CaliberCos Inc

Previous wording

Our business depends in large part on our ability to raise capital for our funds from investors. Since our inception, we have continued to successfully raise capital into our funds with our total capital raised through March 31, 2024 of approxi mately$667.7 million. Our success at raising new capital into our funds is impacted by the extent to which new investors see alternative assets as a viable option for capital appreciation and/or income generation. Since our ability to raise new capital into our funds is dependent upon the availability and willingness of investors to direct their investment dollars into our products, our financial performance is sensitive in part to changes in overall economic conditions that affect investment behaviors. The demand from investors is dependent upon the type of asset, the type of return it will generate (current cash flow, long-term capital gains, or both) and the actual return earned by our fund investors relative to other comparable or substitute products. General economic factors and conditions, including the general interest rate environment and unemployment rates, may affect an investor’s ability and desire to invest in real estate. For example, a significant interest rate increase could cause a projected rate of return to be insufficient after considering other risk exposures. Additionally, if weakness in the economy emerges and actual or expected default rates increase, investors in our funds may delay or reduce their investments; however, we believe our approach to investing and the capabilities that Caliber manages throughout the deal cycle will continue to offer an attractive value proposition to investors.

Current wording

Our business depends in large part on our ability to raise capital for our funds from investors. Since our inception, we have continued to successfully raise capital into our funds with our total capital raised through June 30, 2024 of approxi mately$691.2 million. Our success at raising new capital into our funds is impacted by the extent to which new investors see alternative assets as a viable option for capital appreciation and/or income generation. Since our ability to raise new capital into our funds is dependent upon the availability and willingness of investors to direct their investment dollars into our products, our financial performance is sensitive in part to changes in overall economic conditions that affect investment behaviors. The demand from investors is dependent upon the type of asset, the type of return it will generate (current cash flow, long-term capital gains, or both) and the actual return earned by our fund investors relative to other comparable or substitute products. General economic factors and conditions, including the general interest rate environment and unemployment rates, may affect an investor’s ability and desire to invest in real estate. For example, a significant interest rate increase could cause a projected rate of return to be insufficient after considering other risk exposures. Additionally, if weakness in the economy emerges and actual or expected default rates increase, investors in our funds may delay or reduce their investments; however, we believe our approach to investing and the capabilities that Caliber manages throughout the deal cycle will continue to offer an attractive value proposition to investors.

Previous wording

Global markets are experiencing significant volatility driven by concerns over inflation, rising interest rates, slowing economic growth and geopolitical uncertainty. The annual inflation rate in the United States increased to 9.1% in June 2022, the highest rate since November 1981, but decreased to 3.5% in March 2024. As a result, from January 1, 2022 through April 30, 2024, the Federal Reserve increased the federal funds rate by 525 basis points. The rising interest rates, coupled with periods of significant equity and credit market volatility may potentially make it more difficult for us to find attractive opportunities for our funds to exit and realize value from their existing investments. Historically, inflation has tended to favor new capital formation for Caliber’s funds, as investors seek opportunities that can hedge against rising costs, such as real estate investments. In addition, the increase in interest rates has put pressure on owners of existing real estate to sell assets as their loans mature. Combined with a shrinking pool of buyers, the commercial and residential real estate markets in our favored geographies are moving away from a seller’s market and closer to a buyer’s market. It remains to be seen if a stressed or distressed market may emerge, similar to Caliber’s early years of operations. In both a buyer’s market and a stressed or distressed market, Caliber expects its business model to outperform, as our direct access to investor capital and our ability to invest in a variety of asset classes allows Caliber to move with the market and take advantage of potentially attractive prices. For project execution, inflation has increased the cost of nearly all building materials and labor types, increasing the cost of construction and renovation of our funds’ assets.

