424B3 1 cci424b3supplementno5-nov1.htm 424B3 CCI SUPPLEMENT NO. 5 (DATED 11.15.22)

Filed Pursuant to Rule 424(b)(3)

Registration No. 333-258754

COTTONWOOD COMMUNITIES, INC.

SUPPLEMENT NO. 5 DATED NOVEMBER 15, 2022

TO THE PROSPECTUS DATED JULY 26, 2022

This document supplements, and should be read in conjunction with, the prospectus of Cottonwood Communities, Inc. dated July 26, 2022 as supplemented by supplement no. 1 dated August 15, 2022, supplement no. 2 dated September 16, 2022, supplement no. 3 dated September 27, 2022 and supplement no. 4 dated October 17, 2022. 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 December 1, 2022;

•the calculation of our October 31, 2022 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;

•updated information regarding related party transactions;

•“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 September 30, 2022;

•updated experts information; and

•our unaudited financial statements and the notes thereto as of and for the period ended September 30, 2022.

Status of this Offering

As of November 10, 2022, we have raised gross proceeds of approximately $164.8 million from the sale of 8,313,414 shares in this offering, including proceeds from our distribution reinvestment plan of approximately $2.1 million. As of November 10, 2022, approximately $835.2 million in shares remain available for sale pursuant to this offering, including approximately $97.9 million in shares available for sale through our distribution reinvestment plan.

December 1, 2022 Transaction Price

The transaction price for each share class of our common stock for subscriptions accepted (and distribution reinvestment plan issuances) as of December 1, 2022 (and repurchases as of November 30, 2022) is as follows:

						Transaction Price (per share)
Class T						$20.5722
Class D						$20.5722
Class I						$20.5722
Class A						$20.5722

The transaction price for each of our share classes is equal to such class’s NAV per share as of October 31, 2022. 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.

October 31, 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.

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The October 31, 2022 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 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 October 31, 2022 (Class T, Class D, Class I, and Class A) 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 October 31, 2022 and September 30, 2022:

			As of
Components of NAV*			October 31, 2022			September 30, 2022
Investments in Multifamily Operating Properties			$	2,327,260,768		$	2,342,201,112
Investments in Multifamily Development Properties			231,582,110			231,882,158
Investments in Real-estate Related Structured Investments			53,943,070			53,305,049
Investments in Land Held for Development			77,938,885			73,157,904
Operating Company and Other Net Current Assets			14,660,855			15,807,840
Cash and Cash Equivalents			14,465,047			8,764,838
Secured Real Estate Financing			(1,142,585,408)			(1,147,347,377)
Subordinated Unsecured Notes			(43,443,000)			(43,443,000)
Preferred Equity			(127,124,852)			(127,174,852)
Accrued Performance Participation Allocation			(30,297,984)			(31,159,673)
Net Asset Value			$	1,376,399,491		$	1,375,993,999
Fully-diluted Shares/Units Outstanding			66,905,811			66,455,073
* 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 October 31, 2022 and September 30, 2022:

			Class
			T						D						I						A						OP(1)						Total
As of October 31, 2022
Monthly NAV			$	93,393,303					$	280,619					$	72,286,501					$	556,656,626					$	653,782,442					$	1,376,399,491
Fully-diluted Outstanding Shares/Units			4,539,783						13,641						3,513,796						27,058,687						31,779,904						66,905,811
NAV per Fully-diluted Share/Unit			$	20.5722					$	20.5722					$	20.5722					$	20.5722					$	20.5722
As of September 30, 2022
Monthly NAV			$	89,015,559					$	152,408					$	67,371,050					$	561,468,357					$	657,986,625					$	1,375,993,999
Fully-diluted Outstanding Shares/Units			4,299,100						7,361						3,253,755						27,116,703						31,778,154						66,455,073
NAV per Fully-diluted Share/Unit			$	20.7056					$	20.7056					$	20.7056					$	20.7056					$	20.7056
(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 October 31, 2022, valuations of our real property assets, based on property types.

			Discount Rate						Exit Capitalization Rate
Operating Assets			6.09%						4.69%
Development Assets			5.90%						4.50%
* 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			2.5%			2.2%
			0.25% increase			(2.5)%			(2.1)%
Exit Capitalization Rate			0.25% decrease			4.4%			4.3%
			0.25% increase			(3.8)%			(3.8)%
* Presented as adjusted for our economic ownership percentage in each asset.

Real Estate Investments

As of our September 30, 2022 NAV, we had a portfolio of $2.7 billion in total assets, with 81.9% of our equity value in operating properties, 9.8% in development, 4.7% in land held for development and 3.6% in real estate-related structured investments. 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 September 30, 2022.

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Declaration of Distributions

On November 14, 2022, our board of directors declared a distribution for the month of November 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 November 30, 2022, to be paid in December 2022.

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, 2021 and the nine months ended September 30, 2022.

Repurchases

During the three months ended September 30, 2022, 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)
July 2022						64,553						0.2100215		%				$18.7055						—
August 2022						187,154						0.5921825		%				$18.6799						—
September 2022						57,198						0.1802480		%				$19.2816						—
Total						308,905
(1) All shares have been repurchased pursuant to our share purchase 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 paid to our advisor and its affiliates in connection with their services provided to us pursuant to the terms of the agreements with them in effect at such times. The table includes amounts incurred for the nine months ended September 30, 2022 and the year ended December 31, 2021. We entered an amended and restated advisory agreement on May 7, 2021 at the effective time of our merger with Cottonwood Residential II, Inc. (the “CRII Merger”). The fees paid prior to May 7, 2021 were earned under our prior advisory agreement (amounts in thousands).

			Nine Months Ended September 30, 2022						Year Ended December 31, 2021
Form of Compensation
Offering Stage
Organization and offering expenses(1)			$—						$14,100
Operational Stage
Asset management fees(2)			12,761						8,052
Asset management fees waived by our advisor(3)			—						(27)
Property management fee(4)			—						151
Reimbursable operating expenses(5)			—						331
Reimbursable employee costs(6)			(178)						(115)
Affiliate coworking fees(7)			396						—
Performance participation allocation(8)			31,160						51,761
			$44,139						$74,253

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(1)Pursuant to our advisory agreement in effect through May 6, 2021, our advisor was obligated to pay all of the organization and offering expenses associated with our initial public offering on our behalf (with the exception of costs associated with restructuring the offering and any equity incentive awards granted by us to registered persons associated with the dealer manager for the offering).

(2)Under our advisory agreement in effect through May 6, 2021, we paid our advisor an annual asset management fee, paid monthly, in an amount equal to 1.25% per annum of our gross assets as of the last day of the prior month. Under the amended and restated advisory agreement entered May 7, 2021 and renewed on May 7, 2022, our Operating Partnership pays our advisor a monthly management fee equal to 0.0625% of GAV (gross asset value of our Operating Partnership, calculated pursuant to our valuation guidelines and reflective of the ownership interest held by our Operating Partnership in such gross assets), subject to a cap of 0.125% of net asset value of our Operating Partnership.

(3)In connection with our initial public offering, our advisor agreed to waive its asset management fee each month in an amount equivalent to the 6.0% discount provided to those who purchased Class A shares through certain distribution channels. This was to ensure that we received proceeds equivalent to those received for sales of shares outside of these channels.

(4)Through May 7, 2021, we paid Cottonwood Communities Management, LLC (our subsidiary following the CRII Merger) a property management fee in an amount up to 3.5% of the annual gross revenues of our multifamily apartment communities that it manages. Cottonwood Communities Management, LLC could subcontract the performance of its property management duties to third parties and Cottonwood Communities Management, LLC would pay a portion of its property management fee to the third parties with whom it subcontracts for these services.

(5)Subject to the limitations on total operating expenses, our advisor is entitled to reimbursement of all costs and expenses incurred by it or its affiliates on our behalf, provided that our advisor is responsible for the expenses related to any and all of our advisor’s personnel who provide investment advisory services to us (including, without limitation, each of our executive officers and any directors who are also directors, officers or employees of our advisor or any of its affiliates), including, without limitation, salaries, bonuses and other wages, payroll taxes and the cost of employee benefit plans of such personnel, and costs of insurance with respect to such personnel; provided that we will be responsible for the personnel costs of our employees even if they are also directors or officers of our advisor or any of its affiliates except as provided for in the Reimbursement and Cost Sharing Agreement. Prior to May 7, 2021, we had no employees and amounts reimbursed for the year ended December 31, 2021 represent employee costs for individuals who are now employed by us.

(6)Reflects reimbursable costs received by us pursuant to the Reimbursement and Cost Sharing Agreement between Cottonwood Capital Management, a wholly owned subsidiary of CROP, and CCA.

(7)We, through our subsidiaries, have engaged APT Cowork, LLC (“APT”), an entity owned directly and indirectly by certain of our officers and affiliated directors, to provide co-working space related services at certain of our multifamily apartment communities. In addition, we have entered into a Reimbursement and Cost Sharing Agreement pursuant to which we will make certain employees available to APT and in exchange APT will reimburse us its allocable share of all direct and indirect costs related to the employees utilized by APT. Amounts shown reflect fees paid to APT pursuant to seven Coworking Space Design Agreements pursuant to which we pay APT a one-time design and project management fee of $60,000 with one exception of a $75,000 fee for a larger retail space. No amounts were reimbursed under the cost sharing agreement during the nine months ended September 30, 2022.

(8)As of May 7, 2021, the “Special Limited Partner,” an affiliate of our advisor, is entitled to receive a 12.5% promotional interest, subject to a 5% hurdle and certain limitations, under the terms of the amended and restated limited partnership agreement of CROP as amended to date. The performance participation allocation is an annual distribution to be made following the end of each year and accrues on a monthly basis. On January 31, 2022, the accrued $51.8 million performance participation allocation was paid in cash to the Special Limited Partner.

In addition to the amounts described above, from January 1, 2022 through the September 27, 2022 closing date of the merger with Cottonwood Multifamily Opportunity Fund, Inc. (“CMOF”), we earned $0.6 million in management fees from CMOF related to the asset management fee pursuant to the asset management agreement between our indirect subsidiary and CMOF prior to the closing of the CMOF Merger.

Risk Factors

The following risk factors supersede and replace the similar risk factors contained 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 nine months ended September 30, 2022 and for the year ended December 31, 2021, we had consolidated net losses of $32.2 million and $106.9 million, respectively. As of September 30, 2022, we had an accumulated deficit of $70.6 million. These amounts largely reflect the expense of real estate depreciation and amortization in accordance with GAAP, which was $37.5 million for the nine months ended September 30, 2022 and $63.4 million for the year ended December 31, 2021. In addition, the nine months ended September 30, 2022 and the year ended December 31, 2021 also included $31.2 million and $51.8 million, respectively, of charges related to the performance participation allocation.

Net loss and accumulated deficit are calculated and presented in accordance with GAAP, which, among other things, requires depreciation of real estate investments to be calculated 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, 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

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amortization and after adjustments for our share of consolidated and unconsolidated entities. See “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.

During the early stages of our operations, 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 at least during the early stages of our existence and from time to time during our operational stage, 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, especially during our early periods of operation. 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 nine months ended September 30, 2022, and the year ended December 31, 2021, we paid aggregate distributions to common stockholders and limited partnership unit holders of $31.9 million and $20.2 million, including $30.5 million and $20.1 million of distributions paid in cash and $1.6 million and $0.1 million of distributions reinvested through our distribution reinvestment plan, respectively. Our net loss for the nine months ended September 30, 2022 and the year ended December 31, 2021 was $32.2 million and $106.9 million, respectively. Cash flows provided by operating activities were $1.6 million for the nine months ended September 30, 2022, and cash flows provided by operating activities were $5.4 million for the year ended December 31, 2021. We funded our total distribution paid during the nine months ended September 30, 2022, which includes net cash distributions and distribution reinvestment by stockholders, with $16.4 million prior period cash provided by operating activities, $4.3 million from additional borrowings, $9.6 million from offering proceeds, and $1.6 million of offering proceeds from issuance of common stock pursuant to the distribution reinvestment plan. We funded our total distributions paid for the year ended December 31, 2021, which includes net cash distributions and distributions reinvested by stockholders, with $11.1 million prior period cash provided by operating activities, $5.0 million from additional borrowings, $4.0 million from offering proceeds, and $0.1 million of offering proceeds from issuance of common stock pursuant to the distribution reinvestment plan.

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.

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Related Party Transactions

Form of Services Agreement with APT Cowork, LLC

On November 7, 2022, our conflicts committee approved a form of Services Agreement to be entered by and between our taxable REIT subsidiary, Cottonwood Capital Management, Inc. (“CCMI”) and APT, an entity in which our officers and directors have a direct or indirect ownership interest as follows: Glenn Rand (21.49%), Daniel Shaeffer (21.46%), Chad Christensen (21.46%), Gregg Christensen (8.89%), Eric Marlin (6.71%), Enzio Cassinis (5.25%), Adam Larson (2.81%), Susan Hallenberg (2.18%), Paul Fredenberg (1.83%), and Stan Hanks (1.06%).

