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 ) 52 Consolidated Balance Sheets as of December 31, 2023 and 2022 53 Consolidated Statements of Operations for the years ended December 31, 2023 and 2022 54 Consolidated Statements of Changes in Members’ Capital for the years ended December 31, 2023 and 2022 55 Consolidated Statements of Cash Flows for the years ended December 31, 2023 and 2022 56 Notes to Consolidated Financial Statements 57 51 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, 2023 and 2022, and the related consolidated statements of operations, changes in members’ capital and cash flows for each of the years in the two-year period ended December 31, 2023, and the related notes (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, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2023, 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 28, 2024 52 Belpointe PREP, LLC Consolidated Balance Sheets (in thousands, except unit and per unit data) 2023 2022 December 31, 2023 2022 Assets Real estate Land $ 38,741 $ 38,741 Building and improvements 17,939 17,843 Intangible assets 9,172 9,495 Real estate under construction 291,130 133,898 Total real estate 356,982 199,977 Accumulated depreciation and amortization ( 3,441 ) ( 1,719 ) Real estate, net 353,541 198,258 Cash and cash equivalents 20,125 143,467 Other assets 8,451 12,270 Total assets $ 382,117 $ 353,995 Liabilities Debt, net $ 19,678 $ — Short-term loan from affiliate 4,000 — Due to affiliates 10,370 5,803 Lease liabilities 1,324 7,126 Accounts payable 12,584 1,686 Accrued expenses and other liabilities 9,097 6,728 Total liabilities 57,053 21,343 Commitments and contingencies — — Members’ Capital Class A units, unlimited units authorized, 3,622,399 and 3,523,449 units issued and outstanding at December 31, 2023 and 2022, respectively 322,626 329,482 Class B units, 100,000 units authorized, 100,000 units issued and outstanding at December 31, 2023 and 2022, respectively — — Class M unit, one unit authorized, one unit issued and outstanding at December 31, 2023 and 2022, respectively — — Total members’ capital excluding noncontrolling interests 322,626 329,482 Noncontrolling interests 2,438 3,170 Total members’ capital 325,064 332,652 Total liabilities and members’ capital $ 382,117 $ 353,995 See accompanying notes to consolidated financial statements. 53 Belpointe PREP, LLC Consolidated Statements of Operations (in thousands, except unit and per unit data) 2023 2022 Years Ended December 31, 2023 2022 Revenue Rental revenue $ 2,254 $ 1,391 Total revenue 2,254 1,391 Expenses Property expenses 4,179 3,809 General and administrative 6,335 5,798 Depreciation and amortization 2,067 1,291 Impairment of real estate 4,060 — Total expenses 16,641 10,898 Other income Interest income 113 1,850 Other expense ( 87 ) ( 469 ) Total other income 26 1,381 Loss before income taxes ( 14,361 ) ( 8,126 ) Provision for income taxes ( 1 ) ( 112 ) Net loss ( 14,362 ) ( 8,238 ) Net loss attributable to noncontrolling interests 11 555 Net loss attributable to Belpointe PREP, LLC $ ( 14,351 ) $ ( 7,683 ) Loss per Class A unit (basic and diluted) Net loss per unit $ ( 4.04 ) $ ( 2.25 ) Weighted-average units outstanding 3,553,319 3,416,527 See accompanying notes to consolidated financial statements. 54 Belpointe PREP, LLC Consolidated Statements of Changes in Members’ Capital (in thousands, except unit and per unit data) Units Amount Units Amount Units Amount Interests Interests Capital Class A units Class B units Class M unit Total Members’ Capital Excluding Noncontrolling Noncontrolling Total Members’ Units Amount Units Amount Units Amount Interests Interests Capital Balance at December 31, 2021 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 interests — — — — — — — 433 433 Acquisition of ownership in CMC Storrs SPV, LLC ( Note 5 ) — — — — — — — 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 Beginning Balance 3,523,449 329,482 100,000 — 1 — 329,482 3,170 332,652 Issuance of units 98,950 7,932 — — — — 7,932 — 7,932 Contribution from noncontrolling interests — — — — — — — 266 266 Return of capital — — — — — — — ( 24 ) ( 24 ) Acquisition of noncontrolling interests ( Note 5 ) — — — — — — — ( 963 ) ( 963 ) Offering costs — ( 437 ) — — — — ( 437 ) — ( 437 ) Net loss — ( 14,351 ) — — — — ( 14,351 ) ( 11 ) ( 14,362 ) Balance at December 31, 2023 3,622,399 $ 322,626 100,000 $ — 1 $ — $ 322,626 $ 2,438 $ 325,064 Ending Balance 3,622,399 $ 322,626 100,000 $ — 1 $ — $ 322,626 $ 2,438 $ 325,064 See accompanying notes to consolidated financial statements. 55 Belpointe PREP, LLC Consolidated Statements of Cash Flows (in thousands) 2023 2022 Year Ended December 31, 2023 2022 Cash flows from operating activities Net loss $ ( 14,362 ) $ ( 8,238 ) Adjustments to net loss: Amortization of rent-related intangibles and straight-line rent adjustments ( 820 ) ( 231 ) Depreciation and amortization 2,067 1,291 Impairment of real estate 4,060 — Unrealized loss on interest rate derivative, net 66 — Changes in operating assets and liabilities: Increase in due to affiliates 1,896 39 (Increase) decrease in other assets ( 228 ) 676 Increase (decrease) in accounts payable 479 ( 186 ) Decrease in accrued expenses and other liabilities ( 103 ) ( 2 ) Net cash used in operating activities ( 6,945 ) ( 6,651 ) Cash flows from investing activities Development of real estate ( 139,733 ) ( 39,596 ) Acquisitions of real estate ( 5,190 ) ( 27,254 ) Purchase of interest rate cap ( 159 ) — Other investing activity ( 41 ) ( 225 ) Repayment of loans receivable — 38,413 Funding of loans receivable — ( 34,955 ) Cash acquired from CMC ( Note 