Joining Caliber’s CEO, Chris Loeffler, was George Pace who heads up Caliber’s wealth development department. Among George’s various accomplishments as a seasoned investment advisor, George is responsible for all of our clients and investors – and an essential cog in the Caliber machine.
Quick & Digestible Highlights
|The Reg A+ Offering – A huge success, closing on February 26th with nearly $12 million raised.|
|Traditional IPO Discussion – Questions from investors centered around topics including which key metrics are being utilized to underwrite a pubic offering, how Caliber compares to their competitors and what would the timing look like for an IPO. |
Potential Routes to go Public –
– Traditional public debut, SPACs, or other distressed REITs/Companies that could serve as reverse merger candidates.
– Chris has been engaged with several Wall Street firms – Goldman Sachs is acting as a Capital Markets Advisor, and the timing is estimated to be around 24 months, not including the due diligence period.
|The Hospitality Industry has Been Hit Hard by the Pandemic – Chris discussed the $20 million PPP loan offer on the hotel portfolio and the potential to roll out the hotel assets into a Real Estate Investment Trust (REIT). Discussions revolving around this topic included the size, net asset value (NAV) and timing for the industry. |
The Sheraton Four-Points Asset – It was asked if this property would be rolled into the REIT. The answer is yes, but with the caveat that this estate would probably be a better candidate to repurpose into an apartment asset.
|Colorado Developments – The opportunities are vast. Caliber is planning to unleash its resources in this area. There are over 300 acres of land available to create future opportunities. Of the $500 million under development, about $450 million is in developing single-family and multi-family projects in Colorado.|
|Multi-Family Investments – |
– The sale of the Treehouse Apartments generated gross proceeds of approximately $11 million
– The land in Flagstaff is for sale for approximately $5 million. It has been earmarked to become a 200 apartment community with some retail space
– Caliber’s decision to sell the land and reinvest in it. It makes the most sense to leave the land development to a regional builder.
|Wrap-Up – Caliber is upbeat and cautiously optimistic about the future.|
Reg A+ Offering
At the forefront of this discussion was the status of Caliber’s Reg A+ Offering, which closed Friday, February 26th. Since the beginning of January, we have seen the top of the funnel of our stock offering grow from a couple of million dollars and to close with $11,894,696. Not bad, considering this was essentially launched at the beginning of the pandemic. However, Chris and the team took a step back and said, “Are we going to succumb to the fear, or are we going to focus on our core business, take care of our assets and pick up the offering and run with it?”
During the discussion, Chris quipped to the online audience, “With all of the propaganda around this offering through the website and emails, I want to make sure that I cover this topic from every shareholder’s perspective.” He focused was what this offering really means to Caliber and its shareholders, and how he believes it will propel the Company to its next step.
Chris continued, “We are learning how to raise capital online.” This type of equity raising is relatively new to everyone. Caliber is somewhat of a pioneer – until roughly five years ago it wasn’t legal.”
Today, the capital formation landscape is changing. Caliber wants to be very successful in raising capital through this new capital source. For investors, this type of fund-raising levels the playing field among investors, while opening investment opportunities to others who were otherwise shut out. For companies – including Caliber – it can serve as a path to an official public debut. In short, Chris and the team at Caliber believe there is a lot of upside in these types of equity structures.
Chris mentioned that Caliber is researching an IPO starting at around $50 million. For this to happen, the process depends on a variety of factors, including the underlying market conditions.
Right now, those conditions have been very favorable. The process for Caliber to achieve IPO-status, would require re-filing an S-1 with the SEC. This can be done quickly because Caliber has a draft ready to use. To achieve this goal, it all comes down to market timing, securing a final underwriter and doing the associated due diligence.
There were a few questions from the audience surrounding the timing, valuation, and type of financial and operating metrics that would be considered, as well as who would be a comparable peer to Caliber. The expectation is that Caliber would be valued as a publicly-traded alternative asset manager, much like The Carlyle Group and Blackstone.
On a valuation basis, Caliber’s model would likely dictate a forward multiple of 10 to 15 times EBITDA, which in turn would determine the appropriate market capitalization and underlying stock price. Chris also mentioned that a valuation would be based on a combination of previous performance as well as projected future performance, with 2020 most likely being a gap year due to the pandemic.
Right now, Caliber is facing the same kind of headwinds as other companies trying to rebound from 2020. However, as Chris stated, Caliber is expecting a 30% or 40% increase in 2021 from 2019. Caliber is probably priced around 13 times actual EBITDA for 2019.
Chris wrapped up this part of the discussion by saying, “We’ve Got This!” Caliber has a vision of what it looks like in the future and how to get there. There are many ways to realize this vision, one of which could be acquiring another public company, doing a traditional IPO, or even a SPAC transaction, which are empty companies that have raised capital to acquire a private company and take it public. There are a lot of moving pieces, and many discussions to be had – the Caliber team is on top of it.
