Cadre’s Most Valuable Places to Invest (MVPs)

Executive Summary

• Location is a critical consideration in commercial real estate. Cadre takes a data-driven, high-tech/high-touch approach to market selection.

• Both in-house data scientists and our company’s experienced real estate professionals contribute to Cadre MVPs—our Most Valuable Places to Invest.^[1]

• Our process digs deeply into specific property types (multifamily, office, and industrial) in each metro area, as we pursue strong risk-adjusted returns to help more investors grow their wealth with us.

How We Choose Where to Invest

Cadre sources properties across the entire U.S., considering thousands of investment opportunities every year. Data science drives our team’s ability to analyze historical returns, project future growth, and determine the potential for liquidity in markets across the country. We then incorporate the experience of our Investments team. The result is three lists, one for each property type (multifamily, office, industrial). These are the Cadre MVPs.

Spotlight on Machine Learning in Cadre’s Market Selection Process

Cadre’s data scientists predict future market growth two full years ahead. To make these projections possible, we lean on machine learning to derive expected outcomes from historical data.

By definition, machine learning is a sophisticated form of data mining in which artificial intelligence (AI) algorithms “train” computer models to predict outcomes from historical data. The model recognizes patterns in data and applies rules programmed by the user to similar types of information. In the case of Cadre’s growth predictions, our proprietary model considers the complex relationships that exist between various drivers of market appreciation.

We track over 40,000 variables and 3 million data points to generate forecasts for each property type (multifamily, office, and industrial) across all major metropolitan statistical areas in the U.S. Since multifamily, office, and industrial properties trade in very different ways, we analyze these property types’ future price growth independently.

How do the Cadre MVPs differ from the Cadre 15?

In 2020, Cadre launched the results of our first data-driven market selection process: The Cadre 15.^[2] Our choice of high-growth commercial real estate markets proved remarkably resilient throughout the pandemic.

We achieved great investment success with the Cadre 15, and it would have been easy to release a new list of top markets based on the same characteristics. Instead, the team at Cadre dug deeper. Our new market selection process includes more granular criteria than we were able to in 2020, including:

1. We enhanced our model with rigorous backtesting.
2. We based our selections on property type—one list each for multifamily, office, and industrial properties.
3. We considered liquidity (sales volume) for each property type and market over time.
4. We incorporated experienced insights from Cadre’s Investments team.

Cadre’s focused, high-tech/high-touch approach to market selection is truly a game-changer. Our sophisticated approach to real estate market analysis can be revolutionary in an industry that has long resisted change. With the release of the Cadre MVPs, we are pleased to announce that Cadre has disrupted the market selection process once again.

Cadre developed new proprietary technologies that modernize every stage of the commercial real estate lifecycle to help us provide unparalleled access to this essential asset class.

Our innovations bring individuals, institutions, and advisors together in the same high-quality commercial real estate deals on our platform. However, models alone do not drive our investment process. Cadre develops proprietary technology and tools to support our highly experienced investment professionals. Our high-tech/high-touch approach to commercial real estate is vital to our company’s mission: to help individuals invest in top deals alongside leading institutions—both easily and affordably.

Introducing the Cadre MVPs

Multifamily

At Cadre, we look for multifamily investments in markets that demonstrate both high job growth and high population growth. Employment opportunities with competitive and growing wages can keep tenants gainfully employed, so they can continue to pay rent and support their families.

We are bullish on markets where multifamily rentals are priced more affordably than the price of home ownership. As housing costs increase, home ownership typically decreases, leading to a greater number of individuals renting their primary residences.

At $493,337, average median home values for Cadre MVPs were over 9% higher than the rest of the nation ($442,144) as of August 31, 2022. Homes in our multifamily MVP category were also valued higher than all Cadre MVPs by almost $11,000 on average.

Cadre’s most valuable multifamily markets have also supported significantly higher rent growth than the rest of the country over the past year. Cadre MVPs show year-over-year rent growth of 12.65% vs. 8.86% for non-MVPs in the one-year ending June 30, 2022.

Cadre’s two-year projections (as of June 30, 2022) for returns from multifamily investments in Cadre MVPs is 12.0% vs. 9.8% for multifamily assets in the rest of the country.

Sign up to read Cadre’s recent multifamily success story. We achieved a net multiple of 2.1x and a realized net IRR of 29.2% for our investors. ^[3]

Office

The Great Resignation tide may have turned. At Cadre, we anticipate most U.S. workers will come back into the office by 2024, at least on a hybrid basis. Companies continue to experiment with new layouts, amenities, and solutions to accommodate the new normal. The shift to second-tier cities, begun before the pandemic and accelerated by it, is likely to continue, while urban core offices may remain at reduced occupancy levels.

Office properties located in Cadre MVPs performed quite well since the start of the COVID-19 pandemic (March 2020 through June 2022). During that period, Cadre MVPs saw office asset prices increase by 27.64% on average, with the rest of the country barely scraping by at 10.61%.

Cadre’s office MVPs also outpaced the rest of the office markets in rent growth over the past year. Average office rents in Cadre MVPs grew 2.82% vs. 1.81% for non-MVPs in the one-year time period ending June 30, 2022.

Our two-year projections (as of June 30, 2022) for returns from office investments in Cadre MVPs is 10.0% vs. 5.7% for the rest of the country.

Sign up to read Cadre’s recent office success story. We provided our investors with 40.2% realized net IRR and a 1.8x realized net multiple in June 2022: nearly doubling our investors’ money in just two years. ^[3:1]

Industrial

The rise of e-commerce continues to drive the need for warehouse and distribution spaces. The location of such industrial properties is critical. For example, proximity to highways is important in order to ease transportation for shipping and deliveries. Cadre considers easy access to major transportation routes, ports, railroads, and airports among our criteria for the market selection of industrial properties.

