Form 424B3 Cottonwood Communities,
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E-mailFiled Pursuant to Rule 424(b)(3)
Registration No. 333-258754
COTTONWOOD COMMUNITIES, INC.
SUPPLEMENT NO. 10 DATED MAY 16, 2025
TO THE PROSPECTUS DATED OCTOBER 21, 2024
This document supplements, and should be read in conjunction with, the prospectus of Cottonwood Communities, Inc. dated October 21, 2024 as supplemented by supplement no. 9 dated April 17, 2025. As used herein, the terms “we,” “our” and “us” refer to Cottonwood Communities, Inc. and, as required by context, Cottonwood Residential O.P., LP, which we refer to as our “Operating Partnership,” and to their subsidiaries. Capitalized terms used in this supplement have the same meanings as set forth in the prospectus. The purpose of this supplement is to disclose:
•the status of this offering;
•the transaction price for each class of our common stock as of June 1, 2025;
•the calculation of our April 30, 2025 net asset value (“NAV”) per share, as determined in accordance with our valuation guidelines, for each of our share classes;
•information regarding our portfolio;
•information regarding our distributions;
•information regarding repurchases;
•information regarding fees and expenses payable to our advisor and its affiliates;
•updated risks related to an investment in us;
•“Management’s Discussion and Analysis of Financial Condition and Results of Operations” similar to that filed in our quarterly report on Form 10-Q for the period ended March 31, 2025;
•updated experts information; and
•our unaudited financial statements and the notes thereto as of and for the period ended March 31, 2025.
Status of this Offering
As of May 12, 2025, we have raised gross proceeds of approximately $252.8 million from the sale of 14.3 million shares in this offering, including proceeds from our distribution reinvestment plan of approximately $9.4 million. As of May 12, 2025, approximately $747.2 million in shares remain available for sale pursuant to this offering, including approximately $90.6 million in shares available for sale through our distribution reinvestment plan.
June 1, 2025 Transaction Price
The transaction price for each share class of our common stock for subscriptions accepted (and distribution reinvestment plan issuances) as of June 1, 2025 (and repurchases as of May 31, 2025) is as follows:
Transaction Price (per share) | ||||||||
Class T | $ | 11.5458 | ||||||
Class D | $ | 11.5458 | ||||||
Class I | $ | 11.5458 | ||||||
The transaction price for each of our share classes is equal to such class’s NAV per share as of April 30, 2025. A calculation of the NAV per share is set forth below. The purchase price of our common stock for each share class equals the transaction price of such class, plus applicable upfront selling commissions and dealer manager fees.
April 30, 2025 NAV Calculation
Our board of directors, including a majority of our independent directors, has adopted valuation guidelines, as amended from time to time, that contain a comprehensive set of methodologies to be used in connection with the calculation of our NAV. Our most recent NAV per share for each share class, which is updated as of the last calendar day of each month, is posted on our website at www.cottonwoodcommunities.com and is also available on our toll-free, automated telephone line at (888) 422-2584.
The April 30, 2025 NAV for our outstanding Class T, Class D, Class I, and Class A shares was calculated pursuant to these valuation guidelines.
Please see “Net Asset Value Calculation and Valuation Guidelines” in our prospectus for a more detailed description of our valuation guidelines, including important disclosures regarding real property valuations, debt-related asset valuations and
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property management business valuations provided by Altus Group U.S. Inc. (the “Independent Valuation Advisor”). All parties engaged by us in the calculation of our NAV, including CC Advisors III, LLC, our advisor, are subject to the oversight of our board of directors. As described in our valuation guidelines, each real property is appraised by a third-party appraiser (the “Third-Party Appraisal Firm”) at least once per calendar year and reviewed by our advisor and the Independent Valuation Advisor. Additionally, the real property assets not appraised by the Third-Party Appraisal Firm in a given calendar month will be appraised for such calendar month by our Independent Valuation Advisor, and such appraisals are reviewed by our advisor.
Our Operating Partnership has certain classes or series of OP Units that are each economically equivalent to a corresponding class of shares. Accordingly, on the last day of each month, for such classes or series of OP Units, the NAV per OP Unit equals the NAV per share of the corresponding class. To the extent our Operating Partnership has classes of units that do not correspond to a class of our shares, such units will be valued in a manner consistent with our valuation guidelines. The NAV of our Operating Partnership on the last day of each month equals the sum of the NAVs of each fully-diluted outstanding OP Unit on such day. In calculating the fully-diluted outstanding OP Units we include all outstanding vested LTIP Units, unvested time-based LTIP Units and those performance-based LTIP Units that would be earned based on the internal rate of return as of such day.
Our total NAV in the following table includes the NAV of our outstanding classes of common stock as of April 30, 2025 as well as the partnership interests of the Operating Partnership held by parties other than us. The following table sets forth the components of our NAV as of April 30, 2025 and March 31, 2025:
| As of | ||||||||
| Components of NAV* | April 30, 2025 | March 31, 2025 | ||||||
| Investments in Multifamily Operating Properties | 2,042,287,145 | $ | 2,035,059,581 | |||||
| Investments in Multifamily Development Properties | 46,379,046 | 46,382,760 | ||||||
| Investments in Real Estate-Related Structured Investments | 105,817,304 | 99,814,247 | ||||||
| Investments in Land Held for Development | 44,137,861 | 44,120,468 | ||||||
| Operating Company and Other Net Current Assets | 14,656,317 | 15,701,119 | ||||||
| Cash and Cash Equivalents | 11,622,413 | 19,360,822 | ||||||
| Secured Real Estate Financing | (1,193,863,975) | (1,192,464,682) | ||||||
| Subordinated Unsecured Notes | (20,490,000) | (20,690,000) | ||||||
| Preferred Equity | (242,431,673) | (237,920,836) | ||||||
| Convertible Preferred Equity | (82,089,022) | (78,054,213) | ||||||
| Accrued Performance Participation Allocation | — | — | ||||||
| Net Asset Value | $ | 726,025,416 | $ | 731,309,266 | ||||
| Fully-diluted Shares/Units Outstanding | 62,882,077 | 63,355,792 | ||||||
| * Presented as adjusted for our economic ownership percentage in each asset. | ||||||||
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The following table provides a breakdown of our total NAV and NAV per share/unit by class as of April 30, 2025 and March 31, 2025:
| Class | |||||||||||||||||||||||||||||||||||
| T | D | I | A | OP(1) | Total | ||||||||||||||||||||||||||||||
As of April 30, 2025 | |||||||||||||||||||||||||||||||||||
| Monthly NAV | $ | 49,949,596 | $ | 5,146,998 | $ | 76,734,414 | $ | 225,043,868 | $ | 369,150,540 | $ | 726,025,416 | |||||||||||||||||||||||
| Fully-diluted Outstanding Shares/Units | 4,326,204 | 445,789 | 6,646,075 | 19,491,364 | 31,972,645 | 62,882,077 | |||||||||||||||||||||||||||||
| NAV per Fully-diluted Share/Unit | $ | 11.5458 | $ | 11.5458 | $ | 11.5458 | $ | 11.5458 | $ | 11.5458 | |||||||||||||||||||||||||
As of March 31, 2025 | |||||||||||||||||||||||||||||||||||
| Monthly NAV | $ | 49,887,496 | $ | 4,909,508 | $ | 77,536,679 | $ | 227,095,909 | $ | 371,879,674 | $ | 731,309,266 | |||||||||||||||||||||||
| Fully-diluted Outstanding Shares/Units | 4,321,922 | 425,327 | 6,717,264 | 19,674,086 | 32,217,193 | 63,355,792 | |||||||||||||||||||||||||||||
| NAV per Fully-diluted Share/Unit | $ | 11.5429 | $ | 11.5429 | $ | 11.5429 | $ | 11.5429 | $ | 11.5429 | |||||||||||||||||||||||||
(1) Includes the partnership interests of our Operating Partnership held by High Traverse Holdings, an entity beneficially owned by Daniel Shaeffer, Chad Christensen, Gregg Christensen and Eric Marlin and other Operating Partnership interests, including LTIP Units as described above, held by parties other than us. | |||||||||||||||||||||||||||||||||||
Set forth below are the weighted averages of the key assumptions that were used by the Independent Appraisal Firms in the discounted cash flow methodology used in the April 30, 2025, valuations of our real property assets.
| Discount Rate | Exit Capitalization Rate | ||||||||||
| Operating Assets | 6.80% | 5.42% | |||||||||
| * Presented as adjusted for our economic ownership percentage in each asset, weighted by gross value. The weighted averages were calculated by our advisor based on the information provided by the Independent Appraisal Firms. | |||||||||||
A change in these assumptions would impact the calculation by the Independent Appraisal Firms of the value of our operating and development assets. For example, assuming all other factors remain unchanged, the changes listed below would result in the following effects on our operating and development asset values:
| Sensitivities | Change | Operating Asset Values | ||||||
| Discount Rate | 0.25% decrease | 2.4% | ||||||
| 0.25% increase | (2.3)% | |||||||
| Exit Capitalization Rate | 0.25% decrease | 3.4% | ||||||
| 0.25% increase | (3.0)% | |||||||
| * Presented as adjusted for our economic ownership percentage in each asset. | ||||||||
Real Estate Investments
As of our April 30, 2025 NAV, we had a portfolio of $2.3 billion in total assets, with 82.3% of our equity value in operating properties, 2.6% in development, 10.9% in real estate-related structured investments and 4.2% in land held for development. Refer to the section of this supplement titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Our Investments” for additional detail regarding our portfolio as of March 31, 2025.
Declaration of Distributions
On May 16, 2025, our board of directors declared a distribution for the month of May of $0.06083333, or $0.73 annually, reduced for any class-specific expense allocated to the class, for each class of our common stock to holders of record on May 31, 2025, to be paid in June 2025.
Refer to the section of this supplement titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Distributions” for additional detail regarding our distributions paid for the year ended December 31, 2024 and the three months ended March 31, 2025.
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Repurchases
During the three months ended March 31, 2025, we repurchased shares of our common stock in the following amounts at the then-applicable transaction price (reduced as applicable by the Early Repurchase Deduction):
| Month of: | Total Number of Shares Repurchased (1) | Repurchases as a Percentage of NAV (2) | Average Price Paid per Share | Maximum Number of Shares Pending Repurchase Pursuant to Publicly Announced Plans or Programs (3) | ||||||||||||||||||||||
| January 2025 | 338,494 | 1.0612681 | % | $11.7809 | — | |||||||||||||||||||||
| February 2025 | 204,007 | 0.6337656 | % | $11.6992 | — | |||||||||||||||||||||
| March 2025 | 455,794 | 1.4255518 | % | $11.6360 | — | |||||||||||||||||||||
| Total | 998,295 | |||||||||||||||||||||||||
(1) All shares have been repurchased pursuant to our share repurchase program. | ||||||||||||||||||||||||||
(2) Represents aggregate NAV of the shares repurchased under our share repurchase plan over aggregate NAV of all shares of our common stock outstanding, in each case, based on our NAV as of the last calendar day of the prior month. Pursuant to our share repurchase program, we may repurchase up to 2% of the aggregate NAV of our common stock outstanding per month and 5% of the aggregate NAV of our common stock outstanding per calendar quarter. | ||||||||||||||||||||||||||
(3) All repurchase requests under our share repurchase plan were satisfied. We funded our repurchases with cash available from operations, financing activities and capital raising activities. | ||||||||||||||||||||||||||
Fees and Expenses Payable to Our Advisor and its Affiliates
The table below provides information regarding fees and expenses, including the performance allocation, paid by us, directly or indirectly, to our advisor and its affiliates in connection with this offering and our operations. The table includes amounts incurred for the three months ended March 31, 2025 and the year ended December 31, 2024 (amounts in thousands). Refer to the “Compensation” section of the prospectus for more information regarding these fees and expenses.
| Three Months Ended March 31, 2025 | Year Ended December 31, 2024 | ||||||||||
| Form of Compensation | |||||||||||
| Offering Stage | |||||||||||
Selling commissions, dealer manager fees and wholesaling fee (1) | $ | 258 | $ | 924 | |||||||
| Organization and offering expenses | — | — | |||||||||
| Operational Stage | |||||||||||
| Asset management fees | 3,091 | 12,485 | |||||||||
| Reimbursable operating expenses | — | — | |||||||||
Reimbursable employee costs (2) | (60) | (208) | |||||||||
Affiliate coworking income (3) | — | (10) | |||||||||
Affiliate coworking fees (4) | 45 | 459 | |||||||||
| Performance participation allocation | — | — | |||||||||
| $ | 3,334 | $ | 13,650 | ||||||||
(1)These amounts were paid to Orchard Securities as the dealer manager for this offering. Orchard Securities has reallowed all or a portion of these amounts to participating broker-dealers and certain wholesalers, all of whom are internal to our advisor and its affiliates.
(2)Reflects reimbursable costs received by us pursuant to the Reimbursement and Cost Sharing Agreement between Cottonwood Capital Management, LLC (“CCM”), a wholly owned subsidiary of CROP, and Cottonwood Communities Advisors, LLC (“CCA”) pursuant to which CCM will make available to CCA on an as-needed basis certain employees of CCM to the extent the employees are not otherwise occupied in providing services for us or our subsidiaries and CCA reimburses CCM for CCA’s allocable share of all direct and indirect costs related to the employees, including wages, salaries and other employee benefits and allocable overhead expenses..
(3)Affiliate coworking income reflects revenue received pursuant to the Coworking Space Services Agreement with APT Cowork, LLC (“APT”), an entity owned directly and indirectly by certain of our officers and affiliated directors as describe. See Part III, Item 13. “Certain Relationships and Related Transactions, and Director Independence” in our Annual Report on Form 10-K for the year ended December 31, 2024, which is incorporated into the prospectus by reference for additional information regarding our agreements with APT.
(4)We, through our subsidiaries, have engaged APT to provide co-working space design and services at certain of our multifamily apartment communities. Amounts shown reflect fees paid to APT pursuant to our Coworking Space Design Agreements and Service Agreements and exclude approximately $35,000 in furniture charges paid to APT which are capitalized to the project. See Part III, Item 13. “Certain Relationships and Related Transactions, and Director Independence” in our Annual Report on Form 10-K for the year ended December 31, 2024, which is incorporated into the prospectus by reference for additional information regarding our agreements with APT.
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Risk Factors
The following risk factors supplement the risk factors and/or supersede and replace the similar risk factors contained in the prospectus and all similar disclosure in the prospectus.
We have incurred net losses under GAAP in the past and may incur net losses in the future, and we have an accumulated deficit and may continue to have an accumulated deficit in the future.
For the three months ended March 31, 2025, we had consolidated net loss of $13.0 million. For the year ended December 31, 2024, we had consolidated net loss of $20.6 million. As of March 31, 2025, we had an accumulated deficit of $112.0 million. These amounts largely reflect the expense of real estate depreciation and amortization in accordance with GAAP, which was $15.0 million for the three months ended March 31, 2025 and $65.3 million for the year ended December 31, 2024.
Net loss and accumulated deficit are calculated and presented in accordance with GAAP, which, among other things, requires depreciation of real estate investments. We calculate depreciation on a straight-line basis. As a result, our operating results imply that the value of our real estate investments will decrease evenly over a set time period. However, we believe that the value of real estate investments will fluctuate over time based on market conditions. Thus, in addition to GAAP financial metrics, management reviews certain non-GAAP financial metrics, including funds from operations, or FFO and Core FFO. FFO measures operating performance that excludes gains or losses from sales of depreciable properties, real estate-related depreciation and amortization and after adjustments for our share of consolidated and unconsolidated entities. See Part I, Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations– Funds from Operations” for considerations on how to review this metric.
We have paid distributions from offering proceeds. In the future we may continue to fund distributions with offering proceeds. 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.
Our charter permits us to make distributions from any source, including offering proceeds or borrowings (which may constitute a return of capital), and our charter does not limit the amount of funds we may use from any source to pay such distributions. We intend to make distributions on our common stock on a per share basis with each share receiving the same distribution, subject to any class-specific expenses such as distribution fees on our Class T and Class D shares. If we fund distributions from financings, our offerings or other sources, we will have less funds available for investment in multifamily apartment communities and other multifamily real estate-related assets and the number of real estate properties that we invest in and the overall return to our stockholders may be reduced. If we fund distributions from borrowings, our interest expense and other financing costs, as well as the repayment of such borrowings, will reduce our earnings and cash flow from operations available for distribution in future periods. If we fund distributions from the sale of assets or the maturity, payoff or settlement of multifamily real estate-related assets, this will affect our ability to generate cash flows from operations in future periods.
