“I’ve always chosen to see problems and challenges as opportunities.“
Ryan Williams founded the technology-enabled investment platform Cadre in 2014. Cadre is an online marketplace that provides institutions and individuals access to previously inaccessible quality real estate and alternative investment opportunities. As Chief Executive Officer of Cadre, Ryan has raised more than $130mm of corporate capital backed by investors such as Goldman Sachs, Andreessen Horowitz, Ford Foundation, Khosla Ventures, Thrive Capital, General Catalyst, and others.
A true entrepreneur, Ryan is not a “conventional founder or CEO.” Many people take the first step from recognizing a problem to identifying a solution, but most fall off when trying to bring their idea to life. Ryan applied this philosophy to his first company, where he worked with embroiderers in his area to buy products at a fraction of the area’s established retailers.
At the time of filming, Cadre Cash had just been launched. Investors on Cadre’s real estate investment platform can earn an annualized 3% reward on their cash, 4x higher than leading banks and 60x the national average. “This is all part of our mission to provide more individual investors with greater access to financial products that drive their futures forward.”
LISTEN AND SUBSCRIBE
SPEAKER
Ryan Williams
Co-Founder & CEO
Cadre
MODERATOR
Anthony Scaramucci
Founder & Managing Partner
SkyBridge
EPISODE TRANSCRIPT
John Darsie: (00:07)
Hello, and good morning everyone. Welcome back to SALT Talks. My name is John Darsie. I'm the managing director of SALT, which is a global thought leadership forum at the intersection of finance, technology and public policy. SALT Talks are a digital interview series that we started during this work from home period with the world's foremost investors, creators and thinkers. And our guest today combines all those aspects into one, into a fascinating startup that's really democratizing access to investment opportunities that have typically only been available to institutional investors. More really trying to do during this SALT Talk series is replicate the experience that we provided at our global conference series, the SALT Conference, and that is to provide our audience a window into the minds of subject matter experts, as well as to provide a platform for what we think are big ideas that are shaping the future. And today we're very pleased to welcome Ryan Williams to SALT Talks.
John Darsie: (01:01)
Ryan is the co-founder and CEO of Cadre which is a technology platform providing individual investors with access to the kind of commercial real estate investment opportunities that were previously only available to institutional style investors. The company currently owns and manages about a $3 billion portfolio of properties. And today Cadre has delivered a net IRR of better than 18% on its portfolio realizations. It's a very unique company and Ryan is a unique founder. He grew up in Baton Rouge, Louisiana, and he began his entrepreneurial career at the tender age of 14 when he founded a sports apparel company that he later sold. He worked his way through Harvard and during his senior year at Harvard when the financial crisis hit, Ryan started a company that invested in single-family distress properties, mainly in the Southeast. Like I said, his company acquired more than 500 properties mainly in the Southeast United States.
John Darsie: (01:55)
And as a part of building that business, he caught the attention of some of the major investment firms on Wall Street. And he joined the Telecom group at Goldman Sachs before moving on to the private equity real estate division of Blackstone. He then launched Cadre in 2014 and has built it into one of the leading real estate technology startups today. He is about the same age as me. So I'm feeling very unaccomplished right about now. At 32 years old, Ryan has won widespread recognition as one of America's most promising young CEOs. Appearing on the cover of Forbes Magazine last year. He's described his self in the past as reticent to talk publicly about his experience as a black tech founder, but in the wake of the George Floyd incident this summer and subsequent protests that followed that, he's emerged as a strong voice for economic and social justice.
John Darsie: (02:42)
A reminder, if you have any questions for Ryan during today's SALT Talk, you can enter them in the Q and A box at the bottom of your video screen. And hosting today's interview is Anthony Scaramucci, who is the founder and managing partner of SkyBridge Capital, a global alternative investment firm. He's also the chairman of SALT and another quick anecdote that I'm sure they might get into during this conference, the chairman of the investment committee at Cadre, Mike Fascitelli, once had the privilege at Goldman Sachs of firing Anthony. So I'm sure Ryan and Anthony can have a fun conversation about that, but with that I'm going to turn it over to Anthony for the interview.
Anthony Scaramucci: (03:14)
Ryan, you see you're missing the sibling rivalry that's going on in here. Okay, so you had to just bring up the fact that Mike fired me. So at least the good news is when John Kelly fired me from the White House, Ryan, I was prepared for it because I had been fired once before.
Ryan Williams: (03:31)
There you go, good training.