5 ) — 87 Net cash used in investing activities ( 145,123 ) ( 63,530 ) Cash flows from financing activities Proceeds from issuance of debt 21,874 — Proceeds from units issued 7,932 14,130 Short-term loan from affiliate 5,500 — Payment of debt issuance costs ( 2,618 ) — Repayment of short-term loan from affiliate ( 1,500 ) — Payment of offering costs ( 373 ) ( 731 ) Payment of financing deposits ( 225 ) — Contributions from noncontrolling interests 216 268 Other financing activities, net ( 96 ) ( 360 ) Return of capital from noncontrolling interests ( 24 ) — Proceeds from subscriptions receivable — 20,295 Repayment of debt — ( 10,800 ) Net cash provided by financing activities 30,686 22,802 Net decrease in cash cash equivalents and restricted cash ( 121,382 ) ( 47,379 ) Cash and cash equivalents and restricted cash, beginning of year 144,967 192,346 Cash and cash equivalents and restricted cash, end of year $ 23,585 $ 144,967 See accompanying notes to consolidated financial statements. 56 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”) is focused on identifying, acquiring, developing or redeveloping and managing commercial real estate located within “qualified opportunity zones.” We were formed on January 24, 2020 as a Delaware limited liability company and qualify as a partnership and qualified opportunity fund for U.S. federal income tax purposes. At least 90% of our assets consist of qualified opportunity zone property, and all of our assets are held by, and all of our operations are conducted through, one or more operating companies (each an “Operating Company” and collectively, our “Operating Companies”), either directly or indirectly through their subsidiaries. We are externally managed by Belpointe PREP Manager, LLC (our “Manager”), an affiliate of our sponsor, Belpointe, LLC (our “Sponsor”). Subject to the oversight of our board of directors (our “Board”), our Manager is responsible for managing our affairs on a day-to-day basis and for identifying and making acquisitions and investments on our behalf. Capitalization On May 9, 2023, the U.S. Securities and Exchange Commission (the “SEC”) declared effective our registration statement on Form S-11, as amended (File No. 333-271262) (the “Follow-on Registration Statement”), registering the offer and sale of up to $ 750,000,000 of our Class A units on a continuous “best efforts” basis by any method deemed to be an “at the market” offering pursuant to Rule 415(a)(4) under the Securities Act of 1933, as amended (the “Securities Act”), including by offers and sales made directly to investors or through one or more agents (our “Follow-on Offering”). In connection with the Follow-on Registration Statement, we entered into a non-exclusive dealer manager agreement with Emerson Equity LLC (the “Dealer Manager”), a registered broker-dealer, for the sale of our Class A units through the Dealer Manager. The Dealer Manager will enter into participating dealer agreements and wholesale agreements with other broker-dealers, referred to as “selling group members,” to authorize those broker-dealers to solicit offers to purchase our Class A units. We will pay our Dealer Manager commissions of up to 0.25 %, and the selling group members commissions ranging from 0.25 % to 4.50 %, of the principal amount of Class A unit sold in the Follow-on Offering. As of December 31, 2023, we have not sold any Class A units in connection with the Follow-on Offering. In addition, the Follow-on Registration Statement constitutes a post-effective amendment to the registration statement on Form S-11, as amended (File No. 333-255424), registering the offer and sale of our ongoing initial public offering of up to $ 750,000,000 of our Class A units, declared effective by the SEC on September 30, 2021, of which $ 514,724,350 remained unsold as of December 31, 2023 (our “Primary Offering” and, together with our Follow-on Offering, our “Public Offerings”). The purchase price for Class A units in the Public Offerings will be the lesser of (i) the current net asset value (the “NAV”) of our Class A units, and (ii) the average of the high and low sale prices of our Class A units on the NYSE American (the “NYSE”) during regular trading hours on the last trading day immediately preceding the investment date on which the NYSE was open for trading and trading in our Class A units occurred. Our Manager calculates our NAV within approximately 60 days of the last day of each quarter, and any adjustments take effect as of the first business day following its public announcement. On February 29, 2024, we announced that our NAV as of December 31, 2023 was equal to $ 100.88 per Class A unit. Note 2 – Summary of Significant Accounting Policies Basis of Presentation The accompanying consolidated financial statements have been prepared on the accrual basis of accounting and conform to accounting principles generally accepted in the United States of America (“U.S. GAAP”) 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. 