CaliberCos Inc. (CWD) Q4 2023 Earnings Report, Transcript and Summary

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 Caliber manages. Over a 15-year history, Caliber has raised over $660 million from our large and growing customer base. Fundraising is a key driver of our growth, and it occurs in the funds we create and manage and importantly this fundraising is non-dilutive to CWD shareholders. Caliber's in-house fundraising team raises money direct from high net worth individuals, family offices, investment advisors, and small institutions. As we fundraise we then invest the capital and increase our assets under management or our AUM. We earn fees by providing financial and real estate services to the portfolio properties. So as our AUM grows, so does our revenue. With that brief summary of Caliber, I'd like to address what we're seeing in the macro environment, including prolonged high interest rates and how this is impacting our business in the short-term. In 2023, we made a number of strategic investments in people and our platform to scale our business based on our growth projections. Year-over-year, this resulted in an increase of $7.3 million or 75.5% in payroll, $2.7 million or 23.9% in other non-payroll operating expenses, and 100 full-time employees in total headcount by the end of the year. During that same period the fundraising environment in our industry degraded and the macro environment proved to be more challenging than we anticipated. In response, we've initiated a review of our current cost structure, and we will be evaluating potential reductions to better reflect current market dynamics as we are committed to our goal of growing profitably in the near term. In our medium and long-term view, we remain confident in the growth prospects for Caliber. To that end, we remain focused on meeting the three-year financial targets we announced in November of 2023, which underpin our growth plans, including the following. Cumulative fundraising of $750 million for the period between 2024 to 2026. A total AUM of $3 billion at the end of 2026. And total annual platform revenue of $50 million per year, essentially our year-end revenue run rate by the end of 2026. How will we get there? We start with fundraising. As I just mentioned, the fundraising environment has been very challenging due to historically high interest rates and the lingering impact of the regional banking challenges, which has caused constraints and delays in funding for projects. Despite these market headwinds in 2023, we made strategic investments to scale our fundraising efforts, what we call the Caliber Fundraising Engine, to position the company to achieve our fundraising objectives. Even as we consider cost reduction measures, optimizing our fundraising engine remains a top priority. Our first growth catalyst is driven by our expansion into the wholesale fundraising channel. We grew our internal wholesale team to significantly extend Caliber's reach into the Registered Investment Advisor, RIA, and Independent Broker Dealer, BD channels. We also engage with Skyway Capital Markets, an independent broker dealer, with a strong network of BD and RIA relationships across the country to serve as the exclusive managing broker dealer for the primary investment products that Caliber has in our funds. These investments are paying off. To-date, we have signed 26 selling agreements with regional broker dealers and registered investment advisors for investments in company-sponsored products. In total, these partners have approximately 381 representatives, representing $3.4 billion of accessible AUM. This is meaningful progress as compared to the single selling agreement we had previously announced as of December 2023. It generally takes about three to six months to build momentum in this channel once the selling agreement has been executed and we are now starting to see the initial dollars coming in from wholesale. We expect progress in this channel to accelerate this year. While selling is important, having the right product to sell is arguably more impactful. An important result of the investments we made in 2023 in operating expenses was the launch of four new fund products. The first, the Caliber Hospitality Trust, a tax favorite acquisition vehicle for attractive income producing hotels. The second, Caliber's Opportunity Zone Fund, a $250 million dollar offering focused on tax advantage investing in Arizona, Colorado, and Texas. The third, Caliber's Opportunistic Growth Fund, specifically designed to capture undervalued real estate, due to the distressed market we are now seeing. And the fourth, Caliber's Core Plus Income Fund, a great way to invest in undervalued income property with Caliber for the long-term. Importantly, each of these four products was created and launched strategically to capture what we believe is the best real estate investment opportunity we have seen since the beginning our business during the 2008 financial crisis. With the investments we've made in our caliber fundraising engine and the new products we've created specifically to capture the market we find ourselves in today, we are well positioned to grow. Moving on 2023 was a challenging year in the real estate investment industry, due to macroeconomic uncertainty, high interest rates, and inflation. According to MSCI, Real Capital Analytics, a commercial real