OZ Belpointe PREP LLC

 

Issuer Free Writing Prospectus dated December 22, 2021

Filed Pursuant To Rule 433

Registration No. 333-255424

 

[Transcript of Opportunity Zone Investing, Year-End Tax Growth and Income Strategy in the Face of Widespread Uncertainty Webinar from December 21, 2021]

 

Cody Laidlaw: I believe we’re live now. Perfect. So good afternoon, everybody. Before we get started on today’s webinar: Opportunity Zone Investing, Year-End Tax Growth and Income Strategy in the Face of Widespread Uncertainty, I have to read a little disclaimer, so bear with me. Today’s presentation may include statements that are forward-looking statements within the meaning of the federal securities laws. Any forward-looking statements expressed in this webinar are made in good faith, and we believe there is a reasonable basis for them. However, there are a number of risks, uncertainties and other important factors, many of which are difficult or impossible to predict. That could cause actual results to vary materially from the forward-looking statements expressed in this webinar. Except as otherwise required by law, we will not update or revise any forward-looking statements to reflect subsequent events.

 

Belpointe PREP has filed a registration statement with the SEC for the offer and sale of up to $750 million worth of its Class A units. Investing in Belpointe PREP’s Class A units involve a high degree of risk, including a complete loss of your investment. You should read Belpointe PREP’s most recent prospectus and the other documents that it has filed with the SEC for more complete information about Belpointe PREP and its offering. Prior to making an investment decision, you should carefully consider Belpointe PREP’s investment objectives and strategy, risk factors, fees and expenses, and any tax consequences that may result from an investment in Belpointe PREP’s Class A units. You can obtain a copy of Belpointe PREP’s prospectus, and other filings on the SEC’s website, on our website at belpointeoz.com, or by contacting me at 203-883-1944 or emailing me at claidlaw@belpointe.com. With that, I will pass it over to Brandon Lacoff, Belpointe, CEO.

 

Brandon Lacoff: Cody, thank you very much for the intro, and obviously, that legal disclosure that you have to do, because we’re a publicly traded company. So today, I want to give the high level of what we’re doing, talk about what OZ is and the opportunity zone program is, high level. Go into OZ, our company, which is listed on New York Stock Exchange, and then talk about some of the deals that we’ve invested in. So high level on Belpointe, like Cody said, we’re registered for another $750 million worth of shares. We’re listed on the New York Stock Exchange American under the symbol, “OZ.” We currently, as Belpointe, as a parent company, we manage over $3 billion in securities on the financial advisory side of the business, we also have over a billion dollars’ worth of multi-family experience with our team, so we’re going to get into those details as we go forward in the presentation.

 

In our last couple of funds, we’ve deployed $236 million of equity, and over $400 million worth of investments, and that’s about approximately 14 investments, and we’re going to talk a little bit about our history and really our expertise in multi-family. So first, I want to just talk about the opportunity zone regulations. I don’t want to spend too much time, because most people know the basics of opportunity zone investing. There’s many different funds out there and it’s been around since the beginning of 2018. So opportunity zones came out of the administration, Trump’s administration of the Tax Cut and Jobs Act of 2017, which was actually passed in December of 2017. There’s over 8700 opportunity zones around the country, and you can see, here’s a map right here that gives you all the census tracts that have opportunity zones that are designated opportunity zones around the country.

 

So, opportunity zones. The requirements of the opportunity zones require us as a fund to invest 90% of the capital that we have invested in us into opportunity zones around the country. So that is our requirement as being qualified opportunity zone funds. The requirement for the shareholders to receive the benefit is they have to have a capital gain and reinvest that capital gain within 180 days, receiving that capital gain. And that capital gain can be either from stocks, bonds, commodities, cryptocurrencies, artwork, classic cars, real estate, it can be from any type of capital gain, it can be a short-term capital gain, it can be a long-term capital gain. As long as they invest that capital gain within 180 days, they receive the tax benefits of opportunity zone investing. One of the nuances I wanted to talk about is, again, it’s just a capital gain portion, we get this question a lot. It’s just a capital gain portion, you’re not investing the basis where you get the opportunity zone tax benefits. Only the capital gain portion that you’re reinvesting receives the opportunity zone tax benefits.

 

So, let’s talk about the benefits. If you make a qualified opportunity zone investment within 180 days of recognizing your capital gain, what are the tax benefits that an investor would receive?

 

Number one, you have deferral. You get to defer your capital gain until the end of 2026. So right now, it’s just past five-year deferral. As time goes on, if you make an investment next year, you’ll have less than five years. So, you have, currently right now, if you make an investment before the end of this year, you’ll receive five-year tax deferment on...

 

 

Cody Laidlaw: Hey, Brandon.

 

Brandon Lacoff: Yeah.

 

Cody Laidlaw: I hate to interrupt but I think there’s a technical issue. We cannot see you change the slides.

