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)
(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
☐ No
As of November 8, 2024, 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 (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which reflect the current views of Belpointe PREP, LLC, a Delaware limited liability company (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 version of these words or other comparable words or statements that do not relate strictly 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, 2023, a copy of which may be accessed here, and, in particular due to changes with respect to borrowing costs as a result of interest rates and other factors, our ability to raise capital and access debt financing to continue to execute on our investment strategy, inflation, changes in the availability and price of insurance coverage, construction delays, delays in the lease-up and stabilization of our multifamily properties, fluctuations in occupancy rates and market rents as a result of competition, severe weather events and other natural phenomena, local economic factors and other market conditions beyond our control, changes in landlord-tenant laws in the markets in which we operate and the projected impact of such factors on our business, financial performance and operating results. Our expectations, beliefs and projections are expressed in good faith, and we believe there is a reasonable basis for them. However, there can be no assurance that management’s expectations, beliefs and projections will result or be achieved, and actual results may vary materially from what is expressed in or indicated by the forward-looking statements.
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 U.S. Securities and Exchange Commission (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)
| September 30, 2024 | December 31, 2023 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Real estate | ||||||||
| Land | $ | $ | ||||||
| Building and improvements | ||||||||
| Furniture, fixtures and equipment | ||||||||
| 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 | $ | $ | ||||||
| Short-term loan from affiliate | ||||||||
| Due to affiliates | ||||||||
| Lease liabilities | ||||||||
| Accounts payable | ||||||||
| Accrued expenses and other liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 11) | ||||||||
| Members’ Capital | ||||||||
| Class A units, units authorized, and units issued and outstanding at September 30, 2024 and December 31, 2023, respectively | ||||||||
| Class B units, units authorized, units issued and outstanding at September 30, 2024 and December 31, 2023 | ||||||||
| Class M unit, unit authorized, unit issued and outstanding at September 30, 2024 and December 31, 2023 | ||||||||
| Total members’ capital excluding noncontrolling interests | ||||||||
| Noncontrolling interests | ||||||||
| 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 September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenue | ||||||||||||||||
| Rental revenue | $ | $ | $ | $ | ||||||||||||
| Total revenue | ||||||||||||||||
| Expenses | ||||||||||||||||
| Property expenses | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Interest expense | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Impairment of real estate | ||||||||||||||||
| Total expenses | ||||||||||||||||
| Other income | ||||||||||||||||
| Interest income | ||||||||||||||||
| Other (expense) income | ( | ) | ( | ) | ( | ) | ||||||||||
| Total other income | ||||||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net (income) loss attributable to noncontrolling interests | ( | ) | ( | ) | ||||||||||||
| 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
(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 | Interests | Interests | Capital | ||||||||||||||||||||||||||||
| Balance at January 1, 2024 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||
| Issuance of units | ||||||||||||||||||||||||||||||||||||
| Offering costs | — | ( | ) | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Net loss | — | ( | ) | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Balance at March 31, 2024 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||
| Offering costs | — | ( | ) | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Acquisition of noncontrolling interests | — | ( | ) | — | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Contributions from noncontrolling interests | — | — | — | |||||||||||||||||||||||||||||||||
| Net (loss) income | — | ( | ) | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Balance at June 30, 2024 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||
| Issuance of units | ||||||||||||||||||||||||||||||||||||
| Offering costs | — | ( | ) | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Net (loss) income | — | ( | ) | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Balance at September 30, 2024 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||
| 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, 2023 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||
| Acquisition of noncontrolling interests | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Offering costs | — | ( | ) | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Net (loss) income | — | ( | ) | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Balance at March 31, 2023 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||
| Issuance of units | ||||||||||||||||||||||||||||||||||||
| Capital distribution | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Offering costs | — | ( | ) | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Contributions from noncontrolling interest | — | — | — | |||||||||||||||||||||||||||||||||
| Net (loss) income | — | ( | ) | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Balance at June 30, 2023 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||
| Issuance of units | ||||||||||||||||||||||||||||||||||||
| Offering Costs | — | ( | ) | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Net loss | — | ( | ) | — | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Balance at September 30, 2023 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||
See accompanying notes to consolidated financial statements.
| 3 |
Belpointe PREP, LLC
Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
| Nine Months Ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Cash flows from operating activities | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to net loss: | ||||||||
| Depreciation and amortization including intangible assets and deferred financing costs | ||||||||
| Accretion of rent-related intangibles and straight-line rent adjustments | ( | ) | ||||||
| Impairment of real estate | ||||||||
| Unrealized loss (gain) on interest rate derivative | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Increase in due to affiliates | ||||||||
| Decrease 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 | ||||||||
| Development of real estate | ( | ) | ( | ) | ||||
| Other investing activity | ( | ) | ( | ) | ||||
| Proceeds from interest rate cap | ||||||||
| Purchase of interest rate cap | ( | ) | ( | ) | ||||
| Acquisitions of real estate | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities | ||||||||
| Proceeds from term loans | ||||||||
| Proceeds from construction loan | ||||||||
| Repayment of short-term loan from affiliate | ( | ) | ||||||
| Payment of deferred financing costs | ( | ) | ( | ) | ||||
| Short-term loan from affiliate | ||||||||
| Proceeds from units issued | ||||||||
| Capital distribution to noncontrolling interests | ( | ) | ( | ) | ||||
| Other financing activities | ( | ) | ||||||
| Payment of offering costs | ( | ) | ( | ) | ||||
| Contributions from noncontrolling interests | ||||||||
| Net cash provided by financing activities | ||||||||
| Net increase (decrease) in cash, 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 | $ | $ | ||||||
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”) is focused on identifying, acquiring, developing or redeveloping and managing commercial real estate located within “qualified opportunity zones.” We were formed on January 24, 2020 as a Delaware limited liability company and qualify as a partnership and qualified opportunity fund for U.S. federal income tax purposes.
At least 90% of our assets consist of qualified opportunity zone property, and 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 collectively, 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
On
May 9, 2023, the U.S. Securities and Exchange Commission (the “SEC”) declared effective our registration statement on Form
S-11, as amended (File No. 333-271262) (the “Follow-on Registration Statement”), registering the offer and sale of up to
$
In
connection with the Follow-on Registration Statement, we entered into a non-exclusive dealer manager agreement with Emerson Equity LLC
(the “Dealer Manager”), a registered broker-dealer, for the sale of our Class A units through the Dealer Manager. The Dealer
Manager will enter into participating dealer agreements and wholesale agreements with other broker-dealers, referred to as “selling
group members,” to authorize those broker-dealers to solicit offers to purchase our Class A units. We will pay our Dealer Manager
commissions of up to
In
addition, the Follow-on Registration Statement constitutes a post-effective amendment to the registration statement on Form S-11, as
amended (File No. 333-255424), registering the offer and sale of our ongoing initial public offering of up to $
The purchase price for Class A units in the Public Offerings will be the lesser of (i) the current net asset value (the “NAV”) of our Class A units, and (ii) the average of the high and low sale prices of our Class A units on the NYSE American (the “NYSE”) during regular trading hours on the last trading day immediately preceding the investment date on which the NYSE was open for trading and trading in our Class A units occurred. Our Manager calculates our NAV within approximately 60 days of the last day of each quarter, and any adjustments take effect as of the first business day following its public announcement. On August 30, 2024, we announced that our NAV as of June 30, 2024 was equal to $ per Class A unit.
Note 2 – Summary of Significant Accounting Policies
Basis of Presentation
The accompanying 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 SEC.
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 September 30, 2024, and for the three and nine months ended September 30, 2024 and 2023, 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, 2023 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.
| 5 |
Basis of Consolidation
The accompanying consolidated financial statements reflect all of our accounts, including those of our controlled subsidiaries. The portion of members’ capital in controlled subsidiaries that are not attributable, directly or indirectly, to us are presented in noncontrolling interests. All significant intercompany accounts and transactions have been eliminated.
We have evaluated our economic interests 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 September 30, 2024 and December 31, 2023, respectively (amounts in thousands):
| September 30, 2024 | December 31, 2023 | |||||||
| (unaudited) | ||||||||
| Assets | ||||||||
| Real estate | ||||||||
| Land | $ | $ | ||||||
| Building and improvements | ||||||||
| Furniture, fixtures and equipment | ||||||||
| 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 | ||||||||
| Lease liabilities | ||||||||
| 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.
| 6 |
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 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, our 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 consolidated financial statements and the accompanying notes. Actual results could materially differ from those estimates.
Impairment of Long-Lived Assets
We evaluate our tangible and identifiable intangible real estate assets for impairment when events such as delays or changes in development, declines in a property’s operating performance, deteriorating market conditions, or environmental or legal concerns bring recoverability of the carrying value of one or more assets into question. When qualitative factors indicate the possibility of impairment, the total undiscounted cash flows of the property, including proceeds from disposition, are compared to the net book value of the property. If the carrying value of the asset exceeds the undiscounted cash flows of the asset, an impairment loss is recorded in earnings to reduce the carrying value of the asset to fair value, calculated as the discounted net cash flows of the property. In circumstances where the highest and best use of a property is the fee simple value of vacant land, we compare book value of the property to the appraised value of the land. If the carrying value of the asset exceeds the appraised value of the land, an impairment loss is recorded to reduce the carrying value to the appraised value.
Restricted Cash
Restricted cash consists of amounts required to be reserved pursuant to contractual obligations and 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 consolidated statements of cash flows (amounts in thousands):
| September 30, 2024 | December 31, 2023 | September 30, 2023 | ||||||||||
| (unaudited) | (unaudited) | |||||||||||
| Cash and cash equivalents | $ | $ | $ | |||||||||
| Restricted cash (1) | ||||||||||||
| Total cash and cash equivalents and restricted cash | $ | $ | $ | |||||||||
| (1) |
Liquidity
Our future needs for liquidity will depend on a variety of factors, including, without limitation, our ability to generate cash flows from operations, the timing and availability of net proceeds from our Public Offerings and any future offerings that we may conduct, the timing and extent of our real estate acquisition and disposition activities, and the timing and extent of our construction and development costs.
Economic uncertainty, fluctuating interest rates, volatility in the real estate markets, slowdowns in transaction volume, delays in financings from banks and other lenders and other negative trends may, in the future, adversely impact our ability to timely access potential sources of liquidity. If we are unable to raise additional capital when desired, or on terms that are acceptable to us, our business, financial condition and results of operations could be adversely affected.
We believe that our cash on-hand, the anticipated net proceeds from our Public Offerings, the projected cash flows from our real estate assets and our current and anticipated financing activities will be sufficient to meet our liquidity and capital resource requirements for the next 12 months from the date of issuance of this Form 10-Q.
| 7 |
Recent Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). ASU 2023-07 is effective for public entities for fiscal years beginning after December 15, 2023, and interim periods in fiscal years beginning after December 15, 2024, and requires single reporting entities to comply with the expanded reportable segment disclosures outlined in the ASU. The expanded reportable segment disclosures are intended to enhance certain disclosures surrounding significant segment expenses. We are currently evaluating the impact of the new standard on our consolidated financial statements.
In March 2024, the SEC adopted final rules under Release No. 33-11275, The Enhancement and Standardization of Climate-Related Disclosures for Investors (the “Climate Rules”). The Climate Rules require quantitative and qualitative disclosure of certain climate-related information in registration statements and annual reports filed. These disclosures include financial statement footnote disclosure related to the effects of certain severe weather events and other natural conditions. In April 2024, the SEC issued an order staying the Climate Rules pending completion of a judicial review of certain petitions challenging their validity. If the stay is lifted, the effective dates remain unchanged and we remain a smaller reporting company, emerging growth company or non-accelerated filer, the Climate Rules will be effective for our fiscal year ending December 31, 2027. We are currently evaluating the impact of the Climate Rules on our consolidated financial statements.
Note 3 – Leases
Lessor Accounting
We own rental properties which are leased to tenants under operating leases with current expirations ranging from 2024 to 2040, with options to extend or terminate the leases. Revenues from such leases are reported as Rental revenue in our consolidated statements of operations and are comprised of (i) lease components, which includes fixed and variable lease payments, and (ii) non-lease components which includes reimbursements of property level operating expenses. We do not separate non-lease components from the related lease components, as the timing and pattern of transfer are the same, and account for the combined component.
Fixed lease revenues represent the base rent that each tenant is required to pay in accordance with the terms of their respective leases reported on a straight-line basis over the non-cancelable term of the lease. Variable lease revenues include payments based on (i) tenant reimbursements, (ii) changes in the index or market-based indices after the inception of the lease, (iii) percentage rents, or (iv) the operating performance of the property. Variable lease revenues are not recognized until the specific events that trigger the variable payments have occurred.
The following table summarizes the components of lease revenues (amounts in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| (unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||||||||
| Fixed lease revenues | $ | $ | $ | $ | ||||||||||||
| Variable lease revenues (1) | ||||||||||||||||
| Lease revenues (2) (3) | $ | $ | $ | $ | ||||||||||||
| (1) |
| (2) |
| (3) | Excludes
straight-line rent of less than $ |
In certain of our leases, the tenant is obligated to pay the real estate taxes, insurance, and certain other expenses directly to the vendor. These obligations, which have been assumed by the tenants, are not reflected in our consolidated financial statements. To the extent any such tenant defaults on its lease or if it is deemed probable that the tenant will fail to pay for such obligations, a liability for such obligations would be recorded.
We assess the collectability of substantially all lease payments due by reviewing a tenant’s payment history or financial condition. Changes to collectability are recognized as a current period adjustment to rental revenue. We have assessed the collectability of all recorded lease revenues as probable as of September 30, 2024.
| 8 |
Note 4 – Related Party Arrangements
Our Transaction with Belpointe Development Holding, LLC
On
May 16, 2024, we entered into an agreement to borrow up to $
Our Transaction with Lacoff Holding II, LLC
On
December 29, 2023, we borrowed $
Our Relationship with Our Manager and Sponsor
Our Manager and its affiliates, including our Sponsor, receive fees or reimbursements in connection with our Public Offerings 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 with such parties (amounts in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| (unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||||||||
| Amounts included in the Consolidated Statements of Operations | ||||||||||||||||
| Costs incurred by our Manager and its affiliates (1) | $ | $ | $ | $ | ||||||||||||
| Management fees (2) | ||||||||||||||||
| Insurance (3) | ||||||||||||||||
| Director compensation | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Capitalized costs included in the Consolidated Balance Sheets | ||||||||||||||||
| Development fee and reimbursements | $ | $ | $ | $ | ||||||||||||
| Insurance (3) | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
| (1) |
| (2) |
| (3) |
The following table presents a summary of amounts included in Due to affiliates in the consolidated balance sheets (amounts in thousands):
| September 30, 2024 | December 31, 2023 | |||||||
| (unaudited) | ||||||||
| Due to affiliates | ||||||||
| Management fees | $ | $ | ||||||
| Development fees | ||||||||
| Employee cost sharing and reimbursements (1) | ||||||||
| Director compensation | ||||||||
| $ | $ | |||||||
| (1) |
Other Operating Expenses
Pursuant to the terms of the management agreement between us, our 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 us.