It is likely that we will use sources of funds, which may constitute a return of capital to fund distributions. During our offering stage, when we may raise capital more quickly than we acquire income-producing assets, and for some period after, we may not be able to make distributions solely from our cash flow from operations. Further, because we may receive income from our investments at various times during our fiscal year and because we may need cash flow from operations during a particular period to fund capital expenditures and other expenses, we expect that we will declare distributions in anticipation of cash flow that we expect to receive during a later period and we will make these distributions in advance of our actual receipt of these funds. In addition, to the extent our investments are in development or redevelopment projects or in properties that have significant capital requirements, our ability to make distributions may be negatively impacted. In these instances, we expect to look to third-party borrowings to fund our distributions. We may also fund such distributions from the sale of assets. To the extent distributions exceed cash flow from operations, a stockholder’s basis in our stock will be reduced and, to the extent distributions exceed a stockholder’s basis, the stockholder may recognize capital gain.
For the three months ended March 31, 2025, and the year ended December 31, 2024, we paid aggregate distributions to convertible preferred stockholders, common stockholders and limited partnership unit holders of $12.7 million and $48.3 million, including $11.9 million and $45.1 million of distributions paid in cash and $0.9 million and $3.2 million of distributions reinvested through our distribution reinvestment plan, respectively.
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Our net loss for the three months ended March 31, 2025 was $13.0 million and our net loss for the year ended December 31, 2024 was $20.6 million. Cash flows used in operating activities were $5.5 million for the three months ended March 31, 2025, and cash flows provided by operating activities were $15.4 million for the year ended December 31, 2024.
We funded our total distribution paid during the three months ended March 31, 2025, which includes net cash distributions and distribution reinvestment by stockholders, with $0.9 million of offering proceeds from issuance of common stock pursuant to our distribution reinvestment plan and $11.9 million from proceeds from realized investments.
We funded our total distributions paid during the year ended December 31, 2024, which includes net cash distributions and distributions reinvested by stockholders, with $16.5 million cash provided by operating activities, $3.2 million of offering proceeds from issuance of common stock pursuant to our distribution reinvestment plan and $28.6 million from proceeds from realized investment.
Generally, for purposes of determining the source of our distributions paid, we assume first that we use cash flow from operating activities from the relevant or prior periods to fund distribution payments. To the extent that we pay distributions from sources other than our cash flow from operating activities, we will have less funds available for the acquisition of real estate investments, the overall return to our stockholders may be reduced and subsequent investors will experience dilution. In addition, to the extent distributions exceed cash flow from operating activities, a stockholder’s basis in our stock will be reduced and, to the extent distributions exceed a stockholder’s basis, the stockholder may recognize capital gain.
Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with our financial statements and the related notes included in this supplement.
This discussion contains forward-looking statements that can be identified with the use of forward-looking terminology such as “may,” “will,” “seeks,” “anticipates,” “believes,” “estimates,” “expects,” “plans,” “intends,” “should” or similar expressions. Actual results may differ from those described in forward-looking statements. For a discussion of the factors that could cause actual results to differ from those anticipated, see “Risk Factors” in the prospectus as supplemented to date.
Overview
Cottonwood Communities, Inc. invests in a diverse portfolio of multifamily apartment communities and multifamily real estate-related assets throughout the United States. We are externally managed by our advisor, CC Advisors III, LLC (“CC Advisors III”), a wholly owned subsidiary of our sponsor, Cottonwood Communities Advisors, LLC (“CCA”). We were incorporated in Maryland in 2016. We hold all of our assets through Cottonwood Residential O.P., LP (“CROP”), our operating partnership. We are the sole member of the sole general partner of CROP and own general partner interests in CROP alongside third-party limited partners.
We are a non-listed perpetual-life, net asset value (“NAV”), REIT. We qualified as a REIT for U.S. federal income tax purposes beginning with the taxable year ended December 31, 2019. We generally will not be subject to U.S. federal income taxes on our taxable income to the extent we annually distribute all of our net taxable income to stockholders and maintain our qualification as a REIT.
As of March 31, 2025, we raised $372.1 million from the sale of common stock in this offering and $322.7 million from the sale of our preferred stock in periodic private offerings to accredited investors (the “Private Offerings”). We have contributed our net proceeds to CROP in exchange for a corresponding number of mirrored OP Units in CROP.
As of our March 31, 2025 NAV, we had a portfolio of $2.3 billion in total assets, with 82.8% of our equity value in operating properties, 2.6% in development, 10.4% in real estate-related structured investments and 4.2% in land held for development. Refer to the sections entitled “Our Investments” and “Net Asset Value” below for further description of our portfolio and NAV.
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Highlights for the Three Months Ended March 31, 2025
The following highlights activities that occurred during the three months ended March 31, 2025:
•Net loss attributable to common stockholders was $(0.24) per diluted share compared to net earnings attributable to common stockholders of $0.12 per diluted share for the same period in the prior year. The decrease was primarily due to a $26.6 million gain on the sale of Cottonwood West Palm in the first quarter of 2024.
•Reportable segment net operating income was $28.4 million compared to $25.3 million for the same period in the prior year primarily due to increases from lease up properties, offset by lost net operating income from the sale of Cottonwood West Palm.
•Same store net operating income (“Same Store NOI”) was $21.9 million compared to $22.4 million for the same period in the prior year.
•Funds from operations attributable to common stockholders and unit holders (“FFO”) was $(0.07) per diluted share/unit compared to $(0.04) for the same period in the prior year. Core FFO was $0.05 per diluted share/unit, compared to $0.00 for the same period in the prior year.
•Net asset value was $11.5429 per share/unit at March 31, 2025, compared to $12.0083 per share/unit at December 31, 2024.
•Sold Cottonwood Broadway for net proceeds of $41.0 million, recording a net gain on sale of $7.9 million.
•Raised $7.1 million of net proceeds from the sale of Series 2025 Preferred Stock.
•Exchanged 3,249,634 and 22,000 shares of Series 2019 and Series 2023, respectively, for Series 2025 Preferred Stock.
•Raised $18.3 million of net proceeds from the sale of Series A Convertible Preferred Stock.
•Repurchased $0.5 million of Series A Convertible Preferred Stock.
•Raised $7.1 million of net proceeds from the sale of our common stock issued under this offering.
•Repurchased $11.9 million of common stock and OP Units at an average discount of 2% to NAV.
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Our Investments
Information regarding our investments as of March 31, 2025 is as follows:
Stabilized Properties ($ in thousands, except net effective rent)
| Property Name | Market | Number of Units | Average Unit Size (Sq Ft) | Purchase Date | Purchase Price | Mortgage Debt Outstanding (1) | Net Effective Rent | Physical Occupancy Rate | Percentage Owned by CROP | ||||||||||||||||||||||||||
805 Riverfront (2) | West Sacramento, CA | 285 | 746 | Sept 2023 | $ | 104,646 | (3) | $ | 60,210 | $ | 2,304 | 89.82% | 100.00% | ||||||||||||||||||||||
| Alpha Mill | Charlotte, NC | 267 | 830 | May 2021 | 69,500 | 12,285 | 1,650 | 95.13% | 100.00% | ||||||||||||||||||||||||||
| Cason Estates | Murfreesboro, TN | 262 | 1,078 | May 2021 | 51,400 | 37,462 | 1,531 | 90.84% | 100.00% | ||||||||||||||||||||||||||
| Cottonwood Apartments | Salt Lake City, UT | 264 | 834 | May 2021 | 47,300 | 35,430 | 1,391 | 98.48% | 100.00% | ||||||||||||||||||||||||||
| Cottonwood Bayview | St. Petersburg, FL | 309 | 805 | May 2021 | 95,900 | 71,417 | 2,519 | 96.12% | 71.00% | ||||||||||||||||||||||||||
| Cottonwood Clermont | Clermont, FL | 230 | 1,111 | Sept 2022 | 85,000 | 34,376 | 2,022 | 90.43% | 100.00% | ||||||||||||||||||||||||||
Cottonwood Highland (2)(4) | Salt Lake City, UT | 250 | 745 | May 2021 | 65,210 | (3) | 44,046 | 1,778 | 92.40% | 36.93% | |||||||||||||||||||||||||
| Cottonwood Lighthouse Point | Pompano Beach, FL | 243 | 996 | June 2022 | 95,500 | 47,964 | 2,235 | 90.53% | 100.00% | ||||||||||||||||||||||||||
| Cottonwood Reserve | Charlotte, NC | 352 | 1,021 | May 2021 | 77,500 | 48,049 | 1,463 | 92.61% | 91.14% | ||||||||||||||||||||||||||
| Cottonwood Ridgeview | Plano, TX | 322 | 1,156 | May 2021 | 72,930 | 65,300 | 1,785 | 96.27% | 100.00% | ||||||||||||||||||||||||||
| Cottonwood Westside | Atlanta, GA | 197 | 860 | May 2021 | 47,900 | 26,986 | 1,605 | 93.40% | 100.00% | ||||||||||||||||||||||||||
| Enclave on Golden Triangle | Keller, TX | 273 | 1,048 | May 2021 | 51,600 | 48,400 | 1,689 | 93.77% | 98.93% | ||||||||||||||||||||||||||
| Fox Point | Salt Lake City, UT | 398 | 841 | May 2021 | 79,400 | 45,175 | 1,444 | 95.73% | 52.75% | ||||||||||||||||||||||||||
| Heights at Meridian | Durham, NC | 339 | 997 | May 2021 | 79,900 | 53,401 | 1,586 | 92.33% | 100.00% | ||||||||||||||||||||||||||
Melrose (2) | Nashville, TN | 220 | 951 | May 2021 | 67,400 | 56,600 | 1,763 | 90.45% | 100.00% | ||||||||||||||||||||||||||
Melrose Phase II (2) | Nashville, TN | 139 | 675 | May 2021 | 40,350 | 32,400 | 1,540 | 92.09% | 100.00% | ||||||||||||||||||||||||||
Parc Westborough (5) | Boston, MA | 249 | 1,008 | May 2021 | 74,000 | 16,965 | 2,469 | 97.59% | 100.00% | ||||||||||||||||||||||||||
| Park Avenue | Salt Lake City, UT | 234 | 714 | May 2021 | 67,525 | (3) | 43,453 | 1,870 | 93.16% | 100.00% | |||||||||||||||||||||||||
| Pavilions | Albuquerque, NM | 240 | 1,162 | May 2021 | 61,100 | 58,500 | 1,891 | 95.42% | 96.35% | ||||||||||||||||||||||||||
| Raveneaux | Houston, TX | 382 | 1,065 | May 2021 | 57,500 | 47,400 | 1,417 | 98.43% | 96.97% | ||||||||||||||||||||||||||
| Regatta | Houston, TX | 490 | 862 | May 2021 | 48,100 | 35,367 | 1,079 | 93.66% | 100.00% | ||||||||||||||||||||||||||
| Retreat at Peachtree City | Peachtree City, GA | 312 | 980 | May 2021 | 72,500 | 58,412 | 1,743 | 95.83% | 100.00% | ||||||||||||||||||||||||||
| Scott Mountain | Portland, OR | 262 | 927 | May 2021 | 70,700 | 48,373 | 1,798 | 97.71% | 95.80% | ||||||||||||||||||||||||||
| Stonebriar of Frisco | Frisco, TX | 306 | 963 | May 2021 | 59,200 | 53,600 | 1,552 | 93.79% | 84.19% | ||||||||||||||||||||||||||
| Sugarmont | Salt Lake City, UT | 341 | 904 | May 2021 | 139,792 | (3) | 91,200 | 2,231 | 94.71% | 99.00% | (6) | ||||||||||||||||||||||||
| Summer Park | Buford, GA | 358 | 1,064 | May 2021 | 75,500 | 52,398 | 1,575 | 94.13% | 98.68% | ||||||||||||||||||||||||||
The Marq Highland Park (2) | Tampa, FL | 239 | 999 | May 2021 | 65,700 | 46,802 | 2,139 | 95.82% | 74.10% | ||||||||||||||||||||||||||
| Toscana at Valley Ridge | Lewisville, TX | 288 | 738 | May 2021 | 47,700 | 32,571 | 1,271 | 96.88% | 58.60% | ||||||||||||||||||||||||||
| Total / Weighted-Average | 8,051 | 937 | $ | 1,970,753 | $ | 1,304,542 | $ | 1,732 | 94.35% | 90.83% | |||||||||||||||||||||||||
(1) Mortgage debt outstanding is shown as if CROP owned 100% of the property. | |||||||||||||||||||||||||||||||||||
(2) Data from commercial retail units are excluded from number of units and physical occupancy. | |||||||||||||||||||||||||||||||||||
(3) These purchase price amounts represent the acquisition date fair value plus subsequent capitalized costs on the projects placed in service. | |||||||||||||||||||||||||||||||||||
(4) CROP’s percentage ownership is not proportionate to the total amount CROP invested in the project due to a disproportionate ownership percentage assigned to CROP and related parties as fees and commissions were waived for the sponsor and its affiliates. | |||||||||||||||||||||||||||||||||||
(5) On March 28, 2025, we entered into a contract to sell Parc Westborough for $96.2 million. On May 14, 2025, we sold Parc Westborough for net proceeds of $54.6 million after repayment of the entire drawn balance on the revolving credit facility. We expect to recognize a gain on sale during the three months ended June 30, 2025. | |||||||||||||||||||||||||||||||||||
(6) The one percent interest not owned by us has limited rights, including the right to control on behalf of the joint venture the prosecution and resolution of all litigation, claims, or causes of action that the joint venture has or may have against certain third parties associated with the design and construction of Sugarmont, as well as the obligation to defend any cross claims resulting from these actions. In September 2024, Sugarmont entered into an agreement to settle all matters in dispute. | |||||||||||||||||||||||||||||||||||
8
Development/Lease Up Properties ($ in thousands)
| Property Name | Market | Units to be Built | Average Unit Size (Sq Ft) | Purchase Date | Total Project Investment | Debt Outstanding (1) | Physical Occupancy Rate (2) | Percentage Owned by CROP | ||||||||||||||||||
The Westerly (3) | Salt Lake City, UT | 198 | 808 | May 2021 (3) | 41,306 | — | —% | 82.45% | ||||||||||||||||||
(1) Debt outstanding is shown as if CROP owned 100% of the development property. | ||||||||||||||||||||||||||
(2) The Westerly is estimated to be completed in the second quarter of 2026. | ||||||||||||||||||||||||||
(3) Construction on The Westerly began in July 2023. The amount above includes contributions from the Block C Joint Venture to The Westerly as of March 31, 2025 including the related land cost and capital expenditures. Refer to the land held for development table below for additional information on the Block C Joint Venture. | ||||||||||||||||||||||||||
Structured Investments ($ in thousands)
| Property Name | Market | Investment Type | Date of Initial Investment | Number of Units | Funding Commitment | Amount Funded to Date | ||||||||||||||
| 417 Callowhill | Philadelphia, PA | Preferred Equity | November 2022 | 220 | $ | 33,413 | $ | 33,413 | ||||||||||||
| 2215 Hollywood | Hollywood, FL | Mezzanine Loan | April 2023 | 180 | 10,045 | 10,045 | ||||||||||||||
| Monrovia Station | Monrovia, CA | Mezzanine Loan | July 2023 | 296 | 20,150 | 20,150 | ||||||||||||||
| Infield | Kissimmee, FL | Preferred Equity | November 2023 | 384 | 12,650 | 12,650 | ||||||||||||||
| Total | 1,080 | $ | 76,258 | $ | 76,258 | |||||||||||||||
(1) On April 25, 2025, we increased our commitment by an additional $2.0 million on the Infield preferred equity investment, and funded $1.0 million on April 30, 2025, bringing our total funding to $13.7 million. | ||||||||||||||||||||
Land Held for Development ($ in thousands)
| Property Name | Market | Acreage | Purchase Date | Total Investment Amount | Percentage Owned by CROP | ||||||||||||
Block C Joint Venture (1) | Salt Lake City, UT | 1.69 acres | May 2021 | $ | 18,121 | 82.45% | |||||||||||
| 3300 Cottonwood | Salt Lake City, UT | 1.76 acres | October 2021 | 7,578 | 100.00% | ||||||||||||
| Galleria | Salt Lake City, UT | 26.07 acres | September 2022 | 29,957 | 100.00% | ||||||||||||
| Total | $ | 55,656 | |||||||||||||||
(1) The total investment amount above for the Block C Joint Venture consists of land held for development for Millcreek North and The Archer multifamily development projects and cash held at the joint venture for future investment. The Westerly, a project currently under development, is also funded through the Block C Joint Venture and reflected separately in the development property table above. On January 31, 2025, we entered into a contract to sell The Archer for $3.0 million. We expect to close during the third quarter of 2025. | |||||||||||||||||
(2) On October 15, 2024, we entered into a contract to sell approximately 6.9 acres of land at Galleria for $8.0 million. We expect to close by the second or third quarter of 2025. | |||||||||||||||||
9
Results of Operations
Our results of operations for the three months ended March 31, 2025 and 2024 are as follows ($ in thousands, except share and per share data):
| Three Months Ended March 31, | |||||||||||||||||
| 2025 | 2024 | Change | |||||||||||||||
| Revenues | |||||||||||||||||
| Rental and other property revenues | $ | 37,308 | $ | 34,355 | $ | 2,953 | |||||||||||
| Property management revenues | 1,792 | 2,339 | (547) | ||||||||||||||
| Other revenues | 1,566 | 785 | 781 | ||||||||||||||
| Total revenues | 40,666 | 37,479 | 3,187 | ||||||||||||||
| Operating expenses | |||||||||||||||||
| Property operations expense | 13,582 | 14,032 | (450) | ||||||||||||||
| Property management expense | 4,582 | 4,578 | 4 | ||||||||||||||
| Asset management fee | 3,091 | 3,144 | (53) | ||||||||||||||
| Depreciation and amortization | 14,950 | 14,954 | (4) | ||||||||||||||
| General and administrative expenses | 2,559 | 1,767 | 792 | ||||||||||||||
| Impairment loss | 957 | — | 957 | ||||||||||||||
| Total operating expenses | 39,721 | 38,475 | 1,246 | ||||||||||||||
| Income (loss) from operations | 945 | (996) | 1,941 | ||||||||||||||
| Equity in earnings of unconsolidated real estate entities | 1,369 | 1,368 | 1 | ||||||||||||||
| Interest income | 334 | 473 | (139) | ||||||||||||||
| Interest expense | (20,047) | (20,418) | 371 | ||||||||||||||
| Loss on debt extinguishment | (98) | (1,239) | 1,141 | ||||||||||||||
| Gain on sale of real estate assets | 7,932 | 26,638 | (18,706) | ||||||||||||||
| Gain on legal settlement | 400 | — | 400 | ||||||||||||||
| Other (expense) income | (3,974) | 1,222 | (5,196) | ||||||||||||||
| (Loss) income before income taxes | (13,139) | 7,048 | (20,187) | ||||||||||||||
| Income tax benefit | 125 | 15 | 110 | ||||||||||||||
| Net (loss) income | (13,014) | 7,063 | (20,077) | ||||||||||||||
| Net loss (income) attributable to noncontrolling interests: | |||||||||||||||||
| Limited partners | 6,405 | (3,856) | 10,261 | ||||||||||||||
| Partially owned entities | 336 | 712 | (376) | ||||||||||||||
| Net (loss) income attributable to controlling interests | (6,273) | 3,919 | (10,192) | ||||||||||||||
| Less: preferred stock dividends | $ | 1,333 | $ | 143 | $ | 1,190 | |||||||||||
| Net (loss) income attributable to common stockholders | $ | (7,606) | $ | 3,776 | $ | (11,382) | |||||||||||
| Weighted-average common shares outstanding - basic | 31,543,589 | 31,581,072 | (37,483) | ||||||||||||||
| Weighted-average common shares outstanding - diluted | 31,543,589 | 64,362,720 | (32,819,131) | ||||||||||||||
| Net (losses) earnings per common share - basic | $ | (0.24) | $ | 0.12 | $ | (0.36) | |||||||||||
| Net (losses) earnings per common share - diluted | $ | (0.24) | $ | 0.12 | $ | (0.36) | |||||||||||
Comparison of the Three Months Ended March 31, 2025 and 2024
Rental and Other Property Revenues
Rental and other property revenues increased $3.0 million due to an increase of $3.0 million from the consolidation of Cottonwood Lighthouse Point and Alpha Mill in March 2024 and April 2024, respectively, an increase of $3.0 million from the lease up of 805 Riverfront and Cottonwood Highland during 2024, offset by a decrease of $1.2 million from the sale of Cottonwood West Palm in February 2024, a decrease of $1.6 million from the deconsolidation of The Marq Highland Park in July 2024, and a slight increase in vacancy and bad debt.