Current wording

Global markets are experiencing significant volatility driven by concerns over inflation, rising interest rates, slowing economic growth and geopolitical uncertainty. The annual inflation rate in the United States increased to 9.1% in June 2022, the highest rate since November 1981, but decreased to 3.0% in June 2024. As a result, from January 1, 2022 through July 30, 2024, the Federal Reserve increased the federal funds rate by 525 basis points. The rising interest rates, coupled with periods of significant equity and credit market volatility may potentially make it more difficult for us to find attractive opportunities for our funds to exit and realize value from their existing investments. Historically, inflation has tended to favor new capital formation for Caliber’s funds, as investors seek opportunities that can hedge against rising costs, such as real estate investments. In addition, the increase in interest rates has put pressure on owners of existing real estate to sell assets as their loans mature. Combined with a shrinking pool of buyers, the commercial and residential real estate markets in our favored geographies are moving away from a seller’s market and closer to a buyer’s market. It remains to be seen if a stressed or distressed market may emerge, similar to Caliber’s early years of operations. In both a buyer’s market and a stressed or distressed market, Caliber expects its business model to outperform, as our direct access to investor capital and our ability to invest in a variety of asset classes allows Caliber to move with the market and take advantage of potentially attractive prices. For project execution, inflation has increased the cost of nearly all building materials and labor types, increasing the cost of construction and renovation of our funds’ assets.

Previous wording

The following table and discussion provide insight into our consolidated results of operations for the three months ended March 31, 2024 and 2023 (in thousands):

Current wording

Our consolidated results of operations are impacted by the timing of consolidation, deconsolidation, and operating performance of our consolidated and previously consolidated funds. Periods presented may not be comparable due to the consolidation or deconsolidation certain funds. In particular, the Company deconsolidated Caliber Hospitality, LP, the Caliber Hospitality Trust, and their consolidated subsidiaries, and Elliot during the six months ended June 30, 2024. The following table and discussion provide insight into our consolidated results of operations for the three months ended June 30, 2024 and 2023 (in thousands):

Previous wording

For the three months ended March 31, 2024 and 2023, total revenues were $23.0 million and $29.5 million, respectively, representing a period-over-period decrease of 22.3%, which was primarily due to a decrease in consolidated fund revenues. This decrease was primarily due to the deconsolidation of Caliber Hospitality, LP and the Caliber Hospitality Trust in March 2024, a decrease in performance allocation revenue which was earned related to the contribution of the hospitality assets to Caliber Hospitality L.P in March 2023, and was partially offset by an increase in asset management revenue due to an increase in development and construction activities. See the Segment Analysis section below in which revenues are presented on a basis that deconsolidates our consolidated funds. As a result, segment revenues are different than those presented on a consolidated basis in accordance with U.S. GAAP basis because these fees are eliminated in consolidation when they are derived from a consolidated fund.

Current wording

For the three months ended June 30, 2024 and 2023, total revenues were $8.2 million and $20.4 million, respectively, representing a period-over-period decrease of 60.0%, which was primarily due to a decrease in consolidated fund revenues. This decrease was primarily due to the deconsolidation of Caliber Hospitality, LP and the Caliber Hospitality Trust in March 2024 and was partially offset by an increase in asset management revenue due to an increase in fund management revenues. See the Segment Analysis section below in which revenues are presented on a basis that deconsolidates our consolidated funds. As a result, segment revenues are different than those presented on a consolidated basis in accordance with U.S. GAAP basis because these fees are eliminated in consolidation when they are derived from a consolidated fund.

Previous wording

For the three months ended March 31, 2024 and 2023, total expenses were $27.3 million and $29.0 million, respectively, representing a period-over-period decrease of 5.9%. The increase was primarily due to an decrease in consolidated fund expenses which was primarily due to the deconsolidation of Caliber Hospitality, LP and Caliber Hospitality Trust in March 2024.