estate transactions were down 50% year-over-year in 2023, the sharpest decline we've seen since 2009. Despite challenging conditions, Caliber still brought deals over the finish line according to the business plans we had set for each of those assets. For example, we completed the sale of Northsight Crossing Retail Center in Scottsdale, Arizona. Through a single asset syndicate, we purchased the property that includes more than 112,000 square feet of retail space in January 2022 for $21.1 million. After completing a number of tenant improvements, we executed new leases and brought the facility to 98% occupied. We then sold the asset in October 2023, less than 24 months after purchase for $27.4 million, generating an internal rate of return of approximately 22% after fees and other expenses. We also sold Southridge, an 80-acre parcel of land in Johnstown, Colorado, to journey homes. The land is part of Caliber's Johnstown development, a 750 acre master plan mixed-use development project. After fees and other expenses, the sale generated an IRR of approximately 22.9% and Caliber earned approximately $1.5 million in profit sharing interest from the sale of the project and fees earned throughout the life of the project. Given current industry conditions and low transaction volume, these profitable transactions serve as further proof that Caliber is in the right markets and we help investors make money across all market cycles. The current distressed real estate theme will be a catalyst for Caliber in 2024. The ongoing regional banking turmoil in the United States creates an opportunity for Caliber since we're positioned to provide a solution to regional banks or under pressure from non-performing loans, which are caused by the rapid rise in interest rates and market dynamics such as the office properties that are not able to maintain occupancy. According to Bloomberg, the pipeline of opportunities in distressed and undervalued real estate is ripe with $218 billion in potential distressed commercial real estate of which $82 billion is in true outstanding distress. MSCI Real Assets puts the number of distress commercial properties at $85 billion, noting this is the highest level since the third quarter of 2013. On the ground, we see this increasing at a rapid rate and spilling into asset classes outside of office. As an example, we are seeing multifamily assets head to foreclosure with high levels of occupancy and attractive rent rates. This simply indicates that any assets purchased in the 2020 to 2022 era may well have been overpaid for, creating a distressed capital stack with a performing asset. Thankfully, Caliber was primarily selling assets during this period and was not investing heavily as other firms were. We remain focused on an especially strong set of undervalued and stressed real estate investment opportunities driven by the post-COVID environment and high interest rates. We will continue to source opportunities directly from our existing deal pipeline and increasingly collaborate more closely with the regional banks that are under pressure to get non-performing assets off their balance sheets. These examples highlight the strength of Caliber's business model, which is a significant competitive advantage. We specialize in complex projects that are often overlooked by most institutional asset managers. Our unique focus on these opportunities, including land development, opportunity zones, distressed assets, and more, are also highly profitable, enabling us to earn higher returns in IRR, compared to your average real estate transactions. Our objective is to make money in all market conditions, and our expertise in managing complexity enables us to secure and execute opportunities that others may not be able to capture. Our third growth catalyst is product focused, driven primarily by the launch of the Caliber Hospitality Trust or CHT. As a reminder, CHT is a private hospitality Real Estate Investment Trust managed by Caliber. It was structured as an [Indiscernible], which is a tax-efficient vehicle for us to merge hotel assets together on a tax-free exchange. CHT was established to provide hotel owners across the country with a compelling alternative to asset sales to access liquidity, reduce and extend debt, and pay for property improvement plans or access well-priced operating capital by contributing their hotel assets to CHT. Last year, we contributed Caliber six hotels into the trust and received a commitment for another nine properties from LTD Hospitality in August. Last month CHT acquired the Holiday Inn Newport News located in Newport News, Virginia, the first of nine hotel assets committed. In total, the portfolio of nine assets will increase CHT's total portfolio to 15 hotels and $410 million in assets under management once the transaction is complete. With additional contributions currently in the pipeline, the number of hotels in the Trust is expected to grow to 49 assets and increase AUM to exceed our $1 billion initial target. We earn a fee calculated as 95 basis points of the enterprise value of the hotel assets we manage in the Caliber Hospitality Trust, which is a combination of an asset management fee of 70 basis points and an administrative fee of 25 basis points. Once we achieve our target, CHT will generate approximately $10 million in fees per year, doubling Caliber's overall asset