New Horizons of High Caliber Investing

New Horizons of High Caliber Investing

In an era of financial anxiety, a young Airpark company captures the trust and imagination of investors, amassing a $50 million real estate portfolio.

–By Marjorie Rice

At the height of the global recession, three young entrepreneurs decided to buck the trend and start a real estate investment business, building on their shared experience in flipping houses, design and finance.

“This business was born in a period of fear,” says Chris Loeffler, who founded Caliber Companies with partners Donnie and Jennifer Schrader. “It was the beginning of 2009. We had just gone through this hellacious period and people inherently knew that in theory it was a good time to invest, but connecting that theory to reality was difficult.”

Working from their homes, Loeffler and the Schraders found their first client. “At the time transactions were being completed quickly and we were able to perform quickly,” Loeffler says. “The way we won the game was through referrals and performance and by aligning our interests with that of our investors.

“The old way of doing business was, ‘I sell you a deal and I make a big commission and hopefully you do, too, later on.’ Instead, we don’t make anything unless the property makes money on the other side.”

Today, Caliber Companies has 31 employees, is housed in spiffy Airpark offices and has a real estate portfolio worth more than $50 million. The company has expanded its services to buying, renovating and managing commercial properties including apartment and business complexes and its newest venture, the Wren hotel.

Loeffler, 29, whose background is in banking and accounting, oversees Caliber’s business systems, strategic relationships and commercial asset acquisitions. Donnie Schrader, 34, who worked in finance and insurance before becoming a real estate investor, oversees acquisitions and remodeling. Jennifer Schrader, 32, began her career as a real estate investor after attending architecture school. She oversees the real estate brokerage and design work for Caliber’s projects.

“We used to only flip homes, and we still flip properties, but in 2008 and 2009 we did it in an entirely different way than we do today,” Loeffler says. “Today, we do value-added renovations. Flipping can be taking a small home, adding another bedroom and making the whole property more modern—not just a facelift. That accounts for about 20 percent of our activities at the present time.”

The Wren, a Crowne Plaza Hotel, is an example of Caliber’s value-added approach. The hotel is undergoing an $8 million renovation, expected to be completed in March. The timeworn interiors are being transformed with sleek, contemporary fixtures and finishes, an updated lobby, pool and cabana areas and a new restaurant (the Post, which opened Jan. 31) and three-level bar (the Perch).

Jennifer Schrader was in architecture school until she decided to strike out into real estate. “I realized very early on that I could have a much bigger impact if I could start working immediately in real estate rather than continuing architecture school and working for someone else,” she says.

Loeffler describes Jennifer’s experience as an invaluable component of the company. “In combination with the design firm we hired, she designed almost the whole interior of the Wren,” he says. “When we started planning the renovation, we realized there’s nowhere to eat in that area, nowhere to go for happy hour. We realized there was an opportunity to create a great restaurant and bar for the local community.”

When the Caliber team was checking out the hotel’s investment potential, they were impressed by the location. The Wren is at the corner of 44th and Washington streets, right next to the METRO Light Rail station that connects to the Sky Train at Sky Harbor International Airport, so visitors can get to their hotel rooms and back to the airport without ever stepping into a cab.

The Wren’s contemporary look reflects the youthful sensibilities of Caliber’s young founders. Their youth hasn’t been an issue for investors though. “If it is, they don’t make a big deal out of it. Once in a while they make a wisecrack,” Loeffler says.

While the leaders of the company are for the most part in their 20s and 30s, Caliber has brought in people who bring a lot of experience to the table, Loeffler adds. “I think our young team was what was needed at the time. In this business, the world is changing, and it’s changing every couple of months. We’re comfortable with adapting to those changes.”

Chief Financial Officer Paul Bressan is one of the seasoned professionals brought into Caliber’s management. A CPA, Bressan worked for 25 years in real estate before joining the company, and he has long experience in real estate’s boom-and-bust cycles.

“Understanding cycles requires experience and restraint,” he says. “When things are going well, you might think you’re bulletproof. You have to keep yourself in check and adapt to changing markets. We started this company on distressed real estate. Four years ago, there were a lot of single-family homes that were in foreclosure. The market is changing. You can’t go out and buy a $50,000 home anymore and expect to make a profit on fixing it up and selling it. We’ve had to redefine how that works going forward.”

