about the Primary Offering proceeds and our use of proceeds, including direct or indirect payments to our directors, officers, affiliates or to any person owning 10% or more of any class of our equity securities as of March 31, 2022:
| Offering proceeds | ||||
| Class A units sold | 2,132,039 | |||
| Gross offering proceeds | 213,203,900 | |||
| Selling commissions | — | |||
| Offering costs (1) (2) | 665,000 | |||
| Net offering proceeds | 212,538,900 | |||
| (1) | Includes $0.3 million of reimbursements to an affiliate for costs incurred on our behalf. |
| (2) | Direct or indirect payments of $0.4 million have been made to others, including payments for legal, accounting, transfer agent and filing fees, as of March 31, 2022. |
| Uses of net offering proceeds | ||||
| Funding of loans receivable (1) | 34,955 | |||
| Purchases and development of real estate (2) | 4,170 | |||
| Working capital (3) (4) | 1,794 | |||
| 40,919 | ||||
| (1) | Includes direct payment of $30.0 million (the “Norpointe Loan”) to Norpointe, LLC (“Norpointe”), an affiliate of our Chief Executive Officer. Please see “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Our Investments—Investments in Commercial Real Estate Loans—Norpointe Secured Loan” for additional detail regarding the Norpointe Loan. |
| (2) | Includes direct or indirect payments of $0.3 million to directors, officers and affiliates as of March 31, 2022 predominantly for employee reimbursement expenditures. |
| (3) | Includes direct or indirect payments of $1.3 million to directors, officers and affiliates as of March 31, 2022 for management fees, insurance premiums and employee cost sharing expenses (pursuant to our management agreement and employee and cost sharing agreement). Please see “Note 3 – Related Party Arrangements” in our unaudited consolidated financial statements in this Form 10-Q for additional information regarding fees incurred on our behalf by, and expenses reimbursable to, our Manager and its affiliates. |
| (4) | Includes direct or indirect payments of $0.5 million to others, including payments for legal, accounting, marketing, transfer agent and filing fees, as of March 31, 2022. |
Item 3. Defaults Upon Senior Securities
Not Applicable.
Item 4. Mine Safety Disclosures
Not Applicable.
Item 5. Other Information
None.
| 21 |
Item 6. Exhibits
| * | Filed herewith. |
| 22 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| BELPOINTE PREP, LLC | ||
| Date: May 16, 2022 | By: | /s/ Brandon E. Lacoff |
| Brandon E. Lacoff | ||
| Chief Executive Officer and Chairman of the Board | ||
| (Principal Executive Officer) | ||
| Date: May 16, 2022 | By: | /s/ Martin Lacoff |
| Martin Lacoff | ||
| Chief Strategic Officer, Principal Financial Officer and Director | ||
| (Principal Financial Officer) | ||
| 23 |
Exhibit 31.1
CERTIFICATION
I, Brandon E. Lacoff, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Belpointe PREP, LLC;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) [Omitted];
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| BELPOINTE PREP, LLC | ||
| Date: May 16, 2022 | By: | /s/ Brandon E. Lacoff |
| Brandon E. Lacoff | ||
| Chief Executive Officer and Chairman of the Board | ||
| (Principal Executive Officer) | ||
Exhibit 31.2
CERTIFICATION
I, Martin Lacoff, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Belpointe PREP, LLC;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) [Omitted];
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| BELPOINTE PREP, LLC | ||
| Date: May 16, 2022 | By: | /s/ Martin Lacoff |
| Martin Lacoff | ||
Chief Strategic Officer, Principal Financial Officer and Director | ||
| (Principal Financial Officer) | ||
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Belpointe PREP, LLC (the “Company”) for the period ended March 31, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company
| BELPOINTE PREP, LLC | ||
| Date: May 16, 2022 | By: | /s/ Brandon E. Lacoff |
| Brandon E. Lacoff | ||
| Chief Executive Officer and Chairman of the Board | ||
| (Principal Executive Officer) | ||
Exhibit 32.2
CERTIFICATION
PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Belpointe PREP, LLC (the “Company”) for the period ended March 31, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company
| BELPOINTE PREP, LLC | ||
| Date: May 16, 2022 | By: | /s/ Martin Lacoff |
| Martin Lacoff | ||
| Chief Strategic Officer, Principal Financial Officer and Director | ||
| (Principal Financial Officer) | ||
Consolidated Balance Sheets (Parenthetical) - shares |
3 Months Ended | 12 Months Ended |
|---|---|---|
Mar. 31, 2022 |
Dec. 31, 2021 |
|
| Common Class A [Member] | ||
| Common stock authorized unlimited | Unlimited | Unlimited |
| Common stock shares, issued | 3,382,149 | 3,382,149 |
| Common stock shares, outstanding | 3,382,149 | 3,382,149 |
| Common Class B [Member] | ||
| Common stock shares, issued | 100,000 | 100,000 |
| Common stock shares, outstanding | 100,000 | 100,000 |
| Common stock authorized | 100,000 | 100,000 |
| Class M Units [Member] | ||
| Common stock shares, issued | 1 | 1 |
| Common stock shares, outstanding | 1 | 1 |
| Common stock authorized | 1 | 1 |
Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 31, 2022 |
Mar. 31, 2021 |
|
| Revenue | ||
| Rental revenue | $ 329 | $ 154 |
| Total revenue | 329 | 154 |
| Expenses | ||
| Property expenses | 907 | 71 |
| General and administrative | 1,641 | 132 |
| Depreciation and amortization expense | 284 | 70 |
| Total expenses | 2,832 | 273 |
| Other income (loss) | ||
| Interest income | 501 | |
| Other income (expense) | (7) | (16) |
| Total other income (loss) | 494 | (16) |
| Net loss | (2,009) | (135) |
| Net (income) loss attributable to noncontrolling interest | (7) | 7 |
| Net loss attributable to Belpointe PREP, LLC | $ (2,016) | $ (128) |
| Loss per Class A unit (basic and diluted) | ||
| Net loss per unit | $ (0.60) | $ (1,280) |
| Weighted-average units outstanding | 3,382,149 | 100 |
Consolidated Statements of Changes in Members' Capital (Deficit) (Unaudited) - USD ($) $ in Thousands |
Total |
Class A Common [Member] |
Class B Common [Member] |
Class M Common [Member] |
Total Members (Deficit) Capital Excluding Noncontrolling Interest [Member] |
Noncontrolling Interest [Member] |
|---|---|---|---|---|---|---|
| Balance at Dec. 31, 2020 | $ (102) | $ (102) | $ (102) | |||
| Balance, shares at Dec. 31, 2020 | 100 | |||||
| Contribution from noncontrolling interest | 200 | 200 | ||||
| Net loss | (135) | (128) | (128) | (7) | ||
| Balance at Mar. 31, 2021 | (37) | $ (230) | (230) | 193 | ||
| Balance, shares at Mar. 31, 2021 | 100 | |||||
| Balance at Dec. 31, 2021 | 323,875 | $ 323,683 | 323,683 | 192 | ||
| Balance, shares at Dec. 31, 2021 | 3,382,149 | 100,000 | 1 | |||
| Offering costs | (20) | $ (20) | (20) | |||
| Net loss | (2,009) | (2,016) | (2,016) | 7 | ||
| Balance at Mar. 31, 2022 | $ 321,846 | $ 321,647 | $ 321,647 | $ 199 | ||
| Balance, shares at Mar. 31, 2022 | 3,382,149 | 100,000 | 1 |
Organization, Business Purpose and Capitalization |
3 Months Ended |
|---|---|
Mar. 31, 2022 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| Organization, Business Purpose and Capitalization | Note 1 - Organization, Business Purpose and Capitalization
Organization and Business Purpose
Belpointe PREP, LLC (together with its subsidiaries, the “Company,” “we,” “us,” or “our”) was formed on January 24, 2020 as a Delaware limited liability company. We operate in a manner that allows us to qualify as a partnership for U.S. federal income tax purposes. We are focused on identifying, acquiring, developing or redeveloping and managing commercial real estate located within “qualified opportunity zones.” At least 90% of our assets consist of qualified opportunity zone property, which enables us to be classified as a “qualified opportunity fund” as defined in the U.S. Internal Revenue Code of 1986, as amended (the “Code”). We qualified as a qualified opportunity fund beginning with our taxable year ended December 31, 2020.