10
Loss on Debt Extinguishment
The $1.1 million change in loss on debt extinguishment was due to $1.2 million associated with the payoff of the Cottonwood West Palm mortgage in 2024 compared to $0.1 million associated with the payoff of the Cottonwood Broadway mortgage in 2025 when those assets were sold.
Gain on Sale of Real Estate Assets
The $7.9 million gain on sale of real estate during the three months ended March 31, 2025 was from the sale of Cottonwood Broadway. The $26.6 million gain on sale of real estate during the three months ended March 31, 2024 was from the sale of Cottonwood West Palm.
Other (Expense) Income
Net other expenses increased $5.2 million primarily due to $3.1 million in selling commissions and expenses associated with Series 2025 Preferred Stock Exchanges and changes in the fair value of interest rate caps.
Reportable Segment Net Operating Income
Reportable segment net operating income (“Reportable Segment NOI”) is a supplemental non-GAAP measure of our property operating results. We define Reportable Segment NOI as operating revenues less operating expenses. We consider Reportable Segment NOI to be an appropriate supplemental measure of operating performance to net income because it measures the core operations of property performance by excluding corporate level expenses, depreciation and amortization, and other items not directly related to ongoing property operating performance. While we believe our net income (loss), as defined by GAAP, to be the most appropriate measure to evaluate our overall performance, we consider Reportable Segment NOI to be an appropriate supplemental performance measure. We believe Reportable Segment NOI provides useful information to our investors regarding our results of operations because it reflects the operating performance of our properties and excludes certain items that are not considered to be controllable in connection with the management of properties, such as real estate-related depreciation and amortization, general and administrative expenses, advisory and property management fees, interest expense, gains on sale of real estate, other income and expense, and noncontrolling interests. However, Reportable Segment NOI should not be viewed as an alternative measure of our financial performance since it excludes such items which could materially impact our results of operations. Further, our Reportable Segment NOI may not be comparable to that of other real estate companies, as they may use different methodologies for calculating reportable segment net operating income, therefore, our investors should consider net income (loss) as the primary indicator of our overall financial performance.
As discussed in Note 14 of the condensed consolidated financial statements, Reportable Segment NOI represents 100% of each of our consolidated and unconsolidated properties’ reportable segment rental and other property revenues and reportable segment property operations expense. Of our portfolio of multifamily properties, 24 are consolidated and four are unconsolidated for financial reporting purposes. We believe the drivers of Reportable Segment NOI for our consolidated properties are generally the same for our unconsolidated properties, of which we own on average 62.8%.
11
The following table reconciles the net (loss) income attributable to common stockholders in the condensed consolidated statement of operations to Reportable Segment NOI for the three months ended March 31, 2025 and 2024 ($ in thousands):
| Three Months Ended March 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Net (loss) income attributable to common stockholders | $ | (7,606) | $ | 3,776 | |||||||
| Depreciation and amortization | 14,950 | 14,954 | |||||||||
| General and administrative expenses | 2,559 | 1,767 | |||||||||
| Impairment loss | 957 | — | |||||||||
| Property management revenues | (1,792) | (2,339) | |||||||||
| Property management expense | 4,582 | 4,578 | |||||||||
| Asset management fee | 3,091 | 3,144 | |||||||||
| Other revenues | (1,566) | (785) | |||||||||
| Equity in earnings of unconsolidated real estate entities | (1,369) | (1,368) | |||||||||
| Interest income | (334) | (473) | |||||||||
| Interest expense | 20,047 | 20,418 | |||||||||
Loss on debt extinguishment | 98 | 1,239 | |||||||||
| Gain on sale of real estate | (7,932) | (26,638) | |||||||||
| Gain on legal settlement | (400) | — | |||||||||
| Other expense (income) | 3,974 | (1,222) | |||||||||
| Income tax benefit | (125) | (15) | |||||||||
| Net (loss) income attributable to noncontrolling interests - limited partners | (6,405) | 3,856 | |||||||||
| Net loss attributable to noncontrolling interests - partially owned entities | (336) | (712) | |||||||||
| Less preferred stock dividends | 1,333 | 143 | |||||||||
Rental and other property revenues of unconsolidated properties | 7,080 | 8,395 | |||||||||
Property operations expense of unconsolidated properties | (2,400) | (3,433) | |||||||||
Reportable segment net operating income | $ | 28,406 | $ | 25,285 | |||||||
Refer to Note 14 for the details of Reportable Segment NOI, including significant expenses, for the three months ended March 31, 2025 and 2024.
Reportable Segment NOI increased $3.1 million for the three months ended March 31, 2025 when compared to the same period in the prior year primarily due to increases in net operating income from the lease up of Cottonwood Highland and 805 Riverfront, offset by lost net operating income from the sale of Cottonwood West Palm.
We also evaluate the performance of operating properties within our reportable segment using a same store analysis (“Same Store NOI”) because the population of properties is consistent from period to period, thereby eliminating the effects of any material changes in the composition of the aggregate portfolio on performance measures. Our same store portfolio includes those properties in our reportable segment for which we manage and have ownership interests in for the entirety of both current and prior years. Operating properties excluded from same store include development properties that have undergone lease up and properties that have been acquired or disposed during the same store reporting period. We evaluate Same Store NOI based on our ownership in the properties within the same store portfolio, applying our ownership percentage at March 31, 2025 for all periods presented. Our same store analysis may not be comparable to that of other real estate companies and should not be considered to be more relevant or accurate in evaluating our operating performance than current GAAP methodology.
For the three months ended March 31, 2025, our same store portfolio consisted of 21 consolidated properties, representing approximately 6,000 units, and four unconsolidated properties, representing approximately 1,200 units.
12
The following table reconciles Reportable Segment NOI, as reconciled to net loss attributable to common stockholder above, to Same Store NOI for the three months ended March 31, 2025 and 2024 ($ in thousands):
| Three Months Ended March 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Reportable segment net operating income | $ | 28,406 | $ | 25,285 | |||||||
| Lease up properties | (2,470) | 463 | |||||||||
| Disposed properties | (1,730) | (1,562) | |||||||||
| Non-core property expenses, net | (332) | 178 | |||||||||
At share adjustments (1) | (1,971) | (1,942) | |||||||||
| Same Store NOI | $ | 21,903 | $ | 22,422 | |||||||
(1) Adjustment to apply CROP’s ownership percentage in the properties within the same store portfolio. | |||||||||||
Comparison of the Three Months Ended March 31, 2025 and 2024
Same store NOI decreased slightly for the three months ended March 31, 2025 when compared to the same periods in the prior year. The weighted-average rents for the same store portfolio were $1,683 and $1,690, while the weighted-average occupancy rate for the same store portfolio was 94.5% at March 31, 2025 and 2024. For the three months ended March 31, 2025, utilities increased while insurance and real estate taxes decreased when compared to the same period in the prior year.
Funds from Operations
We believe funds from operations, or FFO, is a beneficial indicator of the performance of an equity REIT and of our company. We compute FFO in accordance with the standards established by the National Association of Real Estate Investment Trusts, or NAREIT, as net income or loss (computed in accordance with GAAP), excluding gains or losses from sales of operating real estate assets (which can vary among owners of identical assets in similar conditions based on historical cost accounting and useful-life estimates), gains and losses from change in control, impairment losses on operating real estate assets, the cumulative effect of changes in accounting principles, real estate-related depreciation and amortization, and after adjustments for our share of unconsolidated partnerships and joint ventures.
We believe FFO facilitates comparisons of operating performance between periods and among other REITs. However, our computation of FFO may not be comparable to other REITs that do not define FFO in accordance with the NAREIT definition or that interpret the current NAREIT definition differently than we do. Our management believes that historical cost accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered the presentation of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. As a result, we believe that the use of FFO, together with the required GAAP presentations, provides a more complete understanding of our performance relative to our competitors and provides a more informed and appropriate basis on which to make decisions involving operating, financing, and investing activities.
We adjust FFO by the items below to arrive at Core FFO. Our management uses Core FFO as a measure of our operating performance. Our calculation of Core FFO may differ from the methodology used for calculating Core FFO by other REITs and, accordingly, our Core FFO may not be comparable. We believe these measures are useful to investors because they facilitate an understanding of our operating performance after adjusting for non-cash expenses and other items not indicative of ongoing operating performance.
Neither FFO nor Core FFO is equivalent to net income or cash generated from operating activities determined in accordance with U.S. GAAP. Furthermore, FFO and Core FFO do not represent amounts available for management’s discretionary use because of needed capital replacement or expansion, debt service obligations or other commitments or uncertainties. Neither FFO nor Core FFO should be considered as an alternative to net income as an indicator of our operating performance.
13
The following table presents the calculation of FFO and Core FFO ($ in thousands, except share and per share data):
| Three Months Ended March 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Net (loss) income attributable to controlling interests | $ | (6,273) | $ | 3,919 | |||||||
| Adjustments to arrive at FFO: | |||||||||||
| Real estate-related depreciation and amortization | 14,349 | 14,279 | |||||||||
| Depreciation and amortization from unconsolidated real estate entities | 1,988 | 2,287 | |||||||||
| Gain on sale of real estate assets | (7,932) | (26,638) | |||||||||
| Income (loss) allocated to noncontrolling interests - limited partners | (6,405) | 3,856 | |||||||||
| Amount attributable to above from noncontrolling interests - partially owned entities | (514) | (505) | |||||||||
| Funds from operations attributable to common stockholders and unit holders | (4,787) | (2,802) | |||||||||
| Adjustments: | |||||||||||
| Gain on legal settlement | (400) | — | |||||||||
| Amortization of intangible assets | 601 | 675 | |||||||||
| Amortization of debt issuance costs | 946 | 739 | |||||||||
| Accretion of discount on preferred stock | 939 | 685 | |||||||||
Selling commissions and expenses from Series 2025 Preferred Stock Exchanges | 3,090 | — | |||||||||
| Share-based compensation | 1,042 | 982 | |||||||||
| Promote from incentive allocation agreement (tax effected) | — | (40) | |||||||||
| Losses on debt extinguishment | 98 | 1,239 | |||||||||
| Impairment loss | 957 | — | |||||||||
| Losses (gains) on derivatives | 690 | (594) | |||||||||
| Legal costs and settlements, net | (7) | (703) | |||||||||
Other adjustments (1) | 320 | (390) | |||||||||
| Amount attributable to above from noncontrolling interests and unconsolidated entities | 55 | 7 | |||||||||
| Core funds from operations attributable to common stockholders and unit holders | $ | 3,544 | $ | (202) | |||||||
| FFO per common share and unit - diluted | $ | (0.07) | $ | (0.04) | |||||||
| Core FFO per common share and unit - diluted | $ | 0.05 | $ | 0.00 | |||||||
| Weighted-average diluted common shares and units outstanding - FFO and Core FFO | 69,794,328 | 64,362,720 | |||||||||
(1) Other adjustments include acquisition fees and expenses, insurance losses, and other miscellaneous non-cash or non-recurring items. | |||||||||||
Weighted-average dilutive common shares and units for FFO and Core FFO are as follows:
| Three Months Ended March 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Dilutive weighted-average Series A Convertible Preferred shares | 6,038,949 | 693,606 | |||||||||
| Weighted-average common shares | 31,543,589 | 31,581,072 | |||||||||
| Weighted-average limited partnership units | 32,211,790 | 32,088,042 | |||||||||
| Weighted-average common shares and units outstanding | 69,794,328 | 64,362,720 | |||||||||
Refer to “Results of Operations” and “Reportable Segment Net Operating Income” above for further detail.
Net Asset Value
Our board of directors, including a majority of our independent directors, has adopted valuation guidelines, as amended from time to time, that contain a comprehensive set of methodologies to be used in connection with the calculation of our net asset value (“NAV”). Pursuant to these valuation procedures, we computed a March 31, 2025 NAV per share for our outstanding Class T, Class D, Class I, and Class A shares of $11.5429.
