Q4 2024 Caliber Cos Inc Earnings Call
Welcome to your conference call, discussing the standby your conference will begin shortly.
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Lisa Fortuna: All right, Kelly, she's sending the proof, or she just hit send. It should be in your inbox in a sec.
Speaker Change: Kelly just signed up she's sending the pulse, but she's just touch it certainly should be here at Baxter in effect.
[Company Representative] (CaliberCos): Okay.
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Lisa Fortuna: Operator?
Speaker Change: Operator.
Operator: Yes, hello.
Speaker Change: Yes Hello.
Lisa Fortuna: Oh, we should be starting very soon. We are just getting the final approval, but I just wanted to give you a heads up.
Well for this should be starting very soon where we're just getting the final approval but.
Speaker Change: Yep.
Operator: Yes. Thank you. Would you like me to notify the participants once again?
Speaker Change: Thank you and would you like.
Speaker Change: Great.
Speaker Change: Hey.
Lisa Fortuna: Yeah, if you could do that just to try to keep them hanging on. Do you see Brendan McCarthy at Sidoti & Company? Do you see him dialed in?
Speaker Change: Yeah, if you could do that just to try to keep them hanging on D. C. Brendan Mccarthy It should I mean, you see them dialed in yes.
Operator: Yes, we do have him on the line.
Speaker Change: Yes, I do have I'll be glad to have him on the line.
Lisa Fortuna: Okay, awesome. Is he in the queue? If he is there anyone else in the queue?
Speaker Change: Okay Awesome is he in the Q as you can tell me if she is anyone else.
Speaker Change: And no one at Hasbro Star, one yet, but I can see a break in the psyche.
Operator: No one has pressed star one yet, Pam, but I can see Mr. Brendan McCarthy on the line. Yes, I'll just notify the participants for now. One moment, please.
Speaker Change: And yes, I'll just notified the participants if I know my mother.
Lisa Fortuna: Thank you.
Speaker Change: Thank you.
Operator: Ladies and gentlemen, welcome to CaliberCos Inc. Q4 2024 Earnings Call. As a reminder, today's call is being recorded for replay purposes. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star 0 for the operator. I would now like to turn the call over to Ms. Lisa Fortuna, Investor Relations for CaliberCos Inc. Thank you. Please go ahead.
Speaker Change: Welcome to our conference call appears to be to stand by your conference with the gain shortly.
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Speaker Change: [noise], ladies and gentlemen, welcome to calibrate fourth quarter 2024 earnings call.
Speaker Change: During today's call is being recorded for replay purposes. At this time all lines are in listen only mode.
Speaker Change: Following the presentation, we will conduct a question and answer session.
Speaker Change: If at any time during this call you equate you need assistance. Please press star zero for the operator, I would now like to turn the call over to Mr is a Virginia Investor Relations for calibration. Thank you. Please go ahead.
Lisa Fortuna: Good afternoon, everyone. Welcome to Caliber's Q4 and full year 2024 Financial Results Conference Call. With me today are Chris Loeffler, Chief Executive Officer and Co-founder, and Jade Leung, Chief Financial Officer of Caliber. After management's commentary, we will open the call for your questions. As a reminder, the information discussed today may include forward-looking statements that involve risks and uncertainties. Words like believe, expect, and anticipate refer to our best estimates as of this call, and there can be no assurances that these will actually take place. Our actual future results could differ significantly from these statements. Further information on the company's risk factors is contained in the company's quarterly and annual reports, and filed with the Securities and Exchange Commission. It is now my pleasure to turn the call over to Chris. Please go ahead.
Speaker Change: Good afternoon, everyone welcome to calibers fourth quarter and full year 'twenty 'twenty four financial results conference call.
Chris Loughlin: With me today are Chris Loughlin, our Chief Executive Officer, and co founder and Jamie Loch Chief.
Speaker Change: Officer of caliber.
Speaker Change: After management's commentary, we will open the call for your questions.
Speaker Change: The information discussed today may include forward looking statements that involve risks and uncertainties.
Speaker Change: Words, like believe expect and anticipate refer to our best estimates as of this call and there can be no assurance.
Speaker Change: That these will actually take place.
Speaker Change: Our actual future results could differ significantly from these statements.
Speaker Change: Further information on the company's risk factors is contained in the company's quarterly and annual reports and filed with the Securities and Exchange Commission.
Chris Loughlin: It is now my pleasure to turn the call over to Chris. Please go ahead.
Chris Loeffler: Thank you, Lisa, thank you to all of our investors, employees, and participating call attendees today. One of Caliber's core value pairings is vision and agility. We think these two values are intertwined. It is Caliber's purpose as a real estate asset manager to have the vision to see what is coming and the agility to adapt our business and our strategies to change. 2024 was a year of adapting to an environment where commercial real estate values had been falling, financing costs had remained high, and financing was difficult to obtain. This environment has delayed some of our plans to increase revenue and grow our managed assets. To display agility, Caliber adapted to these market conditions by first reducing operating costs in May of 2024, and continuing with cost containment to drive Caliber back to profitability in 2025.
Chris Loughlin: Thank you Lisa and thank you to all of our investors employees and participating call attendees today.
Chris Loughlin: One of the Calibers Corp value pairings is vision and agility. We think these two values are intertwined.
Chris Loughlin: Calibers purpose as a real estate asset manager to have the vision to see what is coming and the agility to adapt our business and our strategy has to change.
Chris Loughlin: 'twenty 'twenty four it was a year of adapting to the environment, where commercial real estate values had been falling.
Chris Loughlin: Financing costs should remain high and financing was difficult to obtain.
Chris Loughlin: This environment has delayed silver plans to increase revenue and grow our managed assets.
Chris Loughlin: Display agility caliber adapted to these market conditions by first reducing operating costs in may of 'twenty 'twenty four.
Chris Loughlin: Continuous cost containment to drive Calvert back to profitability in 2025.
Chris Loeffler: Second, waiting to reenter the real estate market until such a time that we saw value declines flattening and values beginning to grow again. This is the environment we have begun to see in real time. Third, launching new financing vehicles to increase our access to capital and ability to grow and refinance debt. Beyond market conditions, experience also drove Caliber's decisions in 2024. Now in our 16th year, Caliber's team has entered 2025 with a leaner structure and a more narrowly defined objectives. Those objectives include, number 1, focusing on 3 key asset classes going forward and selling assets that do not meet these 3 categories. Number 2, growing assets under management, or AUM, with income-producing assets and reducing our development footprint by completing existing projects, selling early-stage developments, and limiting future development commitments.
Chris Loughlin: Second waiting to reenter the real estate market until such a time that we saw value declines flattening and values beginning to grow again.
Chris Loughlin: This is the environment, we have begun to see in real time.
Chris Loughlin: Third launching new financing vehicles to increase our access to capital and ability to grow and refinance debt.
Chris Loughlin: Beyond market conditions experience also drove calibers decisions in 2024 now in our 16th year Calibers team has entered 2025 with a leaner structure and a more narrowly defined objectives.
Chris Loughlin: These those objectives include number one.
Chris Loughlin: Focusing on three key asset classes going forward and selling assets that do not meet these three categories.
Chris Loughlin: Number two growing assets under management or AUM with income producing assets and reducing our development footprint by completing existing projects selling early stage developments and limiting future development commitments.
Chris Loeffler: Number 3, embracing our unique abilities and competitive advantage between tax advantaged real estate investing, the innovative Caliber Hospitality Trust, and the moment in time we find ourselves in to acquire distressed real estate at a discount to its inherent value. Number 4, enhancing Caliber's access to capital with growth in wholesale fundraising and the introduction of several Caliber-level corporate financings, which Jade will touch on in his section. Allow me to provide a few more details as we look back over the prior year. In May 2024, we began implementing reductions in our operating expenses to align our cost structure with current market dynamics.
Chris Loughlin: And number three embracing our unique abilities and competitive advantage between tax advantaged real estate investing the innovative caliber hospitality trust and a moment in time, we find ourselves in and two acquired distressed real estate at a discount to its inherent value and.
Speaker Change: Number four enhancing calibers access to capital with growth in wholesale fund raising and the introduction of several caliber level corporate financings, which Jay will touch on in his in his section.
Speaker Change: Allow me to provide a few more details as we look back over the prior year.