We commenced principal operations on October 28, 2020. All of our assets are held by, and all of our operations are conducted through, one or more operating companies (each an “Operating Company” and together, our “Operating Companies”), either directly or indirectly through their subsidiaries. We are externally managed by Belpointe PREP Manager, LLC (our “Manager”), an affiliate of our sponsor, Belpointe, LLC (our “Sponsor”). Subject to the oversight of our board of directors (our “Board”), our Manager is responsible for managing our affairs on a day-to-day basis and for identifying and making acquisitions and investments on our behalf.
Capitalization
We are offering Class A units in our ongoing initial public offering (our “Primary Offering”) directly to investors and not through any underwriters, dealer-managers or other agents who would be paid commissions by us or any of our affiliates. In the future, however, we may engage the services of one or more underwriters, dealer-managers or other offering participants to participate in our Primary Offering or in other public offerings that we may conduct. The amount of selling commissions, deal manager fees or other offering fees that we or our investors would pay to such underwriters, dealer managers or other offering participants will depend on the terms of their engagement. Our Primary Offering is a “best efforts” offering and we undertake closings on a rolling basis.
We set our Primary Offering price at $ per Class A unit. No later than the first quarter following the December 31, 2022 year end, and every quarter thereafter, we plan to calculate our net asset value (“NAV”) within approximately 60 days of the last day of each quarter (the “Determination Date”). If our NAV increases above or decreases below the price per Class A unit as stated in our prospectus, we will adjust the Primary Offering price, effective as of the first business day following its public announcement. The adjusted Primary Offering price will be equal to our adjusted NAV as of the Determination Date (rounded to the nearest dollar) divided by the number of Class A Units outstanding on the Determination Date.
|
Summary of Significant Accounting Policies |
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| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Significant Accounting Policies | Note 2 – Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared on the accrual basis of accounting and conform to accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and Article 8 of Regulation S-X of the rules and regulations of the U.S. Securities and Exchange Commission.
In the opinion of management, all adjustments considered necessary for a fair presentation of our financial position, results of operations and cash flows have been included and are of a normal and recurring nature. The consolidated financial statements as of March 31, 2022, and for the three months ended March 31, 2022 and 2021 are unaudited and may not include year-end adjustments necessary to make them comparable to audited results. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of and for the year ended December 31, 2021 included in our Annual Report on Form 10-K. The operating results for interim periods are not necessarily indicative of operating results for any other interim period or for the entire year.
Basis of Consolidation
The accompanying unaudited consolidated financial statements reflect all of our accounts, including those of our controlled subsidiaries. The portion of members’ capital (deficit) in controlled subsidiaries that are not attributable, directly or indirectly, to us are presented in noncontrolling interest. All significant intercompany accounts and transactions have been eliminated.
We have evaluated our economic interest in entities to determine if they are deemed to be variable interest entities (“VIEs”) and whether the entities should be consolidated. An entity is a VIE if it has any one of the following characteristics: (i) the entity does not have enough equity at risk to finance its activities without additional subordinated financial support; (ii) the at-risk equity holders, as a group, lack the characteristics of a controlling financial interest; or (iii) the entity is structured with non-substantive voting rights. The distinction between a VIE and other entities is based on the nature and amount of the equity investment and the rights and obligations of the equity investors. Fixed price purchase and renewal options within a lease, as well as certain decision-making rights within a loan or joint-venture agreement, can cause us to consider an entity a VIE. Limited partnerships and other similar entities that operate as a partnership will be considered VIEs unless the limited partners hold substantive kick-out rights or participation rights.
Significant judgment is required to determine whether a VIE should be consolidated. We review all agreements and contractual arrangements to determine whether (i) we or another party have any variable interests in an entity, (ii) the entity is considered a VIE, and (iii) which variable interest holder, if any, is the primary beneficiary of the VIE. Determination of the primary beneficiary is based on whether a party (a) has the power to direct the activities that most significantly impact the economic performance of the VIE, and (b) has the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE.
The following table presents the financial data of the consolidated VIEs included in the consolidated balance sheets as of March 31, 2022 and December 31, 2021, respectively (amounts in thousands):
An interest in a VIE requires reconsideration when an event occurs that was not originally contemplated. At each reporting period we will reassess whether there are any events that require us to reconsider our determination of whether an entity is a VIE and whether it should be consolidated.
Emerging Growth Company Status
We are an “emerging growth company,” as defined in the Jump Start Our Business Startups Act of 2012 (“JOBS Act”). Under Section 107 of the JOBS Act, emerging growth companies are permitted to use an extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the “Securities Act”), for complying with new or revised accounting standards that have different effective dates for public and private companies. We have elected to use the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that we (i) are no longer an emerging growth company, or (ii) affirmatively and irrevocably opt out of the extended transition period provided in Section 7(a)(2)(B). By electing to extend the transition period for complying with new or revised accounting standards, these consolidated financial statements may not be comparable to the consolidated financial statements of companies that comply with public company effective dates.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the unaudited consolidated financial statements and the accompanying notes. Actual results could materially differ from those estimates.
