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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________________
FORM 10-Q
________________________________

(Mark one)
ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2025

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _________ TO _________
Commission file number: 000-56165
________________________________

cwlogoa06.gif
Cottonwood Communities, Inc.
(Exact name of Registrant as specified in its charter)

________________________________
Maryland61-1805524
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)

1245 E. Brickyard Road, Suite 250, Salt Lake City, UT 84106
(Address of principal executive offices) (Zip code)

(801) 278-0700
(Registrant's telephone number, including area code)
________________________________

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
None N/AN/A

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ☐




Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý  No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filerAccelerated filer
Non-Accelerated filerýSmaller reporting company
Emerging growth company
 
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.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐  No ý

As of May 9, 2025, there were 4,359,982 shares of the registrant’s Class T common stock, 464,701 shares of the registrant's Class D common stock, 6,633,939 shares of the registrant's Class I common stock, and 19,501,626 shares of the registrant’s Class A common stock outstanding.


Table of Contents
Cottonwood Communities, Inc.
Table of Contents
PART I
Item 1.
Item 2.
Item 3.
Item 4.
PART II
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.



Table of Contents
PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Cottonwood Communities, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)
March 31, 2025December 31, 2024
Assets
Real estate assets, net$1,599,242 $1,679,497 
Investments in unconsolidated real estate entities112,355 111,556 
Investments in real estate-related loans, net30,048 30,027 
Cash and cash equivalents52,866 59,877 
Restricted cash28,958 33,560 
Other assets34,766 29,338 
Total assets$1,858,235 $1,943,855 
Liabilities, Equity, and Noncontrolling Interests
Liabilities
Mortgage notes and revolving credit facility, net$1,056,342 $1,151,514 
Construction loans, net44,046 44,046 
Land loans, net19,044  
Preferred stock, net228,560 221,072 
Unsecured promissory notes, net20,690 21,350 
Accounts payable, accrued expenses and other liabilities55,545 60,944 
Total liabilities1,424,227 1,498,926 
Commitments and contingencies (Note 12)
Equity and noncontrolling interests
Stockholders' equity
Series A Convertible Preferred Stock, $0.01 par value, 15,000,000 shares authorized at $10.00 per share; 7,805,421 and 5,825,457 shares issued and outstanding at March 31, 2025 and December 31, 2024, respectively.
68,496 50,668 
Common stock, Class T shares, $0.01 par value, 275,000,000 shares authorized; 4,321,922 and 4,289,506 shares issued and outstanding at March 31, 2025 and December 31, 2024, respectively.
43 43 
Common stock, Class D shares, $0.01 par value, 275,000,000 shares authorized; 425,327 and 386,477 shares issued and outstanding at March 31, 2025 and December 31, 2024, respectively.
4 4 
Common stock, Class I shares, $0.01 par value, 275,000,000 shares authorized; 6,639,434 and 6,162,803 shares issued and outstanding at March 31, 2025 and December 31, 2024, respectively.
66 62 
Common stock, Class A shares, $0.01 par value, 125,000,000 shares authorized; 19,674,086 and 20,358,844 shares issued and outstanding at March 31, 2025 and December 31, 2024, respectively.
190 197 
Additional paid-in capital371,562 372,611 
Accumulated distributions - Series A Convertible Preferred(3,588)(2,255)
Accumulated distributions - common stock(90,445)(84,797)
Accumulated deficit(111,990)(105,717)
Total stockholders' equity234,338 230,816 
Noncontrolling interests
Limited partners172,018 186,032 
Partially owned entities27,652 28,081 
Total noncontrolling interests199,670 214,113 
Total equity and noncontrolling interests434,008 444,929 
Total liabilities, equity and noncontrolling interests$1,858,235 $1,943,855 
See accompanying notes to condensed consolidated financial statements

Note: The condensed consolidated balance sheets as of March 31, 2025 and December 31, 2024 include assets of consolidated variable interest entities, or VIEs of $493.6 million and $498.9 million, respectively, and liabilities of $408.1 million and $409.7 million, respectively. Refer to Note 10 for additional discussion of our VIEs.
1

Table of Contents
Cottonwood Communities, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
(in thousands, except share and per share data)
Three Months Ended March 31,
20252024
Revenues
Rental and other property revenues$37,308 $34,355 
Property management revenues1,792 2,339 
Other revenues1,566 785 
Total revenues40,666 37,479 
Operating expenses
Property operations expense13,582 14,032 
Property management expense4,582 4,578 
Asset management fee3,091 3,144 
Depreciation and amortization14,950 14,954 
General and administrative expenses2,559 1,767 
Impairment loss957  
Total operating expenses39,721 38,475 
 Income (loss) from operations945 (996)
Equity in earnings of unconsolidated real estate entities1,369 1,368 
Interest income334 473 
Interest expense(20,047)(20,418)
Loss on debt extinguishment(98)(1,239)
Gain on sale of real estate assets7,932 26,638 
Gain on legal settlement400  
Other (expense) income(3,974)1,222 
(Loss) income before income taxes(13,139)7,048 
Income tax benefit125 15 
    Net (loss) income(13,014)7,063 
Net loss (income) attributable to noncontrolling interests:
Limited partners6,405 (3,856)
Partially owned entities336 712 
Net (loss) income attributable to controlling interests(6,273)3,919 
Less: preferred stock dividends1,333 143 
Net (loss) income attributable to common stockholders$(7,606)$3,776 
Weighted-average common shares outstanding - basic31,543,589 31,581,072 
Weighted-average common shares outstanding - diluted31,543,589 64,362,720 
Net (losses) earnings per common share - basic$(0.24)$0.12 
Net (losses) earnings per common share - diluted$(0.24)$0.12 
See accompanying notes to condensed consolidated financial statements

2

Table of Contents
Cottonwood Communities, Inc.
Condensed Consolidated Statements of Stockholders' Equity
(Unaudited)
(in thousands)
Cottonwood Communities, Inc. Stockholders' EquityNoncontrolling interests
Series A Convertible Preferred StockPar Value - Common StockAdditional Paid-In CapitalAccumulated DistributionsAccumulated DeficitTotal Stockholders' EquityLimited PartnersPartially Owned EntitiesTotal Equity and Noncontrolling Interests
Class TClass DClass IClass AConvertible PreferredCommon Stock
Balance at January 1, 2025$50,668 $43 $4 $62 $197 $372,611 $(2,255)$(84,797)$(105,717)$230,816 $186,032 $28,081 $444,929 
Issuance of Series A Convertible Preferred Stock19,899 — — — — — — — — 19,899 — — 19,899 
Offering Costs - Series A Convertible Preferred Stock(1,621)— — — — — — — — (1,621)— — (1,621)
Series A Convertible Preferred Stock repurchased(450)— — — — — — — — (450)— — (450)
Issuance of common stock— 1 — 5 — 7,660 — — — 7,666 — — 7,666 
Offering costs - common stock— — — — — (489)— — — (489)— — (489)
Distribution reinvestment— — — — — 871 — — — 871 — — 871 
Common stock/CROP Units repurchased— (1)— (2)(7)(11,758)— — — (11,768)(90)— (11,858)
Exchanges and transfers— — — 1 — 1,792 — — — 1,793 (1,793)—  
Share-based compensation— — — — — 93 — — — 93 949 — 1,042 
Distributions to investors— — — — — — (1,333)(5,648)— (6,981)(5,893)(93)(12,967)
Net loss— — — — — — — — (6,273)(6,273)(6,405)(336)(13,014)
Reallocation of stockholders' equity and noncontrolling interests— — — — — 782 — — — 782 (782)—  
Balance at March 31, 2025$68,496 $43 $4 $66 $190 $371,562 $(3,588)$(90,445)$(111,990)$234,338 $172,018 $27,652 $434,008 




















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Cottonwood Communities, Inc.
Condensed Consolidated Statements of Stockholders' Equity (Continued)
(Unaudited)
(in thousands)
Cottonwood Communities, Inc. Stockholders' EquityNoncontrolling interests
Series A Convertible Preferred StockPar Value - Common StockAdditional Paid-In CapitalAccumulated DistributionsAccumulated DeficitTotal Stockholders' EquityLimited PartnersPartially Owned EntitiesTotal Equity and Noncontrolling Interests
Class TClass DClass IClass AConvertible PreferredCommon Stock
Balance at January 1, 2024$1,569 $39 $2 $43 $226 $373,954 $(14)$(62,114)$(94,761)$218,944 $221,617 $30,986 $471,547 
Issuance of Series A Convertible Preferred Stock13,608 — — — — — — — — 13,608 — — 13,608 
Offering Costs - Series A Convertible Preferred Stock(1,713)— — — — — — — — (1,713)— — (1,713)
Issuance of common stock— 1 — 3 — 5,976 — — — 5,980 — — 5,980 
Offering costs - common stock— — — — — (88)— — — (88)— — (88)
Distribution reinvestment— — — — — 724 — — — 724 — — 724 
Common stock/CROP Units repurchased— (1)— (1)(7)(12,575)— — — (12,584)(1,968)— (14,552)
Exchanges and transfers— — — 1 — 612 — — — 613 (613)—  
OP Units issued for real estate interests— — — — — — — — — — 3,322 — 3,322 
Share-based compensation— — — — — 53 — — — 53 929 — 982 
Distributions to investors— — — — — — (143)(5,656)— (5,799)(5,887)(39)(11,725)
Net income (loss)— — — — — — — — 3,919 3,919 3,856 (712)7,063 
Reallocation of stockholders' equity and noncontrolling interests— — — — — 1,914 — — — 1,914 (1,914)—  
Balance at March 31, 2024$13,464 $39 $2 $46 $219 $370,570 $(157)$(67,770)$(90,842)$225,571 $219,342 $30,235 $475,148 
See accompanying notes to condensed consolidated financial statements
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Cottonwood Communities, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
Three Months Ended March 31,
20252024
Cash flows from operating activities:
Net (loss) income$(13,014)$7,063 
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Depreciation and amortization14,950 14,954 
Gain on sale of real estate assets(7,932)(26,638)
Gain on legal settlement(400) 
Share-based compensation1,042 982 
Deferred taxes(126) 
Amortization of debt issuance costs, discounts and premiums1,881 1,413 
Derivative fair value adjustments690 (78)
Loss on debt extinguishment98 1,239 
Impairment loss957  
Other operating(46)(104)
Equity in earnings of unconsolidated real estate entities(1,369)(1,368)
Distributions from unconsolidated real estate entities - return on capital570 695 
Changes in operating assets and liabilities:
Other assets474 (2,295)
Accounts payable, accrued expenses and other liabilities(3,238)3,051 
Net cash used in operating activities(5,463)(1,086)
Cash flows from investing activities:
Cash acquired on consolidation of real estate 2,167 
Proceeds from sale of real estate assets, net83,414 82,434 
Promissory note to buyer of real estate assets(7,000) 
Capital expenditures and development activities(12,931)(13,183)
Investments in unconsolidated real estate entities (1,314)
Contributions to investments in real estate-related loans(27)(3,399)
Net cash provided by investing activities63,456 66,705 
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Cottonwood Communities, Inc.
Condensed Consolidated Statements of Cash Flows (Continued)
(Unaudited)
(in thousands)
Three Months Ended March 31,
20252024
Cash flows from financing activities:
Principal payments on mortgage notes(119)(115)
Borrowings from revolving credit facility 28,600 
Repayments on revolving credit facility(50,000)(35,000)
Repayments of mortgage notes(46,072)(48,458)
Borrowings from construction loans 7,138 
Borrowings under land loans19,240  
Deferred financing costs on land loans(222) 
Repayments of related party notes assumed on acquisition (1,332)
Proceeds from issuance of preferred stock8,013 6,877 
Redemption of preferred stock(619)(1,839)
Offering costs paid on issuance of preferred stock(893)(888)
Repurchase of unsecured promissory notes(643)(755)
Proceeds from issuance of Series A Convertible Preferred Stock19,652 13,008 
Offering costs paid on issuance of Series A Convertible Preferred Stock(1,639)(1,647)
Repurchase of Series A Convertible Preferred Stock(450) 
Proceeds from issuance of common stock7,666 5,980 
Repurchase of common stock/CROP Units(11,043)(20,234)
Offering costs paid on issuance of common stock(518)(557)
Distributions to convertible preferred stockholders(1,193)(70)
Distributions to common stockholders(4,778)(4,976)
Distributions to noncontrolling interests - limited partners(5,894)(5,854)
Distributions to noncontrolling interests - partially owned entities(94)(39)
Net cash used in financing activities(69,606)(60,161)
Net (decrease) increase in cash and cash equivalents and restricted cash(11,613)5,458 
Cash and cash equivalents and restricted cash, beginning of period93,437 90,813 
Cash and cash equivalents and restricted cash, end of period$81,824 $96,271 
Reconciliation of cash and cash equivalents and restricted cash to the condensed consolidated balance sheets:
Cash and cash equivalents$52,866 $72,162 
Restricted cash28,958 24,109 
Total cash and cash equivalents and restricted cash$81,824 $96,271 
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Cottonwood Communities, Inc.
Condensed Consolidated Statements of Cash Flows (Continued)
(Unaudited)
(in thousands)
Three Months Ended March 31,
20252024
Supplemental disclosure of non-cash investing and financing activities:
Changes in accrued deferred offering costs$(43)$(423)
Distributions reinvested in common stock871 724 
Changes in accrued capital expenditures(2,233)(6,240)
Paid-in-kind interest related to construction 1,083 
Changes in accrued redemptions370 (5,656)
Cottonwood Lighthouse Point Acquisition
Real estate assets, net of cash acquired$ $86,961 
Mortgage note assumed (47,581)
Other assets and liabilities assumed, net (2,426)
Value of CROP Units issued for interests acquired 3,322 
See accompanying notes to condensed consolidated financial statements
7

Cottonwood Communities, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)

1.Organization and Business
Cottonwood Communities, Inc. (the “Company,” “we,” “us,” or “our”) invests in a diverse portfolio of multifamily apartment communities and multifamily real estate-related assets throughout the United States. We are externally managed by our advisor, CC Advisors III, LLC (“CC Advisors III”), a wholly owned subsidiary of our sponsor, Cottonwood Communities Advisors, LLC (“CCA”). We were incorporated in Maryland in 2016. We own all of our assets through our operating partnership, Cottonwood Residential O.P., LP (“CROP”), and its subsidiaries. We are the sole member of the sole general partner of CROP and own general partner interests in CROP alongside third-party limited partners.

