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 ) 50 Consolidated Balance Sheets as of December 31, 2024 and 2023 51 Consolidated Statements of Operations for the years ended December 31, 2024 and 2023 52 Consolidated Statements of Changes in Members’ Capital for the years ended December 31, 2024 and 2023 53 Consolidated Statements of Cash Flows for the years ended December 31, 2024 and 2023 54 Notes to Consolidated Financial Statements 55 49 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, 2024 and 2023, 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, 2024, 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, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2024, 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, 2025 50 Table of Contents Belpointe PREP, LLC Consolidated Balance Sheets (in thousands, except unit and per unit data) 2024 2023 December 31, 2024 2023 Assets Real estate Land $ 51,038 $ 38,741 Building and improvements 238,684 17,939 Furniture, fixtures and equipment 2,633 — Intangible assets 8,530 9,172 Real estate under construction 191,308 291,130 Total real estate 492,193 356,982 Accumulated depreciation and amortization ( 6,917 ) ( 3,441 ) Real estate, net 485,276 353,541 Cash and cash equivalents 24,737 20,125 Other assets 7,578 8,451 Total assets $ 517,591 $ 382,117 Liabilities Debt, net $ 177,017 $ 19,678 Loan from affiliate 2,600 4,000 Due to affiliates 9,103 10,370 Lease liabilities 1,225 1,324 Accounts payable 13,322 12,584 Accrued expenses and other liabilities 10,267 9,097 Total liabilities 213,534 57,053 Commitments and contingencies — — Members’ Capital Class A units, unlimited units authorized, 3,664,173 and 3,622,399 units issued and outstanding at December 31, 2024 and 2023, respectively 301,776 322,626 Class B units, 100,000 units authorized, 100,000 units issued and outstanding at December 31, 2024 and 2023, respectively — — Class M unit, one unit authorized, one unit issued and outstanding at December 31, 2024 and 2023, respectively — — Total members’ capital excluding noncontrolling interests 301,776 322,626 Noncontrolling interests 2,281 2,438 Total members’ capital 304,057 325,064 Total liabilities and members’ capital $ 517,591 $ 382,117 See accompanying notes to consolidated financial statements. 51 Table of Contents Belpointe PREP, LLC Consolidated Statements of Operations (in thousands, except unit and per unit data) 2024 2023 Years Ended December 31, 2024 2023 Revenue Rental revenue $ 2,675 $ 2,254 Total revenue 2,675 2,254 Expenses Property expenses 6,839 4,179 General and administrative 5,111 6,335 Interest expense 10,006 — Depreciation and amortization 4,215 2,067 Impairment of real estate 777 4,060 Total expenses 26,948 16,641 Other income Interest income 646 113 Other expense ( 228 ) ( 87 ) Total other income 418 26 Loss before income taxes ( 23,855 ) ( 14,361 ) Provision for income taxes ( 1 ) ( 1 ) Net loss ( 23,856 ) ( 14,362 ) Net loss attributable to noncontrolling interests — 11 Net loss attributable to Belpointe PREP, LLC $ ( 23,856 ) $ ( 14,351 ) Loss per Class A unit (basic and diluted) Net loss per unit $ ( 6.56 ) $ ( 4.04 ) Weighted-average units outstanding 3,638,258 3,553,319 See accompanying notes to consolidated financial statements. 52 Table of Contents 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 Non controlling Total Members’ Units Amount Units Amount Units Amount Interests Interests Capital Balance at December 31, 2022 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 Distribution to noncontrolling interests — — — — — — — ( 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 Balance 3,622,399 322,626 100,000 — 1 — 322,626 2,438 325,064 Issuance of units 41,774 3,061 — — — — 3,061 — 3,061 Contribution from noncontrolling interests — — — — — — — 51 51 Distribution to noncontrolling interests — — — — — — — ( 47 ) ( 47 ) Acquisition of noncontrolling interests — ( 39 ) — — — — ( 39 ) ( 161 ) ( 200 ) Offering costs — ( 16 ) — — — — ( 16 ) — ( 16 ) Net loss — ( 23,856 ) — — — — ( 23,856 ) — ( 23,856 ) Balance at December 31, 2024 3,664,173 $ 301,776 100,000 $ — 1 $ — $ 301,776 $ 2,281 $ 304,057 Balance 3,664,173 $ 301,776 100,000 $ — 1 $ — $ 301,776 $ 2,281 $ 304,057 See accompanying notes to consolidated financial statements. 53 Table of Contents Belpointe PREP, LLC Consolidated Statements of Cash Flows (in thousands) 2024 2023 Year Ended December 31, 2024 2023 Cash flows from operating activities Net loss $ ( 23,856 ) $ ( 14,362 ) Adjustments to net loss: Amortization of rent-related intangibles and straight-line rent adjustments ( 2 ) ( 820 ) Depreciation and amortization including intangible assets and deferred financing costs 5,514 2,067 Impairment of real estate 777 4,060 Unrealized loss on interest rate derivatives, net 225 66 Changes in operating assets and liabilities: Increase in due to affiliates 2,513 1,896 Increase in other assets ( 223 ) ( 228 ) (Decrease) increase in accounts payable ( 248 ) 479 Increase (decrease) in accrued expenses and other liabilities 1,611 ( 103 ) Net cash used in operating activities ( 13,689 ) ( 6,945 ) Cash flows from investing activities Development of real estate ( 137,845 ) ( 139,733 ) Other investing activity ( 244 ) ( 200 ) Acquisition of real estate — ( 5,190 ) Net cash used in investing activities ( 138,089 ) ( 145,123 ) Cash flows from financing activities Proceeds from construction loans 102,767 21,874 Proceeds from term loans 55,755 — Repayment of loan from affiliate ( 4,000 ) ( 1,500 ) Payment of debt issuance costs ( 3,143 ) ( 2,618 ) Proceeds from units issued 3,061 7,932 Proceeds from loan from affiliate 2,600 5,500 Distribution to noncontrolling interests ( 247 ) ( 24 ) Other financing activities, net 226 ( 96 ) Contributions from noncontrolling interests 52 216 Payment of offering costs ( 47 ) ( 373 ) Payment of financing deposits — ( 225 ) Net cash provided by financing activities 157,024 30,686 Net increase (decrease) in cash cash equivalents and restricted cash 5,246 ( 121,382 ) Cash and cash equivalents and restricted cash, beginning of year 23,585 144,967 Cash and cash equivalents and restricted cash, end of year $ 28,831 $ 23,585 See accompanying notes to consolidated financial statements. 54 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”) 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 We are the successor in interest to Belpointe REIT, Inc., a Maryland corporation (“Belpointe REIT”), incorporated on June 19, 2018. During the year ended December 31, 2021, we acquired all of the outstanding shares of common stock of Belpointe REIT in an exchange offer and related conversion and merger transaction. 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 may 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 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 units sold in the Follow-on Offering. In addition, the Follow-on Registration Statement constituted a post-effective amendment to our initial registration statement on Form S-11, as amended (File No. 333-255424), registering our continuous primary offering of up to $ 750,000,000 of Class A units, declared effective by the SEC on September 30, 2021 (our “Primary Offering” and, together with our Follow-on Offering, our “Public Offerings”). For the year ended December 31, 2024, we have sold aggregate gross proceeds of $ 3.1 million, of Class A units in connection with our Public Offerings. Together with the gross proceeds raised in Belpointe REIT, Inc.’s prior offerings, as of December 31, 2024, we have raised aggregate gross offering proceeds of $ 357.3 million in our Public Offerings. The purchase price for Class A units in our Public Offerings is 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 March 10, 2025, we announced that our NAV as of December 31, 2024 was equal to $ 119.94 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. 55 Table of Contents 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 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, 2024 and 2023, respectively (amounts in thousands): Schedule of Carrying Value Net Assets 2024 2023 December 31, 2024 2023 Assets Real estate Land $ 41,223 $ 26,059 Building and improvements 236,165 12,953 Furniture, fixtures and equipment 2,633 — Intangible assets 6,174 6,816 Real estate under construction 190,750 290,627 Total Real estate 476,945 336,455 Accumulated depreciation and amortization ( 5,578 ) ( 2,161 ) Real estate, net 471,367 334,294 Cash and cash equivalents 2,566 8,204 Other assets 7,096 7,841 Total assets $ 481,029 $ 350,339 Liabilities Debt, net $ 177,017 $ 19,678 Due to affiliates 3,413 7,292 Lease liabilities 21 25 Accounts payable 13,137 12,374 Accrued expenses and other liabilities 9,690 8,595 Total liabilities $ 203,278 $ 47,964 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. 56 Table of Contents 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. We will remain an emerging growth company until the earlier of (i) December 31, 2026 (the last day of the fiscal year following the fifth anniversary of our Primary Offering), (ii) the last day of the first fiscal year in which we have total annual gross revenue of at least $1.07 billion, (iii) the last day of the first fiscal year in which we are deemed to be a “large accelerated filer,” as defined in the rules under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and (iv) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period. To the extent that we continue to qualify as a “smaller reporting company,” as defined in Rule 12b-2 under the Exchange Act, after we cease to qualify as an emerging growth company, certain of the exemptions available to us as an emerging growth company may continue to be available to us as a smaller reporting company, including: (i) not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002; and (ii) the requirement to provide only two years of audited financial statements, instead of three years. 