UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of Earliest Event Reported): February 28, 2022

 

Cottonwood Communities, Inc.

(Exact Name of Registrant as Specified in Its Charter)

 

 

Maryland		000-56165		61-1805524
(State or other jurisdiction of incorporation)		(Commission file number)		(IRS employer identification number)

1245 Brickyard Road, Suite 250

Salt Lake City, Utah 84106

(Address of Principal Executive Offices)

(801) 278-0700

(Registrant’s Telephone Number, Including Area Code)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
None		N/A		N/A

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

 

 

 

Item 8.01 Other Events.

Cottonwood Communities, Inc. (and referred to herein as the “Company,” “we,” “our,” or “us”) is filing this Current Report on Form 8-K in order to disclose the most recent net asset value (“NAV”) per share, as determined in accordance with the Company’s valuation procedures, for each of its classes of common stock.

February 28, 2022 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 February 28, 2022 NAV for our outstanding Class T, Class I, Class A and Class TX shares was calculated pursuant to these valuation guidelines. As of February 28, 2022, we had no outstanding Class D shares. Until Class D shares are outstanding as of the date our NAV is determined, we will deem the NAV per share of our Class D shares to be the NAV per share of our Class I, Class A and Class TX shares.

Please see our Current Report on Form 8-K/A, filed with the SEC on June 8, 2021 and available on the SEC’s website at www.sec.gov, for a more detailed description of our valuation guidelines, including important disclosures regarding real property valuations, debt-related asset valuations and 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 February 28, 2022 (Class T, Class I, Class A and Class TX) 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 February 28, 2022 and January 31, 2022:

 

		As of
Components of NAV*		February 28, 2022				January 31, 2022
Investments in Multifamily Operating Properties		$	1,932,931,592			$	1,889,995,176
Investments in Multifamily Development Properties			215,957,526				212,309,794
Investments in Real-estate Related Structured Investments			63,107,358				62,453,482
Operating Company, Land and Other Net Current Assets			47,537,198				71,472,912
Cash and Cash Equivalents			42,203,999				10,647,731
Secured Real Estate Financing			(914,172,495	)			(909,878,318	)
Subordinated Unsecured Notes			(43,443,000	)			(43,493,000	)
Preferred Equity			(267,072,952	)			(264,662,852	)
Accrued Performance Participation Allocation			(14,404,374	)			(9,339,426	)
Net Asset Value		$	1,062,644,852			$	1,019,505,499
Fully-diluted Shares/Units Outstanding			55,963,513				55,386,600

 

*	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 February 28, 2022 and January 31, 2022:

 

		Class
		T				I				A				TX				OP(1)				Total
As of February 28, 2022
Monthly NAV		$	14,170,316			$	7,981,021			$	443,931,296			$	332,740			$	596,229,479			$	1,062,644,852
Fully-diluted Outstanding Shares/Units			746,271				420,315				23,379,358				17,524				31,400,045				55,963,513
NAV per Fully-diluted Share/Unit		$	18.9882			$	18.9882			$	18.9882			$	18.9882			$	18.9882
As of January 31, 2022
Monthly NAV		$	6,065,945			$	3,725,493			$	431,361,980			$	322,526			$	578,029,555			$	1,019,505,499
Fully-diluted Outstanding Shares/Units			329,544				202,395				23,434,570				17,522				31,402,569				55,386,600
NAV per Fully-diluted Share/Unit		$	18.4071			$	18.4071			$	18.4071			$	18.4071			$	18.4071

 

(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 February 28, 2022, valuations of our real property assets, based on property types.

 

		Discount Rate		Exit Capitalization Rate
Operating Assets		5.74%		4.44%
Development Assets		5.92%		4.40%

 

*	Presented as adjusted for our economic ownership percentage in each asset, weighted by gross value.

A change in these assumptions would impact the calculation 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		Development Asset Values
Discount Rate		0.25% decrease		2.6%		2.2%
		0.25% increase		(2.4)%		(2.2)%
Exit Capitalization Rate		0.25% decrease		4.8%		4.6%
		0.25% increase		(4.1)%		(4.1)%

 

*	Presented as adjusted for our economic ownership percentage in each asset.

Forward-Looking Statements

This Current Report on Form 8-K includes certain statements that are intended to be deemed “forward-looking statements” within the meaning of, and to be covered by the safe harbor provisions contained in, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such forward-looking statements are generally identifiable by the use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” “project,” “continue,” or other similar words or terms. These statements are based on certain assumptions and analyses made in light of our experience and our perception of historical trends, current conditions, expected future developments and other factors we believe are appropriate. Such statements are subject to a number of assumptions, risks and uncertainties that may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by these forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements. Among the factors that may cause results to vary are the impact of COVID-19 on our financial condition and results of operations being more significant than expected, the negative impact of COVID-19 on our tenants being more significant than expected, general economic and business (particularly real estate and capital market) conditions being less favorable than expected, the business opportunities that may be presented to and pursued by us, changes in laws or regulations (including changes to laws governing the taxation of real

 

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estate investment trusts (“REITs”)), risk of acquisitions, availability and creditworthiness of prospective tenants, availability of capital (debt and equity), interest rate fluctuations, competition, supply and demand for properties in current and any proposed market areas in which we invest, our tenants’ ability and willingness to pay rent at current or increased levels, accounting principles, policies and guidelines applicable to REITs, environmental, regulatory and/or safety requirements, tenant bankruptcies and defaults, the availability and cost of comprehensive insurance, including coverage for terrorist acts, and other factors, many of which are beyond our control. For a further discussion of these factors and other risk factors that could lead to actual results materially different from those described in the forward-looking statements, see “Risk Factors” under Item 1A of Part 1 of our Annual Report on Form 10-K for the year ended December 31, 2020 and subsequent periodic and current reports filed with the SEC. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of future events, new information or otherwise.

 

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Date:  March 30, 2022

 

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