We are a non-listed, perpetual-life, net asset value (“NAV”) real estate investment trust (“REIT”). We generally will not be subject to U.S. federal income taxes on our taxable income to the extent we annually distribute all of our net taxable income to stockholders and maintain our qualification as a REIT.

We conducted an initial public offering of common stock (the “Initial Offering”) from August 13, 2018 to December 22, 2020, from which we raised gross proceeds of $122.0 million. In November 2021, we registered with the SEC an offering of up to $1.0 billion of shares of common stock (the “Follow-on Offering”), consisting of up to $900.0 million in shares of common stock offered in a primary offering (the “Primary Offering”) and $100.0 million in shares under our distribution reinvestment plan (the “DRP Offering”). As of March 31, 2025, we have raised gross proceeds of $250.1 million from the Follow-on Offering, including $8.8 million proceeds from the DRP Offering. We intend to conduct a continuous public offering of our common stock that will not have a predetermined duration, subject to continued compliance with the rules and regulations of the SEC and applicable state laws.

Since November 2019, we have periodically conducted private placement offerings exempt from registration under the Securities Act pursuant to which we have offered for sale to accredited investors preferred stock at a purchase price of $10.00 per share of preferred stock (the “Private Offerings”). As of March 31, 2025, we have raised gross proceeds of $322.7 million from the Private Offerings. Additional information about our preferred stock is included in Note 7 and Note 8 to these financial statements.

We own and operate a diverse portfolio of investments in multifamily apartment communities located in targeted markets throughout the United States. As of March 31, 2025, our portfolio consists of ownership interests or structured investment interests in 33 multifamily apartment communities with a total of 9,329 units, including 198 units in one multifamily apartment community under construction and another 1,080 units in four multifamily apartment communities in which we have a structured investment interest. In addition, we have an ownership interest in four land sites. We operate as one reportable segment comprising of multifamily real estate.

2.    Summary of Significant Accounting Policies
Basis of Presentation
The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. The condensed consolidated financial statements, including the condensed notes thereto, are unaudited and exclude some of the disclosures required in audited financial statements. The condensed consolidated balance sheet as of December 31, 2024 has been derived from our audited financial statements as of that date, but does not include all of the information and footnotes required by GAAP for complete financial statements.

In the opinion of management, the accompanying condensed consolidated financial statements contain all adjustments and eliminations, consisting only of normal recurring adjustments necessary for a fair presentation in conformity with GAAP. The accompanying condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in our Annual Report on Form 10-K for the period ending December 31, 2024 filed with the SEC. As our comprehensive income is equivalent to net income, our accompanying condensed consolidated financial statements do not include a Statement of Other Comprehensive Income.

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

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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.

Debt Modifications

Our Series 2025 Preferred Stock is being offered for (i) cash at a purchase price of $10.00 per share or (ii) in exchange for existing Series 2019 Preferred Stock or Series 2023 Preferred Stock (“Series 2025 Preferred Stock Exchanges”). Series 2025 Preferred Stock are classified as liabilities on the condensed consolidated balance sheets as they are mandatorily redeemable on a fixed date for a fixed amount.

Series 2025 Preferred Stock Exchanges are accounted as debt modifications in accordance with Accounting Standards Codification Subtopic No. 470-50, Debt—Modifications and Extinguishments, as the present value of cash flows from the newly issued Series 2025 Preferred Stock are not substantially different from Series 2019 Preferred Stock or Series 2023 Preferred Stock that are exchanged.

Under debt modification accounting, selling commissions and expenses, legal and other third-party costs in connection with Series 2025 Preferred Stock Exchanges are expensed as incurred. They are included in other expenses on the condensed consolidated statements of operations and as an operating activity on the condensed consolidated statements of cash flows.

3.    Real Estate Assets, Net
The following table summarizes the carrying amounts of our consolidated real estate assets ($ in thousands):

March 31, 2025December 31, 2024
Land$254,289 $265,635 
Buildings and improvements1,394,663 1,459,787 
Furniture, fixtures and equipment65,652 67,131 
Intangible assets37,782 37,782 
Construction in progress (1)
54,955 46,965 
1,807,341 1,877,300 
Less: Accumulated depreciation and amortization(208,099)(197,803)
Real estate assets, net$1,599,242 $1,679,497 
(1) Includes construction in progress for our development projects and capitalized costs for improvements not yet placed in service at our stabilized properties.

Dispositions

Sale of Cottonwood Broadway

On February 28, 2025, we sold Cottonwood Broadway for net proceeds of $41.0 million after repayment of associated mortgage debt. We recorded a net gain on sale of $7.9 million. As part of the sale, we provided a 10-year, $7.0 million unsecured promissory note to the buyer. The note bears an interest rate of 6.78%. The promissory note can be prepaid anytime with the first payment due on 25th month of the loan. The promissory note is included in other assets on the condensed consolidated balance sheet at March 31, 2025.

Sale of Parc Westborough

On March 28, 2025, we entered into a contract to sell Parc Westborough for $96.2 million. On May 14, 2025, we sold Parc Westborough for net proceeds of $54.6 million after repayment of the entire drawn balance on the revolving credit facility. We expect to recognize a gain on sale during the three months ended June 30, 2025.
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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 March 31, 2025 and December 31, 2024 ($ in thousands):

Balance at
Property / DevelopmentLocation% OwnedMarch 31, 2025December 31, 2024
Stabilized Properties
Cottonwood Bayview (1)
St. Petersburg, FL71.0%$9,947 $10,314 
Toscana at Valley Ridge (1)
Lewisville, TX58.6%5,988 6,036 
Fox Point (1)
Salt Lake City, UT52.8%12,424 12,570 
The Marq Highland Park (1)
Tampa, FL74.1%21,549 22,265 
Preferred Equity Investments
417 Callowhill (2)
Philadelphia, PA46,168 44,733 
Infield (2)
Kissimmee, FL16,048 15,408 
Other231 230 
Total$112,355 $111,556 
(1) We account for our tenant in common interests in these properties as equity method investments.
(2) As of March 31, 2025, we have fully funded our commitments on both 417 Callowhill and Infield. As disclosed in Note 15, we committed and contributed additional funding to our Infield preferred equity investment subsequent to March 31, 2025.

Equity in losses for our stabilized properties for the three months ended March 31, 2025 and 2024 were $0.7 million and $1.5 million, respectively.

Our preferred equity investments, which are in development projects, have liquidation rights and priorities that are different from ownership percentages. As such, equity in earnings is determined using the hypothetical liquidation book value method. Equity in earnings for our preferred equity investments for the three months ended March 31, 2025 and 2024 were $2.1 million and $2.9 million, respectively.

5.    Debt
Mortgage Notes and Revolving Credit Facility

The following table is a summary of the mortgage notes and revolving credit facility secured by our properties as of March 31, 2025 and December 31, 2024 ($ in thousands):
Principal Balance Outstanding
IndebtednessWeighted-Average Interest Rate
Weighted-Average Remaining Term (1)
March 31, 2025December 31, 2024
Fixed rate loans
Fixed rate mortgages4.45%
3.9 Years
$807,937 $808,056 
Total fixed rate loans807,937 808,056 
Variable rate loans (2)
Floating rate mortgages
     6.15% (3)
4.7 Years
227,344 273,416 
Variable rate revolving credit facility6.92%
2.7 Years
29,250 79,250 
Total variable rate loans256,594 352,666 
Total secured loans1,064,531 1,160,722 
Unamortized debt issuance costs and discounts(3,392)(4,220)
Premium on assumed debt, net(4,797)(4,988)
Mortgage notes and revolving credit facility, net$1,056,342 $1,151,514 
(1) For loans where we have the ability to exercise extension options at our own discretion, the maximum maturity date has been assumed, subject to certain debt service coverage ratio, loan to cost or debt yield requirements.
(2) The interest rates of our variable rate loans are based on 30-Day Average SOFR or one-month SOFR (CME Term). The variable rate mortgages as of March 31, 2025 no longer include the related debt for Cottonwood Broadway, which was sold in February 2025.
(3) Includes the impact of interest rate caps in effect on March 31, 2025.
As of March 31, 2025, our $100.0 million variable rate revolving credit facility was secured by Parc Westborough and
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Alpha Mill, with the amount available to draw subject to a cap as certain loan-to-value ratios and other requirements. As of March 31, 2025, the amount on our variable rate revolving credit facility was capped at $80.8 million primarily due to the interest rate environment and the applicable debt-service coverage ratio. With the sale of Parc Westborough in May 2025, all advances on the credit facility were paid off and the capacity on the credit facility was reduced to $34.7 million.

We are in compliance with all covenants associated with our mortgage notes and revolving credit facility as of March 31, 2025.

Construction Loans

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

DevelopmentInterest RateFinal Expiration DateLoan AmountAmount Drawn at March 31, 2025Amount Drawn at December 31, 2024
Cottonwood Highland
30-Day Average SOFR + 2.55%
May 1, 2029$44,250 $44,046 $44,046 
The Westerly (1)
One-Month SOFR + 3.0%
July 12, 202842,000   
$86,250 $44,046 $44,046 
(1) In July 2023, we entered into a construction loan agreement for The Westerly, a development project in Millcreek, UT. Construction is expected to be completed in 2026. No amounts have been drawn on the construction loan as of March 31, 2025.

Land Loans

Information on our land loans is as follows ($ in thousands):

Principal Balance Outstanding
DevelopmentInterest RateMaturity DateMarch 31, 2025December 31, 2024
Galleria (1)
One-Month SOFR + 3.0%
February 25, 2026$14,500 $ 
3300 Cottonwood (2)
7.29%January 22, 20264,740  
Total land loans19,240  
Unamortized debt issuance costs(196) 
Land loans, net$19,044 $ 
(1) On February 25, 2025, we closed on a $14.5 million floating rate loan on Galleria, a parcel of land held for development, receiving net proceeds of $14.3 million. The loan is interest only until maturity and can be extended for six months, subject to a 25% reduction of the principal balance.
(2) On January 22, 2025, we closed on a $4.74 million fixed rate loan on 3300 Cottonwood, a parcel of land held for development, receiving net proceeds of $4.69 million. The loan is interest only until maturity and can be extended for one twelve month period.

Unsecured Promissory Notes, Net

We have issued unsecured promissory notes to investors outside of the United States. These notes are subordinate to all of CROP's debt. Information on our unsecured promissory notes are as follows ($ in thousands):
Principal Balance Outstanding
Offering SizeInterest Rate
Maturity Date (1)
March 31, 2025December 31, 2024
2019 6% Notes (1)
$25,000 6.50%December 31, 2025$20,690 $21,350 
(1) We intend to repay these notes in cash by December 31, 2025 with proceeds from the sale of real estate assets, cash on hand and available capacity on our revolving credit facility. We project these actions will provide sufficient liquidity to satisfy the repayment of these notes on maturity.
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The aggregate maturities, including amortizing principal payments on our debt for years subsequent to March 31, 2025 are as follows ($ in thousands):

YearMortgage Notes and Revolving Credit FacilityConstruction LoansLand LoansUnsecured
Promissory Notes
Total
2025 (1)
$61,137 $ $ $20,690 $81,827 
2026122,010  19,240  141,250 
2027363,868    363,868 
202872,167    72,167 
20291,815 44,046   45,861 
Thereafter443,534    443,534 
$1,064,531 $44,046 $19,240 $20,690 $1,148,507 
(1) Of the amounts maturing in 2025, $20.7 million relates to our 2019 6% Unsecured Promissory Notes and $60.2 million relates to our 805 Riverfront bridge loan, which we intend to refinance or convert to a permanent loan prior to or upon maturity. The 805 Riverfront bridge loan may be extended to June 2026.

6.    Fair Value of Financial Instruments
We estimate the fair value of our financial instruments using available market information and valuation methodologies we believe to be appropriate. As of March 31, 2025 and December 31, 2024, the fair values of cash and cash equivalents, restricted cash, other assets, related party payables, and accounts payable, accrued expenses and other liabilities approximate their carrying values due to the short-term nature of these instruments.

Fair value measurements are determined based on the assumptions that market participants would use in pricing the asset or liability. Fair value measurements are categorized into one of three levels of the fair value hierarchy based on the lowest level of significant input used. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers 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):

March 31, 2025December 31, 2024
Carrying ValueFair ValueCarrying ValueFair Value
Financial Asset:
Investments in real estate-related loans$30,048 $30,195 $30,027 $30,195 
Unsecured promissory note7,000 7,000   
Total$37,048 $37,195 $30,027 $30,195 
Financial Liability:
Fixed rate mortgages$807,937 $792,649 $808,056 $787,680 
Floating rate mortgages227,344 227,642 273,416 273,301 
Variable rate revolving credit facility29,250 29,250 79,250 79,250 
Construction loans44,046 44,046 44,046 44,046 
Land loans19,240 19,240   
Series 2019 Preferred Stock87,512 87,512 120,119 120,119 
Series 2023 Preferred Stock106,987 106,987 107,277 107,277 
Series 2023-A Preferred Stock2,950 2,950 2,950 2,950 
Series 2025 Preferred Stock40,472 40,472   
Unsecured promissory notes, net20,690 20,690 21,350 21,350 
Total$1,386,428 $1,371,438 $1,456,464 $1,435,973 

All financial instruments in the table above are categorized as Level 2 in the fair value hierarchy.

