Deidre Woollard: I'm Deidre Woollard, I'm an editor of Millionacres. I'm here with Matt Argersinger who is our lead analyst on Mogul and we now have Ryan Williams of Cadre with us, which is excellent. Hi, Ryan.
Ryan Williams: Hi. How are you?
Deidre Woollard: Great. I'm just going to do a quick intro of you since we're so honored to have you here. Ryan founded the technology-enabled investment platform, Cadre, in 2014, and since inception, Cadre has closed more than three billion in real estate transactions across 16 markets and delivered more than 18 percent annualized returns to investors, including four complete property sales resulting in the return of more than $130 million of capital to Cadre investors to date. As the CEO of Cadre, Ryan has raised more than 130 million of corporate capital backed by investors that include Goldman Sachs, Andreessen Horowitz, Ford Foundation, and others, so very, very excited to have you here. Can you explain for our listeners what Cadre does?
Ryan Williams: Sure. Thank you again for having me. Cadre is a real estate investment platform. I founded the company more than six years ago after spending some time working at Blackstone real estate private equity and having my own real estate business prior to that. What I saw from my time at Blackstone is that real estate, as was referenced earlier, is one of the most important asset classes to own to build long-term wealth. But it's pretty inaccessible, it's pretty opaque, and it's pretty illiquid for most individuals, and I wanted to change that. What Cadre does is we provide individuals and institutions the opportunity to invest directly in commercial real estate around the country. We curate, we vet, we underwrite, we backstop transactions, and then we ultimately give investors all the information they'd ever want about the assets that we're vetting and effectively offering up. We give them information about the operators we work with and then we let them directly invest in real estate properties and portfolios around the country.
Matt Argersinger: Ryan, thanks again for joining us. It's so great to have you. I know you guys are working on some exciting things at Cadre and we're going to talk about one or two in particular later on the show. But I want to just maybe get your temperature on the real estate market overall, maybe particularly the types of real estate that you guys look at in Cadre, more on the commercial side, more on the large multi-family space, things like that. Deidre and I were just talking about it, 2020 has been such a watershed year, how unprecedented, there's so many different words. What do you think about the real estate market? Maybe even talking about what you think is going to happen to things like traditional office or hospitality, retail, the really beleaguered property types in the marketplace? How are you feeling about it? Are you optimistic or is this still something that you think is going to struggle for at least the near term?
Ryan Williams: Well, look, real estate, like a lot of other industries, is facing a lot of challenges, but also opportunities. Our view is real estate, also like a lot of other industries, will have winners and losers. There's definitely a lot more risky asset classes, many that were already deteriorating pre-COVID like retail for instance, that had seen even more headwinds. But there's also some asset classes that have seen pretty strong growth and resiliency, like multifamily and industrial for instance. So we believe there's going to be winners, we believe there's going to be some losers. What I think is most important frankly in this period of time is who you're investing with. Just like in the stock market, great management teams can drive outperformance, and that's what we prided ourselves on at Cadre building a team with billions of investing experience. Our investment committee is chaired by Mike Fascitelli who used to be the CEO of Vornado, and as you alluded too, we've built a strong track record. I'd say that's the most important focus that I would encourage any investor to think through. Then I think you've got to really look at two variables. One is market and the other again is asset class. That's what we focus on at Cadre, it's the dimensions with which we invest through. Starting with the market, there clearly are going to be some markets that are more impacted than others. You look at a lot of the urban large markets infill, New York which is where I am right now, you look at LA, and a lot of those markets are facing tremendous challenges, and frankly, a lot of urban outflow into the suburbs. You also need to look beyond just the urban versus suburban dynamic. Affordability, which markets that had decent affordability, which markets are seeing population inflow, outflow. What we've actually done at Cadre is we've developed something called the Cadre 15 which are really high potential growth markets as of literally last week, because we update it regularly, where we look at just what I had mentioned, population growth, we look at jobs growth, we look at affordability. There's really these 15 markets with which we're investing more actively now, and they include markets like Phoenix, Dallas, Houston, Nashville, Atlanta, Charlotte, Tampa, Orlando, Miami, again, markets where there is that unique combination of population