Anthony Scaramucci: (03:33)
And this is a learning lesson that everybody out there, when you're getting fired by somebody build a friendship. Mike's one of my best friends. It turns out that General Kelly and I have become very close as well. But I want to go to you Ryan, you had an amazing career. I had the chance to see you speak at the Forbes 30, Under 30 up in Boston a few years ago. Obviously you've spoken at our conference, but I haven't asked you this question, and I'm very curious about this because you are the classic entrepreneur and something happens in your childhood where the light bulb goes off and you're like, "I'm going to run my own business. I'm going to build my own enterprise." And I want you to tell us when that was, where it was, when did that moment happen for you?
Ryan Williams: (04:15)
Yeah. Thank you Anthony for having me, I'm really excited to spend some more time talking about myself, but also about our business and what we've been up to. You're right. I thought a lot about what drives me, thought a lot about when I kind of got on that entrepreneurial flywheel so to speak, and kind of going back to my childhood, I didn't really grow up around a lot of money or frankly had a lot of role models in the business world that would provide a clear path to building my own business but I think what it was, was I've always chosen to see problems and challenges as opportunities.
Ryan Williams: (04:57)
And I was fortunate that I had a family that definitely encouraged me to think about the what if and having this mentality of questioning the status quo, asking why not. And so I think as a kid, I brought that mentality to a lot of things. It probably bothered my family when I was really young. But as I grew a little bit older, I started thinking about these personal pain points and challenges that I experienced and faced. And that's when that natural entrepreneurial streak began emerging. And the first business I ended up starting it started with that question, why can't we change this situation? And the situation there was I didn't have a lot of money growing up. I played sports. I didn't want to pay an exorbitant amount of money to buy a Nike or an Adidas headband and wristband when people still wore those things. And so I said, "Why can't I find a cheaper product that-"
Anthony Scaramucci: (05:58)
Ryan, some of us are still waring those things. I just want to point that out to you. Okay. Go easy on the old folks here, go ahead.
Ryan Williams: (06:04)
... it'll come back Anthony at some point. Yeah. I mean, everything does, right? But what I said is, "I want to figure out a way where I can identify a lower cost product and actually have something that represents me." And a lot of people I think do take that leap from, okay, here's an issue to all right, how do I change this issue? Not a lot of people take that next step forward to how do I bring that to life? And I think that's for me, that was the first time where I said, "All right, I actually want to make this happen. I want to implement something different. I want to change the status quo." So I ended up going and speaking to a bunch of different embroiderers in the area. I went to effectively a version of the [inaudible 00:06:48] district like they have up here in the city and I was able to buy these products 10%, 20% of what the retail stores were charging and initially just for myself, eventually I started creating custom headbands and wristbands for teammates and friends.
Ryan Williams: (07:06)
Grew that business pretty significantly, won a bunch of awards, was able to exit that company. And that gave me the confidence when I then was fortunate enough to get to Harvard. And again, with Harvard, I was told by a guidance counselor, "No shot." And again, I said, "Why not?" I was fortunate to be accepted. And when I got there, that was like a playground of resources. It was a playground of opportunities. And I wouldn't have been able to launch the real estate business I started in 2008 when again, I noticed there were all these foreclosed homes up and down at my best friend and roommate street in Atlanta and said, "Why can't I invest in these areas and stabilize these communities." But I wouldn't have been able to get to that point had I not, when I was younger, acknowledged that I had this mentality of looking at challenges as opportunities, but then taking the step, building the confidence, building that muscle and I think, again, the essence of entrepreneurship is about how you view the world and then being willing to take risks.
Ryan Williams: (08:10)
I mean, you've done it in your career, Anthony as well. And I think as you build that muscle of risk-taking and fearlessness, it kind of builds on itself. And I'm fortunate again to be in a position now where we're running the leading real estate tech platform for individual investors. I'm not a conventional founder CEO but I built up a lot of that resiliency from an early age.
Anthony Scaramucci: (08:39)
Well, I mean, I think it's attributed to you, but I think that there's a resilience that you need to get to where you are. And there's also a level of projection that you need as well, which we try to teach people that are aspiring entrepreneurs, that you have to believe in yourself. And I have a 21 year old son in the music industry, so you got to act 31 men. You can't act 21. Get your brain on 31. And so I really appreciate what you're doing and I admire you. Talk about Cadre for a second. Let's give the high concept. Let's pretend that people with us today don't know Cadre, which is a phenomenal company, and I want to get them to know it, give us the elevator pitch on Cadre?