7.    Preferred Stock

We have four classes of preferred stock outstanding as of March 31, 2025: Series 2019, Series 2023, Series 2023-A and Series 2025 that are accounted for as liabilities on the condensed consolidated balance sheets as they are mandatorily redeemable. Information on these classes of preferred stock as of March 31, 2025 and December 31, 2024 is as follows ($ in thousands):

Shares Outstanding at
Current Dividend RateRedemption DateMaximum Extension DateMarch 31, 2025December 31, 2024
Series 2019 Preferred Stock (1)
6.0%December 31, 2025December 31, 20258,751,135 12,011,899 
Series 2023 Preferred Stock (1)
     6.0% (2)
June 30, 2027June 30, 202910,698,738 10,727,658 
Series 2023-A Preferred Stock7.0%December 31, 2027N/A295,000 295,000 
Series 2025 Preferred Stock (1)
     6.5% (3)
December 31, 2028December 31, 20304,047,210  
Total
23,792,083 23,034,557 
\
(1) During the three months ended March 31, 2025, we exchanged 3,249,634 and 22,000 shares of Series 2019 and Series 2023, respectively, for Series 2025 Preferred Stock.
(2) The first-year extension dividend rate, applicable from July 1, 2027 to June 30, 2028, is 6.25%. The fully extended divided rate, applicable from July 1, 2028 to June 30, 2028, is 6.5%.
(3) The first-year extension dividend rate, applicable from January 1, 2029 to December 31, 2029, is 6.75%. The fully extended divided rate, applicable from January 1, 2030 to December 31, 2030, is 7.0%.
March 31, 2025December 31, 2024
Preferred stock outstanding
$237,921 $230,346 
Unamortized offering costs and discounts(9,361)(9,274)
Preferred stock, net$228,560 $221,072 
All offerings of preferred stock listed above have terminated other than the Series 2025 Preferred Stock offering, which remains ongoing. Shares of Series 2025 Preferred Stock were first issued in January 2025. During the three months ended March 31, 2025, we issued $40.5 million of Series 2025 Preferred Stock, of which $32.9 million was issued through Series 2025 Preferred Stock Exchanges and $7.6 million was issued for cash. Selling commissions and expenses, legal and
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other third-party costs of $3.1 million for Series 2025 Preferred Stock Exchanges were expensed under debt modification accounting.

We are required to redeem for cash all outstanding Series 2019 Preferred Stock that has not been exchanged for Series 2025 Preferred Stock on or before December 31, 2025 at a price of $10.00 per share. As of May 9, 2025, 6,664,781 shares of Series 2019 Preferred Stock had not been exchanged and remain outstanding. Series 2025 Preferred Stock Exchanges may occur through the exchange offering period, which ends June 30, 2025 and can be extended upon approval of the board of directors.

Management intends to pay this obligation with proceeds from the sale of real estate assets, including Parc Westborough (Refer to Note 3), cash on hand and available capacity on our revolving credit facility. We project these actions will provide sufficient liquidity to satisfy the redemption of Series 2019 Preferred Stock on maturity.

Preferred Stock Dividends

Dividends on preferred stock accounted for as liabilities are recorded through interest expense in the condensed consolidated statements of operations. The following table summarizes our dividend activity for the three months ended March 31, 2025 and 2024 ($ in thousands):
Three Months Ended March 31,
20252024
Series 2019 Preferred Stock$1,564 $1,839 
Series 2023 Preferred Stock1,586 1,297 
Series 2023-A Preferred Stock51 51 
Series 2025 Preferred Stock275  
Total
$3,476 $3,187 

Preferred Stock Repurchases

The following table summarizes our repurchase activity for the three months ended March 31, 2025 and 2024 ($ in thousands):
Three Months Ended March 31,
20252024
Number of shares Aggregate dollar amountNumber of sharesAggregate dollar amount
Series 2019 Preferred Stock11,130$106 217,700$2,108 
Series 2023 Preferred Stock6,92062   
Total
18,050$168 217,700$2,108 

8.    Stockholders' Equity
Convertible Preferred Stock

As of March 31, 2025, there were 7,805,421 shares of Convertible Preferred Stock issued and outstanding. For the three months ended March 31, 2025, we paid aggregate dividends on our Convertible Preferred Stock of $1.2 million.

During the three months ended March 31, 2025, we repurchased 50,000 shares of Convertible Preferred Stock for $0.5 million at a repurchase price of $9.00. We had no unfulfilled repurchase requests during the three months ended March 31, 2025.
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Common Stock

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

Three Months Ended March 31, 2025
Class TClass DClass IClass ATotal
December 31, 20244,289,506 386,477 6,162,803 20,358,844 31,197,630 
Issuance of common stock116,994 39,344 485,453  641,791 
Distribution reinvestment20,878 2,541 18,288 30,536 72,243 
Exchanges and transfers (1)
  147,400  147,400 
Repurchases of common stock(105,456)(3,035)(174,510)(715,294)(998,295)
March 31, 20254,321,922 425,327 6,639,434 19,674,086 31,060,769 
(1) Exchanges represent the number of shares CROP Unit holders have exchanged for Class I shares during the period. Transfers represent Class T shares that were converted to Class I shares during the period, of which there were none during the three months ended March 31, 2025.

Common Stock Distributions

Distributions on our common stock are determined by the board of directors based on our financial condition and other relevant factors. Common stockholders may choose to receive cash distributions or purchase additional shares through our distribution reinvestment plan. For the three months ended March 31, 2025, we paid aggregate distributions of $5.6 million, including $0.9 million of distributions reinvested through our distribution reinvestment plan.

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

Shareholder Record DateMonthly RateAnnually
January 31, 2025$0.06083333 $0.73 
February 28, 2025$0.06083333 $0.73 
March 31, 2025$0.06083333 $0.73 

The net distribution varies for each class of our common stock based on the applicable distribution fee, which is deducted from the gross distribution per share and paid to the dealer manager for the Follow-on Offering and reallowed to participating broker-dealers and servicing broker-dealers.

Common Stock Repurchases

During the three months ended March 31, 2025, we repurchased 998,295 shares of common stock pursuant to our share repurchase program for $11.8 million, at an average repurchase price of $11.79. We had no unfulfilled repurchase requests during the three months ended March 31, 2025.

9.    Related-Party Transactions

Advisor Compensation

CC Advisors III manages our business as our external advisor and, under the terms of our advisory agreement, performs certain services for us, including the identification, evaluation, negotiation, origination, acquisition and disposition of investments; and the management of our business. These activities are all subject to oversight by our board of directors. Our advisor is entitled to receive fees and compensation for services provided as described below.

Management Fee. CROP pays our advisor a monthly management fee equal to 0.0625% of GAV (gross asset value of CROP, calculated pursuant to our valuation guidelines and reflective of the ownership interest held by CROP in such gross assets), subject to a cap. The cap is equal to 0.125% of “adjusted net asset value” of CROP, which is defined to include the value attributable to preferred stock that is convertible into common equity in the calculation of net asset value of CROP.

Management fees to our advisor for the three months ended March 31, 2025 and 2024 were $3.1 million and $3.1 million, respectively.

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Acquisition Expense Reimbursement. We will reimburse our advisor for out-of-pocket expenses in connection with the selection, evaluation, structuring, acquisition, financing and development of investments, whether or not such investments are acquired, and make payments to third parties or possibly certain of our advisor’s affiliates in connection with providing services to us. There were no acquisition expense reimbursements for the three months ended March 31, 2025 and 2024.

Performance Participation Allocation. In addition to the fees paid to our advisor for services provided pursuant to our advisory agreement, CC Advisors - SLP, LLC, an affiliate of our advisor and the Special Limited Partner at CROP, holds a performance participation interest in CROP that entitles it to receive an allocation of CROP's total return to its capital account. The performance participation allocation is an incentive fee indirectly paid to our advisor and receipt of the allocation is subject to the ongoing effectiveness of the advisory agreement. As the performance participation allocation is associated with the performance of a service by the advisor, it is expensed in our condensed consolidated statements of operations.

Total return is defined as all distributions accrued or paid (without duplication) on Participating Partnership units (all units in CROP with the exception of preferred units and the Special Limited Partner Interest) plus the change in the aggregate net asset value of such Participating Partnership units. The annual total return will be allocated solely to the Special Limited Partner only after the other unit holders have received a total return of 5% (after recouping any loss carryforward amount) and such allocation will continue until the allocation between the Special Limited Partner and all other unit holders is equal to 12.5% and 87.5%, respectively. Thereafter, the Special Limited Partner will receive an allocation of 12.5% of the annual total return. The performance participation allocation is ultimately determined at the end of each calendar year, accrues monthly and will be paid in cash or Class I units at the election of the Special Limited Partner after the completion of each calendar year.

Due to the decrease in the value of our net assets, no performance participation allocation was incurred during the three months ended March 31, 2025 or during 2024.

Block C

We, through our indirect subsidiaries, have a joint venture investment in Block C for the purpose of developing three multifamily development projects near Salt Lake City, Utah: The Westerly, Millcreek North and The Archer. As of March 31, 2025, entities affiliated with us and our advisor (the “Affiliated Members”) have made aggregate capital contributions of $10.9 million towards the joint venture. The Affiliated Members are owned directly or indirectly by our officers or directors, as well as certain employees of CROP and our advisor or its affiliates. The Affiliated Members participate in the economics of Block C on the same terms and conditions as us. The development projects are located in an Opportunity Zone, which provides tax benefits for development programs located in designated areas as established by Congress in the Tax Cuts and Jobs Act of 2017. As of March 31, 2025, our ownership in the Block C joint venture was 82.4%. On January 31, 2025, we entered into a contract to sell The Archer to an unrelated party for $3.0 million. This transaction is expected to close in the third quarter of 2025. During the three months ended March 31, 2025, we recognized an impairment loss of $1.0 million on this development project.

Assumption of Related Party Notes and Interest

On March 28, 2024, we acquired all of the outstanding tenant in common interests in Cottonwood Lighthouse Point from an unaffiliated third-party. As part of the transaction, we assumed $1.3 million of notes and accrued interest held by an affiliate of the seller of the tenant in common interests in favor, directly and indirectly, of nine of our executive officers. Subsequent to the transaction, we paid the amount outstanding under the notes to the executive officers.

APT Cowork, LLC

APT Cowork, LLC (“APT”) engages in the business of converting underutilized and unused common space in multifamily apartment communities or retail space to revenue producing co-working space. Our officers and directors own 93.14% of APT through direct or indirect ownership interests. We and several of our properties have entered into agreements with APT as described below.

Reimbursement and Cost Sharing Agreement. Under the Reimbursement and Cost Sharing Agreement, we make certain employees available to APT. In exchange, APT reimburses us its allocable share of all direct and indirect costs related to the employees utilized by APT, subject to an annual limit of $120,000.

Coworking Space Design Agreement. Under the Coworking Space Design Agreement, APT may advise, design and upgrade common areas at our multifamily properties. In exchange, our properties pay APT a one-time fee of $60,000, which may increase to $75,000.
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Services Agreement. Under the Services Agreement, APT provides ongoing administration services in exchange for a service fee paid by the property (the “Service Fee”). Effective September 1, 2024, the Service Fee was reduced from $10.00 per apartment unit per month to $5.00 per occupied unit per month for any unit not covered under the license agreement as discussed below. Under the agreement, APT will pay us 50% of coworking revenue it receives at the properties from non-residents. Each of our properties with Services Agreements must also have a Coworking Space Design Agreement with APT.

The following are the fees paid or incurred to APT under these agreements for the periods presented ($ in thousands):

Three Months Ended March 31,
20252024
Reimbursement and Cost Sharing Agreement$7 $ 
Coworking Space Design Agreement35 185 
Services Agreement, net revenue share45 106 

APT is transitioning its services from a coworking agreement to a license agreement based on occupied units instead of total units. Effective September 1, 2024, the Services Agreement was amended to reduce the Service Fee and provide that the services agreement will terminate upon the earlier of (i) the unit-by-unit transition resulting in no additional units receiving payment under the coworking agreement; and (ii) September 30, 2025. Under the license agreement, new leases and renewal of existing leases with our residents will have the Service Fee charged directly to them and remitted to APT.

10.    Variable Interest Entities

A VIE is a legal entity in which the equity investors at risk lack sufficient equity to finance the entity’s activities without additional subordinated financial support or, as a group, the equity investors at risk lack: the power to direct the entity’s activities, the obligation to absorb the entity’s expected losses or the right to receive the entity’s expected residual returns. Qualitative and quantitative factors are considered in determining whether we are the primary beneficiary of a VIE, including, but not limited to, which activities most significantly impact economic performance, which party controls such activities, the amount and characteristics of our investments, the obligation or likelihood for us or other investors to provide financial support, and the management relationship of the property.

CROP is a VIE as the limited partners lack substantive kick-out rights and substantive participating rights. We are the primary beneficiary of CROP as we have the power to direct the activities that most significantly impact economic performance and the rights to receive economic benefits. Substantially all of our assets and liabilities are held in CROP.

As of both March 31, 2025 and December 31, 2024, we had eight consolidated properties not wholly owned by us that are VIEs. As with our wholly owned properties, the debt is collateralized by the real estate for each respective property and assets can only be used to settle obligations of each respective VIE. With exception of Cottonwood Highland, a recently completed development, creditors of consolidated VIEs do not have recourse to our general credit. We have a payment guarantee to cover a specified percent of the Cottonwood Highland loan during the lease up and stabilization periods. As of March 31, 2025, the payment guarantee was 25%. This guarantee will be extinguished as milestone debt coverage ratios and occupancy rates are achieved.