Current wording

For the three months ended June 30, 2024 and 2023, total expenses were $12.7 million and $31.4 million, respectively, representing a period-over-period decrease of 59.7%. The increase was primarily due to an decrease in consolidated fund expenses which was primarily due to the deconsolidation of Caliber Hospitality, LP and Caliber Hospitality Trust in March 2024.

Previous wording

For the three months ended March 31, 2024 and 2023, total revenues were $4.7 million and $6.4 million, respectively, representing a period-over-period decrease of 25.6%. The table below (in thousands) compares the revenues earned for providing services under the Company’s asset management platform as described in the Revenue Recognition section of Note 2 – Summary of Significant Accounting Policies for the three months ended March 31, 2024 to the revenues earned for the same period in 2023.

Current wording

For the three months ended June 30, 2024 and 2023, total revenues were $4.2 million and $3.4 million, respectively, representing a period-over-period increase of 24.9%. The table below (in thousands) compares the revenues earned for providing services under the Company’s asset management platform as described in the Revenue Recognition section of Note 2 – Summary of Significant Accounting Policies for the three months ended June 30, 2024 to the revenues earned for the same period in 2023.

Previous wording

The increase in fund management fees is related to the change in fee structure effective upon the contribution of the hospitality assets to Caliber Hospitality, LP in March 2023. Fund management fees were based on 1.0% to 1.5% of the unreturned capital contributions in each hospitality fund. During the three months ended March 31, 2024, the Company earns a fund management fee of 0.7% of the Caliber Hospitality Trust’s enterprise value.

Current wording

The increase in fund management fees is related to an increase of managed capital and fees earned from the Caliber Hospitality Trust related to the acquisition of one hotel property. Fund management fees were based on 1.0% to 1.5% of the unreturned capital contributions in each fund and a fund management fee of 0.7% of the Caliber Hospitality Trust’s enterprise value.

Previous wording

For the three months ended March 31, 2024, performance allocations were $0.2 million, related to the sale of land located in Johnstown, Colorado. For the three months ended March 31, 2023, performance allocations were $2.4 million, which represents the carried interest earned related to the contribution of the hospitality assets to Caliber Hospitality, LP in March 2023.

Current wording

The decrease in performance allocations is is due to the carried interest earned related to the contribution of the hospitality assets to Caliber Hospitality, LP in March 2023.

Previous wording

Other income, net was $0.5 million for the three months ended March 31, 2024, as compared to a loss of $0.2 million for the three months ended March 31, 2023. The changes is primarily due to $0.3 million of income recorded related to a legal settlement completed during the three months ended March 31, 2024 and an increase in rental income, including straight-line rent, of $0.3 million from space leased in the Company’s corporate headquarters.

Current wording

Other income, net was $0.9 million for the six months ended June 30, 2024, as compared to $0.1 million for the six months ended June 30, 2023. The increase is primarily due to an increase in rental and reimbursement revenue from space leased at the Company’s corporate headquarters.

Previous wording

For the three months ended March 31, 2024 and 2023, interest expense was $1.3 million and $0.8 million, respectively. The increase was primarily due to the increase in corporate notes outstanding during the three months ended March 31, 2024, as compared to the same period in 2023.

Current wording

For the six months ended June 30, 2024 and 2023, interest expense was $2.6 million and $2.1 million, respectively. The increase was primarily due to the increase in the weighted average corporate notes outstanding during the six months ended June 30, 2024, as compared to the same period in 2023.

Previous wording

With respect to the underlying factors that led to the change in fair value in the current year, we identify assets that are undervalued and/or underperforming at the time of acquisition. Such assets generally undergo some form of repositioning soon after our acquisition to help drive increased appreciation and operating performance. Once the repositioning is complete, we focus on increasing the asset’s net operating income, thereby further increasing the value of the asset. By making these below-market acquisitions, adding value through development activities, and increasing free cash flow with proper management all represent a material component to our core business model.