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. Liquidity Our primary need for liquidity is to fund our investments, including construction and development costs, pay our Public Offering and operating fees and expenses, pay any distributions that we may make to the holders of our units and pay interest on our outstanding indebtedness. As of December 31, 2024, we held cash, cash equivalents and other short-term investments of $ 24.7 million. We believe that our cash on-hand as of December 31, 2024, together with the anticipated net proceeds from our Public Offerings, the projected cash flows from our real estate assets and our current and anticipated financing activities will be sufficient to fund our operations for at least 12 months from the date of issuance of these consolidated financial statements. Our future needs for liquidity will depend on a variety of factors, including, without limitation, our ability to generate cash flows from operations, the timing and availability of net proceeds from our Public Offerings and any future offerings that we may conduct, the timing and extent of our real estate acquisition and disposition activities, and the timing and extent of our construction and development costs. Economic uncertainty, uncertainty surrounding legislation, regulation and government policy at the U.S. federal level, fluctuating interest rates, unemployment rates, energy prices, tariffs, immigration, taxes, inflation, volatility in the real estate markets, slowdowns in transaction volume, delays in financings from banks and other lenders and other negative trends may, in the future, adversely impact our ability to timely access potential sources of liquidity. If we are unable to raise additional capital when desired, or on terms that are acceptable to us, our business, financial condition and results of operations could be adversely affected. Segment Reporting We are focused on identifying, acquiring, developing or redeveloping and managing real estate assets located within qualified opportunity zones. Our operating segments are based on the way we organize and evaluate our business internally. We currently operate in two reportable segments, commercial and mixed-use, which are further described in Note 12 - Segment Reporting . 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. 57 Table of Contents 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. 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. 58 Table of Contents 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. 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. 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 2024 2023 December 31, 2024 2023 Cash and cash equivalents $ 24,737 $ 20,125 Restricted cash (1) 4,094 3,460 Total cash and cash equivalents and restricted cash $ 28,831 $ 23,585 (1) Restricted cash is included within Other assets in our consolidated balance sheets. 59 Table of Contents 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, 2024 and 2023, 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. Organization, Public Offerings 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 Public Offering costs for the years ended December 31, 2024, and 2023, were less than $ 0.1 million, and $ 0.4 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 commercial 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, accrued interest, 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. 60 Table of Contents 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 March 2024, the SEC adopted final rules under Release No. 33-11275, The Enhancement and Standardization of Climate-Related Disclosures for Investors (the “Climate Rules”). The Climate Rules require quantitative and qualitative disclosure of certain climate-related information in registration statements and annual reports filed. These disclosures include financial statement footnote disclosure related to the effects of certain severe weather events and other natural conditions. In April 2024, the SEC issued an order staying the Climate Rules pending completion of a judicial review of certain petitions challenging their validity. If the stay is lifted, the effective dates remain unchanged and we remain a smaller reporting company, emerging growth company or non-accelerated filer, the Climate Rules will be effective for our fiscal year ending December 31, 2027. We are currently evaluating the impact of the Climate Rules on our consolidated financial statements. Recently Adopted 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. The objective of ASU 2023-07 is to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The Company adopted ASU 2023-07 during the fourth quarter of 2024 and these consolidated financial statements incorporate the required disclosures. See Note 12 - Segment Reporting . Note 3 – Leases Lessor Accounting We own rental properties which are leased to tenants under operating leases that typically have terms of between 12 and 24 months with current expirations ranging from 2025 to 2040, and 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 2024 2023 Years Ended December 31, 2024 2023 Fixed lease revenues $ 2,121 $ 1,019 Variable lease revenues (1) 552 415 Lease revenues (2) (3) $ 2,673 $ 1,434 (1) Includes reimbursements for property taxes, insurance, and common area maintenance services. (2) Excludes lease intangible amortization of less than $ 0.1 million, and $ 0.8 million, for the years ended December 31, 2024, and 2023, respectively. (3) Excludes straight-line rent of less than $ 0.1 million for the years ended December 31, 2024, and 2023, 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. 61 Table of Contents We assess the collectability of substantially all lease payments due, including unbilled rent receivable balances, by reviewing a tenant’s payment history and financial condition, and the age of the receivables. 