Thanks in no small part to our market selection process, industrial assets in Cadre MVPs performed significantly better than non-MVPs since the start of the pandemic (March 2020 through June 2022). Industrial assets in the Cadre MVP grew by 34.13%, while assets outside of the Cadre MVP only increased by 18.79%.

Throughout the one-year time period ending June 30, 2022, industrial properties located in Cadre MVPs generated 13.49% rent growth while non-MVPs came in far lower at 11.37%.

Our two-year projections (as of June 30, 2022) for returns from industrial investments in Cadre MVPs is 12.6% vs. 8.4% for industrial assets located in the rest of the country.

Sign up to read Cadre’s recent industrial success story. We provided our investors a realized net IRR of 67.3% and a 2.1x realized net multiple as of June 2022—more than doubling our investors’ money in this industrial deal. ^[3:2]

Conclusion

Technological advances have improved individuals’ access to information for hundreds of years. In the case of commercial real estate, barriers to investing have existed for generations. Investment information was restricted to “insiders.” Data on properties for sale, prices, tenant lists, etc., were unavailable to many others who could have benefitted from real estate investing.

Cadre is proud to be at the forefront of the movement to democratize this vital asset class. We continue to provide transparent information through innovative technologies that will help more investors make more informed decisions and create new systems to broaden access to investing itself.

Get access to details on Cadre’s Triple Crown cities, as well as a more in-depth analysis of Cadre's Most Valuable Places to Invest in our full report. Sign up free to download here.

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1. The Cadre MVP is a list of metropolitan statistical areas periodically identified by Cadre as commercial real estate markets with strong potential for risk-adjusted returns. The Cadre MVP is developed through a combination of quantitative and qualitative analysis, including predictive analytics and on-the-ground intel. Quantitative analysis involves forecasting two-year growth projections for each market and asset class based on various variables known to drive market appreciation including but not limited to population growth, employment, rent growth, new construction, and occupancy. Qualitative analysis involves a review of quantitative data by our industry experts. There is no guarantee that an investment in a Cadre MVP market will be successful. ↩︎

2. The Cadre 15 is a list of metropolitan statistical areas periodically identified by Cadre as commercial real estate markets with strong potential for risk-adjusted returns. The Cadre 15 is developed through a combination of quantitative and qualitative analysis, including predictive analytics and on-the-ground intel. Quantitative analysis involves forecasting two-year growth projections for each market and asset class based on variables known to drive market appreciation, including but not limited to population growth, employment, rent growth, new construction, and occupancy. Qualitative analysis involves a review of quantitative data by our industry experts. There is no guarantee that an investment in a Cadre 15 market will be successful. ↩︎

3. Data for Hudson Ridge as of July 2022. Data for Key West Crossings and 10 West Commerce as of June 2022. Realized returns are subject to change following final distributions on sold assets. Calculations are generally made as of the date of the sale of the applicable asset and may include targeted proceeds that are to be distributed to the vehicles managed by Cadre (but which have not been realized by the vehicle as of the date of calculation). The calculation of net return figures for each investment pertains to single-asset investment vehicles only. The calculation of net return figures for each investment in a multi-investment fund vehicle is difficult, if not impossible, to prepare with accuracy due to the estimation of fund-wide expenses and other variable fees applicable to each investment that are necessary for such calculations. Returns reflect net performance and are not audited. ↩︎ ↩︎ ↩︎

Disclaimer

Educational Communication

The views expressed above are presented only for educational and informational purposes and are subject to change in the future. No specific securities or services are being promoted or offered herein.

Not Advice

This communication is not to be construed as investment, tax, or legal advice in relation to the relevant subject matter; investors must seek their own legal or other professional advice.

Performance Not Guaranteed

Past performance is no guarantee of future results. Any historical returns, expected returns, or probability projections are not guaranteed and may not reflect actual future performance.

Risk of Loss

All securities involve a high degree of risk and may result in partial or total loss of your investment.

Liquidity Not Guaranteed

Investments offered by Cadre are illiquid and there is never any guarantee that you will be able to exit your investments on the Secondary Market or at what price an exit (if any) will be achieved.

Not a Public Exchange

The Cadre Secondary Market is NOT a stock exchange or public securities exchange, there is no guarantee of liquidity and no guarantee that the Cadre Secondary Market will continue to operate or remain available to investors.

Opportunity Zones Disclosure

Any discussion regarding “Opportunity Zones” ⁠— including the viability of recycling proceeds from a sale or buyout ⁠— is based on advice received regarding the interpretation of provisions of the Tax Cut and Jobs Act of 2017 (the “Jobs Act”) and relevant guidances, including, among other things, two sets of proposed regulations and the final regulations issued by the IRS and Treasury Department in December of 2019. A number of unanswered questions still exist and various uncertainties remain as to the interpretation of the Jobs Act and the rules related to Opportunity Zones investments. We cannot predict what impact, if any, additional guidance, including future legislation, administrative rulings, or court decisions will have and there is risk that any investment marketed as an Opportunity Zone investment will not qualify for, and investors will not realize the benefits they expect from, an Opportunity Zone investment. We also cannot guarantee any specific benefit or outcome of any investment made in reliance upon the above.

Cadre makes no representations, express or implied, regarding the accuracy or completeness of this information, and the reader accepts all risks in relying on the above information for any purpose whatsoever. Any actual transactions described herein are for illustrative purposes only and, unless otherwise stated in the presentation, are presented as of underwriting and may not be indicative of actual performance. Transactions presented may have been selected based on a number of factors such as asset type, geography, or transaction date, among others. Certain information presented or relied upon in this presentation may have been obtained from third-party sources believed to be reliable, however, we do not guarantee the accuracy, completeness or fairness of the information presented.