Current wording

With respect to the underlying factors that led to the change in fair value in the current year, we identify assets that are undervalued and/or underperforming as part of our acquisition strategy. Such assets generally undergo some form of repositioning soon after our acquisition to help drive increased appreciation and operating performance. Once the repositioning is complete, we focus on increasing the asset’s net operating income, thereby further increasing the value of the asset. By making these below-market acquisitions, adding value through development activities, and increasing free cash flow with proper management all represent a material component to our core business model.

Previous wording

ii. Fair Value (“FV”) AUM – we define this as the aggregate fair value of the real estate assets we manage and from which we derive management fees, performance revenues and other fees and expense reimbursements. We estimate the value of these assets quarterly to help make sale and hold decisions and to evaluate whether an existing asset would benefit from refinancing or recapitalization. This also gives us insight into the value of our carried interest at any point in time. We also utilize FV AUM to predict the percentage of our portfolio which may need development services in a given year, fund management services (such as refinance), and brokerage services. As we control the decision to hire for these services, our service income is generally predictable based upon our current portfolio AUM and our expectations for AUM growth in the year forecasted. As of March 31, 2024, we had total FV AUM of approximately $766.7 million.

Current wording

ii. Fair Value (“FV”) AUM – we define this as the aggregate fair value of the real estate assets we manage and from which we derive management fees, performance revenues and other fees and expense reimbursements. We estimate the value of these assets quarterly to help make sale and hold decisions and to evaluate whether an existing asset would benefit from refinancing or recapitalization. This also gives us insight into the value of our carried interest at any point in time. We also utilize FV AUM to predict the percentage of our portfolio which may need development services in a given year, fund management services (such as refinance), and brokerage services. As we control the decision to hire for these services, our service income is generally predictable based upon our current portfolio AUM and our expectations for AUM growth in the year forecasted. As of June 30, 2024, we had total FV AUM of approximately $773.2 million.

Previous wording

The table below summarizes the activity of the managed capital for the three months ended March 31, 2024 (in thousands):

Current wording

The table below summarizes the activity of the managed capital for the six months ended June 30, 2024 (in thousands):

Previous wording

(2)Beginning during the year ended December 31, 2023, the Company includes capital raised from investors in CaliberCos Inc. through corporate note issuances that was further invested in our funds in Managed Capital. As of March 31, 2024 and December 31, 2023, the Company had invested $18.6 million and $18.3 million, respectively, in our funds.

Current wording

(2)Beginning during the year ended December 31, 2023, the Company includes capital raised from investors in CaliberCos Inc. through corporate note issuances that was further invested in our funds in Managed Capital. As of June 30, 2024 and December 31, 2023, the Company had invested $18.8 million and $18.3 million, respectively, in our funds.

Previous wording

(3) Credit managed capital represents loans made to Caliber’s investment funds by the Company and our diversified funds. As of March 31, 2024 and December 31, 2023, the Company had loaned $7.2 million and $8.5 million to our funds.

Current wording

(3) Credit managed capital represents loans made to Caliber’s investment funds by the Company and our diversified funds. As of June 30, 2024 and December 31, 2023, the Company had loaned $1.1 million and $8.5 million to our funds.

Previous wording

Managed capital for the Caliber Hospitality Trust increased by $13.4 million during the three months ended March 31, 2024, primarily representing: (i) issuance of $9.6 million of Caliber Hospitality, LP operating partnership units in exchange for the contribution of a hotel from L.T.D. on March 7, 2024 (the first of nine committed hotels from L.T.D.’s portfolio), (ii) $1.2 million of investments in Caliber Hospitality Trust’s Class A non-voting preferred stock, (iii) $0.3 million of investments in Caliber Hospitality Trust’s Class B non-voting preferred stock, and (iv) $2.3 million of investments in Caliber Hospitality Trust's Class C non-voting preferred stock.