management fees on an annualized basis, not inclusive of the performance fees that we have a right to earn. These three catalysts, fundraising through the Caliber engine, opportunities and undervalued real estate assets, and the roll-up of CHT together provide a roadmap for Caliber to achieve our three-year growth targets. Turning to an overview of the full-year of 2023, total consolidated revenues increased 8.3% to $90.9 million, primarily due to the higher hospitality revenue. The platform revenue decreased 14.4% to $20.6 million due to lower asset management revenue, partially offset by higher performance allocations. We earned a one-time fee, setup fee, associated with the opening of our second Opportunity Zone Fund in 2022, which we formally launched in 2023. However, core asset management fees continue to improve in 2023, increasing by 15.1% from the prior year. AUM decreased by 0.6% year-over-year to $741.2 million, primarily driven by asset sales, partially offset by asset purchases. Managed capital increased 14.2% year-over-year to $437.6 million, reflecting the success of our continued fundraising into Caliber’s investment vehicles. For the full-year, 2023 reported a net loss attributable to Caliber’s of $12.7 million, or $0.63 per diluted share. The loss reflects an accumulation of expenses related to the significant investments we made throughout 2023 and the growth of our team, the launching of three new funds, and the launching of the Caliber Hospitality Trust. Notably, our fourth quarter was our strongest quarter of the year and began to show progress on the investments we've been making in the business. I will now turn the call over to Jade, who will take you through our financials in greater detail.

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 fees, brokerage fees, development and construction fees, and certain financing fees. The other line item is performance allocations or carried interest, which are earned on cash distributions made by a particular fund and are generated on cash flows from operations or when we sell or refinance any real estate assets held in a fund. To create more comparability of our results to our peers, we have introduced fee-related earnings and distributable earnings measures. These supplemental non-GAAP measures are widely used in the asset management industry, and including our version of these measures creates a simpler way of comparing our platform across the industry. We have included these additional measures as part of our reconciliation between net income or loss and adjusted EBITDA. Finally, with the culmination of our work on CHT and the contribution of third-party hotels to the portfolio, we anticipate a significant change to the assets which are included in our consolidated financial information beginning in the first quarter of this year. This will also add to the simplification and transparency of our financial results for our investors by removing hotel performance that has historically been included in our consolidated results. We believe that these changes align with how we view the business, make our performance clear to a reader by simplifying our structure, and ultimately creates more comparability and transparency of our results. So with that background, let's go through our results for the fourth quarter and full-year 2023. As Chris mentioned, our fourth quarter was our strongest quarter of the year and began to show progress on the investments we had been making in the business. Fourth quarter total consolidated revenue was $23.9 million, an increase of 11.5% versus the same period a year ago, primarily due to higher performance allocations and offset by partially lower asset management fees. Consolidated asset management revenues were $4.3 million, a 7.2% increase, compared to the same period a year ago, due to the higher levels of managed capital. Keep in mind, consolidated asset management fees are different than what we show on an unconsolidated basis, because we have to eliminate any fees earned related to assets that we consolidate in accordance with GAAP. Total managed capital grew from $383 million to $438 million from December 31, 2022 to 2023 respectively. Managed capital is defined as the total capital raised from investors in our company or our funds at any point in time, excluding common stock in CWD. We use this information to monitor, among other things, the amount of preferred return that would be paid at the time of a distribution and the potential to earn a performance fee over and above the preferred return at the time of the distribution. Our fund management fees are based on a percentage of managed capital or a percentage of assets under management and monitoring the change and composition of managed capital provides relevant data points for Caliber management to further calculate and predict future earnings. Consolidated expenses for the fourth quarter were $30.7 million, up 16.4% over the same period one year ago, primarily due to an increase in hospitality expenses, slightly offset by a decrease in operating costs. As Chris explained in detail, we made significant strategic investments this year to grow our team, expand the distribution of our products, and scale our infrastructure for future growth. For the fourth quarter of 2023, net loss attributed to Caliber, which excludes net loss attributable to non-controlling