Pursuant
to the terms of the employee and cost sharing agreement between us, our Operating Companies, our Manager and our Sponsor, we reimburse
our Sponsor and our 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 September 30, 2024 and 2023, our Manager and its affiliates, including our Sponsor, incurred
operating expenses of $
Management Fee
Subject to the limitations set forth in our Amended and Restated Limited Liability Company Operating Agreement (our “Operating Agreement”) and the oversight of our Board, our Manager is responsible for managing our 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 pay our Manager a quarterly management fee in arrears of one-fourth of
| 9 |
Development Fees and Reimbursements
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.
During
the three months ended September 30, 2024 and 2023, we incurred development fees earned during the construction phase of $
During
the three months ended September 30, 2024 and 2023, we incurred employee reimbursement expenditures to our affiliates acting as development
managers of $
On
April 25, 2023, each of the indirect majority-owned subsidiaries for our Nashville investments entered into development management agreements
with certain development entities in which immediate family members of our Chief Executive Officer have a passive indirect minority beneficial
ownership interest (collectively, the “Nashville DMAs”). The aggregate development fees payable under the Nashville DMAs
are equal to
Acquisition Fees
We
will pay our Manager, Sponsor, or an affiliate of our Manager or Sponsor, an acquisition fee equal to
Insurance
Certain family members of our Chief Executive Officer hold a non-controlling beneficial 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, and may continue to engage, 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 September 30, 2024 and 2023, and 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 Public Offerings 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 our Manager and its affiliates 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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Note 5 – Real Estate, Net
Real Estate Under Construction
The following table provides the activity of our Real estate under construction in the consolidated balance sheets (amounts in thousands):
| September 30, 2024 | December 31, 2023 | |||||||
| (unaudited) | ||||||||
| Beginning balance | $ | $ | ||||||
| Placed into service | ( | ) | ||||||
| Capitalized costs (1) (2) | ||||||||
| Capitalized interest | ||||||||
| Impairment charges (3) | ( | ) | ( | ) | ||||
| Land held for development (4) | ||||||||
| $ | $ | |||||||
| (1) | |
| (2) | |
| (3) | |
| (4) |
Placed into Service
During the nine months ended September 30, 2024 certain phases of our 1991 Main Street, Sarasota, Florida (“Aster & Links”) development project reached substantial completion, and as a result, we reclassified the related real estate under construction to their respective fixed asset accounts.
Non-cash Disclosures
Real
estate under construction includes non-cash investing activity of $
Depreciation Expense
Depreciation
expense was $
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Note 6 – Intangible Assets and Liabilities
Intangible assets and liabilities are summarized as follows (amounts in thousands):
| September 30, 2024 | December 31, 2023 | |||||||||||||||||||||||
| 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 | ||||||||||||||||||||||||
| Total intangible assets | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Finite-Lived Intangible Liabilities | ||||||||||||||||||||||||
| Below-market leases | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||||||
| Total intangible liabilities | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||||||
In-place leases and development rights intangible assets, noted above, are included in Intangible assets on the consolidated balance sheets. Below-market lease liabilities, noted above, are included in Lease liabilities on the consolidated balance sheets.
Amortization
of in-place lease intangible assets was less than $
Amortization
of below-market lease liabilities was less than $
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Note 7 – Debt, Net
2024 Debt Transactions
On
June 28, 2024, our indirect majority-owned subsidiary entered into a variable-rate construction loan agreement for up to $
On
June 26, 2024, our indirect majority-owned subsidiary entered into a fixed-rate loan agreement for $
On
January 31, 2024, our indirect majority-owned subsidiary entered into a fixed-rate mezzanine loan agreement for up to $
2023 Debt Transactions
On
May 12, 2023, our indirect majority-owned subsidiary entered into a variable-rate construction loan agreement for up to $
The following table details our Debt, net (dollars in thousands):
| Carrying Value as of | ||||||||||||||||||
| Indebtedness | Interest Rate | Maturity Date | Total Commitment | September 30, 2024 | December 31, 2023 | |||||||||||||
| (unaudited) | ||||||||||||||||||
| Fixed rate loans: | ||||||||||||||||||
| 1991 Main Mezzanine Loan (1) (3) | % | $ | $ | $ | ||||||||||||||
| 900 8th Land Loan (2) | % | N/A | ||||||||||||||||
| Variable rate loans: | ||||||||||||||||||
| 1991 Main Construction Loan (1) (4) | SOFR + | % | $ | |||||||||||||||
| 1000 First Construction Loan (5) | SOFR
+ | % | $ | |||||||||||||||
| Total debt | ||||||||||||||||||
| Unamortized debt issuance costs | ( | ) | ( | ) | ||||||||||||||
| Unamortized debt discount | ( | ) | ( | ) | ||||||||||||||
| Debt, net | $ | $ | ||||||||||||||||
| (1) | |
| (2) | |
| (3) | |
| (4) | |
| (5) |
The following table summarizes the scheduled future principal payments under our debt arrangements as of September 30, 2024 (amounts in thousands):
| Year ended December 31, | (unaudited) | |||
| 2024 (remainder) | $ | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Thereafter | ||||
| Total | $ | |||
Interest
paid, net of capitalized interest for the nine months ended September 30, 2024 and 2023, was $
Amortization
of deferred financing costs for the three months ended September 30, 2024 and 2023, was $
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Guarantees and Covenants
Each of our indebtedness agreements are secured by the individual underlying real estate investments serving as collateral. In connection with certain agreements, we provided completion guarantees, which, among other things, guarantee completion of the work at each individual construction project, as well as carveout guarantees pursuant to which we guarantee the borrowers obligations with respect to certain non-recourse carveout events, such as “bad acts,” environmental conditions, and violations of certain provisions of the loan documents. We also provided a customary environmental indemnity agreement to the certain lenders pursuant to which we agreed to protect, defend, indemnify, release and hold harmless such lenders from and against certain environmental liabilities related to the real estate investments for which they apply.
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.
Except as described below, we estimated that our other financial assets and liabilities had fair values that approximated their carrying values as of September 30, 2024 and December 31, 2023.
Recurring Fair Value Measurements
Our interest rate caps are measured at fair value on a recurring basis (see Note 9 – Derivative Instruments for further details). The valuation of our interest rate caps are prepared by an independent third-party and are classified as Level 2 in the fair value hierarchy, as the valuation is approximated using market values of similar instruments in active markets.
The following table sets forth the carrying value and estimated fair value of our debt arrangements as of September 30, 2024 and December 31, 2023, respectively (amounts in thousands):
| September 30, 2024 | December 31, 2023 | |||||||||||||||||||
| Level | Carrying Value (1) | Fair Value (2) | Carrying Value (1) | Fair Value (3) | ||||||||||||||||
| (unaudited) | (unaudited) | |||||||||||||||||||
| Total indebtedness | 2 | $ | $ | $ | $ | |||||||||||||||
| (1) | |
| (2) | |
(3) |
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Note 9 – Derivative Instruments
In connection with our variable rate loan agreements (Note 7 – Debt, Net), we are required to obtain and maintain interest rate protection in the form of interest rate caps during the term of the loans to effectively limit the impact of increases in the one-month SOFR. We are subject to credit risk by the counterparty of these derivative instruments in the event of non-performance under the derivative contracts, however we believe the risk to be minimal.
The following table details our derivative financial instruments as of September 30, 2024 (amounts in thousands):
| Interest Rate Derivative | Notional Amount | Strike Price | Maturity Date | |||||||
| Interest rate cap | $ | % | ||||||||
| Interest rate cap | $ | % | ||||||||
The following table details the fair value of our derivative financial instruments (amounts in thousands):
| Fair Value (1) | ||||||||
| Interest Rate Derivative | September 30, 2024 | December 31, 2023 | ||||||
| (unaudited) | ||||||||
| Interest rate caps | $ | $ | ||||||
| (1) |
The following table details the effect of our derivative financial instruments on our consolidated statements of operations (amounts in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||
| Interest Rate Derivative | Location of Gain (Loss) | 2024 | 2023 | 2024 | 2023 | |||||||||||||
| (unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||||||||||
| Interest rate caps | Other (expense) income | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | |||||||
Note 10 – Members’ Capital
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, and in most cases without the approval of our 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.
During the three months ended September 30, 2024 and 2023, we issued and Class A units, respectively. During the nine months ended September 30, 2024 and 2023, we issued and Class A units, respectively. As of September 30, 2024 and December 31, 2023, there were and Class A units, respectively, Class B units and Class M unit issued and outstanding.
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. Holders of our 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 the election of directors, by a plurality) of the votes entitled to be cast.
Holders of our 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 our Class A units are entitled to receive our remaining assets available for distribution.
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Class B units
All of our Class B units are currently held by our Manager and were issued on September 14, 2021. Holders of our Class B units are not entitled to preemptive, redemption or conversion rights. Holders of our 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 the 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 currently held by our Manager and was issued on September 14, 2021. The holder of our Class M unit is not entitled to preemptive, redemption or conversion rights. The holder of our 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.
Basic and Diluted Loss Per Class A Unit
For
the three months ended September 30, 2024 and 2023, the basic and diluted weighted-average units outstanding were and ,
respectively. For the three months ended September 30, 2024 and 2023, net loss attributable to Class A units was $
For
the nine months ended September 30, 2024 and 2023, the basic and diluted weighted-average units outstanding were and ,
respectively. For the nine months ended September 30, 2024 and 2023, net loss attributable to Class A units was $
Note 11 – Commitments and Contingencies
As of September 30, 2024, we were not subject to any material litigation nor were we aware of any material litigation threatened against us.
In
connection with the development of our investment at 1000 First Avenue North, St. Petersburg, Florida (“Viv”) and
Aster & Links, we have entered into separate construction management agreements for each asset which contain terms and conditions that are
customary for the related scope of work. As of September 30, 2024, we have an aggregate unfunded commitment of $
Note 12 – Subsequent Events
Management has evaluated subsequent events to determine if events or transactions occurring after the balance sheet date through the date the consolidated financial statements were issued require potential adjustment to or disclosure in the consolidated financial statements and has concluded that, except as set forth below, all such events or transactions that would require recognition or disclosure have been recognized or disclosed.
Through the date of this Form 10-Q, we
drew down an additional $
| 16 |
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, its operating companies, Belpointe PREP OC, LLC, and Belpointe PREP TN OC, LLC (each an “Operating Company” and collectively, the “Operating Companies”), and each of the Operating Companies’ subsidiaries, collectively.
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, 2023 (our “Annual Report”) filed with the U.S. Securities and Exchange Commission on March 29, 2024, a copy of which may be accessed here. As discussed in the section entitled “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 only publicly traded qualified opportunity fund listed on a national securities exchange. We are a Delaware limited liability company formed on January 24, 2020. We have been treated as a partnership for U.S. federal income tax purposes since our tax year ended December 31, 2020, and we currently intend to operate in a manner that will allow us to continue to meet the requirements for classification as a partnership. 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 May 9, 2023, the U.S. Securities and Exchange Commission (“SEC”) declared effective our registration statement on Form S-11, as amended (File No. 333-271262) (the “Follow-on Registration Statement”), registering the offer and sale of up to $750,000,000 of our Class A units on a continuous “best efforts” basis by any method deemed to be an “at the market” offering pursuant to Rule 415(a)(4) under the Securities Act of 1933, as amended (the “Securities Act”), including by offers and sales made directly to investors or through one or more agents.
In connection with the Follow-on Registration Statement, we entered into a non-exclusive dealer manager agreement with Emerson Equity LLC (the “Dealer Manager”), a registered broker-dealer, for the sale of our Class A units through the Dealer Manager. The Dealer Manager will enter into participating dealer agreements and wholesale agreements with other broker-dealers, referred to as “selling group members,” to authorize those broker-dealers to solicit offers to purchase our Class A units. We will pay our Dealer Manager commissions of up to 0.25%, and the selling group members commissions ranging from 0.25% to 4.50%, of the principal amount of Class A unit sold in the Follow-on Offering.
In addition, the Follow-on Registration Statement constitutes a post-effective amendment to the registration statement on Form S-11, as amended (File No. 333-255424), registering the offer and sale of our ongoing initial public offering of up to $750,000,000 of our Class A units, declared effective by the SEC on September 30, 2021, of which $513,013,330 remained unsold as of September 30, 2024 (our “Primary Offering” and, together with our Follow-on Offering, our “Public Offerings”). For the three and nine months ended September 30, 2024, we have sold aggregate gross proceeds of $1,000,000 and $1,711,020, respectively, of Class A units in connection with our Public Offerings.
The purchase price for Class A units in our Public Offerings will be the lesser of (i) the net asset value (“NAV”) of our Class A units, and (ii) the average of the high and low sale prices of our Class A units on the NYSE American (the “NYSE”) during regular trading hours on the last trading day immediately preceding the investment date on which the NYSE was open for trading and trading in our Class A units occurred. Our Manager calculates our NAV within approximately 60 days of the last day of each quarter, and any adjustments take effect as of the first business day following its public announcement. On August 30, 2024, we announced that our NAV as of June 30, 2024 was equal to $98.24 per Class A unit.
| 17 |
Our Business Outlook
Market conditions for multifamily and mixed-use rental properties in the geographic markets in which we operate remained strong over the past several quarters. Future economic conditions and the demand for multifamily and mixed-use rental properties in the geographic markets in which we operate are, and the real estate industry in general is, subject to uncertainty as a result of a number of factors, including, among others, construction delays, delays in the lease-up and stabilization of properties, unemployment rates, changes with respect to borrowing costs as a result of interest rates and other factors, inflation, fluctuations in occupancy rates and market rents, financial market volatility, general economic uncertainty, increasing energy costs, supply chain disruptions and labor shortages. The potential effect of these and other factors and the projected impact of these and other events on our business, results of operations and financial performance, presents 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 governmental and regulatory policies applicable to us. As a result, our past performance may not be indicative of future results.
Given the evolving nature of certain of these factors, the extent to which they may impact our future performance and financial results will depend on future developments which remain highly uncertain and, as a result, at this time we are unable to estimate the impact that these factors may have on our future financial results. Our Manager continuously reviews our investment and financing strategies for optimization and to reduce our risk in the face of the fluidity of these and other factors.
