BELPOINTE PREP, LLC Management’s Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

In this Quarterly Report on Form 10-Q (this “Form 10-Q”), unless context
otherwise requires, references to “we,” “us,” “our” “Belpointe” or the “Company”
refer to Belpointe PREP, LLC, a Delaware limited liability company, its
operating companies, Belpointe PREP OC, LLC, a Delaware limited liability
company, and Belpointe PREP TN OC, LLC, a Delaware limited liability company
(each an “Operating Company” and, together, the “Operating Companies”), and each
of the Operating Companies’ subsidiaries, taken together.

The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our unaudited consolidated
financial statements and related notes appearing elsewhere in this Form 10-Q and
our audited consolidated financial statements and related notes included in our
Annual Report on Form 10-K for the year ended December 31, 2021 (our “Annual
Report”) filed with the U.S. Securities and Exchange Commission on March 11,
2022
, a copy of which may be accessed here . As discussed in the section
titled “Forward-Looking Statements,” the following discussion and analysis
contains forward-looking statements that involve risks and uncertainties, as
well as assumptions that, if they never materialize or prove incorrect, could
cause our results to differ materially from those expressed or implied by such
forward-looking statements. Factors that could cause or contribute to such
differences include, but are not limited to, those identified below, and those
discussed in the section entitled “Risk Factors” included our Annual Report.



Overview


We are the first and only publicly traded qualified opportunity fund listed on a
national securities exchange. We are a Delaware limited liability company formed
on January 24, 2020, and we operate in a manner that will allow us to qualify as
a partnership for U.S. federal income tax purposes. We are focused on
identifying, acquiring, developing or redeveloping and managing commercial real
estate located within qualified opportunity zones. At least 90% of our assets
consist of qualified opportunity zone property. We qualified as a qualified
opportunity fund beginning with our taxable year ended December 31, 2020.
Because we are a qualified opportunity fund certain of our investors are
eligible for favorable capital gains tax treatment on their investments.

All of our assets are held by, and all of our operations are conducted through,
one or more of our Operating Companies, either directly or indirectly through
their subsidiaries. We are externally managed by Belpointe PREP Manager, LLC
(our “Manager”), which is an affiliate of our sponsor, Belpointe, LLC (our
“Sponsor”).

On September 30, 2021, the U.S. Securities and Exchange Commission (the “SEC”)
declared effective our registration statement on Form S-11, as amended (File No.
333-255424) (the “Registration Statement”), registering up to $750,000,000 in
our Class A units on a continuous basis, as part of our ongoing initial public
offering (the “Primary Offering”), at an initial price equal to $100.00 per
Class A unit.

Our Transactions with Belpointe REIT, Inc.

During the year ended December 31, 2021, pursuant to the terms of an Agreement
and Plan of Merger (the “Merger Agreement”), we conducted an offer to exchange
(the “Offer”) each outstanding share of common stock (the “Common Stock”), of
Belpointe REIT, Inc. (“Belpointe REIT”) validly tendered in the Offer for 1.05
of our Class A units, with any fractional Class A units rounded up to the
nearest whole unit (the “Transaction Consideration”). The Offer was completed on
September 14, 2021.

Following the Offer, and in accordance with the terms of the Merger Agreement,
Belpointe REIT converted from a corporation into a limited liability company
(the “Conversion”) named BREIT, LLC (“BREIT”). In the Conversion each
outstanding share of Common Stock was converted into a limited liability company
interest (an “Interest”) in BREIT. The Conversion was completed on October 1,
2021
.

Following the Conversion, and in accordance with the terms of the Merger
Agreement, BREIT merged with and into BREIT Merger, LLC (“BREIT Merger”), our
wholly-owned subsidiary (the “Merger”). In the Merger, each outstanding Interest
was converted into the right to receive the Transaction Consideration. The
Merger was completed on October 12, 2021.

