Belpointe PREP (OZ) risk factors, FY2025 10-K

Risks Related to our Organizational Structure

1. 01We have a limited operating history, and the prior performance of our Sponsor or other real estate investment opportunities sponsored by our Sponsor may not predict our future results
2. 02We have only held our investments for a limited period of time, and you will not have the opportunity to evaluate our future investments before we make them, which makes your investment more speculative
3. 03Our Class A units are listed on the NYSE American, however, an active, liquid and orderly market for our Class A units may not be sustained51% rewritten
4. 04If we are unable to raise sufficient proceeds in our ongoing Follow-on Offering, and any other offerings that we may conduct, we may not be able to fund all of our existing projects or find additional suitable investments, and, as a result, we may not be able to achieve our investment objectives or pay distributions
5. 05Our ability to deploy the capital we raise in our Public Offerings may be constrained
6. 06Our NAV per Class A unit may change materially from our current NAV
7. 07Valuations and appraisals of our real estate and real estate assets are estimates of fair value and may not necessarily correspond to realizable value, in addition it may be difficult to reflect, fully and accurately, material events that impact our NAV
8. 08NAV calculations are not set by governmental or independent securities, financial or accounting rules or standards
9. 09Our Sponsor does not hold a significant amount of our equity, and therefore may not be as strongly incentivized to avoid losses as a sponsor who holds a significant equity investment, and as a result you may be more likely to sustain a loss on your investment
10. 10Our Sponsor currently sponsors and will in the future sponsor other investment programs some of which may compete with us
11. 11Our Manager and its affiliates have little or no experience managing a portfolio of assets in the manner necessary to maintain our qualification as a publicly traded partnership and qualified opportunity fund or our exclusion or exemption from registration under the Investment Company Act
12. 12We, our Operating Companies, and our Manager have entered into a Management Agreement pursuant to which our Manager manages our day-to-day operations, implements our investment objectives and strategy and performs certain services for us, subject to oversight by our Board35% rewritten
13. 13If the Sponsor Group fails to retain its key personnel, we may not be able to achieve our anticipated level of growth and our business could suffer35% rewritten
14. 14The Management Agreement with our Manager was not negotiated with an unaffiliated third party on an arm’s length basis and may not be as favorable to us as if it had been negotiated with an unaffiliated third party
15. 15We do not have an exclusive management arrangement with our Manager35% rewritten
16. 16Terminating the Management Agreement for unsatisfactory performance by our Manager or electing not to renew the Management Agreement may be difficult, and, even if we elect not to renew or terminate the Management Agreement, our Manager will continue to hold our Class B units
17. 17Your interest in us will be diluted if we issue additional units
18. 18Our investment guidelines delegate broad discretion to our Manager and our Board does not approve each investment and financing decision made by our Manager
19. 19We may change our investment strategy and guidelines without member consent
20. 20Our Operating Agreement contains provisions that substantially limit remedies available to holders of our units for actions that might otherwise result in liability for our officers, directors, or Manager
21. 21Certain claims that may be brought against the Company or our Sponsor, Manager, directors, officers, or other agents must be resolved by final and binding arbitration, which follows a different set of procedures and may be more restrictive than litigation
22. 22Holders of our Class A units have limited voting rights and may be bound by a majority or supermajority vote or by a vote of the holder of our Class M unit, as applicable
23. 23If we internalize our management functions, your interest in us could be diluted, and we could incur other significant costs associated with being self-managed
24. 24We will incur additional costs and expenses associated with maintaining our status as a publicly traded partnership and operating as an Exchange Act reporting company
25. 25We are not required to comply with certain reporting and disclosure requirements that are applicable to other public companies
26. 26If we fail to maintain effective disclosure controls and procedures or internal controls over financial reporting, we may not be able to accurately and timely make our required disclosures or report our financial results
27. 27We are engaged primarily in the business of investing in real estate and to conduct our operations such that neither we nor any of our subsidiaries are required to register as an “investment company” under the Investment Company Act
28. 28We enter into joint ventures, partnerships, co-tenancies and other co-ownership arrangements or participations with affiliates of our Sponsor and Manager, including Belpointe SP, LLC
29. 29Any membership interests that members of the Belpointe SP Group hold in our joint venture investments in their capacity as a general partner, manager or managing member will be exempt from paying any promotes
30. 30Operational risks may disrupt our business, result in losses or limit our growth
31. 31If our techniques for managing risk are ineffective, we may be exposed to unanticipated losses

