Our Promise To Do Right By You

Cadre’s investment management and advisory business operates as a Registered Investment Advisor with the Securities Exchange Commission — which means we have a legal duty to act in our clients’ best interests, with undivided loyalty and good faith. In our industry, this legal duty is called a fiduciary obligation. At Cadre, this standard of integrity drives our every action.

The past decade has proven prosperous for investors across the globe. Asset valuations have continually appreciated, and cash flow has been consistently strong. Of course, in good times, the interests of investors and investment managers appear to be well-aligned as all parties are benefiting.

In periods of severe stress, however — as we are experiencing now — that dynamic can be tested as firms confront choices between doing what is best for their investors versus what is best for themselves.  At Cadre, we remain anchored by a simple guiding principle: Our commitment is to serve our clients’ best interests. This is our legal obligation. Even more, it is our unwavering standard of integrity for how we do business.

So, in the midst of current market volatility, we are seeking to prioritize and protect the financial interests of our investors through the following actions:

1. Actively Managing Our Existing Assets

Our highest priority is to optimize the value of our current portfolio. Because the transaction market is currently frozen, our acquisition specialists have joined our asset management team to review each existing property in our portfolio for emerging risks — and to work with our partners to adopt changes where necessary.  

We are focused primarily on the following two risk factors:

Tenancy risk:

• Multifamily: Although considered among the most defensive property types, we believe it is possible to experience higher than normal vacancy and slower collection of rent due to extensive job losses. We are closely monitoring properties located in markets dependent on leisure and hospitality — along with student tenants and other rental cohorts that have been adversely impacted by COVID-19. Given existing tenants have paid rent through March, this type of weakness is more likely to become apparent in April and beyond. We are also tracking emerging laws concerning both tenant and landlord protections, including rent relief and loan forbearance.
• Office: Industry experts anticipate that in coming months, office tenants may request various forms of landlord concessions, including deferral of rent payments. We are undertaking a lease-by-lease review to identify tenants who may be disproportionately impacted by the economic downturn and represent a material percentage of overall building rental income.

Financing risk:

We are maintaining active dialogue with our lenders about property operations and analyzing the ability of each asset to maintain compliance with loan covenants, including debt service coverage ratios, debt yield tests, and cash reserve requirements.  

2. Increasing Cadence of Investor Communications

At a minimum, investors can normally expect to hear from our asset management team on a quarterly basis — with updates on assets and portfolios. During this period of time, we intend to communicate with you more, both to offer insights into the overall market, as well as specific investments.  

One key aspect of investor communication relates to our quarterly asset valuations. We want to remind investors that changes in the value of private real estate assets tend to lag the public market and, therefore, will likely not be apparent until the second half of the year. The performance of real estate has historically been closely correlated with GDP and our investments will not be immune to the impact of the broad-based economic downturn. We will have more to share on this as uncertainty abates about both the containment of COVID-19 and the direction of the economy.  

3. Pausing Investment into Existing Cadre Assets

We are currently pausing any new investment into “warehoused” Cadre assets.

Whenever launching a new investment opportunity, we reserve a portion of equity for new Cadre Portfolio enrollments. Investors have enjoyed the timely deployment of capital this provides.

Yet, each of the investment offerings currently available was underwritten based on the pre-pandemic economic environment. As a result, we believe it is our fiduciary duty to pause any investment into these legacy offerings by newly enrolled Cadre Portfolio clients.

So, if you commit to a Cadre Portfolio in the coming days and weeks, your portfolio will be comprised of investments we have underwritten or re-underwritten after understanding more about these changed circumstances. This may mean that the time to invest capital will be prolonged until we have more confidence in the economic outlook.  

4. Position Investors for Potential Buying Opportunities

To quote Warren Buffett, “attempt to be fearful when others are greedy and to be greedy only when others are fearful.” Consistent with this philosophy, Cadre plans to raise capital for future deals in the coming months. Accumulating capital now will allow us to take advantage of potential dislocations in the market that will give rise to attractive risk adjusted returns.  Periods of severe distress have invariably been followed by periods with outsized return potential for those who are prepared.  Cadre intends to be positioned to offer our investors access to these opportunities.  

Once the dust settles, we look forward to introducing new investment opportunities for our clients. And when that time comes, you can be assured that we hold our fiduciary duty — our integrity to do right by our clients — in the highest regard.