CaliberCos Inc. (the “Company” or “Caliber”) (NASDAQ: CWD), a leading vertically integrated alternative asset manager, today reported results for the second quarter ended on June 30, 2023.
Second Quarter 2023 Financial Results, Compared to Second Quarter 2022
- Total revenues of $20.4 million, a 9.4% increase
- Asset management (“AM”) revenue(1) of $2.4 million, a 9.8% increase; asset management revenue run rate(1) increases to $9.6 million, a 15.3% increase as compared to the full year results in 2022
- Net loss attributable to Caliber of $5.7 million, or $0.29 per diluted share, compared to a net loss of $0.5 million or $0.03 per diluted share
- Caliber Adjusted EBITDA(2) loss of $2.3 million, compared to $0.5 million
- Fair value assets under management(3) (“FV AUM”) of $825.3 million, a 29.4% year-over-year increase
- Managed capital(4) of $401.8 million, a 24.1% year-over-year increase
Management Commentary
“In the second quarter, our team executed well on our strategic plan. We successfully completed our IPO in May, delivered year-over-year consolidated revenue growth of 9.4%, and increased our FV AUM as of June 30, 2023 to $825.3 million,” said Chris Loeffler, CEO of Caliber.
“During the quarter, we continued to make strategic investments in our business to position Caliber for sustained growth. We expanded our overall sales force and built out our wholesale team to significantly expand the distribution of our funds in the Registered Investment Advisor (RIA) and independent broker-dealer channels. Simultaneously, we developed new funds and investment products for both the private and wholesale channels that will enhance our ability to capitalize on the growing number of attractive real estate investment opportunities created by this elevated interest rate environment, where access to attractively priced capital is a challenge for many property owners. While these investments increased the current period expenses, we believe they are critical to supporting our strategic plan to accelerate AUM, increase our annualized asset management revenue run rate and capture distressed real estate investment opportunities.”
“We continue to make great strides in building out Caliber Hospitality Trust (“CHT”), our externally advised private hospitality company. We signed our first third-party contribution agreement with L.T.D. Hospitality Group through which it will contribute nine hotel properties to CHT. Upon closing, this addition will more than double the value of CHT’s current portfolio to $405 million and increase Caliber’s FV AUM(3) by approximately 25%. In addition, Caliber’s asset management revenue run rate will further increase by approximately $2 million, or 20%(1), considering the value of the portfolio contributed and the terms of the contribution and management agreements. We are in active discussions with other potential third parties and expect to make additional announcements in the second half of 2023.”
Business Update
The following are key milestones completed both during and subsequent to the second quarter ended June 30, 2023.
- On May 19, 2023, as previously disclosed, Caliber successfully completed its initial public offering raising $4.8 million through the issuance of 1,200,000 Class A common shares at an offering price of $4.00 per share.
- On June 30, 2023, Caliber reached an agreement with L.T.D. Hospitality Group LLC (“L.T.D.”) in which L.T.D. will contribute nine hotel properties to its subsidiary, Caliber Hospitality Trust. The transaction is subject to customary closing conditions and is expected to close before the end of the year.
- As of June 30, 2023, Caliber is actively developing 2,460 multifamily units, 2,300 single family units, 2.5 million square feet of commercial and industrial, and 1.3 million square feet of office and retail.
- On July 19, 2023, Caliber sold 38 lots in its Ridge at Johnstown, CO project for $3.8 million. The lots were part of Caliber’s holdings where it owns over 600 acres of land through various funds.
Summary of Consolidated Results
Second Quarter 2023 Consolidated Financial Review
Total revenues for the second quarter of 2023 increased 9.4% to $20.4 million, compared to $18.7 million for the second quarter 2022, primarily due to higher revenues in the Company’s consolidated fund hotel assets with the addition of the Hilton Tucson East property. This was offset by lower transaction and advisory fees. Consolidated asset and performance-based fees decreased during the quarter due to lower transaction and advisory fees, primarily due to decreased capital raise and loan service fees.