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, 2024. 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 tenant operating leases as of December 31, 2024 (amounts in thousands): Schedule of Minimum Future Lease Payments For the year ended December 31, (1) (1) 2025 $ 5,569 2026 3,287 2027 1,324 2028 1,352 2029 1,348 Thereafter 10,720 Total (2) $ 23,600 (1) A majority of our operating leases have terms of between 12 and 24 months, however expiration dates range from 2025 to 2040. (2) Excludes $ 0.1 million of straight-line rent and $ 1.2 million of lease intangible amortization. Note 4 – Related Party Arrangements Our Transactions with Belpointe Development Holding, LLC On May 16, 2024, we entered into an agreement, which has since been amended, to borrow up to $ 3.0 million in principal amount from Belpointe Development Holding, LLC, an affiliate of our Chief Executive Officer, pursuant to the terms of a revolving credit facility agreement (the “BDH Facility”). Interest accrues on the BDH Facility at an annual rate of 5.0 %, due and payable at maturity. The BDH Facility is due to mature on August 31, 2026 . Proceeds under the BDH Facility are to be used for general corporate purposes. As of December 31, 2024, the BDH Facility had an outstanding principal balance of $ 2.6 million and accrued interest of less than $ 0.1 million. 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 was due and payable on April 1, 2024 and interest accrued on the LH II Note at an annual rate of 5.26 %. The proceeds of the loan were used for general corporate purposes. On February 8, 2024, the LH II Loan, including accrued interest of less than $ 0.1 million, was repaid in full. Joint Ventures During the years ended December 31, 2024 and 2023, less than $ 0.1 million, and less than $ 0.1 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 Public Offerings and the management of our investments. 62 Table of Contents 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 2024 2023 Years Ended December 31, 2024 2023 Amounts included in the Consolidated Statements of Operations Costs incurred by our Manager and its affiliates (1) $ 3,128 $ 3,050 Management fees (2) 2,705 2,693 Insurance (3) 793 449 Director compensation 80 80 Costs and expenses related parties $ 6,706 $ 6,272 Capitalized costs included in the Consolidated Balance Sheets Development fee and reimbursements $ 5,438 $ 7,324 Insurance (3) 2,479 2,160 Capitalized costs $ 7,917 $ 9,484 (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. The following table summarizes amounts included in Due to affiliates in our consolidated balance sheets (amounts in thousands): Schedule of Due to Related Party 2024 2023 December 31, 2024 2023 Amounts Due to affiliates Management fees $ 4,070 $ 1,365 Development fees 2,546 6,129 Employee cost sharing and reimbursements (1) 2,388 2,856 Accrued interest 79 — Director compensation 20 20 Amounts Due to affiliates $ 9,103 $ 10,370 (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 Public Offering expenses incurred by our Manager and its affiliates during the years ended December 31, 2024 and 2023. 63 Table of Contents 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, 2024, and 2023, our Manager and its affiliates, including our Sponsor, incurred operating expenses of $ 2.6 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, 2024, 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. 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, 2024, and 2023, we incurred development fees earned during the construction phase of $ 4.2 million, and $ 5.9 million, respectively. As of December 31, 2024 and 2023, $ 2.5 million and $ 6.1 million, respectively, remained due and payable to our affiliates for development fees. During the years ended December 31, 2024, and 2023, we incurred employee reimbursement expenditures to our affiliates acting as development managers of $ 1.7 million, and $ 1.6 million, respectively, of which $ 1.1 million, and $ 1.2 million, respectively, is included in Real estate under construction in our consolidated balance sheets, and $ 0.6 million, $ 0.4 million, respectively, is included in General and administrative expenses in our consolidated statements of operations. As of December 31, 2024 and 2023, $ 1.2 million and $ 1.3 million, respectively, remained due and payable to our affiliates for employee reimbursement expenditures. On April 25, 2023, each of the indirect majority-owned subsidiaries for our Nashville investments entered into development management agreements with certain development entities in which immediate family members of our Chief Executive Officer have a passive indirect minority beneficial ownership interest (collectively, the “Nashville DMAs”). The aggregate development fees payable under the Nashville DMAs are equal to 55 % of 4.5 % of the development budget or hard costs, as applicable. During the year ended December 31, 2023, we incurred $ 0.4 million of development fees related to the Nashville DMAs, which were capitalized to Real estate under construction in our consolidated balance sheets, with the remaining development fees payable upon our achieving various milestones throughout the development of our Nashville investments. As of December 31, 2024, $ 0.4 million in development fees related to the Nashville DMAs remained outstanding and payable. 