Ladies and gentlemen, welcome to Caliber's Fourth Quarter 2024 Earnings Call. As a reminder, today's call is being recorded for replay purposes. At this time, all lines are in 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 Ms. Lisa Fortuna, Investor Relations for Caliber. Thank you. Please go ahead.

Good afternoon, everyone. Welcome to Caliber's fourth quarter and full year 2024 financial results conference call. With me today are Chris Loeffler, Chief Executive Officer and Co-Founder; and Jade Leung, Chief Financial Officer of Caliber. After management's commentary, we will open the call for your 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, Lisa. And thank you to all of our investors, employees and participating call attendees, today. One of Caliber's core value pairings is vision and agility. We think these two values are intertwined. It is Caliber's purpose as a real estate asset manager, to have the vision to see what is coming, and the agility to adapt our business and our strategies to change. 2024 was a year of adapting to an environment, where commercial real estate values have been falling, financing costs had remained high, and financing was difficult to obtain. This environment has delayed some of our plans to increase revenue and grow our managed assets. To display agility, Caliber adapted to these market conditions by first, reducing operating costs in May of 2024, and continuing with cost containment to drive Caliber back to profitability in 2025. Second, waiting to reenter the real estate market, until such a time that we saw value declines flattening, and values beginning to grow again. This is the environment, we have begun to see in real-time. Third, launching new financing vehicles, to increase our access to capital, and ability to grow and refinance debt. Beyond market conditions, experience also drove Caliber's decisions in 2024. Now in our 16th year, Caliber's team has entered 2025, with a leaner structure and a more narrowly defined objectives. Those objectives include, number one, focusing on three key asset classes going forward, and selling assets that do not meet these three categories. Number two growing assets under management, or AUM with income producing assets, and reducing our development footprint, by completing existing projects, selling early stage developments, and limiting future development commitments. And number three, embracing our unique abilities and competitive advantage between tax advantaged real estate investing, the innovative Caliber Hospitality Trust, and the moment…

Thank you, Chris. Good afternoon, everyone. As Chris just mentioned, we are continuing to increase the transparency in our financial reports, with the goal of helping investors understand, analyze and value Caliber's performance that includes transparency into the value of the assets, we hold and manage in our portfolio. Up to now, we have reported the value of each asset, we manage at fair value or AUM. Moving forward, we will report managed assets, which include both AUM and assets under development or AUD. AUD includes the value at estimated cost of development, or improvement work we expect to complete on land we own, or assets we own which are not yet improved. In addition, we will also disclose the value of the performance allocations, we expect to earn on each asset, which we have not reported previously. For those of you who are not familiar with performance allocations, which may also be called carried interest, or promote in our industry, is the portion of the profits of each project, or fund we own and expect to receive when we sell an asset or [liquidate fund]. A fundamental the anticipated performance allocation, is forecasted in the detailed life cycle plans we develop for each asset prior to investing in it. These plans are updated every quarter, and they are rigorously tested and reviewed by external specialists, and auditors each year. Because these performance allocations are all estimates, there is no guarantee they will be achieved and a material change, to an asset plan will likely cause the amount of an unexpected performance allocation, to change as well. Investors should understand that many of the assets driving these performance allocations, may be following a multiyear business plan, and the allocations are expected to be harvested over time. Adding in the value…

Thank you, Jade and just want to share a few thank yous. First to the hard working team at Caliber. You guys continue to manage, through change effectively and position Caliber and our investors, for success in the current environment. And thank you as well, to the many capital markets participants, we've had a chance to engage with recently. Your interest in Caliber's story, and encouragement as it relates to our plans, for consistent profitable growth are appreciated. Finally, thank you to all of Caliber's clients. We are committed to a focus on positioning each asset, and fund that you own to maximize its potential, and bringing you future opportunities that make sense in today's environment. Caliber's vision is focused on a renewed opportunity, for real estate investment. The best we have seen, since the 2008 to 2012 era, and the agility we have displayed recently, will serve each of you well. Jade and I look forward to taking questions. I'll turn it over to the operator.

Thank you. [Operator Instructions] Your first question comes from the line of Brendan McCarthy from Sidoti. Please go ahead.

Great. Hi Chris. Hi Jade. Appreciate you taking the questions today?

Hi Brendan, how are you?

Doing well, doing well a lot to unpack there with the information. Appreciate the detail, but maybe we could start just at the quarter. Jade, I think you mentioned there was a $4 million bad debt expense, and then losses in the quarter were impacted by $8.6 million of some non-cash write-downs. Can you go into detail there on what drove that expense?

Sure, thanks. So as part of our as part of our assessment of our consolidations. We look every year at factors that that change and impact our conclusions. In in December midyear, mid-month of December, we made an announcement to the investors in one of our funds, our lending fund [CTAF-3] that the fund was in a wind down mode. The corresponding steps for that fund, were to then reevaluate how much how much the fund would produce of distributable cash, from the accelerated nature of the return of that capital. And as a result of looking at those revised terms, we identified various assets that we would be incurring losses on, and recorded those losses in our consolidated financial statements on the platform. So what you're seeing there, is the effect of our assessment of the collection of certain outstanding receivables that, we have from some of those assets and also a decrease in the - or an impairment in one of the investments that, we manage as well.

