CaliberCos Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; unaudited. Caliber is an alternative asset manager and real estate services provider, with Fund Management, Development and Brokerage segments. Financial statement amounts below are in millions unless noted. Consolidated results include funds Caliber controls, so fund assets, debt, revenue and expenses are reported gross; fund cash is not generally available for corporate purposes.
Financial performance
| Metric | Q1 2023 | Q1 2022 | Change / context |
|---|---|---|---|
| Total revenue | $29.5 | $24.3 | Up 21.5%, mainly higher hospitality revenue as hotel operations recovered; management fees, performance allocations and transaction/advisory fees also rose. |
| Total expenses | $29.0 | $24.2 | Up 19.9%, reflecting higher hotel operating costs and increased corporate payroll and growth-related costs. |
| Net income (loss) | $0.3 | $21.7 | Prior period included a $21.5 gain on sale of a multifamily property; no real estate sale gain was recorded in Q1 2023. |
| Net income (loss) attributable to Caliber | $(1.2) | $0.5 | Basic and diluted loss per share was $(0.07), versus income per share of $0.04 and $0.03, respectively. |
| Caliber Adjusted EBITDA (non-GAAP) | $1.0 | $2.2 | Management-defined measure; not a substitute for GAAP earnings or cash flow. |
| Operating cash flow | $1.1 | $4.4 | Lower year over year, particularly at consolidated funds. |
| Investing cash flow | $(36.0) | $(11.4) | Included $19.5 of corporate headquarters acquisition and $6.6 of fund property acquisitions. |
| Financing cash flow | $42.7 | $12.2 | Higher borrowings and $7.6 of fund contributions from noncontrolling investors contributed to inflow. |
Consolidated net margin was approximately 1% in Q1 2023, compared with approximately 89% in Q1 2022; the prior-period figure was exceptionally elevated by the property-sale gain. These consolidated margins include fund operations and should not be read as the standalone margin of Caliber’s management business.
Balance sheet, debt and liquidity
- At March 31, total assets were $331.1 and total liabilities were $258.6; total equity was $72.5. Caliber-attributable stockholders’ deficit was $3.7.
- Cash was $2.3 at the Company level and $8.4 at consolidated funds; restricted cash was $2.2 and $10.9, respectively. Cash and restricted cash totaled $23.7, but fund resources are generally unavailable for corporate use.
- Company notes payable, net, were $51.0, versus $14.7 at year-end. Consolidated-fund notes payable, net, were $147.4, versus $134.3. These are gross consolidated obligations, not equivalent to debt solely recourse to the parent.
- The Company reported $34.8 of unsecured corporate notes outstanding, with an 11.23% weighted-average rate and maturities from April 2023 through June 2024. Management expected to seek extensions; it reported that notes maturing in April and May 2023 were extended or repaid after quarter-end, and it was working on June maturities.
- Aggregate consolidated-fund principal maturities included $29.7 due April–December 2023 and $79.2 in 2025. Caliber also disclosed guarantees of fund loans and actively pursued extensions, repayment or refinancing. The liquidity note reports five outside loans totaling $28.8 with maturities within 12 months after issuance; the MD&A contains an inconsistent statement describing “zero separate loans” while also citing $28.8, so the precise count and wording are unclear in the filing text.
- One consolidated-fund commercial-property loan was out of compliance with its debt-service-coverage covenant at December 31, 2022. The Company was negotiating with the lender as of the filing date; management believed an agreement could be reached, but gave no assurance.
- Management stated it believed current capital was sufficient for at least 12 months. That assessment is subject to refinancing, cash availability and fund-level restrictions. A 100-basis-point change in variable rates would change annual interest expense by approximately $0.8, all else equal.
Material changes and notable items
- Asset management fees increased 37.7% to $1.3; performance allocations increased 5.4% to $2.4. Q1 2023 performance allocations were associated with hospitality assets contributed to Caliber Hospitality, LP; Q1 2022 allocations were primarily tied to the GC Square Apartments sale.
- Hospitality revenue rose 25.0% to $23.2, alongside an 18.3% increase in hospitality expenses. Development-segment revenue rose 85.3% to $1.0, while Brokerage revenue fell 64.7% to $0.3 as transaction volume declined.
- Caliber acquired its headquarters office building for $19.5 in January 2023. Consolidated funds acquired a multifamily property for $6.6.
- Several entities were consolidated or deconsolidated during the quarter, including consolidation of Caliber Hospitality, LP and other VIEs. Changes in consolidation affect reported gross revenue, assets and debt.
- Managed capital was $392.5 at quarter-end, up from $383.2 at year-end; fair-value AUM was $806.9, up from $745.5. AUM measures are management-defined and may not be comparable across firms.
- Subsequent to quarter-end, Caliber completed its May 19 IPO, selling 1.2 million Class A shares at $4.00 for $4.8 gross proceeds. The listing ended the $12.2 buyback obligation. The filing states IPO net proceeds had been used by the report date. Series B preferred shares converted into Class A shares.
Outlook, risks and other disclosures
No specific earnings or revenue guidance was provided. Management described opportunities to source investments and anticipated that its strategy could benefit in a buyer’s market, while noting that results depend on fundraising, deal execution and market conditions. It cited inflation and higher interest rates as increasing construction costs and potentially limiting refinancing, acquisitions and asset exits. Management also noted the need for significant funding to complete development projects; the estimated $2.2 billion cost to complete the active development pipeline is not a commitment to finish those projects, and financing may not be available.
Key risks include the ability to raise investor capital, refinance or extend near-term debt, service debt and guarantees, and execute development projects amid higher costs and uncertain demand. Performance allocations are variable and generally depend on investment realizations. The Company reported no material change to previously disclosed risk factors, no material legal proceeding expected to affect results, and no material change in internal control over financial reporting; disclosure controls were considered effective at a reasonable-assurance level.
Important facts for investors to verify
- Current status, maturity dates, extensions and covenant compliance for corporate and fund debt, including the disclosed $28.8 of near-term guaranteed loans and the DT Mesa covenant issue.
- How much cash and operating cash flow is available to the parent after excluding restricted and fund-level amounts, and whether management’s 12-month liquidity assessment remains supportable.
- Whether the Q1 performance allocations and reported AUM translate into recurring fees and cash generation; distinguish management-company economics from consolidated fund results.
- Actual funding sources, costs and completion plans for the $2.2 billion development pipeline, and the assumptions behind fair-value AUM estimates.
- Use of IPO proceeds and the post-IPO share count, including the preferred-stock conversion and shares issued upon listing.