Oxstones Investment Club™Cadre, co-founded by President Trump’s son-in-law, is trying to move past White House disclosure controversy.
In 2014, when Ryan Williams started his real-estate investing company Cadre, he turned to the two people he knew with the best networks and connections in the industry: Josh Kushner, who he’d met while a freshman at Harvard, and his older brother, Jared.
It was a savvy move: The Kushners’ connections helped bring in advisers, investors and customers for Cadre, which lets wealthy investors buy small stakes in residential and commercial buildings. Cadre lists both Kushner brothers as founders. But the Kushner brand also landed Cadre in hot water a month ago, when a report said Jared Kushner didn’t disclose his investment in Cadre when he became a senior advisor to President Donald Trump, sparking ethics questions.
Williams is grateful for Jared Kushner’s role in the company. In his first interview since the disclosure controversy, Williams told Bloomberg that Kushner was “a really important adviser.” But he also emphasizes that Kushner “has no operational control, governance or say on the company.” Kushner, who’s married to President Trump’s daughter Ivanka, stepped down from Cadre’s board and sold some of his stake in the company before the inauguration.
Instead, 29-year-old Williams wants to focus the newfound curiosity about Cadre on a different name: Andreessen Horowitz, the venture firm that’s leading Cadre’s newest $65 million round of financing. Jeff Jordan, a partner at the firm, is joining Cadre’s board. Other investors in the round include Breyer Capital, the Ford Foundation, General Catalyst and Khosla Ventures. The investment increases Cadre’s valuation to more than $800 million, said a person familiar with the matter. The fundraising amount and valuation were previously reported by technology website The Information.
Jordan, an eBay veteran, said he was drawn to the idea of applying a marketplace model like EBay’s to a traditionally opaque industry of commercial real estate, where investors usually give money to funds and hope for the best. With Cadre, prospective real estate investors “get to decide deal by deal,” Jordan said. “That really isn’t available now. Essentially, what they do is give Blackstone a bunch of money, and hopefully something comes out of the black box years later.”
Jordan also said he was impressed by Williams’s unusual background. Williams grew up near Baton Rouge, Louisiana, and started his first business by buying worms, cutting them in half and selling them in a bait-and-tackle venture. (“Really good margins,” he said.) As a teenager, he started a custom-embroidery sweatband shop and sold the business six years later.
Neither of Williams’s parents had gone to college out of state, but he attended Harvard University and quickly spotted another opportunity there: the network. As a freshman, he said he was pitching a business plan at Harvard Business School for a campus organization he’d created when he met Josh Kushner, who was two years ahead of him at school and is now a partner at Thrive Capital, a Cadre investor. Josh introduced him to his older brother.
As a sophomore in 2008, Williams noticed that foreclosed houses outside of Atlanta were being sold for a small fraction of what he thought they were worth. He didn’t have enough money to buy them—but he had the chance to raise some. “At Harvard, one of the benefits was that I had a lot of wealthy classmates,” he said. “Being able to have resources at that scale was unique.”
Williams started pitching fellow students on the opportunity to buy homes and raised $65,000. It covered his first purchase: 1411 New Hope Road, a 1,300 square foot single-family home in tree-lined southwest Atlanta. By the time he graduated, Williams said he had used the money from 60 investors to buy 800 housing units, often renting them back to their residents to allow them to rebuild enough credit to get a new mortgage.
He moved on to spend stints at Goldman Sachs Group Inc. and Blackstone Group LP, but after a while, Williams said he was tired of helping the wealthy become wealthier. Instead, he wanted to come up with a way to allow more people to invest in commercial real estate—an asset that usually offers high yields. He cites a revelation he had when he realized his grandmother, who the family calls Dear, was only getting a return of 1 percent or 2 percent on her retirement savings that led him to start Cadre in 2014. “There’s this crazy disconnect between what she can invest in versus the ultra-affluent,” he said. “She should be someone who could own a piece of a building in Baton Rouge or New Orleans.”
Despite his vision of bringing those high yields to the masses, Cadre is far from allowing Dear to tap into that growth. Cadre allows people to pool together money to buy stakes in buildings, but only accredited investors—who have a net worth of $1 million, not including a primary residence, or make $200,000 in yearly income—can participate.
Jim Breyer, the founder of Breyer Capital, said that he was glad to see an offline, relationship-driven industry begin to move online, even if it’s not yet allowing regular investors to tap into real estate. “I believe it is his vision, though it’s not part of the business yet,” he said. “It’s important to start somewhere.”
Cadre’s platform only has 10 properties available, each one vetted by its in-house investing team, scattered across the U.S. About 800 investors—half individuals, half institutions—can buy small stakes in the buildings. This summer, Cadre plans to start allowing investors to resell their real estate holdings at set intervals. Eventually, Williams says, retail investors will be able to join in as well, and Cadre will add buildings in more cities.
Jared Kushner still owns a stake in the company. Despite emphasizing the distance between him and Cadre, his younger brother Josh—who sits on the board because of Thrive Capital’s investment—remains very involved in the company, Williams said. The two talk once a week or more. “Most traditional VCs are not calling me up, giving me advice, asking questions, talking about product,” Williams said. “He’s a friend and a mentor in many ways to me.”
https://www.bloomberg.com/news/articles/2017-06-06/startup-s-ties-to-kushners-came-with-benefits-until-it-got-complicated
Tags: Blackstone Group LP, Breyer Capital, Cadre, commercial real estate, Ford Foundation, General Catalyst, Goldman Sachs Group Inc., Harvard Business School, Josh Kushner, Khosla Ventures, Thrive Capital