Ladies and gentlemen, welcome to Caliber’s Fourth Quarter and Full-Year 2023 Earnings Call. As a reminder, today's call is being recorded for replay purposes. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. [Operator Instructions] I would now like to turn the call over to Lisa Fortuna, Investor Relations for Caliber. Please go ahead.

Good afternoon, everyone. Welcome to Caliber's fourth quarter and full-year 2023 financial results conference call. With me today are Chris Loeffler, Chief Executive Officer and Co-Founder, and Jade Leung, 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 on 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. Chris?

Thank you Lisa and thank you to everyone joining us on the call today. This is our first full-year results call since going public in May of last year. We've enjoyed engaging with the investor community in one-on-one meetings and at conferences over the past several months as we continue to raise awareness and understanding of Caliber among investors and among analysts. Looking ahead, we plan to increase our engagement this year and we look forward to our ongoing conversations with you all. For those of you who are still new or may be new to the Caliber story, I'd like to start by providing a quick overview of the company. Caliber has a 15-year track record of investing, developing, and managing middle market real estate assets to deliver attractive returns to our investors. Our NASDAQ listed parent company, CWD creates and manages real estate investments for our investor customers in the form of private funds and a private REIT. In doing so, it earns revenue and performance fees based on the success of each real estate investment. Through our funds, we invest in undervalued or distressed real estate primarily in the Western United States, with a focus on the middle market, which we define as real estate projects ranging in size from $5 million to $50 million. We have experience investing in almost every real estate asset class from multifamily apartment buildings to mixed use developments to qualified opportunities on projects. Our opportunistic approach allows us to invest in the best asset classes based on prevailing market conditions. Our in-house services group allows us to acquire, develop, build, and manage properties. By controlling the process from start to finish, we can optimize returns for investors, while reducing the risk of poor execution and increasing revenue per dollar of assets…

Thank you, Chris. Good afternoon everyone. Nice to be with you all today. As a reminder, Caliber's consolidated financial statements include our wholly-owned subsidiaries and certain funds that we manage. Generally speaking, we consolidate any fund that has third-party debt with a payment guaranteed by Caliber or any of our wholly-owned entities. Consolidation occurs even if we only own a nominal equity interest. This year we made a change to our segments. Segments are based on information reviewed by our Chief Operating Decision Maker or CODM, in this case Chris. Previously the company reported in three segments: asset management, development, and brokerage. With the evolution and growth of the company, our CODM now assesses performance and resource allocation on an aggregate basis under the company's asset management platform and no longer reviews operating results for development or brokerage segments separately. As such, we concluded that the company operates through one operating segment presented in our financials as unconsolidated results or platform results. In response to the change in our segments, we have also modified the way Caliber's core revenues are grouped. Asset management fees have been replaced by asset management revenues, which combine our previous revenue categories of asset management fees with transaction and advisory fees. We view all these activities as contributing to the execution of being an alternative asset manager. Our asset management revenues include the fund management fees we earn on the assets we manage and are generally equal to 1% to 1.5% of the total capital managed in a particular fund to compensate us for the overall administration of that fund. In addition we receive certain cost recoveries. As Chris mentioned, these core fees increased by 15.1% year-over-year. Asset management revenues also include one-time fees for services conducted by our in-house services group, including fund setup…

Thank you, Jade. I'll leave you all with why we believe now is the time to invest in Caliber. We have a 15-year history of growth across market cycles with $3.1 billion in combined assets under management and assets under development. Second, we have a demonstrated track record of delivering unlevered annualized gross internal rate of return of 19% on all investments that have sold or gone full cycle, showing that we can do what's most important in our business, which is to deliver for our customers. Third, we operate in a large and growing market with alternative assets forecasted to grow 50% from 2023 to 2028. We have a sizable and loyal customer base with a successful track record of fundraising, total fundraising of about $660 million inception. And we have our in-house services model, which creates a competitive advantage, including the focus on these middle market underserved asset classes in the Western United States. We're poised for our next level of growth with scalable infrastructure, and we have a focused value creation model for shareholders. And we have an experienced cycle tested management team with significant insider ownership. In closing I'd like to thank our employees for their dedication and our shareholders and our investors for your continued interest and investment with Caliber. Thank you for the time today. We look forward to speaking and meeting with all of you and let's go ahead and open up the Q&A.