In cases where we become the primary beneficiary of a VIE, we recognize a gain or loss for the difference between the sum of (1) the fair value of any consideration paid, the fair value of the noncontrolling interest, and the reported amount of our equity method investment and (2) the net fair value of identifiable assets and liabilities of the VIE.

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The following table details the assets and liabilities of our consolidated VIEs ($ in thousands):

March 31, 2025December 31, 2024
Assets:
Real estate assets, net$478,987 $482,871 
Cash and cash equivalents6,251 5,257 
Restricted cash6,950 8,447 
Other assets1,367 2,347 
Total assets$493,555 $498,922 
Liabilities:
Mortgage notes and revolving credit facility, net$354,935 $354,761 
Construction loans, net44,046 44,046 
Accounts payable, accrued expenses and other liabilities9,154 10,905 
Total liabilities$408,135 $409,712 

11.    Noncontrolling Interests

Noncontrolling Interests - Limited Partners

Common Limited CROP Units and LTIP Units are CROP units not owned by us and collectively referred to as “Noncontrolling Interests – Limited Partners.”
Common Limited CROP Units - During the three months ended March 31, 2025 and 2024, we paid aggregate distributions to noncontrolling CROP Unit holders of $5.9 million and $5.9 million, respectively.
LTIP Units - As of March 31, 2025, there were 437,734 unvested time-based LTIP awards and 597,133 unvested performance-based LTIP awards outstanding. LTIP Unit award share-based compensation, included within share-based compensation in the condensed consolidated statements of stockholders’ equity, was $0.9 million and $0.9 million for the three months ended March 31, 2025 and 2024, respectively. Total unrecognized compensation expense for LTIP Units as of March 31, 2025 is $4.5 million and is expected to be recognized on a straight-line basis through December 2028.

Noncontrolling Interests - Partially Owned Entities

As of March 31, 2025, noncontrolling interests in consolidated entities not wholly owned by us ranged from 1% to 63%, with the average being 11%.

12.    Commitments and Contingencies

Litigation

We are subject to a variety of legal actions in the ordinary course of our business, most of which are covered by liability insurance. While the resolution of these matters cannot be predicted with certainty, as of March 31, 2025, we believe the final outcome of such legal proceedings and claims will not have a material adverse effect on our liquidity, financial position or results of operations.

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13.    Earnings Per Share
The following table sets forth the computation of our net earnings (losses) per common share - basic and diluted ($ in thousands except share and per share amounts):
Three Months Ended March 31,
20252024
Numerator for net (losses) earnings per common share - basic
Net (loss) income$(13,014)$7,063 
Net loss (income) attributable to noncontrolling interests - limited partners6,405 (3,856)
Net loss attributable to noncontrolling interests - partially owned entities336 712 
Preferred distributions(1,333)(143)
Numerator for net (losses) earnings per common share - basic$(7,606)$3,776 
Numerator for net (losses) earnings per common share - diluted:
Net (loss) income$(13,014)$7,063 
Net loss attributable to noncontrolling interests - limited partners6,405  
Net loss attributable to noncontrolling interests - partially owned entities336 712 
Preferred distributions(1,333)(143)
Numerator for net (losses) earnings per share - diluted$(7,606)$7,632 
Denominator for net (losses) earnings per common share - basic and diluted:
Denominator for net (losses) earnings per common share - basic31,543,58931,581,072
Effect of dilutive securities:
Convertible Preferred Shares693,605
OP Units29,477,235
Long-term compensation shares/units2,610,808
Denominator for net (losses) earnings per share - diluted31,543,58964,362,720
Net (losses) earnings per common share - basic$(0.24)$0.12 
Net (losses) earnings per common share - diluted$(0.24)$0.12 
For the three months ended March 31, 2025, convertible preferred shares, CROP units and long-term compensation shares/units are excluded from the calculation of diluted earnings per share as the inclusion of such potential common shares in the calculation would be anti-dilutive.

14.    Segment Financial Information

Our chief operating decision maker (“CODM”) utilizes reportable segment net operating income (“Reportable Segment NOI”) to assess performance and determine allocation of resources. Reportable Segment NOI represents 100% of each of our consolidated and unconsolidated properties’ reportable segment rental and other property revenues and reportable segment property operations expense. We consider Reportable Segment NOI to be an appropriate supplemental measure of operating performance to net income because it measures the core operations of property performance by excluding corporate level expenses, depreciation and amortization, and other items not directly related to ongoing property operating performance. The CODM does not regularly review total assets for our reportable segment as total assets are not used to assess performance or allocate resources.

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The following table details Reportable Segment NOI, including significant expenses, for the three months ended March 31, 2025 and 2024 ($ in thousands):

Three Months Ended March 31,
20252024
Reportable segment rental and other property revenues
$44,388 $42,750 
Reportable segment property operations expense
Real estate taxes5,430 6,210 
Payroll and benefits3,180 3,204 
Utilities2,854 2,643 
Repairs and maintenance1,809 1,819 
Insurance
1,615 2,076 
Other property expenses (1)
1,094 1,513 
        Total reportable segment property operations expense
15,982 17,465 
Total reportable segment net operating income
$28,406 $25,285 
(1) Other property expenses include general and administrative, marketing and advertising, and other non-recurring expenses.

The following table reconciles reportable segment net operating income to the reported net (loss) income attributable to common stockholders in the condensed consolidated statements of operations for the three months ended March 31, 2025 and 2024 ($ in thousands):

Three Months Ended March 31,
20252024
Total reportable segment net operating income
$28,406 $25,285 
Rental and other property revenues of unconsolidated properties (1)
(7,080)(8,395)
Property operations expense of unconsolidated properties (1)
2,400 3,433 
Equity in earnings of unconsolidated real estate entities (2)
1,369 1,368 
Property management revenues1,792 2,339 
Other revenues1,566 785 
Property management expense(4,582)(4,578)
Asset management fee(3,091)(3,144)
Depreciation and amortization(14,950)(14,954)
General and administrative expenses(2,559)(1,767)
Impairment loss(957) 
Interest income334 473 
Interest expense(20,047)(20,418)
Loss on debt extinguishment(98)(1,239)
Gain on sale of real estate assets7,932 26,638 
Gain on legal settlement400  
Other (expense) income(3,974)1,222 
Income tax benefit125 15 
Net loss (income) attributable to noncontrolling interests - limited partners6,405 (3,856)
Net loss attributable to noncontrolling interests - partially owned entities336 712 
Less preferred stock dividends(1,333)(143)
Net (loss) income attributable to common stockholders$(7,606)$3,776 
(1) Rental and other property revenues and property operations expense for unconsolidated properties are included in Reportable Segment NOI. They are removed here as this activity is included in equity in earnings of unconsolidated real estate entities on our condensed consolidated statements of operations.
(2) Equity in earnings of unconsolidated real estate entities includes our portion of revenues and expenses of unconsolidated properties as recorded under the equity method of accounting.

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The following table reconciles rental and other property revenues and property operations expense for our reportable segment to rental and other property revenues and property operations expense as reported in the condensed consolidated statements of operations ($ in thousands):
Three Months Ended March 31,
20252024
Reportable segment rental and other property revenues$44,388 $42,750 
Rental and other property revenues of unconsolidated properties(7,080)(8,395)
Rental and other property revenues$37,308 $34,355 
Reportable segment property operations expense$15,982 $17,465 
Property operations expense of unconsolidated properties(2,400)(3,433)
Property operations expense$13,582 $14,032 

15.    Subsequent Events

We evaluate subsequent events up until the date the condensed consolidated financial statements are issued and have determined there are none to be reported or disclosed in the condensed consolidated financial statements other than those mentioned below.

Prospect Mezzanine Loan

On April 16, 2025, we entered into an agreement to provide a $5.1 million mezzanine loan to refinance Prospect on Central, a mixed-use property in Denver, Colorado. We provided the first $3.8 million of our commitment upon the execution of the agreement, while the remaining $1.3 million is held in reserve. The mezzanine loan is paid current interest at a rate of 15.0% on the entire commitment drawn from the debt service reserve and matures on May 8, 2027 with two 12-month extension options, subject to conditions being met.

Infield Funding

On April 25, 2025, we increased our commitment by an additional $2.0 million on the Infield preferred equity investment, and funded $1.0 million on April 30, 2025, bringing our total funding to $13.7 million.

Sale of Parc Westborough

On May 14, 2025, we sold Parc Westborough for net proceeds of $54.6 million after repayment of the entire drawn balance on the revolving credit facility. We expect to recognize a gain on sale during the three months ended June 30, 2025.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

References herein to “Company,” “we,” “us,” and “our” refer to Cottonwood Communities, Inc. together with its subsidiaries. The following discussion of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and the related notes.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements include statements about our business, including, in particular, statements about our plans, strategies and objectives. You can generally identify forward-looking statements by our use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “anticipate,” “estimate,” “believe,” “continue,” or other similar words. You should not rely on these forward-looking statements because the matters they describe are subject to known and unknown risks, uncertainties and other unpredictable factors, many of which are beyond our control. Our actual results, performance and achievements may be materially different from those expressed or implied by these forward-looking statements.

The following is a summary of the principal risks that could adversely affect our business, financial condition, results of operations and cash flows and an investment in our common stock.

We depend on our advisor to identify suitable investments and to manage our investments. There is no assurance that we will be able to successfully achieve our investment objectives.

There is no public trading market for shares of our common stock and the repurchase of shares by us will likely be the only way to dispose of your shares. Our share repurchase program provides stockholders with the opportunity to request that we repurchase their shares on a monthly basis, but we are not obligated to repurchase any shares and may choose to repurchase only some, or even none, of the shares that have been requested to be repurchased in any particular month in our discretion. In addition, repurchases are subject to available liquidity and other significant restrictions. Further, our board of directors may modify or suspend our share repurchase program if in its reasonable judgment it deems a suspension to be in our best interest and the best interest of our stockholders, such as when a repurchase request would place an undue burden on our liquidity, adversely affect our operations or risk having an adverse impact on the company that would outweigh the benefit of the repurchase offer.

The offering price and repurchase price for shares of our common stock are generally based on our prior month’s NAV plus, in the case of our offering price, applicable upfront selling commissions and dealer manager fees, and are not based on any public trading market. In addition to being up to a month old when share purchases and repurchases take place, our NAV does not currently represent our enterprise value and may not accurately reflect the actual prices at which our assets could be liquidated on any given day, the value a third-party would pay for all or substantially all of our shares, or the price that our shares would trade at on a national stock exchange. Furthermore, our board of directors may amend our NAV procedures from time to time. Although there will be independent appraisals of our properties, the appraisal of properties is inherently subjective and our NAV may not accurately reflect the actual price at which our properties could be liquidated on any given day.

Investing in commercial real estate assets involves certain risks, including, but not limited to: changes in values caused by global, national, regional or local economic performance, the performance of the real estate sector, unemployment and stock market volatility, demographic or capital market conditions; increases in interest rates and lack of availability of financing; vacancies, fluctuations in the average occupancy and rental rates for our residential properties; and residents experiencing financial hardships (resulting in an inability to pay rent). Disruptions in the financial markets and economic uncertainty, including as a result of uncertainties regarding actual and potential shifts in U.S. and foreign policies on trade and other fiscal, monetary and regulatory policies, including with respect to treaties and tariffs, could adversely affect our operations.

We have paid distributions from offering proceeds and may continue to fund distributions with offering proceeds. We have not established a limit on the amount of proceeds from our offering that we may use to fund distributions. To the extent we fund distributions from sources other than our cash flow from operations, we will have less funds available for investment in multifamily apartment communities and multifamily real estate-related assets and the overall return to our stockholders may be reduced. Distributions may also be paid from other sources such as borrowings, advances or the deferral of fees and expense reimbursements. These distributions may constitute a return of capital.
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All of our officers and certain of our directors are also officers of our sponsor, advisor and their affiliates and, as a result, are subject to conflicts of interest, including conflicts arising from time constraints and the fact that the fees our advisor receives for services rendered to us are based on our NAV, which our advisor is responsible for determining.

We pay certain fees and expenses to our advisor and its affiliates. These fees were not negotiated at arm’s length and therefore may be higher than fees payable to unaffiliated third parties.

Development projects in which we invest will be subject to potential development and construction delays as well as the impact of any rising costs associated with increased inflation, or the persistence of elevated rates of inflation, as well as changes to tariffs and trade policies, all of which could result in unanticipated increased costs and risks and may hinder our operating results and ability to make distributions.

We may incur significant debt in certain circumstances, including through the issuance of preferred equity that is accounted for as debt. Our use of leverage increases the risk of an investment in us. Loans we obtain may be collateralized by some or all of our investments, which will put those investments at risk of forfeiture if we are unable to pay our debts. Principal and interest payments on these loans and dividend payments on our preferred shares reduce the amount of money that would otherwise be available for other purposes.

Volatility in the debt markets could affect our ability to obtain financing for investments or other activities related to real estate assets and the diversification or value of our portfolio, potentially reducing cash available for distribution to our stockholders or our ability to make investments. In addition, volatility in the debt markets could negatively impact our loans with variable interest rates.

There are limits on the ownership and transferability of our shares.

If we fail to continue to qualify as a real estate investment trust (“REIT”), it would adversely affect our operations and our ability to make distributions to our stockholders because we will be subject to United States federal income tax at regular corporate rates with no ability to deduct distributions made to our stockholders.

