Maryland (State or other jurisdiction of incorporation or organization) | | | 6798 (Primary Standard Industrial Classification Code Number) | | | 61-1805524 (I.R.S. Employer Identification Number) |
Darryl Steinhause, Esq. Robert H. Bergdolt, Esq. Laura K. Sirianni, Esq. DLA Piper LLP (US) 4141 Parklake Avenue, Suite 300 Raleigh, North Carolina 27612-2350 (919) 786-2000 | | | Josh Schneiderman, Esq. Snell & Wilmer L.L.P. 350 South Grand Ave., Suite 3100 Los Angeles, California 90071 Tel: (213) 929-2500 |
Large accelerated filer | | | ☐ | | | Accelerated filer | | | ☐ |
Non-accelerated filer | | | ☒ | | | Smaller reporting company | | | ☒ |
| | | | Emerging growth company | | | ☒ |
Title of each class of securities to be registered | | | Amount to be registered | | | Proposed maximum offering price per share | | | Proposed maximum aggregate offering price(3) | | | Amount of registration fee(4) |
Class A Common Stock, par value $0.01 per share | | | 5,762,253(1) | | | $10.00(2) | | | $57,622,530 | | | $6,287 |
(1) | Represents the estimated maximum number of shares of common stock, par value $0.01 per share, of the Registrant to be issued in connection with the merger described herein based on the product of 4,904,045 shares of Cottonwood Multifamily REIT I, Inc. common stock, par value $0.01 per share, outstanding as of March 23, 2021 multiplied by an assumed exchange ratio of 1.175 shares of Cottonwood Communities, Inc. for each share of Cottonwood Multifamily REIT I, Inc. common stock. |
(2) | There is no established market for the Registrant’s shares of common stock. The estimated value per share of the Registrant’s Class A common stock is $10.00, based solely on the last price paid to acquire a share of the Registrant’s Class A common stock in the Registrant’s suspended initial public offering in December 2020. |
(3) | Estimated solely for purposes of calculating the registration fee required by Section 6(b) of the Securities Act, and calculated pursuant to Rule 457(f)(2) under the Securities Act. |
(4) | Determined in accordance with Section 6(b) of the Securities Act at a rate equal to $109.10 per $1 million of the proposed maximum aggregate offering price. |
| | Portfolio Statistics (as of December 31, 2020) | ||||||||||||||||
| | CCI | | | CMRI | | | CRII | | | CMRII | | | Combined Company | | | Fully Combined Company | |
Stabilized Properties/States | | | 2 / 2 | | | 3 / 3(1) | | | 22 / 9 | | | 2 / 2(1) | | | 24 / 9 | | | 24 / 9 |
Average Effective Rent | | | $2,057 | | | $1,445 | | | $1,284 | | | $1,507 | | | $1,367(2) | | | $1,377(2) |
Portfolio Occupancy | | | 95.3% | | | 94.9% | | | 95.0% | | | 94.4% | | | 95.0%(2) | | | 94.9%(2) |
Average Age of Portfolio (years) | | | 4 | | | 8 | | | 22 | | | 6 | | | 19(2) | | | 18(2) |
Structured Investments/States | | | 4 /4 | | | — | | | 2 / 2 | | | — | | | 6 / 6 | | | 6 / 6 |
Development Projects/States | | | — | | | — | | | 4 / 1 | | | — | | | 4 / 1 | | | 4 / 1 |
Land Held for Development | | | — | | | — | | | 1 / 1 | | | — | | | 1 / 1 | | | 1 / 1 |
Total Real Estate Assets/States | | | 6 / 4 | | | 3 / 3(1) | | | 29 / 10 | | | 2 / 2(1) | | | 35 / 12 | | | 35 / 12 |
Total Assets (in millions) | | | $204.8 | | | $27.5 | | | $970.8 | | | $37.9 | | | $1,612.2 | | | $1,612.4 |
(1) | Properties held jointly with CROP, CRII’s operating partnership, prior to the CROP Merger. |
(2) | Averages weighted by ownership percentage and unit counts by asset |
• | Increased Diversification. The Combined Company and the Fully Combined Company will benefit from enhanced investment diversification such as the number and location of assets, asset lifecycle (e.g., under development or stabilized) and investment structure (e.g., direct equity investment, preferred equity or debt). |
• | Expanded Access to Capital and Reduced Cost of Capital. The larger size of the Combined Company and the Fully Combined Company will likely improve access to capital markets and reduce the cost of capital to support strategic investments that drive growth opportunities, and may increase opportunities for stockholder liquidity should the company ever opt to list its securities on a national securities exchange. |
• | Greater Management Focus and Economies of Scale. The integrated organizational structure of the Combined Company and the Fully Combined Company will allow CCI management and CCI’s advisor to focus their efforts on the operation of the company instead of on separate REITs. The increased focus and size of the Combined Company and Fully Combined Company is expected to result in enhanced operating and cost efficiencies. |
• | Broadened Potential Liquidity Options. The Combined Company and the Fully Combined Company are expected to have improved liquidity options for stockholders through the expansion of the share repurchase program which considerably increases the maximum amount of shares that may be repurchased, provides for monthly repurchases and removes the limitations on the funding sources that may be used to repurchase shares. |
1. | A proposal to approve the merger of Cottonwood Multifamily REIT I, Inc. with and into Cottonwood Communities GP Subsidiary, LLC, a wholly owned subsidiary of Cottonwood Communities, Inc., pursuant to the Agreement and Plan of Merger, dated as of January 26, 2021, by and among Cottonwood Multifamily REIT I, Inc., Cottonwood Communities, Inc. and the other parties thereto, which we refer to as the “CMRI Merger Proposal.” |
2. | A proposal to adjourn the Special Meeting to solicit additional proxies in favor of the CMRI Merger Proposal if there are not sufficient votes to approve the CMRI Merger Proposal, if necessary and as determined by the chair of the Special Meeting, which we refer to as the “Adjournment Proposal.” |
| | By Order of the Board of Directors, | |
| | ||
Salt Lake City, Utah | | | Gregg Christensen, Secretary |
[•], 2021 | | |
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ANNEXES | | | |
Annex A– Agreement and Plan of Merger | |||
Annex B– Opinion of CMRI Special Committee’s Financial Advisor | |||
Annex C– Opinion Update of CMRI Special Committee’s Financial Advisor | |||
Annex D CMRI Annual Report on Form 1-K | |||
Annex E– CCI Annual Report on Form 10-K | |||
Annex F– CRII Unaudited Consolidated Financial Statements for the period ending December 31, 2020 | |||
Annex G– CMRII Annual Report on Form 1-K |
1. | “Acquisition Proposal” are to any bona fide proposal or offer from any person (other than CCI or any of its subsidiaries) made after January 26, 2021, whether in one transaction or a series of related transactions, relating to any (i) merger, consolidation, share exchange, business combination or similar transaction involving CMRI or any significant CMRI subsidiary, (ii) sale or other disposition, by merger, consolidation, share exchange, business combination or any similar transaction, of any assets of CMRI or any of its subsidiaries representing 20% or more of the consolidated assets of CMRI, (iii) issue, sale or other disposition by CMRI of securities representing 20% or more of the votes associated with the outstanding CMRI Common Stock, (iv) tender offer or exchange offer in which any person or group will acquire beneficial ownership, or the right to acquire beneficial ownership, of 20% or more of the outstanding CMRI Common Stock, or (v) recapitalization, restructuring, liquidation, dissolution or other similar type of transaction with respect to CMRI in which a third party will acquire beneficial ownership of 20% or more of the outstanding shares of CMRI Common Stock; |
2. | “Adjournment Proposal” are to the proposal to adjourn the Special Meeting to solicit additional proxies in favor of the CMRI Merger Proposal if there are not sufficient votes to approve the CMRI Merger Proposal, if necessary and as determined by the chair of the Special Meeting; |
3. | “Amended and Restated Advisory Agreement” are to the Amended and Restated Advisory Agreement dated April [•], 2021 entered into by CCI, CROP and CCI Advisor as of the closing of the CRII Merger, as may be amended; |
4. | “Broadridge” are to Broadridge Financial Solutions, Inc., the proxy solicitor; |
5. | “CBRE Capital” are to CBRE Capital Advisors, Inc., the financial advisor of the CMRI Special Committee; |
6. | “CCA” are to Cottonwood Communities Advisors, LLC, a Delaware limited liability company, the sole owner of CCI Advisor and CMRI Asset Manager; |
7. | “CCA Note” are to the Amended and Restated Promissory Note of CCA dated January 1, 2021 payable to CROP in the amount of $13 million; |
8. | “CCI” are to Cottonwood Communities, Inc., a Maryland corporation; |
9. | “CCI Advisor” are to CC Advisors III, LLC, a Delaware limited liability company, a wholly owned subsidiary of CCA and the advisor to CCI and CROP (as successor to CCOP); |
10. | “CCI Board” are to the board of directors of CCI; |
11. | “CCI Bylaws” are to the bylaws of CCI; |
12. | “CCI Charter” are to the Articles of Amendment and Restatement of CCI, as supplemented and amended; |
13. | “CCI Common Stock” are to the shares of Class A common stock, $0.01 par value per share, of CCI, and where applicable in this proxy statement/prospectus, may also include the other classes of common stock, $0.01 per share, of CCI, including the Class T, TX, D and I shares; |
14. | “CCI Parties” are to CCI, CCOP and Merger Sub; |
15. | “CCI Series 2016 Preferred Stock” are to the shares of Series 2016 preferred stock, $0.01 par value per share, of CCI, which were issued to the holders of CRII’s Series 2016 preferred stock in connection with the CRII Merger; |
16. | “CCI Series 2017 Preferred Stock” are to the shares of Series 2017 preferred stock, $0.01 par value per share, of CCI, which were issued to the holders of CRII’s Series 2017 preferred stock in connection with the CRII Merger; |
17. | “CCI Series 2019 Preferred Stock” are to the shares of Series 2019 preferred stock, $0.01 par value per share, of CCI; |
18. | “CCI Special Committee” are to the special committee of the CCI Board that was formed by the CCI Board to consider the Mergers and the other transactions contemplated by the Merger Agreements; |
19. | “CCM” are to Cottonwood Communities Management, LLC, a Delaware limited liability company, a wholly owned subsidiary of Cottonwood Capital Management and the property manager of CCI, CCOP and their subsidiaries prior to the CROP Merger; |
20. | “CCOP” are to Cottonwood Communities O.P., LP., a Delaware limited partnership, the operating partnership of CCI prior to the CROP Merger; |
21. | “CCOP Common Unit” are to the common limited partner units of CCOP as set forth in the CCOP Partnership Agreement; |
22. | “CCOP LTIP Units” are to the limited partner units of CCOP designated as LTIP Units as set forth in the CCOP Partnership Agreement and the documentation pursuant to which the LTIP Units are granted; |
23. | “CCOP Partnership Agreement” are to the Amended and Restated Limited Partnership Agreement of CCOP, dated as of February 1, 2020, as may be amended; |
24. | “CCOP Special LTIP Units” are to the CCOP LTIP Units designated as Special LTIP Units in the documentation pursuant to which the CCOP LTIP Units are granted; |
25. | “CCPM II” are to Cottonwood Capital Property Management II, LLC, a Delaware limited liability company, a wholly owned subsidiary of Cottonwood Capital Management and the property manager of CMRI, CMRI OP, CMRII, CMRII OP and their respective subsidiaries, and the former asset manager of CMR I and CMRII; |
26. | “CMRI” are to Cottonwood Multifamily REIT I, Inc., a Maryland corporation; |
27. | “CMRI Asset Manager” are to CC Advisors I, LLC, a Delaware limited liability company, a wholly owned subsidiary of CCA and the asset manager of CMRI and CMRI OP; |
28. | “CMRI Board” are to the board of directors of CMRI; |
29. | “CMRI Bylaws” are to the bylaws of CMRI; |
30. | “CMRI Charter” are to the Second Articles of Amendment and Restatement of CMRI, as supplemented and amended; |
31. | “CMRI Common Stock” are to the shares of common stock, $0.01 par value per share, of CMRI; |
32. | “CMRI Merger” are to the merger of CMRI with and into Merger Sub, with Merger Sub surviving the merger, pursuant to the CMRI Merger Agreement, and where applicable in this proxy statement/prospectus may also include the CMRI OP Merger; |
33. | “CMRI Merger Agreement” are to the Agreement and Plan of Merger, dated as of January 26, 2021, by and among the CMRI Parties and the CCI Parties, as it may be amended from time to time, a copy of which is attached as Annex A to this proxy statement/prospectus; |
34. | “CMRI Merger Proposal” are to proposal to approve the CMRI Merger; |
35. | “CMRI OP” are to Cottonwood Multifamily REIT I O.P., LP, a Delaware limited partnership, the operating partnership of CMRI; |
36. | “CMRI OP Merger” are to the merger of CMRI OP with and into CROP (as successor to CCOP), with CROP surviving the merger, pursuant to the CMRI Merger Agreement; |
37. | “CMRI OP Partnership Agreement” are to the Agreement of Limited Partnership of CMRI OP., dated June 18, 2015, as may be amended; |
38. | “CMRI OP Unit Split” are to the split of each partnership unit of CMRI OP issued and outstanding immediately prior to the effective date of the CMRI OP Merger in an amount that results in the total number of CMRI OP partnership units then outstanding being equal to the number of shares of CMRI Common Stock that were outstanding immediately prior to the effective time of the CMRI Merger, which will occur immediately prior to the effective time of the CMRI OP Merger; |
39. | “CMRI Parties” are to CMRI and CMRI OP; |
40. | “CMRI Special Committee” are to the special committee of the CMRI Board that was formed by the CMRI Board to consider the CMRI Merger and the other transactions contemplated by the CMRI Merger Agreement; |
41. | “CMRII” are to Cottonwood Multifamily REIT II, Inc., a Maryland corporation; |
42. | “CMRII Merger” are to the merger of CMRII with and into Merger Sub, with Merger Sub surviving the merger, pursuant to the CMRII Merger Agreement, and where applicable in this proxy statement/prospectus may also include the CMRII OP Merger; |
43. | “CMRII Merger Agreement” are to the Agreement and Plan of Merger, dated as of January 26, 2021, by and among the CCI Parties, CMRII and CMRII OP, as it may be amended from time to time; |
44. | “CMRII OP” are to Cottonwood Multifamily REIT II O.P., LP, a Delaware limited partnership, the operating partnership of CMRII; |
45. | “CMRII OP Merger” are to the merger of CMRII OP with and into CROP (as successor to CCOP), with CROP surviving the merger, pursuant to the CMRII Merger Agreement; |
46. | “Code” are to the Internal Revenue Code of 1986, as amended; |
47. | “Combined Company” are to CCI and its consolidated subsidiaries (including the Surviving Entity) after the closing of the CRII Merger, the CROP Merger, the CMRI Merger and the CMRI OP Merger; |
48. | “Cottonwood Capital Management” are to Cottonwood Capital Management, Inc., a Delaware corporation, a wholly owned subsidiary of CROP and the owner of CCM and CCPM II; |
49. | “CR Holdings” are to Cottonwood Residential Holdings, LLC, a Delaware limited liability, the sole owner of CRII’s voting common stock, and which is beneficially owned by Daniel Shaeffer, Chad Christensen, Gregg Christensen and Eric Marlin; |
50. | “CRII” are to Cottonwood Residential II, Inc., a Maryland corporation; |
51. | “CRII Merger” are to the merger of CRII with and into Merger Sub, with Merger Sub surviving the merger, pursuant to the CRII Merger Agreement, and where applicable in this proxy statement/prospectus may also include the CROP Merger; |
52. | “CRII Merger Agreement” are to the Agreement and Plan of Merger, dated as of January 26, 2021, by and among the CCI Parties, CRII and CROP, as it may be amended from time to time; |
53. | “CROP” are to Cottonwood Residential O.P., LP, a Delaware limited partnership, the operating partnership of CRII; |
54. | “CROP Common Units” are to the common limited partner units of CROP as set forth in the CROP Partnership Agreement; |
55. | “CROP LTIP Units” are to the limited partner units of CROP designated as LTIP Units as set forth in the CROP Partnership Agreement and the documentation pursuant to which the LTIP Units are granted; |
56. | “CROP Merger” are to the merger of CCOP with and into CROP, with CROP surviving the merger, pursuant to the CRII Merger Agreement; |
57. | “CROP Partnership Agreement” are to the Fifth Amended and Restated Limited Partnership Agreement of CROP dated April [•], 2021 entered into as of the closing of the CROP Merger, as may be amended; |
58. | “CROP Special LTIP Units” are to the CROP LTIP Units designated as Special LTIP Units in the documentation pursuant to which the CROP LTIP Units are granted; |
59. | “CROP Tax Protection Agreement” are to the tax protection agreement between CROP and HT Holdings dated January 26, 2021, which became effective as of the closing of the CROP Merger; |
60. | “DLA Piper” are to DLA Piper LLP (US); |
61. | “DRULPA” are to the Delaware Revised Uniform Limited Partnership Act or any successor statute; |
62. | “ERISA” are to the Employee Retirement Income Security Act of 1974, as amended; |
63. | “Exchange Act” are to the Securities Exchange Act of 1934, as amended; |
64. | “Fully Combined Company” are to CCI and its consolidated subsidiaries (including the Surviving Entity and CROP) assuming the closing of all of the Mergers; |
65. | “HT Holdings” are to High Traverse Holdings, LLC, a Delaware limited liability company, which is beneficially owned by Daniel Shaeffer, Chad Christensen, Gregg Christensen and Eric Marlin; |
66. | “Investment Company Act” are to the Investment Company Act of 1940, as amended; |
67. | “Mergers” are to the CMRI Merger, CRII Merger and CMRII Merger, and where applicable in this proxy statement/prospectus may also include the CMRI OP Merger, the CROP Merger and the CMRII OP Merger; |
68. | “Merger Agreements” are to the CMRI Merger Agreement, CRII Merger Agreement and CMRII Merger Agreement; |
69. | “Merger Consideration” are to the conversion of each share of CMRI Common Stock issued and outstanding immediately prior to the effective time of the CMRI Merger, into the right to receive 1.175 shares of CCI Common Stock, pursuant to the terms of the CMRI Merger Agreement; |
70. | “Merger Sub” are to Cottonwood Communities GP Subsidiary, LLC, a Maryland limited liability company, a wholly owned subsidiary of CCI; |
71. | “MGCL” are to the Maryland General Corporation Law or any successor statute; |
72. | “ordinary course of business” are to an action taken by a person or entity that is consistent with past practice and similar in nature and magnitude to actions customarily taken without any authorization by the board of directors in the course of normal day-to-day operations; |
73. | “Outside Date” are to October 25, 2021; |
74. | “Record Date” are to [•], 2021, the date for determining the stockholders entitled to receive notice of, and to vote at, the Special Meeting; |
75. | “REIT” are to a real estate investment trust; |
76. | “SDAT” are to the State Department of Assessments and Taxation of Maryland; |
77. | “SEC” are to the U.S. Securities and Exchange Commission; |
78. | “Securities Act” are to the Securities Act of 1933, as amended; |
79. | “Snell & Wilmer” are to Snell & Wilmer, L.L.P, counsel to the CMRI Special Committee; |
80. | “Special Meeting” are to the special meeting of the CMRI stockholders, at which the CMRI stockholders will be asked to consider and vote on the CMRI Merger Proposal and the Adjournment Proposal; |
81. | “Superior Proposal” are to a written Acquisition Proposal made by a third party (except for purposes of this definition, the references in the definition of “Acquisition Proposal” to 20% will be replaced with 50%) that the CMRI Board (based on the recommendation of the CMRI Special Committee) determines in its good faith judgment (after consultation with its outside legal and financial advisors and after taking into account (i) all of the terms and conditions of the Acquisition Proposal and the CMRI Merger Agreement (as it may be proposed to be amended by CCI) and (ii) the feasibility and certainty of consummation of such Acquisition Proposal on the terms proposed (taking into account such legal, financial, regulatory and other aspects of such Acquisition Proposal and conditions to consummation |
82. | “Surviving Entity” are to Merger Sub, a wholly owned subsidiary of CCI, after the effective time of the CMRI Merger and the other Mergers, as applicable; and |
83. | “TRS” are to a taxable REIT subsidiary. |
Q: | What is the CMRI Merger and what is the CMRI OP Merger? |
A: | The CMRI Parties and the CCI Parties have entered into the CMRI Merger Agreement pursuant to which CMRI will merge with and into Merger Sub, with Merger Sub surviving the CMRI Merger, such that following the CMRI Merger, the Surviving Entity will continue as a wholly owned subsidiary of CCI. In accordance with the applicable provisions of the MGCL, the separate existence of CMRI will cease at the effective time of the CMRI Merger. In addition, CMRI OP will merge with and into CROP (as successor to CCOP), with CROP surviving the CMRI OP Merger. In accordance with the DRULPA, the separate existence of CMRI OP will cease at the effective time of the CMRI OP Merger. |
Q: | What is the CRII Merger and what is the CROP Merger? |
A: | The CCI Parties also entered into the CRII Merger Agreement with CRII and CROP whereby CRII would merge with and into CCI, with CCI surviving the CRII Merger, and CCOP would merge with and into CROP, with CROP surviving the CROP Merger. On April [•], 2021, the CRII Merger and the CROP Merger were completed. |
Q | What is the CMRII Merger and what is the CMRII OP Merger? |
A: | The CCI Parties also entered into the CMRII Merger Agreement with CMRII and CMRII OP whereby CMRII will merge with and into Merger Sub, with Merger Sub surviving the CMRII Merger, and CMRII OP will merge with and into CROP (as successor to CCOP), with CROP surviving the CMRII OP Merger. The consummation of the CMRI Merger is not contingent upon the completion of the CMRII Merger, and the consummation of the CMRII Merger is not contingent upon the completion of the CMRI Merger. |
Q: | What will happen in the CMRI Merger and the CMRI OP Merger? |
A: | At the effective time of the CMRI Merger, each issued and outstanding share of CMRI Common Stock will be converted automatically into the right to receive 1.175 shares of CCI Common Stock pursuant to the terms of the CMRI Merger Agreement. |
Q: | Why am I receiving this proxy statement/prospectus? |
A: | This proxy statement/prospectus is being delivered to you as both a proxy statement of CMRI for the Special Meeting and a prospectus of CCI in connection with the CMRI Merger. The CMRI Board is using this proxy statement/prospectus to solicit proxies of the CMRI stockholders in connection with the Special Meeting. In addition, this proxy statement/prospectus constitutes the prospectus of CCI with respect to the shares of CCI Common Stock to be issued to the CMRI stockholders pursuant to the CMRI Merger Agreement. |
Q: | How will the CCI stockholders be affected by the CMRI Merger and the issuance of shares of CCI Common Stock in connection with the CMRI Merger? |
A: | After the CMRI Merger, each CCI stockholder will continue to own the shares of CCI Common Stock that such stockholder held immediately prior to the effective time of the CMRI Merger. As a result, each CCI stockholder will own shares of common stock in a larger company with more assets. However, because CCI will be issuing new shares of CCI Common Stock to the CMRI stockholders in exchange for shares of CMRI Common Stock in the CMRI Merger, each outstanding share of CCI Common Stock immediately prior to the effective time of the CMRI Merger will represent a smaller percentage of the aggregate number of shares of CCI Common Stock outstanding after the CMRI Merger. In addition, after completion of the CMRI OP Merger, CROP, the operating partnership of CCI following the CROP Merger, will have a greater number of partnership units outstanding including limited partner units that are separate from the general partner interest to be held by CCI. The CMRI Merger will have no impact on the terms of the CCI Series 2019 Preferred Stock issued and outstanding at the effective time of the CMRI Merger. |
Q: | What vote is required to approve the CMRI Merger Proposal? |
A: | The approval of the CMRI Merger Proposal requires the affirmative vote of a majority of all of the votes entitled to be cast on such proposal. |
Q: | Am I being asked to vote on any other proposals at the Special Meeting in addition to the CMRI Merger Proposal? |
A: | Yes. At the Special Meeting, CMRI stockholders will be asked to consider and vote to approve one or more adjournments of the Special Meeting to another date, time or place, if necessary and as determined by the chair of the Special Meeting, to solicit additional proxies in favor of the CMRI Merger Proposal. The approval of the Adjournment Proposal requires the affirmative vote of a majority of all of the votes cast on such proposal. |
Q: | How does the CMRI Board recommend that the CMRI stockholders vote? |
A: | The CMRI Board recommends that the CMRI stockholders vote FOR the proposal to approve the CMRI Merger and FOR the proposal to adjourn the Special Meeting, if necessary or appropriate, to solicit additional proxies in favor of the CMRI Merger Proposal. |
Q: | When and where will the Special Meeting be held? |
A: | The Special Meeting will be held on [•], 2021, at [•] a.m. Mountain Time at the offices of CMRI located at 1245 Brickyard Road, Suite 250, Salt Lake City, Utah 84106. If you need directions to the location of the Special Meeting, please contact Investor Relations at (801) 278-0700. |
Q: | Who can vote at the Special Meeting? |
A: | All holders of CMRI Common Stock of record as of the close of business on [•], 2021, the Record Date for determining stockholders entitled to notice of and to vote at the Special Meeting, are entitled to receive notice of and to vote at the Special Meeting. |
Q: | What constitutes a quorum? |
A: | The CMRI Bylaws provide that the presence in person or by proxy of stockholders entitled to cast a majority of all the votes entitled to be cast constitutes a quorum at a meeting of its stockholders. Shares that are voted and shares abstaining from voting are treated as being present at the Special Meeting for purposes of determining whether a quorum is present. |
Q: | Will CMRI and CCI continue to pay dividends or distributions prior to the closing of the CMRI Merger? |
A: | The CMRI Merger Agreement permits CMRI to continue to pay regular distributions in accordance with past practice at a monthly rate not to exceed $0.04792 per share of CMRI Common Stock, and any distributions that are reasonably necessary to maintain CMRI’s REIT qualification and avoid or reduce the imposition of U.S. federal income or excise tax. |
Q: | Are there other transactions that the CMRI stockholders should be aware of? |
A: | Prior to the consummation of the CRII Merger, the appropriate parties completed the following transactions: (i) CRII redeemed all outstanding shares of CRII’s voting common stock held by CR Holdings in exchange for an in-kind distribution by CRII of all of CROP’s interest in CCA, (ii) CROP issued 155,441 CROP Common Units in exchange for all of the interests in CC Advisors Promote – Employee Investor, LLC and CC Advisors Promote – Incentive Grant Investor, LLC and (iii) CROP redeemed an aggregate of 306,584 CROP Common Units held by HT Holdings in exchange for $6.46 million of notes receivables payable to CROP. In addition, CCA issued a $13 million promissory note payable to CROP, CROP entered into the CROP Tax Protection Agreement with HT Holdings and certain CROP LTIP Units and CCOP LTIP Units accelerated and vested in full in connection with the CRII Merger and the CROP Merger. For more information regarding these transactions, see “The Companies—Cottonwood Communities, Inc.—Certain Transactions with Related Persons” beginning on page 45 and “The Companies—Cottonwood Communities, Inc.—Equity Grants.” |
Q: | Does CCI engage a third party to manage its operations? |
A: | CCI has engaged CCI Advisor, an affiliated third party, to act as the external advisor to CCI and manage its portfolio of real estate investments and conduct certain of its operations, subject to the supervision of the CCI Board. CCI Advisor is solely owned by CCA, which is also the sole owner of CMRI Asset Manager. As a result of transactions completed immediately prior to the CRII Merger, an entity beneficially owned and controlled by Daniel Shaeffer, Chad Christensen and Gregg Christensen currently owns approximately 84.5% of CCA. |
Q: | What fees will CMRI Asset Manager and CCI Advisor receive in connection with the CMRI Merger? |
A: | Neither CMRI Asset Manager nor CCI Advisor will receive any fees directly in connection with the CMRI Merger, but CCI Advisor is expected to continue to receive fees as the advisor of the Combined Company pursuant to the Amended and Restated Advisory Agreement. See “The Companies—Cottonwood Communities, Inc.—Certain Transactions with Related Persons—Amended and Restated Advisory Agreement” beginning on page 45. |
Q: | Do any of CMRI’s executive officers or directors have interests in the CMRI Merger that may differ from those of the CMRI stockholders? |
A: | Some of CMRI’s executive officers and directors have interests in the CMRI Merger that are different from, or in addition to, the interests of the CMRI stockholders. The independent director of the CMRI Board is aware of and considered these interests, among other matters, in evaluating the CMRI Merger Agreement and the CMRI Merger and in recommending that the CMRI stockholders vote FOR the CMRI Merger Proposal and FOR the Adjournment Proposal. For a description of these interests, refer to the section entitled “The CMRI Merger—Interests of CMRI’s and CCI’s Directors and Executive Officers in the CMRI Merger” beginning on page 122. |
Q: | When is the CMRI Merger expected to be completed? |
A: | CMRI and CCI expect to complete the CMRI Merger as soon as reasonably practicable following satisfaction or waiver of all of the required conditions set forth in the CMRI Merger Agreement. If the CMRI stockholders |
Q: | What are the anticipated U.S. federal income tax consequences to me of the proposed CMRI Merger? |
A: | The CMRI Merger is intended to qualify as a “reorganization” within the meaning of Section 368(a) of the Code, and the closing of the CMRI Merger is conditioned on the receipt by each of CMRI and CCI of an opinion from its respective counsel to that effect. Assuming the CMRI Merger qualifies as a reorganization, a holder of shares of CMRI Common Stock generally will not recognize gain or loss for U.S. federal income tax purposes upon the receipt of CCI Common Stock in exchange for shares of CMRI Common Stock in connection with the CMRI Merger. |
Q: | How will my receipt of CCI Common Stock in exchange for my CMRI Common Stock be recorded? Will I have to take any action in connection with the recording of such ownership of CCI Common Stock? Will such shares of CCI Common Stock be certificated or in book-entry form? |
A: | Pursuant to the CMRI Merger Agreement, as soon as practicable following the effective time of the CMRI Merger, CCI will cause DST Systems, Inc., the exchange agent in connection with the CMRI Merger, to record the issuance of CCI Common Stock as Merger Consideration pursuant to the CMRI Merger Agreement. If the CMRI Merger is consummated, you will not have to take any action in connection with the recording of your ownership of CCI Common Stock. Shares of CCI Common Stock issued as Merger Consideration to you will not be certificated and will be in book-entry form and will be recorded in the books and records of CCI. |
Q: | Will my shares of CCI Common Stock be publicly traded? |
A: | Shares of CCI Common Stock are not publicly traded. |
Q: | Are CMRI stockholders entitled to appraisal rights? |
A: | CMRI stockholders are not entitled to exercise any rights of an objecting stockholder provided for under Title 3, Subtitle 2 of the MGCL in connection with the CMRI Merger. |
Q: | What do I need to do now? |
A: | After you have carefully read this proxy statement/prospectus, please respond by completing, signing and dating your proxy card or voting instruction card and returning it in the enclosed pre-addressed postage-paid envelope or by submitting your proxy by one of the other methods specified in your proxy card or voting instruction card as promptly as possible so that your shares of CMRI Common Stock will be represented and voted at the Special Meeting. The method by which you submit a proxy will in no way limit your right to vote at the Special Meeting if you later decide to attend the Special Meeting in person. |
Q: | How will my proxy be voted? |
A: | All shares of CMRI Common Stock entitled to vote and represented by properly completed proxies received prior to the Special Meeting, and not revoked, will be voted at the Special Meeting as instructed on the proxies. If you properly sign, date and return a proxy card, but do not indicate how your shares of CMRI Common Stock should be voted on any proposal, the shares of CMRI Common Stock represented by your proxy will be voted as the CMRI Board recommends. If your shares are held in street name through a broker or other nominee and you do not provide voting instructions to your broker or other nominee, your shares of CMRI Common Stock will NOT be voted at the Special Meeting and may result in broker non-votes. |
Q: | Can I, as a CMRI stockholder, revoke my proxy or change my vote after I have delivered my proxy? |
A: | Yes. You may revoke your proxy or change your vote at any time before your proxy is voted at the Special Meeting. For information on how to revoke your proxy or change your vote, see “The Special Meeting—Revocation of Proxies or Voting Instructions” beginning on page 101. |
Q: | What does it mean if I receive more than one set of voting materials for the Special Meeting? |
A: | You may receive more than one set of voting materials for the Special Meeting, including multiple copies of this proxy statement/prospectus and multiple proxy cards or voting instruction cards. For example, if you hold your shares of CMRI Common Stock in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold your shares of CMRI Common Stock. If you are a holder of record and your shares of CMRI Common Stock are registered in more than one name, you may receive more than one proxy card. Please complete, sign, date and return each proxy card and voting instruction card that you receive or, if available, please submit your proxy by telephone or over the Internet. |
Q: | Do I need identification to attend the Special Meeting in person? |
A: | Yes. Please bring proper identification, together with proof that you are a record owner of shares of CMRI Common Stock. If your shares are held in street name, please bring acceptable proof of ownership, such as a letter from your broker or an account statement showing that you beneficially owned shares of CMRI Common Stock on the Record Date. If your shares are held in street name, you must obtain a legal proxy from your broker or other nominee in order to vote at the Special Meeting. |
Q: | Will a proxy solicitor be used? |
A: | CMRI has contracted with Broadridge Financial Solutions, Inc. to assist CMRI in the distribution of proxy materials and the solicitation of proxies. CMRI expects to pay Broadridge fees of approximately $115,200 to solicit and distribute proxies, which includes estimated postage of $60,000 and other out-of-pocket expenses of Broadridge, plus other fees and expenses for other services related to this proxy solicitation, including, but not limited to, the review of proxy materials. CMRI will also reimburse brokerage houses and other custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses for forwarding proxy and solicitation materials to CMRI’s stockholders. |
Q: | If I plan to attend the Special Meeting in person, should I notify anyone? |
A: | While you are not required to notify anyone in order to attend the Special Meeting, if you do plan to attend the Special Meeting, CMRI would appreciate it if you would mark the appropriate box on the applicable enclosed proxy card to let the management of CMRI know how many stockholders will be attending the Special Meeting so that a suitable meeting room for the attendees can be prepared. |
Q: | Who can answer my questions? |
A: | If you have any questions about the CMRI Merger or how to submit your proxy or need additional copies of this proxy statement/prospectus, the enclosed proxy card or voting instructions, you should contact CMRI or Broadridge, the proxy solicitor: |
CMRI: | | | Broadridge: |
Cottonwood Multifamily REIT I, Inc. Attention: Investor Relations 1245 Brickyard Road, Suite 250 Salt Lake City, Utah 84106 (801) 278-0700 | | | Cottonwood Multifamily REIT I, Inc. c/o Broadridge Financial Solutions, Inc. 51 Mercedes Way Edgewood, NY 11717 (855) 200-8032 |
• | The Merger Consideration will not be adjusted in the event of any change in the relative values of CMRI or CCI. |
• | Completion of the CMRI Merger is subject to many conditions and if these conditions are not satisfied or waived, the CMRI Merger will not be completed, which could result in the expenditure of significant unrecoverable transaction costs. |
• | Completion of the CMRI Merger is not contingent upon completion of the CMRII Merger. |
• | Failure to complete the CMRI Merger could negatively impact the future business and financial results of CMRI. |
• | The pendency of the CMRI Merger, including as a result of the restrictions on the operation of CMRI’s and CCI’s business during the period between signing the CMRI Merger Agreement and the completion of the CMRI Merger, could adversely affect the business and operations of CMRI, CCI or both. |
• | Some of the directors and executive officers of CMRI have interests in seeing the CMRI Merger completed that are different from, or in addition to, those of the CMRI stockholders. |
• | The CMRI Merger is subject to approval by the CMRI stockholders. |
• | The CMRI Merger Agreement prohibits CMRI from soliciting proposals after January 26, 2021 and places conditions on its ability to accept a Superior Proposal, which may adversely affect the CMRI stockholders. |
• | CMRI and CCI each expect to incur substantial expenses related to the CMRI Merger. |
• | The CMRI Merger is not a liquidity event for the CMRI stockholders. If a liquidity event is ever realized or if stockholders are otherwise able to sell their stock, the value received may be substantially less than what CMRI or CCI could have obtained by effecting a liquidity event at this time and substantially less than what stockholders paid for their investment in CMRI or CCI. |
• | CMRI stockholders’ ownership interests will be diluted by the CMRI Merger. |
• | Litigation, if any, challenging the CMRI Merger may increase transaction costs and prevent the CMRI Merger from becoming effective within the expected time frame. |
1. | a proposal to approve the CMRI Merger; and |
2. | a proposal to adjourn the Special Meeting to solicit additional proxies in favor of the CMRI Merger Proposal if there are not sufficient votes to approve the CMRI Merger Proposal, if necessary and as determined by the chair of the Special Meeting. |
• | the approval by the CMRI stockholders of the CMRI Merger; |
• | the receipt of opinions of counsel concerning certain tax matters; |
• | the absence of any judgment, injunction, order or decree issued by any governmental authority of competent jurisdiction prohibiting the consummation of the CMRI Merger, and the absence of any law that has been enacted, entered, promulgated or enforced by any governmental authority after the date of the CMRI Merger Agreement that prohibits, restrains, enjoins or makes illegal the consummation of the CMRI Merger or the other transactions contemplated by the CMRI Merger Agreement; |
• | the registration statement filed by CCI of which this proxy statement/prospectus is a part having been declared effective by the SEC, no stop order suspending the effectiveness of such registration statement having been issued by the SEC and no proceeding for that purpose will have been initiated by the SEC and not withdrawn; |
• | the truth and accuracy of the representations and warranties of each party made in the CMRI Merger Agreement as of the closing, subject to certain materiality standards; |
• | the performance in all material respects with all agreements required by the CMRI Merger Agreement to be performed by each party; |
• | the absence of any change, event, circumstance or development arising during the period from the date of the CMRI Merger Agreement until the effective time of the CMRI Merger that has had or would have a material adverse effect on the other party; and |
• | the receipt of the specified lender consents. |
• | CMRI receives an Acquisition Proposal that was not obtained in violation of the CMRI Merger Agreement and such Acquisition Proposal is not withdrawn; |
• | the CMRI Special Committee has determined that such Acquisition Proposal constitutes a Superior Proposal and, after consultation with outside legal counsel and its financial advisor, that failure to take such action would be inconsistent with the duties of the directors of CMRI under applicable Maryland law; |
• | CMRI has given CCI at least five business days’ prior written notice of its intention to take such action; and |
• | CCI and CMRI have negotiated in good faith during such notice period to enable CCI to propose in writing revisions to the terms of the CMRI Merger Agreement such that it would, in the good faith determination of the CMRI Board or the CMRI Special Committee, after consultation with outside legal counsel and its financial advisor, cause such Superior Proposal to no longer constitute a Superior Proposal. |
• | the CMRI Merger has not occurred on or before the Outside Date; |
• | there is any final, non-appealable order issued by a governmental authority of competent jurisdiction that permanently restrains or otherwise prohibits the transactions contemplated by the CMRI Merger Agreement; or |
• | the approval of the CMRI stockholders of the CMRI Merger is not obtained at the Special Meeting. |
• | CMRI has breached any of its representations or warranties or failed to perform any of its obligations, covenants or agreements set forth in the CMRI Merger Agreement, which breach or failure to perform (i) would result in a failure of CMRI to satisfy certain closing conditions and (ii) cannot be cured or, if curable, is not cured by CMRI by the earlier of 20 days following written notice of such breach or failure from CCI to CMRI and two business days before the Outside Date; or |
• | at any time prior to obtaining the required approval of the CMRI stockholders, if (i) the CMRI Board has made an Adverse Recommendation Change or (ii) CMRI has materially violated any of its obligations described in “The CRII Merger Agreement —Covenants and Agreements—No Solicitation; Change in Recommendation.” |
• | CCI has breached any of its representations or warranties or failed to perform any of its obligations, covenants or agreements set forth in the CMRI Merger Agreement, which breach or failure to perform (i) would result in a failure of CCI to satisfy certain closing conditions and (ii) cannot be cured or, if curable, is not cured by CCI by the earlier of 20 days following written notice of such breach or failure from CMRI to CCI and two business days before the Outside Date; |
• | CCI permits or agrees to any material modification, amendment or termination of, or waiver, release, compromise or assignment of any material rights or claims under, the CRII Merger Agreement, the CMRII Merger Agreement or the Amended and Restated Advisory Agreement without obtaining CMRI’s prior written consent; and |
• | at any time prior to obtaining the required CMRI stockholder approval to permit CMRI to enter into an alternative acquisition agreement with respect to a Superior Proposal so long as the termination payment described below in “—Termination Payment and Expense Reimbursement” is made in full to CCI prior to or concurrently with such termination. |
| | As of December 31, | |||||||||||||
| | 2020 | | | 2019 | | | 2018 | | | 2017 | | | 20161 | |
Balance Sheet data | | | | | | | | | | | |||||
Total real estate assets, net | | | $199,347 | | | $70,927 | | | $— | | | $— | | | $— |
Total assets | | | 204,805 | | | 119,376 | | | 3,724 | | | 200 | | | 200 |
Credit facilities, net | | | 70,320 | | | 34,990 | | | — | | | — | | | — |
Preferred stock, net | | | 29,825 | | | 809 | | | — | | | — | | | — |
Total liabilities | | | 102,721 | | | 37,080 | | | 158 | | | — | | | — |
Total stockholders’ equity | | | 102,084 | | | 82,296 | | | 3,566 | | | 200 | | | 200 |
| | For the Year Ended December 31, | |||||||||||||
| | 2020 | | | 2019 | | | 2018 | | | 2017 | | | 20161 | |
Operating Data | | | | | | | | | | | |||||
Total revenues | | | $11,325 | | | $2,842 | | | $— | | | $— | | | $— |
Equity in earnings (losses) of unconsolidated real estate entities | | | 2,113 | | | 273 | | | — | | | — | | | — |
Net loss | | | (8,551) | | | (3,296) | | | (100) | | | — | | | — |
Net loss per common share - basic and diluted | | | (0.79) | | | (0.70) | | | (3.13) | | | — | | | — |
Other Data | | | | | | | | | | | |||||
Net cash provided by (used in) operating activities | | | (2,816) | | | (459) | | | (4) | | | — | | | — |
Net cash used in investing activities | | | (83,284) | | | (38,130) | | | — | | | — | | | — |
Net cash provided by financing activities | | | 42,991 | | | 82,925 | | | 3,210 | | | — | | | — |
Distributions declared to common stockholders | | | 5,398 | | | 2,370 | | | — | | | — | | | — |
Distributions declared per common share | | | 0.50 | | | 0.50 | | | — | | | — | | | — |
Weighted average shares outstanding | | | 10,781,487 | | | 4,711,343 | | | 32,053 | | | 20,000 | | | — |
FFO(2) | | | (1,585) | | | (558) | | | — | | | — | | | — |
FFO per common share(2) | | | (0.15) | | | (0.12) | | | — | | | — | | | — |
Core FFO(2) | | | 1,422 | | | (307) | | | — | | | — | | | — |
Core FFO per common share(2) | | | 0.13 | | | (0.07) | | | — | | | — | | | — |
(1) | Period from July 27, 2016 (Inception) to December 31, 2016. CCI was capitalized on December 2, 2016 with a $0.2 million investment by CROP. |
(2) | For additional information on how CCI calculates FFO, FFO per common share, Core FFO, Core FFO per common share and a reconciliation to net loss and net loss per common share, see Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Funds From Operations” in CCI’s Annual Report on Form 10-K for the year ended December 31, 2020, attached as Annex E to this proxy statement/prospectus. |
| | As of December 31, | |||||||||||||
| | 2020 | | | 2019 | | | 2018 | | | 2017 | | | 2016 | |
Balance Sheet data | | | | | | | | | | | |||||
Total real estate and real estate-related investments, net | | | $27,126 | | | $31,478 | | | $35,810 | | | $42,818 | | | $46,403 |
Total assets | | | 27,485 | | | 31,797 | | | 36,796 | | | 43,134 | | | 48,784 |
Credit facilities, net | | | — | | | — | | | — | | | — | | | — |
Total liabilities | | | 2,930 | | | 1,371 | | | 421 | | | 2,162 | | | 24,444 |
Total stockholders’ equity | | | 24,555 | | | 30,426 | | | 36,375 | | | 40,972 | | | 24,340 |
| | For the Year Ended December 31, | |||||||||||||
| | 2020 | | | 2019 | | | 2018 | | | 2017 | | | 2016 | |
Operating Data | | | | | | | | | | | |||||
Total revenues | | | — | | | — | | | — | | | — | | | — |