Prior to and in connection with the Offer and Merger, we entered into a series
of loan transactions with Belpointe REIT, whereby Belpointe REIT advanced us an
aggregate of $74.0 million evidenced by a series of secured promissory notes
(the “Secured Notes”) bearing interest at a rate of 0.14%, due and payable on
December 31, 2021, and secured by all of our assets. Upon consummation of the
Merger, BREIT Merger acquired the Secured Notes as successor in interest to
Belpointe REIT and, effective October 12, 2021, we entered into a Release and
Cancellation of Indebtedness agreement with BREIT Merger pursuant to the terms
of which BREIT Merger cancelled the Secured Notes and discharged us from all
obligations to repay the principal and any accrued interest on the Secured
Notes.




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COVID-19



COVID-19 has caused significant disruptions to the U.S. and global economy and
normal business operations worldwide-creating ongoing global supply chain
issues, negatively impacting job markets, and adversely affecting a number of
industries-and there is continued uncertainty as to the duration of the economic
impact caused by COVID-19, even with vaccines now available. While the global
economy has started to reopen and restrictions previously imposed by
governmental and other authorities to contain the spread of the virus, such as
business closures and limitations on travel, as well as responses by businesses
and individuals to reduce the risk of exposure to infection, including through
reduced travel, cancellation of in-person events, and implementation of
work-at-home policies, have begun to ease, the recovery nevertheless remains
uneven and is subject to setbacks. Accordingly, COVID-19 continues to present
material uncertainty and risk with respect to our future performance and
financial results, including the potential to negatively impact our costs of
operations, the value of any investments we make and the laws, regulations and
governmental and regulatory policies applicable to us.

Given the evolving nature of the COVID-19 virus, the extent to which it may
impact our future performance and financial results will depend on future
developments which remain highly uncertain at this time and as a result we are
unable to estimate the impact that COVID-19 may have on our future financial
results at this time. Our Manager continuously reviews our investment and
financing strategies for optimization and to reduce our risk in the face of the
fluidity of this situation.



Our Investments


As of March 31, 2022, our investment portfolio consisted of 15 investments in
three states. These investments include:

Investments in Multifamily and Mixed-Use Rental Properties

1700 Main StreetSarasota, Florida1700 Main Street (“1700 Main”) is a
1.3-acre site, consisting of a former gas station, a three-story office building
with parking lot and a three-story retail building, located in Sarasota,
Florida
, which we acquired for an aggregate purchase price of $6.9 million,
inclusive of transaction costs. We currently anticipate that 1700 Main will be
redeveloped into a 168-apartment home community consisting of one-bedroom,
two-bedroom and three-bedroom apartments, with approximately 7,000 square feet
of retail space located on the first two levels. We anticipate that 1700 Main
will consist of a 10-story podium style building with a 3-story, 360-space
garage and 7-stories of apartments above, including a clubroom, fitness center,
courtyards with a swimming pool and rooftop terraces as well as a leasing
office. The existing three-story office building will remain, and the new
building will wrap around it.

1701-1710 Ringling BoulevardSarasota, Florida1701-1710 Ringling Boulevard
(“1701-1710 Ringling”) is a 1.62-acre site, consisting of a six-story previously
owner-occupied office building with parking lot, located in Sarasota, Florida,
which we acquired for an aggregate purchase price of $7.0 million, inclusive of
transaction costs. We currently anticipate that 1701-1710 Ringling will be
renovated into a fully functioning office building, consisting of approximately
80,000 square feet of rentable space and approximately 128 parking spaces, with
an existing tenant leasing back approximately 42,000 square feet for 20 years
with several lease extensions.

902-1020 First Avenue North and 900 First Avenue North – St. Petersburg, Florida
902-1020 First Avenue North (“902-1020 First”) consists of several parcels,
comprising 1.6-acres of land, located in St. Petersburg, Florida, which we
acquired for an aggregate purchase price of $12.1 million, inclusive of
transaction costs. We currently anticipate that 902-1020 First will be developed
into a high-rise apartment featuring approximately 266-apartment homes
consisting of one-bedroom, two-bedroom and three-bedroom apartments, with
approximately 22,100 square feet of retail space located on the first level and
a four-level parking garage. We anticipate that 902-1020 First will consist of
two 15-story high-rise buildings and will have a clubroom, fitness center,
courtyard with a swimming pool, shared working space and a leasing office.