The form of agreement provides that APT will provide the ongoing administration of coworking services at the property subject to the agreement in exchange for $10.00 per apartment unit per month. In addition, there is a revenue sharing component of the agreement which provides that APT will pay CCMI 50% of coworking revenue it receives at the properties. Upon approval of the form agreement, we intend to enter into a Services Agreement with respect to ten of our properties. We expect to enter into agreements for an additional fifteen of our properties over the next six to twelve months. Each of the properties for which we expect to enter a Services Agreement are or will be subject to a Coworking Space Design Agreement with APT pursuant to which APT will design and upgrade the amenities for the common areas at the properties. The conflicts committee previously approved the form of the Coworking Space Design Agreement in August 2022.

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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-traded perpetual-life, net asset value (“NAV”), real estate investment trust (“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 September 30, 2022, we raised $122.0 million from the sale of our common stock in an initial public offering that we conducted from August 2018 through December 2020; we raised gross proceeds of $127.0 million from the sale of our Series 2019 Preferred Stock in a private offering to accredited investors only; and we raised $147.7 million in this offering that we commenced in November 2021 (including shares issued through the distribution reinvestment plan offering). We have primarily used the net proceeds to make investments in multifamily real estate and real estate-related assets.

As of our September 30, 2022 NAV, we had a portfolio of $2.7 billion in total assets, with 81.9% of our equity value in operating properties, 9.8% in development, 4.7% in land held for development and 3.6% in real estate-related structured investments. Refer to the sections entitled “Our Investments” and “Net Asset Value” below for further description of our portfolio and NAV.

Merger with Cottonwood Multifamily Opportunity Fund, Inc.

On July 8, 2022, we entered into an agreement and plan of merger with Cottonwood Multifamily Opportunity Fund, Inc. (“CMOF”) and its operating partnership (the “CMOF OP”) to merge CMOF with and into our wholly owned subsidiary and the CMOF OP with and into CROP through the exchange of stock-for-stock and units-for-units (the “CMOF Merger”). The CMOF Merger closed on September 27, 2022.

CMOF stockholders received 0.8669 shares of our Class A common stock in exchange for each share of their CMOF common stock. We issued 4,335,367 shares of Class A common stock in connection with the CMOF Merger, at an aggregate value of $89.7 million on the close date.

In connection with the merger of the CMOF OP with and into CROP, the CMOF OP partnership units outstanding held by third parties were converted into CROP common units at the same ratio as the common stock.

CROP was a joint venture partner with CMOF in all three of CMOF’s investments: Park Avenue (development project), Cottonwood on Broadway (development project) and Block C (land held for development). Following the CMOF Merger, we acquired CMOF’s interest in these joint ventures increasing our percentage ownership interest in the joint ventures as follows: Park Avenue, 100.0%, Cottonwood on Broadway, 100.0% and Block C, 79.0%. The remaining interest in the Block C joint venture is held by some of our officers and affiliated directors, either directly or indirectly.

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The 2021 Mergers

On January 26, 2021, we entered into separate agreements with three affiliated REITs and their respective operating partnerships to merge through the exchange of stock-for-stock and units-for-units, respectively. The merger with Cottonwood Residential II, Inc. (“CRII,” the “CRII Merger”) closed on May 7, 2021. The mergers with Cottonwood Multifamily REIT I, Inc. (“CMRI,” the “CMRI Merger”) and with Cottonwood Multifamily REIT II, Inc. (“CMRII,” the “CMRII Merger”) closed on July 15, 2021. We refer to the CRII Merger, the CMRI Merger and the CMRII Merger as the “2021 Mergers.”

Through the 2021 Mergers we acquired interests in 22 stabilized multifamily apartment communities, four multifamily development projects, one structured investment, and land held for development. We also acquired CRII’s property management business and its employees, which currently manage approximately 9,600 units, including 7,300 units we own or have ownership interests in, an advisory contract with CMOF, and personnel who performed certain administrative and other services for us, including legal, accounting, property development oversight and certain services relating to construction management, shareholder relations, human resources, renter insurance and information technology.

CC Advisors III continues to manage our business as our external advisor pursuant to an amended and restated advisory agreement. With the exception of our Chief Legal Officer, Chief Operating Officer, Chief Accounting Officer, and Chief Development Officer, we do not employ our executive officers.

See Note 1 of the consolidated financial statements in this supplement for further description of the 2021 Mergers.

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Highlights for the Three Months Ended September 30, 2022

The following highlights activities that occurred during the three months ended September 30, 2022:

•Attained net loss attributable to common stockholders of $(0.20) per diluted share, representing an 81.3% improvement compared to the same period in the prior year.

•Achieved funds from operations attributable to common stockholders and unit holders (“FFO”) of $0.01 per diluted share/unit. Core FFO was $0.11 per diluted share/unit, compared to $0.10 for the same period in the prior year.

•NAV per share decreased slightly from $20.7202 as of June 30, 2022 to $20.7056 as of September 30, 2022.

•Merged with CMOF, acquiring the remaining interests in two development properties and an additional interest in a joint venture holding land for development.

•Acquired Cottonwood Clermont, a 250 unit apartment community in Clermont, FL, for $85.0 million.

•Acquired the remaining tenant-in-common interests of Cottonwood Ridgeview.

•Received a $1.8 million minimum make whole payment with the prepayment of our Integra Peaks mezzanine loan investment.

•Executed additional draws of $7.7 million on construction loans to further the completion of our development projects.

•Raised $52.7 million of net proceeds from the sale of stock issued under this offering.

Highlights for the Nine Months Ended September 30, 2022

The following highlights activities that occurred during the nine months ended September 30, 2022:

•Attained net loss attributable to common stockholders of $(0.54) per diluted share, representing a 73.9% improvement compared to the same period in the prior year.

•Achieved funds from operations attributable to common stockholders and unit holders (“FFO”) of $0.00 per diluted share/unit. Core FFO was $0.27 per diluted share/unit, compared to $0.29 per share/unit for the same period in the prior year.

•NAV per share increased from $17.2839 as of December 31, 2021 to $20.7056 as of September 30, 2022, representing an increase of 19.8%.

•Merged with CMOF, acquiring the remaining interests in two development properties and an additional interest in a joint venture holding land for development.

•Acquired Cottonwood Lighthouse Point, a 243 unit apartment community in Pompano Beach, FL, for $95.5 million.

•Acquired Cottonwood Clermont, a 250 unit apartment community in Clermont, FL, for $85.0 million.

•Acquired the remaining tenant-in-common interests of Cottonwood Ridgeview.

•Received a $1.8 million minimum make whole payment with the prepayment of our Integra Peaks mezzanine loan investment.

•Sold equity method investments in 3800 Main and Alpha Mill, recognizing $7.8 million of gains from these investments.

•Recapitalized our Block C and Jasper developments, receiving $10.9 million from affiliated investors and obtaining a controlling interest in Block C.

•Obtained an aggregate of $470.0 million in property-level financing and repaid $231.2 million.

•Executed additional draws of $30.6 million on construction loans to further the completion of our development projects and refinanced $59.7 million of construction loans with permanent debt.

•Raised $133.1 million of net proceeds from the sale of stock issued under this offering.

•Fully redeemed our Series 2016 Preferred Stock for $139.8 million and fully redeemed our Series 2017 Preferred Stock for $2.6 million.

•Achieved stabilization at Sugarmont and commenced lease-up at our Park Ave development.

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Our Investments

    

Information regarding our investments as of September 30, 2022 is as follows:

Stabilized Properties ($ in thousands)

Property Name			Market			Number of Units			Average Unit Size (Sq Ft)			Purchase Date			Purchase Price						Mortgage Debt Outstanding (1)			Physical Occupancy Rate			Percentage Owned by CROP
Alpha Mill			Charlotte, NC			267			830			May 2021			$	69,500					$	39,044		94.76%			28.29%
Cason Estates			Murfreesboro, TN			262			1,078			May 2021			51,400						33,594			95.04%			100.00%
Cottonwood Apartments			Salt Lake City, UT			264			834			May 2021			47,300						35,430			89.77%			100.00%
Cottonwood Bayview			St. Petersburg, FL			309			805			May 2021			95,900						46,463			92.23%			71.00%
Cottonwood Clermont			Clermont, FL			250			1,111			Sept 2022			85,000						35,521			92.54%			100.00%
Cottonwood Lighthouse Point			Pompano Beach, FL			243			996			June 2022			95,500						47,964			89.71%			100.00%
Cottonwood One Upland			Boston, MA			262			1,160			March 2020			103,600						28,200			93.89%			100.00%
Cottonwood Reserve			Charlotte, NC			352			1,021			May 2021			77,500						37,944			95.00%			91.14%
Cottonwood Ridgeview			Plano, TX			322			1,156			May 2021			72,930			(2)			65,300			96.58%			100.00%
Cottonwood West Palm			West Palm Beach, FL			245			1,122			May 2019			66,900						47,978			93.88%			100.00%
Cottonwood Westside			Atlanta, GA			197			860			May 2021			47,900						25,144			94.92%			100.00%
Enclave on Golden Triangle			Keller, TX			273			1,048			May 2021			51,600						48,400			96.34%			98.93%
Fox Point			Salt Lake City, UT			398			841			May 2021			79,400						46,000			93.47%			52.75%
Heights at Meridian			Durham, NC			339			997			May 2021			79,900						45,341			94.99%			100.00%
Melrose			Nashville, TN			220			951			May 2021			67,400						56,600			93.64%			100.00%
Melrose Phase II			Nashville, TN			139			675			May 2021			40,350						32,400			87.77%			79.82%
Parc Westborough			Boston, MA			249			1,008			May 2021			74,000						18,800			93.17%			100.00%
Pavilions			Albuquerque, NM			240			1,162			May 2021			61,100						58,500			92.08%			96.35%
Raveneaux			Houston, TX			382			1,065			May 2021			57,500						47,400			93.19%			96.97%
Regatta			Houston, TX			490			862			May 2021			48,100						35,367			92.84%			100.00%
Retreat at Peachtree City			Peachtree City, GA			312			980			May 2021			72,500						48,719			93.59%			100.00%
Scott Mountain			Portland, OR			262			927			May 2021			70,700						48,373			89.31%			95.80%
Stonebriar of Frisco			Frisco, TX			306			963			May 2021			59,200						53,600			94.12%			84.19%
Sugarmont			Salt Lake City, UT			341			904			May 2021			139,567			(3)			105,000			91.79%			99.00%(4)
Summer Park			Buford, GA			358			1,064			May 2021			75,500						44,620			95.81%			98.68%
The Marq Highland Park (5)			Tampa, FL			239			999			May 2021			65,700						34,160			94.56%			100.00%
Toscana at Valley Ridge			Lewisville, TX			288			738			May 2021			47,700						30,700			97.92%			58.60%
Total / Weighted-Average						7,809			970						$	1,903,647					$	1,196,562		93.59%
(1) Mortgage debt outstanding is shown as if CROP owned 100% of the property.
(2) We acquired 90.45% of Cottonwood Ridgeview with the CRII Merger at a value of $70.0 million. The remaining 9.55% was acquired through the issuance of OP Units valued at $2.9 million on the close date in September 2022.
(3) We acquired the Sugarmont development with the CRII Merger at a value of $112.5 million. The $139.6 million above represents the total capitalized costs on the project placed in service through September 30, 2022.
(4) 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.
(5) Excludes the commercial data in units count and physical occupancy.

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Development Properties ($ in thousands)

Property Name			Market			Units to be Built			Average Unit Size (Sq Ft)			Purchase Date			Completion Date			Total Project Investment			Construction Debt Outstanding (1)			Percentage Owned by CROP
Cottonwood on Broadway			Salt Lake City, UT			254			817			May 2021			4Q2022			$	67,654		$	36,724		100.00
Park Avenue			Salt Lake City, UT			234			714			May 2021			2Q2022			62,077			37,000			100.00
Cottonwood on Highland (2)			Salt Lake City, UT			250			757			May 2021			2Q2023			39,209			13,914			36.93% (2)
Total						738												$	168,940		$	87,638
(1) Construction debt outstanding is shown as if CROP owned 100% of the development property.
(2) Intended to qualify as a qualified opportunity zone investment. Excludes the commercial data in unit count. CROP’s percentage ownership is not proportionate to the total amount CROP invested in the project.

Structured Investments ($ in thousands)

Property Name			Market			Investment Type			Date of Initial Investment			Number of Units			Funding Commitment			Amount Funded to Date
Lector85			Ybor City, FL			Preferred Equity			August 2019			254			$	9,900		$	9,900
Vernon Boulevard			Queens, NY			Preferred Equity			July 2020			534			15,000			15,000
Riverfront			West Sacramento, CA			Preferred Equity			November 2020			285			15,092			15,092
Total												1,073			$	39,992		$	39,992

Land Held for Development ($ in thousands)

Property Name

Market

Acreage

Purchase Date

Total Investment Amount

Percentage Owned by CROP

Block C

Salt Lake City, UT

2.84 acres

May 2021

$

37,838

78.99% (1)

Jasper

Salt Lake City, UT

0.79 acres

June 2021

11,889

80.02%(2)

3300 Cottonwood

Salt Lake City, UT

1.76 acres

October 2021

7,521

100.00%

Galleria

Salt Lake City, UT

26.07 acres

September 2022

28,500

100.00%

Total

$

85,748

(1) On June 28, 2022, Block C was recapitalized. We provided additional capital contributions to the project and obtained a majority interest, and subsequently increased our ownership interest again when we merged with CMOF on September 27, 2022. At the time of recapitalization, we admitted two affiliated entities as members in the joint venture (the “Affiliated Members”). The Affiliated Members are owned directly or indirectly by certain officers or directors, as well as certain employees of CROP and our advisor or its affiliates.

