Belpointe PREP, LLC 10-K

Item 8. Financial Statements and Supplementary Data. TABLE OF CONTENTS Page No. Report of Independent Registered Public Accounting Firm (PCAOB Firm ID: 2468 ) 54 Consolidated Balance Sheets as of December 31, 2022 and 2021 55 Consolidated Statements of Operations for the years ended December 31, 2022 and 2021 56 Consolidated Statements of Changes in Members’ Capital (Deficit) for the years ended December 31, 2022 and 2021 57 Consolidated Statements of Cash Flows for the years ended December 31, 2022 and 2021 58 Notes to Consolidated Financial Statements 59 53 Table Of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Members of Belpointe PREP, LLC Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Belpointe PREP, LLC (the “Company”) as of December 31, 2022 and 2021, and the related consolidated statements of operations, changes in members’ capital (deficit) and cash flows for each of the years in the two-year period ended December 31, 2022, and the related notes to the consolidated financial statements (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Citrin Cooperman & Company, LLP We have served as the Company’s auditor since 2020. New York, New York March 31, 2023 54 Table Of Contents Belpointe PREP, LLC Consolidated Balance Sheets (in thousands, except unit and per unit data) December 31, 2022 December 31, 2021 Assets Real estate Land $ 38,741 $ 22,116 Building and improvements 17,843 16,256 Intangible assets 9,495 9,672 Real estate under construction 133,898 76,882 Total real estate 199,977 124,926 Accumulated depreciation and amortization ( 1,719 ) ( 629 ) Real estate, net 198,258 124,297 Cash and cash equivalents 143,467 192,131 Loans receivable from third parties — 3,462 Subscriptions receivable — 20,295 Other assets 12,270 1,241 Total assets $ 353,995 $ 341,426 Liabilities Debt, net $ — $ 10,790 Due to affiliates 5,803 1,544 Lease liabilities 7,126 2,000 Accounts payable 1,686 1,352 Accrued expenses and other liabilities 6,728 1,865 Total liabilities 21,343 17,551 Commitments and contingencies - - Members’ Capital Class A units, unlimited units authorized, 3,523,449 and 3,382,149 units issued and outstanding at December 31, 2022 and 2021, respectively 329,482 323,683 Class B units, 100,000 units authorized, 100,000 units issued and outstanding at December 31, 2022 and 2021, respectively — — Class M unit, one unit authorized, one unit issued and outstanding at December 31, 2022 and 2021, respectively — — Total members’ capital excluding noncontrolling interest 329,482 323,683 Noncontrolling interest 3,170 192 Total members’ capital 332,652 323,875 Total liabilities and members’ capital $ 353,995 $ 341,426 See accompanying notes to consolidated financial statements. 55 Table Of Contents Belpointe PREP, LLC Consolidated Statements of Operations (in thousands, except unit and per unit data) Year Ended December 31, 2022 2021 Revenue Rental revenue $ 1,391 $ 997 Total revenue 1,391 997 Expenses Property expenses 3,809 1,140 General and administrative 5,798 2,924 Depreciation and amortization expense 1,291 588 Total expenses 10,898 4,652 Other income (loss) Gain on redemption of equity investment — 251 Interest income 1,850 369 Other income (expense) ( 469 ) ( 7 ) Total other income (loss) 1,381 613 Loss before income taxes ( 8,126 ) ( 3,042 ) Provision for income taxes ( 112 ) — Net loss ( 8,238 ) ( 3,042 ) Net loss (income) attributable to noncontrolling interests 555 ( 93 ) Net loss attributable to Belpointe PREP, LLC $ ( 7,683 ) $ ( 3,135 ) Loss per Class A unit (basic and diluted) Net loss per unit $ ( 2.25 ) $ ( 7.64 ) Weighted-average units outstanding 3,416,527 410,194 See accompanying notes to consolidated financial statements. 56 Table Of Contents Belpointe PREP, LLC Consolidated Statements of Changes in Members’ (Deficit) Capital (in thousands, except unit and per unit data) Class A units Class B units Class M unit Total Members’ (Deficit) Capital Excluding Noncontrolling Total Members’ (Deficit) Units Amount Units Amount Units Amount Noncontrolling Interests Capital Balance at December 31, 2020 100 $ ( 102 ) — $ — — $ — $ ( 102 ) $ — $ ( 102 ) Issuance of units 2,132,039 213,204 100,000 — 1 — 213,204 — 213,204 Contribution from noncontrolling interest — — — — — — — 200 200 Exchange of Belpointe REIT, Inc. shares to Belpointe PREP, LLC Class A Units ( Note 2 ) 1,250,010 114,361 — — — — 114,361 ( 101 ) 114,260 Offering costs — ( 645 ) — — — — ( 645 ) — ( 645 ) Net loss — ( 3,135 ) — — — — ( 3,135 ) 93 ( 3,042 ) Balance at December 31, 2021 3,382,149 323,683 100,000 — 1 — 323,683 192 323,875 Balance 3,382,149 323,683 100,000 — 1 — 323,683 192 323,875 Issuance of units 141,300 14,130 — — — — 14,130 — 14,130 Contribution from noncontrolling interest — — — — — — — 433 433 Acquisition of ownership in CMC Storrs SPV, LLC ( Note 6 ) — — — — — — — 3,100 3,100 Offering costs — ( 648 ) — — — — ( 648 ) — ( 648 ) Net loss — ( 7,683 ) — — — — ( 7,683 ) ( 555 ) ( 8,238 ) Balance at December 31, 2022 3,523,449 $ 329,482 100,000 $ — 1 $ — $ 329,482 $ 3,170 $ 332,652 Balance 3,523,449 $ 329,482 100,000 $ — 1 $ — $ 329,482 $ 3,170 $ 332,652 See accompanying notes to consolidated financial statements. 57 Table Of Contents Belpointe PREP, LLC Consolidated Statements of Cash Flows (in thousands) 2022 2021 Year Ended December 31, 2022 2021 Cash flows from operating activities Net loss $ ( 8,238 ) $ ( 3,042 ) Adjustments to net loss Depreciation and amortization 1,291 588 Amortization of rent-related intangibles and deferred rental revenue ( 231 ) ( 109 ) Gain on redemption of equity investment — ( 251 ) Increase in due to affiliates 39 860 Decrease (increase) in other assets 676 ( 452 ) Decrease in accounts payable ( 186 ) ( 86 ) Increase in accrued expenses and other liabilities ( 2 ) 224 Net cash used in operating activities ( 6,651 ) ( 2,268 ) Cash flows from investing activities Development of real estate ( 39,596 ) ( 7,919 ) Repayment of loans receivable 38,413 — Funding of loans receivable ( 34,955 ) ( 3,462 ) Acquisitions of real estate ( 27,254 ) ( 52,076 ) Cash acquired from CMC ( Note 6 ) 87 — Other investing activity ( 225 ) ( 43 ) Cash acquired from Belpointe REIT, Inc. ( Note 2 ) — 14,251 Proceeds from redemption of preferred equity interest ( Note 2 ) — 3,462 Cash acquired from BPOZ 1991 Main, LLC ( Note 6 ) — 2,422 Net cash used in investing activities ( 63,530 ) ( 43,365 ) Cash flows from financing activities Proceeds from subscriptions receivable 20,295 — Proceeds from units issued 14,130 192,909 Repayment of debt ( 10,800 ) — Payment of offering costs ( 731 ) ( 544 ) Contributions from noncontrolling interests 268 — Other financing activities, net ( 360 ) 36 Short-term loan from affiliate — 39,000 Net cash provided by financing activities 22,802 231,401 Net (decrease) increase in cash and cash equivalents and restricted cash ( 47,379 ) 185,768 Cash and cash equivalents and restricted cash, beginning of year 192,346 6,578 Cash and cash equivalents and restricted cash, end of year $ 144,967 $ 192,346 Cash paid during the year for interest, net of amount capitalized $ — $ — See accompanying notes to consolidated financial statements. 58 Table Of Contents BELPOINTE PREP, LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 – Organization, Business Purpose and Capitalization Organization and Business Purpose Belpointe PREP, LLC (together with its subsidiaries, the “Company,” “we,” “us,” or “our”) was formed on January 24, 2020 as a Delaware limited liability company. We operate in a manner that allows us to qualify as a partnership for U.S. federal income tax purposes. We are focused on identifying, acquiring, developing or redeveloping and managing commercial real estate located within “qualified opportunity zones.” At least 90% of our assets consist of qualified opportunity zone property, which enables us to be classified as a “qualified opportunity fund” as defined in the U.S. Internal Revenue Code of 1986, as amended (the “Code”). We qualified as a qualified opportunity fund beginning with our taxable year ended December 31, 2020. We commenced principal operations on October 28, 2020. All of our assets are held by, and all of our operations are conducted through, one or more operating companies (each an “Operating Company” and together, our “Operating Companies”), either directly or indirectly through their subsidiaries. We are externally managed by Belpointe PREP Manager, LLC (our “Manager”), an affiliate of our sponsor, Belpointe, LLC (our “Sponsor”). Subject to the oversight of our board of directors (our “Board”), our Manager is responsible for managing our affairs on a day-to-day basis and for identifying and making acquisitions and investments on our behalf. Capitalization We were capitalized with a $ 10,000 investment by our Sponsor. We are offering our Class A units in our ongoing initial public offering (our “Primary Offering”) directly to investors. Our Primary Offering is a “best efforts” offering and we undertake closings on a rolling basis. We set our Primary Offering price at $ 100.00 per Class A unit. No later than the first quarter following the December 31, 2022 year end, and every quarter thereafter, we plan to calculate our net asset value (“NAV”) within approximately 60 days of the last day of each quarter (the “Determination Date”). If our NAV increases above or decreases below the price per Class A unit as stated in our prospectus, we will adjust the Primary Offering price, effective as of the first business day following its public announcement. The adjusted Primary Offering price will be equal to our adjusted NAV as of the Determination Date (rounded to the nearest dollar) divided by the number of Class A units outstanding on the Determination Date. Note 2 – Exchange Offer, Conversion and Merger During the year ended December 31, 2021, pursuant to the terms of an Agreement and Plan of Merger (the “Merger Agreement”), we conducted an offer to exchange (the “Offer”) each outstanding share of common stock (the “Common Stock”), of Belpointe REIT, Inc. (“Belpointe REIT”) validly tendered in the Offer for 1.05 of our Class A units, with any fractional Class A units rounded up to the nearest whole unit (the “Transaction Consideration”). The Offer was completed on September 14, 2021 (the “Exchange Date”). Following the Offer, and in accordance with the terms of the Merger Agreement, Belpointe REIT converted from a corporation into a limited liability company (the “Conversion”) named BREIT, LLC (“BREIT”). In the Conversion each outstanding share of Common Stock was converted into a limited liability company interest (an “Interest”) in BREIT. The Conversion was completed on October 1, 2021. Following the Conversion, and in accordance with the terms of the Merger Agreement, BREIT merged with and into BREIT Merger, LLC (“BREIT Merger”), our wholly-owned subsidiary (the “Merger”). In the Merger, each outstanding Interest was converted into the right to receive the Transaction Consideration. The Merger was completed on October 12, 2021. 