Our Investments
As of the date of this Form 10-Q, our investment portfolio consisted of the following multifamily and mixed-use rental properties:
1991 Main Street – Sarasota, Florida (“Aster & Links”) – 1991 Main Street (“1991 Main” or “Aster & Links”) is a 5.13-acre site which was acquired for an aggregate purchase price of $20.7 million.
During the nine months ended September 30, 2024, construction was completed and lease up began at Aster & Links, our mixed-use luxury development in downtown Sarasota, Florida. Aster & Links is comprised of 424 luxury residential units, including a mix of one-bedroom, two-bedroom, three-bedroom, four-bedroom apartments, townhome-style penthouse apartments, and six guest suite apartments, with approximately 51,000 square feet of retail space located on the first level. Aster & Links is made up of two distinct 10 story buildings and features over 900 garage and surface-level parking spaces, designed to cater to both residents and retail visitors.
In May 2023, we announced the signing of a definitive lease agreement with Sprouts Farmers Market (“Sprouts”). Sprouts, now open and occupying 23,000 square feet of retail space at Aster & Links, serves as a key anchor tenant, bringing fresh, natural and organic food options to the heart of downtown Sarasota.
Aster & Links offers a range of high-end amenities for residents, including a clubroom, fitness room, center courtyard with heated saltwater pool and roof top amenities including a community room and a private dining area for private events as well as outdoor grills and seating. Each building has its own leasing office to assist new residents.
Situated in downtown Sarasota, at the intersection of Main Street and Links Avenue, Aster & Links is located in a high foot traffic area next to a number of popular retail establishments. Sarasota’s metro area economy is the largest of the southwest Florida markets and has had very strong gains in jobs, population, and home values over the past few years. Aster & Links is well-positioned to be a premier residential and retail destination in the heart of this vibrant city.
1991 Main Construction Management Agreement
During the year ended December 31, 2022, our indirect wholly-owned subsidiary entered into a construction management agreement for the development of Aster & Links. The construction management agreement contains terms and conditions that are customary for a project of this type and will be subject to a guaranteed maximum price (a “GMP”). We currently anticipate that the funding for construction and soft costs associated with the development will be a minimum of $187.7 million, inclusive of the GMP, and are building to an estimated unlevered yield of greater than 6%.
1991 Main Construction Loan
On May 12, 2023, our indirect majority-owned subsidiary entered into a variable-rate construction loan agreement (the “1991 Main Construction Loan Agreement”) for up to $130.0 million in principal amount (the “1991 Main Construction Loan”) with Bank OZK (the “1991 Main Mortgage Lender”), which is secured by Aster & Links. Advances under the 1991 Main Construction Loan bear interest at a per annum rate equal to the one-month term Secured Overnight Financing Rate (SOFR) plus 3.45%, subject to a minimum all-in per annum rate of 8.51%, and may be used to fund the development of 1991 Main. The 1991 Main Construction Loan has an initial maturity date of May 12, 2027 and contains a one-year extension option, subject to certain restrictions. As of September 30, 2024, we have drawn down $84.3 million on the 1991 Main Construction Loan.
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1991 Main Interest Rate Cap
As required under the terms of the 1991 Main Construction Loan Agreement, our indirect majority-owned subsidiary also entered into an interest rate cap agreement, effective July 10, 2024 (the “1991 Main Interest Rate Cap”), which, as of September 30, 2024, had a notional amount of approximately $94.6 million, a one-month SOFR rate based strike price of 5.07%, and which is due to mature on July 10, 2025.
1991 Main Mezzanine Loan
On January 31, 2024, our indirect majority-owned subsidiary entered into a mezzanine loan agreement, for up to $56.4 million in principal amount (the “1991 Main Mezzanine Loan”) with Southern Realty Trust Holdings, LLC (the “1991 Main Mezzanine Lender”). The 1991 Main Mezzanine Loan bears interest at a rate of 13.0% per annum and is secured by our investment in Aster & Links. Advances under the 1991 Main Mezzanine Loan may be used to reimburse us for certain costs and expenses incurred in relation to, and to fund the continued development of, Aster & Links. The 1991 Main Mezzanine Loan has an initial maturity date of May 12, 2027 and contains a one-year extension option, subject to certain restrictions.
In connection with the 1991 Main Mezzanine Loan, we are required to maintain an interest reserve and carry reserve for purposes of paying accrued but unpaid interest on the 1991 Main Mezzanine Loan and interest, principal and other obligations under the 1991 Main Construction Loan (the “Reserves”). We also provided the 1991 Main Mezzanine Lender with (i) a completion guaranty, which, among other things, guarantees completion of the work on Aster & Links, and (ii) a carveout guaranty, which, among other things, indemnifies the 1991 Main Mezzanine Lender for losses resulting from certain “bad acts,” insolvency, environmental conditions, violations of the terms of the 1991 Main Mezzanine Loan and certain provisions of the 1991 Main Construction Loan Agreement (collectively, the “Mezzanine Guarantees”). Similar to the Carveout Guaranty we provided to the 1991 Main Mortgage Lender, the Mezzanine Guarantees contain financial covenants requiring that we maintain liquid assets of no less than $20.0 million and a net worth of no less than $130.0 million. As of September 30, 2024, the principal balance of the 1991 Main Mezzanine Loan was $44.7 million.
1900 Fruitville Road – Sarasota Florida – 1900 Fruitville Road was a 1.2-acre site, consisting of a retail building and parking lot, which we acquired for an aggregate purchase price of $4.7 million, inclusive of transaction costs. In July 2024, we completed the redevelopment of this property into additional non-exclusive parking for Sprouts, our grocery store tenant at Aster & Links.
1000 First Avenue North and 900 First Avenue North – St. Petersburg, Florida (“Viv”) – We previously acquired several parcels, comprising 1.6-acres of land (previously referred to as 902-1020 First Avenue North, St. Petersburg, Florida), which we acquired for an aggregate purchase price of $12.1 million, inclusive of transaction costs, with the intent to consolidate them and develop into a 15-story high-rise building at 1000 First Avenue North, St. Petersburg, Florida (“1000 First” or “Viv”). As of September 30, 2024, construction on Viv was approximately 60% complete. We currently anticipate construction to be completed in the second half of 2025, with leasing to begin prior.
Viv will be comprised of two 11-story residential towers above a 4-story parking garage, featuring approximately 269-apartment homes with a mix of studio, one-bedroom, two-bedroom and three-bedroom units, with approximately 15,500 square feet of retail space located on the first level. Amenities at Viv will include a clubroom, fitness center, courtyard with a swimming pool, shared working space and a leasing office.
Viv is located in the downtown district of St. Petersburg, one mile west of Tampa Bay and the downtown waterfront district and only one block away from Tropicana Field, home to the Tampa Bay Rays professional baseball team. It features direct access to downtown amenities such as public parking, restaurants, museums and cultural sites.
In July of 2024, the St. Petersburg City Council voted to approve a joint plan by the Tampa Bay Rays, City of St. Petersburg and Pinellas County to build a brand new approximately 30,000 seat stadium for the Tampa Bay Rays as part of the 86-acre Historic Gas Plant District redevelopment project in downtown St. Petersburg, located just half a mile from Viv. The project will include nearly 8 million square feet of mixed-use development and result in over $6.5 billion in investment over the next 20 years.
St. Petersburg placed 42nd on Niche’s 2024 Best Cities to Live in America list, earning an Overall Niche Grade of “A.” St. Petersburg is the 5th largest city in Florida and the 86th largest city in the United States and an annual population growth rate of approximately 0.7% in 2023. Downtown St. Petersburg is one of the fastest growing neighborhoods in the Tampa-St. Petersburg-Clearwater metropolitan statistical area (“MSA”) and has experienced increased demand in recent years because of proximity to the water, sporting events, shopping, bars and restaurants in the neighborhood. The Tampa-St. Petersburg-Clearwater MSA is home to more than 20 corporate headquarters, 13 of which are on the 2024 edition of the Inc. 5000 (listing the fastest-growing private companies in America). The St. Petersburg area also includes a branch of St. Petersburg College and the University of South Florida St. Petersburg and is home to two professional sports teams, the Tampa Bay Rays (Major League Baseball) and the Tampa Bay Rowdies (United Soccer League Championship).
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900 First Avenue North (“900 First”) is a parcel of land with a two-tenant retail building which we acquired for an aggregate purchase price of $2.5 million, inclusive of transaction costs. 900 First will remain a two-tenant retail building and we have taken the additional development rights and added them to 1000 First.
1000 First Construction Management Agreement
In April 2023, our indirect majority-owned subsidiary entered into a construction management agreement in connection with the development of 1000 First. The construction management agreement contains terms and conditions that are customary for a project of this type and will be subject to a GMP of $140.0 million.
1000 First Construction Loan
On June 28, 2024, our indirect majority-owned subsidiary entered into a variable-rate construction loan agreement (the “1000 First Construction Loan Agreement”) for up to $104.0 million in principal amount (the “1000 First Construction Loan”) with various lenders, which is secured by 1000 First. Advances under the 1000 First Construction Loan bear interest at a per annum rate equal to the one-month term SOFR plus 3.80%, subject to a minimum all-in per annum rate of 7.55% and may be used to fund the development of 1000 First. The 1000 First Construction Loan has an initial maturity date of June 28, 2027 and contains two one-year extension options, subject to certain restrictions. As of September 30, 2024, we have drawn down $12.1 million on the 1000 First Construction Loan.
1000 First Interest Rate Cap
As required under the terms of the 1000 First Construction Loan Agreement, our indirect majority-owned subsidiary also entered into an interest rate cap agreement, effective June 28, 2024 (the “1000 First Interest Rate Cap”), which, as of September 30, 2024, had a notional amount of approximately $104.0 million, a one-month SOFR rate based strike price of 6.25%, and which is due to mature on July 1, 2025.
1701, 1702 and 1710 Ringling Boulevard – Sarasota, Florida – 1701 Ringling Boulevard (“1701 Ringling”) and 1710 Ringling Boulevard (“1710 Ringling”) make up a 1.6-acre site, consisting of a six-story office building and a parking lot which we acquired for an aggregate purchase price of $7.0 million, inclusive of transaction costs. We currently anticipate that 1701 Ringling will be renovated into a modern office building, consisting of approximately 80,000 square feet of rentable space, with 1710 Ringling consisting of an approximately 128-space parking lot. Upon acquiring 1701 Ringling, we entered into a new lease agreement with the existing tenant covering approximately 42,000 square feet for an initial term of 20 years, and several lease extension options.
1702 Ringling Boulevard (“1702 Ringling” and, together with 1701 Ringling and 1710 Ringling, “1701-1710 Ringling”) is a 0.327-acre site consisting of a fully-leased, single-story 1,546 gross square foot single-tenant office building and associated parking lot, which we acquired for an aggregate purchase price of $1.5 million, inclusive of transaction costs. We currently anticipate holding 1702 Ringling for future multifamily development.
1701-1710 Ringling is located within the historic downtown Sarasota area along Ringling Boulevard, a major two-way arterial road, with good access to the surrounding Sarasota market, as well as easy access to Interstate 75 and the greater Tampa-St Petersburg area. 1701-1710 Ringling is located in a high foot traffic area close to a number of popular restaurants and retail establishments.
497-501 Middle Turnpike and Cedar Swamp Road – Storrs, Connecticut – 497-501 Middle Turnpike (“497-501 Middle”) is an approximately 60.0-acre site, consisting of approximately 30 acres of former golf course and approximately 30 acres of wetlands some of which includes walking trails. We acquired a majority ownership interest in CMC Storrs SPV, LLC (“CMC”), the holding company for 497-501 Middle, for an initial capital contribution of $3.8 million.
We currently anticipate 497-501 Middle will be developed into an approximately 261-apartment home community and an adjacent single-family home, with amenities that will include a leasing office, clubroom with chef’s kitchen, fitness center, game room, study/lounge area, meeting rooms, and an outside AstroTurf meadow.
Cedar Swamp Road (“Cedar Swamp Road”) is a 1.1-acre site immediately adjacent to 497-501 Middle, which we acquired for a purchase price of $0.3 million, inclusive of transaction costs. We currently anticipate adding Cedar Swamp Road to the 497-501 Middle development.
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497-501 Middle and Cedar Swamp Road are located less than a mile from the main college campus at the University of Connecticut (“UConn”) in Storrs, Connecticut (“Storrs”), approximately 30 minutes from Hartford, Connecticut, and 90 minutes from Boston, Massachusetts. UConn ranked 26th among “top public universities” nationally in the 2024 U.S. New & World Report (“U.S. News”) collegiate rankings, and, based on a fact sheet published by UConn, over 19,300 undergraduate students attended college at the Storrs campus in 2023, with more than a third of those students living off campus.
900 8th Avenue South – Nashville, Tennessee – 900 8th Avenue South (“900 8th Avenue South”) is a 3.2-acre land assemblage, which we acquired for an aggregate purchase price of $19.7 million, inclusive of transaction costs.
On June 26, 2024, our indirect majority-owned subsidiary entered into a fixed-rate loan for $10.0 million in principal amount with KHRE SMA Funding, LLC, which is secured by 900 8th Avenue South (the “900 8th Land Loan”). The 900 8th Land Loan bears interest at a rate of 9.50% per annum, and is due to mature on June 26, 2025, with two six-month extension options, subject to certain restrictions.
900 8th Avenue South is located in central Nashville at the north end of the 8th Avenue South District, within walking distance of a number of popular retail, dining and nightlife establishments in downtown Nashville. The parcels have received approval for a mixed-use development including residential, retail and office with a maximum of 300 residential multi-family units and a maximum of seven stories.
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 two-story retail building, 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 an approximate 187-apartment home community consisting of one-bedroom, two-bedroom and three-bedroom units, with approximately 6,000 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, 330-space garage and 7 stories of apartments above, including a clubroom, fitness center and courtyard with a swimming pool, as well as a leasing office.
U.S. News & World Report ranked Sarasota as the 5th best place to live in the United States for 2023-2024, number two among the fastest growing places in the U.S., and the 18th best place to retire. Sarasota is headquarters to a diverse group of large companies, such as Boar’s Head Provisions, CAE Healthcare, PGT Innovations, Tervis, Sun Hydraulics and Voalte. The Sarasota area also has a large number of universities including the University of Southern Florida, Florida State University’s College of Medicine campus, Ringling College, State College of Florida, Keiser College and New College of Florida.
1700 Main is located in historic downtown Sarasota along Main Street and is located in a high foot traffic area next to a number of popular restaurants and retail establishments.