 

Brandon Lacoff: Really? Okay, let me...

 

Cody Laidlaw: We see it changing now, but maybe you want to put it into presentation mode?

 

Brandon Lacoff: It was in presentation mode. Do you see it now?

 

Cody Laidlaw: It’s still not in presentation mode.

 

Brandon Lacoff: That’s interesting. Which slide do you see now?

 

Cody Laidlaw: Opportunity zone map.

 

Brandon Lacoff: Oh really? Okay. Let me try to unshare and reshare again. Let’s try it one more time. Okay. How about that?

 

Cody Laidlaw: Perfect.

 

Brandon Lacoff: Let me go to the next slide or slide back and see if it changes. Does that change?

 

Cody Laidlaw: Yep. That’s working.

 

Brandon Lacoff: All right. That’s interesting why that happened. I apologize for that. So, again the first benefit is the deferral, you have an old capital gain that by investing in that, the gain from that old capital gain, you invest that into our structure within the qualified period of time, which is the 180 days, you receive the deferral. You get the deferral until the end of 2026, which is just past five years from now. The second benefit that you would receive if you invest by the end of this year, which is why this webinar is so important today, because we want to make sure people get in by the end of the year, is because you also receive a 10% step up basis, which would reduce your old capital gain by 10%, as long as you invest by the end of this year and you hold it for at least five years. If you miss the window of December 31st of this year, you will not receive this tax benefit going forward. You’ll still receive deferral until the end of 2026, but you will not receive this one benefit if you invest after December 31st of this year.

 

The third benefit, which is the largest benefit is the exclusion of capital gains on the growth of our stock. So, and it’s really the growth of the investment, it’s the best way of saying. So, with our investment stock growing, as long as you hold the stock for 10 years, you have no capital gains on the growth of the investment. And obviously the growth of the stock, which is, you know, which are our lines. So that is probably one of the biggest tax benefits. And we’re going to talk about another tax benefits, later on in the presentation, which is depreciation and having no depreciation recapture, which is another big benefit, we’re going to get into details on. The fourth benefit, which most funds and most people don’t talk about is the same tax benefits you get on the opportunity zone at the federal level, you can also receive at the state level. And I’m going to jump to this slide.

 

Cody, did that slide change?

 

Cody Laidlaw: It did. Yep.

 

Brandon Lacoff: Great. So this is a map of what states you would receive the tax benefit. If you reside in one of these states, this is the states that you would receive the tax benefits, except for the five states in red; California, Mississippi, North Carolina, New York, and Massachusetts, you would not receive any of the tax benefits of opportunity zone, if you invested in our structure. But all the other states, the other 45 states you receive, both the federal and state tax benefit of OZ.

 

 

So let’s get into, I think probably the most important piece of our structure compared to all the other structures out there. So the first column we’re talking about the PREP structure, which is Belpointe PREP, which “PREP” stands for “public real estate partnership.” So having a structure like ours is you get actively managed real estate because opportunity zone investing requires either new construction, ground up construction in the opportunity zone or substantial improvement, which you take an existing building in an opportunity zone, and you renovate that building. You have to meet the substantial improvement test, which is, for example, if you put thirty million dollars in, by buying a building, you have to put another 30 million or more to renovate that building to be, to have it be a qualified opportunity zone investment for that fund. So high bar you’d have to reach, and you need to have experienced real estate team because it’s heavy construction, either renovation or ground up construction; you need to have that expertise. Our team is former Avalon Bay and Avalon is the largest multifamily, REITs on New York stock exchange that solely invests in ground up construction, multifamily. The original team is now with us, that was there in the early nineties. And some of those members left Avalon in the early 2000s are now with us and we’ll talk about that more about our team.

 

Obviously having greater diversification, having a structure that has many investments across the country gives us greater diversification, which is important for an opportunity zone structure.

 

Obviously pass-through depreciation to investors, having a partnership structure that is a PREP, allows us to have depreciation to pass through to our investors, which is offsetting, distributions. The ability to make quarterly distributions is something, that is important to investors, and having that ability and also having that requirement under the PTP rules, which is the publicly traded partnership rules, similar to like a REIT, we’re going to be making, in the future, once we start getting positive net income, we will start making quarterly distributions and required minimum required, 90% of those distributions to be, distributed to our shareholders.

 

Another huge benefit of our structure, there’s no ... I shouldn’t say no. There’s low minimum investment to investors. It’s really just one share, which is $100 a share currently. I think we’re trading just over $100 a share right now, and an investor simply has to buy one share and that would be the minimum for the investment.

