A Review of 2017 and Caliber’s Vision for 2018

UPDATE: Caliber’s online public offering is now closed. Have any questions? Please do not hesitate to contact us as we are always answering investor FAQs.

Thanks to the investment and support from our entire stakeholder group, CaliberCos Inc. and our affiliates and subsidiary companies (“Caliber”) acquired and committed to purchase approximately $55,000,000 in high quality investments in 2017, taking our key metric of assets under management (AUM) to approximately $300,000,000 at year-end.

This is an incredible accomplishment for a business which began from zero less than 10 years ago and it is a testament to the wealth-building capabilities of the Caliber platform. Caliber set our AUM goal for 2017 at $300M and we worked hard to hit our goals.

In addition, Caliber is executing a development pipeline comprised of four additional projects which we estimate to have a combined value in excess of $85,000,000.  Simply completing these developments would bring our AUM total to $385,000,000, without acquiring a single new asset or adding a new development.

As Caliber adds assets, our tangible book value grows, our private clients and advisors grow their access to attractive alternatives to traditional investments, and our deal-making ability and clout in the marketplace grows.  This builds a positive feedback loop whereby each success breeds additional success, and whereby our market presence delivers continued access to investment opportunities that most people find difficult to uncover in today’s improving economy.

Most importantly, we have seen a growing spread between our estimate of Caliber’s intrinsic value and our book value.  Intrinsic value is comprised of the growth in the value of our underlying real estate assets and the distinct real estate operating companies Caliber owns to care for them.  As each asset moves from opportunistic purchase, to stabilized, to optimized, Caliber finds its business value growing.  This translates to growth in the wealth and net worth of our private investors and our shareholders, which further feeds Caliber’s ability to continue to invest and grow its AUM.  Another positive feedback loop.

These two loops, growing access to attractive investment opportunities and growing the capital of our stakeholders, represent Caliber’s true purpose in the market and the strength behind our business model.  There is no ‘man behind the curtain’, no large institution, that fuels our success.  It is the hundreds and thousands of relationships we have built, one relationship at a time, that represent our greatest asset.

Each of you represent the team, the tribe of Caliberites as we affectionately call you, who have made Caliber’s vision a reality.  Your continued contribution of capital, access to great projects, referrals to friends, encouragement in the marketplace, honest feedback, and words of wisdom is Caliber’s secret formula – our recipe for success.

2017 In Review

Caliber’s executive leadership team chose to dedicate 2017 to a business plan that allowed our internal team to build Caliber into a world-class investment platform in hot pursuit of the title that lives in our tagline – to be The Wealth Development Company.

Our plan targeted improvements to our business operations, financial reporting, investor reporting, investment client experience, and acquisition and asset management methodology.

As I look back at 2017, I can say with confidence that our team delivered on much of the 2017 business plan.  Here are a few key accomplishments in each category:

• Business Operations– Engaged with Smart Tribes Institute to provide a comprehensive training and coaching program designed to assist Caliber’s leadership teams to scale the company successfully.
• Organized Caliber’s Talent Development department to ensure a strong business culture, attractive employment package, and improve retention.
• Improved Caliber’s focus on attractive financial performance for all investments by eliminating non-core business initiatives
• Grew Caliber’s administrative capabilities with new team members and team member training
• Implemented Caliber Cares program for internal team members to support each other by donating 997 hours of PTO and complete 24 Care requests. Caliber also implemented a 401k plan to supplement our benefits package and ensure we attract top talent.
• Financial Reporting– Completed the first, in Caliber’s history, PCAOB level audits of the consolidated parent company, CaliberCos Inc. for the years of 2014 and 2015
• With our external auditors, Marcum, LLP, designed, implemented, and nearing completion of an audit plan for 2016’s consolidated financial statements that will bring Caliber current in our financial reporting calendar.
• Engaged a top-20 law firm, Manatt, Phelps & Phillips, LLP, to complete the Reg A+ registration statement for CaliberCos Inc.’s contemplated public offering
• Engaged Riley FBR Inc. to provide investment banking services in support of Caliber’s Reg A+ offering in 2018.
• Added a Director of Tax position within Caliber and filled the position with a Deloitte alumni to enhance tax reporting and discover more tax-saving opportunities for our investment clients.
• Investor Reporting & Investment Client Experience– Successful completion of the programming and soft launch of Caliber’s online “Client Portal” where investors can access relevant information on their investments.
• Completion and implementation of Caliber’s “Distribution Statements” which are provided each time a distribution is made from an asset.
• Design and distribution of a Mid-Year Asset Report providing pertinent details on the status of each investment Caliber held through the first portion of 2017.
• Submittal of the Caliber Residential Advantage Fund, LP as the Company’s first product to be introduced on the TD Ameritrade platform for alternative investments.
• Over 25 live and web events providing thousands of participants unprecedented access to executive leadership and investment insights in Arizona, California, Illinois, Washington, Oregon, Nevada, Texas, and throughout Canada.
• A 2017 two-day Caliber Summit that set the tone for the year and received tremendous reviews from participants
• Launched the Caliber Residential Advantage Fund, LP – Caliber’s solution for investors seeking a sophisticated way to own rental homes without the headaches of day to day management.
• Launched our flagship private investment fund, the Caliber Diversified Opportunity Fund II, LP, our primary wealth-building vehicle investing in commercial real estate and hospitality.
• Acquisition and Asset Management Methodology– Implementation and ongoing improvement to the Caliber investment acquisition process, a multi-step process designed to ensure deal-making flexibility for empowered executives matched with 360-degree due diligence reviews of each potential project.
• The addition of a VP of Project Finance role, providing a 20+ year real estate finance veteran as an internal asset to Caliber to improve our financing outcomes and reduce loan costs
• Design and implementation of a lifecycle financial plan for each asset, connecting the initial investment forecast, actual results, and new forecasts completed each year.
• Completion of asset development plans for all Caliber projects

2018’s Annual Theme: Completion, Execution & Leadership

Caliber’s vision for 2018 and beyond starts and ends with leadership.