64 Table of Contents 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, 2024 and 2023, 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, 2024, and 2023, we obtained insurance coverage and paid premiums in the aggregate amount of $ 2.9 million, and $ 2.6 million, respectively, from which Belpointe Specialty Insurance earned commissions and administrative fees of $ 0.2 million, and $ 0.2 million, respectively. Insurance premiums are prepaid and are included in Other assets in our consolidated balance sheets. Economic Dependency Under various agreements we have engaged our Manager and its affiliates, including in certain cases our Sponsor, to provide certain services that are essential to us, including asset management services, asset acquisition and disposition services, supervision of our Public Offerings 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 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. 65 Table of Contents 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 2024 2023 December 31, 2024 2023 Beginning balance $ 291,130 $ 133,898 Placed in service ( 235,675 ) — Capitalized costs (1) (2) 133,236 155,969 Capitalized interest 3,394 387 Impairment charges (3) ( 777 ) ( 4,060 ) Land held for development (4) — 4,936 Ending balance $ 191,308 $ 291,130 (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 $ 5.4 million and $ 3.4 million for the years ended December 31, 2024 and 2023, respectively. (3) Impairments for the years ended December 31, 2024 and 2023 are 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. (4) Includes the acquisition of land located in Sarasota, Florida during the year ended December 31, 2023 as discussed above. Placed in Service During the year ended December 31, 2024, our 1991 Main Street, Sarasota, Florida (“Aster & Links”) development project reached substantial completion, and as a result, we reclassified $ 235.7 million from Real estate under construction to Land ($ 12.3 million), Building and improvements ($ 220.8 million), and Furniture, fixtures and equipment ($ 2.6 million) on our consolidated balance sheets. Non-cash Disclosures Real estate under construction includes non-cash investing activity of $ 21.0 million for year ended December 31, 2024 (inclusive of unpaid development fees of $ 2.2 million and unpaid employee cost sharing and reimbursements of $ 0.9 million) and $ 27.6 million for the 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). Depreciation Expense Depreciation expense was $ 4.0 million, and $ 0.8 million for the years ended December 31, 2024, and 2023, respectively, and is included in Depreciation and amortization in our consolidated statements of operations. 66 Table of Contents 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, 2024 2023 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Finite-Lived Intangible Assets In-place leases $ 2,871 $ ( 1,188 ) $ 1,683 $ 3,513 $ ( 1,699 ) $ 1,814 Indefinite-Lived Intangible Assets Development rights 5,659 — 5,659 5,659 — 5,659 Total intangible assets $ 8,530 $ ( 1,188 ) $ 7,342 $ 9,172 $ ( 1,699 ) $ 7,473 Finite-Lived Intangible Liabilities Below-market leases $ ( 1,743 ) $ 518 $ ( 1,225 ) $ ( 2,100 ) $ 776 $ ( 1,324 ) Total intangible liabilities $ ( 1,743 ) $ 518 $ ( 1,225 ) $ ( 2,100 ) $ 776 $ ( 1,324 ) During the years ended December 31, 2024, and 2023, the amortization of in-place lease intangible assets was $ 0.1 million, and $ 1.2 million, respectively, and is included in Depreciation and amortization in our consolidated statements of operations. During the years ended December 31, 2024, and 2023, the amortization of below-market lease liability was $ 0.1 million and $ 0.8 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, 2024, scheduled annual net amortization of intangibles for the next five calendar years and thereafter is as follows (amounts in thousands): Schedule of Annual Net Amortization of Intangibles Years Ending December 31, Increase in Rental Revenue Increase to Amortization Net 2025 $ ( 80 ) $ 114 $ 34 2026 ( 80 ) 114 34 2027 ( 80 ) 114 34 2028 ( 80 ) 114 34 2029 ( 80 ) 114 34 Thereafter ( 825 ) 1,113 288 $ ( 1,225 ) $ 1,683 $ 458 Note 7 – Debt, Net 2024 Debt Transactions On June 28, 2024, our indirect majority-owned subsidiary entered into a variable-rate construction loan agreement for up to $ 104.0 million in principal amount (the “1000 First Construction Loan”) with various lenders. On June 26, 2024, our indirect majority-owned subsidiary entered into a fixed-rate loan agreement for $ 10.0 million in principal amount (the “900 8th Land Loan”) with KHRE SMA Funding, LLC. On January 31, 2024, our indirect majority-owned subsidiary entered into a fixed-rate mezzanine loan agreement for up to $ 56.4 million in principal amount (the “1991 Main Mezzanine Loan”) with Southern Realty Trust Holdings, LLC. 67 Table of Contents 2023 Debt Transactions On May 12, 2023, our indirect majority-owned subsidiary entered into a variable-rate construction loan agreement for up to $ 130.0 million in principal amount (the “1991 Main Construction Loan”) with Bank OZK. The following table details our Debt, net (dollars in