| Summary of Significant Accounting Policies | 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. 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,
2023 and 2022, respectively (amounts in thousands): Schedule of Carrying Value Net Assets
2023 2022
December 31,
2023 2022
Assets
Real estate
Land $ 26,059 $ 24,967
Building and improvements 12,953 11,297
Intangible assets 6,816 6,725
Real estate under construction 290,627 133,773
Total Real estate 336,455 176,762
Accumulated depreciation and amortization (2,161 ) (672 )
Real estate, net 334,294 176,090
Cash and cash equivalents 8,204 124,159
Other assets 7,841 11,773
Total assets $ 350,339 $ 312,022
Liabilities
Debt, net $ 19,678 $ —
Due to affiliates 7,292 4,399
Lease liabilities 25 5,350
Accounts payable 12,374 1,679
Accrued expenses and other liabilities 8,595 6,064
Total liabilities $ 47,964 $ 17,492 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. 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. 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. Segment
Reporting We
operate in a single reportable segment which includes the development, redevelopment and managing of commercial real estate properties
located within qualified opportunity zones. Therefore, we aggregate all of our real estate assets into one reportable segment. 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. 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. 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. Deposits for pending financings are presented within Other assets
in our consolidated balance sheets. 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
2023 2022
December 31,
2023 2022
Cash and cash equivalents $ 20,125 $ 143,467
Restricted cash (1) 3,460 1,500
Total cash and cash equivalents and restricted cash $ 23,585 $ 144,967
(1) Restricted
cash is included within Other assets in our consolidated balance sheets. 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, 2023 and 2022, there was no 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,
Primary Offering 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 Primary Offering costs for the years ended December 31, 2023, and 2022, were
$ 0.4 0.6 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 multifamily 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, 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. 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
November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07,
S gment Reporting (Topic 280): Improvements to Reportable Segment Disclosures Recently Adopted Accounting Pronouncements June
2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326), Measurement of Credit Losses on Financial
Instruments ( ,
Leases (Topic 842). We
adopted ASU 2016-13 on January 1, 2023 using the modified retrospective method. The adoption of this standard did not have a material
impact on our consolidated financial statements, and no cumulative-effect adjustment was recorded to retained earnings. |