Equity in earnings (losses) of unconsolidated real estate entities | | | (885) | | | (1,323) | | | (385) | | | (1,365) | | | (1,796) |
Net loss | | | (2,622) | | | (2,654) | | | (1,611) | | | (2,825) | | | (3,205) |
Net loss per common share, basic and diluted | | | (0.53) | | | (0.53) | | | (0.32) | | | (0.60) | | | (7.40) |
Other Data | | | | | | | | | | | |||||
Net cash provided by (used in) operating activities | | | 2,296 | | | 2,595 | | | (86) | | | 1,243 | | | 851 |
Net cash provided by (used in) investing activities | | | — | | | — | | | 3,747 | | | — | | | (49,050) |
Net cash (used in) provided by financing activities | | | (2,255) | | | (3,297) | | | (2,990) | | | (3,333) | | | 50,570 |
Distributions declared to common stockholders | | | 2,832 | | | 2,857 | | | 2,863 | | | 2,714 | | | 259 |
Distributions declared per common share | | | 0.58 | | | 0.57 | | | 0.57 | | | 0.57 | | | 0.60 |
Weighted average shares outstanding, basic and diluted | | | 4,925 | | | 4,974 | | | 4,992 | | | 4,721 | | | 433 |
FFO(1) | | | 1,700 | | | 1,619 | | | 2,601 | | | 1,737 | | | (68) |
FFO per common share, basic and diluted(2) | | | 0.35 | | | 0.33 | | | 0.52 | | | 0.37 | | | (0.16) |
Core FFO(1) | | | 2,097 | | | 2,101 | | | 2,438 | | | 1,746 | | | (28) |
Core FFO per common share, basic and diluted(1) | | | 0.43 | | | 0.42 | | | 0.49 | | | 0.37 | | | (0.06) |
(1) | For additional information on how CMRI calculates FFO, FFO per common share, Core FFO, Core FFO per common share and a reconciliation to net loss and net loss per common share, see Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Funds From Operations” in CMRI’s Annual Report on Form 1-K for the year ended December 31, 2020, attached as Annex D to this proxy statement/prospectus. |
| | As of December 31, 2020 | ||||||||||||||||
| | CCI Historical | | | CRII Historical | | | CMRI Historical | | | Autonomous Entity Adjustments | | | Pro Forma Combined Company Transaction Accounting Adjustments | | | Pro Forma Combined Company | |
Balance Sheet data | | | | | | | | | | | | | ||||||
Total real estate and real estate-related investments, net | | | $199,347 | | | $866,962 | | | $27,126 | | | $(27,115) | | | $452,450 | | | $1,518,770 |
Total assets | | | 204,805 | | | 970,772 | | | 27,485 | | | (34,883) | | | 444,029 | | | 1,612,208 |
Mortgage notes, net | | | 70,320 | | | 628,042 | | | — | | | — | | | 6,811 | | | 705,173 |
Construction loans, net | | | — | | | 50,007 | | | — | | | — | | | — | | | 50,007 |
Preferred stock, net | | | 29,825 | | | 143,532 | | | — | | | — | | | 528 | | | 173,885 |
Unsecured promissory notes, net | | | — | | | 46,642 | | | — | | | — | | | 2,000 | | | 48,642 |
Total liabilities | | | 102,721 | | | 901,577 | | | 2,930 | | | (668) | | | 6,674 | | | 1,013,234 |
Total stockholders' equity and noncontrolling interests | | | 102,084 | | | 69,195 | | | 24,555 | | | (34,215) | | | 437,355 | | | 598,974 |
| | | | | | | | | | | | |||||||
| | For The Year Ended December 31, 2020 | ||||||||||||||||
Operating Data | | | | | | | | | | | | | ||||||
Total revenues | | | $11,325 | | | $106,699 | | | $— | | | $(4,517) | | | $— | | | $113,507 |
Equity in earnings (losses) of unconsolidated real estate entities | | | 2,113 | | | 589 | | | (885) | | | 885 | | | (13,433) | | | (10,731) |
Net income (loss) attributable to common stockholders | | | (8,551) | | | (959) | | | (2,622) | | | 991 | | | 382 | | | (10,759) |
Net income (loss) per common share - basic and diluted | | | (0.79) | | | (3.99) | | | (0.53) | | | — | | | 0.06 | | | (0.63) |
| | As of December 31, 2020 | |||||||||||||||||||
| | CCI Historical | | | CRII Historical | | | CMRI Historical | | | CMRII Historical | | | Autonomous Entity Adjustments | | | Pro Forma Fully Combined Transaction Accounting Adjustments | | | Pro Forma Fully Combined Company | |
Balance Sheet data | | | | | | | | | | | | | | | |||||||
Total real estate and real estate-related investments, net | | | $199,347 | | | $866,962 | | | $27,126 | | | $37,676 | | | $(64,811) | | | $452,450 | | | $1,518,750 |
Total assets | | | 204,805 | | | 970,772 | | | 27,485 | | | 37,932 | | | (72,585) | | | 444,029 | | | 1,612,438 |
Mortgage notes, net | | | 70,320 | | | 628,042 | | | — | | | — | | | — | | | 6,811 | | | 705,173 |
Construction loans, net | | | — | | | 50,007 | | | — | | | — | | | — | | | — | | | 50,007 |
Preferred stock, net | | | 29,825 | | | 143,532 | | | — | | | — | | | — | | | 528 | | | 173,885 |
Unsecured promissory notes, net | | | — | | | 46,642 | | | — | | | — | | | — | | | 2,000 | | | 48,642 |
Total liabilities | | | 102,721 | | | 901,577 | | | 2,930 | | | 3,157 | | | (673) | | | 3,822 | | | 1,013,534 |
Total stockholders' equity and noncontrolling interests | | | 102,084 | | | 69,195 | | | 24,555 | | | 34,775 | | | (71,912) | | | 440,207 | | | 598,904 |
| | | | | | | | | | | | | | ||||||||
| | For the year ended December 31, 2020 | |||||||||||||||||||
Operating Data | | | | | | | | | | | | | | | |||||||
Total revenues | | | $11,325 | | | $106,699 | | | $— | | | $— | | | $(4,517) | | | $— | | | $113,507 |
Equity in earnings (losses) of unconsolidated real estate entities | | | 2,113 | | | 589 | | | (885) | | | (262) | | | 1,148 | | | (13,433) | | | (10,730) |
Net income (loss) attributable to common stockholders | | | (8,551) | | | (959) | | | (2,622) | | | (1,690) | | | 1,279 | | | 1,335 | | | (11,208) |
Net income (loss) per common share - basic and diluted | | | (0.79) | | | (3.99) | | | (0.53) | | | (0.34) | | | — | | | 0.12 | | | (0.50) |
| | CCI Historical | | | CRII Historical | | | CMRI Historical | | | CMRII Historical | | | Pro Forma Combined | | | Pro Forma Fully Combined | |
As of December 31, 2020 | | | | | | | | | | | | | ||||||
Book value per share of common stock | | | $9.47 | | | $5.35 | | | $4.99 | | | $7.07 | | | $9.61 | | | $9.69 |
For the year ended December 31, 2020 | | | | | | | | | | | | | ||||||
Distributions declared per common stock | | | $0.50 | | | $0.89 | | | $0.58 | | | $0.53 | | | $0.50 | | | $0.50 |
Net (loss) income per common share - basic and diluted | | | $(0.79) | | | $(3.99) | | | $(0.53) | | | $(0.34) | | | $(0.63) | | | $(0.50) |
Period | | | Total Distributions Paid to Common Stockholders | | | Distributions Declared Per Common Share(1) |
First Quarter 2020 | | | $710,830 | | | $0.14375 |
Second Quarter 2020 | | | 710,320 | | | $0.14375 |
Third Quarter 2020 | | | 707,666 | | | $0.14375 |
Fourth Quarter 2020 | | | 705,418 | | | $0.14375 |
(1) | Assumes the share was issued and outstanding each day during the period presented. |
Period | | | Total Distributions Paid to Common Stockholders | | | Distributions Declared Per Common Share(1) |
First Quarter 2020 | | | $1,126,131 | | | $0.125 |
Second Quarter 2020 | | | 1,292,163 | | | $0.125 |
Third Quarter 2020 | | | 1,383,845 | | | $0.125 |
Fourth Quarter 2020 | | | 1,449,604 | | | $0.125 |
(1) | Assumes the share was issued and outstanding each day during the period presented. |
• | changes in the respective businesses, operations, assets, liabilities and prospects of CMRI and CCI; |
• | CCI’s failure to complete the CMRII Merger; |
• | changes in the estimated value per share of either the shares of CMRI Common Stock or CCI Common Stock; |
• | interest rates, general market and economic conditions and other factors generally affecting the businesses of CMRI and CCI; |
• | federal, state and local legislation, governmental regulation and legal developments in the businesses in which CMRI and CCI operate; |
• | dissident stockholder activity, including any stockholder litigation challenging the transaction; |
• | acquisitions, dispositions or new development opportunities; and |
• | other factors beyond the control of CMRI and CCI, including those described or referred to elsewhere in this “Risk Factors” section. |
• | CMRI being required, under certain circumstances, to pay to CCI a termination payment of $1,707,000 and up to $284,000 as reimbursement for CCI’s expenses; |
• | CMRI having to pay certain costs relating to the CMRI Merger, such as legal, accounting, financial advisor, filing, printing and mailing fees; and |
• | the diversion of CMRI management focus and resources from operational matters and other strategic opportunities while working to implement the CMRI Merger. |
• | vulnerability of the Combined Company to general adverse economic and industry conditions; |
• | limiting the Combined Company’s ability to obtain additional financing to fund future working capital, capital expenditures and other general corporate requirements; |
• | requiring the use of a substantial portion of the Combined Company’s cash flow from operations for the payment of principal and interest on its indebtedness, thereby reducing its ability to use its cash flow to fund working capital, acquisitions, capital expenditures and general corporate requirements; |
• | limiting the Combined Company’s flexibility in planning for, or reacting to, changes in its business and its industry; |
• | putting the Combined Company at a disadvantage compared to its competitors with less indebtedness; and |
• | limiting the Combined Company’s ability to access capital markets. |
• | it would be subject to U.S. federal corporate income tax on its net income for the years it did not qualify for taxation as a REIT (and, for such years, would not be allowed a deduction for dividends paid to stockholders in computing its taxable income); |
• | it could be subject to the federal alternative minimum tax for taxable years prior to January 1, 2018 and possibly increased state and local taxes; |
• | unless it is entitled to relief under applicable statutory provisions, neither it nor any “successor” company could elect to be taxed as a REIT until the fifth taxable year following the year during which it was disqualified; and |
• | for five years following re-election of REIT status, upon a taxable disposition of an asset owned as of such re-election, it could be subject to corporate level tax with respect to any built-in gain inherent in such asset at the time of re-election. |
• | a CCI stockholder would be able to sell its shares at the $10.00 offering price; |
• | a CCI stockholder would ultimately realize distributions per share equal to the $10.00 offering price upon liquidation of CCI’s assets and settlement of its liabilities or a sale of CCI; |
• | CCI Common Stock would trade at the $10.00 offering price on a national securities exchange; |
• | a third party would offer the $10.00 offering price in an arm’s-length transaction to purchase all or substantially all of the CCI Common Stock; or |
• | the methodologies used to estimate the value per share would be acceptable to FINRA or for compliance with reporting requirements under the Employee Retirement Income Security Act of 1974, as amended. |
• | pursuant to Section 3(a)(1)(A), is or holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities (the “primarily engaged test”); or |
• | pursuant to Section 3(a)(1)(C), is engaged or proposes to engage in the business of investing, reinvesting, owning, holding or trading in securities and owns or proposes to acquire “investment securities” having a value exceeding 40% of the value of such issuer’s total assets (exclusive of United States government securities and cash items) on an unconsolidated basis (the “40% test”). “Investment securities” excludes United States government securities and securities of majority-owned subsidiaries that are not themselves investment companies and are not relying on the exception from the definition of investment company under Section 3(c)(1) or Section 3(c)(7) (relating to private investment companies). |
• | stagger the CCI Board into three classes; |
• | require a two-thirds stockholder vote for removal of directors; |
• | provide that only the CCI Board can fix the size of the board; |
• | provide that all vacancies on the CCI Board, however created, may be filled only by the affirmative vote of a majority of the remaining directors in office; and |
• | require that special stockholder meetings may only be called by holders of a majority of the voting shares entitled to be cast at the meeting. |
• | the election or removal of directors; |
• | the amendment of the CCI Charter, except that the CCI Board may amend the CCI Charter without stockholder approval to increase or decrease the aggregate number of shares of stock of CCI, to increase or decrease the number of shares of stock of any class or series that CCI has the authority to issue, to change the name or other designation or the par value of any class or series of shares of stock of CCI and the aggregate par value of shares of stock of CCI, or to effect certain reverse stock splits, provided however, that any such amendment does not adversely affect the rights, preferences and privileges of the stockholders; |
• | the liquidation or dissolution of CCI; and |
• | a merger, consolidation, conversion, statutory share exchange or sale or other disposition of substantially all of CCI’s assets. |
• | the ability of CMRI to obtain the required stockholder approval; |
• | the satisfaction or waiver of other conditions in the CMRI Merger Agreement; |
• | the risk that the CMRI Merger or other transactions contemplated by the CMRI Merger Agreement may not be completed in the time frame expected by the parties or at all; |
• | the occurrence of any event, change or other circumstances that could give rise to the termination of the CMRI Merger Agreement and that a termination under certain circumstances could cause CMRI to pay CCI a termination payment, as described under “The CMRI Merger Agreement—Termination of the CMRI Merger Agreement” beginning on page 162; |
• | the ability of CCI to complete the CMRII Merger; |
• | the ability of CCI to acquire and dispose of properties, including properties to be acquired in the Mergers; |
• | changes in national, regional and local economic conditions; |
• | changes in financial markets and interest rates, or to the business or financial condition of CMRI, CCI, the Combined Company, the Fully Combined Company or their respective businesses; |
• | the nature and extent of future competition; |
• | the ability of CMRI, CCI, the Combined Company or the Fully Combined Company to maintain its qualification as a REIT due to economic, market, legal, tax or other considerations; |
• | the availability to CCI, CMRI, the Combined Company or the Fully Combined Company of financing and capital; and |
• | those additional risks and factors discussed in reports or prospectuses filed with the SEC by CMRI and CCI from time to time, including those discussed under the heading “Risk Factors” in this proxy statement/prospectus. |
• | Asset Management Fee. CCI Advisor will receive a monthly asset management fee equal to 0.0625% of the gross asset value or GAV of CROP (subject to a cap of 0.125% of net asset value or NAV of the operating partnership), before giving effect to any accruals (related to the month for which the asset management fee is being calculated) for the asset management fee, distribution fees in connection with a securities offering, the Performance Allocation (as defined in the CROP Partnership Agreement) or any distributions. The GAV and NAV of CROP will be determined in accordance with the valuation guidelines adopted by the CCI Board and reflective of the ownership interest held by CROP in such gross assets. If CCI owns assets other than through CROP, CCI will pay a corresponding fee. |
• | Organization and Offering Expenses. CCI will reimburse CCI Advisor for any organization and offering expenses that it incurs on CCI’s behalf as and when incurred. CCI Advisor is no longer obligated to pay the organization and offering expenses associated with the Offering with the exception of the deferred selling commission associated with Class TX shares (formerly Class T shares) sold under the current offering structure. After the termination of the primary offering, CCI Advisor will reimburse CCI to the extent that the organization and offering expenses that CCI incurs exceed 15% of the gross proceeds from any public offering. |
• | Expense Reimbursement. Subject to the limitations on total operating expenses (as described further under “—Certain Transactions with Related Persons—Our Relationship with CCI Advisor—Other Fees and Reimbursable Expenses”), CCI Advisor will be entitled to reimbursement of all costs and expenses incurred by it or its affiliates on CCI’s behalf, provided that CCI Advisor is responsible for the expenses related to any and all personnel of CCI Advisor who provide investment advisory services pursuant to the Amended and Restated Advisory Agreement. |
• | Contingent Acquisition Fees and Contingent Financing Fees. If the Amended and Restated Advisory Agreement is terminated other than for cause (or non-renewal or termination by CCI Advisor), the contingent acquisition fees and contingent financing fees provided for in the previous advisory agreement will be due and payable in an amount equal to approximately $22 million (if the termination occurs in year one) reduced by 10% each year thereafter. |
• | Performance Allocation. The promotional interest in CCOP that was held by Cottonwood Communities Advisors Promote, LLC prior to the CRII Merger was replaced by a performance participation that is held by CCI Advisor as the “Special Limited Partner” of CROP. So long as the Amended and Restated Advisory Agreement has not been terminated (including by means of non-renewal), the Special Limited Partner will be entitled to receive a 12.5% promotional interest under the terms of the CROP Partnership Agreement, subject to a 5% hurdle and certain limitations. Such allocation will be made annually and accrue monthly. See “Summary of CROP Partnership Agreement—Performance Allocation” for additional information about the performance participation payable to CCI Advisor. |
Property Name | | | Location | | | Investment Type | | | Purchase Date | | | Number of Units | | | Purchase Price/ Commitment | | | Secured Debt Outstanding | | | Occupancy Rate(5) | | | Monthly Net Effective Rent |
Cottonwood West Palm | | | West Palm Beach, FL | | | Wholly owned | | | 05/30/2019 | | | 245 | | | $63,923,500 | | | $35,995,000(3) | | | 97.6% | | | $1,751 |
Dolce Twin Creeks | | | Allen, TX | | | B-Note | | | 07/31/2019 | | | 366 | | | 10,000,000(1) | | | — | | | — | | | — |
Cottonwood One Upland | | | Boston, MA | | | Wholly owned | | | 03/19/2020 | | | 262 | | | 103,600,000 | | | 35,500,000(4) | | | 92.4% | | | 2,344 |
Lector 85 | | | Ybor City, FL | | | Preferred Equity | | | 08/15/2019 | | | 254 | | | 9,990,000 | | | — | | | — | | | — |
Vernon Boulevard | | | Queens, NY | | | Preferred Equity | | | 07/23/2020 | | | 534 | | | 15,000,000 | | | — | | | — | | | — |
Riverfront | | | West Sacramento, CA | | | Preferred Equity | | | 11/30/2020 | | | 285 | | | 15,091,649(2) | | | — | | | — | | | — |
Total/Weighted Average | | | | | | | | | 1,946 | | | $217,515,149 | | | $71,495,000 | | | 94.9% | | | $2,057 |
(1) | As of December 31, 2020, we had funded $8,205,862 of the amount committed. |
(2) | As of December 31, 2020, we had funded $2,680,148 of the amount committed. |
(3) | There is no limit on the amount we can draw on the Berkadia Credit Facility as long as we maintain certain loan-to-value ratios and other requirements as set forth in the loan documents. |
(4) | We may obtain advances secured against Cottonwood One Upland up to $67,600,000 on our JP Morgan Credit Facility, as well as finance other future acquisitions up to $125,000,000 as long as we maintain certain loan-to-value ratios and other requirements as set forth in the loan documents. |
Property Name | | | Location | | | Number of Units | | | Average Unit Size (Sq Ft) | | | Purchase Date | | | Asset Value(1) | | | Mortgage Debt Outstanding(2) | | | Physical Occupancy Rate(3) | | | Percentage Owned by CROP |
3800 Main | | | Houston, TX | | | 319 | | | 831 | | | 12/14/2012 | | | $58,715 | | | $36,283 | | | 94.92% | | | 50.00% |
Alpha Mill(4) | | | Charlotte, NC | | | 267 | | | 830 | | | 08/03/2016 | | | 65,500 | | | 36,265 | | | 92.13% | | | 10.00% |
Cason Estates | | | Murfreesboro, TN | | | 262 | | | 1,078 | | | 12/31/2012 | | | 44,400 | | | 33,594 | | | 96.56% | | | 100.00% |
Cottonwood | | | Salt Lake City, UT | | | 264 | | | 834 | | | 09/27/2010 | | | 46,200 | | | 21,645 | | | 94.32% | | | 100.00% |
Cottonwood Bayview | | | St. Petersburg, FL | | | 309 | | | 805 | | | 12/22/2016 | | | 86,100 | | | 48,163 | | | 99.03% | | | 71.00% |
Cottonwood Reserve | | | Charlotte, NC | | | 352 | | | 1,021 | | | 11/07/2014 | | | 66,176 | | | 38,788 | | | 94.03% | | | 91.14% |
Cottonwood Ridgeview (formerly Courtney Manor) | | | Plano, TX | | | 322 | | | 1,156 | | | 6/30/2015 | | | 61,350 | | | 30,394 | | | 95.34% | | | 90.45% |
Cottonwood Westside(4) | | | Atlanta, GA | | | 197 | | | 860 | | | 08/03/2016 | | | 44,400 | | | 25,655 | | | 94.92% | | | 10.00% |
Enclave on Golden Triangle | | | Keller, TX | | | 273 | | | 1,048 | | | 12/27/2013 | | | 48,200 | | | 34,000 | | | 97.80% | | | 98.93% |
Fox Point | | | Salt Lake City, UT | | | 398 | | | 841 | | | 10/20/2010 | | | 75,620 | | | 20,924 | | | 94.72% | | | 52.75% |
Heights at Meridian(5) | | | Durham, NC | | | 339 | | | 997 | | | 01/08/2019 | | | 70,800 | | | 33,750 | | | 94.69% | | | 10.00% |
Melrose(6) | | | Nashville, TN | | | 220 | | | 951 | | | 08/24/2016 | | | 67,400 | | | 47,100 | | | 89.55% | | | 100.00% |
Parc Westborough(7) | | | Boston, MA | | | 249 | | | 1,008 | | | 05/16/2018 | | | 69,500 | | | 38,010 | | | 93.98% | | | 35.65% |
Pavilions | | | Albuquerque, NM | | | 240 | | | 1,162 | | | 06/28/2011 | | | 57,300 | | | 37,350 | | | 91.25% | | | 96.35% |
Raveneaux | | | Houston, TX | | | 382 | | | 1,065 | | | 03/31/2016 | | | 51,500 | | | 26,675 | | | 96.07% | | | 96.97% |
Regatta | | | Houston, TX | | | 490 | | | 862 | | | 10/22/2010 | | | 45,700 | | | 35,367 | | | 94.48% | | | 100.00% |
Retreat at Peachtree City | | | Peachtree City, GA | | | 312 | | | 980 | | | 08/15/2014 | | | 64,900 | | | 48,719 | | | 93.59% | | | 100.00% |
Scott Mountain | | | Portland, OR | | | 262 | | | 927 | | | 10/20/2010 | | | 68,130 | | | 48,373 | | | 95.42% | | | 95.80% |
Stonebriar of Frisco | | | Frisco, TX | | | 306 | | | 963 | | | 09/27/2013 | | | 53,700 | | | 36,400 | | | 94.44% | | | 84.19% |
Summer Park | | | Buford, GA | | | 358 | | | 1,064 | | | 08/19/2014 | | | 59,900 | | | 44,620 | | | 95.25% | | | 98.68% |
The Marq Highland Park(4)(6) | | | Tampa, FL | | | 239 | | | 999 | | | 12/21/2015 | | | 54,300 | | | 32,260 | | | 97.91% | | | 10.00% |
Toscana at Valley Ridge | | | Lewisville, TX | | | 288 | | | 738 | | | 07/30/2015 | | | 41,850 | | | 18,157 | | | 98.96% | | | 58.60% |
Total/Weighted Average | | | | | 6,648 | | | | | | | $1,371,141 | | | $772,493 | | | 94.96% | | |
(1) | As of CRII’s most recently determined NAV as of December 31, 2019. |
(2) | Mortgage Debt Outstanding is shown as if CRII owned 100% of the asset. |
(3) | As of December 31, 2020. |
(4) | CMRI owns the remaining 90% interest in the property. If the CMRI Merger is completed, CROP will own 100% of the property. |
(5) | CMRII owns the remaining 90% interest in the property. If the CMRII Merger is completed, CROP will own 100% of the property. |
(6) | Excludes the commercial data in units count and physical occupancy. |
(7) | CMRII owns the remaining 64.35% interest in the property. If the CMRII Merger is completed, CROP will own 100% of the property. |
Property Name | | | Location | | | Units to be Built | | | Average Unit Size (Sq Ft) | | | Purchase Date | | | Estimated Completion Date | | | Investment Amount | | | Percentage Owned by CROP |
Cottonwood on Broadway | | | Salt Lake City, UT | | | 254 | | | 817 | | | 06/24/2016 | | | 2Q2022 | | | $5,069,480 | | | 18.84%(1) |
Park Avenue (formerly Sugar House) | | | Salt Lake City, UT | | | 234 | | | 714 | | | 08/06/2018 | | | 4Q2021 | | | 4,756,716 | | | 23.31%(1) |
Sugarmont | | | Salt Lake City, UT | | | 341 | | | 904 | | | 07/15/2016 | | | 2Q2021 | | | 21,265,627 | | | 61.02% |
Cottonwood on Highland(2) | | | Millcreek, UT | | | 250 | | | 757 | | | 10/25/2018 | | | 4Q2022 | | | 9,490,981 | | | 35.55% |
| | | | 1,079 | | | | | | | | | $40,582,803 | | |
(1) | Cottonwood Multifamily Opportunity Fund, Inc., a fund sponsored by CCPM II, indirectly owns a majority of the remaining interest. |
(2) | Intended to qualify as a qualified opportunity zone investment. Excludes the commercial data in unit count. |
Property Name | | | Location | | | Number of Units | | | Average Unit Size (Sq Ft) | | | Purchase Date | | | Investment Amount | | | Mortgage Debt Outstanding | | | Physical Occupancy Rate | | | Percentage Owned by CROP |
Melrose Phase II(1) | | | Nashville, TN | | | 139 | | | 617 | | | 08/26/2016 | | | $3,750,000 | | | $18,770,169 | | | 85.61% | | | n/a |
Timber Ridge(1) | | | Mobile, AL | | | 320 | | | 1,111 | | | 11/30/2012 | | | 1,846,520 | | | 15,273,828 | | | 97.00% | | | 30.40% |
| | | | 459 | | | | | | | $5,596,520 | | | $34,043,997 | | | | |
(1) | Excludes fully occupied retail units at Melrose Phase II. Timber Ridge occupancy provided by Real Source, the third-party property manager. |
Property Name | | | Location | | | Purchase Date | | | Investment Amount | | | Percentage Owned by CROP |
Block C | | | Salt Lake City, UT | | | 04/2019 | | | $4,502,348 | | | 100% |
• | preserve, protect and return invested capital; |
• | pay stable cash distributions to our stockholders; |
• | realize capital appreciation in the value of our investments over the long term; and |
• | provide a real estate investment alternative with lower expected volatility relative to public real estate companies whose securities trade daily on a stock exchange. |
• | Location. From a geographic perspective, we have the competitive advantage of flexibility, and we may invest where our advisor identifies unique opportunities, market dislocation or mispriced assets. Our advisor generally targets investment locations with enduring value and high barriers to entry (such as time-consuming regulatory hurdles for new construction), and where minimal competitive supply is planned or under construction and there exist opportunities to buy assets below replacement cost. Buying an asset below replacement cost offers a margin of safety for property owners, typically, ensuring that no new construction will be completed until values rise to justify new (competing) product. Our advisor also seeks to anticipate broader market capital flows and invest where economic growth is expected to drive resident demand but new supply is not yet on the horizon. Additional investment location considerations by our advisor include: |
• | Local Industry and Employment. Certain employment sectors, such as financial services, information technology and healthcare, are better positioned for higher employee earnings potential, enhancing price elasticity of rents. |
• | Demographics. Locations with a higher concentration of the prime renter demographic with above average incomes will drive increased demand for renting apartments. |
• | Infill Locations. Sites within markets or sub-markets undergoing redevelopment programs, land recycling initiatives or that generally exhibit high barrier to entry characteristics offer, in the opinion of our advisor, better investment prospects over the long run. |
• | Accessibility to Key Attractions. Focus on local block-by-block details (the sub-market within a sub-market) during the investment selection process, including walkability scores, public transportation, crime rates, projected employment growth and access to popular dining, entertainment and retail venues, as well as sought after school districts. |
• | Time Horizon. Our portfolio will generally consist of illiquid real estate investments. Though we expect the average holding period for our stabilized operating assets to be between five and ten years, an asset within our investment portfolio may experience short-term fluctuations in value. Nonetheless, our advisor believes purchasing and holding assets in enduring locations will ultimately create long-term value and capital appreciation. Our structure allows us to hold assets for periods of time sufficient to withstand short-term market volatility. |
• | Asset-Specific Attributes. The management team of our advisor has extensive experience investing in and managing institutional multifamily apartment communities. Our advisor investigates each investment opportunity in the context of comparable communities to assess relative market position, functionality, suite of amenity offerings, unit-specific features and obsolescence. Site inspections are an important aspect of our advisor’s underwriting process. For example, under-managed or under-capitalized assets represent a unique investment opportunity to stabilize and/or refurbish the community to maximize operating performance and long-term value. |
• | Leverage. Downside risk of short-term fluctuations in market values or cash flow can be mitigated by using appropriately conservative leverage policies. Excess leverage during market corrections often result in property owners being forced to sell or liquidate assets at inopportune times. We expect to finance the purchase of our stabilized multifamily apartment communities using a loan-to-cost or loan-to-value ratio of 45% to 65% at the REIT level. |
• | Financial Due Diligence. A preliminary review of each investment opportunity will be conducted in order to screen the attractiveness of each transaction. The preliminary review is followed by an initial projection based on macro- and micro-economic analyses. Projection assumptions are developed from analysis of historical operating performance, communications with management, and analysis of research reports generated from real estate brokerage firms, investment banks, consultants and other pertinent resources. The advisor will also leverage a broad network of contacts in developing investment projections, such as strategic partners, local developers, appraisers, industry experts, third-party consultants, outside counsel, accountants and tax advisors. As necessary, third-party accounting consultants may be used to review relevant books and records, confirm cash flow information provided by a seller and conduct other similar types of analysis. |
• | Physical Due Diligence. Our advisor will hire third-party consultants, as necessary, to prepare reports on environmental and engineering matters. Conclusions from such consultants’ reports may influence the financial projections for an investment or lead our advisor to terminate the pursuit of an investment. Our advisor and/or property manager will also spend time in the surrounding market and visit competitive properties to better understand market dynamics. |
• | Legal and Tax Due Diligence. Our advisor will work closely with outside counsel to review diligence materials and negotiate applicable legal and property specific documents pertaining to any investment opportunity. The scope of legal and tax diligence will be broad and include (as appropriate) review of property title and survey, existing and/or new loan documents, leases, management agreements and purchase contracts. Additionally, our advisor will work with tax advisors to structure investments in an efficient manner. |
• | Property management fees; |
• | Asset management fees; |
• | Construction management; |
• | Development oversight; |
• | Various ancillary businesses; and |
• | Certain operating cost reimbursements. |
State | | | Units Managed |
Alabama | | | 320 |
Arizona | | | 456 |
Florida | | | 1,111 |
Georgia | | | 1,371 |
Massachusetts | | | 511 |
Michigan | | | 376 |
North Carolina | | | 1,688 |
New Mexico | | | 240 |
Oregon | | | 262 |
South Carolina | | | 730 |
Tennessee | | | 985 |
Texas | | | 4,701 |
Utah | | | 662 |
• | the ratio of the amount of the investment to the value of the property by which it is secured; |
• | the amount of existing debt on the property and the priority thereof relative to our prospective investment; |
• | the property’s potential for capital appreciation; |
• | expected levels of rental and occupancy rates; |
• | current and projected cash flow of the property; |
• | potential for rental increases; |
• | the degree of liquidity of the investment; |
• | the geographic location of the property; |
• | the condition and use of the property; |
• | the property’s income-producing capacity; |
• | the quality, experience and creditworthiness of the borrower; and |
• | general economic conditions in the area where the property is located. |
• | invest more than 10% of our total assets in unimproved property or mortgage loans on unimproved property, which we define as property not acquired for the purpose of producing rental or other operating income or on which there is no development or construction in progress or planned to commence within one year; |
• | make or invest in mortgage loans unless an appraisal is available concerning the underlying property, except for those mortgage loans insured or guaranteed by a government or government agency; |
• | make or invest in mortgage loans, including construction loans, on any one property if the aggregate amount of all mortgage loans on such property would exceed an amount equal to 85% of the appraised value of such property as determined by appraisal, unless substantial justification exists for exceeding such limit because of the presence of other underwriting criteria; |
• | make an investment if the related acquisition fees and expenses are not reasonable or exceed 6% of the contract purchase price for the asset, provided that the investment may be made if a majority of the directors (including a majority of the members of our conflicts committee) not otherwise interested in the transaction determines that the transaction is commercially competitive, fair and reasonable to us; |
• | acquire equity securities unless a majority of our directors (including a majority of the members of our conflicts committee) not otherwise interested in the transaction approve such investment as being fair, |
• | invest in real estate contracts of sale, otherwise known as land sale contracts, unless the contract is in recordable form and is appropriately recorded in the chain of title; |
• | invest in commodities or commodity futures contracts, except for futures contracts when used solely for the purpose of hedging in connection with our ordinary business of investing in real estate assets and mortgages; |
• | issue equity securities on a deferred payment basis or other similar arrangement; |
• | issue debt securities in the absence of adequate cash flow to cover debt service unless the historical debt service coverage (in the most recently completed fiscal year), as adjusted for known changes, is sufficient to service that higher level of debt as determined by the board of directors or a duly authorized executive officer; |
• | issue equity securities that are assessable after we have received the consideration for which our board of directors authorized their issuance; |
• | issue redeemable equity securities (as defined in the Investment Company Act), which restriction has no effect on our share repurchase program or the ability of our operating partnership to issue redeemable partnership interests; or |
• | make distributions in kind, except for distributions of readily marketable securities, distributions of beneficial interests in a liquidating trust established for our dissolution and the liquidation of our assets in accordance with the terms of our charter or distributions that meet all of the following conditions: (i) our board of directors advises each stockholder of the risks associated with direct ownership of the property, (ii) our board of directors offers each stockholder the election of receiving such in kind distributions and (iii) in kind distributions are made only to those stockholders who accept such offer. |
• | pursuant to Section 3(a)(1)(A), is or holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities (the “primarily engaged test”); or |
• | pursuant to Section 3(a)(1)(C), is engaged or proposes to engage in the business of investing, reinvesting, owning, holding or trading in securities and owns or proposes to acquire “investment securities” having a value exceeding 40% of the value of such issuer’s total assets (exclusive of United States government securities and cash items) on an unconsolidated basis (the “40% test”). “Investment securities” excludes United States government securities and securities of majority-owned subsidiaries that are not themselves investment companies and are not relying on the exception from the definition of investment company under Section 3(c)(1) or Section 3(c)(7) (relating to private investment companies). |
Period | | | Distributions Declared(1) | | | Distributions Declared Per Share(1)(2) | | | Distributions Paid(3) | | | Cash Provided By (Used In) Operating Activities | ||||||
| Cash | | | Reinvested (DRP) | | | Total | | ||||||||||
First Quarter 2020 | | | $1,183,119 | | | $0.125 | | | $888,805 | | | $237,326 | | | $1,126,131 | | | $571,878 |
Second Quarter 2020 | | | 1,309,923 | | | $0.125 | | | 1,017,593 | | | 274,570 | | | 1,292,163 | | | (32,296) |
Third Quarter 2020 | | | 1,412,921 | | | $0.125 | | | 1,090,610 | | | 293,235 | | | 1,383,845 | | | (364,225) |
Fourth Quarter 2020 | | | 1,492,087 | | | $0.125 | | | 1,148,369 | | | 301,235 | | | 1,449,604 | | | (2,991,041) |
Total | | | $5,398,050 | | | | | $4,145,377 | | | $1,106,366 | | | $5,251,743 | | | $(2,815,684) |
(1) | Distributions for the periods from January 1, 2020 through December 31, 2020 were based on daily record dates and were calculated at a rate of $0.00136612 per share per day. |
(2) | Assumes the share was issued and outstanding each day during the period presented. |
(3) | Distributions are paid on a monthly basis. In general, distributions for all record dates of a given month are paid on or about the fifth business day of the following month. |
Authorization Date | | | Period | | | Daily Distribution Amount | | | Annualized Rate(1) | | | Payment or Expected Payment |
March 23, 2021 | | | March 1, 2021 – March 31, 2021 | | | $0.00136986 | | | 5% | | | April 2021 |
March 23, 2021 | | | April 1, 2021 – April 30, 2021 | | | $0.00136986 | | | 5% | | | May 2021 |
March 23, 2021 | | | May 1, 2021 – May 31, 2021 | | | $0.00136986 | | | 5% | | | June 2021 |
(1) | Annualized rate is based on the $10.00 purchase price and assumes distributions are paid every day for a year at the daily distribution amount. |
Name | | | Position(s) | | | Age* |
Daniel Shaeffer | | | Chief Executive Officer and Director | | | 50 |
Chad Christensen | | | Executive Chairman of the Board of Directors and Director | | | 48 |
Enzio Cassinis | | | President | | | 43 |
Adam Larson | | | Chief Financial Officer | | | 39 |
Susan Hallenberg | | | Chief Accounting Officer and Treasurer | | | 53 |
Gregg Christensen | | | Chief Legal Officer and Secretary | | | 52 |
Glenn Rand | | | Chief Operating Officer | | | 60 |
Stan Hanks | | | Executive Vice President | | | 53 |
Eric Marlin | | | Executive Vice President, Capital Markets | | | 46 |
Paul Fredenberg | | | Chief Investment Officer | | | 44 |
John Lunt | | | Independent Director | | | 48 |
CRII nominated director | | | Independent Director | | | — |
CRII nominated director | | | Independent Director | | | — |
* | As of March 31, 2021 |
Executive Officer | | | Date of Grant | | | Number of Time-Based LTIP Units | | | Value of Time-Based LTIP Units |
Enzio A. Cassinis | | | March 25, 2020 | | | 4,500 | | | $45,000 |
Adam Larson | | | March 25, 2020 | | | 3,375 | | | $33,750 |
Paul Fredenberg | | | March 25, 2020 | | | 2,063 | | | $20,630 |
Executive Officer | | | Date of Grant | | | Number of Performance- Based LTIP Units | | | Value of Performance- Based LTIP Units |
Enzio A. Cassinis | | | March 25, 2020 | | | 13,500 | | | $77,490 |
Adam Larson | | | March 25, 2020 | | | 10,125 | | | $58,118 |
Paul Fredenberg | | | March 25, 2020 | | | 6,187 | | | $35,513 |
Internal Rate of Return | | | Percentage Earned |
Less than 6% | | | 0% |
6% | | | 50% |
10% or greater | | | 100% |
Name and Principal Position | | | Year | | | Stock Awards(1) | | | All Other Compensation | | | Total |
Enzio A. Cassinis Chief Executive Officer and President | | | 2020 | | | $122,490 | | | — | | | $122,490 |
Adam Larson Chief Financial Officer | | | 2020 | | | $91,868 | | | — | | | $91,868 |
Paul Fredenberg, Chief Investment Officer | | | 2020 | | | $56,143 | | | — | | | $56,143 |
(1) | Represents the aggregate grant date fair value of awards computed in accordance with ASC Topic 718. The values of the time-based LTIP Units granted on March 25, 2020 are as follows: Enzio A. Cassinis—$45,000; Adam Larson—$33,750; and Paul Fredenberg—$20,630. The values of the performance-based LTIP Units granted on March 25, 2020 are as follows: Enzio A. Cassinis--$77,490; Adam Larson—$58,118; and Paul Fredenberg—$35,513. |
| | Stock Awards | ||||||||||
Name | | | Number of Units that Have Not Vested(1) | | | Market Value of Units that Have Not Vested(2) | | | Equity Incentive Plan Awards: Number of Unearned Units that Have Not Vested(3) | | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Units that Have Not Vested(2)(4) |
Enzio A. Cassinis | | | 4,500 | | | $45,000 | | | 13,500 | | | $135,000 |
Adam Larson | | | 3,375 | | | $33,750 | | | 10,125 | | | $101,250 |
Paul Fredenberg | | | 2,063 | | | $20,630 | | | 6,187 | | | $61,870 |
(1) | Represents the number of LTIP Units for which a portion of the awards remain unvested as of December 31, 2020, based on service conditions. The time-based LTIP Units granted on March 25, 2020 vest in four equal installments on an annual basis beginning on January 1, 2021, subject to continued employment with CCI Advisor or its affiliates. |
(2) | Based on the estimated value of our common stock of $10.00 per share (which represents the most recent price an investor was willing to purchase our shares of common stock in our public offering) as of December 31, 2020. |
(3) | Represents the number of LTIP Units (at maximum amounts) for which a portion of the awards remain unearned and unvested as of December 31, 2020, based on performance conditions. For more information regarding the threshold, target and maximum amounts with respect to performance-based LTIP Units, see “—2020 Equity Grants—Performance-Based LTIP Units.” Any earned performance-based LTIP Units will vest on the first anniversary of the end of the performance period, subject to continued employment with CCI Advisor or its affiliates. |
Name | | | Fees Earned or Paid in Cash in 2020 | | | All Other Compensation | | | Total |
Chad Christensen | | | $— | | | $— | | | $— |
Daniel Shaeffer | | | — | | | — | | | — |
R. Brent Hardy | | | 12,000 | | | — | | | 12,000 |
Gentry Jensen | | | 12,000 | | | — | | | 12,000 |
John Lunt | | | 12,000 | | | — | | | 12,000 |
• | $500 for each board meeting attended; and |
• | $500 for each committee meeting attended (if held at a different time or place than a board meeting). |
Name and Address of Beneficial Owner(1) | | | Amount and Nature of Beneficial Ownership | | | Percent of all Shares |
Enzio Cassinis, Chief Executive Officer and President | | | 10,125(2) | | | * |
Adam Larson, Chief Financial Officer | | | 8,375(2) | | | * |
Gregg Christensen, Chief Legal Officer and Secretary | | | 20,000(3) | | | * |
Paul Fredenberg, Chief Investment Officer | | | 6,438(2) | | | * |
Susan Hallenberg, Chief Accounting Officer and Treasurer | | | — | | | — |
Chad Christensen, Director | | | 20,000(3) | | | * |
Daniel Shaeffer, Director | | | 20,000(3) | | | * |
R. Brent Hardy, Independent Director | | | — | | | — |
Gentry Jensen, Independent Director | | | — | | | — |
John Lunt, Independent Director | | | — | | | — |
All officers and directors as a group (10 persons) | | | 29,938 | | | * |
* | Indicates less than 1% of the outstanding common stock. |
(1) | The address of each named beneficial owner is 1245 Brickyard Road, Suite 250, Salt Lake City, Utah 84106. |
(2) | Reflects LTIP Units granted by the board of directors. Upon achieving parity with the common units and becoming “redeemable” in accordance with the terms of CCOP’s partnership agreement, LTIP Units may be redeemed for cash, or at our option, an equal number of shares of our common stock, subject to certain restrictions. Not all LTIP Units have vested |
(3) | CROP owns 20,000 shares of our outstanding common stock. Through entities they own and control, as of March 31, 2021, Gregg Christensen, Daniel Shaeffer and Chad Christensen had an ownership interest in CROP. In addition, they were three of the five directors that comprised the board of directors of CRII, the general partner of CROP, and as such may be deemed to have had beneficial ownership of the shares held by CROP. |
• | finding, presenting and recommending investment opportunities to us consistent with our investment policies and objectives; |
• | making certain real estate-related debt investment decisions for us, subject to the limitations in our charter and the direction and oversight of our board of directors; |
• | structuring the terms and conditions of our investments, sales and joint ventures; |
• | acquiring properties and other investments on our behalf in compliance with our investment objectives and policies; |
• | arranging for financing and refinancing of our properties and our other investments; |
• | entering into leases and service contracts for our real properties; |
• | supervising and evaluating each loan servicer’s and property manager’s performance; |
• | reviewing and analyzing the operating and capital budgets of properties underlying our investments and properties we may acquire; |
• | entering into servicing contracts for our loans; |
• | assisting us in obtaining insurance; |
• | generating an annual budget for us; |
• | reviewing and analyzing financial information for each of our assets and our overall portfolio; |
• | formulating and overseeing the implementation of strategies for the administration, promotion, management, operation, maintenance, improvement, financing and refinancing, marketing, leasing and disposition of our properties and other investments; |
• | performing investor-relations services; |
• | maintaining our accounting and other records and assisting us in filing all reports required to be filed with the SEC, the IRS and other regulatory agencies; |
• | engaging and supervising the performance of our agents, including our registrar and transfer agent; and |
• | performing any other services reasonably requested by us. |
Property Name(1) | | | Location | | | Purchase Date | | | Number of Units | | | Asset Value(2) | | | Secured Debt Outstanding(3) | | | Physical Occupancy Rate | | | Monthly Net Effective Rent |
Alpha Mill | | | Charlotte, NC | | | 08/03/2016 | | | 267 | | | $65,500 | | | $36,265 | | | 92.13% | | | $1,340 |
Cottonwood Westside | | | Atlanta, GA | | | 08/03/2016 | | | 197 | | | 44,400 | | | 25,655 | | | 94.92% | | | 1,430 |
The Marq Highland Park(4) | | | Tampa, FL | | | 08/03/2016 | | | 239 | | | 54,300 | | | 32,260 | | | 97.91% | | | 1,576 |
Total | | | | | | | 703 | | | $164,200 | | | $94,180 | | | | |
(1) | CROP owns the remaining 10% interest in the property. |
(2) | As of CRII’s most recently determined NAV as of December 31, 2019. |
(3) | Secured Debt Outstanding is shown as if CMRI owned 100% of the asset. |
(4) | Excludes the commercial data in units count and physical occupancy. |
• | preserve, protect and return invested capital; |
• | pay stable cash distributions to our stockholders; and |
• | realize capital appreciation in the value of our investments over the long term. |
• | built after 2000 and completed or substantially completed as of the date acquired by our joint venture; |
• | located in a primary market or a secondary market (see “Location and Markets—Primary Markets” and “Locations and Markets—Secondary Markets” below); |
