CaliberCos Inc. (CWD) Q4 2024 Earnings Report, Transcript and Summary

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 in time we find ourselves in, to acquire distressed real estate at a discount to its inherent value. And number four, enhancing Caliber's access to capital, with growth in wholesale fundraising and the introduction of several Caliber level corporate financings, which Jade will touch on in his section. Allow me to provide a few more details, as we look back over the prior year. In May of 2024, we began implementing reductions in our operating expenses, to align our cost structure with current market dynamics. Our target was to reduce annualized operating expenses, by $6 million and we're pleased to report that, we began to achieve those reductions in the second half of the year, completing in Q3, 2024, our first profitable quarter since we went public. We expect to realize the full benefits of our expense reduction efforts in 2025. While the road to consistent profitability may not be completely linear, as evidenced by our fourth quarter results, we believe we are moving in the right direction to make 2025 profitable for the full year. A key component to accelerate Caliber's path to profitability, is our decision to narrow our investment focus to the three real estate asset classes we find most attractive multifamily residential, hospitality and multi-tenant industrial. In these three asset classes, we are continuing to focus on middle market projects where local knowledge, is key and larger institutions may not have a competitive advantage, as Caliber does. Caliber is committed long-term to these three key asset classes, and to aligning our team of experts within them. We're excited to reenter multifamily investment in a more meaningful way, now that valuations have begun to drop from their peak. As you may recall, Caliber sold most of its multifamily assets while valuations were elevated, and did not reinvest at the same level. We now see opportunity as multifamily real estate, is the second most distressed asset class behind office nationwide. Distress in our business carries, with it the opportunity to buy assets at a potentially favorable price, and produce potentially attractive risk adjusted returns. You've heard me speak in detail about hospitality, so I'll only reaffirm our commitment to the sector, and to the opportunity we see in it. The pandemic caused hotels not to be overbuilt in the last development cycle, while simultaneously reducing existing hotel supply through conversions of hotels to other uses. This unique setup reduces supply with demand returning, and creates an excellent opportunity for acquiring existing assets, and selectively developing new ones. We are building a growing track record of success in smaller multi-tenant industrial assets. I'd like to share with you why we believe that it's an excellent time, to invest in this asset class, which includes assets from self-storage, manufacturing and local warehousing. First, sometimes it's a little easier to say what we are doing, by stating what we're not doing. We are not investing in large million plus square foot industrial assets, with single tenants. This is a space well covered by our institutional competitors, and a space we do not believe we can gain a competitive advantage in, as compared to the middle market assets we focus on. We see that the industrial sector, is benefiting from a durable trend of companies throughout the world returning to build and manufacture in the United States. As an example, in Phoenix, Arizona, our most active market, we have seen this trend in action with Intel and TSMC, recently investing approximately $100 billion in semiconductor manufacturing facilities. In addition, during the first quarter of 2025, TSMC announced plans for another $100 billion of investment in their facilities. These two large companies have driven the geographic expansion, and formation of hundreds of smaller companies that supply or otherwise support Intel and TSMC manufacturing. Caliber expects, we will have a role to play in investing in, and developing the infrastructure necessary for the middle market participants in this industry. As I stated, we are prioritizing income producing assets, and reducing our development footprint, to 30% or less of our asset portfolio. To do this, we expect to sell parcels throughout our projects in Johnstown, Colorado as the infrastructure on that land is completed. For projects that are in an earlier stage, we have chosen to sell the project, if it does not meet one of our three asset classes. Caliber's plans allow us to sharpen our focus on fewer priorities, which further allows us to focus our team's time, and increases our results with a lower overall cost structure. They also align our business with the opportunities we see in the market today, moving away from a traditional development cycle and towards a cycle like the one we experienced in our first five years in business. Given our 16 years of experience, we know what to do in real estate cycles such as this, and how to help investors take advantage of it. Continuing with some business updates, we launched 2 new programs during the fourth quarter that, target accredited investors who are seeking tax efficient investment opportunities. In October, Caliber launched our innovative Qualified Opportunity Zone Fund Roll Up program, offering a potential solution for