57 We have evaluated our economic interests in entities to determine if they are deemed to be variable interest entities (“VIEs”) and whether the entities should be consolidated. An entity is a VIE if it has any one of the following characteristics: (i) the entity does not have enough equity at risk to finance its activities without additional subordinated financial support; (ii) the at-risk equity holders, as a group, lack the characteristics of a controlling financial interest; or (iii) the entity is structured with non-substantive voting rights. The distinction between a VIE and other entities is based on the nature and amount of the equity investment and the rights and obligations of the equity investors. Fixed price purchase and renewal options within a lease, as well as certain decision-making rights within a loan or joint-venture agreement, can cause us to consider an entity a VIE. Limited partnerships and other similar entities that operate as a partnership will be considered VIEs unless the limited partners hold substantive kick-out rights or participation rights. Significant judgment is required to determine whether a VIE should be consolidated. We review all agreements and contractual arrangements to determine whether (i) we or another party have any variable interests in an entity, (ii) the entity is considered a VIE, and (iii) which variable interest holder, if any, is the primary beneficiary of the VIE. Determination of the primary beneficiary is based on whether a party (a) has the power to direct the activities that most significantly impact the economic performance of the VIE, and (b) has the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. The following table presents the financial data of the consolidated VIEs included in the consolidated balance sheets as of December 31, 2023 and 2022, respectively (amounts in thousands): Schedule of Carrying Value Net Assets 2023 2022 December 31, 2023 2022 Assets Real estate Land $ 26,059 $ 24,967 Building and improvements 12,953 11,297 Intangible assets 6,816 6,725 Real estate under construction 290,627 133,773 Total Real estate 336,455 176,762 Accumulated depreciation and amortization ( 2,161 ) ( 672 ) Real estate, net 334,294 176,090 Cash and cash equivalents 8,204 124,159 Other assets 7,841 11,773 Total assets $ 350,339 $ 312,022 Liabilities Debt, net $ 19,678 $ — Due to affiliates 7,292 4,399 Lease liabilities 25 5,350 Accounts payable 12,374 1,679 Accrued expenses and other liabilities 8,595 6,064 Total liabilities $ 47,964 $ 17,492 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. 58 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 consolidated 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. 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. 59 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. 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 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 Assets We evaluate our tangible and identifiable intangible real estate assets for impairment when events such as delays or changes in development, declines in a property’s operating performance, deteriorating market conditions, or environmental or legal concerns bring recoverability of the carrying value of one or more assets into question. When qualitative factors indicate the possibility of impairment, the total undiscounted cash flows of the property, including proceeds from disposition, are compared to the net book value of the property. If the carrying value of the asset exceeds the undiscounted cash flows of the asset, an impairment loss is recorded in earnings to reduce the carrying value of the asset to fair value, calculated as the discounted net cash flows of the property. In circumstances where the highest and best use of a property is the fee simple value of vacant land, we compare book value of the property to the appraised value of the land. If the carrying value of the asset exceeds the appraised value of the land, an impairment loss is recorded to reduce the carrying value to the appraised value. 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. 60 Initial Direct Costs 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. Derivative Instruments Our derivative instruments are measured at fair value and are recorded as either assets or liabilities in our consolidated balance sheets depending on the pertinent rights or obligations under the applicable derivative contract. The derivative contracts that we may enter into are generally concurrent with obtaining floating rate debt and are intended to manage the economic risk of increases in benchmark interest rates. Our derivative instruments are not designated as hedges for accounting purposes, and therefore we account for changes in the fair value of the derivative instruments as either a gain or loss in the consolidated statements of operations. 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 2023 2022 December 31, 2023 2022 Cash and cash equivalents $ 20,125 $ 143,467 Restricted cash (1) 3,460 1,500 Total cash and cash equivalents and restricted cash $ 23,585 $ 144,967 (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. Subscriptions receivable are carried at cost which approximates fair value. As of December 31, 2023 and 2022, there was no subscriptions that had not yet settled. 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. 61 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, 2023, and 2022, were $ 0.4 million, and $ 0.6 million, respectively. 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. 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, and ongoing supply chain disruptions. 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. 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 In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, S e gment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). ASU 2023-07 is effective for public entities for fiscal years beginning after December 15, 2023, and interim periods in fiscal years beginning after December 15, 2024, and requires single reporting entities to comply with the expanded reportable segment disclosures outlined in the ASU. The expanded reportable segment disclosures are intended to enhance certain disclosures surrounding significant segment expenses. We are currently evaluating the impact of the new standard on our consolidated financial statements. 