Yes, Brendan, I'll just add to Jade's answer that, when we made a decision to start narrowing our focus of a business, and selling assets that we were otherwise planning to develop and execute on, we're making estimates on the fact that, if we sell an asset earlier in its development cycle, or sooner or more quickly, that we're not going to achieve the same sale proceeds, or the same outcome we had been planning for previously. And then took any corresponding write-down, of a receivable that we had, or an investment that we made.

Got it. That makes sense. So that was the receivables on the platform balance sheet, in essence?

That's right, yes. Receivables and an investment that we held as well.

Okay. Thanks for that. And then just want to talk about, the kind of the renewed focus on the three separate asset classes that you mentioned, and the impact there on assets under development. Just maybe you could talk in detail about what's kind of driving, this decision and is it kind of based off fundraising environment, or I guess just kind of what's driving the decision overall?

Yes, I think it's driven by the fact that, we find it the fastest path to operate consistently, profitably is to narrow our focus on the most attractive asset classes. It allows us to make sure that, we can have the right staffing levels, and the right levels of personnel and the right experts inside the building, to focus on a more narrow set of assets. It kind of eliminates some of the diffusion of our time, across too many things and also allows us to narrow our fundraising in our story, to market participants who are looking at Caliber, as a focused and regional investor. We found as we've been out there fundraising recently, there's a lot of desire to see us focus on one, or two or three key areas. And then, we took that feedback and said, okay, what are those key areas where we have a long-term track record, we know we have the internal team to execute well, and we see an opportunity in the market. And once we align those things together, we settled on the three asset classes that I mentioned to you. It does impact our assets under development, because there's going to be certain developments like our behavioral health facilities that we acquired, and others that we're just not going to build. We're going to sell those pieces of land and move on. But on the other side of the equation, as we start to, grow in the specific asset classes we're talking about, we'll be seeking opportunities just in those asset classes.

Got it. That's helpful. Thanks, Chris. And are you able to disclose, I guess, how much of the assets under development pipeline, the roughly $2.2 billion AUD pipeline, how much of that is going to be maybe subject to monetization?

I don't think that, we've done an analysis at that level that, I can give you a specific response, but I can say that we do intend to continue to develop, and build the assets we have. There are some, like the behavioral health hospital sites that I mentioned that we're selling. And our strategy, is to work to a lower balance of total developments, by adding more income producing and existing assets, through the acquisition programs that we announced to you. And then, as it makes sense to sell assets in the development pipeline, or as it makes sense to complete them, and then move them out of development, we would do that over time. So we're sort of, we're just, we're tightening and shrinking our exposure to development, and our target is eventually to get to 30%, or less of our AUM as development, versus the current balance.

Understood, understood. And then more broadly, I think, you touched on it in your remarks, but what's your outlook for the fundraising environment going forward? I know it's still been challenging, but maybe just out your outlook for the next 12 or so months?

Yes, I feel really good. I feel like there's still obviously some uncertainty in, what's going on in the economy. But I feel good. And I'll give you some context to why, I feel good. Because if you look at real estate, it has definitely had a difficult fundraising environment for the last two, two and a half years. And that's a long time in our asset class and in our business, to be sort of on the sidelines. We're now seeing that investors are generally talking to us about, hi, it might be a good time to buy real estate. And they're right, the timing is good. So when the general consciousness of the investor crowd, starts to move back in our direction, which we feel that it is, that's a big benefit. And then when you add to that, the financing environment was very challenging as Jade mentioned. Pretty much the day that Silicon Valley bank had issues, for the next year or so, the community banking system in the regional banking system, was really just not producing loans. And companies like us, need that system to be healthy. So it appears that that system, is starting to get healthy again. There's many more lenders that are out bidding on our loans now, and we feel pretty good about that too.

Great, great. That's good to hear. And then on CHT, I guess so with the Satori Collective contribution, I heard what you mentioned as it relates to the L.T.D. contribution, but with the Satori Collective, we still pretty confident that that deal will close, or the separate deals will close?

Yes. Once we started to see issues with L.T.D., we immediately started working with Satori to get them ready, for the next closing. And we've been working very well together. They had a - like I mentioned, they had an eighth asset that, they wanted to add to the contribution. So we've been working through the valuation of that asset, and just have to finalize that, and we can move towards the closing. But being that the contribution agreement is already done, we'll modify some terms on what we think, will be a relatively simple agreement, and then we can move to a closing process.

Got it, got it. I know you mentioned the L.T.D. transaction might impact the 2026 financial targets that Caliber put out, but are you still pretty confident that operating income will be positive in 2025, despite what happened with L.T.D.?

Yes, I think those two targets are very different. The operating income target, is based on us continuing to reduce expenses while growing revenues, and we're really making a lot of progress there. The $3 billion in AUM target, as compared to our current AUM, which is approximately $750 million, is a lot of growth between now and the end of 2026, and more than $1 billion of that was driven by CHT. So, we just want to make sure that, we're managing expectations. We have to do the analysis ourselves if you - certainly if you look at it on paper, there's plenty of portfolios for us, to acquire and plenty of ability for us, to achieve that target. But we're still working our way, through that analysis.

Great. Thanks, Chris. Thanks, Jade. That's all for me.

Thank you, Brendan.

Thank you once again. [Operator Instructions] There are no further questions at this time. I will now hand the call back to Mr. Chris Loeffler, for any closing remarks.

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 questions, please visit our website at www.caliberco.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 get engaged with you directly. Thank you and have a good evening.

Thank you. And this concludes today's call. Thank you for participating. You may all disconnect.