(2) On June 28, 2022, the Affiliated Members were admitted as members in the Jasper joint venture and provided a capital contribution.

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Results of Operations

Our results of operations for the three and nine months ended September 30, 2022 and 2021 are as follows (in thousands, except share and per share data):

			Three Months Ended September 30,																		Nine Months Ended September 30,
			2022						2021						Change						2022						2021						Change
Revenues
Rental and other property revenues			$	32,959					$	26,708					$	6,251					$	88,382					$	46,723					$	41,659
Property management revenues			2,829						3,487						(658)						8,655						5,607						3,048
Other revenues			2,295						365						1,930						3,544						887						2,657
Total revenues			38,083						30,560						7,523						100,581						53,217						47,364
Operating expenses
Property operations expense			12,444						10,210						2,234						32,705						18,362						14,343
Property management expense			4,323						4,373						(50)						13,863						6,925						6,938
Asset management fee			4,622						2,392						2,230						12,761						4,720						8,041
Performance participation allocation			1,081						29,524						(28,443)						31,160						35,979						(4,819)
Depreciation and amortization			14,289						27,716						(13,427)						37,549						43,536						(5,987)
General and administrative expenses			3,938						2,978						960						10,513						7,747						2,766
Total operating expenses			40,697						77,193						(36,496)						138,551						117,269						21,282
Loss from operations			(2,614)						(46,633)						44,019						(37,970)						(64,052)						26,082
Equity in earnings (losses) of unconsolidated real estate entities			1,982						(1,154)						3,136						8,705						(855)						9,560
Interest income			23						64						(41)						47						201						(154)
Interest expense			(13,296)						(9,229)						(4,067)						(36,100)						(16,382)						(19,718)
Gain on sale of unconsolidated real estate entities			176						—						176						7,810						—						7,810
Promote from incentive allocation agreement			—						—						—						30,309						—						30,309
Loss on debt extinguishment, net			—						—						—						(481)						—						(481)
Other income (expense)			1,913						(97)						2,010						3,732						(78)						3,810
Loss before income taxes			(11,816)						(57,049)						45,233						(23,948)						(81,166)						57,218
Income tax (expense) benefit			(511)						38						(549)						(8,261)						(255)						(8,006)
Net loss			(12,327)						(57,011)						44,684						(32,209)						(81,421)						49,212
Net loss attributable to noncontrolling interests:															—																		—
Limited partners			6,198						31,153						(24,955)						16,778						43,936						(27,158)
Partially owned entities			241						2,312						(2,071)						694						4,925						(4,231)
Net loss attributable to common stockholders			$	(5,888)					$	(23,546)					$	17,658					$	(14,737)					$	(32,560)					$	17,823
Weighted-average common shares outstanding			29,733,453						21,927,155						7,806,298						27,199,948						15,586,067						11,613,881
Net loss per common share - basic and diluted			$	(0.20)					$	(1.07)					$	0.87					$	(0.54)					$	(2.09)					$	1.55

Comparison of the Three Months Ended September 30, 2022 and 2021

Rental and Other Property Revenues, Property Operations Expense

Rental and other property revenues increased $6.3 million and property operations expense increased $2.2 million. The acquisition of Cottonwood Lighthouse Point in June 2022 and the acquisitions of Cottonwood Clermont and Cottonwood Ridgeview in September 2022 contributed $2.7 million of property revenues and $1.0 million of property operation expenses. Higher rents and higher operating costs across all of our portfolio accounted for remaining increases.

Other Revenues

Other revenues increased $1.9 million primarily due to a $1.8 million minimum multiple payment made with the early payoff of the Integra Peaks mezzanine loan.

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Asset Management Fee

The increase in asset management fees of $2.2 million is due to the increase in the value and number of overall assets under management.

Performance Participation Allocation

The performance participation allocation was $1.1 million for the three months ended September 30, 2022 compared to $29.5 million for the same period in the prior year. The performance participation allocation is a function of NAV growth for the respective period, which was significant during the three months ended September 30, 2021.

Depreciation and Amortization

Depreciation and amortization decreased $13.4 million primarily due to certain intangible assets from the CRII Merger being fully amortized in 2021. Amortization expense for the three months ended September 30, 2021 for these intangible assets was $16.2 million. The decrease in amortization was offset by additional depreciation and amortization of $2.2 million from Cottonwood Lighthouse, Cottonwood Clermont and Cottonwood Ridgeview.

Equity in earnings of unconsolidated real estate entities

The $3.1 million increase in equity in earnings of unconsolidated real estate entities is due to improved earnings from the underlying properties from increased rents and the absence in 2022 of amortization from intangible assets acquired with the CRII Merger. We also had additional increases in income on preferred equity and other investments.

Interest Expense

The $4.1 million increase in interest expense is primarily due to $5.2 million of additional interest related to increased leverage on our properties, debt acquired with Cottonwood Lighthouse, Cottonwood Clermont and Cottonwood Ridgeview, and higher variable interest rates. In addition, we incurred additional interest expense of $1.4 million from our Series 2019 Preferred Stock. This was offset by a decrease of $2.5 million of interest on our Series 2016 Preferred Stock, which was redeemed in April 2022.

Other Income

Other income increased $2.0 million due to gains from the increase in fair value of our interest rate caps.

Comparison of the Nine Months Ended September 30, 2022 and 2021

Rental and Other Property Revenues, Property Operations Expense

Rental and other property revenues increased $41.7 million and property operations expense increased $14.3 million. A full nine months of activity in 2022 from real estate assets acquired with the CRII Merger compared to less than five months of activity for the same period in 2021 combined with higher rents and expenses across the portfolio contributed $37.8 million of rental and other property revenues and $13.3 million of property operation expenses. The acquisitions of Cottonwood Lighthouse Point in June 2022 and Cottonwood Clermont and Cottonwood Ridgeview in September 2022 also contributed $2.7 million of rental and property revenues and $1.0 million of property operation expenses.

Property Management Revenues and Property Management Expense

Property management revenues and property management expenses increased $3.0 million and $6.9 million, respectively. The increase was due to nine months of activity in 2022 from the property management business acquired with the CRII Merger compared to less than five months of activity for the same period in 2021. This was offset by the loss of a portfolio of 12 properties we managed for a third party in February 2022. Our consolidated properties are managed by us. The property management income received from those properties is eliminated with the associated expense at those properties.

Other Revenues

Other revenues increased $2.7 million primarily due to increased interest from the Integra Peaks mezzanine loan and a $1.8 million minimum multiple payment made with the early payoff that loan.

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Asset Management Fee

Asset management fees prior to May 7, 2021 were 1.25% of gross book value. After May 7, 2021 the asset management fee was the lesser of 0.0625% gross asset value or 0.125% of net asset value each month (0.75% and 1.5% annually), with values updated monthly. The increase in asset management fees of $8.0 million is due to the increase in assets acquired, the increase in capital raised, and overall increases in real estate values applied to the revised fee structure.

Performance Participation Allocation

The performance participation allocation was $31.2 million for the nine months ended September 30, 2022 compared to $36.0 million for the same period in the prior year. The performance participation allocation is a function of NAV growth for the respective period. The performance participation allocation in 2021 represents the growth in NAV from May 7, 2021, the effective date of the amended and restated operating agreement of CROP, to September 30, 2021.

Depreciation and Amortization

Depreciation and amortization decreased $6.0 million primarily due to certain intangible assets from the CRII Merger being fully amortized in 2021. Amortization expense for the nine months ended September 30, 2021 for these intangible assets was $24.0 million. This was offset by an increase of $16.0 million of depreciation from nine months of depreciation in 2022 on properties acquired with the CRII Merger compared to less than five months of depreciation for the same period in 2021 and additional depreciation and amortization of $2.2 million from Cottonwood Lighthouse, Cottonwood Clermont, and Cottonwood Ridgeview.

General and Administrative Expenses

General and administrative expenses increased $2.8 million primarily due increased costs of professional services, including legal, valuation, and tax, higher insurance costs and additional share based compensation, offset by a reduction in transaction costs of $2.0 million.

Equity in earnings of unconsolidated real estate entities

The $9.6 million increase in equity in earnings of unconsolidated real estate entities is due to nine months of earnings in 2022 from the underlying properties of the equity method investments acquired with the CRII Merger compared to less than five months of earnings for the same period in 2021. In addition, earnings from the underlying properties improved from increased rents and the absence in 2022 of amortization from intangible assets acquired with the CRII Merger. We also had additional increase in income on preferred equity and other investments.

Interest Expense

Interest expense increased $19.7 million, of which $13.5 million is primarily due to nine months of interest in 2022 on debt acquired with the CRII Merger compared to less than five months of interest for the same period in 2021, increased leverage on our properties, and higher variable interest rates. Interest expense also increased $5.6 million from additional Series 2019 Preferred Stock issued. This was offset by a $1.1 million reduction in interest from our Series 2016 Preferred Stock that was redeemed in April 2022.

Gain on Sale of Unconsolidated Real Estate Entities

The gain on sale of unconsolidated real estate entities of $7.8 million is from the sale of additional interests in Alpha Mill and the sale of 3800 Main to a third party.

Promote from Incentive Allocation Agreement, Income Tax Expense

In 2018, CROP sold a portfolio of twelve properties to an unrelated real estate firm. Under the sales arrangement, CROP entered into an incentive allocation agreement that entitled CROP to participate in distributions from the portfolio should returns exceed certain amounts. During the first quarter of 2022 the real estate firm sold the portfolio of properties. Our taxable REIT subsidiary realized a promote distribution of $30.3 million from the sale. We managed the portfolio on behalf of the real estate firm prior to the portfolio being sold.

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Income Tax Expense

The $8.0 million increase in income tax expense is mainly due to a $7.3 million tax liability on the $30.3 million promote distribution combined with higher income at our taxable REIT subsidiary.

Other Income

Other income increased $3.8 million primarily due to gains from the increase in fair value of our interest rate caps.

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 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.

Our management also uses Core FFO as a measure of our operating performance. Core FFO is further adjusted from FFO for the following items included in GAAP net income: amortization of issuance costs associated with investments in real-estate related loans and debt, accretion of discounts on preferred stock, the performance participation allocation, share-based compensation, legal costs and settlements, net, acquisition fees and expenses, and amortization of above or below intangible lease assets and liabilities. 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 or as an alternative to cash flow from operating activities as a measure of our liquidity.

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The following table presents the calculation of FFO and Core FFO (in thousands, except share and per share data):

			Three Months Ended September 30,												Nine Months Ended September 30,
			2022						2021						2022						2021
Net loss attributable to common stockholders			$	(5,888)					$	(23,546)					$	(14,737)					$	(32,560)
Adjustments to arrive at FFO:
Real estate related depreciation and amortization			12,182						26,862						33,762						42,243
Depreciation and amortization from unconsolidated real estate entities			1,804						5,292						6,303						7,935
Gain on sale of investments in unconsolidated real estate entities			(176)						—						(7,810)						—
Loss allocated to noncontrolling interests - limited partners			(6,198)						(31,153)						(16,778)						(43,936)
Amount attributable to above from noncontrolling interests - partially owned entities			(1,184)						(3,290)						(719)						(6,985)
Funds from operations attributable to common stockholders and unit holders			540						(25,835)						21						(33,303)
Adjustments:
Amortization of intangible assets			2,108						855						3,786						1,293
Accretion of discount on preferred stock			1,377						648						4,031						1,374
Performance participation allocation			1,081						29,524						31,160						35,979
Share-based compensation (1)			938						552						2,743						1,018
Promote from incentive allocation agreement (tax effected)			—						—						(23,047)						—
Acquisition fees and expenses (2)			970						670						1,607						3,416
Loss on debt extinguishment			—						—						481						—
Legal costs and settlements, net (1)			767						398						1,713						588
Gains on derivatives			(1,997)						—						(3,820)						—
Other adjustments			327						(1,202)						(1,712)						(1,078)
Amount attributable to above from unconsolidated real estate entities			249						(104)						(1,408)						368
Amount attributable to above from noncontrolling interests - partially owned entities			50						(23)						126						(118)
Core funds from operations attributable to common stockholders and unit holders			$	6,410					$	5,483					$	15,681					$	9,537
FFO per common share and unit - basic and diluted			$	0.01		(3)			$	(0.49)					$	0.00		(3)			$	(1.03)
Core FFO per common share and unit - basic and diluted			$	0.11		(3)			$	0.10					$	0.27		(3)			$	0.29
Weighted-average common shares and units outstanding			61,029,554						53,187,154						58,561,620						32,471,680
(1) Core FFO was adjusted for these items beginning the three and nine months ending September 30 2022. Core FFO for the three and nine months ended September 30, 2021 was also adjusted by these items for comparability.
(2) Acquisition fees and expenses during the three and nine months ended September 30, 2021 included costs associated with the CRII Merger, the CMRI Merger, and the CMRII Merger.
(3) FFO and Core FFO for the three and nine months ending September 30, 2022 include the $1.8 million minimum multiple payment made with the payoff of the Integra Peaks mezzanine loan.

