Schedule of components of the common stock exchange

The following table summarizes the carrying value of Belpointe REIT’s net assets on the Exchange Date (amounts in thousands).

Schedule of carrying value net assets

Note 3 – Capitalization

We were capitalized with a $10,000 investment by our Sponsor and its affiliate. We are offering the Class A Units in our Primary Offering directly to investors and not through any underwriters, dealer-managers or other agents who would be paid commissions by us or any of our affiliates. In the future, however, we may engage the services of one or more underwriters, dealer-managers or other agents to participate in our Primary Offering or other primary offerings. The amount of selling commissions or dealer-manager fees that we or our investors would pay to such underwriters, dealer-managers or other agents will depend on the terms of their engagement. Our Primary Offering is a “best efforts” offering. We plan to undertake closings on a rolling basis on the last business day of each calendar quarter, we may, however, in our sole discretion, choose to conduct more frequent closings.

We set our initial Primary Offering price at $100.00 per Class A Unit. No later than the first quarter following the December 31, 2022 year end, and every quarter thereafter, we plan to calculate our net asset value (“NAV”) within approximately 60 days of the last day of each quarter (the “Determination Date”). If our NAV increases above or decreases below the price per Class A Unit as stated in our prospectus, we will adjust the Primary Offering price, effective as of the first business day following its public announcement. The adjusted Primary Offering price will be equal to our adjusted NAV as of the Determination Date (rounded to the nearest dollar) divided by the number of Class A Units outstanding on the Determination Date.

Note 4 – Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited 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”), for interim financial information, and Article 8 of Regulation S-X of the rules and regulations of the 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. Interim results are not necessarily indicative of operating results for any other interim period or for the entire year. Our interim unaudited consolidated financial statements should be read in conjunction with our audited consolidated financial statements and accompanying notes for the year ended December 31, 2020. The unaudited consolidated financial statements as of September 30, 2021, and for the three and nine months ended September 30, 2021 and the period beginning January 24, 2020 (formation) to September 30, 2020, and certain related notes thereto, are unaudited, have not been reviewed, and may not include year-end adjustments necessary to make those unaudited consolidated financial statements comparable to audited results.

Basis of Consolidation

The accompanying unaudited 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 interest. All significant intercompany accounts and transactions have been eliminated.

We have evaluated our economic interest in entities to determine if they are deemed to be variable interest entities (“VIEs”) and whether the entities should be consolidated. An entity is a VIE if it has any one of the following characteristics: (i) the entity does not have enough equity at risk to finance its activities without additional subordinated financial support; (ii) the at-risk equity holders, as a group, lack the characteristics of a controlling financial interest; or (iii) the entity is structured with non-substantive voting rights. The distinction between a VIE and other entities is based on the nature and amount of the equity investment and the rights and obligations of the equity investors. Fixed price purchase and renewal options within a lease, as well as certain decision-making rights within a loan or joint-venture agreement, can cause us to consider an entity a VIE. Limited partnerships and other similar entities that operate as a partnership will be considered VIEs unless the limited partners hold substantive kick-out rights or participation rights.

Significant judgment is required to determine whether a VIE should be consolidated. We review all agreements and contractual arrangements to determine whether (i) we or another party have any variable interests in an entity, (ii) the entity is considered a VIE, and (iii) which variable interest holder, if any, is the primary beneficiary of the VIE. Determination of the primary beneficiary is based on whether a party (a) has the power to direct the activities that most significantly impact the economic performance of the VIE, and (b) has the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE.

As of September 30, 2021 and December 31, 2020, we considered three entities and one entity, respectively, to be VIEs, which are consolidated as we are considered the primary beneficiary. The following table presents the financial data of the consolidated VIEs included in the consolidated balance sheets as of September 30, 2021 and December 31, 2020, respectively (amounts in thousands):

  Schedule of variable interest entities

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 reconsideration events that require us to reconsider our determination of whether an entity is a VIE and whether it should be consolidated.

Loans Receivable

We evaluate our loans receivable on a periodic basis to assess whether there are any indicators that the value may be impaired. A loan is considered impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due from the borrower in accordance with the original contractual terms of the loan. If a loan receivable is deemed impaired, we would be required to establish a reserve for losses in an amount deemed to be both probable and reasonably estimable.