900 First Avenue North (“900 First”) is a parcel of land with a two-tenant
retail building, located in St. Petersburg, Florida, which we acquired for an
aggregate purchase price of $2.5 million, inclusive of transaction costs. We
currently anticipate that 900 First will remain a two-tenant retail building and
that we will take the additional development rights and add them to 902-1020
First.

1900 Fruitville RoadSarasota Florida1900 Fruitville Road is a 1.205-acre
site, consisting of a retail building and parking lot located in Sarasota,
Florida
, which we acquired for an aggregate purchase price of $4.7 million,
inclusive of transaction costs. The sole tenant in the building vacated in
January 2022 and the property will be used as a future development site.



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900 8th Avenue South – Nashville, Tennessee900 8th Avenue South (“900 8th
Avenue South
“) is a 3.17-acre land assemblage, consisting of a few small
buildings, parking lots and open lots, located in Nashville, Tennessee, which we
acquired for an aggregate purchase price of $19.7 million, inclusive of
transaction costs.

As part of our acquisition of 900 8th Avenue South, on February 24, 2021, an
indirect wholly owned subsidiary of our Operating Company and an unaffiliated
third party (the “JV Partner”) entered into a limited liability company
agreement (the “LLC Agreement”) for BPOZ 900 Eighth QOZB, LLC (the “BPOZ 900
Eighth QOZB”), an indirect holding company for 900 8th Avenue South. Pursuant to
the LLC Agreement, the JV Partner assigned the purchase and sale agreement for
900 8th Avenue South together with a previously paid property deposit of $0.4
million
to BPOZ 900 Eighth QOZB in exchange for the JV Partner’s deemed initial
capital contribution of $0.2 million and a promissory note (the “900 Eighth
Promissory Note”) from 900 Eighth, LP, the direct holding company for 900 8th
Avenue South
, in the amount of $0.2 million. The 900 Eighth Promissory Note,
which is included in Accrued expenses and other liabilities in the consolidated
balance sheets, earned interest at the greater of (i) 1% per annum, or (ii) the
short-term adjusted applicable federal rate for the current month for purposes
of Section 1288(b) of the U.S. Internal Revenue Code of 1986, as amended, and
matured upon receipt of construction permits which were received in April 2022.

We currently anticipate that 900 8th Avenue South will be redeveloped into an
approximately 266-apartment home community consisting of one-bedroom,
two-bedroom and three-bedroom apartments, with approximately 14,100 square feet
of retail space located on the first level. We anticipate that 900 8th Avenue
South
will consist of a 7-story building with a 2-story approximately 400-space
garage, a fitness center, courtyard with a swimming pool and rooftop terraces as
well as a leasing office. As of the date of this Form 10-Q, we have completed
the demolition of 900 8th Avenue South.

Storrs RoadStorrs, ConnecticutStorrs Road (“Storrs Road“) is a 9-acre
parcel of land located in Storrs, Connecticut, which we acquired for an
aggregate purchase price of $0.1 million, inclusive of transaction costs. We
currently anticipate holding Storrs Road for future multifamily development.

Nashville No. 2 – Nashville, Tennessee – Our second investment in Nashville,
Tennessee
(“Nashville No. 2”) is an approximately 8-acre site, consisting of two
industrial buildings and associated parking, which we acquired for an aggregate
purchase price of $21.0 million, inclusive of transaction costs. We currently
anticipate that Nashville No. 2 will be redeveloped into an approximately
412-apartment home community consisting of one-bedroom, two-bedroom and
three-bedroom apartments. The buildings will have a fitness center, game room,
co-working spaces, outdoor heated saltwater swimming pool, riverfront courtyards
and rooftop terraces as well as a leasing office.