• | had an average occupancy of 85% during the 30-day period prior to the date the multifamily apartment community is placed under contract by our joint venture; |
• | derives at least 75% of its projected stabilized net operating income from rental apartments; |
• | requires no more than a $15,000,000 equity investment; and |
• | is a single asset and not part of a multiple asset portfolio purchase, joint venture or partnership. |
• | $15,000,000 of our equity capital in our operating partnership being invested in a single multifamily apartment community in a primary market; or |
• | $10,000,000 of our equity capital in our operating partnership being invested in a single multifamily apartment community in a secondary market. |
• | Orlando, Florida |
• | Atlanta, Georgia |
• | Dallas, Texas |
• | Houston, Texas |
• | Phoenix, Arizona |
• | Denver, Colorado |
• | Salt Lake City, Utah |
• | Miami, Florida |
• | Portland, Oregon |
• | Charlotte, North Carolina |
• | Tampa, Florida |
• | Nashville, Tennessee |
• | Austin, Texas |
• | Raleigh, North Carolina |
• | Durham, North Carolina |
• | San Antonio, Texas |
• | pursuant to Section 3(a)(1)(A), is or holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities (the “primarily engaged test”); or |
• | pursuant to Section 3(a)(1)(C), is engaged or proposes to engage in the business of investing, reinvesting, owning, holding or trading in securities and owns or proposes to acquire “investment securities” having a value exceeding 40% of the value of such issuer’s total assets (exclusive of United States government securities and cash items) on an unconsolidated basis (the “40% test”). “Investment securities” excludes United States government securities and securities of majority-owned subsidiaries that are not themselves investment companies and are not relying on the exception from the definition of investment company under Section 3(c)(1) or Section 3(c)(7) (relating to private investment companies). |
| | Distributions Declared | | | Distributions Declared Per Share(1) | | | Distributions Paid | | | Cash Provided By (Used In) Operating Activities | |
First Quarter 2020 | | | $710,320 | | | $0.14375 | | | $710,830 | | | $748,327 |
Second Quarter 2020 | | | 710,320 | | | $0.14375 | | | 710,320 | | | 275,749 |
Third Quarter 2020 | | | 706,338 | | | $0.14375 | | | 707,666 | | | 765,864 |
Fourth Quarter 2020 | | | 704,958 | | | $0.14375 | | | 705,418 | | | 506,085 |
Total | | | $2,831,936 | | | | | $2,834,234 | | | $2,296,025 |
(1) | Assumes the share was issued and outstanding each day during the period presented. |
Name | | | Position(s) | | | Age* |
Enzio Cassinis | | | Chief Executive Officer and President | | | 43 |
Adam Larson | | | Chief Financial Officer | | | 39 |
Susan Hallenberg | | | Chief Accounting Officer and Treasurer | | | 53 |
Gregg Christensen | | | Chief Legal Officer and Secretary; Director | | | 52 |
Paul Fredenberg | | | Chief Investment Officer | | | 44 |
Daniel Shaeffer | | | Chairman of the Board of Directors; Director | | | 50 |
Chad Christensen | | | Director | | | 48 |
Kurt Wickman | | | Independent Director | | | 50 |
* | As of March 31, 2021 |
Name | | | Fees Earned or Paid in Cash in 2020 | | | All Other Compensation | | | Total |
Chad Christensen | | | $— | | | $— | | | $— |
Gregg Christensen | | | — | | | — | | | — |
Daniel Shaeffer | | | — | | | — | | | — |
Kurt Wickham | | | 35,000 | | | — | | | 35,000 |
Name and Address of Beneficial Owner(1) | | | Amount and Nature of Beneficial Ownership | | | Percentage |
Enzio Cassinis, Chief Executive Officer and President | | | — | | | — |
Adam Larson, Chief Financial Officer | | | — | | | — |
Gregg Christensen, Chief Legal Officer and Secretary; Director | | | 1,021(2) | | | * |
Paul Fredenberg, Chief Investment Officer | | | — | | | — |
Susan Hallenberg, Chief Accounting Officer and Treasurer | | | — | | | — |
Daniel Shaeffer, Chairman of the Board of Directors and Director | | | 1,021(2) | | | * |
Chad Christensen, Director | | | 1,021(2) | | | * |
Kurt Wickham, Independent Director | | | — | | | — |
All officers and directors as a group (eight persons) | | | 1,021 | | | * |
* | Indicates less than 1% of the outstanding common stock. |
(1) | The address of each named beneficial owner is 1245 Brickyard Road, Suite 250, Salt Lake City, Utah 84106. |
(2) | CROP owns 1,021 shares of our common stock. Through entities they own and control, as of March 31, 2021, Gregg Christensen, Daniel Shaeffer and Chad Christensen had an ownership interest in CROP. In addition, they were three of the five directors that comprised the board of directors of CRII, the general partner of CROP, and as such they may be deemed to have had beneficial ownership of the shares held by CROP. |
• | performing and supervising our administrative functions either directly or through access to our asset manager’s employees or contractors; |
• | selecting service providers and entering into service contracts for us and our properties; |
• | performing due diligence and underwriting duties as required by our board of directors in connection with the acquisition or disposition of our investments; |
• | monitoring and evaluating the performance of our investments and managing our relationships with our joint venture partners; |
• | overseeing each property manager’s performance; |
• | assisting us with respect to recommendations regarding capital improvements, payment and contestation of property and other taxes, and insurance policies for us and our joint ventures; |
• | arranging for financing and refinancing of our properties; |
• | providing cash management services for us; and |
• | performing any other services reasonably requested by us. |
Portfolio Statistics | |||
Properties/States(1) | | | 35 / 12 |
Average Effective Rent(2) | | | $1,367 |
Portfolio Occupancy(2) | | | 95.0% |
Average Age of Portfolio (years)(2) | | | 19 |
Total Assets (in billions)(3) | | | $1.6 |
(1) | Includes ownership interests and structured interests. |
(2) | Averages weighted by ownership percentage and unit counts by asset |
(3) | Based on the Unaudited Pro Forma Condensed Consolidated Financial Information of the Combined Company beginning on page F-1. |
| | Geographic Diversification | | | | | ||||||
State | | | Number of Units(1) | | | %(1) | | | Gross Stabilized Property Revenues(2) (in millions) | | | % |
Texas | | | 2,746 | | | 27.5% | | | $30.3 | | | 29.5% |
Utah | | | 1,716 | | | 17.2% | | | 6.3 | | | 6.1% |
Florida | | | 1,047 | | | 10.5% | | | 14.9 | | | 14.5% |
North Carolina | | | 958 | | | 9.6% | | | 9.8 | | | 9.6% |
Georgia | | | 867 | | | 8.7% | | | 14.7 | | | 14.3% |
New York | | | 534 | | | 5.4% | | | 0.0 | | | 0.0% |
Massachusetts | | | 511 | | | 5.1% | | | 9.1 | | | 8.9% |
Tennessee | | | 482 | | | 4.8% | | | 9.0 | | | 8.7% |
Alabama | | | 320 | | | 3.2% | | | 0.0 | | | 0.0% |
California | | | 285 | | | 2.9% | | | 0.0 | | | 0.0% |
Oregon | | | 262 | | | 2.6% | | | 4.5 | | | 4.4% |
New Mexico | | | 240 | | | 2.4% | | | 4.0 | | | 3.9% |
Total | | | 9,968 | | | 100.0% | | | $102.7 | | | 100.0% |
(1) | Includes stabilized properties, structured investments and development projects. |
(2) | Gross Property Revenues for the year ended December 31, 2020 are shown based on the percent ownership interest of each of CCI, CRII and CMRI. Excludes structured investments and development projects. |
Capital Structure | |||
Secured Debt | | | 47.9% |
Unsecured Notes | | | 3.1% |
Preferred Equity | | | 11.0% |
Common Equity | | | 38.0% |
Total | | | 100.0% |
Portfolio Statistics | |||
Properties/States(1) | | | 35 / 12 |
Average Effective Rent(2) | | | $1,377 |
Portfolio Occupancy(2) | | | 94.9% |
Average Age of Portfolio (years)(2) | | | 18 |
Total Assets (in billions)(3) | | | $1.6 |
(1) | Includes ownership interests and structured interests. |
(2) | Averages weighted by ownership percentage and unit counts by asset. |
(3) | Based on the Unaudited Pro Forma Condensed Consolidated Financial Information of the Fully Combined Company beginning on page F-1. |
Geographic Diversification | | | | | ||||||||||||||
State | | | Number of Units(1) | | | %(1) | | | Gross Stabilized Property Revenues(2) (in millions) | | | % | | |||||
Texas | | | 2,746 | | | 27.5% | | | $30.3 | | | 33.2% | | |||||
Utah | | | 1,716 | | | 17.2% | | | 6.3 | | | 5.7% | | |||||
Florida | | | 1,047 | | | 10.5% | | | 14.9 | | | 13.4% | | |||||
North Carolina | | | 958 | | | 9.6% | | | 14.9 | | | 13.4% | | |||||
Georgia | | | 867 | | | 8.7% | | | 14.7 | | | 13.2% | | |||||
New York | | | 534 | | | 5.4% | | | 0.0 | | | 0.0% | | |||||
Massachusetts | | | 511 | | | 5.1% | | | 12.8 | | | 11.5% | | |||||
Tennessee | | | 482 | | | 4.8% | | | 9.0 | | | 8.0% | | |||||
Alabama | | | 320 | | | 3.2% | | | 0.0 | | | 0.0% | | |||||
California | | | 285 | | | 2.9% | | | 0.0 | | | 0.0% | | |||||
Oregon | | | 262 | | | 2.6% | | | 4.5 | | | 4.1% | | |||||
New Mexico | | | 240 | | | 2.4% | | | 4.0 | | | 3.8% | | |||||
Total | | | 9,968 | | | 100.0% | | | $111.5 | | | 100.0% | |
(1) | Includes stabilized properties, structured investments and development projects. |
(2) | Gross Property Revenues for the year ended December 31, 2020 are shown based on the percent ownership interest of each of CCI, CMRI, CRII and CMRII. Excludes structured investments and development projects. The following table summarizes the Fully Combined Company’s pro forma capital structure upon consummation of all of the Mergers, using data as of December 31, 2020. |
Capital Structure | |||
Secured Debt | | | 47.9% |
Unsecured Notes | | | 3.1% |
Preferred Equity | | | 11.0% |
Common Equity | | | 38.0% |
Total | | | 100.0% |
Property | | | Location | | | Date Acquired | | | Number of Units | | | Total Purchase Price | | | Ownership % |
Cottonwood West Palm | | | West Palm Beach, FL | | | 05/30/2019 | | | 245 | | | $63,923,500 | | | 100% |
Cottonwood One Upland | | | Norwood, MA | | | 03/19/2020 | | | 262 | | | $103,600,000 | | | 100% |
| | December 31, | |||||||
Property | | | 2020 | | | 2019 | | | 2018 |
Cottonwood West Palm | | | 97.55% | | | 92.20% | | | 73.80% (1) |
Cottonwood One Upland | | | 93.10% (2) | | | 89.88% (3) | | | 88.10% (3) |
(1) | Calculated using financial information provided by the seller, for 2018, the first year in which construction was completed and primarily including the property’s lease-up period. |
(2) | Calculated using the last three quarters of 2020. Asset was purchased in March 2020. |
(3) | Calculated using financial information provided by the seller. |
| | December 31, | |||||||
Property | | | 2020 | | | 2019 | | | 2018 |
Cottonwood West Palm | | | $1,741 | | | $1,741 | | | $1,577 (1) |
Cottonwood One Upland | | | $2,327 (2) | | | $2,380 (3) | | | $2,284 (3) |
(1) | Calculated using financial information provided by the seller, for 2018, the first year in which construction was completed. |
(2) | Calculated using the last three quarters of 2020. Asset was purchased in March 2020. |
(3) | Calculated using financial information provided by the seller. |
Property | | | Depreciable Tax Basis* |
Cottonwood West Palm | | | $57,360,875 |
Cottonwood One Upland | | | $89,648,688 |
* | Excluding Land |
Property | | | Location | | | Date Acquired | | | Number of Units | | | Total Purchase Price | | | Ownership % |
Alpha Mill | | | Charlotte, NC | | | 08/03/2016 | | | 267 | | | $51,925,000 | | | 90% |
Cottonwood Westside | | | Atlanta, GA | | | 08/03/2016 | | | 197 | | | 43,000,000 | | | 90% |
The Marq Highland Park | | | Tampa, FL | | | 08/03/2016 | | | 239 | | | 45,960,000 | | | 90% |
| | December 31, | |||||||
Property | | | 2020 | | | 2019 | | | 2018 |
Alpha Mill | | | 92.13% | | | 94.38% | | | 96.23% |
Cottonwood Westside | | | 94.92% | | | 92.89% | | | 96.43% |
The Marq Highland Park | | | 97.91% | | | 94.98% | | | 94.14% |
| | December 31, | |||||||
Property | | | 2020 | | | 2019 | | | 2018 |
Alpha Mill | | | $1,387 | | | $1,393 | | | $1,329 |
Cottonwood Westside | | | $1,447 | | | $1,464 | | | $1,433 |
The Marq Highland Park | | | $1,549 | | | $1,555 | | | $1,525 |
Property | | | Depreciable Tax Basis |
Alpha Mill | | | $40,804,908 |
Cottonwood Westside | | | 34,229,467 |
The Marq Highland Park | | | 41,191,913 |
* | Excluding Land |
1. | a proposal to approve the CMRI Merger; and |
2. | a proposal to adjourn the Special Meeting to solicit additional proxies in favor of the CMRI Merger Proposal if there are not sufficient votes to approve the CMRI Merger Proposal, if necessary and as determined by the chair of the Special Meeting. |
• | Internet. CMRI stockholders may submit a proxy over the Internet by following the “Vote by Internet” instructions on the enclosed proxy card. |
• | Telephone. CMRI stockholders may submit a proxy by following the “Vote by Phone” instructions on the enclosed proxy card. |
• | Mail. CMRI stockholders may submit a proxy by completing, signing, dating and returning their proxy card or voting instruction card in the pre-addressed postage-paid envelope provided. |
• | submitting notice in writing to CMRI’s Secretary, Gregg Christensen, at CMRI’s offices located at 1245 Brickyard Road, Suite 250, Salt Lake City, Utah 84106; |
• | executing and delivering a later-dated, properly executed proxy card or submitting a later-dated proxy by telephone or on the Internet; |
• | submitting another proxy via the Internet or by telephone; or |
• | voting in person at the Special Meeting. |
• | CMRI’s limited mix of assets within its portfolio expose it to customary risks associated with a limited investment portfolio such as downturns in the geographic regions in which CMRI’s assets are concentrated. |
• | The attractiveness of various alternatives considered was limited. Specifically, the CMRI Special Committee considered continuing existing operations, a stock-for-stock merger with a public or non-public U.S. multifamily REIT, a sale of assets for cash, an equity recapitalization by private investors and listing on a national exchange (either with or without a concurrent capital raise), among other alternatives. Each of such alternatives presented valuation and execution challenges that made them less desirable than the CMRI Merger. |
• | The receipt of shares of CCI Common Stock as merger consideration provides the CMRI stockholders the opportunity to continue ownership in the Combined Company, which is expected to provide a number of significant potential benefits, including the following: |
• | better positioning for the Combined Company to take advantage of business opportunities, including facilitating an eventual liquidity event, as a result of its increased size and scale; |
• | the Combined Company will have significantly increased scale, including a more diversified portfolio (both in terms of asset type and geography); |
• | the increased size of the Combined Company will likely improve access to capital markets, which can be used to support acquisitions that drive growth in stockholder value; and |
• | significant cost of capital advantages generally enjoyed by REITs with higher capitalizations. |
• | The CMRI Board’s and CMRI Special Committee’s belief that the Combined Company would be better positioned than CMRI alone to achieve certain potential liquidity events, such as listing its shares on a national securities exchange, as a result of increased size, portfolio diversity and other factors noted above. |
• | The integrated organizational structure of the Combined Company will allow CCI management and CCA to focus their efforts on the operation of the Combined Company instead of on separate REITs, which is expected to result in substantial operating and cost efficiencies. |
• | (i) The recommendation made by the CMRI Special Committee related to the proposed CMRI Merger, (ii) the financial analysis reviewed by CBRE Capital with the CMRI Special Committee, (iii) the opinion of CBRE Capital orally rendered to the CMRI Special Committee on December 29, 2020 (which oral opinion was subsequently confirmed in writing by delivery of CBRE Capital’s written Opinion addressed to the CMRI Special Committee dated December 29, 2020) to the effect that, as of such date, the consideration to be received by the holders of CMRI Common Stock in the CMRI Merger pursuant to the CMRI Merger Agreement was fair, from a financial point of view, to the holders of CMRI Common Stock and (iv) CBRE Capital’s oral update of certain matters referred to in the Opinion that was rendered to the CMRI Special Committee on January 22, 2021 (which oral update was subsequently confirmed in writing by delivery of CBRE Capital’s written Opinion Update dated January 22, 2021) that confirmed to the CMRI Special Committee that CBRE Capital’s updated review described in the Opinion Update had not caused CBRE Capital to change its opinion, set forth in the Opinion, to the effect that the consideration to be received by the holders of CMRI Common Stock in the CMRI Merger pursuant to the CMRI Merger Agreement was fair, from a financial point of view, to the holders of CMRI Common Stock. See “—Opinion of CMRI Special Committee’s Financial Advisor” beginning on page 115. |
• | The CMRI Merger Consideration is fixed and will not be adjusted in the event of any change in the relative values of CMRI or CCI, which provides certainty as to the pro forma percentage ownership of the Combined Company by the CMRI stockholders and limits the impact of external forces on the CMRI Merger. |
• | The CMRI Merger Agreement provides CMRI with a termination right in the event that CCI permits or agrees to any material modification or waiver of any material rights or claims under the CRII Merger Agreement, the CMRII Merger Agreement or the Amended and Restated Advisory Agreement without obtaining CMRI’s prior written consent, therefore mitigating the risk to the CMRI stockholders of certain adverse events arising for the Combined Company from the CRII Merger or the CMRII Merger. |
• | The CMRI Merger Agreement provides CMRI the right, upon receipt of a written Acquisition Proposal that constitutes a Superior Proposal that did not result from a material breach of the non-solicitation provisions of the CMRI Merger Agreement, to give notice of its intention to terminate the CMRI Merger Agreement to enter into an agreement for a Superior Proposal and/or effect an Adverse Recommendation Change (as defined in “The CMRI Merger Agreement—Covenants and Agreements— No Solicitation; Change in Recommendation”), subject to certain conditions. |
• | The CMRI Merger Agreement provides CMRI with the ability, under certain specified circumstances, to consider an Acquisition Proposal if the CMRI Board or the CMRI Special Committee determines, in good faith, that it is reasonably expected to lead to a Superior Proposal and provides the CMRI Board with the ability, under certain specified circumstances, to make an Adverse Recommendation Change and to terminate the CMRI Merger Agreement in order to enter into an agreement with respect to a Superior Proposal upon payment to CCI of a $1,707,000 termination fee plus reimbursement of CCI’s expenses up to $284,000. |
• | The CMRI Board may also change or withdraw its recommendation in the instance of an Intervening Event (as defined in the CMRI Merger Agreement). |
• | The CMRI Merger Agreement permits CMRI to continue to pay its stockholders regular monthly dividends in the ordinary course of business through the effective date of the CMRI Merger. |
• | The CMRI Merger Agreement, the CMRI Merger and the transactions contemplated by the CMRI Merger Agreement were negotiated on an arm’s length basis between the CMRI Special Committee and its advisors, on the one hand, and CCI and its advisors, on the other hand. |
• | The intent for the CMRI Merger to qualify as a reorganization for U.S. federal income tax purposes, resulting in the receipt of shares of CCI Common Stock in the CMRI Merger on a tax-deferred basis. |
• | The commitment on the part of each of CMRI and CCI to complete the CMRI Merger as reflected in their respective obligations under the terms of the CMRI Merger Agreement and the absence of any required government consents. |
• | The risk that the value of the CCI Common Stock to be received by the CMRI stockholders may decline as a result of the CMRI Merger (or the other Mergers) if the Combined Company does not achieve the perceived benefits of the CMRI Merger (or the other Mergers) as rapidly or to the extent anticipated. |
• | The fact that the CMRI Merger was not contingent upon completion of the CRII Merger or the CMRII Merger, and therefore at the time of the approval it was not known whether the anticipated size, scale and prospects of the Combined Company or the Fully Combined Company would be realized. |
• | The risk that if the CMRI Merger or the CMRII Merger is not completed, the CMRI/CCI combined company may compete with CMRII and vice versa. |
• | The fact that the exchange ratio utilized in calculating the Merger Consideration is slightly lower than the exchange ratio included in the financial model presented to CMRI by CCI on July 16, 2020. |
• | The fact that the CMRI Merger is not a liquidity event for the CMRI stockholders, the risk that the Combined Company may not achieve a liquidity event on favorable terms, and that certain alternatives considered (such as a cash sale of individual assets or a recapitalization) would, if successful, provide liquidity for the CMRI stockholders. |
• | The risk that a prolonged period of operations before the Combined Company achieves a liquidity event could, when coupled with expected general and administrative expenses of the Combined Company, result in lower investor returns than other strategic alternatives currently available to CMRI. |
• | The terms of the CMRI Merger Agreement that limit the ability of CMRI to initiate, solicit, knowingly encourage or facilitate any inquiries or the making of any proposal, offer or other activities that constitute an Acquisition Proposal, which has the potential to create more value for the CMRI stockholders than the CMRI Merger. |
• | The risk that, while the CMRI Merger is expected to be completed, there is no assurance that all of the conditions to the parties’ obligations to complete the CMRI Merger will be satisfied or waived. |
• | The risk of diverting management’s focus and resources from operational matters and other strategic opportunities while working to implement the CMRI Merger. |
• | The risk of stockholder litigation relating to the CMRI Merger. |
• | The obligations under the CMRI Merger Agreement regarding the restrictions on the operation of CMRI’s business during the period between signing the CMRI Merger Agreement and the completion of the CMRI Merger may delay or prevent CMRI from undertaking business opportunities that may arise or any other actions it would otherwise take with respect to its operations absent the pending completion of the CMRI Merger. |
• | The substantial costs to be incurred in connection with the CMRI Merger, including the transaction expenses arising from the CMRI Merger (and the CRII Merger and CMRII Merger). |
• | CMRI and CCI have affiliates in common and, therefore, conflicts of interest may have been involved when the individuals that comprised the management teams of each entity that assisted the respective companies in connection with the Mergers, and some of CMRI’s directors and executive officers have interests with respect to the CMRI Merger that are different from, and in addition to, those of the CMRI stockholders generally, as more fully described in the section entitled “—Interests of CMRI’s and CCI’s Directors and Executive Officers in the CMRI Merger” in this proxy statement/prospectus. |
• | The risk that the CMRI stockholders do not approve the CMRI Merger. |
• | The risk of the Combined Company being unable to service its combined indebtedness following the Mergers. |
• | The fact that the CMRI Merger Agreement provides that CMRI will pay CCI a termination fee equal to $1,707,000 plus reimbursement of CCI’s expenses up to $284,000 if the CMRI Merger Agreement is terminated (i) for a Superior Proposal, (ii) for an Adverse Recommendation Change or (iii) if CMRI eventually consummates an Acquisition Proposal within 12 months of certain related circumstances (provided the various conditions and procedural requirements are met). |
• | Each of CCI, CRII, CMRII and CMRI is managed by affiliates of CCA, and there are conflicts of interest inherent where the individuals who comprise the management teams of each entity assisted in connection with the Mergers. |
• | In the event the Combined Company becomes publicly traded on a national securities exchange, externally managed REITs, which the Combined Company is expected to be, tend not to have as high of valuations as internally managed REITs. |
• | The CMRI stockholders are not entitled to dissenters’ or appraisal rights in connection with the CMRI Merger. |
• | The CMRI Merger Consideration is fixed and will not fluctuate as a result of changes in the value of CMRI or CCI, such that a decline in the value of CCI unmatched by a similar decline in the value of CMRI, or an increase in the value of CMRI without a similar increase in the value of CCI, would impact the relative value of CCI in a manner adverse to CMRI. |
• | The types and nature of the risks described under the section entitled “Risk Factors” in this proxy statement/prospectus. |
• | The Combined Company will likely achieve scale benefits due to its enhanced size and benefit from additional geographic diversity. |
• | The larger size of the Combined Company will likely improve access to capital markets and reduce the cost of capital, which can be used to support strategic investments that drive growth opportunities, and may increase opportunities for stockholder liquidity should the Combined Company ever opt to list its securities on a national securities exchange. |
• | The Combined Company will retain the existing senior management team that has managed the CCI and CMRI assets since each company’s formation. |
• | The Combined Company’s external advisor is expected to be able to focus its efforts on the operation of a single REIT (assuming the CMRI Merger and the CMRII Merger are also completed). |
• | The Combined Company is expected to be able to pay a greater percentage of its ordinary distributions with funds from operations in comparison with CCI’s current distribution coverage. |
• | The Merger Consideration in the CMRI Merger Agreement uses a fixed exchange ratio and will not be adjusted in the event of any adverse change in the value of the shares of CCI Common Stock. |
• | The CMRI exchange ratio is slightly below (i.e., more favorable to CCI) the ratio derived from CCI Advisor’s relative valuation of the companies (as of June 30, 2020) and at the midpoint of the fair exchange ratio as estimated by the financial advisor to the CCI Special Committee. |
• | The Combined Company may be able to raise more equity capital in CCI’s ongoing (temporarily suspended) public offering, which will enable the Combined Company to offer a more robust share repurchase program. See “Description of Capital Stock—Share Repurchase Program” beginning on page 178. |
• | The CMRI Merger Agreement provides that CMRI will pay a termination fee to CCI if CMRI terminates the CMRI Merger Agreement to enter into an agreement for a Superior Proposal. |
• | The commitment on the part of each of CMRI and CCI to complete the CMRI Merger as reflected in their respective obligations under the terms of the CMRI Merger Agreement and the absence of any required government consents. |
• | The other terms of the CMRI Merger Agreement, including the representations, warranties and covenants of the parties, as well as the conditions to their respective obligations under the CMRI Merger Agreement. |
• | The estimated value of CCI Common Stock may decline as a result of the CMRI Merger if the Combined Company does not achieve the perceived benefits of the CMRI Merger as rapidly or to the extent anticipated. |
• | The CMRI Merger is not a liquidity event. If a liquidity event is ever realized or if stockholders are otherwise able to sell their shares, the value received may be substantially less than what CCI could have obtained by effecting a liquidity event at this time and substantially less than what the stockholders paid for their investment in CCI. |
• | The value of the CMRI assets may decline vis-à-vis the value of the CCI assets before the closing of the CMRI Merger such that the Merger Consideration may become less favorable to CCI. |
• | There is no assurance that all of the conditions to the parties’ obligations to complete the CMRI Merger will be satisfied or waived. |
• | The risk of diverting management focus and resources from operational matters and other strategic opportunities while working to implement the CMRI Merger. |
• | The obligations under the CMRI Merger Agreement regarding the restrictions on the operation of CCI’s business during the period between signing the CMRI Merger Agreement and the completion of the CMRI Merger may delay or prevent CCI from undertaking business opportunities that may arise or any other action it would otherwise take with respect to its operations absent the pending completion of the CMRI Merger. |
• | The expenses to be incurred in connection with pursuing the CMRI Merger, including fees payable to third party advisors of CCI and CMRI. |
• | CMRI and CCI have common management and directors. These individuals faced conflicts of interest when assisting the CCI Board and the CMRI Board in connection with the CMRI Merger. |
• | The risks described under the section entitled “Risk Factors” beginning on page 27. |
• | NOI—net operating income, which is generally calculated as revenue, less property operating expenses. |
• | Net Cash Flows Before Debt Service—generally calculated as NOI, less total leasing costs and total capital expenditures. |
• | Net Asset Value — generally calculated as implied property value, plus cash and cash equivalents (net of projected remaining transaction expenses) and other assets as of June 30, 2020, less outstanding debt (including debt mark-to-market adjustments) and other liabilities as of June 30, 2020. |
| | Twelve Months Ended December 31, | |||||||||||||
| | 2021 | | | 2022 | | | 2023 | | | 2024 | | | 2025 | |
Total Revenues | | | $11,670,684 | | | 12,000,290 | | | 12,279,411 | | | 12,554,640 | | | 12,828,594 |
Real Estate Operating Expenses | | | (5,201,318) | | | (5,312,571) | | | (5,419,590) | | | (5,523,969) | | | (5,630,175) |
Net Operating Income | | | 6,469,366 | | | 6,687,718 | | | 6,859,822 | | | 7,030,671 | | | 7,198,419 |
REIT G&A and Other Expenses | | | (1,573,526) | | | (1,602,300) | | | (1,626,989) | | | (1,651,107) | | | (1,673,669) |
EBITDA | | | 4,895,841 | | | 5,085,418 | | | 5,232,833 | | | 5,379,565 | | | 5,524,750 |
Mortgage Interest Expense | | | (2,497,429) | | | (2,426,023) | | | (2,593,625) | | | (3,264,258) | | | (3,255,339) |
Unsecured Note Interest Expense | | | (92,952) | | | (353,733) | | | (402,930) | | | 0 | | | 0 |
Funds from Operations (FFO)/CORE Funds from Operations (Core FFO) | | | 2,305,460 | | | 2,305,662 | | | 2,236,277 | | | 2,115,307 | | | 2,269,411 |
Maintenance Capital Improvements | | | (318,150) | | | (324,513) | | | (331,003) | | | (337,623) | | | (344,376) |
Core Adjusted Funds from Operations (Core AFFO) | | | 1,987,310 | | | 1,981,149 | | | 1,905,274 | | | 1,777,684 | | | 1,925,035 |
• | banks, insurance companies, and other financial institutions; |
• | tax-exempt organizations or governmental organizations; |
• | S corporations, partnerships or other entities or arrangements treated as partnerships for U.S. federal income tax purposes (and investors therein); |
• | persons or entities who hold shares of CMRI Common Stock (or, following the CMRI Merger, CCI Common Stock) pursuant to the exercise of any employee stock option or otherwise as compensation; |
• | individuals subject to the alternative minimum tax; |
• | regulated investment companies and REITs; |
• | “controlled foreign corporations,” “passive foreign investment companies,” and corporations that accumulate earnings to avoid U.S. federal income tax; |
• | broker, dealers or traders in securities; |
• | United States expatriates and former citizens or long-term residents of the United States; |
• | persons holding shares of CMRI Common Stock (or, following the CMRI Merger, CCI Common Stock) as part of a hedge, straddle or other risk reduction strategy or as part of a conversion transaction or other integrated investment; |
• | persons or entities deemed to sell CMRI Common Stock (or, following the CMRI Merger, CCI Common Stock) under the constructive sale provisions of the Code; |
• | United States persons or entities whose functional currency is not the U.S. dollar; |
• | tax-qualified retirement plans; |
• | “qualified foreign pension funds” as defined in Section 897(l)(2) of the Code and entities all of the interests of which are held by one or more qualified foreign pension funds; |
• | “qualified shareholders” as defined in Section 897(k)(3)(A) of the Code; or |
• | persons or entities subject to special tax accounting rules as a result of any item of gross income with respect to the stock being taken into account in an applicable financial statement. |
• | an individual who is a citizen or resident of the United States; |
• | a corporation (or other entity taxable as a corporation) created or organized under the laws of the United States, any state thereof, or the District of Columbia; |
• | an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or |
• | a trust that (i) is subject to the primary supervision of a United States court and the control of one or more “United States persons” (within the meaning of the Code) or (ii) has a valid election in effect under applicable Treasury Regulations to be treated as a United States person for U.S. federal income tax purposes. |
• | First, the Combined Company will be required to pay regular U.S. federal corporate income tax on any REIT taxable income, including net capital gain, that it does not distribute to stockholders during, or within a specified time period after, the calendar year in which the income is earned. |
• | Second, if the Combined Company has (i) net income from the sale or other disposition of “foreclosure property” held primarily for sale to customers in the ordinary course of business or (ii) other nonqualifying income from foreclosure property, the Combined Company will be required to pay regular U.S. federal corporate income tax on this income. To the extent that income from foreclosure property is otherwise qualifying income for purposes of the 75% gross income test, this tax is not applicable. Subject to certain other requirements, foreclosure property generally is defined as property the Combined Company acquired through foreclosure or after a default on a loan secured by the property or a lease of the property. See “—Foreclosure Property.” |
• | Third, the Combined Company will be required to pay a 100% tax on any net income from prohibited transactions. Prohibited transactions are, in general, sales or other taxable dispositions of property, other than foreclosure property, held as inventory or primarily for sale to customers in the ordinary course of business. |
• | Fourth, if the Combined Company fails to satisfy the 75% gross income test or the 95% gross income test, as described below, but has otherwise maintained its qualification as a REIT because certain other requirements are met, it will be required to pay a tax equal to (i) the greater of (A) the amount by which it fails to satisfy the 75% gross income test and (B) the amount by which it fails to satisfy the 95% gross income test, multiplied by (ii) a fraction intended to reflect its profitability. |
• | Fifth, if the Combined Company fails to satisfy any of the asset tests (other than a de minimis failure of the 5% asset test, the 10% vote test or the 10% value test), as described below, due to reasonable cause and not due to willful neglect, and the Combined Company nonetheless maintains its REIT qualification because of specified cure provisions, it will be required to pay a tax equal to the greater of $50,000 or the U.S. federal corporate income tax rate multiplied by the net income generated by the nonqualifying assets that caused the Combined Company to fail such test. |
• | Sixth, if the Combined Company fails to satisfy any provision of the Code that would result in its failure to qualify as a REIT (other than a violation of the gross income tests or certain violations of the asset tests, as described below) and the violation is due to reasonable cause and not due to willful neglect, the Combined Company may retain its REIT qualification, but it will be required to pay a penalty of $50,000 for each such failure. |
• | Seventh, the Combined Company will be required to pay a 4% nondeductible excise tax to the extent it fails to distribute during each calendar year at least the sum of (i) 85% of its ordinary income for the year, (ii) 95% of its capital gain net income for the year, and (iii) any undistributed taxable income from prior periods. |
• | Eighth, if the Combined Company acquires any asset from a corporation that is or has been a C corporation in a transaction in which the Combined Company’s tax basis in the asset is less than the fair market value of the asset, in each case determined as of the date on which it acquired the asset, and it subsequently recognizes gain on the disposition of the asset during the five-year period beginning on the date on which it acquired the asset, then it generally will be required to pay regular U.S. federal corporate income tax on this gain to the extent of the excess of (i) the fair market value of the asset over (ii) its adjusted tax basis in the asset, in each case determined as of the date on which it acquired the asset. |
• | Ninth, the Combined Company’s subsidiaries that are C corporations, including its TRSs described below, generally will be required to pay regular U.S. federal corporate income tax on their earnings. |
• | Tenth, the Combined Company will be required to pay a 100% excise tax on transactions with its TRSs that are not conducted on an arm’s-length basis. |
(1) | It is managed by one or more trustees or directors; |
(2) | Its beneficial ownership is evidenced by transferable shares of stock, or by transferable shares or certificates of beneficial ownership; |
(3) | It would be taxable as a domestic corporation, but for Sections 856 through 860 of the Code; |
(4) | It is not a financial institution or an insurance company within the meaning of certain provisions of the Code; |
(5) | It is beneficially owned by 100 or more persons; |
(6) | Not more than 50% in value of the outstanding stock or shares of beneficial interest of which are owned, actually or constructively, by five or fewer individuals, which the U.S. federal income tax laws define to include certain entities, during the last half of each taxable year; |
(7) | It elects to be a REIT, or has made such election for a previous taxable year, and satisfies all relevant filing and other administrative requirements established by the IRS that must be met to qualify to be taxed as a REIT for U.S. federal income tax purposes; |
(8) | It uses a calendar year for U.S. federal income tax purposes and complies with the recordkeeping requirements of the U.S. federal income tax laws; and |
(9) | It meets certain other requirements, described below, regarding the sources of its gross income, the nature and diversification of its assets and the distribution of its income. |
• | rents from real property; |
• | interest on debt secured by mortgages on real property or on interests in real property and interest on debt secured by mortgages on both real and personal property if the fair market value of such personal property does not exceed 15% of the total fair market value of all such property; |
• | dividends or other distributions on, and gain from the sale of, stock or shares of beneficial interest in other REITs; |
• | gain from the sale of real estate assets (other than gain from prohibited transactions); |
• | income and gain derived from foreclosure property; and |
• | income derived from the temporary investment of new capital attributable to the issuance of its stock or a public offering of its debt with a maturity date of at least five years and that the Combined Company received during the one-year period beginning on the date on which the Combined Company received such new capital. |
• | The amount of rent is not based in whole or in part on the income or profits of any person. However, an amount the Combined Company receives or accrues generally will not be excluded from the term “rents from real property” solely because it is based on a fixed percentage or percentages of receipts or sales; |
• | Neither the Combined Company nor an actual or constructive owner of 10% or more of its capital stock actually or constructively owns 10% or more of the interests in the assets or net profits of a non-corporate tenant, or, if the tenant is a corporation, 10% or more of the total combined voting power of all classes of stock entitled to vote or 10% or more of the total value of all classes of stock of the tenant. Rents the Combined Company receives from such a tenant that is a TRS of the Combined Company, however, will not be excluded from the definition of “rents from real property” as a result of this condition if at least 90% of the space at the property to which the rents relate is leased to third parties, and the rents paid by the TRS are substantially comparable to rents paid by the Combined Company’s other tenants for comparable space. Whether rents paid by a TRS are substantially comparable to rents paid by other tenants is determined at the time the lease with the TRS is entered into, extended, and modified, if such modification increases the rents due under such lease; |
• | Rent attributable to personal property, leased in connection with a lease of real property, is not greater than 15% of the total rent received under the lease. If this condition is not met, then the portion of the rent attributable to personal property will not qualify as “rents from real property.” To the extent that rent attributable to personal property, leased in connection with a lease of real property, exceeds 15% of the total rent received under the lease, the Combined Company may transfer a portion of such personal property to a TRS; and |
• | The Combined Company generally may not operate or manage the property or furnish or render noncustomary services to its tenants, subject to a 1% de minimis exception and except as provided below. The Combined Company may, however, perform services that are “usually or customarily rendered” in connection with the rental of space for occupancy only and are not otherwise considered “rendered to the occupant” of the property. Examples of these services include the provision of light, heat, or other utilities, trash removal and general maintenance of common areas. In addition, the Combined Company may employ an independent contractor from whom it derives no revenue to provide customary services to the Combined Company’s tenants, or a TRS (which may be wholly or partially owned by the Combined Company) to provide both customary and non-customary services to the Combined Company’s tenants without causing the rent the Combined Company receives from those tenants to fail to qualify as “rents from real property.” |
• | Cash or cash items, including certain receivables and shares in certain money market funds; |
• | Government securities; |
• | Interests in real property, including leaseholds and options to acquire real property and leaseholds; |
• | Interests in mortgage loans secured by real property, and interests in mortgage loans secured by both real property and personal property if the fair market value of such personal property does not exceed 15% of the total fair market value of all such property; |
• | Stock or shares of beneficial interest in other REITs; |
• | Investments in stock or debt instruments during the one-year period following its receipt of new capital that the Combined Company raises through equity offerings or public offerings of debt with at least a five-year term; |
• | Debt instruments of publicly offered REITs; and |
• | Personal property leased in connection with a lease of real property for which the rent attributable to personal property is not greater than 15% of the total rent received under the lease. |
• | 90% of its REIT taxable income; and |
• | 90% of its after-tax net income, if any, from foreclosure property; minus |
• | the excess of the sum of certain items of non-cash income over 5% of its REIT taxable income. |
• | the investment in the Combined Company’s common stock is treated as effectively connected with the conduct by the non-U.S. holder of a trade or business within the United States (and, if required by an applicable income tax treaty, the non-U.S. holder maintains a permanent establishment in the United States to which such dividends are attributable), in which case the non-U.S. holder will be subject to the same treatment as U.S. holders with respect to such gain, except that a non-U.S. holder that is a corporation may also be subject to a branch profits tax of up to 30%, as discussed above; or |
• | the non-U.S. holder is a nonresident alien individual who is present in the United States for 183 days or more during the taxable year and certain other conditions are met, in which case the non-U.S. holder will be subject to U.S. federal income tax at a rate of 30% on the non-U.S. holder’s capital gains (or such lower rate specified by an applicable income tax treaty), which may be offset by U.S. source capital losses of such non-U.S. holder (even though the individual is not considered a resident of the United States), provided the non-U.S. holder has timely filed U.S. federal income tax returns with respect to such losses. |
• | the gain is treated as effectively connected with the conduct by the non-U.S. holder of a trade or business within the United States (and, if required by an applicable income tax treaty, the non-U.S. holder maintains a permanent establishment in the United States to which such gain is attributable), in which case the non-U.S. holder will be subject to the same treatment as U.S. holders with respect to such gain, except that a non-U.S. holder that is a corporation may also be subject to the 30% branch profits tax (or such lower rate as may be specified by an applicable income tax treaty) on such gain, as adjusted for certain items; or |
• | the non-U.S. holder is a nonresident alien individual who is present in the United States for 183 days or more during the taxable year and certain other conditions are met, in which case the non-U.S. holder will be subject to a 30% tax on its capital gains (or such lower rate specified by an applicable income tax treaty), which may be offset by U.S. source capital losses of such non-U.S. holder (even though the individual is not considered a resident of the United States), provided the non-U.S. holder has timely filed U.S. federal income tax returns with respect to such losses. |
• | the holder fails to furnish the holder’s taxpayer identification number, which for an individual is ordinarily his or her social security number; |
• | the holder furnishes an incorrect taxpayer identification number; |
• | the applicable withholding agent is notified by the IRS that the holder previously failed to properly report payments of interest or dividends; or |
• | the holder fails to certify under penalties of perjury that the holder has furnished a correct taxpayer identification number and that the IRS has not notified the holder that the holder is subject to backup withholding. |