59 Table Of Contents Prior to and in connection with the Offer and Merger (collectively, the “Transaction”), we entered into a series of loan transactions with Belpointe REIT, whereby Belpointe REIT advanced us an aggregate of $ 74.0 million evidenced by a series of secured promissory notes (the “Secured Notes”) bearing interest at a rate of 0.14 %, due and payable on December 31, 2021, and secured by all of our assets. Upon consummation of the Merger, BREIT Merger acquired the Secured Notes as successor in interest to Belpointe REIT and, effective October 12, 2021, we entered into a Release and Cancellation of Indebtedness agreement with BREIT Merger pursuant to the terms of which BREIT Merger cancelled the Secured Notes and discharged us from all obligations to repay the principal and any accrued interest on the Secured Notes. See “ Note 5 – Related Party Arrangements ” for additional details regarding the Secured Notes. The following table summarizes the carrying value of Belpointe REIT’s net assets on the Exchange Date (amounts in thousands). Schedule of Carrying Value Net Assets Belpointe REIT Assets Real estate under construction (1) $ 4 Cash and cash equivalents 14,251 Loan receivable to affiliate (1) (2) 24,773 Investment in real estate (3) 3,207 Other assets (1) 7 Total assets 42,242 Liabilities Due to affiliates (1) 256 Accounts payable (1) 17 Accrued expenses and other liabilities (1) 5 Total liabilities 278 Total net assets (4) $ 41,964 (1) Represents non-cash investing activity during the year ended December 31, 2021. (2) The Secured Notes, as further discussed in “ Note 5 – Related Party Arrangements, ” and respective accrued interest were eliminated upon the Exchange Date. (3) Proceeds from the redemption of Belpointe REIT’s preferred equity interests, as further discussed in “ Note 8 – Loans Receivable, ” were received on October 1, 2021. (4) Represents our noncontrolling interest in Belpointe REIT as of the Exchange Date relating to the shares of Belpointe REIT Common Stock that were not tendered. Upon consummation of the Merger, on October 12, 2021, the noncontrolling interest carrying value was reclassed to the Class A unitholders members’ equity. We obtained a controlling financial interest in Belpointe REIT on the Exchange Date and consolidated Belpointe REIT and its subsidiaries as of December 31, 2021. We accounted for the Transaction as an asset reorganization of entities under common control due to the fact that all of the voting ownership interests of Belpointe REIT were exchanged for voting ownership interests in the Company through the issuance of Class A units. Accordingly, the Transaction was accounted for at carrying value prospectively on the Exchange Date. The following table summarizes the components of the Common Stock exchanged as of December 31, 2021: Schedule of Components of the Common Stock Exchange Belpointe REIT Common Stock exchanged (1) 1,190.123 Exchange ratio 1.05 Belpointe PREP Class A units issued 1,249,629 Additional Belpointe PREP Class A units issued in lieu of fractional Class A units (2) 381 Total Belpointe PREP Class A units exchanged 1,250,010 Belpointe PREP Class A unit price (3) $ 100.00 Total Class A units issued in connection with the Transaction (4) $ 125,001,000 (1) Represents Belpointe REIT’s outstanding Common Stock exchanged in connection with the Transaction. (2) All fractional Class A units issued in the Transaction were rounded up to the nearest whole unit. (3) Belpointe PREP Class A unit Primary Offering price. (4) Represents non-cash financing activity during the year ended December 31, 2021. 60 Table Of Contents Note 3 – 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”) and Article 8 of Regulation S-X of the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). In the opinion of management, all adjustments considered necessary for a fair presentation of the Company’s financial position, results of operations and cash flows have been included and are of a normal and recurring nature. Basis of Consolidation The accompanying consolidated financial statements reflect all of our accounts, including those of our controlled subsidiaries. The portion of members’ capital (deficit) in controlled subsidiaries that are not attributable, directly or indirectly, to us are presented in noncontrolling interests. All significant intercompany accounts and transactions have been eliminated. We have evaluated our economic interest in entities to determine if they are deemed to be variable interest entities (“VIEs”) and whether the entities should be consolidated. An entity is a VIE if it has any one of the following characteristics: (i) the entity does not have enough equity at risk to finance its activities without additional subordinated financial support; (ii) the at-risk equity holders, as a group, lack the characteristics of a controlling financial interest; or (iii) the entity is structured with non-substantive voting rights. The distinction between a VIE and other entities is based on the nature and amount of the equity investment and the rights and obligations of the equity investors. Fixed price purchase and renewal options within a lease, as well as certain decision-making rights within a loan or joint-venture agreement, can cause us to consider an entity a VIE. Limited partnerships and other similar entities that operate as a partnership will be considered VIEs unless the limited partners hold substantive kick-out rights or participation rights. Significant judgment is required to determine whether a VIE should be consolidated. We review all agreements and contractual arrangements to determine whether (i) we or another party have any variable interests in an entity, (ii) the entity is considered a VIE, and (iii) which variable interest holder, if any, is the primary beneficiary of the VIE. Determination of the primary beneficiary is based on whether a party (a) has the power to direct the activities that most significantly impact the economic performance of the VIE, and (b) has the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. 61 Table Of Contents The following table presents the financial data of the consolidated VIEs included in the consolidated balance sheets as of December 31, 2022 and 2021, respectively (amounts in thousands): Schedule of Variable Interest Entities December 31, 2022 December 31, 2021 Assets Real estate Land $ 24,967 $ 5,127 Building and improvements 11,297 10,226 Intangible assets 6,725 6,731 Real estate under construction 133,773 76,332 Total Real estate 176,762 98,416 Accumulated depreciation and amortization ( 672 ) ( 35 ) Real estate, net 176,090 98,381 Cash and cash equivalents 124,159 188,608 Other assets 11,773 503 Total assets $ 312,022 $ 287,492 Liabilities Debt, net $ — $ 10,790 Due to affiliates 4,399 305 Lease liabilities 5,350 — Accounts payable 1,679 1,118 Accrued expenses and other liabilities 6,064 822 Total liabilities $ 17,492 $ 13,035 An interest in a VIE requires reconsideration when an event occurs that was not originally contemplated. At each reporting period we will reassess whether there are any events that require us to reconsider our determination of whether an entity is a VIE and whether it should be consolidated. Emerging Growth Company Status We are an “emerging growth company,” as defined in the Jump Start Our Business Startups Act of 2012 (“JOBS Act”). Under Section 107 of the JOBS Act, emerging growth companies are permitted to use an extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the “Securities Act”), for complying with new or revised accounting standards that have different effective dates for public and private companies. We have elected to use the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that we (i) are no longer an emerging growth company, or (ii) affirmatively and irrevocably opt out of the extended transition period provided in Section 7(a)(2)(B). By electing to extend the transition period for complying with new or revised accounting standards, 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 our consolidated financial statements and the accompanying notes to the financial statements. Actual results could materially differ from those estimates. Segment Reporting We operate in a single reportable segment which includes the development, redevelopment and managing of commercial real estate properties located within qualified opportunity zones. Therefore, we aggregate all of our real estate assets into one reportable segment. 62 Table Of Contents Allocation of Purchase Price of Acquired Assets and Liabilities Upon the acquisition of real estate properties we determine whether a transaction is a business combination, which requires that the assets acquired and liabilities assumed constitute a business. If the assets acquired are not a business, we account for the transaction as an asset acquisition. We capitalize acquisition-related costs and fees associated with our asset acquisitions, and expense acquisition-related costs and fees associated with business combinations. It is our policy to allocate the purchase price of properties to acquired tangible assets, consisting of land, buildings, fixtures and improvements, and identified intangible lease assets and liabilities, consisting of the value of above-market and below-market leases, as applicable, the other value of in-place leases, certain development rights and the value of tenant relationships, based in each case on their fair values. The fair value of the tangible assets of an acquired property is determined by valuing the property as if it were vacant, which value is then allocated to land, buildings and improvements based on management’s determination of the fair values of these assets. We measure the aggregate value of other intangible assets acquired based on the difference between the property valued (i) with existing in-place leases, adjusted to market rental rates, and (ii) as if vacant. Other factors considered include an estimate of carrying costs during hypothetical expected lease-up periods considering current market conditions and costs to execute similar leases. We consider information obtained about each property as a result of its pre-acquisition due diligence, marketing and leasing activities in estimating the fair value of the tangible and intangible assets acquired. In estimating carrying costs, we include real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up periods. We estimate costs to execute similar leases including leasing commissions and legal and other related expenses to the extent that such costs have not already been incurred in connection with a new lease origination as part of the transaction. In connection with the purchase of real property for development use, development rights are often transferred from one party to another to provide additional density. This transfer of rights allows an entity to permit, construct and develop additional dwelling units. Accordingly, we allocate a portion of the purchase price to these development right intangible assets based on the value attributed to the land of which we do not hold title to but are provided density transfer rights over. These rights are amortized to amortization expense over the useful life based on the respective contract. If the rights are transferred in perpetuity and there are no legal, regulatory, contractual, competitive, economic or other factors that limit its useful life, we consider the intangible asset indefinite-lived and therefore do not amortize. The total amount of other intangible assets acquired are further allocated to in-place lease values and customer relationship intangible values based on management’s evaluation of the specific characteristics of each tenant’s lease and our overall relationship with