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Cadre Review: Pros, Cons and How It Compares

Cadre Real Estate Review
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Investors looking to diversify their portfolios and grow wealth often turn to real estate as an alternative investment idea. While there are many options for investing in real estate, Cadre offers an easy, technology-driven way to invest in a portfolio of commercial properties. 

With an impressive track record and a unique approach, Cadre provides an intriguing option for those looking to maximize their returns. Read on to learn if Cadre may be the right choice for you.

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Cadre provides accredited investors direct access to institutional quality assets, including investing in opportunity zones. The company's minimum investment of $50,000 is among the highest of real estate crowdfunding platforms, but so is the historical return of 18.2% per year. Cadre is a good fit for high-net worth investors without a need for liquidity who are looking to build a diversified portfolio.

Pros:
  • Strong historical performance.
  • Very selective vetting process.
  • Uses tax breaks from opportunity zones to maximize return.
Cons:
  • Minimum $50,000 investment.
  • For accredited investors only.
  • Doesn’t guarantee liquidity.
  • Highly-concentrated portfolio (only 36 investments to date).

Cadre Basics

Cadre is a real estate crowdfunding platform for accredited investors that focuses on quality over quantity. Many competitors in the industry hold more properties in their portfolios, but Cadre aims to produce better returns by taking a more selective approach and only investing in the best properties. 

The company was founded in 2014 and is focused on making commercial real estate a practical investment opportunity for those who otherwise could not invest in these deals. 

Cadre relies on technology, data and extensive manual due diligence to identify what they believe to be the very best opportunities. The company invests in multi-family apartment buildings, offices, hotels and industrial properties.

Although there are countless possibilities for those who choose to invest in real estate, Cadre stands out in a few key ways:

  1. They put their own money into the properties. Instead of simply providing a platform to invest, Cadre itself has significant skin in the game. This helps provide confidence in the level of due diligence performed on the specific deals.
  2. They focus on opportunity zones. Not all of Cadre’s properties are part of opportunity zones, but many are, which offers some potential tax benefits.
  3. They’ve produced solid historical returns. Cadre reports a historical rate of return of 18.2% per year. Of course, this doesn’t guarantee that future returns will be strong, but it does indicate that Cadre’s approach has worked well so far.

An experienced team leads Cadre, and they’re backed by top venture capital firms like Andreesen-Horowitz, Khosla Ventures and Goldman Sachs. 

Ryan Williams, one of the company’s co-founders, serves as CEO. The other co-founders are Joshua and Jared Kushner. Cadre has made headlines due to its ties with the Kushners and a potential conflict of interest due to Jared Kushner’s former position in the Trump administration. 

Cadre’s holdings include more than $3 billion of owned transaction value, and the company has distributed more than $168 million to investors.

Types of Property Cadre Invests In

Cadre invests in institutional quality commercial properties, including multi-family apartment buildings, office buildings, hotels and industrial buildings like warehouses. If you invest in the Cadre Direct Access Fund (more details below), you’ll own a share of a portfolio that includes all of these types of properties.

The due diligence and vetting process are part of how Cadre stands out from competitors and other real estate crowdfunding platforms.

Cadre relies extensively on proprietary technology to analyze every property before making any purchasing decisions. They perform due diligence on the property itself, the deal sponsors or developers, and the market where the property is located. Their goal is to find properties that can achieve “outsized risk-adjusted returns,” and they only invest in properties that meet very stringent requirements.

Additionally, Cadre co-invests in every deal closed on their platform. This isn’t the case with many crowdfunding platforms, which typically only serve as a middleman.

In January of 2021, Cadre announced a strategic partnership with DisruptAD that will open the way for Cadre to invest in international properties outside of the United States for the first time, beginning with Abu Dhabi of the United Arab Emirates. 

Investments in Opportunity Zones

Some of the properties that Cadre invests in are a part of opportunity zones. The Tax Cuts and Jobs Act of 2017 encourages investment in designated low-income census tracts by providing significant tax benefits for investors. This is one of the approaches that Cadre uses to maximize returns, although not all of Cadre’s properties are in opportunity zones. You can read more about Cadre and opportunity zones here.

There is some controversy surrounding opportunity zones. Although the purpose of the incentives is to help low-income neighborhoods, some people question who is actually benefiting from these investments. 

Investors in opportunity zones receive significant tax breaks, both short-term and long term. One of the immediate benefits is deferral of taxes on capital gains realized from other investments if those gains are invested into opportunity zones.

