Caliber – The Middle Market Is The Sweet Spot Says This Wealth Builder
Caliber is a vertically integrated asset management firm whose primary goal is to enhance the wealth of investors seeking to make investments in middle-market assets. The company creates, manages and services proprietary products, including middle-market investment funds, private syndications and direct investments. Its funds include investment vehicles focused primarily on real estate, private equity and debt facilities. Caliber says that its middle-market specialty allows the company to compete with agility and speed in an evolving arena of alternative investments.
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00:00 (upbeat music)
00:02 - Chris Lafleur, the CEO of Caliber, again, ticker CWD.
00:08 Chris, how are you doing this morning?
00:09 Where are you joining us from?
00:10 - I'm doing great.
00:11 Joining you from sunny Scottsdale, Arizona.
00:14 It's a little warm here today, though.
00:15 - Wow, well, you must've got up early,
00:17 then that means it's what, about 8 a.m. for you over there?
00:19 - Yeah, I've got young kids, so that's easy for me.
00:22 - Oh, okay, yeah, they were probably up hours before that.
00:26 - Yep, absolutely.
00:27 - You play any golf out there in Arizona?
00:29 - Yeah, you know, sometimes I do.
00:31 I'm the best guy to play golf with
00:32 because I'm really bad, even though I love it,
00:35 and so I'll make you look great on the course.
00:37 - All right, well, let's do it.
00:38 Next time I'm out in Arizona, I'll hit you up
00:39 and we'll have to go get nine or 18 in real quick.
00:42 - Sounds good.
00:43 - All right, so let's hop into it, Chris.
00:46 Do you mind just giving us a brief overview of Caliber,
00:48 what it is that you guys do?
00:50 - Sure, yeah, we're in the business
00:51 of building generational wealth for our customers,
00:54 the communities that we invest in
00:55 and the team that invests here.
00:57 We do that predominantly by investing in real estate,
01:00 managing real estate and developing real estate
01:02 in areas that we know, mostly the inner mountain west.
01:05 As a 15-year-old business now,
01:08 Caliber's been recognized
01:09 as one of the fastest growing companies in the country,
01:12 seven times in a row on the Inc. 500.
01:14 And we come today, having come public in May of this year,
01:19 bringing our story to the market.
01:22 - So Chris, why do you guys focus on the middle market?
01:24 What advantages does this offer to your investors?
01:28 - Yeah, so if you look at the space I exist in,
01:32 we're an alternative asset management firm,
01:34 which basically means kind of using Charles Schwab
01:37 as a proxy.
01:38 If you buy stock in Schwab,
01:40 you don't own any specific fund or investment
01:42 that Schwab has created,
01:43 but you own the revenue associated with all the investments
01:47 and strategies on the Schwab platform.
01:50 And similar to that, when you buy stock in Caliber,
01:53 you own a portionate share of the revenue that we generate
01:57 from all the different funds and strategies we create
01:59 in the alternative investment space,
02:00 primarily in the real estate private investment space.
02:02 And so when you look at what's going on in the market,
02:07 this market is growing significantly.
02:09 In 2020, there was approximately $10 trillion
02:12 in global asset center management
02:14 in alternative investments.
02:15 In the next five years,
02:16 that's expected to grow to 20 trillion.
02:19 And the problem is that there's not enough players
02:23 in smaller assets doing smaller funds.
02:26 So Caliber creates those smaller funds,
02:28 invest in those smaller assets,
02:29 which are still at 25 to $50 million asset
02:32 and a $250 million fund,
02:34 but it's essentially a middle market alternative
02:36 to a larger player like a Blackstone.
02:39 - Got it.
02:40 So I imagine with kind of taking on some of these
02:42 bigger name players,
02:43 the leadership team is gonna be important.
02:46 What type of experience and expertise
02:48 does Caliber's leadership team have?
02:50 - Yeah, so I co-founded the company 15 years ago,
02:53 started coming out of public accounting.
02:56 And then since then we've built an incredible team.
