Cottonwood Multifamily REIT II Buys First Property
Cottonwood Multifamily REIT II Inc., a private real estate investment trust, with a co-investment from affiliated REIT Cottonwood Residential Inc., purchased the Parc Westborough multifamily apartment community located in Westborough, Massachusetts.
Cottonwood Multifamily REIT II Inc., a private real estate investment trust, with a co-investment from affiliated REIT Cottonwood Residential Inc., purchased the Parc Westborough multifamily apartment community located in Westborough, Massachusetts for $65.5 million.
Developed in 2016, the 249-unit, Class A multifamily development is approximately 96 percent leased and has an average unit size of 1,008 square feet.
Cottonwood Multifamily REIT II said that it was drawn to the property for its top-ranked school system—ranked 13th in the state, and its close proximity to the Metro West office market, which employs nearly 750,000 people and is home to more than 15 Fortune 500 companies.
“We are pleased with the terms of the Parc Westborough acquisition and are thrilled to have found an asset that is located in a gateway market with strong employment and demographic attributes.” said Paul Fredenberg, senior vice president of acquisitions at Cottonwood Residential.
Property amenities at Parc Westborough include on-site school bus pick-up, a clubhouse, resident lounge and game room, 24-hour fitness center, dog spa, saltwater pool with grilling area and fire pit, and children’s playground.
Cottonwood Residential O.P. LP originally purchased the property from a third-party seller, and Cottonwood Multifamily REIT II contributed $18.7 million to acquire a 99 percent interest in a joint venture with Cottonwood Residential O.P. that acquired a 65 percent tenant-in-common interest in the property. CW Westborough 1031 LLC, a wholly owned subsidiary of Cottonwood Residential O.P., owns the remaining 35 percent tenant-in common-interest.
In conjunction with the acquisition, a Fannie Mae debt facility was put into place, providing financing for the acquisition and future acquisitions made by Cottonwood Multifamily REIT II.
Terms of the initial borrowing of $38 million, include a 10-year loan term with full-term interest only at a rate of LIBOR + 1.48 percent, for a current all-in rate of 3.57 percent, as of closing. A LIBOR hedging instrument was also purchased, providing a 2.75 percent cap on LIBOR, resulting in a maximum effective interest rate of 4.23 percent.
Cottonwood Multifamily REIT II primarily invests in properties located in major metropolitan areas across the U.S. that have, in the opinion of the board of directors, attractive investment dynamics for property owners. These include population growth, active employment centers, and strong renter demographics.
The REIT partners with Cottonwood Residential, a fully-integrated owner/operator of multifamily properties with $1.7 billion in total assets. Established in 2009, Cottonwood has ownership interests or structured investment interests (including development projects) in approximately 14,600 apartment units in 13 states.