 

Tax advantages of our structure, which we talked about, of opportunity zones, obviously, the deferral of your old capital gain, reduction of your old capital gain, as long as you invest by the end of this year and you hold for at least five years, the elimination of all capital gains on the appreciation of our units. Again, you have to hold our stock for 10 years to receive the zero, or the elimination of capital gains. The other two benefits I want to get into a little more detail on is 199A, which is a 20% tax deduction on distributions, or dividends that are distributed to shareholders. That is if depreciation doesn’t offset 100% of the income. Anything above depreciation, only 80% would be taxable, the other 20% would be waived under 199A, which is a pretty unique tax benefit for our structure because, typically, there’s all these limitations under 199A, but those limitations are waived for REITs and publicly traded partnerships. Obviously, we’re a publicly traded partnership and those limitations are waived.

 

The next benefit, which I think is probably the second most important tax benefit of OZ structures and having the right OZ structure, is no depreciation recapture. You’re receiving depreciation every year, which is offsetting income, and as long as you hold our stock for at least 10 years, there is no depreciation recapture. You’re getting the benefit every year, and if you hold our stock for 10 years, 15 years, 20 years, whatever how long you decide to hold it and you sell, as long as you hold for at least 10 years, there’s no depreciation recapture, which is a huge benefit for shareholders.

 

The next column is talking ... is the being listed on the New York Stock Exchange, the benefits of that. Obviously, having better transparency, having SEC reporting is a huge benefit for shareholders and advisors for these shareholders, because you’re getting better transparency on reporting and information. The second benefit of being publicly traded is the ease to be able to invest in our structure. We call it one-click investing. You simply have to log on to your brokerage account and buy this stock like any other publicly traded stock, and when you purchase our stock, you automatically made a valid opportunity zone investment, as long as you made it within 180 days of receiving your capital gain. Again, because it’s one-click investing, there’s no subscription agreement, there’s no wiring money to us, you simply just have to open your brokerage account and buy our stock and you made the investment. It’s really a one-click investment tool.

 

The next thing that I think is important to talk about, why being publicly traded is important, is having control of your exit. In opportunity zone, all the other structures out there are closed-end structures, and you’re relying on a manager to decide when they’re going to sell that real estate, when you’re going to be able to liquidate and be able to get out of that investment. In our structure, we put the shareholders in control. The shareholders get to sell their stock like any other publicly traded stock. If they want to leave early, before 10 years or before five years or even before a year, they simply can just sell their stock on the open exchange and get liquid and be able to get out of their position, in whole or part. Having that ability is huge for investors, and why many of our investors invest with us is because they want to know that they have that ability to get out whenever they want.

 

 

In addition to getting out early, the other big benefit, which is even a bigger benefit, is the ability to be able to stay in the investment for a longer period of time. Most structures have anywhere between a 10 and 13-year life of their funds, but if the fund is giving tax-free distributions and the stock is growing tax-free, because you’re holding this for more than 10 years, you’re going to want to hold this for more than a 10 or 13-year period. You’re going to want to hold it for longer than 20 years because of those tax benefits that you’re receiving on an annual basis. That’s one of the big differences of our structure compared to everybody else, is that you have the ability to stay in as long as you want and you have the ability to control when you want to exit.

 

Because we’re publicly traded, you also have the ability to possibly be able to borrow against your stock as well, which is another nice benefit of being a publicly traded company. Obviously, it depends where your brokerage house is and what your ability to be able to borrow off equity is. It’s on a case-by-case basis, depending on what brokerage firm you’re at. Last benefit of being a New York Stock Exchange listed company is both accredited and non-accredited investors have access to the structure. All other opportunity zone structures, you have to be an accredited investor. that again, gives everyday Americans the opportunity to be able to participate in the opportunity zone program.

 

The last column which talks about Belpointe’s advantages, stuff that we’re doing that really separates ourselves in addition to the stuff we talked about by being listed on the exchange or having the PREP structure is things that we’ve set in place ourselves from the very beginning. We wanted to have a very low management fee, our annual management fee is only 75 basis points so it’s 3/4 of 1%, which most of our competitors are anywhere between 1.5% to 2.5% is their management fee. So obviously, we’re anywhere from half to 63% less than most of our competitors. Our carried interest is only 5%, where many of our competitors are anywhere from 15 to 25% or sometimes even more. We’re simply charging 5% carried interest and that’s on the real estate itself, that if the stock moves up, we’re not getting 5% of that profit, we’re simply getting the investments that we’re making. We charge no investor servicing fees, which a lot of funds out there charge an investor servicing fee, which is really just another management fee to pay the broker-dealers, so we don’t have that investor servicing fee. We also don’t have capital calls, which is actually a big factor, it really separates us from everybody else. Many funds out there have a capital call, so if they need more capital, they’ll have to call capital, and investors obviously don’t like surprises, and sometimes they may not have additional capital gains ready to go if a capital call was made, so that’s a nice feature that we do not charge, we do not call for capital if more capital’s needed.

