Micro cap CaliberCos soars on agreement with Hyatt

Quotes on CaliberCos, a micro-cap company specializing in real estate investments, surged more than 12% yesterday, May 6, after it announced an exclusive agreement with Hyatt to develop and manage 15 Hyatt Studios hotels.

Yesterday, Caliber jumped more than 12% on the Nasdaq to $5.53 per share before gaining another 7% in after-hours trading.

Earlier in the day, the company announced it had signed an exclusive development agreement with an affiliate of Hyatt Hotels Corporation. Under the deal, Caliber’s subsidiary will build 15 extended-stay Hyatt Studios hotels across five U.S. states over the next 3-5 years.

Caliber currently has $2.9 billion in assets under management. According to the press release, the company expects the agreement with Hyatt to add another $400 million and deliver an attractive operating margin and significant growth in annual and one-time revenue.

Caliber notes that there are fewer hotels in the U.S. now than in January 2020. Combined with historically low new construction and a recent rebound in demand for hotel rooms, this makes the expansion of the Hyatt Studios network an attractive option. 

Hyatt announced this upper-midscale extended-stay brand in 2023. The hotels Caliber has agreed to build will feature about 122 apartment-style suites with kitchens, free internet, grab-and-go breakfasts, EV charging stations, a 24-hour market, a self-service laundry, a fitness studio, and pet-friendly accommodations.

According to the press release, the new hotels will be built in states where the brand is not yet present. The first one will be located in Texas (in the city of Georgetown), with construction expected to start in the fourth quarter. The second is set to break ground in the second quarter of 2026 in Arizona (Scottsdale). Caliber says if market conditions allow, it will seek to expand the agreement.

Founded in 2009, Caliber describes itself as having been “forged in distress, born of the financial crisis.” Initially, it focused on acquiring distressed assets, but now it offers qualified investors access to five funds specializing in different types of real estate.

One of them is Caliber Hospitality Trust, which develops and manages hospitality properties. It operates as a private corporation with a structure similar to an UPREIT, a real estate investment trust that allows property owners to exchange their properties for shares in the trust, providing them with tax-deferral benefits. 

For the year to date, Caliber stock is down more than 60%. The steepest drop came on April 16, when the company lost a third of its market value in a single day. It was triggered by a heavily discounted $900,000 stock offering.

For a company with such a small market capitalization (currently at $7.2 million), raising capital on such unfavorable terms signals an urgent need for money and alternative financing sources, Stock Titan wrote at the time.

According to MarketWatch, the single analyst who covers Caliber has a “buy” recommendation with a target price of $80 per share, 14.5 times the last closing price.