The purchase price per share for each class of common stock will vary and will generally equal our prior month’s NAV per share, as determined monthly, plus applicable upfront selling commissions and dealer manager fees. Refer to Part II. Item 5. “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Repurchase of Equity Securities – Net Asset Value and — NAV and NAV Per Share Calculation” in our Annual Report on Form 10-K for further information on the valuation methods used for the purposes of determining the valuations of our assets and liabilities.
14
CROP has certain classes or series of OP Units that are each economically equivalent to a corresponding class of shares. Accordingly, on the last day of each month, for such classes or series of OP Units, the NAV per OP Unit equals the NAV per share of the corresponding class. To the extent CROP has classes of units that do not correspond to a class of our shares, such units will be valued in a manner consistent with our valuation guidelines. The NAV of CROP on the last day of each month equals the sum of the NAVs of each fully-diluted outstanding OP Unit on such day. In calculating the fully-diluted outstanding OP Units we include all outstanding vested LTIP Units, unvested time-based LTIP Units and those performance-based LTIP Units that would be earned based on the internal rate of return as of such day.
Our total NAV in the following table includes the NAV of our outstanding classes of common stock, as well as the partnership interests of CROP held by parties other than us. The following table sets forth the components of our NAV as of March 31, 2025 ($ in thousands except share data):
| Components of NAV* | As of March 31, 2025 | ||||
| Investments in Multifamily Operating Properties | $ | 2,035,060 | |||
| Investments in Multifamily Development Properties | 46,383 | ||||
| Investments in Real Estate-Related Structured Investments | 99,814 | ||||
| Investments in Land Held for Development | 44,120 | ||||
| Operating Company and Other Net Current Assets | 15,701 | ||||
| Cash and Cash Equivalents | 19,361 | ||||
| Secured Real Estate Financing | (1,192,465) | ||||
| Subordinated Unsecured Notes | (20,690) | ||||
| Preferred Equity | (237,921) | ||||
| Convertible Preferred Equity | (78,054) | ||||
| Net Asset Value | $ | 731,309 | |||
| Fully-diluted Shares/Units Outstanding | 63,355,792 | ||||
| * Presented as adjusted for our economic ownership percentage in each asset. | |||||
The following table provides a breakdown of our total NAV and NAV per share/unit by class as of March 31, 2025 ($ in thousands, except share and per share data):
| Class | |||||||||||||||||||||||||||||||||||
| T | D | I | A | OP(1) | Total | ||||||||||||||||||||||||||||||
As of March 31, 2025 | |||||||||||||||||||||||||||||||||||
| Monthly NAV | $ | 49,887 | $ | 4,909 | $ | 77,537 | $ | 227,096 | $ | 371,880 | $ | 731,309 | |||||||||||||||||||||||
| Fully-diluted Outstanding Shares/Units | 4,321,922 | 425,327 | 6,717,264 | 19,674,086 | 32,217,193 | 63,355,792 | |||||||||||||||||||||||||||||
| NAV per Fully-diluted Share/Unit | $ | 11.5429 | $ | 11.5429 | $ | 11.5429 | $ | 11.5429 | $ | 11.5429 | |||||||||||||||||||||||||
(1) Includes the partnership interests of CROP held by High Traverse Holdings, an entity beneficially owned by Daniel Shaeffer, Chad Christensen, Gregg Christensen and Eric Marlin and other CROP interests, including LTIP Units as described above, held by parties other than us. | |||||||||||||||||||||||||||||||||||
Set forth below are the weighted averages of the key assumptions that were used by the Independent Appraisal Firms in the discounted cash flow methodology used in the March 31, 2025, valuations of our real property assets, based on property types.
| Discount Rate | Exit Capitalization Rate | ||||||||||
| Operating Assets | 6.81% | 5.42% | |||||||||
| * Presented as adjusted for our economic ownership percentage in each asset, weighted by gross value. The weighted averages were calculated by our advisor based on the information provided by the Independent Appraisal Firms. | |||||||||||
15
A change in these assumptions would impact the calculation by the Independent Appraisal Firms of the value of our operating and development assets. For example, assuming all other factors remain unchanged, the changes listed below would result in the following effects on our operating and development asset values:
| Sensitivities | Change | Operating Asset Values | ||||||
| Discount Rate | 0.25% decrease | 2.3% | ||||||
| 0.25% increase | (2.3)% | |||||||
| Exit Capitalization Rate | 0.25% decrease | 3.4% | ||||||
| 0.25% increase | (3.0)% | |||||||
| * Presented as adjusted for our economic ownership percentage in each asset. | ||||||||
The following table reconciles stockholders’ equity and CROP partners’ capital per our condensed consolidated balance sheet to our NAV ($ in thousands):
March 31, 2025 | |||||
| Stockholders’ equity | $ | 234,338 | |||
| Non-controlling interests attributable to limited partners | 172,018 | ||||
| $ | 406,356 | ||||
| Adjustments at share: | |||||
| Accumulated depreciation and amortization, consolidated and unconsolidated entities | $ | 248,299 | |||
| Discount on preferred stock | (8,154) | ||||
| Convertible preferred shares | (78,054) | ||||
| Unrealized net real estate and debt appreciation | 149,219 | ||||
Other (1) | 13,643 | ||||
| NAV | $ | 731,309 | |||
(1) Other includes deferred revenue, non current commissions, and derivative assets where settlement is not imminent. | |||||
The following describes the adjustments to reconcile GAAP stockholders’ equity and CROP partners' capital per our condensed consolidated balance sheet to our NAV:
•We depreciate our investments in real estate and amortize certain other assets and liabilities in accordance with GAAP. Such depreciation and amortization is not recorded for purposes of determining our NAV. Accumulated depreciation and amortization associated with our investments in unconsolidated real estate entities is also not recorded for purposes of determining our NAV.
•Our preferred stock that is mandatorily redeemable is accounted for as a liability with associated issuance costs deferred and amortized under GAAP. These issuance costs are excluded for purposes of determining our NAV.
•Convertible preferred shares are treated as a reduction to NAV.
•Our investments in real estate are presented under historical cost in our GAAP condensed consolidated financial statements. Additionally, our mortgage notes, revolving credit facility and construction loans are presented at their carrying value in our GAAP condensed consolidated financial statements. As such, any increases or decreases in the fair market value of our investments in real estate or our debt instruments are not included in our GAAP results. For purposes of determining our NAV, our investments in real estate and our instruments are recorded at fair value.
Policies Regarding Operating Expenses
Our advisor must reimburse us the amount by which our aggregate total operating expenses for the four fiscal quarters then ended exceed the greater of 2% of our average invested assets or 25% of our net income (the 2%/25% Limitation), unless the conflicts committee has determined that such excess expenses were justified based on unusual and non-recurring factors. For the four consecutive quarters ended March 31, 2025, our total operating expenses were less than the 2%/25% Limitation.
16
Liquidity and Capital Resources
Our principal demands for funds during the short and long-term are and will be for the acquisition of multifamily apartment communities and investments in multifamily real estate-related assets, including funding commitments on our structured investments; operating expenses, including the management fee we pay to our advisor and the performance participation allocation (when applicable); capital expenditures, including those on our development projects; general and administrative expenses; payments under debt obligations; repurchases of common and preferred stock; and payments of distributions to stockholders. We will obtain the capital required to purchase multifamily apartment communities and make investments in multifamily real estate-related assets and conduct our operations from the proceeds of our public and private offerings, our credit facilities, other secured or unsecured financings from banks and other lenders, and from any undistributed funds from our operations.
We intend to strengthen our capital and liquidity positions by continuing to focus on our core fundamentals at the property level. Factors which could increase or decrease our future liquidity include but are not limited to operating performance of the properties, the interest rate environment and inflation which could increase our expenses, the satisfaction of REIT dividend requirements and the volume of repurchase requests under our share purchase program. We have satisfied all of our repurchase requests to date. Due to commitments on our structured investments and development projects, which we believe will be accretive to our portfolio, our available cash to fund repurchase requests is limited. We completed the sale of Cottonwood Broadway (February 2025) to strengthen our liquidity position and enhance our ability to fund repurchase requests and anticipate we will be able to fully fund repurchase requests. We also completed the sale of Parc Westborough on May 14, 2025. To continue to bolster our liquidity position, we may pursue additional strategic asset sales in the future or seek additional sources of capital.
As of March 31, 2025, we have $807.9 million of fixed rate debt and $300.6 million of variable rate debt, which includes $44.0 million of construction loans. We have interest rate cap hedging instruments on $167.1 million, or 55.6%, of our variable rate debt. In addition, CROP has issued unsecured promissory notes in a private placement offering, in an aggregate amount of $20.7 million as of March 31, 2025.
We have a credit facility in place with JP Morgan that provides us with additional liquidity. Our JP Morgan Revolving Credit Facility has a variable rate. We can draw upon or pay down the JP Morgan Revolving Credit Facility at our option, subject to loan-to-value requirements, debt-service coverage ratios and other covenants and restrictions as set forth in the loan documents. At March 31, 2025 the $100.0 million credit facility was secured by Parc Westborough and Alpha Mill and was capped at $80.8 million due to the current interest rate environment and the applicable debt-service coverage ratio. As of March 31, 2025, we had advances of $29.3 million on the credit facility. With the sale of Parc Westborough in May 2025, all advances on the credit facility were paid off and the capacity on the credit facility was reduced to $34.7 million.
One of our principal long-term liquidity requirements includes the repayment of maturing debt. Aggregate maturities will be $81.8 million for the year ended December 31, 2025 and for the years ending 2026 through 2029 will be $141.3 million, $363.9 million, $72.2 million, and $45.9 million, respectively, and $443.5 million in the aggregate thereafter. Of the $81.8 million maturing during the current year ended December 31, 2025, $20.7 million relates to our 2019 6% Unsecured Promissory Notes and $60.2 million relates to 805 Riverfront, which can be extended to June 2026.
We have issued and outstanding Series 2019, Series 2023, Series 2023-A and Series 2025 Preferred Stock, each of which are similar in nature. Each series must be redeemed for cash at a redemption price per share equal to $10.00 plus any accrued and unpaid dividends, to the extent there are funds legally available, on the redemption date.
The Series 2019 Preferred Stock redemption date is December 31, 2025. The Series 2023 Preferred Stock redemption date is June 30, 2027, subject to two one-year extensions at our option. The Series 2023-A Preferred Stock redemption date is December 31, 2027. The Series 2025 Preferred Stock redemption date is December 31, 2028, subject to two one-year extension options at our discretion.
As of March 31, 2025, we had 8.8 million shares outstanding for our Series 2019 Preferred Stock, 10.7 million shares outstanding for our Series 2023 Preferred Stock, 0.3 million shares outstanding for our Series 2023-A Preferred Stock, and 4.0 million shares outstanding for our Series 2025 Preferred Stock.
17
Holders of Series 2019 Preferred Stock and Series 2023 Preferred Stock may exchange their shares at a ratio between 1:1 and 1:1.0782 with respect to the Series 2019 Preferred Stock and at a ratio of 1:1 with respect the Series 2023 Preferred Stock through June 30, 2025, which date may be extended at the discretion of the board of directors. As of May 9, 2025, $53.2 million of Series 2019 Preferred Stock had been exchanged into Series 2025 Preferred Stock, reducing the amount of Series 2019 Preferred Stock to be redeemed to $66.6 million.
Management intends to pay this obligation with proceeds from the sale of real estate assets, including Parc Westborough (Refer to Note 3 in the notes to the condensed consolidated financial statements), cash on hand and available capacity on our revolving credit facility. We project these actions will provide sufficient liquidity to satisfy the redemption of Series 2019 Preferred Stock on maturity.
In addition to making investments in accordance with our investment objectives, we expect to use our capital resources to pay offering costs in connection with our securities offerings, as well as make certain payments to our advisor pursuant to the terms of our advisory management agreement.
To maintain our qualification as a REIT, we will be required to make aggregate annual distributions to our stockholders of at least 90% of our REIT taxable income (computed without regard to the dividends-paid deduction and excluding net capital gain). Our board of directors may authorize distributions in excess of those required for us to maintain REIT status depending on our financial condition and such other factors as our board of directors deems relevant.
Cash Flows
The following table provides a breakdown of the net change in our cash and cash equivalents and restricted cash ($ in thousands):
| Three Months Ended March 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| Net cash used in operating activities | $ | (5,463) | $ | (1,086) | ||||||||||
| Net cash provided by investing activities | 63,456 | 66,705 | ||||||||||||
| Net cash used in financing activities | (69,606) | (60,161) | ||||||||||||
| Net (decrease) increase in cash and cash equivalents and restricted cash | $ | (11,613) | $ | 5,458 | ||||||||||
Net cash flows from operating activities decreased by $4.4 million compared to the same period in the prior year primarily due to $3.0 million in selling commissions and expenses from Series 2025 Preferred Stock exchanges, large legal fee refunds in 2024 that were not present in 2025, property sales, and higher interest costs primarily from our preferred offerings.
Net cash flows from investing activities decreased by $3.2 million compared to the same period in the prior year. The decrease came from the issuance of a $7.0 promissory note to the buyer of Cottonwood Broadway and the absence of cash acquired from consolidations, which was $2.2 million in the prior year with Cottonwood Lighthouse Point. These decreases were offset by the absence of funds provided for preferred equity investments and mezzanine loans, which were $1.3 million and $3.4 million, respectively, during the same period in the prior year. In addition, the sale of Cottonwood Broadway in February 2025 provided $1.0 million more in cash than what was provided with the sale of Cottonwood West Palm in February of 2024.
Net cash flows from financing activities decreased by $9.4 million compared to the same period in the prior year. This is primarily due to a decrease of $47.0 million in borrowings on our revolving credit facility, mortgage notes and construction loans, and an increase of $1.0 million in distributions. This was offset by $19.0 in net proceeds received from land loans, $9.5 million in net proceeds received from the issuance of preferred and common stock, and a decrease of $10.0 million in redemptions of preferred and common stock.
18
Distributions
The following table shows distributions paid and cash flow (used in) provided by operating activities during the nine months ended March 31, 2025 and the year ended December 31, 2024 ($ in thousands):
| Three Months Ended March 31, 2025 | Year Ended December 31, 2024 | ||||||||||
| Distributions paid in cash - convertible preferred stockholders | $ | 1,193 | $ | 1,885 | |||||||
| Distributions paid in cash - common stockholders | 4,778 | 19,544 | |||||||||
| Distributions paid in cash to noncontrolling interests - limited partners | 5,894 | 23,708 | |||||||||
| Distributions of DRP (reinvested) | 871 | 3,182 | |||||||||
Total distributions (1) | $ | 12,736 | $ | 48,319 | |||||||
Source of distributions (2) | |||||||||||
| Paid from cash flows provided by operations | $ | — | $ | 16,529 | |||||||
| Paid from proceeds from realized investments | 11,865 | 28,608 | |||||||||
| Offering proceeds from issuance of common stock pursuant to the DRP | 871 | 3,182 | |||||||||
| Total sources | $ | 12,736 | $ | 48,319 | |||||||
Net cash (used in) provided by operating activities (2) | $ | (5,463) | $ | 15,443 | |||||||
(1) 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. | |||||||||||
(2) The allocation of total sources are calculated on a quarterly basis. Generally, for purposes of determining the source of our distributions paid, we assume first that we use positive cash flow from operating activities from the relevant or prior quarter to fund distribution payments. As such, amounts reflected above as distributions paid from cash flows provided by operations may be from prior quarters which had positive cash flow from operations. | |||||||||||
For the three months ended March 31, 2025, distributions declared to convertible preferred stockholders, common stockholders and limited partners were $1.3 million, $5.6 million and $5.9 million, respectively.
For the three months ended March 31, 2025, we paid cash distributions to convertible preferred stockholders, common stockholders and limited partners of $1.2 million, $4.8 million and $5.9 million, respectively. For the three months ended March 31, 2025, our net loss was $13.0 million. Cash flows used in operating activities for the three months ended March 31, 2025 was $5.5 million.
Critical Accounting Policies
Please refer to Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the period ending December 31, 2024 for discussions of our critical accounting estimates. As of March 31, 2025, our critical accounting estimates have not changed from those described in that report.
