CaliberCos Inc.

Thank you for standing by. My name is Eric, and I will be your conference operator today. At this time, I would like to welcome everyone to the Calibre second quarter 2025 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. I would now like to turn the call over to Ilya Grzegorzewski, Vice President, Investor Relations and Corporate Development. Please go ahead.

Good afternoon, everyone. Welcome to Caliber's second quarter 2025 Financial Results Conference call. With me today are Chris Loeffler, Chief Executive Officer and Co-Founder, and Jade Miao, Chief Financial Officer of Caliber. Please note, that we have a quarterly earnings presentation which will serve as a supplement to today's prepared remarks. You can access the presentation in the investor relations section of our website at www.caliberco.com. After management's commentary, we will open the call for 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. So, 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.

Thank you, Ilya, and thank you to our investors, employees, and participating call attendees. The second quarter of 2025 was another step towards our goal of achieving platform adjusted EBITDA profitability in the second half of 2025. To that end, with essentially similar revenues in the second quarter of 2025 versus the second quarter of 2024, We have narrowed our platform-adjusted EBITDA loss to $54,000 compared to $2.5 million in the year ago and quarter, importantly. The cost savings initiatives that we have implemented in the first half of 2025 should show their full impact in the third quarter and beyond and drive positive results in the fourth quarter. Our long-term objective continues to be an annual EBITDA margin of 25 percent or greater on a sustainable basis. In terms of overall industry dynamics, commercial real estate values continue to show signs of stability. And we continue to believe that we are in a period of long-term opportunity for Caliber, given our experience in complex and distressed transactions. The recent passage of the One Big Beautiful Bill offers Caliber tailwinds, as the Opportunity Zone program that underpins one of our most successful fund strategies was made permanent as part of the tax code. And as investors are seeking to gain access to 100% bonus depreciation vis-a-vis our investment strategies. We expect this legislation will help Caliber drive fundraising results and, combined with the market opportunity to buy real estate at historically attractive prices, drive results for our investor clients. After Caliber's restructuring in May, we are now a more focused company centered around three core verticals, hospitality, multifamily, and multi-tenant industrials. We believe these asset classes offer the greatest opportunity for scalable fee-based growth. We remain opportunistic, a core component of Caliber's culture, and we are seeking to maximize value for our shareholders. Touching on visibility to Caliber's financial performance, we have updated our platform performance financial supplement as of June 30, 2025. As a reminder, the platform supplement excludes consolidated assets to offer a simple and transparent view of our operating business. Calibre's estimated performance allocations, or carried interest as it's sometimes referred to in our industry, were updated, totaling $84.8 million. We first published this carried interest estimate in our 2024 10-K and have worked to help investors understand how including it in a calculation of the company's book value transforms investors' views into Calibre's balance sheet. The supplement is available on our website, and we encourage you to review it and get a better sense of Caliber's estimated net worth or book value that is not reflected in our GAAP financials. I'll continue on with some business updates. In the second quarter, Caliber announced that it entered a development rights agreement with an affiliate of Hyatt Hotels Corporation to develop 15 new Hyatt Studios hotels under the terms of the agreement, Caliber Hospitality Development, will receive exclusive development rights for future development of Hyatt Studios hotels in target market areas within Arizona, Colorado, Nevada, Texas, and Louisiana. As of today, Caliber has placed three sites in escrow to purchase and develop into Hyatt Studios hotels. The first is in Georgetown, Texas, a suburb of the Austin metropolitan area and the fastest growing city of its size for the last three years in the United States. The second site is adjacent to Taiwan Semiconductor, or TSMC's, $165 billion semiconductor fabrication facility in Phoenix, Arizona. The third site is located in Steamboat, Colorado, a highly attractive destination market with significant barriers to entry. We hope to close on these three acquisitions through the end of this year, adding them to the existing sites we own vis-a-vis our Opportunity Zone funds near Scottsdale, Arizona. Beside the prestige and vote of confidence of working with Hyatt, I wanted to discuss the economic benefit of the developments. We believe the first four Hyatt Studios locations will increase Caliber's AUM by approximately $100 million, generating approximately $4 million in one-time fees for Caliber and generating approximately $700,000 on an annualized recurring basis through asset management fees. Our long-term goal will be to either sell the assets to a third-party buyer or harvest performance allocations by doing so, or contribute the