Ryan Williams: (09:24)
Sure. Yeah. Cadre was founded almost six years ago and I founded it really to lower the barriers of entry to institutional real estate. Commercial real estate is one of the most important asset classes to own to build long-term wealth, but it's also one of the most opaque, expensive and a liquid asset classes as well. And what I saw was that, from my time at Blackstone, there was just so much wealth being created, but being created for equity, sovereign wealth funds. Nothing wrong with sovereigns, we love sovereigns, but it was a very small subset of our global economy. And most individuals were just significantly under allocated. Had no idea how to get into alternatives. And I believe from my own personal experience as never being anywhere near this asset class growing up, that I was uniquely equipped to build a platform and a model that would unlock access to institutional real estate, allow more people to invest with transparency, efficiency and the quiddity.
Ryan Williams: (10:28)
And so that's what I decided to do with Cadre. Through technology we've been able to create a platform where individual investors can go online and invest in an individual real estate asset, not this building or multi-family property or a portfolio of real estate investments. And so in summary what we're doing is making real estate investments more accessible through a pretty frictionless technology interface [inaudible 00:10:54] investment platform that prides ourselves on our bedding process and we're allowing thousands of individuals and institutions to be able to invest in real estate with the click of a button. And we think this is the future of how people will be accessing real estate and other alternatives. And the goal is to make alternatives less alternative.
Anthony Scaramucci: (11:13)
So Charles Schwab has this advertisement that talks about stock slices, where for $5 you can buy a little bit of Amazon and a little bit of Facebook and so forth. Is cadre a little bit like that? Like let's say I had $5,000 and I wanted to sort of own a sliver of commercial real estate, is that something I can do through Cadre?
Ryan Williams: (11:32)
Yeah, same concept. So, effectively what we do is we allow people to, if they want to pick and choose thousands of dollars, they can invest in an individual asset or a millions. And we've had people, Goldman Sachs put it in more than 250 million into their own portfolio of real estate. But you can pick, or... And this is what we recommend to folks, you can invest in a diversified manner because the reality is like the equity markets, most individuals shouldn't be picking and choosing. And I think you've seen that with a lot of the recent market volatility. And so we allow people to basically build a custom curated portfolio of real estate that we diversify at Cadre. We got Mike as our chairman of our investment committee, Allen Smith, our president who was formerly president CEO of Four Seasons and Prudential, Dan Rosenbloom at acquisitions [inaudible 00:12:23] in Chicago.
Ryan Williams: (12:24)
So we have that in-house team, that's doing the bedding, the underwriting, we have a backstop. So, we've raised a couple 100 million dollars and it's been reported that it's the [Soros 00:12:33] Fund that's given us that backstop. And that allows us to guarantee the funding of deals and then investors can get access. And really Anthony it's like 10 to 15 properties. Geography diversification, asset class diversification, operator diversification. And we want to make investing in diversified real estate as simple, straightforward, and frictionless as investing in a portfolio of stocks or an ETF.
Anthony Scaramucci: (13:01)
So, it's a brilliant idea. And the good news is you've got all the technology now and the resources to apply this idea to the marketplace, but tell us about the post COVID situation, what's your view of the real estate market in a post COVID-19 environment and how has the pandemic affected investment opportunities?
Ryan Williams: (13:24)
Yeah, it's a great question. And we don't proport to have the answers to everything we can only speak from our experience and what we're seeing and data frankly as well. I think the first point is we spent a better part of the last call it six months, very focused on our portfolio of real estate. So we own more than three billion real estate around the country, more than 15 markets around the country, primarily multi-family. So a lot of workforce housing, some affordable, a few class A assets. That's the bulk of what we own. And then it's office, a little hotel and then some development as well, in kind of that order. And we needed to make sure that everything we owned was performing well, and we didn't have any issues on debt.
Ryan Williams: (14:16)
We didn't have any issues with working capital at the properties and that we had good collections. And we're not declaring victory yet, but we are saying that we've been pretty pleased with how resilient our portfolio has been. Our multi-families North of 95% occupancy offices around that same level. Even our hotels are starting to bounce back. And I say that to say, it's incredibly important when you're investing that you're doing so in a prudent manner, in a diversified manner, you have a great team just like in the stock market. A good management team can drive out performance in real estate as well. And I think that's something that's paid off for us to date. So as we came to this conclusion that our portfolio is performing well, we're delivering cashflow to our investors yield, et cetera. We said, "All right, let's start looking forward because we all know that in these periods of dislocation, some of the most compelling opportunities can emerge, some of the most unique investments can emerge, and where do we think those opportunities will be?"
Ryan Williams: (15:17)
And so what we've aligned on, and we announced a few days ago is we're launching a new real estate portfolio investment opportunity for folks who logged on to cadre.com. We're focused on building a diversified portfolio into asset classes we think will be winners. And we're staying away from the asset classes we think will be losers. So where do we think they're going to be winners? First from an asset class perspective, multi-family we've seen it with our own portfolio rates are at an all time low, people are always going to need somewhere to stay. A lot of people aren't really willing to pay the cost to move, and to find other opportunities. So they're renewing at all time high rates. And I think the other reality is just cap rates are continuing to compress in the space, in the right markets.