that respective tenant. We consider the nature and extent of our existing business relationships with the tenant, growth prospects for developing new business with the tenant, the tenant’s credit quality and expectations of lease renewals (including those existing under the terms of the lease agreement), among other factors. We amortize the value of in-place leases to depreciation and amortization expense over the remaining term of the respective leases (as well as any applicable below market renewal options). The value of customer relationship intangibles will be amortized to expense over the initial term in the respective leases, but in no event will the amortization periods for the intangible assets exceed the remaining depreciable life of the building. Should a tenant terminate its lease, the unamortized portion of the in-place lease value and customer relationship intangibles would be charged to expense in that period. The values of acquired above-market and below-market leases are determined based on our experience and the relevant facts and circumstances that existed at the time of the acquisitions and are recorded based on the present values (using discount rates which reflect the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the leases negotiated and in place at the time of acquisition of the properties, and (ii) our estimate of fair market lease rates for the properties or equivalent properties. Such valuations include consideration of the non-cancellable terms of the respective leases (as well as any applicable below market renewal options). The values of above and below-market leases associated with the original non-cancelable lease term are amortized to rental revenue over the terms of the respective non-cancelable lease periods. The portion of the values of the leases associated with below-market renewal options, that are likely to be exercised, are amortized to rental revenue over the respective renewal periods. 63 Table Of Contents When we acquire leveraged properties, the fair value of the related debt instruments is determined using a discounted cash flow model with rates that take into account the credit of the tenants, where applicable, and interest rate risk. Such resulting premium or discount is amortized over the remaining term of the obligation and is included in Other income (expense) in our consolidated statements of operations. We also consider the value of the underlying collateral taking into account the quality of the collateral, the credit quality of the tenant, the time until maturity and the current interest rate. The determination of the fair value of the assets and liabilities acquired requires the use of significant assumptions with regard to current market rental rates, discount rates and other variables. Real Estate Real estate is carried at cost, less accumulated depreciation. Expenditures which improve or extend the useful life of the assets are capitalized, while expenditures for maintenance and repairs, which do not extend lives of the assets, are charged to expense. Deprecation is calculated using the straight-line method based on the estimated useful lives of the respective assets (not to exceed 40 years). Project costs directly related to the construction and development of real estate projects (including but not limited to interest and related loan fees, property taxes, insurance and legal costs) are capitalized as a cost of the project. Indirect project costs that relate to projects are capitalized and allocated to the projects to which they relate. Pertaining to assets under development, capitalization begins when both direct and indirect project costs have been made and it is probable that development of the future asset is probable. If we suspend substantially all activities related to the project, we will cease cost capitalization of indirect costs until activities are resumed. We will not suspend cost capitalization for brief interruptions, interruptions that are externally imposed, or delays that are inherent in the development process unless there are other circumstances involved that warrant a judgmental decision to cease capitalization. In addition, capitalization of project costs will cease when the project is considered substantially completed and occupied, or ready for its intended use (but no later than one year from cessation of major construction activity). Upon substantial completion, depreciation of these assets will commence. If discrete portions of a project are substantially completed and occupied and other portions have not yet reached that stage, the substantially completed portions are accounted for separately. We allocate costs incurred between the portions under construction and the portions substantially completed and only capitalize those costs associated with the portions under construction. Impairment of Long-Lived Asset s 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 equal to the shortage of the book value to fair value, calculated as the discounted net cash flows of the property. Abandoned Pursuit Costs Pre-development and due diligence costs incurred in pursuit of new development and acquisition opportunities, which we deem to be probable, will be capitalized in Other assets in our consolidated balance sheets. If the development or acquisition opportunity is not probable or the status of the project changes such that it is deemed no longer probable, the costs incurred will be expensed. Loans Receivable We evaluate our loans receivable on a periodic basis to assess whether there are any indicators that the value may be impaired. A loan is considered impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due from the borrower in accordance with the original contractual terms of the loan. If a loan receivable is deemed impaired, we would be required to establish a reserve for losses in an amount deemed to be both probable and reasonably estimable. 64 Table Of Contents Interest income on real estate loans and notes receivable is recognized on an accrual basis over the lives of the loans or notes. We stop accruing interest on loans when circumstances indicate that it is probable that the ultimate collection of all interest due according to the loan agreement will not be realized. Initial Direct Cost s Initial direct costs are incremental costs of a lease that would not have been incurred had the lease not been executed. Such costs include lease incentives and leasing commissions. Costs incurred to obtain tenant leases are amortized using the straight-line method over the term of the related lease agreement. If the lease is terminated early, the remaining unamortized deferred leasing cost is written off. Initial direct costs are capitalized in Other assets in our consolidated balance sheets. Deferred Financing Costs Deferred financing costs include fees and other expenditures necessary to obtain debt financing and are amortized on a straight-line basis, which approximates the effective interest method, over the term of the loan. In situations where financing is in place, deferred financing costs are generally presented as a direct deduction from the related debt liability and any unamortized financing costs are generally charged to earnings when debt is retired before the maturity date. Deposits for pending financings are presented within Other assets in our consolidated balance sheets. Cash and Cash Equivalents Cash and cash equivalents consist of cash held in major financial institutions, cash on hand and liquid investments with original maturities of three months or less. Cash balances may at times exceed federally insurable limits per institution, however, we deposit our cash and cash equivalents with high credit-quality institutions to minimize credit risk exposure. 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 our consolidated balance sheets to our consolidated statements of cash flows (amounts in thousands): Schedule of Restricted Cash and Cash Equivalents December 31, 2022 December 31, 2021 Cash and cash equivalents $ 143,467 $ 192,131 Restricted cash (1) 1,500 215 Total cash and cash equivalents and restricted cash $ 144,967 $ 192,346 (1) Restricted cash is included within Other assets in our consolidated balance sheets. Subscriptions Receivable Subscriptions receivable consists of units that have been issued with subscriptions that have not yet settled. As of December 31, 2022 and 2021, there was approximately zero and $ 20.3 million, respectively, in subscriptions that had not yet settled. All of these funds were settled prior to the filing of this report. Subscriptions receivable are carried at cost which approximates fair value. Fair Value Measurements 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. 65 Table Of Contents 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. Non-controlling Interest A non-controlling interest in a subsidiary (minority interest) is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements and separate from the parent company’s equity. In addition, consolidated net loss is required to be reported at amounts that include the amounts attributable to both the parent and the noncontrolling interest and the amount of consolidated net loss attributable to the parent and the noncontrolling interests are required to be disclosed on the face of the consolidated statements of operations. Organization, Primary Offering and Other Operating Costs Organization costs are expensed as incurred. Offering expenses include, without limitation, legal, accounting, printing, mailing and filing fees and expenses, fees and expenses of our escrow agent and transfer agent. Offering costs, when incurred, will be charged to members’ equity against the gross proceeds of an offering. Our Primary Offering costs for the years ended December 31, 2022 and 2021 were $ 0.6 million and $ 0.6 million, respectively, of which less than $ 0.1 million and $ 0.1 million, respectively, was unpaid and represents a non-cash financing activity. We became liable to reimburse our Manager and its affiliates, including our Sponsor, when the first closing was held in connection with our Primary Offering, which occurred in October 2021. Pursuant to a management agreement by and among the Company, 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 an investment, whether or not we ultimately acquire or originate the 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 employee and cost sharing agreement by and among the Company, our Operating Companies, our Manager and our Sponsor (the “Employee and Cost Sharing Agreement”), 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. The expenses are payable, at the election of the recipient, in cash, by issuance of our Class A units at the then-current NAV, or through some combination of the foregoing. Reclassifications Certain prior period amounts have been reclassified to conform to the current period presentation. Below-market rent liabilities, net were previously presented separately, but are now included within Lease liabilities in the consolidated balance sheets. Risks and Uncertainties Demand for multifamily and mixed-use rental properties is subject to uncertainty as a result of a number of factors, including, among others, increasing interest rates, the availability of credit, higher rates of inflation, the rate of unemployment, ongoing supply chain disruptions, and the continuing impact of COVID-19. The potential effect of these and other factors 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 government and regulatory policies applicable to us. We are closely monitoring the potential impact of these and other factors on all aspects of our investments and operations. 