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Cadre

Cadre

Cadre Review 2020: Is this platform suited for you?

Founded in 2014, Cadre is a property crowdfunding company that invests considerable resources to identify the best commercial real estate ventures it can find and make them available to accredited investors seeking to invest at least $50,000 in money. You can pick standalone deals to buy a $50,000 stake in or invest $50,000 with Cadre's "Managed Portfolio" product that will evenly split your money into the next five deals Cadre provides in its marketplace.

This large minimum investment may mean that Cadre is not a good fit — or even achievable — for many people. The typical Cadre real estate project will also take five or six years to complete, so it's not a good option for investors looking for fast deals. Nonetheless, Cadre gives something else-  a differentiator. A few times a year, Cadre opens up a secondary market, enabling investors to offer all or part of previous investments to other investors.

Yet for those with the means and a longer available timeline, there's plenty to like. Cadre is one of a handful crowdfunding platforms:

  • Invests in every deal with investors
  • Generates more revenue from recurring maintenance fees relative to one-time transaction fees
  • Has bonuses related to transactions meeting their goal rates

Cadre also has a good record of incentives zone sales.

Put it all together, and Cadre is the most investor-aligned platform we've seen.

Summary: Is Cadre's a Healthy Investment?

If Cadre's minimum investment of $50,000 is within your scope and you're searching for deals that are typically designed to take five or more years to get capital gain, Cadre is one of the top platforms to consider.

For about five years, as of this date, 31 transactions were transacted on Cadre. Among those, only four have completed so far: one that completely realized, while the other three were early opportunistic sellers. According to Cadre, all four deals earned investors a profit, outperforming their original goals.

Based on Cadre's intensive due diligence, incentive structure, and stakeholders' personal stake in every deal, we expect Cadre to continue to be a good place to find high-quality real estate investments.

What are the pros and cons of Cadre?

Benefits

  • Deep investor alignment
    • Cadres's executives and workers participate in every contract
    • Cadre's financial rewards are closely related to long-term success, not high transaction volume on its platform
  • Industry-leading dedication
  • Liquidity potential with secondary market
  • Investment opportunities region leader
  • Cadre "backstops" any deal; that means you're not committing to a contract that falls apart before closing and missing another chance.

Drawbacks

  • No deals for investors that are non-accredited.
  • Minimum investment of $50,000
  • Doesn't offer any REITs — real estate investment trusts — or other highly diversified funds.
  • Low deal flow — around one new deal per month — could mean you won't find a suitable real estate deal on Cadre when you're ready to invest

How Cadre Works: How are investments made?

Cadre employs an experienced and effective real estate investment team with a due diligence procedure designed to unravel all but the best real estate opportunities in the best markets. It involves screening contract sponsors (project developers) as well as individual property proposals, all of which must meet rigorous criteria before consideration. It involves comprehensive local-level work to assess the feasibility of a project meeting its goals and more deals that do not meet risk expectations.

Cadre also uses data to advise vigilance and define business opportunities. The business says it uses quantitative analysis to help it define and forecast which markets are formed for best future performance and combine that with fundamental analysis. Cadre also says its investment team's experienced professionals have extensive connections around the real estate industry, and many of the best offers come from these outlets, and others are off-market transactions that help reduce transaction costs and boost returns.

Due to the screening process, Cadre claims that only about 2 percent of the deals submitted for consideration make it to the Cadre marketplace.

Is Cadre legitimate? How effective is it?

Cadre performance

Cadre continues to prove a solid platform with each transaction, and I think it's safe to call it legit, not a scam (despite what you might have seen on social media due to the early investment in the business by a Trump family member).

Cadre also says its balance sheet is a source of strength. The business claims it has no debt, so it "backstops"—meaning it closes the gap in financing required to close transactions on its marketplace — every deal it provides.

Cadre is not a public corporation — there is no Cadre portfolio or SEC filing — and we have no audited financial statements to analyze. Nevertheless, it raised over $135 million from some of the world's biggest private investors including Andreessen Horowitz, Goldman Sachs (NYSE: GS), and the Ford Foundation.

Management at Cadre

Ryan Williams, Cadre's CEO, is also a co-founder with a proven track record using technology to exploit real estate business opportunities that extend to his Harvard student years. His residential property experience during and after the Great Recession and housing crisis led him to leave Blackstone Group (NYSE: BX) and co-found Cadre in 2014.

Cadre's executive team also includes a number of veterans, many of whom have invested in multiple business and residential property cycles. The company also has deep-tech leaders at innovators including Square (NYSE: SQ) who understand how technology and finance can work hand-in-hand.

Who can invest in Cadre?

Initially, you must qualify as an accredited investor, meaning you have to meet at least one of two requirements:

  • Your net worth (or the joint net worth with your spouse) must be above $1 million. You can't count in net equity of the $1 million in your primary residence.
  • Person income over $200,000 in either of the last two years or a combined income over $300,000 in those years. You will therefore have realistic expectations of the same income level in the current year.

What's Cadre's minimum investment?

At time of this writing, minimum investment in any Cadre standalone real estate deal is $50,000.