Ryan Williams: (16:09)
The second asset class we liked that we think will be relatively defensive, is industrial. And this was happening pre COVID, but eCommerce has accelerated in light of COVID. The growth in industrial, as more people need warehouse, space, logistics, et cetera and so we're going to be focused on some industrial assets as well. And then finally we like select niche office. And this might be a little bit contrarian just given what you hear in the news and read, but the reality is that there are office markets, especially suburban office markets that are seeing increased occupancy. A lot of people are setting up satellite shops and for instance, the Greenwich Connecticut's of the world, which we're in many ways markets that were deteriorating pre COVID. And there's some niche strategies in office like life sciences, where there's tremendous tailwinds, that we're also focused on. We're staying away from retail.
Ryan Williams: (17:04)
We're staying away from central business district office investments, [inaudible 00:17:08], New York city. And we're staying away from full service hotels that really require and rely on travel. And so that's how we see the market playing out. In terms of timeline for recovery, it's going to vary based off of the course of this virus. Our government's collective will in addressing this quickly, and then distributing vaccines [inaudible 00:17:32], but we're not expecting for instance in a hotel, any kind of meaningful recovery until 2022 timeframe at the earliest. And in retail I think it's still a falling knife. And so you got to be really selective. There are winners in real estate despite what you hear in terms of just the distress, a lot of that's in those losing kind of asset classes we focused on.
Ryan Williams: (17:57)
And then the other big dimension is markets. We developed something called a Cadre 15, which is a data science driven proprietary market ranking system of the top 15 markets in the country as of last week. These are markets where we think there's unique growth, unique affordability and through quantitative... And so in qualitative analysis, we've identified these markets. They're markets like Phoenix, Dallas, Houston, Nashville, Atlanta, Charlotte, Tampa, Orlando. Markets where there's, again, a unique combination of population growth, job growth. We even can look at millennial inflow and outflow, and that's how we invest, the asset class we think are winners and the top growth markets.
Anthony Scaramucci: (18:37)
Well, I'm glad you mentioned Charlotte, because if John Dorsey keeps picking on me Ryan, you're going to help me find a house for him in Charlotte. We're going to move him back.
Ryan Williams: (18:46)
You got it, count us in.
Anthony Scaramucci: (18:48)
I beg you. I need you to be the help on that. He picks on me, Ryan.
Ryan Williams: (18:53)
So I heard in the intro. Yeah, [crosstalk 00:18:55].
Anthony Scaramucci: (18:55)
[crosstalk 00:18:55] unbelievable. Let me go to Cadre Cash for a second.
Ryan Williams: (18:59)
Sure.
Anthony Scaramucci: (19:00)
Because I think is an amazing thing, it's an account that earns interest well in excess of the traditional banks, explain to people how you're doing that, explain the safety around that and why this is another exciting asset class and even low interest rate environment?
Ryan Williams: (19:18)
Yeah. We launched Cadre Cash a few days ago. I'd say it's probably our most significant product to date given this current low yield, low growth, high volatility market. And I think all three of those trends are going to be in play for the foreseeable future, especially with the guidance we've gotten from the fed on rates. And so we decided-
Anthony Scaramucci: (19:41)
And what yields are you getting for people?
Ryan Williams: (19:43)
... yeah, so we're providing investors in FBIC insured 3% reward on their cash, which is more than 60 times the national APY. We're providing investors as well with access to a real estate investment portfolio that they can participate in as well. So the idea was when you invest with Cadre, when you sign up, you become a user on our platform, you automatically become eligible for this 3% reward savings account where you're able to earn that 3% on the cash that you say you're going to invest in the real estate on our platform, but also we basically give you a credit for whatever that kind of total commitment amount is. So an example is you come to the platform, you say, "Look, I want to get a portfolio where I invest across 10 assets, and I put $50,000 into a growth oriented, defensive real estate?"
Ryan Williams: (20:40)
We'll say, "Great, got it." We'll open a Cadre Cash account for you. You deposit that $50,000, start earning 3% on that $50,000. As we fund from that account into your real estate portfolio, you can then add more cash to get back to your initial $50,000 balance. And we want it to go out with a 3% rate because we just felt like today given where rates are, and frankly given just the overall alternatives for folks, it's hard to get yield, it's hard to get that kind of return without taking a lot of outsize risk in volatility. And that was really our focus was to ensure that investors got that return on their capital at a time when people need it more than ever while also getting access to a defensive portfolio that's a hedge in many ways to the equity market volatility.