Subsequent Events
Prospect Mezzanine Loan
On April 16, 2025, we entered into an agreement to provide a $5.1 million mezzanine loan to refinance Prospect on Central, a mixed-use property in Denver, Colorado. We provided the first $3.8 million of our commitment upon the execution of the agreement, while the remaining $1.3 million is held in reserve. The mezzanine loan is paid current interest at a rate of 15.0% on the entire commitment drawn from the debt service reserve and matures on May 8, 2027 with two 12-month extension options, subject to conditions being met.
Infield Funding
On April 25, 2025, we increased our commitment by an additional $2.0 million on the Infield preferred equity investment, and funded the additional amount at the same time, bringing our total funding to $13.7 million.
Sale of Parc Westborough
On May 14, 2025, we sold Parc Westborough for net proceeds of $54.6 million after repayment of the entire drawn balance on the revolving credit facility. We expect to recognize a gain on sale during the three months ended June 30, 2025.
19
Experts
The statements included in this supplement under “April 30, 2025 NAV Calculation,” relating to the role of Altus Group U.S. Inc. have been reviewed by Altus Group U.S. Inc., an independent valuation advisor, and are included in this supplement given the authority of such firm as experts in real estate valuations. Altus Group U.S. Inc. does not admit that it is in the category of persons whose consent is required under Section 7 of the Securities Act.
20
Index to Condensed Consolidated Financial Statements
F-1
| Cottonwood Communities, Inc. | ||||||||||||||
| Condensed Consolidated Balance Sheets | ||||||||||||||
| (in thousands, except share and per share data) | ||||||||||||||
| March 31, 2025 | December 31, 2024 | |||||||||||||
| Assets | ||||||||||||||
| Real estate assets, net | $ | 1,599,242 | $ | 1,679,497 | ||||||||||
| Investments in unconsolidated real estate entities | 112,355 | 111,556 | ||||||||||||
| Investments in real estate-related loans, net | 30,048 | 30,027 | ||||||||||||
| Cash and cash equivalents | 52,866 | 59,877 | ||||||||||||
| Restricted cash | 28,958 | 33,560 | ||||||||||||
| Other assets | 34,766 | 29,338 | ||||||||||||
| Total assets | $ | 1,858,235 | $ | 1,943,855 | ||||||||||
| Liabilities, Equity, and Noncontrolling Interests | ||||||||||||||
| Liabilities | ||||||||||||||
| Mortgage notes and revolving credit facility, net | $ | 1,056,342 | $ | 1,151,514 | ||||||||||
| Construction loans, net | 44,046 | 44,046 | ||||||||||||
| Land loans, net | 19,044 | — | ||||||||||||
| Preferred stock, net | 228,560 | 221,072 | ||||||||||||
| Unsecured promissory notes, net | 20,690 | 21,350 | ||||||||||||
| Accounts payable, accrued expenses and other liabilities | 55,545 | 60,944 | ||||||||||||
| Total liabilities | 1,424,227 | 1,498,926 | ||||||||||||
| Commitments and contingencies (Note 12) | ||||||||||||||
| Equity and noncontrolling interests | ||||||||||||||
| Stockholders' equity | ||||||||||||||
Series A Convertible Preferred Stock, $0.01 par value, 15,000,000 shares authorized at $10.00 per share; 7,805,421 and 5,825,457 shares issued and outstanding at March 31, 2025 and December 31, 2024, respectively. | 68,496 | 50,668 | ||||||||||||
Common stock, Class T shares, $0.01 par value, 275,000,000 shares authorized; 4,321,922 and 4,289,506 shares issued and outstanding at March 31, 2025 and December 31, 2024, respectively. | 43 | 43 | ||||||||||||
Common stock, Class D shares, $0.01 par value, 275,000,000 shares authorized; 425,327 and 386,477 shares issued and outstanding at March 31, 2025 and December 31, 2024, respectively. | 4 | 4 | ||||||||||||
Common stock, Class I shares, $0.01 par value, 275,000,000 shares authorized; 6,639,434 and 6,162,803 shares issued and outstanding at March 31, 2025 and December 31, 2024, respectively. | 66 | 62 | ||||||||||||
Common stock, Class A shares, $0.01 par value, 125,000,000 shares authorized; 19,674,086 and 20,358,844 shares issued and outstanding at March 31, 2025 and December 31, 2024, respectively. | 190 | 197 | ||||||||||||
| Additional paid-in capital | 371,562 | 372,611 | ||||||||||||
| Accumulated distributions - Series A Convertible Preferred | (3,588) | (2,255) | ||||||||||||
| Accumulated distributions - common stock | (90,445) | (84,797) | ||||||||||||
| Accumulated deficit | (111,990) | (105,717) | ||||||||||||
| Total stockholders' equity | 234,338 | 230,816 | ||||||||||||
| Noncontrolling interests | ||||||||||||||
| Limited partners | 172,018 | 186,032 | ||||||||||||
| Partially owned entities | 27,652 | 28,081 | ||||||||||||
| Total noncontrolling interests | 199,670 | 214,113 | ||||||||||||
| Total equity and noncontrolling interests | 434,008 | 444,929 | ||||||||||||
| Total liabilities, equity and noncontrolling interests | $ | 1,858,235 | $ | 1,943,855 | ||||||||||
| See accompanying notes to condensed consolidated financial statements | ||||||||||||||
Note: The condensed consolidated balance sheets as of March 31, 2025 and December 31, 2024 include assets of consolidated variable interest entities, or VIEs of $493.6 million and $498.9 million, respectively, and liabilities of $408.1 million and $409.7 million, respectively. Refer to Note 10 for additional discussion of our VIEs.
F-2
| Cottonwood Communities, Inc. | |||||||||||
| Condensed Consolidated Statements of Operations | |||||||||||
| (Unaudited) | |||||||||||
| (in thousands, except share and per share data) | |||||||||||
| Three Months Ended March 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Revenues | |||||||||||
| Rental and other property revenues | $ | 37,308 | $ | 34,355 | |||||||
| Property management revenues | 1,792 | 2,339 | |||||||||
| Other revenues | 1,566 | 785 | |||||||||
| Total revenues | 40,666 | 37,479 | |||||||||
| Operating expenses | |||||||||||
| Property operations expense | 13,582 | 14,032 | |||||||||
| Property management expense | 4,582 | 4,578 | |||||||||
| Asset management fee | 3,091 | 3,144 | |||||||||
| Depreciation and amortization | 14,950 | 14,954 | |||||||||
| General and administrative expenses | 2,559 | 1,767 | |||||||||
| Impairment loss | 957 | — | |||||||||
| Total operating expenses | 39,721 | 38,475 | |||||||||
| Income (loss) from operations | 945 | (996) | |||||||||
| Equity in earnings of unconsolidated real estate entities | 1,369 | 1,368 | |||||||||
| Interest income | 334 | 473 | |||||||||
| Interest expense | (20,047) | (20,418) | |||||||||
| Loss on debt extinguishment | (98) | (1,239) | |||||||||
| Gain on sale of real estate assets | 7,932 | 26,638 | |||||||||
| Gain on legal settlement | 400 | — | |||||||||
| Other (expense) income | (3,974) | 1,222 | |||||||||
| (Loss) income before income taxes | (13,139) | 7,048 | |||||||||
| Income tax benefit | 125 | 15 | |||||||||
| Net (loss) income | (13,014) | 7,063 | |||||||||
| Net loss (income) attributable to noncontrolling interests: | |||||||||||
| Limited partners | 6,405 | (3,856) | |||||||||
| Partially owned entities | 336 | 712 | |||||||||
| Net (loss) income attributable to controlling interests | (6,273) | 3,919 | |||||||||
| Less: preferred stock dividends | 1,333 | 143 | |||||||||
| Net (loss) income attributable to common stockholders | $ | (7,606) | $ | 3,776 | |||||||
| Weighted-average common shares outstanding - basic | 31,543,589 | 31,581,072 | |||||||||
| Weighted-average common shares outstanding - diluted | 31,543,589 | 64,362,720 | |||||||||
| Net (losses) earnings per common share - basic | $ | (0.24) | $ | 0.12 | |||||||
| Net (losses) earnings per common share - diluted | $ | (0.24) | $ | 0.12 | |||||||
| See accompanying notes to condensed consolidated financial statements | |||||||||||
F-3
| Cottonwood Communities, Inc. | ||||||||||||||||||||||||||||||||||||||||||||
| Condensed Consolidated Statements of Stockholders' Equity | ||||||||||||||||||||||||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||||||||||||||||||||
| Cottonwood Communities, Inc. Stockholders' Equity | Noncontrolling interests | |||||||||||||||||||||||||||||||||||||||||||
| Series A Convertible Preferred Stock | Par Value - Common Stock | Additional Paid-In Capital | Accumulated Distributions | Accumulated Deficit | Total Stockholders' Equity | Limited Partners | Partially Owned Entities | Total Equity and Noncontrolling Interests | ||||||||||||||||||||||||||||||||||||
| Class T | Class D | Class I | Class A | Convertible Preferred | Common Stock | |||||||||||||||||||||||||||||||||||||||
| Balance at January 1, 2025 | $ | 50,668 | $ | 43 | $ | 4 | $ | 62 | $ | 197 | $ | 372,611 | $ | (2,255) | $ | (84,797) | $ | (105,717) | $ | 230,816 | $ | 186,032 | $ | 28,081 | $ | 444,929 | ||||||||||||||||||
| Issuance of Series A Convertible Preferred Stock | 19,899 | — | — | — | — | — | — | — | — | 19,899 | — | — | 19,899 | |||||||||||||||||||||||||||||||
| Offering Costs - Series A Convertible Preferred Stock | (1,621) | — | — | — | — | — | — | — | — | (1,621) | — | — | (1,621) | |||||||||||||||||||||||||||||||
| Series A Convertible Preferred Stock repurchased | (450) | — | — | — | — | — | — | — | — | (450) | — | — | (450) | |||||||||||||||||||||||||||||||
| Issuance of common stock | — | 1 | — | 5 | — | 7,660 | — | — | — | 7,666 | — | — | 7,666 | |||||||||||||||||||||||||||||||
| Offering costs - common stock | — | — | — | — | — | (489) | — | — | — | (489) | — | — | (489) | |||||||||||||||||||||||||||||||
| Distribution reinvestment | — | — | — | — | — | 871 | — | — | — | 871 | — | — | 871 | |||||||||||||||||||||||||||||||
| Common stock/CROP Units repurchased | — | (1) | — | (2) | (7) | (11,758) | — | — | — | (11,768) | (90) | — | (11,858) | |||||||||||||||||||||||||||||||
| Exchanges and transfers | — | — | — | 1 | — | 1,792 | — | — | — | 1,793 | (1,793) | — | — | |||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | — | 93 | — | — | — | 93 | 949 | — | 1,042 | |||||||||||||||||||||||||||||||
| Distributions to investors | — | — | — | — | — | — | (1,333) | (5,648) | — | (6,981) | (5,893) | (93) | (12,967) | |||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | — | — | (6,273) | (6,273) | (6,405) | (336) | (13,014) | |||||||||||||||||||||||||||||||
| Reallocation of stockholders' equity and noncontrolling interests | — | — | — | — | — | 782 | — | — | — | 782 | (782) | — | — | |||||||||||||||||||||||||||||||
| Balance at March 31, 2025 | $ | 68,496 | $ | 43 | $ | 4 | $ | 66 | $ | 190 | $ | 371,562 | $ | (3,588) | $ | (90,445) | $ | (111,990) | $ | 234,338 | $ | 172,018 | $ | 27,652 | $ | 434,008 | ||||||||||||||||||
F-4
| Cottonwood Communities, Inc. | ||||||||||||||||||||||||||||||||||||||||||||
| Condensed Consolidated Statements of Stockholders' Equity (Continued) | ||||||||||||||||||||||||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||||||||||||||||||||
| Cottonwood Communities, Inc. Stockholders' Equity | Noncontrolling interests | |||||||||||||||||||||||||||||||||||||||||||
| Series A Convertible Preferred Stock | Par Value - Common Stock | Additional Paid-In Capital | Accumulated Distributions | Accumulated Deficit | Total Stockholders' Equity | Limited Partners | Partially Owned Entities | Total Equity and Noncontrolling Interests | ||||||||||||||||||||||||||||||||||||
| Class T | Class D | Class I | Class A | Convertible Preferred | Common Stock | |||||||||||||||||||||||||||||||||||||||
| Balance at January 1, 2024 | $ | 1,569 | $ | 39 | $ | 2 | $ | 43 | $ | 226 | $ | 373,954 | $ | (14) | $ | (62,114) | $ | (94,761) | $ | 218,944 | $ | 221,617 | $ | 30,986 | $ | 471,547 | ||||||||||||||||||
| Issuance of Series A Convertible Preferred Stock | 13,608 | — | — | — | — | — | — | — | — | 13,608 | — | — | 13,608 | |||||||||||||||||||||||||||||||
| Offering Costs - Series A Convertible Preferred Stock | (1,713) | — | — | — | — | — | — | — | — | (1,713) | — | — | (1,713) | |||||||||||||||||||||||||||||||
| Issuance of common stock | — | 1 | — | 3 | — | 5,976 | — | — | — | 5,980 | — | — | 5,980 | |||||||||||||||||||||||||||||||
| Offering costs - common stock | — | — | — | — | — | (88) | — | — | — | (88) | — | — | (88) | |||||||||||||||||||||||||||||||
| Distribution reinvestment | — | — | — | — | — | 724 | — | — | — | 724 | — | — | 724 | |||||||||||||||||||||||||||||||
| Common stock/CROP Units repurchased | — | (1) | — | (1) | (7) | (12,575) | — | — | — | (12,584) | (1,968) | — | (14,552) | |||||||||||||||||||||||||||||||
| Exchanges and transfers | — | — | — | 1 | — | 612 | — | — | — | 613 | (613) | — | — | |||||||||||||||||||||||||||||||
| OP Units issued for real estate interests | — | — | — | — | — | — | — | — | — | — | 3,322 | — | 3,322 | |||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | — | 53 | — | — | — | 53 | 929 | — | 982 | |||||||||||||||||||||||||||||||
| Distributions to investors | — | — | — | — | — | — | (143) | (5,656) | — | (5,799) | (5,887) | (39) | (11,725) | |||||||||||||||||||||||||||||||
| Net income (loss) | — | — | — | — | — | — | — | — | 3,919 | 3,919 | 3,856 | (712) | 7,063 | |||||||||||||||||||||||||||||||
| Reallocation of stockholders' equity and noncontrolling interests | — | — | — | — | — | 1,914 | — | — | — | 1,914 | (1,914) | — | — | |||||||||||||||||||||||||||||||
| Balance at March 31, 2024 | $ | 13,464 | $ | 39 | $ | 2 | $ | 46 | $ | 219 | $ | 370,570 | $ | (157) | $ | (67,770) | $ | (90,842) | $ | 225,571 | $ | 219,342 | $ | 30,235 | $ | 475,148 | ||||||||||||||||||
| See accompanying notes to condensed consolidated financial statements | ||||||||||||||||||||||||||||||||||||||||||||
F-5
| Cottonwood Communities, Inc. | ||||||||||||||
| Condensed Consolidated Statements of Cash Flows | ||||||||||||||
| (Unaudited) | ||||||||||||||
| (in thousands) | ||||||||||||||
| Three Months Ended March 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| Cash flows from operating activities: | ||||||||||||||
| Net (loss) income | $ | (13,014) | $ | 7,063 | ||||||||||
| Adjustments to reconcile net (loss) income to net cash used in operating activities: | ||||||||||||||
| Depreciation and amortization | 14,950 | 14,954 | ||||||||||||
| Gain on sale of real estate assets | (7,932) | (26,638) | ||||||||||||
| Gain on legal settlement | (400) | — | ||||||||||||
| Share-based compensation | 1,042 | 982 | ||||||||||||
| Deferred taxes | (126) | — | ||||||||||||
| Amortization of debt issuance costs, discounts and premiums | 1,881 | 1,413 | ||||||||||||
| Derivative fair value adjustments | 690 | (78) | ||||||||||||
| Loss on debt extinguishment | 98 | 1,239 | ||||||||||||
| Impairment loss | 957 | — | ||||||||||||
| Other operating | (46) | (104) | ||||||||||||
| Equity in earnings of unconsolidated real estate entities | (1,369) | (1,368) | ||||||||||||
| Distributions from unconsolidated real estate entities - return on capital | 570 | 695 | ||||||||||||
| Changes in operating assets and liabilities: | ||||||||||||||
| Other assets | 474 | (2,295) | ||||||||||||
| Accounts payable, accrued expenses and other liabilities | (3,238) | 3,051 | ||||||||||||
| Net cash used in operating activities | (5,463) | (1,086) | ||||||||||||
| Cash flows from investing activities: | ||||||||||||||
| Cash acquired on consolidation of real estate | — | 2,167 | ||||||||||||
| Proceeds from sale of real estate assets, net | 83,414 | 82,434 | ||||||||||||
| Promissory note to buyer of real estate assets | (7,000) | — | ||||||||||||
| Capital expenditures and development activities | (12,931) | (13,183) | ||||||||||||
| Investments in unconsolidated real estate entities | — | (1,314) | ||||||||||||
| Contributions to investments in real estate-related loans | (27) | (3,399) | ||||||||||||
| Net cash provided by investing activities | 63,456 | 66,705 | ||||||||||||
F-6
| Cottonwood Communities, Inc. | ||||||||||||||
| Condensed Consolidated Statements of Cash Flows (Continued) | ||||||||||||||
| (Unaudited) | ||||||||||||||