66 Table Of Contents Other Assets and Liabilities Other assets in our consolidated balance sheets include our transaction costs pertaining to our deal pursuits, restricted cash, interest on loan receivables, property deposits, capitalized leasing commissions, corporate fixed assets, utility deposits, prepaid expenses, and accounts receivable. We include accrued expenses, straight-line lease liabilities, prepaid rent, leasing commission payables and security deposits payable in Accrued expenses and other liabilities in our consolidated balance sheets. Income Taxes We intend to operate in a manner that will allow us to qualify as a partnership for U.S. federal income tax purposes. Generally, an entity that is treated as a partnership for U.S. federal income tax purposes is not a taxable entity and incurs no U.S. federal income tax liability. Accordingly, no provision for U.S. federal income taxes has been made in our consolidated financial statements. If we fail to qualify as a partnership for U.S. federal income tax purposes in any taxable year, and if we are not entitled to relief under the Code for an inadvertent termination of our partnership status, we will be subject to federal and state income tax on our taxable income at regular corporate income tax rates. Loss Per Unit Loss per unit represents both basic and dilutive per-unit amounts for the period presented in our consolidated financial statements. Basic and diluted loss per unit is calculated by dividing Net loss attributable to the Company by the weighted-average number of Class A units outstanding during the year. Recent Accounting Pronouncements ASC 842 - Leases In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842) , codified as Accounting Standards Codification (“ASC”) Topic 842, and subsequently amended by ASU 2018-01, Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842 , ASU 2018-10, Codification Improvements to Topic 842, Leases , ASU 2018-11, Leases (Topic 842): Targeted Improvements , ASU 2018-20, Leases (Topic 842): Narrow-Scope Improvements for Lessor , ASU 2019-01, Leases (Topic 842) : Codification Improvements , ASU 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates , ASU 2020-05, Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842) Effective Dates for Certain Entities , and ASU No. 2021-05, Leases (Topic 842): Lessors – Certain Leases with Variable Lease Payments (collectively “ASC 842”), which superseded ASC Topic 840, Leases . ASC 842 amended the accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. ASC 842 requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. As an emerging growth company, we are permitted, and have elected, to use an extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies. For private companies, ASC 842 is effective for annual reporting periods beginning after December 15, 2021 and interim periods within fiscal years beginning after December 15, 2022. We adopted ASC 842 for our annual period beginning January 1, 2022 (the “Date of Adoption”) using the modified retrospective method—applying the transition provisions at the beginning of the period of adoption rather than at the beginning of the earliest comparative period presented. We elected and applied the optional package of practical expedients permitted under ASC 842’s transition guidance, which allowed us to not reassess whether existing arrangements contain leases, lease classification, and initial direct costs. The adoption of ASC 842 did not result in a cumulative effect adjustment to the opening balance of retained earnings as of January 1, 2022. 67 Table Of Contents As a Lessee: Right-of-use (“ROU”) assets represent our right to use an underlying asset over the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. We determine if an arrangement contains a lease at contract inception and determine the classification of the lease at commencement. Operating lease ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. We do not include renewal options in the lease term when calculating the lease liability unless we are reasonably certain we will exercise the option. Variable lease payments are excluded from the ROU assets and lease liabilities and are recognized in the period in which the obligation for those payments is incurred. Lease expense for lease payments is recognized on a straight-line basis over the lease term. For determining the present value of lease payments, we use the discount rate implicit in the lease when readily determinable. As the implicit rate within our operating leases is generally not determinable, we use an incremental borrowing rate at the lease commencement date to determine the present value of lease payments. The determination of our incremental borrowing rate requires judgment. We determine our incremental borrowing rate for each lease using estimated baseline borrowing rate plus a spread. The rates are then adjusted for various factors, including level of collateralization and lease term. On the Date of Adoption, we recognized a $ 1.8 million ROU operating asset and a $ 1.2 million corresponding lease liability for the only ground lease arrangement for which we were a lessee. The recognition of the aforementioned ROU operating asset and lease liability included the reclassification of our ground lease purchase option, and deferred rent from Intangible Assets in our consolidated balance sheet, as of the Date of Adoption, to ROU asset (a net reclassification of $ 0.6 million). The settlement date to close on the exercised purchase option on our ground lease was extended in December 2022 (the “Remeasurement Date”) to April 30, 2023. Accordingly, as of the remeasurement date on December 29, 2022, we reclassified this contract from an operating lease to a finance lease and recorded a finance lease liability. See “ Note 4 – Leases ” for additional details regarding the presentation of these amounts in our consolidated balance sheet. Additionally, the Company will not recognize a lease liability or ROU asset for any short-term lease (defined as a lease that, at commencement date, has a term of 12 months of less and does not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise) and will recognize lease payments on a straight-line basis over the lease term. As a Lessor: A practical expedient under ASC 842 allows lessors to combine non-lease components (lease arrangements that include common area maintenance services) with related lease components (lease revenue), if both the timing and pattern of transfer are the same for the non-lease component and related lease component, the lease component is the predominant component, and the lease component would otherwise be classified as an operating lease. We elected this practical expedient. For (i) operating lease arrangements involving real estate that include common area maintenance services and (ii) all real estate arrangements that include real estate taxes and insurance costs, we present these amounts within Rental revenue in our consolidated statements of operations. We record amounts reimbursed by the lessee in the period in which the applicable expenses are incurred. As a result, we were not impacted by this change. Under ASC 842, lessors are allowed to only capitalize incremental direct leasing costs. ASC 326 - Financial Instruments — Credit Losses In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 introduces a new model for estimating credit losses based on current expected credit losses for certain types of financial instruments, including loans receivable, held-to-maturity debt securities, and net investments in direct financing leases, amongst other financial instruments. ASU 2016-13 also modifies the impairment model for available-for-sale debt securities and expands the disclosure requirements regarding an entity’s assumptions, models, and methods for estimating the allowance for losses. As an emerging growth company, we are permitted, and have elected, to use an extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies. For private companies, ASU 2016-13 will be effective for annual reporting periods beginning after December 15, 2022, including interim periods within those fiscal years. We do not expect the adoption of ASU 2016-13 to have a material impact in our consolidated financial statements. 68 Table Of Contents Note 4 – Leases Lessor Accounting We own rental properties which are leased to tenants under operating leases with current expirations ranging from 2023 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 allowed under the ASC 842 practical expedient, as the timing and pattern of transfer are the same, and account for the combined component in accordance with ASC 842. 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): Schedule of Components of Lease Revenues 2022 2021 December 31, 2022 2021 Fixed lease revenues $ 878 $ 718 Variable lease revenues (1) 282 171 Lease revenues (2) (3) $ 1,160 $ 889 Lease revenues (1) Includes reimbursements for property taxes, insurance, and common area maintenance services. (2) Excludes lease intangible amortization of $ 0.3 million and $ 0.1 million for the years ended December 31, 2022 and 2021, respectively. (3) Excludes straight-line rent of less than $ 0.1 million for the years ended December 31, 2022 and 2021, respectively. 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 December 31, 2022. Minimum Future Lease Payments The following table summarizes the minimum future contractual rents to be received (exclusive of expenses paid by tenants, and percentage of sales rents) on non-cancellable operating leases as of December 31, 2022 (amounts in thousands). Summary of Minimum Future Contractual Rents For the year ended December 31, 2023 $ 958 2024 758 2025 1,246 2026 1,153 2027 1,139 Thereafter 11,824 Total (1) $ 17,078 (1) Excludes $ 0.1 million of straight-line rent and $ 2.1 million of lease intangible amortization. 