Ryan Williams: (21:31)
And so we've seen tremendous demand for the products. People can sign up, it is a limited time offering, it's cadre.com\cash. And we're excited about what it will mean for people's financial future. That's what we're always anchored on. How do we let more people have access to quality investments that will drive their futures forward? So it's really powerful product and one we think we'll actually expand our reach even further for more individuals.
Anthony Scaramucci: (21:59)
Well, congratulations on that. Just say it again, it's Cadre Cash...
Ryan Williams: (22:04)
Cadre.com\cash-
Anthony Scaramucci: (22:07)
... com\cash.
Ryan Williams: (22:08)
... that's right.
Anthony Scaramucci: (22:09)
Cadre.com\cash for people that are interested. Before I turn it over to John who's got... We've had a tremendous audience participation in lots of questions, I want to talk about the George Floyd incident for a second, because as an African-American black entrepreneur, you've got diversity issues, social issues, economic justice, you're reticent to do that. And I admire that by the way, because you're basically just want to be a person like Dr. King said, you want to be judged by the content of your character and not the color of your skin, but yet we do have this racial tension in our society and the George Floyd incident and other incidents for those men. Other tragic incidents has caused you to speak out a little bit. So I just wonder if you could tell us about the tipping point there and what advice do you have for people in terms of thinking about these issues and how can we work together to improve our society?
Ryan Williams: (23:05)
Yeah, no, thank you for asking Anthony and yeah, you're right. Again, it's been a challenging time. You have this dynamic where the kind of COVID pandemic has just laid bare some really ugly realities for many people in our country and reckoning and acknowledging that it's painful. And so for me, I've navigated my own personal challenges. I can empathize with a lot of the pain and frustration that you see, and you hear, and I just felt like I had an obligation as an African-American founder and CEO to do what I can to help personalize some of what people are seeing and hearing, especially folks and the bubbles that I kind of exist in today and then bubbles being real estate and technology to relatively homogenous industries.
Ryan Williams: (24:11)
And so, as you mentioned, I was a lot more willing to be outspoken, but not just with problems, but with ideas and solutions as well. And I think that's what it's really going to take now that everyone has seen what they've seen on TV, everyone saw George Floyd's life be taken from him. Everyone saw subsequent anger and frustration on all sides. And I think now the idea is like, "Okay, what do we do to build a more perfect union?" And I think we all can start with our own home, so to speak, our own organizations, our own networks. And I think for us at Cadre what we said is, "Look, let's start with our organization." We want to build a more inclusive organization. Right now more than 50% of our management team are women or people of color, that's great.
Ryan Williams: (25:09)
Let's make sure that throughout the whole organization we have a representative company. And I think a lot of the commitments on the company side are great. We need more diversity but what I would do is I would push companies to think about what they can do with their platforms, with their networks, with their ecosystems, with their resources. For me and for Cadre, what I've realized is we have a platform with the mission of expanding access, leveling the playing field, allowing more people to invest in an asset class that's been pretty inaccessible to date and we can use that platform and we can use that mission to extend an increased access opportunity for more people especially those who have been underserved.
Ryan Williams: (26:05)
And so what we've done at Cadre is said, "Okay, let's go above and beyond using our platform. Let's think about how do we create a more inclusive form of capitalism that sustainable because what we're seeing right now in this world is not sustainable and let's focused on driving capital into underserved communities. Let's focus on ensuring that our ecosystem is inclusive and representative as possible." And so what we've specifically said is we're making some from explicit commitments, one, we are going to do everything in our power to ensure that the operating partners that we work with in our real estate investments are more diverse. So we've made commitments at least 10%. We want to be closer to 20% of the operating partners we work with being underrepresented minorities.
Ryan Williams: (26:55)
Anthony, I think you could probably count on two hands and number of let's just say black operators in real estate that have invested more than 50 million of equity. I can only think of four, frankly, right now. Needless to say, there are hundreds, if not, thousands of others who have done that. And we think, again, there's opportunities to be heard in markets that are underserved with partners who haven't been backed and capitalized.
Ryan Williams: (27:20)
But that's one thing uniquely leverage our platform. The second is let's be more open working with minority depository institutions, MDIs. We've heard about how under capitalized, a lot of these communities banks are, and by the way, these community banks don't just serve black and Latino communities. I mean, these are communities that socioeconomically are disadvantaged. And so I think that if you can help include some of these banks that have been left on the outside looking in, in transactions, deposits as well which is great, and people have talked about that, but transactions really where you can create a multiplier effect on capital, then you're going to help again, elevate the least among us and reduce a lot of the pain economically we're seeing today.