Speaker Change: In may of 'twenty 'twenty, four we began implementing reductions in our operating expenses to align our cost structure with current market dynamics.
Chris Loeffler: Our target was to reduce annualized operating expenses by $6 million, and we are pleased to report that we began to achieve those reductions in H2, completing in Q3 2024, our first profitable quarter since we went public. We expect to realize the full benefits of our expense reduction efforts in 2025. While the road to consistent profitability may not be completely linear, as evidenced by our Q4 results, we believe we are moving in the right direction to make 2025 profitable for the full year. A key component to accelerate Caliber's path to profitability is our decision to narrow our investment focus to the three real estate asset classes we find most attractive: multifamily residential, hospitality, and multi-tenant industrial.
Speaker Change: Our target was to reduce annualized operating expenses by $6 million and we're pleased to report that we began to achieve those reductions in the second half of the year.
Speaker Change: Bleeding in Q3 2024, our first profitable quarter since we went public.
Speaker Change: We expect to realize the full benefits of our expense reduction efforts in 2025.
Speaker Change: While the road to consistent profitability it may not be completely linear as evidenced by our fourth quarter results. We believe we are moving in the right direction to make 'twenty twenty-five profitable for the full year.
Speaker Change: The key component to accelerate calibers prep path to profitability is our decision to narrow our investment focus to the three real estate asset classes, we find most attractive.
Speaker Change: Multifamily residential hospitality and multi tenant industrial.
Chris Loeffler: In these 3 asset classes, we are continuing to focus on middle market projects where local knowledge is key and larger institutions may not have a competitive advantage as Caliber does. Caliber is committed long-term to these 3 key asset classes and to aligning our team of experts within them. We're excited to reenter multifamily investment in a more meaningful way now that valuations have begun to drop from their peak. As you may recall, Caliber sold most of its multifamily assets while valuations were elevated and did not reinvest at the same level. We now see opportunity as multifamily real estate is the second most distressed asset class behind office nationwide. Distress in our business carries with it the opportunity to buy assets at a potentially favorable price and produce potentially attractive risk-adjusted returns.
Speaker Change: In these three asset classes, we are continuing to focus on middle market projects, where local knowledge is key and larger institutions may not have a competitive advantage as caliber does.
Speaker Change: Calibers committed long term to these three key asset classes into aligning our team of experts within them.
Speaker Change: We're excited to reenter multifamily investment in a more meaningful way now.
Speaker Change: Now that valuations have begun to dropped in their peak as you may recall caliber sold most of its multifamily assets will valuations were elevated it did not reinvest at the same level.
Speaker Change: We now see opportunities multifamily real estate is set is the second most distressed asset class behind office nationwide.
Speaker Change: Distress in our business curious with it the opportunity to buy assets at a potentially favorable price and produce potentially attractive.
Speaker Change: Risk adjusted returns.
Chris Loeffler: You've heard me speak in detail about hospitality, so I'll only reaffirm our commitment to the sector and to the opportunity we see in it. The pandemic caused hotels not to be overbuilt in the last development cycle, while simultaneously reducing existing hotel supply through conversions of hotels to other uses. This unique setup reduces supply with demand returning and creates an excellent opportunity for acquiring existing assets and selectively developing new ones. We are building a growing track record of success in smaller multi-tenant industrial assets. I'd like to share with you why we believe that it's an excellent time to invest in this asset class, which includes assets from self-storage, manufacturing, and local warehousing. First, sometimes it's a little easier to say what we are doing by stating what we're not doing. We are not investing in large million-plus square foot industrial assets with single tenants.
Speaker Change: You've heard me speak in detail about hospitality, so only reaffirm our commitment to the sector.
Speaker Change: And to the opportunity we see it at the pandemic caused hotels not to be overbuilt in the last development cycle, while simultaneously, reducing existing hotel supply through conversions of hotels to other uses.
Speaker Change: This unique setup reduces supply with demand returning and creates an excellent opportunity for acquiring existing assets and selectively developing new ones.
Speaker Change: We are building a growing track record of success in smaller multi tenant industrial assets.
Speaker Change: Like to share with you why we believe this that it is an excellent time to invest in this asset class, which.
Speaker Change: Which includes assets from self storage manufacturing and local warehousing.
Speaker Change: First.
Speaker Change: Sometimes it's a little easier to say, but we are doing by sitting what we're not doing we're not investing in large million plus square foot industrial assets with single tenants. This is a space well covered by our institutional competitors in our space. We do not believe we can gain a competitive advantage and as compared to the middle market assets, we focus on.
Chris Loeffler: This is a space well covered by our institutional competitors and a space we do not believe we can gain a competitive advantage in as compared to the middle market assets we focus on. We see that the industrial sector is benefiting from a durable trend of companies throughout the world returning to build and manufacture in the United States. As an example, in Phoenix, Arizona, our most active market, we have seen this trend in action with Intel and TSMC recently investing approximately $100 billion in semiconductor manufacturing facilities. In addition, during Q1 2025, TSMC announced plans for another $100 billion of investment in their facilities. These two large companies have driven the geographic expansion and formation of hundreds of smaller companies that supply or otherwise support Intel and TSMC manufacturing.
Speaker Change: We see that the industrial sector is benefiting from a durable trend of companies throughout the world returning to build and manufacture in the United States as.
Speaker Change: As an example in Phoenix, Arizona, our most active market. We have seen this trend in action with Intel and TSMC recently investing approximately $100 billion in semiconductor manufacturing facilities. In addition, during the first quarter of 2025, TSMC announced plans for another $100 billion of investment in their.
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Speaker Change: These two large companies have driven the geographic expansion and formation of hundreds of smaller companies that supply or otherwise support Intel and TSMC manufacturing caliber expects, we will have a role to play in investing in and developing the infrastructure necessary for the middle market participants in this industry.
Chris Loeffler: Caliber expects we will have a role to play in investing in and developing the infrastructure necessary for the middle-market participants in this industry. As I stated, we are prioritizing income-producing assets and reducing our development footprint to 30% or less of our asset portfolio. To do this, we expect to sell parcels throughout our projects in Johnstown, Colorado, as the infrastructure on that land is completed. For projects that are in an earlier stage, we have chosen to sell the project if it does not meet one of our 3 asset classes. Caliber's plans allow us to sharpen our focus on fewer priorities, which further allows us to focus our team's time and increases our results with a lower overall cost structure.
Speaker Change: As I stated, we are prioritizing income producing assets and reducing our development footprint to 30% or less of our asset portfolio.
Speaker Change: To do this we expect to sell parcels throughout our projects in Johnstown, Colorado as the infrastructure on that land is completed.
Speaker Change: The projects that are in earlier stage, we have chosen to sell the project. If it does not meet one of our three asset classes.
Speaker Change: Calibers plans allow us to sharpen our focus on fewer priorities.
Speaker Change: Which further allows us to focus our teams time and increases our results with a lower overall cost structure.
Chris Loeffler: They also align our business with the opportunities we see in the market today, moving away from a traditional development cycle and towards a cycle like the one we experienced in our first 5 years in business. Given our 16 years of experience, we know what to do in real estate cycles such as this and how to help investors take advantage of it. Continuing with some business updates, we launched two new programs during Q4 that target accredited investors who are seeking tax-efficient investment opportunities. In October, Caliber launched our innovative Qualified Opportunity Zone Fund Roll-Up Program, offering a potential solution for investors who have not been able to realize the benefits of these complex investment vehicles.
Speaker Change: They also align our business with the opportunities we see in the market today moving away from a traditional development cycle and towards the cycle like the one we experienced in our first five years in business.
Speaker Change: Given our 16 years of experience, we know what to do in real estate cycles, such as this and how to help investors take advantage of it.
Speaker Change: Continuing with some business updates we launched two new programs during the fourth quarter that target. The credited investors who are seeking tax efficient investment opportunities.
Speaker Change: In October caliber launched our innovative qualified opportunities on fund rollout program offering a potential solution for investors, who have not been able to realize the benefits of these complex investment vehicles.
