Cadre Review 2023: Data-Driven Commercial Real Estate Investing
Real estate investing startup Cadre provides accredited investors with direct investment access to commercial real estate.
The company leverages tax advantages from opportunity zone investing. It also has a data-driven approach to finding real estate opportunities, and stands behind its technology as a means to disrupt the traditional crowdfunding maket.
But much of the media's attention surrounding Cadre has been about its founders and connection to the White House. And with high investing minimums and few options to choose from, it's unlikely to be your best choice for adding real estate to your portfolio.
Commission & Fees - 7
Amount of Deals - 3
Ease-of-Use - 6
Diversification - 3
Transparency - 4
Liquidity - 5
Cadre Pros and Cons
What Is Cadre?
Cadres is a commercial real estate investing platform that began in 2014. The company was founded by Ryan Williams and is known for its opportunity zone fund that aims to invest in lower-income zones to leverage tax benefits following changes in the Tax Cuts and Jobs Act of 2017.
But Cadre is also known for its early-day connections to Jared Kushner, the former Senior Advisor of 45th president Donald Trump.
Kushner was an early-stage investor in Cadre, and Joshua Kushner, Jared's brother, even helped found Cadre. Both Kushner brothers ended up with advisory roles, but connection to the White House lead to concerns over potential conflicts of interest with Cadre raising money from foreign investors. This conflict led to Jared Kushner planning to divest from Cadre before delaying his decision due to Covid.
To be clear, Cadre is a legitimate real estate investing platform that's looking to challenge crowdfunding companies and leverage opportunity zones to generate high returns. But investors should know that much of the media attention surrounding Cadre has focused on potential conflicts of interest and how that impacts the company's future.
How Does Cadre Work?
Cadre invests in a portfolio of multi-family homes, industrial spaces, office buildings, and hotels. And, as mentioned, the company largely focuses on opportunity zone investments.
According to its website, opportunity zones “are low-income census tracts designated by state and federal government. Qualifying investments in these tracts may be eligible for preferential tax treatment if made through existing capital gains.”
The idea behind opportunity zones is to encourage economic development in less-affluent areas. And investors can also get significant tax breaks like capital gains deferrals. This is part of how Cadre plans to generate significant returns for investors.
The other strategy Cadre is using to try and disrupt the crowdfunding market is data and technology. The company stresses how it's a “data-driven” real estate investment company. Specifically, Cadre has its own data science team and seeks to outperform the competition. It says:
“By leveraging traditional, alternative, and proprietary data sets, we can supplement the traditional real estate investing strategy with the advanced quantitative methods and machine learning techniques that have transformed other areas of finance.”
Is this all jargon, or is there something behind the data?
With a reported historical rate of return of 18.6%, it seems as if Cadre's model is working. But there are still some concerns regarding investment options and liquidity potential investors should be aware of.
Cadre Investment Options
Cadre has two main products for investors: a deal-by-deal marketplace and its own direct access fund. There's also a secondary marketplace for buying and selling shares.
Here's how each investment option works.
Cadre's deal-by-deal marketplace is similar to investing platforms like CrowdStreet and lets you invest in individual commercial real estate assets.
Cadre is still in earlier stages versus the larger players in the space. At the time of writing, it's acquired over 40 deals in 24 markets. As mentioned, these include commercial real estate assets like multifamily homes, office spaces, and hotels.
There's a $50,000 minimum investment for direct deals. You have to sign-up for Cadre with your email, name, and phone number to view listings. Cadre also verifies your account which can take a business day or two.
Deals include information on the purchase price, total equity, and the type of investment objective. Cadre outlines four different investment objectives just like its competitor CrowdStreet. These objectives include:
- Core: High occupancy properties in primary markets. Lower investment risk overall and target net internal rate of return (IRR) of 6-8%.
- Core Plus: High occupancy properties in secondary markets with stable cash flow. These offer low risk but slightly more appreciation potential and have a target IRR of 8-10%.
- Value Add: This is a mid-level risk category and includes assets that require improvements to help with appreciation. The target IRR is 10-12%.
- Opportunistic: This is the riskiest investment objective category and includes ground-up development projects and properties with lower cash flow. The target IRR is 12% or higher.
Again, everything harkens back to Cadre's data-driven approach and proprietary technology. The company has certainly shown strong historical returns, so make of this claim what you will.
At the time of writing, there are five available direct deals. This is significantly lower than marketplaces like CrowdStreet which generally has dozens of open deals at a given time.
Cadre Direct Access Fund
The most popular way to invest with Cadre used to be its direct access fund. However, this fund closed in March 2022.
This fund had a $25,000 minimum investment and provided a more diversified portfolio of 12 to 15 investments. Specifically, the fund invested in 50% multifamily homes and 50% office spaces. Cadre also had skin in the game and was targeting 10-12% returns through a “value-add” approach.