690/1106 Davidson Street – Nashville, Tennessee – 690/1106 Davidson Street (“690/1106 Davidson Street”) is an approximately 8.0-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 690/1106 Davidson Street will be redeveloped into mixed-use residential community consisting of studio, 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. In September 2023, the parcels were successfully rezoned to accommodate medium to high density multi-family residential and a mix of other commercial uses including hotel, office, retail and restaurant.
1130 Davidson Street – Nashville, Tennessee – 1130 Davidson Street (“1130 Davidson Street”) is an approximately 1.7-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. The building is leased back to the seller through November 2024, with the ability to continue month to month thereafter. In September 2023, the parcel was successfully rezoned to accommodate medium to high density multi-family residential and a mix of other commercial uses including hotel, office, retail and restaurant.
1400 Davidson Street – Nashville, Tennessee – 1400 Davidson Street (“1400 Davidson Street”) is an approximately 5.9-acre site consisting of an industrial building, which we acquired for an aggregate purchase price of $16.4 million, inclusive of transaction costs. We currently anticipate that 1400 Davidson Street will be redeveloped into a mixed-use residential community consisting of studio, one-bedroom, two-bedroom and three bedroom apartments. In September 2023, the parcel was successfully rezoned to accommodate medium to high density multi-family residential and a mix of other commercial uses including hotel, office, retail and restaurant.
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Storrs Road – Storrs, Connecticut – Storrs Road (“Storrs Road”) is a 9.0-acre parcel of land near UConn, 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.
1750 Storrs Road - Storrs, Connecticut – 1750 Storrs Road (“1750 Storrs”) is an approximately 19.0-acre development site near UConn, which we acquired for an aggregate purchase price of $5.5 million, inclusive of transaction costs.
We currently anticipate that 1750 Storrs will be developed into a multifamily mixed-use development, featuring one-bedroom, two-bedroom and three-bedroom apartments. Amenities are anticipated to include a clubhouse, with state-of-the-art fitness center, chef’s kitchen and more.
901-909 Central Avenue North – St. Petersburg, Florida – 901-909 Central Avenue North (“901-909 Central Avenue”) is a 0.13-acre site consisting of a 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.
Results of Operations
The following table sets forth information regarding our consolidated results of operations during the three and nine months ended September 30, 2024 and 2023 (amounts in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||||||||
| 2024 | 2023 | $ Change | % Change | 2024 | 2023 | $ Change | % Change | |||||||||||||||||||||||||
| Revenue | ||||||||||||||||||||||||||||||||
| Rental revenue | $ | 860 | $ | 468 | $ | 392 | 84 | % | $ | 1,581 | $ | 1,743 | $ | (162 | ) | (9 | )% | |||||||||||||||
| Total revenue | 860 | 468 | 392 | 84 | % | 1,581 | 1,743 | (162 | ) | (9 | )% | |||||||||||||||||||||
| Expenses | ||||||||||||||||||||||||||||||||
| Property expenses | 2,083 | 1,020 | 1,063 | 104 | % | 4,775 | 3,027 | 1,748 | 58 | % | ||||||||||||||||||||||
| General and administrative | 921 | 1,482 | (561 | ) | (38 | )% | 3,667 | 4,469 | (802 | ) | (18 | )% | ||||||||||||||||||||
| Interest expense | 3,331 | — | 3,331 | 100 | % | 5,757 | — | 5,757 | 100 | % | ||||||||||||||||||||||
| Depreciation and amortization | 1,464 | 485 | 979 | 202 | % | 2,389 | 1,685 | 704 | 42 | % | ||||||||||||||||||||||
| Impairment of real estate | — | 795 | (795 | ) | (100 | )% | 777 | 2,961 | (2,184 | ) | (74 | )% | ||||||||||||||||||||
| Total expenses | 7,799 | 3,782 | 4,017 | 106 | % | 17,365 | 12,142 | 5,223 | 43 | % | ||||||||||||||||||||||
| Other income | ||||||||||||||||||||||||||||||||
| Interest income | 148 | 92 | 56 | 61 | % | 386 | 93 | 293 | 315 | % | ||||||||||||||||||||||
| Other (expense) income | (133 | ) | (80 | ) | (53 | ) | 66 | % | (224 | ) | 126 | (350 | ) | (278 | )% | |||||||||||||||||
| Total other income | 15 | 12 | 3 | 25 | % | 162 | 219 | (57 | ) | (26 | )% | |||||||||||||||||||||
| Net loss | (6,924 | ) | (3,302 | ) | (3,622 | ) | 110 | % | (15,622 | ) | (10,180 | ) | (5,442 | ) | 53 | % | ||||||||||||||||
| Net (income) loss attributable to noncontrolling interests | (4 | ) | 18 | (22 | ) | (122 | )% | (8 | ) | 6 | (14 | ) | (233 | )% | ||||||||||||||||||
| Net loss attributable to Belpointe PREP, LLC | $ | (6,928 | ) | $ | (3,284 | ) | $ | (3,644 | ) | 111 | % | $ | (15,630 | ) | $ | (10,174 | ) | $ | (5,456 | ) | 54 | % | ||||||||||
Revenue
Rental Revenue
During the three months ended September 30, 2024 as compared to the same period in 2023, rental revenue increased by $0.4 million, primarily as a result of the lease-up of certain residential units and retail spaces at Aster & Links, which was placed into service during the current year.
During the nine months ended September 30, 2024 as compared to the same period in 2023, rental revenue decreased by $0.2 million, primarily due to lower below-market rent intangible amortization as certain intangible liabilities became fully amortized in the prior year, partially offset as a result of the lease-up of certain residential units and retail spaces at Aster & Links, which was placed into service during the current year.
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Expenses
Property Expenses
During the three and nine months ended September 30, 2024 and 2023, property expenses consisted of management fees, property operational expenses, real estate taxes, and utilities and insurance expenses incurred in relation to our operating properties. During the three and nine months ended September 30, 2024, as compared to the same period in 2023, property expenses increased by $1.1 million and $1.7 million, respectively. This increase is primarily due to the property expenses incurred at Aster & Links, which was placed into service during the current year.
General and Administrative
During the three and nine months ended September 30, 2024 and 2023, general and administrative expenses primarily consisted of employee cost sharing expenses (pursuant to our management agreement and employee and cost sharing agreement), marketing expenses, legal, audit, tax and accounting fees. During the three and nine months ended September 30, 2024, as compared to the same period in 2023, general and administrative expenses decreased by $0.6 million and $0.8 million, respectively. This decrease is primarily due to lower marketing expenses, and dead deal costs recognized during the three and nine months ended September 30, 2023.
Interest Expense
During the three months ended September 30, 2024 and 2023, interest expense totaled $3.3 million and zero, respectively, due to gross interest expense of $4.5 million and $0.2 million, respectively, and the impact of non-cash amortization of debt discount and debt issuance costs of $0.7 million and $0.4 million, respectively, partially offset by capitalized interest and fees of $1.9 million and $0.6 million, respectively.
During the nine months ended September 30, 2024 and 2023, interest expense totaled $5.8 million and zero, respectively, due to gross interest expense of $8.8 million and $0.2 million, respectively, and the impact of non-cash amortization of debt discount and debt issuance costs of $1.5 million and $0.4 million, respectively, partially offset by capitalized interest and fees of $4.5 million and $0.6 million, respectively. Please see “Note 7– Debt” in our consolidated financial statements in this Form 10-Q for additional information regarding our debt arrangements.
Depreciation and Amortization
During the three and nine months ended September 30, 2024 as compared to the same periods in 2023, depreciation and amortization increased by $1.0 million and $0.7 million, respectively. This increase is primarily attributable to the impact of placing certain fixed assets into service at Aster & Links during the three and nine months ended September 30, 2024, partially offset by lower in-place lease intangible amortization as certain intangible assets became fully amortized in 2023.
Impairment of Real Estate
During the three and nine months ended September 30, 2024, we recorded impairment charges of zero and $0.8 million, respectively. During the three and nine months ended September 30, 2023, we recorded impairment charges of $0.8 million and $3.0 million, respectively. The impairment charges recorded were in relation to one of our real estate assets located in Nashville, Tennessee, based on our conclusion that the estimated fair market value of the real estate asset was lower than the carrying value, and as a result, we reduced the carrying value to the estimated fair market value.
Other income
Interest Income
Interest income for the periods presented were comprised of interest earned from cash balances held in interest bearing bank accounts. The increase in the current year periods as compared to the prior year periods were attributable to higher cash balances in interest bearing accounts.
Other (expense) income
Other (expense) income for the periods presented were primarily comprised of gains and losses in connection with our interest rate caps. Please see “Note 9 – Derivative Instruments” in our consolidated financial statements in this Form 10-Q for additional information.
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Liquidity and Capital Resources
Overview
Our primary needs for liquidity and capital resources are to fund our investments, including construction and development costs, pay our Public Offering and operating fees and expenses, pay any distributions that we may make to the holders of our units and pay interest on our outstanding indebtedness.
Our Public Offering and operating fees and expenses include, among other things, legal, audit and valuation fees and expenses, federal and state filing fees, SEC, FINRA and NYSE 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.
Liquidity
Our future needs for liquidity will depend on a variety of factors, including, without limitation, our ability to generate cash flows from operations, the timing and availability of net proceeds from our Public Offerings and any future offerings that we may conduct, the timing and extent of our real estate acquisition and disposition activities, and the timing and extent of our construction and development costs.
Economic uncertainty, fluctuating interest rates, volatility in the real estate markets, slowdowns in transaction volume, delays in financings from banks and other lenders and other negative trends may, in the future, adversely impact our ability to timely access potential sources of liquidity. If we are unable to raise additional capital when desired, or on terms that are acceptable to us, our business, financial condition and results of operations could be adversely affected.
We believe that our cash on-hand, the anticipated net proceeds from our Public Offerings, the projected cash flows from our real estate assets and our current and anticipated financing activities will be sufficient to meet our liquidity and capital resource requirements for the next 12 months from the date of issuance of this Form 10-Q.
Capital Requirements and Resources
Where our Manager and its affiliates, including our Sponsor, have funded, and in the future if they continue to fund, our capital requirements 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. There were no Public Offering costs incurred by our Manager and its affiliates during the nine months ended September 30, 2024 and 2023. During the three months ended September 30, 2024 and 2023, our Manager and its affiliates, including our Sponsor, incurred operating expenses of $0.5 million and $0.4 million, respectively, on our behalf. During the nine months ended September 30, 2024 and 2023, our Manager and its affiliates, including our Sponsor, incurred operating expenses of $1.7 million and $1.7 million, respectively, on our behalf.
During the year ended December 31, 2022, our indirect majority-owned subsidiary entered into a construction management agreement for the development of Aster & Links. For additional details regarding 1991 Main, see “—Our Investments—1991 Main Street – Sarasota Florida (“Aster & Links”).” 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 September 30, 2024, we had an unfunded capital commitment totaling $17.8 million under the terms of this agreement as well as other construction related commitments for the development of Aster & Links. As of the date of this Form 10-Q, we currently anticipate that the remaining funding for construction and soft costs associated with the development of Aster & Links will be a minimum of $37.8 million (inclusive of the aforementioned unfunded capital commitment).
During the year ended December 31, 2023, our indirect majority-owned subsidiary entered into a variable-rate construction loan agreement for up to $130.0 million in principal amount to fund the development of Aster & Links. Advances under the 1991 Main Construction Loan bear interest at a per annum rate equal to the one-month term SOFR plus 3.45%, subject to a minimum all-in per annum rate of 8.51%. The 1991 Main Construction Loan has an initial maturity date of May 12, 2027 and contains a one-year extension option, subject to certain restrictions. As of September 30, 2024, we have drawn down $84.3 million on the 1991 Main Construction Loan. For additional details regarding the 1991 Main Construction Loan, see “—Our Investments—1991 Main Street – Sarasota Florida (“Aster & Links”).”
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On January 31, 2024, our indirect majority-owned subsidiary entered into a mezzanine loan agreement for up to $56.4 million in principal amount. The 1991 Main Mezzanine Loan bears interest at a rate of 13.0% per annum, and is secured by Aster & Links. In connection with the 1991 Main Mezzanine Loan, we are required to maintain an interest reserve and carry reserve for purposes of paying accrued but unpaid interest on the 1991 Main Mezzanine Loan and interest, principal and other obligations under the 1991 Main Construction Loan. As of September 30, 2024, the 1991 Main Mezzanine Loan balance was $44.7 million. Proceeds under the 1991 Main Mezzanine Loan may be used to reimburse the Company for certain costs and expenses incurred in relation to, and to fund the continued development of, Aster & Links. The 1991 Main Mezzanine Loan has an initial maturity date of May 12, 2027 and contains a one-year extension option, subject to certain restrictions. For additional details regarding the 1991 Main Mezzanine Loan, see “—Our Investments—1991 Main Street – Sarasota Florida (“Aster & Links”).”
In April 2023, our indirect majority-owned subsidiary entered into a construction management agreement for the development of Viv. For additional details regarding Viv, see “—Our Investments—1000 First Avenue North and 900 First Avenue North – St. Petersburg, Florida (“Viv”).” 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 September 30, 2024, we had an unfunded capital commitment of $66.0 million under the terms of this agreement. We currently anticipate the remaining funding for construction and soft costs associated with the development of Viv will be a minimum of approximately $84.8 million (inclusive of the aforementioned unfunded capital commitment).
On June 28, 2024, our indirect majority-owned subsidiary entered into a variable-rate construction loan agreement for up to $104.0 million in principal amount. The 1000 First Construction Loan bears interest at a per annum rate equal to the one-month term SOFR plus 3.80%, subject to a minimum all-in per annum rate of 7.55%, and is secured by Viv. Advances under the 1000 First Construction Loan may be used to fund the development of Viv. The 1000 First Construction Loan has an initial maturity date of June 28, 2027 and contains two one-year extension options, subject to certain restrictions. For additional details regarding the 1000 First Construction Loan, see “—Our Investments—1000 First Avenue North and 900 First Avenue North – St. Petersburg, Florida (“Viv”). As of September 30, 2024, we have drawn down $12.1 million on the 1000 First Construction Loan.
On June 26, 2024, our indirect majority-owned subsidiary entered into a fixed-rate loan for $10.0 million in principal amount with KHRE SMA Funding, LLC, which is secured by 900 8th Avenue South. The 900 8th Land Loan bears interest at a rate of 9.50% per annum, and is due to mature on June 26, 2025, with two six-month extension options, subject to certain restrictions. For additional details regarding the 900 8th Land Loan, see “—Our Investments—900 8th Avenue South – Nashville, Tennessee.”