See “Results of Operations” above for further detail.

Weighted average common shares and units are as follows:

			Three Months Ended September 30,												Nine Months Ended September 30,
			2022						2021						2022						2021
Weighted-average common shares			29,733,453						21,927,155						27,199,948						15,586,067
Weighted-average limited partnership unit			31,296,101						31,259,999						31,361,672						16,885,613
Weighted-average common shares and units outstanding			61,029,554						53,187,154						58,561,620						32,471,680

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Net Asset Value

Our board of directors, including a majority of our independent directors, has adopted valuation procedures, 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 September 30, 2022 NAV per share for our outstanding Class T, Class D, Class I, and Class A shares of $20.7056.

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. Please see “Net Asset Value Calculation and Valuation Guidelines” in the prospectus for a detailed description of our valuation guidelines.

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 procedures. 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 Class T, Class D, Class I, and Class A common stockholders, 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 September 30, 2022 (in thousands except share data):

Components of NAV*			As of 9/30/2022
Investments in Multifamily Operating Properties			$	2,342,201
Investments in Multifamily Development Properties			231,882
Investments in Real-estate Related Structured Investments			53,305
Investments in Land Held for Development			73,158
Operating Company and Other Net Current Assets			15,808
Cash and Cash Equivalents			8,765
Secured Real Estate Financing			(1,147,347)
Subordinated Unsecured Notes			(43,443)
Preferred Equity			(127,175)
Accrued Performance Participation Allocation			(31,160)
Net Asset Value			$	1,375,994
Fully-diluted Shares/Units Outstanding			66,455,073
* 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 September 30, 2022 (in thousands, except share and per share data):

			Class
			T						D						I						A						OP(1)						Total
As of September 30, 2022
Monthly NAV			$	89,016					$	152					$	67,371					$	561,468					$	657,987					$	1,375,994
Fully-diluted Outstanding Shares/Units			4,299,100						7,361						3,253,755						27,116,703						31,778,154						66,455,073
NAV per Fully-diluted Share/Unit			$	20.7056					$	20.7056					$	20.7056					$	20.7056					$	20.7056
(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.

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Set forth below are the weighted averages of the key assumptions that were used by the independent appraisal advisor in the discounted cash flow methodology used in the September 30, 2022, valuations of our real property assets, based on property types.

			Discount Rate						Exit Capitalization Rate
Operating Assets			6.06%						4.62%
Development Assets			5.85%						4.50%
* Presented as adjusted for the Company's 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			2.4%			2.2%
			0.25% increase			(2.3)%			(2.1)%
Exit Capitalization Rate			0.25% decrease			4.4%			4.3%
			0.25% increase			(3.7)%			(3.8)%
* 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):

			September 30, 2022
Stockholders’ equity			$	311,252
Non-controlling interests attributable to limited partners			266,836
Total partners' capital of CROP under U.S. GAAP			578,088
Adjustments at share:
Accumulated depreciation and amortization, consolidated and unconsolidated entities			122,076
Goodwill			(439)
Deferred tax liability			3,659
Discount on preferred stock			(6,855)
Unrealized net real estate and debt appreciation			679,465
NAV			$	1,375,994

The following details the adjustments to reconcile GAAP stockholders’ equity and CROP partners' capital per our condensed consolidated balance sheet to our NAV:

–Our preferred stock 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.

–We recorded goodwill for the difference between the transaction price of the CRII Merger and the fair value of identifiable assets acquired, liabilities assumed, and non-controlling interests. Goodwill was not included for purposes of determining our NAV.

–We recorded certain deferred tax liabilities for the tax effects on the difference in the value of certain assets recorded with the CRII Merger and their underlying tax basis. These deferred tax liabilities are excluded for purposes of determining 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.

–We manage properties on behalf of third parties and under certain agreements have contractual rights to receive promotional interests subject to minimum return hurdles. We do not recognize promotes under GAAP until a liquidation transaction is probable, but do include the fair value of promotes, using a hypothetical liquidation valuation method, for purposes of determining our NAV.

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–Our investments in real estate are presented under historical cost in our GAAP consolidated financial statements. Additionally, our mortgage notes, revolving credit facility and construction loans (“Debt”) are presented at their carrying value in our consolidated GAAP financial statements. As such, any increases or decreases in the fair market value of our investments in real estate or our Debt are not included in our GAAP results. For purposes of determining our NAV, our investments in real estate and our Debt 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 September 30, 2022, our total operating expenses exceeded the 2%/25% Limitation.

Based upon a review of unusual and non-recurring factors, including but not limited to the performance participation allocation expense and the costs of the CMOF Merger, our independent directors determined that the excess expenses were justified.

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; operating expenses, including the management fee we pay to our advisor and the performance participation allocation, capital expenditures and 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 this offering, from 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, including the impact of COVID-19 on the properties, the rising interest rate environment and inflation which could increase our expenses, and the satisfaction of REIT dividend requirements.

As of September 30, 2022, we have $528.8 million of fixed rate debt and $560.8 million of variable rate debt, which includes $87.6 million of construction loans. $318.7 million, or 57% of our variable rate debt, is accompanied by interest rate cap hedging instruments. In addition, CROP has issued unsecured promissory notes in several private placement offerings, in an aggregate amount of $43.4 million as of September 30, 2022.

We have various credit facilities in place that provide us with additional liquidity. Our JP Morgan Revolving Credit Facility has a variable rate and is secured by Cottonwood One Upland and Parc Westborough. We may obtain advances secured against Cottonwood One Upland and Parc Westborough up to $125.0 million on the JP Morgan Revolving Credit Facility. We can draw upon or pay down the JP Morgan Revolving Credit Facility at our discretion, subject to loan-to-value requirements, debt service coverage ratios and other covenants and restrictions as set forth in the loan documents. As of September 30, 2022, we had advances of $47.0 million on the JP Morgan Revolving Credit Facility. Additionally, we have three other facilities through Fannie Mae that may provide additional liquidity if necessary as long as we maintain certain loan-to-value ratios and other requirements as set forth in the loan documents.

We must redeem the Series 2019 Preferred Stock 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 December 31, 2023. This date may be extended by two one-year extension options. Our Series 2017 Preferred Stock was fully redeemed in the first quarter of 2022 immediately following the January 31, 2022 redemption date for $2.6 million. On April 18, 2022, we fully redeemed the Series 2016 Preferred Stock for $139.8 million.

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 this offering, 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

20

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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):

						Nine Months Ended September 30,
						2022						2021
Net cash provided by operating activities						$	1,601					$	10,842
Net cash used in investing activities						(146,438)						(12,189)
Net cash provided by financing activities						196,001						59,748
Net increase in cash and cash equivalents and restricted cash						$	51,164					$	58,401

Net cash flows provided by operating activities were $1.6 million during the nine months ended September 30, 2022. Operating cash inflows increased primarily due to the impact of the 2021 Mergers, which resulted in increased tenant receipts and property management fees and an increase in accounts payable and accrued liabilities. We also acquired an incentive allocation promote with the CRII Merger that was realized in 2022 for $30.3 million, of which we have received $28.9 million as of September 30, 2022. These operating cash inflows were mostly offset by the performance participation allocation payment of $51.8 million, additional operating expenses including interest expense on our mortgage notes and revolving credit facility and payment of preferred stock interest. Cash flows provided by operating activities for the same period in 2021 were $10.8 million, primarily due to the CRII Merger which resulted in increased tenant receipts and property management fees. Operating cash inflows were also due to an increase in accounts payable and accrued liabilities, partially offset by operating expenses and payment of preferred stock interest.

Cash flows used in investing activities were $146.4 million during the nine months ended September 30, 2022, primarily due to the acquisitions of Cottonwood Clermont and Cottonwood Lighthouse Point, purchases of land held for development, and investments in development projects and capital improvements. These investing cash inflows were partially offset by a return on capital from investments in unconsolidated entities upon refinance, proceeds from the sale of 3800 Main and the sale of interests in Alpha Mill, and proceeds received from the repayment of the Integra Peaks mezzanine loan. Cash flows used in investing activities were $12.2 million for the same period in 2021 primarily due to investments in development projects and capital improvements, funding of preferred equity at Riverfront, and draws on the Integra Peaks mezzanine loan, largely offset by the cash acquired in connection with the CRII Merger and repayment on the Dolce B-Notes.

Cash flows provided by financing activities were $196.0 million during the nine months ended September 30, 2022, as a result of net proceeds we received from the issuance of common stock, net borrowings under mortgage notes and term loans, net draws on our JP Morgan Revolving Credit Facility, and the issuance of Series 2019 Preferred Stock, partially offset by the full redemption of both our Series 2016 and our Series 2017 Preferred Stock, distributions paid to both common stockholders and noncontrolling interest holders, net repayment on construction loans, and repurchases of common stock and OP Units. Cash flows provided by financing activities were $59.7 million for the same period in 2021, driven mainly by the net proceeds we received from the issuance of our Series 2019 Preferred Stock and proceeds from construction loans, offset partially by distributions paid to both common stockholders and noncontrolling interest holders, net repayments made on our JP Morgan Revolving Credit Facility, and repurchases of preferred stock, common stock and OP Units.

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Distributions

The following table shows distributions paid and cash flow provided by (used in) operating activities during the nine months ended September 30, 2022 and the year ended December 31, 2021 (in thousands):

			Nine Months Ended September 30, 2022						Year Ended December 31, 2021
Distributions paid in cash - common stockholders			$	13,842					$	9,482
Distributions paid in cash to noncontrolling interests - limited partners			16,507						10,591
Distributions of DRP (reinvested)			1,563						141
Total distributions (1)			$	31,912					$	20,214
Source of distributions (2)
Paid from cash flows provided by operations			$	16,407					$	11,044
Paid from additional borrowings			4,308						5,000
Paid from offering proceeds			9,634						4,029
Offering proceeds from issuance of common stock pursuant to the DRP			1,563						141
Total sources			$	31,912					$	20,214
Net cash provided by operating activities (2)			$	1,601					$	5,424
(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 nine months ended September 30, 2022, distributions declared to common stockholders and limited partners were $14.5 million and $16.7 million, respectively. For the nine months ended September 30, 2022, we paid aggregate distributions to common stockholders and limited partners of $13.8 million and $16.5 million. For the nine months ended September 30, 2022, our net loss was $32.2 million. Cash flows provided by operating activities for the nine months ended September 30, 2022 was $1.6 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, 2021 for discussions of our critical accounting estimates. As of September 30, 2022, our critical accounting estimates have not changed from those described in that report.

Experts

The statements included in this supplement under “October 31, 2022 NAV Calculation,” relating to the role of Altus Group U.S. Inc. have been reviewed by Altus Group U.S. Inc., an independent valuation firm, and are included in this supplement given the authority of such firm as experts in real estate valuations.