 

One of the biggest things that we’re excited about at Belpointe and one of the reasons why we converted from a REIT structure to a publicly traded partnership structure is our ability to acquire other opportunity zone funds and their assets, so that allows us to acquire stabilized cash flowing opportunity zone deals through these acquisitions. So let’s get to the next slide, this really separates us from everybody else, and because we are a publicly traded and we’re a publicly traded partnership, it allows us to be able to do these acquisitions. So what these acquisitions are is ... earlier on the conversation, we talked about the regulations only allows opportunity zone structures to either invest in opportunity zones either through ground-up construction or substantial improvement, mean a substantial improvement test where you’re renovating a building and putting a lot of capital into those projects, which comes with a lot of risk, and the biggest risk in opportunity zone investing is construction risk. With this structure and our ability to acquire stabilized opportunity zone deals by acquiring the parent company is really a game changer for what we’re doing and greatly reduces the risk because we don’t have the construction risk for those properties because they’re already built by somebody else and we don’t have the lease-up risk as well, where we’re trying to figure out if we bought ... there’s some funds out there who bought pre-CO deals that have been built by someone else but then are not leased up yet, we don’t have that risk as well, because our properties that we’ll be buying will not have any of those construction risk or the lease-up risk.

 

So why does that work and how is it even possible? So let’s go through the three reasons why, how it works and why it’s a win-win for everybody from the target company to our shareholders. So, number one, the sponsors of these other opportunity zone structures either have one or multiple deals and typically it takes about two years to build a project, and then once it’s stabilized, they’re holding the asset for additional eight more years and that’s because they have to hold it for a total of 10 years to receive the full opportunity zone benefit. In our structure, being able to make these acquisitions using our stock as a commodity, as almost like cash, we’re able to make these acquisitions of other QOFs which allows us to allow the sponsor to get out of their investment eight years faster than they normally would. So by providing that liquidity for the sponsor, they built the project, they created the value, they don’t want to hold for another eight more years, they want to be able to get their carried interest, their profit of the real estate eight years faster, so we provide that ability for that sponsor, so that’s number one, and that’s why sponsors are excited about what we’re doing.

 

 

Number two, this also benefits their shareholders because now those shareholders are going to receive the same benefits as our unitholders. They’re going to get the greater diversification, they’re going to get liquidity, they’re going to be able to borrow against their security, they’re going to get lower fees, they’re going to get the 199A tax benefit, so they’re going to get the same benefit as our shareholders but they’re selling the security to us or the assets to us at the fair market value, so they’re actually going to recognize their profit and they’re going to be able to get ... so they’re going to get a recognized of the fair market value, so whatever the fair market value is when we’re buying that real estate, that’s what they’re receiving, and it ends up being a tax benefit for them because they get to lock in their profit without losing any of their opportunity zone tax benefits. So they’re recognizing their increased value, they’re not losing their tax benefits and then they get all the other benefits of our structure, which we talked about earlier today.

 

The third benefit is for our unitholders, people who own our shares. They’re getting the benefit because instead of waiting the typical two or three years to start getting cash flow from their investment, they’re going to receive cash flow immediately because they’re getting cash flow from these stabilized assets. So again, you’re still getting their opportunity zone tax benefits, you’re not losing that because we’re making these acquisitions, they’re still receiving that, but they’re just getting cash flow much quicker because we’re ... instead of building everything, we’re acquiring some of our assets. So we are still going to, just take a step back, we’re still going to develop projects and we’re going to show some of the projects later in this webinar, we’re still going to develop like everybody else, but in addition to the traditional renovation or ground-up construction, we are going to also acquire stabilized opportunity zone deals by acquiring the QOFs of the parent company.

 

So let’s go to the next slide which really talks about our investment strategy. So our investment strategy is pretty simple, we’re using data analytics from really 2010 through today, we want to see where the markets have changed over the last 11 years. The census tracks were really set on 2010-2011 data, and we can see what happened in the last 10-11 years, with these census tracks and where the growth is, so looking at the analytics and understanding the markets is an important factor for us. So we’re mostly investing in metropolitan areas within 75 miles of a metropolitan city using the data that we talked about. So having the proper geographic diversification obviously is important for what we’re looking to do because we’re planning on having many opportunity zone investments either ground up or buying stabilized assets.

 

The next category is obviously stabilized assets which I just talked about, obviously a game changer for OZ investors because they’re getting cash flow immediately when we buy these acquisitions, which we’ll start buying sometime next year.

 

Asset classes, we are invested in mostly multifamily, we do have some non-multifamily currently, a lot of those non-multifamilies are tied to multifamily projects, so even though we own non-multifamily, it’s really a multifamily focus is our investment strategy. We expect about 85% of our investments to be multifamily and then the other 15% will be diversified through different asset classes.