investors who have not been able to realize the benefits of these complex investment vehicles. At that time, we completed our first merger with a third-party fund resulting in a $14 million increase in managed capital in Caliber's existing Qualified Opportunity Zone Fund, the Caliber Tax Advantage Qualified Opportunity Zone Fund LP or CTAF-1, as we call it, and this capital has already been successfully deployed into new projects. We are actively seeking additional opportunities for the Opportunity Zone Fund Roll Up Program, which includes investors with un-deployed capital in their personal funds, and projects that may be attractive acquisitions or joint ventures. The second program, we launched is the Caliber 1031 exchange program, an elevated experience for 1031 exchange investors, who are seeking quality income from generating assets. Investors seeking to complete a 1031 know that they are often faced with two choices. Number one, hire brokers and buy a new asset on their own or number two, invest in a highly structured financial product called a DST. The first choice requires the investor to become a real estate expert, and create their own deal flow on attractive assets, all within 45 days of the sale date of their property. The second choice typically comes with upfront fees that reduce the investor's capital by 7% to 10%, and require the investor to buy a new asset that, may be priced close to market value. Caliber's program offers a third way forward, combining the benefits of low fee structure with Caliber's ability to acquire assets at potentially below market prices. The program also positions Caliber, to act as an asset manager helping alleviate the challenges investors face, with day-to-day real estate ownership. Since Caliber launched the program, we have seen robust lead flow of interested parties and we are in the process of learning what each investor needs and matching them to our pipeline. We hope this program will also support our growth in the wholesale fundraising, making Caliber a unique provider of tax solutions to investment professionals. Last week we announced the completion of our first 1031 transaction, a $10 million acquisition of a 602 unit self-storage facility in Rifle, Colorado. This acquisition was made on behalf of a group of investors through a Tenant in Common or TIC arrangement. We will oversee all third-party relationships in connection with managing the property and the planned construction of additional climate controlled storage units. Moving on from business updates to project updates within our portfolio of managed funds. As we mentioned last quarter, in September we acquired the Canyon Corporate Plaza in Phoenix, which has over 300,000 square feet of Class A office space and two parking garages. This is our first distressed acquisition since the 2012, era of distressed assets. Our plan is to renovate the two buildings, into at least 400 apartment units with the potential to go up to 700 units throughout the site. We recently received the density waiver we needed for this project, and we are on track now to finalize our plans and set a date to commence construction of Phase 1. Considering this, we plan to raise another round of capital on the project that, combined with the construction loan will fully fund Phase 1. We are also making good progress on our SP10 project, which is the conversion of a hotel into a multifamily development. Permitting has been approved, and the demolition of the tower is complete. While construction of Phase 1 has started, we have chosen to move from a phased project plan, to completing the entire plan in a single phase. In light of that, we are in the market to refinance our Phase 1 construction loan, and complete phases 1, 2 and 3 together. This is driven by our view that we will save on overall project costs in a single phase, and the fact that the construction financing environment has improved since we placed the first loan. Our Pure Pickleball and Padel project at Riverwalk in Scottsdale, Arizona is also moving forward. As a reminder, the project entails building a state-of-the-art Pickleball and Padel facility including 50 courts for daily open play as well as large tournaments, a clubhouse, fitness center, pro shop, team room, office, restaurant, cafe and locker rooms. The project plans are nearly complete, and presuming we received an approval from the Salt River Pima Maricopa Indian Community, we will seek to place a construction loan and commence construction soon. Moving on to the Caliber Hospitality Trust or CHT, which is Caliber's strategy to rapidly grow AUM, by acquiring quality income producing hotels nationwide. I have several updates to share. In October, we reached a definitive agreement with the Satori Collective, to contribute seven hotels to the Trust. These properties include a mix of middle market, full service and select service, and extended state hotels in the Midwestern and Southern U.S. that are branded by Marriott, Hilton and IHG. We are currently modifying the terms of the Satori agreement, and now expect eight hotels to be contributed instead of seven, as initially announced. Following this modification, we expect to move toward an efficient closing with the institutional investors we had previously identified. In contrast, our contribution agreement with L.T.D. is no longer expected to close, in the state that we previously announced. CHT had agreed to acquire