thousands): Schedule of Debt, Net Indebtedness Interest Rate Maturity Date Maximum Facility 2024 2023 Carrying Value as of December 31, Indebtedness Interest Rate Maturity Date Maximum Facility 2024 2023 Fixed rate loans: 1991 Main Mezzanine Loan (1) (3) 13.00 % May 2027 $ 56,378 $ 46,243 $ — 900 8th Land Loan (2) 9.50 % June 2025 N/A 10,000 — Variable rate loans: 1991 Main Construction Loan (1) (4) SOFR + 3.45 % May 2027 $ 130,000 97,521 23,076 1000 First Construction Loan (5) SOFR + 3.80 % June 2027 $ 104,000 29,468 — Total debt 183,232 23,076 Unamortized debt issuance costs ( 3,931 ) ( 2,239 ) Unamortized debt discount ( 2,284 ) ( 1,159 ) Debt, net $ 177,017 $ 19,678 (1) Loan contains a one-year extension option, subject to certain restrictions. (2) The 900 8th Land Loan contains two six-month extension options, subject to certain restrictions. (3) 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. Undrawn amounts were held back at closing and are being maintained by an administrative agent appointed by the lender (the “Reserves”). As interest and other obligations accrue, the Reserves balance will be reduced and be added to the principal outstanding on the 1991 Main Mezzanine Loan. As of December 31, 2024, the Reserves balance was $ 10.1 million. (4) Advances under the 1991 Main Construction Loan bear interest at a per annum rate equal to the one-month term Secured Overnight Financing Rate (“SOFR”) plus 3.45 %, subject to a minimum all-in per annum rate of 8.51 %. To mitigate our exposure to increases to the one-month SOFR, we have obtained an interest rate cap (see Note 9 – Derivative Instruments ). (5) The 1000 First Construction Loan contains two one-year extension options, subject to certain restrictions. Advances under the 1000 First Construction Loan bear interest at a per annum rate equal to the one-month term SOFR plus 3.80 %, subject to a minimum all-in per annum rate of 7.55 %. To mitigate our exposure to increases to the one-month SOFR, we have obtained an interest rate cap (see Note 9 – Derivative Instruments ). The following table summarizes the scheduled future principal payments under our debt arrangements as of December 31, 2024 (amounts in thousands): Schedule of Future Principal Payments Year ended December 31, 2025 $ 10,000 2026 — 2027 173,232 2028 — 2029 — Thereafter — Total $ 183,232 Interest paid, net of capitalized interest for the years ended December 31, 2024 and 2023, was $ 7.5 million and zero , respectively. During the year ended December 31, 2024 we capitalized unpaid lender fees of less than $ 0.1 million, which is a non-cash financing activity. 68 Table of Contents Amortization of deferred financing costs for the years ended December 31, 2024 and 2023, was $ 2.3 million and $ 0.6 million, respectively, of which $ 1.0 million and $ 0.6 million was capitalized, respectively. Guarantees and Covenants Each of our indebtedness agreements are secured by the individual underlying real estate investments serving as collateral. In connection with certain agreements, we provided completion guarantees, which, among other things, guarantee completion of the work at each individual construction project, as well as carveout guarantees pursuant to which we guarantee the borrowers obligations with respect to certain non-recourse carveout events, such as “bad acts,” environmental conditions, and violations of certain provisions of the loan documents. We also provided a customary environmental indemnity agreement to the certain lenders pursuant to which we agreed to protect, defend, indemnify, release and hold harmless such lenders from and against certain environmental liabilities related to the real estate investments for which they apply. We are subject to various financial and operational covenants which includes, but is not limited to, maintaining liquid assets of no less than $20.0 million and a net worth of no less than $130.0 million . As of December 31, 2024 and 2023, we were in compliance with all of our loan covenants. Note 8 – Fair Value of Financial Instruments Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between marketplace participants at the measurement date under current market conditions ( i.e. , the exit price). We categorize our financial instruments, based on the priority of the inputs to the valuation technique, into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument. Financial assets and liabilities recorded on the consolidated balance sheets are categorized based on the inputs to the valuation techniques as follows: Level 1 – Quoted market prices in active markets for identical assets or liabilities. Level 2 – Significant other observable inputs ( e.g. , quoted prices for similar items in active markets, quoted prices for identical or similar items in markets that are not active, inputs other than quoted prices that are observable such as interest rate and yield curves, and market-corroborated inputs). Level 3 – Valuation generated from model-based techniques that use inputs that are significant and unobservable in the market. These unobservable assumptions reflect estimates of inputs that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow methodologies or similar techniques, which incorporate management’s own estimates of assumptions that