Real estate crowdfunding has grown tremendously in popularity since the JOBS Act was enacted in 2012. This Act, which was adopted by the Securities and Exchange Commission (SEC), democratized access to real estate deals that were traditionally only available to institutions and those able to write larger checks.
One of the leading real estate platforms for retail and institutional investors, Cadre, announced that it is launching a $400 million fund. They’re calling it the “Cadre Direct Access Fund.”
Cadre and its new Direct Access Fund
Cadre claims to have delivered a net IRR of more than 18% and returned more than $168 million to investors, while its rent collections exceeded 95% in 2020.
The new fund is going to make investments in the multifamily, office, industrial, and hospitality sectors. Cadre is also committed to working with underrepresented minority operating partners across the portfolio, while the company also has some other great ESG goals and initiatives.
Cadre was ranked by Millionacres as one of the top real estate crowdfunding sites of 2020. If you’re curious to learn more about Cadre, our team interviewed its CEO Ryan Williams at the end of 2020.
Why crowdfunding over a REIT?
One of the many benefits of crowdfunding is that it allows investors access to institutional quality deals at a much smaller check size. A real estate investment trust (REIT) also allows for smaller checks from investors, but REITs spread the capital across a portfolio of assets as opposed to investing in a single property. REITs also tend to invest within a particular real estate asset class, whereas Cadre plans on building a diversified portfolio across multiple asset classes.
REITs also offer great liquidity within the real estate asset class, whereas crowdfunding deals are traditionally highly illiquid. This is something that Cadre is working on through its secondary market platform, which will need to be built out much more in order to come close to competing with the liquidity of a REIT. But maybe that isn’t necessarily Cadre’s goal.
All that said, is this Cadre’s signal that they’re taking on the REIT asset class? If Cadre’s base of investors is impressed with its deal-by-deal track record, perhaps Cadre can convince them to choose a crowdfunded fund over a REIT allocation. Until Cadre is able to match the liquidity that a REIT provides, it'll have to rely upon the ability to bring a high volume of deals to the table that can outperform traditionally steady REITs, which of course means taking on more risk.
The Millionacres bottom line
Crowdfunding is not going away. Historically, crowdfunding has been used for individual real estate deals. Now Cadre is entering the fund game and will be competing with REITs. That’s what this $400 million fund is signaling, at least.