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Index to Condensed Consolidated Financial Statements

Condensed Consolidated Balance Sheets as of September 30, 2022 (Unaudited) and December 31, 2021			F - 2
Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2022 and 2021 (Unaudited)			F - 3
Condensed Consolidated Statements of Stockholders' Equity for the Three and Nine Months Ended September 30, 2022 and 2021 (Unaudited)			F - 4
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021 (Unaudited)			F - 6
Notes to Condensed Consolidated Financial Statements (Unaudited)			F - 9

F - 1

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Cottonwood Communities, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)
						September 30, 2022						December 31, 2021
Assets						(Unaudited)
Real estate assets, net						$	1,702,432					$	1,408,483
Investments in unconsolidated real estate entities						126,597						190,733
Investments in real-estate related loans						—						13,035
Cash and cash equivalents						63,045						27,169
Restricted cash						33,509						18,221
Other assets						32,049						29,249
Total assets						$	1,957,632					$	1,686,890
Liabilities, Equity, and Noncontrolling Interests
Liabilities
Mortgage notes and revolving credit facility, net						$	993,180					$	642,107
Construction loans, net						87,638						116,656
Preferred stock, net						120,320						245,268
Unsecured promissory notes, net						43,443						43,543
Performance participation allocation due to affiliate						31,160						51,761
Accounts payable, accrued expenses and other liabilities						71,217						46,886
Total liabilities						1,346,958						1,146,221
Commitments and contingencies (Note 12)
Equity and noncontrolling interests
Stockholders' equity
Common stock, Class T shares, $0.01 par value, 275,000,000 shares authorized; 4,299,100 shares issued and outstanding at September 30, 2022. No Class T shares were outstanding at December 31, 2021.						43						—
Common stock, Class D shares, $0.01 par value, 275,000,000 shares authorized; 7,361 shares issued and outstanding at September 30, 2022. No Class D shares were outstanding at December 31, 2021.						—						—
Common stock, Class I shares, $0.01 par value, 275,000,000 shares authorized; 3,236,141 and 151,286 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively.						32						2
Common stock, Class A shares, $0.01 par value, 125,000,000 shares authorized; 27,116,703 and 23,445,174 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively.						271						234
Common stock, Class TX shares, $0.01 par value, 50,000,000 shares authorized; zero and 17,520 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively.						—						—
Additional paid-in capital						413,328						252,035
Accumulated distributions						(31,822)						(17,273)
Accumulated deficit						(70,600)						(55,864)
Total stockholders' equity						311,252						179,134
Noncontrolling interests
Limited partners						266,836						291,258
Partially owned entities						32,586						70,277
Total noncontrolling interests						299,422						361,535
Total equity and noncontrolling interests						610,674						540,669
Total liabilities, equity and noncontrolling interests						$	1,957,632					$	1,686,890
See accompanying notes to condensed consolidated financial statements

F - 2

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Cottonwood Communities, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
(in thousands, except share and per share data)
			Three Months Ended September 30,												Nine Months Ended September 30,
			2022						2021						2022						2021
Revenues
Rental and other property revenues			$	32,959					$	26,708					$	88,382					$	46,723
Property management revenues			2,829						3,487						8,655						5,607
Other revenues			2,295						365						3,544						887
Total revenues			38,083						30,560						100,581						53,217
Operating expenses
Property operations expense			12,444						10,210						32,705						18,362
Property management expense			4,323						4,373						13,863						6,925
Asset management fee			4,622						2,392						12,761						4,720
Performance participation allocation			1,081						29,524						31,160						35,979
Depreciation and amortization			14,289						27,716						37,549						43,536
General and administrative expenses			3,938						2,978						10,513						7,747
Total operating expenses			40,697						77,193						138,551						117,269
Loss from operations			(2,614)						(46,633)						(37,970)						(64,052)
Equity in earnings (losses) of unconsolidated real estate entities			1,982						(1,154)						8,705						(855)
Interest income			23						64						47						201
Interest expense			(13,296)						(9,229)						(36,100)						(16,382)
Gain on sale of unconsolidated real estate entities			176						—						7,810						—
Promote from incentive allocation agreement			—						—						30,309						—
Loss on debt extinguishment, net			—						—						(481)						—
Other income (expense)			1,913						(97)						3,732						(78)
Loss before income taxes			(11,816)						(57,049)						(23,948)						(81,166)
Income tax (expense) benefit			(511)						38						(8,261)						(255)
Net loss			(12,327)						(57,011)						(32,209)						(81,421)
Net loss attributable to noncontrolling interests:
Limited partners			6,198						31,153						16,778						43,936
Partially owned entities			241						2,312						694						4,925
Net loss attributable to common stockholders			$	(5,888)					$	(23,546)					$	(14,737)					$	(32,560)
Weighted-average common shares outstanding			29,733,453						21,927,155						27,199,948						15,586,067
Net loss per common share - basic and diluted			$	(0.20)					$	(1.07)					$	(0.54)					$	(2.09)
See accompanying notes to condensed consolidated financial statements

F - 3

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Cottonwood Communities, Inc.
Condensed Consolidated Statements of Stockholders' Equity
(Unaudited)
(in thousands, except share data)
			Cottonwood Communities, Inc. Stockholders' Equity																														Noncontrolling interests
			Par Value															Additional Paid-In Capital			Accumulated Distributions			Accumulated Deficit			Total Stockholders' Equity						Limited Partners			Partially Owned Entities			Total Equity and Noncontrolling Interests
			Common Stock Class T			Common Stock Class D			Common Stock Class I			Common Stock Class A			Common Stock Class TX
Balance at January 1, 2022			$	—		$	—		$	2		$	234		$	—		$	252,035		$	(17,273)		$	(55,864)		$	179,134					$	291,258		$	70,277		$	540,669
Issuance of common stock			14			—			4			—			—			32,912			—			—			32,930						—			—			32,930
Offering costs			—			—			—			—			—			(2,958)			—			—			(2,958)						—			—			(2,958)
Distribution reinvestment			—			—			—			—			—			464			—			—			464						—			—			464
Common stock/OP Units repurchased			—			—			—			(2)			—			(3,106)			—			—			(3,108)						(286)			—			(3,394)
Contributions from noncontrolling interests			—			—			—			—			—			—			—			—			—						—			662			662
Share-based compensation			—			—			—			—			—			—			—			—			—						865			—			865
Distributions to investors			—			—			—			—			—			—			(4,314)			—			(4,314)						(5,460)			(4,073)			(13,847)
Net loss			—			—			—			—			—			—			—			(3,005)			(3,005)						(3,828)			(55)			(6,888)
Balance at March 31, 2022			14			—			6			232			—			279,347			(21,587)			(58,869)			199,143						282,549			66,811			548,503
Issuance of common stock			15			—			12			—			—			53,522			—			—			53,549						—			—			53,549
Offering costs			—			—			—			—			—			(4,211)			—			—			(4,211)						—			—			(4,211)
Distribution reinvestment			—			—			—			1			—			656			—			—			657						—			—			657
Common stock/OP Units repurchased			—			—			—			(3)			—			(5,591)			—			—			(5,594)						(445)			—			(6,039)
Contributions from noncontrolling interests			—			—			—			—			—			—			—			—			—						(210)			15,444			15,234
Share-based compensation			—			—			—			—			—			—			—			—			—						941			—			941
Distributions to investors			—			—			—			—			—			—			(4,765)			—			(4,765)						(5,558)			(122)			(10,445)
Net loss			—			—			—			—			—			—			—			(5,843)			(5,843)						(6,752)			(398)			(12,993)
Balance at June 30, 2022			29			—			18			230			—			323,723			(26,352)			(64,712)			232,936						270,525			81,735			585,196
Issuance of common stock			14			—			13			—			—			56,798			—			—			56,825						—			—			56,825
Offering costs			—			—			—			—			—			(4,748)			—			—			(4,748)						—			—			(4,748)
Distribution reinvestment			—			—			—			—			—			583			—			—			583						—			—			583
Exchanges and transfers			—			—			2			—			—			3,382			—			—			3,384						(3,384)			—			—
OP Units issued for real estate interests			—			—			—			—			—			—			—			—			—						2,930			—			2,930
CMOF Merger			—			—			—			43			—			39,393			—			—			39,436						8,273			(49,178)			(1,469)
Common stock/OP Units repurchased			—			—			(1)			(2)			—			(5,803)			—			—			(5,806)						(602)			—			(6,408)
Contributions from noncontrolling interests			—			—			—			—			—			—			—			—			—						—			386			386
Share-based compensation			—			—			—			—			—			—			—			—			—						938			—			938
Distributions to investors			—			—			—			—			—			—			(5,470)			—			(5,470)						(5,646)			(116)			(11,232)
Net loss			—			—			—			—			—			—			—			(5,888)			(5,888)						(6,198)			(241)			(12,327)
Balance at September 30, 2022			$	43		$	—		$	32		$	271		$	—		$	413,328		$	(31,822)		$	(70,600)		$	311,252					$	266,836		$	32,586		$	610,674

F - 4

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Cottonwood Communities, Inc.
Condensed Consolidated Statements of Stockholders' Equity (Continued)
(Unaudited)
(in thousands, except share data)
			Cottonwood Communities, Inc. Stockholders' Equity																														Noncontrolling interests
			Par Value															Additional Paid-In Capital			Accumulated Distributions			Accumulated Deficit			Total Stockholders' Equity						Limited Partners			Partially Owned Entities			Total Equity and Noncontrolling Interests
			Common Stock Class T			Common Stock Class D			Common Stock Class I			Common Stock Class A			Common Stock Class TX
Balance at January 1, 2021			$	—		$	—		$	—		$	122		$	—		$	121,677		$	(7,768)		$	(11,948)		$	102,083					$	—		$	—		$	102,083
Share-based compensation			—			—			—			—			—			45			—			—			45						—			—			45
Distributions to investors			—			—			—			—			—			—			(1,511)			—			(1,511)						—			—			(1,511)
Net loss			—			—			—			—			—			—			—			(3,010)			(3,010)						—			—			(3,010)
Balance at March 31, 2021			—			—			—			122			—			121,722			(9,279)			(14,958)			97,607						—			—			97,607
CRII Merger			—			—			—			4			—			4,654			—			—			4,658						363,278			221,656			589,592
Contributions from noncontrolling interests			—			—			—			—			—			—			—			—			—						—			83			83
Share-based compensation			—			—			—			—			—			—			—			—			—						421			—			421
Other			—			—			—			—			—			(200)			—			—			(200)						—			—			(200)
Distributions to investors			—			—			—			—			—			—			(1,546)			—			(1,546)						(2,312)			(1,256)			(5,114)
Net loss			—			—			—			—			—			—			—			(6,004)			(6,004)						(12,783)			(2,613)			(21,400)
Balance at June 30, 2021			—			—			—			126			—			126,176			(10,825)			(20,962)			94,515						348,604			217,870			660,989
CMRI Merger			—			—			—			58			—			70,036			—			—			70,094						—			(79,447)			(9,353)
CMRII Merger			—			—			—			52			—			57,324			—			—			57,376						—			(63,752)			(6,376)
Contributions from noncontrolling interests			—			—			—			—			—			—			—			—			—						—			567			567
Share-based compensation			—			—			—			—			—			—			—			—			—						552			—			552
Common stock/OP Units repurchased			—			—			—			(1)			—			(838)			—			—			(839)						(1,440)			—			(2,279)
Other			—			—			—			—			—			(863)			—			—			(863)						—			—			(863)
Distributions to investors			—			—			—			—			—			—			(2,816)			—			(2,816)						(3,961)			(95)			(6,872)
Net loss			—			—			—			—			—			—			—			(23,546)			(23,546)						(31,153)			(2,312)			(57,011)
Balance at September 30, 2021			$	—		$	—		$	—		$	235		$	—		$	251,835		$	(13,641)		$	(44,508)		$	193,921					$	312,602		$	72,831		$	579,354
See accompanying notes to condensed consolidated financial statements

F - 5

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Cottonwood Communities, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
						Nine Months Ended September 30,
						2022						2021
Cash flows from operating activities:
Net loss						$	(32,209)					$	(81,421)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization						37,549						43,536
Gain on sale of investments in unconsolidated real estate entities						(7,810)						—
Share-based compensation						2,743						1,018
Other operating						4,802						1,150
Loss on debt extinguishment						481						—
Equity in earnings (losses) of unconsolidated real estate entities						(8,705)						855
Distributions from unconsolidated real estate entities - return on capital						8,389						2,936
Changes in operating assets and liabilities:
Other assets						(2,647)						(431)
Performance participation allocation						31,160						35,979
Performance participation allocation payment						(51,761)						—
Accounts payable, accrued expenses and other liabilities						19,609						7,220
Net cash provided by operating activities						1,601						10,842
Cash flows from investing activities:
Acquisitions of real estate, net of cash acquired						(148,216)						—
Settlement of related party notes and liabilities assumed with the CMOF Merger						(1,469)						—
Cash, cash equivalents and restricted cash acquired in connection with the CRII Merger						—						51,943
Capital expenditures and development activities						(77,235)						(50,625)
Investments in unconsolidated real estate entities						(197)						(12,909)
Proceeds from sale of investments in unconsolidated real estate entities						28,910						—
Distributions from unconsolidated real estate entities - return on capital						38,769						—
Contributions to investments in real-estate related loans						—						(10,871)
Proceeds from settlement of investments in real-estate related loans						13,000						9,332
Other investing activities						—						941
Net cash used in investing activities						(146,438)						(12,189)

F - 6

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Cottonwood Communities, Inc.
Condensed Consolidated Statements of Cash Flows (Continued)
(Unaudited)
(in thousands)
						Nine Months Ended September 30,
						2022						2021
Cash flows from financing activities:
Principal payments on mortgage notes						(1,186)						(195)
Borrowings from revolving credit facility						168,000						8,500
Repayments on revolving credit facility						(141,000)						(15,000)
Borrowings under mortgage notes and term loans						469,976						—
Repayments of mortgage notes and term loans						(231,177)						—
Deferred financing costs on mortgage notes and term loans						(5,067)						—
Borrowings from construction loans						30,642						37,816
Repayments of construction loans						(59,660)						—
Proceeds from issuance of Series 2019 Preferred Stock						15,472						52,267
Redemption of preferred stock						(142,720)						(1,006)
Offering costs paid on issuance of preferred stock						(1,708)						(5,496)
Proceeds from issuance of common stock						145,008						—
Repurchase of common stock/OP Units						(15,840)						(2,279)
Offering costs paid on issuance of common stock						(11,918)						—
Contributions from noncontrolling interests						11,935						—
Distributions to common stockholders						(13,842)						(6,382)
Distributions to noncontrolling interests - limited partners						(16,507)						(6,260)
Distributions to noncontrolling interests - partially owned entities						(4,311)						(1,383)
Other financing activities						(96)						(834)
Net cash provided by financing activities						196,001						59,748
Net increase in cash and cash equivalents and restricted cash						51,164						58,401
Cash and cash equivalents and restricted cash, beginning of period						45,390						4,633
Cash and cash equivalents and restricted cash, end of period						$	96,554					$	63,034
Reconciliation of cash and cash equivalents and restricted cash to the condensed consolidated balance sheets:
Cash and cash equivalents						$	63,045					$	41,313
Restricted cash						33,509						21,721
Total cash and cash equivalents and restricted cash						$	96,554					$	63,034