market participants would use in pricing the instrument or valuations that require significant management judgment or estimation. We estimated that our other financial assets and liabilities had fair values that approximated their carrying values as of December 31, 2024 and 2023. Recurring Fair Value Measurements Assets measured at fair value on a recurring basis is comprised of our interest rate caps (see Note 9 – Derivative Instruments ). The valuation of our interest rate caps are 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. The following table sets forth the carrying value and estimated fair value of our debt arrangements as of December 31, 2024 and 2023 (amounts in thousands): Schedule of Carrying Value and Estimated Fair Value December 31, 2024 2023 Level Carrying Value (1) Fair Value (2) Carrying Value (1) Fair Value (3) Total indebtedness 2 $ 177,017 $ 183,088 $ 19,678 $ 19,678 (1) Amounts disclosed are net of unamortized debt issuance costs and debt discounts. (2) The fair value of our indebtedness as of December 31, 2024 was prepared by an independent third-party using a discounted cash flow analysis, reviewed by management utilizing estimated credit spreads, and observable market interest rates. (3) The fair value of our debt as of December 31, 2023 approximated its carrying value. 69 Table of Contents Note 9 – Derivative Instruments In connection with our variable rate loan agreements ( Note 7 – Debt, Net ), we are required to obtain and maintain interest rate protection in the form of interest rate caps during the term of the loans to effectively limit the impact of increases in the one-month SOFR. We are subject to credit risk by the counterparty of these derivative instruments in the event of non-performance under the derivative contracts, however we believe the risk to be minimal. The following table details our derivative financial instrument as of December 31, 2024 (dollars in thousands): Schedule of Table Derivative Financial Instrument Interest Rate Derivative Notional Amount Strike Maturity Date Interest rate cap $ 102,820 5.07 % July 2025 Interest rate cap $ 104,000 6.25 % July 2025 The following table details the fair value of our derivative financial instruments (amounts in thousands): Schedule of Fair Value of Our Derivative Financial Instruments Fair Value as of December 31, (1) Interest Rate Derivative 2024 2023 Interest rate caps $ 3 $ 93 (1) Amounts are 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 years ended December 31, 2024 and 2023 (in thousands): Schedule of Table Details Effect Derivative Financial Instrument Years Ended December 31, Interest Rate Derivative Location of Gain (Loss) 2024 2023 Interest rate caps Other expense $ ( 225 ) $ ( 66 ) Note 10 – Members’ Capital Our Operating Agreement generally authorizes our Board to issue an unlimited number of units and options, rights, warrants and appreciation rights relating to such units for consideration or for no consideration and on the terms and conditions as determined by our Board, in its sole discretion, 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, 2024, and 2023, we issued 41,774 , and 98,950 , respectively, Class A units. As of December 31, 2024, there were 3,664,173 Class A units, 100,000 Class B units and one Class M unit issued and outstanding. 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. 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. 70 Table of Contents 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. 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, 2024, and 2023, the basic and diluted weighted-average units outstanding were 3,638,258 , and 3,553,319 , respectively. For the years ended December 31, 2024, and 2023, net loss attributable to our Class A units was $ 23.9 million, and $ 14.4 million, respectively, and the loss per basic and diluted unit was $ 6.56 , and $ 4.04 , respectively. Note 11 – Commitments and Contingencies From time to time the Company may become involved in certain non-material litigation or other claims arising in the ordinary course of business. See Note — 13 Subsequent Events . As of December 31, 2024, 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, 2024, we have two development projects with an aggregate unfunded commitment of $ 59.9 million. As of December 31, 2024, $ 19.6 million, inclusive of retainage of $ 13.0 million, is outstanding and payable in connection with these developments. Note 12 – Segment Reporting We identify our operating segments based on the way we organize and evaluate our business. As a result of the placement of Aster & Links in service and the commencement of operations during the year ended December 31, 2024, we have revised our reportable segments to include two distinct segments as follows: ● Commercial Segment — which includes properties such as office, retail centers, and warehouses (the “Commercial Segment”). For reporting purposes, we aggregate these asset types into the Commercial Segment given their similar characteristics in property management and leasing. ● Mixed-use Segment — which includes properties that blend both residential and retail components within a single real estate asset (the “Mixed-use Segment”). For reporting purposes, we aggregate these business components into the Mixed-use Segment due to their functional integration and the fact that they are evaluated as a unified asset. 