• | corporate organization, valid existence, organizational documents, good standing, qualification to do business, and subsidiaries; |
• | capitalization; |
• | due authorization, execution, delivery and enforceability of the CMRI Merger Agreement; |
• | board and special committee approvals; |
• | absence of any conflict with or violation of organizational documents or applicable laws, and the absence of any violation or breach of, or default or consent requirements under, certain agreements; |
• | permits and compliance with law; |
• | SEC filings and financial statements; |
• | absence of improper payments; |
• | no undisclosed liabilities; |
• | absence of material changes to the conduct of CMRI’s business since September 30, 2020 or any “material adverse effect” (described below) to CMRI since September 30, 2020; |
• | labor and other employment matters and employee benefit plans; |
• | material contracts; |
• | litigation; |
• | environmental matters; |
• | intellectual property; |
• | real properties and leases; |
• | tax matters, including qualification as a REIT; |
• | insurance; |
• | receipt of the opinion of the CMRI Special Committee’s financial advisor; |
• | broker’s, finder’s, investment banker’s or other similar fees; |
• | inapplicability of the Investment Company Act; |
• | exemption of the CMRI Merger from anti-takeover statutes; |
• | stockholder vote in connection with the CMRI Merger; |
• | COVID-19 matters; |
• | related-party transactions; and |
• | limitation on warranties and disclaimer of other representations and warranties. |
• | corporate organization, valid existence, organizational documents, good standing, qualification to do business and subsidiaries; |
• | capitalization; |
• | due authorization, execution, delivery and enforceability of the CMRI Merger Agreement; |
• | board and special committee approvals; |
• | absence of any conflict with or violation of organizational documents or applicable laws, and the absence of any violation or breach of, or default or consent requirements under, certain agreements; |
• | permits and compliance with law; |
• | SEC filings and financial statements; |
• | internal accounting controls, compliance with the Sarbanes-Oxley Act, and the absence of improper payments; |
• | no undisclosed liabilities; |
• | absence of material changes to the conduct of CCI’s and Merger Sub’s business since September 30, 2020 or any “material adverse effect” (described below) to CCI or Merger Sub since September 30, 2020; |
• | absence of employees and employee benefit plans; |
• | material contracts; |
• | litigation; |
• | environmental matters; |
• | intellectual property; |
• | real properties and leases; |
• | tax matters, including qualification as a REIT; |
• | insurance; |
• | receipt of an opinion from the CCI Special Committee’s financial advisor; |
• | broker’s, finder’s, investment banker’s, or other similar fees; |
• | inapplicability of the Investment Company Act; |
• | COVID-19 matters; |
• | related-party transactions; |
• | the purposes, activities and ownership of Merger Sub; and |
• | limitation on warranties and disclaimer of other representations and warranties. |
(i) | any failure of CMRI or CCI, as applicable, to meet any projections or forecasts or any estimates of earnings, revenues or other metrics for any period (provided that any event, circumstance, change, effect, development, condition or occurrence giving rise to such failure may be taken into account in determining whether there has been a material adverse effect), |
(ii) | any changes that generally affect the residential real estate industry in which the CMRI and its subsidiaries or CCI and its subsidiaries, as applicable, operate, |
(iii) | any changes in the United States or global economy or capital, financial or securities markets generally, including changes in interest or exchange rates, |
(iv) | any changes in the regulatory or political conditions in the United States or in any other country or region of the world, |
(v) | the commencement, escalation or worsening of a war or armed hostilities or the occurrence of acts of terrorism or sabotage occurring after the date of the CMRI Merger Agreement, |
(vi) | the taking of any action expressly required by the CMRI Merger Agreement or, in the case of CCI, assuming no waiver or amendment thereof that was not approved by CMRI, the CRII Merger Agreement or the CMRII Merger Agreement, |
(vii) | earthquakes, hurricanes, floods or other natural disasters, |
(viii) | any epidemic, pandemic or disease outbreak (including COVID-19 or any COVID-19 measures) and any |
(ix) | changes or prospective changes in GAAP or in any law of general applicability unrelated to the CMRI Merger (or the interpretation or enforcement of the foregoing), or |
(x) | the public announcement of the CMRI Merger Agreement or the pendency of the CMRI Merger Agreement, including the impact thereof on the relationships of CMRI and its subsidiaries or CCI and its subsidiaries, as applicable, with their respective partners or other material third-party business relations. |
• | amend or propose to amend the CMRI Charter or the CMRI Bylaws, the certificate of limited partnership of CMRI OP, the CMRI OP Partnership Agreement or such equivalent organizational or governing documents of any material subsidiary of CMRI, or waive the stock ownership limit or create an excepted holder limit (as defined in the CMRI Charter) under the CMRI Charter, other than as contemplated by the CMRI Merger Agreement in connection with a Superior Proposal; |
• | adjust, split, combine, reclassify or subdivide any shares of stock or other equity securities or ownership interests of CMRI or any subsidiaries of CMRI (other than a wholly owned subsidiary of CMRI); |
• | declare, set aside or pay any dividend on or make any other actual, constructive or deemed distributions (whether in cash, stock, property or otherwise) with respect to shares of CMRI Common Stock or any common stock of any CMRI subsidiary or other equity securities or ownership interests of CMRI or any CMRI subsidiary or otherwise make any payment to its or their stockholders or other equity holders in their capacity as such, except for (i) the declaration and payment by CMRI of regular dividends in accordance with past practice at a monthly rate not to exceed $0.04792 per share of CMRI Common Stock, (ii) the payment by CMRI OP of regular distributions in accordance with past practice, (iii) the declaration and payment of dividends or other distributions to CMRI or CMRI OP by any directly or indirectly wholly owned subsidiary of CMRI, and (vi) distributions by any CMRI subsidiary that is not wholly owned, directly or indirectly, by CMRI or CMRI OP, in accordance with the requirements of the organizational documents of such CMRI subsidiaries; provided that, notwithstanding the foregoing restrictions and |
• | except as required pursuant to the terms of any outstanding securities as set forth in the CMRI or CMRI OP governing documents, redeem, repurchase or otherwise acquire, directly or indirectly, any shares of CMRI Common Stock or other equity or debt interests of CMRI or a CMRI subsidiary or securities convertible or exchangeable into or exercisable therefor; |
• | adopt a plan of merger, complete or partial liquidation or resolutions providing for or authorizing such merger, liquidation or a dissolution, consolidation, recapitalization or bankruptcy reorganization, except in connection with any transaction permitted by the CMRI Merger Agreement in a manner that would not reasonably be expected to be materially adverse to the CMRI Parties or to prevent or impair their ability to consummate the CMRI Merger and the CMRI OP Merger; |
• | except for transactions among CMRI and one or more wholly owned subsidiaries of CMRI or among one or more wholly owned subsidiaries of CMRI, issue, sell, pledge, dispose, encumber or grant any shares of capital stock of CMRI or any of the capital stock or equity interests of any CMRI subsidiaries or any options, warrants, convertible securities or other rights of any kind to acquire any CMRI Common Stock or any of the common stock or other equity interests of any CMRI subsidiary; |
• | enter into any contract or understanding with respect to the voting of any shares of CMRI or any of the CMRI subsidiaries; |
• | acquire or agree to acquire any material assets, except (i) acquisitions by CMRI or any wholly owned subsidiary of CMRI of or from an existing wholly owned subsidiary of CMRI and (ii) other acquisitions of personal property for a purchase price of less than $100,000 in the aggregate; |
• | sell, mortgage, pledge, lease, assign, transfer, dispose of or encumber, or effect a deed in lieu of foreclosure with respect to, any property or assets, except in the ordinary course of business, provided that any sale, mortgage, pledge, lease, assignment, transfer, disposition or deed in connection with the satisfaction of any margin call or the posting of collateral in connection with any contract to which CMRI or any CMRI subsidiary is a party will be considered to be done in the ordinary course of business; |
• | incur, create, assume, refinance, replace or prepay any indebtedness for borrowed money or guarantee such indebtedness of another person (other than a wholly owned subsidiary of CMRI), except (i) indebtedness incurred under CMRI’s or any CMRI subsidiary’s existing credit facilities in the ordinary course of business, (ii) indebtedness incurred in the ordinary course of business that does not, in the aggregate, exceed $100,000 and (iii) refinancing of existing indebtedness (provided that the terms of such new indebtedness will not be materially more onerous on CMRI compared to the existing indebtedness and the principal amount of such replacement indebtedness will not be materially greater than the indebtedness it is replacing); |
• | make any loans, advances or capital contributions to, or investments in, any other person (including to any of its officers, directors, affiliates, agents or consultants), make any change in its existing borrowing or lending arrangements for or on behalf of such persons, other than loans, advances or capital contributions to, or investments in, any wholly owned subsidiary of CMRI; |
• | enter into any “keep well” or similar agreement to maintain the financial condition of another entity; |
• | other than in the ordinary course of business, enter into, renew, modify, amend or terminate, or waive, release, compromise or assign any material rights or claims under, any CMRI material contract (or any contract that, if existing as of the date of the CMRI Merger Agreement, would be a CMRI material contract) in any material respect, except as expressly permitted by the CMRI Merger Agreement; |
• | authorize, make or commit to make any material capital expenditures other than in the ordinary course of business or to address obligations under existing contracts, or in conjunction with emergency repairs; |
• | make any payment, direct or indirect, of any liability of CMRI or any CMRI subsidiary before it comes due in accordance with its terms, other than in the ordinary course of business or in connection with dispositions or refinancings of any indebtedness otherwise permitted by the CMRI Merger Agreement; |
• | waive, release, assign, settle or compromise any material legal action or proceeding, other than waivers, releases, assignments, settlements or compromises that (i) (A) involve only the payment of monetary damages in an amount (less any portion of such payment payable under an existing property-level insurance policy or reserved for such matter by the CMRI on the most recent balance sheet of CMRI made available to CCI as of the date of the CMRI Merger Agreement) no greater than $25,000 individually or $100,000 in the aggregate, (B) do not involve the imposition of injunctive relief against CMRI or any CMRI subsidiary or the Surviving Entity and (C) do not provide for any admission of material liability by CMRI or any of the CMRI subsidiaries, or (ii) are made with respect to any legal action or proceeding involving any present, former or purported holder or group of holders of capital stock of CMRI in accordance with the CMRI Merger Agreement; |
• | (i) hire any officer or employee of CMRI or any CMRI subsidiary, (ii) except where due to cause, terminate any officer of CMRI or any CMRI subsidiary, (iii) increase in any manner the amount of compensation or benefits of any officer of CMRI or any CMRI subsidiary or of any employee or officer of CMRI Asset Manager or any affiliate thereof or (iv) enter into or adopt, amend or terminate any bonus or other compensation or employee benefits arrangement for any officer of CMRI or any CMRI subsidiary or any employee or officer of CMRI Asset Manager or any affiliate thereof; |
• | fail to maintain all financial books and records in all material respects in accordance with GAAP or make any material change to its methods of accounting in effect on January 1, 2020, except as required by a change in GAAP or in applicable law, or make any change with respect to accounting policies, principles or practices unless required by GAAP; |
• | enter into any new line of business; |
• | form any new funds, joint ventures or non-traded real estate investment trusts or other pooled investment vehicles; |
• | fail to duly and timely file all material reports and other material documents required to be filed with any governmental authority, subject to extensions permitted by law or applicable rules and regulations; |
• | enter into or modify in a manner adverse to CMRI any CMRI tax protection agreement (as defined in the CMRI Merger Agreement); make, change or rescind any material election relating to taxes; change a material method of tax accounting; file or amend any material tax return; settle or compromise any material federal, state, local or foreign tax liability, audit, claim or assessment; enter into any material closing agreement related to taxes; knowingly surrender any right to claim any material tax refund; or give or request any waiver of a statute of limitations with respect to any material tax return, with certain exceptions; |
• | take any action, or fail to take any action, which action or failure would reasonably be expected to cause CMRI to fail to qualify as a REIT or any CMRI subsidiary to cease to be treated as any of (i) a partnership or disregarded entity for U.S. federal income tax purposes or (ii) a qualified REIT subsidiary or a taxable REIT subsidiary under the applicable provisions of Section 856 of the Code, as the case may be; |
• | take any action (or fail to take any action) that would make dissenters’, appraisal or similar rights available to the holders of CMRI Common Stock with respect to the CMRI Merger or any other transactions contemplated by the CMRI Merger Agreement; |
• | permit any liens or encumbrances other than those permitted by the CMRI Merger Agreement or that would not reasonably be expected to have a material adverse effect; |
• | materially modify or reduce the amount of any insurance coverage provided by CMRI’s insurance policies; |
• | enter into certain related-party transactions except in the ordinary course of business or as provided for in the CMRI Merger Agreement; or |
• | authorize, or enter into any contract, agreement, commitment or arrangement to do any of the foregoing. |
• | amend or propose to amend the CCI Charter or the CCI Bylaws, the certificate of limited partnership of CROP (as successor to CCOP), the CROP Partnership Agreement, or such equivalent organizational or governing documents of any material subsidiary of CCI, amend the CCI dividend reinvestment plan or the CCI share repurchase program in a manner material to CCI, or waive the stock ownership limit or create an excepted holder limit (as defined in the CCI Charter) under the CCI Charter; |
• | adjust, split, combine, reclassify or subdivide any shares of stock or other equity securities or ownership interests of CCI or any subsidiaries of CCI (other than a wholly owned subsidiary of CCI); |
• | declare, set aside, or pay any dividend on or make any other actual, constructive or deemed distributions (whether in cash, stock, property or otherwise) with respect to shares of capital stock of CCI or any CCI subsidiary or other equity securities or ownership interests in CCI or any CCI subsidiary or otherwise make any payment to its or their stockholders or other equity holders in their capacity as such, except for (i) the declaration and payment by CCI of regular dividends in accordance with past practice at a daily rate not to exceed $0.00136986 per share of CCI Common Stock, (ii) the payment by CROP (as successor to CCOP) of regular distributions in accordance with past practice, (iii) payments pursuant to the terms of the CCI Series 2019 Preferred Stock and the corresponding Series 2019 preferred limited partner units of CROP (as successor to CCOP), (iv) the declaration and payment of dividends or other distributions to CCI or CROP by any directly or indirectly wholly owned subsidiary of CCI and (v) distributions by any CCI subsidiary that is not wholly owned, directly or indirectly, by CCI or CROP, in accordance with the requirements of the organizational documents of such CCI subsidiary; provided that, notwithstanding the foregoing restrictions and limitations, CCI and any CCI subsidiary will be permitted to make distributions reasonably necessary for CCI to maintain its status as a REIT under the Code (or applicable state law) and avoid or reduce the imposition of any entity level income or excise tax under the Code (or applicable state law); |
• | except as required pursuant to the terms of any outstanding securities as set forth in the CCI or CROP (as successor to CCOP) governing documents, redeem, repurchase or otherwise acquire, directly or indirectly, any shares of CCI Common Stock or other equity or debt interests of CCI or a CCI subsidiary or securities convertible or exchangeable into or exercisable therefor; |
• | adopt a plan of merger, complete or partial liquidation or resolutions providing for or authorizing such merger, liquidation or a dissolution, consolidation, recapitalization or bankruptcy reorganization, except in connection with any transaction permitted by the CMRI Merger Agreement in a manner that would not reasonably be expected to be materially adverse to the CCI Parties or to prevent or impair their ability to consummate the CMRI Merger and the CMRI OP Merger; |
• | except for transactions among CCI and one or more wholly owned subsidiaries of CCI or among one or more wholly owned subsidiaries of CCI, issue, sell, pledge, dispose, encumber or grant any shares of capital stock of CCI or any of the capital stock or equity interests of any CCI subsidiaries or any options, warrants, convertible securities or other rights of any kind to acquire any CCI Common Stock or any common stock or other equity interests of any CCI subsidiary; |
• | enter into any contract or understanding with respect to the voting of any shares of CCI or any of the CCI subsidiaries; |
• | acquire or agree to acquire any material assets, except (i) acquisitions by CCI or any wholly owned subsidiary of CCI of or from an existing wholly owned subsidiary of CCI or (ii) other acquisitions of personal property for a purchase price of less than $1,000,000 in the aggregate; |
• | sell, mortgage, pledge, lease, assign, transfer, dispose of or encumber, or effect a deed in lieu of foreclosure with respect to, any property or assets, except in the ordinary course of business, provided that any sale, mortgage, pledge, lease, assignment, transfer, disposition or deed in connection with the satisfaction of any margin call or the posting of collateral in connection with any contract to which CCI or any CCI subsidiary is a party will be considered to be done in the ordinary course of business; |
• | incur, create, assume, refinance, replace or prepay any indebtedness for borrowed money or guarantee such indebtedness of another person, except (i) indebtedness incurred under CCI’s or any CCI subsidiary’s existing credit facilities in the ordinary course of business, (ii) indebtedness incurred in the ordinary course of business that does not, in the aggregate, exceed $1,000,000 and (iii) refinancing of existing indebtedness (provided that the terms of such new indebtedness will not be materially more onerous on CCI compared to the existing indebtedness and the principal amount of such replacement indebtedness will not be materially greater than the indebtedness it is replacing); |
• | make any loans, advances or capital contributions to, or investments in, any other person (including to any of its officers, directors, affiliates, agents or consultants), make any change in its existing borrowing or lending arrangements for or on behalf of such persons, other than loans, advances or capital contributions to, or investments in, any wholly owned subsidiary of CCI; |
• | enter into any “keep well” or similar agreement to maintain the financial condition of another entity; |
• | other than in the ordinary course of business, enter into, renew, modify, amend or terminate, or waive, release, compromise or assign any material rights or claims under, any CCI material contract (or any contract that, if existing as of the date of the CMRI Merger Agreement, would be a CCI material contract), except as expressly permitted by the CMRI Merger Agreement; |
• | authorize, make or commit to make any material capital expenditures other than (i) in the ordinary course of business or (ii) to address obligations under existing contracts, or in conjunction with emergency repairs; |
• | make any payment, direct or indirect, of any liability of CCI or any CCI subsidiary before it comes due in accordance with its terms, other than in the ordinary course of business or in connection with dispositions or refinancings of any indebtedness otherwise permitted by the CMRI Merger Agreement; |
• | waive, release, assign, settle or compromise any material legal; action or proceeding, other than waivers, releases, assignments, settlements or compromises that (i) (A) involve only the payment of monetary damages in an amount (less any portion of such payment payable under an existing property-level insurance policy or reserved for such matter by the CCI on the most recent balance sheet included in the CCI’s reports filed with SEC as of the date of the CMRI Agreement) no greater than $100,000 individually or $250,000 in the aggregate, (B) do not involve the imposition of injunctive relief against CCI or any CCI subsidiary or the Surviving Entity and (C) do not provide for any admission of material liability by CCI or any of the CCI subsidiaries, or (ii) are made with respect to any legal action or proceeding involving any present, former or purported holder or group of holders of capital stock of CCI in accordance with the CMRI Merger Agreement; |
• | (i) hire any officer or employee of CCI or any CCI subsidiary, (ii) except where due to cause, terminate any officer of CCI or any CCI subsidiary, (iii) increase in any manner the amount of compensation of any officer of CCI or any CCI subsidiary or of any employee or officer of CCI Advisor or any affiliate thereof or (iv) enter into or adopt any bonus or other compensation arrangement for any officer of CCI or any CCI subsidiary or any employee or officer of CCI Advisor or any affiliate thereof; |
• | fail to maintain all financial books and records in all material respects in accordance with GAAP or make any material change to its methods of accounting in effect on January 1, 2020, except as required by a change in GAAP or in applicable law, or make any change with respect to accounting policies, principles or practices unless required by GAAP; |
• | enter into any new line of business; |
• | form any new funds, joint ventures or non-traded real estate investment trusts or other pooled investment vehicles; |
• | fail to duly and timely file all material reports and other material documents required to be filed with any governmental authority, subject to extensions permitted by law or applicable rules and regulations; |
• | enter into or modify in a manner adverse to CCI any CCI tax protection agreement (as defined in the CMRI Merger Agreement); make, change or rescind any material election relating to taxes, change a material method of tax accounting; file or amend any material tax return; settle or compromise any material federal, state, local or foreign tax liability, audit, claim or assessment; enter into any material closing agreement related to taxes; knowingly surrender any right to claim any material tax refund; or give or request any waiver of a statute of limitations with respect to any material tax return, with certain exceptions; |
• | take any action, or fail to take any action, which action or failure would reasonably be expected to cause CCI to fail to qualify as a REIT or any CCI subsidiary to cease to be treated as any of (i) a partnership or disregarded entity for U.S. federal income tax purposes or (ii) a qualified REIT subsidiary or a taxable REIT subsidiary under the applicable provisions of Section 856 of the Code, as the case may be; |
• | permit any liens or encumbrances other than those permitted by the CMRI Merger Agreement or that would not reasonably be expected to have a material adverse effect; |
• | materially modify or reduce the amount of any insurance coverage provided by CCI’s insurance policies; |
• | enter into certain related-party transactions except in the ordinary course of business or as provided for in the CMRI Merger Agreement; |
• | fail to remain a “publicly offered” REIT under Section 562(c) of the Code; or |
• | authorize or enter into any contract, agreement, commitment or arrangement to do any of the foregoing. |
• | in the event of any notice or other communication received by such party from (i) any governmental authority in connection with the CMRI Merger or (ii) any person alleging that the consent of such person may be required in connection with the CMRI Merger; |
• | if (i) any representation or warranty made by such party in the CMRI Merger Agreement becomes untrue or inaccurate such that it would be reasonable to expect that the closing conditions set forth in the CMRI Merger Agreement would be incapable of being satisfied by the Outside Date or (ii) such party fails to comply with or satisfy in any material respect any covenant, condition, or agreement to be complied with or satisfied by it pursuant to the CMRI Merger Agreement; and |
• | of any action commenced, or to the knowledge of such party, threatened against, relating to or involving such party or any of its subsidiaries, which relates to the CMRI Merger Agreement, the CMRI Merger, or the other transactions contemplated by the CMRI Merger Agreement. |
• | approval of the CMRI Merger by the CMRI stockholders; |
• | all consents, authorizations, orders or approvals of each governmental authority necessary for the consummation of the CMRI Merger and the other transactions contemplated by the CMRI Merger Agreement will have been obtained and any applicable waiting periods in respect thereof will have expired or been terminated; |
• | the absence of any judgment, injunction, order or decree issued by any governmental authority of competent jurisdiction prohibiting the consummation of the CMRI Merger, and the absence of any law that has been enacted, entered, promulgated or enforced by any governmental authority after the date of the CMRI Merger Agreement that prohibits, restrains, enjoins or makes illegal the consummation of the CMRI Merger or the other transactions contemplated by the CMRI Merger Agreement; and |
• | the registration statement on Form S-4 will have been declared effective and no stop order suspending the effectiveness of the registration statement on Form S-4 will have been issued, and no proceedings for that purpose will have been initiated by the SEC that have not been withdrawn. |
• | the accuracy in all material respects as of the date of the CMRI Merger Agreement and the effective time of the CMRI Merger of certain representations and warranties made in the CMRI Merger Agreement by the CCI Parties regarding (i) certain aspects of the organization and qualification of the CCI Parties, (ii) authority to enter into and approval of the CMRI Merger and the CMRI Merger Agreement, (iii) conflicts or consent requirements in connection with the CMRI Merger, (iv) certain aspects of CCI’s capital structure, (v) exemption from registration under the Investment Company Act of CCI and its subsidiaries and (vi) certain tax matters with respect to CCI and its subsidiaries; |
• | the accuracy in all but de minimis respects as of the date of the CMRI Merger Agreement and the effective time of the CMRI Merger of certain representations and warranties made in the CMRI Merger Agreement by the CCI Parties regarding certain aspects of CMRI’s organization and capital structure; |
• | the accuracy as of the date of the CMRI Merger Agreement and the effective time of the CMRI Merger of all other representations and warranties of the CCI Parties contained in the CMRI Merger Agreement, except (i) representations and warranties made as of a specific date will be true and correct only on such date, (ii) where the failure of such representations or warranties to be true and correct does not have, and would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on CCI and its subsidiaries taken as a whole, and (iii) if the CRII Merger or the CMRII Merger has been consummated before the closing date of the CMRI Merger, such representations and warranties need not be true and correct as of the CMRI closing date if the inaccuracy is due to the consummation of the CRII Merger or the CMRII Merger; |
• | the CCI Parties must have performed and complied in all material respects with all agreements and covenants required by the CMRI Merger Agreement to be performed or complied with by them on or prior to the effective time of the CMRI Merger; |
• | since the date of the CMRI Merger Agreement, no event, circumstance, change, effect, development, condition or occurrence will exist or have occurred that, individually or in the aggregate, constitutes, or would reasonably be expected to constitute, a material adverse effect as to CCI; |
• | CCI will have received the written consents identified in the CCI disclosure letter in form and substance reasonably acceptable to CMRI; |
• | CMRI must have received a certificate, dated the date of the closing of the CMRI Merger, signed by the chief executive officer and chief financial officer of CCI, certifying to the effect that the conditions described in the six preceding bullet points have been satisfied; |
• | CMRI must have received the written opinion of DLA Piper dated as of the closing date, regarding CCI’s qualification and taxation as a REIT under the Code commencing with CCI’s taxable year that ended on December 31, 2019; |
• | CMRI must have received the written opinion of Snell & Wilmer to the effect that the CMRI Merger will qualify as a reorganization within the meaning of Section 368(a) of the Code; and |
• | CCI Advisor will have entered into the Amended and Restated Advisory Agreement or will have agreed to enter into the Amended and Restated Advisory Agreement immediately following the effective time of the CMRI Merger. |
• | the accuracy in all material respects as of the date of the CMRI Merger Agreement and the effective time of the CMRI Merger of certain representations and warranties made in the CMRI Merger Agreement by the CMRI Parties regarding (i) certain aspects of the organization and qualification of the CMRI Parties, (ii) authority to enter into and approval of the CMRI Merger and the CMRI Merger Agreement, (iii) conflicts or consent requirements in connection with the CMRI Merger, (iv) certain aspects of CMRI’s capital structure, (v) exemption from registration under the Investment Company Act of CMRI and its subsidiaries and (vi) certain tax matters with respect to CMRI and its subsidiaries; |
• | the accuracy in all but de minimis respects as of the date of the CMRI Merger Agreement and the effective time of the CMRI Merger of certain representations and warranties made in the CMRI Merger Agreement by the CMRI Parties regarding certain aspects of CMRI’s organization and capital structure; |
• | the accuracy as of the date of the CMRI Merger Agreement and the effective time of the CMRI Merger of all other representations and warranties of the CMRI Parties contained in the CMRI Merger Agreement, except (i) representations and warranties made as of a specific date will be true and correct only on such date, and (ii) where the failure of such representations or warranties to be true and correct does not have, and would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on CMRI and its subsidiaries taken as a whole; |
• | the CMRI Parties must have performed and complied in all material respects with all agreements and covenants required by the CMRI Merger Agreement to be performed or complied with by them on or prior to the effective time of the CMRI Merger; |
• | since the date of the CMRI Merger Agreement, no event, circumstance, change, effect, development, condition or occurrence will exist or have occurred that, individually or in the aggregate, constitutes, or would reasonably be expected to constitute, a material adverse effect as to CMRI; |
• | CMRI will have received the written consents identified in the CMRI disclosure letter in form and substance reasonably acceptable to CCI; |
• | CCI must have received a certificate, dated the date of the closing of the CMRI Merger, signed by the chief executive officer and chief financial officer of CMRI, certifying to the effect that the conditions described in the six preceding bullet points have been satisfied; |
• | CCI must have received the written opinion of DLA Piper, dated as of the closing date, regarding CMRI’s qualification and taxation as a REIT under the Code commencing with CMRI’s taxable year that ended on December 31, 2016; and |
• | CCI must have received the written opinion of DLA Piper to the effect that the CMRI Merger will qualify as a reorganization within the meaning of Section 368(a) of the Code. |
• | The CMRI Merger has not occurred on or before the Outside Date. However, the right to terminate due to the failure of the CMRI Merger to occur on or before the Outside Date will not be available to CMRI or CCI if the failure of CMRI or CCI to perform or comply in all material respects with any of their respective obligations, covenants or agreements under the CMRI Merger Agreement caused the failure of the CMRI Merger to be consummated on the Outside Date. |
• | There is any final, non-appealable order issued by a governmental authority of competent jurisdiction that permanently restrains or otherwise prohibits the transactions contemplated by the CMRI Merger Agreement. The right to terminate due to the issuance of such an order will not be available to CMRI or CCI if the issuance of such final, non-appealable order was primarily due to the failure of CMRI or CCI to perform or comply in all material respects with any of their respective obligations, covenants or agreements under the CMRI Merger Agreement. |
• | The required approval of the CMRI stockholders of the CMRI Merger was not obtained at the Special Meeting. The right to terminate due to the failure to receive the requisite approval of the CMRI stockholders will not be available to CMRI or CCI if such failure was primarily due to the failure of CMRI or CCI to perform or comply in all material respects with any of their respective obligations, covenants or agreements under the CMRI Merger Agreement. |
(1) | CCI has breached any of its representations or warranties or failed to perform any of its obligations, covenants or agreements set forth in the CMRI Merger Agreement, which breach or failure to perform (i) would result in a failure of CCI to satisfy certain closing conditions and (ii) cannot be cured or, if curable, is not cured by CCI by the earlier of 20 days following written notice of such breach or failure from CMRI to CCI and two business days before the Outside Date; provided, however, that CMRI will not have the right to terminate the CMRI Merger Agreement pursuant to the foregoing if CMRI is then in breach of any of its representations or agreements set forth in the CMRI Merger Agreement such that CCI already had a right to terminate the CMRI Merger Agreement as described below; |
(2) | If CCI permits or agrees to any material modification, amendment or termination of, or waiver, release, compromise or assignment of any material rights or claims under, the CRII Merger Agreement, the CMRII Merger Agreement or the Amended and Restated Advisory Agreement without obtaining CMRI’s prior written consent; |
(3) | If CCI Advisor has neither entered into the Amended and Restated Advisory Agreement nor agreed to enter into the Amended and Restated Advisory Agreement immediately following the effective time of the CMRI Merger; and |
(4) | At any time prior to obtaining the required CMRI stockholder approval to permit CMRI to enter into an alternative acquisition agreement with respect to a Superior Proposal in accordance with the CMRI Merger Agreement so long as the termination payment described below in “—Termination Payment and Expense Reimbursement” is made in full to CCI prior to or concurrently with such termination. |
(1) | CMRI has breached any of its representations or warranties or failed to perform any of its obligations, covenants or agreements set forth in the CMRI Merger Agreement, which breach or failure to perform (i) would result in a failure of CMRI to satisfy certain closing conditions and (ii) cannot be cured or, if curable, is not cured by CMRI by the earlier of 20 days following of written notice of such breach or failure from CCI to CMRI and two business days before the Outside Date; provided, however, that CCI will not have the right to terminate the CMRI Merger Agreement pursuant to the foregoing if CCI is then in breach of any of its representations or agreements set forth in the CMRI Merger Agreement such that CCI already had a right to terminate the CMRI Merger Agreement as described above; or |
(2) | At any time prior to obtaining the required approval of the CMRI stockholders, (i) the CMRI Board has made an Adverse Recommendation Change or (ii) CMRI has materially violated any of its obligations described above in “—Covenants and Agreements—No Solicitation; Change in Recommendation.” |
(1) | (i)(A) CCI due to CMRI’s breach of the CMRI Merger Agreement, and prior to the breach, a bona fide Acquisition Proposal (with, for all purposes hereof, all percentages included in the definition of “Acquisition Proposal” increased to 50%) has been communicated to the CMRI Board or any person has publicly announced an intention to make such an Acquisition Proposal or (B) CCI or CMRI due to the failure to obtain the required CMRI stockholder approval and prior to obtaining the required CMRI stockholder approval, an Acquisition Proposal has been made to CMRI or publicly communicated to CMRI’s stockholders, and (ii) within 12 months after the date of such termination, a transaction in respect of an Acquisition Proposal with respect to CMRI is consummated or CMRI enters into a definitive agreement in respect of an Acquisition Proposal with respect to CMRI that is later consummated; |
(2) | CMRI in order to accept a Superior Proposal; or |
(3) | CCI pursuant to item (2) under “—Termination by CCI” above. |
• | amend the charter to adversely affect the rights, preferences and privileges of the common stockholders; |
• | amend charter provisions relating to director qualifications, fiduciary duties, liability and indemnification, conflicts of interest, investment policies or investment restrictions; |
• | cause our liquidation or dissolution after our initial investment; |
• | sell all or substantially all of our assets other than in the ordinary course of business; or |
• | cause our merger or reorganization. |
• | specific disclosure to stockholders focusing on the terms of the offer and information about the bidder; |
• | the ability to allow stockholders to withdraw tendered shares while the offer remains open; |
• | the right to have tendered shares accepted on a pro rata basis throughout the term of the offer if the offer is for less than all of our shares; and |
• | that all stockholders of the subject class of shares be treated equally. |
• | one-tenth or more but less than one-third; |
• | one-third or more but less than a majority; or |
• | a majority or more of all voting power. |
• | a classified board; |
• | a two-thirds vote requirement for removing a director; |
• | a requirement that the number of directors be fixed only by vote of the directors; |
• | a requirement that a vacancy on the board be filled only by the remaining directors and for the remainder of the full term of the directorship in which the vacancy occurred; and |
• | a majority requirement for the calling of a special meeting of stockholders. |
• | Beginning on the first anniversary of the share acquisition date and prior to the third anniversary of the share acquisition date, the purchase price for the repurchased shares will be equal to 85% of the NAV per share; |
• | Beginning on the third anniversary of the share acquisition date and prior to the fifth anniversary of the share acquisition date, the purchase price for the repurchased shares will be equal to 90% of the NAV per share; and |
• | Beginning on the fifth anniversary of the share acquisition date and every year thereafter, the purchase price for the repurchased shares will be equal to 100% of the NAV per share. |
• | Beginning on the share acquisition date and prior to the first anniversary of the share acquisition date, the purchase price for the repurchased shares will be equal to 95% of the NAV per share; and |
• | Beginning on the first anniversary of the share acquisition date and every year thereafter, the purchase price for the repurchased shares will be equal to 100% of the NAV per share. |
• | Until the second anniversary of the share acquisition date, the purchase price for the repurchased shares will be equal to 95% of the NAV per share; and |
• | Following the second anniversary of the share acquisition date, the purchase price for the repurchased shares will be equal to 100% of the NAV per share. |
• | With respect to shares of Class A and Class TX common stock, unless the shares are being repurchased in connection with an Exceptional Repurchase, we generally may not repurchase shares unless the stockholder has held the shares for at least one year. |
• | In any calendar quarter, the total amount of aggregate redemptions of Class A, Class TX, Class T, Class D and Class I shares will be limited to shares whose aggregate value (based on the redemption price per share on the date of the redemption) is no more that 5% of our aggregate NAV as of the last day of the previous calendar quarter. |
• | We have no obligation to repurchase shares if the repurchase would violate the restrictions on distributions under Maryland law, which prohibits distributions that would cause a corporation to fail to meet statutory tests of solvency. |
• | a transaction involving our securities that have been for at least 12 months listed on a national securities exchange; or |
• | a transaction involving only our conversion into a trust or association if, as a consequence of the transaction, there will be no significant adverse change in the voting rights of our common stockholders, the term of our existence, the compensation to our advisor or our investment objectives. |
• | accepting the securities of the Roll-Up Entity offered in the proposed Roll-Up Transaction; or |
• | one of the following: |
• | remaining as common stockholders of us and preserving their interests in us on the same terms and conditions as existed previously; or |
• | receiving cash in an amount equal to the stockholders’ pro rata share of the appraised value of our net assets. |
• | that would result in our common stockholders having democracy rights in a Roll-Up Entity that are less than those provided in our charter and bylaws with respect to the election and removal of directors and the other voting rights of our common stockholders, annual reports, annual and special meetings of common stockholders, the amendment of our charter and our dissolution; |
• | that includes provisions that would operate to materially impede or frustrate the accumulation of shares by any purchaser of the securities of the Roll-Up Entity, except to the minimum extent necessary to preserve the tax status of the Roll-Up Entity, or that would limit the ability of an investor to exercise the voting rights of its securities of the Roll-Up Entity on the basis of the number of shares of common stock that such investor had held in us; |
• | in which investors’ rights of access to the records of the Roll-Up Entity would be less than those provided in our charter and described above in “—Inspection of Books and Records”; or |
• | in which any of the costs of the Roll-Up Transaction would be borne by us if the Roll-Up Transaction would not be approved by our common stockholders. |
(1) | First, to the Special Limited Partner until the Special Limited Partner has received an amount equal to the Performance Allocation (as defined below). |
(2) | Second, to the holders of the Series 2016 Preferred Units, the Series 2017 Preferred Units and the Series 2019 Preferred Units as set forth in the partnership unit designations attached to the CROP Partnership Agreement; and |
(3) | Thereafter, to the Common Limited Partners, the LTIP Limited Partners and the General Partner in proportion to their percentage interests. |
(1) | First, if the Total Return for the applicable period exceeds the sum of (i) the Hurdle Amount for that period and (ii) the Loss Carryforward Amount (any such excess, “Excess Profits”), 100% of such Excess Profits until the total amount allocated to the Special Limited Partner equals 12.5% of the sum of (A) the Hurdle Amount for that period and (B) any amount allocated to the Special Limited Partner pursuant to this clause; and |
(2) | Second, to the extent there are remaining Excess Profits, 12.5% of such remaining Excess Profits. |
• | Any amount by which Total Return falls below the Hurdle Amount and that does not constitute Loss Carryforward Amount will not be carried forward to subsequent periods. |
• | With respect to all CROP partnership units that are repurchased at the end of any month in connection with repurchases of shares of CCI Common Stock pursuant to CCI’s share repurchase plan, the Special Limited Partner will be entitled to such Performance Allocation in an amount calculated as described above calculated in respect of the portion of the year for which such CROP partnership units were outstanding, and proceeds for any such CROP partnership unit repurchase will be reduced by the amount of any such Performance Allocation. |
• | The Performance Allocation may be payable in cash or CROP Common Units at the election of the Special Limited Partner. If the Special Limited Partner elects to receive such distributions in CROP Common Units, the Special Limited Partner will receive the number of CROP Common Units that results from dividing the Performance Allocation by the net asset value per CROP Common Unit at the time of such distribution. If the Special Limited Partner elects to receive such distributions in CROP Common Units, the Special Limited Partner may request CROP to redeem such CROP Common Units from the Special Limited Partner at any time thereafter pursuant to the CROP Partnership Agreement. Any CROP Common Units received by the Special Limited Partner will not be subject to the one-year holding requirement with respect to the exchange right described below. |