Nashville No. 3 – Nashville, Tennessee – Our third investment in Nashville,
Tennessee
(“Nashville No. 3”) is an approximately 1.66-acre site consisting of a
single-story 10,000 square foot retail building and associated parking lot,
which we acquired for an aggregate purchase price of $2.1 million, inclusive of
transaction costs. Upon closing, the building was leased to the seller through
November 2022, with the ability to continue month to month thereafter.

1991 Main StreetSarasota, Florida1991 Main Street (“1991 Main”) is a
5.2-acre site located in Sarasota, Florida, which was originally acquired by
Belpointe REIT for an aggregate purchase price of $20.7 million, inclusive of
transaction costs and deferred financing fees. A portion of the aggregate
purchase of 1991 Main was funded by a $10.8 million secured loan from First
Foundation Bank
(the “Acquisition Loan”).

In furtherance of the Merger, Belpointe REIT sold its interest in the holding
company for 1991 Main (the “1991 Main Interest”) to Belpointe Investment
Holding, LLC
(“BI Holding“), an affiliate of our Chief Executive Officer. In
connection with the transaction BI Holding assumed the Acquisition Loan and
Belpointe REIT provided an additional $24.8 million loan to BI Holding, which
loan was evidenced by a secured promissory note bearing interest at a rate of 5%
per annum and due and payable at maturity on September 14, 2022 (the “BI Secured
Note”). Upon consummation of the Merger, we acquired the BI Secured Note, as
successor in interest to Belpointe REIT. Effective November 30, 2021, we
acquired the 1991 Main Interest and assumed the Acquisition Loan from BI Holding
in consideration of its payment to us of $0.3 million in interest that had
accrued under the terms of the BI Secured Note through November 30, 2021, and in
satisfaction of its remaining obligations under the BI Secured Note. On April
22, 2022
we repaid the Acquisition Loan in full.

We currently anticipate that 1991 Main will be redeveloped into an approximately
418-apartment home community consisting of one-bedroom, two-bedroom and
three-bedroom apartments, and four-bedroom townhome-style penthouse apartments,
with approximately 55,000 square feet of retail space located on the first
level. We anticipate that 1991 Main will consist of two high-rise buildings with
7-stories in the front and 10-stories in the rear, and approximately 721 parking
spaces including 590 from an existing parking garage, currently subject to a
parking garage easement agreement, 104 new underground spaces, and 27 new street
level spaces.

During the three months ended March 31, 2022, we entered into a construction
management agreement for the redevelopment of 1991 Main. The construction
management agreement contains terms and conditions that are customary for a
project of this type and will be subject to guaranteed maximum price. We
currently anticipate that the remaining funding for construction and soft costs
associated with the redevelopment will be a minimum of $237.3 million, and are
building to an unlevered yield of greater than 6%. The redevelopment is
currently in its initial stages and expected to be completed by the first
quarter of 2024.

901-909 Central Avenue North – St. Petersburg, Florida901-909 Central Avenue
North
is a 0.129-acre site consisting of a fully leased single-story 5,328 gross
square foot retail/office building comprised of 4 units located in St.
Petersburg, Florida
, which we acquired for an aggregate purchase price of $2.6
million
, inclusive of transaction costs.



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Cedar Swamp RoadMansfield, ConnecticutCedar Swamp Road is a 1.1-acre site
located in Mansfield, Connecticut , which we acquired for a purchase price of
$0.3 million, inclusive of transaction costs. We currently anticipate holding
Cedar Swamp Road for future multifamily development.

Investments in Commercial Real Estate Loans

CMC Secured Loan – In furtherance of the Merger, on September 30, 2021, we
provided a commercial mortgage loan in the principal amount of $3.5 million (the
“CMC Loan”) to CMC Storrs SPV, LLC (“CMC”). CMC is the owner of certain real
property located in Mansfield, Connecticut (the “CMC Property”). CMC used the
proceeds from the CMC Loan to enter into a redemption agreement with BPOZ 497
Middle Holding, LLC (“BPOZ 497”), an indirect majority-owned subsidiary of
Belpointe REIT, to redeem BPOZ 497’s preferred equity investment in CMC. The CMC
Loan is evidenced by a promissory note (the “CMC Note”) bearing interest at a
rate of 12.0% per annum, and due and payable at maturity, and is secured by a
first mortgage lien on the CMC Property. On March 29, 2022, we entered into an
amendment to the CMC Note to extend the maturity date to June 27, 2022.