Risks Related to our Assets and Investments

1. 32Our success is dependent on general market and economic conditions as well as numerous other factors outside of our control
2. 33Recent uncertainty surrounding legislation, regulation and governmental policy at the U.S. federal level could lead to disruptions in or have the effect of negatively impacting our business, financial condition, results of operations and cash flows
3. 34Our cash, cash equivalents and other investments may be adversely effected if the financial institutions in which we hold our cash, cash equivalents and other investments were to fail
4. 35The market in which we participate is competitive and, if we do not compete effectively, our operating results could be harmed
5. 36We are subject to fraud risk, which could adversely affect our business, financial condition and results of operations
6. 37Our performance is subject to risks associated with the real estate industry
7. 38There are significant risks associated with the development or redevelopment of our real estate investments that may prevent their completion on budget and on schedule and which may adversely affect our financial condition and results of operations
8. 39Our Manager’s due diligence may not reveal all factors or risks affecting an investment
9. 40Actual rents we receive may be less than estimated, operating expenses may be higher than anticipated and we may experience a decline in rental rates from time to time, any of which could adversely affect our financial condition, results of operations and cash flow
10. 41Properties that have significant vacancies could be difficult to sell, which could diminish the return on these properties
11. 42We may enter into long-term leases with tenants in certain properties, which may not result in fair market rental rates over time
12. 43Certain properties that we acquire may not have efficient alternative uses and we may have difficulty leasing them to new tenants or have to make significant capital expenditures to get them to do so
13. 44We depend on tenants for our revenue, and lease defaults or terminations could reduce our net income and limit our ability to pay distributions
14. 45If any of our significant tenants were adversely affected by a material business downturn or were to become bankrupt or insolvent, our results of operations could be adversely affected
15. 46We expect to acquire primarily qualified opportunity zone investments, with a focus on markets with favorable risk-return characteristics. If our investments in these geographic areas experience adverse economic conditions, our investments may lose value and we may experience losses
16. 47Actions of any joint venture partners that we may have in the future could reduce the returns on joint venture investments and decrease your overall investment return
17. 48We intend to seek opportunistic acquisitions of other qualified opportunity funds and qualified opportunity zone businesses
18. 49Costs imposed pursuant to governmental laws and regulations may reduce our net income and the cash available for distributions
19. 50The costs of defending against claims of environmental liability, of complying with environmental regulatory requirements, of remediating any contaminated property or of paying personal injury or other damage claims could reduce the amounts available for distributions
20. 51Costs associated with complying with the Americans with Disabilities Act may decrease cash available for distributions
21. 52Uninsured losses relating to real property or excessively expensive premiums for insurance coverage could reduce our cash flows and the amounts available for distributions
22. 53Many of our investments are illiquid and we may not be able to vary our portfolio in response to changes in economic and other conditions
23. 54Declines in the market values of our investments may adversely affect results of operations and credit availability, which may reduce earnings and, in turn, cash available for distributions
24. 55If we sell a property by providing financing to the purchaser, we will bear the risk of default by the purchaser, which could delay or reduce the cash available for distributions

Risks Related to Conflicts of Interest

1. 56There are conflicts of interest between us, our Manager, and its affiliates
2. 57The interests of our Manager, and its affiliates may conflict with your interests
3. 58Holders of our Class A units have no right to enforce the obligations of our Sponsor, Manager, or any of their or our affiliates under the terms of any agreements with the Company
4. 59The management fee our Manager is entitled to receive is based on our NAV and our Manager is ultimately responsible for calculating our NAV

Risks Related to Sources of Financing and Hedging

1. 60We may incur significant debt, which may subject us to increased risk of loss and may reduce cash available for distributions
2. 61Any lending facilities will likely impose restrictive covenants
3. 62Interest rate fluctuations could increase our financing costs and reduce our ability to generate income on our investments, each of which could lead to a significant decrease in our results of operations, cash flows and the market value of our investments
4. 63Hedging against interest rate exposure may adversely affect our earnings, limit our gains or result in losses, which could adversely affect cash available for distributions
5. 64Hedging instruments are often not traded on regulated exchanges or guaranteed by an exchange or its clearing house and involve risks and costs that could result in material losses
6. 65Any bank credit facilities and repurchase agreements that we may use in the future to finance our assets may require us to provide additional collateral or pay down debt
7. 66We may give full or partial guarantees to lenders of mortgage debt to the entities that own our properties
8. 67If we enter into financing arrangements involving balloon payment obligations, it may adversely affect our ability to make distributions
9. 68Our access to sources of financing may be limited and thus our ability to grow our business and to maximize our returns may be adversely affected

Risks Relating to U.S. Federal Taxation

1. 69Despite the fact that we are organized as a limited liability company under Delaware law, if we fail to meet any of the applicable requirements for classification as a partnership, we would be treated as a corporation pursuant to section 7704 of the Code
2. 70There can be no assurance that we will continue to meet the requirements for classification as a qualified opportunity fund55% rewritten
3. 71Investors must make appropriate timely investments and elections in order to take advantage of the benefits of investing in a qualified opportunity fund
4. 72The tax treatment of an investment in our Class A units could be subject to potential legislative, judicial, or administrative changes or differing interpretations, possibly applied on a retroactive basis
5. 73If the IRS contests the U.S. federal income tax positions we take, the value our Class A units may be adversely impacted, and the cost of any IRS contest will reduce cash available for distributions
6. 74Even if you do not receive any cash distributions from us, you will be required to pay taxes on your share of our taxable income
7. 75You will likely be subject to state and local taxes and return filing requirements as a result of investing in our Class A units
8. 76You will receive a Schedule K-1 to IRS Form 1065, which could increase the complexity of your tax circumstances