nine hotels from L.T.D., and after closing on the first asset, the Trust had been progressing steadily to acquire the remaining eight hotels, in a single closing towards the end of 2024. In the fourth quarter of 2024, the eight hotels experienced a decline in their expected operating performance, which we attributed to the level of exposure, the portfolio has to military and federal government driven spending, and the government's desire to reduce its spending. While we were disappointed that we could not find a revised structure to complete the L.T.D. acquisition, we believe the decision to pause and move on to other assets is a good example of our discipline, and our stewardship of capital. We simply do not know how governmental spending will evolve, and if the L.T.D. portfolio would achieve its targeted performance. Under the terms of the prior contribution agreement, the portfolio did not make sense, and in light of its performance, Caliber is only willing to invest in assets that are accretive to both CHT and to Caliber. Market conditions for hotel owners are changing. Brands like Marriott, Hilton and IHG are all requiring their hotels, to be renovated and owners are not likely to be able to borrow money, to satisfy the brand's demands, with interest rates remaining elevated. Many of those same hotel owners, saw their cash reserves depleted during the pandemic years, and are faced with a challenging capital stack, on assets that are now operating profitably again. In our eyes, these conditions make CHT's offering stronger, than any other point in time. The ability for hotel owners to roll up assets, on a tax deferred exchange and use the power of the combined portfolio, to solve for renovation and refinance requirements may well offer the only viable alternative to a sale of that owner's assets, and a potentially disappointing financial and tax result. Considering this, we have aggressively moved to structure contracts going forward in a manner that allows the transaction to close easily, and allows the investors in those hotels to benefit when their portfolios are driving performance. I am pleased to report, we have seen our pipeline of potential contributors grow by three new parties, since January of 2025, and we expect this trend to continue. Moving on to our 2026 targets, based on the change in direction with L.T.D., and the impact on it on CHT's timeline overall. We are currently evaluating how that will impact our AUM target of $3 billion, by the end of 2026 and we will keep everybody informed as we complete that analysis. From a fundraising perspective, the fundraising environment remains challenging and not surprisingly the fourth quarter was disappointing, due to the disruption around the election and the L.T.D. result that I just mentioned. For the fourth quarter, we were - for the first quarter we are experiencing some ongoing softness, but we're pleased to see that the wholesale channel is picking up something we'd been anticipating, and expect to see continue. As our fundraising can be event driven. The movement of timelines of L.T.D. Satori and the subsequent planned CHT roll ups has shifted results. We are also happy to share from a regulatory development earlier this month, the SEC issued new guidance on the use of general solicitation, and private placements under Rule 506 (c), making it simpler to qualify investors. Issuers like Caliber will now be able to satisfy the verification requirements of Rule 506 (c) by relying on minimum investment amounts, including uncalled capital commitments, and related representations from investors. This is great news for Caliber, because it significantly reduces the administrative burden of qualifying investors, and will make the process of investing with Caliber more seamless. Finally, as we've discussed before, we continue to strive for ways to help investors more effectively understand, analyze and value Caliber's performance. To do so, in the first quarter, we published a financial supplement providing visibility, to what we call our platform performance. These results exclude the impact of consolidation, which we are required to report under GAAP. The supplement is available on our website, and it contains results from 2019 through 2024, to provide investors with the necessary information to measure changes and compare prior periods of our platform performance. This supplement will be updated each quarter, and will remain available to investors on our Investor Relations section of our website. Additionally, we're pleased to share that today we have introduced a new disclosure in our 10-K that provides shareholders with a better understanding, of the value of the assets in our funds, including the estimated value of Caliber's performance allocations. As of year-end 2024, performance allocations were estimated to be $89 million. Performance allocations are commonly referred to as carried interest, or promote in our industry and they are not included on our balance sheet. We hope that sharing this estimate, will assist investors in evaluating Caliber's net worth, or book value as performance allocations are not included on the balance sheet. We expect to regularly update this estimate as Caliber grows AUM, and expect us to grow our performance allocations. I'll now turn the call over to Jade, who will provide additional details on this disclosure, as well as our fourth quarter and full year results.