• | The measurement of the change in net asset value for the purpose of calculating the Total Return is subject to adjustment by the CCI Board to account for any dividend, split, recapitalization or any other similar change in CROP’s capital structure or any distributions that the CCI Board deems to be a return of capital if such changes are not already reflected in CROP’s net assets. |
• | The Special Limited Partner will not be obligated to return any portion of the Performance Allocation paid due to the subsequent performance of CROP. |
• | In the event that the Amended and Restated Advisory Agreement is terminated (including by means of non-renewal), the Special Limited Partner will be allocated any accrued Performance Allocation with respect to all CROP partnership units as of the date of such termination. |
• | acquire, purchase, own, operate, manage, lease, dispose of and exchange any property and other assets; |
• | develop land, construct buildings and make other improvements or renovations on property owned or leased by CROP; |
• | authorize, issue, sell, redeem or otherwise purchase any partnership interests or any securities of CROP; |
• | manage the financings of CROP and become a guarantor or co-maker on any indebtedness of the General Partners or its subsidiaries; |
• | make loans or advances to any person, including affiliates of the General Partner and CROP, for any purpose pertaining to the business of CROP; |
• | pay, either directly or by reimbursement, all administrative expenses to third parties, CCI, the General Partner or its affiliates; |
• | use assets of CROP for any purpose consistent with the CROP Partnership Agreement; |
• | lease all or any portion of any of CROP’s assets; |
• | prosecute, defend, arbitrate or compromise any and all claims or liabilities in favor of or against CROP, its partners or its assets; |
• | deal with any and all governmental agencies having jurisdiction over CROP’s assets or business; |
• | make or revoke any election permitted or required of CROP by any taxing authority and file all federal, state and local income tax returns on behalf of CROP; |
• | maintain such insurance coverage for the protection of CROP, its assets, or any other purpose convenient or beneficial to CROP and manage any insurance proceeds; |
• | hire and dismiss employees and contractors of CROP; |
• | retain legal counsel, accountants, consultants, real estate brokers and other persons for services of any kind in connection with CROP’s business and pay such remuneration as the General Partner deems reasonable; |
• | negotiate and enter into agreements on behalf of CROP; |
• | distribute cash or other assets of CROP in accordance with the CROP Partnership Agreement; |
• | form or acquire an interest in, and contribute property to, any limited or general partnership, joint venture, limited liability company, corporation, subsidiary or other entity or relationship; |
• | establish reserves for working capital, capital expenditures, contingent liabilities or any other purpose of CROP; |
• | merge, consolidate or combine CROP with or into another entity; |
• | take any and all actions necessary to adopt or modify any distribution reinvestment plan of CROP or CCI; and |
• | take all acts necessary to ensure CROP will not be classified as a “publicly traded partnership.” |
• | costs and expenses relating to the formation and operation of CCI, the General Partner and their subsidiaries, including any costs, expenses or fees payable to any director or officer of the General Partner or CCI; |
• | costs and expenses relating to any offering, issuance or registration of securities by CCI or the General Partner and all statements, reports, fees and expenses incidental thereto; |
• | costs and expenses associated with any repurchase of any securities by CCI or the General Partner; |
• | costs and expenses associated with the preparation and filing of any periodic or other reports and communications by CCI or the General Partner under federal, state or local laws or regulations; |
• | costs and expenses associated with compliance by CCI and the General Partner with laws, rules and regulations promulgated by any regulatory body, including the SEC; |
• | costs and expenses incurred by CCI or the General Partner relating to any issuance or redemption of any CROP partnership interests, CCI Common Stock or any other securities of CCI or the General Partner; and |
• | all other operating or administrative costs of CCI and the General Partner incurred in the ordinary course of their business on behalf of or in connection with CROP. |
• | any amendment affecting the operation of the conversion factor or exchange right in a manner adverse to the Common Limited Partners; |
• | any amendment that would adversely affect the rights of the Common Limited Partners to receive the distributions payable to them pursuant to the CROP Partnership Agreement (other than with respect to the issuance of additional Participating Partnership Units and CROP preferred units); |
• | any amendment that would economically reduce CROP’s relative share of net income and net loss to the limited partners (other than with respect to the issuance of additional Participating Partnership Units and CROP preferred units); or |
• | any amendment that would impose on the limited partners any obligation to make additional capital contributions to CROP. |
• | the General Partner declares bankruptcy, is removed or withdraws from CROP, provided, however, that the remaining partners may decide to continue the business of CROP; |
• | 90 days after the sale or other disposition of all or substantially all of the assets of CROP (but not a transfer to a General Partner subsidiary); or |
• | the determination by the General Partner that CROP should be dissolved. |
Cottonwood Communities, Inc. 1245 Brickyard Road, Suite 250 Salt Lake City, UT 84106 (801) 278-0770 ir@cottonwoodres.com | | | Cottonwood Multifamily REIT I, Inc. 1245 Brickyard Road, Suite 250 Salt Lake City, UT 84106 (801) 278-0770 ir@cottonwoodres.com |
• | the historical consolidated financial information of Cottonwood Communities, Inc. (“CCI”) as of and for the year ended December 31, 2020, derived from CCI’s audited consolidated financial statements; |
• | the historical consolidated financial information of Cottonwood Residential II, Inc. (“CRII”) as of and for the year ended December 31, 2020, derived from CRII’s unaudited consolidated financial statements; |
• | the historical consolidated financial information of Cottonwood Multifamily REIT I, Inc. (“CMRI”) as of and for the year ended December 31, 2020, derived from CMRI’s audited consolidated financial statements; |
• | the historical consolidated financial information of Cottonwood Multifamily REIT II, Inc. (“CMRII”) as of and for the year ended December 31, 2020, derived from CMRII’s audited consolidated financial statements; |
• | pro forma adjustments to give effect to the merger of CRII and CMRI with CCI (the “Combined Merger”, as together the “Combined Company”) on CCI’s consolidated balance sheet as of December 31, 2020, as if these mergers closed on December 31, 2020, including the balance sheet effects related to the adjustments in the pro forma consolidated statement of operations of the Combined Company; |
• | pro forma adjustments to give effect to the Combined Merger on CCI’s consolidated statements of operations for the year ended December 31, 2020 as if the mergers closed on January 1, 2020; |
• | pro forma adjustments to give effect to the mergers of CRII, CMRI and CMRII with CCI (the “Fully Combined Merger”, as together the “Fully Combined Company”) on CCI’s consolidated balance sheet as of December 31, 2020, as if these mergers closed on December 31, 2020, including the balance sheet effects related to the adjustments in the pro forma consolidated statement of operations of the Fully Combined Company; |
• | pro forma adjustments to give effect to the Fully Combined Merger on CCI’s consolidated statements of operations for the year ended December 31, 2020, as if these mergers closed on January 1, 2020. |
• | CCI’s audited consolidated financial statements and the related notes thereto as of and for the year ended December 31, 2020, included herein as Annex E to this information statement/prospectus; |
• | CRII’s unaudited consolidated financial statements and the related notes thereto as of and for the year ended December 31, 2020, included herein as Annex F to this proxy statement/prospectus; and |
• | CMRI’s audited consolidated financial statements and the related notes thereto as of and for the year ended December 31, 2020, included herein as Annex D to this information statement/prospectus; and |
• | CMRII’s audited consolidated financial statements and the related notes thereto as of and for the year ended December 31, 2020, included herein as Annex G to this proxy statement/prospectus. |
| | CCI Historical December 31, 2020 | | | CRII Historical December 31, 2020 | | | CMRI Historical December 31, 2020 | | | Autonomous Entity Adjustments | | | Note | | | Pro Forma Combined Company Transaction Accounting Adjustments | | | Note | | | Pro Forma Combined Company | |
| | (Audited) | | | (Unaudited) | | | (Audited) | | | | | | | | | | | ||||||
Assets | | | | | | | | | | | | | | | | | ||||||||
Real estate assets, net | | | $161,092 | | | $822,239 | | | $— | | | $— | | | | | $381,176 | | | (A) | | | $1,364,507 | |
Investment in unconsolidated real estate entities | | | 30,000 | | | 44,723 | | | 27,126 | | | (27,115) | | | (B) | | | 71,274 | | | (C) | | | 146,008 |
Real estate note investment, net | | | 8,255 | | | — | | | — | | | — | | | | | — | | | | | 8,255 | ||
Cash and cash equivalents | | | 4,362 | | | 36,359 | | | 301 | | | (503) | | | (D) | | | (1,270) | | | (F) | | | 39,249 |
Restricted cash | | | 271 | | | 20,924 | | | — | | | — | | | | | — | | | | | 21,195 | ||
Related party notes | | | — | | | 9,177 | | | — | | | 11,828 | | | (E) | | | (21,005) | | | (F) | | | — |
Related party receivables | | | — | | | 1,187 | | | — | | | 173 | | | (G) | | | — | | | | | 1,360 | |
Other assets | | | 825 | | | 36,163 | | | 58 | | | (19,266) | | | (H) | | | 13,854 | | | (I) | | | 31,634 |
Total assets | | | $204,805 | | | $970,772 | | | $27,485 | | | $(34,883) | | | | | $444,029 | | | | | $1,612,208 | ||
Liabilities and equity | | | | | | | | | | | | | | | | | ||||||||
Liabilities | | | | | | | | | | | | | | | | | ||||||||
Mortgage notes, net | | | $70,320 | | | $628,042 | | | $— | | | $— | | | | | $6,811 | | | (J) | | | $705,173 | |
Construction loans, net | | | — | | | 50,007 | | | — | | | — | | | | | — | | | | | 50,007 | ||
Preferred stock, net | | | 29,825 | | | 143,532 | | | — | | | — | | | | | 528 | | | (K) | | | 173,885 | |
Unsecured promissory notes, net | | | — | | | 46,642 | | | — | | | — | | | | | 2,000 | | | (K) | | | 48,642 | |
Related party payables | | | 581 | | | — | | | 1,675 | | | (587) | | | (G) | | | (1,669) | | | | | — | |
Promissory notes to advisor | | | — | | | — | | | 996 | | | — | | | | | (996) | | | (L) | | | — | |
Accounts payable, accrued expenses and other liabilities | | | 1,995 | | | 33,354 | | | 259 | | | (81) | | | (D) | | | — | | | | | 35,527 | |
Total liabilities | | | 102,721 | | | 901,577 | | | 2,930 | | | (668) | | | | | 6,674 | | | | | 1,013,234 | ||
Stockholders' equity and noncontrolling interests | | | | | | | | | | | | | | | | | ||||||||
Common stock | | | 122 | | | 2 | | | 49 | | | (51) | | | (M) | | | 620 | | | (N) | | | 742 |
Additional paid-in capital | | | 121,678 | | | 3,554 | | | 48,948 | | | (52,502) | | | (M) | | | 61,305 | | | (N) | | | 182,983 |
Accumulated distributions | | | (7,768) | | | (380) | | | (11,525) | | | 11,905 | | | (M) | | | — | | | | | (7,768) | |
Accumulated deficit | | | (11,948) | | | (1,889) | | | (12,917) | | | 14,806 | | | (M) | | | (920) | | | (O) | | | (12,868) |
Total stockholders' equity | | | 102,084 | | | 1,287 | | | 24,555 | | | (25,842) | | | | | 61,005 | | | | | 163,089 | ||
Noncontrolling interests | | | | | | | | | | | | | | | | | ||||||||
Limited partners | | | — | | | (70,684) | | | — | | | 69,777 | | | (P) | | | 216,852 | | | (P) | | | 215,945 |
Partially owned entities | | | — | | | 138,592 | | | — | | | (78,150) | | | (P) | | | 159,498 | | | (P) | | | 219,940 |
Total noncontrolling interest | | | — | | | 67,908 | | | — | | | (8,373) | | | | | 376,350 | | | | | 435,885 | ||
Total stockholders' equity and noncontrolling interests | | | 102,084 | | | 69,195 | | | 24,555 | | | (34,215) | | | | | 437,355 | | | | | 598,974 | ||
Total liabilities, stockholders' equity and noncontrolling interests | | | $204,805 | | | $970,772 | | | $27,485 | | | $(34,883) | | | | | $444,029 | | | | | $1,612,208 |
| | CCI Historical December 31, 2020 | | | CRII Historical December 31, 2020 | | | CMRI Historical December 31, 2020 | | | Autonomous Entity Adjustments | | | Note | | | Pro Forma Combined Company Transaction Accounting Adjustments | | | Note | | | Pro Forma Combined Company | |
| | (Audited) | | | (Unaudited) | | | (Audited) | | | | | | | | | | | ||||||
Revenues | | | | | | | | | | | | | | | | | ||||||||
Rental and other property revenues | | | $10,749 | | | $85,851 | | | $— | | | $— | | | | | $— | | | | | $96,600 | ||
Real estate note investment interest | | | 576 | | | — | | | — | | | — | | | | | — | | | | | 576 | ||
Property management and development | | | — | | | 15,532 | | | — | | | — | | | | | — | | | | | 15,532 | ||
Advisory services | | | — | | | 5,316 | | | — | | | (4,517) | | | (a) | | | — | | | | | 799 | |
Total revenues | | | 11,325 | | | 106,699 | | | — | | | (4,517) | | | | | — | | | | | 113,507 | ||
Expenses | | | | | | | | | | | | | | | | | ||||||||
Property operations | | | 4,570 | | | 34,266 | | | — | | | — | | | | | (334) | | | (e) | | | 38,502 | |
Reimbursable operating expenses to related parties | | | 1,030 | | | — | | | — | | | — | | | | | — | | | | | 1,030 | ||
Property management | | | — | | | 14,732 | | | — | | | (3,114) | | | (a) | | | — | | | | | 11,618 | |
Asset management fee to related party | | | 2,799 | | | — | | | 1,108 | | | — | | | | | — | | | | | 3,907 | ||
Depreciation and amortization | | | 6,966 | | | 32,858 | | | — | | | (2,411) | | | (b) | | | 42,932 | | | (f) | | | 80,345 |
General and administrative expenses | | | 3,354 | | | 14,245 | | | 629 | | | — | | | | | 3,379 | | | (g) | | | 21,607 | |
Total operating expenses | | | 18,719 | | | 96,101 | | | 1,737 | | | (5,525) | | | | | 45,977 | | | | | 157,009 | ||
Other (expense) income | | | | | | | | | | | | | | | | | ||||||||
Equity in earnings (losses) of unconsolidated real estate entities | | | 2,113 | | | 589 | | | (885) | | | 885 | | | (c) | | | (13,433) | | | (h) | | | (10,731) |
Interest income | | | 198 | | | 4,137 | | | — | | | 910 | | | (d) | | | (487) | | | (i) | | | 4,758 |
Interest expense | | | (3,665) | | | (41,704) | | | — | | | — | | | | | 6,668 | | | (j) | | | (38,701) | |
Loss on consolidation of variable interest entity | | | — | | | (2,543) | | | — | | | — | | | | | — | | | | | (2,543) | ||
Gain on bargain purchase | | | — | | | — | | | — | | | — | | | | | 47,260 | | | (n) | | | 47,260 | |
Other expenses | | | — | | | (2,385) | | | — | | | — | | | | | — | | | | | (2,385) | ||
Total other (expense) income | | | (1,354) | | | (41,906) | | | (885) | | | 1,795 | | | | | 40,008 | | | | | (2,342) | ||
Total expenses before asset management fee waiver | | | (20,073) | | | (138,007) | | | (2,622) | | | 7,320 | | | | | (5,969) | | | | | (159,351) | ||
Asset management fee waived by Advisor | | | 197 | | | — | | | — | | | — | | | | | — | | | | | 197 | ||
Net expenses after asset management fee waiver | | | (19,876) | | | (138,007) | | | (2,622) | | | 7,320 | | | | | (5,969) | | | | | (159,154) | ||
Income tax benefit | | | — | | | 3,768 | | | — | | | — | | | | | 336 | | | (k) | | | 4,104 | |
Net income (loss) | | | (8,551) | | | (27,540) | | | (2,622) | | | 2,803 | | | | | (5,633) | | | | | (41,543) | ||
Net income (loss) attributable to noncontrolling interests: | | | | | | | | | | | | | | | | | ||||||||
Limited partners | | | — | | | 23,893 | | | — | | | (1,812) | | | (l) | | | (697) | | | (l) | | | 21,384 |
Partially owned entities | | | — | | | 2,688 | | | — | | | — | | | | | 6,712 | | | (l) | | | 9,400 | |
Net income (loss) attributable to common stockholders | | | $(8,551) | | | $(959) | | | $(2,622) | | | $991 | | | | | $382 | | | | | $(10,759) | ||
| | | | | | | | | | | | | | | | |||||||||
Weighted average shares outstanding | | | 10,781,487 | | | 240,390 | | | 4,924,904 | | | — | | | | | 6,192,423 | | | (m) | | | 16,973,910 | |
Net income (loss) per common share - basic and diluted | | | $(0.79) | | | $(3.99) | | | $(0.53) | | | $— | | | | | $0.06 | | | | | $(0.63) |
| | CCI Historical December 31, 2020 | | | CRII Historical December 31, 2020 | | | CMRI Historical December 31, 2020 | | | CMRII Historical December 31, 2020 | | | Autonomous Entity Adjustments | | | Note | | | Pro Forma Fully Combined Transaction Accounting Adjustments | | | Note | | | Pro Forma Fully Combined Company | |
| | (Audited) | | | (Unaudited) | | | (Audited) | | | (Audited) | | | | | | | | | | | ||||||
Assets | | | | | | | | | | | | | | | | | | | |||||||||
Real estate assets, net | | | $161,092 | | | $822,239 | | | $— | | | $— | | | $— | | | | | $381,176 | | | (A) | | | $1,364,507 | |
Investment in unconsolidated real estate entities | | | 30,000 | | | 44,723 | | | 27,126 | | | 37,676 | | | (64,811) | | | (B) | | | 71,274 | | | (C) | | | 145,988 |
Real estate note investment, net | | | 8,255 | | | — | | | — | | | — | | | — | | | | | — | | | | | 8,255 | ||
Cash and cash equivalents | | | 4,362 | | | 36,359 | | | 301 | | | 169 | | | (503) | | | (D) | | | (1,270) | | | (F) | | | 39,418 |
Restricted cash | | | 271 | | | 20,924 | | | — | | | — | | | — | | | | | — | | | | | 21,195 | ||
Related party notes | | | — | | | 9,177 | | | — | | | — | | | 11,828 | | | (E) | | | (21,005) | | | (F) | | | — |
Related party receivables | | | — | | | 1,187 | | | — | | | — | | | 168 | | | (G) | | | — | | | | | 1,355 | |
Other assets | | | 825 | | | 36,163 | | | 58 | | | 87 | | | (19,267) | | | (H) | | | 13,854 | | | (I) | | | 31,720 |
Total assets | | | $204,805 | | | $970,772 | | | $27,485 | | | $37,932 | | | $(72,585) | | | | | $444,029 | | | | | $1,612,438 | ||
Liabilities and equity | | | | | | | | | | | | | | | | | | | |||||||||
Liabilities | | | | | | | | | | | | | | | | | | | |||||||||
Mortgage notes, net | | | 70,320 | | | 628,042 | | | — | | | — | | | — | | | | | 6,811 | | | (J) | | | 705,173 | |
Construction loans, net | | | — | | | 50,007 | | | — | | | — | | | — | | | | | — | | | | | 50,007 | ||
Preferred stock, net | | | 29,825 | | | 143,532 | | | — | | | — | | | — | | | | | 528 | | | (K) | | | 173,885 | |
Unsecured promissory notes, net | | | — | | | 46,642 | | | — | | | — | | | — | | | | | 2,000 | | | (K) | | | 48,642 | |
Related party payables | | | 581 | | | — | | | 1,675 | | | 1,131 | | | (591) | | | (G) | | | (2,796) | | | (L) | | | — |
Promissory notes to advisor | | | — | | | — | | | 996 | | | 1,725 | | | — | | | | | (2,721) | | | (L) | | | — | |
Accounts payable, accrued expenses and other liabilities | | | 1,995 | | | 33,354 | | | 259 | | | 301 | | | (82) | | | (D) | | | — | | | | | 35,827 | |
Total liabilities | | | 102,721 | | | 901,577 | | | 2,930 | | | 3,157 | | | (673) | | | | | 3,822 | | | | | 1,013,534 | ||
Stockholders' equity and noncontrolling interests | | | | | | | | | | | | | | | | | | | |||||||||
Common stock | | | 122 | | | 2 | | | 49 | | | 49 | | | (100) | | | (M) | | | 1,143 | | | (N) | | | 1,265 |
Additional paid-in capital | | | 121,678 | | | 3,554 | | | 48,948 | | | 48,915 | | | (101,417) | | | (M) | | | 113,111 | | | (N) | | | 234,789 |
Accumulated distributions | | | (7,768) | | | (380) | | | (11,525) | | | (7,397) | | | 19,302 | | | (M) | | | — | | | | | (7,768) | |
Accumulated deficit | | | $(11,948) | | | $(1,889) | | | $(12,917) | | | $(6,792) | | | $21,599 | | | (M) | | | $(1,169) | | | (O) | | | $(13,116) |
Total stockholders' equity | | | 102,084 | | | 1,287 | | | 24,555 | | | 34,775 | | | (60,616) | | | | | 113,085 | | | | | 215,170 | ||
Noncontrolling interests | | | | | | | | | | | | | | | | | | | |||||||||
Limited partners | | | — | | | (70,684) | | | — | | | — | | | 66,855 | | | (P) | | | 219,268 | | | (P) | | | 215,439 |
Partially owned entities | | | — | | | 138,592 | | | — | | | — | | | (78,151) | | | (P) | | | 107,854 | | | (P) | | | 168,295 |
Total noncontrolling interest | | | — | | | 67,908 | | | — | | | — | | | (11,296) | | | | | 327,122 | | | | | 383,734 | ||
Total stockholders' equity and noncontrolling interests | | | 102,084 | | | 69,195 | | | 24,555 | | | 34,775 | | | (71,912) | | | | | 440,207 | | | | | 598,904 | ||
Total liabilities, stockholders' equity and noncontrolling interests | | | $204,805 | | | $970,772 | | | $27,485 | | | $37,932 | | | $(72,585) | | | | | $444,029 | | | | | $1,612,438 |
| | CCI Historical December 31, 2020 | | | CRII Historical December 31, 2020 | | | CMRI Historical December 31, 2020 | | | CMRII Historical December 31, 2020 | | | Autonomous Entity Adjustments | | | Note | | | Pro Forma Fully Combined Transaction Accounting Adjustments | | | Note | | | Pro Forma Fully Combined Company | |
| | (Audited) | | | (Unaudited) | | | (Audited) | | | (Audited) | | | | | | | | | | | ||||||
Revenues | | | | | | | | | | | | | | | | | | | |||||||||
Rental and other property revenues | | | $10,749 | | | $85,851 | | | $— | | | $— | | | $— | | | | | $— | | | | | $96,600 | ||
Real estate note investment interest | | | 576 | | | — | | | — | | | — | | | — | | | | | — | | | | | 576 | ||
Property management and development | | | — | | | 15,532 | | | — | | | — | | | — | | | | | — | | | | | 15,532 | ||
Advisory services | | | — | | | 5,316 | | | — | | | — | | | (4,517) | | | (a) | | | — | | | | | 799 | |
Total revenues | | | 11,325 | | | 106,699 | | | — | | | — | | | (4,517) | | | | | — | | | | | 113,507 | ||
Expenses | | | | | | | | | | | | | | | | | | | |||||||||
Property operations | | | 4,570 | | | 34,266 | | | — | | | — | | | — | | | | | (334) | | | (e) | | | 38,502 | |
Reimbursable operating expenses to related parties | | | 1,030 | | | — | | | — | | | — | | | — | | | | | — | | | | | 1,030 | ||
Property management | | | — | | | 14,732 | | | — | | | — | | | (3,114) | | | (a) | | | — | | | | | 11,618 | |
Asset management fee to related party | | | 2,799 | | | — | | | 1,108 | | | 807 | | | — | | | | | — | | | | | 4,714 | ||
Depreciation and amortization | | | 6,966 | | | 32,858 | | | — | | | — | | | (2,411) | | | (b) | | | 42,932 | | | (f) | | | 80,345 |
General and administrative expenses | | | 3,354 | | | 14,245 | | | 629 | | | 621 | | | — | | | | | 3,579 | | | (g) | | | 22,428 | |
Total operating expenses | | | 18,719 | | | 96,101 | | | 1,737 | | | 1,428 | | | (5,525) | | | | | 46,177 | | | | | 158,637 | ||
Other (expense) income | | | | | | | | | | | | | | | | | | | |||||||||
Equity in earnings (losses) of unconsolidated real estate entities | | | 2,113 | | | 589 | | | (885) | | | (262) | | | 1,148 | | | (c) | | | (13,433) | | | (h) | | | (10,730) |
Interest income | | | 198 | | | 4,137 | | | — | | | — | | | 910 | | | (d) | | | (487) | | | (i) | | | 4,758 |
Interest expense | | | (3,665) | | | (41,704) | | | — | | | — | | | — | | | | | 6,668 | | | (j) | | | (38,701) | |
Loss on consolidation of variable interest entity | | | — | | | (2,543) | | | — | | | — | | | — | | | | | — | | | | | (2,543) | ||
Gain on bargain purchase | | | — | | | — | | | — | | | — | | | — | | | | | 53,891 | | | (n) | | | 53,891 | |
Other expenses | | | — | | | (2,385) | | | — | | | — | | | — | | | | | — | | | | | (2,385) | ||
Total other (expense) income | | | (1,354) | | | (41,906) | | | (885) | | | (262) | | | 2,058 | | | | | 46,639 | | | | | 4,290 | ||
Total expenses before asset management fee waiver | | | (20,073) | | | (138,007) | | | (2,622) | | | (1,690) | | | 7,583 | | | | | 462 | | | | | (154,347) | ||
Asset management fee waived by Advisor | | | 197 | | | — | | | — | | | — | | | — | | | | | — | | | | | 197 | ||
Net expenses after asset management fee waiver | | | (19,876) | | | (138,007) | | | (2,622) | | | (1,690) | | | 7,583 | | | | | 462 | | | | | (154,150) | ||
Income tax benefit | | | — | | | 3,768 | | | — | | | — | | | — | | | | | 336 | | | (k) | | | 4,104 | |
Net income (loss) | | | (8,551) | | | (27,540) | | | (2,622) | | | (1,690) | | | 3,066 | | | | | 798 | | | | | (36,539) | ||
Net (income) loss attributable to noncontrolling interests: | | | | | | | | | | | | | | | | | | | |||||||||
Limited partners | | | — | | | 23,893 | | | — | | | — | | | (1,787) | | | (l) | | | (1,860) | | | (l) | | | 20,246 |
Partially owned entities | | | — | | | 2,688 | | | — | | | — | | | — | | | | | 2,397 | | | (l) | | | 5,085 | |
Net income (loss) attributable to common stockholders | | | $(8,551) | | | $(959) | | | $(2,622) | | | $(1,690) | | | $1,279 | | | | | $1,335 | | | | | $(11,208) | ||
| | | | | | | | | | | | | | | | | | ||||||||||
Weighted average shares outstanding | | | 10,781,487 | | | 240,390 | | | 4,924,904 | | | 4,920,913 | | | — | | | | | 11,425,381 | | | (m) | | | 22,206,868 | |
Net income (loss) per common share - basic and diluted | | | $(0.79) | | | $(3.99) | | | $(0.53) | | | $(0.34) | | | $— | | | | | $0.12 | | | | | $(0.50) |
| | December 31, 2020 | |||||||
Purchase price | | | Total | | | CRII | | | CMRI |
Common stock issued and outstanding | | | 5,117,529 | | | 213,484 | | | 4,904,045 |
CROP limited operating partnership units | | | 15,375,850 | | | 15,375,850 | | | — |
Total common stock and limited operating partnership units | | | 20,493,379 | | | 15,589,334 | | | 4,904,045 |
Exchange ratio | | | 1.814 | | | 2.015 | | | 1.175 |
Implied CCI common stock and limited operating partnership units issued as consideration | | | 37,174,761 | | | 31,412,508 | | | 5,762,253 |
CCI's most recently disclosed estimated value per share(1) | | | $10.00 | | | $10.00 | | | $10.00 |
Value of implied CCI common stock and limited operating partnership units issued as consideration | | | $371,748 | | | $314,125 | | | $57,623 |
Promotes assumed | | | 7,419 | | | 979 | | | 6,440 |
Total consideration | | | 379,167 | | | 315,104 | | | 64,063 |
Less cash and restricted cash acquired | | | 65,541 | | | 63,584 | | | 1,957 |
Consideration net of cash and restricted cash acquired | | | $313,626 | | | $251,520 | | | $62,106 |
(1) | No public market for CCI shares exists. For purposes of providing an estimated value per share, CCI provided the net investment amount of its shares in its initial public offering, which is the same as its offering price. CCI established the offering price of its shares on an arbitrary basis and the selling price bears no relationship to the book or asset values or to any other established criteria for valuing shares. The actual value of a share of CCI common stock may be less than the offering price. Additional information regarding the fairness of the merger consideration is included under “Opinion of CMRI Special Committee’s Financial Advisor.” |
| | December 31, 2020 | |
Assets | | | |
Real estate assets, net | | | $1,264,539 |
Investments in unconsolidated real estate entities | | | 129,422 |
Related party receivables | | | 1,067 |
Intangible assets | | | 17,877 |
Other assets | | | 20,465 |
Total assets acquired | | | $1,433,370 |
Liabilities | | | |
Mortgage notes, net | | | $634,965 |
Construction loans, net | | | 50,007 |
Preferred stock, net | | | 144,060 |
Unsecured promissory notes, net | | | 48,643 |
Accounts payable, accrued expenses and other liabilities | | | 39,715 |
Total liabilities assumed | | | $917,390 |
Net assets acquired | | | 515,980 |
Gain on bargain purchase | | | 47,260 |
Less noncontrolling interests | | | 155,094 |
Total estimated purchase price | | | $313,626 |
| | December 31, 2020 | ||||||||||
Purchase price | | | Total | | | CRII | | | CMRI | | | CMRII |
Common stock issued and outstanding | | | 9,999,019 | | | 213,484 | | | 4,904,045 | | | 4,881,490 |
CROP limited operating partnership units | | | 15,375,850 | | | 15,375,850 | | | — | | | — |
Total common stock and limited operating partnership units | | | 25,374,869 | | | 15,589,334 | | | 4,904,045 | | | 4,881,490 |
Exchange ratio | | | 1.671 | | | 2.015 | | | 1.175 | | | 1.072 |
Implied CCI common stock and limited operating partnership units issued as consideration | | | 42,407,718 | | | 31,412,508 | | | 5,762,253 | | | 5,232,957 |
CCI's most recently disclosed estimated value per share (1) | | | $10.00 | | | $10.00 | | | $10.00 | | | $10.00 |
Value of implied CCI common stock and limited operating partnership units issued as consideration | | | $424,078 | | | $314,125 | | | $57,623 | | | $52,330 |
Promotes assumed | | | 11,048 | | | 979 | | | 6,440 | | | 3,629 |
Total consideration | | | 435,126 | | | 315,104 | | | 64,063 | | | 55,959 |
Less cash and restricted cash acquired | | | 67,261 | | | 63,584 | | | 1,957 | | | 1,720 |
Consideration net of cash and restricted cash acquired | | | $367,865 | | | $251,520 | | | $62,106 | | | $54,239 |
(1) | No public market for CCI shares exists. For purposes of providing an estimated value per share, CCI provided the net investment amount of its shares in its initial public offering, which is the same as its offering price. CCI established the offering price of its shares on an arbitrary basis and the selling price bears no relationship to the book or asset values or to any other established criteria for valuing shares. The actual value of a share of CCI common stock may be less than the offering price. Additional information regarding the fairness of the merger consideration is included under “Opinion of CMRI Special Committee’s Financial Advisor.” |
| | December 31, 2020 | |
Assets | | | |
Real estate assets, net | | | $1,264,539 |
Investments in unconsolidated real estate entities | | | 129,422 |
Related party receivables | | | 1,067 |
Intangible assets | | | 17,877 |
Other assets | | | 20,551 |
Total assets acquired | | | 1,433,456 |
Liabilities | | | |
Mortgage notes, net | | | 634,965 |
Construction loans, net | | | 50,007 |
Preferred stock, net | | | 144,060 |
Unsecured promissory notes, net | | | 48,643 |
Accounts payable, accrued expenses and other liabilities | | | 40,014 |
Total liabilities assumed | | | 917,689 |
Net assets acquired | | | 515,767 |
Gain on bargain purchase | | | 53,891 |
Less noncontrolling interests | | | 94,011 |
Total estimated purchase price | | | $367,865 |
(A) | Reflects an increase of $450.9 million in the carrying amount of land, buildings and improvements, furniture, fixtures, equipment and construction in progress to record them at their estimated fair values, offset by accumulated depreciation and amortization of $69.7 million for the year ended December 31, 2020 |
(B) | Reflects the removal of investments in unconsolidated real estate entities upon the consolidation of the respective REITs. |
(C) | Reflects an increase of $84.7 million in the carrying amounts of CRII's investments in unconsolidated real estate entities to record them at their estimated fair value, offset by $13.4 million of accumulated depreciation from the step up in the underlying investments for the year ended December 31, 2020. Investments in unconsolidated real estate entities include stabilize properties, development projects and other real estate related investments which we do not control. |
(D) | Reflects the removal of assets and liabilities at Cottonwood Communities Advisors, LLC (“CCA”) as a result of the redemption of all outstanding shares of CRII voting common stock held by Cottonwood Residential Holdings, LLC in exchange for an in-kind distribution by CRII of all of CROP’s interest in CCA. |
(E) | Reflects the net effect of the in-kind distribution of CCA Notes and accrued interest of $14.5 million offset by the assignment of $2.7 million of CMRI and CMRII Notes to CROP. |
(F) | Reflects the distribution of CCA Notes to CROP unit holders and employee notes to High Traverse as follows (dollars in thousands): |
| | Distributions | | | Cash | |
CCA Notes, CMRI Notes, CMRII Notes and Accrued Interest | | | $14,548 | | | $— |
CCA Borrowings in Cash | | | — | | | 1,270 |
Employee Notes | | | 6,457 | | | — |
Adjustment | | | $21,005 | | | $1,270 |
(G) | Reflects the net effect of the elimination of various receivables and payables between CCI, CRII, CMRI, and CMR II, as applicable for the respective statement and the removal of CCA receivables and payables due to the in-kind distribution by CRII of all of CROP’s interest in CCA. |
(H) | Reflects the removal of advisory service income receivables of $2.7 million, unamortized deferred offering costs of $16.3 million held at CCA, and the elimination and removal of various smaller assets. |
(I) | Reflects the 1) removal of unamortized intangibles and goodwill of $2.1 million, 2) removal of deferred offering costs of $4.8 million, 3) an income tax provision adjustment of $0.3 million, and 4) the acquisition of $22.1 million of intangible assets, offset by $1.7 million of accumulated amortization for the year ended December 31, 2020 (dollars in thousands): |
| | Intangibles | |
Property management company | | | $12,474 |
Technology amenity contracts | | | 2,595 |
Development and disposition fees | | | 7,062 |
Adjustment | | | $22,131 |
(J) | Reflects an increase in the carrying amounts of mortgage notes of $1.1 million to their estimated fair value, the write-off of $5.8 million of unamortized debt issuance costs, and the accumulated amortization of $0.1 million of the fair value adjustment for the year ended December 31, 2020. The estimated fair value of mortgage notes was determined with the assistance of an independent third party debt valuation firm as of December 31, 2020. |
(K) | Reflects the increase in the carrying amounts of preferred stock and unsecured promissory notes to non-U.S investors to their estimated fair value and the elimination of historical unaccredited debt discounts. |
(L) | Reflects the resolution of payables and notes to CCA in conjunction with the distribution of CCA notes to CROP unit holders. |
(M) | Reflects the elimination of the historical stockholders' equity accounts of CRII, CMRI, and CMRII, as applicable for the respective statement. |
(N) | Reflects the increase in common stock at fair value for the respective merger, as shown below (dollars in thousands, except share and per share data): |
| | CRII | | | CMRI | | | CMRII | | | Fully Combined | |
Common stock issued and outstanding | | | 213,484 | | | 4,904,045 | | | 4,881,490 | | | 9,999,019 |
Exchange ratio | | | 2.015 | | | 1.175 | | | 1.072 | | | 1.143 |
Implied CCI common stock issued as consideration | | | 430,170 | | | 5,762,253 | | | 5,232,957 | | | 11,425,380 |
CCI's most recently disclosed estimated value per share | | | $10.00 | | | $10.00 | | | $10.00 | | | $10.00 |
Value of implied CCI common stock issued as consideration | | | $4,302 | | | $57,623 | | | $52,330 | | | $114,254 |
| | | | | | | | |||||
| | CRII | | | CMRI | | | CMRII | | | Combined | |
Value of implied CCI common stock issued as consideration | | | $4,302 | | | $57,623 | | | $— | | | $61,925 |
(O) | Represents the change in accumulated deficit to common stockholders as a result of estimated fair value adjustments to acquired assets and liabilities as of December 31, 2020 and the statement of operations for the year ended December 31, 2020. |
(P) | Represents the changes in noncontrolling interests as a result of changes in ownership fair value adjustments to acquired assets and liabilities as of December 31, 2020, and resulting activity in the statement of operations for the year ended December 31, 2020. |
(a) | Reflects the loss of CCA's advisory service income and associated expenses as a result of the in-kind distribution by CRII of all of CROP’s interest in CCA. CCA's advisory services contracts are with CCI, CMRI, and CMRII. |
| | Year Ended December 31, 2020 | ||||
| | Combined | | | Fully Combined | |
Asset management fee under new advisory services contract | | | $8,599 | | | $8,599 |
Asset management fee under original contract | | | (4,517) | | | (4,714) |
Change in asset management fee | | | 4,082 | | | 3,885 |
Estimated additional overhead costs | | | 3,341 | | | 3,341 |
Net change | | | $741 | | | $544 |
(b) | Reflects the removal of amortization of sponsored offering costs at CCA as a result of the in-kind distribution by CRII of all of CROP’s interest in CCA. |
(c) | Reflects the elimination of equity in earnings at CMRI and CMRII for the respective statement. CMRI and CMRII invested in real estate joint ventures with CROP, recognizing their share of income (loss) under the equity method of accounting. |
(d) | Reflects the adjustment to add interest income from loans provided to CCA from CROP and its subsidiaries. The interest was eliminated before the in-kind distribution by CRII of all of CROP’s interest in CCA. |
(e) | Reflects the removal of mark to market adjustments on interest rate caps as a result of the business combination. |
(f) | Reflects the net effect of depreciation and amortization related to the step up in estimated fair value of real estate assets and acquired intangibles from the business combination, using the estimated fair values as of December 31, 2020. Depreciation and amortization expense is calculated using the straight-line method over an estimated useful life of 30 years for buildings, 5-15 years for building improvements, furniture, fixtures and equipment, and 6 months for in place leases. Other acquired intangibles are amortized over 5-15 years. |
(g) | Reflects additional share based compensation expense resulting from the accelerated vesting of LTIP units and the issuance of additional retention grants to certain executives and an estimated $2.6 million and $2.8 million of transaction costs for the Combined Merger and Fully Combined Merger, respectively, from December 31, 2020 through completion of the respective merger. |
(h) | Reflects the effect of additional depreciation expense recorded in equity in earnings from the estimated fair value step up of investments in unconsolidated real estate entities, using values as of December 31, 2020. |
(i) | Reflects the loss of interest income from CCA Notes and employee notes discussed in tick mark (F). |
(j) | Reflects the following activity (dollars in thousands): |
| | Year Ended December 31, 2020 | |
| |||
Removal of interest expense from amortization of deferred financing costs | | | $(6,557) |
Additional amortization related to the mark to market change in debt | | | (111) |
Adjustment | | | $(6,668) |
(k) | Represents the adjustment to the provision for income taxes resulting from the loss of operating activity at CCA due to the in-kind distribution by CRII of all of CROP’s interest in CCA, the removal of existing intangible assets, and the addition of new intangible assets in our taxable REIT subsidiary. |
(l) | Represents the changes in net loss (income) attributable to noncontrolling interests as a result of the adjustments to the statement of operations for the respective period. |
(m) | Represents additional common shares issued as if the mergers closed on January 1, 2020. |
(n) | Represents a gain on bargain purchase for the difference of the fair value of consideration paid and the fair value of assets acquired and liabilities assumed. |
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| | | |
Defined Term | | | Location of Definition |
Acquisition Proposal | | | Section 7.3(j)(i) |
Adverse Recommendation Change | | | Section 7.3(d) |
Agreement | | | Preamble |
Amended and Restated Advisory Agreement | | | Recitals |
Articles of Merger | | | Section 2.3(a) |
CCI | | | Preamble |
CCI Board | | | Recitals |
CCI Class A Common Stock | | | Section 5.4(a) |
CCI Class T Common Stock | | | Section 5.4(a) |
CCI Common Stock | | | Section 5.4(a) |
CCI Disclosure Letter | | | Article 5 |
CCI Financial Advisor | | | Section 5.19 |
CCI Insurance Policies | | | Section 5.15 |
CCI Material Contract | | | Section 5.12(a) |
CCI Parties | | | Preamble |
CCI Permits | | | Section 5.8(a) |
CCI SEC Documents | | | Section 5.5(a) |
CCI Special Committee | | | Recitals |
CCI Subsidiary Partnership | | | Section 5.13(h) |
CCI Tax Protection Agreement | | | Section 5.13(h) |
CCI Terminating Breach | | | Section 9.1(c)(i) |
CCI Voting Debt | | | Section 5.4(d) |
CCOP | | | Preamble |
Certificate of Merger | | | Section 2.3(b) |
Closing | | | Section 2.2 |
Closing Date | | | Section 2.2 |
CMR | | | Preamble |
CMR Board | | | Recitals |
CMR Board Recommendation | | | Section 4.2(c) |
CMR Change Notice | | | Section 7.3(e)(i) |
CMR Common Stock | | | Section 4.4(a) |
CMR Disclosure Letter | | | Article 4 |
CMR Financial Advisor | | | Section 4.19 |
CMR Insurance Policies | | | Section 4.15 |
CMR Material Contract | | | Section 4.12(a) |
CMR OP | | | Recitals |
CMR Parties | | | Preamble |
CMR Permits | | | Section 4.8(a) |
CMR Preferred Stock | | | Section 4.4(a) |
CMR Proxy Materials | | | Section 7.1(a) |
CMR SEC Documents | | | Section 4.5(a) |
CMR Special Committee | | | Recitals |
CMR Subsidiary Partnership | | | Section 4.13(h) |
CMR Tax Protection Agreements | | | Section 4.13(h) |
CMR Terminating Breach | | | Section 9.1(d)(i) |
CMR Voting Debt | | | Section 4.4(d) |
COVID-19 Measures | | | Recitals |
CMR II | | | Recitals |
Defined Term | | | Location of Definition |
CMR II Merger | | | Recitals |
CMR II OP | | | Recitals |
CRII | | | Recitals |
CRII Merger | | | Recitals |
CROP | | | Recitals |
Delaware Secretary | | | Section 2.3(b) |
DRULPA | | | Recitals |
Escrow Agreement | | | Section 9.3(f) |
Form S-4 | | | Section 7.1(a) |
Indemnified Parties | | | Section 7.7(a) |
Interim Period | | | Section 6.1(a) |
Intervening Event | | | Section 7.3(j)(ii) |
Merger | | | Recitals |
Merger Effective Time | | | Section 2.3(a) |
Merger Sub | | | Preamble |
MGCL | | | Recitals |
MLLCA | | | Recitals |
OP Unit Split | | | Section 3.1(b)(ii) |
Other Mergers | | | Recitals |
Outside Date | | | Section 9.1(b)(i) |
Partnership Merger | | | Recitals |
Partnership Merger Consideration | | | Section 3.1(a)(ii) |
Partnership Merger Effective Time | | | Section 2.3(b) |
Party(ies) | | | Preamble |
Permits | | | Section 4.8(a) |
Qualified REIT Subsidiary | | | Section 4.1(c) |
Qualifying REIT Income | | | Section 9.3(f)(i) |
Referenced Entity | | | Recitals |
Registered Securities | | | Section 7.1(a) |
REIT Merger | | | Recitals |
REIT Merger Consideration | | | Section 3.1(a)(i) |
SDAT | | | Section 2.3(a) |
Superior Proposal | | | Section 7.3(j)(iii) |
Surviving Corporation | | | Section 2.1(a) |
Surviving OP | | | Section 2.1(b) |
Takeover Statutes | | | Section 4.20 |
Taxable REIT Subsidiary | | | Section 4.1(c) |
Transfer Agent | | | Section 3.2(a) |
Transfer Taxes | | | Section 7.10(d) |
(a) | if to CMR to: |
(b) | if to CCI or Merger Sub to: |
| | COTTONWOOD COMMUNITIES, INC. | ||||
| | | | |||
| | By: | | | /s/ Enzio Cassinis | |
| | Name: | | | Enzio Cassinis | |
| | Title: | | | Chief Executive Officer |
| | COTTONWOOD COMMUNITIES GP SUBSIDIARY, LLC | |||||||
| | | | | | ||||
| | By: | | | COTTONWOOD COMMUNITIES, INC., its sole member | ||||
| | | | | | ||||
| | | | By: | | | /s/ Enzio Cassinis | ||
| | | | Name: | | | Enzio Cassinis | ||
| | | | Title: | | | Chief Executive Officer |
| | COTTONWOOD COMMUNITIES O.P., LP | |||||||
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| | By: | | | COTTONWOOD COMMUNITIES, INC., its general partner | ||||
| | | | | |||||
| | | | By: | | | /s/ Enzio Cassinis | ||
| | | | Name: | | | Enzio Cassinis | ||
| | | | Title: | | | Chief Executive Officer |
| | | | |||
| | COTTONWOOD MULTIFAMILY REIT I, INC. | ||||
| | | | |||
| | By: | | | /s/ Gregg Christensen | |
| | Name: | | | Gregg Christensen | |
| | Title: | | | Chief Legal Officer |
| | | | | | ||||
| | COTTONWOOD MULTIFAMILY REIT I O.P., LP | |||||||
| | | | | | ||||
| | By: | | | COTTONWOOD MULTIFAMILY REIT I, INC., its general partner | ||||
| | | | | |||||
| | | | By: | | | /s/ Gregg Christensen | ||
| | | | Name: | | | Gregg Christensen | ||
| | | | Title: | | | Chief Legal Officer |
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1 | Amount to be updated before signing based on previously agreed-upon factors. |
| | REIT: | ||||
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| | Cottonwood Communities, Inc., a Maryland corporation | ||||
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| | By: | | | ||
| | | | Enzio Cassinis, Chief Executive Officer |
| | OPERATING PARTNERSHIP: | |||||||
| | | | | | ||||
| | COTTONWOOD RESIDENTIAL O.P., LP, a Delaware limited partnership | |||||||
| | | | | | ||||
| | By: | | | Cottonwood Communities, Inc., a Maryland corporation, its general partner | ||||
| | | | | |||||
| | | | By: | | | |||
| | | | | | Enzio Cassinis, Chief Executive Officer | |||
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| | CC ADVISORS III: | ||||||||||
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| | CC ADVISORS III, LLC, a Delaware limited liability company | ||||||||||
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| | By: | | | Cottonwood Communities Advisors, LLC, a Delaware limited liability, its sole member | |||||||
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| | | | By: | | | Cottonwood Capital Management, Inc., a Maryland corporation, its manager | |||||
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| | | | | | By: | | | ||||
| | | | | | | | Gregg Christensen, Chief Legal Officer |
1. | reviewed the principal financial terms set forth in the Draft Agreement, which for purposes of this opinion we have, with your permission, assumed to be identical in all material respects to the agreement to be executed; |
2. | reviewed the financial statements contained in certain public company filings of the Company and the Buyer; |
3. | reviewed certain other financial and operating information with respect to the Properties, the Company and the Buyer (including, but not limited to, the Company’s and the Buyer’s third-party broker’s opinion of value dated June 30, 2020 (together, the “Opinions of Value”)) that were provided to us by the Company, the Buyer and certain of their advisors and representatives; |
4. | reviewed the financial terms of recent transactions involving properties that we deemed comparable in certain respects to the Properties; and |
5. | performed such other analyses, and considered such other factors, as we considered appropriate. |
1. | proprietary research, including geographic market and multi-family capitalization rate surveys and economic reports, prepared by affiliates of CBRE Cap; |
2. | a proprietary comparable transaction database and public company information database maintained by CBRE Cap and its affiliates; and |
3. | publicly available third-party research regarding the Company, the Buyer and their publicly traded peer companies. |
By: | | | ![]() | | | |
Printed Name: James E. Scott | ||||||
Title: Managing Principal |
1. | reviewed the principal financial terms set forth in the Agreement and Plan of Merger between, among other parties, the Company and the Buyer, substantially in the form of the execution draft provided to us on January 16, 2021 (the “Draft Merger Agreement”), which we have, with your permission, assumed to be identical in all material respects to the agreement to be executed; |
2. | as of January 20, 2021, updated our review of publicly available third-party research regarding the Company, the Buyer and their publicly traded peer companies; and |
3. | as of January 20, 2021, reviewed certain updated financial forecasts regarding the Transaction that were provided to us by the Company after December 29, 2020. |