We expect to continue to obtain the capital resources that we need over the short and long-term from cash on-hand, from the proceeds of our Public Offerings 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 the proceeds of secured or unsecured financing from banks and other lenders, from projected operating funds from our real estate assets and from any other undistributed cash flow generated from operations. For additional details regarding our Public Offerings, see “—Overview” and “Part II, Item 2. Unregistered Sales of Equity Securities and Use of Proceeds—Use of Proceeds from Registered Sales of Securities.”
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.
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Cash Flows
The following table provides a breakdown of the net change in our cash and cash equivalents and restricted cash during the nine months ended September 30, 2024 and 2023 (amounts in thousands):
| Nine Months Ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Net cash used in operating activities | $ | (8,710 | ) | $ | (5,243 | ) | ||
| Net cash used in investing activities | (110,785 | ) | (101,231 | ) | ||||
| Net cash provided by financing activities | 123,425 | 1,189 | ||||||
| Net increase (decrease) in cash, cash equivalents and restricted cash | $ | 3,930 | $ | (105,285 | ) | |||
As of September 30, 2024 and 2023, cash and cash equivalents and restricted cash totaled approximately $27.5 million and $39.7 million, respectively.
Net cash flows used in operating activities during the nine months ended September 30, 2024 primarily relates to interest expense incurred on our indebtedness, the payment of employee cost sharing expenses as well as payments for property management, legal, and accounting fees. Net cash flows used in operating activities during the nine months ended September 30, 2023 primarily relates to the payment of management fees and employee cost sharing expenses as well as payments for legal, marketing, and accounting fees.
Net cash flows used in investing activities during the nine months ended September 30, 2024 and 2023 primarily relates to funding costs for our development properties. For additional details regarding our development properties, see “—Our Investments.”
Net cash flows provided by financing activities for the nine months ended September 30, 2024 primarily relates to net proceeds from financings, including the 1991 Main Mezzanine Loan, the 1991 Main Construction Loan, the 1000 First Construction Loan, and the 900 8th Land Loan. For additional details regarding our outstanding indebtedness, see “—Liquidity and Capital Resources.” Net cash flows provided by financing activities for the nine months ended September 30, 2023 primarily relates to net proceeds received from our Public Offerings, partially offset by deferred financing costs paid in connection with the 1991 Main Construction Loan.
Critical Accounting Policies
The unaudited consolidated financial statements in this Form 10-Q have been prepared in accordance with U.S. GAAP. The preparation of these 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 consolidated financial statements in this Form 10-Q. There have been no changes to our significant accounting policies and estimates during the nine months ended September 30, 2024 as compared to those disclosed in “Note 2—Summary of Significant Accounting Policies” included in our Annual Report for the year ended December 31, 2023, a copy of which may be accessed here.
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, and as a result are not required to provide the information required by this Item.
| 26 |
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
An evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) of the Exchange Act), as of the end of the period covered by this Form 10-Q, was undertaken by management, under the supervision and with the participation of our principal executive officer and principal financial officer. Based on this evaluation, our principal executive officer and principal financial officer have concluded that, as of the end of the period covered by this Form 10-Q, our disclosure controls and procedures (i) were effective to ensure that the information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified by SEC rules and forms, and (ii) include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act 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.
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 period covered by this Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
| 27 |
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 September 30, 2024, 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 for the year ended December 31, 2023, 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.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Unregistered Sales of Securities
During the nine months ended September 30, 2024, we did not sell any equity securities that were not registered under the Securities Act.
Use of Proceeds from Registered Sales of Securities
On September 30, 2021, the SEC declared effective our registration statement on Form S-11, as amended (File No. 333-255424), registering the offer and sale of our ongoing initial public offering of up to $750,000,000 of our Class A units on a continuous “best efforts” basis at an initial price of $98.24 per Class A unit, of which $513,013,330 remained unsold as of September 30, 2024.
On May 9, 2023, the SEC declared effective our registration statement on Form S-11, as amended (File No. 333-271262), registering the offer and sale of up to $750,000,000 of our Class A units on a continuous “best efforts” basis by any method deemed to be an “ at the market” offering pursuant to Rule 415(a)(4) under the Securities Act, including by offers and sales made directly to investors or through one or more agents. In addition, the Follow-on Registration Statement constitutes a post-effective amendment to the registration statement for our Primary Offering.
In connection with the Follow-on Registration Statement, we entered into a non-exclusive dealer manager agreement with the Dealer Manager for the sale of our Class A units through the Dealer Manager. The Dealer Manager will enter into participating dealer agreements and wholesale agreements with other broker-dealers, referred to as “selling group members,” to authorize those broker-dealers to solicit offers to purchase our Class A units. We will pay our Dealer Manager commissions of up to 0.25%, and the selling group members commissions ranging from 0.25% to 4.50%, of the principal amount of a Class A unit sold in the Public Offerings. For the three and nine months ended September 30, 2024, we have sold aggregate gross proceeds of $1,000,000 and $1,711,020, respectively, of Class A units in connection with our Public Offerings.
| 28 |
The purchase price for Class A units in our Public Offerings will be the lesser of (i) the current NAV of our Class A units, and (ii) the average of the high and low sale prices of our Class A units on the NYSE during regular trading hours on the last trading day immediately preceding the investment date on which the NYSE was open for trading and trading in our Class A units occurred. As of June 30, 2024 the assumed NAV of our Class A units was equal to $98.24 per Class A unit. Our Manager will calculate our NAV within approximately 60 days of the last day of each quarter and any adjustments will take effect as of the first business day following its public announcement.
We will file a prospectus supplement with the SEC disclosing quarterly determinations of our NAV per Class A unit. Additionally, 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, 2023, we issued 2,372,289 Class A units in our Primary Offering, raising net offering proceeds of $233.5 million. During the nine months ended months ended September 30, 2024, we issued 24,694 Class A units, raising aggregate gross proceeds of $1,711,020, in connection with our Public Offerings. Together with the gross proceeds raised in prior offerings by our predecessor in interest, Belpointe REIT, Inc., as of September 30, 2024, we have raised aggregate gross offering cash proceeds of $356.0 million.
The following tables summarize certain information about the proceeds of our Public Offerings and our use of those 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 September 30, 2024:
| Offering proceeds | ||||
| Class A units sold | 2,396,983 | |||
| Gross offering proceeds | $ | 236,976,670 | ||
| Selling commissions | 5,000 | |||
| Offering costs (1) (2) | 1,737,910 | |||
| Net offering proceeds | $ | 235,233,760 | ||
| (1) | Includes $0.3 million of reimbursements to an affiliate for costs incurred on our behalf. |
| (2) | Direct or indirect payments of $1.4 million have been made to others, including payments for legal, accounting, transfer agent, FINRA, and filing fees, as of September 30, 2024. |
| Uses of net offering proceeds (in thousands) | ||||
| Purchases and development of real estate (1) | $ | 180,594 | ||
| Funding of loans receivable (2) | 34,955 | |||
| Working capital (3) (4) | 19,685 | |||
| $ | 235,234 | |||
| (1) | Includes direct or indirect payments of $10.0 million to directors, officers and affiliates as of September 30, 2024 predominantly for development fees, insurance premiums, and employee reimbursement expenditures. |
| (2) | Includes direct payment of $30.0 million to Norpointe, an affiliate of our Chief Executive Office, in connection with a commercial mortgage loan transaction (the “Norpointe Loan”). The Norpointe Loan was repaid in full on June 28, 2022. |
| (3) | Includes direct or indirect payments of $9.0 million to directors, officers and affiliates as of September 30, 2024 for management fees, insurance premiums and employee cost sharing expenses (pursuant to the Management Agreement and employee and cost sharing agreement). Please see “Note 4 – Related Party Arrangements” in our 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 $2.8 million to others, including payments for legal, accounting, marketing, transfer agent and filing fees, as of September 30, 2024. |
Item 3. Defaults Upon Senior Securities
Not Applicable.
Item 4. Mine Safety Disclosures
Not Applicable.
Item 5. Other Information
None.
| 29 |
Item 6. Exhibits
________________________________________
| * | Filed herewith. |
| 30 |
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: November 13, 2024 | By: | /s/ Brandon E. Lacoff |
| Brandon E. Lacoff | ||
| Chief Executive Officer and Chairman of the Board | ||
| (Principal Executive Officer) | ||
| Date: November 13, 2024 | By: | /s/ Martin Lacoff |
| Martin Lacoff | ||
| Chief Strategic Officer, Principal Financial Officer and Director | ||
| (Principal Financial Officer) | ||
| 31 |
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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(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: November 13, 2024 | 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(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: November 13, 2024 | 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 September 30, 2024 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: November 13, 2024 | 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 September 30, 2024 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: November 13, 2024 | By: | /s/ Martin Lacoff |
| Martin Lacoff | ||
| Chief Strategic Officer, Principal Financial Officer and Director | ||
| (Principal Financial Officer) | ||
Consolidated Balance Sheets (Parenthetical) - shares |
9 Months Ended | 12 Months Ended |
|---|---|---|
Sep. 30, 2024 |
Dec. 31, 2023 |
|
| Common Class A [Member] | ||
| Common stock, shares authorized | Unlimited | Unlimited |
| Common stock shares, issued | 3,647,093 | 3,622,399 |
| Common stock shares, outstanding | 3,647,093 | 3,622,399 |
| Common Class B [Member] | ||
| Common stock shares, issued | 100,000 | 100,000 |
| Common stock shares, outstanding | 100,000 | 100,000 |
| Common stock, shares authorized | 100,000 | 100,000 |
| Class M Units [Member] | ||
| Common stock shares, issued | 1 | 1 |
| Common stock shares, outstanding | 1 | 1 |
| Common stock, shares authorized | 1 | 1 |
Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2024 |
Sep. 30, 2023 |
Sep. 30, 2024 |
Sep. 30, 2023 |
|
| Revenue | ||||
| Rental revenue | $ 860 | $ 468 | $ 1,581 | $ 1,743 |
| Total revenue | 860 | 468 | 1,581 | 1,743 |
| Expenses | ||||
| Property expenses | 2,083 | 1,020 | 4,775 | 3,027 |
| General and administrative | 921 | 1,482 | 3,667 | 4,469 |
| Interest expense | 3,331 | 5,757 | ||
| Depreciation and amortization | 1,464 | 485 | 2,389 | 1,685 |
| Impairment of real estate | 795 | 777 | 2,961 | |
| Total expenses | 7,799 | 3,782 | 17,365 | 12,142 |
| Other income | ||||
| Interest income | 148 | 92 | 386 | 93 |
| Other (expense) income | (133) | (80) | (224) | 126 |
| Total other income | 15 | 12 | 162 | 219 |
| Net loss | (6,924) | (3,302) | (15,622) | (10,180) |
| Net (income) loss attributable to noncontrolling interests | (4) | 18 | (8) | 6 |
| Net loss attributable to Belpointe PREP, LLC | $ (6,928) | $ (3,284) | $ (15,630) | $ (10,174) |
| Loss per Class A unit (basic and diluted) | ||||
| Net loss per unit basic | $ (1.90) | $ (0.92) | $ (4.30) | $ (2.87) |
| Net loss per unit diluted | $ (1.90) | $ (0.92) | $ (4.30) | $ (2.87) |
| Weighted-average units outstanding basic | 3,640,067 | 3,577,857 | 3,634,454 | 3,542,765 |
| Weighted-average units outstanding diluted | 3,640,067 | 3,577,857 | 3,634,454 | 3,542,765 |
Consolidated Statements of Changes in Members' Capital (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||||||
|---|---|---|---|---|---|---|---|---|
Sep. 30, 2024 |
Jun. 30, 2024 |
Mar. 31, 2024 |
Sep. 30, 2023 |
Jun. 30, 2023 |
Mar. 31, 2023 |
Sep. 30, 2024 |
Sep. 30, 2023 |
|
| Balance | $ 316,900 | $ 321,792 | $ 325,064 | $ 328,581 | $ 328,763 | $ 332,652 | $ 325,064 | $ 332,652 |
| Issuance of units | 1,000 | 711 | 1,088 | 3,844 | ||||
| Capital distribution | (24) | 200 | 24 | |||||
| Offering Costs | (6) | (4) | (2) | (113) | (169) | (119) | ||
| Net (loss) income | (6,924) | (4,716) | (3,981) | (3,302) | (4,071) | (2,807) | (15,622) | (10,180) |
| Acquisition of noncontrolling interests | (198) | (963) | ||||||
| Contributions from noncontrolling interest | 26 | 238 | ||||||
| Balance | 310,970 | 316,900 | 321,792 | 326,254 | 328,581 | 328,763 | 310,970 | 326,254 |
| Total Members Capital Excluding Noncontrolling Interests Members Noncontrolling Interest [Member] | ||||||||
| Balance | 314,592 | 319,354 | 322,626 | 326,148 | 326,553 | 329,482 | 322,626 | 329,482 |
| Issuance of units | 1,000 | 711 | 1,088 | 3,844 | ||||
| Capital distribution | ||||||||
| Offering Costs | (6) | (4) | (2) | (113) | (169) | (119) | ||
| Net (loss) income | (6,928) | (4,720) | (3,981) | (3,284) | (4,080) | (2,810) | ||
| Acquisition of noncontrolling interests | (38) | |||||||
| Contributions from noncontrolling interest | ||||||||
| Balance | 308,658 | 314,592 | 319,354 | 323,839 | 326,148 | 326,553 | 308,658 | 323,839 |
| Noncontrolling Interest [Member] | ||||||||
| Balance | 2,308 | 2,438 | 2,438 | 2,433 | 2,210 | 3,170 | 2,438 | 3,170 |
| Issuance of units | ||||||||
| Capital distribution | (24) | |||||||
| Offering Costs | ||||||||
| Net (loss) income | 4 | 4 | (18) | 9 | 3 | |||
| Acquisition of noncontrolling interests | (160) | (963) | ||||||
| Contributions from noncontrolling interest | 26 | 238 | ||||||
| Balance | $ 2,312 | 2,308 | 2,438 | $ 2,415 | 2,433 | 2,210 | $ 2,312 | $ 2,415 |
| Common Class A [Member] | ||||||||
| Issuance of units, shares | 15,390 | 12,659 | 24,694 | 56,062 | ||||
| Common Class A [Member] | Common Stock [Member] | ||||||||
| Balance | $ 314,592 | $ 319,354 | $ 322,626 | $ 326,148 | $ 326,553 | $ 329,482 | $ 322,626 | $ 329,482 |
| Balance, shares | 3,631,703 | 3,631,703 | 3,622,399 | 3,566,852 | 3,523,449 | 3,523,449 | 3,622,399 | 3,523,449 |
| Issuance of units | $ 1,000 | $ 711 | $ 1,088 | $ 3,844 | ||||
| Issuance of units, shares | 15,390 | 9,304 | 12,659 | 43,403 | ||||
| Capital distribution | ||||||||
| Offering Costs | $ (6) | $ (4) | $ (2) | $ (113) | (169) | $ (119) | ||
| Net (loss) income | (6,928) | (4,720) | (3,981) | (3,284) | (4,080) | (2,810) | ||
| Acquisition of noncontrolling interests | (38) | |||||||
| Contributions from noncontrolling interest | ||||||||
| Balance | $ 308,658 | $ 314,592 | $ 319,354 | $ 323,839 | $ 326,148 | $ 326,553 | $ 308,658 | $ 323,839 |
| Balance, shares | 3,647,093 | 3,631,703 | 3,631,703 | 3,579,511 | 3,566,852 | 3,523,449 | 3,647,093 | 3,579,511 |
| Common Class B [Member] | Common Stock [Member] | ||||||||
| Balance | ||||||||
| Balance, shares | 100,000 | 100,000 | 100,000 | 100,000 | 100,000 | 100,000 | 100,000 | 100,000 |
| Issuance of units | ||||||||
| Issuance of units, shares | ||||||||
| Capital distribution | ||||||||
| Offering Costs | ||||||||
| Net (loss) income | ||||||||
| Acquisition of noncontrolling interests | ||||||||
| Contributions from noncontrolling interest | ||||||||
| Balance | ||||||||
| Balance, shares | 100,000 | 100,000 | 100,000 | 100,000 | 100,000 | 100,000 | 100,000 | 100,000 |
| Common Class M [Member] | Common Stock [Member] | ||||||||
| Balance | ||||||||
| Balance, shares | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 |
| Issuance of units | ||||||||
| Issuance of units, shares | ||||||||
| Capital distribution | ||||||||
| Offering Costs | ||||||||
| Net (loss) income | ||||||||
| Acquisition of noncontrolling interests | ||||||||
| Contributions from noncontrolling interest | ||||||||
| Balance | ||||||||
| Balance, shares | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 |
Organization, Business Purpose and Capitalization |
9 Months Ended |
|---|---|
Sep. 30, 2024 | |
| 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”) is focused on identifying, acquiring, developing or redeveloping and managing commercial real estate located within “qualified opportunity zones.” We were formed on January 24, 2020 as a Delaware limited liability company and qualify as a partnership and qualified opportunity fund for U.S. federal income tax purposes.
