Real estate markets remain in a sort of stasis due to uncertainty about the speed and the shape of the eventual economic recovery. The recent surge in coronavirus cases in areas that had previously been relatively untouched, illustrates the peril of predicting how markets will behave. While there are signs that more transactions are being brought to the market, actual closings remain exceptionally low and there is little in the way of market-based price discovery. Notably, patterns in rent collection have remained relatively unchanged with multifamily proving to be remarkably resilient. Multifamily rent collections remain high in the face of historic levels of unemployment, seemingly thanks to various forms of government support under the CARES Act. Office rent collections have also performed surprisingly well with the exception of companies in business sectors which have been disproportionately impacted by the pandemic, e.g. retail, travel, co-working.
The Cadre portfolio, by and large, mirrors these broad market trends. Our multifamily portfolio continues to register strong performance and for the month of June we collected ~97% of rent charged, remarkably consistent with historical levels.
Our office portfolio has also performed well, with ~94% of June rent collected as of month-end. The exceptions were tenants whose primary business is in retail, travel & leisure, energy and co-working. Among these tenants, representing ~5% of Cadre’s office tenants, the majority have requested some form of rent relief, which we continue to review on a case-by-case basis. Adjusting for these tenants, ~99% of rent was collected for the balance of Cadre’s rent roll. It has also been encouraging to observe a modest pick up in leasing activity, evidenced by increases in both inquiries and tours.
While performance has exceeded expectations in light of the dramatic economic disruption caused by COVID-19, risks abound and we remain focused on carefully monitoring property operations. With the benefit of various stimulus measures, including those under the CARES Act, set to expire in the coming weeks, individuals and businesses may struggle to meet rental obligations. We are proactively engaging with our operating partners to manage these risks, including but not limited to maintaining adequate cash reserves to protect from the unpredictable events that may yet occur.
Looking ahead, while transaction activity remains low, our investment team has been actively reviewing potential opportunities and working with partners to develop greater conviction around how to underwrite demand and price assets in the current environment. Stay tuned for more information about the exciting opportunities in our pipeline.
We look forward to sharing more as the summer progresses.
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.
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.