UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED ~~MARCH 31,~~JUNE 30, 2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM _________ TO _________

Commission file number: 000-56165

Cottonwood Communities, Inc.

(Exact name of Registrant as specified in its charter)

________________________________

Maryland

61-1805524

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

1245 E. Brickyard Road, Suite 250, Salt Lake City, UT 84106

(Address of principal executive offices) (Zip code)

(801) 278-0700

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
None	N/A	N/A

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer

☐

Accelerated filer

☐

Non-Accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ý

As of ~~May 14,~~August 13, 2021, there were ~~12,644,840~~23,569,544 and 17,518 shares of the registrant’s Class A and Class TX (previously Class T) common stock outstanding, respectively, and no shares of Class T, Class D and Class I outstanding.

Table of Contents


Cottonwood Communities, Inc.
Table of Contents

PART I	FINANCIAL INFORMATION
	Item 1.	Financial Statements
		Condensed Consolidated Balance Sheets as of ~~March~~June 3 10 , ~~202~~1 2021 (Unaudited) and December 31, 20 202020	1
		Condensed Consolidated Statements of Operations for the Three Mand Six o n t h s Months Ended ~~March~~June 3 10 , ~~202~~1 2021 and 20 20 2020 (Unaudited)	2
		Condensed Consolidated Statements of Stockholders' Equity for the Three an d Six Months Ended ~~March~~June 3 10 , ~~202~~1 2021 and 20 20 2020 (Unaudited)	3
		Condensed Consolidated Statements of Cash Flows for the ~~Three~~Six Months Ended ~~March~~June 3 10 , ~~202~~1 2021 and 20 20 2020 (Unaudited)	4
		Notes to Condensed Consolidated Financial Statements (Unaudited)	56
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	1622
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2837
	Item 4.	Controls and Procedures	2837
PART II	OTHER INFORMATION
	Item 1.	Legal Proceedings	2938
	Item 1A.	Risk Factors	2938
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2938
	Item 3.	Defaults Upon Senior Securities	3039
	Item 4.	Mine Safety Disclosures	3039
	Item 5.	Other Information	3039
	Item 6.	Exhibits	3541
	Signatures		3743

Table of Contents

PART 1 - FINANCIAL INFORMATION

Item 1. Financial Statements


Cottonwood Communities, Inc.	Cottonwood Communities, Inc.					Cottonwood Communities, Inc.
Condensed Consolidated Balance Sheets	Condensed Consolidated Balance Sheets					Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)						(in thousands, except share and per share data)

		March 31, 2021		December 31, 2020			June 30, 2021		December 31, 2020
Assets	Assets	(Unaudited)				Assets	(Unaudited)
Real estate assets, net	Real estate assets, net	$	159,789,826	$	161,091,994	Real estate assets, net	$	1,464,431	$	161,092
Investments in unconsolidated real estate entities	Investments in unconsolidated real estate entities	33,464,253		30,000,461		Investments in unconsolidated real estate entities	159,590		30,000
Real estate note investment, net		9,065,740		8,254,736
Investments in real-estate related loans						Investments in real-estate related loans	5,189		8,255
Cash and cash equivalents	Cash and cash equivalents	7,133,941		4,361,564		Cash and cash equivalents	37,507		4,362
Restricted cash	Restricted cash	284,675		271,240		Restricted cash	19,776		271
Related party receivables		29,875		0
Other assets	Other assets	743,572		824,687		Other assets	44,080		825
Total assets	Total assets	210,511,882		204,804,682		Total assets	$	1,730,573	$	204,805
Liabilities and equity
Liabilities, Equity, and Noncontrolling Interests						Liabilities, Equity, and Noncontrolling Interests
Liabilities	Liabilities					Liabilities
Credit facilities, net		68,878,506		70,319,868
Mortgage notes and revolving credit facility, net						Mortgage notes and revolving credit facility, net	$	680,798	$	70,320
Construction loans, net						Construction loans, net	80,814		0
Preferred stock, net	Preferred stock, net	39,817,080		29,824,988		Preferred stock, net	201,378		29,825
Related party payables		540,293		580,983
Unsecured promissory notes, net						Unsecured promissory notes, net	48,643		0
Performance participation allocation due to affiliate						Performance participation allocation due to affiliate	6,455		0
Accounts payable, accrued expenses and other liabilities	Accounts payable, accrued expenses and other liabilities	3,668,271		1,995,117		Accounts payable, accrued expenses and other liabilities	51,496		2,577
Total liabilities	Total liabilities	112,904,150		102,720,956		Total liabilities	1,069,584		102,722
Commitments and contingencies (Note 11)		0		0
Commitments and contingencies (Note 12)						Commitments and contingencies (Note 12)	0		0
Equity and noncontrolling interests						Equity and noncontrolling interests
Stockholders' equity	Stockholders' equity					Stockholders' equity
Common stock, $0.01 par value, 1,000,000,000 shares authorized; 12,232,289 shares issued and outstanding at both March 31, 2021 and December 31, 2020		122,323		122,323
Common stock, $0.01 par value, 1,000,000,000 shares authorized; 12,662,358 shares issued and outstanding at June 30, 2021; 12,232,289 shares issued and outstanding at December 31, 2020						Common stock, $0.01 par value, 1,000,000,000 shares authorized; 12,662,358 shares issued and outstanding at June 30, 2021; 12,232,289 shares issued and outstanding at December 31, 2020	126		122
Additional paid-in capital	Additional paid-in capital	121,721,787		121,676,787		Additional paid-in capital	126,176		121,677
Accumulated distributions	Accumulated distributions	(9,278,647)		(7,767,642)		Accumulated distributions	(10,825)		(7,768)
Accumulated deficit	Accumulated deficit	(14,957,731)		(11,947,742)		Accumulated deficit	(20,962)		(11,948)
Total stockholders' equity	Total stockholders' equity	97,607,732		102,083,726		Total stockholders' equity	94,515		102,083
Total liabilities and stockholders' equity		$	210,511,882	$	204,804,682
Noncontrolling interests						Noncontrolling interests
Limited partners						Limited partners	348,604		0
Partially owned entities						Partially owned entities	217,870		0
Total noncontrolling interests						Total noncontrolling interests	566,474		0
Total equity and noncontrolling interests						Total equity and noncontrolling interests	660,989		102,083
Total liabilities, equity and noncontrolling interests						Total liabilities, equity and noncontrolling interests	$	1,730,573	$	204,805