Norpointe Secured Loan – On January 3, 2022, through an indirect wholly-owned
subsidiary, we provided a commercial mortgage loan in the principal amount of
$30.0 million (the “Norpointe Loan”) to Norpointe, LLC (“Norpointe”), an
affiliate of our Chief Executive Officer. Norpointe is the owner of certain real
property located at 41 Wolfpit Avenue, Norwalk, Connecticut 06851 (the
“Norpointe Property”). The Norpointe Loan is evidenced by a promissory note
bearing interest at a rate of 5.0% per annum, due and payable on December 31,
2022
, and is secured by a first mortgage lien on the Norpointe Property. Given
our excess cash on hand as of the year ended December 31, 2021, management
viewed the Norpointe transaction as an opportunity to earn a strong rate of
return on that cash by making a low risk-due to the low loan-to-value ratio and
first priority mortgage interest-short-term loan rather than depositing the
funds in a lower yielding account pending investment in future developments.

Visco Secured Loan – On February 23, 2022, through an indirect wholly-owned
subsidiary, we provided a commercial mortgage loan in the principal amount of
$5.0 million (the “Visco Loan”) to Visco Propco, LLC (“Visco”). Visco is the
owner of certain real property located at 801 Visco Drive, Nashville, Tennessee
37210 (the “Visco Property”). The Visco Loan is evidenced by a promissory note
bearing interest at a rate of 6.0% per annum, due and payable on February 18,
2023
, and is secured by a first lien deed of trust on the Visco Property.



Results of Operations



Revenue



Rental Revenue


For the three months ended March 31, 2022 and 2021, rental revenue totaled $0.3
million
and $0.2 million, respectively, and was primarily derived from lease
revenues. Rental revenue increased by $0.2 million for the three months ended
March 31, 2022 as compared to the same period in 2021, primarily due to an
increase in lease revenues as a result of properties acquired subsequent to
March 31, 2021 as well as one property acquired during the first quarter of
2021.




Expenses



Property Expenses



For the three months ended March 31, 2022, property expenses totaled $0.9
million
, and consisted of management fees, property expenses, real estate taxes,
utilities and insurance expenses incurred in relation to our acquired
investments. For the three months ended March 31, 2021, property expenses
totaled $0.1 million, and consisted of property expenses, real estate taxes,
utilities and insurance expenses incurred in relation to our acquired
investments. Property expenses increased by $0.8 million for the three months
ended March 31, 2022 as compared to the same period in 2021, primarily due to
management fees incurred and properties acquired subsequent to March 31, 2021 as
well as one property acquired during the first quarter of 2021.



General and Administrative


As a result of the commencement of the first closing in connection with our
Offering, for the three months ended March 31, 2022, general and administrative
expenses totaled $1.6 million, and primarily consisted of employee cost sharing
expenses (pursuant to our management agreement and employee and cost sharing
agreement), marketing expenses, legal, audit and accounting fees. For the three
months ended March 31, 2021, general and administrative expenses totaled $0.1
million
and primarily consisted of employee cost sharing expenses (pursuant to
our management agreement and employee and cost sharing agreement).



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Depreciation and Amortization


For the three months ended March 31, 2022 and 2021, depreciation and
amortization expense totaled $0.3 million and $0.1 million, respectively, and
relates to depreciation and amortization incurred on properties acquired.
Depreciation and amortization increased by $0.2 million for the three months
ended March 31, 2022 as compared to the same period in 2021, primarily due to
operating properties acquired during 2022 and 2021.