If that's more than you want to spend in a single contract, find the Cadre Managed Portfolio. It also has a minimum investment of $50,000, but as explained earlier, the difference is that your money is split up and invested in five different real estate deals, reducing your exposure to a single deal going badly.

The catch is investors can't choose which five projects to invest in. When you sign up for Cadre Managed Portfolio, your money is invested in the company's next five deals that Cadre transacts, typically over a few months. In other words, if you're unwilling or unable to invest at least $50,000 in each deal, then Cadre's diversity price is the loss of control over what you invest in.

What are Cadre fees?

Cadre charges investors two sets of fees:

  • 1% of the gross dollar paid upfront per purchase. For an investment of $50,000, that's $500 coming right off top and going to Cadre
  • 1.5% net asset value recurrent maintenance fee

Therefore, Cadre negotiates a portion of the sponsor's "promotion," which is a percentage of income that the sponsor receives when a transaction goes full circle and the property is sold, usually over a certain minimum level for investors.

There's an claim that this arrangement means Cadre "takes" the future gains of investors. Yet there's also an argument — and one I believe is more valid — that having opportunities tied to seeing transactions go full circle and meet their targets is a very investor-friendly arrangement. Although other sites are completely compensated for financing sales, Cadre makes more money when investors benefit from deals.

If you follow the money, this probably informs Cadre's due diligence and results in the company selecting deals with both high upside and, more importantly, lower loss risk.

Cadre Returns: What's should be your expectations?

At this stage in Cadre's life, we don't have much data to inform this issue. As stated, since its founding in late 2014, Cadre has transacted on 31 standalone investments, and only four of them have realized. That is because Cadre focuses on long-term transactions that can take five or more years to complete and is not, as mentioned above, a high-volume network.

Here's the good news: all four of those deals brought money to investors, and according to Cadre, they all went above their original targets.

And while we don't have much data to go on so far, we expect Cadre to continue delivering attractive, loss-free investment opportunities to investors. That's because of its financial framework that ties its interests to those of investors (as opposed to sites that are promoted by having deals financed without fear of losing money), along with a management team and skin-in-the-game employees.

When (and how) can you sell Cadre investments?

When you invest in a standalone real estate contract, it's very important to consider how long the project will take to complete. And when you pick the investment, invest with the intention of collecting the dividends or other cash flows the company is expecting to pay investors, but don't count on getting any of your invested capital back before the property's expected sale date.

Cadre has proved to be an early pioneer in helping investors who need liquidity sell off part or even all of their investment. The secondary market that the business opens up a few times a year not only offers an incentive to sell, it also provides buyers  the chance to participate in a deal they might have missed out on, or add to their stake in a deal they want.

Cadre makes money on these transactions (as it should because it facilitates them) by charging both buyer and seller 1.5% each on the transaction's net asset value.

At this stage, the company only facilitates selling Cadre deals on its secondary market, but management said the long-term goal is to create a secondary online marketplace for other crowdfunded real estate deals from other platforms.

Mobile Applications: Is there a Cadre app?

There's no Cadre application. Nevertheless, the Cadre website is designed for mobile devices and operates well for them across all features, whether you're searching for a new investment opportunity, updating your portfolio, or looking for tax documents.

Cadre Risks: Is Cadre safe to invest?

Although we've answered if Cadre is safe — it is, in our opinion — we want to provide two answers for this issue.

First, yes, Cadre itself is a good, well-capitalized company. Furthermore, all Cadre investments are structured as separate legal entities. Which means if Cadre struggled or faced financial difficulties, the investments wouldn't be at risk. Cadre serves as the manager of those investments, and the company and its employees hold an interest, but investors can not enforce your stake in those investments to satisfy Cadre's obligations. Each real estate project is developed and run by a separate real estate developer — the sponsor — and not Cadre. And a Cadre failure wouldn't disrupt any of the projects.

However, issuing dividends, tax records, or other information from specific ventures to investors may be disrupted. Cadre, as the investment manager for each contract, manages that, and if the business collapsed, there will be a uncertainty when finding and recruiting a new manager. If that were to happen, the 1.5 percent annual asset management charge and a possible share of the distribution fees would undoubtedly encourage several asset managers to take over.

The other question investors may ask is whether Cadre investments are free. In addition to Cadre's position as asset manager, every deal has a developer sponsor who actually does all the work to build and run (and ultimately sell) the property you invest in. Cadre's results in finding great sponsors and assets so far are good, with four successful deals and no money-losers, and we think the track record will continue. That's especially true with Cadre having so much financial alignment with investors on every deal it puts in its marketplace and with managers and employees with skin in the game.

Unfair Advantages: How Real Estate Became a Billionaire Factory

You probably know that real estate has long been the refuge for the wealthy and well-connected, and that it is also the highest performing investment in modern history, according to recent results. With a range of unfair advantages unheard of for other investments, it's no wonder why.

But in 2020, the barriers have collapsed - and now it's possible to create REAL wealth without Cadre and through real estate at a fraction of what it used to cost, meaning the unfair advantages are now open to people like you.

Cadre main features and highlights

Bottom line
Cadre is building the world's premier digital marketplace for commercial real estate investing.
Fees: 1.5%
Min Deposit: $50,000
Target returns: 5% - 12%
Sectors:
  • Commercial Real Estate

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