Chris Loeffler: At that time, we completed our first merger with a third-party fund, resulting in a $14 million increase in managed capital in Caliber's existing Qualified Opportunity Zone Fund, the Caliber Tax Advantaged Opportunity Zone Fund, LP, or CTAF I as we call it. This capital has already been successfully deployed into new projects. We are actively seeking additional opportunities for the Opportunity Zone Fund Roll-Up Program, which includes investors with undeployed capital in their personal funds and projects that may be attractive acquisitions or joint ventures. The second program we launched is the Caliber 1031 Exchange Program, an elevated experience for 1031 Exchange investors who are seeking quality income-generating assets. Investors seeking to complete a 1031 know that they are often faced with two choices. Number 1, hire brokers and buy a new asset on their own.
Speaker Change: At that time, we completed our first merger with a third party funds, resulting in a $14 million increase in managed capital and calibers existing qualified opportunities and fund the caliber tax advantaged qualified opportunity Zone Fund L. P. R. C type one as we call it.
Speaker Change: And this capital has already been successfully deployed into new projects.
Speaker Change: We are actively seeking additional opportunities for the opportunity Zone fund rollout program, which includes investors with unemployed capital in their personal funds and projects that may be attractive acquisitions or joint ventures.
Speaker Change: The second program, we launched the caliber 10 31 exchange program.
Speaker Change: An elevated experience for 10, 31 exchange investors, who are seeking quality income generating assets.
Speaker Change: Investors seeking to complete a 10 31, no that they're often face with two choices number one hire brokers and buy a new asset on their own. We're number two invest in a highly structured financial product called a D. S T.
Chris Loeffler: Number 2, invest in a highly structured financial product called a DST. The first choice requires the investor to become a real estate expert and create their own deal flow on attractive assets, all within 45 days of the sale date of their property. The second choice typically comes with upfront fees that reduce the investor's capital by 7% to 10% and require the investor to buy a new asset that may be priced close to market value. Caliber's program offers a third way forward, combining the benefits of low fee structure with Caliber's ability to acquire assets at potentially below-market prices. The program also positions Caliber to act as an asset manager, helping alleviate the challenges investors face with day-to-day real estate ownership.
Speaker Change: The first choice requires the investor could become a real estate expert and create their own deal flow unattractive assets. All within 45 days of the sale date of their property.
Speaker Change: The second choice typically comes with upfront fees that reduced the investors' capital by 7% to 10%.
Speaker Change: And require the industrial or buy a new asset that may be priced close to market value.
Speaker Change: Calvert program offers a third way forward combining the benefits of low fee structure with calibers ability to acquire assets at potentially below market prices.
Speaker Change: The program also positions caliber to act as an asset manager, helping alleviate the challenges investors face with day to day real estate ownership.
Chris Loeffler: Since Caliber launched the program, we have seen robust lead flow of interested parties. We are in the process of learning what each investor needs and matching them to our pipeline. We hope this program will also support our growth in wholesale fundraising, making Caliber a unique provider of tax solutions to investment professionals. Last week, we announced the completion of our first 1031 transaction, a $10 million acquisition of a 602-unit self-storage facility in Rifle, Colorado. This acquisition was made on behalf of a group of investors through a tenant in common or TIC arrangement. We will oversee all third-party relationships in connection with managing the property and the planned construction of additional climate-controlled storage units. Moving on from business updates to project updates within our portfolio of managed funds.
Speaker Change: Since caliber launch the program, we have seen robot robust lead flow of interested parties and we are in the process of learning, what each investor needs and matching them to our pipeline.
Speaker Change: We hope this program will also support our growth in wholesale fundraising, making caliber a unique provider of tax solutions to investment professionals.
Speaker Change: Last week, we announced the completion of our first 10 31 transaction a 10 million dollar acquisition was 600 into unit self storage facility in rifle, Colorado.
Speaker Change: This acquisition was made on behalf of a group of investors through a tenant in common Arctic arrangement.
Speaker Change: We will oversee all third party relationships in connection with managing the property and the planned construction of additional climate controlled storage units.
Speaker Change: Yeah.
Speaker Change: Moving onto the business updates to project updates within our portfolio of managed funds.
Chris Loeffler: As we mentioned last quarter, in September, we acquired the Canyon Corporate Plaza in Phoenix, which has over 300,000 square feet of Class A office space and two parking garages. This is our first distressed acquisition since the 2012 era of distressed assets. Our plan is to renovate the two buildings into at least 400 apartment units, with the potential to go up to 700 units throughout the site. We recently received the density waiver we needed for this project, and we are on track now to finalize our plans and set a date to commence construction of phase 1. Considering this, we plan to raise another round of capital in the project that, combined with a construction loan, will fully fund phase 1. We are also making good progress on our SP10 project, which is the conversion of a hotel into a multi-family development.
Speaker Change: As we mentioned last quarter in September we acquired the kidney corporate Plaza, and Phoenix, which has over 300000 square feet of class a office space and two parking garages.
Speaker Change: Our first distressed acquisition since the 2012 era of distressed assets are.
Speaker Change: Our plan is to renovate the two buildings into at least 400 apartment units with a potential to go up to 700 units throughout the site.
Speaker Change: We recently received the density waiver we needed for this project and we are on track now to finalize our plans and set a date to commence construction of phase one.
Speaker Change: Considering this we plan to raise another round of capital on the project that combined with the construction loan will fully fund phase one.
Speaker Change: We're also making good progress on our S. P 10 project, which is the conversion of a hotel or multifamily development permitting has been approved and the demolition of the towers complete while construction of phase. One has started we have chosen to move from a phased project plan to completing the entire plan in a single phase.
Chris Loeffler: Permitting has been approved, and the demolition of the tower is complete. While construction of phase 1 has started, we have chosen to move from a phased project plan to completing the entire plan in a single phase. In light of that, we are in the market to refinance our phase 1 construction loan and complete phases 1, 2, and 3 together. This is driven by our view that we will save on overall project costs in a single phase and the fact that the construction financing environment has improved since we placed the first loan. Our PURE Pickleball & Padel project at Riverwalk in Scottsdale, Arizona is also moving forward. As a reminder, the project entails building a state-of-the-art pickleball and padel facility, including 50 courts for daily open play, as well as large tournaments, a clubhouse, fitness center, pro shop, team room, office, restaurant, cafe, and locker rooms.
Speaker Change: In light of that we are in the market to refinance our phase one construction loan incomplete phases, one two and three together.
Speaker Change: This is driven by our view that we will save on overall project cost and a single phase.
Speaker Change: And the fact that the construction financing environment has improved since we placed the first loan.
Speaker Change: Our pure pickle ball and Padel project at Riverwalk in Scottsville, Arizona is also moving forward as.
Speaker Change: As a reminder, the project entails building a state of the art Pickle ball infidel facility, including 50 courts for daily open play as well as.
Speaker Change: Large tournaments are clubhouse fitness center pro shop team room office restaurant Cafe and locker rooms. The project plans are nearly complete and presuming we received an approval from the Salt River Pinot Mericopa Indian community.
Chris Loeffler: The project plans are nearly complete, and presuming we receive an approval from the Salt River Pima-Maricopa Indian Community, we will seek to place a construction loan and commence construction soon. Moving on to the Caliber Hospitality Trust, or CHT, which is Caliber's strategy to rapidly grow AUM by acquiring quality income-producing hotels nationwide, I have several updates to share. In October, we reached a definitive agreement with the Satori Collective to contribute 7 hotels to the trust. These properties include a mix of middle-market, full-service, flex-service, and extended stay hotels in the Midwestern and Southern US that are branded by Marriott, Hilton, and IHG. We are currently modifying the terms of the Satori agreement and now expect 8 hotels to be contributed instead of 7, as initially announced. Following this modification, we expect to move toward an efficient closing with the institutional investors we had previously identified.
Speaker Change: We will seek to place a construction loan and commence construction soon.
Speaker Change: Moving on to the caliber hospitality trust or C. H T, which is caliber strategy to rapidly grow our U M by acquiring quality income producing hotels nationwide.
Speaker Change: I have several updates to share.
Speaker Change: In October we reached a definitive agreement this Tory collective to contribute seven hotels to the trust. These properties include a mix of middle market full service and select service and extended stay hotels in the Midwestern and southern U S.
That are branded by Marriott Hilton and IHG.
Speaker Change: We are currently modifying the terms of the Satori agreement and now expect eight hotels to be contributed instead of seven as initially announced.
Speaker Change: Following this modification, we expect to move toward inefficient closing with the institutional investors we had previously identified.