We restated our previously issued financial statements for the year ended December 31, 2022 and for each of the quarterly periods therein (the “Restatement”). As a result of the Restatement, we identified a material weakness in our internal control over financial reporting solely related to the statement of cash flows. As a result of this material weakness, management concluded that our disclosure controls and procedures and internal controls over financial reporting were not effective as of December 31, 2023 and 2022, which conclusion could harm our business. This material weakness was remediated as of March 31, 2024. The Restatement and related identification of a material weakness in our internal controls over financial reporting could subject us to increased risk of litigation.

Additional risks related to our business are discussed herein under Part II - “Item 1A. Risk Factors” and under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2024. In light of the significant uncertainties inherent in these forward-looking statements, the inclusion of this information should not be regarded as a representation by us or any other person that our objectives and plans, which we consider to be reasonable, will be achieved. Except as otherwise required by federal securities laws, we do not undertake to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Overview

Cottonwood Communities, Inc. invests in a diverse portfolio of multifamily apartment communities and multifamily real estate-related assets throughout the United States. We are externally managed by our advisor, CC Advisors III, LLC (“CC Advisors III”), a wholly owned subsidiary of our sponsor, Cottonwood Communities Advisors, LLC (“CCA”). We were incorporated in Maryland in 2016. We hold all of our assets through Cottonwood Residential O.P., LP (“CROP”), our operating partnership. We are the sole member of the sole general partner of CROP and own general partner interests in CROP alongside third-party limited partners.

We are a non-listed perpetual-life, net asset value (“NAV”), REIT. We qualified as a REIT for U.S. federal income tax purposes beginning with the taxable year ended December 31, 2019. We generally will not be subject to U.S. federal income taxes on our taxable income to the extent we annually distribute all of our net taxable income to stockholders and maintain our qualification as a REIT.

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As of March 31, 2025, we raised $372.1 million from the sale of common stock in our public offerings and $322.7 million from the sale of our preferred stock in periodic private offerings to accredited investors (the “Private Offerings”). We have contributed our net proceeds to CROP in exchange for a corresponding number of mirrored OP Units in CROP.

As of our March 31, 2025 NAV, we had a portfolio of $2.3 billion in total assets, with 82.8% of our equity value in operating properties, 2.6% in development, 10.4% in real estate-related structured investments and 4.2% in land held for development. Refer to the sections entitled “Our Investments” and “Net Asset Value” below for further description of our portfolio and NAV.

Highlights for the Three Months Ended March 31, 2025

The following highlights activities that occurred during the three months ended March 31, 2025:

Net loss attributable to common stockholders was $(0.24) per diluted share compared to net earnings attributable to common stockholders of $0.12 per diluted share for the same period in the prior year. The decrease was primarily due to a $26.6 million gain on the sale of Cottonwood West Palm in the first quarter of 2024.
Reportable segment net operating income was $28.4 million compared to $25.3 million for the same period in the prior year primarily due to increases from lease up properties, offset by lost net operating income from the sale of Cottonwood West Palm.
Same store net operating income (“Same Store NOI”) was $21.9 million compared to $22.4 million for the same period in the prior year.
Funds from operations attributable to common stockholders and unit holders (“FFO”) was $(0.07) per diluted share/unit compared to $(0.04) for the same period in the prior year. Core FFO was $0.05 per diluted share/unit, compared to $0.00 for the same period in the prior year.
Net asset value was $11.5429 per share/unit at March 31, 2025, compared to $12.0083 per share/unit at December 31, 2024.
Sold Cottonwood Broadway for net proceeds of $41.0 million, recording a net gain on sale of $7.9 million.
Raised $7.1 million of net proceeds from the sale of Series 2025 Preferred Stock.
Exchanged 3,249,634 and 22,000 shares of Series 2019 and Series 2023, respectively, for Series 2025 Preferred Stock.
Raised $18.3 million of net proceeds from the sale of Series A Convertible Preferred Stock.
Repurchased $0.5 million of Series A Convertible Preferred Stock.
Raised $7.1 million of net proceeds from the sale of our common stock issued under our registered public offering.
Repurchased $11.9 million of common stock and OP Units at an average discount of 2% to NAV.
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Our Investments
    
Information regarding our investments as of March 31, 2025 is as follows:

Stabilized Properties ($ in thousands, except net effective rent)

Property NameMarketNumber
of Units
Average
Unit Size
(Sq Ft)
Purchase
Date
Purchase Price
Mortgage Debt Outstanding (1)
Net Effective RentPhysical
Occupancy
Rate
Percentage
Owned by
CROP
805 Riverfront (2)
West Sacramento, CA285 746 Sept 2023$104,646 
(3)
$60,210 $2,304 89.82%100.00%
Alpha MillCharlotte, NC267 830 May 202169,500 12,285 1,650 95.13%100.00%
Cason EstatesMurfreesboro, TN262 1,078 May 202151,400 37,462 1,531 90.84%100.00%
Cottonwood ApartmentsSalt Lake City, UT264 834 May 202147,300 35,430 1,391 98.48%100.00%
Cottonwood BayviewSt. Petersburg, FL309 805 May 202195,900 71,417 2,519 96.12%71.00%
Cottonwood ClermontClermont, FL230 1,111 Sept 202285,000 34,376 2,022 90.43%100.00%
Cottonwood Highland (2)(4)
Salt Lake City, UT250 745 May 202165,210 
(3)
44,046 1,778 92.40%36.93%
Cottonwood Lighthouse PointPompano Beach, FL243 996 June 202295,500 47,964 2,235 90.53%100.00%
Cottonwood ReserveCharlotte, NC352 1,021 May 202177,500 48,049 1,463 92.61%91.14%
Cottonwood RidgeviewPlano, TX322 1,156 May 202172,930 65,300 1,785 96.27%100.00%
Cottonwood WestsideAtlanta, GA197 860 May 202147,900 26,986 1,605 93.40%100.00%
Enclave on Golden TriangleKeller, TX273 1,048 May 202151,600 48,400 1,689 93.77%98.93%
Fox PointSalt Lake City, UT398 841 May 202179,400 45,175 1,444 95.73%52.75%
Heights at MeridianDurham, NC339 997 May 202179,900 53,401 1,586 92.33%100.00%
Melrose (2)
Nashville, TN220 951 May 202167,400 56,600 1,763 90.45%100.00%
Melrose Phase II (2)
Nashville, TN139 675 May 202140,350 32,400 1,540 92.09%100.00%
Parc Westborough (5)
Boston, MA249 1,008 May 202174,000 16,965 2,469 97.59%100.00%
Park AvenueSalt Lake City, UT234 714 May 202167,525 
(3)
43,453 1,870 93.16%100.00%
PavilionsAlbuquerque, NM240 1,162 May 202161,100 58,500 1,891 95.42%96.35%
RaveneauxHouston, TX382 1,065 May 202157,500 47,400 1,417 98.43%96.97%
RegattaHouston, TX490 862 May 202148,100 35,367 1,079 93.66%100.00%
Retreat at Peachtree CityPeachtree City, GA312 980 May 202172,500 58,412 1,743 95.83%100.00%
Scott MountainPortland, OR262 927 May 202170,700 48,373 1,798 97.71%95.80%
Stonebriar of FriscoFrisco, TX306 963 May 202159,200 53,600 1,552 93.79%84.19%
SugarmontSalt Lake City, UT341 904 May 2021139,792 
(3)
91,200 2,231 94.71%99.00%
(6)
Summer ParkBuford, GA358 1,064 May 202175,500 52,398 1,575 94.13%98.68%
The Marq Highland Park (2)
Tampa, FL239 999 May 202165,700 46,802 2,139 95.82%74.10%
Toscana at Valley RidgeLewisville, TX288 738 May 202147,700 32,571 1,271 96.88%58.60%
Total / Weighted-Average8,051 937 $1,970,753 $1,304,542 $1,732 94.35%90.83%
(1) Mortgage debt outstanding is shown as if CROP owned 100% of the property.
(2) Data from commercial retail units are excluded from number of units and physical occupancy.
(3) These purchase price amounts represent the acquisition date fair value plus subsequent capitalized costs on the projects placed in service.
(4) CROP’s percentage ownership is not proportionate to the total amount CROP invested in the project due to a disproportionate ownership percentage assigned to CROP and related parties as fees and commissions were waived for the sponsor and its affiliates.
(5) On March 28, 2025, we entered into a contract to sell Parc Westborough for $96.2 million. On May 14, 2025, we sold Parc Westborough for net proceeds of $54.6 million after repayment of the entire drawn balance on the revolving credit facility. We expect to recognize a gain on sale during the three months ended June 30, 2025.
(6) The one percent interest not owned by us has limited rights, including the right to control on behalf of the joint venture the prosecution and resolution of all litigation, claims, or causes of action that the joint venture has or may have against certain third parties associated with the design and construction of Sugarmont, as well as the obligation to defend any cross claims resulting from these actions. In September 2024, Sugarmont entered into an agreement to settle all matters in dispute.

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Development/Lease Up Properties ($ in thousands)

Property NameMarketUnits to
be Built
Average
Unit Size
(Sq Ft)
Purchase DateTotal Project Investment
Debt Outstanding (1)
Physical Occupancy Rate (2)
Percentage
Owned by
CROP
The Westerly (3)
Salt Lake City, UT198808
May 2021 (3)
41,306 — —%82.45%
(1) Debt outstanding is shown as if CROP owned 100% of the development property.
(2) The Westerly is estimated to be completed in the second quarter of 2026.
(3) Construction on The Westerly began in July 2023. The amount above includes contributions from the Block C Joint Venture to The Westerly as of March 31, 2025 including the related land cost and capital expenditures. Refer to the land held for development table below for additional information on the Block C Joint Venture.

Structured Investments ($ in thousands)

Property NameMarketInvestment TypeDate of Initial InvestmentNumber of UnitsFunding CommitmentAmount Funded to Date
417 CallowhillPhiladelphia, PAPreferred EquityNovember 2022220$33,413 $33,413 
2215 HollywoodHollywood, FLMezzanine LoanApril 202318010,045 10,045 
Monrovia StationMonrovia, CAMezzanine LoanJuly 202329620,150 20,150 
Infield (1)
Kissimmee, FLPreferred EquityNovember 202338412,650 12,650 
Total1,080$76,258 $76,258 
(1) On April 25, 2025, we increased our commitment by an additional $2.0 million on the Infield preferred equity investment, and funded $1.0 million on April 30, 2025, bringing our total funding to $13.7 million.

Land Held for Development ($ in thousands)

Property Name MarketAcreagePurchase DateTotal Investment AmountPercentage Owned by CROP
Block C Joint Venture (1)
Salt Lake City, UT1.69 acresMay 2021$18,121 82.45%
3300 CottonwoodSalt Lake City, UT1.76 acresOctober 20217,578 100.00%
GalleriaSalt Lake City, UT26.07 acresSeptember 202229,957 100.00%
Total$55,656 
(1) The total investment amount above for the Block C Joint Venture consists of land held for development for Millcreek North and The Archer multifamily development projects and cash held at the joint venture for future investment. The Westerly, a project currently under development, is also funded through the Block C Joint Venture and reflected separately in the development property table above. On January 31, 2025, we entered into a contract to sell The Archer for $3.0 million. We expect to close during the third quarter of 2025.
(2) On October 15, 2024, we entered into a contract to sell approximately 6.9 acres of land at Galleria for $8.0 million. We expect to close by the second or third quarter of 2025.


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Results of Operations

Our results of operations for the three months ended March 31, 2025 and 2024 are as follows ($ in thousands, except share and per share data):

Three Months Ended
March 31,
20252024Change
Revenues
Rental and other property revenues$37,308 $34,355 $2,953 
Property management revenues1,792 2,339 (547)
Other revenues1,566 785 781 
Total revenues40,666 37,479 3,187 
Operating expenses
Property operations expense13,582 14,032 (450)
Property management expense4,582 4,578 
Asset management fee3,091 3,144 (53)
Depreciation and amortization14,950 14,954 (4)
General and administrative expenses2,559 1,767 792 
Impairment loss957 — 957 
Total operating expenses39,721 38,475 1,246 
 Income (loss) from operations945 (996)1,941 
Equity in earnings of unconsolidated real estate entities1,369 1,368 
Interest income334 473 (139)
Interest expense(20,047)(20,418)371 
Loss on debt extinguishment(98)(1,239)1,141 
Gain on sale of real estate assets7,932 26,638 (18,706)
Gain on legal settlement400 — 400 
Other (expense) income(3,974)1,222 (5,196)
(Loss) income before income taxes(13,139)7,048 (20,187)
Income tax benefit125 15 110 
    Net (loss) income(13,014)7,063 (20,077)
Net loss (income) attributable to noncontrolling interests:
Limited partners6,405 (3,856)10,261 
Partially owned entities336 712 (376)
Net (loss) income attributable to controlling interests(6,273)3,919 (10,192)
Less: preferred stock dividends$1,333 $143 $1,190 
Net (loss) income attributable to common stockholders$(7,606)$3,776 $(11,382)
Weighted-average common shares outstanding - basic31,543,589 31,581,072 
Weighted-average common shares outstanding - diluted31,543,589 64,362,720 
Net (losses) earnings per common share - basic$(0.24)$0.12 
Net (losses) earnings per common share - diluted$(0.24)$0.12 

Comparison of the Three Months Ended March 31, 2025 and 2024

Rental and Other Property Revenues

Rental and other property revenues increased $3.0 million due to an increase of $3.0 million from the consolidation of Cottonwood Lighthouse Point and Alpha Mill in March 2024 and April 2024, respectively, an increase of $3.0 million from the lease up of 805 Riverfront and Cottonwood Highland during 2024, offset by a decrease of $1.2 million from the sale of Cottonwood West Palm in February 2024, a decrease of $1.6 million from the deconsolidation of The Marq Highland Park in July 2024, and a slight increase in vacancy and bad debt.