71 Table of Contents Our Chief Executive Officer is our Chief Operating Decision Maker (“CODM”). Our CODM reviews financial information presented on an operating segment basis for purposes of allocating resources, making decisions and assessing financial performance. We believe segment net operating income (loss) (“Segment NOI”) provides a useful measure of our performance of our business, as it reflects the core rental operations of our operating real estate. Segment NOI is calculated as total revenues, less property expenses, excluding corporate level items, such as management fees incurred to our Manager ( Note 4 – Related Party Arrangements ), depreciation and amortization, general and administrative expenses, interest expense, and other non-operating items. The following table details the results of Segment NOI, reconciled to our consolidated statement of operations for the years ended December 31, 2024, and 2023 (amounts in thousands): Schedule of Segment NOI Reconciled to Consolidated Statement of Operations Commercial Segment Mixed-use Segment Total Commercial Segment Mixed-use Segment Total Year Ended December 31, 2024 Year Ended December 31, 2023 Commercial Segment Mixed-use Segment Total Commercial Segment Mixed-use Segment Total Segment NOI: Rental revenue $ 1,099 $ 1,576 $ 2,675 $ 1,769 $ 485 $ 2,254 Property expenses ( 1,145 ) ( 2,989 ) ( 4,134 ) ( 730 ) ( 756 ) ( 1,486 ) Total Segment NOI $ ( 46 ) $ ( 1,413 ) $ ( 1,459 ) $ 1,039 $ ( 271 ) $ 768 Non-segment items: Management fees, included in Property expenses ( 2,705 ) ( 2,693 ) General and administrative ( 5,111 ) ( 6,335 ) Interest expense ( 10,006 ) — Depreciation and amortization ( 4,215 ) ( 2,067 ) Impairment of real estate ( 777 ) ( 4,060 ) Interest income 646 113 Other expense ( 228 ) ( 87 ) Loss before income taxes ( 23,855 ) ( 14,361 ) Provision for income taxes ( 1 ) ( 1 ) Net loss ( 23,856 ) ( 14,362 ) Net loss attributable to noncontrolling interests — 11 Net loss attributable to Belpointe PREP, LLC $ ( 23,856 ) $ ( 14,351 ) The following table details the significant expense categories by segment for the years ended December 31, 2024, and 2023 (amounts in thousands): Schedule of Significant Expense Categories by Segment Commercial Segment Mixed-use Segment Total Commercial Segment Mixed-use Segment Total Years Ended December 31, 2024 2023 Commercial Segment Mixed-use Segment Total Commercial Segment Mixed-use Segment Total Property expenses: Real estate taxes $ 628 $ 423 $ 1,051 $ 406 $ 252 $ 658 Management fees 45 812 857 44 65 109 Repairs & maintenance 159 512 671 103 192 295 Insurance 266 399 665 164 154 318 Utilities 47 394 441 12 64 76 Other property expenses — 449 449 1 29 30 Total property expenses $ 1,145 $ 2,989 $ 4,134 $ 730 $ 756 $ 1,486 The following table details our total assets by segment as of December 31, 2024, and 2023 (amounts in thousands): Schedule of Total Assets By Segment December 31, 2024 2023 Commercial Segment $ 97,358 $ 98,711 Mixed-use Segment 395,642 265,301 Other non-segment assets (1) 24,591 18,105 Total assets $ 517,591 $ 382,117 (1) Other non-segment assets primarily consist of cash and cash equivalents not attributable to specific reportable segments. Note 13 – Subsequent Events Management’s Evaluation 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, all such events or transactions that would require recognition or disclosure have been recognized or disclosed. The Galinn Fund LLC On December 5, 2024, the Galinn Fund LLC, a New York limited liability company (“Galinn”), filed a complaint in Connecticut State Superior Court naming CMC Storrs SPV, LLC (“CMC”), the holding company for our investment property located at 497-501 Middle Turnpike, Storrs, Connecticut (“497-501 Middle”), as a defendant, alongside Chen Ji, an individual (“Chen”), and two additional entities (the “Guarantors”). In the complaint Galinn alleges, among other things, that on May 24, 2024, Chen, on behalf of CMC, executed a mortgage note (the “Note”) in the principal amount of $ 3.0 million (the “Loan”), which was secured in part by a mortgage against 497-501 Middle (the “Mortgage”). Galinn further alleges that CMC is in default under both the Note and Mortgage for failure to make payments when due. Galinn is seeking to foreclose on the Mortgage and damages against CMC and the Guarantors. In March 2020, when we first acquired an equity interest in CMC, Chen was an affiliate of the entity, however, he thereafter exited the investment and is no longer in any way affiliated with or authorized to act on behalf of CMC. We maintain that the Loan was obtained as a result of Chen’s fraud and Galinn’s negligence, and had Galinn done adequate due diligence, or reviewed the publicly available filings on the State of Connecticut’s Business Records website, or even a basic Google search, Chen’s lack of authority would have been readily apparent prior to Galinn having made the Loan. We dispute any liability in this litigation, believe we have substantial defenses to Galinn’s claims, and are vigorously defending the matter. 72 Table of Contents Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosures. None.