Asset management fees were $1.2 million, a year-over-year increase of 8.3%; performance allocations were $0.01 million, a decrease of 88.3%; and transaction and advisory fees were $0.7 million, a decrease of 62.0%. Consolidated funds from hospitality revenues were $16.3 million, an increase of 14.3%, while consolidated funds other revenues were $2.3 million, a 56.2% increase from the prior year period.
Total expenses for the second quarter of 2023 were $31.4 million, up 53.5% from the second quarter of 2022, primarily due to an increase in consolidated fund-related hospitality expenses related to one property, the Hilton Tucson East, which was consolidated beginning March 31, 2023. As this segment continued to recover, it has been hiring additional employees to serve increasing occupancies. In addition, operating costs were $6.8 million, up 141.1%, primarily due to additional payroll costs associated with increased headcount and cost of human capital driven by the Company’s growth initiatives, as the Company looks to enhance its capabilities across all lines of service.
Net loss for the second quarter of 2023 was $11.6 million, compared to $2.0 million in the second quarter of 2022 and Consolidated Adjusted EBITDA for the second quarter of 2023 was a loss of $1.3 million, compared to $4.1 million in the prior year period. The decreases compared to the prior year period were due to lower net income attributed to higher expenses related to investment in the Company’s strategic growth initiatives.
After adjusting for net income attributable to noncontrolling interests, net loss attributable to the Company for the second quarter of 2023 was $5.7 million, or $0.29 per diluted share, as compared to net loss attributable to the Company of $0.5 million, or $0.03 per diluted share, in the prior year period.
Caliber’s business is organized into three reportable segments: Fund Management, Development, and Brokerage. The following highlights results from each of those segments. For segment reporting purposes, revenues, expenses, and Caliber Adjusted EBITDA are presented on a basis that deconsolidates the consolidated funds. As a result, segment amounts are different than those presented on a consolidated basis in accordance with U.S. GAAP basis because certain amounts are eliminated in consolidation when they are derived from a consolidated fund. Eliminating the impact of consolidated funds and noncontrolling interest provides investors with a view of the performance attributable to CaliberCos Inc. and is consistent with performance models and analysis used by management.
Second Quarter Segment Performance
Total segment revenues for the second quarter of 2023 decreased 23.0% to $3.4 million, compared to $4.4 million for the second quarter 2022, primarily due to lower transaction and advisory fees in the fund management segment.
Fund Management Segment
Total fund management segment revenues for the second quarter of 2023 were $2.6 million, a decrease of $0.7 million, or 20.4%. Asset management fees were $2.4 million, an increase of 9.8%, while the asset management revenue run rate was $9.6 million, an increase of 15.3%, as compared to the full year results in 2022. The higher asset management fees were driven by a higher year-over-year average balance of managed assets. Performance allocations decreased $0.1 million or 77.7% and transaction and advisory fees decreased $0.8 million or 82.5%. The decrease in the transaction and advisory fees was primarily related to a decrease in capital raise and loan service fees, partially offset by increased fund administration fees.
Total fund management segment expenses for the second quarter of 2023 were $7.7 million, an increase of $2.5 million, or 49.1% from the second quarter 2022. The increase was primarily due to an increase in operating costs from additional payroll associated with increased headcount and cost of human capital driven by the Company’s growth initiatives, as the Company looks to enhance its capabilities across all lines of service.
Fund management segment net loss for the second quarter of 2023 was $5.8 million, compared to segment net loss of $2.1 million in the second quarter of 2022.
Development Segment
Development segment revenues for the second quarter of 2023 were $0.7 million, a decrease of $0.2 million, or 26.9%. The decrease was primarily due to a decrease in development fees related to two commercial development projects in Colorado and one commercial development project in Arizona.