Ryan Williams: (28:09)
And so we said, "We're going to commit to a threshold for all of our go-forward deals to work with minority depository institutions that have been under capitalized and underserved." And then I think the final thing for us is really about building coalitions. I was pleased to work with John Stein, founder, CEO of Betterment, and a handful of around 45, 50 FinTech companies on the FinTech equity coalition that was announced about a month ago or so, where it's not just one company, it's not just me and Ryan, and as a CEO, co-founder Cadre, it's, let's build an alliance of other companies with similar missions from all walks of life to ensure that this is as impactful as possible, and that we reach as many people as possible and that we're helping promote greater equality of opportunity.
Ryan Williams: (29:00)
And I think with those collective efforts, a lot of good will come. A lot of change will come, but I would just say it doesn't need to be a monumental action that you take in order to have impact. It can be as simple as having a conversation, acknowledging you don't know where to get started. For instance, if you want to increase your pipeline from a diversity perspective. Because what we're seeing again, it's not sustainable. And just the final point I would make is I do... And I'm optimistic about this, I do believe there's a real opportunity for investors to do well financially and to do good as well. For a long we've had these different buckets of returns.
Ryan Williams: (29:44)
You've got your financial IRR in kind of your impact oriented return threshold. And our view is we're at a point as you know where our country's never been more divided, our world's increasingly divided, the haves and the have-nots have never been further apart and it's not sustainable right now. And it's not good for anybody to kind of look the other way and ignore the pain that's being surfaced from those who haven't had access to opportunity. And so I think as a platform, as a leader, my obligation is to make sure that one, we're executing on our business plan, but we're thinking more holistically about all the stakeholders that co-exists in our world and those stakeholders are increasingly community. And so as we look to diversify and focus on positive societal change, vis-a-vis our investments, I think there will be this cycle where society, and at least among us are elevated and have greater access to opportunity, communities and neighborhoods around the country especially those underserved become more prosperous.
Ryan Williams: (31:00)
And the long-term effects, the long-term returns in IRRs of this will be significantly greater because there'll be less volatility, there'll be less unrest, there will be less turbulence and more stability and more equity. And I think that's all that folks are looking for is, "Give me a shot, let me compete. Give me more of a level playing field." And companies today can no longer ignore those, please. You know, the cries that we're hearing have to awaken us, we can't keep hitting snooze, and I am optimistic for what it's worth that there's a lot of collective will especially in the private sector to drive great enduring change that's sustainable.
Anthony Scaramucci: (31:45)
Well, I think it's beautiful and very well said. And I what I appreciate more than just what you're saying, or the actions that you're taking, it's an incentive for all of us, Ryan. I'm going to turn it over to John who's got a series of questions for you from our audience, but thank you for joining us today.
Ryan Williams: (32:04)
Thank you, Anthony. I really appreciate it.
John Darsie: (32:06)
And Ryan, I thought your last answer was very well said, and I want to build on that a little bit. There's really two forms of racism that exists. There's the overt in your face type of racism, and then there sort of the nimbyism not in my backyard type of attitude that you see in a lot of major cities and even left leaning cities that are generally thought of as more receptive to minorities. You talked a little bit earlier about affordable housing and about how you think you can do well and do good with a variety of different investments today. We've had other guests on previously people like Steve Case, people like Mark Cuban of [inaudible 00:32:40] talking about how they think affordable housing is a tremendous investment opportunity that also happens to have an impact component built into it. What's your view on affordable housing in general, and how can we... There's a real dearth of quality housing around major cities, how do we fix that, and what do you think of it from an investment perspective?
Ryan Williams: (32:59)
Yeah, no, Greg, great question. Great point. First, it's no one can argue that we have a shortage of affordable housing in our country today. So there's a clear macro case for increasing the supply of affordable. You can't say the same thing for other asset classes. You can't say the same thing for office, especially in some of the larger markets. Can't say the same thing for hotel, especially full service. Definitely can't say the same thing for retail. So I think the first point is, there's definitely a mismatch in some asymmetry between supply and demand for affordable housing. So you check that box, okay, macro investment theme can make sense. The next question really is, what of the right markets to be investing in affordable housing and how do you bring together the public and private sectors in those markets to ensure that there's? Again, more inclusive capitalism, that there's positive revitalization of communities, not gentrification happening with a little pocket of affordable housing.