assets to our Caliber Hospitality Trust, which could yield Caliber additional revenues holding the assets for long-term cash flow. Fundraising in the second quarter continued to show improvement, driven by strength in our wholesale distribution channel. Managed capital at the end of the second quarter was $498 million, up from $495 million at the end of Q1, and up from $470 million from a year ago. Caliber spent much of the second quarter working to open and launch offerings as well as supplement existing offerings to accommodate a change in our managing broker dealer. This work sets us up for Q3 and Q4 to focus on fundraising instead of product development. In wholesale fundraising, we saw consistent momentum build through the quarter, reflected in increased advisor participation and deeper engagement across our platform. Advisor production steadily increased over the quarter with three firm relationships produced in April, four new relationships in May, and six new relationships in June, a total of 13 new advisors in the second quarter. This growth underscores the expanding reach of our distribution efforts and shows our momentum heading into the second half of 2025. In addition to growing order flows with new advisors, we secured three new selling agreements in the second quarter, representing strategic partners with strong long-term pipeline potential. We remain highly encouraged by the acceleration in advisor engagement and the continued diversification of our capital base toward more wholesale fundraising. Now I'll turn to some material updates on assets we manage and the performance of our managed real estate funds. In the interest of your time, each quarter I touch on what I believe are the most important changes that occurred during and after the quarter's end, but will not attempt to comprehensively discuss every movement and every fund. I believe these updates are critical to our shareholders. Even though as a shareholder of Caliber, you are not an owner in a specific fund or asset, other than to the extent Caliber has cash invested in those assets, you are an owner in the fees they generate and the potential profit sharing of the funds and the assets that we manage, vis-a-vis the carried interest. As shareholders, we are jointly vested in the success of Caliber's investor clients. Caliber's Canyon project is moving along well, We are working with the architect, mechanical, electrical, and plumbing consultants to complete the working drawings. We expect to have working drawings submitted for review in approximately 90 days. From there, we should be able to pull the demolition permit for the interior of the first phase buildings, and we will be performing demolition during the drawing completion phase. Currently, we are reviewing construction financing options. and believe that there is an excellent option for a construction to permanent loan of $56 million on the project. Importantly, the Metro Center Mall transformation, an $800 million redevelopment project, has completed its demolition phase. The development will create an outdoor open-air shopping experience with on-site new residential units. We believe the project will provide significant tailwinds for Canyon, as it's only one step away on the new light rail, or one stop away on the new light rail line that's directly in front of our project. We also anticipate tailwinds for Canyon coming from TSMC, the chip manufacturer, which has recently announced an additional $100 billion investment on top of its initial investment for a total of $165 billion invested in their facility. In addition, last week, Apple has announced a $100 billion investment in the area. This is reported to be part of the largest single infrastructure investment by Apple in U.S. history. Moving to SP10, we have taken meaningful steps to improve SP10's capital structure and ensure long-term success advancing towards vertical construction. The hotel tower interior has been cleared and is ready for vertical improvements to deliver 104 modern apartment units. Permits for both the adaptive reuse tower and a new construction, the 84-unit built to rent, are secured. Our original financing structure involved a three-phase loan with builders' capital. This phased approach introduced inefficiencies due to strict disbursement schedules and overlapping infrastructure needs across the three phases. As a result, we were unable to deploy capital as efficiently as planned, which created a short-term cash flow imbalance in the project. Rather than continue with fragmented funding, we made the decision to consolidate all phases into a single construction loan. This will enable us to treat the project as one cohesive development, improving speed, coordination, and capital access. We've executed a term sheet with a lender that consolidates the prior loans and provides sufficient funding to complete the full 188-unit project. And we believe it should close soon, subject to customary closing processes. Moving up to Encore in Northern Colorado, we are working with several potential lenders on a construction loan, which has taken longer than we expected to conclude. This delay has been indicative of the difficulty faced by real estate developers nationwide recently to obtain financing, specifically debt financing for land and infrastructure. Our goal is to secure a $10 to $15 million facility to be able to replenish the interest reserves for the project and start the improvements to Highway 