62 Recently Adopted Accounting Pronouncements 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. ASU 2016-13 does not apply to receivables arising from operating leases, which are within the scope of ASU 2016-02 , Leases (Topic 842). We adopted ASU 2016-13 on January 1, 2023 using the modified retrospective method. The adoption of this standard did not have a material impact on our consolidated financial statements, and no cumulative-effect adjustment was recorded to retained earnings. Note 3 – Leases Lessor Accounting We own rental properties which are leased to tenants under operating leases with current expirations ranging from 2024 to 2040, with options to extend or terminate the leases. Revenues from such leases are reported as Rental revenue in our consolidated statements of operations, and are comprised of (i) lease components, which includes fixed and variable lease payments and (ii) non-lease components which includes reimbursements of property level operating expenses. We do not separate non-lease components from the related lease components as the timing and pattern of transfer are the same and account for the combined component. Fixed lease revenues represent the base rent that each tenant is required to pay in accordance with the terms of their respective leases reported on a straight-line basis over the non-cancelable term of the lease. Variable lease revenues include payments based on (i) tenant reimbursements, (ii) changes in the index or market-based indices after the inception of the lease, (iii) percentage rents, or (iv) the operating performance of the property. Variable lease revenues are not recognized until the specific events that trigger the variable payments have occurred. The following table summarizes the components of lease revenues (amounts in thousands): Schedule of Components of Lease Revenues 2023 2022 Years Ended December 31, 2023 2022 Fixed lease revenues $ 1,019 $ 878 Variable lease revenues (1) 415 282 Lease revenues (2) (3) $ 1,434 $ 1,160 (1) Includes reimbursements for property taxes, insurance, and common area maintenance services. (2) Excludes lease intangible amortization of $ 0.8 million, and $ 0.3 million, for the years ended December 31, 2023, and 2022, respectively. (3) Excludes straight-line rent of less than $ 0.1 million for the years ended December 31, 2023, and 2022, 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, 2023. 63 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, 2023 (amounts in thousands): Summary of Minimum Future Contractual Rents For the year ended December 31, 2024 $ 931 2025 1,198 2026 1,103 2027 1,087 2028 1,108 Thereafter 11,030 Total (1) $ 16,457 (1) Excludes $ 0.1 million of straight-line rent and $ 1.3 million of lease intangible amortization. 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, 2023. Lessee Accounting Ground Lease As further described in Note 5 – Real Estate, Net, on August 24, 2023, through an indirect majority-owned subsidiary of our Operating Company, we purchased land located in Sarasota, Florida, which we previously leased. Therefore, there is no longer a right of use (“ROU”) asset or lease liabilities in our consolidated balance sheets as of December 31, 2023. As of December 31, 2022, we were a lessee under the aforementioned ground lease which was classified as a financing lease. Accordingly, a finance lease liability of $ 5.0 million is included in Lease liabilities in our consolidated balance sheets as of December 31, 2022, which represented our obligation to make payments under this ground lease, and a ROU asset of $ 5.0 million is included in Other assets in our consolidated balance sheets as of December 31, 2022, which represented our right to use the underlying asset during the lease term. During the years ended December 31, 2023, and 2022 we capitalized $ 0.3 million and $ 0.3 million, respectively, of ground rent expense related to this ground lease on one of our development investments, which is included in Real estate under construction in our consolidated balance sheets. There are no operating leases for which we are the lessee; therefore, there are no related ROU assets or lease liabilities in our consolidated balance sheets as of December 31, 2023 and 2022. Note 4 – Related Party Arrangements 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, 2022 (the “BI Secured Note”). Upon consummation of the Merger, we acquired the BI Secured Note as successor in interest to Belpointe REIT. Effective November 30, 2021, we acquired the 1991 Main Interest 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. 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. 64 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. Our Transaction with Belpointe Development Holding, LLC On October 30, 2023, we borrowed $ 1.5 million from Belpointe Development Holding, LLC, an entity in which certain immediate family members of our Chief Executive Officer have a passive indirect minority beneficial ownership interest, pursuant to the terms of an unsecured promissory note (the “BDH Note”). The BDH Note was due and payable on March 31, 2024 and interest accrued on the BDH Note at an annual rate of 4.5 %. The proceeds of the loan were used for general corporate purposes. On December 29, 2023, the BDH Note, including accrued interest of less than $ 0.1 million, was repaid in full. Our Transaction with Lacoff Holding II, LLC On December 29, 2023, we borrowed $ 4.0 million from Lacoff Holding II LLC, an affiliate of our Chief Executive Officer, pursuant to the terms of a promissory note (the “LH II Loan”). The LH II Loan is due and payable on April 1, 2024 and interest accrues on the LH II Note at an annual rate of 5.26 %. The proceeds of the loan were used for general corporate purposes. Joint Ventures During the years ended December 31, 2023 and 2022, less than $ 0.1 million, and $ 0.3 million, respectively, 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. 