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, these unaudited consolidated financial statements may not be comparable to the unaudited consolidated financial statements of companies that comply with public company effective dates.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the unaudited consolidated financial statements and the accompanying notes. Actual results could materially differ from those estimates.

Recent Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board issued Accounting Standards Update No. 2016-02, Leases, which is codified in Accounting Standards Codification (“ASC”) 842, Leases, and supersedes current lease guidance in ASC 840, Leases. The update amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. The standard requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. As an emerging growth company, we are permitted, and have elected, to use an extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies. For private companies, ASC 842 will be effective for annual reporting periods beginning after December 15, 2021 and interim periods within fiscal years beginning after December 15, 2022. The adoption of this standard is not expected to have a material impact on our consolidated financial statements.

Risks and Uncertainties

The spread of COVID-19 has caused significant disruptions to the global economy and normal business operations worldwide, and the duration and severity of the effects are currently unknown. The rapid development and fluidity of the COVID-19 situation precludes any forecast as to its ultimate impact. Nevertheless, COVID-19 presents material uncertainty and risk with respect to the Company’s performance and financial results, such as the potential to negatively impact financing arrangements, increase costs of operations, change laws or regulations, and add uncertainty regarding government and regulatory policy. We are closely monitoring the potential impact of COVID-19 on all aspects of our business.

Note 5 – Related Party Arrangements

On October 28, 2020, Belpointe REIT lent the Company $35,000,000 pursuant to the terms of a secured promissory note (the “First Secured Note”). On February 16, 2021, Belpointe REIT lent the Company an additional $24,000,000 pursuant to the terms of a second secured promissory note (the “Second Secured Note”). On May 28, 2021, the Company and Belpointe REIT entered into an agreement to amend the maturity date of the First Secured Note and Second Secured Note to December 31, 2021 (the “Maturity Date”). In addition, on May 28, 2021, Belpointe REIT lent the Company an additional $15,000,000 pursuant to the terms of a third secured promissory note (the “Third Secured Note” and together with the First Secured Note and Second Secured Note, the “Secured Notes”). The Secured Notes bear interest at a rate of 0.14%, are due and payable on the Maturity Date and are secured by all of the assets of the Company. The Company has and will continue to use the proceeds from the Secured Notes to make certain qualified opportunity zone investments, as discussed below in “Note 6 – Real Estate, Net.”

As a result of the Exchange Offer consummated on September 14, 2021, discussed in “Note 2 – Exchange Offer”, all intercompany balances between the Company and Belpointe REIT have been eliminated as of September 30, 2021.

Effective September 14, 2021, Belpointe REIT lent $24,773,000 to Belpointe Investment Holding, LLC, a Delaware limited liability company (“Belpointe Investment”), and affiliate of our Sponsor, pursuant to the terms of a secured promissory note (the “BI Secured Note”). Belpointe Investment used the proceeds of the BI Secured Note to purchase a 99.99% interest in BPOZ 1991 Main, LLC, a Delaware limited liability company (“BPOZ 1991 Main”), from Belpointe REIT in accordance with the terms of the Merger Agreement. Interest accrues on the BI Secured Note at a rate of 5% per annum and is due and payable at maturity on September 14, 2022.

The Manager and its affiliates, including our Sponsor, will receive fees or reimbursements in connection with our Primary Offering and the management of our investments.

The following table presents a summary of fees paid and expenses reimbursed to the Manager and its affiliates, including our Sponsor, in accordance with the terms of the relevant agreements (amounts in thousands):

The following table presents a summary of amounts included in Due to affiliates in the unaudited consolidated financial statements (amounts in thousands):

Organization, Primary Offering and Merger Expenses

The Manager and its affiliates, including our Sponsor, will be reimbursed, as described in the following paragraph, for organization and offering expenses incurred in conjunction with our organization and Primary Offering as well as expenses incurred in connection with the Offer, QOZB Sale, Conversion and Merger (collectively, the “Transaction”), which Transaction is described in greater detail in “Note 2 – Exchange Offer.”