 

Investment strategy, and really platforms that we’re using is a franchise platform, which is finding a developer that’s at another company in a different market that we want to be in and bringing them to Belpointe and they’ll open up a Belpointe office in that region. We also have a programmatic platform, which is something that’s been a big tool for us to find non-market deals, where we’ll sign a JV with a local partner, and we have a couple of these where that local partner, any opportunity zone deal that they find either on the market or off-market, and mostly, we’re investing in non-market deals, these non-marketed deals, we’re going to get those deals from our local partner, they’re the ones who have the on the ground intel and are finding off-market deals, so having these programmatic platforms are a huge advantage for our investment strategy because we’re able to get deals that are not listed on the exchange, sorry, listed on the market. So that’s been a huge benefit for us to find off-market deals by having these programmatic partners because they have a responsibility, really as exclusivity, to bring those deals to us first before they ... and then if we decide to do that deal with them, with us, if we decide to do that deal with them, I should say, then the deal’s already inked up. If we decide not, we decided to pass on the deal, then the programmatic partner can invest with another institutional partner or another OZ funds and do that deal without us, but we have first right to those deals. Strategic locations, again, part of that geographic diversification and investing around the country. We’re typically building in field locations, in I would say hard to build areas, more urban areas and really looking for that rent growth and job growth and population growth in the markets that we’re investing in.

 

 

Obviously, our underwriting is super detailed, obviously from demographics to employment data, looking at the risk factors and obviously location, location, location are important factors in looking at these data analytics and understanding the fundamentals of each market. We tend to ... you’ll see our... when we get to the asset deck, we tend to invest in markets multiple times because once we get to know an opportunity zone and that market around that opportunity zone and once we think it’s an opportunity zone that we want to invest, we want to invest multiple times in that market because we’re going to be raising capital and a lot of capital over the next five years, this allows us to get a real hold in the market, get to understand that market really well and build multiple projects in that market, and we’ll talk about that in a couple of slides down.

 

Risk mitigation, I don’t want to spend too much time, so I want to leave some time for some questions at the end, but real quick, having that AvalonBay team which we talked about before, in-house allows us to have development and construction oversight, which is crucial in opportunity zone investing, because opportunity zone investing, except for our ability to buy stabilized assets, the traditional opportunity zone investing is heavy construction, either brand new construction or renovation, heavy renovation, so it’s important to have that team in place. And that team has been with me for 11 years, so this is not a new team, we’ve been investing for a long, long time and we’ll show you one of the deals that we built in ‘15 and sold in ‘17. Obviously, risk mitigation, you got to have diversification, you got to have the right asset class, which is for us is multifamily, the correct amount of leverage, we typically have around 65% leverage when we’re going into construction and then once we stabilize, when the asset value goes up and we still have the same loan amount, we’re looking somewhere less than, somewhere around that 50% or less on a loan-to-value once we’re stabilized.

 

Again, we talked about before, the lower fees, having only 75 basis points greatly reduces risk because the drag on the fee is half compared to our, compared to many of our competitors. Again, risk mitigation, we talked about being able to acquire stabilized opportunity zones and because we’re, stabilized opportunity zone deals, and because those deals are stabilized already, we eliminated the construction risk and also the lease-up risk, which obviously is a huge risk mitigation tool, and to me, probably the most important piece of risk mitigation, because the biggest risk in opportunity zone investing is construction risk. And there is some lease-up risk as well which we’re eliminating, but really the construction risk is the big factor when it comes to risk mitigation. Obviously, any successful investor will tell you asset diversification, being diversified both on geographic and the type of assets you’re investing in, we believe multifamily has the lowest risk and best reward for that risk so that’s why a lot of our focus is on multifamily, but we will, down the road acquire some non-multifamily, but it will be limited amount.

 

Cody Laidlaw: So Brandon, I think this is a good time for me to interrupt you here. So, to everybody who’s in attendance, obviously Brandon is going through a lot of information, so if you’d like anybody from Belpointe, a Belpointe rep, specifically from OZ to contact you after this webinar, all you have to do is type “yes” into the chatbox. So again, anybody in attendance, if you want somebody from Belpointe to personally reach out to you to discuss the opportunity zone structure that Brandon is going into great depth, just type “yes” into the chatbox. Additionally at the end, probably 10 to 15 minutes before we end this, there’s going to be a Q&A, so if you have questions, type the questions into the chatbox, I’m getting a lot already, but it is private, so only I can see it. So again, type yes if you want somebody to reach out and if you have questions that you want Brandon to answer at the end, please also type those questions into the chatbox. Back to you, Brandon.

 

Brandon Lacoff: Thanks Cody. So real quick, I just ... I know we went over a lot of information, we talked about what the basics of OZ are, what separates us because of our fees, the management team, our ability to acquire stabilized opportunity zone deals which are obviously a game changer for us and that’s part of the reason why we converted our structure from a REIT structure which would not allow us to make these acquisitions into a publicly traded partnership structure, which allows us to make these acquisitions. So we’ve made the changes that we need to make to be more nimble. Those changes are completed, we are obviously raising capital or continue to raise capital almost similar to open mutual funds, and we’re happy to answer those questions and get into those details, but I wanted to make sure I hit the high level points, which I did today, and I do want to talk about some of the deals we’re investing in, because even though opportunity zones are great and the tax benefits are great, you still have to have great investments.