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 of our performance allocations, currently estimated to be about $89 million, has the effect of increasing Caliber's net worth or book value substantially, and providing an important picture for investors to understand a component of Caliber's value as a business. Moving on, I also wanted to highlight developments related to the company's liquidity, and going concern disclosures. Beginning in December 31, 2023 and throughout 2024, we disclosed the progress the business was making with regards to our liquidity and going concern. Specifically, we express - we experience reoccurring losses and we're managing the maturity of approximately $33 million, of one-year corporate notes without having a corresponding amount of cash on hand, to meet those obligations as they became due. As of December 31, 2024, we continue to make progress on managing those maturities, which will be emphasized in our audit opinion. We have two primary programs available to help us manage these obligations. The first is refinancing existing notes into a 36-month unsecured note program. We have approximately $7 million of notes that have completed this refinance, or are in the process of completing this refinance. We anticipate continued success in this program going forward, as the investors in our corporate notes learn about the merits of this offering. The second is raising newly issued preferred stock. We have two offerings, a Series A and a Series AA. The Series A is our private placement convertible preferred stock, through which we can raise up to $15 million. The Series AA was approved on March 12, 2025 through Reg A+ to raise up to $20 million. Half of the proceeds from the Series A - , are expected to be used to repay matured corporate notes. The other half will be used for general corporate purposes, including Caliber's plans to grow. Our raise under each program has been gaining traction, and we expect both programs to be successful. We have also backstopped our cash position, by executing an equity purchase agreement for up to $25 million of common stock. We believe these measures are part of a holistic plan of strong corporate finance, and they will help us manage satisfying our commitments as they come due. We also expect these programs will offer Caliber, the access to capital it needs, to take advantage of the numerous revenue generating opportunities Chris mentioned previously. Now turning to our results, for the fourth quarter and full year 2024. Total fourth quarter platform revenue of $4.6 million was driven, by asset management revenues. This was a 36.1% decrease, compared to the prior period, due to carried interest generated from the sale of Northside Crossing, and Southridge in addition to the higher levels of development activity, relating to our behavioral health facilities in the prior year. Total platform expenses in Q4, were $10.7 million, an increase of 24% compared to the prior period, primarily due to a decrease in operating costs, related to payroll and payroll related expenses, and a corresponding offset related to bad debt expense of $4 million. Platform adjusted EBITDA loss for the fourth quarter was $1 million, compared to platform adjusted EBITDA gain of $1.6 million during the same period a year ago. Due to the combination of factors impacting platform revenues, and expenses noted previously. Platform revenue for full year 2024 was $21 million at 1.9% increase, compared to last year, primarily driven by asset management revenues of $20.6 million. Performance allocations were nominal at $400,000. 2024 platform expenses of $33.1 million, represented an increase of 9.4% from $30.2 million last year, mainly due to $4 million of bad debt expense, offset by costs related to payroll and payroll related expenses. Platform adjusted EBITDA loss, was $2.4 million - $2.7 million, compared to adjusted EBITDA loss of $1.3 million in 2023. Due to the impact of a loss on our [sea raft] investment in 2023, and the impact of our impairments and bad debt expense in 2024. Managed capital was $492.5 million a 12.5% increase, compared to December 31, 2023, with originations of $69 million partially offset by returns of capital of $14 million. For consolidated results, fourth quarter total consolidated revenue was $8.7 million, compared to $23.9 million the same period a year ago, reflecting the deconsolidation of Caliber Hospitality, LP and CHT in March 2024, and DT Mesa in September 2024. Consolidated expenses for the fourth quarter, declined by 54.4% to $14 million from $30.7 million. The decrease was primarily, due to a decrease in consolidated fund expenses, driven by the deconsolidation of the same assets noted prior. For the fourth quarter of 2024, net loss attributed to Caliber, which excludes net loss attributable to non-controlling interest, was $11.4 million or $0.51 per diluted share. This compares to net loss attributed to Caliber of $2.4 million or $0.11 per diluted share in the same period a year ago. For the full year 2024, total consolidated revenue was $51.1 million, a 43.7% decrease, compared to 2023, again reflecting the deconsolidation of Caliber Hospitality, LP and CHT and DT Mesa, as previously discussed. Similarly, consolidated expenses for 2024, totaled $64.4 million, representing a year-over-year decrease of 46.1%. The decrease was also due to the deconsolidation we discussed. Full year 2024, net loss attributable to Caliber was $19.8 million or $0.90 per share, compared to a loss of $12.7 million or $0.63 per share last year. Consolidated adjusted EBITDA in 2024 was $7 million, compared to adjusted EBITDA loss of $10.2 million in 2023. Turning to an update on our balance sheet, we have approximately $30.7 million of corporate debt consisting of 202 individual unsecured notes, coming due in the next 12 months. Each note generally has a 12-month term, with an option to extend for an additional 12 months. Although, we have historically been able to extend a significant number of these notes, we have moved forward with the steps I mentioned earlier, to either refinance these notes on a longer term basis, or repay them. We continue to focus on collecting our outstanding accounts receivable, and notes receivable. Over the past year, we have collected over $8.7 million in investments, and notes receivable and our overall accounts receivables, decreased by approximately $3.8 million in the year. We have begun to see the impact of these efforts, and their contribution to our improved platform performance for the full year. We continue to look for opportunities, to refinance and recapitalize our balance sheet, and are confident in our ability to achieve our goals. We have noted an increase in lender activities, following a slowdown that began in April 2023, and continued through the November 2024 election, and hope to capitalize on a more normal environment going forward. I'll now turn it back to Chris, for his final remarks before we take your questions.

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.