Related Party Arrangements

9 Months Ended

Sep. 30, 2024

Related Party Transactions [Abstract]

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):

	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)	$	638	$	513	$	2,065	$	1,840
Management fees (2)		672		662		2,037		1,990
Insurance (3)		502		100		992		308
Director compensation		20		20		60		60
	$	1,832	$	1,295	$	5,154	$	4,198
Capitalized costs included in the Consolidated Balance Sheets
Development fee and reimbursements	$	1,489	$	1,484	$	3,370	$	5,672
Insurance (3)		868		588		2,791		1,578
	$	2,357	$	2,072	$	6,161	$	7,250

⁽¹⁾ Includes wage, overhead and other reimbursements to our Manager and its affiliates, including our Sponsor, which are included in General and administrative expenses on the consolidated statements of operations.

⁽²⁾ Included in Property expenses in our consolidated statements of operations.

⁽³⁾ Our insurance premiums are prepaid and are included in Other assets on the consolidated balance sheets and are amortized monthly to either Property expenses on the consolidated statements of operations or Real estate under construction on the consolidated balance sheets as further described below.

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	$	3,401	$	1,365
Development fees		1,988		6,129
Employee cost sharing and reimbursements (1)		1,439		2,856
Director compensation		20		20
	$	6,848	$	10,370

⁽¹⁾ Includes wage, overhead and other reimbursements to our Manager and its affiliates, including our Sponsor.

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.