Cottonwood Communities Announces $150M Preferred Stock Offering

The private placement targets accredited investors, aligning with strategic growth and operational goals.

January 14, 2025

Introduction

Cottonwood Communities, Inc., a Maryland-based real estate investment trust, has unveiled plans for a $150 million private offering of Series 2025 Preferred Stock. This strategic move emphasizes the company's commitment to leveraging its capital base while enhancing its financial flexibility to address market opportunities.

Key Financial Details

The Series 2025 Preferred Stock is priced at $10 per share, designed exclusively for accredited investors. Operating under a best-efforts framework, the offering will channel proceeds toward the company’s operating partnership. These shares, which carry a fixed annual dividend yield starting at 6.5%, align Cottonwood’s goals with investor interests.

Dividend rates are scheduled to increase in the coming years, reinforcing long-term growth and value creation. By December 31, 2028, Cottonwood is obligated to redeem the stock at $10 per share plus accrued dividends, subject to extension options.

Strategic Amendments and Governance

In alignment with this offering, Cottonwood modified its operating partnership agreement to incorporate Series 2025 Preferred Units, mirroring the features of the stock. These adjustments, made effective December 5, 2024, ensure seamless fund allocation and operational alignment across subsidiaries.

Further governance updates were reflected in supplementary articles filed with Maryland’s State Department of Assessments and Taxation. The revised charter enhances the company’s flexibility, positioning it for strategic transactions and compliance.

Brokerage and Distribution

The company enlisted a third-party managing broker dealer, which will oversee distribution. Compensation for the broker includes selling commissions up to 6% of gross proceeds and placement fees up to 3.25%. Certain fees may be waived for affiliated transactions, demonstrating Cottonwood’s focus on efficiency.

Growth and Market Focus

With the launch of this private placement, Cottonwood underscores its focus on sustainable expansion and innovative financing strategies. The company aims to capitalize on its robust real estate portfolio while maintaining a disciplined approach to risk management and investor returns.