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Your first question comes from the line of Brendan McCarthy from Sidoti. Your line is now open.

Hey good afternoon everybody and thanks for taking my questions. I just want to start off at the cost structure review. I'm wondering if you can specify or go into detail on where potential cost cuts might come from?

Sure. So, Caliber, in the scenario where we are managing costs, we always look first to G&A and sort of non-workforce related costs to reduce as much as we can. There's a lot of costs that we incurred in 2023 to create and launch products that don't need to recur or can be toned down, including spending on various forms of marketing and advertising, software costs that we can actually get efficiencies on by combining systems. We're doing a lot of work on the tech stack within the company to create a more efficient operating model for the business and other costs related to G&A. We also can look to a 75%-plus increase in payroll year-over-year for reductions in certain costs and functions that we brought on specifically around managing a larger pool of assets than we currently manage. We are pretty focused and dedicated on the fundraising component of the business, and like I said, we intend to keep that capability in fact. But with the products launched, we need to modulate the cost, compared to the assets that we manage.

Great, that's helpful, thanks Chris. Just on the fundraising, I know there was a large amount of investment to the wholesale distribution capabilities that's passed in 2023. Can you talk about investing in fundraising capabilities in 2024? Is that going to be focused on the wholesale as well as the other channels?

Yes, basically the team is intact. So aside from continuing to double down on the existing team that we have and the efforts they've made, we're really proud of all the work they've done so far, the incredible amount of the relationships they've been able to open up in only the course of roughly four months since December to grow the selling agreements to approximately ‘25, ‘26 now. So we see them making a lot of progress. We're just going to continue to support that team and really start to open up the relationships that we've just begun to establish.

Got it. Got it. And on those selling agreements, it looks like really solid growth there. I think you mentioned there was only one as of the fourth quarter of ‘23 up to ‘26 or so now. Can investors expect a similar pace going forward or how do you see that kind of playing out?

I certainly hope so. We -- there's a certain amount of participants in the market that we're going to be able to access. And of course, there are going to be some participants that we're not going to be a fit for. They won't be a fit for us. But we've just seen a good speed and a good pace, and we continue to have really good conversations with potential selling group members and at this point in time we're also focused on onboarding all of those selling groups. So as an example, if a investment advisory firm that has 40 reps has agreed to start distributing our Opportunity Zone product and maybe our CHT preferred stock offering. Then the next step is going to be, all the reps go through AI Insight and get their education that they need. But then we do onboarding calls and we do some education with those reps and then we support them as they start to have customer conversations. And so it adds an additional dynamic to the process of not just opening the relationship and getting them comfortable with Caliber and excited about what we're doing, but then now kind of going deeper into their sales force and training their team.

Got it, that makes sense, that's helpful. We wanted to pivot to the sales done in the fourth quarter ‘23, the Northsight and the Southridge sales. Can you kind of just talk us, maybe walk us through, you know, what drove those two sales and how that, I guess how that occurred in the fourth quarter?

