Cottonwood Communities Inc., a publicly registered non-traded real estate investment trust, has closed on a commitment to loan up to $10 million to develop Dolce Twin Creeks Phase II, a 366-unit multifamily project on nearly 11 acres located in the Dallas suburb of Allen, Texas.
The total development cost is estimated at $73.4 million, and the project is sponsored by Sovereign Properties, a multifamily property developer and an affiliate of the developer that completed and stabilized the adjacent 374-unit Dolce Twin Creeks Phase I project. Early construction has commenced with completion anticipated in January 2021.
Positioned senior to approximately $18 million in common equity, the $10 million loan bears an interest rate of 9.5 percent plus 1-month LIBOR. The loan includes a 1-month LIBOR floor equal to 2.5 percent, resulting in an interest rate floor equal to 12 percent, and is expected to be drawn upon in stages as needed throughout the construction.
The term of the loan is 36 months with two six-month extension options. The senior financing for the project was provided by BridgeInvest and JLJ Capital.
“We are excited to be invested in this project,” said Enzio Cassinis, CEO of Cottonwood Communities. “Allen is considered an affluent suburb of Dallas with a young, well-educated demographic and favorable job growth outlook.”
“We feel that the execution of the Phase I development by Sovereign’s affiliate, combined with our secured position ahead of the common equity in the capitalization of the project, provides attractive risk-adjusted return potential,” added Adam Larson, CFO of Cottonwood Communities.
Major employers in the North Dallas area include Raytheon Space, Airborne Systems, JPMorgan Chase, Toyota, FedEx and Liberty Mutual Insurance.
Cottonwood Communities launched its $750 million offering in August 2018 to invest primarily in multifamily properties throughout the United States.