Restricted Cash
Restricted cash consists of amounts required to be reserved pursuant to lender agreements for debt service. The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the consolidated balance sheets to the unaudited consolidated statements of cash flows (amounts in thousands):
Risks and Uncertainties
The spread of COVID-19 has caused significant disruptions to the U.S. and global economy and normal business operations worldwide, and has, among other things, created ongoing disruptions in global supply chains, impacted job markets and adversely affected a number of industries. With vaccines now more widely available the global economy has started to reopen and restrictions previously imposed by governmental and other authorities to contain the spread of the virus, such as business closures and limitations on travel, as well as responses by businesses and individuals to reduce the risk of exposure to infection, including through reduced travel, cancellation of in-person events, and implementation of work-at-home policies, have begun to ease. Nevertheless, the recovery remains uneven and is subject to setbacks. As a result, COVID-19 continues to present material uncertainty and risk with respect to our future performance and financial results, including the potential to negatively impact our costs of operations, our financing arrangements, the value of our investments, and the laws, regulations, and government and regulatory policies applicable to us. We are closely monitoring the potential impact of COVID-19 on all aspects of our business.
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Related Party Arrangements |
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| Related Party Arrangements | Note 3 – Related Party Arrangements
Our Transaction with Norpointe, LLC
On January 3, 2022, through an indirect wholly-owned subsidiary, we provided a commercial mortgage loan in the principal amount of $30.0 million (the “Norpointe Loan”) to Norpointe, LLC (“Norpointe”), an affiliate of our Chief Executive Officer. Norpointe is the owner of certain real property located at 41 Wolfpit Avenue, Norwalk, Connecticut 06851 (the “Norpointe Property”). The Norpointe Loan is evidenced by a promissory note bearing interest at a rate of 5.0% per annum, due and payable on December 31, 2022, and is secured by a first mortgage lien on the Norpointe Property.
Our Relationship with Our Manager and Sponsor
Our Manager and its affiliates, including our Sponsor, will receive fees or reimbursements in connection with our Primary Offering and the management of our investments.
The following table presents a summary of fees incurred on our behalf by, and expenses reimbursable to, our Manager and its affiliates, including our Sponsor, in accordance with the terms of the relevant agreements (amounts in thousands):
The following table presents a summary of amounts included in Due to affiliates in the consolidated balance sheets (amounts in thousands):
Organizational, Primary Offering and Merger Expenses
Our Manager and its affiliates, including our Sponsor, will be reimbursed, as described in the following paragraph, for organizational and offering expenses incurred in connection with our organization and Primary Offering and for expenses incurred in connection with our exchange offer and second-step merger to acquire all of the issued and outstanding shares of common stock of Belpointe REIT, Inc. (collectively, the “Transaction”). We became liable to reimburse our Manager and its affiliates, including our Sponsor, when the first closing was held in connection with our Primary Offering, which occurred in October 2021.
There were no organization or Primary Offering costs incurred by our Manager and its affiliates during the three months ended March 31, 2022. During the three months ended March 31, 2021, our Manager and its affiliates, including our Sponsor, incurred organization and Primary Offering expenses of $0.4 million as well as Transaction expenses of $0.1 million on our behalf, all of which have been fully repaid.
Other Operating Expenses
Pursuant to a management agreement by and among the Company, Operating Companies and our Manager (the “Management Agreement”), we reimburse our Manager, Sponsor and their respective affiliates for actual expenses incurred on our behalf in connection with the selection, acquisition or origination of investments, whether or not we ultimately acquire or originate an investment. We also reimburse our Manager, Sponsor and their respective affiliates for out-of-pocket expenses paid to third parties in connection with providing services to the Company.
Pursuant to an employee and cost sharing agreement by and among the Company, Operating Companies, our Manager and Sponsor, we reimburse our Sponsor and Manager for expenses incurred for our allocable share of the salaries, benefits and overhead of personnel providing services to us. During the three months ended March 31, 2022 and 2021, our Manager and its affiliates, including our Sponsor, have incurred operating expenses of $0.5 million and $0.1 million, respectively, on our behalf. The expenses are payable, at the election of the recipient, in cash, by issuance of our Class A units at the then-current NAV, or through some combination of the foregoing. As of March 31, 2022, all expenses incurred since inception have been paid in cash.
Management Fee
Subject to the oversight of our Board, our Manager is responsible for managing the Company’s affairs on a day-to-day basis and for the origination, selection, evaluation, structuring, acquisition, financing and development of our commercial real estate properties, real estate-related assets, including but not limited to commercial real estate loans, and debt and equity securities issued by other real estate-related companies, as well as private equity acquisitions and investments, and opportunistic acquisitions of other qualified opportunity funds and qualified opportunity zone businesses.
Pursuant to the Management Agreement we will pay our Manager a quarterly management fee in arrears of one-fourth of 0.75%. The management fee is based on our NAV at the end of each quarter, which, no later than the first quarter following the December 31, 2022 year end, and every quarter, thereafter, will be announced within approximately 60 days of the last day of each quarter. During the three months ended March 31, 2022, we incurred management fees of $0.6 million which are included in Property expenses in the unaudited consolidated statements of operations. There were no management fees incurred for the three months ended March 31, 2021.
Development Fees
Affiliates of our Sponsor are entitled to receive (i) development fees on each project in an amount that is usual and customary for comparable services rendered to similar projects in the geographic market of the project, and (ii) reimbursements for their expenses, such as employee compensation and other overhead expenses incurred in connection with the project.
On March 29, 2022, construction commenced on one of our properties located in Sarasota, Florida. As a result of revising the budget upon commencement of construction, we incurred an additional upfront development fee of $1.6 million, which is included in Real estate under construction in our unaudited consolidated balance sheet. The remaining development fee for this project will be earned throughout the project in accordance with the development management agreement. As of March 31, 2022 and December 31, 2021, $1.6 million and zero, respectively, remained due and payable to our affiliates for development fees.
