In this webinar, George Pace of Caliber gives a briefing on the company’s first OZ fund and discusses the second OZ fund.

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Webinar Highlights

• Caliber’s lengthy history as a real estate developer and fund manager in the Phoenix area;
• Caliber’s focus on the middle market, avoiding competition with the larger developers;
• Historical results for assets purchased by Caliber;
• Caliber’s focus on creating generational wealth, and being relational and not transactional;
• Review of projects in Caliber’s first Qualified Opportunity Fund;
• Live Q&A with webinar attendees.

Industry Spotlight: Caliber

Caliber Funds is the private equity arm of Caliber The Wealth Development Company, an Arizona-based corporation that services the capital of individual investors and disburses them into private real estate assets across the Southwest. Caliber offers a diversified portfolio of commercial real estate properties, real estate-related equity investments and other real estate-related assets, each of which Caliber Funds believes are compelling from a risk-return perspective.

Learn More About Caliber

• Visit CaliberFunds.co

Webinar Transcript

Jimmy: Well, joining us now is George Pace, Executive Vice President of Wealth Development at Caliber. Caliber’s been a longtime partner of OZ Pitch Day, and we’re really pleased to have them back on again with us today. George, you’re gonna give a briefing on Caliber Oz Fund I, which closed last year, and then your main presentation’s going to be on fund II, which is currently open. So, George, if you’re ready to dive in, please go on.

George: Thank you, Jimmy. Yeah, I’ll briefly go over a little bit of Caliber’s history, touch on Fund I, which is now closed, and then talk about Fund II on, what we’re buying, and what’s in the pipeline. So, thanks again for having us. I start with the disclaimers. These presentations talk about our expectations, beliefs, plans, objectives, goals, and strategies. They are assumptions. This is not an offer to buy or sell securities. It’s merely a presentation to get to know Caliber a little bit better. So, if we talk about the Opportunity Zone Fund II, I think it’d be best to talk about the sponsor Caliber first and talk a little bit about who we are and what we do. We’re based in Scottsdale, Arizona, founded in 2009, so we’ve been operating for about 14 years. We have 82 employees, and soon I think we’ll be on our way to about 100 employees. We have a lot of growth we’re experiencing, so really building up our infrastructure and getting well prepared for what I think is gonna be a great run in the middle market real estate private equity industry.

Caliber has really built our company on buying predominantly commercial real estate. We’re a vertically integrated company, so in other words, in addition to acquisitions, we manage the development. We have a construction management division, asset management, as well as dispositions. As far as our history, you know, we’ve been a pretty fast-growing company here. We’ve been on the Inc 5,000 list for seven consecutive years. So, it’s one of the fastest-growing private companies in the country. Again, 14 years in business.

If you look at our roster of executives, I think we’re very well-rounded. We have executives with accounting degrees, we have executives that are been in development for many decades in acquisitions. So, a real well-rounded team in real estate. And I think it bodes very well, especially for the Opportunity Zone funds. If you look at the team and all their experience, what we do now in the Opportunity Zone funds is what we’ve done in the past. You know, we’ve bought properties, done major renovations, adaptive reuse. So, as this program came to the forefront, Caliber I think was very well prepared for it, because again, it’s what we’ve done historically as a company.

And if you look at our company, our fund, the target markets that we have is really, we say the greater Southwest. We obviously have a big splash in Arizona being that’s where we’re based. We are also creating a pretty good footprint in Texas. Caliber has properties in Colorado, Nevada, Idaho, Utah, etc. But again, it’s really going towards where we see net migration, where we see a lot of population growth, you know, not just for this year or next year, it’s for the coming years in the future, maybe 5, 10 years, where we see patterns of growth. We like tax-friendly states if there’s such a thing, builder-friendly states. And I think we’re really having a lot of success with these particular states that we’re working in and will continue to build out our base on.