Caliber has diversified into different types of real estate products—hotels, office complexes, apartment buildings. The company also is looking into construction of its own properties in addition to buying existing properties.

The company has had to adapt its investment opportunities as well.

Investment Choices

Today, Caliber’s investors have several options. They can put their money in an individual home flip or in a fund that acquires and manages several properties. They may wish to hold on to a renovated home or commercial property but not handle day-to-day renting and management of the property. Caliber provides those services as well.

Bridge notes are a popular option, Bressan says.

Here’s how they work: Caliber finds a property—say a single family home priced at $100,000. Renovation will cost $25,000 and take about 90 days. The upgraded house is expected to sell for $150,000. The investor provides a bridge loan of $100,000, protected by a deed of trust on the property and paying a 12.125 percent fixed annual rate of return. When the property is sold, the customer’s principal and interest are paid first, and any additional proceeds go to Caliber.

Investors are kept informed of every step in the process. Loeffler says this transparency helps set Caliber apart from other real estate investment companies and reassure potential investors who may be skit tish after news about real estate swindles, bogus investment schemes and fraudsters.

“We communicate with our investors through quarterly reporting that includes information about our investments, along with what’s happening in the market, progress on the property we’ve acquired and other properties we’re looking at,” Loeffler says. “Our investors are constantly in the loop and have an opportunity to ask questions if they’re not clear on something.

“We show the source documents—deeds of trust, renovation costs including plans, actual checks. We create transparency. It’s kind of a buzzword today but at the end of the day, we really gave it, and that’s how we built trust.”

Clients are relying on Caliber not just to buy the right deals but also to design the right investment structures, Loeffler adds.

“Because our company was born in the ashes of this horrible crash that we all went through, we also got to be born in those lessons. For example, we have a $25 million distressed properties fund. I designed the entire structure of that fund so that we can’t borrow, over the long term, more than 60 percent of the value of the assets. If we purchased an income-producing property, such as an apartment complex, at 60 percent of value, and we went through the type of crash that we just experienced, our investors would not be able to get cash flow, but they would be able to hold the properties, weather the storm and then come back through the other end.

“Will they make more money if I could borrow 80 percent of the assets? Absolutely. They’ll get better returns from the get-go, but their risk level is too high from my perspective.”

Airpark Hunt

Caliber will continue to adapt and grow, Loeffler says. “We are actively hunting very heavily in the Airpark for good opportunities. I think this is a great place to do business. The community around the Airpark is incredibly supportive. You can feel the business when you’re here.”

They’re also developing an online software project called Venture Localist, which will allow Caliber to put its investments online. “We’ll continue to raise money and meet people through referrals, and our online platform will be another way to reach potential investors and present our properties and opportunities to the market,” Loeffler says.

“You can go online and say ‘Hey, I know that building. I drive by it every day. I can own a portion of that? That sounds phenomenal. It allows you to invest in the community you know.”

Social media and online resources will be important for Caliber’s future, Loeffler says. “Donnie is obsessive about technology. He’s always pushing us to think that way. Twenty years ago, technology was really expensive, just out of reach. Today we can get the same type of technology that a multibillion-dollar company will use. For example, our customers can go online on their portal to see what’s happening at the property in which they’ve invested.”

Going forward, Caliber is reaching out to new investors and partners. “To the broker community, I would say please call us. We’d like to work with you,” Loeffler says. “To the Airpark community I’d say we’re a good fit, offering professionals and business owners another option for investment. To financial advisors, I’d also say call us. We work with financial advisors all the time to provide their clients with an option they may not have seen before.”

The partners are determined to continue their comprehensive approach as their company grows, Jennifer Schrader says.

“We haven’t found another company that does all of what we do in this market. A lot of other companies do one piece of what we do. We like to control all aspects of it. It offers greater protection for our clients. If we’re just taking their money and trusting other companies to help with property management or sales, then how can we make a promise to our clients that we’re looking out for their best interests?”

Loeffler agrees. “When we directly manage all facets of our operations, we make sure we can deliver on our promises,” he says. “It’s about standing behind our word.”

 

Caliber Companies
16074 N. 78th St., Suite B-104
Scottsdale
480-295-7600
CaliberCo.com; TheWrenAZ.com