As of September 30, 2021 and December 31, 2020, the Manager and its affiliates, including our Sponsor, have incurred organization and Primary Offering expenses of approximately $636,000 and $199,000, respectively, on behalf of the Company. As of September 30, 2021 and December 31, 2020, the Manager and its affiliates, including our Sponsor, have incurred Transaction expenses of approximately $187,000 and $104,000, respectively. These organization, Primary Offering and Transaction expenses are not recorded in the accompanying consolidated balance sheets of the Company as of September 30, 2021 and December 31, 2020, because such expenses are not a liability of the Company until the first closing is held in connection with the Primary Offering. The first closing was consummated on October 7, 2021.

Other Operating Expenses

Pursuant to the Management Agreement by and among the Company, Operating Companies and Manager (the “Management Agreement”), we will reimburse our Manager, Sponsor and their respective affiliates for actual expenses incurred on behalf of the Company in connection with the selection, acquisition or origination of an investment, whether or not the Company ultimately acquires or originates the investment. We will also reimburse our Manager, Sponsor and their respective affiliates for out-of-pocket expenses paid to third parties in connection with providing services to the Company. Pursuant to the Employee and Cost Sharing Agreement by and among the Company, Operating Companies, Manager and Sponsor, we will reimburse our Sponsor and Manager for expenses incurred for our allocable share of the salaries, benefits and overhead of personnel providing services to us. As of September 30, 2021 and December 31, 2020, the Manager and its affiliates, including our Sponsor, have incurred operating expenses of approximately $457,000 and $31,000, respectively, on behalf of the Company. The expenses shall be 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.

Management Fees

Subject to the oversight of our board of directors (our “Board”), the Manager is responsible for managing the Company’s 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, private equity acquisitions and investments, and opportunistic acquisitions of other qualified opportunity funds and qualified opportunity zone businesses.

Pursuant to the Management Agreement we will pay our Manager a quarterly management fee in arears of one-fourth of 0.75%. The management fee will be based on our NAV at the end of each quarter, which, no later than the first quarter following the December 31, 2022 year end, and every quarter, thereafter, will be announced within approximately 60 days of the last day of each quarter.

Property Management Oversight Fees

Our Manager, Sponsor or an affiliate of our Manager or Sponsor, will be paid an annual property management oversight fee, to be paid by the individual subsidiaries of our Operating Companies, equal to 1.5% of the revenue generated by the applicable property.

Development Fees

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.

On October 30, 2020, BPOZ 1000 First, LLC, a Delaware limited liability company, and indirect majority-owned subsidiary of our Operating Company, completed the acquisition of several parcels, comprising 1.6-acres of land, located in St. Petersburg, Florida (“902-1020 First”). In connection with our acquisitions of 902-1020 First and 900 8th Avenue South (as defined in “Note 6 – Real Estate, Net”), a development fee of 4.5% of total project costs will be charged throughout the course of each project, of which one half was due at the close of each acquisition and is included in Real estate under construction in our consolidated balance sheets as of September 30, 2021 and December 31, 2020.

During the three months ended September 30, 2021, we incurred employee reimbursement expenditures to the development managers of approximately $152,000, of which approximately $117,000 is included in Real estate under construction in our unaudited consolidated balance sheet and approximately $35,000 is included in General and administrative expenses in our unaudited consolidated statement of operations. During the nine months ended September 30, 2021, we incurred employee reimbursement expenditures to the development managers of approximately $292,000, of which approximately $215,000 is included in Real estate under construction in our unaudited consolidated balance sheet and approximately $77,000 is included in General and administrative expenses in our unaudited consolidated statement of operations. As of September 30, 2021 and December 31, 2020, zero and approximately $330,000, respectively, remained due and payable to our affiliates for the upfront development fees related to 902-1020 First, and approximately $134,000 and $27,000, respectively, remained due and payable to our affiliates for employee reimbursement expenditures related to 902-1020 First and 900 8th Avenue South, combined, as described in greater detail in “Note 6 – “Real Estate, Net.”

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). As of September 30, 2021 and December 31, 2020, we have not incurred any acquisition fees since all investments acquired as of those dates have been or will be subject to payment of development fees.

Economic Dependency

Under various agreements, the Company has engaged the Manager and its affiliates, including in certain cases the Sponsor, to provide certain services that are essential to the Company, including asset management services, asset acquisition and disposition services, supervision of the Company’s Primary Offering and any subsequent offerings, as well as other administrative responsibilities for the Company, including accounting services and investor relations services. As a result of these relationships, the Company is dependent upon the Manager and its affiliates, including the Sponsor. In the event that these companies are unable to provide the Company with these services, the Company would be required to find alternative providers of these services.