Chris Loeffler: In contrast, our contribution agreement with LTD is no longer expected to close in the state that we previously announced. CHT had agreed to acquire 9 hotels from LTD, and after closing on the 1st asset, the trust had been progressing steadily to acquire the remaining 8 hotels in a single closing towards the end of 2024. In Q4 2024, the 8 hotels experienced a decline in their expected operating performance, which we attributed to the level of exposure the portfolio has to military and federal government-driven spending, and the government's desire to reduce its spending. While we are disappointed that we could not find a revised structure to complete the LTD acquisition, we believe the decision to pause and move on to other assets is a good example of our discipline and our stewardship of capital.
Speaker Change: In contrast, our contribution agreement with L. T. D is no longer expected to close in the state that we previously announced.
Speaker Change: C. H T had agreed to acquire nine hotels from L. T D and after closing on the first asset the trust had been progressing steadily to acquire the remaining eight hotels in a single closing towards the end of 2024.
Speaker Change: In the fourth quarter of 2020 for the eight hotels experienced a decline in their expected operating performance, which we attributed to the level of exposure of the portfolio has the military and federal government driven spending and the government's desire to reduce it spending.
While we were disappointed that we could not find the revised structure to complete the L. T. D acquisition, we believe the decision to pause can move onto other assets is a good example of our discipline and our stewardship of capital.
Chris Loeffler: We simply do not know how governmental spending will evolve and if the LTD portfolio would achieve its targeted performance. Under the terms of the prior contribution agreement, the portfolio did not make sense, and in light of its performance, Caliber is only willing to invest in assets that are accretive to both CHT and to Caliber. Market conditions for hotel owners are changing. Brands like Marriott, Hilton, and IHG are all requiring their hotels to be renovated, and owners are not likely to be able to borrow money to satisfy the brand's demands with interest rates remaining elevated. Many of those same hotel owners saw their cash reserves depleted during the pandemic years and are faced with a challenging capital stack on assets that are now operating profitably again. In our eyes, these conditions make CHT's offering stronger than any other point in time.
Speaker Change: We simply do not know how governmental spending will evolve and if the L. T D portfolio would achieve its targeted performance.
Speaker Change: Under the terms of the prior contribution agreement the portfolio did not make sense and in light of its performance Cal.
Speaker Change: Caliber has only willing to invest in assets that are accretive to both C. H T into caliber.
Speaker Change: Market conditions for hotel owners are changing.
Speaker Change: Brands like Marriott, Hilton and IHG or all requiring their hotels to be renovated and owners are not likely to be able to borrow money to satisfy the brand's demands with interest rates remaining elevated many of those same hotel owners saw their cash reserves depleted during the pandemic years.
Speaker Change: And are faced with a challenging capital stack on assets that are now operating profit lead again.
Speaker Change: In our eyes these conditions make CH ts offerings stronger than any other point in time, the ability for hotel owners to roll up assets on a tax deferred exchange and use the power of the combined portfolio to solve for renovation and refinance requirements may well offer the only viable alternative to a sale of that owners assets and a <unk>.
Chris Loeffler: The ability for hotel owners to roll up assets on a tax-deferred exchange and use the power of the combined portfolio to solve for renovation and refinance requirements may well offer the only viable alternative to a sale of that owner's assets and a potentially disappointing financial and tax result. Considering this, we have aggressively moved to structure contracts going forward in a manner that allows the transaction to close easily and allows the investors in those hotels to benefit when their portfolios are driving performance. I am pleased to report we have seen our pipeline of potential contributors grow by three new parties since January of 2025, and we expect this trend to continue.
Speaker Change: Tension disappointing financial and tax result.
Speaker Change: Considering this we have aggressively moved to structure contracts going forward in a manner that allows the transaction to close easily and allows the investors in those hotels to benefit when their portfolios are driving performance.
Speaker Change: I am pleased to report we have seen our pipeline of potential contributors grow by three new parties since January of 2025, and we expect this trend to continue.
Chris Loeffler: Moving on to our 2026 targets, based on the change in direction with LTD and the impact on it on CHT's timeline overall, we are currently evaluating how that will impact our AUM target of $3 billion by the end of 2026. We will keep everybody informed as we complete that analysis. From a fundraising perspective, the fundraising environment remains challenging. Not surprisingly, Q4 was disappointing due to the disruption around the election and the LTD result that I just mentioned. For Q1, we are experiencing some ongoing softness, but we're pleased to see that the wholesale channel is picking up, something we've been anticipating and expect to see continue. As our fundraising can be event driven, the movement of timelines of LTD, Satori, and the subsequent planned CHT roll-ups has shifted results. We are also happy to share from a regulatory development.
Speaker Change: Moving onto our 'twenty 'twenty six targets based on the change in direction with L. T D M.
Speaker Change: And the impact on that on C. H T. S. Timeline overall, we are currently evaluating how that will impact our <unk> target of $3 billion by the end of 2026.
Speaker Change: And we will keep everybody informed as we complete that analysis.
Speaker Change: But from a fundraising perspective, the fund raising environment remains challenging and not surprisingly the fourth quarter was disappointing due to the disruption around the election and the L. T. D result that I just mentioned.
For the fourth quarter, we were for the first quarter, we are experiencing some ongoing softness, but we're pleased to see that the wholesale channel is picking up something we had been anticipating and expect to see continue.
Speaker Change: As our fund raising can be event driven the month the movement of timelines of L. T D Cytori and the subsequent planned C. H T roll ups has shifted results.
Speaker Change: We are also happy to share on from a regulatory development earlier. This month, the SCC issued new guidance on the use of general sources solicitation and private placements on a rule of 560, <unk>, making it simpler to qualify investors issuers like caliber will now be able to satisfy the verification requirements of raw fiber succeed by relying on minimum investment.
Chris Loeffler: Earlier this month, the SEC issued new guidance on the use of general solicitation in private placements under Rule 506(c), making it simpler to qualify investors. Issuers like Caliber will now be able to satisfy the verification requirements of Rule 506(c) by relying on minimum investment amounts, including uncalled capital commitments and related representations from investors. This is great news for Caliber because it significantly reduces the administrative burden of qualifying investors and will make the process of investing with Caliber more seamless. Finally, as we've discussed before, we continue to strive for ways to help investors more effectively understand, analyze, and value Caliber's performance. To do so, in Q1, we published a financial supplement providing visibility to what we call our platform performance. These results exclude the impact of consolidation, which we are required to report under GAAP.
Speaker Change: Mounts, including Uncalled capital commitments.
Speaker Change: And related representations from investors. This is great news for calendar because it significantly reduces the administrative burden of qualifying investors and will make the process of investing with caliber more seamless.
Speaker Change: Finally, as we've discussed before we continue to strive for ways to help investors more effectively understand analyze and value calibers performance.
Speaker Change: To do so in the first quarter, we published our financial supplement providing visibility to what we call our platform performance.
Speaker Change: These results.
Speaker Change: Exclude the impact of consolidation, which we are required to report under GAAP.
Chris Loeffler: The supplement is available on our website, and it contains results from 2019 through 2024 to provide investors with the necessary information to measure changes and compare prior periods of our platform performance. This supplement will be updated each quarter and will remain available to investors on our investor relations section of our website. Additionally, we're pleased to share that today we have introduced a new disclosure in our 10-K that provides shareholders with a better understanding of the value of the assets in our funds, including the estimated value of Caliber's performance allocations. As of year-end 2024, performance allocations were estimated to be $89 million. Performance allocations are commonly referred to as carried interest or promote in our industry, and they are not included on our balance sheet.
Speaker Change: The supplement is available on our website and it contains results through 2019 through 'twenty 'twenty four to revive investors with the necessary information to measure changes in compare prior periods of our platform performance.
Speaker Change: This supplement will be updated each quarter, we mean available to investors on our Investor Relations section of our website.
Speaker Change: Additionally, we're pleased to share that today, we have introduced a new disclosure in our 10-K that provides shareholders with a better understanding of the value of the assets and refunds, including the estimated value of calibers performance allocations.
Speaker Change: As of year end 2024 performance allocations were estimated to be $89 million performance allocations are commonly referred to as carried interests or promote in our industry and they are not included on our balance sheet.