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Loss on Debt Extinguishment

The $1.1 million change in loss on debt extinguishment was due to $1.2 million associated with the payoff of the Cottonwood West Palm mortgage in 2024 compared to $0.1 million associated with the payoff of the Cottonwood Broadway mortgage in 2025 when those assets were sold.

Gain on Sale of Real Estate Assets

The $7.9 million gain on sale of real estate during the three months ended March 31, 2025 was from the sale of Cottonwood Broadway. The $26.6 million gain on sale of real estate during the three months ended March 31, 2024 was from the sale of Cottonwood West Palm.

Other (Expense) Income

Net other expenses increased $5.2 million primarily due to $3.1 million in selling commissions and expenses associated with Series 2025 Preferred Stock Exchanges and changes in the fair value of interest rate caps.

Reportable Segment Net Operating Income

Reportable segment net operating income (“Reportable Segment NOI”) is a supplemental non-GAAP measure of our property operating results. We define Reportable Segment NOI as operating revenues less operating expenses. We consider Reportable Segment NOI to be an appropriate supplemental measure of operating performance to net income because it measures the core operations of property performance by excluding corporate level expenses, depreciation and amortization, and other items not directly related to ongoing property operating performance. While we believe our net income (loss), as defined by GAAP, to be the most appropriate measure to evaluate our overall performance, we consider Reportable Segment NOI to be an appropriate supplemental performance measure. We believe Reportable Segment NOI provides useful information to our investors regarding our results of operations because it reflects the operating performance of our properties and excludes certain items that are not considered to be controllable in connection with the management of properties, such as real estate-related depreciation and amortization, general and administrative expenses, advisory and property management fees, interest expense, gains on sale of real estate, other income and expense, and noncontrolling interests. However, Reportable Segment NOI should not be viewed as an alternative measure of our financial performance since it excludes such items which could materially impact our results of operations. Further, our Reportable Segment NOI may not be comparable to that of other real estate companies, as they may use different methodologies for calculating reportable segment net operating income, therefore, our investors should consider net income (loss) as the primary indicator of our overall financial performance.

As discussed in Note 14 of the condensed consolidated financial statements, Reportable Segment NOI represents 100% of each of our consolidated and unconsolidated properties’ reportable segment rental and other property revenues and reportable segment property operations expense. Of our portfolio of multifamily properties, 24 are consolidated and four are unconsolidated for financial reporting purposes. We believe the drivers of Reportable Segment NOI for our consolidated properties are generally the same for our unconsolidated properties, of which we own on average 62.8%.

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The following table reconciles the net (loss) income attributable to common stockholders in the condensed consolidated statements of operations to Reportable Segment NOI for the three months ended March 31, 2025 and 2024 ($ in thousands):

Three Months Ended March 31,
20252024
Net (loss) income attributable to common stockholders$(7,606)$3,776 
Depreciation and amortization14,950 14,954 
General and administrative expenses2,559 1,767 
Impairment loss957 — 
Property management revenues(1,792)(2,339)
Property management expense4,582 4,578 
Asset management fee3,091 3,144 
Other revenues(1,566)(785)
Equity in earnings of unconsolidated real estate entities(1,369)(1,368)
Interest income(334)(473)
Interest expense20,047 20,418 
Loss on debt extinguishment
98 1,239 
Gain on sale of real estate(7,932)(26,638)
Gain on legal settlement(400)— 
Other expense (income)3,974 (1,222)
Income tax benefit(125)(15)
Net (loss) income attributable to noncontrolling interests - limited partners(6,405)3,856 
Net loss attributable to noncontrolling interests - partially owned entities(336)(712)
Less preferred stock dividends1,333 143 
Rental and other property revenues of unconsolidated properties
7,080 8,395 
Property operations expense of unconsolidated properties
(2,400)(3,433)
Reportable segment net operating income
$28,406 $25,285 

Refer to Note 14 for the details of Reportable Segment NOI, including significant expenses, for the three months ended March 31, 2025 and 2024.

Reportable Segment NOI increased $3.1 million for the three months ended March 31, 2025 when compared to the same period in the prior year primarily due to increases in net operating income from the lease up of Cottonwood Highland and 805 Riverfront, offset by lost net operating income from the sale of Cottonwood West Palm.

We also evaluate the performance of operating properties within our reportable segment using a same store analysis (“Same Store NOI”) because the population of properties is consistent from period to period, thereby eliminating the effects of any material changes in the composition of the aggregate portfolio on performance measures. Our same store portfolio includes those properties in our reportable segment for which we manage and have ownership interests in for the entirety of both current and prior years. Operating properties excluded from same store include development properties that have undergone lease up and properties that have been acquired or disposed during the same store reporting period. We evaluate Same Store NOI based on our ownership in the properties within the same store portfolio, applying our ownership percentage at March 31, 2025 for all periods presented. Our same store analysis may not be comparable to that of other real estate companies and should not be considered to be more relevant or accurate in evaluating our operating performance than current GAAP methodology.

For the three months ended March 31, 2025, our same store portfolio consisted of 21 consolidated properties, representing approximately 6,000 units, and four unconsolidated properties, representing approximately 1,200 units.

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The following table reconciles Reportable Segment NOI, as reconciled to net loss attributable to common stockholder above, to Same Store NOI for the three months ended March 31, 2025 and 2024 ($ in thousands):
Three Months Ended March 31,
20252024
Reportable segment net operating income$28,406 $25,285 
Lease up properties(2,470)463 
Disposed properties(1,730)(1,562)
Non-core property expenses, net(332)178 
At share adjustments (1)
(1,971)(1,942)
Same Store NOI$21,903 $22,422 
(1) Adjustment to apply CROP’s ownership percentage in the properties within the same store portfolio.

Comparison of the Three Months Ended March 31, 2025 and 2024

Same store NOI decreased slightly for the three months ended March 31, 2025 when compared to the same periods in the prior year. The weighted-average rents for the same store portfolio were $1,683 and $1,690, while the weighted-average occupancy rate for the same store portfolio was 94.5% at March 31, 2025 and 2024. For the three months ended March 31, 2025, utilities increased while insurance and real estate taxes decreased when compared to the same period in the prior year.

Funds from Operations

We believe funds from operations, or FFO, is a beneficial indicator of the performance of an equity REIT and of our company. We compute FFO in accordance with the standards established by the National Association of Real Estate Investment Trusts, or NAREIT, as net income or loss (computed in accordance with GAAP), excluding gains or losses from sales of operating real estate assets (which can vary among owners of identical assets in similar conditions based on historical cost accounting and useful-life estimates), gains and losses from change in control, impairment losses on operating real estate assets, the cumulative effect of changes in accounting principles, real estate-related depreciation and amortization, and after adjustments for our share of unconsolidated partnerships and joint ventures.

We believe FFO facilitates comparisons of operating performance between periods and among other REITs. However, our computation of FFO may not be comparable to other REITs that do not define FFO in accordance with the NAREIT definition or that interpret the current NAREIT definition differently than we do. Our management believes that historical cost accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered the presentation of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. As a result, we believe that the use of FFO, together with the required GAAP presentations, provides a more complete understanding of our performance relative to our competitors and provides a more informed and appropriate basis on which to make decisions involving operating, financing, and investing activities.

We adjust FFO by the items below to arrive at Core FFO. Our management uses Core FFO as a measure of our operating performance. Our calculation of Core FFO may differ from the methodology used for calculating Core FFO by other REITs and, accordingly, our Core FFO may not be comparable. We believe these measures are useful to investors because they facilitate an understanding of our operating performance after adjusting for non-cash expenses and other items not indicative of ongoing operating performance.

Neither FFO nor Core FFO is equivalent to net income or cash generated from operating activities determined in accordance with U.S. GAAP. Furthermore, FFO and Core FFO do not represent amounts available for management’s discretionary use because of needed capital replacement or expansion, debt service obligations or other commitments or uncertainties. Neither FFO nor Core FFO should be considered as an alternative to net income as an indicator of our operating performance.

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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 March 31,
20252024
Net (loss) income attributable to controlling interests$(6,273)$3,919 
Adjustments to arrive at FFO:
Real estate-related depreciation and amortization14,349 14,279 
Depreciation and amortization from unconsolidated real estate entities1,988 2,287 
Gain on sale of real estate assets(7,932)(26,638)
Income (loss) allocated to noncontrolling interests - limited partners(6,405)3,856 
Amount attributable to above from noncontrolling interests - partially owned entities(514)(505)
Funds from operations attributable to common stockholders and unit holders(4,787)(2,802)
Adjustments:
Gain on legal settlement(400)— 
Amortization of intangible assets601 675 
Amortization of debt issuance costs946 739 
Accretion of discount on preferred stock939 685 
Selling commissions and expenses from Series 2025 Preferred Stock Exchanges
3,090 — 
Share-based compensation1,042 982 
Promote from incentive allocation agreement (tax effected)— (40)
Losses on debt extinguishment98 1,239 
Impairment loss957 — 
Losses (gains) on derivatives690 (594)
Legal costs and settlements, net(7)(703)
Other adjustments (1)
320 (390)
Amount attributable to above from noncontrolling interests and unconsolidated entities55 
Core funds from operations attributable to common stockholders and unit holders$3,544 $(202)
FFO per common share and unit - diluted$(0.07)$(0.04)
Core FFO per common share and unit - diluted$0.05 $0.00 
Weighted-average diluted common shares and units outstanding - FFO and Core FFO69,794,328 64,362,720 
(1) Other adjustments include acquisition fees and expenses, insurance losses, and other miscellaneous non-cash or non-recurring items.

Weighted-average dilutive common shares and units for FFO and Core FFO are as follows:

Three Months Ended March 31,
20252024
Dilutive weighted-average Series A Convertible Preferred shares6,038,949 693,606 
Weighted-average common shares31,543,589 31,581,072 
Weighted-average limited partnership units32,211,790 32,088,042 
Weighted-average common shares and units outstanding69,794,328 64,362,720 

    Refer to “
Results of Operations” and “Reportable Segment Net Operating Income” above for further detail.

Net Asset Value

Our board of directors, including a majority of our independent directors, has adopted valuation guidelines, as amended from time to time, that contain a comprehensive set of methodologies to be used in connection with the calculation of our net asset value (“NAV”). Pursuant to these valuation procedures, we computed a March 31, 2025 NAV per share for our outstanding Class T, Class D, Class I, and Class A shares of $11.5429.

The purchase price per share for each class of common stock will vary and will generally equal our prior month’s NAV per share, as determined monthly, plus applicable upfront selling commissions and dealer manager fees. Refer to Part II. Item 5. “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Repurchase of Equity Securities – Net Asset Value and — NAV and NAV Per Share Calculation” in our Annual Report on Form 10-K for further information on the valuation methods used for the purposes of determining the valuations of our assets and liabilities.
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CROP has certain classes or series of OP Units that are each economically equivalent to a corresponding class of shares. Accordingly, on the last day of each month, for such classes or series of OP Units, the NAV per OP Unit equals the NAV per share of the corresponding class. To the extent CROP has classes of units that do not correspond to a class of our shares, such units will be valued in a manner consistent with our valuation guidelines. The NAV of CROP on the last day of each month equals the sum of the NAVs of each fully-diluted outstanding OP Unit on such day. In calculating the fully-diluted outstanding OP Units we include all outstanding vested LTIP Units, unvested time-based LTIP Units and those performance-based LTIP Units that would be earned based on the internal rate of return as of such day.

Our total NAV in the following table includes the NAV of our outstanding classes of common stock, as well as the partnership interests of CROP held by parties other than us. The following table sets forth the components of our NAV as of March 31, 2025 ($ in thousands except share data):
Components of NAV*
As of March 31, 2025
Investments in Multifamily Operating Properties$2,035,060 
Investments in Multifamily Development Properties46,383 
Investments in Real Estate-Related Structured Investments99,814 
Investments in Land Held for Development44,120 
Operating Company and Other Net Current Assets15,701 
Cash and Cash Equivalents19,361 
Secured Real Estate Financing(1,192,465)
Subordinated Unsecured Notes(20,690)
Preferred Equity(237,921)
Convertible Preferred Equity(78,054)
Net Asset Value$731,309 
Fully-diluted Shares/Units Outstanding63,355,792 
* Presented as adjusted for our economic ownership percentage in each asset.

The following table provides a breakdown of our total NAV and NAV per share/unit by class as of March 31, 2025 ($ in thousands, except share and per share data):
Class
TDIA
OP(1)
Total
As of March 31, 2025
Monthly NAV$49,887 $4,909 $77,537 $227,096 $371,880 $731,309 
Fully-diluted Outstanding Shares/Units4,321,922 425,327 6,717,264 19,674,086 32,217,193 63,355,792 
NAV per Fully-diluted Share/Unit$11.5429 $11.5429 $11.5429 $11.5429 $11.5429 
(1) Includes the partnership interests of CROP held by High Traverse Holdings, an entity beneficially owned by Daniel Shaeffer, Chad Christensen, Gregg Christensen and Eric Marlin and other CROP interests, including LTIP Units as described above, held by parties other than us.

Set forth below are the weighted averages of the key assumptions that were used by the Independent Appraisal Firms in the discounted cash flow methodology used in the March 31, 2025, valuations of our real property assets, based on property types.
Discount Rate Exit Capitalization Rate
Operating Assets6.81%5.42%
* Presented as adjusted for our economic ownership percentage in each asset, weighted by gross value. The weighted averages were calculated by our advisor based on the information provided by the Independent Appraisal Firms.

