CEO Chris Loeffler of Arizona-based real estate investment firm Caliber remained upbeat during the company’s CEO Call on Sept. 17 despite current market conditions.
Joining Loeffler were Senior Vice President of Business Development Tom Bade and Chief Development Officer Roy Bade. The monthly video conference updates investors on the state of various Caliber projects and offers cursory guidance moving forward.
“Things aren’t as bad as they seem,” Loeffler said, describing regular conversations he and other Caliber executives have had with partner companies and fellow leaders about the business climate the past six months. “Granted, certain industries [such as the hospitality, hotel and commercial office sectors] are taking a little bit of a hit, but the average CEO out there is cautiously optimistic about where the economy is heading.”
Investors won’t be surprised to hear that these are “admittedly difficult times for hotels,” Loeffler says, but not as bad as it could be compared to markets like New York or Las Vegas, where the market has imploded.
“The profits are going to be pushed out in the hotels for several years since we can’t sell a hotel during a global pandemic. There’s really no market right now,” he says. “We won’t be harvesting big profit sharing interests off of our hotel assets or our asset management fees on those properties. (The fees) are something that we could be collecting, but we’ve chosen not to, so there’s more cash in the assets.”
Loeffler says Caliber can continue to sustain hotel debt service and operations. “We have deferred collection of a large chunk of our (hotel) income in favor of protecting the assets, which the company will collect later.” To make up for lower income, Caliber has tightened expenses, reduced some of our payroll, and cut marketing expenditures.
Caliber’s apartment and townhome properties continue to lead the way for the company, operating near full capacity with rents paid.
The company’s TreeHouse Apartments in Tucson are 98 percent leased; GC Square near Grand Canyon University in Phoenix is 99 percent occupied; Eclipse in Scottsdale is at full, 100 percent occupancy. “Our Roosevelt Luxury Townhomes in Tempe, of which we’ve just completed the first 15 units, is already 70 percent occupied,” Bade says. “And we have 28 more units under construction.”
Unlike hotels in the current economic environment, multi-family appears to be holding its value when the time comes to take profits on an asset, Loeffler says.
“An apartment complex like the one we have in Tucson, we are actually going to market for $1 million more than what we went to market with prior to COVID,” he says. “People are looking for safe, income-producing assets, and that’s creating even more favorable status for multi-family. In January or February of this year, we were at $22 million, and I think we’re now coming to market at $23 million on that property.”
Roy Bade joined the call the discuss progress at The Ridge Johnstown, two master-planned, mixed-use projects that total 324 acres with immediate access to Interstate-25 in the Loveland-Fort Collins area about 40 minutes north of Denver. Two homebuilders, possibly a third in the works, have committed to 288 lots with construction underway.
“It’s exciting that those are under contract and are being developed as we speak,” Bade says. “Sewer lines are going in and we anticipate the first phase of delivery in January or February.”
Caliber also planned a “horizontal multi-family” component, but is considering selling off that portion to interested parties or creating a joint venture that can turn those units around faster.
Local governments have helped develop Highway 402-Freedom Parkway at no cost to Caliber with roundabouts, lighting, drainage and other public safety features. Freedom Parkway bisects the property creating mixed-use opportunities and connecting the community with I-25. The company also has 35 additional acres submitted for annexation, Bade says.
The Johnstown project is financed via Caliber’s Diversified Opportunity Fund, which is seeing “some pretty significant gains,” Loeffler says.
“So far, I think we’ve recorded a roughly $7 million gain on our investment,” he says. “Coming into this next valuation period, I think we’re putting another roughly $3 million to $4 million on top of that gain, and that does not include what we anticipate to be future gains.”
Another bright spot is Caliber’s online public offering via SeedInvest. The company has raised about $3 million to date “with a recent commitment from an investment advisory group that I think will bring us up to about $5 million or $6 million,” Loeffler says. “We have additional commitments that we think will get us close to $10 million in the near future.”
Additional CEO Call Highlights:
- Self-storage is performing well, due in part to macroeconomic growth trends in Casa Grande (81 percent occupied), Kingman (94 percent), Henderson, Nev. (89 percent), and Logan, Utah (92 percent). Kingman is currently on the market with multiple offers.
- Fiesta Tech Office Complex—42,000-plus square feet of flex light industrial-office in Gilbert—is 23 percent occupied. This is actually a positive since one or more of the tenants is looking to acquire the building.
- A recent Caliber survey found that about 85 percent of clients are looking to invest in real estate. The company is currently vetting deals to satisfy demand.
- Construction continues on the new Mesa City Center Campus of Arizona State University. 305 E. Main Street and the other downtown Mesa properties are poised to benefit and inquiries continue to come in.
- An update on Caliber’s “three-pack” of airport hotels will be forthcoming with information about occupancy rates, loans, cash on hand, etc.
The next Caliber CEO Call is scheduled for Oct. 15.