interest, was $2.4 million, or $0.11 per diluted share. This compares to net loss attributed to caliber of $2.5 million or $0.14 per diluted share in the same period a year ago. Now turning to the unconsolidated or platform results, platform revenues for the fourth quarter were $7.2 million, an increase of 32.6%, compared to the same period a year ago. Asset management revenue of $6 million was up 11.5%, compared to the year ago period. And performance allocations of $1.2 million were up significantly driven by the sales of Northsight Crossing and Southridge. These results are an early indication of the positive impact from the investments we have made growing the top line performance of the business. Expenses for the fourth quarter of 2023 were $7.4 million, relatively consistent with the same period a year ago. Caliber adjusted EBITDA for the fourth quarter was $1.6 million, compared to an adjusted EBITDA loss of $1.8 million during the same period a year ago due to an increase in total revenue primarily driven by increases in development and construction fee and performance allocations partially offset by a decrease in fund setup fees and brokerage fees. For the full-year 2023, consolidated revenue was $90.9 million, up 8.3%, compared to 2022, primarily due to an increase in revenues in our consolidated fund hotel assets. The revenue growth was driven by increased occupancy and higher average daily rates and due to the consolidation of the Hilton Tucson East Hotel during 2023. The growth was partially offset by lower asset management revenues, which decreased 31.1% to $10.6 million. The decrease in asset management revenues was primarily due to fund setup fees earned for services performed in conjunction with the formation of the Caliber Tax Advantage Opportunity Zone Fund II during 2022. Consolidated expenses of $119.5 million were 29.3% higher due to an increase in consolidated fund asset related expenses due to rising labor costs and variable costs associated with increased revenue, such as management and franchise fees and loyalty program costs, and from operating expenses from Hilton Tucson East, which was consolidated during 2023. Additionally, higher operating costs were driven by increased headcount and our investment in human capital across the organization, in line with the company's growth initiatives. As Chris already addressed, we have initiated a review of our cost structure to determine if cost reduction measures are appropriate given recent fundraising levels and revenue generation. As we've explained, our investments were based on revenue projections that did not materialize in alignment with revenue growth. Looking ahead, we have improved visibility to our revenue pipeline, and our infrastructure needs to support that growth, which will enable us to right-size our cost basis on an ongoing basis. Interest expense for 2023 was $4.7 million, compared to $1.1 million in 2022. The increase in interest expense was primarily due to the increase in corporate debt, which grew from $14.7 million at December 31, 2022 to $53.8 million at December 31, 2023. Of that increase, $16.2 million was in the form of an assumed mortgage on the acquisition of our corporate office, with the remaining $22.8 million used to acquire assets and fund investments in our business. 2023 net loss attributable to Caliber was $12.7 million, or $0.63 per diluted share, compared to net income of $2 million, or $0.11 per diluted share in 2022. Caliber adjusted EBITDA loss for the full-year 2023 was $1.3 million, compared to adjusted EBITDA of $5.5 million during 2022, due to the higher expenses we outlined related to investments in our strategic growth initiatives. Platform revenue of $20.6 million decreased by 14.4% year-over-year, due to lower asset management revenue, partially offset by higher performance allocations. As Chris mentioned, we earned a one-time fund setup fee associated with the opening of our second Opportunity Zone Fund in 2022, which we formally launched in 2023. However, core asset management fees continue to improve into 2023, increasing by 15.1% from the prior year. To reiterate our three-year growth objectives: first, we expect to expand our fundraising activity bringing in $750 million from 2024 through 2026. We expect the investments we made in our private client and wholesale distribution platforms to be the primary contributors to achieving our fundraising targets, which will enable Caliber to accelerate growth in our AUM. Second, we expect to grow AUM to $3 billion, driven primarily by expanding our product offerings and growing the number of assets in the Caliber Hospitality Trust, which we anticipate reaching $1 billion in AUM. Third, we are committed to driving profitable growth by achieving $50 million in annualized total platform revenues by the end of 2026. Caliber's unique business model provides opportunities across different markets and resiliency in challenging times. Our proprietary middle market real estate funds enable us to generate multiple revenue streams from various investments and we are well positioned for future growth as we continue to seize new opportunities and investments, particularly those that arise in market dislocation and disruption. I'll now turn it back to Chris for his final remarks before we take your questions. Chris?

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.