growth, job growth, and affordability. Then we're staying away from markets like New York where there's clearly fiscal challenges with the city but there's also challenges with justifying the affordability in the market. Then the asset class focus, which is the second dimension. We really like multifamily. Multifamily, especially when you look at financing rates and interest rates being at an all-time low, is a great asset class when you're looking to have stability. Multifamily has generally performed well through these market periods of volatility because people will always need somewhere to live. We like industrial a lot. E-commerce and the proliferation of this digitization of retail has really been a tremendous tailwind for industrial. Believe it or not, we actually do like some select office. When I say "select office", what I'm focused on are really adaptive reuses of office, which gets to your question where I think the opportunities will be. Things like life sciences, office conversions, we actually are really interested in. We're looking at offices in suburban markets that are now serving as satellite for major urban hubs. So I do think that real estate is hyperlocal. You've got to be on the ground, you've got to understand market by market dynamics, but there still are opportunities to be had even within office. Then what we're staying away from in terms of asset class, so I mentioned retail, central business district, big urban office investments, and a lot of hotels. Hotels that depend on international travel, business travel and transit, they are all spaces that we again think there'll be a lot of distress. Real estate, like other asset classes, it's very hyperlocal. It is very much going to be a winners and losers game. What we've tried to focus on is building a defensive portfolio and things like multifamily and industrial, and selectively complementing some of the more unique opportunistic investments such as those in life sciences office, for instance.
Deidre Woollard: Interesting, thank you. You mentioned hotels, I feel like that's very interesting because we've seen a lot of stories lately about the potential for hotel foreclosures and commercial-backed loans defaulting. I know that you've been looking at targeting some of the opportunities rising from the pandemic. In terms of those 15 markets, are you investing actively in them? What other lessons have you learned about what you think is happening now, what you think the future could hold?
Ryan Williams: We are now actively investing. We actually announced earlier this week that we were in many ways moving from defense to offense. Because you look back historically, '08, '09, completely different dynamic in terms of credit really driving a lot of the distress. There's less credit issues today, there's more capital on the sidelines, but there also are going to be dislocations in this market. So what we said is we really want to be able to enable more individuals to participate in the recovery in a way that they couldn't, again, in '08, '09 because there wasn't a platform like Cadres. We're focused on building a defensive portfolio which we think is the best way to maximize risk-adjusted returns, focusing on multifamily workforce housing in particular because, again, people are going to need somewhere to live, rates are at an all-time low, financing is actually very accretive for those transactions, and you're seeing in many ways a lot less dislocation and distress in multifamily outside of the major cities. We're focused on almost a foundational dimension to the multifamily portfolio and then we're complimenting that with industrial, we're complimenting that portfolio with some hospitality. There are some interesting buys. Actually, our president recently joined Cadre. He was formerly president and CEO at Four Seasons. Before that, he ran Prudential Real Estate. He and I and our investment committee have been spending a lot of time just seeing which markets do we think that are interesting in hotel investments and that don't require and don't depend on that international travel and business. Then we're focusing a little on office. I think that's where a lot of the opportunities will be today. As you look out more than 6-12 months from now, I think you'll start to see more price discovery in a hotel. I think you'll start to see more price discovery opportunities even in retail. But today, there's still so much distress that has to work its way through the system. But I do think it's important to highlight that real estate has some really unique attributes that actually make it a very interesting asset class to invest in this period of time selectively. First, it's the fact that it's oftentimes been in many ways a good hedge against market volatility. It's been a good place to get yields on the commercial side in particular. There's unique tax advantages ranging from deductions, credits, depreciation. Again, overall, if you're investing with the right manager, you're investing with the right platform, you can achieve outsized returns. So we're definitely encouraging our investors who are looking for yields, who are looking for a way to get stable yield and a way to diversify away from the volatility they're seeing in the stock markets to consider pursuing and investing in our latest portfolio offerings on our platform.