So, if you look at the Opportunity Zone fund program, many know that there’s over 8,700 designated zones in the country. A little under 170 zones in Arizona. Again, where we’re pretty heavily focused. And Caliber is focusing on those acquisitions that are maybe in the $10 million to $50 million range. We want to buy properties that are too big for the small guys, and too small for the big [SP] guys. We’re not gonna compete in the coastal cities, we’re not gonna buy in New York, we’re not gonna buy in LA, Miami, San Francisco. We’re kind of going in those second and third-tier markets. And we think we have a pretty good footprint as far as, you know, kind of being in the know, being in the mix for what properties may be coming available to buy. If there’s some distress out there, we tend to get some calls and get some heads up on situations like that. And most of the properties that we buy, if not all, is really off-market deals.

So, I think being in the industry for 14 years, having a pretty well-known name out there, it bodes well for our acquisitions and the future properties that Caliber will be purchasing here. If you look at our history, you know, we look at single-asset deals here. Our IRR has been 17.7% on those properties that we’ve acquired and closed and disposed of, the 1.84x deal multiple, and that’s with a five-year average hold period. So, a pretty good history there of buying and selling over the years as a company. And our goal at Caliber is really to build generational wealth for the investors, the community, and our team. And what we mean by that is, you know, I always talk to my team about being relational and not transactional. We wanna create offerings for families that they know, that they understand. If something happens to the families that we’re working with, we want their children to be able to step in the shoes of the family and be able to keep that investment going because they fully understand it because it’s been a successful investment for them. We really want Caliber to be a staple in these families’ portfolios for generations and generations. That’s important to us.

And also we just wanna help the surrounding communities. You know, what we’re building, we wanna make sure that we’re doing it for the betterment of the communities, for the people around it. And also our team is very important. I talked earlier about 82 employees, on our way up to about 100 employees. Our team is very important to us. I think we have a great culture here. Our parent company is looking to go public here in the near future. I think that will be very helpful for employee retention. And as we continue to attract I think the best talent out there, and we wanna make sure that we’ve got a great culture and a great environment for those who wanna work with Caliber.

So, if you look at the Fund I, the Opportunity Zone Fund I that raised over $182 million. That was opened in October of 2018. There were 16 properties in that fund and it was predominantly focused in Arizona. And we did start making a splash in Texas. And I think you’re gonna see a lot more acquisitions by Caliber on behalf of our investors in the state of Texas. We right now have a multi-family in Bryan, Texas, so right near College Station. It’s the fastest metro area as far as growth goes in Texas. There’s a lot of demand for military, for manufacturing. And, you know, obviously right near Texas A&M, which is really the largest university in the country, if you look at all their collective campuses combined in the area. So, again, Texas will be a pretty good focus for Caliber as well as Arizona, and maybe some of the surrounding states that I mentioned earlier. And we’ll continue to build diversified portfolios. You know, we believe in diversification and that’s something we’ll continue to do for our investors.

If you look at some of the assets we had in our first fund, DoubleTree by Hilton that’s in Tucson, connected to the Tucson Convention Center, 170 room hotel that’s getting some of the best quality scores in the country for a DoubleTree branded hotel. And you talk about diversification, here we have a behavioral health hospital in Phoenix that has transfer agreements with the local hospitals. So, if a patient has some type of comorbidities, these transfer agreements can take these patients from the local hospitals, and bring them to the behavioral health hospital to get them on track to wellness. We have townhomes that are right near Mill Avenue, near ASU, a very energetic area. And we got that, which is actually an opportunity zone. We have some multi-family in downtown Mesa, right where ASU is building an additional campus, their film school. It’s a block south of Main Street, 144 units.

We’ll also be building some stackable modular homes that are built offsite in Page, Arizona, which are the ZenniHomes. We’ll be using that product for this multi-family right there on Main Street of Mesa. And we also, in Fund I, have an investment in the manufacturer itself ZenniHomes. Jordan Lofts there, that’s a multi-family that is in, Bryan, Texas. Again, we’re starting to do a lot of additional building there. And then, lastly, Riverwalk. That’s, I think, a great acquisition that is right there off the 101 across from the spring training facilities by Talking Stick, by the casino. And we are looking to do a multi-year plan there as an entertainment district, and we have a master plan we’re working out with some major tenants. So, not a whole lot I could say in addition to that right now, but you can expect some announcements down the road there.