Chris Loeffler: We hope that sharing this estimate will assist investors in evaluating Caliber's net worth or book value, as performance allocations are not included on the balance sheet. We expect to regularly update this estimate as Caliber grows AUM and expect us to grow our performance allocations. I'll now turn the call over to Jade, who will provide additional details on this disclosure, as well as our Q4 and full-year results.
Speaker Change: We hope that sharing this estimate will assist investors in evaluating calibers net worth or book valued as performance allocations are not included on the balance sheet.
Speaker Change: We expect to regularly update this estimate as caliber gross AUM and expect expect us to grow our performance allocations.
Speaker Change: I'll now turn the call over to Jay who will provide additional details on this disclosure as well as our fourth quarter and full year results.
Jade Leung: Thank you, Chris. Good afternoon, everyone. As Chris just mentioned, we are continuing to increase the transparency in our financial reports with the goal of helping investors understand, analyze, and value Caliber's performance. That includes transparency into the value of the assets we hold and manage in our portfolio. Up to now, we have reported the value of each asset we manage at fair value or AUM. Moving forward, we will report managed assets, which include both AUM and assets under development or AUD. AUD includes the value at estimated cost of development or improvement work we expect to complete on land we own or assets we own which are not yet improved. In addition, we will also disclose the value of the performance allocations we expect to earn on each asset, which we have not reported previously.
Jay: Thank you Chris Good afternoon, everyone as Chris just mentioned, we are continuing to increase the transparency in our financial reports with the goal of helping investors understand.
Speaker Change: Analyze and value calibers performance that includes transparency into the value of the assets, we hold in managing our portfolio.
Speaker Change: Up to now we have reported the value of each asset we manage at fair value. Our AUM moving forward. We will report managed managed assets, which include both AUM and assets under development or a U D. E. D includes the value at estimated cost of development. Our improvement work, we expect to complete on land we own.
Speaker Change: Our assets, we own which are not yet improved.
Speaker Change: In addition, we will also disclose the value of the performance allocations, we expect to earn on each asset, which we have not reported previously for.
Jade Leung: For those of you who are not familiar with performance allocations, which may also be called carried interest or promote in our industry, is the portion of the profits of each project or fund we own and expect to receive when we sell an asset or liquidate a fund. The anticipated performance allocation is forecasted in the detailed lifecycle plans we develop for each asset prior to investing in it. These plans are updated every quarter, and they are rigorously tested and reviewed by external specialists and auditors each year. Because these performance allocations are all estimates, there is no guarantee they will be achieved, and a material change to an asset plan will likely cause the amount of an unexpected performance allocation to change as well.
Speaker Change: For those of <unk>.
Speaker Change: For those of you who are not familiar with performance allocations, which may also be called carried interest or promote in our industry.
Speaker Change: Is the portion of the profit of each project our fund we own and expect to receive when we sell an asset or liquidate a fund.
The anticipated performance allocation is forecasted in the detailed lifecycle plans, we developed for each asset prior to investing in these plans are updated every quarter and they are rigorously tested and reviewed by external specialists and auditors each year.
Speaker Change: Because these performance allocations are all estimates there is no guarantee they will be achieved and a material change to an acid plant will likely cause the amount of an unexpected performance allocation to change as well investors should understand that many of the assets driving these performance allocations, maybe following a multi year business plan.
Jade Leung: Investors should understand that many of the assets driving these performance allocations may be following a multi-year business plan, and the allocations are expected to be harvested over time. Adding in the value of our performance allocations, currently estimated to be about $89 million, has the effect of increasing Caliber's net worth or book value substantially and providing an important picture for investors to understand a component of Caliber's value as a business. Moving on, I also wanted to highlight developments related to the company's liquidity and going concern disclosures. Beginning in 31 December 2023, and throughout 2024, we disclosed the progress the business was making with regards to our liquidity and going concern. Specifically, we experienced recurring losses and were managing the maturity of approximately $33 million of one-year corporate notes without having a corresponding amount of cash on hand to meet those obligations as they became due.
Speaker Change: And the allocations are expected to be harvested over time.
Speaker Change: Okay.
Speaker Change: Adding in the value of our performance allocations currently estimated to be about $89 million has the effect of increasing calibers net worth or book value substantially and providing an important picture for investors to understand our component of calibers value as a business.
Speaker Change: Moving on I also wanted to highlight developments related to the company's liquidity and going concern disclosures beginning.
Beginning in December 31, 2023 and throughout 2024, we disclosed the progress the business was making with regards.
Speaker Change: Two our liquidity and going concern specifically, we express we experienced reoccurring losses, and we're managing the maturity of approximately $33 million of one year corporate notes without having without having a corresponding amount of cash on hand to meet those obligations as they became due.
Jade Leung: As of December 31, 2024, we continue to make progress on managing those maturities, which will be emphasized in our audit opinion. We have two primary programs available to help us manage these obligations. The first is refinancing existing notes into a 36-month unsecured note program. We have approximately $7 million of notes that have completed this refinance or are in the process of completing this refinance. We anticipate continued success in this program going forward as the investors in our corporate notes learn about the merits of this offering. The second is raising newly issued preferred stock. We have two offerings, a Series A and a Series AA. The Series A is our private placement convertible preferred stock through which we can raise up to $15 million. The Series AA was approved on March 12, 2025, through Regulation A+ to raise up to $20 million.
Speaker Change: As of December 31, 2024.
Speaker Change: We continue to make progress on managing those maturities, which will be emphasized in our audit opinion.
Speaker Change: We have two primary programs available to help us manage these obligations. The first is refinancing existing notes into a 36 month unsecured note program.
Speaker Change: We have approximately $7 million of notes that have completed this refinanced or are in the process of completing Mr Finance.
Speaker Change: We anticipate continued success in this program going forward as the investors in our corporate notes learn about the merits of this offering.
Speaker Change: The second is raising newly issued preferred stock we have two offerings a series a series double a the series a is our private placement convertible preferred stock through which we can raise up to $15 million. The series Doubleday was approved on March 12, 2025 through Reg a plus to raise up to $20 million.
Jade Leung: Half of the proceeds from the Series AA are expected to be used to repay matured corporate notes. The other half will be used for general corporate purposes, including Caliber's plans to grow. Our raise under each program has been gaining traction, and we expect both programs to be successful. We have also backstop our cash position by executing an equity purchase agreement for up to $25 million of common stock. We believe these measures are part of a holistic plan of strong corporate finance, and they will help us manage satisfying our commitments as they come due. We also expect these programs will offer Caliber the access to capital it needs to take advantage of the numerous revenue-generating opportunities Chris mentioned previously. Now turning to our results for Q4 and full year 2024. Total Q4 platform revenue of $4.6 million was driven by asset management revenues.
Speaker Change: Half of the proceeds from the series dental are expected to be used to repay matured corporate notes. The other half will be used for general corporate purposes, including calibers plans to grow.
Speaker Change: Our raise under each program has been gaining traction and we expect both programs to be successful.
Speaker Change: We have also backstop, our cash position by executing an equity purchase agreement for up to 25 million of common stock. We believe these measures are part of a of a holistic plan of strong corporate finance and it will help us manage satisfying our commitments as they come due.
Speaker Change: We also expect these programs will offer caliber the access to capital that needs to take advantage of the numerous revenue generating opportunities Chris mentioned previously.
Speaker Change: Now turning to our results for the fourth quarter and full year 2024.
Speaker Change: Total fourth quarter platform revenue of $4 6 million was driven by asset management revenues. This was a 36, 1% decrease compared to the prior period due to carried interest generated from the sale of neurons are site crossing and South Ridge. In addition to the higher levels of development activity relating to.
Jade Leung: This was a 36.1% decrease compared to the prior period due to carried interest generated from the sale of Northsight Crossing and Southridge, in addition to the higher levels of development activity relating to our behavioral health facilities in the prior year. Total platform expenses in Q4 were $10.7 million, an increase of 24% compared to the prior period, primarily due to a decrease in operating costs related to payroll and payroll-related expenses, and a corresponding offset related to bad debt expense of $4 million. Platform adjusted EBITDA loss for Q4 was $1 million compared to platform adjusted EBITDA gain of $1.6 million during the same period a year ago, due to the combination of factors impacting platform revenues and expenses noted previously. Platform revenue for full year 2024 was $21 million, a 1.9% increase compared to last year, primarily driven by asset management revenues of $20.6 million.
Speaker Change: Our behavioral health facilities in the prior year.