Matt Argersinger: I'm looking forward to talking a little bit more about that, Ryan. Before we do though, you mentioned CBD office, New York City, places like that, really tough to find reasons to invest in those right now. I want to get your take overall on cities like New York, San Francisco, you mentioned LA as well, where you're right, there is a big affordability question. You had office tenants paying high leases, you got luxury apartments, condos being built by the dozens every month in those cities. Do you think there's going to be a long period of unwinding of a lot of that? I don't think anyone's going to bet against New York City or San Francisco or places like that long-term, but would you just stay away from cities like that or is there at some point going to be like people are going to come back to New York City, people are going to come back to San Francisco and other places? There's just maybe a washing out right now and maybe a little bit of a correction in what was probably an overheated office and overheated residential market.
Ryan Williams: Yeah. We'll, look, you nailed it in terms of a lot of these trends that we're seeing accelerated in this moment in time were actually happening pre-COVID. Pre-COVID, there were folks moving outside of a lot of the big cities focusing on quality of life. Pre-COVID, there are a lot of people who said, I can't make the valuations work buying New York office at all-time high price-per-square-foot points, low cap rates. What COVID has really done in one way is it's accelerated a lot of those trends that were already underway and are already happening. My personal view is that in many ways, this was somewhat of a natural correction that was just accelerated. My other personal view is that I believe, and call me an optimist if you want, that cities like New York in particular will recover. New York's incredibly resilient, 9/11 was a different circumstance and situation, but I think you saw that people really rallied and came together. There's the same opportunities and cultural amenities in the city. You got Central Park still, you have Broadway. So there's a lot of those cultural hubs and beacons that really do distinguish New York. There's an energy here that in many ways is unlike anywhere else. They'll still be here. I think it's a matter of when New York begins recovering, when people start coming back, and a lot of that's going to be based off the course of the virus. But I do believe that there's a fighting spirit here in the city. It's going to be a cultural heart of the country in many ways, one of the most important urban headquarter and I wouldn't count the city out. What I think has to happen is there has to be more adaptability and flexibility from New York and other major city office landlords. There has to be creativity on how they adapt their spaces. There has to be creativity on how they address the concerns regarding health, which are real. How much are they willing to invest ultimately in their buildings? Are they willing to expand elevator space? Are they willing to have more up-front testing? Are they willing to provide transparency into what they're doing? I think a lot of it will be the collective will of those who own assets in New York. But I wouldn't bet against the city. I wouldn't bet against folks who are thinking about do we convert our office space to space that's more akin to co-living. Do we convert our office space to space that's more akin to some of the life sciences reuses? Do we convert our hotels to resi? It's really about the pace and the velocity of that adaptation. But I think it is safe to say that over the next 3-6 months, there's going to continue to be some real headwinds, especially as you see some of the stimulus winding down and especially as you start to see whether or not there's going to be an uptake come fall and wintertime here with COVID cases. But long term, I'd sit here and we can come back a year, 18 months from now, and I do think that the city will be on its way to a real recovery. I think it's going to come back in a way that's different, unique, and frankly, even more vibrant than pre-COVID.
Deidre Woollard: I absolutely agree with that. I would not count out the big cities. I wanted to pivot a little bit and talk about accredited investors because I know the SEC recently changed the rules for accredited investing, and one of the things that they did is they opened it up a little bit and made it a little bit more about education and savvy versus just strictly being a wealth requirement. So I was wondering what Cadre is thinking about that and the opportunity to feel like it may open up for your company and for investors in general.
Ryan Williams: I was definitely pleased to see that there was some progress made on who can participate in private placements and starting to broaden that funnel. At Cadre, we started in many ways with larger institutional investors as our clients and we've gradually begun opening up our platform to more and more individuals. What we saw is that there were a lot of individual investors who really wanted to access our site but maybe didn't meet the previous thresholds in terms of net worth or otherwise. But they were in the industry, they knew financial services, many worked in the space, and we saw that there were prohibition there. We do think we'll begin to see more of those professionals in the space, folks who have investing acumen beginning to flock to our platform and to invest. We think it's a great step forward. I think it is important that we're very careful and thoughtful about the various criteria and any unintended consequences it might have the more we change the requirements. But I still think there's a lot of room for expanding access and our view at Cadre is we want more people to be able to participate in the very institutional real estate that we acquire that historically has been reserved for a small group of people. We're doing that, we're giving people access to opportunities, and we also want more individuals to be able to over time participate in real wealth-creating investments. I think it's a good step forward to me, it signals more of the spirit of current regulatory organizations to do what they can to help more people be able to responsibly benefit from access and we are seeing an uptake for sure in our platform.
