Cottonwood Residential Inc., a private real estate investment trust, has sold a 3,473-unit, 12-property multifamily portfolio to a real estate fund managed by Ares Management L.P. (NYSE: ARES) for approximately $440 million. Ares is a publicly traded alternative asset manager with approximately $121.4 billion of assets under management.
Cottonwood Residential recently started a plan to liquidate and restructure its subsidiaries, including Cottonwood Residential O.P. LP., as reported by The DI Wire last week.
The 12 properties were originally built between 1981 to 2006 and are located in Tennessee, Texas, Georgia, North Carolina and South Carolina. Eleven of the 12 transactions closed between September 28th and October 9th, and the final sale is expected to close in late October.
Under the terms of the sale, Ares Management retained a Cottonwood affiliate to continue as the property manager of the assets. Additionally, as part of Cottonwood’s broader plan, five other properties are expected to be sold in the coming months, which are reportedly valued at approximately $290 million.
The company noted that the proceeds generated from the sales will be used to repay and redeem interests in Cottonwood held by Cottonwood’s two institutional investors, FrontRange Capital Partners and Equity Resource Investments, and its non-voting common stockholders.
According to Cottonwood, distributions to its common stockholders resulting from the sales are projected to be between $18.75 to $19.57 per share. This is in addition to the operating distributions received over the course of the investment.
“We’re very happy with the results of the transaction and the exceptional value we believe we’ve delivered to our institutional and common shareholders. Upon completion of these sales, affiliates of Cottonwood will enter a new phase of their business with the intention of pursuing a value-add strategy to enhance the rent levels and net operating income of the remaining assets in the portfolio,” said Dan Shaeffer, CEO of Cottonwood. “Through our affiliates, we also intend to continue investing new capital in select high-quality development opportunities while growing our advisory business.”
Cottonwood Residential sponsors Cottonwood Communities Inc., a non-traded REIT, which launched its $750 million offering in August 2018, as well as two $50 million Regulation A offerings: Cottonwood Multifamily REIT II Inc. and Cottonwood Multifamily Opportunity Fund Inc., which launched in launched July 2017 and November 2017, respectively.