Other Income (Loss)



Interest Income


For the three months ended March 31, 2022, interest income was $0.5 million and
is primarily related to interest earned on the Norpointe Loan of $0.4 million,
interest earned on the CMC Note of $0.1 million, and interest earned on the
Visco Loan of less than $0.1 million. For additional details regarding our
commercial real estate loans, see “- Our Investments – Commercial Real Estate
Loans .” There was no comparable activity for the three months ended March 31,
2021
.




Other Income (Expense)



For the three months ended March 31, 2022, other income (expense) primarily
relates to sales tax in connection with the 1991 Main parking garage easement
agreement and interest expense on the 900 Eighth Promissory Note. For the three
months ended March 31, 2021, other income (expense) relates to Belpointe PREP’s
interest expense on the Secured Notes.

Net (income) loss attributable to noncontrolling interest

Net (income) loss attributable to noncontrolling interest represents the share
of earnings generated in entities we consolidate in which we do not own 100% of
the equity.

Liquidity and Capital Resources

Our primary needs for liquidity and capital resources are to fund our
investments, including construction and development costs, pay our Primary
Offering and operating fees and expenses, make distributions to the holders of
our units and pay interest on any outstanding indebtedness that we incur.

Our Primary Offering and operating fees and expenses include, among other
things, legal, audit and valuation fees and expenses, federal and state filing
fees, SEC and FINRA filing fees, printing expenses, administrative fees,
transfer agent fees, marketing and distribution fees, the management fee that we
pay to our Manager, and fees and expenses related to acquiring, financing,
appraising, and managing our commercial real estate properties. We do not have
office or personnel expenses as we do not have any employees.

Where our Manager and its affiliates, including our Sponsor, have funded, and in
the future if they continue to fund, our liquidity and capital resource needs by
advancing us offering and operating fees and expenses, we reimburse our Manager
and its affiliates, including our Sponsor, pursuant to the terms of our
management agreement and employee and cost sharing agreement. Fees payable and
expenses reimbursable to our Manager and its affiliates, including our Sponsor,
may be paid, 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.
During the three months ended March 31, 2022 and 2021, our Manager and its
affiliates, including our Sponsor, incurred organization and Primary Offering
expenses of zero and $0.4 million, respectively, on our behalf. During the three
months ended March 31, 2022 and 2021, our Manager and its affiliates, including
our Sponsor, incurred operating expenses of $0.5 million and $0.1 million,
respectively, on our behalf.

A portion of the initial acquisition costs of 1991 Main were funded by an
Acquisition Loan payable in consecutive monthly payments of interest only, with
the outstanding principal balance plus any accrued and unpaid interest due and
payable on May 6, 2022. The Acquisition Loan bore interest at a fixed rate of
4.75% per annum and was guaranteed by our Chief Executive Officer. As of March
31, 2022
, the outstanding principal balance of the Acquisition Loan was $10.8
million
, which outstanding principal balance was repaid in full on April 22,
2022
. For additional details regarding our acquisition of 1991 Main and the
Acquisition Loan, see “-Our Investments-Investments in Multifamily and Mixed-Use
Rental Properties
-1991 Main Street – Sarasota Florida.”

During the three months ended March 31, 2022, our indirect wholly owned
subsidiary entered into a construction management agreement for the
redevelopment of 1991 Main. The construction management agreement contains terms
and conditions that are customary for a project of this type and will be subject
to guaranteed maximum price. As of March 31, 2022, we had an unfunded capital
commitment of $3.8 million under the terms of this agreement. We currently
anticipate that the remaining funding for construction and soft costs associated
with the redevelopment will be a minimum of $237.3 million.



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We expect to obtain the liquidity and capital resources that we need over the
short and long-term from the proceeds of our Primary Offering and any future
offerings that we may conduct, from the advancement of reimbursable fees and
expenses by our Manager and its affiliates, including our Sponsor, from secured
or unsecured financings from banks and other lenders and from any undistributed
funds from operations. For additional details regarding our Primary Offering,
see ” Item 2. Unregistered Sales of Equity Securities and Use of
Proceeds – Use of Proceeds from Registered Sales of Securities .”