Maryland | | | 36-4812393 |
(State or other jurisdiction of incorporation or organization) | | | (I.R.S. Employer Identification No.) |
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1245 Brickyard Road, Suite 250, Salt Lake City, UT | | | 84106 |
(Address of principal executive offices) | | | (Zip Code) |
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Business |
• | preserve, protect and return invested capital; |
• | pay stable cash distributions to shareholders; and |
• | realize capital appreciation in the value of our investments over the long term. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
Property Name | | | Property Location | | | Units | | | Net Rentable Square Feet | | | Average Unit Size | | | Year Built | | | Occupancy at December 31, 2020 | | | Date Acquired by the Joint Ventures |
Alpha Mill | | | Charlotte, NC | | | 267 | | | 222,411 | | | 833 | | | 2007, 2014 | | | 92.1% | | | August 3, 2016 |
Cottonwood Westside | | | Atlanta, GA | | | 197 | | | 169,223 | | | 859 | | | 2015 | | | 94.9% | | | August 3, 2016 |
The Marq Highland Park(1) | | | Tampa, FL | | | 239 | | | 232,956 | | | 975 | | | 2015 | | | 97.9% | | | August 3, 2016 |
(1) | Excludes 4 retail units comprising approximately 5,800 net rentable square feet. |
(Amounts in thousands, except share and per share data) | | | 2020 | | | 2019 |
Equity in losses of joint ventures | | | $(885) | | | $(1,323) |
Asset management fee to related party | | | (1,108) | | | (1,054) |
Other expenses | | | (629) | | | (277) |
Net loss | | | $(2,622) | | | $(2,654) |
Net loss per basic and diluted common shares | | | $(0.53) | | | $(0.53) |
Weighted average common shares outstanding, basic and diluted | | | 4,924,904 | | | 4,974,184 |
| | For the Six Months Ended | | | | | | | For the Six Months Ended | | | | | |||||||||||
(Amounts in thousands) | | | June 30, 2020 | | | December 31, 2020 | | | Total | | | Equity in Earnings (Losses) at 90% | | | June 30, 2019 | | | December 31, 2019 | | | Total | | | Equity in Earnings (Losses) at 90% |
Revenues | | | | | | | | | | | | | | | | | ||||||||
Rental and other operating income | | | $6,359 | | | $6,314 | | | $12,673 | | | $11,406 | | | $6,393 | | | $6,358 | | | $12,751 | | | $11,476 |
Operating expenses | | | | | | | | | | | | | | | | | ||||||||
Rental operations expense | | | 2,357 | | | 2,325 | | | 4,682 | | | 4,214 | | | 2,380 | | | 2,186 | | | 4,566 | | | 4,109 |
Advertising and marketing | | | 80 | | | 88 | | | 168 | | | 151 | | | 81 | | | 93 | | | 174 | | | 157 |
General and administrative | | | 101 | | | 99 | | | 200 | | | 180 | | | 97 | | | 118 | | | 215 | | | 194 |
Property management fees | | | 224 | | | 220 | | | 444 | | | 400 | | | 224 | | | 222 | | | 446 | | | 401 |
Total operating expenses | | | 2,762 | | | 2,732 | | | 5,494 | | | 4,945 | | | 2,782 | | | 2,619 | | | 5,401 | | | 4,861 |
Net operating income | | | 3,597 | | | 3,582 | | | 7,179 | | | 6,461 | | | 3,611 | | | 3,739 | | | 7,350 | | | 6,615 |
Non operating expenses (income) | | | | | | | | | | | | | | | | | ||||||||
Interest on Fannie Mae facility | | | 1,637 | | | 1,478 | | | 3,115 | | | 2,804 | | | 1,820 | | | 1,792 | | | 3,612 | | | 3,251 |
Depreciation and amortization | | | 2,397 | | | 2,405 | | | 4,802 | | | 4,322 | | | 2,364 | | | 2,384 | | | 4,748 | | | 4,273 |
Mark to market adjustments on interest rate caps | | | (1) | | | 58 | | | 57 | | | 51 | | | 296 | | | 133 | | | 429 | | | 386 |
Other non operating expenses (income) | | | 85 | | | 103 | | | 188 | | | 169 | | | 17 | | | 14 | | | 31 | | | 28 |
Net loss | | | $(521) | | | $(462) | | | $(983) | | | $(885) | | | $(886) | | | $(584) | | | $(1,470) | | | $(1,323) |
(Amounts in thousands) | | | 2020 | | | 2019 |
Net cash provided by operating activities | | | $2,296 | | | $2,595 |
Net cash used in financing activities | | | (2,255) | | | (3,297) |
Net increase (decrease) in cash and cash equivalents | | | 41 | | | (702) |
Cash and cash equivalents at beginning of period | | | 260 | | | 962 |
Cash and cash equivalents at end of period | | | $301 | | | $260 |
(Amounts in thousands, except share and per share data) | | | 2020 | | | 2019 |
Net loss | | | $(2,622) | | | $(2,654) |
Adjustments: | | | | | ||
Depreciation and amortization - our share of joint ventures | | | 4,322 | | | 4,273 |
FFO | | | 1,700 | | | 1,619 |
Adjustments: | | | | | ||
Amortization of our share of debt issuance costs | | | 96 | | | 96 |
Mark to market adjustments on our share of interest rate caps | | | 51 | | | 386 |
Transaction and other nonrecurring expenses | | | 250 | | | — |
Core FFO | | | $2,097 | | | $2,101 |
FFO per basic and diluted common shares | | | $0.35 | | | $0.33 |
Core FFO per basic and diluted common shares | | | $0.43 | | | $0.42 |
Weighted average common shares outstanding, basic and diluted | | | 4,924,904 | | | 4,974,184 |
Directors and Officers |
Name(1) | | | Positions | | | Age(2) | | | Term of Office |
Enzio Cassinis | | | Chief Executive Officer, President and Investment Committee Member | | | 43 | | | October 2018 to Present(3) December 2015 to Present(5) |
Adam Larson | | | Chief Financial Officer and Investment Committee Member | | | 39 | | | October 2018 to Present(3),(6) |
Susan Hallenberg | | | Chief Accounting Officer and Treasurer and Investment Committee Member | | | 53 | | | October 2018 to Present(3),(6) |
Gregg Christensen | | | Chief Legal Officer, Director and Investment Committee Member | | | 52 | | | June 2015 to Present |
Paul Fredenberg | | | Chief Investment Officer and Investment Committee Member | | | 44 | | | October 2018 to Present(3) December 2015 to Present(5) |
Daniel Shaeffer | | | Chairman of the Board, Director and Investment Committee Member | | | 50 | | | June 2015 to Present(4) |
| | | | | | December 2015 to Present(5) | |||
Chad Christensen | | | Director and Investment Committee Member | | | 48 | | | June 2015 to Present(4) |
| | | | | | December 2015 to Present(5) | |||
Kurt Wickham | | | Independent Director | | | 51 | | | April 2020 to Present |
(1) | The address of each director and executive officer listed is 1245 Brickyard Road, Suite 250, Salt Lake City, Utah 84106. |
(2) | As of March 31, 2021. |
(3) | The current executive officers were appointed in October 2018. |
(4) | The current directors were appointed in June 2015. |
(5) | These investment committee members were appointed in December 2015. |
(6) | These investment committee members were appointed in October 2018. |
Security Ownership of Management and Certain Securityholders |
Name of Beneficial Owner(1) | | | Number of Shares Beneficially Owned | | | Percent of All Shares |
Daniel Shaeffer(2) | | | 1,021 | | | * |
Chad Christensen(2) | | | 1,021 | | | * |
Gregg Christensen(2) | | | 1,021 | | | * |
Enzio Cassinis | | | — | | | — |
Adam Larson | | | — | | | — |
Susan Hallenberg | | | — | | | — |
Paul Fredenberg | | | — | | | — |
Kurt Wickham | | | — | | | — |
All executive officers and directors as a group (8 persons) | | | 1,021 | | | * |
* | Less than 1% of all shares. |
(1) | Under SEC rules, a person is deemed to be a “beneficial owner” of a security if that person has or shares “voting power”, which includes the power to dispose of or to direct the disposition of such security. A person also is deemed to be a beneficial owner of any securities which that person has a right to acquire within 60 days. Under these rules, more than one person may be deemed to be a beneficial owner of the same securities and a person may be deemed to be a beneficial owner of securities as to which he or she has no economic or pecuniary interest. |
(2) | CROP owns 1,021 shares of our common stock. CROP is managed by its general partner, CRII. CRII is managed by its board of directors, which currently consists of Daniel Shaeffer, Chad Christensen, Gregg Christensen, Jonathan Gardner and Philip White. The board of directors of CRII, as the general partner of CROP, has the voting and investment control of the shares of our common stock held by CROP. |
Interest of Management and Others in Certain Transactions |
• | performing and supervising our administrative functions either directly or through access to our asset manager’s employees or contractors; |
• | selecting service providers and entering into service contracts for us and our properties; |
• | performing due diligence and underwriting duties as required by our board of directors in connection with the acquisition or disposition of our investments; |
• | monitoring and evaluating the performance of our investments and managing our relationships with our joint venture partners; |
• | overseeing each property manager’s performance; |
• | assisting us with respect to recommendations regarding capital improvements, payment and contestation of property and other taxes, and insurance policies for us and our joint ventures; |
• | arranging for financing and refinancing of our properties; |
• | providing cash management services for us; and |
• | performing any other services reasonably requested by us. |
Other Information |
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Consolidated Financial Statements | | | |
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| |
| | December 31, | ||||
| | 2020 | | | 2019 | |
Assets | | | | | ||
Investments in joint ventures | | | $27,126 | | | $31,478 |
Cash and cash equivalents | | | 301 | | | 260 |
Related party receivables | | | — | | | 13 |
Other assets | | | 58 | | | 46 |
Total assets | | | $27,485 | | | $31,797 |
Liabilities and equity | | | | | ||
Liabilities: | | | | | ||
Accounts payable and accrued liabilities | | | 259 | | | 327 |
Related party payables | | | 1,675 | | | 1,044 |
Promissory note to advisor | | | 996 | | | — |
Total liabilities | | | 2,930 | | | 1,371 |
Commitments and contingencies (Note 7) | | | | | ||
Equity: | | | | | ||
Preferred stock, $0.01 par value, 100,000,000 shares authorized; no shares issued and outstanding | | | — | | | — |
Common stock, $0.01 par value, 1,000,000,000 shares authorized; 4,904,045 and 4,941,345 shares issued and outstanding at December 31, 2020 and 2019, respectively | | | 49 | | | 49 |
Additional paid in capital | | | 48,948 | | | 49,365 |
Accumulated distributions | | | (11,525) | | | (8,693) |
Accumulated deficit | | | (12,917) | | | (10,295) |
Total equity | | | 24,555 | | | 30,426 |
Total liabilities and equity | | | $27,485 | | | $31,797 |
| | Year Ended December 31, | ||||
| | 2020 | | | 2019 | |
Equity in losses of joint ventures | | | $(885) | | | $(1,323) |
Asset management fee to related party | | | (1,108) | | | (1,054) |
Other expenses | | | (629) | | | (277) |
Net loss | | | $(2,622) | | | $(2,654) |
| | | | |||
Net loss per basic and diluted common shares | | | $(0.53) | | | $(0.53) |
Weighted average common shares outstanding, basic and diluted | | | 4,924,904 | | | 4,974,184 |
| | Common Stock | | | ||||||||||||||
| | Shares | | | Amount | | | Additional Paid in Capital | | | Accumulated Distributions | | | Accumulated Deficit | | | Total Equity | |
Balance at December 31, 2018 | | | 4,984,700 | | | $50 | | | $49,802 | | | $(5,836) | | | $(7,641) | | | $36,375 |
Common stock repurchases | | | (43,355) | | | (1) | | | (437) | | | — | | | — | | | (438) |
Distributions to investors | | | — | | | — | | | — | | | (2,857) | | | — | | | (2,857) |
Net loss | | | — | | | — | | | — | | | — | | | (2,654) | | | (2,654) |
Balance at December 31, 2019 | | | 4,941,345 | | | $49 | | | $49,365 | | | $(8,693) | | | $(10,295) | | | $30,426 |
Common stock repurchases | | | (37,300) | | | — | | | (417) | | | — | | | — | | | (417) |
Distributions to investors | | | — | | | — | | | — | | | (2,832) | | | — | | | (2,832) |
Net loss | | | — | | | — | | | — | | | — | | | (2,622) | | | (2,622) |
Balance at December 31, 2020 | | | 4,904,045 | | | $49 | | | $48,948 | | | $(11,525) | | | $(12,917) | | | $24,555 |
| | Year Ended December 31, | ||||
| | 2020 | | | 2019 | |
Operating activities | | | | | ||
Net loss | | | $(2,622) | | | $(2,654) |
Adjustments to reconcile net loss to net cash provided by operating activities: | | | | | ||
Equity in losses of joint ventures | | | 885 | | | 1,323 |
Distributions of capital from joint ventures | | | 3,467 | | | 3,009 |
Changes in operating assets and liabilities: | | | | | ||
Related party receivables | | | 13 | | | (13) |
Other assets | | | (12) | | | (21) |
Accounts payable and accrued liabilities | | | (66) | | | 38 |
Related party payables | | | 631 | | | 913 |
Net cash provided by operating activities | | | 2,296 | | | 2,595 |
| | | | |||
Financing activities | | | | | ||
Promissory note to advisor | | | 996 | | | — |
Common stock repurchases | | | (417) | | | (438) |
Distributions to common stockholders | | | (2,834) | | | (2,859) |
Net cash used in financing activities | | | (2,255) | | | (3,297) |
Net increase (decrease) in cash and cash equivalents | | | 41 | | | (702) |
Cash and cash equivalents at beginning of period | | | 260 | | | 962 |
Cash and cash equivalents at end of period | | | $301 | | | $260 |
| | Alpha Mill | | | Cottonwood Westside | | | The Marq Highland Park | | | Total | |
2018 carrying value | | | $11,405 | | | $13,469 | | | $10,936 | | | $35,810 |
Equity in losses | | | (440) | | | (522) | | | (361) | | | (1,323) |
Distributions | | | (1,016) | | | (840) | | | (1,153) | | | (3,009) |
2019 carrying value | | | $9,949 | | | $12,107 | | | $9,422 | | | $31,478 |
Equity in losses | | | (326) | | | (406) | | | (153) | | | (885) |
Distributions | | | (1,169) | | | (873) | | | (1,425) | | | (3,467) |
2020 carrying value | | | $8,454 | | | $10,828 | | | $7,844 | | | $27,126 |
Year Ended December 31, 2020 | | | Alpha Mill | | | Cottonwood Westside | | | The Marq Highland Park | | | Total | | | Equity in Earnings (Losses) at 90% |
Revenues | | | | | | | | | | | |||||
Rental and other operating income | | | $4,417 | | | $3,539 | | | $4,717 | | | $12,673 | | | $11,406 |
Operating expenses | | | | | | | | | | | |||||
Rental operations expense | | | 1,371 | | | 1,486 | | | 1,825 | | | 4,682 | | | 4,214 |
Advertising and marketing | | | 63 | | | 47 | | | 58 | | | 168 | | | 151 |
General and administrative | | | 77 | | | 64 | | | 59 | | | 200 | | | 180 |
Property management fees | | | 155 | | | 124 | | | 165 | | | 444 | | | 400 |
Total operating expenses | | | 1,666 | | | 1,721 | | | 2,107 | | | 5,494 | | | 4,945 |
| | | | | | | | | | ||||||
Net operating income | | | 2,751 | | | 1,818 | | | 2,610 | | | 7,179 | | | 6,461 |
Non operating expenses | | | | | | | | | | | |||||
Interest on Fannie Mae facility | | | 1,204 | | | 859 | | | 1,052 | | | 3,115 | | | 2,804 |
Depreciation and amortization | | | 1,734 | | | 1,376 | | | 1,692 | | | 4,802 | | | 4,322 |
Mark to market adjustments on interest rate caps | | | 23 | | | 17 | | | 17 | | | 57 | | | 51 |
Other non operating expenses | | | 152 | | | 17 | | | 19 | | | 188 | | | 169 |
Net loss | | | $(362) | | | $(451) | | | $(170) | | | $(983) | | | $(885) |
Year Ended December 31, 2019 | | | Alpha Mill | | | Cottonwood Westside | | | The Marq Highland Park | | | Total | | | Equity in Earnings (Losses) at 90% |
Revenues | | | | | | | | | | | |||||
Rental and other operating income | | | $4,476 | | | $3,619 | | | $4,656 | | | $12,751 | | | $11,476 |
Operating expenses | | | | | | | | | | | |||||
Rental operations expense | | | 1,312 | | | 1,482 | | | 1,772 | | | 4,566 | | | 4,109 |
Advertising and marketing | | | 60 | | | 57 | | | 57 | | | 174 | | | 157 |
General and administrative | | | 85 | | | 67 | | | 63 | | | 215 | | | 194 |
Property management fees | | | 157 | | | 126 | | | 163 | | | 446 | | | 401 |
Total operating expenses | | | 1,614 | | | 1,732 | | | 2,055 | | | 5,401 | | | 4,861 |
| | | | | | | | | | ||||||
Net operating income | | | 2,862 | | | 1,887 | | | 2,601 | | | 7,350 | | | 6,615 |
Non operating expenses | | | | | | | | | | | |||||
Interest on Fannie Mae facility | | | 1,410 | | | 992 | | | 1,210 | | | 3,612 | | | 3,251 |
Depreciation and amortization | | | 1,708 | | | 1,364 | | | 1,676 | | | 4,748 | | | 4,273 |
Mark to market adjustments on interest rate caps | | | 217 | | | 105 | | | 107 | | | 429 | | | 386 |
Other non operating expenses | | | 16 | | | 5 | | | 10 | | | 31 | | | 28 |
Net loss | | | $(489) | | | $(579) | | | $(402) | | | $(1,470) | | | $(1,323) |
December 31, 2020 | | | Alpha Mill | | | Cottonwood Westside | | | The Marq Highland Park | | | Total |
Real estate assets, net | | | $45,028 | | | $37,105 | | | $37,326 | | | $119,459 |
Other assets | | | 766 | | | 710 | | | 743 | | | 2,219 |
Fannie Mae facility | | | 36,265 | | | 25,655 | | | 32,260 | | | 94,180 |
Other liabilities | | | 345 | | | 217 | | | 244 | | | 806 |
Equity | | | 9,184 | | | 11,943 | | | 5,565 | | | 26,692 |
December 31, 2019 | | | Alpha Mill | | | Cottonwood Westside | | | The Marq Highland Park | | | Total |
Real estate assets, net | | | $46,574 | | | $38,436 | | | $38,952 | | | $123,962 |
Other assets | | | 870 | | | 814 | | | 938 | | | 2,622 |
Fannie Mae facility | | | 36,265 | | | 25,655 | | | 32,260 | | | 94,180 |
Other liabilities | | | 333 | | | 230 | | | 312 | | | 875 |
Equity | | | 10,846 | | | 13,365 | | | 7,318 | | | 31,529 |
Share Purchase Anniversary | | | Repurchase Price As a Percentage of Estimated Value(1) |
Less than 1 year | | | No repurchase allowed |
1 year | | | 80% |
2 years | | | 85% |
3 years | | | 90% |
4 years and thereafter | | | 95% |
In the event of a shareholder’s death or complete disability | | | 95% |
(1) | Estimated value equals Net Asset Value (“NAV”) as determined and disclosed by the board of directors. On December 13, 2019, the board of directors determined the value of our shares of common stock at $12.21 per share as of September 30, 2019, based on our net asset value. See the Form 1-U filed with the SEC on December 16, 2019 for additional information on our most recent NAV. Due to the negotiations and subsequent entry into the merger agreement discussed below in Note 8, the board of directors determined not to update our September 30, 2019 NAV. If the proposed merger is not consummated, our board of directors intends to update our NAV as of a more recent date. |
Exhibits |
Exhibit Number | | | Description |
2.1 | | | Charter, incorporated by reference to Exhibit 2.1 to the Company’s Offering Statement on Form 1-A, filed May 10, 2016 |
2.2 | | | Bylaws, incorporated by reference to Exhibit 2.2 to the Company’s Offering Statement on Form 1-A, filed May 10, 2016 |
4.1 | | | Form of Subscription Agreement, incorporated by reference to the exhibit to the Company’s Supplement No. 2 to the Offering Circular as filed pursuant to Rule 253(g)(3), on November 22, 2016 |
4.2 | | | Form of Israeli Investor Questionnaire, incorporated by reference to the exhibit to the Company’s Supplement No. 3 to the Offering Circular as filed pursuant to Rule 253(g)(2), on March 9, 2017 |
6.1 | | | Share Repurchase Program, incorporated by reference to Exhibit 6.1 to the Company’s Offering Statement on Form 1-A, filed December 18, 2015 |
6.2 | | | Limited Partnership Agreement of Operating Partnership, incorporated by reference to Exhibit 6.2 to the Company’s Offering Statement on Form 1-A, filed on December 18, 2015 |
6.3 | | | Limited Liability Company Agreement of General Partner of Operating Partnership, incorporated by reference to Exhibit 6.3 to the Company’s Offering Statement on Form 1-A, filed on December 18, 2015 |
6.4 | | | Form of Joint Venture Agreement, incorporated by reference to Exhibit 6.4 to the Company’s Offering Statement on Form 1-A, filed on December 18, 2015 |
6.5 | | | Asset Management Agreement, incorporated by reference to Exhibit 6.5 to the Company’s Offering Statement on Form 1-A, filed on December 18, 2015 |
6.6 | | | Form of Property Management Agreement, incorporated by reference to Exhibit 6.6 to the Company’s Offering Statement on Form 1-A, filed on December 18, 2015 |
6.7 | | | Investment Policy Agreement, incorporated by reference to Exhibit 6.8 to the Company’s Offering Statement on Form 1-A, filed on February 29, 2016 |
6.8 | | | Three Party Agreement, incorporated by reference to Exhibit 6.9 to the Company’s Offering Statement on Form 1-A, filed on December 18, 2015 |
6.9 | | | First Amendment to the Three-Party Agreement, incorporated by reference to Exhibit 6.9 to the Company’s Offering Statement on Form 1-K, filed on April 30, 2019 |
6.10 | | | Assignment of Advisory Services Contracts, incorporated by reference to Exhibit 6.10 to the Company’s Annual Report on Form 1-K, filed on April 30, 2019 |
6.11 | | | Property Management Three-Party Agreement, incorporated by reference to Exhibit 6.11 to the Company’s Annual Report on Form 1-K, filed on April 30, 2019 |
6.12 | | | Assignment of Promotional Interest (Multifamily REIT I), incorporated by reference to Exhibit 6.12 to the Company’s Annual Report on Form 1-K, filed on April 30, 2019 |
6.13 | | | Promissory Note between Cottonwood Multifamily REIT I, Inc. and Cottonwood Communities Advisors, LLC, incorporated by reference to Exhibit 6.13 to the Company's Annual Report on Form 1-K, filed on April 29, 2020 |
6.14 | | | Amended and Restated Promissory Note between Cottonwood Multifamily REIT I, Inc. and Cottonwood Communities Advisors, LLC, incorporated by reference to Exhibit 6.14 to the Company's Semiannual Report on Form 1-SA, filed on August 28, 2020 |
6.15 | | | Second Amended and Restated Promissory Note between Cottonwood Multifamily REIT I, Inc. and Cottonwood Communities Advisors, LLC** |
8.1 | | | Escrow Agreement, incorporated by reference to Exhibit 8 to the Company’s Offering Statement on Form 1-A, filed on April 21, 2016 |
8.2 | | | Agreement and Plan of Merger, incorporated by reference to Exhibit 2.1 to the Company’s Current Form on Form 1-U, filed on February 1, 2021 |
9.1 | | | Letter from Ernst & Young LLP to the Securities and Exchange Commission dated November 29, 2018., incorporated by reference to Exhibit 9.1 to the Company’s Form 1-U filed on December 5, 2018 |
** | Exhibits filed herewith. |
| | By: | | | /s/ Enzio Cassinis | |
| | | | Enzio Cassinis, Chief Executive Officer |
Name | | | Title | | | Date |
| | | | |||
/s/ Enzio Cassinis | | | Chief Executive Officer | | | April 8, 2021 |
Enzio Cassinis | | |||||
| | | | |||
/s/Adam Larson | | | Chief Financial Officer (Principal Financial Officer) | | | April 8, 2021 |
Adam Larson | | |||||
| | | | |||
/s/ Gregg Christensen | | | Chief Legal Officer and Director | | | April 8, 2021 |
Gregg Christensen | | |||||
| | | | |||
/s/ Susan Hallenberg | | | Chief Accounting Officer (Principal Accounting Officer) | | | April 8, 2021 |
Susan Hallenberg | | |||||
| | | | |||
/s/ Chad Christensen | | | Director | | | April 8, 2021 |
Chad Christensen | | |||||
| | | | |||
/s/ Daniel Shaeffer | | | Director | | | April 8, 2021 |
Daniel Shaeffer | |
Maryland | | | 61-1805524 |
(State or other jurisdiction of incorporation or organization) | | | (I.R.S. Employer Identification No.) |
Title of Each Class | | | Trading Symbols | | | Name of each exchange on which registered |
None | | | None | | | None |
Large accelerated filer | | | ☐ | | | Accelerated filer | | | ☐ |
Non-accelerated filer | | | ☒ | | | Smaller reporting company | | | ☒ |
| | | | Emerging growth company | | | ☒ |
| | Part I | ||||
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| | Part II | ||||
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| | Part III | ||||
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| | Part IV | ||||
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• | The COVID-19 pandemic, together with the resulting measures imposed to contain the virus, has had a negative impact on the economy and business activity globally. Although we have not seen a material impact on our operations to date, the extent to which the COVID-19 pandemic may impact our operations, the personal financial position of our tenants and the development projects in which we have invested remains uncertain and cannot be predicted with confidence. |
• | Risks related to the proposed mergers, as discussed under Item 1. "Business" below, including that the mergers will not be consummated, the disruption of management’s attention from our ongoing business operations due to the proposed mergers, and that the mergers may not be accretive to the company. |
• | We depend on our advisor to identify suitable investments and to manage our investments. There is no assurance that we will be able to successfully achieve our investment objectives. |
• | We have paid distributions from offering proceeds and may continue to fund distributions with offering proceeds. We have not established a limit on the amount of proceeds from our offering that we may use to fund distributions. To the extent we fund distributions from sources other than our cash flow from operations, we will have less funds available for investment in multifamily apartment communities and multifamily real estate-related assets and the overall return to our stockholders may be reduced. Distributions may also be paid from other sources such as borrowings, advances or the deferral of fees and expense reimbursements. During the early stages of our operations, these distributions may constitute a return of capital. |
• | Some of our officers and certain of our directors are also officers and directors of our sponsor, our advisor or its affiliates. As a result, our officers and affiliated directors are subject to conflicts of interest. |
• | Our ability to raise money and achieve our investment objectives depends on the ability of the dealer manager to successfully market our offering. If we raise substantially less than the maximum offering amount, we may not be able to invest in a diverse portfolio of assets and the value of an investment in us may vary more widely with the performance of certain investments. |
• | We pay certain fees and expenses to our advisor and its affiliates. These fees were not negotiated at arm’s length and therefore may be higher than fees payable to unaffiliated third parties. |
• | Development projects in which we invest will be subject to potential development and construction delays which could result in increased costs and risks and may hinder our operating results and ability to make distributions. |
• | We may incur significant debt in certain circumstances. Our use of leverage increases the risk of an investment in us. Loans we obtain may be collateralized by some or all of our investments, which will put those investments at risk of forfeiture if we are unable to pay our debts. Principal and interest payments on these loans reduce the amount of money that would otherwise be available for other purposes. |
• | Volatility in the debt markets could affect our ability to obtain financing for investments or other activities related to real estate assets and the diversification or value of our portfolio, potentially reducing cash available for distribution to our stockholders or our ability to make investments. In addition, if any of the loans we obtain have variable interest rates, volatility in the debt markets could negatively impact such loans. |
• | If we fail to continue to qualify as a REIT, it would adversely affect our operations and our ability to make distributions to our stockholders because we will be subject to United States federal income tax at regular corporate rates with no ability to deduct distributions made to our stockholders. |
BUSINESS |
• | preserve, protect and return invested capital; |
• | pay stable cash distributions to stockholders; |
• | realize capital appreciation in the value of our investments over the long term; and |
• | provide a real estate investment alternative with lower expected volatility relative to public real estate companies whose securities trade daily on a stock exchange. |
Risk Factors |
• | where we may acquire multifamily apartment communities in the United States; |
• | the percentage of our proceeds that may be invested in properties as compared with the percentage of our proceeds that we may invest in multifamily real estate-related assets; investment in direct interests in real estate and multifamily real estate-related assets will have differing risks and profit potential; or |
• | the percentage of our proceeds that we may invest in any one real estate investment (the greater the percentage of our offering proceeds invested in one asset, the greater the potential adverse effect on us if that asset is unprofitable). |
• | limitations on capital structure; |
• | restrictions on specified investments; |
• | prohibitions on transactions with affiliates; and |
• | compliance with reporting, record keeping, voting, proxy disclosure and other rules and regulations that would significantly increase our operating expenses. |
• | pursuant to Section 3(a)(1)(A), is or holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities (the “primarily engaged test”); or |
• | pursuant to Section 3(a)(1)(C), is engaged or proposes to engage in the business of investing, reinvesting, owning, holding or trading in securities and owns or proposes to acquire “investment securities” having a value exceeding 40% of the value of such issuer’s total assets (exclusive of United States government securities and cash items) on an unconsolidated basis (the “40% test”). “Investment securities” excludes United States government securities and securities of majority-owned subsidiaries that are not themselves investment companies and are not relying on the exception from the definition of investment company under Section 3(c)(1) or Section 3(c)(7) (relating to private investment companies). |
• | that our co-venturer, co-tenant or partner in an investment could become insolvent or bankrupt; |
• | that such co-venturer, co-tenant or partner may at any time have economic or business interests or goals that are or that become inconsistent with our business interests or goals; |
• | that such co-venturer, co-tenant or partner may be in a position to take action contrary to our instructions or requests or contrary to our policies or objectives; or |
• | that disputes between us and our co-venturer, co-tenant or partner may result in litigation or arbitration that would increase our expenses and prevent our officers and directors from focusing their time and effort on our operations. |
• | stagger our board of directors into three classes; |
• | require a two-thirds shareholder vote for removal of directors; |
• | provide that only the board can fix the size of the board; |
• | provide that all vacancies on the board, however created, may be filled only by the affirmative vote of a majority of the remaining directors in office; and |
• | require that special shareholder meetings may only be called by holders of a majority of the voting shares entitled to be cast at the meeting. |
• | responsibility and liability for the costs of investigation, removal, or remediation of hazardous substances released on or in real property, generally without regard to knowledge of or responsibility for the presence of the contaminants; |
• | liability for claims by third parties based on damages to natural resources or property, personal injuries, or costs of removal or remediation of hazardous or toxic substances in, on, or migrating from our property; |
• | responsibility for managing asbestos-containing building materials, and third-party claims for exposure to those materials; and |
• | environmental laws also may impose restrictions on the manner in which property may be used or businesses may be operated, and these restrictions may require expenditures. |
• | In order to qualify as a REIT, we must distribute annually at least 90% of our REIT taxable income to our shareholders (which is determined without regard to the dividends paid deduction or net capital gain). To the extent that we satisfy the distribution requirement but distribute less than 100% of our REIT taxable income, we will generally be subject to federal corporate income tax on the undistributed income. |
• | We will be subject to a 4% nondeductible excise tax on the amount, if any, by which distributions we pay in any calendar year are less than the sum of 85% of our ordinary income, 95% of our capital gain net income, and 100% of our undistributed income from prior years. |
• | If we have net income from the sale of foreclosure property that we hold primarily for sale to customers in the ordinary course of business or other non-qualifying income from foreclosure property, we must pay a tax on that income at the highest corporate income tax rate. |
• | If we sell an asset, other than foreclosure property, that we hold primarily for sale to customers in the ordinary course of business, our gain would be subject to the 100% “prohibited transaction” tax unless such sale were made by one of our taxable REIT subsidiaries or we qualified for a “safe harbor” under the Internal Revenue Code. |
• | the investment is consistent with their fiduciary and other obligations under ERISA and the Internal Revenue Code; |
• | the investment is made in accordance with the documents and instruments governing the plan or IRA, including the plan’s or account’s investment policy; |
• | the investment satisfies the prudence and diversification requirements of Sections 404(a)(1)(B) and 404(a)(1)(C) of ERISA and other applicable provisions of ERISA and the Internal Revenue Code; |
• | the investment in our shares, for which no public market currently exists, is consistent with the liquidity needs of the plan or IRA; |
• | the investment will not produce an unacceptable amount of “unrelated business taxable income” for the plan or IRA; |
• | our shareholders will be able to comply with the requirements under ERISA and the Internal Revenue Code to value the assets of the plan or IRA annually; and |
• | the investment will not constitute a prohibited transaction under Section 406 of ERISA or Section 4975 of the Internal Revenue Code. |
• | vulnerability of the Fully Combined Company to general adverse economic and industry conditions; |
• | limiting the Fully Combined Company’s ability to obtain additional financing to fund future working capital, capital expenditures and other general corporate requirements; |
• | requiring the use of a substantial portion of the Fully Combined Company’s cash flow from operations for the payment of principal and interest on its indebtedness, thereby reducing its ability to use its cash flow to fund working capital, acquisitions, capital expenditures and general corporate requirements; |
• | limiting the Fully Combined Company’s flexibility in planning for, or reacting to, changes in its business and its industry; |
• | putting the Fully Combined Company at a disadvantage compared to its competitors with less indebtedness; and |
• | limiting the Fully Combined Company’s ability to access capital markets. |
• | it would be subject to U.S. federal corporate income tax on its net income for the years it did not qualify for taxation as a REIT (and, for such years, would not be allowed a deduction for dividends paid to shareholders in computing its taxable income); |
• | it could be subject to the federal alternative minimum tax for taxable years prior to January 1, 2018 and possibly increased state and local taxes; |
• | unless it is entitled to relief under applicable statutory provisions, neither it nor any “successor” company could elect to be taxed as a REIT until the fifth taxable year following the year during which it was disqualified; and |
• | for five years following re-election of REIT status, upon a taxable disposition of an asset owned as of such re-election, it could be subject to corporate level tax with respect to any built-in gain inherent in such asset at the time of re-election. |
Unresolved Staff Comments |
Properties |
Legal Proceedings |
Mine Safety Disclosures |
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
Share Purchase Anniversary | | | E-Repurchase Price as a Percentage of Estimated Value(1) |
Less than 1 year | | | No repurchase allowed |
1 year - 2 years | | | 85% |
3 years - 4 years | | | 90% |
5 years and thereafter | | | 95% |
A stockholder’s death or complete disability, less than 2 years | | | 95% |
A stockholder’s death or complete disability, 2 years or more | | | 100% |
(1) | For the purposes of the share repurchase program, the “estimated value per share” will initially be equal to the purchase price per share at which the original purchaser or purchasers of the shares bought its shares from us, and the purchase price per share will be adjusted to reflect any stock dividends, combinations, splits, recapitalizations or any similar transaction with respect to the shares outstanding. |
Selected Financial Data |
Management's Discussion and Analysis of Financial Condition and Results of Operations |
Property Name | | | Location | | | Investment Type | | | Purchase / Investment Date | | | Number of Units | | | Purchase Price / Funding Commitment | | | Amount Paid / Funded to Date |
Cottonwood West Palm | | | West Palm Beach, FL | | | Wholly Owned | | | 05/30/2019 | | | 245 | | | $66,923,500 | | | $66,923,500 |
Cottonwood One Upland | | | Norwood, MA | | | Wholly Owned | | | 03/19/2020 | | | 262 | | | 103,600,000 | | | 103,600,000 |
Dolce Twin Creeks, Phase II | | | Allen, TX | | | B Note | | | 07/31/2019 | | | 366 | | | 10,000,000 | | | 8,205,862 |
Lector85 | | | Ybor City, FL | | | Preferred Equity | | | 08/15/2019 | | | 254 | | | 9,900,000 | | | 9,900,000 |
Vernon Boulevard | | | Queens, NY | | | Preferred Equity | | | 07/23/2020 | | | 534 | | | 15,000,000 | | | 15,000,000 |
Riverfront | | | West Sacramento, CA | | | Preferred Equity | | | 11/30/2020 | | | 285 | | | 15,091,649 | | | 2,680,148 |
Total / Weighted Average | | | | | | | | | 1,946 | | | $220,515,149 | | | $206,309,510 |
Property Name | | | Debt Issuer | | | Maturity Date | | | Payment Type | | | Rate | | | Amount Outstanding |
Cottonwood West Palm | | | Berkadia Commercial Mortgage, LLC | | | June 1, 2029 | | | Interest Only | | | 3.93% | | | $35,995,000(3) |
Cottonwood One Upland | | | J.P. Morgan Chase Bank, N.A. | | | March 19, 2023(1) | | | Interest Only | | | Libor + 1.5-1.75%(2) | | | 35,500,000(4) |
Total credit facilities | | | | | | | | | | | 71,495,000 | ||||
Unamortized debt issuance costs | | | | | | | | | | | (1,175,132) | ||||
Credit facilities, net | | | | | | | | | | | $70,319,868 |
(1) | All or a portion of the amount outstanding can be prepaid at any time and the maturity date can be extended for two one-year periods, subject to the satisfaction of certain conditions. |
(2) | The spread is contingent upon certain debt yield metrics. |
(3) | There is no limit on the amount we can draw on the Berkadia Credit Facility as long as we maintain certain loan-to-value ratios and other requirements as set forth in the loan documents. |
(4) | We may obtain advances secured against Cottonwood One Upland up to $67,600,000 on our JP Morgan Credit Facility, as well as finance other future acquisitions up to $125,000,000 as long as certain loan-to-value ratios and other requirements are maintained. |
| | Year Ended December 31, 2020 | | | Year Ended December 31, 2019 | |
Revenues | | | | | ||
Rental and other property revenues | | | $10,748,748 | | | $2,797,475 |
Real estate note investment interest | | | 575,839 | | | 44,777 |
Total revenues | | | 11,324,587 | | | 2,842,252 |
Expenses | | | | | ||
Property operations expense | | | 4,569,857 | | | 1,428,925 |
Reimbursable operating expenses to related parties | | | 1,029,920 | | | 541,652 |
Asset management fee to related party | | | 2,799,466 | | | 811,395 |
Depreciation and amortization | | | 6,966,232 | | | 2,738,190 |
General and administrative expenses | | | 3,353,892 | | | 876,808 |
Total operating expenses | | | 18,719,367 | | | 6,396,970 |
Other income (expense) | | | | | ||
Equity in earnings of unconsolidated real estate entities | | | 2,113,386 | | | 272,805 |
Interest income | | | 198,003 | | | 492,542 |
Interest expense | | | (3,665,345) | | | (916,626) |
Total other expense | | | (1,353,956) | | | (151,279) |
Total expenses before asset management fee waiver | | | (20,073,323) | | | (6,548,249) |
Asset management fee waived by Advisor | | | 197,397 | | | 409,803 |
Net expenses after asset management fee waiver | | | (19,875,926) | | | (6,138,446) |
Net loss | | | $(8,551,339) | | | $(3,296,194) |
| | Year Ended December 31, 2020 | | | Year Ended December 31, 2019 | |
Net loss | | | $(8,551,339) | | | $(3,296,194) |
Adjustments: | | | | | ||
Real estate-related depreciation and amortization | | | 6,966,232 | | | 2,738,190 |
FFO | | | (1,585,107) | | | (558,004) |
Adjustments: | | | | | ||
Amortization of real estate note investment issuance costs | | | 48,766 | | | 19,904 |
Accretion of discount on preferred stock | | | 467,646 | | | 4,047 |
Amortization of debt issuance costs | | | 213,244 | | | 62,248 |
Acquisition fees and expenses | | | 2,330,872 | | | 164,869 |
Accretion of below market leases | | | (53,544) | | | — |
Core FFO | | | $1,421,877 | | | $(306,936) |
| | | | |||
FFO per share - basic and diluted | | | $(0.15) | | | $(0.12) |
Core FFO per share - basic and diluted | | | $0.13 | | | $(0.07) |
Weighted average shares outstanding | | | 10,781,487 | | | 4,711,343 |
| | For the Year Ended December 31, | ||||
| | 2020 | | | 2019 | |
Net cash used in operating activities | | | $(2,815,684) | | | $(459,142) |
Net cash used in investing activities | | | (83,284,170) | | | (38,130,062) |
Net cash provided by financing activities | | | 42,990,664 | | | 82,925,023 |
Net (decrease) increase in cash and cash equivalents and restricted cash | | | $(43,109,190) | | | $44,335,819 |
| | | | | | Distributions Paid(3) | | | ||||||||||
Period | | | Distributions Declared(1) | | | Distributions Declared Per Share(1)(2) | | | Cash | | | Reinvested (DRP) | | | Total | | | Cash Provided By (Used In) Operating Activities |
First Quarter 2020 | | | $1,183,119 | | | $0.125 | | | $888,805 | | | $237,326 | | | $1,126,131 | | | $571,878 |
Second Quarter 2020 | | | 1,309,923 | | | $0.125 | | | 1,017,593 | | | 274,570 | | | 1,292,163 | | | (32,296) |
Third Quarter 2020 | | | 1,412,921 | | | $0.125 | | | 1,090,610 | | | 293,235 | | | 1,383,845 | | | (364,225) |
Fourth Quarter 2020 | | | 1,492,087 | | | $0.125 | | | 1,148,369 | | | 301,235 | | | 1,449,604 | | | (2,991,041) |
Total | | | $5,398,050 | | | | | $4,145,377 | | | $1,106,366 | | | $5,251,743 | | | $(2,815,684) |
(1) | Distributions for the periods from January 1, 2020 through December 31, 2020 were based on daily record dates and were calculated at a rate of $0.00136612 per share per day. |
(2) | Assumes the share was issued and outstanding each day during the period presented. |
(3) | Distributions are paid on a monthly basis. In general, distributions for all record dates of a given month are paid on or about the fifth business day of the following month. |
Quantitative and Qualitative Disclosures About Market Risk |
Financial Statements and Supplementary Data |
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
Controls and Procedures |
Other Information |
Directors, Executive Officers and Corporate Governance |
Name* | | | Age** | | | Positions |
Enzio Cassinis | | | 43 | | | Chief Executive Officer and President |
Adam Larson | | | 39 | | | Chief Financial Officer |
Susan Hallenberg | | | 53 | | | Chief Accounting Officer and Treasurer |
Gregg Christensen | | | 51 | | | Chief Legal Officer |
Paul Fredenberg | | | 44 | | | Chief Investment Officer |
Daniel Shaeffer | | | 50 | | | Chairman of the Board and Director |
Chad Christensen | | | 48 | | | Director |
R. Brent Hardy | | | 50 | | | Independent Director |
Gentry Jensen | | | 49 | | | Independent Director |
John Lunt | | | 48 | | | Independent Director |
* | The address of each executive officer and director listed is 1245 Brickyard Road, Suite 250, Salt Lake City, Utah 84106. |
** | As of December 31, 2020 |
• | our accounting and financial reporting processes; |
• | the integrity and audits of our financial statements; |
• | our compliance with legal and regulatory requirements; |
• | the qualifications and independence of our independent registered public accounting firm; and |
• | the performance of our internal auditors and our independent registered public accounting firm. |
Executive Compensation |
Executive Officer | | | Date of Grant | | | Number of Time-Based LTIP Units | | | Value of Time-Based LTIP Units |
Enzio A. Cassinis | | | March 25, 2020 | | | 4,500 | | | $45,000 |
Adam Larson | | | March 25, 2020 | | | 3,375 | | | $33,750 |
Paul Fredenberg | | | March 25, 2020 | | | 2,063 | | | $20,630 |
Executive Officer | | | Date of Grant | | | Number of Performance- Based LTIP Units | | | Value of Performance- Based LTIP Units |
Enzio A. Cassinis | | | March 25, 2020 | | | 13,500 | | | $77,490 |
Adam Larson | | | March 25, 2020 | | | 10,125 | | | $58,118 |
Paul Fredenberg | | | March 25, 2020 | | | 6,187 | | | $35,513 |
Internal Rate of Return | | | Percentage Earned |
Less than 6% | | | 0% |
6% | | | 50% |
10% or greater | | | 100% |
Name and Principal Position | | | Year | | | Stock Awards(1) | | | All Other Compensation | | | Total |
Enzio A. Cassinis, Chief Executive Officer and President | | | 2020 | | | $122,490 | | | — | | | $122,490 |
Adam Larson, Chief Financial Officer | | | 2020 | | | $91,868 | | | — | | | $91,868 |
Paul Fredenberg, Chief Investment Officer | | | 2020 | | | $56,143 | | | — | | | $56,143 |
(1) | Represents the aggregate grant date fair value of awards computed in accordance with ASC Topic 718. The values of the time-based LTIP Units granted on March 25, 2020 are as follows: Enzio A. Cassinis - $45,000; Adam Larson - $33,750; and Paul Fredenberg - $20,630. The values of the performance-based LTIP Units granted on March 25, 2020 are as follows: Enzio A. Cassinis - $77,490; Adam Larson - $58,118; and Paul Fredenberg - $35,513. |
| | Stock Awards | ||||||||||
Name | | | Number of Units that Have Not Vested(1) | | | Market Value of Units that Have Not Vested(2) | | | Equity Incentive Plan Awards: Number of Unearned Units that Have Not Vested(3) | | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Units that Have Not Vested(2)(4) |
Enzio A. Cassinis | | | 4,500 | | | $45,000 | | | 13,500 | | | $135,000 |
Adam Larson | | | 3,375 | | | $33,750 | | | 10,125 | | | $101,250 |
Paul Fredenberg | | | 2,063 | | | $20,630 | | | 6,187 | | | $61,870 |
(1) | Represents the number of LTIP Units for which a portion of the awards remain unvested as of December 31, 2020, based on service conditions. The time-based LTIP Units granted on March 25, 2020 vest in four equal installments on an annual basis beginning on January 1, 2021, subject to continued employment with CC Advisors III or its affiliates. |
(2) | Based on the estimated value of our common stock of $10.00 per share (which represents the most recent price an investor was willing to purchase our shares of common stock in our public offering) as of December 31, 2020. |
(3) | Represents the number of LTIP Units (at maximum amounts) for which a portion of the awards remain unearned and unvested as of December 31, 2020, based on performance conditions. For more information regarding the threshold, target and maximum amounts with respect to performance-based LTIP Units, see “—2020 Equity Grants—Performance-Based LTIP Units.” Any earned performance-based LTIP Units will vest on the first anniversary of the end of the performance period, subject to continued employment with CC Advisors III or its affiliates. |
(4) | For performance units, value is based on the estimated value of our common stock of $10.00 per share (which represents the most recent price an investor was willing to purchase our shares of common stock in our public offering) as of December 31, 2020. The number and value set forth in the table assumes that the named executive officers earn the target amounts of performance units. See footnote 3 above. |