Speaker Change: Total platform expenses in Q4 were $10 7 million, an increase of 24% compared to the prior period, primarily due to a decrease in operating costs related to payroll and payroll related expenses and a corresponding offset related to bad debt expense of $4 million.
Speaker Change: Platform adjusted EBITDA loss for the fourth quarter was $1 million compared two platform adjusted EBITDA gain of 1.6 million during the same period a year ago due to the combination of factors impacting platform revenues and expenses noted previously.
Speaker Change: Platform revenue for full year, 2024 was $21 million at 1.9% increase compared to last year, primarily driven by asset management revenues of $20 6 million performed performance allocations were nominal at.
Jade Leung: Performance allocations were nominal at $400,000. 2024 platform expenses of $33.1 million represented an increase of 9.4% from $30.2 million last year, mainly due to $4 million of bad debt expense offset by costs related to payroll and payroll-related expenses. Platform adjusted EBITDA loss was $2.7 million compared to adjusted EBITDA loss of $1.3 million in 2023, due to the impact of a loss on our CRAF investment in 2023 and the impact of our impairments and bad debt expense in 2024.
Speaker Change: $400000.
Speaker Change: 'twenty 'twenty four platform expenses of $33 1 million represented an increase of nine 4% from $30 2 million last year, mainly due to $4 million of bad debt expense offset by costs related to payroll and payroll related expenses.
Speaker Change: Okay.
Speaker Change: Platform adjusted EBITDA loss was 2.4 million $2 7 million compared to adjusted EBITDA loss of $1 3 million in 2023 due to the impact of a loss on our C. RAF investment in 2023, and the impact of our impairments and bad debt expense in 2024.
Jade Leung: Managed capital was $492 and a half million, a 12.5% increase compared to 31 December 2023, with originations of $69 million partially offset by returns of capital of $14 million. For consolidated results, Q4 total consolidated revenue was $8.7 million compared to $23.9 million in the same period a year ago, reflecting the deconsolidation of Caliber Hospitality, LP and CHT in March 2024, and DT Mesa in September 2024. Consolidated expenses for Q4 declined by 54.4% to $14 million from $30.7 million. The decrease was primarily due to a decrease in consolidated fund expenses, driven by the deconsolidation of the same assets noted prior. For Q4 2024, net loss attributed to Caliber, which excludes net loss attributable to non-controlling interest, was $11.4 million or $0.51 per diluted share.
Speaker Change: Managed capital was 492 and a half million a 12, 5% increase compared to December 31, 2023, with originations of 69 million, partially offset by returns of capital of $14 million.
Speaker Change: Our consolidated results fourth quarter total consolidated revenue was $8 7 million compared to $23 9 million in the same period, a year ago, reflecting the deconsolidation of caliber hospitality L. P. N C. H T in March 2024, and.
Speaker Change: N D T Mesa in September 2024.
Speaker Change: Consolidated expenses for the fourth quarter declined by 54, 4%.
Speaker Change: 214 million from $30 7 million. The decrease was primarily due to a decrease in consolidated fund expenses driven by the deconsolidation of the same assets noted noted prior.
Speaker Change: For the fourth quarter of 2024 net loss attributed to caliber, which excludes net loss attributable to Noncontrolling interest was $11 4 million or 51 cents per diluted share. This compares to net loss attributed to the caliber of 2.4 million or 11 cents per diluted share in the same period a year ago.
Jade Leung: This compares to net loss attributed to Caliber of $2.4 million or $0.11 per diluted share in the same period a year ago. For the full year 2024, total consolidated revenue was $51.1 million, a 43.7% decrease compared to 2023, again reflecting the deconsolidation of Caliber Hospitality, LP and CHT and DT Mesa, as previously discussed. Similarly, consolidated expenses for 2024 totaled $64.4 million, representing a year-over-year decrease of 46.1%. The decrease was also due to the deconsolidation we've discussed. Full year 2024 net loss attributable to Caliber was $19.8 million or $0.90 per share, compared to a loss of $12.7 million or $0.63 per share last year. Consolidated adjusted EBITDA in 2024 was $7 million, compared to adjusted EBITDA loss of $10.2 million in 2023. Turning to an update on our balance sheet.
Speaker Change: For the full year 2024, total consolidated revenue was $51 1 million or 43.7% decrease compared to 2023 again, reflecting the deconsolidation.
Speaker Change: Of caliber hospitality L. P N C H T and D T Mesa as previously discussed.
Speaker Change: Similarly, consolidated expenses for 2024 totaled $64 4 million, representing a year over year decrease of 46, 1%. The decrease was also due to the deconsolidation we've discussed.
Speaker Change: Full year 2024, net loss attributable to caliber was $19 8 million or 90 cents per share.
Speaker Change: Impaired to a loss of $12 7 million or <unk> 63 per share last year consolidated adjusted EBITDA in 2024 was 7 million compared to adjusted EBITDA loss of $10 2 million in 2023.
Speaker Change: Turning to an update on our balance sheet, we have approximately $30.7 million of corporate debt consisting of 202 individual unsecured notes coming due in the next 12 months each.
Jade Leung: We have approximately $30.7 million of corporate debt consisting of 202 individual unsecured notes coming due in the next 12 months. Each note generally has a 12-month term with an option to extend for an additional 12 months. Although we have historically been able to extend a significant number of these notes, we have moved forward with the steps I mentioned earlier to either refinance these notes on a longer-term basis or repay them. We continue to focus on collecting our outstanding accounts receivable and notes receivable. Over the past year, we have collected over $8.7 million in investments and notes receivable, and our overall accounts receivables decreased by approximately $3.8 million in the year. We have begun to see the impact of these efforts and their contribution to our improved platform performance for the full year.
Speaker Change: Each node generally has a 12 months term with an option to extend for an additional 12 months.
Speaker Change: Though we have historically been able to extend a significant number of these nodes. We have moved forward with the steps I mentioned earlier to either refinance these notes on a longer term basis or repay that.
Speaker Change: We continue to focus on collecting our outstanding accounts receivable in notes receivable over the past year, we have collected over $8 7 million in investments in notes receivable and our overall accounts receivables decreased by approximately $3 8 million in the year.
Speaker Change: We have begun to see the impact of these efforts and their contribution to our improved platform for performance for the full year. We continue to look for opportunities to refinance and recapitalize, our balance sheet and are confident in our ability to achieve our goals.
Jade Leung: We continue to look for opportunities to refinance and recapitalize our balance sheet and are confident in our ability to achieve our goals. We have noted an increase in lender activities following a slowdown that began in April 2023 and continued through the November 2024 election, and hope to capitalize on a more normal environment going forward. I'll now turn it back to Chris for his final remarks before we take your questions.
Speaker Change: We have noted an increase in lender activities. Following a slowdown that began in April 2023, and continued through the November 'twenty 'twenty four election, and hope to capitalize on a more normal environment going forward.
Speaker Change: I'll now turn it back to Chris for his final remarks before we take your questions.
Chris Loeffler: Thank you, Jade. Just want to share a few thank yous. First to the hardworking team at Caliber. You guys continue to manage through change effectively and position Caliber and our investors for success in the current environment. Thank you as well to the many capital markets participants we've had a chance to engage with recently. Your interest in Caliber's story and encouragement as it relates to our plans for consistent profitable growth are appreciated. Finally, thank you to all of Caliber's clients. We are committed to a focus on positioning each asset and fund that you own to maximize its potential in bringing you future opportunities that make sense in today's environment.
Chris Loughlin: Thank you Jade and just wanted to share a few thank yous first to the hard working team at caliber you guys continue to manage through change effectively and position caliber and our investors for success in the current environment.
Chris Loughlin: And thank you as well to the many capital markets participants we've had a chance to engage with recently your interest in Calvert story and encouragement as it relates to our plans for consistent profitable growth are appreciated.
Chris Loughlin: Finally, thank you to all of calibers clients, we are committed to our focus on positioning each asset and fund that you own to maximize its potential and bringing new future opportunities that makes sense in today's environment calibers vision is focused on our renewed opportunity for real estate investment the best we've seen since the 2008.
Chris Loeffler: Caliber's vision is focused on a renewed opportunity for real estate investment, the best we have seen since the 2008 to 2012 era, and the agility we have displayed recently will serve each of you well. Jade and I look forward to taking questions. I'll turn it over to the operator.
