Cadre, the financial technology company focused on real-estate investing, is launching the Cadre Horizon Fund with minimum investments as low as about $1,000 when it becomes registered with the Securities and Exchange Commission as a real-estate investment fund (REIT), MarketWatch has learned.
With the benefit of crowdfunding regulations established in the 2012 JOBS Act as well as its proprietary technology platform, the Cadre Horizon Fund is expected to be registered in 2023 as a 40 Act real-estate investment fund. The term 40 Act fund refers to pooled investment vehicles by a registered investment company under the 1940 Investment Companies Act.
The fund is currently available to accredited investors. Once it’s registered as a REIT it’ll also be open to non-accredited investors.
About 50% of Cadre Horizon Fund will focus on multi-family apartments to provide steady, dividend-like returns. It’s a sector that has performed well in upturns and downturns. The fund will be blended with investments in warehouses and industrial spaces for storage, with potential opportunities emerging down the road in hotels.
“It’ll be more of a defensive income strategy, like a microcap real-estate portfolio with the ability to invest in platform that’s normally reserved for large institutions,” said Cadre founder and executive chairman Ryan Williams.
The relatively approachable minimum investment level of $1,000 in the new Cadre Horizon Fund marks a departure for most private equity firms, and even for Cadre, which had a $25,000 minimum on its debut flagship Direct Access Fund.
As a veteran of Goldman Sachs Group Inc.
and Blackstone Group Inc.
Williams launched the firm in 2014 with the hope of providing access to non-accredited investors from Main Street, not just people that live in Beverly Hills or on Central Park West.
“I founded the business because I wanted more people to be able to have a better financial future and I wanted to democratize multi-generational wealth creation,” Williams told MarketWatch. “I grew up renting apartments. It was a big pipe dream—a crazy aspiration — to even own real estate. As I got into these big institutions, I realized there’s a whole ecosystem of real-estate investments controlled by a small group of people…who were making a lot of money.”
To be sure, Cadre’s fund is not cost free.
As a registered REIT, the Cadre Horizon’ Fund’s cost structure for investors would include an upfront fee of up to 3.25%, plus a 2.1% management fee.
The vehicle is set up to issue 1099 income statements to its investors, instead of the more cumbersome K-1 partnership income tax filings with typical private equity funds.
The Cadre Horizon Fund comes after Cadre closed its first fund, the flagship Direct Access Fund, which drew in about $300 million in investments from institutions such as Harvard University, as well as high net worth individuals.
The Direct Access fund had a minimum investment of $25,000, which made it more accessible than many other private equity vehicles. But William always wanted to bring the fund minimum down lower so people from his hometown in Baton Rouge, La., could also take part in the asset class.
“As I was working at Goldman and Blackstone I thought I could keep making high net worth people more wealthy, or I could build a platform that levels the playing field and allows less affluent people to have these opportunities as well,” Williams said. “You don’t need to be in the insider ecosystem.”
Real estate is less volatile than stocks and it generates returns comparable to public equities.
At last check, Cadre has handled about $5 billion in transactions since 2015, with a 27.5% historical rate of return, as of July 13 of this year, according to the firm’s website. In the past seven years, it’s wrapped up 49 deals in 25 markets.