A lot of wood to chop
Right now, Caliber’s assets under management (AUM) are sitting at about $500 million, with nearly $500 million in assets under development. It’s time to unleash some of that pent-up demand. Caliber’s Opportunity Zones should benefit from the Biden administration whose transition team has pushed a new deadline for opportunity zones to 12/31/2022 from 3/31/2021.
The IRS now allows people with short-term or long-term capital gains from the sale of stocks, real estate assets, business partnerships, etc. to invest in Opportunity Zones. Those gains can go back as far as January 1, 2019. This is very good news for Caliber’s Opportunity Zone funds.
When COVID hit back in March 2020, Caliber stopped raising capital because investors stopped buying. Around December 2020, Caliber entered its first committed deal – an Opportunity Zone, which is now closing its development in Scottsdale with a tenant in tow.
Chris mentioned that Caliber has had numerous conversations regarding the hospitality portfolio. The discussion revolved around the ever-changing landscape and some potential for bridge capital. Although there are a lot of headwinds, Chris believes there is light at the end of the tunnel. With the COVID vaccine, there seems to be a meaningful drop-off in COVID cases, which hopefully translates into people venturing out and stay at hotels again.
Chris also shared that he received his first round of the vaccine. He is hearing more-and-more from people around him–receiving vaccines too–that they’re ready to get their vacation plans underway, which includes booking hotel rooms. So far, Caliber has received approximately $20 million of “rescue capital.” This is equity that will be invested in the Caliber hotel portfolio to pay for the operating losses for all of 2021 – possibly 2022. In addition, there was an offer to cover debt service payments for 2021, which Caliber declined, due to the cost and other terms that could have wiped out any profits from the Caliber hotel portfolio.
Additionally, the second round of PPP funds is expected to come in at approximately $6 million out of the $20 million expected to raise. Chris confirmed that staying on top of the market conditions, in combination with the portfolio’s performance, will allow Caliber to limit its risk.
Caliber’s goal is to get through this without asking investors for additional capital. Instead, Caliber is considering rolling the hotel portfolio into a hotel REIT. A REIT is a less expensive structure to manage and is typically more investor-friendly since it’s required to distribute 90% of its real estate income to its shareholders in the form of dividends.
This process is being spearheaded by John Hartman (a new addition to the Caliber team) and a host of other professionals with roughly 200 REIT transactions under their belts. Caliber has a seasoned legal team, real estate, finance and accounting professionals who have extensive expertise in this area.
Finally, The Sheraton Four-Points asset will also be part of the potential REIT, however, it will probably be re-purposed for apartments at some juncture.
Chris stated, “There is a lot to talk about with our Colorado developments – the opportunities are vast, and this is where we need to unleash our resources.” There are over 300 acres of land available to create future opportunities.
Of the $500 million under development, about $450 million is in developing single-family and multi-family projects in Colorado.
Additionally, Caliber is focused on infrastructure right now – roads, utilities, sewers, etc. Caliber is going to start raising capital under those projects, so investors can begin funding those projects with Caliber and participate in the upside of each project, as it happens. Chris said, “This should be a source of investment opportunities for everybody in the Caliber ecosystem for years to come, obviously, for our funds, but also for investors who want to participate.”
The Treehouse Apartment sold – this is a big win – Caliber identified the supply and demand fundamentals in the Tucson market and bought a 167-unit apartment building in 2014 for $4.8 million. This underperforming asset underwent an extensive $7.9 million renovation by Caliber, which was completed in 2017.
Caliber sold the asset for $23 million dollars to a multi-family operator based out of Chicago that generated a near $11 million profit. Caliber successfully revitalized an existing asset, in a highly desirable neighborhood, while creating more quality housing for the community.
Chris took a few moments to discuss a piece of land purchased in Flagstaff too, which has been listed for sale for $5 million. Caliber plans to take the proceeds and invest it in a better yielding investment that is more in line with its investment strategy. After reviewing the project, it is estimated that there will be over 200 apartment units, with some amenity-based retail, developed that is better suited for a regional builder.
Chris asserted during the call, “The louder and prouder, we are about Caliber and the business we have created together and the opportunities in front of us, the more that we seem to grow our real estate holdings and capital investments.” What differentiates Caliber from the crowd is their community involvement, tenant engagement and transparency efforts.
Chris ended the call with optimism and unwavering focus, “Caliber was expecting to have a really great year in 2020 we had about half a billion dollars’ worth of projects that we were in negotiation on looking to buy in contract on or in some sort of escrow process. In February, we dropped all those projects in March and April because we didn’t know what was going to happen.”
Today, Caliber is back on track with $450 million of assets under management and is in active negotiations with a greater than 50% chance of winning these projects.
The next CEO Call is scheduled for Thursday, March 18, 2021. Sign up here to join.