• | $500 in cash for each board meeting attended (including if by teleconference); and |
• | $500 in cash for each committee meeting attended (if at a different time or place than a board meeting and including if by teleconference). |
Name | | | Fees Earned or Paid in Cash | | | Total |
Chad Christensen | | | $— | | | $— |
Daniel Shaeffer | | | $— | | | $— |
R. Brent Hardy | | | $12,000 | | | $12,000 |
Gentry Jensen | | | $12,000 | | | $12,000 |
John Lunt | | | $12,000 | | | $12,000 |
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
Name of Beneficial Owner(1) | | | Number of Common Shares Beneficially Owned | | | Percent of Common Shares Beneficially Owned |
Enzio A. Cassinis, Chief Executive Officer and President | | | 10,125(2) | | | * |
Adam Larson, Chief Financial Officer | | | 8,375(2) | | | * |
Susan Hallenberg, Chief Accounting Officer and Treasurer | | | — | | | — |
Paul Fredenberg, Chief Investment Officer | | | 6,438(2) | | | * |
Gregg Christensen, Chief Legal Officer and Secretary | | | 20,000(3) | | | * |
Daniel Shaeffer, Chairman of the Board and Director | | | 20,000(3) | | | * |
Chad Christensen, Director | | | 20,000(3) | | | * |
R. Brent Hardy, Independent Director | | | — | | | — |
Gentry Jensen, Independent Director | | | — | | | — |
John Lunt, Independent Director | | | — | | | — |
All directors and executive officers as a group | | | 44,938 | | | * |
* | Indicates less than 1% of the outstanding common stock. |
(1) | The address of each beneficial owner listed is 1245 Brickyard Road, Suite 250, Salt Lake City, Utah 84106. |
(2) | Reflects LTIP Units granted by the board of directors. Upon achieving parity with the common units and becoming “redeemable” in accordance with the terms of CCOP’s partnership agreement, LTIP Units may be redeemed for cash, or at our option, an equal number of shares of our common stock, subject to certain restrictions. Not all LTIP Units have vested |
(3) | CROP owns 20,000 shares of our outstanding common stock. Through entities they own and control, Gregg Christensen, Daniel Shaeffer and Chad Christensen have an ownership interest in CROP. In addition, they are three of the five directors that comprise the board of directors of CRII, the general partner of CROP, and as such have voting and investment control of the shares held by CROP. |
Certain Relationships and Related Transactions, and Director Independence |
• | finding, presenting and recommending investment opportunities to us consistent with our investment policies and objectives; |
• | making certain real estate-related debt investment decisions for us, subject to the limitations in our charter and the direction and oversight of our board of directors; |
• | structuring the terms and conditions of our investments, sales and joint ventures; |
• | acquiring properties and other investments on our behalf in compliance with our investment objectives and policies; |
• | arranging for financing and refinancing of properties and our other investments; |
• | entering into leases and service contracts for our real properties; |
• | supervising and evaluating each loan servicer’s and property manager’s performance; |
• | reviewing and analyzing the operating and capital budgets of properties underlying our investments and properties we may acquire; |
• | entering into servicing contracts for our loans; |
• | assisting us in obtaining insurance; |
• | generating an annual budget for us; |
• | reviewing and analyzing financial information for each of our assets and the overall portfolio; |
• | formulating and overseeing the implementation of strategies for the administration, promotion, management, operation, maintenance, improvement, financing and refinancing, marketing, leasing and disposition of our properties and other investments; |
• | performing investor-relations services; |
• | maintaining our accounting and other records and assisting us in filing all reports required to be filed with the SEC, the IRS and other regulatory agencies; |
• | engaging and supervising the performance of our agents, including our registrar and transfer |
• | performing any other services reasonably requested by us. |
March 23, 2021 | | | The Conflicts Committee of the Board of Directors: |
| | Gentry Jensen (Chairman), R. Brent Hardy, and John Lunt |
Principal Accounting Fees and Services |
| | For the Year Ended December 31, | ||||
| | 2020 | | | 2019 | |
Audit fees(a) | | | $339,280 | | | $240,855 |
Audit-related fees | | | — | | | — |
Tax fees | | | — | | | — |
All other fees | | | — | | | — |
Total | | | $339,280 | | | $240,855 |
(a) | Audit fees include amounts billed to us related to annual financial statement audit work, quarterly financial statement reviews and review of SEC registration statements. |
Exhibits, Financial Statement Schedules |
(a) (1) | Financial Statement Schedules |
(a) (2) | Exhibits |
Exhibit Number | | | Exhibit Description |
2.1 | | | Agreement and Plan of Merger by and among the Company Cottonwood Communities O.P., LP, Cottonwood Communities GP Subsidiary, LLC, Cottonwood Residential O.P., LP and Cottonwood Residential II, Inc. dated as of January 26, 2021 (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed February 1, 2021) |
2.2 | | | Agreement and Plan of Merger by and among the Company, Cottonwood Communities O.P, LP, Cottonwood Communities GP Subsidiary, LLC, Cottonwood Multifamily REIT I O.P., LP and Cottonwood Multifamily REIT I, Inc. dated as of January 26, 2021 (incorporated by reference to Exhibit 2.2 to the Company’s Current Report on Form 8-K filed February 1, 2021) |
2.3 | | | Agreement and Plan of Merger by and among the Company, Cottonwood Communities O.P., LP, Cottonwood Communities GP Subsidiary, LLC, Cottonwood Multifamily REIT II O.P., LP and Cottonwood Multifamily REIT II, Inc. dated as of January 26, 2021 (incorporated by reference to Exhibit 2.3 to the Company’s Current Report on Form 8-K filed February 1, 2021) |
3.1 | | | Articles of Amendment and Restatement (incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-11(No. 333-215272) filed June 27, 2018) |
3.2 | | | Bylaws (incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-11 (No. 333-215272) filed December 22, 2016) |
3.3 | | | Articles Supplementary - Class A Common Stock (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed August 19, 2019) |
3.4 | | | Articles Supplementary - Class T Common Stock (incorporated by reference to Exhibit 3.2 to the Company's Current Report on Form 8-K filed August 19, 2019) |
3.5 | | | Articles of Amendment (incorporated by reference to Exhibit 3.3 to the Company's Current Report on Form 8-K filed August 19, 2019) |
3.6 | | | Articles Supplementary - Preferred Stock (incorporated by reference to Exhibit 3.6 to the Company’s Quarterly Report on Form 10-Q filed November 13, 2019) |
4.1 | | | Form of Subscription Agreement (incorporated by reference to Appendix A to the prospectus included in the Company’s Post-Effective Amendment No. 5 to the Company’s Registration Statement on Form S-11 filed April 20, 2020) |
4.2 | | | Statement regarding restrictions on transferability of shares of common stock (to appear on stock certificate or to be sent upon request and without charge to stockholders issued shares without certificates) (incorporated by reference to Exhibit 4.2 to the Company’s Registration Statement on Form S-11 (No. 333-215272) filed June 27, 2018) |
4.3 | | | Amended and Restated Distribution Reinvestment Plan (incorporated by reference to Appendix B to the prospectus included in the Company’s Post-Effective Amendment No. 5 to the Company’s Registration Statement on Form S-11 filed April 20, 2020) |
4.4* | | | Description of the Company's Securities |
10.1 | | | Advisory Agreement among Cottonwood Communities, Inc., Cottonwood Communities O.P., LP and CC Advisors III, LLC dated August 13, 2020 (incorporated by reference to Exhibit 10.1 to the Company’s Registration Statement on Form S-4 filed February 3, 2021) |
10.2 | | | Second Amended and Restated Dealer Manager Agreement (including the Form of Selected Dealer Agreement), by and among the Company, CC Advisors III, LLC and Orchard Securities, LLC, dated February 20, 2020 (incorporated by reference to Exhibit 1.4 to the Company’s Post-Effective Amendment No. 5 to the Registration Statement on Form S-11 filed April 20, 2020) |
Exhibit Number | | | Exhibit Description |
10.3 | | | Voting Agreement, by and among the Company, Daniel Schaeffer, Chad Christenson, Gregg Christenson, Eric Marlin, Cottonwood Residential Holdings, LLC and High Traverse Holdings, LLC, dated January 26, 2021, (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed February 1, 2021) |
10.4 | | | Second Amended and Restated Three-Party Agreement by and among the Company, Cottonwood Communities O.P., LP and CC Advisors III, LLC, dated January 26, 2021 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed February 1, 2021) |
10.5 | | | Managing Broker-Dealer Agreement (incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q filed November 13, 2019) |
10.6 | | | Amended and Restated Agreement of Limited Partnership of Cottonwood Communities O.P., LP dated February 1, 2021 (incorporated by reference to Exhibit 10.5 to the Company’s Post-Effective Amendment No. 5 to the Registration Statement on Form S-11 filed April 20, 2020) |
10.7 | | | Assignment of Promotional Interest by and among Cottonwood Residential O.P., LP, Cottonwood Communities Investor, LLC and Cottonwood Communities Advisors Promote, LLC dated March 1, 2019 (incorporated by reference to Exhibit 10.8 to Post-Effective Amendment No. 2 to the Company’s Registration Statement on Form S-11 filed May 3, 2019) |
10.8 | | | Master Credit Facility Agreement by and between CC West Palm, LLC and Berkadia Commercial Mortgage, LLC dated May 30, 2019 (incorporated by reference to Exhibit 10.5 on Form 8-K filed June 4, 2019) |
10.9 | | | Consolidated, Amended and Restated Multifamily Note by and between CC West Palm, LLC and Berkadia Commercial Mortgage, LLC dated May 30, 2019 (incorporated by reference to Exhibit 10.6 on Form 8-K filed June 4, 2019) |
10.10 | | | Property Management Agreement (Luma) between CC West Palm, LLC and Cottonwood Communities Management, LLC effective as of May 30, 2019 (incorporated by reference to Exhibit 10.14 on Form 10-K filed March 25, 2020) |
10.11 | | | Revolving Loan and Security Agreement (One Upland) between KRE JAG One Upload Owner LLC and JPMorgan Chase Bank, N.A. dated March 19, 2020 (incorporated by reference to Exhibit 10.16 to the Company’s Post-Effective Amendment No. 5 to the Registration Statement on Form S-11 filed April 20, 2020) |
10.12 | | | Promissory Note between KRE JAG One Upland Owner LLC and JPMorgan Chase Bank, N.A. dated March 19, 2020 (incorporated by reference to Exhibit 10.17 to the Company’s Post-Effective Amendment No. 5 to the Registration Statement on Form S-11 filed April 20, 2020) |
10.13 | | | Property Management Agreement between KRE JAG One Upland Owner LLC and Cottonwood Communities Management, LLC dated March 19, 2020 (incorporated by reference to Exhibit 10.18 to the Company’s Post-Effective Amendment No. 5 to the Registration Statement on Form S-11 filed April 20, 2020) |
10.14 | | | Form of Performance-Based LTIP Unit Award Agreement (incorporated by reference to Exhibit 10.19 to the Company’s Post-Effective Amendment No. 5 to the Registration Statement on Form S-11 filed April 20, 2020) |
10.15 | | | Form of Time-Based LTIP Unit Award Agreement (incorporated by reference to Exhibit 10.20 to the Company’s Post-Effective Amendment No. 5 to the Registration Statement on Form S-11 filed April 20, 2020) |
21.1* | | | Subsidiaries of the Company |
31.1* | | | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
31.2* | | | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
32.1* | | | Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002 |
32.2* | | | Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002 |
99.1 | | | Share Repurchase Program (incorporated by reference to Exhibit 99.1 to the Company’s Registration Statement on Form S-11 (No. 333-215272) filed May 22, 2018) |
99.2* | | | Amended and Restated Share Repurchase Program |
Exhibit Number | | | Exhibit Description |
101.INS* | | | XBRL Instance Document |
101.SCH* | | | XBRL Taxonomy Extension Schema |
101.CAL* | | | XBRL Taxonomy Extension Calculation Linkbase |
101.DEF* | | | XBRL Taxonomy Extension Definition Linkbase |
101.LAB* | | | XBRL Taxonomy Extension Label Linkbase |
101.PRE* | | | XBRL Taxonomy Extension Presentation Linkbase |
* | Filed herewith |
Form 10-K Summary |
| | COTTONWOOD COMMUNITIES, INC. | |
| | ||
March 26, 2021 | | | /s/ Enzio Cassinis |
Date | | | Enzio Cassinis, Chief Executive Officer (Principal Executive Officer) |
March 26, 2021 | | | /s/ Adam Larson |
Date | | | Adam Larson, Chief Financial Officer (Principal Financial Officer) |
| | ||
March 26, 2021 | | | /s/ Susan Hallenberg |
Date | | | Susan Hallenberg, Chief Accounting Officer and Treasurer (Principal Accounting Officer) |
| | ||
March 26, 2021 | | | /s/ Enzio Cassinis |
Date | | | Enzio Cassinis, Chief Executive Officer and President (Principal Executive Officer) |
| | ||
March 26, 2021 | | | /s/ Daniel Shaeffer |
Date | | | Daniel Shaeffer, Chairman of the Board and Director |
| | ||
March 26, 2021 | | | /s/ Chad Christensen |
Date | | | Chad Christensen, Director |
| | ||
March 26, 2021 | | | /s/ R. Brent Hardy |
Date | | | R. Brent Hardy, Independent Director |
| | ||
March 26, 2021 | | | /s/ Gentry Jensen |
Date | | | Gentry Jensen, Independent Director |
| | ||
March 26, 2021 | | | /s/ John Lunt |
Date | | | John Lunt, Independent Director |
| | ||
Consolidated Financial Statements | | | |
| | ||
| | ||
| | ||
| | ||
| | ||
| | ||
| | ||
Financial Statement Schedule | | | |
| |
| | December 31, | ||||
| | 2020 | | | 2019 | |
Assets | | | | | ||
Real estate assets, net | | | $161,091,994 | | | $63,905,651 |
Investments in unconsolidated real estate entities | | | 30,000,461 | | | 4,961,868 |
Real estate note investment, net | | | 8,254,736 | | | 2,059,309 |
Cash and cash equivalents | | | 4,361,564 | | | 47,549,804 |
Restricted cash | | | 271,240 | | | 192,190 |
Other assets | | | 824,687 | | | 707,524 |
Total assets | | | 204,804,682 | | | 119,376,346 |
Liabilities and equity | | | | | ||
Liabilities | | | | | ||
Credit facilities, net | | | 70,319,868 | | | 34,990,146 |
Preferred stock, net | | | 29,824,988 | | | 809,478 |
Related party payables | | | 580,983 | | | 287,561 |
Accounts payable, accrued expenses and other liabilities | | | 1,995,117 | | | 992,689 |
Total liabilities | | | 102,720,956 | | | 37,079,874 |
Commitments and contingencies (Note 12) | | | | | ||
Stockholders' equity | | | | | ||
Common stock, $0.01 par value, 1,000,000,000 shares authorized; 12,232,289 and 8,851,759 shares issued and outstanding at December 31, 2020 and 2019, respectively | | | 122,323 | | | 88,518 |
Additional paid-in capital | | | 121,676,787 | | | 87,973,949 |
Accumulated distributions | | | (7,767,642) | | | (2,369,592) |
Accumulated deficit | | | (11,947,742) | | | (3,396,403) |
Total stockholders' equity | | | 102,083,726 | | | 82,296,472 |
Total liabilities and stockholders' equity | | | $204,804,682 | | | $119,376,346 |
| | Year Ended December 31, | ||||
| | 2020 | | | 2019 | |
Revenues | | | | | ||
Rental and other property revenues | | | $10,748,748 | | | $2,797,475 |
Real estate note investment interest | | | 575,839 | | | 44,777 |
Total revenues | | | 11,324,587 | | | 2,842,252 |
Expenses | | | | | ||
Property operations expense | | | 4,569,857 | | | 1,428,925 |
Reimbursable operating expenses to related parties | | | 1,029,920 | | | 541,652 |
Asset management fee to related party | | | 2,799,466 | | | 811,395 |
Depreciation and amortization | | | 6,966,232 | | | 2,738,190 |
General and administrative expenses | | | 3,353,892 | | | 876,808 |
Total operating expenses | | | 18,719,367 | | | 6,396,970 |
Other income (expense) | | | | | ||
Equity in earnings of unconsolidated real estate entities | | | 2,113,386 | | | 272,805 |
Interest income | | | 198,003 | | | 492,542 |
Interest expense | | | (3,665,345) | | | (916,626) |
Total other expense | | | (1,353,956) | | | (151,279) |
Total expenses before asset management fee waiver | | | (20,073,323) | | | (6,548,249) |
Asset management fee waived by Advisor | | | 197,397 | | | 409,803 |
Net expenses after asset management fee waiver | | | (19,875,926) | | | (6,138,446) |
Net loss | | | $(8,551,339) | | | $(3,296,194) |
Weighted-average shares outstanding | | | 10,781,487 | | | 4,711,343 |
Net loss per common share - basic and diluted | | | $(0.79) | | | $(0.70) |
| | Stockholders' Equity | | | ||||||||||||||
| | Common Stock | | | Additional Paid-In Capital | | | Accumulated Distributions | | | Accumulated Deficit | | | Total Equity | ||||
| | Shares | | | Amount | | ||||||||||||
Balance at December 31, 2018 | | | 366,654 | | | $3,667 | | | $3,662,233 | | | $— | | | $(100,209) | | | $3,565,691 |
Issuance of common stock | | | 8,485,105 | | | 84,851 | | | 84,311,716 | | | — | | | — | | | 84,396,567 |
Distributions to investors | | | — | | | — | | | — | | | (2,369,592) | | | — | | | (2,369,592) |
Net loss | | | — | | | — | | | — | | | — | | | (3,296,194) | | | (3,296,194) |
Balance at December 31, 2019 | | | 8,851,759 | | | $88,518 | | | $87,973,949 | | | $(2,369,592) | | | $(3,396,403) | | | $82,296,472 |
Issuance of common stock | | | 3,411,837 | | | 34,118 | | | 33,900,138 | | | — | | | — | | | 33,934,256 |
Common stock repurchases | | | (31,307) | | | (313) | | | (268,300) | | | — | | | — | | | (268,613) |
Share based compensation | | | — | | | — | | | 71,000 | | | — | | | — | | | 71,000 |
Distributions to investors | | | — | | | — | | | — | | | (5,398,050) | | | — | | | (5,398,050) |
Net loss | | | — | | | — | | | — | | | — | | | (8,551,339) | | | (8,551,339) |
Balance at December 31, 2020 | | | 12,232,289 | | | $122,323 | | | $121,676,787 | | | $(7,767,642) | | | $(11,947,742) | | | $102,083,726 |
| | For the Year Ended December 31, | ||||
| | 2020 | | | 2019 | |
Cash flows from operating activities: | | | | | ||
Net loss | | | $(8,551,339) | | | $(3,296,194) |
Adjustments to reconcile net loss to net cash used in operating activities: | | | | | ||
Depreciation and amortization | | | 6,966,232 | | | 2,738,190 |
Equity in earnings | | | (2,113,386) | | | (272,805) |
Amortization of real estate note investment issuance cost | | | 48,766 | | | 19,904 |
Amortization of debt issuance costs | | | 213,243 | | | 62,248 |
Noncash interest expense on preferred stock | | | 467,646 | | | 4,047 |
Share based compensation | | | 71,000 | | | — |
Changes in operating assets and liabilities: | | | | | ||
Other assets | | | (646,063) | | | (5,153) |
Related party payables | | | 293,422 | | | 158,944 |
Accounts payable, accrued expenses and other liabilities | | | 434,795 | | | 131,677 |
Net cash used in operating activities | | | (2,815,684) | | | (459,142) |
Cash flows from investing activities: | | | | | ||
Acquisitions of real estate | | | (53,904,597) | | | (31,171,298) |
Capital improvements to real estate | | | (210,173) | | | (190,488) |
Investments in unconsolidated real estate entities | | | (22,925,207) | | | (4,689,063) |
Issuance of real estate note investment including issuance costs | | | (6,244,193) | | | (2,079,213) |
Net cash used in investing activities | | | (83,284,170) | | | (38,130,062) |
Cash flows from financing activities: | | | | | ||
Proceeds from line of credit | | | 12,000,000 | | | — |
Repayments of line of credit | | | (26,500,000) | | | — |
Proceeds from issuance of preferred stock, net of issuance costs | | | 28,547,864 | | | 805,431 |
Proceeds from issuance of common stock | | | 33,356,790 | | | 83,722,064 |
Common stock repurchases | | | (268,613) | | | — |
Distributions to common stockholders | | | (4,145,377) | | | (1,602,472) |
Net cash provided by financing activities | | | 42,990,664 | | | 82,925,023 |
Net (decrease) increase in cash and cash equivalents and restricted cash | | | (43,109,190) | | | 44,335,819 |
Cash and cash equivalents and restricted cash, beginning of period | | | 47,741,994 | | | 3,406,175 |
Cash and cash equivalents and restricted cash, end of period | | | $4,632,804 | | | $47,741,994 |
| | For the Year Ended December 31, | ||||
| | 2020 | | | 2019 | |
Reconciliation of cash and cash equivalents and restricted cash to the consolidated balance sheets: | | | | | ||
Cash and cash equivalents | | | $4,361,564 | | | $47,549,804 |
Restricted cash | | | 271,240 | | | 192,190 |
Total cash and cash equivalents and restricted cash | | | $4,632,804 | | | $47,741,994 |
| | | | |||
Supplemental disclosure of cash flow information: | | | | | ||
Cash paid for interest | | | $2,779,458 | | | $726,949 |
| | | | |||
Supplemental disclosure of non-cash investing and financing activities: | | | | | ||
Credit facilities entered into in conjunction with acquisition of real estate | | | $49,616,479 | | | $35,995,000 |
Assumption of liabilities in connection with acquisition of real estate | | | — | | | 452,639 |
Proceeds receivable for issuance of common stock | | | — | | | 528,900 |
Issuance of common stock through dividend reinvestment program | | | 1,106,366 | | | 401,603 |
Common stock distributions declared but not yet paid | | | 511,824 | | | 365,517 |
Land improvements | | | 5 - 15 |
Buildings | | | 30 |
Building improvements | | | 5 - 15 |
Furniture, fixtures and equipment | | | 5 - 15 |
Intangible assets | | | Over lease term |
Standard | | | Description | | | Required date of adoption | | | Effect on the Financial Statements or Other Significant Matters |
ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments | | | This ASU requires entities to estimate a lifetime expected credit loss for most financial assets, including trade and other receivables and other long term financings including available for sale and held-to-maturity debt securities, and loans. Subsequently, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, which amends the scope of ASU 2016-13 and clarified that receivables arising from operating leases are not within the scope of the standard and should continue to be accounted for in accordance with the leases standard (Topic 842). | | | January 1, 2023 | | | ASU 2016-13 affects entities holding financial assets and net investments in leases that are not accounted for at fair value through net income. The amendments in ASU 2016-13 require a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. We are evaluating the impact of adopting ASU 2016-13 on our financial statements. |
| | December 31, 2020 | | | December 31, 2019 | |
Building and building improvements | | | $134,822,291 | | | $52,466,583 |
Land and land improvements | | | 28,182,025 | | | 10,658,155 |
Furniture, fixtures and equipment | | | 3,983,344 | | | 2,015,778 |
Intangible assets | | | 3,808,756 | | | 1,503,325 |
| | 170,796,416 | | | 66,643,841 | |
Less: Accumulated depreciation and amortization | | | (9,704,422) | | | (2,738,190) |
Real estate assets, net | | | $161,091,994 | | | $63,905,651 |
| | Allocated Amounts | ||||||||||||||||
Property | | | Building | | | Land | | | Land Improvements | | | Personal P roperty | | | Intangible | | | Total |
Cottonwood One Upland | | | $82,145,536 | | | $14,514,535 | | | $3,009,335 | | | $1,967,566 | | | $2,305,430 | | | $103,942,402 |
| | Allocated Amounts | ||||||||||||||||
Property | | | Building | | | Land | | | Land Improvements | | | Personal Property | | | Intangible | | | Total |
Cottonwood West Palm | | | $52,276,096 | | | $9,379,895 | | | $1,278,260 | | | $2,015,778 | | | $1,503,325 | | | $66,453,354 |
Development | | | Location | | | Units | | | Commitment Date | | | Preferred Return | | | Total Commitment | | | Amount Funded to Date |
Lector85 | | | Ybor City, FL | | | 254 | | | 08/15/2019 | | | 13%(1) | | | $9,900,000 | | | $9,900,000 |
Vernon Boulevard | | | Queens, NY | | | 534 | | | 07/23/2020 | | | 13%(2) | | | 15,000,000 | | | 15,000,000 |
Riverfront | | | West Sacramento, CA | | | 285 | | | 11/30/2020 | | | 16% | | | 15,091,649 | | | 2,680,148 |
Total | | | | | | | | | | | $39,991,649 | | | $27,580,148 |
(1) | Will be reduced to 10% annually upon the later to occur of (i) stabilization of the development project or (ii) the one-year anniversary of the receipt of all temporary certificates of occupancy subject to certain financial conditions being satisfied. |
(2) | Return also includes a profit participation upon a liquidity event, pari passu alongside the preferred equity contribution from the Preferred Co-Investor. |
| | | | December 31, | ||||||||||||||
Property Name | | | Debt Issuer | | | Maturity Date | | | Payment Type | | | Rate | | | 2020 | | | 2019 |
Cottonwood West Palm | | | Berkadia Commercial Mortgage, LLC | | | June 1, 2029 | | | Interest Only | | | 3.93% | | | $35,995,000(3) | | | $35,995,000 |
Cottonwood One Upland | | | J.P. Morgan Chase Bank, N.A. | | | March 19, 2023(1) | | | Interest Only | | | Libor + 1.50 -1.75%(2) | | | 35,500,000(4) | | | — |
Total credit facilities | | | | | | | | | | | 71,495,000 | | | 35,995,000 | ||||
Unamortized debt issuance costs | | | | | | | | | | | (1,175,132) | | | (1,004,854) | ||||
Credit facilities, net | | | | | | | | | | | $70,319,868 | | | $34,990,146 |
(1) | All or a portion of the amount outstanding can be prepaid at any time and the maturity date can be extended for two one-year periods, subject to the satisfaction of certain conditions. |
(2) | The spread is contingent upon certain debt yield metrics. |
(3) | We may finance other acquisitions through our Berkadia Credit facility. There is no limit on the amount we can draw as long as we maintain certain loan-to-value ratios and other requirements as set forth in the loan documents. |
(4) | We may obtain advances secured against Cottonwood One Upland up to $67,600,000 on our JP Morgan Credit Facility, as well as finance other future acquisitions up to $125,000,000 as long as certain loan-to-value ratios and other requirements are maintained. |
Year | | | Total |
2021 | | | $— |
2022 | | | — |
2023 | | | 35,500,000(1) |
2024 | | | — |
2025 | | | — |
Thereafter | | | 35,995,000 |
| | $71,495,000 |
(1) | The maturity date on the JP Morgan Credit Facility can be extended for two one-year periods, subject to the satisfaction of certain conditions. |
• | Quoted prices for similar assets/liabilities in active markets; |
• | Quoted prices for identical or similar assets/liabilities in non-active markets (e.g., few transactions, limited information, non-current prices, high variability over time); |
• | Inputs other than quoted prices that are observable for the asset/liability (e.g., interest rates, yield curves, volatilities, default rates); and |
• | Inputs that are derived principally from or corroborated by other observable market data. |
| | As of December 31, 2020 | | | As of December 31, 2019 | |||||||
| | Carrying Value | | | Fair Value | | | Carrying Value | | | Fair Value | |
Financial Asset: | | | | | | | | | ||||
Real estate note investment | | | $8,205,862 | | | $8,205,862 | | | $1,793,771 | | | $1,793,771 |
| | | | | | | | |||||
Financial Liability: | | | | | | | | | ||||
Berkadia Credit Facility | | | $35,995,000 | | | $38,658,000 | | | $35,995,000 | | | $37,410,000 |
JP Morgan Credit Facility | | | $35,500,000 | | | $35,500,000 | | | $— | | | $— |
Series 2019 Preferred Stock | | | $32,932,909 | | | $32,932,909 | | | $1,198,000 | | | $1,198,000 |
Share Purchase Anniversary | | | Repurchase Price |
Less than 1 year | | | $8.80 |
1 year | | | $9.00 |
2 years | | | $9.20 |
3 years | | | $9.40 |
4 years | | | $9.60 |
5 years | | | $9.80 |
A stockholder’s death or complete disability, 2 years or more | | | $10.00 |
Share Purchase Anniversary | | | Repurchase Price as a Percentage of Estimated Value(1) |
Less than 1 year | | | No repurchase allowed |
1 year - 2 years | | | 85% |
3 years - 4 years | | | 90% |
5 years and thereafter | | | 95% |
A stockholder’s death or complete disability, less than 2 years | | | 95% |
A stockholder’s death or complete disability, 2 years or more | | | 100% |
(1) | For the purposes of the share repurchase program, the “estimated value per share” will initially be equal to the purchase price per share at which the original purchaser or purchasers of the shares bought its shares from us, and the purchase price per share will be adjusted to reflect any stock dividends, combinations, splits, recapitalizations or any similar transaction with respect to the shares outstanding. |
| | For the Three Months Ended | ||||||||||
| | March 31, 2020 | | | June 30, 2020 | | | September 30, 2020 | | | December 31, 2020 | |
Revenues | | | | | | | | | ||||
Rental and other property revenues | | | $1,539,577 | | | $3,011,391 | | | $3,054,823 | | | $3,142,957 |
Real estate note investment interest | | | 71,715 | | | 117,413 | | | 171,746 | | | 214,965 |
Total revenues | | | 1,611,292 | | | 3,128,804 | | | 3,226,569 | | | 3,357,922 |
Expenses | | | | | | | | | ||||
Property operations expense | | | 655,284 | | | 1,268,246 | | | 1,358,507 | | | 1,287,820 |
Reimbursable operating expenses to related parties | | | 236,509 | | | 232,574 | | | 263,915 | | | 296,922 |
Asset management fee to related party | | | 449,653 | | | 680,656 | | | 811,233 | | | 857,924 |
Depreciation and amortization | | | 843,984 | | | 2,489,818 | | | 2,295,445 | | | 1,336,985 |
General and administrative expenses | | | 230,361 | | | 550,352 | | | 1,534,590 | | | 1,038,589 |
Total operating expenses | | | 2,415,791 | | | 5,221,646 | | | 6,263,690 | | | 4,818,240 |
Other income (expense) | | | | | | | | | ||||
Equity in earnings of unconsolidated real estate entities | | | 240,096 | | | 325,325 | | | 708,067 | | | 839,898 |
Interest income | | | 184,884 | | | 5,050 | | | 6,887 | | | 1,182 |
Interest expense | | | (537,971) | | | (897,013) | | | (1,045,464) | | | (1,184,897) |
Total other expense | | | (112,991) | | | (566,638) | | | (330,510) | | | (343,817) |
Total expenses before asset management fee waiver | | | (2,528,782) | | | (5,788,284) | | | (6,594,200) | | | (5,162,057) |
Asset management fee waived by Advisor | | | 127,440 | | | 12,350 | | | 48,543 | | | 9,064 |
Net expenses after asset management fee waiver | | | (2,401,342) | | | (5,775,934) | | | (6,545,657) | | | (5,152,993) |
Net loss | | | $(790,050) | | | $(2,647,130) | | | $(3,319,088) | | | $(1,795,071) |
Net loss per common share - basic and diluted | | | $(0.08) | | | $(0.25) | | | $(0.30) | | | $(0.15) |
| | For the Three Months Ended | ||||||||||
| | March 31, 2019 | | | June 30, 2019 | | | September 30, 2019 | | | December 31, 2019 | |
Revenues | | | | | | | | | ||||
Rental and other property revenues | | | $— | | | $367,542 | | | $1,180,972 | | | $1,248,961 |
Real estate note investment interest | | | — | | | — | | | 16,699 | | | 28,078 |
Total revenues | | | — | | | 367,542 | | | 1,197,671 | | | 1,277,039 |
Expenses | | | | | | | | | ||||
Property operations expense | | | — | | | 222,641 | | | 661,181 | | | 545,103 |
Reimbursable operating expenses to related parties | | | 125,000 | | | 125,485 | | | 148,906 | | | 142,261 |
Asset management fee to related party | | | 19,783 | | | 137,942 | | | 296,126 | | | 357,544 |
Depreciation and amortization | | | — | | | 445,951 | | | 1,270,577 | | | 1,021,662 |
General and administrative expenses | | | 118,160 | | | 134,198 | | | 210,700 | | | 413,750 |
Total operating expenses | | | 262,943 | | | 1,066,217 | | | 2,587,490 | | | 2,480,320 |
Other income (expense) | | | | | | | | | ||||
Equity in earnings of unconsolidated real estate entity | | | — | | | — | | | — | | | 272,805 |
Interest income | | | 31,432 | | | 130,599 | | | 137,543 | | | 192,968 |
| | For the Three Months Ended | ||||||||||
| | March 31, 2019 | | | June 30, 2019 | | | September 30, 2019 | | | December 31, 2019 | |
Interest expense | | | — | | | (134,636) | | | (388,186) | | | (393,804) |
Total other income (expense) | | | 31,432 | | | (4,037) | | | (250,643) | | | 71,969 |
Total expenses before asset management fee waiver | | | (231,511) | | | (1,070,254) | | | (2,838,133) | | | (2,408,351) |
Asset management fee waived by Advisor | | | — | | | — | | | 310,484 | | | 99,319 |
Net expenses after asset management fee waiver | | | (231,511) | | | (1,070,254) | | | (2,527,649) | | | (2,309,032) |
Net loss | | | $(231,511) | | | $(702,712) | | | $(1,329,978) | | | $(1,031,993) |
Net loss per common share - basic and diluted | | | $(0.26) | | | $(0.18) | | | $(0.22) | | | $(0.12) |
| | | | | | | | | | Initial Cost to Company | | | Cost Capitalized Subsequent to Acquisition | | | Gross Amount Carried as of December 31, 2020 | | | Accumulated Depreciation and Amortization(2) | | | Date of Construction | | | Date Acquired | ||||||||||||||
Multifamily Apartment Community | | | Location | | | Ownership Percent | | | Number of Units | | | Encumbrances | | | Land | | | Buildings and Improvements | | | Land | | | Buildings and Improvements | | | Total(1) | | |||||||||||
Cottonwood West Palm | | | West Palm Beach, FL | | | 100.0% | | | 245 | | | $(35,995,000) | | | $9,379,895 | | | $57,073,459 | | | $248,531 | | | $9,379,895 | | | $57,321,990 | | | $66,701,885 | | | $(4,829,958) | | | 2018 | | | 5/30/2019 |
Cottonwood One Upland | | | Norwood, MA | | | 100.0% | | | 262 | | | (35,500,000) | | | 14,514,535 | | | 89,427,867 | | | 152,129 | | | 14,514,535 | | | 89,579,996 | | | 104,094,531 | | | (4,874,464) | | | 2016 | | | 3/19/2020 |
| | | | Total | | | 507 | | | $(71,495,000) | | | $23,894,430 | | | $146,501,326 | | | $400,660 | | | $23,894,430 | | | $146,901,986 | | | $170,796,416 | | | $(9,704,422) | | | | |
(1) | The aggregate cost of real estate for federal income tax purposes was $170,922,363 (unaudited) as of December 31, 2020. |
(2) | Depreciation is recognized on a straight-line basis over the estimated useful asset lives of the related assets, which is 30 years for buildings and ranges from five to 15 years for land improvements, building improvements and furniture, fixtures and equipment. Intangible assets are amortized to depreciation and amortization over the remaining lease term. |
| | 2020 | | | 2019 | |
Real estate assets: | | | | | ||
Balance at beginning of the year | | | $66,643,841 | | | $— |
Acquisitions of properties | | | 103,942,402 | | | 66,453,353 |
Improvements | | | 210,173 | | | 190,488 |
Balance at end of the year | | | $170,796,416 | | | $66,643,841 |
Accumulated depreciation and amortization: | | | | | ||
Balance at beginning of the year | | | $(2,738,190) | | | $— |
Depreciation and amortization | | | (6,966,232) | | | (2,738,190) |
Balance at end of the year | | | $(9,704,422) | | | $(2,738,190) |
| | December 31, | ||||
| | 2020 | | | 2019 | |
Assets | | | | | ||
Real estate assets, net | | | $822,239 | | | $675,821 |
Investments in unconsolidated real estate entities | | | 44,723 | | | 73,015 |
Cash and cash equivalents | | | 36,359 | | | 44,568 |
Restricted cash | | | 20,924 | | | 8,127 |
Related party notes | | | 9,177 | | | 9,208 |
Related party receivables | | | 1,187 | | | 1,485 |
Deficiency notes | | | — | | | 10,130 |
Other assets | | | 36,163 | | | 38,378 |
Total assets | | | $970,772 | | | $860,732 |
Liabilities, Equity, and Noncontrolling Interests | | | | | ||
Liabilities | | | | | ||
Mortgage notes, net | | | $628,042 | | | $568,451 |
Construction loans, net | | | 50,007 | | | — |
Preferred stock, net | | | 143,532 | | | 142,634 |
Unsecured promissory notes, net | | | 46,642 | | | 46,424 |
Accounts payable, accrued expenses and other liabilities | | | 33,354 | | | 20,394 |
Total liabilities | | | 901,577 | | | 777,903 |
Commitments and contingencies (Note 11) | | | | | ||
Equity and Noncontrolling Interests | | | | | ||
Stockholders’ equity | | | | | ||
Common stock, $0.01 par value per share; 1,000,000,000 shares authorized, 213,484 and 297,650 shares issued and outstanding at December 31, 2020 and 2019, respectively | | | 2 | | | 3 |
Additional paid-in capital | | | 3,554 | | | 5,355 |
Cumulative distributions | | | (380) | | | (166) |
Accumulated deficit | | | (1,889) | | | (930) |
Total stockholders’ equity | | | 1,287 | | | 4,262 |
Noncontrolling interests | | | | | ||
Limited partners | | | (70,684) | | | (35,634) |
Partially owned entities | | | 138,592 | | | 118,444 |
Total noncontrolling interests | | | 67,908 | | | 82,810 |
Total equity and noncontrolling interests | | | 69,195 | | | 87,072 |
Total liabilities, equity and noncontrolling interests | | | $970,772 | | | $864,975 |
| | Years Ended December 31, | ||||
| | 2020 | | | 2019 | |
Revenues | | | | | ||
Rental and other property revenues | | | $85,851 | | | $85,203 |
Property management and development | | | 15,532 | | | 12,545 |
Advisory services | | | 5,316 | | | 2,717 |
Total revenues | | | 106,699 | | | 100,465 |
Operating expenses | | | | | ||
Property operations | | | 34,266 | | | 35,189 |
Property management | | | 14,732 | | | 14,070 |
Depreciation and amortization | | | 32,858 | | | 32,793 |
General and administrative | | | 14,245 | | | 14,568 |
Total operating expenses | | | 96,101 | | | 96,620 |
Income from operations | | | 10,598 | | | 3,845 |
Equity in earnings of unconsolidated real estate entities | | | 589 | | | 1,179 |
Interest income | | | 4,137 | | | 1,412 |
Interest expense | | | (41,704) | | | (41,488) |
Gain on sale of unconsolidated real estate entities | | | — | | | 6,823 |
Loss on consolidation of variable interest entity | | | (2,543) | | | — |
Other expenses, net | | | (2,385) | | | (148) |
Loss before income taxes | | | (31,308) | | | (28,377) |
Income tax benefit (loss) | | | 3,768 | | | (292) |
Net loss | | | (27,540) | | | (28,669) |
Net loss attributable to noncontrolling interests: | | | | | ||
Limited partners | | | 23,893 | | | 22,194 |
Partially owned entities | | | 2,688 | | | 5,546 |
Net loss attributable to common stockholders | | | $(959) | | | $(929) |
| | Cottonwood Residential II, Inc. Stockholders’ Equity | | | Noncontrolling Interests | | | ||||||||||||||||||||
| | Common Stock | | | Additional Paid-In- Capital | | | Cumulative Distributions | | | Accumulated Deficit | | | Total Stockholders' Equity | | | Limited Partners | | | Partially Owned Entities | | | Total Equity and Noncontrolling Interests | ||||
| | Shares | | | Amount | | |||||||||||||||||||||
Balance at December 31, 2018 | | | 50 | | | $ — | | | $1 | | | $— | | | $(1) | | | $0 | | | $2,989 | | | $65,018 | | | $68,007 |
Acquisition of consolidated real estate assets | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 28,866 | | | 28,866 |
OP Units issued for interests in unconsolidated real estate entities | | | — | | | — | | | — | | | — | | | — | | | — | | | 9,697 | | | — | | | 9,697 |
Development contributions from noncontrolling interests | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 30,416 | | | 30,416 |
Advisor contributions from noncontrolling interests | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 6,457 | | | 6,457 |
Issuance of common stock, net of issuance costs | | | 297,600 | | | 3 | | | 5,354 | | | — | | | — | | | 5,357 | | | — | | | — | | | 5,357 |
Repurchase of OP Units | | | — | | | — | | | — | | | — | | | — | | | — | | | (15,492) | | | — | | | (15,492) |
Share based compensation | | | — | | | — | | | — | | | — | | | — | | | — | | | 2,302 | | | — | | | 2,302 |
Other comprehensive income | | | — | | | — | | | — | | | — | | | — | | | — | | | 143 | | | — | | | 143 |
Net loss | | | — | | | — | | | — | | | — | | | (929) | | | (929) | | | (22,194) | | | (5,546) | | | (28,669) |
Distributions | | | — | | | — | | | — | | | (166) | | | — | | | (166) | | | (13,079) | | | (6,767) | | | (20,012) |
Balance at December 31, 2019 | | | 297,650 | | | $3 | | | $5,355 | | | $(166) | | | $(930) | | | $4,262 | | | $(35,634) | | | $118,444 | | | $87,072 |
Development contributions from noncontrolling interests | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 20,453 | | | 20,453 |
Consolidation upon change of control (Note 3) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 15,430 | | | 15,430 |
Consolidation upon exchange of senior executive notes (Note 5) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (2,800) | | | (2,800) |
Interest acquired upon exchange of senior executive notes (Note 5) | | | — | | | — | | | — | | | — | | | — | | | — | | | 1,714 | | | (1,714) | | | — |
Redemption of common stock | | | (84,166) | | | (1) | | | (1,801) | | | — | | | — | | | (1,802) | | | — | | | — | | | (1,802) |
Repurchase of OP Units | | | — | | | — | | | — | | | — | | | — | | | — | | | (2,792) | | | — | | | (2,792) |
Share based compensation | | | — | | | — | | | — | | | — | | | — | | | — | | | 2,987 | | | — | | | 2,987 |
Other | | | — | | | — | | | — | | | — | | | — | | | — | | | 356 | | | — | | | 356 |
Net loss | | | — | | | — | | | — | | | — | | | (959) | | | (959) | | | (23,893) | | | (2,688) | | | (27,540) |
Distributions | | | — | | | — | | | — | | | (214) | | | — | | | (214) | | | (13,422) | | | (8,533) | | | (22,169) |
Balance at December 31, 2020 | | | 213,484 | | | $2 | | | $3,554 | | | $(380) | | | $(1,889) | | | $1,287 | | | $(70,684) | | | $138,592 | | | $69,195 |
| | Years Ended December 31, | ||||
| | 2020 | | | 2019 | |
Operating activities | | | | | ||
Net loss | | | $(27,540) | | | $(28,669) |
Adjustments to reconcile net loss to cash provided by operating activities: | | | | | ||
Depreciation and amortization | | | 32,858 | | | 32,793 |
Amortization of deferred financing costs | | | 6,632 | | | 6,301 |
Loss on consolidation of variable interest entity | | | 2,543 | | | — |
Gain on sale of unconsolidated real estate entities | | | — | | | (6,823) |
Share based compensation | | | 2,987 | | | 2,302 |
Other operating | | | (64) | | | 126 |
Equity in earnings of unconsolidated real estate entities | | | (589) | | | (1,179) |
Distributions from unconsolidated real estate entities - return on capital | | | 4,310 | | | 4,389 |
Changes in operating assets and liabilities: | | | | | ||
Other assets | | | 715 | | | 4,920 |
Accounts payable, accrued and other liabilities | | | 6,061 | | | 259 |
Net cash provided by operating activities | | | 27,913 | | | 14,419 |
Cash flows from investing activities | | | | | ||
Acquisition of interests in consolidated real estate assets, net of cash and restricted cash acquired | | | — | | | (1,675) |
Capital expenditures and development activities | | | (55,013) | | | (19,933) |
Contributions to developments from noncontrolling interests | | | 22,168 | | | 21,525 |
Investment in unconsolidated real estate entities | | | (274) | | | (9,186) |
Cash and restricted cash from consolidation of variable interest entity | | | 8,681 | | | — |
Distributions from unconsolidated real estate entities - return of capital | | | — | | | 11,140 |
Related party receivables | | | 451 | | | (1,056) |
Related party notes | | | (4,484) | | | (4,553) |
Issuance of deficiency notes | | | (30,942) | | | (10,130) |
Contributions to Advisor from noncontrolling interests | | | — | | | 6,457 |
Sponsored offering costs | | | (3,992) | | | (11,374) |
Other investing activities | | | (15) | | | (114) |
Net cash used in investing activities | | | (63,420) | | | (18,899) |
| | Years Ended December 31, | ||||
| | 2020 | | | 2019(1) | |
Cash flows from financing activities | | | | | ||
Principal payments on mortgage notes | | | (829) | | | (918) |
Proceeds from mortgage notes, net of issuance costs | | | 218,291 | | | 117,132 |
Proceeds from construction loans | | | 8,361 | | | — |
Repayment of mortgage notes | | | (158,834) | | | (95,679) |
Redemption of preferred stock | | | (1,192) | | | (1,640) |
Issuance of unsecured promissory notes, net of issuance costs | | | 947 | | | 21,819 |
Issuance of common stock | | | — | | | 5,665 |
Redemption of common stock | | | (1,802) | | | — |
Repurchase of OP Units | | | (2,792) | | | (15,492) |
Distributions to common stockholders | | | (214) | | | (166) |
Distributions to noncontrolling interest holders | | | (21,963) | | | (19,908) |
Other financing activity | | | 122 | | | 467 |
Net cash provided by financing activities | | | 40,095 | | | 11,280 |
Net increase in cash, cash equivalents and restricted cash | | | 4,588 | | | 6,800 |
Cash, cash equivalents, and restricted cash at the beginning of period | | | 52,695 | | | 45,895 |
Cash, cash equivalents, and restricted cash at the end of period | | | $57,283 | | | $52,695 |
| | | | |||
Reconciliation of cash, cash equivalents and restricted cash to the consolidated balance sheets: | | | | | ||
Cash and cash equivalents(1) | | | $36,359 | | | $44,568 |
Restricted cash(1) | | | 20,924 | | | 8,127 |
Total cash, cash equivalents and restricted cash | | | $57,283 | | | $52,695 |
| | | | |||
Supplemental schedule of cash flow information | | | | | ||
Interest paid | | | $33,813 | | | $34,688 |
Income taxes paid (refunded), net | | | (2,907) | | | 90 |
| | | | |||
Supplemental schedule of noncash investing and financing activities | | | | | ||
Consolidation upon change of control | | | | | ||
Capitalized development costs | | | $119,532 | | | $— |
Construction loan | | | 41,646 | | | — |
Elimination of deficiency notes | | | 41,072 | | | — |
Acquisition of investments in unconsolidated entities | | | | | ||
Value of OP Units issued for investments in unconsolidated real estate entities | | | — | | | 9,697 |
Note receivable exchanged for investment in unconsolidated real estate entity | | | — | | | 2,474 |
Related party note issuance | | | — | | | 4,655 |
Related party notes extinguished on exchange | | | 4,514 | | | — |
(1) | As of January 1, 2019, our cash and cash equivalents balance was $33,052 and our restricted cash balance was $12,843. |
Organization and Business |
2. | Basis of Presentation and Principles of Consolidation |
Land improvements | | | 5–15 |
Building | | | 30 |
Building improvements | | | 5–15 |
Furniture, fixtures, and equipment | | | 5–15 |
Standard | | | Description | | | Required date of adoption | | | Effect on the Financial Statements or Other Significant Matters |
ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments | | | This ASU requires entities to estimate a lifetime expected credit loss for most financial assets, including trade and other receivables and other long term financings including available for sale and held-to-maturity debt securities, and loans. Subsequently, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, which amends the scope of ASU 2016-13 and clarified that receivables arising from operating leases are not within the scope of the standard and should continue to be accounted for in accordance with the leases standard (Topic 842). | | | January 1, 2023 | | | ASU 2016-13 affects entities holding financial assets and net investments in leases that are not accounted for at fair value through net income. The amendments in ASU 2016-13 require a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. We are evaluating the impact of adopting ASU 2016-13 on our financial statements. |
| | December 31, | ||||
| | 2020 | | | 2019 | |
Land | | | $121,029 | | | $103,372 |
Construction in progress (1) | | | 167,506 | | | 15,570 |
Depreciable property: | | | | | ||
Buildings and improvement | | | 624,672 | | | 624,671 |
Furniture, fixtures, and equipment | | | 30,114 | | | 26,302 |
Intangible assets | | | 17,976 | | | 17,976 |
| | 961,297 | | | 787,891 | |
Less: Accumulated depreciation and amortization | | | (139,058) | | | (112,070) |
Real estate assets, net | | | $822,239 | | | $675,821 |
(1) | Includes construction in progress for our development projects and capitalized costs for improvements not yet placed in service at our stabilized properties. |
| | | | Allocated Amounts | ||||||||||||||
Property | | | Consolidation Date | | | Land | | | Building | | | Property Improvements | | | Intangible | | | Net Other |
Heights at Meridian | | | January 8, 2019 | | | $5,855 | | | $52,920 | | | $4,153 | | | $1,658 | | | $942 |