During the three months ended March 31, 2022, we incurred employee reimbursement expenditures to our development managers of $0.3 million, of which $0.2 million is included in Real estate under construction in our unaudited consolidated balance sheet and $0.1 million is included in General and administrative expenses in our unaudited consolidated statement of operations. During the three months ended March 31, 2021, we incurred employee reimbursement expenditures to our development managers of $0.1 million, of which less than $0.1 million is included in Real estate under construction in our unaudited consolidated balance sheet and less than $0.1 million is included in General and administrative expenses in our unaudited consolidated statement of operations. As of March 31, 2022 and December 31, 2021, $0.4 million and $0.4 million, respectively, remained due and payable to our affiliates for employee reimbursement expenditures.
Acquisition Fees
We will pay our Manager, Sponsor, or an affiliate of our Manager or Sponsor, an acquisition fee equal to 1.5% of the total value of any acquisition transaction, including any acquisition through merger with another entity (but excluding any transactions in which our Sponsor, or an affiliate of our Manager or Sponsor, would otherwise receive a development fee). We did not incur any acquisition fees during the three months ended March 31, 2022 and 2021, since all investments acquired during these periods were or will be subject to payment of development fees.
Our Transactions with Belpointe Specialty Insurance, LLC
Certain immediate family members of our Chief Executive Officer have a passive indirect minority beneficial ownership interest in Belpointe Specialty Insurance, LLC (“Belpointe Specialty Insurance”). Belpointe Specialty Insurance has acted as our broker in connection with the placement of insurance coverage for certain of our properties and operations. Belpointe Specialty Insurance earns brokerage commissions related to the brokerage services that it provides to us, which commissions vary, are based on a percentage of the premiums that we pay and are set by the insurer. We have also engaged Belpointe Specialty Insurance to provide us with contract insurance consulting services related to owner controlled insurance programs, for which we pay an administration fee.
During the three months ended March 31, 2022, we obtained insurance premiums in the aggregate amount of $4.5 million, from which Belpointe Specialty Insurance earned commissions of $0.4 million. During the three months ended March 31, 2022, Belpointe Specialty Insurance earned administration fees of less than $0.1 million.
Economic Dependency
Under various agreements we have engaged our Manager and its affiliates, including in certain cases our Sponsor, to provide certain services that are essential to the Company, including asset management services, asset acquisition and disposition services, supervision of our Primary Offering and any other offerings we conduct, as well as other administrative responsibilities for the Company, including, without limitation, accounting services and investor relations services. As a result of these relationships, we are dependent upon our Manager and its affiliates, including our Sponsor. In the event that these companies are unable to provide us with the services we have engaged them to provide, we would be required to find alternative service providers.
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Real Estate, Net |
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| Real Estate, Net | Note 4 – Real Estate, Net
Acquisitions of Real Estate During 2022
On January 7, 2022, through an indirect wholly-owned subsidiary of our Operating Company, we completed the acquisition of a 1.1-acre site, located in Mansfield, Connecticut, for a purchase price of $0.3 million, inclusive of transaction costs of less than $0.1 million. Upon closing, the building was leased to the seller for a term of 12 months. This acquisition was deemed to be an asset acquisition and all direct transaction costs were capitalized. The purchase price was allocated to land and building of $0.1 million and $0.2 million, respectively. All related assets and liabilities, including identifiable intangibles, were recorded at their relative fair values based on the purchase price and acquisition costs incurred.
Depreciation expense was $0.2 million and less than $0.1 million for the three months ended March 31, 2022 and 2021, respectively, and is included in Depreciation and amortization expense on the unaudited consolidated statements of operations.
Real Estate Under Construction
The following table provides the activity of our Real estate under construction (amounts in thousands):
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Intangible Assets and Liabilities |
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| Intangible Assets and Liabilities | Note 5 – Intangible Assets and Liabilities
Intangible assets and liabilities are summarized as follows (amounts in thousands):
In-place lease, development right and ground lease purchase option intangible assets, noted above, are included in Intangible assets on the consolidated balance sheets. Below-market lease liabilities, noted above, are included in Below-market rent liabilities, net on the consolidated balance sheets.
During the three months ended March 31, 2022 and 2021, amortization of in-place lease intangible assets was $0.1 million and less than $0.1 million, respectively, and is included in Depreciation and amortization expense on the unaudited consolidated statements of operations.
During the three months ended March 31, 2022 and 2021, amortization of below-market lease liability was $0.1 million and less than $0.1 million, respectively, and is included in Rental revenue on the unaudited consolidated statements of operations.
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Loans Receivable |
3 Months Ended |
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Mar. 31, 2022 | |
| Receivables [Abstract] | |
| Loans Receivable | Note 6 – Loans Receivable
On January 3, 2022, we provided a commercial mortgage loan in the principal amount of $30.0 million to Norpointe, an affiliate of our Chief Executive Officer. The Norpointe Loan is evidenced by a promissory note bearing interest at an annual rate of 5.0%, due and payable on December 31, 2022, and is secured by a first mortgage lien on the Norpointe Property. See “Note 3 – Related Party Arrangements” for additional details regarding the Norpointe transaction.
On February 23, 2022, through an indirect wholly-owned subsidiary, we provided a commercial mortgage loan in the principal amount of $5.0 million (the “Visco Loan”) to Visco Propco, LLC (“Visco”). Visco is the owner of certain real property located at 801 Visco Drive, Nashville, Tennessee 37210 (the “Visco Property”). The Visco Loan is evidenced by a promissory note bearing interest at an annual rate of 6.0%, due and payable on February 18, 2023, and is secured by a first lien deed of trust on the Visco Property.
On March 29, 2022, we entered into an agreement to extend the maturity date on a $3.5 million loan previously advanced to CMC Storrs SPV, LLC, on September 30, 2021, from March 29, 2022 to June 27, 2022.
Interest income from the loans receivable for the three months ended March 31, 2022 was approximately $0.5 million and is included in Interest income in our unaudited consolidated statement of operations. There was no interest income for the three months ended March 31, 2021.
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Debt, Net |
3 Months Ended |
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Mar. 31, 2022 | |
| Debt Disclosure [Abstract] | |
| Debt, Net | Note 7 – Debt, Net
Debt, net consists of one non-recourse mortgage loan held with an unrelated third party (the “Acquisition Loan”), which is guaranteed by our Chief Executive Officer, and which is collateralized by the assignment of real property with a carrying value of $44.0 million at March 31, 2022. As of March 31, 2022, the Acquisition Loan had an outstanding balance of $10.8 million (excluding debt discount net of accumulated amortization of less than $0.1 million) and a fixed annual interest rate of 4.75%. As of the date of this report, the Acquisition Loan has been repaid. See “Note 11 – Subsequent Events” for additional details.
