CaliberCos Inc. — Q1 2024 Form 10-Q
Business context and period. Unaudited results cover the three months ended March 31, 2024, compared with Q1 2023. Caliber manages private real estate funds and provides asset management and related services. Reported consolidated results include certain investment funds; during Q1 2024, Caliber deconsolidated Caliber Hospitality, LP, Caliber Hospitality Trust and related subsidiaries after determining it was no longer their primary beneficiary. This materially affects period-to-period comparability.
Key financial results
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Total revenue | $23.0 million | $29.5 million |
| Net income (loss), consolidated | $(5.3) million | $0.3 million |
| Net loss attributable to CaliberCos | $(3.8) million | $(1.2) million |
| Basic and diluted loss per share | $(0.18) | $(0.07) |
| Operating cash flow | $(1.5) million | $1.1 million |
| Cash and restricted cash, ending balance | $5.3 million | $23.7 million |
- Revenue fell 22.3%, mainly from lower consolidated-fund hospitality revenue following deconsolidation and the prior-year performance allocation on contributed hospitality assets. Asset management revenue increased 55.7% to $3.2 million, including higher development and construction fees; performance allocations declined to $0.2 million from $2.4 million.
- Total expenses declined 5.9% to $27.3 million, but interest expense rose 55.7% to $1.3 million. The consolidated net loss was $5.3 million; the reported net margin was approximately negative 22.9%, versus positive 1.0% a year earlier.
- At March 31, total assets were $201.5 million and total liabilities were $115.0 million. Notes payable, net, totaled approximately $100.6 million, including $53.0 million at the Company level and $47.7 million at consolidated funds. Consolidated equity was $86.5 million; equity attributable to CaliberCos was negative $0.7 million.
- Cash flows were affected by VIE deconsolidation. Investing activities used $16.1 million and financing activities provided $5.3 million; cash and restricted cash decreased $12.3 million. Of the $5.3 million ending total, $2.1 million was cash and $3.2 million was restricted cash.
- For an additional view excluding consolidated funds and noncontrolling interests, management reported Q1 unconsolidated revenue of $4.7 million (down 25.6%) and a net loss of $3.6 million, versus revenue of $6.4 million and a loss of $0.8 million in Q1 2023. These are management-presented, non-GAAP-basis results, not substitutes for GAAP figures.
Material changes, outlook and risks
- Liquidity and going concern: Management disclosed substantial doubt about the Company’s ability to continue as a going concern because it has insufficient cash to meet obligations, incurred operating losses and negative operating cash flow, and expects further losses and negative operating cash flows. At March 31, $36.7 million of corporate notes matured within the 12 months following issuance of the statements; as of May 9, $36.4 million of corporate and convertible notes remained due within that period.
- Management’s responses include negotiating extensions or refinancing, seeking new financing, reducing costs, collecting receivables and seeking returns of fund investments, and expanding fundraising. After quarter-end, lenders agreed to extend $12.3 million of corporate notes. The Company also reduced its workforce by approximately 10% in May, with stated expected annual compensation and benefit savings of $4.0 million, and reported other cost-reduction plans with estimated annual savings of $2.5 million. Caliber Hospitality Trust received a $10.0 million Series D preferred-equity investment commitment; a portion is expected to repay amounts due to the Company. Management concluded its plans are probable of alleviating the substantial doubt.
- Debt and covenant concerns: Company corporate notes had a weighted-average interest rate of 11.40%. The headquarters-property loan did not meet its required debt-service-coverage ratio, triggering a requirement to transfer funds to a cash-management account. A consolidated fund’s $4.5 million revolving line matures in October 2024; other fund loans include near-term maturities and extensions. In April 2024, a consolidated fund repaid a matured hotel loan and entered a $19.1 million construction loan at a variable rate of SOFR plus 6.140%, subject to a 12.65% floor. The Company also guarantees certain fund debt.
- Operations and pipeline: Managed capital was $453.9 million and fair-value AUM was $766.7 million at quarter-end. Assets under development included 2,240 multifamily units, 2,386 single-family units, and commercial, industrial, office and retail projects. Estimated total project costs to complete were $2.1 billion, expected to require multiple funding sources; Caliber stated it is not obligated to complete these projects, and funding or completion is not assured. No formal earnings guidance was provided.
- Management cited elevated interest rates, inflation and construction costs, market volatility, fundraising dependence, refinancing availability, and execution and project-funding risks. The filing says previously disclosed risk factors had no material changes. Management believes ordinary-course legal proceedings will not materially affect the Company. Disclosure controls were assessed as effective at a reasonable assurance level.
- The Company reported contingent obligations under two fund agreements that may require contributions to provide investors a 6% IRR upon dissolution; management estimated fund values were below that threshold at quarter-end.
Important facts for investors to verify
- Progress on refinancing or extending the remaining near-term corporate notes, and the Company’s cash available for debt service.
- Whether the stated cost savings, receivable collections, fund distributions and Hospitality Trust investment proceeds are realized on the expected timetable and are available to support corporate liquidity.
- The status of the headquarters loan covenant issue, other near-term fund maturities, and potential obligations under debt guarantees and fund return commitments.
- How deconsolidation and the related changes in reported assets, liabilities, revenue and cash flow affect underlying operating trends and exposure to the hospitality portfolio.
- Whether development projects can secure financing and proceed, and whether management fees and performance allocations can recover without relying on asset sales or exceptional transactions.