Yes, sure. So the Northridge sale is a really good example of Caliber's ability to buy right. We acquired the project in an off-market or sort of pseudo off-market manner at a really favorable price at $21 million. There was about 20%, 30% vacancy or vacancy that was coming soon. There needed to be some turnaround to the property, but we acquired it during that 2020 to 2022 era that I mentioned where assets were generally overpriced. So to be able to buy something during that era, get through the turnaround that we accomplished and sell it for a nice profit is a very good example of how our business model works differently than most or the average real estate investment platform. And then on the land development side, the sale of the 80-acre parcel, getting through the land development components through what was a pretty complicated entitlement process, and then selling to a home builder in the environment where home builders were pulling back again kind of demonstrates, which would have been the Southridge sale, demonstrates the strength of the markets that we're doing business in. That Northern Colorado market, it still is showing extremely low levels of vacancy, high levels of occupancy, high demand from new development activity, which may not necessarily be the truth across the rest of the country. There's a lot of parts of the country that are not experiencing that. So it's just two really good examples of one is Caliber picking the right markets, and two is our ability to buy right even in a market environment where most assets were overpriced. Now turning into the market environment we're in today, interest rates stopped going up kind of mid-2023. That created a turnover in the market, and we now see the best opportunities are going to be in some strategic development, some land development, and really most likely in buying existing assets at a discount to what it costs to build them.

Great, thanks. That's helpful. And turning to CHT, I know you talked about potentially 49 assets in that private REIT, and you're targeting over a billion in assets, are you able to provide any timing or when that might occur in the future?

Yes, our target is to obviously close up the contracts that we already have or the agreements that we already have that meets that first 1 billion in the near-term, the faster we can do it, the better. The transactions themselves are somewhat hard to predict because they require approval from the franchisor, approval from the lenders. There's multiple stages to that. But assuming that we were able to hit our targets, we'd like to close that up by the end of the year, which would not give us the full amount of fees for the year, but we would then put those fees on our run rate going forward.

Right, right. And one last question for me, just as a general question, looking at the targets, the AUM target, as well as the cumulative fundraising target, what are some potential factors that could generate upside or downside to some of those targets?

So on the downside side, you know, we are -- we've historically we've in the last three years raised on average of around $100 million a year. And we put out a target to raise $750 million over three years. So there's some ramp in those numbers and it would be outperforming our historical fundraising average. So the downside of course is maybe we can't raise capital as fast as we think we can or something is disrupted that happens in the market that causes investors to pull back again like it did last year. So that's certainly one possibility. I think that as long as we are raising capital, the company is really good at buying great assets. It will generate the associated fees from buying those assets and the revenues associated with that. So I think that our ability to execute on our business is high. I think it's really a matter of can we raise the capital under the various buckets and vehicles we've created. And we obviously feel confident in that because we're not modifying the goals. On the upside, as an example for CHT, that is a less capital dependent transaction because when we acquire an asset in CHT, we're only providing a certain minimal amount of their NAV and cash, and the rest is all provided in shares in CHT. So as we find portfolios or we find investors, who are owners of hotels that have large groups of assets, they may make contributions to CHT. And I think as it continues to grow and the word gets out there, I think it will be very attractive for many hotel owners to the extent that there are assets in the pipeline beyond what we've announced or what we can see right now, I think that could create some significant upside for Caliber and our shareholders. And then secondarily, we have seen, at least historically, companies that do what we are doing that enter the wholesale channel and that really support the channel the way it should be, take care of the advisors and the broker-dealers and really manage those relationships effectively, we'll start to see the fundraising through that channel outstrip their internal fundraising by an order of magnitude. And so our current forecast is based on what we think is reasonable growth, but if you look to the history of other companies that have done what we've done they've actually grown faster than we're forecasting.

Great that's interesting insight thanks again Chris I appreciate it.

Thank you.

There are no further questions at this time. I will now turn the call over to Chris for any closing comments.

All right. Well, thank you, everyone. Appreciate you taking the time and to follow our story. I think that, as Jade mentioned, I don't want to get lost in the commentary. Caliber is continually working to make our story easier to follow, to make our filings easier to understand and to make and to put ourselves in the position on a go-forward basis that it will be, you know, pretty simple to understand how we're building value for you as shareholders and for all of us as shareholders in the fact that you know the management team owns more than 50% of the company here. So appreciate you continuing to follow Caliber in our story if you happen to be in Scottsdale Arizona please join us on the 18th which is on Thursday for our annual customer event at the Caliber Summit, and you can find details on our website. So, take care.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.