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Fair Value of Financial Instruments |
3 Months Ended |
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Mar. 31, 2022 | |
| Fair Value Disclosures [Abstract] | |
| Fair Value of Financial Instruments | Note 8 – Fair Value of Financial Instruments
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between marketplace participants at the measurement date under current market conditions (i.e., the exit price).
We categorize our financial instruments, based on the priority of the inputs to the valuation technique, into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.
Financial assets and liabilities recorded on the consolidated balance sheets are categorized based on the inputs to the valuation techniques as follows:
Level 1 – Quoted market prices in active markets for identical assets or liabilities.
Level 2 – Significant other observable inputs (e.g., quoted prices for similar items in active markets, quoted prices for identical or similar items in markets that are not active, inputs other than quoted prices that are observable such as interest rate and yield curves, and market-corroborated inputs).
Level 3 – Valuation generated from model-based techniques that use inputs that are significant and unobservable in the market. These unobservable assumptions reflect estimates of inputs that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow methodologies or similar techniques, which incorporate management’s own estimates of assumptions that market participants would use in pricing the instrument or valuations that require significant management judgment or estimation.
The carrying value of our loans receivable totaled $38.4 million and $3.5 million as of March 31, 2022 and December 31, 2021, respectively, and had estimated fair values of $38.2 million and $3.5 million as of March 31, 2022 and December 31, 2021, respectively. We determined the estimated fair value of our loans receivable using a discounted cash flow model taking into account the investments liquidity, the strength of the loan collateral, quality of the credit profile of the obligor, term to maturity and the likelihood of a liquidity event, among other factors. These fair value measurements fall within Level 3 of the fair value hierarchy.
We estimated that our other financial assets and liabilities had fair values that approximated their carrying values as of March 31, 2022 and December 31, 2021.
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Members’ Capital (Deficit) |
3 Months Ended |
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Mar. 31, 2022 | |
| Equity [Abstract] | |
| Members’ Capital (Deficit) | Note 9 – Members’ Capital (Deficit)
Our Amended and Restated Limited Liability Company Operating Agreement (our “Operating Agreement”) generally authorizes our Board to issue an unlimited number of units and options, rights, warrants and appreciation rights relating to such units for consideration or for no consideration and on the terms and conditions as determined by our Board, in its sole discretion, without the approval of any members. These additional securities may be used for a variety of purposes, including in future offerings to raise additional capital and acquisitions. Our Operating Agreement currently authorizes the issuance of an number of Class A units, Class B units and Class M unit. As of March 31, 2022 and December 31, 2021, there were Class A units, Class B units and Class M unit issued and outstanding.
As of December 31, 2021, there were units issued by the Company pursuant to subscription agreements which had not yet settled. All of these funds were received during January 2022.
Class A units
Upon payment in full of any consideration payable with respect to the initial issuance of our Class A units, the holder thereof will not be liable for any additional capital contributions to the Company. Holders of Class A units are not entitled to preemptive, redemption or conversion rights. Class A units are entitled to one vote per unit on all matters submitted to a vote of our members. Matters must generally be approved by a majority (or, in the case of election of directors, by a plurality) of the votes entitled to be cast.
Holders of Class A units share ratably in any distributions we make, subject to any statutory or contractual restrictions on distributions and to any restrictions on distributions imposed by the terms of any preferred units we issue.
Upon our dissolution, liquidation or winding up, after payment of all amounts required to be paid to creditors and holders of preferred units, if any, holders of Class A units are entitled to receive our remaining assets available for distribution.
Class B units
All of our Class B units are held by our Manager and were issued on September 14, 2021. Class B units are not entitled to preemptive, redemption or conversion rights. Class B units are entitled to one vote per unit on all matters submitted to a vote of our members. Matters must generally be approved by a majority (or, in the case of election of directors, by a plurality) of the votes entitled to be cast.
Holders of our Class B units are entitled to share ratably as a class in 5% of any gains recognized by or distributed to the Company or recognized by or distributed from our Operating Companies or any subsidiary or other entity to the Company, regardless of whether the holders of our Class A units have received a return of their capital. The allocation and distribution rights that the holders of our Class B units are entitled to may not be amended, altered or repealed, and the number of authorized Class B units may not be increased or decreased, without the consent of our Manager. In addition, our Manager will continue to hold the Class B units even if it is no longer our manager.
Upon our dissolution, liquidation or winding up, after payment of all amounts required to be paid to creditors and holders of preferred units, if any, holders of Class B units will be entitled to receive any accrual of gains or distributions otherwise distributable pursuant to the terms of the Class B units, regardless of whether the holders of our Class A Units have received a return of their capital.
Class M unit
The Class M unit is held by our Manager and was issued on September 14, 2021. The Class M unit is not entitled to preemptive, redemption or conversion rights. The Class M unit is entitled to that number of votes equal to the product obtained by multiplying (i) the sum of the aggregate number of outstanding Class A Units plus Class B units, by (ii) 10, on matters on which the Class M unit has a vote. Our Manager will continue to hold the Class M unit for so long as it remains our manager.
The holder of our Class M unit does not have any right to receive ordinary, special or liquidating distributions.
Preferred units
Under our Operating Agreement, our Board may from time to time establish and cause us to issue one or more classes or series of preferred units and set the designations, preferences, rights, powers and duties of such classes or series.
Subscriptions Receivable
Subscriptions receivable consists of units that have been issued with subscriptions that have not yet settled. As of March 31, 2022 and December 31, 2021, there was and $ million, respectively, in subscriptions that had not yet settled. Subscriptions receivable are carried at cost which approximates fair value.
Basic and Diluted Loss Per Class A Unit (Unaudited)
For the three months ended March 31, 2022, the basic and diluted weighted-average units outstanding was . For the three months March 31, 2022, net loss attributable to Class A units was $2.0 million and the loss per basic and diluted unit was $.
For the three months ended March 31, 2021, the basic and diluted weighted-average units outstanding was . For the three months March 31, 2021, net loss attributable to Class A units was $0.1 million and the loss per basic and diluted unit was $.
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Commitments and Contingencies |
3 Months Ended |
|---|---|
Mar. 31, 2022 | |
| Commitments and Contingencies Disclosure [Abstract] | |
| Commitments and Contingencies | Note 10 – Commitments and Contingencies
As of March 31, 2022, we are not subject to any material litigation nor are we aware of any material litigation threatened against us.
During the three months ended March 31, 2022, we entered into a construction management agreement in connection with the redevelopment of one of our commercial real estate properties. As of March 31, 2022, we had an unfunded capital commitment of $3.8 million under the terms of this agreement.