Chris Loughlin: 2012 era and the agility, we have displayed recently will serve each of you will.
Speaker Change: Jade and I look forward to taking questions I'll turn it over the operator.
Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the one on your telephone keypad. You will hear a prompt that your hand has been raised, and should you wish to cancel your request, please press star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment please, for your first question. Your first question comes from the line of Brendan McCarthy from Sidoti & Company. Please go ahead.
Speaker Change: Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by one on your telephone keypad.
Speaker Change: You'll hear a prompt that you had has been to waste and should you wish to cancel your request. Please press star followed by did you if you're a using a speaker phone. Please stay if he has to take the surpassing.
Speaker Change: One woman thanks for your first question.
Speaker Change: Your first question comes from the line of Brendan Mccarthy from Sidoti. Please go ahead.
Brendan McCarthy: Great. Hey, Chris. Hey, Jade. Appreciate you taking the questions today.
Brendan Mccarthy: Great, Hey, Hey, Chris Hey, Jay I appreciate you taking the questions today.
Jade Leung: Hey, Brendan. How are you?
Speaker Change: Hey, Brandon how are you.
Brendan McCarthy: Doing well. Lots to unpack there with the information. Appreciate the detail, but maybe we could start just at the quarter. Jade, I think you mentioned there was a $4 million bad debt expense, and then losses in the quarter were impacted by $8.6 million of some non-cash write-downs. Can you go into detail there on what drove that expense?
Speaker Change: Joe well do well a lot to unpack there with the information I appreciate the detail, but maybe we could start just at the quarter.
Speaker Change: Jacob I think he mentioned there was a 4 million bad debt expense and then losses in the quarter were impacted by $8 6 million of of some noncash.
Speaker Change: Write downs can you go into detail there on what drove that expense.
Speaker Change: Okay.
Jade Leung: Sure thing. As part of our assessment of our consolidations, we look every year at factors that change and impact our conclusions. In December, mid-month of December, we made an announcement to the investors in one of our funds, our lending fund, CFIV 3, that the fund was in a wind-down mode. The corresponding steps for that fund were to then reevaluate how much the fund would produce of distributable cash from the accelerated nature of the return of that capital. As a result of looking at those revised terms, we identified various assets that we would be incurring losses on and recorded those losses in our consolidated financial statements on the platform.
Speaker Change: Sure thing.
Speaker Change: So.
Speaker Change: As part of our.
Speaker Change: As part of our assessment of our consolidations, we we look every year at <unk>.
Speaker Change: Factors that that change and impact our conclusions.
Speaker Change: In in December mid year mid mid month of December we made an announcement to the investors in one of our funds or our lending fund seafood three that the fund was in a wind down mode.
Speaker Change: The the corresponding steps.
Speaker Change: For that fund were to then reevaluate how much how much the fund would produce of distributable cash.
Speaker Change: From the accelerated.
Speaker Change: The accelerated nature of the return of that capital.
Speaker Change: As a result of looking at those revised terms we identified.
Speaker Change: Various assets that.
Speaker Change: We would we would be incurring losses on and recorded those losses in our in our consolidated financial statements on the platform.
Jade Leung: What you're seeing there is the effect of our assessment of the collection of certain outstanding receivables that we have from some of those assets, and also a decrease or an impairment in one of the investments that we manage as well.
Speaker Change: So what you're seeing there is the effect of our assessment of the collection of certain outstanding.
Speaker Change: Receivables that we have from some of those assets.
Speaker Change: And a.
Speaker Change: And also a decrease in the.
Speaker Change: Art impairment and one of the investments that we manage as well.
Chris Loeffler: Yeah. Brendan, I'll just add to Jade's answer that when we made a decision to start narrowing our focus of a business and selling assets that we were otherwise planning to develop and execute on, we're making estimates on the fact that if we sell an asset earlier in its development cycle or sooner or more quickly, that we're not going to achieve the same sale proceeds or the same outcome we had been planning for previously, and then took any corresponding write-down of a receivable that we had or an investment that we had made.
Brendan: Yeah, Brendan I'll, just add the Gs answered it.
Brendan: When we made a decision to start narrowing our focus of our business and selling assets that we were otherwise planning to develop and execute on we're making estimates on the fact that if we sell an asset earlier in its development cycle or or sooner or more quickly that we're not going to achieve the same sale proceeds are.
Brendan: At the same outcome, we had been planning for previously and then took any corresponding write down of a receivable that we had a war or an investment that we've made.
Brendan McCarthy: Got it. That makes sense. That was the receivables on the platform balance sheet, in essence.
Speaker Change: Got it that makes sense, so that that was the receivables on the platform balance sheet.
Brendan: Mid essence.
Jade Leung: That's right. Yeah. Receivables and an investment that we held as well.
Brendan: That's right yeah receivables in and an investment that we hold as well.
Brendan McCarthy: Okay. Thanks for that. Just want to talk about the renewed focus on the 3 separate asset classes that you mentioned and the impact there on assets under development. Just maybe you could talk in detail about what's driving this decision, and is it based off fundraising environment or I guess just what's driving the decision overall?
Brendan: Okay. Okay. Thanks for that and then.
Brendan: Just wanted to talk about the kind of the renewed focus on the three.
Brendan: A separate asset classes that you mentioned and the impact there on assets under development.
Brendan: Just maybe you could talk in detail about what what's kind of driving this this decision and is it kind of based off fund raising environment or.
Brendan: I guess, just kind of what's driving the decision overall.
Chris Loeffler: Yeah, I think it's driven by the fact that we find it the fastest path to operate consistently profitably is to narrow our focus on the most attractive asset classes. It allows us to make sure that we can have the right staffing levels and the right levels of personnel and the right experts inside the building to focus on a more narrow set of assets. It kind of eliminates some of the diffusion of our time across too many things, and also allows us to narrow our fundraising and our story to market participants who are looking at Caliber as a focused and regional investor.
Brendan: Yeah, I think it's driven by the fact that we find it the fastest path to operate consistently profitably is to narrow our focus on the most attractive asset classes.
Brendan: It allows us to make sure that we can have the right.
Brendan: Staffing levels and the right levels of personnel and the right experts inside the building to focus on a more narrow set of assets.
Brendan: It.
Brendan: Kind of eliminate some of the diffusion of our time across too many things.
Brendan: And also allows us to narrow our fundraising and our story to market participants who are looking at caliber as a focused and regional investor.
Chris Loeffler: We found as we've been out there fundraising recently, there's a lot of desire to see us focus on 1 or 2 or 3 key areas, and then we took that feedback and said, Okay, what are those key areas where we have a long-term track record? We know we have the internal team to execute well, and we see an opportunity in the market. Once we align those things together, we settled on the 3 asset classes that I mentioned to you. It does impact our assets under development because there's going to be certain developments like our behavioral health facilities that we acquired and others that we're just not going to build. We're going to sell those pieces of land and move on.
Brendan: We've found as we've been out their fund raising recently, there's a lot of desire to see us focus on one or two or three key areas and then we took that feedback and said okay. What are those key areas, where we haven't had a long term track record.
Brendan: We know we have the internal team to execute well and we see an opportunity in the market and once we align those things together, we settled on the three asset classes that I mentioned to you.
Brendan: It does impact our assets under development, because theres going to be certain developments like our behavioral health facilities that we acquired and others that we're just not going to build or going to sell those pieces of land and move on.
Chris Loeffler: On the other side of the equation, as we start to grow in the specific asset classes we're talking about, we'll be seeking opportunities just in those asset classes.
Brendan: But on the other side of the equation as we start to grow in the specific asset classes, we're talking about will be seeking opportunities just in those asset classes.
Brendan McCarthy: Got it. That's helpful. Thanks, Chris. Are you able to disclose, I guess, how much of the assets under development pipeline, the roughly AUD 2.2 billion pipeline, how much of that is going to be maybe subject to monetization?
Brendan Mccarthy: Got it that's helpful. Thanks, Chris.
Speaker Change: Are you able to disclose I guess, how much of the assets under development pipeline.
Speaker Change: Roughly 2.2 billion AED pipeline, how much of that is going to be maybe subject to.
Speaker Change: Monetization.