F - 7

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Cottonwood Communities, Inc.
Condensed Consolidated Statements of Cash Flows (Continued)
(Unaudited)
(in thousands)
						Nine Months Ended September 30,
						2022						2021
Supplemental disclosure of non-cash investing and financing activities:
CMOF Merger
CMOF related party notes assumed						$	1,327					$	—
Net other liabilities assumed						$	142					$	—
Cottonwood Ridgeview Acquisition
Real estate assets, net of cash acquired						$	62,636					$	—
Mortgage note						$	58,192					$	—
Other assets and liabilities assumed, net						$	642					$	—
Value of OP Units issued for real estate assets						$	2,930					$	—
Cottonwood Clermont Acquisition
Assumption of mortgage note						$	35,521					$	—
CRII Merger
Fair value of assets acquired and liabilities assumed with the CRII Merger:
Real estate assets						$	—					$	1,291,030
Investments in unconsolidated real estate entities						$	—					$	120,775
Intangibles						$	—					$	32,122
Debt						$	—					$	734,852
Preferred stock						$	—					$	143,979
Other assets acquired						$	—					$	62,147
Other liabilities assumed						$	—					$	40,926
Fair value of equity issued to CRII Shareholders in the CRII Merger						$	—					$	4,658
Fair value of noncontrolling interests from the CRII Merger						$	—					$	581,659
CMRI Merger
Settlement of promote upon closing of the CMRI Merger						$	—					$	5,585
Settlement of CMRI promissory notes and interest with CROP						$	—					$	1,545
Net liabilities assumed with the CMRI Merger						$	—					$	2,223
CMRII Merger
Settlement of promote upon closing of the CMRII Merger						$	—					$	2,424
Settlement of CMRII promissory notes and interest with CROP						$	—					$	2,475
Net liabilities assumed with the CMRII Merger						$	—					$	1,477
See accompanying notes to condensed consolidated financial statements

F - 8

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Cottonwood Communities, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1.Organization and Business

Cottonwood Communities, Inc. (the “Company,” “CCI,” “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 hold all of our assets through our operating partnership, Cottonwood Residential O.P., LP (“CROP”). CROP, together with its subsidiaries, holds the Company's real estate interests and conducts the ongoing operations of the Company. 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-traded perpetual-life, net asset value (“NAV”) real estate investment trust (“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.

From August 13, 2018 to December 22, 2020 we conducted an initial public offering of our common stock (the “Initial Offering”), for which we raised gross proceeds of $122.0 million. The Initial Offering ended in December 2020 as we pursued the 2021 Mergers described below. On November 4, 2021, after the 2021 Mergers (defined below) were completed, 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 September 30, 2022, we have raised gross proceeds of $147.7 million from the Follow-on Offering, including proceeds from the DRP Offering.

On November 8, 2019, we commenced a private placement offering exempt from registration under the Securities Act pursuant to which we offered a maximum of $128.0 million in shares of Series 2019 Preferred Stock to accredited investors at a purchase price of $10.00 per share (the “Private Offering”). The Private Offering was fully subscribed in March 2022, having received gross proceeds of $127.0 million.

We own and operate a diverse portfolio of investments in multifamily apartment communities located in targeted markets throughout the United States. As of September 30, 2022, our portfolio consists of ownership interests or structured investment interests in 33 multifamily apartment communities with a total of 9,620 units, including 1,073 units in three multifamily apartment communities in which we have a structured investment interest and another 738 units in three multifamily apartment communities under construction or recently completed and in lease-up. In addition, we have an ownership interest in four land sites planned for development.

Cottonwood Multifamily Opportunity Fund, Inc. Merger

On July 8, 2022, we entered into an agreement and plan of merger with Cottonwood Multifamily Opportunity Fund, Inc. (“CMOF”) and its operating partnership (the “CMOF OP”) to merge CMOF with and into our wholly owned subsidiary and the CMOF OP with and into CROP through the exchange of stock-for-stock and units-for-units (the “CMOF Merger”). The CMOF Merger closed on September 27, 2022.

CMOF stockholders received 0.8669 shares of our Class A common stock in exchange for each share of their CMOF common stock. We issued 4,335,367 shares of Class A common stock in connection with the CMOF Merger, at an aggregate value of $89.7 million on the close date.

In connection with the merger of the CMOF OP with and into CROP, the CMOF OP partnership units outstanding held by third parties were converted into CROP common units at the same ratio as the common stock.

CROP was a joint venture partner with CMOF in all three of CMOF’s investments: Park Avenue (development project), Cottonwood on Broadway (development project) and Block C (land held for development). Following the CMOF Merger, we acquired CMOF’s interest in these joint ventures, increasing our percentage ownership interest in the joint ventures as follows: Park Avenue, 100.0%, Cottonwood on Broadway, 100.0% and Block C, 79.0%. The remaining interest in the Block C joint venture is held either directly or indirectly by certain officers or directors, as well as certain employees of CROP and our advisor or its affiliates as discussed in Note 10. The three development projects we acquired additional interests in with the CMOF Merger were already consolidated by us.

F - 9

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The 2021 Mergers

On January 26, 2021, we entered into stock-for-stock and unit-for-unit merger agreements with three affiliated REITs. The merger with Cottonwood Residential II, Inc. (“CRII,” the “CRII Merger”) closed on May 7, 2021. The merger with Cottonwood Multifamily REIT I, Inc. (“CMRI,” the “CMRI Merger”) closed on July 7, 2021. The merger with Cottonwood Multifamily REIT II, Inc. (“CMRII,” the “CMRII Merger”) also closed on July 7, 2021. We refer to the CRII Merger, the CMRI Merger and the CMRII Merger as the “2021 Mergers.”

CRII stockholders received (i) 2.015 shares of our Class A common stock in exchange for their shares of common stock, (ii) one share of our Series 2016 preferred stock in exchange for their CRII Series 2016 preferred stock, and (iii) one share of our Series 2017 preferred stock in exchange for their CRII Series 2017 preferred stock.

CROP, the operating partnership of CRII, replaced Cottonwood Communities O.P., LP (“CCOP”) as our operating partnership. The participating partnership units of CROP, which excluded preferred units, were split by a ratio of 2.015 (“CROP Unit Split”). Issued and outstanding partnership units of CCOP, which included Series 2019 Preferred units, LTIP units, Special LTIP units, general partner units and common limited partnership units converted into corresponding units at CROP, the terms of which were identical to the converted CCOP partnership unit.

After giving effect to the CROP Unit Split, each preferred unit, general partner unit, common limited partnership unit, and LTIP unit of CROP remained issued and outstanding.

CMRI stockholders received 1.175 shares of our Class A common stock in exchange for their CMRI common stock. CMRII’s stockholders received 1.072 shares of our Class A common stock in exchange for their CMRII common stock. In connection with the mergers of the operating partnerships of each of CMRI and CMRII with and into CROP, the partnership units outstanding, which were split to equal the amount of the common stock outstanding, were converted into CROP common units at the same ratio as the common stock. Each asset held by CMRI and CMRII was owned through joint ventures with CROP. As a result of the consummation of the CMRI Merger and the CMRII Merger, our ownership interest in the properties held through joint ventures with CMRI and CMRII increased to 100% on July 15, 2021.

Through the 2021 Mergers we acquired interests in 22 stabilized multifamily apartment communities, four multifamily development projects, one structured investment, and land held for development. We also acquired CRII’s property management business and its employees, an advisory contract with Cottonwood Multifamily Opportunity Fund, Inc. (“CMOF”), and personnel who performed certain administrative and other services for us on behalf of CC Advisors III.

CC Advisors III continues to manage our business as our external advisor pursuant to an amended and restated advisory agreement. With the exception of our Chief Legal Officer, Chief Operating Officer, Chief Accounting Officer and Chief Development Officer, we do not employ our executive officers.

Much of our structure and agreements have changed materially as a result of the 2021 Mergers. Accordingly, information presented in these condensed consolidated financial statements may not be directly comparable to prior periods.

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, 2021 has been derived from the Company’s 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, 2021 filed with the SEC.

The accompanying condensed consolidated financial statements include the accounts of the Company and its subsidiaries for which we have a controlling interest. All intercompany balances and transactions have been eliminated in consolidation.

F - 10

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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.

Organization and Offering Costs

Organization and offering costs in the Follow-on Offering are paid by purchasers of the shares through an adjustment to the purchase price of the share or their distribution (depending on the class of share purchased) or by us. They are recorded as an offset to equity. As of September 30, 2022, $13.6 million in organization and offering costs had been incurred in connection with the Follow-on Offering.

Organization and offering costs in the Private Offering for our Series 2019 Preferred Stock were paid by us. They are deferred and amortized up to the redemption date through interest expense. We incurred $13.2 million of organization and offering costs related to the Private Offering, which was fully subscribed and terminated in March 2022.

Income Taxes

As a REIT, we are not subject to federal income tax with respect to the portion of our income that meets certain criteria and is distributed annually to stockholders. Taxable income from activities managed through our taxable REIT subsidiary (“TRS”) are subject to federal, state and local income taxes. Provision for such taxes has been included in income tax expense on our condensed consolidated statements of operations. In 2018, CROP entered into an incentive allocation agreement with a real estate firm who bought a portfolio of twelve assets from CROP. The agreement allowed us to participate in distributions from the portfolio should returns on the portfolio exceed certain amounts. In March 2022, the firm sold the portfolio and our TRS realized a promote distribution of $30.3 million. Income tax expense accrued for this discrete item was $7.3 million. In June 2022, the taxable gain from the promote was contributed to a Qualified Opportunity Zone fund, 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 a result, the $7.3 million income tax payable was reclassified to a deferred tax liability. We expect that this deferred tax liability will be realized in 2026.

3.    Real Estate Assets, Net

The following table summarizes the carrying amounts of our consolidated real estate assets (in thousands):

			September 30, 2022						December 31, 2021
Land			$	267,876					$	202,531
Buildings and improvements			1,346,626						1,074,126
Furniture, fixtures and equipment			52,806						37,463
Intangible assets			40,692						34,905
Construction in progress (1)			97,484						127,493
			1,805,484						1,476,518
Less: Accumulated depreciation and amortization (2)			(103,052)						(68,035)
Real estate assets, net			$	1,702,432					$	1,408,483
(1) Includes construction in progress for our development projects and capitalized costs for improvements not yet placed in service at our stabilized properties.
(2) Includes the amortization of $33.2 million of in-place lease assets acquired with the CRII Merger over a period of six months in 2021.

F - 11

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CMOF Merger

The acquisition of an additional ownership interest of a consolidated entity is accounted for as an equity transaction. The three development projects we acquired additional interests in with the CMOF Merger were already consolidated by us. Accordingly, CMOF’s noncontrolling interest in the three investments was reduced by its carrying amount and the difference between the carrying amount and the consideration paid was recorded as an adjustment to our equity through additional paid-in capital as follows (in thousands, except share and per share data):

2022 Consideration						CMOF Merger
Common stock issued and outstanding						5,001,000
Exchange ratio						0.8669
CCI common stock issued as consideration						4,335,367
Per share value of CCI Common Stock						$	20.7007
Fair value of CCI Common Stock issued						$	89,745
Fair value of OP Units issued						8,273
Settlement of CMOF related party notes and interest						1,327
Settlement of net other liabilities of CMOF						142
Total consideration						$	99,487
2022 Change in equity						CMOF Merger
Carrying amount of noncontrolling interest						$	49,178
Total consideration						99,487
Additional paid in capital adjustment						$	(50,309)
Fair value of CCI Common Stock issued						$	89,745
Additional paid in capital adjustment						(50,309)
Total change in equity						$	39,436

Asset Acquisitions

The following table summarizes the purchase price allocation of the real estate assets acquired or consolidated during the nine months ended September 30, 2022 (in thousands):

									Allocated Amounts
Property			Location			Date Consolidated			Building			Land			Land Improvements			Personal Property			Lease Intangibles			Debt Mark to Market			Total
Cottonwood Lighthouse Point			Pompano Beach, FL			6/22/22			$	76,322		$	13,647		$	1,843		$	2,011		$	1,783		$	—		$	95,606
Cottonwood Ridgeview			Plano, TX			9/19/22			54,337			9,275			2,548			835			1,603			1,504			70,102
Cottonwood Clermont			Clermont, FL			9/21/22			67,400			5,705			5,744			1,817			1,792			3,428			85,886
									$	198,059		$	28,627		$	10,135		$	4,663		$	5,178		$	4,932		$	251,594

The acquisition of Cottonwood Lighthouse Point was funded with debt of $48.0 million and available cash.