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 our relevant agreements with such parties (amounts in thousands): Schedule of Non Cash Activity to Related Party 2023 2022 Years Ended December 31, 2023 2022 Amounts included in the Consolidated Statements of Operations Costs incurred by our Manager and its affiliates (1) $ 3,050 $ 2,349 Management fees (2) 2,693 2,583 Insurance (3) 449 419 Director compensation 80 80 Costs incurred by the manager and its affiliates $ 6,272 $ 5,431 Capitalized costs included in the Consolidated Balance Sheets Development fee and reimbursements $ 7,324 $ 5,649 Insurance (3) 2,160 1,631 Total capitalized costs $ 9,484 $ 7,280 (1) Includes wage, overhead and other reimbursements to our Manager and its affiliates, including our Sponsor, which are included in General and administrative in our consolidated statements of operations. (2) Included in Property expenses in our consolidated statements of operations. (3) Our insurance premiums are prepaid and are included in Other assets in our consolidated balance sheets and are amortized monthly to either Property expenses in our consolidated statements of operations or Real estate under construction in our consolidated balance sheets. 65 The following table summarizes amounts included in Due to affiliates in our consolidated balance sheets (amounts in thousands): Schedule of Due to Related Party 2023 2022 December 31, 2023 2022 Amounts Due to affiliates Development fees $ 6,129 $ 4,256 Employee cost sharing and reimbursements (1) 2,856 866 Management fees 1,365 661 Director compensation 20 20 Due to affiliates $ 10,370 $ 5,803 (1) Includes wage, overhead and other reimbursements to our Manager and its affiliates, including our Sponsor. Public Offering Expenses Our Manager and its affiliates, including our Sponsor, are reimbursed, for organizational and offering expenses incurred in connection with our Public Offerings. We became liable to reimburse our Manager and its affiliates, including our Sponsor, when the first closing was held in connection with our Primary Offering, which occurred in October 2021. There were no organizational or Primary Offering expenses incurred by our Manager and its affiliates during the years ended December 31, 2023 and 2022. 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, 2023, and 2022, our Manager and its affiliates, including our Sponsor, incurred operating expenses of $ 2.9 million and $ 2.9 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, 2023, 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. 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. 66 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 5 – 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. 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. During the years ended December 31, 2023, and 2022, we incurred development fees earned during the construction phase of $ 5.9 million, and $ 4.3 million, respectively. As of December 31, 2023 and 2022, $ 6.1 million and $ 4.3 million, respectively, remained due and payable to our affiliates for development fees. During the years ended December 31, 2023, and 2022, we incurred employee reimbursement expenditures to our affiliates acting as development managers of $ 1.6 million, and $ 1.5 million, respectively, of which $ 1.2 million, and $ 1.3 million, respectively, is included in Real estate under construction in our consolidated balance sheets, and $ 0.4 million, $ 0.2 million, respectively, is included in General and administrative expenses in our consolidated statements of operations. As of December 31, 2023 and 2022, $ 1.3 million and $ 0.3 million, respectively, remained due and payable to our affiliates for employee reimbursement expenditures. On April 25, 2023, each of the indirect majority-owned subsidiaries for our Nashville investments entered into development management agreements with certain development entities in which immediate family members of our Chief Executive Officer have a passive indirect minority beneficial ownership interest (collectively, the “Nashville DMAs”). The aggregate development fees payable under the Nashville DMAs are equal to 55 % of 4.5 % of the development budget or hard costs, as applicable. During the year ended December 31, 2023, we incurred $ 0.4 million of development fees related to the Nashville DMAs, which were capitalized to Real estate under construction in our consolidated balance sheets, with the remaining development fees payable upon our achieving various milestones throughout the development of our Nashville investments. As of December 31, 2023, $ 0.4 million in development fees related to the Nashville DMAs remained outstanding and payable. Acquisition Fees We will pay our Manager, Sponsor, or an affiliate of our Manager or Sponsor, an acquisition fee equal to 1.5 % of the total value of any acquisition transaction, including any acquisition through merger with another entity (but excluding any transactions in which our Sponsor, or an affiliate of our Manager or Sponsor, would otherwise receive a development fee). We did not incur any acquisition fees during the years ended December 31, 2023 and 2022, since all investments acquired during these periods were, or will be, subject to payment of development fees. 