For long-term benefit, investors may be able to eliminate 100% of taxes on capital gains from the opportunity zone investment itself, if the investment is held for at least 10 years.

Most opportunity zone projects have a longer target hold period for this reason. Cadre provides more details about the benefits of opportunity zone investments on its website.  

While it’s clear that investors come out ahead, critics question how much the low-income residents benefit. The complaint is that wealthy investors receive benefits, but the law does not require them to provide affordable housing for those in need. For example, they could invest in higher-priced apartment complexes, making neighborhoods less affordable for the people who have traditionally lived there. In other words, opportunity zones may fuel gentrification.

Investors should consider their own stance on opportunity zone investing since this is a significant part of Cadre’s business.

Investment Options

Cadre offers two different options for investors:

  • Cadre Direct Access Fund. The Direct Access Fund allows you to invest in a diversified portfolio of properties rather than in a single property. It’s the easiest way to get started and requires no time to vet properties and select the right option (Cadre does all of that for you). The portfolio is roughly 50% multi-family and 50% office, hotel and industrial.
  • Deal-by-deal investing. For those who want more control to select their own investments, deal-by-deal investing is available. You’ll have the chance to earn higher returns on your investment, but you won’t get the downside protection from a diversified portfolio.

The minimum investment is $50,000, regardless of which option you choose. All of the deals that are available through Cadre have passed through their vetting process. 

By investing in the Direct Access Fund, you’ll be investing in the same properties available for deal-to-deal investing and vice versa. A certain percentage of each project is available for the deal-to-deal investments, and the rest falls under the Direct Access Fund.

Who Can Invest With Cadre

Cadre is not a good fit for everyone. Like many other real estate crowdfunding platforms, Cadre is open only to accredited investors. To qualify as an accredited investor, you need to meet at least one of the criteria below:

  • Have a net worth of at least $1 million (individually or jointly with your spouse), excluding your primary residence.
  • Have an annual income of at least $200,000 (or $300,000 for joint filers) for the past two years, with the expectation of reaching the same income level in the current year.

The platform is ideal for high-net-worth individuals looking for alternative investment ideas with a chance to produce excellent returns that outpace the stock market. It’s also suitable for those who don’t want to spend time vetting specific investment properties.

Cadre investors should also be comfortable with a lack of liquidity since it typically takes at least five years to get your investment back.

Note: While many real estate crowdfunding platforms are only open to accredited investors, there are some noteworthy exceptions. Fundrise, Groundfloor and Realty Mogul are among a handful of options for those who do not meet the requirements to be classified as accredited investors.

Liquidity

An investment in Cadre, like most other real estate platforms, is not considered liquid. The projects are intended to last five to 10 years, but there is no specific limit on the duration of your investments. In general, you should only invest money with Cadre that you will not need for at least five years.

One of the ways Cadre differentiates itself from other similar platforms is by offering a secondary market for investors. Investors can sell on Cadre’s secondary market during quarterly windows after waiting at least six months from the fundraising period.

While selling on the secondary market does help provide an option for investors who want or need to sell, Cadre does not guarantee liquidity during these windows, and limitations do apply. As a result, investors should view Cadre as mostly illiquid and should not rely upon the ability to sell through the secondary market. 

Equally important, your return is likely to fall short of the target return if you sell on the secondary market, so it’s not the ideal way to use the platform. People who are buying on the secondary market will be looking for an investment at a discounted price — after all, they know you’re trying to liquidate, so they have the leverage. 

During our research, we could not find publicly available data regarding investments sold on the secondary market and the outcome for those investors.

Potential Benefits and Risks

Let’s summarize the key factors to consider if you’re thinking about investing with Cadre.

Here are a few possible benefits:

  • Access to commercial real estate. Investing in large apartment buildings, offices, hotels and other commercial real estate is out of reach for most investors. Cadre not only makes it possible, but they also make it easy. Cadre carries out the due diligence (although investors should always perform their own due diligence) and allows individuals to invest in a hands-free way.
  • Intense vetting is carried out by Cadre. The company doesn’t offer as many deals as some other crowdfunding platforms because they’re incredibly selective in the deals that make it through their vetting process. This is especially valuable for those who do not have experience or expertise with real estate investing. 
  • Potential for excellent returns. There’s no denying that Cadre has an impressive track record with outstanding returns. Only four deals have been finalized so far, but the 18.2% historical rate of return will appeal to many investors.