And going to our second fund, we’ll continue to work on our diversification and work outside of Arizona in many cases. But again, we still will have plenty of development in Arizona, but we’ll probably diversify amongst some other geographic states in the Arizona and surrounding area. And again, we’ll mention this, the Riverwalk Vertical Development that will be more in Fund II. So, we acquired the right to the Land leases in Fund I, and then Fund II is gonna be the beneficiary of that prime property as we go vertical on many projects in that Riverwalk District there in Scottsdale. Fund II is a $250 million offering. The management fee, you can see 1.5% of aggregate capital contributions. So, it’s just a capital raised. We have carry amounts for two different investment amounts. If you go to the Class B units, which is an 80/20 split, that’s for a million dollars and above. We have great representation from our attorneys, from Tax Council, which is obviously very important in the opportunity zone funds. And we are audited by Deloitte, one of the major tax firms out there.

And this slide, many people know, you know, the tax benefits, you know, the capital gains you may have from a business sale, a stock sale, a real estate sale. You won’t have to pay tax on those particular gains if you place them in the opportunity zone fund until April of 2027. Hopefully, they’re gonna be extending some of these benefits. That remains to be seen. But that would be great for investors and all the sponsors as well. The big benefit is really the 10 years in the fund. You’re invested for 10 years, all that potential growth will come out tax-free.

And I really wanted to highlight this slide about the last part of your community impact. I think that’s very important. You know, for this program, the opportunity zone fund program to get extended, I think us as the sponsors really need to do a good job of reporting what kind of impact we are creating for the communities that we’re investing in. Caliber does have a quarterly impact report that we provide to our investors and that shows jobs created, how we’re improving communities, increasing the taxation dollars, which again, will help the communities that we’re investing in. So, we need to continue to toot our horns here in how this program is working, and again, how this is benefiting all those involved for the opportunity zone funds.

Now, if we look at the current assets and some pipeline here for Fund II, the Fund II does have an investment, and the Mesa Commons project right there in downtown Mesa, again near ASU, 144 units, workforce apartments. And we think this is very strategically located again by the campus there that ASU has opened up right near the light rail, and all the surrounding growth, around downtown Mesa, and then as well as the downtown Mesa revitalization that we’re doing on Main Street. And this shows all the growth in downtown Mesa. So, right there on Main Street, we have 10 buildings that we are actively leasing out and doing some TIs. And I think you’re gonna see a very, very different main street of Mesa here in the next couple of years. And Caliber’s gonna be a big part of that renovation. This shows the different buildings that we are executing leases on, and doing the tenant improvements as we speak here. So, we’re very excited about this, you know, with every building in downtown Mesa that we bought is gonna be occupied hopefully in the next year or two.

Now, if you look at the ZenniHomes, this is the modular homes that I was talking about. We’re gonna get this manufactured offsite in Page, Arizona, probably about $125,000 per unit. We will rent these out, the stackable again, right there on Main Street of downtown Mesa with some light retail below it. And, you know, we think the rents are gonna be very affordable, which is much needed right now, but in a great, great area of Mesa.

And this is one of our crown jewels really is this Riverwalk vertical development. The tax advantage fund number two for Caliber, which is currently opened again is gonna be a big beneficiary of this vertical development. When we acquired the rights to the land leases here, it was mostly an office developer and, you know, as Caliber, and we obviously know Scottsdale very well. You know, we knew that that’s an entertainment district, you know. So, we wanted to come up with a master plan. And again, we have some…a couple of large tenants we’re working on right now, some staple tenants. And then beyond that, there’s many other indications of interest for this land because there’s many companies that wanted to be in this area. But again, because the prior owner of these land leases was more of an office builder, they just couldn’t come to any kind of agreement. So, now that we own it, we think we’re on a very good track for the next several years. They have some very, very successful projects for our investors as we build out this prime land right off the 101 in Scottsdale.

And just to again confirm this was not an offer to buy or sell any securities, is more just an educational presentation on Caliber, our history, and specifically our opportunity zone funds. And if anyone needs to reach out to Caliber or myself, my information is right here on the screen. My cell phone, 623-512-6466, and an email [email protected]. I will be more than happy to answer any additional questions or inquiries. So, thank you again for having me today.