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 years ended December 31, 2023, and 2022, we obtained insurance coverage and paid premiums in the aggregate amount of $ 2.6 million, and $ 4.8 million, respectively, from which Belpointe Specialty Insurance earned commissions and administrative fees of $ 0.2 million, and $ 0.5 million, respectively. Insurance premiums are prepaid and are included in Other assets in our consolidated balance sheets. 67 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. Note 5 – Real Estate, Net Acquisitions of Real Estate During 2023 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. As part of the transaction, two unaffiliated joint venture partners (the “CMC JV Partners”) were deemed to have made initial capital contributions to CMC. Following our acquisition of the CMC Interest, we discovered that one of the CMC JV Partners had misappropriated cash from the other’s cash account. Accordingly, the CMC JV Partner forfeited $ 1.0 million, or 29.8 %, of their noncontrolling interest in CMC on March 24, 2023 (a non-cash financing activity during the year ended December 31, 2023). As a result of the forfeiture, we indirectly own a 100 % controlling interest in CMC. On August 24, 2023, through an indirect majority-owned subsidiary of our Operating Company, we acquired land located in Sarasota, Florida, that was previously subject to a ground lease (See Note 3 – Leases for additional information) for a purchase price of $ 4.9 million, inclusive of transaction costs of $ 0.1 million. We accounted for the transaction as an asset acquisition. As the acquired land is being held for development, the total purchase price was allocated to Real estate under construction on the consolidated balance sheets as of December 31, 2023. 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. 68 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 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 Intangible asset $ 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 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. 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. 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 2023 2022 December 31, 2023 2022 Beginning balance $ 133,898 $ 76,882 Capitalized costs (1) (2) 155,969 45,907 Land held for development (3) 4,936 10,958 Impairment charges (4) ( 4,060 ) — Capitalized interest 387 151 Ending balance $ 291,130 $ 133,898 (1) Includes development fees and employee reimbursement expenditures. See “ Note 4 – Related Party Agreements ” for additional details regarding our transactions with related parties. (2) 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 $ 3.4 million and $ 2.2 million for the years ended December 31, 2023 and 2022, respectively. (3) Includes the acquisition of land located in Sarasota, Florida during the year ended December 31, 2023 as discussed above. Additionally, includes ground lease payments and straight-line rent adjustments incurred of $ 0.1 million and $ 0.8 million for the years ended December 31, 2023 and 2022, respectively. (4) During the year ended December 31, 2023, we recorded impairment charges of $ 4.1 million in relation to one of our real estate assets located in Nashville, Tennessee, based on our conclusion that the estimated fair market value of the real estate asset was lower than the carrying value, and as a result, we reduced the carrying value to the estimated fair market value. Real estate under construction includes non-cash investing activity of $ 27.6 million for year ended December 31, 2023 (inclusive of unpaid development fees of $ 6.1 million and unpaid employee cost sharing and reimbursements of $ 1.3 million) and $ 13.9 million for the year ended December 31, 2022 (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). Depreciation expense was $ 0.8 million, and $ 0.7 million for the years ended December 31, 2023, and 2022, respectively, and is included in Depreciation and amortization in our consolidated statements of operations. 69 Note 6 – Intangible Assets and Liabilities The following table summarizes our intangible assets and liabilities (amounts in thousands): Schedule of Intangible Assets And Liabilities December 31, 2023 2022 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Finite-Lived Intangible Assets In-place leases $ 3,513 $ ( 1,699 ) $ 1,814 $ 3,836 $ ( 791 ) $ 3,045 Indefinite-Lived Intangible Assets Development rights 5,659 — 5,659 5,659 — 5,659 Total intangible assets $ 9,172 $ ( 1,699 ) $ 7,473 $ 9,495 $ ( 791 ) $ 8,704 Finite-Lived Intangible Liabilities Below-market leases $ ( 2,100 ) $ 776 $ ( 1,324 ) $ ( 2,517 ) $ 411 $ ( 2,106 ) Total intangible liabilities $ ( 2,100 ) $ 776 $ ( 1,324 ) $ ( 2,517 ) $ 411 $ ( 2,106 ) In-place lease intangible assets recorded for acquisitions of real estate during 2022, noted above, are included in Intangible assets in our consolidated balance sheets and are being amortized over a weighted average lease term of approximately 1.1 years. See “ Note 5 – Real Estate, Net ” for additional details regarding our acquisitions of real estate during 2022. During the years ended December 31, 2023, and 2022, the amortization of in-place lease intangible assets was $ 1.2 million, and $ 0.6 million, respectively, and is included in Depreciation and amortization in our consolidated statements of operations. 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 5 – Real Estate, Net ” for additional details regarding our acquisitions of real estate during 2022. During the years ended December 31, 2023, and 2022, the amortization of below-market lease liability was $ 0.8 million and $ 0.3 million, respectively, and is included in Rental revenue in our consolidated statements of operations. 