 

So real quick, let me just run through some of the investments we had, these are not all of the investments, and obviously we have some more in the pipeline, but the ones that I wanted to hit today is Sarasota, Florida. We have a couple of deals in Sarasota, Florida. Actually, I think it’s four deals right now, and the first one is 1991 Main Street. We’ve begun construction on 1991, and you can read it real quick but it’s 418 apartments with over 55,000 square feet of retail, and we’re excited about some of the tenants we’re working on, and we’ll be announcing hopefully soon, some of those tenants in the near future, probably sometime in the first quarter or second quarter of next year. But again, it’s a large two-tower multifamily, like I said, 418 plus, apartments with amenity and retail, I think we’ll have some restaurants on the first floor, which will be a nice amenity to our residents above.

 

 

We also, this is right next door to a large parking garage, which will give us over 700 parking spaces, so again, phenomenal project, really excited about this project. It’s right on Main Street in Sarasota, Florida. So if anybody knows Sarasota, Florida, Main Street is where the nightlife is, it’s where all the business is, where the County Courthouse is, not that many blocks west, I think it’s seven or eight or nine blocks west is the Ritz Carlton, which is the waterfront of Sarasota, so phenomenal location. I think a lot of people are surprised that downtown Sarasota is an opportunity zone, but it’s gone through a lot of changes in the last 10, 20 years. So it is deserving of opportunity zone and this investment.

 

Diagonally across the street is 1700 Main Street, again, the same street, phenomenal location, a little bit closer to the water, about a block and a half, and we’re going to build over 160 apartments here. This is in the early development stages, we’re excited about what’s going on with this development as well, it’s going to be a sister building to the other 418 apartments we’re building. I talked a little bit about some of the non-multifamily that we bought, that was part of developments, so you can see in the middle here, where the cars are, there is actually a bank building there, which has office, two levels of office above the retail bank. So we’re excited about renovating that building, which is going to be part of this overall development.

 

And then right behind that building is this building, which is 1701 Ringling, which again is an office building, non-multifamily. We bought this building as part of the 1700 Maine because we needed the development rights to be transferred over. So we paid about $6.8 million for this building, the development rights are probably worth something around $2.5 to $3 million. Which obviously we’re moving that basis over to 1700, which means we paid about $4 million for this building. This building is 50% leased. We actually bought it at a bankruptcy through Frontier, when they went through bankruptcy. It was a sale-leaseback, so they leased back 50% of the space and they’re paying 100% of the expenses. So we’re obviously very excited about this acquisition because we bought the building for $4 million after moving the development rights off. And because of that, the land alone, because it owns a parking lot across which we can develop, and this land alone is worth $4 million or greater. So we practically bought the building for itself, the building itself for about zero. So we’re excited about this acquisition. Now, I just want to explain why we bought this office building when typically we would not buy an office building. We bought this because we needed the development rights, and we were able to buy the building for really a zero basis when it comes to the structure itself. We will be putting a couple million dollars into renovating this building so we can lease up the remaining space, and then once we lease up the remaining space, the building hopefully will be 90% to 100% leased. And we’ll end up receiving, when and if the building becomes 100% leased, we’ll actually receive 150% of the expenses on the building because we’re already receiving 100% from Frontier, and when we lease up the other 50% of the space, we’ll be able to get CAM charges for the remaining space, which will allow us to get over 100% of the expenses covered. So, again, phenomenal location, great building. And it’s an important factor for Frontier because all their telecommunications runs through this building. The cell phone towers, that is their switches for 911 and all that kind of stuff. So it’s a critical building, they’re not going anywhere, and if they do file bankruptcy again, another company or the federal government would have to come in, because 911 is a safety issue for the community, so this building is not going anywhere.

 

Saint Pete Florida. See how much time we have. I want to run through real quick, because we only have about 15 minutes left. Saint Pete Florida again, 260-plus units, it’s at the EDGE District, which is near the Tropicana Fields, phenomenal location, again, half a block away from Central Ave, which is where all the nightlife is and the restaurants and entertainment. So it’s a phenomenal location. We’re excited about this project. It’s actually right across the street from related projects that they built, which is, believe it or not, is a non-opportunity zone deal right across the street. So we’re right on the corner of opportunity zone, and all the benefits that Saint Petersburg, Florida provides its residents. It’s just a huge, huge opportunity to invest in this market, and we’re excited because of what’s going on in the growth of the Tampa and Saint Pete market.