At least 90% of our assets consist of qualified opportunity zone property, and 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 collectively, 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
On May 9, 2023, the U.S. Securities and Exchange Commission (the “SEC”) declared effective our registration statement on Form S-11, as amended (File No. 333-271262) (the “Follow-on Registration Statement”), registering the offer and sale of up to $750,000,000 of our Class A units on a continuous “best efforts” basis by any method deemed to be an “at the market” offering pursuant to Rule 415(a)(4) under the Securities Act of 1933, as amended (the “Securities Act”), including by offers and sales made directly to investors or through one or more agents (our “Follow-on Offering”).
In connection with the Follow-on Registration Statement, we entered into a non-exclusive dealer manager agreement with Emerson Equity LLC (the “Dealer Manager”), a registered broker-dealer, for the sale of our Class A units through the Dealer Manager. The Dealer Manager will enter into participating dealer agreements and wholesale agreements with other broker-dealers, referred to as “selling group members,” to authorize those broker-dealers to solicit offers to purchase our Class A units. We will pay our Dealer Manager commissions of up to 0.25%, and the selling group members commissions ranging from 0.25% to 4.50%, of the principal amount of Class A unit sold in the Follow-on Offering.
In addition, the Follow-on Registration Statement constitutes a post-effective amendment to the registration statement on Form S-11, as amended (File No. 333-255424), registering the offer and sale of our ongoing initial public offering of up to $750,000,000 of our Class A units, declared effective by the SEC on September 30, 2021, of which $513,013,330 remained unsold as of September 30, 2024 (our “Primary Offering” and, together with our Follow-on Offering, our “Public Offerings”). For the three and nine months ended September 30, 2024, we have sold aggregate gross proceeds of $1,000,000 and $1,711,020, respectively, of Class A units in connection with our Public Offerings.
The purchase price for Class A units in the Public Offerings will be the lesser of (i) the current net asset value (the “NAV”) of our Class A units, and (ii) the average of the high and low sale prices of our Class A units on the NYSE American (the “NYSE”) during regular trading hours on the last trading day immediately preceding the investment date on which the NYSE was open for trading and trading in our Class A units occurred. Our Manager calculates our NAV within approximately 60 days of the last day of each quarter, and any adjustments take effect as of the first business day following its public announcement. On August 30, 2024, we announced that our NAV as of June 30, 2024 was equal to $ per Class A unit.
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Summary of Significant Accounting Policies |
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| Summary of Significant Accounting Policies | Note 2 – Summary of Significant Accounting Policies
Basis of Presentation
The accompanying 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 SEC.
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 September 30, 2024, and for the three and nine months ended September 30, 2024 and 2023, 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, 2023 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 consolidated financial statements reflect all of our accounts, including those of our controlled subsidiaries. The portion of members’ capital in controlled subsidiaries that are not attributable, directly or indirectly, to us are presented in noncontrolling interests. All significant intercompany accounts and transactions have been eliminated.
We have evaluated our economic interests 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 September 30, 2024 and December 31, 2023, 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 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, our 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 consolidated financial statements and the accompanying notes. Actual results could materially differ from those estimates.
Impairment of Long-Lived Assets
We evaluate our tangible and identifiable intangible real estate assets for impairment when events such as delays or changes in development, declines in a property’s operating performance, deteriorating market conditions, or environmental or legal concerns bring recoverability of the carrying value of one or more assets into question. When qualitative factors indicate the possibility of impairment, the total undiscounted cash flows of the property, including proceeds from disposition, are compared to the net book value of the property. If the carrying value of the asset exceeds the undiscounted cash flows of the asset, an impairment loss is recorded in earnings to reduce the carrying value of the asset to fair value, calculated as the discounted net cash flows of the property. In circumstances where the highest and best use of a property is the fee simple value of vacant land, we compare book value of the property to the appraised value of the land. If the carrying value of the asset exceeds the appraised value of the land, an impairment loss is recorded to reduce the carrying value to the appraised value.
Restricted Cash
Restricted cash consists of amounts required to be reserved pursuant to contractual obligations and 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 consolidated statements of cash flows (amounts in thousands):
Liquidity
Our future needs for liquidity will depend on a variety of factors, including, without limitation, our ability to generate cash flows from operations, the timing and availability of net proceeds from our Public Offerings and any future offerings that we may conduct, the timing and extent of our real estate acquisition and disposition activities, and the timing and extent of our construction and development costs.
Economic uncertainty, fluctuating interest rates, volatility in the real estate markets, slowdowns in transaction volume, delays in financings from banks and other lenders and other negative trends may, in the future, adversely impact our ability to timely access potential sources of liquidity. If we are unable to raise additional capital when desired, or on terms that are acceptable to us, our business, financial condition and results of operations could be adversely affected.
We believe that our cash on-hand, the anticipated net proceeds from our Public Offerings, the projected cash flows from our real estate assets and our current and anticipated financing activities will be sufficient to meet our liquidity and capital resource requirements for the next 12 months from the date of issuance of this Form 10-Q.
Recent Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). ASU 2023-07 is effective for public entities for fiscal years beginning after December 15, 2023, and interim periods in fiscal years beginning after December 15, 2024, and requires single reporting entities to comply with the expanded reportable segment disclosures outlined in the ASU. The expanded reportable segment disclosures are intended to enhance certain disclosures surrounding significant segment expenses. We are currently evaluating the impact of the new standard on our consolidated financial statements.
In March 2024, the SEC adopted final rules under Release No. 33-11275, The Enhancement and Standardization of Climate-Related Disclosures for Investors (the “Climate Rules”). The Climate Rules require quantitative and qualitative disclosure of certain climate-related information in registration statements and annual reports filed. These disclosures include financial statement footnote disclosure related to the effects of certain severe weather events and other natural conditions. In April 2024, the SEC issued an order staying the Climate Rules pending completion of a judicial review of certain petitions challenging their validity. If the stay is lifted, the effective dates remain unchanged and we remain a smaller reporting company, emerging growth company or non-accelerated filer, the Climate Rules will be effective for our fiscal year ending December 31, 2027. We are currently evaluating the impact of the Climate Rules on our consolidated financial statements.
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Leases |
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| Leases | Note 3 – Leases
Lessor Accounting
We own rental properties which are leased to tenants under operating leases with current expirations ranging from 2024 to 2040, with options to extend or terminate the leases. Revenues from such leases are reported as Rental revenue in our consolidated statements of operations and are comprised of (i) lease components, which includes fixed and variable lease payments, and (ii) non-lease components which includes reimbursements of property level operating expenses. We do not separate non-lease components from the related lease components, as the timing and pattern of transfer are the same, and account for the combined component.
Fixed lease revenues represent the base rent that each tenant is required to pay in accordance with the terms of their respective leases reported on a straight-line basis over the non-cancelable term of the lease. Variable lease revenues include payments based on (i) tenant reimbursements, (ii) changes in the index or market-based indices after the inception of the lease, (iii) percentage rents, or (iv) the operating performance of the property. Variable lease revenues are not recognized until the specific events that trigger the variable payments have occurred.
The following table summarizes the components of lease revenues (amounts in thousands):
In certain of our leases, the tenant is obligated to pay the real estate taxes, insurance, and certain other expenses directly to the vendor. These obligations, which have been assumed by the tenants, are not reflected in our consolidated financial statements. To the extent any such tenant defaults on its lease or if it is deemed probable that the tenant will fail to pay for such obligations, a liability for such obligations would be recorded.
We assess the collectability of substantially all lease payments due by reviewing a tenant’s payment history or financial condition. Changes to collectability are recognized as a current period adjustment to rental revenue. We have assessed the collectability of all recorded lease revenues as probable as of September 30, 2024.
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Related Party Arrangements |
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| Related Party Arrangements | Note 4 – Related Party Arrangements
Our Transaction with Belpointe Development Holding, LLC
On May 16, 2024, we entered into an agreement to borrow up to $3.0 million in principal amount from Belpointe Development Holding, LLC, an affiliate of our Chief Executive Officer, pursuant to the terms of a revolving credit facility agreement (the “BDH Facility”). Interest accrues on the BDH Facility at an annual rate of 5.0%, due and payable at maturity. On September 27, 2024, we amended the BDH Facility to extend the maturity date to December 31, 2025. Proceeds under the BDH Facility are to be used for general corporate purposes. As of September 30, 2024, the BDH Facility had an outstanding principal balance of $2.6 million and accrued interest of less than $0.1 million.
Our Transaction with Lacoff Holding II, LLC
On December 29, 2023, we borrowed $4.0 million from Lacoff Holding II LLC, an affiliate of our Chief Executive Officer, pursuant to the terms of a promissory note secured by a first mortgage lien on certain property owned by subsidiaries of the Company (the “LH II Loan”). The LH II Loan was due and payable on April 1, 2024 and interest accrued on the LH II Note at an annual rate of 5.26%. The proceeds of the loan were used for general corporate purposes. On February 8, 2024, the LH II Loan, including accrued interest of less than $0.1 million, was repaid in full.
Our Relationship with Our Manager and Sponsor
Our Manager and its affiliates, including our Sponsor, receive fees or reimbursements in connection with our Public Offerings 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 with such parties (amounts in thousands):
The following table presents a summary of amounts included in Due to affiliates in the consolidated balance sheets (amounts in thousands):
Other Operating Expenses
Pursuant to the terms of the management agreement between us, our 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 us.
Pursuant to the terms of the employee and cost sharing agreement between us, our Operating Companies, our Manager and our Sponsor, we reimburse our Sponsor and our 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 September 30, 2024 and 2023, our Manager and its affiliates, including our Sponsor, incurred operating expenses of $0.5 million and $0.4 million, respectively, on our behalf. During the nine months ended September 30, 2024 and 2023, our Manager and its affiliates, including our Sponsor, incurred operating expenses of $1.7 million and $1.7 million, respectively, on our behalf. The expenses are payable, at the election of the recipient, either in cash, by issuance of our Class A units at the then-current NAV, or through some combination of the foregoing. As of September 30, 2024, all expenses incurred since inception have been settled in cash.
Management Fee
Subject to the limitations set forth in our Amended and Restated Limited Liability Company Operating Agreement (our “Operating Agreement”) and the oversight of our Board, our Manager is responsible for managing our 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 pay our Manager a quarterly management fee in arrears of one-fourth of 0.75%. The management fee is based on our NAV in effect at the end of the quarter. For the three months ended September 30, 2024 and 2023, we incurred management fees of $0.7 million and $0.7 million, respectively, and $2.0 million and $2.0 million for the nine months ended September 30, 2024 and 2023, respectively, which are included in Property expenses in our consolidated statements of operations.
Development Fees and Reimbursements
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.
During the three months ended September 30, 2024 and 2023, we incurred development fees earned during the construction phase of $1.2 million and $1.2 million, respectively. During the nine months ended September 30, 2024 and 2023, we incurred development fees earned during the construction phase of $2.8 million and $4.8 million, respectively. Such development fees are included in Real estate under construction in our consolidated balance sheets. As of September 30, 2024 and December 31, 2023, $2.0 million and $6.1 million, respectively, remained due and payable to our affiliates for development fees.
During the three months ended September 30, 2024 and 2023, we incurred employee reimbursement expenditures to our affiliates acting as development managers of $0.4 million and $0.3 million, respectively, of which $0.2 million and $0.2 million, respectively, is included in Real estate under construction in our consolidated balance sheets, and $0.2 million and $0.1 million, respectively, is included in General and administrative expenses in our consolidated statements of operations. During the nine months ended September 30, 2024 and 2023, we incurred employee reimbursement expenditures to our affiliates acting as development managers of $0.9 million and $1.0 million, respectively, of which $0.5 million and $0.8 million, respectively, is included in Real estate under construction in our consolidated balance sheets, and $0.4 million and $0.3 million, respectively, is included in General and administrative expenses in our consolidated statements of operations. As of September 30, 2024 and December 31, 2023, $0.7 million and $1.3 million, respectively, remained due and payable to our affiliates for employee reimbursement expenditures.
On April 25, 2023, each of the indirect majority-owned subsidiaries for our Nashville investments entered into development management agreements with certain development entities in which immediate family members of our Chief Executive Officer have a passive indirect minority beneficial ownership interest (collectively, the “Nashville DMAs”). The aggregate development fees payable under the Nashville DMAs are equal to 55% of 4.5% of the development budget or hard costs, as applicable. During the year ended December 31, 2023, we incurred $0.4 million of development fees related to the Nashville DMAs, which were capitalized to Real estate under construction in our consolidated balance sheets, with the remaining development fees payable upon our achieving various milestones throughout the development of our Nashville investments. As of September 30, 2024, $0.4 million in development fees related to the Nashville DMAs remained outstanding and payable.