| (in thousands) | ||||||||||||||
| Three Months Ended March 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| Cash flows from financing activities: | ||||||||||||||
| Principal payments on mortgage notes | (119) | (115) | ||||||||||||
| Borrowings from revolving credit facility | — | 28,600 | ||||||||||||
| Repayments on revolving credit facility | (50,000) | (35,000) | ||||||||||||
| Repayments of mortgage notes | (46,072) | (48,458) | ||||||||||||
| Borrowings from construction loans | — | 7,138 | ||||||||||||
| Borrowings under land loans | 19,240 | — | ||||||||||||
| Deferred financing costs on land loans | (222) | — | ||||||||||||
| Repayments of related party notes assumed on acquisition | — | (1,332) | ||||||||||||
| Proceeds from issuance of preferred stock | 8,013 | 6,877 | ||||||||||||
| Redemption of preferred stock | (619) | (1,839) | ||||||||||||
| Offering costs paid on issuance of preferred stock | (893) | (888) | ||||||||||||
| Repurchase of unsecured promissory notes | (643) | (755) | ||||||||||||
| Proceeds from issuance of Series A Convertible Preferred Stock | 19,652 | 13,008 | ||||||||||||
| Offering costs paid on issuance of Series A Convertible Preferred Stock | (1,639) | (1,647) | ||||||||||||
| Repurchase of Series A Convertible Preferred Stock | (450) | — | ||||||||||||
| Proceeds from issuance of common stock | 7,666 | 5,980 | ||||||||||||
| Repurchase of common stock/CROP Units | (11,043) | (20,234) | ||||||||||||
| Offering costs paid on issuance of common stock | (518) | (557) | ||||||||||||
| Distributions to convertible preferred stockholders | (1,193) | (70) | ||||||||||||
| Distributions to common stockholders | (4,778) | (4,976) | ||||||||||||
| Distributions to noncontrolling interests - limited partners | (5,894) | (5,854) | ||||||||||||
| Distributions to noncontrolling interests - partially owned entities | (94) | (39) | ||||||||||||
| Net cash used in financing activities | (69,606) | (60,161) | ||||||||||||
| Net (decrease) increase in cash and cash equivalents and restricted cash | (11,613) | 5,458 | ||||||||||||
| Cash and cash equivalents and restricted cash, beginning of period | 93,437 | 90,813 | ||||||||||||
| Cash and cash equivalents and restricted cash, end of period | $ | 81,824 | $ | 96,271 | ||||||||||
| Reconciliation of cash and cash equivalents and restricted cash to the condensed consolidated balance sheets: | ||||||||||||||
| Cash and cash equivalents | $ | 52,866 | $ | 72,162 | ||||||||||
| Restricted cash | 28,958 | 24,109 | ||||||||||||
| Total cash and cash equivalents and restricted cash | $ | 81,824 | $ | 96,271 | ||||||||||
| Supplemental disclosure of non-cash investing and financing activities: | ||||||||||||||
| Changes in accrued deferred offering costs | $ | (43) | $ | (423) | ||||||||||
| Distributions reinvested in common stock | 871 | 724 | ||||||||||||
| Changes in accrued capital expenditures | (2,233) | (6,240) | ||||||||||||
| Paid-in-kind interest related to construction | — | 1,083 | ||||||||||||
| Changes in accrued redemptions | 370 | (5,656) | ||||||||||||
| Cottonwood Lighthouse Point Acquisition | ||||||||||||||
| Real estate assets, net of cash acquired | $ | — | $ | 86,961 | ||||||||||
| Mortgage note assumed | — | (47,581) | ||||||||||||
| Other assets and liabilities assumed, net | — | (2,426) | ||||||||||||
| Value of CROP Units issued for interests acquired | — | 3,322 | ||||||||||||
| See accompanying notes to condensed consolidated financial statements | ||||||||||||||
F-7
Cottonwood Communities, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1.Organization and Business
Cottonwood Communities, Inc. (the “Company,” “we,” “us,” or “our”) invests in a diverse portfolio of multifamily apartment communities and multifamily real estate-related assets throughout the United States. We are externally managed by our advisor, CC Advisors III, LLC (“CC Advisors III”), a wholly owned subsidiary of our sponsor, Cottonwood Communities Advisors, LLC (“CCA”). We were incorporated in Maryland in 2016. We own all of our assets through our operating partnership, Cottonwood Residential O.P., LP (“CROP”), and its subsidiaries. We are the sole member of the sole general partner of CROP and own general partner interests in CROP alongside third-party limited partners.
We are a non-listed, perpetual-life, net asset value (“NAV”) real estate investment trust (“REIT”). We generally will not be subject to U.S. federal income taxes on our taxable income to the extent we annually distribute all of our net taxable income to stockholders and maintain our qualification as a REIT.
We conducted an initial public offering of common stock (the “Initial Offering”) from August 13, 2018 to December 22, 2020, from which we raised gross proceeds of $122.0 million. In November 2021, we registered with the SEC an offering of up to $1.0 billion of shares of common stock (the “Follow-on Offering”), consisting of up to $900.0 million in shares of common stock offered in a primary offering (the “Primary Offering”) and $100.0 million in shares under our distribution reinvestment plan (the “DRP Offering”). As of March 31, 2025, we have raised gross proceeds of $250.1 million from the Follow-on Offering, including $8.8 million proceeds from the DRP Offering. We intend to conduct a continuous public offering of our common stock that will not have a predetermined duration, subject to continued compliance with the rules and regulations of the SEC and applicable state laws.
Since November 2019, we have periodically conducted private placement offerings exempt from registration under the Securities Act pursuant to which we have offered for sale to accredited investors preferred stock at a purchase price of $10.00 per share of preferred stock (the “Private Offerings”). As of March 31, 2025, we have raised gross proceeds of $322.7 million from the Private Offerings. Additional information about our preferred stock is included in Note 7 and Note 8 to these financial statements.
We own and operate a diverse portfolio of investments in multifamily apartment communities located in targeted markets throughout the United States. As of March 31, 2025, our portfolio consists of ownership interests or structured investment interests in 33 multifamily apartment communities with a total of 9,329 units, including 198 units in one multifamily apartment community under construction and another 1,080 units in four multifamily apartment communities in which we have a structured investment interest. In addition, we have an ownership interest in four land sites. We operate as one reportable segment comprising of multifamily real estate.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. The condensed consolidated financial statements, including the condensed notes thereto, are unaudited and exclude some of the disclosures required in audited financial statements. The condensed consolidated balance sheet as of December 31, 2024 has been derived from our audited financial statements as of that date, but does not include all of the information and footnotes required by GAAP for complete financial statements.
In the opinion of management, the accompanying condensed consolidated financial statements contain all adjustments and eliminations, consisting only of normal recurring adjustments necessary for a fair presentation in conformity with GAAP. The accompanying condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in our Annual Report on Form 10-K for the period ending December 31, 2024 filed with the SEC. As our comprehensive income is equivalent to net income, our accompanying condensed consolidated financial statements do not include a Statement of Other Comprehensive Income.
F-8
The accompanying condensed consolidated financial statements include our accounts and the accounts of our subsidiaries for which we have a controlling interest. All intercompany balances and transactions have been eliminated in consolidation.
Certain amounts in the prior year condensed consolidated financial statements and notes to the condensed consolidated financial statements have been reclassified to conform to the current year presentation. Such reclassifications did not impact previously reported net loss or accumulated deficit or change net cash provided by or used in operating, investing or financing activities.
Debt Modifications
Our Series 2025 Preferred Stock is being offered for (i) cash at a purchase price of $10.00 per share or (ii) in exchange for existing Series 2019 Preferred Stock or Series 2023 Preferred Stock (“Series 2025 Preferred Stock Exchanges”). Series 2025 Preferred Stock are classified as liabilities on the condensed consolidated balance sheets as they are mandatorily redeemable on a fixed date for a fixed amount.
Series 2025 Preferred Stock Exchanges are accounted as debt modifications in accordance with Accounting Standards Codification Subtopic No. 470-50, Debt—Modifications and Extinguishments, as the present value of cash flows from the newly issued Series 2025 Preferred Stock are not substantially different from Series 2019 Preferred Stock or Series 2023 Preferred Stock that are exchanged.
Under debt modification accounting, selling commissions and expenses, legal and other third-party costs in connection with Series 2025 Preferred Stock Exchanges are expensed as incurred. They are included in other expenses on the condensed consolidated statements of operations and as an operating activity on the condensed consolidated statements of cash flows.
3. Real Estate Assets, Net
The following table summarizes the carrying amounts of our consolidated real estate assets ($ in thousands):
| March 31, 2025 | December 31, 2024 | ||||||||||
| Land | $ | 254,289 | $ | 265,635 | |||||||
| Buildings and improvements | 1,394,663 | 1,459,787 | |||||||||
| Furniture, fixtures and equipment | 65,652 | 67,131 | |||||||||
| Intangible assets | 37,782 | 37,782 | |||||||||
Construction in progress (1) | 54,955 | 46,965 | |||||||||
| 1,807,341 | 1,877,300 | ||||||||||
| Less: Accumulated depreciation and amortization | (208,099) | (197,803) | |||||||||
| Real estate assets, net | $ | 1,599,242 | $ | 1,679,497 | |||||||
(1) Includes construction in progress for our development projects and capitalized costs for improvements not yet placed in service at our stabilized properties. | |||||||||||
Dispositions
Sale of Cottonwood Broadway
On February 28, 2025, we sold Cottonwood Broadway for net proceeds of $41.0 million after repayment of associated mortgage debt. We recorded a net gain on sale of $7.9 million. As part of the sale, we provided a 10 year, $7.0 million unsecured promissory note to the buyer. The note bears an interest rate of 6.78%. The promissory note can be prepaid anytime with the first payment due on 25th month of the loan. The promissory note is included in other assets on the condensed consolidated balance sheet at March 31, 2025.
F-9
Sale of Parc Westborough
On March 28, 2025, we entered into a contract to sell Parc Westborough for $96.2 million. On May 14, 2025, we sold Parc Westborough for net proceeds of $54.6 million after repayment of the entire drawn balance on the revolving credit facility. We expect to recognize a gain on sale during the three months ended June 30, 2025.
4. Investments in Unconsolidated Real Estate Entities
Our investments in unconsolidated real estate entities consist of ownership interests in stabilized properties and preferred equity investments as follows as of March 31, 2025 and December 31, 2024 ($ in thousands):
| Balance at | ||||||||||||||||||||
| Property / Development | Location | % Owned | March 31, 2025 | December 31, 2024 | ||||||||||||||||
| Stabilized Properties | ||||||||||||||||||||
Cottonwood Bayview (1) | St. Petersburg, FL | 71.0% | $ | 9,947 | $ | 10,314 | ||||||||||||||
Toscana at Valley Ridge (1) | Lewisville, TX | 58.6% | 5,988 | 6,036 | ||||||||||||||||
Fox Point (1) | Salt Lake City, UT | 52.8% | 12,424 | 12,570 | ||||||||||||||||
The Marq Highland Park (1) | Tampa, FL | 74.1% | 21,549 | 22,265 | ||||||||||||||||
| Preferred Equity Investments | ||||||||||||||||||||
417 Callowhill (2) | Philadelphia, PA | 46,168 | 44,733 | |||||||||||||||||
Infield (2) | Kissimmee, FL | 16,048 | 15,408 | |||||||||||||||||
| Other | 231 | 230 | ||||||||||||||||||
| Total | $ | 112,355 | $ | 111,556 | ||||||||||||||||
(1) We account for our tenant in common interests in these properties as equity method investments. | ||||||||||||||||||||
(2) As of March 31, 2025, we have fully funded our commitments on both 417 Callowhill and Infield. As disclosed in Note 15, we committed and contributed additional funding to our Infield preferred equity investment subsequent to March 31, 2025. | ||||||||||||||||||||
Equity in losses for our stabilized properties for the three months ended March 31, 2025 and 2024 were $0.7 million and $1.5 million, respectively.
Our preferred equity investments, which are in development projects, have liquidation rights and priorities that are different from ownership percentages. As such, equity in earnings is determined using the hypothetical liquidation book value method. Equity in earnings for our preferred equity investments for the three months ended March 31, 2025 and 2024 were $2.1 million and $2.9 million, respectively.
F-10
5. Debt
Mortgage Notes and Revolving Credit Facility
The following table is a summary of the mortgage notes and revolving credit facility secured by our properties as of March 31, 2025 and December 31, 2024 ($ in thousands):
| Principal Balance Outstanding | |||||||||||||||||
| Indebtedness | Weighted-Average Interest Rate | Weighted-Average Remaining Term (1) | March 31, 2025 | December 31, 2024 | |||||||||||||
| Fixed rate loans | |||||||||||||||||
| Fixed rate mortgages | 4.45% | 3.9 Years | $ | 807,937 | $ | 808,056 | |||||||||||
| Total fixed rate loans | 807,937 | 808,056 | |||||||||||||||
Variable rate loans (2) | |||||||||||||||||
| Floating rate mortgages | 6.15% (3) | 4.7 Years | 227,344 | 273,416 | |||||||||||||
| Variable rate revolving credit facility | 6.92% | 2.7 Years | 29,250 | 79,250 | |||||||||||||
| Total variable rate loans | 256,594 | 352,666 | |||||||||||||||
| Total secured loans | 1,064,531 | 1,160,722 | |||||||||||||||
| Unamortized debt issuance costs and discounts | (3,392) | (4,220) | |||||||||||||||
| Premium on assumed debt, net | (4,797) | (4,988) | |||||||||||||||
| Mortgage notes and revolving credit facility, net | $ | 1,056,342 | $ | 1,151,514 | |||||||||||||
(1) For loans where we have the ability to exercise extension options at our own discretion, the maximum maturity date has been assumed, subject to certain debt service coverage ratio, loan to cost or debt yield requirements. | |||||||||||||||||
(2) The interest rates of our variable rate loans are based on 30-Day Average SOFR or one-month SOFR (CME Term). The variable rate mortgages as of March 31, 2025 no longer include the related debt for Cottonwood Broadway, which was sold in February 2025. | |||||||||||||||||
(3) Includes the impact of interest rate caps in effect on March 31, 2025. | |||||||||||||||||
As of March 31, 2025, our $100.0 million variable rate revolving credit facility was secured by Parc Westborough and Alpha Mill, with the amount available to draw subject to a cap as certain loan-to-value ratios and other requirements. As of March 31, 2025, the amount on our variable rate revolving credit facility was capped at $80.8 million primarily due to the interest rate environment and the applicable debt-service coverage ratio. With the sale of Parc Westborough in May 2025, all advances on the credit facility were paid off and the capacity on the credit facility was reduced to $34.7 million.
We are in compliance with all covenants associated with our mortgage notes and revolving credit facility as of March 31, 2025.