But you also need to be aware of some of the risks and drawbacks, including:

  • Limited History. Cadre has produced outstanding results so far, but the company has only been operating for a few years. Less than 40 deals have been presented to investors on their platform, and only four have been completed. Although Cadre has done very well so far, the track record is limited (the same thing is true of real estate crowdfunding in general).
  • Lack of liquidity. Although Cadre does offer the possibility to sell your investment through their secondary market once per quarter, you should consider the investment to be illiquid since they make no guarantees regarding liquidity. You might not be able to sell your investment, or you might get less than you think is fair. 
  • Limited options. Cadre focuses on quality instead of quantity. That’s a significant factor in their success so far, but it does limit the number of available deals to investors. 

Aside from the risks and drawbacks mentioned above, Cadre is only an option for accredited investors. In addition, the minimum investment of $50,000 is also a barrier for some.

Historical Performance

To date, Cadre has invested in 38 properties. Only four have been fully realized so far, and investments in the other properties are still outstanding. The final results of those investments won’t be determined until the properties are sold. 

However, all four of the completed deals outperformed their target return. The company reports an overall 18.2% historical rate of return, with the four completed deals ranging from 15% to 27.4%.

Here’s a look at the returns reported by some other real estate platforms, as of 2021 and for the purpose of comparison:

  • Cadre: 18.2%
  • CrowdStreet: 17.1%
  • EquityMultiple: 14.5%
  • Streitwise: 9.4

Cadre has produced excellent results so far for investors through the Direct Access Fund and the deal-by-deal investments. In addition, their vetting process has been successful to date for those who want to invest in the portfolio of properties, meaning that you don’t need to be a real estate expert yourself to generate solid returns.

Cadre vs. Fundrise

Fundrise is one of the most popular real estate crowdfunding platforms, so it may be helpful to compare and contrast these two options. 

Here are some of the ways that they are different.

  • Fundrise is open to all investors, while Cadre is open only to accredited investors.
  • Fundrise offers a minimum investment of just $1,000, while Cadre’s current minimum is $50,000.
  • Fundrise’s fees are lower at just 1% per year, compared to Cadre’s 1% up front and 1.5% per year.
  • Fundrise offers different core plans (long-term growth, supplemental income, balanced investing), while Cadre’s Direct Access Fund is one-size-fits-all.
  • Fundrise invests in a higher quantity of properties, while Cadre is more selective.
  • Cadre offers the potential for higher returns. Fundrise’s historical returns have been around 10%, while Cadre boasts more than 18%.

Fundrise is a viable option for any investor, and Cadre is inaccessible to the average investor. However, those who qualify as accredited investors looking to maximize returns may value Cadre’s strong performance to date.

Learn more in our Funride review.

Costs and Fees

Understanding the associated costs and fees is an essential step before making any investment. 

Cadre charges two different fees to investors:

  • 1% up front. If you invest $100,000, Cadre will take $3,000 as an up-front fee, and the remaining $97,000 will be invested. This is a one-time fee that’s applied each time you invest.
  • 1.75-2% annual management and administrative fee. Cadre charges up to 2% of the net asset value each year, allowing them to manage their portfolio of properties.

These fees may seem high compared to traditional investments like stocks, mutual funds, ETFs, or bonds. However, the costs are reasonable and in line with many other alternative investments. Keep in mind that Cadre is not simply facilitating the investments, but they are actually managing the properties for several years before eventually selling.

It’s also important to note that the historical returns reported, according to Cadre, are net of fees (i.e., after fees have been deducted).

Cadre Review Summary

Real estate is a proven alternative investment that has been the cornerstone of the portfolio of many millionaires and billionaires. Commercial properties like multi-family apartment buildings, office buildings and hotels offer massive potential for investors, but they’ve traditionally been off-limits for most individuals. 

Cadre is a platform that makes institutional-quality investments available to individual investors. They’ve produced solid results so far, even though the track record is limited due to the relatively small number of investments they’ve made to date.

There’s a lot to like about Cadre’s approach to using technology and data to make the most selective investments, and the most significant downsides to the platform are the requirement to qualify as an accredited investor and the high minimum investment of $50,000. 

For those who do meet the requirements, Cadre presents an intriguing investment opportunity due to the strong results generated to date.

Of course, past results do not indicate or guarantee success for future investments, so be sure to perform your own due diligence before investing.

Visit Cadre.com

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Marc Andre is a personal finance blogger at Vital Dollar, where he writes about saving, managing and making money. He lives in Pennsylvania with his wife and two kids, and has been a full-time blogger and internet marketer since 2008.
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