03:00 We've got an executive leadership team
03:01 that's been working together on average
03:03 for around seven years now.
03:04 Ex-PWC, CFO, fantastic chief development officer
03:09 who rolled his business into Caliber
03:11 and created essentially a combined platform.
03:14 My co-founder is fantastic on the real estate side
03:17 and the investment side.
03:19 And then we've got a great board.
03:20 Bill Gerber on our board
03:22 is a former CFO of TD Ameritrade.
03:24 Dan Hanson created one of the best public hotel companies
03:27 in the country, Summit Hospitality.
03:30 Many other great parties involved with Caliber.
03:33 - Yeah, it sounds like you guys
03:34 are in some good hands there.
03:36 Chris, I know your Q1 report showed some strong numbers
03:39 at 21.5% revenue increase
03:42 and expanding your assets under management by 30%.
03:45 What was the major contributing factor to this growth
03:47 and do you expect it to continue going forward?
03:50 - Yeah, I think that's kind of the whole point
03:51 of our business is a sustainable growth engine.
03:56 So how does Caliber's value grow?
03:59 How does our business grow?
04:00 It starts with raising capital
04:02 and that comes from creating investment products
04:04 and strategies that people are interested in investing into.
04:07 Everyone wants to get into real estate.
04:09 Everyone wants to find private deals.
04:11 Everyone wants to have insider access.
04:13 That's what we do.
04:14 So as we do that and we create these different products,
04:16 people invest in the products
04:18 and that grows our assets under management,
04:20 that grows our revenue,
04:21 and ultimately that grows our earnings.
04:22 And so it's all come from organic growth,
04:25 essentially of us going out and doing what we do.
04:27 - That's awesome.
04:30 I know you recently expanded your internal wholesale team.
04:33 What is your plan in growing your capital market initiatives?
04:37 - Yeah, so Caliber started with one investor.
04:40 We grew to two, we grew to five.
04:42 We now have 2000.
04:44 High net worth, ultra high net worth investors,
04:46 family offices, et cetera.
04:49 By adding a wholesale channel,
04:50 it's essentially like taking our product
04:52 from being sold at the farmer's market
04:54 as a specialty product
04:56 and putting it on the shelf at Whole Foods.
04:58 And so by doing that, we have an internal team
05:01 that's selling to investment advisors.
05:03 And so it creates a B2B model
05:04 for distribution of our funds,
05:06 where we can get one advisor,
05:08 they like what we do, they do diligence us,
05:11 and then they bring that out to hundreds of clients
05:13 instead of Caliber going direct to the investor themselves.
05:16 - Got it.
05:17 So, I mean, and especially I think after COVID,
05:20 once we had all this big influx of new retail investors,
05:23 we've really seen this alternative asset class
05:26 or alternative investment class start to pop up.
05:30 And you stated that the team, among other things,
05:32 had a deep understanding of alternative asset products.
05:35 What do you see as the most promising alternative assets?
05:40 Where will Caliber's focus go?
05:42 - Right, so we started this company in late 2008.
05:45 The first five years of the business
05:46 was all spent buying distressed assets,
05:48 auction properties, foreclosures, bankruptcies.
05:51 And buying distressed in my world is a good thing
05:54 because that means you're buying at a deep discount.
05:56 You've got a lot of protection, a lot of safety,
05:58 and there's a lot of upside in those assets.
06:00 So for the first time since 2012,
06:03 I'm now actually talking to banks
06:05 about properties they're taking back.
06:08 The change in interest rates has created a catalyst
06:11 because it changed so fast
06:13 that many owners of real estate
06:15 are gonna have to give the keys back.
06:17 Many banks are gonna have to find a workout plan.
06:19 And Caliber is an engine
06:21 that knows how to find those deals,
06:23 take advantage of them,
06:25 and essentially by investing with us,
06:27 you're investing in the strategy.
06:28 - Got it.
06:31 What do you believe to be the biggest change in investing
06:33 for the retail market over the next five years?
06:36 - Yeah, I think everybody's come to realize
06:38 that the traditional kind of 60/40 portfolio
06:41 isn't gonna cut it in the modern world.