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A change in these assumptions would impact the calculation by the Independent Appraisal Firms of the value of our operating and development assets. For example, assuming all other factors remain unchanged, the changes listed below would result in the following effects on our operating and development asset values:
Sensitivities ChangeOperating Asset
Values
Discount Rate0.25% decrease2.3%
 0.25% increase(2.3)%
Exit Capitalization Rate0.25% decrease3.4%
0.25% increase(3.0)%
* Presented as adjusted for our economic ownership percentage in each asset.

The following table reconciles stockholders’ equity and CROP partners’ capital per our condensed consolidated balance sheet to our NAV ($ in thousands):
March 31, 2025
Stockholders’ equity$234,338 
Non-controlling interests attributable to limited partners172,018 
$406,356 
Adjustments at share:
Accumulated depreciation and amortization, consolidated and unconsolidated entities$248,299 
Discount on preferred stock(8,154)
Convertible preferred shares(78,054)
Unrealized net real estate and debt appreciation149,219 
Other (1)
13,643 
NAV$731,309 
(1) Other includes deferred revenue, non current commissions, and derivative assets where settlement is not imminent.

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

We depreciate our investments in real estate and amortize certain other assets and liabilities in accordance with GAAP. Such depreciation and amortization is not recorded for purposes of determining our NAV. Accumulated depreciation and amortization associated with our investments in unconsolidated real estate entities is also not recorded for purposes of determining our NAV.
Our preferred stock that is mandatorily redeemable is accounted for as a liability with associated issuance costs deferred and amortized under GAAP. These issuance costs are excluded for purposes of determining our NAV.
Convertible preferred shares are treated as a reduction to NAV.
Our investments in real estate are presented under historical cost in our GAAP condensed consolidated financial statements. Additionally, our mortgage notes, revolving credit facility and construction loans are presented at their carrying value in our GAAP condensed consolidated financial statements. As such, any increases or decreases in the fair market value of our investments in real estate or our debt instruments are not included in our GAAP results. For purposes of determining our NAV, our investments in real estate and our instruments are recorded at fair value.

Policies Regarding Operating Expenses

Our advisor must reimburse us the amount by which our aggregate total operating expenses for the four fiscal quarters then ended exceed the greater of 2% of our average invested assets or 25% of our net income (the 2%/25% Limitation), unless the conflicts committee has determined that such excess expenses were justified based on unusual and non-recurring factors. For the four consecutive quarters ended March 31, 2025, our total operating expenses were less than the 2%/25% Limitation.

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Liquidity and Capital Resources

Our principal demands for funds during the short and long-term are and will be for the acquisition of multifamily apartment communities and investments in multifamily real estate-related assets, including funding commitments on our structured investments; operating expenses, including the management fee we pay to our advisor and the performance participation allocation (when applicable); capital expenditures, including those on our development projects; general and administrative expenses; payments under debt obligations; repurchases of common and preferred stock; and payments of distributions to stockholders. We will obtain the capital required to purchase multifamily apartment communities and make investments in multifamily real estate-related assets and conduct our operations from the proceeds of our public and private offerings, our credit facilities, other secured or unsecured financings from banks and other lenders, and from any undistributed funds from our operations.

We intend to strengthen our capital and liquidity positions by continuing to focus on our core fundamentals at the property level. Factors which could increase or decrease our future liquidity include but are not limited to operating performance of the properties, the interest rate environment and inflation which could increase our expenses, the satisfaction of REIT dividend requirements and the volume of repurchase requests under our share purchase program. We have satisfied all of our repurchase requests to date. Due to commitments on our structured investments and development projects, which we believe will be accretive to our portfolio, our available cash to fund repurchase requests is limited. We completed the sale of Cottonwood Broadway (February 2025) to strengthen our liquidity position and enhance our ability to fund repurchase requests and anticipate we will be able to fully fund repurchase requests. We also completed the sale of Parc Westborough on May 14, 2025. To continue to bolster our liquidity position, we may pursue additional strategic asset sales in the future or seek additional sources of capital.

As of March 31, 2025, we have $807.9 million of fixed rate debt and $300.6 million of variable rate debt, which includes $44.0 million of construction loans. We have interest rate cap hedging instruments on $167.1 million, or 55.6%, of our variable rate debt. In addition, CROP has issued unsecured promissory notes in a private placement offering, in an aggregate amount of $20.7 million as of March 31, 2025.

We have a credit facility in place with JP Morgan that provides us with additional liquidity. Our JP Morgan Revolving Credit Facility has a variable rate. We can draw upon or pay down the JP Morgan Revolving Credit Facility at our option, subject to loan-to-value requirements, debt-service coverage ratios and other covenants and restrictions as set forth in the loan documents. At March 31, 2025 the $100.0 million credit facility was secured by Parc Westborough and Alpha Mill and was capped at $80.8 million due to the current interest rate environment and the applicable debt-service coverage ratio. As of March 31, 2025, we had advances of $29.3 million on the credit facility. With the sale of Parc Westborough in May 2025, all advances on the credit facility were paid off and the capacity on the credit facility was reduced to $34.7 million.

One of our principal long-term liquidity requirements includes the repayment of maturing debt. Aggregate maturities will be $81.8 million for the year ended December 31, 2025 and for the years ending 2026 through 2029 will be $141.3 million, $363.9 million, $72.2 million, and $45.9 million, respectively, and $443.5 million in the aggregate thereafter. Of the $81.8 million maturing during the current year ended December 31, 2025, $20.7 million relates to our 2019 6% Unsecured Promissory Notes and $60.2 million relates to 805 Riverfront, which can be extended to June 2026.

We have issued and outstanding Series 2019, Series 2023, Series 2023-A and Series 2025 Preferred Stock, each of which are similar in nature. Each series must be redeemed for cash at a redemption price per share equal to $10.00 plus any accrued and unpaid dividends, to the extent there are funds legally available, on the redemption date.

The Series 2019 Preferred Stock redemption date is December 31, 2025. The Series 2023 Preferred Stock redemption date is June 30, 2027, subject to two one-year extensions at our option. The Series 2023-A Preferred Stock redemption date is December 31, 2027. The Series 2025 Preferred Stock redemption date is December 31, 2028, subject to two one-year extension options at our discretion.

As of March 31, 2025, we had 8.8 million shares outstanding for our Series 2019 Preferred Stock, 10.7 million shares outstanding for our Series 2023 Preferred Stock, 0.3 million shares outstanding for our Series 2023-A Preferred Stock, and 4.0 million shares outstanding for our Series 2025 Preferred Stock.

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Holders of Series 2019 Preferred Stock and Series 2023 Preferred Stock may exchange their shares at a ratio between 1:1 and 1:1.0782 with respect to the Series 2019 Preferred Stock and at a ratio of 1:1 with respect the Series 2023 Preferred Stock through June 30, 2025, which date may be extended at the discretion of the board of directors. As of May 9, 2025, $53.2 million of Series 2019 Preferred Stock had been exchanged into Series 2025 Preferred Stock, reducing the amount of Series 2019 Preferred Stock to be redeemed to $66.6 million.

Management intends to pay this obligation with proceeds from the sale of real estate assets, including Parc Westborough (Refer to Note 3 in the notes to the condensed consolidated financial statements), cash on hand and available capacity on our revolving credit facility. We project these actions will provide sufficient liquidity to satisfy the redemption of Series 2019 Preferred Stock on maturity.

In addition to making investments in accordance with our investment objectives, we expect to use our capital resources to pay offering costs in connection with our securities offerings, as well as make certain payments to our advisor pursuant to the terms of our advisory management agreement.

To maintain our qualification as a REIT, we will be required to make aggregate annual distributions to our stockholders of at least 90% of our REIT taxable income (computed without regard to the dividends-paid deduction and excluding net capital gain). Our board of directors may authorize distributions in excess of those required for us to maintain REIT status depending on our financial condition and such other factors as our board of directors deems relevant.

Cash Flows

The following table provides a breakdown of the net change in our cash and cash equivalents and restricted cash ($ in thousands):

Three Months Ended March 31,
20252024
Net cash used in operating activities$(5,463)$(1,086)
Net cash provided by investing activities63,456 66,705 
Net cash used in financing activities(69,606)(60,161)
Net (decrease) increase in cash and cash equivalents and restricted cash$(11,613)$5,458 

Net cash flows from operating activities decreased by $4.4 million compared to the same period in the prior year primarily due to $3.0 million in selling commissions and expenses from Series 2025 Preferred Stock exchanges, large legal fee refunds in 2024 that were not present in 2025, property sales, and higher interest costs primarily from our preferred offerings.

Net cash flows from investing activities decreased by $3.2 million compared to the same period in the prior year. The decrease came from the issuance of a $7.0 promissory note to the buyer of Cottonwood Broadway and the absence of cash acquired from consolidations, which was $2.2 million in the prior year with Cottonwood Lighthouse Point. These decreases were offset by the absence of funds provided for preferred equity investments and mezzanine loans, which were $1.3 million and $3.4 million, respectively, during the same period in the prior year. In addition, the sale of Cottonwood Broadway in February 2025 provided $1.0 million more in cash than what was provided with the sale of Cottonwood West Palm in February of 2024.

Net cash flows from financing activities decreased by $9.4 million compared to the same period in the prior year. This is primarily due to a decrease of $47.0 million in borrowings on our revolving credit facility, mortgage notes and construction loans, and an increase of $1.0 million in distributions. This was offset by $19.0 in net proceeds received from land loans, $9.5 million in net proceeds received from the issuance of preferred and common stock, and a decrease of $10.0 million in redemptions of preferred and common stock.

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Distributions

The following table shows distributions paid and cash flow (used in) provided by operating activities during the nine months ended March 31, 2025 and the year ended December 31, 2024 ($ in thousands):

Three Months Ended
March 31, 2025
Year Ended
December 31, 2024
Distributions paid in cash - convertible preferred stockholders$1,193 $1,885 
Distributions paid in cash - common stockholders4,778 19,544 
Distributions paid in cash to noncontrolling interests - limited partners5,894 23,708 
Distributions of DRP (reinvested)871 3,182 
Total distributions (1)
$12,736 $48,319 
Source of distributions (2)
Paid from cash flows provided by operations$— $16,529 
Paid from proceeds from realized investments11,865 28,608 
Offering proceeds from issuance of common stock pursuant to the DRP871 3,182 
Total sources$12,736 $48,319 
Net cash (used in) provided by operating activities (2)
$(5,463)$15,443 
(1) Distributions are paid on a monthly basis. In general, distributions for all record dates of a given month are paid on or about the fifth business day of the following month.
(2) The allocation of total sources are calculated on a quarterly basis. Generally, for purposes of determining the source of our distributions paid, we assume first that we use positive cash flow from operating activities from the relevant or prior quarter to fund distribution payments. As such, amounts reflected above as distributions paid from cash flows provided by operations may be from prior quarters which had positive cash flow from operations.
For the three months ended March 31, 2025, distributions declared to convertible preferred stockholders, common stockholders and limited partners were $1.3 million, $5.6 million and $5.9 million, respectively.

For the three months ended March 31, 2025, we paid cash distributions to convertible preferred stockholders, common stockholders and limited partners of $1.2 million, $4.8 million and $5.9 million, respectively. For the three months ended March 31, 2025, our net loss was $13.0 million. Cash flows used in operating activities for the three months ended March 31, 2025 was $5.5 million.

Critical Accounting Policies

Please refer to Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the period ending December 31, 2024 for discussions of our critical accounting estimates. As of March 31, 2025, our critical accounting estimates have not changed from those described in that report.

Subsequent Events

Prospect Mezzanine Loan

On April 16, 2025, we entered into an agreement to provide a $5.1 million mezzanine loan to refinance Prospect on Central, a mixed-use property in Denver, Colorado. We provided the first $3.8 million of our commitment upon the execution of the agreement, while the remaining $1.3 million is held in reserve. The mezzanine loan is paid current interest at a rate of 15.0% on the entire commitment drawn from the debt service reserve and matures on May 8, 2027 with two 12-month extension options, subject to conditions being met.

Infield Funding

On April 25, 2025, we increased our commitment by an additional $2.0 million on the Infield preferred equity investment, and funded $1.0 million on April 30, 2025, bringing our total funding to $13.7 million.

Sale of Parc Westborough

On May 14, 2025, we sold Parc Westborough for net proceeds of $54.6 million after repayment of the entire drawn balance on the revolving credit facility. We expect to recognize a gain on sale during the three months ended June 30, 2025.
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Item 3. Quantitative and Qualitative Disclosure about Market Risk

Interest Rate Risk

We are exposed to the effects of interest rate changes as we incur debt to maintain liquidity and to finance our real estate investment portfolio and operations. Interest rate changes affect our profitability and the value of our real estate investment portfolio. Our objective with interest rate risk is to reduce the potentially adverse effects of interest rate changes on earnings, prepayment penalties and cash flows and to lower overall borrowing costs. We manage interest rate risk by maintaining a ratio of fixed rate, long-term debt such that variable rate exposure is kept at an acceptable level. We also utilize a variety of derivative financial instruments, including interest rate caps. These financial instruments may be subject to the risk that losses on a hedge position will reduce the funds available for the payment of distributions to our stockholders and/or that the losses may exceed the amount we invested in the derivative instrument itself.

We have both fixed and variable rate debt. Interest rate fluctuations will generally not affect future earnings or cash flows on fixed rate debt unless such debt matures or is otherwise terminated. However, interest rate changes do affect the fair value of fixed rate instruments. As of March 31, 2025, the face value of our fixed rate mortgage debt was $807.9 million and the estimated aggregate fair value was $792.6 million. Fair value is computed using rates available to us for debt with similar terms and remaining maturities. If interest rates had been 100 basis points higher as of March 31, 2025, the fair value of our fixed rate debt would have decreased by $13.0 million.

