By MAP Strategies Group

Solid multi-family performance, scary hospitality numbers, red-hot single-family, and other fascinating real estate investment insights highlighted Caliber's monthly CEO Call.

Caliber CEO Chris Loeffler and Senior Vice President of Business Development Tom Bade conducted a lively conversation on the Aug. 21 edition of our monthly CEO Call. The briefing gives investors an opportunity to receive the latest information about the company and a chance to present questions.Topics included:

• Adjusting to a post-COVID real estate landscape

• Shocks to the hospitality industry

• Solid multi-family rental performance

• A red-hot residential market

Multi-Family Holds Steady

According to Loeffler and Bade, the Southwest remains somewhat insulated from macroeconomic trends. Net migration continues to benefit the region and helps offset job losses as companies and residents flee California for Arizona’s favorable business climate, high standard of living and modest taxes.

“Arizona and the Southwest are going to be areas that snap back quicker,” Bade says. “Fundamentally, they are just more solid.” Bade pointed out the 160,000 apartment vacancies in New York City, which has seen rents decline on average by just over 10 percent.

“You look at Phoenix on the other side of that, and we’ve actually seen rents rise by 7 percent, with Caliber properties operating between 97 to 100 percent occupancy level,” Bade explained.

Caliber owns and operates the 167-unit Treehouse Apartments in Tucson, 164 units at GC Square Apartments in Phoenix, the brand-new Eclipse Townhomes in Scottsdale, among others. The company also recently started to market beautiful and bright Roosevelt Luxury Townhomes near downtown Tempe.

One investor asked about Grand Canyon University’s announcement that all instruction during spring 2020 semester will take place remotely due to COVID-19—will this have an impact on occupancy for Caliber-owned GC Square apartments near the campus? Some students did return home, but GC Square remains 98 percent occupied and 93 percent of occupants are physically present.

In Tucson, Caliber’s Treehouse property has similar issues with the University of Arizona, but fortunately, recent marketing efforts targeted non-students, instead looking to young professionals and families to secure leases. Treehouse currently is 95 percent occupied.

Multi-family is a bright spot for Caliber and “going in a really solid direction,” Loeffler says.

Residential single-family is equally red-hot and comprises several hundred million dollars of Caliber’s asset base right now, Bade says.

“Residential development is on fire, even more so than multi-family residential,” Bade says. “Almost all the single-family properties in our portfolio are sold or under contract, waiting for infrastructure to be completed.

Caliber also recently signed a deal with D.R. Horton, the nation’s largest homebuilder, to build residences in the company’s new 324-acre master-planned community The Ridge at Johnstown north of Denver. Caliber sold some of the acreage to D.R. Horton and the company is expected to start marketing properties by the end of the year.

“The remaining property, anything that has an industrial designation, is also seeing a significant amount of activity,” Bade says. “Our multi-family and retail sites, like convenience stores and gas stations, have received inquiries.”

The hospitality asset class has taken a hit due to COVID-19. Caliber’s overall portfolio of 10 hotels, managed by Highgate Hotel and Hospitality of New York, is “down somewhere between 70 and 80 percent as compared to the prior year,” Loeffler says.

“The majority of our portfolio is in Arizona with a small piece of it up in Alaska. The properties in Alaska have maintained year-over-year,” Loeffler says, due to aggressive marketing, enhanced safety protocols and relative isolation and ease of social distancing.

Loeffler also noted that the company is starting to see the light at the end of the tunnel, month over month.

“Travel occupancy rates, and the flights into Phoenix continue to improve every month through Sky Harbor International,” he says. “The occupancy rates every week were improving until we had another spike of COVID, which has completely diminished at this point. I would expect to see the occupancy we saw back in in May and June pick up again.”

Additional CEO Call Highlights And Caliber News

• If a vaccine is approved and widely distributed by 2021, the outlook within the hospitality industry is positive. Caliber cites pent-up demand for travel and the lure of Arizona’s world-class events like the Phoenix Open, Barrett- Jackson, auto races, spring training and more.

• The new Hilton hotel at the Tucson Convention Center is nearing completion with carpet installation and furnishings underway.

• Self-storage is “basically flat” compared to last year, Bade says, and does not expect “degradation in our numbers” for the remainder of the year.

• Disruptions due to COVID-19 and remote working have delayed reporting documents. Mid-Year Investor Summary and K-1s are nearing completion. Workforce reductions, cash reforecasting and renegotiations with lenders to protect assets have required additional attention and therefore caused delays.

• COVID-19 slowed productivity during the first two quarters of 2020, but new deals continue to churn and investors are looking for alternatives to the lofty evaluations in the stock market and underperforming savings and cash markets.
  
  The next CEO call with Chris Loeffler is scheduled for Sept. 17. Visit CaliberCo.com for time and link information.