Belpointe PREP, LLC Fair Value Disclosure

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.

  

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 were determined by management based on a valuation 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, 2025 and 2024 (amounts in thousands):

 

Schedule of Carrying Value and Estimated Fair Value

						December 31,
						2025								2024
		Level				Carrying Value (1)				Fair Value (2)				Carrying Value (1)				Fair Value (2)
Total indebtedness			3			$	260,638			$	265,225			$	177,017			$	183,088

 

(1)	Amounts disclosed are net of unamortized debt issuance costs and debt discounts.
(2)	We estimate the fair value of our indebtedness by discounting the expected future loan payments using current market interest rates. These rates reflect market conditions and consider the quality of the underlying collateral, the credit quality of the tenant or borrower, and the remaining loan term.

 

We estimated that our other financial assets and liabilities had fair values that approximated their carrying values as of December 31, 2025 and 2024.