Current wording

Managed capital for the Caliber Hospitality Trust increased by $25.1 million during the six months ended June 30, 2024, primarily representing: the issuance of $9.6 million of Caliber Hospitality, LP operating partnership units in exchange for the contribution of a hotel from L.T.D. on March 7, 2024 (the first of nine committed hotels from L.T.D.’s portfolio) and $15.5 million of investments in Caliber Hospitality Trusts’s non-voting preferred stock.

Previous wording

Managed capital for our residential investment funds increased by $3.0 million during the three months ended March 31, 2024, representing: (i) $1.4 million in capital raised into our residential assets offset by $0.4 million of redemptions, and (ii) $2.0 million contributed by our diversified funds.

Current wording

Managed capital for our residential investment funds increased by $15.5 million during the six months ended June 30, 2024, representing: (i) $6.6 million in capital raised into our residential assets offset by $0.9 million of redemptions, and (ii) $9.8 million contributed by our diversified funds.

Previous wording

Managed capital for our commercial investment funds increased $2.4 million during the three months ended March 31, 2024, representing: (i) $3.3 million in capital raised into our commercial assets, offset by $2.4 million of redemptions and (ii) $1.5 million contributed by our diversified funds to support seven commercial ground-up builds and acquisitions in Arizona and two commercial ground-up builds and acquisition in Colorado. The scope of investments included tenant improvements, land development, and acquiring existing operating commercial properties.

Current wording

Managed capital for our commercial investment funds increased $6.7 million during the six months ended June 30, 2024, representing: (i) $6.4 million in capital raised into our commercial assets, offset by $2.4 million of redemptions to support one commercial ground-up build and acquisition in Arizona and two commercial ground-up builds and acquisitions in Colorado and (ii) $5.0 million contributed by our diversified funds offset by $2.5 million return of capital to support seven commercial ground-up builds and acquisitions in Arizona. The scope of investments included tenant improvements, land development, and acquiring existing operating commercial properties.

Previous wording

During the three months ended March 31, 2024, our diversified funds deployed $9.6 million into our various real estate investments, which was offset by $9.0 million of repayments of outstanding notes receivable. The Company deployed $0.1 million directly into real estate investments in the form of notes receivable, which was offset by $1.5 million of repayments of outstanding notes receivable.

Current wording

During the six months ended June 30, 2024, our diversified funds deployed $10.9 million into our various real estate investments, which was offset by $17.1 million of repayments of outstanding notes receivable. The Company deployed $0.1 million directly into real estate investments in the form of notes receivable, which was offset by $7.5 million of repayments of outstanding notes receivable.

Previous wording

As of March 31, 2024, we held $7.6 million of other managed capital, which included a $3.2 million private equity investment in a local start-up business and $4.4 million of undeployed cash and pursuit costs, compared to $9.4 million of other managed capital, which included a $3.2 million private equity investment in a local start-up business and $6.2 million of undeployed cash and pursuit costs held as of December 31, 2023.

Current wording

As of June 30, 2024, we held $7.9 million of other managed capital, which included a $3.2 million private equity investment in a local start-up business and $4.7 million of undeployed cash and pursuit costs, compared to $9.4 million of other managed capital, which included a $3.2 million private equity investment in a local start-up business and $6.2 million of undeployed cash and pursuit costs held as of December 31, 2023.

Previous wording

Our FV AUM increased primarily due to the L.T.D. hotel contribution into the Caliber Hospitality Trust. The table below details the activities that had an impact on our FV AUM, during the three months ended March 31, 2024 (in thousands).

Current wording

Our FV AUM increased primarily due to the L.T.D. hotel contribution into the Caliber Hospitality Trust. The table below details the activities that had an impact on our FV AUM, during the six months ended June 30, 2024 (in thousands).

Previous wording

(1)Assets sold during thethree months ended March 31, 2024 include lot sales related to a development asset in Colorado and one home from our residential fund.

Current wording

(1)Assets sold during thesix months ended June 30, 2024 include a commercial asset, lot sales related to two development assets in Colorado, and one home from our residential fund.

