Caliber, a Scottsdale-based real estate investment company, is focusing its energy on a new fund offering significant tax benefits for investors.
“This is actually a really interesting topic, the opportunity zones,” said Chris Loeffler, CEO and co-founder of Caliber. “A lot of people have heard the buzzword, maybe they know about it because they own a property that’s in an opportunity zone, maybe they had a big capital gain and they heard about it from their CPA.”
The concept was created in 2017 as part of the Tax Cuts and Jobs Act. Across the country, states identify census tracts, or areas of land, in need of economic development. These are called “opportunity zones.”
“If you invest and either create a business or do a real estate investment that creates economic development or economic growth for people, [you will get] a tax benefit, or a tax break, on any short- or long-term capital gains that you’ve incurred that would normally be taxable, because you’re helping create growth in areas that need it,” Loeffler said.
Investors who have recently sold a business, stocks, real estate or some other high-value asset can immediately reinvest in real estate in places that need it. Some communities are distressed while others are simply up-and-coming, Loeffler said.
Caliber is one of the first firms in the country to take advantage of this new tax benefit, with its July 2018 launch of the Caliber Tax Advantaged Opportunity Zone Fund.
“There are probably about 80 to 100 funds across the country, but we’re one of the first in the country that’s open, actively investing capital, actively taking in investments,” Loeffler said. “I think that’s important, because there’s a finite [number] of zones, and there’s a finite [number] of projects in those zones, and some of the best projects are going to go to the people that were there first.”
Loeffler said Caliber’s previous work made it uniquely-positioned to pivot seamlessly into the opportunity zone arena.
“This was our seventh discretionary fund, and we’d already built a 10-year track record of investing in big turnaround projects, in new developments and those types of things,” Loeffler said. “Caliber had actually spent the last three years — unbeknownst to us that this law was going to come down the road — building our infrastructure, hiring a world-class team, building out a Big Four-powered accounting team and finance team, adding a director of tax… we’d already built the infrastructure for something we didn’t even know was coming, and once it came, we saw the opportunity and we wanted to jump on it.”
Loeffler said Caliber has seen five to 10 times its usual number of incoming calls from potential investors and at least 10 times its usual number of incoming deals since starting the Opportunity Zone Fund.
Dubbed “The Wealth Development Company,” Caliber was founded in 2010 to shake up the investment world, working to build clients’ wealth by offering alternatives to stocks, bonds, insurance products and other common investment options.
“We did that through real estate private equity, which is investing in real estate, but investing in real estate with a co-owner in Caliber that makes the decisions, that sponsors the financing, that finds the deals and, frankly, that does all the work,” Loeffler said.
“For an investor who wants to find something where they can be passive, set it and forget it, invest in an asset class they understand but have a co-owner that really is out there working on their behalf every day, that’s what we built.”
At its start, Caliber’s primary focus was on buying homes at trustee sale auctions, fixing them up and putting them back on the market. This niche market is also referred to as flipping houses.
“In 2008, we’d gone through the financial crisis, and we were at a point in time in the lifecycle of real estate that that’s what was needed,” Loeffler said. “Now, we’ve moved into doing all kinds of real estate transactions, buying hotels, buying historic [downtown areas] in Mesa, and we’ve moved into different markets.”
Today, Caliber operates in Arizona, Colorado, Texas, Nevada and Utah, and it continues to expand its scope across the country. Still, about 65 percent of the capital that Caliber invests comes from investors in Arizona.
“It’s people here building their wealth on projects that are created here, whereas most companies bring in money from Wall Street, New York, etc.,” Loeffler said. “The money comes into Arizona, builds the projects; the wealth leaves along with the investors. We’ve had a very interesting and unique impact on Arizona because of the way our business works.”
In August 2018, Caliber was listed on the Inc. 5000 Honor Roll, a list of the fastest-growing companies in America, for the fifth year in a row.
Building partnerships in Arizona has been a “big deal” for Caliber and is one of the company’s core strengths, he said.
“One of our new projects going into our Opportunity Zone Fund is our Roosevelt townhome project,” Loeffler said. “It’s walking distance to ASU. It’s walking distance to The Yard, which is a great place. And it’s a beautiful group of townhomes — about 42 units — that we’re going to build out. It’s in an opportunity zone, and, again, that opportunity zone program is driving capital into an area that desperately needs it, so we’re happy to build them there.”
Loeffler credits Caliber’s success to the people he has been able to work with, including both staff and investors.
“They’re some of the best people I’ve ever worked with; they’re inspirational to me,” he said. “I get to learn from both our team members and our clients on a regular basis, and so I gauge my own success by the success of the people that I’m able to bring into my world.”
Vistage, a worldwide CEO peer-mentoring organization, honored Loeffler at the 2019 Arizona Member Excellence Awards, where he was presented with the Vistage Impact Award for his impact on the group and the growth and development of his company.