See accompanying notes to condensed consolidated financial statements	See accompanying notes to condensed consolidated financial statements					See accompanying notes to condensed consolidated financial statements

Table of Contents


Cottonwood Communities, Inc.	Cottonwood Communities, Inc.					Cottonwood Communities, Inc.
Condensed Consolidated Statements of Operations	Condensed Consolidated Statements of Operations					Condensed Consolidated Statements of Operations
(Unaudited)	(Unaudited)					(Unaudited)
(in thousands, except share and per share data)						(in thousands, except share and per share data)

		Three Months Ended March 31,					Three Months Ended June 30,				Six Months Ended June 30,
		2021		2020			2021		2020		2021		2020
Revenues	Revenues					Revenues
Rental and other property revenues	Rental and other property revenues	$	3,172,181	$	1,539,577	Rental and other property revenues	$	16,843	$	3,011	$	20,015	$	4,551
Real estate note investment interest		245,352		71,715
Property management revenues						Property management revenues	2,121		0		2,121		0
Other revenues						Other revenues	277		118		523		189
Total revenues	Total revenues	3,417,533		1,611,292		Total revenues	19,241		3,129		22,659		4,740
Expenses
Operating expenses						Operating expenses
Property operations expense	Property operations expense	1,348,135		655,284		Property operations expense	6,804		1,268		8,152		1,924
Reimbursable operating expenses to related parties		257,044		236,509
Asset management fee to related party		886,307		449,653
Property management expense						Property management expense	2,552		0		2,552		0
Reimbursable operating expenses						Reimbursable operating expenses	74		233		331		469
Asset management fee						Asset management fee	1,442		681		2,328		1,130
Performance participation allocation						Performance participation allocation	6,455		0		6,455		0
Depreciation and amortization	Depreciation and amortization	1,338,430		843,984		Depreciation and amortization	14,482		2,490		15,820		3,334
General and administrative expenses	General and administrative expenses	2,246,715		230,361		General and administrative expenses	2,190		550		4,438		780
Total operating expenses	Total operating expenses	6,076,631		2,415,791		Total operating expenses	33,999		5,222		40,076		7,637
Other income (expense)
Equity in earnings of unconsolidated real estate entities		951,454		240,096
Loss from operations						Loss from operations	(14,758)		(2,093)		(17,417)		(2,897)
Equity in earnings (losses) of unconsolidated real estate entities						Equity in earnings (losses) of unconsolidated real estate entities	(652)		325		299		565
Interest income	Interest income	362		184,884		Interest income	136		5		137		190
Interest expense	Interest expense	(1,329,835)		(537,971)		Interest expense	(5,824)		(897)		(7,154)		(1,435)
Total other expense		(378,019)		(112,991)
Total expenses before asset management fee waiver		(6,454,650)		(2,528,782)
Asset management fee waived by Advisor		27,128		127,440
Net expenses after asset management fee waiver		(6,427,522)		(2,401,342)
Other (expense) income						Other (expense) income	(302)		12		(275)		140
Net loss	Net loss	$	(3,009,989)	$	(790,050)	Net loss	(21,400)		(2,648)		(24,410)		(3,437)
Net loss attributable to noncontrolling interests:						Net loss attributable to noncontrolling interests:
Limited partners						Limited partners	12,783		0		12,783		0
Partially owned entities						Partially owned entities	2,613		0		2,613		0
Net loss attributable to common stockholders						Net loss attributable to common stockholders	$	(6,004)	$	(2,648)	$	(9,014)	$	(3,437)