69 Table Of Contents Unbilled Straight-Line Rent As of December 31, 2022 and 2021, our unbilled rent receivables aggregating less than $ 0.1 million and zero , respectively, represent rent reported on a straight-line basis in excess of rental payments required under the respective leases and are included in Other assets in our consolidated balance sheets. The unbilled rent receivable is to be billed and received pursuant to the lease terms during the next 9.7 years. As of December 31, 2022 and 2021, our unbilled rent payables aggregating $ 0.1 million and $ 0.5 million, respectively, represent rent reported on a straight-line basis less than rental payments required under the respective leases and are included in Accrued expenses and other liabilities in our consolidated balance sheets. The unbilled rent payable is to be billed and received pursuant to the lease terms during the next 17.8 years. We assess the collectability of unbilled rent receivable balances by reviewing a tenant’s payment history and financial condition. We have assessed the collectability of all unbilled rent receivable balances as probable as of December 31, 2022. Lessee Accounting Ground Lease We are a lessee under a ground lease in Sarasota, Florida. As discussed in “ Note 3 - Summary of Significant Accounting Policies ”, we applied the optional package of practical expedients permitted under ASC 842’s transition guidance, which permitted us to not reassess the original operating lease classification as of the Date of Adoption. The settlement date to close on the exercised purchase option on our ground lease was extended in December 2022 to April 30, 2023. Accordingly, as of the remeasurement date on December 29, 2022, we reclassified this contract from an operating lease to a finance lease and recorded a financing lease liability of $ 5.0 million for the obligation to make payments under the lease (a non-cash financing activity during the year ended December 31, 2022) and a financing ROU asset of $ 5.0 million for the right to use the underlying asset during the lease term, which are included in Lease liabilities and Other assets, respectively, in our consolidated balance sheet. As of December 31, 2022, the remaining lease term, including renewal options deemed exercised, is 0.3 years. We applied a discount rate of 8.1 % based on our incremental borrowing rate (“IBR”) given the term of the lease, as the rate implicit in the lease is not known. This IBR was determined based on borrowing rates available to us in the market for a term similar to the applicable lease. During the year ended December 31, 2022, we recognized $ 0.6 million of lease expense related to this ground lease on one of our development investments which is included in Real estate under construction in our consolidated balance sheet. Minimum Future Lease Payments The following table summarizes the minimum future lease payments related to our finance ground lease as of December 31, 2022 (amounts in thousands): Schedule of Minimum Future Lease Payments For the year ended December 31, 2023 $ 5,158 2024 — 2025 — 2026 — 2027 — Thereafter — Total undiscounted cash flows 5,158 Present value discount ( 137 ) Lease liability $ 5,021 There are no operating leases for which we are the lessee, therefore there are no related ROU assets or lease liabilities as of December 31, 2022. 70 Table Of Contents Note 5 – Related Party Arrangements Secured Note Transactions Prior to and in connection with the Transaction, we entered into a series of loan transactions with Belpointe REIT whereby: (i) on October 28, 2020, Belpointe REIT advanced us $ 35.0 million evidenced by a secured promissory note (the “First Secured Note”) bearing interest at a rate of 0.14 % , due and payable on the Maturity Date (as hereinafter defined) and secured by all of our assets, (ii) on February 16, 2021, Belpointe REIT advanced us an additional $ 24.0 million evidenced by a second secured promissory note (the “Second Secured Note”) on the same terms as the First Secured Note, and (iii) on May 28, 2021, we entered into an agreement with Belpointe REIT to amend the Maturity Date of the First Secured Note and Second Secured Note to December 31, 2021 (the “Maturity Date”) and Belpointe REIT advanced us an additional $ 15.0 million evidenced by a third secured promissory note (the “Third Secured Note” and, together with the First Secured Note and Second Secured Note, the “Secured Notes”) on the same terms as the First Secured Note and Second Secured Note. We used the proceeds from the Secured Notes to make certain qualified opportunity zone investments, as described in greater detail throughout “ Note 6 – Real Estate, Net. ” Upon consummation of the Merger, effective October 12, 2021, we entered into a Release and Cancellation of Indebtedness Agreement with BREIT Merger, the surviving entity in the Merger, pursuant to the terms of which BREIT Merger cancelled the Secured Notes and discharged us from all obligations to repay the principal and any accrued interest on the Secured Notes (a non-cash financing activity). All intercompany activity between the Company and Belpointe REIT has been eliminated for the year ended December 31, 2021. Our Transactions with Belpointe Investment Holding, LLC In furtherance of the Merger, Belpointe REIT sold its interest (the “1991 Main Interest”) in the holding company for 1991 Main Street (“1991 Main”) to Belpointe Investment Holding, LLC (“BI Holding”), an affiliate of our Chief Executive Officer. As part of the transaction, BI Holding assumed a $ 10.8 million secured loan (the “Acquisition Loan”), and Belpointe REIT provided BI Holding with a $ 24.8 million loan, which was evidenced by a secured promissory note bearing interest at an annual rate of 5.0 % and due and payable at maturity on September 14, 2021 (the “BI Secured Note”). Upon consummation of the Merger, we acquired the BI Secured Note as successor in interest to Belpointe REIT. Effective November 30, 2021, we acquired the 1991 Main Interest from BI Holding in consideration of its payment to us of $ 0.3 million in interest that had accrued under the terms of the BI Secured Note through November 30, 2021, and in satisfaction of its remaining obligations under the BI Secured Note. On April 22, 2022, we repaid the Acquisition Loan in full. For additional details regarding our acquisition of the 1991 Main Interest see “ Note 6 – Real Estate, Net. ” Our Transaction with Norpointe, LLC On January 3, 2022, through an indirect wholly-owned subsidiary, we provided a commercial mortgage loan in the principal amount of $ 30.0 million (the “Norpointe Loan”) to Norpointe, LLC (“Norpointe”), an affiliate of our Chief Executive Officer. Norpointe is the owner of certain real property located at 41 Wolfpit Avenue, Norwalk, Connecticut 06851 (the “Norpointe Property”). The Norpointe Loan was evidenced by a promissory note bearing interest at an annual rate of 5.0 %, due and payable on December 31, 2022, and was secured by a first mortgage lien on the Norpointe Property. On June 28, 2022, for purposes of complying with the qualified opportunity fund requirements under the Code and related Treasury Regulations, we restructured the Norpointe Loan through an indirect majority owned subsidiary (the “Restructured Norpointe Loan”). The Restructured Norpointe Loan was evidenced by a promissory note bearing interest at an annual rate of 5.0 %, due and payable on June 28, 2023, and was secured by a first mortgage lien on the Norpointe Property. On December 13, 2022, the Restructured Norpointe Loan including accrued interest of less than $ 0.1 million was repaid in full. Joint Ventures During the year ended December 31, 2022, $ 0.3 million of noncontrolling interest contributions were made by affiliates of our Sponsor representing their 0.1 % ownership in various investments. These noncontrolling interests will be allocated profit and loss in accordance with the respective operating agreements. 71 Table Of Contents Our Relationship with Our Manager and Sponsor Our Manager is an affiliate of our Sponsor and is indirectly owned by our Chief Executive Officer and beneficially owned by certain immediate family members of our Chief Executive Officer. Our Manager and its affiliates, including our Sponsor, receive fees or reimbursements in connection with our Primary Offering and the management of our investments. The following table summarizes the fees incurred on our behalf by, and expenses reimbursable to, our Manager and its affiliates, including our Sponsor, in accordance with the terms of the relevant agreements (amounts in thousands): Schedule of Non-Cash Activity to Related Party Year Ended December 31, 2022 2021 Amounts Included in our Consolidated Statements of Operations Management fees $ 2,583 $ 674 Costs incurred by our Manager and its affiliates (1) 2,349 1,618 Insurance 419 — Director compensation 80 20 Costs incurred by the manager and its affiliates $ 5,431 $ 2,312 Other capitalized costs Development fee and reimbursements $ 5,649 $ 1,994 Insurance (2) 1,631 — Offering costs — 513 Acquisition fee — 38 Other capitalized costs $ 7,280 $ 2,545 (1) Includes wage, overhead and other reimbursements to our Manager and its affiliates, including our Sponsor, which are included in General and administrative expenses in our consolidated statements of operations. (2) During the year ended December 31, 2022, we incurred insurance premiums of $ 4.8 million pertaining to insurance policies with effective dates that commenced during the period, which are included in Other assets in our consolidated balance sheet. Of this amount, zero was unpaid as of December 31, 2022 and $ 1.6 million was amortized into Real estate under construction in our consolidated balance sheet. The following table summarizes amounts included in Due to affiliates in our consolidated balance sheets (amounts in thousands): Schedule of Due to Related Party December 31, 2022 2021 Amounts Due to affiliates Development fees $ 4,256 $ — Management fees 661 634 Employee cost sharing and reimbursements (1) 866 852 Director compensation 20 20 Acquisition fee — 38 Due to affiliates $ 5,803 $ 1,544 (1) Includes wage, overhead and other reimbursements to the Manager and its affiliates, including our Sponsor. Organizational, Primary Offering and Merger Expenses Our Manager and its affiliates, including our Sponsor, will be reimbursed, as described in the following paragraph, for organizational and offering expenses incurred in connection with our organization and Primary Offering and for expenses incurred in connection with the Transaction. See “ Note 1 – Organization, Business Purpose and Capitalization ” for additional details regarding our Primary Offering, and “ Note 2 – Exchange Offer, Conversion and Merger, ” for additional details regarding the Transaction. We became liable to reimburse our Manager and its affiliates, including our Sponsor, when the first closing was held in connection with our Primary Offering, which occurred in October 2021. 72 Table Of Contents There were no organizational or Primary Offering expenses incurred by our Manager and its affiliates during the year ended December 31, 2022. During the year ended December 31, 2021, our Manager and its affiliates, including our Sponsor, incurred organizational and Primary Offering expenses of $ 0.6 million as well as transaction expenses of $ 0.2 million on our behalf, all of which have been fully repaid. Other Operating Expenses Pursuant to the terms of a 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 an 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 years ended December 31, 2022 and 2021, our Manager and its affiliates, including our Sponsor, incurred operating expenses of $ 2.9 million and $ 1.3 million, respectively, on our behalf. The expenses are payable, at the election of the recipient, in cash, by issuance of our Class A units at the then-current NAV, or through some combination of the foregoing. As of December 31, 2022, all expenses incurred since inception have been paid 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 at the end of each quarter, which, no later than the first quarter following the December 31, 2022 year end, and every quarter thereafter, will be announced within approximately 60 days of the last day of each quarter. For the years ended December 31, 2022 and 2021, we incurred management fees of $ 2.6 million and $ 0.7 million, 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. In connection with our acquisition of several parcels, comprising 1.6 -acres of land, located in St. Petersburg, Florida, in October 2020, and our acquisition of 900 8th Avenue South (as defined and described in greater detail in “ Note 6 – Real Estate, Net ”), a development fee of 4.5 % of total project costs will be charged throughout the course of each project, of which one half was due at the close of each acquisition and is included in Real estate under construction in our consolidated balance sheets. On March 29, 2022, we commenced construction on one of our properties located in Sarasota, Florida, and in connection therewith, due to an increase in scope of work, we agreed to increase the development fee payable to an affiliate of our Sponsor under the terms of our existing development management agreement from 4.0% to 4.25%. In addition, again due to the increase in scope of work, as well as due to increases in construction costs, we also revised our construction budget. As a result of the increase in development fees and revisions to our construction budget, we incurred an additional upfront development fee of $ 2.5 million, which is included in Real estate under construction in our consolidated balance sheets. The remaining development fee will be charged throughout the course of the project in accordance with the terms of the development management agreement. 