Investing in Cadre’s Secondary Market: What Investors Need to Know
Introduced in late 2018, Cadre’s Secondary Market is the first online platform to enable the trading of private real estate investments. Now entering its second phase, the platform is doubling the number of eligible assets and participants, making it easier for investors to diversify their portfolios, while providing the potential to seek liquidity when life demands it.
Here’s what you need to know to effectively incorporate the Secondary Market into your investment strategy.
What is the Cadre Secondary Market?
The best way to understand the Secondary Market is in relation to initial offerings. Cadre’s initial offerings are carefully evaluated investment opportunities across various property types and markets. Once an initial offering is fully syndicated, it’s considered closed and additional commitments are no longer accepted. Most deals are then held between five and ten years, from acquisition to disposition.
But what if an investor wants to sell their position before the disposition of the project? Historically, marketplaces have not existed for the listing of these positions for sale.
Enter Cadre’s Secondary Market, where investors have the flexibility to buy and sell positions in ongoing deals. And after a one year regulatory hold period, investors have the potential to sell their investment on the secondary market, thus increasing their liquidity options and giving buyers the opportunity to enter properties through secondary market investments.
(Find more detail about Cadre’s Secondary Market in our FAQ.)
Why should I consider investing in a secondary offering?
Immediate Value. Investors who enter deals on the Secondary Market have the opportunity to realize immediate value, since listings may be offered at a discount. Plus, these properties are also closer to their exit date, giving investors the ability to invest in shorter hold periods and realize gains sooner.
Invest in properties with established business plans. Properties listed on Cadre’s Secondary Market will be at least one year into their business plan. So, instead of relying solely on underwritten projections — which despite every effort can change as the deal progresses — investors can enter into a partnership that has built familiarity with the property and executed on some, if not all, of the original business plan.
Cadre reassesses and updates the go-forward projection for every property after the one-year mark. For investors evaluating secondary market offerings, the go-forward projections are intended to reflect Cadre’s latest view of the property, incorporating actual market and operating experience since acquisition. This is one reason why some investors may decide to opt for a position with a lower Internal Rate of Return (IRR) on the secondary market versus a higher IRR opportunity on the primary market — especially if stability and risk are key concerns.
A second chance. The Secondary Market can give investors the opportunity to enter deals they otherwise missed on the primary market — Cadre’s offerings can sell out quickly. Interested investors may be able to invest in those properties on the Secondary Market should any participating investors decide to exit the position.
Portfolio diversification. The Secondary Market affords investors the opportunity to quickly invest across various markets and property types. Instead of investing only in Cadre’s primary market deals, secondary market offerings can significantly reduce the time an investor might need to wait for an opportunity that meets their specific investment criteria.
For existing investors
The Secondary Market introduces one huge benefit for current investors — the potential to seek liquidity through listing a position before the deal’s exit.
Historically, individual real estate interests have typically lacked any consistent access to liquidity. Now, the Secondary Market platform allows investors to list sale opportunities in a property long before the hold period expires. This is critical for investors who need liquidity, or for those who want to lock in gains and transition into another investment.
By expanding this opportunity to its investor base, Cadre’s Secondary Market represents a step forward in the world of commercial real estate investing. Investors who have questions about Cadre’s Secondary Market can learn more here. To become an investor, please request access to the Cadre platform.