 

Nashville, Tennessee, real quick. This is on the edge of The Gulch, which is a happening downtown, Nashville urban area. Nashville is exploding, employment is exploding, companies are moving down to both the Tampa market and the Sarasota market, as well as Nashville market. So we’re extremely excited about this project as well. We have a great local partner who again, is a programmatic partner, so we have this deal, and in addition to that deal we also have, which we’re not showing yet, the location, because we’re buying some more properties in that neighborhood, but we also have another deal that’s on the east side of Nashville, looking at downtown Nashville. Again, we’re excited about both Nashville deals and our partnership with our local partner in Nashville. So we’re excited about all the Nashville deals and the overall market.

 

 

We also have some projects that we’re working on up at University of Connecticut, which is Storrs, which is the main campus in UCONN. The reason why I kind of bring this one out, it’s a little bit different than typically we would do. We don’t typically do student housing, but it’s such a high barrier to entry market, University of Connecticut. Approximately 82% of the ... more than 82% of the students actually live on campus, where a typical university would be around 60%, and that’s because there is ... the supply that they’re out there, there’s only been one project that’s been built in the last 50 years. And the supply that’s out there, it’s just ... it’s not quality supply. It’s old, un-renovated and just needs ... it’s just not a great product. The University is busting at the seams. Needs more off-campus housing. Juniors and seniors do not want to live on campus, even though they’re more or less forced to, or if they do, they’re living in 1940-1950’s product, or they’re driving 25 minutes away to get off-campus housing, which is really not safe for the kind of weather that upstate Connecticut has. So, we’re excited about this market. It’s in an opportunity zone. We’re just north of the north side of the campus, and we’re excited about what we’re doing there and what the future brings for, not just for this project but for other projects that we hope to find in that market.

 

Last thing, and then I think we have like 10 minutes for questions is, I wanted to show this one project real quick. This is called Baypointe. We built this project in ‘15, 2015. We sold it in 2019. It was actually completed in 2017. Which obviously was before the opportunity zone regulations came into effect. But we sold in ‘19. We did not get the tax benefits of opportunity zone, but it is an opportunity zone. It’s on the direct waterfront as you can see the boats. We did phenomenally well in this project. We built it for $39 million, and we actually sold it for north of $50 million. And just as an example of what we do, you can see in the picture, you have these lofts, where these things are popping up out of the roof.

 

Again, one of the things that we try to do in every building, we put lofts in our units, which really don’t cost that much more, but allows people to have, their living rooms to 18-foot ceilings in their units plus have a private roof deck on the top of the building, something that we’re doing in in Sarasota and Nashville and many other markets that, where we can do it, we will do it, it creates a lot of value, and for not a lot of cost. And we typically get anywhere from $1,000 to $1,500 more a month for these penthouse lofts. So I just wanted to show that as an example of our track record and a project that was an opportunity zone that we did, like I said in 2015, and completed in ‘17 and sold in ‘19. And you can see kind of the success we’ve had on this particular project and others.

 

Cody, you want to go through the questions real quick. So I know we have about …

 

Cody Laidlaw: Perfect. Yep. So just as a reminder, anybody who wants somebody from Belpointe to reach out to them following this webinar, please type “yes” into the chatbox. Alright, but let’s get to the questions. So first question. And a lot of people have this along the similar lines. Average daily volume is now over 20,000 shares. Do you have any idea who all these sellers are who do not want the long-term OZ benefits? So along the same lines, just to cover everybody’s question, can you explain how we’re trading and also raising capital? So go ahead and answer those.

 

Brandon Lacoff: Yeah. So I’m sure you asked those questions so they’re really kind of together. So we’re issuing shares on an ongoing basis. The best way to describe is a IPO, that’s an ongoing IPO, which I know is unique, and I’m sure it’s been done before, but we’ve never seen it done before. And our attorneys and other people have not seen it done before. So it’s a unique structure, it’s almost like an open mutual fund. So we are issuing units on an ongoing basis. And a lot of those units are issued to market makers. Those market makers are making a market in the stock, both on the bid and the ask. And then obviously when an investor comes in, they’re buying those units from market makers, most of the time. So most of the shares being sold are not OZ investors who are liquidating. It is, most of the time, it’s a market maker who’s buying inventory from us, and then selling the security to make the market. To make liquidity, make float in the stock. And that’s why the stock stays very true to NAV and how the stock trades and how it works.

 

Cody Laidlaw: Perfect. Along similar lines, just to clarify. So purchasing publicly traded units, from Belpointe OZ, even if it’s from a reseller of the stock, does that qualify for the opportunity zone program?

 

Brandon Lacoff: 100%. It’s in the regulations as well. But it doesn’t matter if you’re buying from the market maker, you’re buying it through subscription through us directly, or you’re buying from another seller, as long as you bought the stock. It doesn’t matter. You get the OZ benefits.

 

Cody Laidlaw: Got it. Simple question. What’s the minimum investment?