Previous wording

We have a number of development, redevelopment, construction, and entitlement projects that are underway or are in the planning stages, which we define as AUD. This category includes projects to be built on undeveloped land and projects to be built and constructed on undeveloped lands, which are not yet owned by our funds. Completing these development activities may ultimately result in income-producing assets, assets we may sell to third parties, or both. As of March 31, 2024, we are actively developing 2,240 multifamily units, 2,386 single family units, 2.6 million square feet of commercial and industrial, and 1.0 million square feet of office and retail. If all of these projects are brought to completion, the total cost capitalized to these projects, which represents total current estimated costs to complete the development and construction of such projects by us or a third party, is $2.1 billion, which we expect would be funded through a combination of undeployed fund cash, third-party equity, project sales, tax credit financing and similar incentives, and secured debt financing. We are under no obligation to complete these projects and may dispose of any such assets at any time. There can be no assurance that AUD will ultimately be developed or constructed because of the nature of the cost of the approval and development process and market demand for a particular use. In addition, the mix of residential and commercial assets under development may change prior to final development. The development of these assets will require significant additional financing or other sources of funding, which may not be available.

Current wording

We have a number of development, redevelopment, construction, and entitlement projects that are underway or are in the planning stages, which we define as AUD. This category includes projects to be built on undeveloped land and projects to be built and constructed on undeveloped lands, which are not yet owned by our funds. Completing these development activities may ultimately result in income-producing assets, assets we may sell to third parties, or both. As of June 30, 2024, we are actively developing 1,940 multifamily units, 1,942 single family units, 2.6 million square feet of commercial and industrial, and 0.8 million square feet of office and retail. If all of these projects are brought to completion, the total cost capitalized to these projects, which represents total current estimated costs to complete the development and construction of such projects by us or a third party, is $2.1 billion, which we expect would be funded through a combination of undeployed fund cash, third-party equity, project sales, tax credit financing and similar incentives, and secured debt financing. We are under no obligation to complete these projects and may dispose of any such assets at any time. There can be no assurance that AUD will ultimately be developed or constructed because of the nature of the cost of the approval and development process and market demand for a particular use. In addition, the mix of residential and commercial assets under development may change prior to final development. The development of these assets will require significant additional financing or other sources of funding, which may not be available.

Previous wording

The following table presents a reconciliation of net (loss) income attributable to CaliberCos Inc. to Fee-Related Earnings, Distributable Earnings, Caliber Adjusted EBITDA, and Consolidated Adjusted EBITDA for the three months ended March 31, 2024 and 2023 (in thousands):

Current wording

The following table presents a reconciliation of net (loss) income attributable to CaliberCos Inc. to Fee-Related Earnings, Distributable Earnings, Caliber Adjusted EBITDA, and Consolidated Adjusted EBITDA for the three and six months ended June 30, 2024 and 2023 (in thousands):

Previous wording

The following tables present a reconciliation of unconsolidated revenues, expenses and net income to the most comparable GAAP measure for the three months ended March 31, 2024 and 2023 (in thousands):

Current wording

The following tables present a reconciliation of unconsolidated revenues, expenses and net income to the most comparable GAAP measure for the three and six months ended June 30, 2024 and 2023 (in thousands):

Previous wording

At March 31, 2024, the Company had individual corporate notes aggregating $36.7 million for which the maturity dates of these notes are within the 12-month period subsequent to when these financial statements were issued. Additionally, the Company has incurred operating losses and negative operating cash flows for the three months ended March 31, 2024, and anticipates additional future operating losses and negative operating cash flows. The Company does not have sufficient cash on hand to satisfy such obligations. As such these conditions and events raise substantial doubt about the Company’s ability to continue as a going concern.