Ryan Williams: (34:05)
And I do think that there is an increasing focus from investors LPs, allocators on that very dynamic and they're willing. And increasingly we hear it because we have investors reach out to us and recently in particular, we hear it from investors that they're willing to think differently about the business plans, the return profiles within reason of course, and the [inaudible 00:34:32] periods. And so I think if you can identify high growth markets, affordable markets, create partnerships between private public sectors, which sounds a lot easier than it actually is, I actually think that there's almost this arbitrage opportunity from an investing standpoint, just because affordable housing has been under invested historically, but there has to be the right incentives. Again, from a public private perspective, I think we've seen that there are a lot of programs where the spirit of the program is good, but the actual execution is not.
Ryan Williams: (35:07)
And I attribute that again to not having the right balance between the private sort of incentives and the public incentives. The other thing I would just say is that there are definitely a lot of operating partners, sponsors, developers that I've spoken with, that if the capital was there, they would be building and developing affordable housing at scale. And so I also think there's an untapped operating partner pool, and management team pool, especially among more diverse operators and managers who really know the communities and allowing the affordable housing will be developed. So I think if you can create almost this kind of investment lifecycle where at every single point you're ensuring that the stakeholders are aligned with the mission, they have the right incentives and you're picking the right markets, the macro story here makes sense.
Ryan Williams: (36:03)
At Cadre, we've done a little bit of affordable housing. We've done a lot in workforce housing but we're increasingly focused on affordable housing, finding opportunities that we think fit within the markets we're focused on, and working to structure partnerships, public, private, but I definitely think it's one of those asset classes in the scheme of everything going on, it would be defensive, could actually drive outsize returns because of the dearth of capital in the space today and also can clearly do good.
John Darsie: (36:33)
Have you thought about... You talked about different programs that have existed from a public policy perspective that have sometimes failed in their mission despite having a good spirit within the legislation. Have you thought about what type of incentives from a public policy perspective would drive the type of investment that you'd like to see in underserved communities?
Ryan Williams: (36:54)
Yeah. I've thought a bit about it. What I would say is that to me there's a lot of different ways you can skin the cat and there's a lot of different ways that you could incentivize developers, sponsors and investors. And we've seen a lot of it. Look at the Opportunity Zone Program in terms of capital gains being deferred and then ultimately subset a part of that being eliminated. We've seen different tax credits. So the economics of it, I'm not as focused on because I think that's relatively straight forward. I think the bigger issue is there's not... I haven't seen in really many cases a sustained and ongoing set of incentives, checks and balances. What I mean is let's take the, Opportunity Zone Program.
Ryan Williams: (37:46)
You put the capital in, as an investor you're now able to defer gains, and then on any appreciation above your initial basis, you can eliminate those gains. But that's like a one and done deal. Now with the developer, the operator, they've got to abide by the whole periods, et cetera. What if there were ongoing incentives based off of things like community impact, right? You could figure out some kind of metric based off of diversity of the tenant base, based off of the turnover in the properties themselves. So that you're thinking about this in more of a longterm way, not a one-time, let me see if I can benefit economically and then make sure that I get my money 10 years from now.
Ryan Williams: (38:37)
And I think that that's been missing in a lot of recent policy, a lot of recent structures, is how do you create almost these different tiers of incentives above and beyond the initial that align with the long-term development and inclusion of these communities. And I think if folks could come with some ideas related to, how do we ensure that the missions of these programs are kind of delivered over the course of the whole period, not just one time upfront and you move on, then there would be greater accountability and there would be greater alignment with actually ensuring that positive societal impact and inclusion is delivered. And there are models, and there are examples that I've seen where, you're changing for instance in a shopping center tenant base, right?
Ryan Williams: (39:30)
You're taking out in, for instance, in my hometown of Baton Rouge, I was speaking with a local official there recently about swapping out a liquor store in a retail strip center for a Starbucks or a Whole Foods and the kind of change that that would create almost even in the mentality of many of these communities in terms of what the access is, and that's something that those kinds of changes where you're repositioning, but still including the community and the progress and development, aren't hard to do. You just need the right incentives, you need the right accountability, and you need a long-term orientation on making sure that every year, every month, these communities, these investments are bringing forth the intended mission and that all the stakeholders, public, private and otherwise are aligned on an ongoing basis, not just one time.
John Darsie: (40:26)
So, one last question, before we let you go, you started Cadre and you democratize primary access to real estate, but you've also more recently developed a robust secondary market on the Cadre platform for real estate. One of the things that discourages people from investing in real estate in the first place is the illiquidity factor. Why do you think it's important for healthy financial markets in this case, a healthy secondary market for commercial real estate, why is that important for the development of that market and what type of positive impact does that have on returns, and just outcomes in communities?