34. We also intend to secure a $30 million facility for the on-site improvements, and we are working to establish a special improvement district bond financing through our metro district. This process to obtain a bond can take time, and we have met with the town manager and several council members to obtain their support for approval at council. We are also working with several retailers for sales of plots for a gas station and several pad users. Our final construction drawings have been approved. The expected total duration of the construction is six months for Highway 34 and 14 months for the on-site improvements and property sales are projected to begin at the end of 2026 once substantial construction is completed, presuming we obtain financing in a reasonable period of time. Moving on to Caliber's Pure Pickleball and Padel project at Riverwalk in Scottsdale. We're building a state-of-the-art pickleball and padel facility, including 50 courts with some available for daily open play, as well as large tournaments, a clubhouse, a fitness center that is sponsored by Honor Health. We have recently concluded a 10-year agreement with a very large and well-known food services company to be the exclusive food and beverage provider for Pure. Also as part of the agreement, the company has agreed to contribute $2 million towards the project's build-out. We believe this partnership will generate significant one-time and recurring revenues for Caliber over the course of the next 10 years. The project has received design review board approval from the Salt River Pima Maricopa Indian Community Planning Department. And the next step is to have final construction documents approved to seek a building permit. Groundbreaking will occur shortly after the permit is received. Moving on to the opportunity zone investment front, In the second quarter, Fund 1 refinanced the Doubletree by Hilton Hotel in Tucson at the Convention Center. This was Caliber's first transaction with the lending team at Citibank, and we hope to continue to build the relationship for future financing opportunities. The financing released some cash-out proceeds, which we reinvested across the portfolio. Both Opportunity Zone funds are expected to benefit from the Opportunity Zone permanence as a result of the new BBB. We expect that as the program continues to gain capital, it will be directed towards the designated opportunity zones, and those investments may offer a better-than-market-rate level of appreciation for our existing projects. In terms of the Caliber Hospitality Trust, the holiday in Newport News is beginning to show meaningful signs of stabilization as we head into the second half of the year. Efforts at enhanced cost controls and more targeted revenue strategies have driven monthly improvements. More importantly, key developments in our group base are expected to significantly strengthen the performance over the next several months of the hotel. We finalized an agreement with the 138th Fighter Wing, a key government group that began arriving on June 26th and will remain through October 1st. This stay aligns with peak season and will materially support ADR and REVPAR through the third quarter of 2025. Looking ahead, we are forecasting a strong third quarter with expectations to exceed budgeted room revenue driven by this high-impact group, continued momentum in social, military, education, religious and fraternal groups, or SMRF groups, and local negotiated rates, or L&R segments, and a more disciplined approach to revenue management. As a result, our current forecast anticipates an increase in revenue and gross operating profit compared to our prior projections. Despite the challenging start to 2025, the most difficult since the onset of COVID in 2020, we believe the hotel may finish the year with gross operating profit close to 2024 levels. Also, Caliber's management team is in active discussions with the current lender associated with the Holiday Inn Newport News to allow for a potential refinance of the existing loans. Other properties inside of the CHT portfolio, which is concentrated in the southwestern United States, are seeing traditional extreme summer heat, As it relates to Arizona, where we're based, which consistently drives some seasonal softness in demand. This annual pattern impacts both occupancy and ADR, which in turn leads to decreased profitability during the summer months. As cooler weather returns, we expect a rebound in performance and improved profitability across the portfolio. To that effect, we continue to target new acquisitions for CHT, and we are looking forward to announcing those acquisitions when the prospects of closing are firm. Simultaneously with the filing of our 10Q, we plan on filing a shelf registration with an at-the-market offer or an ATM. We do not have any plans to offer shares right now, but as part of a good corporate governance, we believe that it's good to have an ATM in place should we ever need it. This would allow Caliber to raise capital incrementally and opportunistically and not in a large transaction in order to fund the future growth initiatives that we have, pay down debt, or simply have a stronger balance sheet. Overall, I'm pleased with the second quarter and excited for our continued positive momentum in the second half of the year. With that, I'll turn the call over to Jade, who will cover our platform financial results and provide more insights into Caliber's business performance.

