UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
FORM 8-K
____________________
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): June 30, 2021
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Cottonwood Communities, Inc.
(Exact Name of Registrant as Specified in Its Charter)
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| Maryland | 000-56165 | 61-1805524 | ||||||
| (State or other jurisdiction of incorporation) | (Commission file number) | (IRS employer identification number) | ||||||
1245 Brickyard Road, Suite 250
Salt Lake City, Utah 84106
(Address of Principal Executive Offices)
(801) 278-0700
(Registrant’s Telephone Number, Including Area Code)
____________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | ||||
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | ||||
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | ||||
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | ||||
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
| None | N/A | N/A | ||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). ý | ||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ý | ||
Item 8.01 Other Events.
June 30, 2021 NAV Calculation
Cottonwood Communities, Inc. (the “Company,” “CCI,” “we,” “our,” and “us”) is filing this Current Report on Form 8-K in order to disclose its most recent net asset value (“NAV”) per share, as determined in accordance with the Company’s valuation procedures, for each of its classes of common stock.
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 NAV. Pursuant to these valuation procedures, the Company computed a June 30, 2021 NAV per share for its outstanding Class A and Class TX shares of $11.7865. We have no outstanding Class T, Class D or Class I shares as of the date of this report. Until we sell shares of these classes, we will deem the NAV per share of these classes to be the NAV per share of our Class A and Class TX shares.
We expect that generally, within 15 calendar days after the last calendar day of each month, we will determine and disclose our NAV per share for each share class as of the last calendar day of the prior month. This NAV will be posted when available on our website at cottonwoodcommunities.com and in prospectus supplements or a Current Report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”).
Please see our Current Report on Form 8-K/A, filed with the SEC on June 8, 2021 and available on the SEC’s website at www.sec.gov, for a more detailed description of our valuation procedures, 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 procedures, 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 procedures. 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.
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Our total NAV in the following table includes the NAV of our Class A and Class TX common stockholders, as well as the partnership interests of the Operating Partnership held by parties other than us. The following table sets forth the components of NAV for the Company as of June 30, 2021 and May 31, 2021:
| As of | ||||||||
| Components of NAV* | June 30, 2021 | May 31, 2021 | ||||||
| Investments in Multifamily Operating Properties | $ | 1,237,497,351 | $ | 1,207,183,848 | ||||
| Investments in Multifamily Development Properties | 144,410,233 | 140,889,368 | ||||||
| Investments in Real-estate Related Structured Investments | 48,291,828 | 40,502,175 | ||||||
| Operating Company, Land and Other Net Current Assets | 53,980,715 | 31,886,752 | ||||||
| Cash and Cash Equivalents | 8,799,086 | 15,248,784 | ||||||
| Secured Real Estate Financing | (712,186,860) | (710,021,441) | ||||||
| Subordinated Unsecured Notes | (48,643,000) | (48,643,000) | ||||||
| Preferred Equity | (207,175,732) | (199,781,556) | ||||||
| Accrued Performance Participation Allocation | (6,455,087) | (331,142) | ||||||
| Net Asset Value | $ | 518,518,534 | $ | 476,933,787 | ||||
| Fully-diluted Shares/Units Outstanding | 43,992,506 | 43,962,014 | ||||||
| * Presented as adjusted for the Company's 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 June 30, 2021 and May 31, 2021:
| Class | |||||||||||
| A | TX | OP(1) | |||||||||
| As of June 30, 2021 | |||||||||||
| Monthly NAV | $ | 149,038,656 | $ | 206,480 | $ | 369,273,398 | |||||
| Fully-diluted Outstanding Shares/Units | 12,644,840 | 17,518 | 31,330,148 | ||||||||
| NAV per Fully-diluted Share/Unit | $ | 11.7865 | $ | 11.7865 | $ | 11.7865 | |||||
| As of May 31, 2021 | |||||||||||
| Monthly NAV | $ | 137,180,965 | $ | 190,052 | $ | 339,562,771 | |||||
| Fully-diluted Outstanding Shares/Units | 12,644,840 | 17,518 | 31,299,656 | ||||||||
| NAV per Fully-diluted Share/Unit | $ | 10.8488 | $ | 10.8488 | $ | 10.8488 | |||||
(1) Includes the partnership interests of the 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 Valuation Advisor in the discounted cash flow methodology used in the June 30, 2021, valuations of our real property assets, based on property types.
| Discount Rate | Exit Capitalization Rate | ||||||||||
| Operating Assets | 6.21% | 4.82% | |||||||||
| Development Assets | 6.90% | 4.65% | |||||||||
| * Presented as adjusted for the Company's economic ownership percentage in each asset, weighted by gross value. | |||||||||||
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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 | 2.1% | 2.6% | ||||||||
| 0.25% increase | (2.0)% | (2.4)% | |||||||||
| Exit Capitalization Rate | 0.25% decrease | 3.8% | 5.0% | ||||||||
| 0.25% increase | (3.3)% | (4.4)% | |||||||||
| * Presented as adjusted for the Company's economic ownership percentage in each asset. | |||||||||||
Forward-Looking Statements
This Current Report on Form 8-K includes certain statements that are intended to be deemed “forward-looking statements” within the meaning of, and to be covered by the safe harbor provisions contained in, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such forward-looking statements are generally identifiable by the use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” “project,” “continue,” or other similar words or terms. These statements are based on certain assumptions and analyses made in light of our experience and our perception of historical trends, current conditions, expected future developments and other factors we believe are appropriate. Such statements are subject to a number of assumptions, risks and uncertainties that may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by these forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements. Among the factors that may cause results to vary are the impact of COVID-19 on our financial condition and results of operations being more significant than expected, the negative impact of COVID-19 on our tenants being more significant than expected, general economic and business (particularly real estate and capital market) conditions being less favorable than expected, the business opportunities that may be presented to and pursued by us, changes in laws or regulations (including changes to laws governing the taxation of real estate investment trusts (“REITs”)), risk of acquisitions, availability and creditworthiness of prospective tenants, availability of capital (debt and equity), interest rate fluctuations, competition, supply and demand for properties in current and any proposed market areas in which we invest, our tenants’ ability and willingness to pay rent at current or increased levels, accounting principles, policies and guidelines applicable to REITs, environmental, regulatory and/or safety requirements, tenant bankruptcies and defaults, the availability and cost of comprehensive insurance, including coverage for terrorist acts, and other factors, many of which are beyond our control. For a further discussion of these factors and other risk factors that could lead to actual results materially different from those described in the forward-looking statements, see “Risk Factors” under Item 1A of Part 1 of our Annual Report on Form 10-K for the year ended December 31, 2020 and subsequent periodic and current reports filed with the SEC. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of future events, new information or otherwise.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| COTTONWOOD COMMUNITIES, INC. | ||||||||
| By: | /s/ Adam Larson | |||||||
| Name: | Adam Larson | |||||||
| Title: | Chief Financial Officer | |||||||
Date: July 16, 2021
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