70 Based on the intangible assets and liabilities recorded as of December 31, 2023, 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 2024 $ ( 98 ) $ 130 $ 32 2025 ( 80 ) 114 34 2026 ( 80 ) 114 34 2027 ( 80 ) 114 34 2028 ( 80 ) 114 34 Thereafter ( 906 ) 1,228 322 $ ( 1,324 ) $ 1,814 $ 490 Note 7 – Loans Receivable As described in greater detail in “ Note 4 - Related Party Arrangements ”, 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. 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, we provided a $ 30.0 million commercial mortgage loan to Norpointe, LLC (“Norpointe”) an affiliate of our Chief Executive Officer, pursuant to the terms of a secured promissory note bearing interest at an annual rate of 5.0 %, was due and payable on December 31, 2022 (the “Norpointe Loan”). On June 28, 2022, for purposes of complying with the qualified opportunity fund requirements under the Internal Revenue Code of 1986, as amended (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 secured promissory note bearing interest at an annual rate of 5.0 %, due and payable on June 28, 2023. On December 13, 2022, the Restructured Norpointe Loan was repaid in full, including accrued interest of less than $ 0.1 million. See “ Note 4 – Related Party Arrangements ” for additional details regarding our transactions with Norpointe. On February 23, 2022, we provided an approximately $ 5.0 million commercial mortgage loan to Visco Propco, LLC (“Visco”) pursuant to the terms of a secured promissory note bearing interest at an annual rate of 6.0 %, due and payable on February 18, 2023 (the “Visco Loan”).On December 2, 2022, the Visco Loan was repaid in full, including accrued interest of $ 0.2 million. Interest income from loans receivable was zero , and $ 1.8 million, for the years ended December 31, 2023, and 2022, respectively, and is included in Interest income in our consolidated statements of operations. 71 Note 8 – Debt, Net On May 12, 2023, our indirect majority-owned subsidiary (the “Mortgage Borrower”) entered into a variable-rate construction loan agreement (the “1991 Main Construction Loan Agreement”) for up to $ 130.0 million in principal amount (the “1991 Main Construction Loan”) with Bank OZK (the “Mortgage Lender”), which is secured by our investment in 1991 Main Street, Sarasota, Florida (“1991 Main”). Advances under the 1991 Main Construction Loan bear interest at a per annum rate equal to the one-month term SOFR plus 3.45 % , subject to a minimum all-in per annum rate of 8.51 % , and will be used to fund the development of 1991 Main. The 1991 Main Construction Loan has an initial maturity date of May 12, 2027 and contains a one-year extension option, subject to certain restrictions. As of December 31, 2023, we have drawn down $ 23.1 million on the 1991 Main Construction Loan, and have incurred interest expense of $ 0.1 million which was capitalized to Real estate under construction in our consolidated balance sheets. We incurred deferred financing costs of $ 4.0 million (inclusive of debt discount of $ 1.4 million) for the 1991 Main Construction Loan which are reflected as a component of Debt, net in our consolidated balance sheets as of December 31, 2023. During the construction period, the deferred financing costs are amortized to Real estate under construction in our consolidated balance sheets. As of December 31, 2023, the accumulated amortization for deferred financing costs was $ 0.6 million. In connection with the 1991 Main Construction Loan, we provided a carveout guaranty to the Lender (the “Guaranty”) pursuant to which we guaranteed the Borrower’s obligations to the Lender with respect to certain non-recourse carveout events, such as “bad acts,” environmental conditions, and violations of certain provisions of the loan documents. The Guaranty contains financial covenants requiring that we maintain liquid assets of no less than $ 20.0 million and a net worth of no less than $ 130.0 million. As of December 31, 2023, the Company was in compliance with all covenants under the Guaranty. Together with the Borrower, we also provided a customary environmental indemnity agreement to the Lender pursuant to which we agreed to protect, defend, indemnify, release and hold harmless the Lender from and against certain environmental liabilities related to 1991 Main. Note 9 – 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. We estimated that our other financial assets and liabilities had fair values that approximated their carrying values as of December 31, 2023 and 2022. Recurring Fair Value Measurements Assets measured at fair value on a recurring basis is comprised of our interest rate cap (see Note 10 – Derivative Instruments). The valuation of our interest rate cap is prepared by an independent third-party and is classified as Level 2 in the fair value hierarchy, as the valuation is approximated using market values of similar instruments in active markets. 