06:44 Everybody wants to access private real estate investments,
06:48 private lending, venture capital, private equity,
06:51 different types of alternatives.
06:52 And if you can create access for more people
06:55 over a broader scale, especially using technology,
06:59 that's what Caliber is pretty focused on.
07:02 And I think that's just a market
07:03 that is waiting to be captured, highly underserved.
07:06 A lot of people are looking for it,
07:07 don't know how to have access, and that's what we do.
07:10 - Yeah, I mean, it's an incredible time right now
07:12 for retail investors.
07:13 I mean, of course you have the JOBS Act a few years ago
07:17 that allowed investors to start getting access
07:20 to some of these more startups and stuff.
07:22 A lot of things that previously were held
07:25 only for institutional investors.
07:27 So I mean, it's exciting for people like me
07:29 that are like, oh, I can now go buy a couple shares
07:32 of this startup, or I can go buy a fraction
07:37 of this real estate, of this commercial property.
07:39 So it's an incredible time.
07:41 I'm gonna ask you for a hot take here, Chris.
07:44 The recent CPI numbers saw many hopeful
07:48 about the future, inflation falling, all that good stuff.
07:51 What's your take on the state of the economy?
07:53 Is recession in our near future, or are you a bull or bear?
07:58 - I think you gotta be defensive.
07:59 And I think if you're gonna invest defensively,
08:01 you gotta invest in companies and platforms
08:04 that know how to capture the moment that we're in.
08:08 We're in a moment where in some markets,
08:11 things are still screaming.
08:12 Arizona is a phenomenal market.
08:14 Things are screaming here.
08:16 We have the largest investments across the country
08:18 in semiconductor, as an example.
08:20 That's happening in Phoenix right now.
08:22 There's approximately $80 billion being invested
08:25 in the city of Phoenix just in the semiconductor industry.
08:28 So in those markets, you wanna take advantage
08:30 of lack of supply, huge demand, and the need to tackle it.
08:35 In other markets like San Francisco and New York,
08:38 you're seeing massive empty office buildings.
08:40 You're seeing companies give the keys back to the banks,
08:43 and that's gonna affect us across the whole country.
08:45 So I think you just have to be smart.
08:47 You have to invest defensively.
08:49 I don't necessarily know whether we're gonna go
08:51 into a deep recession or not, but I can tell you
08:55 I know how to take advantage of distressed real estate.
08:57 And I think that's gonna be a very, very good strategy
09:00 for the next 12 to 24 months.
09:02 - Yeah, that's interesting, just kind of some
09:04 of the things you're mentioning,
09:05 because when people look at the market right now,
09:08 they look at inflation, keep falling,
09:10 oh, everything's great, everything's humming,
09:12 firing all cylinders, but like you said,
09:14 some of these banks are now taking some properties back.
09:17 And you said this is the first time
09:18 you've seen this in 11 years.
09:19 So that sounds pretty notable.
09:22 - I mean, I'll give you a simple example.
09:24 If you bought an apartment complex for 100 million bucks
09:27 with a $80 million mortgage in March of 2022,
09:32 today, that asset is not worth 100 million anymore.
09:35 It's probably worth 80.
09:36 That mortgage payment is more than doubled in cost.
09:40 And so how are you gonna get from the bridge loan
09:43 that you invested with to a takeout financing?
09:47 The math doesn't work.
09:49 And when the math doesn't work,
09:50 that creates opportunity for investors.
09:52 - Interesting, yeah, and I'm sure,
09:54 I think in specific markets, the real estate,
09:56 commercial real estate market,
09:57 you'll start seeing some of those ripple effects
10:00 throughout, well, Chris, this has been a great conversation.
10:03 I would love to have you back on in the future
10:05 and talk more about Caliber and what you guys are doing.
10:07 - Yeah, awesome.
10:08 Great to spend the first opportunity with you.
10:11 And hopefully everyone enjoys the ride with us.
10:15 (upbeat music)
10:18 (upbeat music)