Cottonwood Multifamily REIT I Reports 8% Increase in NAV to $12.21
December 17, 2019 | James Sprow | Blue Vault
The Board of Directors of Cottonwood Multifamily REIT I, Inc., a Regulation A+ real estate investment trust (the “REIT”) sponsored by Cottonwood Residential, approved an updated net asset value of $12.21 for the company’s common stock as of September 30, 2019.
The new valuation represents an approximate 8 percent increase from the previous NAV per share of $11.31 and a 22 percent increase from the original purchase NAV of $10.00 per share. The current distribution rate remains unchanged at $0.575 per share on an annualized basis representing a 5.75% yield based on the original $10.00 per share offering price.
Cottonwood Multifamily REIT I owns a portfolio of three multifamily properties located in Tampa, FL, Atlanta, GA, and Charlotte, NC, purchased for a combined $140.9 million. The REIT owns a 90 percent interest in the properties, which were purchased in joint ventures with affiliates of Cottonwood Residential O.P LP. The properties have a combined appraised market value of $164.2 million as of September 30, 2019 and were appraised by Cushman & Wakefield, Newmark Knight Frank, and CBRE. The appraised values show a combined increase of 16.5% over the original purchase prices. The three properties are shown below with their original purchase prices:
As of June 30, 2019, Alpha Mill was leased at a rate of 95.51%, Cottonwood Westside was leased at a rate of 95.94%, and The Marq Highland Park was leased at a rate of 90.38%.
The portfolio’s loan-to-value (“LTV”) is 57 percent based on the new appraised values, a reduction from the initial LTV of 64 percent.
In the REIT’s filings with the SEC, reported for the six months ended June 30, 2019, FFO was $687,000 for $0.14 per share, with Core FFO, after adjusting for amortization of debt issuance costs and market to market adjustments on interest rate caps, totaling $0.20 per share.
“We believe that the value creation we have seen thus far in the REIT’s lifecycle is a testament to our investment thesis of acquiring high quality assets in enduring locations with strong demographics and job growth,” said Adam Larson, Chief Financial Officer of the REIT. “Furthermore, we are encouraged by the positive impact that our pioneering ‘no upfront load’ structure has had on investment performance.”
The company noted that the NAV considered metrics such as cash flows, comparable sales metrics, capitalization rates, loan balances, interest rates, and financial projections.
Cottonwood Multifamily REIT I commenced its $50 million private offering in May 2016 and had sold all of the 5 million shares of its common stock by April 2017. Thereafter, Cottonwood launched two other Regulation A+ offerings (Cottonwood Multifamily REIT II and Cottonwood Multifamily Opportunity Fund) which also became fully subscribed.
About Cottonwood Residential’s Open Public Non-Traded REIT
Cottonwood Communities, Inc. is a public, non-traded real estate investment trust (“REIT”) advised by Cottonwood Residential that seeks to invest in multifamily apartment communities and multifamily real estate-related assets located throughout the United States. Its strategy is based on a philosophy that location, investment time horizon, asset-specific attributes, and appropriate leverage are fundamental drivers of long-term value creation in real estate. The REIT will consider the following when targeting properties for investment:
• Local Industry Profile
• Favorable Demographics
• Infill Locations
• Accessibility
• Unique Opportunities
The REIT has a portfolio composition strategy to invest 65% in stabilized properties (income-producing, stabilized rents, stabilized occupancy levels) and 35% in growth investments (preferred equity, mezzanine loans, equity investments in property/land to be developed). The REIT’s first property investment was Cottonwood West Palm in Palm Beach, Florida, a 245-unit multifamily community completed in 2018. In July 2019 the REIT invested in a $10 million note with a 9.50% + 1-month LIBOR interest rate, secured by a deed of trust on a development project in Allen, Texas. In August 2019 the REIT invested in a preferred equity position with an annual preferred return of 13% as partial financing of a 254-unit apartment community in Ybor City, Florida.
The offering was effective August 13, 2018, and is raising up to $750 million. Shares of the offering are available to investors that meet the minimum suitability standards set forth in the prospectus at $10 per share with a minimum investment of $5,000. The offering’s Class A and Class T shares have no front loads for investors. The selling commissions and dealer manager fees are paid by the advisor.
Cottonwood’s REITs form joint ventures with Cottonwood, which is a fully-integrated owner/operator of multifamily properties throughout the country with approximately $2 billion in total assets. Established in 2009, Cottonwood owns nearly 14,000 units with operations in 11 states. Its senior executive team has an average of 18+ years of relevant industry experience, resulting in specific expertise to investors, residents, and employees in all aspects of multifamily ownership and management.
Source: Cottonwood Residential, Cottonwood Communities, SEC