Ryan Williams: (40:59)
Yeah. First thing, I guess I have to take a step back, when I started Cadre I said, "Why are so many individuals under allocated to alternatives and to real estate?" And there were two reasons I believed, one was a lack of efficient, low fee access. And the second was a lack of liquidity. On the low fee efficient access, we created a technology interface with the great institutional investing team so people can log on with the click of a button, pay significantly lower fees than traditional real estate PE firms. And we've delivered on that. We've executed on that. The liquidity dimension was a lot more challenging, but I also thought if we could crack that code on building a secondary market, we would give more individuals confidence and comfort in investing in real estate, because they knew if there are market dislocations, like we saw 10, 12 years ago or things like we're seeing recently with COVID, they'd have the optionality to get out.
Ryan Williams: (41:56)
They want to be prone to market swings about the ability to get liquidity. For individuals it's a lot more important in many ways to then institutions because they don't have the same balance sheets, the same assets. And so we spent the better part of the first three years just working on legal regulatory and making sure that we could actually provide fractional liquidity for investors in both properties and in portfolios to the extent they wanted to sell. We spent the first few years testing the concept, building prototypes, spending some time with folks who would serve as backstops, almost market makers, and about two and a half years ago we formally launched our secondary marketplace successfully. And the idea is we want individuals on a quarterly basis to be able to sell at more efficient pricing levels than the real estate secondaries funds charge, right? Where you're getting massive discounts because there's no symmetry of information. Buyers and sellers don't have the same information.
Ryan Williams: (42:55)
So you're basically baking in some kind of opacity discount into your investing. And I think many ways we've delivered on that, we've closed hundreds of trades on our secondary marketplace for hundreds of individual investors, pricing generally been within a few 100 basis points of the latest third-party valuation, and I think as a result, we've given people just an extra degree of comfort that if they need, these aren't people kind of high-frequency trading or otherwise, they can get out without the pain associated with a real estate, private equity funds, illiquidity dimension, and I think what's exciting is you can see a world where we take this proprietary first ever direct secondary market for real estate and apply it to other assets, other real estate holdings, other alternatives over time.
Ryan Williams: (43:46)
So let's say there's an office landlord in New York, great building, but they've been struggling. Tenant base is not coming back anytime soon, there's a lot of headwinds in terms of the cost of reopen. They need some level of liquidity. They need to sell a 20% interest in their building of their asset. Well, we've built secondary marketplace that connects owners and operators and their holdings to thousands of investors around the world. And we can effectively start unlocking liquidity and real estate assets and making it a more liquid asset class than it is today. And I think what the outcome will be is there'll be more people comfortable with dipping their toe and getting involved in this space, more institutions comfortable to the extent there are major market corrections. And ultimately I believe change the paradigm in real estate from one of opacity and illiquidity to transparency and liquidity, which I think is better for everybody.
John Darsie: (44:47)
Yeah, and as you talked about, there's no shortage of developers who have identified great projects in terms of things like affordable housing, but there's a lack of capital. If you can create a robust secondary market, it makes more people more comfortable putting capital into the space and it just drives capital in general.
Ryan Williams: (45:03)
Absolutely.
John Darsie: (45:05)
Well, Ryan, thanks so much for joining us. It's been a fascinating conversation. I might have to log onto cadre.com here in a few minutes and put some money to work, but it's a fascinating concept. Congratulations on building a great business. The tremendous team you've put together and all the impact you're having in communities as well. Anthony, you have a final word.
Anthony Scaramucci: (45:23)
Oh wow. I'm going to be looking for a house in Charlotte, Ryan, so I'm expecting you to help me. Okay-
Ryan Williams: (45:28)
I'm there for you. You tell me where.
John Darsie: (45:31)
[crosstalk 00:45:31].
Anthony Scaramucci: (45:32)
[crosstalk 00:45:32] SALT Talk, you know what I mean?
John Darsie: (45:34)
Do you have any retirement communities in your portfolio, Ryan, that we could find Anthony a home that he can [crosstalk 00:45:39] his later years?
Anthony Scaramucci: (45:42)
It's relentless Ryan. Okay. Next week, Ryan Williams will be joining me as the co-host of SALT Talks on a going forward basis. [crosstalk 00:45:52] John will be reporting-
John Darsie: (45:52)
God willing, he'd do way better than me, that's for sure.
Anthony Scaramucci: (45:54)
... on assignment from Charlotte, North Carolina. Ryan, thanks very much.
Ryan Williams: (45:59)
Thank you both.
Anthony Scaramucci: (46:00)
[crosstalk 00:46:00] terrific. We look forward to following your career. We hope you'll come back and of course, love to have you at one of our live events.
Ryan Williams: (46:06)
And wait for it. Thank you both, [crosstalk 00:46:08] appreciate it [crosstalk 00:46:09].