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Cadre is acquiring a portfolio of 2 select service hotels in Ann Arbor, MI consisting of a 130-key Hilton Garden Inn and a 97-key TownePlace Suites (collectively, the “Asset”), both of which were constructed in 2012.
We were attracted by the potential to purchase alongside an experienced partner two premium branded, cash flowing hotels with unique demand generators driven by their proximity to the University of Michigan as well as to prominent companies in Ann Arbor.
Attractive Select Service Model
Strong Hotel Positioning
Repeat Sponsorship with Proven Track Record
The hotels’ locations provide connectivity to both the University of Michigan in Downtown Ann Arbor as well as to Ann Arbor’s Research Park and surrounding office stock, driving diverse demand to the Asset.
Cadre’s business plan includes a combination of capital improvements in addition to improved operating margins all benefiting from continued pick up in revenue in a post-COVID world.
We are financing the acquisition of the Ann Arbor Hotel Portfolio with a $30.7mm loan. The rate is SOFR+495 bps with a four-year initial term and 1 extension option.
We are acquiring the Ann Arbor Hotel Portfolio in early Q2 2022 (“Asset Close”). We anticipate holding an initial investor close in Q2 2022 (“Initial Close”).
Based in Chicago, Arbor Lodging is a premier hotel investment and management company with a portfolio of 35 hotels owned across the country and more than 4,500 rooms under management. Founded by industry leaders Vamsi Bonthala and Sheenal Patel on the principle of uniting the best practices of enterprising hotel operators and sophisticated institutional investors to effectively underwrite and execute value-add opportunities in the lodging space.
Hilton and Marriott-branded hotels represent 77% of the Arbor portfolio, which includes six other Hilton Garden Inns and 12 extended-stay hotels (two TownePlace Suites).
Arbor’s corporate office has over 30 employees and on average 20+ years of hotel industry operating experience across the senior executive team.
Please see the Sponsor Overview section of the Investment Memo for additional detail.
The Sponsor is committing approximately $0.8mm (5%) of total equity to the transaction. The remaining share, approximately $16.6mm (95%), will come from Cadre’s investor partnerships including Cadre Direct Access Fund.
We have committed to backstop the transaction; Cadre’s senior partners and employees invest personally in this transaction through the Cadre Direct Access Fund.
The primary risks include: post-pandemic demand, exit price, and market supply dynamics. We believe these are mitigated by (i) conservative occupancy assumptions; (ii) conservative exit assumptions with built-in safety margin; and (iii) no hotels currently under construction in the market.Please reference the Investment Memo for Sensitivity Analysis, as well as additional risk factors.
Cadre charges investors the following:
3.5% commitment fee on each investor’s capital commitment;
1.5% annual asset management fee and 0.5% annual administration fee on the fair value of the applicable Cadre fund’s investment in the joint venture. Refer to Section 8.7 of the Partnership Agreement for a determination of “fair value”.
Other deal fees are charged by the LLC joint venture. Investors should review the Investment Memo for complete fee disclosures and descriptions.
Investors who commit or fund after the Initial Close (defined above) will be subject to contribution interest calculated at a 6% annual rate from the Initial Close to the date of the subsequent investor close. The contribution interest is paid to a Cadre affiliate that funds remaining equity between the Asset Closeand subsequent investor closings. Any such cost will be deducted from the investor’s initial distribution(s).
Regardless of when they commit or fund, all investors are entitled to their share of Asset cash flows (if any) from the Initial Close onward. More details can be found under "Subsequent Closings" in the "Summary of Principal Terms of the Investor Partnership" of the Final Investment Memo.
We intend to make regular (roughly quarterly) distributions from available cash flow. These distributions may vary depending on each period’s cash flow and capital requirements.Initial distributions typically occur 3 to 5 months after
Initial Close as we work with our operating partners to determine appropriate reserves and budget needs and have collected sufficient cash flow from the property. Thereafter, we target distributions within 6 weeks following quarter-end. We work to distribute as efficiently as possible but, given the involvement of multiple parties, timing can and does vary.
Through the Cadre Secondary Market, you may have an option to offer your position for sale on our platform at a target sale price based on the net asset value (“NAV”) of the investment at that time. Investments typically are first eligible to post on the Secondary Market six months after the Initial Close. However, liquidity and pricing are not guaranteed. Prior to investing, you should assume that you may be required to hold your investment for the duration of Cadre’s hold period.
See important disclosures below.
Investors will purchase an ownership interest in a Delaware limited partnership managed by Cadre. The Cadre partnership and an affiliate of the Sponsor entered into an LLC joint venture that indirectly owns the Asset.
Certain non-U.S. or tax-exempt investors may alternatively opt to purchase ownership interests through a parallel blocker partnership.
Investors can expect to receive the following:
Property Updates: We provide quarterly updates for each property within 45 days of quarter-end (your first quarterly report may follow the first complete calendar quarter). An online summary and full downloadable report can be accessed through our Portfolio page.
Investor NAVs: We aim to publish Investor NAVs roughly 60 days after quarter-end.
Tax Reporting: For U.S. taxpayers, we aim to provide annual K-1 statements by the first week of April. All current and historical statements are available for download on our Documents page.