73 Table Of Contents During the years ended December 31, 2022 and 2021, we incurred development fees earned during the construction phase of $ 4.3 million and $ 1.5 million, respectively. As of December 31, 2022 and 2021, $ 4.3 million and zero , respectively, remained due and payable to our affiliates for development fees. During the years ended December 31, 2022 and 2021, we incurred employee reimbursement expenditures to our affiliates acting as development managers of $ 1.5 million and $ 0.6 million, respectively, of which $ 1.3 million and $ 0.5 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. As of December 31, 2022 and 2021, $ 0.3 million and $ 0.4 million, respectively, remained due and payable to our affiliates for employee reimbursement expenditures. Acquisition Fees We will pay our Manager, Sponsor, or an affiliate of our Manager or Sponsor, an acquisition fee equal to 1.5 % of the total value of any acquisition transaction, including any acquisition through merger with another entity (but excluding any transactions in which our Sponsor, or an affiliate of our Manager or Sponsor, would otherwise receive a development fee). We did not incur any acquisition fees during the year ended December 31, 2022, since all investments acquired during these periods were, or will be, subject to payment of development fees. For the year ended December 31, 2021, we incurred acquisition fees of less than $ 0.1 million in connection with our acquisition of 901-909 Central (as defined and described in greater detail in “ Note 6 – Real Estate, Net ”). Insurance Certain immediate family members of our Chief Executive Officer have a passive indirect minority beneficial ownership interest in Belpointe Specialty Insurance, LLC (“Belpointe Specialty Insurance”). Belpointe Specialty Insurance has acted as our broker in connection with the placement of insurance coverage for certain of our properties and operations. Belpointe Specialty Insurance earns brokerage commissions related to the brokerage services that it provides to us, which commissions vary, are based on a percentage of the premiums that we pay and are set by the insurer. We have also engaged Belpointe Specialty Insurance to provide us with contract insurance consulting services related to owner-controlled insurance programs, for which we pay an administration fee. During the year ended December 31, 2022, we obtained insurance coverage and paid premiums in the aggregate amount of $ 4.8 million from which Belpointe Specialty Insurance earned commissions of $ 0.5 million. During the year ended December 31, 2022, Belpointe Specialty Insurance earned administration fees of less than $ 0.1 million. Insurance premiums are prepaid and are included in Other assets in our consolidated balance sheets. With respect to our properties under development, for the year ended December 31, 2022, $ 1.6 million was amortized into Real estate under construction on the consolidated balance sheet. As it pertains to our operating properties, for year ended December 31, 2022, $ 0.4 million was amortized into Property expenses on the consolidated statement of operations. 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 us, including asset management services, asset acquisition and disposition services, supervision of our Primary Offering and any other offerings that we may 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 that we have engaged them to provide, we would be required to find alternative service providers. 74 Table Of Contents Note 6 – Real Estate, Net Acquisitions of Real Estate During 2022 On January 7, 2022, through an indirect majority-owned subsidiary of our Operating Company, we completed the acquisition of a 1.1 -acre site, located in Mansfield, Connecticut, for a purchase price of $ 0.3 million, inclusive of transaction costs of less than $ 0.1 million. Upon closing, the building was leased back to the seller for a term of 12 months. This acquisition was deemed to be an asset acquisition and all direct transaction costs were capitalized. The purchase price was allocated to land and building of $ 0.1 million and $ 0.2 million, respectively. All related assets and liabilities, including identifiable intangibles, were recorded at their relative fair values based on the purchase price and acquisition costs incurred. On May 9, 2022, through an indirect majority-owned subsidiary of our Operating Company, we completed the acquisition of a 0.265 -acre site, located in Sarasota, Florida, for a purchase price of $ 1.5 million, inclusive of transaction costs of $ 0.1 million. This acquisition was deemed to be an asset acquisition and all direct transaction costs were capitalized. The purchase price was allocated to land, building, and an in-place lease intangible asset of $ 1.3 million, $ 0.1 million and less than $ 0.1 million, respectively. All related assets and liabilities, including identifiable intangibles, were recorded at their relative fair values based on the purchase price and acquisition costs incurred. On June 28, 2022, through an indirect majority-owned subsidiary of our Operating Company, we acquired a 70.2 % controlling interest (the “CMC Interest”) in CMC Storrs SPV, LLC (“CMC”), a holding company for an approximately 60 -acre site located in Mansfield, Connecticut, for an initial capital contribution of $ 3.8 million. As part of the transaction two unaffiliated joint venture partners (the “CMC JV Partners”) were deemed to have made a combined initial capital contribution of $ 3.1 million (a non-cash financing activity during the year ended December 31, 2022). Following our acquisition of the CMC Interest, we discovered that one of the CMC JV Partners had misappropriated cash from the other CMC JV Partner’s cash account resulting in the loss of $ 0.4 million included in Other income (expense) in the accompanying consolidated statement of operations for the year ended December 31, 2022. The CMC JV Partner agreed to forfeit its interest in CMC as of March 24, 2023. Our acquisition of the CMC Interest was deemed to be an asset acquisition and all direct transaction costs were capitalized. All related assets and liabilities, including identifiable intangibles, were recorded at their relative fair values based on the purchase price and acquisition costs incurred. As a result of our controlling financial interest, we consolidate this development project. The purchase price was allocated as follows (amounts in thousands): Schedule of Real Estate Properties As of June 28, 2022 Assets Real estate Land $ - Building and improvements - Intangible assets $ 424 Real estate under construction 4,633 Total real estate 5,057 Accumulated depreciation and amortization — Real estate, net 5,057 Cash and cash equivalents 87 Other assets (1) 2,105 Total assets $ 7,249 Liabilities Debt, net $ - Due to affiliates - Accounts payable $ 363 Accrued expenses and other liabilities 16 Total liabilities $ 379 Amounts attributable to noncontrolling interests (2) $ 3,100 Total net assets $ 3,770 (1) Includes restricted cash of $ 1.4 million. (2) Represents a non-cash financing activity during the year ended December 31, 2022. 75 Table Of Contents On October 13, 2022, through an indirect majority-owned subsidiary of our Operating Company, we completed the acquisition of an approximately 19 -acre site, located in Mansfield, Connecticut, for a purchase price of $ 5.5 million, inclusive of transaction costs of $ 0.1 million. This acquisition was deemed to be an asset acquisition and all direct transaction costs were capitalized. The purchase price was solely allocated to land, and was recorded at the relative fair value based on the purchase price and acquisition costs incurred. On December 2, 2022, an indirect majority-owned subsidiary of our Operating Company acquired a 99 % controlling interest in a jointly-owned investment with an unaffiliated third party to acquire an approximately 5.9 -acre site, located in Nashville, Tennessee (“Nashville No. 4”) for a purchase price of $ 16.4 million, inclusive of transaction costs $ 0.2 million. This acquisition was deemed to be an asset acquisition and all direct transaction costs were capitalized. The purchase price was allocated to land, building, intangible assets and below-market lease liability of $ 15.2 million, $ 0.8 million, $ 0.6 million and $ 0.4 million, respectively. All related assets and liabilities, including identifiable intangibles, were recorded at their relative fair values based on the purchase price and acquisition costs incurred. Acquisitions of Real Estate During 2021 On February 24, 2021, an indirect majority owned subsidiary of our Operating Company and an unaffiliated third party (the “JV Partner”) entered into a limited liability company agreement (the “LLC Agreement”) for BPOZ 900 Eighth QOZB, LLC, a Delaware limited liability company (“BPOZ 900 Eighth QOZB”). BPOZ 900 Eighth QOZB was formed for purposes of acquiring all of the limited partnership interests of 900 Eighth, LP, a Tennessee limited partnership (“900 Eighth”). 900 Eighth was formed to acquire a 3.17 -acre land assemblage, consisting of a few small buildings, parking lots and open lots, located in Nashville, Tennessee (together “900 8th Avenue South”). Pursuant to the LLC Agreement, the JV Partner assigned the purchase and sale agreement for 900 8th Avenue South together with a previously paid property deposit of $ 0.4 million to BPOZ 900 Eighth QOZB in exchange for the JV Partner’s deemed initial capital contribution of $ 0.2 million (a non-cash investing activity during the year ended December 31, 2021) and a promissory note (the “900 Eighth Promissory Note”) from 900 Eighth in the amount of $ 0.2 million. The 900 Eighth Promissory Note, which is included in Accrued expenses and other liabilities in our consolidated balance sheets, earns interest at the greater of (i) 1 % per annum, or (ii) the short-term adjusted applicable federal rate for the current month for purposes of Section 1288(b) of the Code, and was repaid in full in April 2022. On May 28, 2021, 900 Eighth completed the acquisition of 900 8th Avenue South for a purchase price of $ 19.7 million, inclusive of transaction costs of $ 0.1 million. We funded this acquisition with proceeds from the Secured Notes. This acquisition was deemed to be an asset acquisition and all transaction costs were capitalized. All related assets were recorded at their relative fair values based on the purchase price and acquisition costs incurred. We anticipate funding entitlement and development costs with a mix of equity investments by the JV Partner and proceeds from the Primary Offering. 