Construction Loans
Information on our construction loans is as follows ($ in thousands):
| Development | Interest Rate | Final Expiration Date | Loan Amount | Amount Drawn at March 31, 2025 | Amount Drawn at December 31, 2024 | ||||||||||||
| Cottonwood Highland | 30-Day Average SOFR + 2.55% | May 1, 2029 | $ | 44,250 | $ | 44,046 | $ | 44,046 | |||||||||
The Westerly (1) | One-Month SOFR + 3.0% | July 12, 2028 | 42,000 | — | — | ||||||||||||
| $ | 86,250 | $ | 44,046 | $ | 44,046 | ||||||||||||
(1) In July 2023, we entered into a construction loan agreement for The Westerly, a development project in Millcreek, UT. Construction is expected to be completed in 2026. No amounts have been drawn on the construction loan as of March 31, 2025. | |||||||||||||||||
F-11
Land Loans
Information on our land loans is as follows ($ in thousands):
| Principal Balance Outstanding | |||||||||||||||||
| Development | Interest Rate | Maturity Date | March 31, 2025 | December 31, 2024 | |||||||||||||
Galleria (1) | One-Month SOFR + 3.0% | February 25, 2026 | $ | 14,500 | $ | — | |||||||||||
3300 Cottonwood (2) | 7.29% | January 22, 2026 | 4,740 | — | |||||||||||||
| Total land loans | 19,240 | — | |||||||||||||||
| Unamortized debt issuance costs | (196) | — | |||||||||||||||
| Land loans, net | $ | 19,044 | $ | — | |||||||||||||
(1) On February 25, 2025, we closed on a $14.5 million floating rate loan on Galleria, a parcel of land held for development, receiving net proceeds of $14.3 million. The loan is interest only until maturity and can be extended for six months, subject to a 25% reduction of the principal balance. | |||||||||||||||||
(2) On January 22, 2025, we closed on a $4.74 million fixed rate loan on 3300 Cottonwood, a parcel of land held for development, receiving net proceeds of $4.69 million. The loan is interest only until maturity and can be extended for one twelve month period. | |||||||||||||||||
Unsecured Promissory Notes, Net
We have issued unsecured promissory notes to investors outside of the United States. These notes are subordinate to all of CROP's debt. Information on our unsecured promissory notes are as follows ($ in thousands):
| Principal Balance Outstanding | ||||||||||||||||||||
| Offering Size | Interest Rate | Maturity Date (1) | March 31, 2025 | December 31, 2024 | ||||||||||||||||
2019 6% Notes (1) | $ | 25,000 | 6.50% | December 31, 2025 | $ | 20,690 | $ | 21,350 | ||||||||||||
(1) We intend to repay these notes in cash by December 31, 2025 with proceeds from the sale of real estate assets, cash on hand and available capacity on our revolving credit facility. We project these actions will provide sufficient liquidity to satisfy the repayment of these notes on maturity. | ||||||||||||||||||||
The aggregate maturities, including amortizing principal payments on our debt for years subsequent to March 31, 2025 are as follows ($ in thousands):
| Year | Mortgage Notes and Revolving Credit Facility | Construction Loans | Land Loans | Unsecured Promissory Notes | Total | ||||||||||||||||||
2025 (1) | $ | 61,137 | $ | — | $ | — | $ | 20,690 | $ | 81,827 | |||||||||||||
| 2026 | 122,010 | — | 19,240 | — | 141,250 | ||||||||||||||||||
| 2027 | 363,868 | — | — | — | 363,868 | ||||||||||||||||||
| 2028 | 72,167 | — | — | — | 72,167 | ||||||||||||||||||
| 2029 | 1,815 | 44,046 | — | — | 45,861 | ||||||||||||||||||
| Thereafter | 443,534 | — | — | — | 443,534 | ||||||||||||||||||
| $ | 1,064,531 | $ | 44,046 | $ | 19,240 | $ | 20,690 | $ | 1,148,507 | ||||||||||||||
(1) Of the amounts maturing in 2025, $20.7 million relates to our 2019 6% Unsecured Promissory Notes and $60.2 million relates to our 805 Riverfront bridge loan, which we intend to refinance or convert to a permanent loan prior to or upon maturity. The 805 Riverfront bridge loan may be extended to June 2026. | |||||||||||||||||||||||
6. Fair Value of Financial Instruments
We estimate the fair value of our financial instruments using available market information and valuation methodologies we believe to be appropriate. As of March 31, 2025 and December 31, 2024, the fair values of cash and cash equivalents, restricted cash, other assets, related party payables, and accounts payable, accrued expenses and other liabilities approximate their carrying values due to the short-term nature of these instruments.
Fair value measurements are determined based on the assumptions that market participants would use in pricing the asset or liability. Fair value measurements are categorized into one of three levels of the fair value hierarchy based on the lowest level of significant input used. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers
F-12
factors specific to the asset or liability. Considerable judgment and a high degree of subjectivity are involved in developing these estimates. These estimates may differ from the actual amounts that we could realize upon settlement.
The fair value hierarchy is as follows:
Level 1 - Quoted (unadjusted) prices in active markets for identical assets or liabilities.
Level 2 - Other observable inputs, either directly or indirectly, other than quoted prices included in Level 1, including:
•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, volatility, default rates); and
•Inputs that are derived principally from or corroborated by other observable market data.
Level 3 - Unobservable inputs that cannot be corroborated by observable market data.
The table below includes the carrying value and fair value for our financial instruments for which it is practicable to estimate fair value ($ in thousands):
| March 31, 2025 | December 31, 2024 | |||||||||||||||||||||||||
| Carrying Value | Fair Value | Carrying Value | Fair Value | |||||||||||||||||||||||
| Financial Asset: | ||||||||||||||||||||||||||
| Investments in real estate-related loans | $ | 30,048 | $ | 30,195 | $ | 30,027 | $ | 30,195 | ||||||||||||||||||
| Unsecured promissory note | 7,000 | 7,000 | — | — | ||||||||||||||||||||||
| Total | $ | 37,048 | $ | 37,195 | $ | 30,027 | $ | 30,195 | ||||||||||||||||||
| Financial Liability: | ||||||||||||||||||||||||||
| Fixed rate mortgages | $ | 807,937 | $ | 792,649 | $ | 808,056 | $ | 787,680 | ||||||||||||||||||
| Floating rate mortgages | 227,344 | 227,642 | 273,416 | 273,301 | ||||||||||||||||||||||
| Variable rate revolving credit facility | 29,250 | 29,250 | 79,250 | 79,250 | ||||||||||||||||||||||
| Construction loans | 44,046 | 44,046 | 44,046 | 44,046 | ||||||||||||||||||||||
| Land loans | 19,240 | 19,240 | — | — | ||||||||||||||||||||||
| Series 2019 Preferred Stock | 87,512 | 87,512 | 120,119 | 120,119 | ||||||||||||||||||||||
| Series 2023 Preferred Stock | 106,987 | 106,987 | 107,277 | 107,277 | ||||||||||||||||||||||
| Series 2023-A Preferred Stock | 2,950 | 2,950 | 2,950 | 2,950 | ||||||||||||||||||||||
| Series 2025 Preferred Stock | 40,472 | 40,472 | — | — | ||||||||||||||||||||||
| Unsecured promissory notes, net | 20,690 | 20,690 | 21,350 | 21,350 | ||||||||||||||||||||||
| Total | $ | 1,386,428 | $ | 1,371,438 | $ | 1,456,464 | $ | 1,435,973 | ||||||||||||||||||
All financial instruments in the table above are categorized as Level 2 in the fair value hierarchy.
F-13
7. Preferred Stock
We have four classes of preferred stock outstanding as of March 31, 2025: Series 2019, Series 2023, Series 2023-A and Series 2025 that are accounted for as liabilities on the condensed consolidated balance sheets as they are mandatorily redeemable. Information on these classes of preferred stock as of March 31, 2025 and December 31, 2024 is as follows ($ in thousands):
| Shares Outstanding at | ||||||||||||||||||||
| Current Dividend Rate | Redemption Date | Maximum Extension Date | March 31, 2025 | December 31, 2024 | ||||||||||||||||
Series 2019 Preferred Stock (1) | 6.0% | December 31, 2025 | December 31, 2025 | 8,751,135 | 12,011,899 | |||||||||||||||
Series 2023 Preferred Stock (1) | 6.0% (2) | June 30, 2027 | June 30, 2029 | 10,698,738 | 10,727,658 | |||||||||||||||
| Series 2023-A Preferred Stock | 7.0% | December 31, 2027 | N/A | 295,000 | 295,000 | |||||||||||||||
Series 2025 Preferred Stock (1) | 6.5% (3) | December 31, 2028 | December 31, 2030 | 4,047,210 | — | |||||||||||||||
Total | 23,792,083 | 23,034,557 | ||||||||||||||||||
\ | ||||||||||||||||||||
(1) During the three months ended March 31, 2025, we exchanged 3,249,634 and 22,000 shares of Series 2019 and Series 2023, respectively, for Series 2025 Preferred Stock. | ||||||||||||||||||||
(2) The first-year extension dividend rate, applicable from July 1, 2027 to June 30, 2028, is 6.25%. The fully extended divided rate, applicable from July 1, 2028 to June 30, 2028, is 6.5%. | ||||||||||||||||||||
(3) The first-year extension dividend rate, applicable from January 1, 2029 to December 31, 2029, is 6.75%. The fully extended divided rate, applicable from January 1, 2030 to December 31, 2030, is 7.0%. | ||||||||||||||||||||
| March 31, 2025 | December 31, 2024 | |||||||||||||
Preferred stock outstanding | $ | 237,921 | $ | 230,346 | ||||||||||
| Unamortized offering costs and discounts | (9,361) | (9,274) | ||||||||||||
| Preferred stock, net | $ | 228,560 | $ | 221,072 | ||||||||||
All offerings of preferred stock listed above have terminated other than the Series 2025 Preferred Stock offering, which remains ongoing. Shares of Series 2025 Preferred Stock were first issued in January 2025. During the three months ended March 31, 2025, we issued $40.5 million of Series 2025 Preferred Stock, of which $32.9 million was issued through Series 2025 Preferred Stock Exchanges and $7.6 million was issued for cash. Selling commissions and expenses, legal and other third-party costs of $3.1 million for Series 2025 Preferred Stock Exchanges were expensed under debt modification accounting.
We are required to redeem for cash all outstanding Series 2019 Preferred Stock that has not been exchanged for Series 2025 Preferred Stock on or before December 31, 2025 at a price of $10.00 per share. As of May 9, 2025, 6,664,781 shares of Series 2019 Preferred Stock had not been exchanged and remain outstanding. Series 2025 Preferred Stock Exchanges may occur through the exchange offering period, which ends June 30, 2025 and can be extended upon approval of the board of directors.
Management intends to pay this obligation with proceeds from the sale of real estate assets, including Parc Westborough (Refer to Note 3), cash on hand and available capacity on our revolving credit facility. We project these actions will provide sufficient liquidity to satisfy the redemption of Series 2019 Preferred Stock on maturity.
Preferred Stock Dividends
Dividends on preferred stock accounted for as liabilities are recorded through interest expense in the condensed consolidated statements of operations. The following table summarizes our dividend activity for the three months ended March 31, 2025 and 2024 ($ in thousands):
| Three Months Ended March 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Series 2019 Preferred Stock | $ | 1,564 | $ | 1,839 | |||||||
| Series 2023 Preferred Stock | 1,586 | 1,297 | |||||||||
| Series 2023-A Preferred Stock | 51 | 51 | |||||||||
| Series 2025 Preferred Stock | 275 | — | |||||||||
Total | $ | 3,476 | $ | 3,187 | |||||||
F-14
Preferred Stock Repurchases
The following table summarizes our repurchase activity for the three months ended March 31, 2025 and 2024 ($ in thousands):
| Three Months Ended March 31, | |||||||||||||||||
| 2025 | 2024 | ||||||||||||||||
| Number of shares | Aggregate dollar amount | Number of shares | Aggregate dollar amount | ||||||||||||||
| Series 2019 Preferred Stock | 11,130 | $ | 106 | 217,700 | $ | 2,108 | |||||||||||
| Series 2023 Preferred Stock | 6,920 | 62 | — | — | |||||||||||||
Total | 18,050 | $ | 168 | 217,700 | $ | 2,108 | |||||||||||
8. Stockholders' Equity
Convertible Preferred Stock
As of March 31, 2025, there were 7,805,421 shares of Convertible Preferred Stock issued and outstanding. For the three months ended March 31, 2025, we paid aggregate dividends on our Convertible Preferred Stock of $1.2 million.
During the three months ended March 31, 2025, we repurchased 50,000 shares of Convertible Preferred Stock for $0.5 million at a repurchase price of $9.00. We had no unfulfilled repurchase requests during the three months ended March 31, 2025.
Common Stock
The following table details the movement in our outstanding shares for each class of common stock:
| Three Months Ended March 31, 2025 | |||||||||||||||||||||||||||||
| Class T | Class D | Class I | Class A | Total | |||||||||||||||||||||||||
| December 31, 2024 | 4,289,506 | 386,477 | 6,162,803 | 20,358,844 | 31,197,630 | ||||||||||||||||||||||||
| Issuance of common stock | 116,994 | 39,344 | 485,453 | — | 641,791 | ||||||||||||||||||||||||
| Distribution reinvestment | 20,878 | 2,541 | 18,288 | 30,536 | 72,243 | ||||||||||||||||||||||||
Exchanges and transfers (1) | — | — | 147,400 | — | 147,400 | ||||||||||||||||||||||||
| Repurchases of common stock | (105,456) | (3,035) | (174,510) | (715,294) | (998,295) | ||||||||||||||||||||||||
| March 31, 2025 | 4,321,922 | 425,327 | 6,639,434 | 19,674,086 | 31,060,769 | ||||||||||||||||||||||||
(1) Exchanges represent the number of shares CROP Unit holders have exchanged for Class I shares during the period. Transfers represent Class T shares that were converted to Class I shares during the period, of which there were none during the three months ended March 31, 2025. | |||||||||||||||||||||||||||||
Common Stock Distributions
Distributions on our common stock are determined by the board of directors based on our financial condition and other relevant factors. Common stockholders may choose to receive cash distributions or purchase additional shares through our distribution reinvestment plan. For the three months ended March 31, 2025, we paid aggregate distributions of $5.6 million, including $0.9 million of distributions reinvested through our distribution reinvestment plan.
F-15
We declared the following gross monthly distributions for each share of our common stock as shown in the table below:
| Shareholder Record Date | Monthly Rate | Annually | ||||||
| January 31, 2025 | $ | 0.06083333 | $ | 0.73 | ||||
| February 28, 2025 | $ | 0.06083333 | $ | 0.73 | ||||
| March 31, 2025 | $ | 0.06083333 | $ | 0.73 | ||||
The net distribution varies for each class of our common stock based on the applicable distribution fee, which is deducted from the gross distribution per share and paid to the dealer manager for the Follow-on Offering and reallowed to participating broker-dealers and servicing broker-dealers.
Common Stock Repurchases
During the three months ended March 31, 2025, we repurchased 998,295 shares of common stock pursuant to our share repurchase program for $11.8 million, at an average repurchase price of $11.79. We had no unfulfilled repurchase requests during the three months ended March 31, 2025.
9. Related-Party Transactions
Advisor Compensation
CC Advisors III manages our business as our external advisor and, under the terms of our advisory agreement, performs certain services for us, including the identification, evaluation, negotiation, origination, acquisition and disposition of investments; and the management of our business. These activities are all subject to oversight by our board of directors. Our advisor is entitled to receive fees and compensation for services provided as described below.
Management Fee. CROP pays our advisor a monthly management fee equal to 0.0625% of GAV (gross asset value of CROP, calculated pursuant to our valuation guidelines and reflective of the ownership interest held by CROP in such gross assets), subject to a cap. The cap is equal to 0.125% of “adjusted net asset value” of CROP, which is defined to include the value attributable to preferred stock that is convertible into common equity in the calculation of net asset value of CROP.
Management fees to our advisor for the three months ended March 31, 2025 and 2024 were $3.1 million and $3.1 million, respectively.
Acquisition Expense Reimbursement. We will reimburse our advisor for out-of-pocket expenses in connection with the selection, evaluation, structuring, acquisition, financing and development of investments, whether or not such investments are acquired, and make payments to third parties or possibly certain of our advisor’s affiliates in connection with providing services to us. There were no acquisition expense reimbursements for the three months ended March 31, 2025 and 2024.
Performance Participation Allocation. In addition to the fees paid to our advisor for services provided pursuant to our advisory agreement, CC Advisors - SLP, LLC, an affiliate of our advisor and the Special Limited Partner at CROP, holds a performance participation interest in CROP that entitles it to receive an allocation of CROP's total return to its capital account. The performance participation allocation is an incentive fee indirectly paid to our advisor and receipt of the allocation is subject to the ongoing effectiveness of the advisory agreement. As the performance participation allocation is associated with the performance of a service by the advisor, it is expensed in our condensed consolidated statements of operations.