Matt Argersinger: We certainly hope the ranks of the accredited investors can expand quite a bit. I think just giving more investors access to some of the investments that you guys are working on, alternative assets and things like that, that's going to be a nice thing for a lot of investors. I want to get your quick opinion on Opportunity Zones, program that came out a few years ago, and I know Cadre has had some dealings in that space. I want to see what your overall take on Opportunity Zones. I feel like they've worked really well for investors in a lot of cases. Do you think they've worked well for the communities and the markets they're really trying to target and benefit?
Ryan Williams: As you mentioned, we did launch an Opportunity Zone investment program a couple of years ago. The idea was we wanted to allow the investors on our platform to have the opportunity to help drive greater economic progress and growth in underserved communities. We successfully invested in a number of markets. We haven't invested in Opportunity Zones in more than a year. We shifted our focus to our current income-oriented growth investments. We haven't been as close recently. What I will say is that the spirit of the program, the mission of the program is one that I believe is beneficial. I think that there absolutely has to be greater investment in communities that have been underinvested and underserved and deprived of capital. I know firsthand, I'm from Baton Rouge, Louisiana, and it's a city where there just aren't a lot of investments and opportunities. I'm one of the few people that has been fortunate to really grow and succeed and the like. I think that the program's spirit and the mission is great. I think no one would argue that the execution of the Opportunity Zones and others previously can be improved. I think that it's critical that it's not just a public program or private; there has to be greater partnerships, there has to be greater accountability, and there also have to be greater incentives on an ongoing basis. It can't just be invest in this market, get this benefit, and you've done good. There has to be ongoing sustained incentives. Why not, for a program like the OZ program or otherwise, improve the tier of benefits over time based off continued and further investment in these markets and these communities? Why not focus more on supporting local businesses that have already been in those communities versus incentivizing new businesses to come into those areas and the like? It's a longer answer than you're probably looking for, but what I would say is, one, the mission and the program is one that I absolutely believe is needed. The execution of this program and others over time is one that I think absolutely can be improved.
Deidre Woollard: Yeah, I absolutely agree with that. Recently on Millionacres, we published some research on diversity in real estate investing. It's something that's important to us and I know that it's something important to you. I wanted to have you comment a little bit on what you've been doing with increasing diversity and what Cadre has been doing with opening up real estate opportunities to a more diverse audience.
Ryan Williams: It's a great question and I personally have been a lot more public about my views and beliefs that we all collectively can be doing so much better as well as what the benefits are financially and for society to increase diversity, equity, and inclusion. You look at real estate, you look at technologies. We're a real estate investment platform that leverages technology and they're two pretty homogeneous industries, and in order, I believe, for the industries to reach their maximum potential, there has to be greater access, there has to be greater inclusion. We know just from research that diversity, having more perspectives and views at the table, leads to greater innovation, can be a competitive advantage in accessing new markets, creating greater market share. A lot of the companies that lead their industries in diversity, equity, and inclusion perform better than the market average on a lot of different key performance metrics. Beyond the right societal obligation, there's also a business imperative here as well in terms of innovation and the like. It's been a period of time that, again, is deeply personal to me as an African-American. We've done what we can at Cadre to help reduce that opportunity gap. We first have leveraged our platform, and I'll talk about that in a second. We've also focused on what we can do at Cadre corporate. We want to build a more diverse organization. As it stands right now, more than 50 percent of our management team are women or minorities. We're pleased with that start. We think we can continue to do better. What we committed to in July was really a four-pronged approach. First, again, discussion. We launched a series of Cadre chats. We had folks like Darren Walker, president of Ford Foundation, an investor in our business, speak about social inequities and the ways that we all can drive meaningful change. It was really a great start. We also focused on supporting employees who wanted to personally donate to non-profits focused on economic justice. We also, again, focus on our own team and diversity and what we can do to improve across the board from the senior levels to our more junior team members. Maybe most importantly, we use our platform to do more to help increase diversity within the Cadre ecosystem. We