Depreciation expense for the three and nine months ended September 30, 2021 was approximately $47,000 and $134,000, respectively, and is included in Depreciation and amortization expense on the unaudited consolidated statements of operations. There was no depreciation expense for the period beginning January 24, 2020 (formation) to September 30, 2020.

Acquisitions of Real Estate

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, a Delaware limited liability company (“BPOZ 900 Eighth QOZB”). BPOZ 900 Eighth QOZB was formed for purposes of acquiring all of the limited partnership interests of 900 Eighth, LP, a Tennessee limited partnership (“900 Eighth”). 900 Eighth was formed to acquire a 3.17-acre land assemblage, consisting of a few small buildings, parking lots and open lots, located in Nashville, Tennessee (together “900 8th Avenue South”). Pursuant to the LLC Agreement, the JV Partner assigned the purchase and sale agreement for 900 8th Avenue South together with a previously paid property deposit of $400,000 to 900 Eighth in exchange for the JV Partner’s deemed initial capital contribution of $200,000 (a non-cash investing activity during the nine months ended September 30, 2021) and a promissory note (the “Promissory Note”) from 900 Eighth in the amount of $200,000. The Promissory Note, which is included in Accounts payable, accrued expenses and other liabilities, earns interest at an annual rate of 1% and matures during the fourth quarter of 2021. 900 Eighth completed the acquisition of 900 8th Avenue South on May 28, 2021 for a total cost of approximately $19,696,000, inclusive of transaction costs of approximately $108,000. We funded this acquisition with proceeds from the Secured Notes. This acquisition was deemed to be an asset acquisition and all transaction costs were capitalized. All related assets were recorded at their relative fair values based on the purchase price and acquisition costs incurred. We anticipate funding entitlement and development costs with a mix of equity investments by the JV Partner and proceeds from the Secured Notes.

On March 12, 2021, BPOZ 900 First, LLC, a Delaware limited liability company, and indirect majority-owned subsidiary of our Operating Company, completed the acquisition of an additional parcel, located in St. Petersburg, Florida, for a total cost of approximately $2,454,000, inclusive of transaction costs of approximately $54,000. We funded this acquisition with proceeds from the Secured Notes. This acquisition was deemed to be an asset acquisition and all transaction costs were capitalized. The purchase price was allocated to land, building, intangible assets and below-market lease liability of approximately $1,776,000, $585,000, $243,000 and $204,000, respectively. All related assets and liabilities, including identifiable intangibles, were recorded at their relative fair values based on the purchase price and acquisition costs incurred.

On May 7, 2021, BPOZ 1900 Fruitville, LLC, a Delaware limited liability company, and indirect majority-owned subsidiary of our Operating Company, completed the acquisition of a 1.205-acre site, consisting of a retail building and parking lot located in Sarasota, Florida, for a total cost of approximately $4,706,000, inclusive of transaction costs of approximately $56,000. We funded the acquisition with proceeds from the Secured Notes. The property will be used as a future development site. This acquisition was deemed to be an asset acquisition and all transaction costs were capitalized. The purchase price was allocated to land and intangible in-place lease assets of approximately $4,460,000 and $190,000, respectively. All related assets, including identifiable intangibles, were recorded at their relative fair values based on the purchase price and acquisition costs incurred.

On June 28, 2021, Belpointe PREP Acquisitions, LLC, a Connecticut limited liability company (“PREP Acquisitions”), and our wholly owned subsidiary, entered into a purchase and sale agreement for the acquisition of an additional parcel located at 901-909 Central Avenue North in St. Petersburg, Florida (“901-909 Central”), for a purchase price of approximately $2,500,000, exclusive of transaction costs. On July 2, 2021, in connection with this transaction, PREP Acquisitions funded a property deposit of $100,000 with proceeds from the Secured Notes, which, at the date of this report, is nonrefundable.