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Subsequent Events |
3 Months Ended |
|---|---|
Mar. 31, 2022 | |
| Subsequent Events [Abstract] | |
| Subsequent Events | Note 11 – Subsequent Events
Management has evaluated subsequent events to determine if events or transactions occurring after the balance sheet date through the date the unaudited consolidated financial statements were available for issuance require potential adjustment to or disclosure in the unaudited consolidated financial statements and has concluded that all such events or transactions that would require recognition or disclosure have been recognized or disclosed.
Mortgage Loan Repayment
On April 22, 2022, we repaid the $10.8 million Acquisition Loan from First Foundation Bank. The Acquisition Loan encumbered one of our properties located in Sarasota, Florida. |
Summary of Significant Accounting Policies (Policies) |
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Mar. 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Basis of Presentation | Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared on the accrual basis of accounting and conform to accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and Article 8 of Regulation S-X of the rules and regulations of the U.S. Securities and Exchange Commission.
In the opinion of management, all adjustments considered necessary for a fair presentation of our financial position, results of operations and cash flows have been included and are of a normal and recurring nature. The consolidated financial statements as of March 31, 2022, and for the three months ended March 31, 2022 and 2021 are unaudited and may not include year-end adjustments necessary to make them comparable to audited results. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of and for the year ended December 31, 2021 included in our Annual Report on Form 10-K. The operating results for interim periods are not necessarily indicative of operating results for any other interim period or for the entire year.
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| Basis of Consolidation | Basis of Consolidation
The accompanying unaudited consolidated financial statements reflect all of our accounts, including those of our controlled subsidiaries. The portion of members’ capital (deficit) in controlled subsidiaries that are not attributable, directly or indirectly, to us are presented in noncontrolling interest. All significant intercompany accounts and transactions have been eliminated.
We have evaluated our economic interest in entities to determine if they are deemed to be variable interest entities (“VIEs”) and whether the entities should be consolidated. An entity is a VIE if it has any one of the following characteristics: (i) the entity does not have enough equity at risk to finance its activities without additional subordinated financial support; (ii) the at-risk equity holders, as a group, lack the characteristics of a controlling financial interest; or (iii) the entity is structured with non-substantive voting rights. The distinction between a VIE and other entities is based on the nature and amount of the equity investment and the rights and obligations of the equity investors. Fixed price purchase and renewal options within a lease, as well as certain decision-making rights within a loan or joint-venture agreement, can cause us to consider an entity a VIE. Limited partnerships and other similar entities that operate as a partnership will be considered VIEs unless the limited partners hold substantive kick-out rights or participation rights.
Significant judgment is required to determine whether a VIE should be consolidated. We review all agreements and contractual arrangements to determine whether (i) we or another party have any variable interests in an entity, (ii) the entity is considered a VIE, and (iii) which variable interest holder, if any, is the primary beneficiary of the VIE. Determination of the primary beneficiary is based on whether a party (a) has the power to direct the activities that most significantly impact the economic performance of the VIE, and (b) has the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE.
The following table presents the financial data of the consolidated VIEs included in the consolidated balance sheets as of March 31, 2022 and December 31, 2021, respectively (amounts in thousands):
An interest in a VIE requires reconsideration when an event occurs that was not originally contemplated. At each reporting period we will reassess whether there are any events that require us to reconsider our determination of whether an entity is a VIE and whether it should be consolidated.
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| Emerging Growth Company Status | Emerging Growth Company Status
We are an “emerging growth company,” as defined in the Jump Start Our Business Startups Act of 2012 (“JOBS Act”). Under Section 107 of the JOBS Act, emerging growth companies are permitted to use an extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the “Securities Act”), for complying with new or revised accounting standards that have different effective dates for public and private companies. We have elected to use the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that we (i) are no longer an emerging growth company, or (ii) affirmatively and irrevocably opt out of the extended transition period provided in Section 7(a)(2)(B). By electing to extend the transition period for complying with new or revised accounting standards, these consolidated financial statements may not be comparable to the consolidated financial statements of companies that comply with public company effective dates.
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| Use of Estimates | Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the unaudited consolidated financial statements and the accompanying notes. Actual results could materially differ from those estimates.
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| Restricted Cash | Restricted Cash
Restricted cash consists of amounts required to be reserved pursuant to lender agreements for debt service. The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the consolidated balance sheets to the unaudited consolidated statements of cash flows (amounts in thousands):
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| Risks and Uncertainties | Risks and Uncertainties