Jade? Thank you, Chris. Good afternoon, everyone.

I wanted to start with progress on our efforts to deconsolidate our financial statements. On May 9, 2025, the company completed a refinance of the existing debt of the Doubletree by Hilton next to the Tucson Convention Center. With the refinancing of this loan, Caliber no longer guarantees the debt of the asset and, as a result, is no longer required to include it in our consolidated balance sheet at June 30, 2025. Calibre had aggregated and reported the results of operations of this asset in consolidated fund revenues and consolidated fund expenses within the accompanying condensed consolidated statements of operations through the date of deconsolidation, which was in this case May 9th. Since Calibre went public, we have deconsolidated a total of 11 assets, and we have two remaining assets that we plan to deconsolidate in the future when the opportunity presents itself. The main reason we provide Calibre's platform results is to avoid the noise that these consolidations create until such time when we have completed deconsolidating these remaining assets. Turning to our progress on addressing the platform's leverage, we have three primary programs available to help us manage Calibre's debt obligations. The first is refinancing existing notes into a 36-month unsecured note program. We have approximately 5 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 the 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. To date, we have raised $2.4 million in Series A. The Series AA was approved on March 12th, 2025 through Reg A Plus to raise up to $20 million. 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. To date, we have raised about $1.2 million. Our raise under each program continues to gain traction, and we expect both programs to be successful. We have also backstopped our cash position by executing an equity purchase agreement for up to $25 million of common stock. To date, we have raised $2.3 million through this program. We continue to focus on collecting our outstanding accounts and notes receivable. Thus far in 2025 to the end of the second quarter, we have collected over $9.7 million in investments and notes receivable, but we also recognized an impairment charge of $2.3 million in the quarter. related to investments we made in our lending fund through that effort. We believe these measures are part of a holistic plan of strong corporate finance, and they will help us manage satisfying our commitments if they become due. Turning to our results for the second quarter of 2025, total second quarter platform revenue of $4.1 million was driven by asset management revenues. This was essentially flat compared to last year's Q2 results due to a change in the mixture of revenue activities. However, I am happy to note that the asset management fees continue to expand. Total platform expenses in Q2 were $5.3 million, a decrease of 35% compared to last year's Q2 of $8.2 million, primarily due to a decrease in operating costs related to payroll and payroll editing expenses. Average employee headcount decreased 36%. from those two quarters as part of our continued comprehensive cost-saving initiatives to return Caliber to profitability. These impacts on our performance translate to platform-adjusted EBITDA loss for the second quarter of $54,000 compared to platform-adjusted EBITDA loss of 2.5 million during the same period a year ago. Managed capital was 498 million, a 6% increase compared to the year-ago quarter. Turning to an update on our balance sheet, as of the end of Q2, we had 195 individual unsecured notes with an aggregate principal balance of approximately $33 million, of which $26.1 million will mature within 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.

I will now turn it back to the operator for your questions.

As a reminder, if you would like to ask a question, please press star followed by the number one on your telephone keypad. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Brendan McCarthy with Sedoti.

Please go ahead. Hey, Chris. Hey, Jay.

Good afternoon. Appreciate you taking the questions today.

Hey, Brendan.

Hey, I wanted to start off looking at the expectation for the back half of this year, positive adjusted EBITDA forecast. Just curious as to your outlook for the financing environment. Looks like we might get a lower interest rate environment later this year. Just curious as to whether you see upside or downside to your forecast, depending on the interest rate environment.

Sure. On the interest rate side, that lower interest rate environment would be positive for Caliber, primarily because it would loosen likely and improve the ability for us to finance the projects inside of the funds that we manage. And those financings have been struggling to get done because of the environment we've been in for the last two years. As those financings get completed, that provides proceeds for us to build or renovate some of the portfolio we have, which generates revenues at the time that we execute those services. And then in addition to that, it gives us the ability to start selling off some assets in cycling capital, which is also very favorable for our business. So presuming that we get a decrease in interest rates, the improvement to our business would come primarily from just more activity on the platform. If you combine that with the fact that we think that the commercial real estate market has seen a significant decline in values similar to 2008, and that we're starting to find opportunities to buy assets at a discount to their inherent value and to their construction value, that's a really good combination for our business because we are designed to raise capital into our funds and go take advantage of those types of opportunities.

That makes sense, Chris. You mentioned performance allocations. I'm just curious as to what other factors might make it a more favorable environment to harvest some of the gains in the funds. I think you mentioned roughly $84 million locked up or potentially visibility into $84 million of performance allocations. I'm just curious as to what else, aside from interest rates, might lead to an uptick there.

Yeah. So I'll just sort of make sure everyone understands what they are in the first place and how they're calculated. And then that, I think that actually answers your question. So the performance allocations are, you know, in Caliber's business model, we're managing private equity real estate funds. And typically we're going to earn 20 to 30% of the profitability of that fund or that asset over and above a minimum rate of return. And so every single asset that we manage inside of our platform, We have a business plan for every asset. You know, we know if we're going to keep it for three years or four years or five years or six years or whatever the timeframe is. And we know that upon sale, based on our estimated sales price, mathematically, we stand to capture certain revenues in this carried interest or performance allocation. So sort of like not from a GAAP perspective, but from a, you know, kind of an accounting concept perspective, it's like deferred revenue that we get to collect in the future. So interest rates going down allows us to execute those plans faster and potentially sell those assets faster, which would, to your point, Brendan, allow us to harvest some of that carry at a faster pace. In addition, what else helps us in that space? you know, a return to a more normalized real estate market where the market is no longer declining in values and the values have stabilized and started to climb again as they more typically do. That pricing stability in commercial real estate happened nationwide in roughly, you know, September, October of 2024 was sort of the bottom. And the first half of this year, we started to see that pricing has become stable So you get a stable market, you get favorable interest rates, you get banks lending again, and that all adds to our ability to harvest that carried interest.