Caliber has built a new business in one of the oldest industries in the world: real estate.  Our fresh approach, utilizing the improving regulatory environment in the US, embracing technology that allows Caliber’s business model to thrive, and challenging the conventional notion that real estate investment was either single family rentals or reserved for the institutional class is an expression of that leadership.

As The Wealth Development Company, we are dedicated to fulfill the promise of our name and to produce a high-quality investment experience for you.

We are growing your wealth and we love to hear your stories of how your relationship with Caliber has improved your own ability to give back to our common community.  Our team sees the impact we are making on the world around us each day, and that impact has given our late nights and weekend work meaning.

Caliber continues to take the lead in providing access to high quality real estate private funds and investment for accredited investors and registered investment advisors.  Our vision for 2018 forward includes growing from hundreds of accredited investors to thousands.  Caliber has built all that we are today with over 450 private clients, or less than one tenth of one percent of the market of US Accredited Households (10.1M+ in total per federal reserve data).  Capturing 1% of the US Accredited Investor market would translate to 10x growth for Caliber, moving from $300M in AUM to $3B+ in AUM.

One important channel to grow our access to capital is partnering with independent registered investment advisors, or wealth managers, who would like to be able to offer their clientele direct access to private real estate deals.  A majority of wealth mangers report their clients are interested in maintaining or growing their exposure to real estate and, until Caliber, many of the options available to those wealth managers were less than attractive.

Large fees, bloated structure, and a business model designed to produce an up-front ‘feel good’ distribution of 6%-7% to investors have lead, 10 years down the road, to failed non-traded REIT products at an alarming rate.  Who knew sending the investors their capital back each year (to make them feel as if the real estate is producing enough cash-flow to provide a distribution) would lead to eventual losses at a large scale?  I believe the answer to my rhetorical question is just about anyone with a calculator, a passion for reading investment structure documents, and a few hours of quiet time.

The non-traded REIT industry dropping from a high of $20B per year of new investment to a recent low of less than $6B per year tells the same story.

This divergence of two key trends – investors seeking more access to real estate and actual investment in one of the most commonly used products at an all-time low – provides a clear opportunity to Caliber’s leadership.

Build a better product that satisfies investor demand and avoids the pitfalls of the last generation of funds and we will win.  Put that product on the shelf in the stores that advisors can shop in (TD Ameritrade, Charles Schwab, Pershing, Fidelity, Etc.) and we expect substantial new capital to find its way to Caliber in 2018.  Our 2018 goal, $100M+ in new and re-invested capital.

Winning is incredibly important in modern business.  Our competition grows each year: watching Caliber’s path and finding ways to innovate from our initial leadership.  Because of this, Caliber will dedicate 2018 to the Completion and Execution of our well-laid plans.

Here are a few of the key initiatives you can expect Caliber to complete in 2018:

• Successful Reg A+ public offering and NASDAQ or NYSE listing
• Listing of Caliber private real estate funds and individual asset investments on TD Ameritrade and 2 more top-tier platforms
• Completion of all 3^rd party due diligence reports for Caliber’s investments
• Selection and implementation of a 3^rd party custodian to boost investor reporting and statement distribution
• Launch of the Beta test of Caliber’s client portal and subsequent company-wide launch
• Launch of Caliber’s presence on Mil Advisor – a portal built specifically to support registered investment advisors allocating funds to Caliber’s private investments.
• Successful harvesting of several legacy assets, some of which have come ‘full-cycle’ and present an opportunity for Caliber investors to more than double their initial capital
• A continued focus to find off-market, unique investment opportunities, with a balanced approach toward all asset types
• Continued expansion into Caliber’s target investment markets: Arizona, Colorado, Texas, Nevada and Utah.
• The launch of the Caliber Fixed Income Fund III, LP, following Fund I and Fund II, a fixed income alternative for investors seeking opportunities in private lending.
• The acquisition of Caliber’s first Marriott-brand hotel, the Four Points by Sheraton in Phoenix, Arizona.
• The implementation of new strategic partnerships with property managers to allow Caliber to access new markets and scale our investment platform.
• Completion of all Fund and Asset year-end reports by March 31^st, allowing investors to receive their results at or before the 2018 Caliber Summit.
• A 2018 Caliber Summit with a new format, combining past-year results with forward-looking information and providing more Caliber-centric education for existing, new, or prospective investment clients and shareholders (April 5, 6, 7, & 8^th)

I believe we are making the right moves and taking the right actions to ensure Caliber remains a winning business in 2018.  In business and in life, if you are not growing, you are dying, and I do not believe anyone could accuse Caliber of lack of growth.

My final thought for you is one of gratitude.

I consider our leadership team and our business lucky and fortunate to have connected with you.  It is your support that has created a truly special company in Caliber.

I am also grateful to the Caliber team, as I am sure are you.  It is through the strength of their hard work, late nights, long hours, and personal values that Caliber succeeds.  None of our assets would move an inch without the Caliber team in the background.  I thank them on our behalf, on a regular basis, and will continue to count our blessings in 2018.

Onward,Chris Loeffler
CEO & Co-Founder