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 and nine months ended September 30, 2024 and 2023.
Insurance
Certain family members of our Chief Executive Officer hold a non-controlling beneficial 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, and may continue to engage, 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 September 30, 2024 and 2023, and we obtained insurance premiums in the aggregate amount of $0.7 million and zero, respectively, from which Belpointe Specialty Insurance earned commissions and administrative fees of less than $0.1 million and zero, respectively. During the nine months ended September 30, 2024 and 2023, we obtained insurance premiums in the aggregate amount of $2.6 million and $2.4 million, respectively, from which Belpointe Specialty Insurance earned commissions and administrative fees $0.2 million and $0.2 million, respectively. Insurance premiums are prepaid and are included in Other assets on the consolidated balance sheets.
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 Public Offerings 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 our Manager and its affiliates 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 | Note 5 – Real Estate, Net
Real Estate Under Construction
The following table provides the activity of our Real estate under construction in the consolidated balance sheets (amounts in thousands):
Placed into Service
During the nine months ended September 30, 2024 certain phases of our 1991 Main Street, Sarasota, Florida (“Aster & Links”) development project reached substantial completion, and as a result, we reclassified the related real estate under construction to their respective fixed asset accounts.
Non-cash Disclosures
Real estate under construction includes non-cash investing activity of $22.0 million for the nine months ended months ended September 30, 2024 (inclusive of unpaid development fees of $1.5 million and unpaid employee cost sharing and reimbursements of $0.4 million) and $28.1 million for the nine months ended September 30, 2023 (inclusive of unpaid development fees of $5.7 million and unpaid employee cost sharing and reimbursements of $0.8 million).
Depreciation Expense
Depreciation expense was $1.4 million and $0.2 million for the three months ended September 30, 2024 and 2023, respectively, and $2.2 million and $0.6 million for the nine months ended September 30, 2024 and 2023, respectively, and is included in Depreciation and amortization on the consolidated statements of operations.
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Intangible Assets and Liabilities |
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| Intangible Assets And Liabilities | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Intangible Assets and Liabilities | Note 6 – Intangible Assets and Liabilities
Intangible assets and liabilities are summarized as follows (amounts in thousands):
In-place leases and development rights intangible assets, noted above, are included in Intangible assets on the consolidated balance sheets. Below-market lease liabilities, noted above, are included in Lease liabilities on the consolidated balance sheets.
Amortization of in-place lease intangible assets was less than $0.1 million and $0.3 million for the three months ended September 30, 2024 and 2023, respectively, and $0.1 million and $1.1 million for the nine months ended September 30, 2024 and 2023, respectively, and is included in Depreciation and amortization in the consolidated statements of operations.
Amortization of below-market lease liabilities was less than $0.1 million and $0.1 million for the three months ended September 30, 2024 and 2023, respectively, and $0.1 million and $0.7 million for the nine months ended September 30, 2024 and 2023, respectively, and is included in Rental revenue in the consolidated statements of operations.
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Debt, Net |
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| Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt, Net | Note 7 – Debt, Net
2024 Debt Transactions
On June 28, 2024, our indirect majority-owned subsidiary entered into a variable-rate construction loan agreement for up to $104.0 million in principal amount (the “1000 First Construction Loan”) with various lenders.
On June 26, 2024, our indirect majority-owned subsidiary entered into a fixed-rate loan agreement for $10.0 million in principal amount (the “900 8th Land Loan”) with KHRE SMA Funding, LLC.
On January 31, 2024, our indirect majority-owned subsidiary entered into a fixed-rate mezzanine loan agreement for up to $56.4 million in principal amount (the “1991 Main Mezzanine Loan”) with Southern Realty Trust Holdings, LLC.
2023 Debt Transactions
On May 12, 2023, our indirect majority-owned subsidiary entered into a variable-rate construction loan agreement for up to $130.0 million in principal amount (the “1991 Main Construction Loan”) with Bank OZK.
The following table details our Debt, net (dollars in thousands):
The following table summarizes the scheduled future principal payments under our debt arrangements as of September 30, 2024 (amounts in thousands):
Interest paid, net of capitalized interest for the nine months ended September 30, 2024 and 2023, was $4.0 million and zero, respectively.
Amortization of deferred financing costs for the three months ended September 30, 2024 and 2023, was $0.7 million and $0.2 million, respectively, of which $0.3 million and $0.2 million was capitalized, respectively. Amortization of deferred financing costs for the nine months ended September 30, 2024 and 2023 was $1.5 million and $0.4 million, respectively, of which $0.7 million and $0.4 million was capitalized, respectively.
Guarantees and Covenants
Each of our indebtedness agreements are secured by the individual underlying real estate investments serving as collateral. In connection with certain agreements, we provided completion guarantees, which, among other things, guarantee completion of the work at each individual construction project, as well as carveout guarantees pursuant to which we guarantee the borrowers obligations with respect to certain non-recourse carveout events, such as “bad acts,” environmental conditions, and violations of certain provisions of the loan documents. We also provided a customary environmental indemnity agreement to the certain lenders pursuant to which we agreed to protect, defend, indemnify, release and hold harmless such lenders from and against certain environmental liabilities related to the real estate investments for which they apply.
We are subject to various financial and operational covenants which includes, but is not limited to, maintaining liquid assets of no less than $20.0 million and a net worth of no less than $130.0 million. As of September 30, 2024, we were in compliance with all of our loan covenants.
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Fair Value of Financial Instruments |
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| 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.
Except as described below, we estimated that our other financial assets and liabilities had fair values that approximated their carrying values as of September 30, 2024 and December 31, 2023.
Recurring Fair Value Measurements
Our interest rate caps are measured at fair value on a recurring basis (see Note 9 – Derivative Instruments for further details). The valuation of our interest rate caps are prepared by an independent third-party and are classified as Level 2 in the fair value hierarchy, as the valuation is approximated using market values of similar instruments in active markets.
The following table sets forth the carrying value and estimated fair value of our debt arrangements as of September 30, 2024 and December 31, 2023, respectively (amounts in thousands):
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Derivative Instruments |
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| Derivative Instruments | Note 9 – Derivative Instruments
In connection with our variable rate loan agreements (Note 7 – Debt, Net), we are required to obtain and maintain interest rate protection in the form of interest rate caps during the term of the loans to effectively limit the impact of increases in the one-month SOFR. We are subject to credit risk by the counterparty of these derivative instruments in the event of non-performance under the derivative contracts, however we believe the risk to be minimal.
The following table details our derivative financial instruments as of September 30, 2024 (amounts in thousands):
The following table details the fair value of our derivative financial instruments (amounts in thousands):
The following table details the effect of our derivative financial instruments on our consolidated statements of operations (amounts in thousands):
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Members’ Capital |
9 Months Ended |
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Sep. 30, 2024 | |
| Equity [Abstract] | |
| Members’ Capital | Note 10 – Members’ Capital
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, and in most cases without the approval of our 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.
During the three months ended September 30, 2024 and 2023, we issued and Class A units, respectively. During the nine months ended September 30, 2024 and 2023, we issued and Class A units, respectively. As of September 30, 2024 and December 31, 2023, there were and Class A units, respectively, Class B units and Class M unit issued and outstanding.
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. Holders of our 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 the election of directors, by a plurality) of the votes entitled to be cast.
Holders of our 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 our Class A units are entitled to receive our remaining assets available for distribution.
Class B units
All of our Class B units are currently held by our Manager and were issued on September 14, 2021. Holders of our Class B units are not entitled to preemptive, redemption or conversion rights. Holders of our 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 the 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 related 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 the holders of our Class B units. In addition, our Manager, or any other holder of our Class B units, will continue to hold the Class B units even if our Manager 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 currently held by our Manager and was issued on September 14, 2021. The holder of our Class M unit is not entitled to preemptive, redemption or conversion rights. The holder of our 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.
Basic and Diluted Loss Per Class A Unit
For the three months ended September 30, 2024 and 2023, the basic and diluted weighted-average units outstanding were and , respectively. For the three months ended September 30, 2024 and 2023, net loss attributable to Class A units was $6.9 million and $3.3 million, respectively, and the loss per basic and diluted unit was $ and $, respectively.
For the nine months ended September 30, 2024 and 2023, the basic and diluted weighted-average units outstanding were and , respectively. For the nine months ended September 30, 2024 and 2023, net loss attributable to Class A units was $15.6 million and $10.2 million, respectively, and the loss per basic and diluted unit was $ and $, respectively.
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Commitments and Contingencies |
9 Months Ended |
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Sep. 30, 2024 | |
| Commitments and Contingencies Disclosure [Abstract] | |
| Commitments and Contingencies | Note 11 – Commitments and Contingencies
As of September 30, 2024, we were not subject to any material litigation nor were we aware of any material litigation threatened against us.
In connection with the development of our investment at 1000 First Avenue North, St. Petersburg, Florida (“Viv”) and Aster & Links, we have entered into separate construction management agreements for each asset which contain terms and conditions that are customary for the related scope of work. As of September 30, 2024, we have an aggregate unfunded commitment of $83.8 million under these two development projects. As of September 30, 2024, $25.5 million, inclusive of retainage of $15.2 million, is outstanding and payable in connection with these developments.
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Subsequent Events |
9 Months Ended |
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Sep. 30, 2024 | |
| Subsequent Events [Abstract] | |
| Subsequent Events | Note 12 – Subsequent Events
Management has evaluated subsequent events to determine if events or transactions occurring after the balance sheet date through the date the consolidated financial statements were issued require potential adjustment to or disclosure in the consolidated financial statements and has concluded that, except as set forth below, all such events or transactions that would require recognition or disclosure have been recognized or disclosed.
Through the date of this Form 10-Q, we drew down an additional $7.1 million and $3.4 million on the 1000 First Construction Loan and 1991 Main Construction Loan, respectively. |
Summary of Significant Accounting Policies (Policies) |
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| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Basis of Presentation | Basis of Presentation
The accompanying 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 SEC.
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 September 30, 2024, and for the three and nine months ended September 30, 2024 and 2023, 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, 2023 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 consolidated financial statements reflect all of our accounts, including those of our controlled subsidiaries. The portion of members’ capital in controlled subsidiaries that are not attributable, directly or indirectly, to us are presented in noncontrolling interests. All significant intercompany accounts and transactions have been eliminated.
We have evaluated our economic interests 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 September 30, 2024 and December 31, 2023, 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 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, our 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 consolidated financial statements and the accompanying notes. Actual results could materially differ from those estimates.
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| Impairment of Long-Lived Assets | Impairment of Long-Lived Assets
We evaluate our tangible and identifiable intangible real estate assets for impairment when events such as delays or changes in development, declines in a property’s operating performance, deteriorating market conditions, or environmental or legal concerns bring recoverability of the carrying value of one or more assets into question. When qualitative factors indicate the possibility of impairment, the total undiscounted cash flows of the property, including proceeds from disposition, are compared to the net book value of the property. If the carrying value of the asset exceeds the undiscounted cash flows of the asset, an impairment loss is recorded in earnings to reduce the carrying value of the asset to fair value, calculated as the discounted net cash flows of the property. In circumstances where the highest and best use of a property is the fee simple value of vacant land, we compare book value of the property to the appraised value of the land. If the carrying value of the asset exceeds the appraised value of the land, an impairment loss is recorded to reduce the carrying value to the appraised value.
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| Restricted Cash | Restricted Cash
Restricted cash consists of amounts required to be reserved pursuant to contractual obligations and 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 consolidated statements of cash flows (amounts in thousands):
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| Liquidity | Liquidity
Our future needs for liquidity will depend on a variety of factors, including, without limitation, our ability to generate cash flows from operations, the timing and availability of net proceeds from our Public Offerings and any future offerings that we may conduct, the timing and extent of our real estate acquisition and disposition activities, and the timing and extent of our construction and development costs.
Economic uncertainty, fluctuating interest rates, volatility in the real estate markets, slowdowns in transaction volume, delays in financings from banks and other lenders and other negative trends may, in the future, adversely impact our ability to timely access potential sources of liquidity. If we are unable to raise additional capital when desired, or on terms that are acceptable to us, our business, financial condition and results of operations could be adversely affected.
We believe that our cash on-hand, the anticipated net proceeds from our Public Offerings, the projected cash flows from our real estate assets and our current and anticipated financing activities will be sufficient to meet our liquidity and capital resource requirements for the next 12 months from the date of issuance of this Form 10-Q.
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| Recent Accounting Pronouncements | Recent Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). ASU 2023-07 is effective for public entities for fiscal years beginning after December 15, 2023, and interim periods in fiscal years beginning after December 15, 2024, and requires single reporting entities to comply with the expanded reportable segment disclosures outlined in the ASU. The expanded reportable segment disclosures are intended to enhance certain disclosures surrounding significant segment expenses. We are currently evaluating the impact of the new standard on our consolidated financial statements.