The spread of COVID-19 has caused significant disruptions to the U.S. and global economy and normal business operations worldwide, and has, among other things, created ongoing disruptions in global supply chains, impacted job markets and adversely affected a number of industries. With vaccines now more widely available the global economy has started to reopen and restrictions previously imposed by governmental and other authorities to contain the spread of the virus, such as business closures and limitations on travel, as well as responses by businesses and individuals to reduce the risk of exposure to infection, including through reduced travel, cancellation of in-person events, and implementation of work-at-home policies, have begun to ease. Nevertheless, the recovery remains uneven and is subject to setbacks. As a result, COVID-19 continues to present material uncertainty and risk with respect to our future performance and financial results, including the potential to negatively impact our costs of operations, our financing arrangements, the value of our investments, and the laws, regulations, and government and regulatory policies applicable to us. We are closely monitoring the potential impact of COVID-19 on all aspects of our business. |
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Summary of Significant Accounting Policies (Tables) |
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Mar. 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Variable Interest Entities | The following table presents the financial data of the consolidated VIEs included in the consolidated balance sheets as of March 31, 2022 and December 31, 2021, respectively (amounts in thousands):
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| Schedule of Restricted Cash and Cash Equivalents | Restricted cash consists of amounts required to be reserved pursuant to lender agreements for debt service. The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the consolidated balance sheets to the unaudited consolidated statements of cash flows (amounts in thousands):
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Related Party Arrangements (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Non-Cash Activity to Related Party | The following table presents a summary of fees incurred on our behalf by, and expenses reimbursable to, our Manager and its affiliates, including our Sponsor, in accordance with the terms of the relevant agreements (amounts in thousands):
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| Schedule of Due to Related Party | The following table presents a summary of amounts included in Due to affiliates in the consolidated balance sheets (amounts in thousands):
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Real Estate, Net (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Real Estate [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Real Estate Under Construction | The following table provides the activity of our Real estate under construction (amounts in thousands):
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Intangible Assets and Liabilities (Tables) |
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Mar. 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Intangible Assets And Liabilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Intangible Assets and Liabilities | Intangible assets and liabilities are summarized as follows (amounts in thousands):
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Organization, Business Purpose and Capitalization (Details Narrative) |
Mar. 31, 2022
$ / shares
|
|---|---|
| Common Class A [Member] | |
| Offering price | $ 100.00 |
Schedule of Restricted Cash and Cash Equivalents (Details) - USD ($) $ in Thousands |
Mar. 31, 2022 |
Dec. 31, 2021 |
||
|---|---|---|---|---|
| Accounting Policies [Abstract] | ||||
| Cash and cash equivalents | $ 171,544 | $ 192,131 | ||
| Restricted cash | [1] | 87 | 215 | |
| Total cash and cash equivalents and restricted cash | $ 171,631 | $ 192,346 | ||
| ||||
Schedule of Non-Cash Activity to Related Party (Details) (Parenthetical) $ in Millions |
3 Months Ended |
|---|---|
|
Mar. 31, 2022
USD ($)
| |
| Insurance premium | $ 4.5 |
| Maximum [Member] | |
| Amortization of insurance to real estate | $ 0.1 |
Schedule of Due to Related Party (Details) - USD ($) $ in Thousands |
Mar. 31, 2022 |
Dec. 31, 2021 |
||
|---|---|---|---|---|
| Due to affiliates | $ 7,539 | $ 1,544 | ||
| InsuranceMember | ||||
| Due to affiliates | 4,407 | |||
| Development Fees [Member] | ||||
| Due to affiliates | 1,585 | |||
| Employee Cost Sharing and Reimbursements [Member] | ||||
| Due to affiliates | [1] | 893 | 852 | |
| Management Fees [Member] | ||||
| Due to affiliates | 634 | 634 | ||
| Director Compensation [Member] | ||||
| Due to affiliates | 20 | 20 | ||
| Acquisition Fee [Member] | ||||
| Due to affiliates | $ 38 | |||
| ||||
Related Party Arrangements (Details Narrative) - USD ($) $ in Thousands |
3 Months Ended | ||||
|---|---|---|---|---|---|
Mar. 29, 2022 |
Mar. 31, 2022 |
Mar. 31, 2021 |
Jan. 03, 2022 |
Dec. 31, 2021 |
|
| Related Party Transaction [Line Items] | |||||
| Asset acquisition, transaction cost | $ 100 | ||||
| Operating expenses | 2,832 | $ 273 | |||
| Property expenses | 600 | ||||
| Due to affiliates | 7,539 | $ 1,544 | |||
| General and administrative expense | $ 1,641 | 132 | |||
| Acquisition fee percentage | 1.50% | ||||
| Real Estate Insurance | $ 4,500 | ||||
| Insurance commission | 400 | ||||
| Administration fees | 100 | ||||
| General and Administrative Expense [Member] | |||||
| Related Party Transaction [Line Items] | |||||
| General and administrative expense | 100 | 100 | |||
| Employee Expense [Member] | |||||
| Related Party Transaction [Line Items] | |||||
| Due to affiliates | 400 | 400 | |||
| Development Manager [Member] | |||||
| Related Party Transaction [Line Items] | |||||
| Development costs | 200 | 100 | |||
| Reimbursement expense | 300 | 100 | |||
| Upfront Development Fee [Member] | |||||
| Related Party Transaction [Line Items] | |||||
| Development costs | $ 1,600 | ||||
| Development Fees [Member] | |||||
| Related Party Transaction [Line Items] | |||||
| Due to affiliates | $ 1,600 | $ 0 | |||
| Management Agreement [Member] | |||||
| Related Party Transaction [Line Items] | |||||
| Property Management Fee, Percent Fee | 0.75% | ||||
| Norpointe Loan [Member] | |||||
| Related Party Transaction [Line Items] | |||||
| Loan principal amount | $ 30,000 | ||||
| Promissory note interest rate | 5.00% | ||||
| Manager and Affliates [Member] | |||||
| Related Party Transaction [Line Items] | |||||
| Operating expenses | $ 500 | $ 100 | |||
| Manager and Affliates [Member] | IPO [Member] | |||||
| Related Party Transaction [Line Items] | |||||
| Primary offering expenses | $ 400 | ||||
Schedule of Real Estate Under Construction (Details) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2022 |
Dec. 31, 2021 |
|||||||||
| Beginning balance | $ 76,882 | $ 15,101 | ||||||||
| Capitalized costs | [1],[2],[3] | 8,236 | 8,991 | |||||||
| Land held for development | [3],[4] | 200 | 48,085 | |||||||
| Capitalized interest | 128 | 43 | ||||||||
| Acquisition of construction in progress | 4,662 | |||||||||
| Ending balance | 85,446 | 76,882 | ||||||||
| Real Estate [Member] | ||||||||||
| [custom:NonCashInvestingActivity] | $ 6,700 | $ 1,600 | ||||||||
| ||||||||||