Current wording

Because the Company incurred operating losses and negative cash flow from operations for the six months ended June 30, 2024, and could experience additional future operating losses and negative cash flow in the near term, combined with the fact that the Company does not have sufficient cash on hand to satisfy the total of the notes that mature within the next 12 months, these conditions and events raise substantial doubt about the Company’s ability to continue as a going concern. In response to these conditions, management considered the impact of these near-term maturities on the Company.

Previous wording

In response to these conditions, management plans to i) continue to negotiate extensions of such loans or refinance such debt, ii) obtain new financing, iii) reduce operating costs, iv) collect receivables and return investments from the Consolidated Funds, and/or v) increase capital raise through continued expansion of fundraising channels. The Company has commenced discussions with the various lenders in pursuit of extending or refinancing its loans. Subsequent to March 31, 2024, the Company extended the maturity dates of certain corporate and convertible notes. As of May 9, 2024, an aggregate of $36.4 million of corporate and convertible notes mature within the 12-month period subsequent to when these financial statements were issued (see Note 6 – Notes Payable). Management’s plans include timely collection on the Company’s outstanding accounts and notes receivable from affiliated entities for which management has influence and control and implementing strategies to reduce costs. The Company executed a reduction in force of approximately 10% of its employees in May 2024, with an expected annual saving of compensation and benefits expenses of $$4.0 million. The Company has also executed on cost reduction plans with estimated annual savings of $2.5 million. In addition, the Caliber Hospitality Trust received a $10.0 million investment commitment into its Series D preferrd equity in May 2024, of which a portion will be used to repay amounts due to the Company. The Company concluded that management’s plans are probable of being achieved to alleviate substantial doubt about the Company’s ability to continue as a going concern.

Current wording

In the execution of our aforementioned plans, during the six months ended June 30, 2024, we collected $7.3 million of notes receivable and $2.2 million of accounts receivable. The Company also executed a reduction in force of approximately 10% of its employees in May 2024, with an expected annual saving of compensation and benefits expenses of $4.0 million. The Company has also executed on cost reduction plans with estimated annual savings of $2.5 million.

Previous wording

As of March 31, 2024, we have issued and outstanding unsecured promissory notes of $36.7 million with an average outstanding principal balance of $0.2 million, a weighted average interest rate of 11.40%, and maturity dates ranging from January 2024 to March 2025. The purpose of this financing program is to provide the Company with flexible, short-term capital to be used to grow its assets under management and assist funds in a fast-moving acquisition or investment, as well as general corporate purposes. Additionally, the program provides customers of Caliber’s funds access to a short-term lending opportunity. Management actively manages each relationship to determine if the respective customer would like to redeem upon maturity or extend for an additional period of time. Management has historically been successful at extending these note programs and, as a result, continues to expect similar outcomes. This outstanding debt resulted in $1.1 million and $0.7 million of interest expense for the three months ended March 31, 2024 and 2023.

Current wording

As of June 30, 2024, we have issued and outstanding unsecured promissory notes of $33.6 million with an average outstanding principal balance of $0.2 million, a weighted average interest rate of 11.38%, and maturity dates ranging from January 2024 to April 2026. The purpose of this financing program is to provide the Company with flexible, short-term capital to be used to grow its assets under management and assist funds in a fast-moving acquisition or investment, as well as general corporate purposes. Additionally, the program provides customers of Caliber’s funds access to a short-term lending opportunity. Management actively manages each relationship to determine if the respective customer would like to redeem upon maturity or extend for an additional period of time. Management has historically been successful at extending these note programs and, as a result, continues to expect similar outcomes. This outstanding debt resulted in $1.0 million and $2.1 million of interest expense for the three and six months ended June 30, 2024, respectively, and $1.0 million and $1.7 million of interest expense for the three and six months ended June 30, 2023, respectively.