On July 13, 2021, PREP Acquisitions entered into an Agreement for Purchase and Sale of Real Property, as amended by First Amendment to Agreement for Purchase and Sale of Real Property, dated August 11, 2021, and Second Amendment to Agreement for Purchase and Sale of Real Property, dated August 31, 2021, for the acquisition of an approximately 8-acre site located in Nashville, Tennessee (“Nashville No.2”), for a purchase price of approximately $20,825,000, exclusive of transaction costs. Nashville No.2 will be redeveloped into a 412-apartment home community. On July 16, 2021, in connection with this transaction, PREP Acquisitions funded a property deposit of $1,100,000 with proceeds from the Secured Notes. We completed the acquisition of this property on October 29, 2021, which is discussed in greater detail below in “Note 11 – Subsequent Events.”

On July 15, 2021, BPOZ Storrs Road, LLC, a Connecticut limited liability company and our indirect majority-owned subsidiary, completed the acquisition of a 9-acre parcel of land located in Storrs, Connecticut (“Storrs Road”), for a purchase price of $135,000. We funded the purchase price with proceeds from the Secured Notes and anticipate holding Storrs Road for future multifamily development.

In-place lease intangible assets recorded at acquisition, noted above, are included in Intangible assets on the consolidated balance sheets. The below-market lease liability recorded at acquisition, noted above, is included in Accounts payable, accrued expenses and other liabilities on the consolidated balance sheets. As of September 30, 2021, the weighted average remaining lease term was 8 years. During the three and nine months ended September 30, 2021, the amortization of in-place lease intangible assets was approximately $115,000 and $236,000, respectively, and is included in Depreciation and amortization expense on the unaudited consolidated statements of operations. There was no amortization of in-place lease intangible assets for the period beginning January 24, 2020 (formation) to September 30, 2020.

During the three and nine months ended September 30, 2021, the amortization of below-market lease liability was approximately $40,000 and $103,000, respectively, and is included in Rental and other rental income on the unaudited consolidated statements of operations. There was no amortization of below-market lease liability for the period beginning January 24, 2020 (formation) to September 30, 2020.

Real Estate Under Construction

The following table provides the activity of our Real estate under construction (amounts in thousands):

Note 7 – Loans Receivable

As discussed in greater detail in “Note 5 – Related Party Arrangements,” effective September 14, 2021, Belpointe REIT lent $24,773,000 to Belpointe Investment an affiliate of our Sponsor. Interest accrues on the BI Secured Note at a rate of 5% per annum and is due and payable at maturity on September 14, 2022.

On September 30, 2021, we lent approximately $3,462,000 to CMC Storrs SPV, LLC a Connecticut limited liability company (“CMC”), pursuant to the terms of a promissory note (the “CMC Note”) secured by a Mortgage Deed and Security Agreement. CMC used the proceeds from the CMC Note to enter into a Redemption Agreement with BPOZ 497 Middle Holding, LLC, a Connecticut limited liability company (“BPOZ 497”), and indirect majority-owned subsidiary of Belpointe REIT, to redeem BPOZ 497’s preferred equity investment in CMC in accordance with the terms of the Merger Agreement. Interest accrues on the CMC Note at a rate of 12% per annum and is due and payable at maturity on March 29, 2022.

Interest income from the loans receivable for the three and nine months ended September 30, 2021 was approximately $56,000 and is included in Other income in our unaudited consolidated statement of operations.

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.

As of September 30, 2021, the Company did not have any significant financial instruments. We estimated that our other financial assets and liabilities had fair values that approximated their carrying values as of September 30, 2021 and December 31, 2020.

Note 9 – Members’ Capital (Deficit)

Our Amended and Restated Limited Liability Company Operating Agreement (our “Operating Agreement”) generally authorizes our Board to issue an unlimited number of units and preferred 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 without the approval of any 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. As of September 30, 2021, there are 795,108 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 Class A Units are not entitled to preemptive, redemption or conversion rights. 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 election of directors, by a plurality) of the votes entitled to be cast.

Holders of 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 Class A Units are entitled to receive our remaining assets available for distribution.

Class B units

All of our Class B units are held by our Manager and were issued on September 14, 2021, upon effectiveness of our Form S-4. Class B units are not entitled to preemptive, redemption or conversion rights. 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 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 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 our Manager. In addition, our Manager will continue to hold the Class B units even if it 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 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 units

The Class M unit is held by our Manager and was issued on September 14, 2021, upon effectiveness of our Form S-4. The Class M unit is not entitled to preemptive, redemption or conversion rights. The 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 Income (Loss) Per Class A Unit (Unaudited)