Conversely, movements in interest rates on variable rate debt change future earnings and cash flows, but, other than changes in required risk premiums, do not significantly affect fair value. As of March 31, 2025, we had $300.6 million of variable rate debt outstanding, including $44.0 million of construction loans, with 55.6% of our variable rate debt under rate cap hedging arrangements. If interest rates on non-hedged variable rate debt had been 100 basis points higher during the three months ended March 31, 2025, our interest expense would have increased by approximately $330,000. Interest on construction loans prior to being placed in service is capitalized; therefore, the impact of a change in interest rates on our condensed consolidated statements of operations would be less than the total change, but we would incur higher cash payments and capitalized costs, resulting in greater depreciation in later years.

The weighted-average interest rate of our variable rate debt at March 31, 2025 was 6.15%. The interest rate represents the actual interest rate in effect at March 31, 2025 (consisting of the contractual interest rate and the effect of interest rate swaps, if applicable), using interest rate indices as of March 31, 2025 were applicable.

Credit Risk

For our structured investments, we are exposed to the risk of a borrower’s ability to perform under the terms of their obligations to us. We manage this credit risk by conducting a comprehensive due diligence process prior to making an investment and by actively monitoring the projects we have invested in. The performance and value of our real estate-related structured investments depend upon the sponsors’ ability to manage the development of the respective properties that serve as collateral so that each property’s value ultimately supports the repayment of the investment and accrued returns. Mezzanine loans and preferred equity investments are subordinate to senior mortgage loans and, therefore, involve a higher degree of risk. In the event of a default, mezzanine loans and preferred equity investments will be satisfied only after the senior lender’s investment is fully recovered. As a result, in the event of a default, we may not recover all of our investment.

In addition, we are exposed to the risks generally associated with the commercial real estate market, including variances in occupancy rates, capitalization rates, absorption rates, and other macroeconomic factors beyond our control. We seek to manage these risks through our underwriting and asset management processes.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the direction of our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of March 31, 2025. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of March 31, 2025, our disclosure controls and procedures were effective.

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Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the quarter ended March 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we may be involved in various claims and legal actions arising in the ordinary course of business. As of March 31, 2025, we were not involved in any material legal proceedings.

Item 1A. Risk Factors

Please see the risks discussed below and in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2024.

Risks Related to our Company

We have incurred net losses under GAAP in the past and may incur net losses in the future, and we have an accumulated deficit and may continue to have an accumulated deficit in the future.

For the three months ended March 31, 2025, we had consolidated net loss of $13.0 million. For the year ended December 31, 2024, we had consolidated net loss of $20.6 million. As of March 31, 2025, we had an accumulated deficit of $112.0 million. These amounts largely reflect the expense of real estate depreciation and amortization in accordance with GAAP, which was $15.0 million for the three months ended March 31, 2025 and $65.3 million for the year ended December 31, 2024.

Net loss and accumulated deficit are calculated and presented in accordance with GAAP, which, among other things, requires depreciation of real estate investments. We calculate depreciation on a straight-line basis. As a result, our operating results imply that the value of our real estate investments will decrease evenly over a set time period. However, we believe that the value of real estate investments will fluctuate over time based on market conditions. Thus, in addition to GAAP financial metrics, management reviews certain non-GAAP financial metrics, including funds from operations, or FFO and Core FFO. FFO measures operating performance that excludes gains or losses from sales of depreciable properties, real estate-related depreciation and amortization and after adjustments for our share of consolidated and unconsolidated entities. See Part I, Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations– Funds from Operations” for considerations on how to review this metric.

We have paid distributions from offering proceeds. In the future we may continue to fund distributions with offering proceeds. To the extent we fund distributions from sources other than our cash flow from operations, we will have less funds available for investment in multifamily apartment communities and multifamily real estate-related assets and the overall return to our stockholders may be reduced.

Our charter permits us to make distributions from any source, including offering proceeds or borrowings (which may constitute a return of capital), and our charter does not limit the amount of funds we may use from any source to pay such distributions. We intend to make distributions on our common stock on a per share basis with each share receiving the same distribution, subject to any class-specific expenses such as distribution fees on our Class T and Class D shares. If we fund distributions from financings, our offerings or other sources, we will have less funds available for investment in multifamily apartment communities and other multifamily real estate-related assets and the number of real estate properties that we invest in and the overall return to our stockholders may be reduced. If we fund distributions from borrowings, our interest expense and other financing costs, as well as the repayment of such borrowings, will reduce our earnings and cash flow from operations available for distribution in future periods. If we fund distributions from the sale of assets or the maturity, payoff or settlement of multifamily real estate-related assets, this will affect our ability to generate cash flows from operations in future periods.

It is likely that we will use sources of funds, which may constitute a return of capital to fund distributions. During our offering stage, when we may raise capital more quickly than we acquire income-producing assets, and for some period after, we may not be able to make distributions solely from our cash flow from operations. Further, because we may receive income from our investments at various times during our fiscal year and because we may need cash flow from operations during a particular period to fund capital expenditures and other expenses, we expect that we will declare distributions in anticipation of cash flow that we expect to receive during a later period and we will make these distributions in advance of our actual receipt of these funds. In addition, to the extent our investments are in development or redevelopment projects or in properties that have significant capital requirements, our ability to make distributions may be negatively impacted. In these instances, we expect to look to third-party borrowings to fund our distributions. We may also fund such distributions from the sale of assets. To the
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extent distributions exceed cash flow from operations, a stockholder’s basis in our stock will be reduced and, to the extent distributions exceed a stockholder’s basis, the stockholder may recognize capital gain.

For the three months ended March 31, 2025, and the year ended December 31, 2024, we paid aggregate distributions to convertible preferred stockholders, common stockholders and limited partnership unit holders of $12.7 million and $48.3 million, including $11.9 million and $45.1 million of distributions paid in cash and $0.9 million and $3.2 million of distributions reinvested through our distribution reinvestment plan, respectively.

Our net loss for the three months ended March 31, 2025 was $13.0 million and our net loss for the year ended December 31, 2024 was $20.6 million. Cash flows used in operating activities were $5.5 million for the three months ended March 31, 2025, and cash flows provided by operating activities were $15.4 million for the year ended December 31, 2024.

We funded our total distribution paid during the three months ended March 31, 2025, which includes net cash distributions and distribution reinvestment by stockholders, with $0.9 million of offering proceeds from issuance of common stock pursuant to our distribution reinvestment plan and $11.9 million from proceeds from realized investments.

We funded our total distributions paid during the year ended December 31, 2024, which includes net cash distributions and distributions reinvested by stockholders, with $16.5 million cash provided by operating activities, $3.2 million of offering proceeds from issuance of common stock pursuant to our distribution reinvestment plan and $28.6 million from proceeds from realized investment.

Generally, for purposes of determining the source of our distributions paid, we assume first that we use cash flow from operating activities from the relevant or prior periods to fund distribution payments. To the extent that we pay distributions from sources other than our cash flow from operating activities, we will have less funds available for the acquisition of real estate investments, the overall return to our stockholders may be reduced and subsequent investors will experience dilution. In addition, to the extent distributions exceed cash flow from operating activities, a stockholder’s basis in our stock will be reduced and, to the extent distributions exceed a stockholder’s basis, the stockholder may recognize capital gain.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Unregistered Sale of Equity Securities

During the three months ended March 31, 2025, we sold equity securities that were not registered under the Securities Act and not previously included in a Quarterly Report on Form 10-Q or Current Report on Form 8-K as described below.

LTIP Units

On January 9, 2025, we granted 23,420 time-based LTIP Units in CROP with an aggregate value of $0.3 million, to our three independent directors as compensation for serving as directors. The LTIP Units have a one-year vesting schedule.

On January 9, 2025, we granted an aggregate of 132,521 time-based LTIP Units in CROP with an aggregate value of $1.6 million to our executive officers and certain of our employees as equity compensation. The LTIP Units vest over four years in equal installments on a quarterly basis, subject to continued service.

The value of the LTIP Units granted in January 2025 was determined by reference to the November 30, 2024 net asset value of OP Units of $12.1688. The issuance of all such shares of LTIP Units was effected in reliance upon an exemption from registration provided by Section 4(a)(2) under the Securities Act and the rules and regulations promulgated thereunder.

Over time, the LTIP Units can achieve full parity with OP Units for all purposes. If such parity is reached, non-forfeitable LTIP Units may be converted into OP Units. OP Units may be redeemed for cash equal to the then-current market value of one share of Class I common stock or, at our election, for shares of Class I common stock on a one-for-one basis. The OP Units were issued at the most recently disclosed NAV per unit of the OP Units as determined based on the valuation guidelines adopted by our board of directors.

Class I Common Stock

On January 9, 2025, we granted 18,687 restricted shares of our Class I common stock to certain employees of us and our advisor and its affiliates for past and future services for us. The restricted stock units have a four-year vesting schedule. The shares were issued exclusively to accredited investors in reliance on Rule 506(b) of Regulation D. No general solicitation or
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underwriters were involved in the issuance. The shares were issued at the most recently disclosed net asset value or NAV of per share on November 30, 2024, as determined based on the valuation guidelines adopted by our board of directors which was $12.1688.

During the three months ended March 31, 2025, we issued 147,400 shares of Class I common stock upon exchange of corresponding OP Units held by various limited partners. The issuance of such shares of common stock was effected in reliance upon an exemption from registration provided by Section 4(a)(2) under the Securities Act and the rules and regulations promulgated thereunder. We relied on the exemption based on representations given by the holders of the OP Units. The Class I common stock was issued at the most recently disclosed NAV of the Class I shares as determined based on the valuation guidelines adopted by our board of directors.

Share Repurchase Program

We have adopted a share repurchase program, whereby subject to the limitations of the program, on a monthly basis, stockholders may request that we repurchase all or any portion of their shares. We are not obligated to repurchase any shares and may choose to repurchase only some, or even none, of the shares that have been requested to be repurchased in any particular month in our discretion.

Under our share repurchase program, to the extent we choose to repurchase shares in any particular month, we will only repurchase shares as of the last calendar day of that month (a “Repurchase Date”). Repurchases will be made at the transaction price in effect on the Repurchase Date (which will generally be equal to our prior month’s NAV per share), except that depending on the class of shares requested to be repurchased and how long the shares have been outstanding, the shares may be repurchased at a discount to the transaction price (an “Early Repurchase Deduction”) as described in the Share Repurchase Program which is filed as exhibit 99.1 in our Annual Report on Form 10-K, subject to certain limited exceptions.

The total amount of aggregate repurchases of our Class T, Class D, Class I, and Class A shares (all of our outstanding classes of common stock) is limited to no more than 2% of the aggregate NAV of our common stock outstanding per month and no more than 5% of our aggregate NAV of our common stock outstanding per calendar quarter.

During the three months ended March 31, 2025, we repurchased shares of our common stock in the following amounts at the then-applicable transaction price (reduced as applicable by the Early Repurchase Deduction):

Month of:
Total Number of Shares Repurchased (1)
Repurchases as a Percentage of NAV (2)
Average Price Paid per Share
Maximum Number of Shares Pending Repurchase Pursuant to Publicly Announced Plans or Programs (3)
January 2025338,4941.0612681 %$11.7809
February 2025204,0070.6337656 %$11.6992
March 2025455,7941.4255518 %$11.6360
Total998,295
(1) All shares have been repurchased pursuant to our share repurchase program.
(2) Represents aggregate NAV of the shares repurchased under our share repurchase plan over aggregate NAV of all shares of our common stock outstanding, in each case, based on our NAV as of the last calendar day of the prior month. Pursuant to our share repurchase program, we may repurchase up to 2% of the aggregate NAV of our common stock outstanding per month and 5% of the aggregate NAV of our common stock outstanding per calendar quarter.
(3) All repurchase requests under our share repurchase plan were satisfied. We funded our repurchases with cash available from operations, financing activities and capital raising activities.

Additional information regarding recent unregistered sales of equity securities is included herein at Item 5. “Other Information”.

Item 3. Defaults Upon Senior Securities

None

Item 4. Mine Safety Disclosures

Not applicable

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Item 5. Other Information

(c) During the quarterly period ended March 31, 2025, none of our directors or officers (as defined in Rule 16a-1(f) promulgated under the Exchange Act) adopted or terminated any “Rule 10b5-1 trading arrangement” or any “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408 of Regulation S-K.

Sales of Series 2025 Preferred Stock

During the period from May 7, 2025 through May 14, 2025, we issued and sold 113,281 shares of Series 2025 Preferred Stock in the Series 2025 Private Offering and received aggregate proceeds of $1,124,000. In connection with the sale of these shares in the Series 2025 Private Offering, we paid selling commissions of $61,800 and aggregate placement fees of $34,658. Additionally, during the same period, we issued and sold 10,638 shares of Series 2025 Preferred Stock in exchange for our Series 2019 Preferred Stock or Series 2023 Preferred Stock, as applicable, in the Exchange Offering and paid aggregate selling commissions of $0 and placement fees of $2,950. As of May 14, 2025, there were 6,849,344 shares of our Series 2025 Preferred Stock outstanding.
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Item 6. Exhibits
Exhibit NumberExhibit Description
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
3.9
3.10
3.11
3.12
3.13
3.14
3.15
3.16
3.17
3.18
3.19
3.20
4.1
4.2
4.3
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4.4
10.1*
10.2*
31.1*
31.2*
32.1*
32.2*
101.INS*Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
101.SCH*Inline XBRL Taxonomy Extension Schema Document
101.CAL*Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*Inline XBRL Taxonomy Extension Presentation Linkbase Document
104*Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
*Filed herewith

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SIGNATURES

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 thereunto duly authorized.
COTTONWOOD COMMUNITIES, INC.
By:/s/ Daniel Shaeffer
Daniel Shaeffer, Chief Executive Officer
By:/s/ Adam Larson
Adam Larson, Chief Financial Officer

Dated: May 15, 2025
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