Got it. That's helpful. And one more question for me. I wanted to look at the Hospitality Trust, EHT. Can you talk a little bit more about the pipeline there and how the hotels contributed by the Satori Collective Um, do those remain on track to close, you know, in the timeframe that you were considering originally, or how can we kind of think about, you know, those contributions from Satori?

Yeah, the hotel trust has, um, has gone the first sort of half of this year has gone through, um, a series of, of, of challenges. Um, the trust itself and the assets that exist in the trust are, are doing fine. And in fact, I think we'll be improving their performance going forward, um, But the ability to close on some of these transactions was first impacted by us canceling the LTD transaction due to the fact that half of their business came from government spending, and therefore they saw this significant decline in their results, which we did buy one of the nine LTD assets, which is the Holiday in Newport News that we reported on. And you can see the first half was a pretty rough first half of the year for us. for that asset. So I'm very happy that we didn't acquire the other eight. On the Satori side, same thing. They had a very similar operating decline in their portfolio that we were unable to overcome and come to a modified deal to close on their deal. So in both cases, we've certainly offered the portfolio contributors the ability to come back and do a deal that makes sense for the trust. but we're not willing to move forward based on the terms that we have currently. So that's the downside. The upside has been that because of the fact that these interest rates have been persistently high and because of the fact that there's been some declines in hotel operating performance across the country for a variety of reasons, the opportunity that Caliber Hospitality Trust presents to an existing portfolio owner has improved significantly. and our negotiating leverage has improved. So we have been hitting the market looking to do deals with what we think are even more favorable terms than what we had originally put out in the first round. And then we've also added in some ability to start acquiring assets in cash in a distressed format, which would be at a deeper discount and provide more value, we think, to the hospitality trust. There's now a three-part strategy to build the trust. One is the contribution model to find more portfolios and bring them in. The second is through cash acquisitions of single assets, presumably in a distressed format at a discount to their inherent value. And the third would be as a takeout acquirer of the Hyatt Studios portfolio, which we think is pretty attractive to the trust. So while we don't have anything significant to announce today in terms of an opportunity or a new portfolio we've added to the ecosystem, we are in pursuit of those.

Got it. I appreciate the color there. And one last question for me on the wholesale fundraising side of the business. It sounds like there's some solid momentum there. You mentioned three new selling agreements. I guess how many selling agreements is the firm at to date and, you know, what do you kind of gauge that market opportunity in terms of asset size?

Sure. Yeah. Approximately, I think we're at approximately 35, but, um, uh, that's me trying to remember off the top of my head. Um, and as far as the market size goes, um, it's, it's, it's significant. We have, uh, we haven't scratched the surface in terms of the market, uh, opportunity. I think, um, The adoption of alternative investments and investment advisors seeking real estate alternatives has been very strong. We have seen that Caliber's offerings make a lot of sense for these advisors because the funds are new or newly issued and don't have a lot of exposure to the prior cycle that we just went through with COVID and interest rates. And we've seen that there's a desire to go beyond the few opportunities types of investment funds and real estate investments they typically have access to, which is kind of the household names. So it's going well. We're building relationships. The process is to sign a selling agreement. And then after that, we have to build individual relationships with individual advisors and start to get them to incorporate our investments into their practice. And as you see from our results, we're starting to see that happen on a monthly basis.

Got it. That's great. And what's the, can you remind us what the typical timeframe looks like after you sign a selling agreement? I think you mentioned there's roughly a three to six month ramp up period when you start to see asset inflows.

Yeah, I think that's right. Although it seems to be moving faster now because we're starting to become a proven commodity in this space and advisors and their firms understand what we have to offer. So we're starting to see orders come in faster, which is nice to see. But right now with our 35 or so selling agreements, we probably cover about 500, 600 advisors. We will feel like we've achieved success when we're touching thousands, probably somewhere in the two to ten thousand range of advisors. So we're still are out there trying to build the initial distribution group. But Caliber is very focused on making sure that we can raise sustainably about $200 million a year, which is significantly higher than what we're raising right now. But at that level, we are consistently able to find great projects We can remain boutique in nature. We don't get too big and outgrow our infrastructure. And we can find a home for $200 million a year in capital into what we think are really attractive projects in the region that we invest in. So that's currently the target is get enough of a selling group that we can consistently raise that amount and hopefully turn a few people away because we're full.

Understood. Thanks, Chris. Thanks, everybody. That's all from me.

There are no further questions at this time. I will now turn the call back over to Ilya Grazovsky for closing remarks. Please go ahead.

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 additional questions, please visit our website at www.calibercode.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 engage with you directly. Thank you and have a good evening.

Ladies and gentlemen, that concludes today's call. Thank you all for joining and you may now disconnect.