Schedule of Real Estate Under Construction (Details) (Parenthetical) - USD ($) $ in Millions |
3 Months Ended | 12 Months Ended |
|---|---|---|
Mar. 31, 2022 |
Dec. 31, 2021 |
|
| Real Estate [Abstract] | ||
| Development fees and employee reimbursement expenditures | $ 1.9 | $ 2.7 |
| Direct and indirect project costs | 0.2 | 0.5 |
| Ground lease payments | $ 0.2 | $ 0.1 |
Real Estate, Net (Details Narrative) $ in Millions |
3 Months Ended | ||
|---|---|---|---|
|
Jan. 07, 2022
USD ($)
a
|
Mar. 31, 2022
USD ($)
|
Mar. 31, 2021
USD ($)
|
|
| Area of Real Estate Property | a | 1.1 | ||
| Real Estate [Member] | |||
| Depreciation expense | $ 0.2 | $ 0.1 | |
| Mansfield Connecticut [Member] | BPOZ 17 Cedar Swamp, LLC [Member] | |||
| Asset Acquisition, Consideration Transferred | $ 0.3 | ||
| Asset acquisition consideration real estate transaction costs | 0.1 | ||
| Mansfield Connecticut [Member] | BPOZ 17 Cedar Swamp, LLC [Member] | Land [Member] | |||
| Asset acquisition consideration transferred land | 0.1 | ||
| Mansfield Connecticut [Member] | BPOZ 17 Cedar Swamp, LLC [Member] | Building [Member] | |||
| Asset acquisition consideration transferred building | $ 0.2 | ||
Schedule of Intangible Assets and Liabilities (Details) - USD ($) $ in Thousands |
Mar. 31, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Finite-Lived Intangible Assets [Line Items] | ||
| Total intangible assets, Gross | $ 9,481 | $ 9,672 |
| Total intangible assets, Accumulated amortization | (309) | (383) |
| Total intangible assets, Net | 9,172 | 9,289 |
| Total intangible liabilities | (2,159) | (2,159) |
| Total intangible liabilities, Accumulated Amortization | 216 | 159 |
| Total intangible liabilities, Net Carrying Amount | (1,943) | (2,000) |
| Development Rights [Member] | ||
| Finite-Lived Intangible Assets [Line Items] | ||
| Gross carrying amount, indefinite lived intangible assets | 5,659 | 5,659 |
| Accumulated amortization, indefinite lived intangible assets | ||
| Net carrying amount, indefinite lived intangible assets | 5,659 | 5,659 |
| Ground Lease Purchase Option [Member] | ||
| Finite-Lived Intangible Assets [Line Items] | ||
| Gross carrying amount, indefinite lived intangible assets | 1,072 | 1,072 |
| Accumulated amortization, indefinite lived intangible assets | ||
| Net carrying amount, indefinite lived intangible assets | 1,072 | 1,072 |
| In-place Leases [Member] | ||
| Finite-Lived Intangible Assets [Line Items] | ||
| Gross carrying amount, finite lived intangible assets | 2,750 | 2,941 |
| Accumulated amortization, finite lived intangible assets | (309) | (383) |
| Net carrying amount, finite lived intangible assets | 2,441 | 2,558 |
| Below Market Leases [Member] | ||
| Finite-Lived Intangible Assets [Line Items] | ||
| Total intangible liabilities | (2,159) | (2,159) |
| Total intangible liabilities, Accumulated Amortization | 216 | 159 |
| Total intangible liabilities, Net Carrying Amount | $ (1,943) | $ (2,000) |
Intangible Assets and Liabilities (Details Narrative) - USD ($) $ in Millions |
3 Months Ended | |
|---|---|---|
Mar. 31, 2022 |
Mar. 31, 2021 |
|
| In-place Leases [Member] | ||
| Finite-Lived Intangible Assets [Line Items] | ||
| Amortization of intangible assets | $ 0.1 | $ 0.1 |
| Below Market Leases [Member] | ||
| Finite-Lived Intangible Assets [Line Items] | ||
| Amortization of intangible assets | $ 0.1 | $ 0.1 |
Loans Receivable (Details Narrative) - USD ($) $ in Millions |
3 Months Ended | ||||
|---|---|---|---|---|---|
Mar. 29, 2022 |
Feb. 23, 2022 |
Jan. 03, 2022 |
Mar. 31, 2022 |
Mar. 31, 2021 |
|
| Defined Benefit Plan Disclosure [Line Items] | |||||
| Interest income on loans receivables | $ 0.5 | $ 0.0 | |||
| CMC Storrs SPV, LLC [Member] | |||||
| Defined Benefit Plan Disclosure [Line Items] | |||||
| Notes receivable | $ 3.5 | ||||
| Maturity date description | On March 29, 2022, we entered into an agreement to extend the maturity date on a $3.5 million loan previously advanced to CMC Storrs SPV, LLC, on September 30, 2021, from March 29, 2022 to June 27, 2022 | ||||
| Visco Loan [Member] | |||||
| Defined Benefit Plan Disclosure [Line Items] | |||||
| Promissory note interest rate | 6.00% | ||||
| Promissory note maturity date | Feb. 18, 2023 | ||||
| Notes receivable | $ 5.0 | ||||
| Norpointe Loan [Member] | |||||
| Defined Benefit Plan Disclosure [Line Items] | |||||
| Principal loan amount | $ 30.0 | ||||
| Promissory note interest rate | 5.00% | ||||
| Promissory note maturity date | Dec. 31, 2022 | ||||
Debt, Net (Details Narrative) $ in Millions |
Mar. 31, 2022
USD ($)
|
|---|---|
| Debt Disclosure [Abstract] | |
| Debt carrying value | $ 44.0 |
| Outstanding balance | 10.8 |
| Long-term Debt, Gross | $ 0.1 |
| Fixed interest rate | 4.75% |
Fair Value of Financial Instruments (Details Narrative) - USD ($) $ in Millions |
Mar. 31, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Fair Value Disclosures [Abstract] | ||
| Loans receivable | $ 38.4 | $ 3.5 |
| Estimated fair value of loans receivable | $ 38.2 | $ 3.5 |
Members’ Capital (Deficit) (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 12 Months Ended | |
|---|---|---|---|
Mar. 31, 2022 |
Mar. 31, 2021 |
Dec. 31, 2021 |
|
| Class of Stock [Line Items] | |||
| Basic and diluted weighted-average units outstanding | 3,382,149 | 100 | |
| Net loss | $ 2,016 | $ 128 | |
| Loss per basic and diluted unit | $ 0.60 | $ 1,280 | |
| Subscription Agreement [Member] | |||
| Class of Stock [Line Items] | |||
| Units issued | 202,952 | ||
| Subscriptions receivable | $ 0 | $ 20,300 | |
| Common Class A [Member] | |||
| Class of Stock [Line Items] | |||
| Common stock, shares authorized unlimited | Unlimited | Unlimited | |
| Common stock, shares issued | 3,382,149 | 3,382,149 | |
| Common stock, shares outstanding | 3,382,149 | 3,382,149 | |
| Basic and diluted weighted-average units outstanding | 3,382,149 | 100 | |
| Net loss | $ 2,000 | $ 100 | |
| Loss per basic and diluted unit | $ 0.60 | $ 1,280 | |
| Common Class B [Member] | |||
| Class of Stock [Line Items] | |||
| Common stock, shares authorized | 100,000 | 100,000 | |
| Common stock, shares issued | 100,000 | 100,000 | |
| Common stock, shares outstanding | 100,000 | 100,000 | |
| Dividends rate percentage | 5.00% | ||
| Common Class M [Member] | |||
| Class of Stock [Line Items] | |||
| Common stock, shares authorized | 1 | ||
| Common stock, shares issued | 1 | 1 | |
| Common stock, shares outstanding | 1 | 1 | |
Commitments and Contingencies (Details Narrative) $ in Millions |
Mar. 31, 2022
USD ($)
|
|---|---|
| Construction Management Agreement [Member] | |
| Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | |
| Other Commitment | $ 3.8 |
Subsequent Events (Details Narrative) $ in Millions |
Apr. 22, 2022
USD ($)
|
|---|---|
| Subsequent Event [Member] | First Foundation Bank [Member] | |
| Subsequent Event [Line Items] | |
| Repayments of Long-Term Debt | $ 10.8 |