Previous wording

Our net cash flows from operating activities are generally comprised of asset management revenues and performance allocations, less cash used for operating expenses, including interest paid on our debt obligations. Net cash flows used in operating activities of the Company increased during the three months ended March 31, 2024 as compared to net cash provided by operating activities in the same period in 2023. The increase primarily related to an increase in prepaid expenses and increased interest payments related to the Company’s corporate notes during the three months ended March 31, 2024 as compared to the same period in 2023. Net cash flows provided by operating activities of the consolidated funds increased from the three months ended March 31, 2024, as compared to the same period in 2023. The increase was primarily due to increased interest payments related to the consolidated funds notes payable.

Current wording

Our net cash flows from operating activities are generally comprised of asset management revenues and performance allocations, less cash used for operating expenses, including interest paid on our debt obligations. Net cash flows used in operating activities of the Company increased during the six months ended June 30, 2024 as compared to the same period in 2023. The increase primarily related to increased interest payments related to the Company’s corporate notes during the six months ended June 30, 2024 as compared to the same period in 2023. Net cash flows provided by operating activities of the consolidated funds increased from the six months ended June 30, 2024, as compared to net cash flows used in operating activities of the consolidated funds during the same period in 2023. The increase was primarily due to increased interest payments related to the consolidated funds notes payable and the consolidation and deconsolidation of VIEs.

Previous wording

The decrease in net cash flows used in investing activities of the Company for the three months ended March 31, 2024 as compared to the same period in 2023 primarily relates to an decrease in the acquisition of real estate assets. The increase in net cash flows used in investing activities of the consolidated funds is primarily due to the consolidation and deconsolidation of VIEs, offset by a decrease in the acquisition of and investment in real estate assets and an increase in the net proceeds from notes receivable - related parties.

Current wording

Net cash flows provided by investing activities of the Company increased during the six months ended June 30, 2024 as compared to the net cash flows used in investing activities of the Company for the same period in 2023. The increase primarily relates to an decrease in the acquisition of real estate assets. The decrease in net cash flows used in investing activities of the consolidated funds during the six months ended June 30, 2024 as compared to the same period in 2023 is primarily due to the consolidation and deconsolidation of VIEs, offset by a decrease in the acquisition of and investment in real estate assets and an increase in the net proceeds from notes receivable - related parties.

Previous wording

The decrease in net cash flows from financing activities of the Company for the three months ended March 31, 2024 as compared to the same period in 2023 was primarily due to an decrease of $36.6 million of proceeds on notes payable. The decrease in net cash flows provided by financing activities of the consolidated funds is primarily due to a decrease in the net proceeds from notes payable and notes payable – related parties of our consolidated funds of $1.4 million and a decrease in contributions from noncontrolling interest holders of $1.2 million, offset by a decrease in deferred financing costs paid of $2.4 million during the three months ended March 31, 2024 as compared to the same period in 2023.

Current wording

Net cash flows used in financing activities of the Company increased during the six months ended June 30, 2024 as compared to the net cash flows provided by financing activities of the Company for the same period in 2023. The increase was primarily due to an decrease of $41.9 million of proceeds on notes payable. The decrease in net cash flows provided by financing activities of the consolidated funds during the six months ended June 30, 2024 as compared to the same period in 2023 is primarily due to a decrease in contributions from noncontrolling interest holders of $2.6 million during the six months ended June 30, 2024 as compared to the same period in 2023.

Previous wording

Consolidated funds – other revenue primarily consists of rental revenue of $0.4 million and $1.0 million for the three months ended March 31, 2024 and 2023, respectively. Rental revenue includes the revenues generated primarily by the rental operations of the residential (multi-family and single-family) and commercial properties of our consolidated funds.

Current wording

Consolidated funds – other revenue primarily consists of rental revenue of $0.5 million and $0.9 million for the three and six months ended June 30, 2024, respectively, and $1.4 million and $2.3 million for the three and six months ended June 30, 2023, respectively. Rental revenue includes the revenues generated primarily by the rental operations of the residential (multi-family and single-family) and commercial properties of our consolidated funds.