| | | | | | December 31, | ||||||
Lender | | | Debtor | | | Investment Type | | | 2020 | | | 2019 |
Operating Partnership | | | Senior Executives | | | Cottonwood Communities Advisor | | | $6,457 | | | $6,457 |
Operating Partnership | | | Senior Executives | | | Park Avenue Development | | | — | | | 1,811 |
Operating Partnership | | | Senior Executives | | | Broadway Development | | | — | | | 940 |
Cottonwood Communities Advisor | | | Cottonwood Multifamily REIT I, Inc. | | | Sponsored REIT | | | 996 | | | — |
Cottonwood Communities Advisor | | | Cottonwood Multifamily REIT II, Inc. | | | Sponsored REIT | | | 1,724 | | | — |
| | | | | | $9,177 | | | $9,208 |
| | December 31, | ||||
| | 2020 | | | 2019 | |
Fixed rate mortgage notes | | | $193,032 | | | $252,275 |
Variable rate mortgage notes | | | 440,813 | | | 321,317 |
Total mortgage notes | | | 633,845 | | | 573,592 |
Unamortized debt financing costs | | | (5,803) | | | (5,141) |
Mortgage notes, net | | | $628,042 | | | $568,451 |
Year | | | Total |
2021 | | | $1,371 |
2022 | | | 17,187 |
2023 | | | 83,465 |
2024 | | | 140,383 |
2025 | | | 4,135 |
Thereafter | | | 387,304 |
| | $633,845 |
Development | | | Interest Rate | | | Final Expiration Date | | | Loan Amount | | | Amount Drawn as of December 31, 2020 |
Sugarmont | | | 3.50% | | | October 1, 2022 | | | $63,250 | | | $41,646 |
Park Ave | | | Daily Libor + 1.9% | | | May 15, 2023 | | | 37,000 | | | 8,361 |
| | | | | | $100,250 | | | $50,007 |
| | | | | | | | December 31, | |||||||
| | Offering Size | | | Interest Rate | | | Maturity Date | | | 2020 | | | 2019 | |
2017 6.25% Notes | | | $5,000 | | | 6.25% | | | December 31, 2021 | | | $5,000 | | | $4,000 |
2017 6% Notes | | | 35,000 | | | 6.00% | | | December 31, 2022 | | | 20,918 | | | 20,918 |
2019 6% Notes | | | 25,000 | | | 6.00% | | | December 31, 2023 | | | 22,725 | | | 22,675 |
Unamortized debt financing costs | | | | | | | | | (2,001) | | | (2,764) | |||
| | $65,000 | | | | | | | $46,642 | | | $44,829 |
| | | | | | | | Shares Outstanding at December 31, | |||||||
| | Dividend Rate | | | Extension Dividend Rate | | | Redemption Date | | | 2020 | | | 2019 | |
Series 2016 Preferred Stock | | | 6.5% | | | 7.0% | | | January 31, 2021 | | | 14,149,943 | | | 14,277,566 |
Series 2017 Preferred Stock | | | 7.5% | | | 8.0% | | | January 31, 2022 | | | 258,550 | | | 258,550 |
| | | | Shares Outstanding at December 31, | |||||
Class | | | Shares Authorized | | | 2020 | | | 2019 |
Common Stock Total | | | 1,100,000,000 | | | 213,484 | | | 297,650 |
Voting Common Stock | | | 50 | | | 50 | | | 50 |
Non-Voting Common Stock | | | 2,000,000 | | | 213,434 | | | 213,434 |
Non-Voting Series B Common Stock | | | 100,000 | | | — | | | 84,166 |
| | | | | | | | | | Initial Cost to Company | | | | | December 31, 2020 | ||||||||||||||||||||||||
Property Name | | | Property Location | | | Number of Units | | | Year(s) Built | | | Percent Owned by the Operating Partnership | | | Land | | | Buildings, Intangibles and Improvements | | | Cost Capitalized Subsequent to Acquisition | | | Land | | | Buildings and Fixtures | | | Total | | | Accumulated Depreciation and Amortization | | | Total Cost, Net | | | Encumbrances |
Stabilized Multifamily Communities | | | | | | | | | | | | | | | | | | | | | | | | | |||||||||||||||
Alpha Mill | | | Charlotte, NC | | | 267 | | | 2007, 2014 | | | 10.0% | | | $8,156 | | | $43,770 | | | $1,427 | | | $8,156 | | | $45,163 | | | $53,319 | | | $(8,549) | | | $44,770 | | | $(36,265) |
Cason Estates | | | Murfreesboro, TN | | | 262 | | | 2005 | | | 100.0% | | | 1,865 | | | 25,028 | | | 440 | | | 1,865 | | | 25,463 | | | 27,328 | | | (4,568) | | | 22,760 | | | (33,594) |
Cottonwood | | | Salt Lake City, UT | | | 264 | | | 1986 | | | 100.0% | | | 3,290 | | | 20,645 | | | 1,278 | | | 3,290 | | | 21,921 | | | 25,211 | | | (3,992) | | | 21,219 | | | (21,645) |
Cottonwood Reserve | | | Charlotte, NC | | | 352 | | | 2004 | | | 91.1% | | | 2,911 | | | 34,987 | | | 11,277 | | | 3,757 | | | 45,411 | | | 49,168 | | | (10,180) | | | 38,988 | | | (38,788) |
Cottonwood Westside | | | Atlanta, GA | | | 197 | | | 2014 | | | 10.0% | | | 5,894 | | | 37,107 | | | 852 | | | 5,894 | | | 37,954 | | | 43,848 | | | (6,901) | | | 36,947 | | | (25,655) |
Enclave at Golden Triangle | | | Keller, TX | | | 273 | | | 2006 | | | 98.9% | | | 2,523 | | | 23,984 | | | 1,565 | | | 2,523 | | | 25,545 | | | 28,068 | | | (7,226) | | | 20,842 | | | (34,000) |
Heights at Meridian | | | Durham, NC | | | 339 | | | 2015 | | | 10.0% | | | 5,882 | | | 58,703 | | | 308 | | | 5,882 | | | 59,008 | | | 64,890 | | | (6,093) | | | 58,797 | | | (33,750) |
Melrose | | | Nashville, TN | | | 220 | | | 2015 | | | 100.0% | | | 6,181 | | | 52,920 | | | 458 | | | 6,181 | | | 53,371 | | | 59,552 | | | (10,036) | | | 49,516 | | | (47,100) |
Parc Westborough | | | Westborough, MA | | | 249 | | | 2016 | | | 35.7% | | | 10,221 | | | 55,179 | | | 269 | | | 10,221 | | | 55,444 | | | 65,665 | | | (7,068) | | | 58,597 | | | (38,010) |
Pavilions | | | Albuquerque, NM | | | 240 | | | 1992 | | | 96.4% | | | 2,100 | | | 24,437 | | | 5,222 | | | 2,100 | | | 29,651 | | | 31,751 | | | (12,454) | | | 19,297 | | | (37,350) |
Raveneaux | | | Houston, TX | | | 382 | | | 2000 | | | 97.0% | | | 3,423 | | | 45,308 | | | 2,387 | | | 3,423 | | | 47,688 | | | 51,111 | | | (9,816) | | | 41,295 | | | (26,675) |
Regatta | | | Houston, TX | | | 490 | | | 1968-1976 | | | 100.0% | | | 4,633 | | | 21,033 | | | 2,037 | | | 4,633 | | | 23,053 | | | 27,686 | | | (3,697) | | | 23,989 | | | (35,367) |
Retreat at Peachtree | | | Peachtree City, GA | | | 312 | | | 1999 | | | 100.0% | | | 6,415 | | | 38,790 | | | 1,666 | | | 6,415 | | | 40,446 | | | 46,861 | | | (9,979) | | | 36,882 | | | (48,719) |
Scott Mountain | | | Portland, OR | | | 262 | | | 1997, 2000 | | | 95.8% | | | 3,500 | | | 34,672 | | | 2,496 | | | 3,500 | | | 37,163 | | | 40,663 | | | (9,352) | | | 31,311 | | | (48,373) |
Stonebriar of Frisco | | | Frisco, TX | | | 306 | | | 1999 | | | 84.2% | | | 3,785 | | | 22,843 | | | 3,110 | | | 3,785 | | | 25,958 | | | 29,743 | | | (7,922) | | | 21,821 | | | (36,400) |
Summer Park | | | Buford, GA | | | 358 | | | 2001 | | | 98.7% | | | 6,596 | | | 30,116 | | | 529 | | | 6,596 | | | 30,640 | | | 37,236 | | | (3,713) | | | 33,523 | | | (44,620) |
Timber Ridge | | | Mobile, AL | | | 320 | | | 1998, 2000 | | | 30.4% | | | 1,833 | | | 21,614 | | | 3,521 | | | 1,833 | | | 25,135 | | | 26,968 | | | (7,865) | | | 19,103 | | | (15,274) |
The Marq Highland Park | | | Tampa, FL | | | 239 | | | 2015 | | | 10.0% | | | 2,962 | | | 43,039 | | | 868 | | | 2,962 | | | 43,906 | | | 46,868 | | | (9,647) | | | 37,221 | | | (32,260) |
Development Projects | | | | | | | | | | | | | | | | | | ||||||||||||||||||||||
Sugarmont | | | Salt Lake City, UT | | | 341 | | | N/A | | | 60.6% | | | 15,037 | | | 113,179 | | | — | | | 15,037 | | | 113,179 | | | 128,216 | | | — | | | 128,216 | | | (41,646) |
Broadway | | | Salt Lake City, UT | | | 254 | | | N/A | | | 18.8% | | | 6,215 | | | 31,796 | | | — | | | 6,215 | | | 31,796 | | | 38,011 | | | — | | | 38,011 | | | (8,361) |
Other Developments | | | Various | | | 484 | | | N/A | | | Various | | | 16,761 | | | 22,373 | | | — | | | 16,761 | | | 22,373 | | | 39,134 | | | — | | | 39,134 | | | — |
| | | | 6,411 | | | | | | | $120,183 | | | $801,523 | | | $39,710 | | | $121,029 | | | $840,268 | | | $961,297 | | | $(139,058) | | | $822,239 | | | $(683,852) |
| | | | Balance Sheet Information as of December 31, 2020 | | | Operating data for the period ending December 31, 2020 | |||||||||||||||||||||||||||||||||||||||||
Property | | | Location | | | % Owned | | | Apartment Units | | | Real Estate Assets, Net | | | Other Assets | | | Mortgage Debt | | | Other Liabilities | | | Equity | | | Revenue | | | Direct Expenses | | | Interest | | | Management Fee | | | Net Operating Income | | | Depreciation | | | Other Income (Loss) | | | Property Income (Loss) |
3800 Main | | | Houston, TX | | | 50.0% | | | 319 | | | $44,850 | | | $2,435 | | | $36,283 | | | $1,673 | | | $9,329 | | | $5,623 | | | $2,937 | | | $1,165 | | | $148 | | | $1,373 | | | $1,721 | | | $(48) | | | $(300) |
Cottonwood Bayview | | | St. Petersburg, FL | | | 71.0% | | | 309 | | | 66,240 | | | 1,073 | | | 48,163 | | | 341 | | | 18,809 | | | 7,109 | | | 2,919 | | | 1,897 | | | 213 | | | 2,080 | | | 2,522 | | | 29 | | | (471) |
Cottonwood Ridgeview | | | Plano, TX | | | 90.5% | | | 322 | | | 36,369 | | | 1,744 | | | 30,394 | | | 1,294 | | | 6,425 | | | 5,740 | | | 2,516 | | | 1,330 | | | 172 | | | 1,722 | | | 1,689 | | | 57 | | | (24) |
Fox Point | | | Salt Lake City, UT | | | 52.8% | | | 398 | | | 25,263 | | | 1,171 | | | 20,809 | | | 338 | | | 5,287 | | | 5,461 | | | 1,721 | | | 705 | | | 218 | | | 2,817 | | | 1,226 | | | 8 | | | 1,583 |
Toscana at Valley Ridge | | | Lewisville, TX | | | 58.6% | | | 288 | | | 24,103 | | | 1,355 | | | 18,157 | | | 806 | | | 6,495 | | | 4,019 | | | 1,698 | | | 824 | | | 121 | | | 1,376 | | | 1,150 | | | (50) | | | 276 |
| | | | | | 1,636 | | | $196,825 | | | $7,778 | | | $153,806 | | | $4,452 | | | $46,345 | | | $27,952 | | | $11,791 | | | $5,921 | | | $872 | | | $9,368 | | | $8,308 | | | $(4) | | | $1,064 |
Maryland | | | 61-1795178 |
(State or other jurisdiction of incorporation or organization) | | | (I.R.S. Employer Identification No.) |
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1245 Brickyard Road, Suite 250, Salt Lake City, UT | | | 84106 |
(Address of principal executive offices) | | | (Zip Code) |
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Business |
• | preserve, protect and return invested capital; |
• | pay attractive and stable cash distributions to shareholders; and |
• | realize capital appreciation in the value of our investments over the long term. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
Property Name | | | Property Location | | | Percent Acquired | | | Units | | | Net Rentable Square Feet | | | Average Unit Size | | | Year Built | | | Occupancy at December 31, 2020 | | | Date Acquired by the Joint Venture |
Parc Westborough | | | Westborough, MA | | | 64.4% | | | 249 | | | 250,945 | | | 1,008 | | | 2016 | | | 94.0% | | | June 29, 2018 |
Heights at Meridian | | | Durham, NC | | | 90.0% | | | 339 | | | 337,852 | | | 997 | | | 2015 | | | 94.7% | | | January 8, 2019 |
(Amounts in thousands, except share and per share data) | | | 2020 | | | 2019 |
Interest income | | | $— | | | $14 |
Equity in losses of joint ventures | | | (262) | | | (2,350) |
Asset management fee to related party | | | (807) | | | (745) |
Other expenses | | | (621) | | | (522) |
Net loss | | | $(1,690) | | | $(3,603) |
Net loss per basic and diluted common shares | | | $(0.34) | | | $(0.72) |
Weighted average common shares outstanding, basic and diluted | | | 4,920,913 | | | 4,982,816 |
| | For the Six Months Ended | | | | | | | For the Six Months Ended | | | | | |||||||||||
(Amounts in thousands) | | | June 30, 2020 | | | December 31, 2020 | | | Total | | | Equity in Earnings (Losses)(1) | | | June 30, 2019(2) | | | December 31, 2019 | | | Total | | | Equity in Earnings (Losses)(1) |
Revenues | | | | | | | | | | | | | | | | | ||||||||
Rental and other operating income | | | $5,734 | | | $5,631 | | | $11,365 | | | $8,753 | | | $5,449 | | | $5,682 | | | $11,131 | | | $8,580 |
Operating expenses | | | | | | | | | | | | | | | | | ||||||||
Rental operations expense | | | 1,991 | | | 2,031 | | | 4,022 | | | 3,065 | | | 1,985 | | | 2,009 | | | 3,994 | | | 3,036 |
Advertising and marketing | | | 33 | | | 41 | | | 74 | | | 56 | | | 38 | | | 38 | | | 76 | | | 56 |
General and administrative | | | 101 | | | 96 | | | 197 | | | 153 | | | 100 | | | 113 | | | 213 | | | 167 |
Property management fees | | | 201 | | | 197 | | | 398 | | | 307 | | | 191 | | | 198 | | | 389 | | | 300 |
Total operating expenses | | | 2,326 | | | 2,365 | | | 4,691 | | | 3,581 | | | 2,314 | | | 2,358 | | | 4,672 | | | 3,559 |
Net operating income | | | 3,408 | | | 3,266 | | | 6,674 | | | 5,172 | | | 3,135 | | | 3,324 | | | 6,459 | | | 5,021 |
Non operating expenses (income) | | | | | | | | | | | | | | | | | ||||||||
Interest on Fannie Mae facility | | | 1,317 | | | 1,152 | | | 2,469 | | | 2,006 | | | 1,549 | | | 1,518 | | | 3,067 | | | 2,382 |
Depreciation and amortization | | | 2,128 | | | 2,132 | | | 4,260 | | | 3,308 | | | 3,771 | | | 2,114 | | | 5,885 | | | 4,774 |
Mark to market adjustments on interest rate caps | | | (2) | | | 3 | | | 1 | | | 1 | | | 102 | | | 9 | | | 111 | | | 71 |
Other non operating expenses | | | 138 | | | 45 | | | 183 | | | 119 | | | 61 | | | 157 | | | 218 | | | 144 |
Net loss | | | $(173) | | | $(66) | | | $(239) | | | $(262) | | | $(2,348) | | | $(474) | | | $(2,822) | | | $(2,350) |
(1) | Represents equity in earnings (losses) attributable to our 64.35% and 90% joint venture interest in Parc Westborough and Heights at Meridian, respectively. |
(2) | Operational information included for Heights at Meridian for the six months ended June 30, 2019 is for the period from January 8, 2019, the date of acquisition by the joint venture, to June 30, 2019. Operational information included for Parc Westborough for the six months ended June 30, 2019 is for the entire period. |
(Amounts in thousands) | | | 2020 | | | 2019 |
Net cash provided by operating activities | | | $1,653 | | | $2,563 |
Net cash used in investing activities | | | — | | | (27,461) |
Net cash used in financing activities | | | (1,625) | | | (2,834) |
Net increase (decrease) in cash and cash equivalents | | | 28 | | | (27,732) |
Cash and cash equivalents at beginning of period | | | 141 | | | 27,873 |
Cash and cash equivalents at end of period | | | $169 | | | $141 |
(Amounts in thousands, except share and per share data) | | | 2020 | | | 2019 |
Net loss | | | $(1,690) | | | $(3,603) |
Adjustments: | | | | | ||
Depreciation and amortization - our share of joint ventures | | | 3,308 | | | 4,774 |
FFO | | | 1,618 | | | 1,171 |
Adjustments: | | | | | ||
Amortization of our share of debt issuance costs | | | 59 | | | 59 |
Mark to market adjustments on our share of interest rate cap | | | 1 | | | 71 |
Acquisition costs | | | — | | | 62 |
Transaction and other nonrecurring expenses | | | 243 | | | — |
Core FFO | | | $1,921 | | | $1,363 |
FFO per basic and diluted common shares | | | $0.33 | | | $0.24 |
Core FFO per basic and diluted common shares | | | $0.39 | | | $0.27 |
Weighted average common shares outstanding, basic and diluted | | | 4,920,913 | | | 4,982,816 |
Directors and Officers |
Name(1) | | | Positions | | | Age(2) | | | Term of Office |
Enzio Cassinis | | | Chief Executive Officer, President, and Investment Committee Member | | | 43 | | | October 2018 to Present(3) July 2016 to Present(5) |
Adam Larson | | | Chief Financial Officer and Investment Committee Member | | | 39 | | | October 2018 to Present(3),(6) |
Susan Hallenberg | | | Chief Accounting Officer and Treasurer and Investment Committee Member | | | 53 | | | October 2018 to Present(3),(6) |
Gregg Christensen | | | Chief Legal Officer, Director and Investment Committee Member | | | 52 | | | July 2016 to Present |
Paul Fredenberg | | | Chief Investment Officer and Investment Committee Member | | | 44 | | | October 2018 to Present(3) July 2016 to Present(5) |
Daniel Shaeffer | | | Chairman of the Board, Director and Investment Committee Member | | | 50 | | | July 2016 to Present(4),(5) |
Chad Christensen | | | Director and Investment Committee Member | | | 48 | | | July 2016 to Present(4),(5) |
Blake Bunker | | | Independent Director | | | 43 | | | April 2020 to Present |
(1) | The address of each director and executive officer listed is 1245 Brickyard Road, Suite 250, Salt Lake City, Utah 84106. |
(2) | As of March 31, 2021. |
(3) | The current executive officers were appointed in October 2018. |
(4) | The current directors were appointed in July 2016. |
(5) | These investment committee members were appointed in July 2016. |
(6) | These investment committee members were appointed in October 2018. |
Security Ownership of Management and Certain Securityholders |
Name of Beneficial Owner(1) | | | Number of Shares Beneficially Owned | | | Percent of All Shares |
Daniel Shaeffer(2) | | | 2,375 | | | * |
Chad Christensen(2) | | | 2,375 | | | * |
Gregg Christensen(2) | | | 2,375 | | | * |
Enzio Cassinis | | | — | | | — |
Adam Larson | | | — | | | — |
Susan Hallenberg | | | — | | | — |
Paul Fredenberg | | | — | | | — |
Blake Bunker | | | — | | | — |
All executive officers and directors as a group (8 persons) | | | 2,375 | | | * |
* | Less than 1% of all shares. |
(1) | Under SEC rules, a person is deemed to be a “beneficial owner” of a security if that person has or shares “voting power”, which includes the power to dispose of or to direct the disposition of such security. A person also is deemed to be a beneficial owner of any securities which that person has a right to acquire within 60 days. Under these rules, more than one person may be deemed to be a beneficial owner of the same securities and a person may be deemed to be a beneficial owner of securities as to which he or she has no economic or pecuniary interest. |
(2) | CROP owns 2,375 shares of our common stock. CROP is managed by its general partner, CRII. CRII is managed by its board of directors, which currently consists of Daniel Shaeffer, Chad Christensen, Gregg Christensen, Jonathan Gardner and Philip White. The board of directors of CRII., as the general partner of CROP, has the voting and investment control of the shares of our common stock held by CROP. |
Interest of Management and Others in Certain Transactions |
• | performing and supervising our administrative functions either directly or through access to our asset manager’s employees or contractors; |
• | selecting service providers and entering into service contracts for us and our properties; |
• | performing due diligence and underwriting duties as required by our board of directors in connection with the acquisition or disposition of our investments; |
• | monitoring and evaluating the performance of our investments and managing our relationships with our joint venture partners; |
• | overseeing each property manager’s performance; |
• | assisting us with respect to recommendations regarding capital improvements, payment and contestation of property and other taxes, and insurance policies for us and our joint ventures; |
• | arranging for financing and refinancing of our properties; |
• | providing cash management services for us; and |
• | performing any other services reasonably requested by us. |
Other Information |
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Consolidated Financial Statements | | | |
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| | December 31, | ||||
| | 2020 | | | 2019 | |
Assets | | | | | ||
Investments in joint ventures | | | $37,676 | | | $40,668 |
Cash and cash equivalents | | | 169 | | | 141 |
Other assets | | | 87 | | | 38 |
Total assets | | | $37,932 | | | $40,847 |
Liabilities and equity | | | | | ||
Liabilities: | | | | | ||
Accounts payable and accrued liabilities | | | 301 | | | 339 |
Related party payables | | | 1,131 | | | 697 |
Promissory note to advisor | | | 1,725 | | | — |
Total liabilities | | | $3,157 | | | $1,036 |
Commitments and contingencies (Note 7) | | | | | ||
Equity | | | | | ||
Preferred stock, $0.01 par value, 100,000,000 shares authorized; no shares issued and outstanding | | | — | | | — |
Common stock, $0.01 par value, 1,000,000,000 shares authorized; 4,881,490 and 4,969,990 shares issued and outstanding at December 31, 2020 and 2019, respectively | | | 49 | | | 50 |
Additional paid in capital | | | 48,915 | | | 49,676 |
Accumulated distributions | | | (7,397) | | | (4,813) |
Accumulated deficit | | | (6,792) | | | (5,102) |
Total equity | | | 34,775 | | | 39,811 |
Total liabilities and equity | | | $37,932 | | | $40,847 |
| | Year Ended December 31, | ||||
| | 2020 | | | 2019 | |
Revenues | | | | | ||
Interest income | | | $— | | | $14 |
Expenses | | | | | ||
Equity in losses of joint ventures | | | (262) | | | (2,350) |
Asset management fee to related party | | | (807) | | | (745) |
Other expenses | | | (621) | | | (522) |
Net loss | | | $(1,690) | | | $(3,603) |
Net loss per basic and diluted common shares | | | $(0.34) | | | $(0.72) |
Weighted average common shares outstanding, basic and diluted | | | 4,920,913 | | | 4,982,816 |
| | Common Stock | | | ||||||||||||||
| | Shares | | | Amount | | | Additional Paid in Capital | | | Accumulated Distributions | | | Accumulated Deficit | | | Total Equity | |
Balance at December 31, 2018 | | | 4,993,600 | | | $50 | | | $49,891 | | | $(2,195) | | | $(1,499) | | | $46,247 |
Common stock repurchases | | | (23,610) | | | — | | | (215) | | | — | | | — | | | (215) |
Distributions to investors | | | — | | | — | | | — | | | (2,618) | | | — | | | (2,618) |
Net loss | | | — | | | — | | | — | | | — | | | (3,603) | | | (3,603) |
Balance at December 31, 2019 | | | 4,969,990 | | | $50 | | | $49,676 | | | $(4,813) | | | $(5,102) | | | $39,811 |
Common stock repurchases | | | (88,500) | | | (1) | | | (761) | | | — | | | — | | | (762) |
Distributions to investors | | | — | | | — | | | — | | | (2,584) | | | — | | | (2,584) |
Net loss | | | — | | | — | | | — | | | — | | | (1,690) | | | (1,690) |
Balance at December 31, 2020 | | | 4,881,490 | | | $49 | | | $48,915 | | | $(7,397) | | | $(6,792) | | | $34,775 |
| | Year Ended December 31, | ||||
| | 2020 | | | 2019 | |
Operating activities | | | | | ||
Net loss | | | $(1,690) | | | $(3,603) |
Adjustments to reconcile net loss to net cash provided by operating activities: | | | | | ||
Equity in losses of joint ventures | | | 262 | | | 2,350 |
Distributions of capital from joint ventures | | | 2,730 | | | 2,965 |
Changes in operating assets and liabilities: | | | | | ||
Related party receivables | | | — | | | 9 |
Other assets | | | (49) | | | 46 |
Accounts payable and accrued liabilities | | | (34) | | | 101 |
Related party payables | | | 434 | | | 695 |
Net cash provided by operating activities | | | 1,653 | | | 2,563 |
Investing activities | | | | | ||
Investments in joint ventures | | | — | | | (27,461) |
Net cash used in investing activities | | | — | | | (27,461) |
Financing activities | | | | | ||
Promissory note to advisor | | | 1,725 | | | — |
Common stock repurchases | | | (762) | | | (215) |
Distributions to common stockholders | | | (2,588) | | | (2,619) |
Net cash used in financing activities | | | (1,625) | | | (2,834) |
Net increase (decrease) in cash and cash equivalents | | | 28 | | | (27,732) |
Cash and cash equivalents at beginning of period | | | 141 | | | 27,873 |
Cash and cash equivalents at end of period | | | $169 | | | $141 |
| | Parc Westborough | | | Heights at Meridian | | | Total | |
2018 carrying value | | | $17,117 | | | $— | | | $17,117 |
Investment in Heights at Meridian | | | — | | | 28,866 | | | 28,866 |
Equity in losses | | | (475) | | | (1,875) | | | (2,350) |
Distributions | | | (850) | | | (2,115) | | | (2,965) |
2019 carrying value | | | $15,792 | | | $24,876 | | | $40,668 |
Equity in losses | | | 116 | | | (378) | | | (262) |
Distributions | | | (1,163) | | | (1,567) | | | (2,730) |
2020 carrying value | | | $14,745 | | | $22,931 | | | $37,676 |
Year Ended December 31, 2020 | | | Parc Westborough | | | Heights at Meridian | | | Total | | | Equity in Earnings (Losses)(1) |
Revenues | | | | | | | | | ||||
Rental and other operating income | | | $5,751 | | | $5,614 | | | $11,365 | | | $8,753 |
Operating expenses | | | | | | | | | ||||
Rental operations expense | | | 2,161 | | | 1,861 | | | 4,022 | | | 3,065 |
Advertising and marketing | | | 43 | | | 31 | | | 74 | | | 56 |
General and administrative | | | 93 | | | 104 | | | 197 | | | 153 |
Property management fees | | | 201 | | | 197 | | | 398 | | | 307 |
Total operating expenses | | | 2,498 | | | 2,193 | | | 4,691 | | | 3,581 |
| | | | | | | | |||||
Net operating income | | | 3,253 | | | 3,421 | | | 6,674 | | | 5,172 |
Non operating expenses | | | | | | | | | ||||
Interest on Fannie Mae facility | | | 841 | | | 1,628 | | | 2,469 | | | 2,006 |
Depreciation and amortization | | | 2,052 | | | 2,208 | | | 4,260 | | | 3,308 |
Mark to market adjustments on interest rate cap | | | 1 | | | — | | | 1 | | | 1 |
Other non operating expenses | | | 178 | | | 5 | | | 183 | | | 119 |
Net loss | | | $181 | | | $(420) | | | $(239) | | | $(262) |
(1) | Represents equity in earnings (losses) attributable to our 64.35% and 90% joint venture interest in Parc Westborough and Heights at Meridian, respectively. |
Year Ended December 31, 2019 | | | Parc Westborough | | | Heights at Meridian(2) | | | Total | | | Equity in Earnings (Losses)(1) |
Revenues | | | | | | | | | ||||
Rental and other operating income | | | $5,604 | | | $5,527 | | | $11,131 | | | $8,580 |
Operating expenses | | | | | | | | | ||||
Rental operations expense | | | 2,176 | | | 1,818 | | | 3,994 | | | 3,036 |
Advertising and marketing | | | 48 | | | 28 | | | 76 | | | 56 |
General and administrative | | | 96 | | | 117 | | | 213 | | | 167 |
Property management fees | | | 196 | | | 193 | | | 389 | | | 300 |
Total operating expenses | | | 2,516 | | | 2,156 | | | 4,672 | | | 3,559 |
| | | | | | | | |||||
Net operating income | | | 3,088 | | | 3,371 | | | 6,459 | | | 5,021 |
Non operating expenses | | | | | | | | | ||||
Interest on Fannie Mae facility | | | 1,474 | | | 1,593 | | | 3,067 | | | 2,382 |
Depreciation and amortization | | | 2,038 | | | 3,847 | | | 5,885 | | | 4,774 |
Mark to market adjustments on interest rate cap | | | 111 | | | — | | | 111 | | | 71 |
Other non operating expenses | | | 204 | | | 14 | | | 218 | | | 144 |
Net loss | | | $(739) | | | $(2,083) | | | $(2,822) | | | $(2,350) |
(1) | Represents equity in earnings (losses) attributable to our 64.35% and 90% joint venture interest in Parc Westborough and Heights at Meridian, respectively. |
(2) | Operational information for Heights at Meridian is for the period from January 8, 2019, the date of acquisition by the joint venture, to December 31, 2019. |
December 31, 2020 | | | Parc Westborough | | | Heights at Meridian | | | Total |
Real estate assets, net | | | $58,848 | | | $59,016 | | | $117,864 |
Other assets | | | 1,574 | | | 688 | | | 2,262 |
Fannie Mae facility | | | 38,010 | | | 33,750 | | | 71,760 |
Other liabilities | | | 376 | | | 345 | | | 721 |
Equity | | | 22,036 | | | 25,609 | | | 47,645 |
December 31, 2019 | | | Parc Westborough | | | Heights at Meridian | | | Total |
Real estate assets, net | | | $60,829 | | | $61,168 | | | $121,997 |
Other assets | | | 1,332 | | | 737 | | | 2,069 |
Fannie Mae facility | | | 38,010 | | | 33,750 | | | 71,760 |
Other liabilities | | | 488 | | | 385 | | | 873 |
Equity | | | 23,663 | | | 27,770 | | | 51,433 |
Share Purchase Anniversary | | | Repurchase Price As a Percentage of Estimated Value(1) |
Less than 1 year | | | No repurchase allowed |
1 year | | | 80% |
2 years | | | 85% |
3 years | | | 90% |
4 years and thereafter | | | 95% |
In the event of a shareholder’s death or complete disability | | | 95% |
(1) | Estimated value equals Net Asset Value (“NAV”) as determined and disclosed by the board of directors. On December 13, 2019, the board of directors determined the value of our shares of common stock at $10.46 per share as of September 30, 2019, based on our net asset value. See the Form 1-U filed with the SEC on December 17, 2019 for additional information on our most recent NAV. Prior to December 2019, our estimated value per share was equal to the purchase price of shares in our offering. Due to the negotiations and subsequent entry into the merger agreement discussed below in Note 8, the board of directors determined not to update our September 30, 2019 NAV. If the proposed merger is not consummated, our board of directors intends to update our NAV as of a more recent date. |
Exhibits |
Exhibit Number | | | Description |
2.1 | | | CHARTER. INCORPORATED BY REFERENCE TO EXHIBIT 2.1 OF THE COMPANY’S OFFERING STATEMENT ON FORM 1-A/A (FILE NO. 024-10615) FILED DECEMBER 23, 2016 |
| | ||
2.2 | | | BYLAWS. INCORPORATED BY REFERENCE TO EXHIBIT 2.2 OF THE COMPANY’S OFFERING STATEMENT ON FORM 1-A/A (FILE NO. 024-10615) FILED DECEMBER 23, 2016 |
| | ||
4.1 | | | FORM OF SUBSCRIPTION AGREEMENT. INCORPORATED BY REFERENCE TO EXHIBIT 4.1 OF THE COMPANY’S OFFERING STATEMENT ON FORM 1-A POS (FILE NO. 024-10615) FILED JULY 5, 2018 |
| | ||
4.2 | | | ISRAELI INVESTOR QUESTIONNAIRE. INCORPORATED BY REFERENCE TO EXHIBIT 4.2 OF THE COMPANY’S OFFERING STATEMENT ON FORM 1-A/A (FILE NO. 024-10615) FILED APRIL 3, 2017 |
| | ||
6.1 | | | SHARE REPURCHASE PROGRAM. INCORPORATED BY REFERENCE TO EXHIBIT 6.1 OF THE COMPANY’S OFFERING STATEMENT ON FORM 1-A/A (FILE NO. 024-10615) FILED DECEMBER 23, 2016 |
| | ||
6.2 | | | LIMITED PARTNERSHIP AGREEMENT OF OPERATING PARTNERSHIP. INCORPORATED BY REFERENCE TO EXHIBIT 6.2 OF THE COMPANY’S OFFERING STATEMENT ON FORM 1-A/A (FILE NO. 024-10615) FILED DECEMBER 23, 2016 |
| | ||
6.3 | | | LIMITED LIABILITY COMPANY AGREEMENT OF GENERAL PARTNER OF OPERATING PARTNERSHIP. INCORPORATED BY REFERENCE TO EXHIBIT 6.3 OF THE COMPANY’S OFFERING STATEMENT ON FORM 1-A/A (FILE NO. 024-10615) FILED DECEMBER 23, 2016 |
| | ||
6.4 | | | FORM OF JOINT VENTURE AGREEMENT. INCORPORATED BY REFERENCE TO EXHIBIT 6.4 OF THE COMPANY’S OFFERING STATEMENT ON FORM 1-A/A (FILE NO. 024-10615) FILED DECEMBER 23, 2016 |
| | ||
6.5 | | | ASSET MANAGEMENT AGREEMENT. INCORPORATED BY REFERENCE TO EXHIBIT 6.5 OF THE COMPANY’S OFFERING STATEMENT ON FORM 1-A/A (FILE NO. 024-10615) FILED DECEMBER 23, 2016 |
| | ||
6.6 | | | FORM OF PROPERTY MANAGEMENT AGREEMENT. INCORPORATED BY REFERENCE TO EXHIBIT 6.6 OF THE COMPANY’S OFFERING STATEMENT ON FORM 1-A/A (FILE NO. 024-10615) FILED DECEMBER 23, 2016 |
| | ||
6.7 | | | INVESTMENT POLICY AGREEMENT. INCORPORATED BY REFERENCE TO EXHIBIT 6.8 OF THE COMPANY’S OFFERING STATEMENT ON FORM 1-A/A (FILE NO. 024-10615) FILED DECEMBER 23, 2016 |
| | ||
6.8 | | | THREE-PARTY AGREEMENT. INCORPORATED BY REFERENCE TO EXHIBIT 6.9 OF THE COMPANY’S OFFERING STATEMENT ON FORM 1-A/A (FILE NO. 024-10615) FILED DECEMBER 23, 2016 |
| |
Exhibit Number | | | Description |
6.9 | | | PURCHASE AND SALE AGREEMENT. INCORPORATED BY REFERENCE TO EXHIBIT 6.10 OF THE COMPANY’S OFFERING STATEMENT ON FORM 1-A POS (FILE NO. 024-10615) FILED JULY 5, 2018 |
| | ||
6.10 | | | ASSIGNMENT OF PURCHASE AND SALE AGREEMENT. INCORPORATED BY REFERENCE TO EXHIBIT 6.11 OF THE COMPANY’S OFFERING STATEMENT ON FORM 1-A POS (FILE NO. 024-10615) FILED JULY 5, 2018 |
| | ||
6.11 | | | FIRST AMENDMENT TO PURCHASE AND SALE AGREEMENT. INCORPORATED BY REFERENCE TO EXHIBIT 6.12 OF THE COMPANY’S OFFERING STATEMENT ON FORM 1-A POS (FILE NO. 024-10615) FILED JULY 5, 2018 |
| | ||
6.12 | | | MASTER CREDIT FACILITY AGREEMENT. INCORPORATED BY REFERENCE TO EXHIBIT 6.13 OF THE COMPANY’S OFFERING STATEMENT ON FORM 1-A POS (FILE NO. 024-10615) FILED JULY 5, 2018 |
| | ||
6.13 | | | MULTIFAMILY NOTE (VARIABLE RATE). INCORPORATED BY REFERENCE TO EXHIBIT 6.14 OF THE COMPANY’S OFFERING STATEMENT ON FORM 1-A POS (FILE NO. 024-10615) FILED JULY 5, 2018 |
| | ||
6.14 | | | CONTRIBUTION AGREEMENT. INCORPORATED BY REFERENCE TO EXHIBIT 6.15 OF THE COMPANY’S OFFERING STATEMENT ON FORM 1-A POS (FILE NO. 024-10615) FILED JULY 5, 2018 |
| | ||
6.15 | | | MEMBERSHIP INTEREST PURCHASE AGREEMENT, INCORPORATED BY REFERENCE TO EXHIBIT 6.1 TO THE COMPANY’S CURRENT REPORT ON 1-U FILED DECEMBER 14, 2018 |
| | ||
6.16 | | | FIRST AMENDMENT TO MEMBERSHIP INTEREST PURCHASE AGREEMENT, INCORPORATED BY REFERENCE TO EXHIBIT 6.2 TO THE COMPANY’S CURRENT REPORT ON 1-U FILED DECEMBER 14, 2018 |
| | ||
6.17 | | | CW HEIGHTS AT MERIDIAN JV, LLC JOINT VENTURE AGREEMENT, INCORPORATED BY REFERENCE TO EXHIBIT 6.1 TO THE COMPANY’S CURRENT REPORT ON 1-U FILED JANUARY 14, 2019 |
| | ||
6.18 | | | AMENDMENT NO. 1 TO MASTER CREDIT FACILITY AGREEMENT, INCORPORATED BY REFERENCE TO EXHIBIT 6.2 TO THE COMPANY’S CURRENT REPORT ON 1-U FILED JANUARY 14, 2019 |
| | ||
6.19 | | | MULTIFAMILY NOTE (FIXED RATE), INCORPORATED BY REFERENCE TO EXHIBIT 6.3 TO THE COMPANY’S CURRENT REPORT ON 1-U FILED JANUARY 14, 2019 |
| | ||
6.20 | | | AMENDMENT NO. 1 TO CONTRIBUTION AGREEMENT, INCORPORATED BY REFERENCE TO EXHIBIT 6.4 TO THE COMPANY’S CURRENT REPORT ON 1-U FILED JANUARY 14, 2019 |
| | ||
6.21 | | | JOINDER TO MULTIFAMILY NOTE, INCORPORATED BY REFERENCE TO EXHIBIT 6.5 TO THE COMPANY’S CURRENT REPORT ON 1-U FILED JANUARY 14, 2019 |
| | ||
6.22 | | | PROPERTY MANAGEMENT AGREEMENT, INCORPORATED BY REFERENCE TO EXHIBIT 6.6 TO THE COMPANY’S CURRENT REPORT ON 1-U FILED JANUARY 14, 2019 |
Exhibit Number | | | Description |
6.23 | | | FIRST AMENDMENT TO THE THREE-PARTY AGREEMENT, INCORPORATED BY REFERENCE TO EXHIBIT 6.24 TO THE COMPANY’S ANNUAL REPORT ON FORM 1-K, FILED APRIL 29, 2020 |
| | ||
6.24 | | | ASSIGNMENT OF ADVISORY SERVICES CONTRACTS, INCORPORATED BY REFERENCE TO EXHIBIT 6.25 TO THE COMPANY’S ANNUAL REPORT ON FORM 1-K, FILED APRIL 29, 2020 |
| | ||
6.25 | | | PROPERTY MANAGEMENT THREE-PARTY AGREEMENT, INCORPORATED BY REFERENCE TO EXHIBIT 6.26 TO THE COMPANY’S ANNUAL REPORT ON FORM 1-K, FILED APRIL 29, 2020 |
| | ||
6.26 | | | ASSIGNMENT OF PROMOTIONAL INTEREST, INCORPORATED BY REFERENCE TO EXHIBIT 6.27 TO THE COMPANY’S ANNUAL REPORT ON FORM 1-K, FILED APRIL 29, 2020 |
| | ||
6.27 | | | PROMISSORY NOTE, INCORPORATED BY REFERENCE TO EXHIBIT 6.28 TO THE COMPANY'S ANNUAL REPORT ON FORM 1-K, FILED APRIL 29, 2020 |
| | ||
6.28 | | | AMENDED AND RESTATED PROMISSORY NOTE, INCORPORATED BY REFERENCE TO EXHIBIT 6.29 TO THE COMPANY’S SEMIANNUAL REPORT ON FORM 1-SA, FILED AUGUST 28, 2020 |
| | ||
6.29 | | | SECOND AMENDED AND RESTATED PROMISSORY NOTE** |
| | ||
8.1 | | | ESCROW AGREEMENT. INCORPORATED BY REFERENCE TO EXHIBIT 8 OF THE COMPANY’S OFFERING STATEMENT ON FORM 1-A/A (FILE NO. 024-10615) FILED JULY 11, 2017 |
| | ||
8.2 | | | AGREEMENT AND PLAN OF MERGER. INCORPORATED BY REFERENCE TO EXHIBIT 2.1 TO THE COMPANY’S CURRENT FORM ON FORM 1-U FILED FEBRUARY 1, 2021 |
| | ||
9.1 | | | LETTER FROM ERNST & YOUNG LLP TO THE SECURITIES AND EXCHANGE COMMISSION DATED NOVEMBER 29, 2018, INCORPORATED BY REFERENCE TO EXHIBIT 9.1 TO THE COMPANY’S CURRENT FORM ON FORM 1-U FILED DECEMBER 5, 2018 |
| | ||
10.1 | | | POWER OF ATTORNEY OF CHAD CHRISTENSEN, GREGG CHRISTENSEN, AND SUSAN HALLENBERG. INCORPORATED BY REFERENCE TO THE SIGNATURE PAGE OF THE COMPANY’S OFFERING STATEMENT ON FORM 1-A/A (FILE NO. 024-10615) FILED JUNE 8, 2017 |
| | ||
11.1 | | | CONSENT OF ERNST & YOUNG LLP. INCORPORATED BY REFERENCE TO EXHIBIT 11 OF THE COMPANY’S OFFERING STATEMENT ON FORM 1-A POS (FILE NO. 024-10615) FILED JULY 5, 2018 |
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11.2 | | | CONSENT OF WSRP, LLC. INCORPORATED BY REFERENCE TO EXHIBIT 11.2 OF THE COMPANY'S OFFERING STATEMENT ON FORM 1-A POS (FILE NO. 024-10615) FILED JULY 17, 2018 |
| | ||
15.1 | | | PRIOR PERFORMANCE TABLES. INCORPORATED BY REFERENCE TO EXHIBIT 15.1 OF THE COMPANY’S OFFERING STATEMENT ON FORM 1-A POS (FILE NO. 024-10615) FILED JULY 5, 2018 |
| | ||
15.2 | | | UNAUDITED BALANCE SHEETS AND INCOME STATEMENTS OF COTTONWOOD RESIDENTIAL, INC. INCORPORATED BY REFERENCE TO EXHIBIT 15.2 OF THE COMPANY’S OFFERING STATEMENT ON FORM 1-A/A (FILE NO. 024-10615) FILED DECEMBER 23, 2016 |
Exhibit Number | | | Description |
15.3 | | | DLA RESPONSE LETTER TO SEC DATED SEPTEMBER 28, 2016. INCORPORATED BY REFERENCE TO EXHIBIT 15.3 OF THE COMPANY’S OFFERING STATEMENT ON FORM 1-A/A (FILE NO. 024-10615) FILED JUNE 8, 2017 |
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15.4 | | | DLA RESPONSE LETTER TO SEC DATED APRIL 3, 2017. INCORPORATED BY REFERENCE TO EXHIBIT 15.4 OF THE COMPANY’S OFFERING STATEMENT ON FORM 1-A/A (FILE NO. 024-10615) FILED JUNE 8, 2017 |
| | ||
15.5 | | | DLA RESPONSE LETTER TO SEC DATED MAY 11, 2017. INCORPORATED BY REFERENCE TO EXHIBIT 15.5 OF THE COMPANY’S OFFERING STATEMENT ON FORM 1-A/A (FILE NO. 024-10615) FILED JUNE 8, 2017 |
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15.6 | | | ACCELERATION REQUEST DATED MAY 11, 2017. INCORPORATED BY REFERENCE TO EXHIBIT 15.6 OF THE COMPANY’S OFFERING STATEMENT ON FORM 1-A/A (FILE NO. 024-10615) FILED JUNE 8, 2017 |
| | ||
15.7 | | | DLA RESPONSE LETTER TO SEC DATED JUNE 8, 2017. INCORPORATED BY REFERENCE TO EXHIBIT 15.7 OF THE COMPANY’S OFFERING STATEMENT ON FORM 1-A/A (FILE NO. 024-10615) FILED JUNE 8, 2017 |
** | Exhibits filed herewith. |
| | By: | | | /s/ Enzio Cassinis | |
| | | | Enzio Cassinis, Chief Executive Officer |
Name | | | Title | | | Date |
/s/ Enzio Cassinis | | | Chief Executive Officer | | | April 8, 2021 |
Enzio Cassinis | | |||||
| | | | |||
/s/Adam Larson | | | Chief Financial Officer (Principal Financial Officer) | | | April 8, 2021 |
Adam Larson | | |||||
| | | | |||
/s/ Gregg Christensen | | | Chief Legal Officer and Director | | | April 8, 2021 |
Gregg Christensen | | |||||
| | | | |||
/s/ Susan Hallenberg | | | Chief Accounting Officer (Principal Accounting Officer) | | | April 8, 2021 |
Susan Hallenberg | | |||||
| | | | |||
/s/ Chad Christensen | | | Director | | | April 8, 2021 |
Chad Christensen | | |||||
| | | | |||
/s/ Daniel Shaeffer | | | Director | | | April 8, 2021 |
Daniel Shaeffer | |
Ex. | | | Description |
| | Agreement and Plan of Merger, dated as of January 26, 2021, by and among the Company, Cottonwood Communities O.P, LP, Cottonwood Communities GP Subsidiary, LLC, Cottonwood Multifamily REIT I O.P., LP and Cottonwood Multifamily REIT I, Inc., incorporated by reference to Exhibit 2.2 to the Company’s Current Report on Form 8-K filed February 1, 2021 | |
| | Agreement and Plan of Merger, dated as of January 26, 2021, by and among the Company, Cottonwood Communities O.P., LP, Cottonwood Communities GP Subsidiary, LLC, Cottonwood Residential O.P., LP and Cottonwood Residential II, Inc., incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed February 1, 2021 | |
| | Agreement and Plan of Merger, dated as of January 26, 2021, by and among the Company, Cottonwood Communities O.P., LP, Cottonwood Communities GP Subsidiary, LLC, Cottonwood Multifamily REIT II O.P., LP and Cottonwood Multifamily REIT II, Inc., incorporated by reference to Exhibit 2.3 to the Company’s Current Report on Form 8-K filed February 1, 2021 | |
| | Articles of Amendment and Restatement, incorporated by reference to Exhibit 3.1 to Pre-Effective Amendment No. 3 to the Company’s Registration Statement on Form S-11 (No. 333-215272) filed June 27, 2018 | |
| | Bylaws, incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-11 (No. 333-215272) filed December 22, 2016 | |
| | Articles Supplementary for the Class A shares of common stock, incorporated by reference to Exhibit 3.1 on Form 8-K (No. 333-215272) filed August 19, 2019 | |
| | Articles Supplementary for the Class T shares of common stock, incorporated by reference to Exhibit 3.2 on Form 8-K (No. 333-215272) filed August 19, 2019 | |
| | Articles of Amendment, incorporated by reference to Exhibit 3.3 on Form 8-K (No. 333-215272) filed August 19, 2019 | |
| | Article Supplementary – Preferred Stock, incorporated by reference to Exhibit 3.6 to the Company’s Quarterly Report on Form 10-Q filed November 13, 2019 | |
| | Articles Supplementary for the Series 2016 Preferred Stock, incorporated by reference to Exhibit 3.1 on Form 8-K (No. 000-56165) filed April 2, 2021 | |
| | Articles Supplementary for the Series 2017 Preferred Stock, incorporated by reference to Exhibit 3.2 on Form 8-K (No. 000-56165) filed April 2, 2021 | |
| | Articles Supplementary for the Series 2019 Preferred Stock, incorporated by reference to Exhibit 3.3 on Form 8-K (No. 000-56165) filed April 2, 2021 | |
| | Articles of Amendment for the Class TX shares of common stock, incorporated by reference to Exhibit 3.4 on Form 8-K (No. 000-56165) filed April 2, 2021 | |
| | Articles Supplementary for the Class D, Class I and Class T shares of common stock, incorporated by reference to Exhibit 3.5 on Form 8-K (No. 000-56165) filed April 2, 2021 | |
| | Form of Subscription Agreement, incorporated by reference to Appendix A to the prospectus included in the Company’s Post-Effective Amendment No. 5 to the Company’s Registration Statement on Form S-11 (No. 333-215272) filed April 20, 2020 | |
| | Statement regarding restrictions on transferability of shares of common stock (to appear on stock certificate or to be sent upon request and without charge to stockholders issued shares without certificates), incorporated by reference to Exhibit 4.2 to Pre-Effective Amendment No. 3 to the Company’s Registration Statement on Form S-11 (No. 333-215272) filed June 27, 2018 | |
| | Amended and Restated Distribution Reinvestment Plan, incorporated by reference to Appendix B to the prospectus included in the Company’s Post-Effective Amendment No. 5 to the Company’s Registration Statement on Form S-11 (No. 333-215272) filed April 20, 2020 | |
5.1 | | | Opinion of DLA Piper LLP (US) re legality* |
8.1 | | | Opinion of DLA Piper LLP (US) as to tax issues regarding reorganization* |
8.2 | | | Opinion of Snell & Wilmer L.L.P. as to tax issues regarding reorganization* |
8.3 | | | Opinion of DLA Piper LLP (US) regarding REIT qualification of Cottonwood Communities, Inc.* |
Ex. | | | Description |
8.4 | | | Opinion of DLA Piper LLP (US) regarding REIT qualification of Cottonwood Multifamily REIT I, Inc.* |
| | Advisory Agreement, by and among the Company, Cottonwood Communities O.P., LP and CC Advisors III, LLC, dated August 13, 2020, incorporated by reference to Exhibit 10.1 to the Company’s Registration Statement on Form S-4 (No. 333-252697) filed February 3, 2021 | |
| | Second Amended and Restated Dealer Manager Agreement (including the Form of Selected Dealer Agreement), by and among the Company, CC Advisors III, LLC and Orchard Securities, LLC, dated February 20, 2020, incorporated by reference to Exhibit 1.4 to the Company’s Post-Effective Amendment No. 5 to the Registration Statement on Form S-11 (No. 333-184476) filed April 20, 2020 | |
| | Voting Agreement, by and among the Company, Daniel Schaeffer, Chad Christensen, Gregg Christensen, Eric Marlin, Cottonwood Residential Holdings, LLC and High Traverse Holdings, LLC, dated January 26, 2021, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed February 1, 2021 | |
| | Second Amended and Restated Three-Party Agreement by and among the Company, Cottonwood Communities O.P., LP and CC Advisors III, LLC, dated January 26, 2021, incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed February 1, 2021 | |
| | Managing Broker-Dealer Agreement, incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q filed November 13, 2019 | |
| | Amended and Restated Agreement of Limited Partnership of Cottonwood Communities O.P., LP dated February 1, 2021, incorporated by reference to Exhibit 10.5 to the Company’s Post-Effective Amendment No. 5 to the Registration Statement on Form S-11 (No. 333-184476) filed April 20, 2020 | |
| | Assignment of Promotional Interest by and among Cottonwood Residential O.P., LP, Cottonwood Communities Investor, LLC and Cottonwood Communities Advisors Promote, LLC dated March 1, 2019, incorporated by reference to Exhibit 10.8 to Post-Effective Amendment No. 2 to the Company’s Registration Statement on Form S-11 (No. 333-215272) filed May 3, 2019 | |
| | Master Credit Facility Agreement by and between CC West Palm, LLC and Berkadia Commercial Mortgage, LLC dated May 30, 2019, incorporated by reference to Exhibit 10.5 on Form 8-K (No. 333-215272) filed June 4, 2019 | |
| | Consolidated, Amended and Restated Multifamily Note by and between CC West Palm, LLC and Berkadia Commercial Mortgage, LLC dated May 30, 2019, incorporated by reference to Exhibit 10.6 on Form 8-K (No. 333-215272) filed June 4, 2019 | |
| | Property Management Agreement (Luma) between CC West Palm, LLC and Cottonwood Communities Management, LLC effective as of May 30, 2019, incorporated by reference to Exhibit 10.14 on Form 10-K (No. 333-215272) filed March 25, 2020 | |
| | Revolving Loan and Security Agreement (One Upland) between KRE JAG One Upload Owner LLC and JPMorgan Chase Bank, N.A. dated March 19, 2020, incorporated by reference to Exhibit 10.16 to the Company’s Post-Effective Amendment No. 5 to the Registration Statement on Form S-11 (No. 333-184476) filed April 20, 2020 | |
| | Promissory Note between KRE JAG One Upland Owner LLC and JPMorgan Chase Bank, N.A. dated March 19, 2020, incorporated by reference to Exhibit 10.17 to the Company’s Post-Effective Amendment No. 5 to the Registration Statement on Form S-11 (No. 333-184476) filed April 20, 2020 | |
| | Property Management Agreement between KRE JAG One Upland Owner LLC and Cottonwood Communities Management, LLC dated March 19, 2020, incorporated by reference to Exhibit 10.18 to the Company’s Post-Effective Amendment No. 5 to the Registration Statement on Form S-11 (No. 333-184476) filed April 20, 2020 | |
| | Form of Performance-Based LTIP Unit Award Agreement, incorporated by reference to Exhibit 10.19 to the Company’s Post-Effective Amendment No. 5 to the Registration Statement on Form S-11 (No. 333-184476) filed April 20, 2020 | |
| | Form of Time-Based LTIP Unit Award Agreement, incorporated by reference to Exhibit 10.20 to the Company’s Post-Effective Amendment No. 5 to the Registration Statement on Form S-11 (No. 333-184476) filed April 20, 2020 |
Ex. | | | Description |
| | Subsidiaries of the Company, incorporated by reference to Exhibit 21.1 on Form 10-K (No. 000-56165) filed March 26, 2021 | |
| | Consent of KPMG LLP, independent registered public accounting firm, regarding Cottonwood Communities, Inc.** | |
| | Consent of KPMG LLP, independent registered public accounting firm, regarding Cottonwood Multifamily REIT I, Inc.** | |
| | Consent of KPMG LLP, independent registered public accounting firm, regarding Cottonwood Multifamily REIT II, Inc.** | |
23.4 | | | Consent of DLA Piper LLP (US) (included in Exhibits 5.1, 8.1, 8.3 and 8.4)* |
23.5 | | | Consent of Snell & Wilmer L.L.P. (included in Exhibit 8.2)* |
| | Power of Attorney (included on signature page of registration statement)** | |
| | Amended and Restated Share Redemption Program, incorporated by reference to Exhibit 99.2 on Form 10-K (No. 000-56165) filed March 26, 2021 | |
| | Consent of CBRE Capital Advisors, Inc.** | |
101.INS | | | XBRL Instance Document |
101.SCH | | | XBRL Taxonomy Extension Schema |
101.CAL | | | XBRL Taxonomy Extension Calculation Linkbase |
101.DEF | | | XBRL Taxonomy Extension Definition Linkbase |
101.LAB | | | XBRL Taxonomy Extension Label Linkbase |
101.PRE | | | XBRL Taxonomy Extension Presentation Linkbase |
* | To be filed by amendment. |
** | Filed herewith. |
| | | | COTTONWOOD COMMUNITIES, INC. | ||
| | | | |||
| | By: | | | /s/ Enzio Cassinis | |
| | | | Enzio Cassinis | ||
| | | | Chief Executive Officer and President |
Name | | | Title | | | Date |
/s/ Enzio Cassinis | | | Chief Executive Officer, President and Director (principal executive officer) | | ||
Enzio Cassinis | | | April 9, 2021 | |||
| | | | |||
/s/ Susan Hallenberg | | | Chief Accounting Officer and Treasurer (principal accounting officer) | | ||
Susan Hallenberg | | | April 9, 2021 | |||
| | | ||||
/s/ Adam Larson | | | Chief Financial Officer (principal financial officer) | | ||
Adam Larson | | | April 9, 2021 | |||
| | | | |||
/s/ Chad Christensen | | | Director | | | April 9, 2021 |
Chad Christensen | | | | | ||
| | | | |||
/s/ Daniel Shaeffer | | | Chairman of the Board and Director | | | April 9, 2021 |
Daniel Shaeffer | | | | | ||
| | | | |||
/s/ R. Brent Hardy | | | Director | | | April 9, 2021 |
R. Brent Hardy | | | | | ||
| | | | |||
/s/ Gentry Jensen | | | Director | | | April 9, 2021 |
Gentry Jensen | | | | |||
| | | | |||
/s/ John Lunt | | | Director | | | April 9, 2021 |
John Lunt | | | | |
Dated: April 9, 2021 | |
/s/ CBRE Capital Advisors, Inc.
|
|
CBRE CAPITAL ADVISORS, INC.
|
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