Cottonwood Ridgeview was consolidated when we issued 141,543 operating partnership units in CROP (“OP Units) to acquire the remaining 9.5% tenant-in-common interests in the property. The value of the OP Units was $2.9 million on the close date. Cottonwood Ridgeview was previously accounted for as an equity method investment.

The acquisition of Cottonwood Clermont was funded through an assumed loan of $35.5 million and available cash.

In asset acquisitions, assets and liabilities are recorded at relative fair value. The weighted-average amortization period for the intangible lease assets acquired in connection with these acquisitions is 0.5 years.

Galleria Land Purchase

On September 20, 2022, we acquired 26 acres of land for future development in Murray, Utah for $28.5 million.

F - 12

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Block C

On June 28, 2022, Block C, an early-stage development joint venture with CMOF, was recapitalized. Entities affiliated with us and our advisor contributed capital to the joint venture and were admitted as members. We contributed additional funds to obtain a controlling interest and consolidated the joint venture, which had previously been recorded as an equity method investment. On September 27, 2022, we acquired CMOF’s interest in Block C as a result of the CMOF Merger. The joint venture consists of cash, land held for development, and payables. Refer to Note 10 for further information on the Block C recapitalization.

CRII Merger

On May 7, 2021, we completed the CRII Merger, which was accounted for as a business combination in accordance with ASC 805, Business Combinations ("ASC 805"). Based on an evaluation of the relevant factors and the guidance in ASC 805, CCI was determined to be both the legal and accounting acquirer. In order to make this determination, various factors were analyzed including which entity issued its equity interests, relative voting rights, existence of noncontrolling interests, control of the board of directors, management composition, relative size, transaction initiation, operational structure, relative composition of employees, and other factors. The most significant factor identified was the relative voting rights, as CCI stockholders hold the majority of the controlling financial (voting) interests. CCI also initiated the transaction and was the entity issuing common equity interests in the merger.

The consideration given in exchange for CRII was as follows ($ in thousands, except share and per share data):

CRII Common stock issued and outstanding			213,434
Exchange ratio			2.015
CCI common stock issued as consideration			430,070
CCI's estimated value per share as of May 7, 2021			$	10.83
Value of CCI common stock issued as consideration			$	4,658

F - 13

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The allocation of the purchase price below required significant judgment and represented management's best estimate of the fair value as of the acquisition date. The following table shows the purchase price allocation of CRII's identifiable asset and liabilities assumed as of May 7, 2021 ($ in thousands):

Assets
Real estate assets (1)			$	1,291,030
Investments in unconsolidated real estate entities			120,775
Cash and cash equivalents			31,799
Restricted cash			20,144
Other assets (2)			42,325
Total assets acquired			$	1,506,073
Liabilities
Mortgage notes, net			$	622,095
Construction loans			64,114
Preferred stock			143,979
Unsecured promissory notes			48,643
Accounts payable, accrued expenses and other liabilities			40,926
Total liabilities assumed			919,757
Consolidated net assets acquired			586,316
Noncontrolling interests (3)			(581,659)
Net assets acquired			$	4,657
(1) Real estate assets acquired in connection with the CRII Merger include $33.2 million of intangible lease assets, which have a weighted-average amortization period of 0.5 years. As such, based on the May 7, 2021 merger date, the intangible lease assets acquired from the CRII Merger have been fully amortized by December 31, 2021.
(2) Other assets includes $32.1 million of intangible assets from the CRII Merger. Of this amount, $8.0 million relates to a promote asset which was removed upon the closing of the CMRI Merger and CMRII Merger on July 15, 2021. The remaining $24.1 million of intangible assets have a weighted-average amortization period of 8.8 years, and include $22.2 million related to the acquisition of CRII's property management and ancillary businesses (with a weighted-average amortization period of 9.2 years) and $1.9 million related to acquired disposition fees on certain properties and promotes on development assets (with a weighted-average amortization period of 3.8 years).
(3) The fair value of noncontrolling interests is based on the fair value of assets and liabilities held by the noncontrolling interests at their ownership share. These values were determined using methods similar to those used by independent appraisers, and include using replacement cost estimates less depreciation, discounted cash flows, market comparisons, and direct capitalization of net operating income.

As a result of the CRII Merger we consolidated 17 multifamily apartment communities and four development properties as well as added six multifamily apartment communities accounted for under the equity method of accounting.

The results of operations for the CRII Merger are included in the Company's statements of operations beginning on the May 7, 2021 merger closing date onward. For the nine months ended September 30, 2022, the accompanying statements of operations include the following revenue and net income generated from the assets acquired and liabilities assumed with the CRII Merger (unaudited, in thousands):

Revenue			$	91,763
Net income			$	31,247

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Pro Forma Financial Information (unaudited)

The following condensed pro forma operating information is presented as if the CRII Merger occurred in 2020 and had been included in operations as of January 1, 2020. The pro forma operating information excludes certain nonrecurring adjustments, such as acquisition fees and expenses incurred, to reflect the pro forma impact the acquisition would have on earnings on a continuous basis (unaudited, in thousands):

			Three Months Ended September 30,												Nine Months Ended September 30,
			2022						2021						2022						2021
Pro forma revenue:
Historic results			$	38,083					$	30,560					$	100,581					$	53,217
CRII Merger (excluding those in historic results)			—						—						—						36,657
Total			$	38,083					$	30,560					$	100,581					$	89,874
Pro forma net loss:
Historic results			$	(12,327)					$	(57,011)					$	(32,209)					$	(81,421)
CRII Merger (excluding those in historic results)			—						16,609						—						(13,300)
Total			$	(12,327)					$	(40,402)					$	(32,209)					$	(94,721)

    

The pro forma information is not necessarily indicative of the results which actually would have occurred if the business combination had occurred on the first day of the periods presented, nor does the pro forma financial information purport to represent the results of operations for future periods.

CMRI Merger and CMRII Merger

With the closing of the CRII Merger in May 2021, we consolidated the properties that CMRI and CMRII invested in through joint ventures with CROP. As a result of the consummation of the CMRI Merger and the CMRII Merger in July 2021, our ownership interest in these properties increased to 100%. The acquisition of an additional ownership interest of a consolidated entity is accounted for as an equity transaction. Accordingly, CMRI's and CMRII's noncontrolling interest in the properties was reduced by its carrying amount and the difference between the carrying amount and the consideration paid was recorded as an adjustment to our equity through additional paid-in capital. Information regarding these equity transactions is as follows (in thousands, except share and per share data):

2021 Consideration									CMRI Merger						CMRII Merger
Common stock issued and outstanding									4,904,045						4,881,490
Exchange ratio									1.175						1.072
CCI common stock issued as consideration									5,762,253						5,232,957
Per share value of CCI Common Stock									$	11.7865					$	11.7865
Fair value of CCI Common Stock issued									$	67,917					$	61,678
Settlement of promote									5,585						2,424
Settlement of CMRI and CMRII promissory notes and interest with CROP									1,545						2,475
Net liabilities assumed									2,223						1,477
Total consideration									$	77,270					$	68,054
2021 Change in equity									CMRI Merger						CMRII Merger
Carrying amount of noncontrolling interest									$	79,447					$	63,752
Total consideration									77,270						68,054
Additional paid in capital adjustment									$	2,177					$	(4,302)
Fair value of CCI Common Stock issued									$	67,917					$	61,678
Additional paid in capital adjustment									2,177						(4,302)
Total change in equity									$	70,094					$	57,376

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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 September 30, 2022 and December 31, 2021 (in thousands):

												Balance at
Property / Development			Location			% Owned						September 30, 2022						December 31, 2021
Stabilized Assets
3800 Main (1)			Houston, TX			0% (1)						$	—					$	10,347
Alpha Mill (2) (3)			Charlotte, NC			28.3%						10,560						22,034
Cottonwood Bayview (2)			St. Petersburg, FL			71.0%						30,943						31,399
Cottonwood Ridgeview (4)			Plano, TX			100% (4)						—						34,352
Fox Point (2)			Salt Lake City, UT			52.8%						15,103						16,056
Toscana at Valley Ridge (2)			Lewisville, TX			58.6%						9,399						9,370
Melrose Phase II (2)			Nashville, TN			79.8%						6,408						15,523
Preferred Equity Investments
Lector85			Ybor City, FL									14,310						13,010
Vernon Boulevard			Queens, NY									19,908						18,079
Riverfront			West Sacramento, CA									19,047						16,884
Other												919						3,679
Total												$	126,597					$	190,733
(1) On June 23, 2022, 3800 Main was sold. We received $16.8 million in cash for the sale and recorded a gain on sale of $6.8 million.
(2) We account for our tenant-in-common interests in these properties as equity method investments.
(3) On April 7, 2022, we sold 28.9% of our ownership interest in Alpha Mill for $11.9 million to certain unaffiliated third parties and we recorded a gain on sale of $0.8 million related to the transaction, which reduced our remaining ownership in Alpha Mill to 28.3%.
(4) On September 19, 2022, we issued 141,543 OP Units to acquire the remaining 9.5% tenant-in-common interests in Cottonwood Ridgeview, bringing our ownership in Cottonwood Ridgeview to 100% and resulting in the consolidation of the property from that date onward. The value of the OP Units was $2.9 million on the close date.

Our investments in unconsolidated real estate entities for the stabilized assets above were acquired on May 7, 2021 as part of the CRII Merger. Equity in earnings (losses) for our stabilized assets for the three months ended September 30, 2022 and 2021 were $0.1 million and $(2.7) million, respectively. Equity in earnings for our stabilized assets for the nine months ended September 30, 2022 was $3.4 million. Equity in losses for our stabilized and other assets during the period from the CRII Merger closing on May 7, 2021 to September 30, 2021 was $4.8 million. During March 2022, we received $30.4 million and $8.3 million in distributions as a return of capital from debt refinances at Cottonwood Ridgeview and Melrose Phase II, 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 September 30, 2022 and 2021 were $1.8 million and $1.6 million, respectively. Equity in earnings for our preferred equity investments for the nine months ended September 30, 2022 and 2021 were $5.3 million and $3.9 million, respectively. By the end of 2021, we had fully funded our commitments on all of our preferred equity investments.

5. Investments in Real-Estate Related Loans

On June 30, 2021, we entered into a co-lender agreement to participate in a $19.5 million mezzanine loan originated for the purpose of developing a 300-unit multifamily apartment community located in Reno, Nevada (the “Integra Peaks Mezzanine Loan”). We committed a total of $13.0 million of the Integra Peaks Mezzanine Loan, with the remaining $6.5 million funded by our co-lender (an unaffiliated third party). As of December 31, 2021, we had funded all of our commitment. The Integra Peaks Mezzanine Loan bore interest of 12.0% per annum, had an original maturity date of March 30, 2024 and could be prepaid in whole or in part subject to certain limitations and a minimum multiple payment.

On September 2, 2022, the borrower prepaid the Integra Peaks Mezzanine Loan in full. Net interest income from the Integra Peaks Mezzanine Loan for the three and nine months ended September 30, 2022 was $0.3 million and $1.1 million, respectively. Net interest income for both the three and nine months ended September 30, 2021 was $0.2 million. In addition to the payment of all accrued interest, we received a minimum multiple payment of $1.8 million. Interest income and the minimum multiple on the Integra Peaks Mezzanine Loan is classified within other revenues on our condensed consolidated statements of operations.

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6.    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 September 30, 2022 and December 31, 2021 ($ in thousands):

									Principal Balance Outstanding
Indebtedness			Weighted-Average Interest Rate			Weighted-Average Remaining Term (1)			September 30, 2022			December 31, 2021
Fixed rate loans
Fixed rate mortgages			3.63%			5.4 Years			$	528,824		$	213,009
Total fixed rate loans									528,824			213,009
Variable rate loans (2)
Floating rate mortgages			4.69%			6.9 Years			426,130			407,022
Variable rate revolving credit facility (3)			4.23%			2.5 Years			47,000			20,000
Total variable rate loans									473,130			427,022
Total secured loans									1,001,954			640,031
Unamortized debt issuance costs									(5,345)			(940)
Premium on assumed debt, net									(3,429)			3,016
Mortgage notes and revolving credit facility, net									$	993,180		$	642,107
(1) For loans where we have the ability to exercise extension options at our own discretion, the maximum maturity date has been assumed.
(2) The interest rate of our variable rate loans is primarily based on one-month LIBOR or one-month SOFR.
(3) We may obtain advances secured against Cottonwood One Upland and Parc Westborough up to $125.0 million on our variable rate revolving credit facility, as long as certain loan-to-value ratios and other requirements are maintained.

We are in compliance with all covenants associated with our mortgage notes and revolving credit facility as of September 30, 2022.