Development segment expenses for the second quarter of 2023 were $0.6 million, an increase of $0.1 million, or 24.9% from the second quarter 2022. The increase was primarily due to additional payroll associated with increased headcount and cost of human capital driven by the Company’s growth initiatives resulting in higher operating costs.
Development segment net income for the second quarter of 2023 was $0.1 million, a decrease of $0.3 million, or 82.5%, from the second quarter of 2022.
Brokerage Segment
Brokerage segment revenues for the second quarter of 2023 were $0.2 million, a decrease of $0.1 million, or 40.8%. The decrease was primarily due to a $7.3 million decrease in brokerage transactions between periods.
Brokerage segment expenses for the second quarter of 2023 were $0.3 million, comparable with the second quarter of 2022.
Brokerage segment net income for the second quarter of 2023 was $0.1 million, in line with the second quarter of 2022.
Managed Capital
Managed capital as of June 30, 2023 was $401.8 million, an increase of $78.0 million, or 24.1%, from June 30, 2022, and an increase of $18.6 million, or 4.8%, from December 31, 2022. The sequential $9.3 million increase from March 31, 2023 was due to $11.2 million of originations and was partially offset by $2.0 million of redemptions. Originations during the quarter were primarily driven by a $15.9 million increase in the Company’s commercial investment funds as a result of capital raised and funds contributed to support commercial development and acquisition activity in the quarter.
FV AUM
Fair value assets under management as of June 30, 2023 were $825.3 million, an increase of $79.8 million, or 10.7%, from December 31, 2022, and an increase of $18.4 million, or 2.3%, from March 31, 2023. The increase in the second quarter of 2023 was primarily due to $19.1 million of construction and net market appreciation, as the value of Caliber’s hospitality assets continued to recover in an improving economy.
Balance Sheet and Liquidity
The Company, excluding consolidated funds, ended the quarter with $55.0 million of total debt and unrestricted cash and cash equivalents of $1.3 million.
(1) | Asset management revenue run rate is an estimate that annualizes asset management revenue, which are on a basis that deconsolidates the consolidated funds, for the month ended June 30, 2023. | |
(2) | Caliber Adjusted EBITDA is a non-GAAP financial measure. See “Non-GAAP Financial Measures” below. | |
(3) | Fair value assets under management is defined as the aggregate fair value of the real estate assets the Company manages from which it derives management fees, performance revenues and other fees and expense reimbursements as of June 30, 2023. | |
(4) | Managed capital is defined as the total equity capital raised by the Company from investors for its investment funds as of June 30, 2023. |
About CaliberCos Inc.
Caliber (NASDAQ: CWD) is an alternative asset management firm whose purpose is to build generational wealth for investors seeking to access opportunities in real estate. Caliber differentiates itself by creating, managing, and servicing proprietary products, including middle-market investment funds, private syndications, and direct investments, which are managed by our in-house asset services group. The Company leverages access to both the public and private markets to maximize value for its customers and funds. Our funds include investment vehicles focused primarily on real estate, private equity, and debt facilities. Additional information can be found at Caliberco.com and CaliberFunds.co.
Forward-Looking Statements
This press release contains “forward-looking statements” that are subject to substantial risks and uncertainties. All statements, other than statements of historical fact, contained in this press release are forward-looking statements. Forward-looking statements contained in this press release may be identified by the use of words such as “anticipate,” “believe,” “contemplate,” “could,” “estimate,” “expect,” “intend,” “seek,” “may,” “might,” “plan,” “potential,” “predict,” “project,” “target,” “aim,” “should,” "will” “would,” or the negative of these words or other similar expressions, although not all forward-looking statements contain these words. Forward-looking statements are based on the Company’s current expectations and are subject to inherent uncertainties, risks and assumptions that are difficult to predict. Further, certain forward-looking statements are based on assumptions as to future events that may not prove to be accurate including, but not limited to, the closing of the transaction with L.T.D. Hospitality Group LLC. These and other risks and uncertainties are described more fully in the section titled “Risk Factors” in the final prospectus related to the Company’s public offering filed with the SEC and other reports filed with the SEC thereafter. Forward-looking statements contained in this announcement are made as of this date, and the Company undertakes no duty to update such information except as required under applicable law.