76 Table Of Contents On March 12, 2021, through an indirect majority-owned subsidiary of our Operating Company, we completed the acquisition of a parcel of land with a two-tenant retail building and a parking lot located in St. Petersburg, Florida, for a purchase price of $ 2.5 million, inclusive of transaction costs of $ 0.1 million. We funded this acquisition with proceeds from the Secured Notes. This acquisition was deemed to be an asset acquisition and all transaction costs were capitalized. The purchase price was allocated to land, building, intangible assets and below-market lease liability of $ 1.9 million, $ 0.6 million, $ 0.2 million and $ 0.2 million, respectively. All related assets and liabilities, including identifiable intangibles, were recorded at their relative fair values based on the purchase price and acquisition costs incurred. On May 7, 2021, through an indirect majority-owned subsidiary of our Operating Company, we completed the acquisition of a 1.205 -acre site, consisting of a retail building and parking lot located in Sarasota, Florida, for a purchase price of $ 4.7 million, inclusive of transaction costs of $ 0.1 million. We funded this acquisition with proceeds from the Secured Notes. The sole tenant in the building vacated in January 2022 and the property will be used as a future development site. This acquisition was deemed to be an asset acquisition and all transaction costs were capitalized. The purchase price was allocated to land and intangible in-place lease assets of $ 4.5 million and $ 0.2 million, respectively. All related assets, including identifiable intangibles, were recorded at their relative fair values based on the purchase price and acquisition costs incurred. On July 15, 2021, through an indirect majority-owned subsidiary, we completed the acquisition of a 9 -acre parcel of land located in Storrs, Connecticut, for a purchase price of $ 0.1 million, inclusive of transaction costs of less than $ 0.1 million. We funded the purchase price with proceeds from the Secured Notes and anticipate holding Storrs Road for future multifamily development. On October 29, 2021, through certain indirect majority-owned subsidiaries of our Operating Company, we completed the acquisition of an approximately 8 -acre site consisting of two industrial buildings and associated parking located in Nashville, Tennessee, for a purchase price of $ 21.0 million, inclusive of transaction costs of $ 0.2 million. This acquisition was deemed to be an asset acquisition and all transaction costs were capitalized. All related assets were recorded at their relative fair values based on the purchase price and acquisition costs incurred. On November 18, 2021, through an indirect majority-owned subsidiaries of our Operating Company, we completed the acquisition of an approximately 1.66 -acre site consisting of a 10,000 square foot retail building and associated parking lot located in Nashville, Tennessee, for a purchase price of $ 2.1 million, inclusive of transaction costs of $ 0.1 million. The building was leased back to the seller through November 2023, with the ability to continue month to month thereafter. This acquisition was deemed to be an asset acquisition and all transaction costs were capitalized. The purchase price was allocated to land, building and in-place lease intangible asset of $ 1.8 million, $ 0.2 million and $ 0.1 million, respectively. All related assets and liabilities, including identifiable intangibles, were recorded at their relative fair values based on the purchase price and acquisition costs incurred. 77 Table Of Contents Effective November 30, 2021, pursuant to the terms of an Agreement to Accept Interests in Satisfaction of Obligations, through an indirect majority owned subsidiary, we acquired the 1991 Main Interest from BI Holding for a gross purchase price of $ 33.9 million, excluding the Acquisition Loan of $ 10.8 million which assumed in connection with the transaction. On April 22, 2022, the Acquisition Loan was repaid in full. See “ Note 5 – Related Party Agreements ” for additional details regarding our transactions with BI Holding. This acquisition was deemed to be an asset acquisition and all transaction costs were capitalized. All related assets and liabilities, including identifiable intangibles, were recorded at their relative fair values based on the purchase price and acquisition costs incurred. The purchase price was allocated as follows (amounts in thousands): Schedule of Real Estate Properties As of November 30, 2021 Assets Real Estate Land (1) $ 3,159 Building and improvements (1) 10,226 Intangible assets (1) 6,731 Real estate under construction (1) 11,853 Total Real estate (1) 31,969 Accumulated depreciation and amortization (1) — Real estate, net (1) 31,969 Cash and cash equivalents 2,165 Other assets (2) 519 Total assets $ 34,653 Liabilities Debt, net (1) $ 10,787 Due to affiliates (1) 89 Accounts payable (1) 302 Accrued expenses and other liabilities (1) 403 Total liabilities $ 11,581 Total net assets $ 23,072 (1) Represents non-cash investing activity during the year ended December 31, 2021. (2) Includes restricted cash of $ 0.3 million. The remaining $0.2 million represents non-cash investing activity during the year ended December 31, 2021. On December 21, 2021, through an indirect majority-owned subsidiary of our Operating Company, we completed the acquisition of a 0.129 -acre site, consisting of a fully leased singly-story 5,328 gross square foot mixed-use building, located in St. Petersburg, Florida (“901-909 Central”), for a purchase price of $ 2.6 million, inclusive of transaction costs of $ 0.1 million. This acquisition was deemed to be an asset acquisition and all transaction costs were capitalized. The purchase price was allocated to land, building, in-place lease intangible asset and below-market lease liability of $ 1.1 million, $ 1.6 million, $ 0.4 million and $ 0.5 million, respectively. All related assets and liabilities, including identifiable intangibles, were recorded at their relative fair values based on the purchase price and acquisition costs incurred. Depreciation expense was $ 0.7 million and $ 0.2 million for the years ended December 31, 2022 and 2021, respectively. Real Estate Under Construction The following table provides the activity of our Real estate under construction (amounts in thousands): Schedule of Real Estate Under Construction December 31, 2022 2021 Beginning balance $ 76,882 $ 15,101 Capitalized costs (1) (2) (3) 45,907 8,991 Land held for development (1) (4) 10,958 48,085 Capitalized interest 151 43 Acquisition of construction in progress (1) — 4,662 Ending balance $ 133,898 $ 76,882 (1) Includes non-cash investing activity of $ 13.9 million (inclusive of land contributed by one of the CMC JV Partners, unpaid development fees of $ 4.3 million, and unpaid employee cost sharing and reimbursements of $ 0.3 million) and $ 1.6 million for the years ended December 31, 2022 and 2021, respectively. See “ Note 5 – Related Party Agreements ” for additional details regarding our transactions with related parties . 78 Table Of Contents (2) Includes development fees and employee reimbursement expenditures of $ 5.6 million and $ 2.7 million for the years ended December 31, 2022 and 2021, respectively. (3) Includes direct and indirect project costs to the construction and development of real estate projects, including but not limited to loan fees, property taxes and insurance, incurred of $ 2.2 million and $ 0.5 million for the years ended December 31, 2022 and 2021, respectively. (4) Includes ground lease payments and straight-line rent adjustments incurred of $ 0.8 million and less than $ 0.1 million for the years ended December 31, 2022 and 2021, respectively. Note 7 – Intangible Assets and Liabilities The following table summarizes our intangible assets and liabilities (amounts in thousands): Schedule of Intangible Assets And Liabilities December 31, 2022 2021 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Finite-Lived Intangible Assets In-place leases $ 3,836 $ ( 791 ) $ 3,045 $ 2,941 $ ( 383 ) $ 2,558 Indefinite-Lived Intangible Assets Development rights 5,659 — 5,659 5,659 — 5,659 Ground lease purchase option — — — 1,072 — 1,072 Total intangible assets $ 9,495 $ ( 791 ) $ 8,704 $ 9,672 $ ( 383 ) $ 9,289 Finite-Lived Intangible Liabilities Below-market leases $ ( 2,517 ) $ 411 $ ( 2,106 ) $ ( 2,159 ) $ 159 $ ( 2,000 ) Total intangible liabilities $ ( 2,517 ) $ 411 $ ( 2,106 ) $ ( 2,159 ) $ 159 $ ( 2,000 ) In-place lease intangible assets recorded for acquisitions of real estate during 2022, noted above, are included in Intangible assets in our consolidated balance sheet and are being amortized over a weighted average lease term of approximately 1.1 years. See “ Note 6 – Real Estate, Net ” for additional details regarding our acquisitions of real estate during 2022. In-place lease intangible assets recorded for acquisitions of real estate during 2021, noted above, are included in Intangible assets in our consolidated balance sheet and are being amortized over a weighted average lease term of 3.5 years. See “ Note 6 – Real Estate, Net ” for additional details regarding our acquisitions of real estate during 2021. During the years ended December 31, 2022 and 2021, the amortization of in-place lease intangible assets was $ 0.6 million and $ 0.4 million, respectively, and is included in Depreciation and amortization expense in our consolidated statements of operations. Intangible assets recorded in connection with our acquisition of the 1991 Main Interest (as described in greater detail in “ Note 5 - Related Party Arrangements, ” and “ Note 6 – Real Estate, Net ”) include land development rights of $ 5.7 million (which have a perpetual legal and economic life) and an exercised ground lease purchase option of $ 1.1 million and are included in Intangible assets in our consolidated balance sheet as of December 31, 2021. Upon the adoption of ASC 842 on the Date of Adoption, the ground lease purchase option recognized was reclassified to a ROU operating asset. As discussed further in “ Note 4 - Leases ”, the settlement date to close on the exercised purchase option on our ground lease was extended in December 2022 to April 30, 2023. Accordingly, as of the remeasurement date on December 29, 2022, we reclassified this contract from an operating lease to a finance lease and recorded a ROU asset of $ 5.0 million for the right to use the underlying asset during the lease term, which is included in Other assets in our consolidated balance sheet. See “ Note 6 – Real Estate, Net ” for additional details regarding our ROU asset as of December 31, 2022. 