72 Note 10 – Derivative Instruments The 1991 Main Construction Loan Agreement required the Borrower to enter into an interest rate cap agreement with a one-month SOFR rate based strike price of 5.07 % (the “1991 Main Interest Rate Cap”). The notional amount of the 1991 Main Interest Rate Cap increases in accordance with the schedule set forth in the interest rate cap agreement up to a maximum notional amount of $ 112.5 million. The following table details our derivative financial instrument as of December 31, 2023 (amounts in thousands): Schedule of Table Derivative Financial Instrument Interest Rate Derivative Notional Amount Strike Maturity Date Fair Value (1) 1991 Main Interest Rate Cap $ 72,218 5.07 % July 2024 $ 93 (1) Included in Other assets in our consolidated balance sheets. The following table details the effect of our derivative financial instrument on our consolidated statement of operations for the year ended December 31, 2023 (amounts in thousands): Schedule of Table Details Effect Derivative Financial Instrument Interest Rate Derivative Location of Gain (Loss) Amount 1991 Main Interest Rate Cap Other expense $ ( 66 ) 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. For the years ended December 31, 2023, and 2022, we issued 98,950 , and 141,300 , respectively, Class A units. As of December 31, 2023, there were 3,622,399 Class A units, 100,000 Class B units and one Class M unit issued and outstanding. 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. 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. 73 Class M unit The Class M unit is currently held by our Manager and was issued on September 14, 2021. The holder of our Class M unit is not entitled to preemptive, redemption or conversion rights. The holder of our Class M unit is entitled to that number of votes equal to the product obtained by multiplying (i) the sum of the aggregate number of outstanding Class A units plus Class B units, by (ii) 10, on matters on which the Class M unit has a vote. Our Manager will continue to hold the Class M unit for so long as it remains our manager. The holder of our Class M unit does not have any right to receive ordinary, special or liquidating distributions. Preferred units Under our Operating Agreement, our Board may from time to time establish and cause us to issue one or more classes or series of preferred units and set the designations, preferences, rights, powers and duties of such classes or series. Basic and Diluted Loss Per Class A Unit For the years ended December 31, 2023, and 2022, the basic and diluted weighted-average units outstanding were 3,553,319 , and 3,416,527 , respectively. For the years ended December 31, 2023, and 2022, net loss attributable to our Class A units was $ 14.4 million, and $ 7.7 million, respectively, and the loss per basic and diluted unit was $ 4.04 , and $ 2.25 , respectively. Note 12 – Commitments and Contingencies As of December 31, 2023, the Company is not subject to any material litigation nor is the Company aware of any material litigation threatened against it. In connection with the development of our commercial real estate assets, we have entered into separate construction management agreements for each asset which contain terms and conditions that are customary for the related scope of work. As of December 31, 2023, we have two development projects with an aggregate unfunded commitment of $ 102.1 million. As of December 31, 2023, $ 19.2 million, inclusive of retainage of $ 12.2 million, is outstanding and payable in connection with these developments. 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 issued require potential adjustment to or disclosure in the audited consolidated financial statements and has concluded that, except as set forth below and disclosed herein, all such events or transactions that would require recognition or disclosure have been recognized or disclosed. Mezzanine Loan Agreement On January 31, 2024, our indirect majority-owned subsidiary (the “Mezzanine Borrower”) entered into a mezzanine loan agreement, for up to $ 56.4 million in principal amount (the “1991 Main Mezzanine Loan”) with Southern Realty Trust Holdings, LLC (the “Mezzanine Lender”). The 1991 Main Mezzanine Loan bears interest at a rate of 13.0 % per annum and is secured by our investment in 1991 Main. Advances under the 1991 Main Mezzanine Loan may be used to reimburse us for certain costs and expenses incurred in relation to, and to fund the continued development of, 1991 Main. The 1991 Main Mezzanine Loan has an initial maturity date of May 12, 2027 and contains a one-year extension option, subject to certain restrictions. In connection with the 1991 Main Mezzanine Loan, we are required to maintain an interest reserve and carry reserve for purposes of paying accrued but unpaid interest on the 1991 Main Mezzanine Loan and interest, principal and other obligations under the 1991 Main Construction Loan (the “Reserves”). We also provided the Mezzanine Lender with (i) a completion guaranty, which, among other things, guarantees completion of the work on 1991 Main, and (ii) a carveout guaranty, which, among other things, indemnifies the Mezzanine Lender for losses resulting from certain “bad acts,” insolvency, environmental conditions, violations of the terms of the 1991 Main Mezzanine Loan and certain provisions of the 1991 Main Construction Loan Agreement (collectively, the “Mezzanine Guarantees”). Similar to the Carveout Guaranty, we provided to the Mortgage Lender, the Mezzanine Guarantees contain financial covenants requiring that we maintain liquid assets of no less than $ 20.0 million and a net worth of no less than $ 130.0 million. Cash proceeds from the 1991 Main Mezzanine Loan totaled $ 39.8 million, after the Reserves of $ 15.0 million were held back at closing, and incurring closing costs of $ 1.6 million. Related Party On February 8 2024, the LH II Loan was repaid in full, including accrued interest (see Note 4 – Related Party Arrangements). Other Through the date of this Form 10-K, we drew down $ 17.0 million on the 1991 Main Construction Loan. 74 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosures. None.