Chris Loeffler: I don't think that we've done an analysis at that level that I can give you a specific response, but I can say that we do intend to continue to develop and build the assets we have. There are some, like the behavioral health hospital sites that I mentioned, that we're selling. Our strategy is to work to a lower balance of total developments by adding more income-producing and existing assets through the acquisition programs that we announced to you. As it makes sense to sell assets in the development pipeline, or as it makes sense to complete them and then move them out of development, we would do that over time. We're tightening and shrinking our exposure to development, and our target is eventually to get to 30% or less of our AUM as development versus the current balance.
Speaker Change: I don't think that we've done an analysis at that level that I can give you a specific.
Speaker Change: Response, but I can say that we do intend to continue to develop and build the assets. We have there are some like the behavioral health hospital sites that I mentioned that we're selling.
Speaker Change: And our strategy is to.
Speaker Change: Work to a lower balance of total developments by adding more income producing an existing assets through the the acquisition programs that we announced to you.
Speaker Change: And then as it makes sense to sell assets in the development pipeline.
Speaker Change: Or as it makes sense to complete them and then and then move them out of development, we would do that over time. So we're sort of we're just we're tightening and shrinking our exposure to development and our target is eventually to get to 30% or less of our AUM is development versus the current balance.
Brendan McCarthy: Understood. More broadly, I think you touched on it in your remarks, but what's your outlook for the fundraising environment going forward? I know it's still been challenging, but maybe just your outlook for the next 12 or so months.
Speaker Change: Understood understood and then.
Speaker Change: More broadly I think you know you touched on it in your remarks, but.
Speaker Change: What's your outlook for the fund raising environment going forward I know, it's it's still been challenging but maybe just at your outlook for the next 12 or so months.
Chris Loeffler: Yeah, I feel really good. I feel like there's still obviously some uncertainty in what's going on in the economy, but I feel good, and I'll give you some context to why. I feel good because if you look at real estate, it has definitely had a difficult fundraising environment for the last two and a half years. That's a long time in our asset class and in our business to be sort of on the sidelines. We're now seeing that investors are generally talking to us about, Hey, it might be a good time to buy real estate. They're right, the timing is good. When the general consciousness of the investor crowd starts to move back in our direction, which we feel that it is, that's a big benefit. When you add to that, the financing environment was very challenging, as Jade mentioned.
Speaker Change: Yeah, I feel really good.
Speaker Change: I I feel like there's still obviously some uncertainty in what's going on in the economy, but I feel good.
Speaker Change: And then I'll give you some context to why I feel good because if you look at real estate. It has definitely had a difficult fund raising environment for the last two two and a half years.
Speaker Change: And that's a long time in our asset class and in our in our business to be sort of on the sidelines.
Speaker Change: We're now seeing that investors are generally talking to us about hey, it might be a good time to buy real estate in there right. The timing is good.
Speaker Change: So when when the general consciousness of the Investor crowd starts to move back in our direction, which we feel that it is that's a big benefit and then when you add to that.
Speaker Change: The financing environment was very challenging as Jade mentioned pretty much the day that Silicon Valley Bank had issues for.
Chris Loeffler: Pretty much the day that Silicon Valley Bank had issues, for the next year or so, the community banking system and the regional banking system was really just not producing loans. Companies like us need that system to be healthy. It appears that that system is starting to get healthy again. There's many more lenders that are out bidding on our loans now, and we feel pretty good about that too.
Speaker Change: For the next year or so the community banking system in the regional banking system was really just not producing loans.
Speaker Change: And companies like us need that system to be healthy. So it appears that that system is starting to get healthy again theres. Many more lenders that are out bidding on our loans now and we feel pretty good about that too.
Speaker Change: Okay.
Brendan McCarthy: Great. That's good to hear. On CHT, so with the Satori Collective contribution, I heard what you mentioned as it relates to the LTD contribution, but with the Satori Collective, are you still pretty confident that that deal will close, or the separate deals will close?
Speaker Change: Great Great that's good to hear.
Speaker Change: And then on a C H C.
Speaker Change: I guess, so with the Cytori collective contribution yeah.
Speaker Change: I heard what you mentioned.
Speaker Change: As it relates to the LTV contribution, but with this Tory collective are you still pretty confident that that deal will close or do you have a separate deal will close.
Chris Loeffler: Yeah. Once we started to see issues with LTD, we immediately started working with Satori to get them ready for the next closing. We've been working very well together. Like I mentioned, they had an eighth asset that they wanted to add to the contribution, so we've been working through the valuation of that asset, and just have to finalize that, and we can move towards the closing. Being that the contribution agreement is already done, we'll modify some terms on what we think will be a relatively simple agreement, and then we can move to a closing process.
Speaker Change: Yeah. Once we started to see issues with L. T. D. We immediately started working with satori to get them ready.
Speaker Change: And for the next for that for the next closing.
Speaker Change: And we've been working very well together they.
Speaker Change: They had it but like I mentioned, they had an ace asset that they wanted to add to the contribution so we've been working through the valuation of that asset.
Speaker Change: And just have to finalize that and we can move towards the closing, but being that the contribution agreement and is already done.
Speaker Change: We will modify some terms on a what we think will be a relatively simple agreement and then we can move to a closing process.
Brendan McCarthy: Got it. I know you mentioned the LTD transaction might impact the 2026 financial targets that Caliber put out, are you still pretty confident that operating income will be positive in 2025 despite what happened with LTD?
Speaker Change: Got it got it I know you mentioned the LTV transaction might impact the 2026 financial targets that caliber put out but are you still pretty confident that your operating income will be.
Speaker Change: Positive in 2025 despite.
Speaker Change: Yeah, what happened with LTV.
Chris Loeffler: Yeah, I think those two targets are very different. The operating income target is based on us continuing to reduce expenses while growing revenues, and we're really making a lot of progress there. The $3 billion in AUM target as compared to our current AUM, which is approximately $750 million, is a lot of growth between now and the end of 2026. More than $1 billion of that was driven by CHT. We just want to make sure that we're managing expectations. We have to do the analysis ourselves. Certainly, if you look at it on paper, there's plenty of portfolios for us to acquire and plenty of ability for us to achieve that target. We're still working our way through that analysis.
Speaker Change: Yeah, I think those two targets R. R.
Speaker Change: Very different the operating income target is based on us.
Speaker Change: Continuing to reduce expenses, while growing revenues, and where where we're really making a lot of progress there.
Speaker Change: The 3 billion in AUM target as compared to our current AUM, which is approximately $750 million is a lot of growth between now and the end of 2026 and more than 1 billion of that was driven by a C. H T. So we just want to make sure that we're managing expectations, we have to do the analysis ourselves.
Speaker Change: If you certainly if you look at it on paper, there's plenty of portfolios for us to acquire and plenty of ability for us to achieve that target.
Speaker Change: But we're still working our way through that analysis.
Brendan McCarthy: Great. Thanks, Chris. Thanks, Jade Leung. That's all for me.
Speaker Change: Great. Thanks, Chris Thanks, Jamie that's all for me.
Chris Loeffler: Thank you, Brendan.
Speaker Change: Thank you Brendan.
Operator: Thank you once again. Should you have a question, please press star 4.1 on your telephone keypad. There are no further questions at this time. I will now hand the call back to Mr. Chris Loeffler for any closing remarks.
Speaker Change: Thank you once again should you have a question. Please press star felt like the one on your telephone keypad.
Speaker Change: There are no further questions at this time I would now hand, the call back to Mr. Chris Loughlin for any closing remarks.
Chris Loeffler: Thank you for your time today. We look forward to speaking and meeting with many of you in the near future. If you have any questions, please visit our website at www.caliberco.com and follow the path for public shareholders. There you can download our financial supplement and sign up on the mailing list specifically focused for public investors. If you have any questions, please complete the Contact Us form so we can get engaged with you directly. Thank you and have a good evening.
Speaker Change: Thank you for your time today, we look forward to speaking and meeting with many of you in the near future. If you have any questions. Please visit our website at www dot caliber co dot com and follow the path for public shareholders. There you can download our financial supplement and sign up on them.
Speaker Change: Mailing lists specifically focused Republic investors do you have any questions. Please complete the contact us form so we can get engaged with us directly. Thank you and have a good evening.
Operator: Thank you. This concludes today's call. Thank you for participating. You may all disconnect.
Speaker Change: Thank you and this concludes today's call. Thank you for participating you may all disconnect.