We currently anticipate that our available capital resources, including the
proceeds from our Primary Offering and the proceeds from any construction or
other loans that we may incur, when combined with cash flow generated from our
operations, will be sufficient to meet our anticipated working capital and
capital expenditure requirements over the next 12 months and beyond.



Leverage


We employ leverage in order to provide more funds available for investment. We
believe that careful use of conservatively structured leverage will help us to
achieve our diversification goals and potentially enhance the returns on our
investments.

Our targeted aggregate property-level leverage, excluding any debt at the
Company level or on assets under development or redevelopment, after we have
acquired a substantial portfolio of stabilized commercial real estate, is
between 50-70% of the greater of the cost (before deducting depreciation or
other non-cash reserves) or fair market value of our assets. During the period
when we are acquiring, developing and redeveloping our investments, we may
employ greater leverage on individual assets. An example of property-level
leverage is a mortgage loan secured by an individual property or portfolio of
properties incurred or assumed in connection with our acquisition of such
property or portfolio of properties. An example of debt at the Company level is
a line of credit obtained by us or our Operating Companies.

Our Manager may from time to time modify our leverage policy in its discretion
in light of then-current economic conditions, relative costs of debt and equity
capital, market values of our assets, general conditions in the market for debt
and equity securities, growth and acquisition opportunities or other factors.
There is no limit on the amount we may borrow with respect to any individual
property or portfolio.



Cash Flows


The following table provides a breakdown of the net change in our cash and cash
equivalents and restricted cash (amounts in thousands):




                                                          Three Months Ended March 31,
                                                           2022                  2021
Cash flows used in operating activities               $        (1,770 )     $          (87 )
Cash flows used in investing activities                       (39,128 )             (3,405 )
Cash flows provided by financing activities                    20,183               24,000
Net (decrease) increase in cash and cash
equivalents and restricted cash                       $       (20,715 )     $       20,508




As of March 31, 2022 and 2021, cash and cash equivalents and restricted cash
totaled approximately $171.6 million and $27.1 million, respectively.

Cash flows used in operating activities for the three months ended March 31,
2022
primarily relates to the payment of management fees and employee cost
sharing expenses as well as payments for legal, marketing, and accounting fees.
These outflows were partially offset by interest received on our Norpointe Loan
during the period. Cash flows used in operating activities for the three months
ended March 31, 2021 primarily relates to operating properties acquired.

Cash flows used in investing activities for the three months ended March 31,
2022
relate primarily to funding of loans receivables in addition to funding
costs for our development properties and investments in real estate. Cash flows
used in investing activities for the three months ended March 31, 2021 primarily
relates to one property acquired during the period as well as development costs
incurred.

Cash flows provided by financing activities for the three months ended March 31,
2022
primarily relates to net proceeds received from the Primary Offering. Cash
flows provided by financing activities for the three months ended March 31, 2021
relates to Secured Notes funded by Belpointe REIT.



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Critical Accounting Policies


The unaudited consolidated financial statements in this Form 10-Q have been
prepared in accordance with generally accepted accounting principles in the
United States of America
. The preparation of these unaudited consolidated
financial statements requires us to make estimates and assumptions that affect
the reported amounts of assets, liabilities, revenue, expenses, and related
disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our
estimates are based on historical experience and various other assumptions that
we believe to be reasonable under the circumstances. Our actual results could
differ from these estimates.

Our significant accounting policies are described in ” Note 2 – Summary of
Significant Accounting Policies ,” in our unaudited consolidated financial
statements in this Form 10-Q. There have been no changes to our significant
accounting policies and estimates during the three months ended March 31, 2022
as compared to those disclosed in “Note 3 – Summary of Significant Accounting
Policies” included in our Annual Report on Form 10-K for the year ended December
31, 2021
(our “Annual Report”), a copy of which may be accessed here .

Off-Balance Sheet Arrangements

We currently have no off-balance sheet arrangements that are reasonably likely
to have a material current or future effect on our financial condition, changes
in financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources.

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