Construction Loans

Information on our construction loans are as follows ($ in thousands):

Development			Interest Rate			Final Expiration Date			Loan Amount			Amount Drawn at September 30, 2022			Amount Drawn at December 31, 2021
Sugarmont (1)			(1)			(1)			(1)			$	—		$	59,660
Park Avenue			One-Month USD Libor + 1.75%			November 30, 2023			$	37,000		37,000			29,520
Cottonwood on Broadway			One-Month USD Libor + 1.9%			May 15, 2024			44,625			36,724			27,476
Cottonwood on Highland			One-Month USD SOFR + 2.55%			May 1, 2029			44,250			13,914			—
									$	125,875		$	87,638		$	116,656
(1) The Sugarmont construction loan was refinanced in January 2022 with a $105.0 million floating rate mortgage.

Unsecured Promissory Notes, Net

CROP issued notes to foreign investors outside of the United States. These notes are unsecured and subordinate to all of CROP's debt. Each note has two one-year extension options during which the interest rate will increase 0.25% each additional period.

    Information on our unsecured promissory notes are as follows ($ in thousands):

			Offering Size			Interest Rate			Maturity Date			September 30, 2022			December 31, 2021
2017 6% Notes			$	35,000		6.00%			December 31, 2022			$	20,818		$	20,918
2019 6% Notes			25,000			6.00%			December 31, 2023			22,625			22,625
			$	60,000								$	43,443		$	43,543

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The aggregate maturities, including amortizing principal payments on our debt for years subsequent to September 30, 2022 are as follows (in thousands):

Year						Mortgage Notes and Revolving Credit Facility			Construction Loans			Unsecured Promissory Notes						Total
2022 (1)						$	516		$	37,000		$	20,818					$	58,334
2023 (2)						103,506			36,724			22,625						162,855
2024						1,008			—			—						1,008
2025						3,227			—			—						3,227
2026						143,516			—			—						143,516
Thereafter						750,181			13,914			—						764,095
						$	1,001,954		$	87,638		$	43,443					$	1,133,035
(1) $20.8 million of the amount maturing in 2022 relates to the amount outstanding at September 30, 2022 on our 2017 6% Unsecured Promissory Notes. The maturity date on these notes can be extended for two one-year periods to a fully-extended maturity date of December 31, 2024. An additional $37.0 million of the amount maturing in 2022 relates to the Park Avenue construction loan originally due on November 30, 2022, which was extended on October 4, 2022 to May 30, 2023. We also have the option on the Park Avenue construction loan to further extend the maturity date to November 30, 2023.
(2) $22.6 million of the amount maturing in 2023 relates to the amount outstanding at September 30, 2022 on our 2019 6% Unsecured Promissory Notes. The maturity date on these notes can be extended for two one-year periods to a fully-extended maturity date of December 31, 2025. An additional $47.0 million of the amount maturing in 2023 relates to the amount outstanding at September 30, 2022 on our variable rate revolving credit facility. The maturity date on the variable rate revolving credit facility can be extended for two one-year periods to a fully-extended maturity date of March 19, 2025, subject to the satisfaction of certain conditions.

7.    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 September 30, 2022 and December 31, 2021, 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 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.

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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):

						September 30, 2022												December 31, 2021
						Carrying Value						Fair Value						Carrying Value						Fair Value
Financial Asset:
Investments in real-estate related loans						$	—					$	—					$	13,035					$	13,035
Financial Liability:
Fixed rate mortgages						$	528,824					$	509,085					$	213,009					$	216,566
Floating rate mortgages						$	426,130					$	421,146					$	407,022					$	409,377
Variable rate revolving credit facility						$	47,000					$	47,000					$	20,000					$	20,000
Construction loans						$	87,638					$	87,638					$	116,656					$	116,656
Series 2016 Preferred Stock						$	—					$	—					$	139,996					$	139,996
Series 2017 Preferred Stock						$	—					$	—					$	2,586					$	2,586
Series 2019 Preferred Stock						$	127,175					$	127,175					$	111,863					$	111,863
Unsecured promissory notes						$	43,443					$	43,443					$	43,543					$	43,543

Our investments in real-estate related loans, fixed and floating rate mortgages, variable rate revolving credit facility, construction loans, preferred stock and unsecured promissory notes are categorized as Level 3 in the fair value hierarchy.

8. Preferred Stock

    

Information on our preferred stock as of September 30, 2022 and December 31, 2021 is as follows:

															Shares Outstanding at
			Dividend Rate			Extension Dividend Rate			Redemption Date			Maximum Extension Date			September 30, 2022			December 31, 2021
Series 2016 Preferred Stock (1)			6.5%			7.0%			January 31, 2022			January 31, 2023			—			13,999,560
Series 2017 Preferred Stock (2)			7.5%			8.0%			January 31, 2022			January 31, 2024			—			258,550
Series 2019 Preferred Stock			5.5%			6.0%			December 31, 2023			December 31, 2025			12,717,485			11,186,301
(1) We fully redeemed our Series 2016 Preferred Stock on April 18, 2022 for $139.8 million.
(2) We fully redeemed our Series 2017 Preferred Stock immediately after the January 31, 2022 redemption date for $2.6 million.

The Private Offering for our Series 2019 Preferred Stock was fully subscribed and terminated in March 2022. We issued $15.4 million of our Series 2019 Preferred Stock in the first quarter of 2022 prior to the termination of the Private Offering. During the nine months ended September 30, 2021 we issued $52.5 million of Series 2019 Preferred Stock. During the nine months ended September 30, 2022 and 2021, we incurred $5.2 million and $2.2 million in dividends on our Series 2019 Preferred Stock, respectively. During the nine months ended September 30, 2022, we incurred $2.9 million in dividends on our Series 2016 Preferred Stock prior to their full redemption on April 18, 2022, and we incurred an insignificant amount in dividends on our Series 2017 Preferred Stock prior to their full redemption immediately after the January 31, 2022 redemption date. During the period from the CRII Merger closing on May 7, 2021 to September 30, 2021, we incurred $4.0 million and $0.1 million in dividends on our Series 2016 Preferred Stock and Series 2017 Preferred Stock, respectively.

During the nine months ended September 30, 2022, we repurchased 16,000 shares of Series 2019 Preferred Stock for $0.2 million. Additionally, we fully redeemed our Series 2017 Preferred Stock immediately after the January 31, 2022 redemption date for $2.6 million and we fully redeemed our Series 2016 Preferred Stock on April 18, 2022 for $139.8 million. During the nine months ended September 30, 2021, we repurchased 10,000 shares of Series 2019 Preferred Stock for $0.1 million and during the period from the CRII Merger closing on May 7, 2021 to September 30, 2021 we repurchased 96,490 shares of Series 2016 Preferred Stock for $0.9 million.

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9. Stockholders' Equity

Common Stock

The following table details the movement in the Company's outstanding shares for each class of common stock:

						Nine Months Ended September 30, 2022
						Class T						Class D						Class I						Class A						Class TX						Total
December 31, 2021						—						—						151,286						23,445,174						17,520						23,613,980
Issuance of common stock						4,301,688						7,361						2,948,338						—						—						7,257,387
Distribution reinvestment						5,173						—						3,739						72,090						13						81,015
Exchanges and transfers (1)						—						—						163,325						17,533						(17,533)						163,325
CMOF Merger						—						—						—						4,335,367						—						4,335,367
Repurchases of common stock						(7,761)						—						(30,547)						(753,461)						—						(791,769)
September 30, 2022						4,299,100						7,361						3,236,141						27,116,703						—						34,659,305
(1) Exchanges represent the number of shares OP Unit holders have exchanged for Class I shares during the period. Transfers represent Class TX shares that were converted to Class A shares during the period.

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 nine months ended September 30, 2022, we paid aggregate distributions of $15.4 million, including $13.8 million distributions paid in cash and $1.6 million of distributions reinvested through our distribution reinvestment plan.

We declared the following monthly distributions for each share of our common stock as shown in the table below:

Shareholder Record Date			Monthly Rate			Annually
January 31, 2022			$	0.05833333		$	0.70
February 28, 2022			$	0.05916667		$	0.71
March 31, 2022			$	0.05916667		$	0.71
April 30, 2022			$	0.05916667		$	0.71
May 31, 2022			$	0.06000000		$	0.72
June 30, 2022			$	0.06083333		$	0.73
July 31, 2022			$	0.06083333		$	0.73
August 31, 2022			$	0.06083333		$	0.73
September 30, 2022			$	0.06083333		$	0.73

Repurchases

During the nine months ended September 30, 2022, we repurchased 791,769 shares of common stock pursuant to our share repurchase program for $14.5 million, at an average repurchase price of $18.32. During the nine months ended September 30, 2021, we repurchased 81,524 shares of common stock pursuant to our repurchase program for $0.8 million, at an average price of $10.29. We had no unfulfilled repurchase requests during the nine months ended September 30, 2022.

10.    Related-Party Transactions

Asset Management Fee

Under the amended and restated advisory agreement entered May 7, 2021 and renewed for an additional one-year term as of May 7, 2022, 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 of 0.125% of net asset value of CROP. Prior to May 7, 2021, we paid our advisor an annual asset management fee in an amount equal to 1.25% per annum (paid monthly) of the gross book value of our assets as of the last day of the prior month.

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Asset management fees to our advisor for the three months ended September 30, 2022 and 2021 were $4.6 million and $2.4 million, respectively. Asset management fees to our advisor for the nine months ended September 30, 2022 and 2021 were $12.8 million and $4.7 million, respectively.

Performance Participation Allocation

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 as long as the advisory agreement has not been terminated. Total return is defined as all distributions accrued or paid (without duplication) on the Participating Partnership units (all units in CROP with the exception of preferred units) plus the change in the aggregate net asset value of such Participating Partnership units. Under the Operating Partnership agreement, 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 allocation of the performance participation interest 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.

On January 31, 2022, the performance participation allocation incurred during the period from the CRII Merger closing on May 7, 2021 to December 31, 2021 of $51.8 million was paid in cash. During the three and nine months ended September 30, 2022, we recognized $1.1 million and $31.2 million, respectively, of performance participation expense as a result of the increase in the value of our net assets and dividends paid to stockholders. The Operating Partnership agreement was amended with the CRII Merger in May 2021 to provide for the performance participation allocation. Therefore, no performance participation allocation was recognized prior to the CRII Merger.

Block C and Jasper Investments

On June 28, 2022, we, through our indirect subsidiaries, admitted entities affiliated with us and our advisor, Brickyard QOF, LLC (“Brickyard QOF”) and HV Millcreek, LLC (“Millcreek,” and together with Brickyard QOF, the “Affiliated Members”) as members in CW Block C, LLC, a development joint venture with CMOF, and CW Jasper, LLC, a development project owned 100% by CROP (“Jasper”). 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. In connection with their admission as members, the Affiliated Members made an aggregate capital contribution of $8.5 million and $2.4 million to Block C and Jasper, respectively. The Affiliated Members will participate in the economics of Block C and Jasper on the same terms and conditions as us. The operating agreements of Block C and Jasper were amended in August 2022 to reflect additional terms related to the admission of the Affiliated Members. Block C and Jasper 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 a result of the consummation of the CMOF Merger on September 27, 2022, we acquired CMOF’s joint venture interests in Block C, increasing our ownership interest in Block C to 79.0%.

11.    Noncontrolling Interests

Noncontrolling Interests - Limited Partners

Common Limited OP Units and LTIP Units are CROP units not owned by us and collectively referred to as “Noncontrolling Interests – Limited Partners.”

Common Limited OP Units - During the nine months ended September 30, 2022, we paid aggregate distributions to noncontrolling OP Unit holders of $16.5 million. During the period from the CRII Merger closing on May 7, 2021 to September 30, 2021, we paid aggregate distributions to noncontrolling OP Unit holders of $6.3 million.

LTIP Units - As of September 30, 2022, there were 673,780 unvested time LTIP awards and 548,138 unvested performance LTIP awards outstanding. Share-based compensation was $2.7 million and $1.0 million for the nine months ended September 30, 2022 and 2021, respectively. Total unrecognized compensation expense for LTIP Units at September 30, 2022 is $9.0 million and is expected to be recognized on a straight-line basis through December 2025.

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Noncontrolling Interests - Partially Owned Entities

As of September 30, 2022, noncontrolling interests in consolidated entities not wholly owned by us ranged from 1% to 63%, with the average being 12%.

On June 28, 2022, Block C was recapitalized. We contributed additional funds to obtain a controlling interest and consolidated the Block C joint venture, recording the Block C membership interests owned by CMOF and Affiliated Members at that time as noncontrolling interests. Upon recapitalization, additional noncontrolling interests were recorded with the Affiliated Members contribution to Jasper, an entity that was already consolidated.

With the CMOF Merger on September 27, 2022, we acquired the noncontrolling interest in Broadway, Park Ave, and Block C that were previously owned by CMOF. The remaining portion of Block C not owned by us continues to be recorded as noncontrolling interest.

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 September 30, 2022, 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.

13.    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.

On November 3, 2022, we entered into an agreement to provide $33.4 million of preferred equity for 417 Callowhill, a multifamily development in Philadelphia, Pennsylvania. The preferred equity accrues at a rate of 12.75% per annum, compounded monthly, on the full amount as of the closing date and will be funded as the development progresses.

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