79 Table Of Contents The below-market lease liabilities recorded for acquisitions of real estate during 2022, noted above, are included in Lease liabilities in our consolidated balance sheets and are being amortized over a weighted average lease term of approximately 1.0 years. See “ Note 6 – Real Estate, Net ” for additional details regarding our acquisitions of real estate during 2022. The below-market lease liabilities recorded for acquisitions of real estate during 2021, noted above, are included in Lease liabilities in our consolidated balance sheets and are being amortized over a weighted average lease term of approximately 5.2 years. See “ Note 6 – Real Estate, Net ” for additional details regarding our acquisitions of real estate during 2021. During the years ended December 31, 2022 and 2021, the amortization of below-market lease liability was $ 0.3 million and $ 0.1 million, respectively, and is included in Rental revenue in our consolidated statements of operations. Based on the intangible assets and liabilities recorded as of December 31, 2022, scheduled annual net amortization of intangibles for the next five calendar years and thereafter is as follows (in thousands): Schedule of Annual Net Amortization of Intangibles Years Ending December 31, Increase in Rental Revenue Increase to Amortization Net 2023 $ ( 518 ) $ 1,090 $ 572 2024 ( 146 ) 159 13 2025 ( 146 ) 148 2 2026 ( 146 ) 148 2 2027 ( 146 ) 148 2 Thereafter ( 1,004 ) 1,352 348 $ ( 2,106 ) $ 3,045 $ 939 Note 8 – Loans Receivable As described in greater detail in “ Note 5 - Related Party Arrangements ” and “ Note 6 – Real Estate, Net ”, pursuant to the terms of the BI Secured Note, Belpointe REIT provided BI Holding with a $ 24.8 million loan, bearing interest at an annual rate of 5.0 % and due and payable at maturity on September 14, 2022. Effective November 30, 2021, we acquired the 1991 Main Interest from BI Holding in consideration of its payment to us of $ 0.3 million in interest that had accrued under the terms of the BI Secured Note through November 30, 2021, and in satisfaction of its remaining obligations under the BI Secured Note. On September 30, 2021, we lent approximately $ 3.5 million to CMC (the “CMC Loan”) pursuant to the terms of a non-recourse promissory note (the “CMC Note”) secured by a Mortgage Deed and Security Agreement on a property owned by CMC located in Mansfield, Connecticut. CMC used the proceeds from the CMC Loan to enter into a Redemption Agreement with BPOZ 497 Middle Holding, LLC (“BPOZ 497”), an indirect majority-owned subsidiary of Belpointe REIT, to redeem BPOZ 497’s preferred equity investment in CMC in furtherance of our Transaction with Belpointe REIT. See “ Note 2 – Exchange Offer, Conversion and Merger, ” for additional details regarding the Transaction. Interest accrued on the CMC Note at an annual rate of 12.0 %, and was due and payable at maturity on June 27, 2022 . On June 28, 2022, CMC repaid the CMC Note in full, including accrued interest of $ 0.3 million. On January 3, 2022, through an indirect wholly owned subsidiary, we provided a commercial mortgage loan in the principal amount of $ 30.0 million to Norpointe, an affiliate of our Chief Executive Officer. The Norpointe Loan was evidenced by a promissory note bearing interest at an annual rate of 5.0 %, was due and payable on December 31, 2022 , and was secured by a first mortgage lien on the Norpointe Property. On June 28, 2022, for purposes of complying with the qualified opportunity fund requirements under the Code and related Treasury Regulations, we restructured the Norpointe Loan through an indirect majority owned subsidiary. The Restructured Norpointe Loan was evidenced by a promissory note bearing interest at an annual rate of 5.0 %, due and payable on June 28, 2023 , and was secured by a first mortgage lien on the Norpointe Property. On December 13, 2022, the Restructured Norpointe Loan was repaid in full, including accrued interest of less than $ 0.1 million. See “ Note 5 – Related Party Arrangements ” for additional details regarding our transactions with Norpointe. 80 Table Of Contents On February 23, 2022, through an indirect wholly-owned subsidiary, we provided a commercial mortgage loan in the principal amount of approximately $ 5.0 million (the “Visco Loan”) to Visco Propco, LLC (“Visco”). Visco is the owner of certain real property located at 801 Visco Drive, Nashville, Tennessee 37210 (the “Visco Property”). The Visco Loan was evidenced by a promissory note bearing interest at an annual rate of 6.0 %, due and payable on February 18, 2023 , and was secured by a first lien deed of trust on the Visco Property. On December 2, 2022, the Visco Loan was repaid in full, including accrued interest of $ 0.2 million. Interest income from loans receivable was $ 1.8 million and $ 0.4 million for the years ended December 31, 2022 and 2021, respectively, and is included in Interest income in our consolidated statements of operations. Note 9 – Debt, Net Debt, net consisted of one non-recourse mortgage loan—the Acquisition Loan (as described in greater detail in “ Note 6 – Real Estate, Net, ”)—which was guaranteed by our Chief Executive Officer and held with an unrelated third party, and which was collateralized by the assignment of real property with a carrying value of $ 33.1 million at December 31, 2021. As of December 31, 2021, the Acquisition Loan had an outstanding balance of $ 10.8 million (excluding debt discount net of accumulated amortization of less than $ 0.1 million) and a fixed annual interest rate of 4.75 %. The Acquisition Loan, including outstanding interest of less than $ 0.1 million, was repaid in full on April 22, 2022. Note 10 – Fair Value of Financial Instruments Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between marketplace participants at the measurement date under current market conditions ( i.e. , the exit price). We categorize our financial instruments, based on the priority of the inputs to the valuation technique, into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument. Financial assets and liabilities recorded on the consolidated balance sheets are categorized based on the inputs to the valuation techniques as follows: Level 1 – Quoted market prices in active markets for identical assets or liabilities. Level 2 – Significant other observable inputs ( e.g. , quoted prices for similar items in active markets, quoted prices for identical or similar items in markets that are not active, inputs other than quoted prices that are observable such as interest rate and yield curves, and market-corroborated inputs). Level 3 – Valuation generated from model-based techniques that use inputs that are significant and unobservable in the market. These unobservable assumptions reflect estimates of inputs that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow methodologies or similar techniques, which incorporate management’s own estimates of assumptions that market participants would use in pricing the instrument or valuations that require significant management judgment or estimation. The carrying value of our loans receivable totaled zero and $ 3.5 million as of December 31, 2022 and 2021, respectively, and had estimated fair values of zero and $ 3.5 million as of December 31, 2022 and 2021, respectively. We determined the estimated fair value of our loans receivable using a discounted cash flow model taking into account the investments liquidity, the strength of the loan collateral, quality of the credit profile of the obligor, term to maturity and the likelihood of a liquidity event, among other factors. These fair value measurements fall within Level 3 of the fair value hierarchy. We estimated that our other financial assets and liabilities had fair values that approximated their carrying values as of December 31, 2022 and 2021. Note 11 – 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, 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 unlimited number of Class A units, 100,000 Class B units and one Class M unit. 81 Table Of Contents For the years ended December 31, 2022 and 2021, we issued 141,300 Class A units and 3,382,049 Class A units (inclusive of 1,250,010 Class A units exchanged in connection with the Merger), respectively. See “ Note 2 – Exchange Offer, Conversion and Merger, ” for additional details regarding the Merger. As of December 31, 2022, there were 3,523,449 Class A units, 100,000 Class B units and one Class M unit issued and outstanding. As of December 31, 2021, there were 3,382,149 Class A units, 100,000 Class B units and one Class M unit issued and outstanding. As of December 31, 2021, there were 202,952 Class A units issued by the Company pursuant to subscription agreements which had not yet settled. Accordingly, $ 20.3 million was a non-cash financing activity during 2021 and was recorded as a Subscriptions receivable in our consolidated balance sheet relating to such units issued as of December 31, 2021. All of these funds were received during January 2022. Class A units Upon payment in full of any consideration payable with respect to the initial issuance of our Class A units, the holder thereof will not be liable for any additional capital contributions to the Company. Holders of our 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 our 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. 82 Table Of Contents Preferred units Under our Operating Agreement, our Board may from time to time establish and cause us to issue one or more classes or series of preferred units and set the designations, preferences, rights, powers and duties of such classes or series. Subscriptions Receivable Subscriptions receivable consist of Class A units that have been issued with subscriptions that have not yet settled. As of December 31, 2022 and 2021, there was zero and $ 20.3 million, respectively, in subscriptions that had not yet settled. Subscriptions receivable are carried at cost, which approximates fair value. Basic and Diluted Loss Per Class A Unit For the years ended December 31, 2022 and 2021, the basic and diluted weighted-average units outstanding were 3,416,527 and 410,194 , respectively. For the years ended December 31, 2022 and 2021, net loss attributable to our Class A units was $ 7.7 million and $ 3.1 million, respectively, and the loss per basic and diluted unit was $ 2.25 and $ 7.64 , respectively. Note 12 – Commitments and Contingencies As of December 31, 2022, the Company is not subject to any material litigation nor is the Company aware of any material litigation threatened against it. During the year ended December 31, 2022, we entered into a construction management agreement in connection with the development of one of our commercial real estate properties. As of December 31, 2022, we had an unfunded capital commitment of $ 144.3 million (excluding capitalized interest, development fees and indirect project costs) under the terms of this agreement. We expect to incur this capital commitment incrementally over the course of the next 18 months. As of December 31, 2022, $ 6.6 million, inclusive of retainage of $ 1.9 million, is outstanding and payable in connection with this development. Note 13 – Subsequent Events Management has evaluated subsequent events to determine if events or transactions occurring after the balance sheet date through the date the audited consolidated financial statements were available for issuance require potential adjustment to or disclosure in the audited consolidated financial statements and has concluded that all such events or transactions that would require recognition or disclosure have been recognized or disclosed. 83 Table Of Contents Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosures. None.