The fund only closed on six assets, which is about 50% of the target number of assets for the fund. It's unfortunate that the fund isn't available since this takes diversification off the table. For investors who want to invest in commercial REITs or funds, options like CrowdStreet and Fundrise are currently superior to Cadre.
Cadre Investing Requirements
Cadre is only open to accredited investors. And since its fund closed, the investing minimum is now $50,000 for deal-by-deal investments.
There are different ways to become an accredited investor:
- Have a net worth over $1 million either alone or together with a spouse OR
- Earn an income exceeding $200,000 (or $300,000 with a spouse) in the prior two years and have the same income expectation for the current year
A $50,000 minimum investment requirement is steep and a downside of Cadre. This is especially true since competitors like CrowdStreet, which is also for accredited investors, has a $25,000 minimum requirement.
One downside of real estate investing versus investing in stocks or ETFs is that investments are typically very illiquid. In other words, real estate is harder to convert into cash in a short period of time.
However, Cadre has a secondary marketplace where investors can create sell orders six months from the date of acquiring an asset. On its support page, Cadre says “we expect” this is how the sell window will work. It also says “we expect these windows will take place for approximately 2 weeks in the middle of each quarter.”
Cadre uses this language because it doesn't actually guarantee liquidity. Rather, it reserves the right to prevent investors from listing assets for sale. Examples of events that could lead to this scenario include sales having started at the property level, natural disasters, and partners restricting sales to comply with tax regulations.
In short, it depends on a lot of factors if you can offload Cadre assets or not. So keep this liquidity risk in mind. Sellers also pay a 1.5% fee in secondary market sales, and buyers pay a 3.25% fee.
Cadres Pricing & Fees
Cadre doesn't charge monthly account fees or any direct fees for joining the platform. However, investors pay various transaction fees and annual asset management fees:
- Transaction Fee: Usually 1.0%
- Annual Asset Management Fees: Usually 1.5% of investor equity once a project is funded
The annual asset management fee is deducted from the distributable cash flow. Cadre also states you must review the specific Investment Advisory Agreement for a complete breakdown of fees for each project since fees can vary.
Is Cadre A Good Investment – Historical Performance
Cadre is a smaller player in the crowded real estate crowdfunding space. But it boasts high historical returns, albeit with a small number of completed deals.
At the time of writing, Cadre has 9 fully-realized investments. Here's how its track record breaks down:
- Owned Transaction Value: $4.7+ billion.
- Gross Distributions to Investors: $292+ million.
- Historical Rate of Return: 18.6%.
This is a higher average rate of return than many competitors like Fundrise and RealtyMogul. But keep in mind, Cadre has a more limited history to work off of. And past performance isn't a guarantee of future returns.
And, once again, Cadre's history has some investors questioning its relationship with the Kushners. Starting in 2013, Kushner Companies filed false NYC housing paperwork according to the Associated Press to remove tenants from rent-controlled apartments to replace them with higher-paying tenants. Kushner Companies then turned around and sold three of these buildings for almost 50% in profit.
This shouldn't concern Cadre, except the growing real estate FinTech company helped complete the deal and had an ownership stake in the buildings. For a startup seeking proof-of-concept and a nice valuation, this sure was convenient!
Overall, it's difficult to know what to expect from Cadre. It touts a data-driven model and has strong historical performance. But the history of the company is a messy one.
Cadre is an innovative company and its use of opportunity zone investing is what makes it more unique. But with a high $50,000 investing requirement and limited investing options, it won't be the right fit for every investor.
Thankfully, there are numerous, reputable Cadre alternatives that are open to accredited and non-accredited investors alike:
|Account Fees||1%/year||None||1-1.25%/year asset management fee|
As for CrowdStreet, it's a better Cadre alternative if you want more marketplace selection and a lower $25,000 minimum. It's also for accredited investors, but it recently launched its own C-REIT so you can get more diversification.
Finally, RealtyMogul, is another commercial real estate investing platform for accredited and non-accredited investors. The $5,000 investing minimum is also significantly lower than Cadre.
Fundrise and RealtyMogul have similar fees, and CrowdStreet's fee structure is similar to Cadre and varies by deal.
Cadre is a newer player in a crowded market. And while it has one of the highest historical returns out there on paper, it's not the best option for every investor.
The $50,000 minimum is steep, and Cadre has way less investing selection than most competitors due to its size. Negative or questioning media attention surrounding the company's funding history is also concerning, especially since this may have impacted historical returns.
We prefer Fundrise for beginner investors and CrowdStreet for accredited investors to Cadre at this time. But as always, conduct your own due diligence and explore Cadre's offerings for commercial real estate investing in opportunity zones.