discussed first as we launched our latest investment strategy, which we announced we're doing on Monday, that we would be more active in backing minority and women operating partners across our portfolio. If investors wanted to understand that in more depth, they could go to cadre.com and sign up for our latest investment offering. They would see the explicit commitments we've made to invest and really drive capital into these communities. We also committed to working with minority depository institutions. These are banks and the stats are just startling in terms of how under-capitalized many of these banks are. These are, in many ways, the lifelines financially to the communities they serve. So we're going to be actually working with a number of minority depository institutions to finance new real estate deals which will help increase the cycle of capital. We've also committed to depositing corporate cash with minority depository institutions as well. So for us, it's been really a multidimensional approach. I mean, I think the important point is there's something we all can do it, no matter how small, no matter how large. I think that the reality as well is that what we're seeing today is not just a blip. This is an amalgamation of frustration, of pain, and of economic inequity that's been building up for years and for decades. It's only a matter of time before it rears its ugly head if we hit snooze instead of awaken to some of the opportunities here to help reduce that equity gap. We're not going to solve it at Cadre. There's no one company, there's no one person that's going to solve it, but I do believe with greater collective will to do whatever we can in our organizations, in our households, with our platforms, that we can build a more fair, equitable society. We can help more people realize the American dream and that's what it's about. I'm a complete believer in the American dream and I saw it myself firsthand being the first in my family to do a lot. I know that that opportunity should be democratized, which is very in line with the Cadre mission.
Matt Argersinger: That was all so well put, Ryan. Few minutes left here. I think it's time for a little reveal time. You talked a little bit earlier about some of the investment offerings and trying to get investors access to greater yield, greater direct exposure to real estate. Could you tell us about something that Cadre has been working on and it's just about to unveil?
Ryan Williams: Yes. Yes, I'm incredibly excited. I couldn't be more excited to announce the launch of a new product called Cadre Cash. Cadre Cash is a product that we frankly have been working on for more than a year and a half. Basically, we're now giving investors access to really two important investment products. First is access to an FDIC-insured account where they can earn a three percent reward on their cash, which is more than 60 times the national APY. Second, as we announced earlier, we're also offering investors the opportunity to participate in our latest portfolio of growth-oriented real estate investments, investments that we're pursuing with an orientation on helping investors get access to more growth, more safety and diversification, especially in what's a very low yield, high instability, high volatility market. We're all seeing stock markets, we're all seeing how uncertain and volatile the economy is, and we see how challenging of a time it is to invest. Cadre Cash is our answer to this market with very limited opportunities to achieve higher return on cash savings and diversify away from extreme stock market volatility. Investors can go to cadre.com\cash or just cadre.com to sign up for the product. It is a limited time offering. But again, we wanted to design this and launch it now because we know how important stable income-producing real estate is as, again, a hedge away from the current macro-environment. We know how important yield is and our product that we're launching was really in response to that. Then the final thing I'll say is because lot of people have asked us, "Well, how has your existing real estate portfolio held up?" We own more than three billion of real estate around the country. The answer is incredibly well. Our multifamily portfolio is more than 97 percent occupied. Our office is north of 94 percent occupied. I think that's a testament to the fact that we only approve two percent of the investments that are shown to us. It's a testament to the prudent approach we take to investing and the skin in the game that we all have by backstopping and investing alongside our investors as well. We are poised to be able to move from defense to offense because of the strong performance of what we own, but also because of the macro environment. We couldn't be more excited to launch Cadre Cash and really to help more people have greater stability, greater financial opportunity, and greater long-term wealth.
Matt Argersinger: Ryan Williams, it's been an absolute pleasure to have you. Thanks so much for giving us your time to talk about real estate, to talk about Cadre, talk about the markets. It's been an absolute pleasure. You're an optimist and you said you'd come back and tell us how New York City's going to be doing it in, like, 6-18 months. We'll have you back and we'll get on top of that. Thanks again. Investors, head over to cadre.com, check out Cadre Cash, and the other investment offerings that Cadre has available. Thanks so much, Ryan.