Total return is defined as all distributions accrued or paid (without duplication) on Participating Partnership units (all units in CROP with the exception of preferred units and the Special Limited Partner Interest) plus the change in the aggregate net asset value of such Participating Partnership units. The annual total return will be allocated solely to the Special Limited Partner only after the other unit holders have received a total return of 5% (after recouping any loss carryforward amount) and such allocation will continue until the allocation between the Special Limited Partner and all other unit holders is equal to 12.5% and 87.5%, respectively. Thereafter, the Special Limited Partner will receive an allocation of 12.5% of the annual total return. The performance participation allocation is ultimately determined at the end of each calendar year, accrues monthly and will be paid in cash or Class I units at the election of the Special Limited Partner after the completion of each calendar year.
F-16
Due to the decrease in the value of our net assets, no performance participation allocation was incurred during the three months ended March 31, 2025 or during 2024.
Block C
We, through our indirect subsidiaries, have a joint venture investment in Block C for the purpose of developing three multifamily development projects near Salt Lake City, Utah: The Westerly, Millcreek North and The Archer. As of March 31, 2025, entities affiliated with us and our advisor (the “Affiliated Members”) have made aggregate capital contributions of $10.9 million towards the joint venture. The Affiliated Members are owned directly or indirectly by our officers or directors, as well as certain employees of CROP and our advisor or its affiliates. The Affiliated Members participate in the economics of Block C on the same terms and conditions as us. The development projects are located in an Opportunity Zone, which provides tax benefits for development programs located in designated areas as established by Congress in the Tax Cuts and Jobs Act of 2017. As of March 31, 2025, our ownership in the Block C joint venture was 82.4%. On January 31, 2025, we entered into a contract to sell The Archer to an unrelated party for $3.0 million. This transaction is expected to close in the third quarter of 2025. During the three months ended March 31, 2025, we recognized an impairment loss of $1.0 million on this development project.
Assumption of Related Party Notes and Interest
On March 28, 2024, we acquired all of the outstanding tenant in common interests in Cottonwood Lighthouse Point from an unaffiliated third-party. As part of the transaction, we assumed $1.3 million of notes and accrued interest held by an affiliate of the seller of the tenant in common interests in favor, directly and indirectly, of nine of our executive officers. Subsequent to the transaction, we paid the amount outstanding under the notes to the executive officers.
APT Cowork, LLC
APT Cowork, LLC (“APT”) engages in the business of converting underutilized and unused common space in multifamily apartment communities or retail space to revenue producing co-working space. Our officers and directors own 93.14% of APT through direct or indirect ownership interests. We and several of our properties have entered into agreements with APT as described below.
Reimbursement and Cost Sharing Agreement. Under the Reimbursement and Cost Sharing Agreement, we make certain employees available to APT. In exchange APT reimburses us its allocable share of all direct and indirect costs related to the employees utilized by APT, subject to an annual limit of $120,000.
Coworking Space Design Agreement. Under the Coworking Space Design Agreement, APT may advise, design and upgrade common areas at our multifamily properties. In exchange, our properties pay APT a one-time fee of $60,000, which may increase to $75,000.
Services Agreement. Under the Services Agreement, APT provides ongoing administration services in exchange for a service fee paid by the property (the “Service Fee”). Effective September 1, 2024, the Service Fee was reduced from $10.00 per apartment unit per month to $5.00 per occupied unit per month for any unit not covered under the license agreement as discussed below. Under the agreement, APT will pay us 50% of coworking revenue it receives at the properties from non-residents. Each of our properties with Services Agreements must also have a Coworking Space Design Agreement with APT.
The following are the fees paid or incurred to APT under these agreements for the periods presented ($ in thousands):
| Three Months Ended March 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| Reimbursement and Cost Sharing Agreement | $ | 7 | $ | — | ||||||||||
| Coworking Space Design Agreement | 35 | 185 | ||||||||||||
| Services Agreement, net revenue share | 45 | 106 | ||||||||||||
APT is transitioning its services from a coworking agreement to a license agreement based on occupied units instead of total units. Effective September 1, 2024, the Services Agreement was amended to reduce the Service Fee and provide that the services agreement will terminate upon the earlier of (i) the unit-by-unit transition resulting in no additional units receiving payment under the coworking agreement; and (ii) September 30, 2025. Under the license agreement, new leases and renewal of existing leases with our residents will have the Service Fee charged directly to them and remitted to APT.
F-17
10. Variable Interest Entities
A VIE is a legal entity in which the equity investors at risk lack sufficient equity to finance the entity’s activities without additional subordinated financial support or, as a group, the equity investors at risk lack the power to direct the entity’s activities, the obligation to absorb the entity’s expected losses or the right to receive the entity’s expected residual returns. Qualitative and quantitative factors are considered in determining whether we are the primary beneficiary of a VIE, including, but not limited to, which activities most significantly impact economic performance, which party controls such activities, the amount and characteristics of our investments, the obligation or likelihood for us or other investors to provide financial support, and the management relationship of the property.
CROP is a VIE as the limited partners lack substantive kick-out rights and substantive participating rights. We are the primary beneficiary of CROP as we have the power to direct the activities that most significantly impact economic performance and the rights to receive economic benefits. Substantially all of our assets and liabilities are held in CROP.
As of both March 31, 2025 and December 31, 2024, we had eight consolidated properties not wholly owned by us that are VIEs. As with our wholly owned properties, the debt is collateralized by the real estate for each respective property and assets can only be used to settle obligations of each respective VIE. With exception of Cottonwood Highland, a recently completed development, creditors of consolidated VIEs do not have recourse to our general credit. We have a payment guarantee to cover a specified percent of the Cottonwood Highland loan during the lease up and stabilization periods. As of March 31, 2025, the payment guarantee was 25%. This guarantee will be extinguished as milestone debt coverage ratios and occupancy rates are achieved.
In cases where we become the primary beneficiary of a VIE, we recognize a gain or loss for the difference between the sum of (1) the fair value of any consideration paid, the fair value of the noncontrolling interest, and the reported amount of our equity method investment and (2) the net fair value of identifiable assets and liabilities of the VIE.
The following table details the assets and liabilities of our consolidated VIEs ($ in thousands):
| March 31, 2025 | December 31, 2024 | |||||||||||||
| Assets: | ||||||||||||||
| Real estate assets, net | $ | 478,987 | $ | 482,871 | ||||||||||
| Cash and cash equivalents | 6,251 | 5,257 | ||||||||||||
| Restricted cash | 6,950 | 8,447 | ||||||||||||
| Other assets | 1,367 | 2,347 | ||||||||||||
| Total assets | $ | 493,555 | $ | 498,922 | ||||||||||
| Liabilities: | ||||||||||||||
| Mortgage notes and revolving credit facility, net | $ | 354,935 | $ | 354,761 | ||||||||||
| Construction loans, net | 44,046 | 44,046 | ||||||||||||
| Accounts payable, accrued expenses and other liabilities | 9,154 | 10,905 | ||||||||||||
| Total liabilities | $ | 408,135 | $ | 409,712 | ||||||||||
F-18
11. Noncontrolling Interests
Noncontrolling Interests - Limited Partners
Common Limited CROP Units and LTIP Units are CROP units not owned by us and collectively referred to as “Noncontrolling Interests – Limited Partners.”
Common Limited CROP Units - During the three months ended March 31, 2025 and 2024, we paid aggregate distributions to noncontrolling CROP Unit holders of $5.9 million and $5.9 million, respectively.
LTIP Units - As of March 31, 2025, there were 437,734 unvested time-based LTIP awards and 597,133 unvested performance-based LTIP awards outstanding. LTIP Unit award share-based compensation, included within share-based compensation in the condensed consolidated statements of stockholders’ equity, was $0.9 million and $0.9 million for the three months ended March 31, 2025 and 2024, respectively. Total unrecognized compensation expense for LTIP Units as of March 31, 2025 is $4.5 million and is expected to be recognized on a straight-line basis through December 2028.
Noncontrolling Interests - Partially Owned Entities
As of March 31, 2025, noncontrolling interests in consolidated entities not wholly owned by us ranged from 1% to 63%, with the average being 11%.
12. Commitments and Contingencies
Litigation
We are subject to a variety of legal actions in the ordinary course of our business, most of which are covered by liability insurance. While the resolution of these matters cannot be predicted with certainty, as of March 31, 2025, we believe the final outcome of such legal proceedings and claims will not have a material adverse effect on our liquidity, financial position or results of operations.
F-19
13. Earnings Per Share
The following table sets forth the computation of our net earnings (losses) per common share - basic and diluted ($ in thousands except share and per share amounts):
| Three Months Ended March 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| Numerator for net (losses) earnings per common share - basic | ||||||||||||||
| Net (loss) income | $ | (13,014) | $ | 7,063 | ||||||||||
| Net loss (income) attributable to noncontrolling interests - limited partners | 6,405 | (3,856) | ||||||||||||
| Net loss attributable to noncontrolling interests - partially owned entities | 336 | 712 | ||||||||||||
| Preferred distributions | (1,333) | (143) | ||||||||||||
| Numerator for net (losses) earnings per common share - basic | $ | (7,606) | $ | 3,776 | ||||||||||
| Numerator for net (losses) earnings per common share - diluted: | ||||||||||||||
| Net (loss) income | $ | (13,014) | $ | 7,063 | ||||||||||
| Net loss attributable to noncontrolling interests - limited partners | 6,405 | — | ||||||||||||
| Net loss attributable to noncontrolling interests - partially owned entities | 336 | 712 | ||||||||||||
| Preferred distributions | (1,333) | (143) | ||||||||||||
| Numerator for net (losses) earnings per share - diluted | $ | (7,606) | $ | 7,632 | ||||||||||
| Denominator for net (losses) earnings per common share - basic and diluted: | ||||||||||||||
| Denominator for net (losses) earnings per common share - basic | 31,543,589 | 31,581,072 | ||||||||||||
| Effect of dilutive securities: | ||||||||||||||
| Convertible Preferred Shares | — | 693,605 | ||||||||||||
| OP Units | — | 29,477,235 | ||||||||||||
| Long-term compensation shares/units | — | 2,610,808 | ||||||||||||
| Denominator for net (losses) earnings per share - diluted | 31,543,589 | 64,362,720 | ||||||||||||
| Net (losses) earnings per common share - basic | $ | (0.24) | $ | 0.12 | ||||||||||
| Net (losses) earnings per common share - diluted | $ | (0.24) | $ | 0.12 | ||||||||||
For the three months ended March 31, 2025, convertible preferred shares, CROP units and long term compensation shares/units are excluded from the calculation of diluted earnings per share as the inclusion of such potential common shares in the calculation would be anti-dilutive.
14. Segment Financial Information
Our chief operating decision maker (“CODM”) utilizes reportable segment net operating income (“Reportable Segment NOI”) to assess performance and determine allocation of resources. Reportable Segment NOI represents 100% of each of our consolidated and unconsolidated properties’ reportable segment rental and other property revenues and reportable segment property operations expense. We consider Reportable Segment NOI to be an appropriate supplemental measure of operating performance to net income because it measures the core operations of property performance by excluding corporate level expenses, depreciation and amortization, and other items not directly related to ongoing property operating performance. The CODM does not regularly review total assets for our reportable segment as total assets are not used to assess performance or allocate resources.
F-20
The following table details Reportable Segment NOI, including significant expenses, for the three months ended March 31, 2025 and 2024 ($ in thousands):
| Three Months Ended March 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
Reportable segment rental and other property revenues | $ | 44,388 | $ | 42,750 | ||||||||||
Reportable segment property operations expense | ||||||||||||||
| Real estate taxes | 5,430 | 6,210 | ||||||||||||
| Payroll and benefits | 3,180 | 3,204 | ||||||||||||
| Utilities | 2,854 | 2,643 | ||||||||||||
| Repairs and maintenance | 1,809 | 1,819 | ||||||||||||
Insurance | 1,615 | 2,076 | ||||||||||||
Other property expenses (1) | 1,094 | 1,513 | ||||||||||||
Total reportable segment property operations expense | 15,982 | 17,465 | ||||||||||||
Total reportable segment net operating income | $ | 28,406 | $ | 25,285 | ||||||||||
(1) Other property expenses include general and administrative, marketing and advertising, and other non-recurring expenses. | ||||||||||||||
The following table reconciles reportable segment net operating income to the reported net (loss) income attributable to common stockholders in the condensed consolidated statements of operations for the three months ended March 31, 2025 and 2024 ($ in thousands):
| Three Months Ended March 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
Total reportable segment net operating income | $ | 28,406 | $ | 25,285 | ||||||||||
Rental and other property revenues of unconsolidated properties (1) | (7,080) | (8,395) | ||||||||||||
Property operations expense of unconsolidated properties (1) | 2,400 | 3,433 | ||||||||||||
Equity in earnings of unconsolidated real estate entities (2) | 1,369 | 1,368 | ||||||||||||
| Property management revenues | 1,792 | 2,339 | ||||||||||||
| Other revenues | 1,566 | 785 | ||||||||||||
| Property management expense | (4,582) | (4,578) | ||||||||||||
| Asset management fee | (3,091) | (3,144) | ||||||||||||
| Depreciation and amortization | (14,950) | (14,954) | ||||||||||||
| General and administrative expenses | (2,559) | (1,767) | ||||||||||||
| Impairment loss | (957) | — | ||||||||||||
| Interest income | 334 | 473 | ||||||||||||
| Interest expense | (20,047) | (20,418) | ||||||||||||
| Loss on debt extinguishment | (98) | (1,239) | ||||||||||||
| Gain on sale of real estate assets | 7,932 | 26,638 | ||||||||||||
| Gain on legal settlement | 400 | — | ||||||||||||
| Other (expense) income | (3,974) | 1,222 | ||||||||||||
| Income tax (expense) income | 125 | 15 | ||||||||||||
| Net loss (income) attributable to noncontrolling interests - limited partners | 6,405 | (3,856) | ||||||||||||
| Net loss attributable to noncontrolling interests - partially owned entities | 336 | 712 | ||||||||||||
| Less preferred stock dividends | (1,333) | (143) | ||||||||||||
| Net (loss) income attributable to common stockholders | $ | (7,606) | $ | 3,776 | ||||||||||
(1) Rental and other property revenues and property operations expense for unconsolidated properties are included in Reportable Segment NOI. They are removed here as this activity is included in equity in earnings of unconsolidated real estate entities on our condensed consolidated statements of operations. | ||||||||||||||
(2) Equity in earnings of unconsolidated real estate entities includes our portion of revenues and expenses of unconsolidated properties as recorded under the equity method of accounting. | ||||||||||||||
F-21
The following table reconciles rental and other property revenues and property operations expense for our reportable segment to rental and other property revenues and property operations expense as reported in the condensed consolidated statements of operations ($ in thousands):
| Three Months Ended March 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| Reportable segment rental and other property revenues | $ | 44,388 | $ | 42,750 | ||||||||||
| Rental and other property revenues of unconsolidated properties | (7,080) | (8,395) | ||||||||||||
| Rental and other property revenues | $ | 37,308 | $ | 34,355 | ||||||||||
| Reportable segment property operations expense | $ | 15,982 | $ | 17,465 | ||||||||||
| Property operations expense of unconsolidated properties | (2,400) | (3,433) | ||||||||||||
| Property operations expense | $ | 13,582 | $ | 14,032 | ||||||||||
15. Subsequent Events
We evaluate subsequent events up until the date the condensed consolidated financial statements are issued and have determined there are none to be reported or disclosed in the condensed consolidated financial statements other than those mentioned below.
Prospect Mezzanine Loan
On April 16, 2025, we entered into an agreement to provide a $5.1 million mezzanine loan to refinance Prospect on Central, a mixed-use property in Denver, Colorado. We provided the first $3.8 million of our commitment upon the execution of the agreement, while the remaining $1.3 million is held in reserve. The mezzanine loan is paid current interest at a rate of 15.0% on the entire commitment drawn from the debt service reserve and matures on May 8, 2027 with two 12-month extension options, subject to conditions being met.
Infield Funding
On April 25, 2025, we increased our commitment by an additional $2.0 million on the Infield preferred equity investment, and funded the additional amount at the same time, bringing our total funding to $13.7 million.
Sale of Parc Westborough
On May 14, 2025, we sold Parc Westborough for net proceeds of $54.6 million after repayment of the entire drawn balance on the revolving credit facility. We expect to recognize a gain on sale during the three months ended June 30, 2025.
F-22
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