CALIBERCOS INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) | |||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||
Revenues | |||||||||||||||
Asset management fees | $ | 1,229 | $ | 1,135 | $ | 2,511 | $ | 2,066 | |||||||
Performance allocations | 12 | 103 | 2,438 | 2,405 | |||||||||||
Transaction and advisory fees | 665 | 1,750 | 1,419 | 2,371 | |||||||||||
Consolidated funds – hospitality revenue | 16,273 | 14,242 | 39,482 | 32,813 | |||||||||||
Consolidated funds – other revenue | 2,266 | 1,451 | 4,117 | 3,328 | |||||||||||
Total revenues | 20,445 | 18,681 | 49,967 | 42,983 | |||||||||||
Expenses | |||||||||||||||
Operating costs | 6,820 | 2,829 | 11,324 | 5,218 | |||||||||||
General and administrative | 1,426 | 2,149 | 3,242 | 4,137 | |||||||||||
Marketing and advertising | 325 | 765 | 678 | 1,005 | |||||||||||
Depreciation and amortization | 137 | 7 | 269 | 16 | |||||||||||
Consolidated funds – hospitality expenses | 20,749 | 12,685 | 41,032 | 29,826 | |||||||||||
Consolidated funds – other expenses | 1,949 | 2,030 | 3,874 | 4,469 | |||||||||||
Total expenses | 31,406 | 20,465 | 60,419 | 44,671 | |||||||||||
Consolidated funds - gain on sale of real estate investments | — | — | — | 21,530 | |||||||||||
Other income (loss), net | 546 | (3 | ) | 1,065 | 216 | ||||||||||
Interest income | 96 | 3 | 194 | 3 | |||||||||||
Interest expense | (1,261 | ) | (175 | ) | (2,092 | ) | (344 | ) | |||||||
Net (loss) income before income taxes | (11,580 | ) | (1,959 | ) | (11,285 | ) | 19,717 | ||||||||
Provision for income taxes | — | — | — | — | |||||||||||
Net (loss) income | (11,580 | ) | (1,959 | ) | (11,285 | ) | 19,717 | ||||||||
Net (loss) income attributable to noncontrolling interests | (5,854 | ) | (1,499 | ) | (4,352 | ) | 19,628 | ||||||||
Net (loss) income attributable to CaliberCos Inc. | (5,726 | ) | (460 | ) | (6,933 | ) | 89 | ||||||||
Basic net (loss) income per share attributable to common stockholders | $ | (0.29 | ) | $ | (0.03 | ) | $ | (0.37 | ) | $ | 0.01 | ||||
Diluted net (loss) income per share attributable to common stockholders | $ | (0.29 | ) | $ | (0.03 | ) | $ | (0.37 | ) | $ | 0.01 | ||||
Weighted average common shares outstanding: | |||||||||||||||
Basic | 19,612 | 17,791 | 18,901 | 17,873 | |||||||||||
Diluted | 19,612 | 17,791 | 18,901 | 19,750 | |||||||||||
CALIBERCOS INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (AMOUNTS IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA) | |||||||
June 30, 2023 | December 31, 2022 | ||||||
Assets | |||||||
Cash | $ | 1,335 | $ | 1,921 | |||
Restricted cash | 2,330 | 23 | |||||
Real estate investments, net | 21,411 | 2,065 | |||||
Due from related parties | 7,675 | 9,646 | |||||
Investments in unconsolidated entities | 3,246 | 3,156 | |||||
Operating lease - right of use assets | 215 | 1,411 | |||||
Prepaid and other assets | 2,722 | 5,861 | |||||
Assets of | |||||||