 

Brandon Lacoff: It’s simply one share. So the stock is trading just over $100 right now. So if you buy stock, just over 100 bucks you made a qualified opportunity zone investment by just buying one share.

 

 

Cody Laidlaw: Okay, does the capital gain you invest have to come from the sale of one investment, or can it come from several?

 

Brandon Lacoff: It can come from several, it doesn’t matter how many investments you have. So it can come from several.

 

Cody Laidlaw: Perfect. How do you let the IRS know about your deferral?

 

Brandon Lacoff: So an individual would file an 8949 and 8997, which gets filed with your next year’s tax return. So for this year, if someone makes an investment, when they file their 2021 tax returns, obviously you have a capital gains, so you have to file 8949 anyway, but you would make the election of the OZ in that form, and then in addition to that, you would describe what you invested in, which is the 8997, which again, is attached to the same tax return.

 

Cody Laidlaw: Okay. Very commonly asked question here. If a unit holder sells a portion of their OZ units, does that trigger an inclusion event for the entire investment?

 

Brandon Lacoff: No, you would only have an inclusion event for that portion that you sold. It would not be an inclusive event for the whole investment. so it’s first-in, first-out, which accountants call FIFO. So only portion, so if you bought stock three times over, let’s say a year period, or a three-year period, when you sell your first shares that you bought would be the ones that would be exiting. And it does not trigger the whole amount. You’d only trigger the portion that you sold.

 

Cody Laidlaw: Perfect, nice and easy. I know this is a recap question. You went over this. How is your investment strategy different than of your private structures, aka your competitors?

 

Brandon Lacoff: Yeah, I mean, it’s very similar to our competitors when it comes to new construction or substantial improvement tests when we’re renovating. Our strategy, when it comes to ground-up construction, like I said, we’re executing it a little bit different than our competitors, so we’re building larger apartment buildings on most markets. Obviously, not student housing, because you’re not going to get paid for the larger units. But typically we build larger units, we build those penthouses, like I talked about, everything you touch and feel in the apartment, we upgrade, so I think that separates us. So that’s really when it comes to the traditional construction and renovating projects, but obviously what makes us really different is buying stabilized opportunity zone deals, that’s a unique feature for us because we’re a publicly traded partnership structure and the ability to be able to acquire stabilized opportunity zone deals by acquiring their parent company is really a game changer and something that separates us from everybody else, because those other structures they are private, non-liquid, non-traded, non-publicly-traded companies, so that’s probably the biggest difference between us and everybody else.

 

Cody Laidlaw: Okay, and then with that unique acquisition model, why would a private fund manager want to be acquired by OZ?

 

Brandon Lacoff: The reason why they want to be acquired is because, if they’re going to get a profit, profit sharing in their deals, do you want that today or do you want to wait another seven, eight more years, sometimes even longer? So, for the sponsor, it’s a no-brainer because they’re getting their profit sharing seven to 10 years faster than they normally would, so that’s, for them, it’s a no-brainer. For their shareholders, it’s a no-brainer as well, because they’re going to get to recognize their gain, so they’re going to get to see what their profit is and be able to lock that profit in. There’s still obviously risk with our investment, but we’re going to give them a greater diversification, so that risk is going to be diversified over much more investments, which will help mitigate that risk once they realize their or recognize their gains in the old structure. So, it’s really a no-brainer for the sponsor and it’s a no-brainer for the LPs of that investment.

 

Cody Laidlaw: Perfect. So, two minutes left, so I’ll give you two questions. Question about the ultimate exit: At the 10-year mark and your structure being publicly traded, how do unit holders get their capital out?

 

Brandon Lacoff: They can just sell the stock, as easy as they had bought it, by logging on to a brokerage account and putting in the order in, they can sell the same way. So, whenever they’re ready to sell, if it’s year 10, if it’s something earlier or something later, whenever it is, the full control of the exit of the investment is in the shareholders’ hands. They literally just have to sell the stock like they sell any other publicly traded stock by logging on to their brokerage account or telling their advisor just to exit the investment.

 

 

Cody Laidlaw: Perfect, last question. One minute to go. Very timely. What’s the benefit of investing on, or prior to the end of this year?

 

Brandon Lacoff: Yeah. I mean, the big benefit is that 10% step-up basis, which reduces your old capital gain by 10%. So, if you invest by December 31st, which is end of next week, if you invest by the end of next week and you hold it for five years, or greater, you receive that 10% step-up basis, which reduces your old capital gain by 10%. If you don’t make that investment by the end of this year, you lose that one benefit, everything else you still receive, you just lose that one benefit.

 

Cody Laidlaw: Perfect, so that concludes the questions, as well as the webinar. So, thank you, Brandon. Thank you everybody in attendance, if you do have questions, my email is up on the screen as well as the phone number, feel free to reach out to me. So again, thank you everybody.

 

Brandon Lacoff: Thanks everybody. Thanks, Cody.