Cottonwood to Acquire Reg A+ REIT Affiliate in Stock-for-Stock Merger Transaction

Cottonwood Communities Inc., a publicly registered non-traded real estate investment trust with $2.4 billion in total assets, has entered into a stock-for-stock merger agreement with Cottonwood Multifamily Opportunity Fund

Cottonwood Communities Inc., a publicly registered non-traded real estate investment trust with $2.4 billion in total assets, has entered into a stock-for-stock merger agreement with Cottonwood Multifamily Opportunity Fund Inc, a Regulation A+ REIT affiliate. The boards of both REITs have unanimously approved the merger.

The combined company will be a $2.5 billion multifamily REIT comprised of 36 assets across 12 states. The post-merger REIT will retain the name “Cottonwood Communities,” and the separate existence of Cottonwood Multifamily Opportunity Fund and its operating partnership will cease, the company said.

According to filings with the Securities and Exchange Commission, each share of Cottonwood Multifamily Opportunity Fund will be converted to the right to receive 0.8669 shares of Cottonwood Communities Class A common stock.

The current net asset value per share for Cottonwood Communities’ Class A common stock is $20.63, implying a current value of $17.88 per share of Cottonwood Multifamily Opportunity Fund common stock.

The merger is expected to close at the end of the third or beginning of the fourth quarter of 2022, with the approval by a majority of Cottonwood Multifamily Opportunity Fund stockholders.

Cottonwood Multifamily Opportunity Fund was created to invest in multifamily development projects and/or make mezzanine loans or preferred equity investments in multifamily construction and development projects. Its $50 million offering launched in November 2017 and was fully subscribed in June 2019.

Cottonwood Multifamily Opportunity Fund’s investments include two development projects and one investment in a land parcel held for development, all through separate joint ventures with its operating partnership, Cottonwood Residential O.P. LP.

Last May, Cottonwood Communities completed the first of three affiliated mergers when it merged with Cottonwood Residential II Inc. and its operating partnership, Cottonwood Residential O.P.

In July 2021, the REIT closed two additional mergers with Cottonwood Multifamily REIT I Inc. and Cottonwood Multifamily REIT II Inc., both Regulation A+ REITs.

Cottonwood Communities has raised gross proceeds of approximately $127.3 million from the sale of Series 2019 Preferred Stock in its private offering and approximately $158.1 million from the sale of common stock in its two public offerings, as of March 31, 2022.

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