In March 2024, the SEC adopted final rules under Release No. 33-11275, The Enhancement and Standardization of Climate-Related Disclosures for Investors (the “Climate Rules”). The Climate Rules require quantitative and qualitative disclosure of certain climate-related information in registration statements and annual reports filed. These disclosures include financial statement footnote disclosure related to the effects of certain severe weather events and other natural conditions. In April 2024, the SEC issued an order staying the Climate Rules pending completion of a judicial review of certain petitions challenging their validity. If the stay is lifted, the effective dates remain unchanged and we remain a smaller reporting company, emerging growth company or non-accelerated filer, the Climate Rules will be effective for our fiscal year ending December 31, 2027. We are currently evaluating the impact of the Climate Rules on our consolidated financial statements. |
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Summary of Significant Accounting Policies (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Carrying Value Net Assets | The following table presents the financial data of the consolidated VIEs included in the consolidated balance sheets as of September 30, 2024 and December 31, 2023, 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 contractual obligations and 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 consolidated statements of cash flows (amounts in thousands):
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Leases (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Leases | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Components of Lease Revenues | The following table summarizes the components of lease revenues (amounts in thousands):
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Related Party Arrangements (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 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 with such parties (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) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Real Estate [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Real Estate Under Construction | The following table provides the activity of our Real estate under construction in the consolidated balance sheets (amounts in thousands):
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Intangible Assets and Liabilities (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 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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Debt, Net (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Debt, Net | The following table details our Debt, net (dollars in thousands):
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| Schedule of Future Principal Payments | The following table summarizes the scheduled future principal payments under our debt arrangements as of September 30, 2024 (amounts in thousands):
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Fair Value of Financial Instruments (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Carrying Value and Estimated Fair Value | The following table sets forth the carrying value and estimated fair value of our debt arrangements as of September 30, 2024 and December 31, 2023, respectively (amounts in thousands):
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Derivative Instruments (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Table Derivative Financial Instrument | The following table details our derivative financial instruments as of September 30, 2024 (amounts in thousands):
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| Schedule of Fair Value of Our Derivative Financial Instruments | The following table details the fair value of our derivative financial instruments (amounts in thousands):
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| Schedule of Table Details Effect Derivative Financial Instrument | The following table details the effect of our derivative financial instruments on our consolidated statements of operations (amounts in thousands):
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Organization, Business Purpose and Capitalization (Details Narrative) - USD ($) |
3 Months Ended | 9 Months Ended | ||||||
|---|---|---|---|---|---|---|---|---|
May 09, 2023 |
Sep. 30, 2021 |
Sep. 30, 2024 |
Mar. 31, 2024 |
Sep. 30, 2023 |
Jun. 30, 2023 |
Sep. 30, 2024 |
Aug. 30, 2024 |
|
| Initial public offering | $ 1,000,000 | $ 711,000 | $ 1,088,000 | $ 3,844,000 | ||||
| Dealer Manager [Member] | Maximum [Member] | ||||||||
| Payments for commissions percentage | 0.25% | |||||||
| Selling Group Members [Member] | Maximum [Member] | ||||||||
| Payments for commissions percentage | 4.50% | |||||||
| Selling Group Members [Member] | Minimum [Member] | ||||||||
| Payments for commissions percentage | 0.25% | |||||||
| Common Class A [Member] | ||||||||
| Offering price per share | $ 98.24 | |||||||
| Common Class A [Member] | Follow On Offering [Member] | ||||||||
| Initial public offering | $ 750,000,000 | |||||||
| Common Class A [Member] | Primary Offering [Member] | ||||||||
| Proceeds from initial public offering | $ 750,000,000 | 1,000,000 | $ 1,711,020 | |||||
| Outstanding units unsold of initial public offering | $ 513,013,330 | $ 513,013,330 | ||||||
Schedule of Restricted Cash and Cash Equivalents (Details) - USD ($) $ in Thousands |
Sep. 30, 2024 |
Dec. 31, 2023 |
Sep. 30, 2023 |
||
|---|---|---|---|---|---|
| Accounting Policies [Abstract] | |||||
| Cash and cash equivalents | $ 23,990 | $ 20,125 | $ 15,743 | ||
| Restricted cash | [1] | 3,525 | 3,460 | 23,939 | |
| Total cash and cash equivalents and restricted cash | $ 27,515 | $ 23,585 | $ 39,682 | ||
| |||||
Schedule of Components of Lease Revenues (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||||||
|---|---|---|---|---|---|---|---|---|
Sep. 30, 2024 |
Sep. 30, 2023 |
Sep. 30, 2024 |
Sep. 30, 2023 |
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| Leases | ||||||||
| Fixed lease revenues | $ 539 | $ 241 | $ 1,041 | $ 773 | ||||
| Variable lease revenues | [1] | 302 | 99 | 563 | 247 | |||
| Lease revenues (2) (3) | [2] | $ 841 | $ 340 | $ 1,604 | $ 1,020 | |||
| ||||||||
Schedule of Components of Lease Revenues (Details) (Parenthetical) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2024 |
Sep. 30, 2023 |
Sep. 30, 2024 |
Sep. 30, 2023 |
|
| Lease intangible amortization | $ 0.1 | $ 0.1 | $ 0.1 | $ 0.7 |
| Maximum [Member] | Straight Line Rent [Member] | ||||
| Straight line rent adjustment | $ 0.1 | $ 0.1 | $ 0.1 | $ 0.1 |
Schedule of Non Cash Activity to Related Party (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2024 |
Sep. 30, 2023 |
Sep. 30, 2024 |
Sep. 30, 2023 |
|||||||
| Costs and expenses related parties | $ 1,832 | $ 1,295 | $ 5,154 | $ 4,198 | ||||||
| Other capitalized costs | 2,357 | 2,072 | 6,161 | 7,250 | ||||||
| Manager and Affliates [Member] | ||||||||||
| Costs and expenses related parties | [1] | 638 | 513 | 2,065 | 1,840 | |||||
| Management Fees [Member] | ||||||||||
| Costs and expenses related parties | [2] | 672 | 662 | 2,037 | 1,990 | |||||
| Insurance [Member] | ||||||||||
| Costs and expenses related parties | [3] | 502 | 100 | 992 | 308 | |||||
| Other capitalized costs | [3] | 868 | 588 | 2,791 | 1,578 | |||||
| Director Compensation [Member] | ||||||||||
| Costs and expenses related parties | 20 | 20 | 60 | 60 | ||||||
| Development Fee and Reimbursements [Member] | ||||||||||
| Other capitalized costs | $ 1,489 | $ 1,484 | $ 3,370 | $ 5,672 | ||||||
| ||||||||||
Schedule of Due to Related Party (Details) - USD ($) $ in Thousands |
Sep. 30, 2024 |
Dec. 31, 2023 |
||
|---|---|---|---|---|
| Related Party Transaction [Line Items] | ||||
| Due to affiliates | $ 6,848 | $ 10,370 | ||
| Management Fees [Member] | Related Party [Member] | ||||
| Related Party Transaction [Line Items] | ||||
| Due to affiliates | 3,401 | 1,365 | ||
| Development Fees [Member] | Related Party [Member] | ||||
| Related Party Transaction [Line Items] | ||||
| Due to affiliates | 1,988 | 6,129 | ||
| Employee Cost Sharing and Reimbursements [Member] | Related Party [Member] | ||||
| Related Party Transaction [Line Items] | ||||
| Due to affiliates | [1] | 1,439 | 2,856 | |
| Director Compensation [Member] | Related Party [Member] | ||||
| Related Party Transaction [Line Items] | ||||
| Due to affiliates | $ 20 | $ 20 | ||
| ||||
Schedule of Real Estate Under Construction (Details) - USD ($) $ in Thousands |
9 Months Ended | 12 Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2024 |
Dec. 31, 2023 |
|||||||||
| Real Estate [Abstract] | ||||||||||
| Beginning balance | $ 291,130 | $ 133,898 | ||||||||
| Placed into service | (231,241) | |||||||||
| Capitalized costs | [1],[2] | 110,385 | 155,969 | |||||||
| Capitalized interest | 2,834 | 387 | ||||||||
| Impairment charges | [3] | (777) | (4,060) | |||||||
| Land held for development | [4] | 4,936 | ||||||||
| Ending balance | $ 172,331 | $ 291,130 | ||||||||
| ||||||||||
Schedule of Real Estate Under Construction (Details) (Parenthetical) - USD ($) $ in Millions |
9 Months Ended | 12 Months Ended |
|---|---|---|
Sep. 30, 2024 |
Dec. 31, 2023 |
|
| Real Estate [Abstract] | ||
| Direct and indirect project costs | $ 3.9 | $ 3.4 |
Real Estate, Net (Details Narrative) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2024 |
Sep. 30, 2023 |
Sep. 30, 2024 |
Sep. 30, 2023 |
|
| Depreciation expense | $ 1.4 | $ 0.2 | $ 2.2 | $ 0.6 |
| Real Estate [Member] | ||||
| Non cash investing activity | 22.0 | 28.1 | ||
| Unpaid development fees | 1.5 | 5.7 | ||
| Unpaid employee cost sharing and reimbursements | $ 0.4 | $ 0.8 | ||
Intangible Assets and Liabilities (Details Narrative) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2024 |
Sep. 30, 2023 |
Sep. 30, 2024 |
Sep. 30, 2023 |
|
| In-place Leases [Member] | ||||
| Finite-Lived Intangible Assets [Line Items] | ||||
| Amortization of intangible assets | $ 0.1 | $ 0.3 | $ 0.1 | $ 1.1 |
| Below-market Leases [Member] | ||||
| Finite-Lived Intangible Assets [Line Items] | ||||
| Amortization of intangible assets | $ 0.1 | $ 0.1 | $ 0.1 | $ 0.7 |
Schedule of Debt, Net (Details) - USD ($) $ in Thousands |
9 Months Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2024 |
Dec. 31, 2023 |
|||||||||||
| Short-Term Debt [Line Items] | ||||||||||||
| Total debt | $ 151,088 | $ 23,076 | ||||||||||
| Unamortized debt issuance costs | (4,403) | (2,239) | ||||||||||
| Unamortized debt discount | (2,550) | (1,159) | ||||||||||
| Debt, net | $ 144,135 | 19,678 | ||||||||||
| 1991 Main Mezzanine Loan [Member] | ||||||||||||
| Short-Term Debt [Line Items] | ||||||||||||
| Interest Rate | [1],[2] | 13.00% | ||||||||||
| Maturity Date | [1],[2] | May 2027 | ||||||||||
| Total commitment | [1],[2] | $ 56,378 | ||||||||||
| 900 8th Land Loan [Member] | ||||||||||||
| Short-Term Debt [Line Items] | ||||||||||||
| Interest Rate | [3] | 9.50% | ||||||||||
| Maturity Date | [3] | June 2025 | ||||||||||
| 1991 Main Construction Loan Agreement [Member] | ||||||||||||
| Short-Term Debt [Line Items] | ||||||||||||
| Interest Rate | [2],[4] | 3.45% | ||||||||||
| Maturity Date | [2],[4] | May 2027 | ||||||||||
| Total commitment | [1],[2] | $ 130,000 | ||||||||||
| 1000 First Construction Loan [Member] | ||||||||||||
| Short-Term Debt [Line Items] | ||||||||||||
| Interest Rate | [5] | 3.80% | ||||||||||
| Maturity Date | [5] | June 2027 | ||||||||||
| Total commitment | [1],[2] | $ 104,000 | ||||||||||
| 1991 Main Mezzanine Loan [Member] | ||||||||||||
| Short-Term Debt [Line Items] | ||||||||||||
| Total debt | [1],[2] | 44,735 | ||||||||||
| 900 8th Land Loan [Member] | ||||||||||||
| Short-Term Debt [Line Items] | ||||||||||||
| Total debt | [3] | 10,000 | ||||||||||
| 1991 Main Construction Loan [Member] | ||||||||||||
| Short-Term Debt [Line Items] | ||||||||||||
| Total debt | [2],[4] | 84,299 | 23,076 | |||||||||
| 1000 First Construction Loan [Member] | ||||||||||||
| Short-Term Debt [Line Items] | ||||||||||||
| Total debt | [5] | $ 12,054 | ||||||||||
| ||||||||||||
Schedule of Debt Net (Details) (Parenthetical) $ in Millions |
Sep. 30, 2024
USD ($)
|
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 1991 Main Mezzanine Loan [Member] | ||||||||||
| Debt Instrument [Line Items] | ||||||||||
| Reserves | $ 11.6 | |||||||||
| Interest rate | 13.00% | [1],[2] | ||||||||
| 1991 Main Construction Loan Agreement [Member] | ||||||||||
| Debt Instrument [Line Items] | ||||||||||
| Interest rate | 3.45% | [2],[3] | ||||||||
| 1991 Main Construction Loan Agreement [Member] | Minimum [Member] | ||||||||||
| Debt Instrument [Line Items] | ||||||||||
| Interest rate | 8.51% | |||||||||
| 1000 First Construction Loan [Member] | ||||||||||
| Debt Instrument [Line Items] | ||||||||||
| Interest rate | 3.80% | [4] | ||||||||
| 1000 First Construction Loan [Member] | Minimum [Member] | ||||||||||
| Debt Instrument [Line Items] | ||||||||||
| Interest rate | 7.55% | |||||||||
| ||||||||||
Schedule of Future Principal Payments (Details) - USD ($) $ in Thousands |
Sep. 30, 2024 |
Dec. 31, 2023 |
|---|---|---|
| Debt Disclosure [Abstract] | ||
| 2024 (remainder) | ||
| 2025 | 10,000 | |
| 2026 | ||
| 2027 | 141,088 | |
| 2028 | ||
| Thereafter | ||
| Total | $ 151,088 | $ 23,076 |
Schedule of Carrying Value and Estimated Fair Value (Details) - Fair Value, Inputs, Level 2 [Member] - USD ($) |
Sep. 30, 2024 |
Dec. 31, 2023 |
||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||||||||
| Carring Value | [1] | $ 144,135,000 | $ 19,678,000 | |||||||
| Fair Value | $ 151.398 | [2] | $ 19,678,000 | [3] | ||||||
| ||||||||||
Schedule of Table Derivative Financial Instrument (Details) $ in Thousands |
9 Months Ended |
|---|---|
|
Sep. 30, 2024
USD ($)
| |
| Interest Rate Cap One [Member] | |
| Derivative Instruments, Gain (Loss) [Line Items] | |
| Notional amount | $ 94,587 |
| Strike rate | 5.07% |
| Maturity date | July 2025 |
| Interest Rate Cap Two [Member] | |
| Derivative Instruments, Gain (Loss) [Line Items] | |
| Notional amount | $ 104,000 |
| Strike rate | 6.25% |
| Maturity date | July 2025 |
Schedule of Fair Value of Our Derivative Financial Instruments (Details) - USD ($) $ in Thousands |
Sep. 30, 2024 |
Dec. 31, 2023 |
||
|---|---|---|---|---|
| Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||||
| Interest rate caps | [1] | $ 7 | $ 93 | |
| ||||
Schedule of Table Details Effect Derivative Financial Instrument (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2024 |
Sep. 30, 2023 |
Sep. 30, 2024 |
Sep. 30, 2023 |
|
| Derivative Instruments, Gain (Loss) [Line Items] | ||||
| Derivative gain (loss) | $ (221) | $ 135 | ||
| Interest Rate Cap [Member] | ||||
| Derivative Instruments, Gain (Loss) [Line Items] | ||||
| Derivative gain (loss) | $ (134) | $ (73) | $ (221) | $ 135 |
Commitments and Contingencies (Details Narrative) - Construction Management Agreement [Member] $ in Millions |
Sep. 30, 2024
USD ($)
|
|---|---|
| Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | |
| Other commitment | $ 83.8 |
| Accounts payable | 25.5 |
| Retainage payable | $ 15.2 |
Subsequent Events (Details Narrative) - 1000 First Construction Loan [Member] $ in Millions |
Sep. 30, 2024
USD ($)
|
|---|---|
| Short-Term Debt [Line Items] | |
| Construction loan | $ 7.1 |
| Construction loan | $ 3.4 |