Weighted-average shares outstanding		12,232,289		9,483,288
Weighted-average common shares outstanding						Weighted-average common shares outstanding	12,492,221		10,520,556		12,362,973		10,001,922
Net loss per common share - basic and diluted	Net loss per common share - basic and diluted	$	(0.25)	$	(0.08)	Net loss per common share - basic and diluted	$	(0.48)	$	(0.25)	$	(0.73)	$	(0.34)

See accompanying notes to condensed consolidated financial statements	See accompanying notes to condensed consolidated financial statements					See accompanying notes to condensed consolidated financial statements

Table of Contents


Cottonwood Communities, Inc.	Cottonwood Communities, Inc.																			Cottonwood Communities, Inc.
Condensed Consolidated Statements of Stockholders' Equity	Condensed Consolidated Statements of Stockholders' Equity																			Condensed Consolidated Statements of Stockholders' Equity
(Unaudited)	(Unaudited)																			(Unaudited)
(in thousands, except share data)																				(in thousands, except share data)

		Stockholders' Equity																			Cottonwood Communities, Inc. Stockholders' Equity																			Noncontrolling interests
		Common Stock			Additional Paid-In Capital				Accumulated Distributions			Accumulated Deficit					Total Equity				Common Stock					Additional Paid-In Capital			Accumulated Distributions			Accumulated Deficit			Total Stockholders' Equity					Limited Partners			Partially Owned Entities		Total Equity and Noncontrolling Interests
		Shares	Amount								Shares				Amount
Balance at January 1, 2021	Balance at January 1, 2021	12,232,289	$	122,323			$	121,676,787						$	(7,767,642)				$	(11,947,742)				$	102,083,726	Balance at January 1, 2021		12,232,289			$	122		$	121,677		$	(7,768)	$	(11,948)		$	102,083				$	—	$	—	$	102,083
Share based compensation		—	—		45,000				—			—					45,000
Share-based compensation																				Share-based compensation	—			—		45			—			—			45					—			—		45
Distributions to investors	Distributions to investors	—	—		—				(1,511,005)			—					(1,511,005)			Distributions to investors	—			—		—			(1,511)			—			(1,511)					—			—		(1,511)
Net loss	Net loss	—	—		—				—			(3,009,989)					(3,009,989)			Net loss	—			—		—			—			(3,010)			(3,010)					—			—		(3,010)
Balance at March 31, 2021	Balance at March 31, 2021	12,232,289	$	122,323	$	121,721,787			$	(9,278,647)		$	(14,957,731)				$	97,607,732		Balance at March 31, 2021	12,232,289			122		121,722			(9,279)			(14,958)			97,607					—			—		97,607

		Stockholders' Equity
		Common Stock			Additional Paid-In Capital				Accumulated Distributions			Accumulated Deficit					Total Equity
		Shares	Amount
Balance at January 1, 2020		8,851,759	$	88,518			$	87,973,949							$	(2,369,592)						$	(3,396,403)				$	82,296,472
Issuance of common stock		1,304,712	13,047		12,963,697				—			—					12,976,744
CRII Merger																				CRII Merger	430,070			4		4,654			—			—			4,658					363,278			221,656		589,592
Development contributions from noncontrolling interests																				Development contributions from noncontrolling interests	—			—		—			—			—			—					—			83		83
Share-based compensation																				Share-based compensation	—			—		—			—			—			—					421			—		421
Other																				Other	—			—		(200)			—			—			(200)					—			—		(200)
Distributions to investors	Distributions to investors	—	—		—				(1,183,119)			—					(1,183,119)			Distributions to investors	—			—		—			(1,546)			—			(1,546)					(2,312)			(1,256)		(5,114)
Net loss	Net loss	—	—		—				—			(790,050)					(790,050)			Net loss	—			—		—			—			(6,004)			(6,004)					(12,783)			(2,613)		(21,400)
Balance at March 31, 2020		10,156,471	$	101,565	$	100,937,646			$	(3,552,711)		$	(4,186,453)				$	93,300,047

See accompanying notes to condensed consolidated financial statements
Balance at June 30, 2021																				Balance at June 30, 2021	12,662,359			$	126	$	126,176		$	(10,825)		$	(20,962)		$	94,515				$	348,604		$	217,870	$	660,989


	Cottonwood Communities, Inc. Stockholders' Equity											Noncontrolling interests
	Common Stock			Additional Paid-In Capital		Accumulated Distributions		Accumulated Deficit		Total Stockholders' Equity		Limited Partners		Partially Owned Entities		Total Equity and Noncontrolling Interests
	Shares	Amount
Balance at January 1, 2020	8,851,759	$	89	$	87,974	$	(2,370)	$	(3,396)	$	82,297	$	—	$	—	$	82,297
Issuance of common stock	1,304,712	13		12,964		—		—		12,977		—		—		12,977
Distributions to investors	—	—��		—		(1,183)		—		(1,183)		—		—		(1,183)
Net loss	—	—		—		—		(790)		(790)		—		—		(790)
Balance at March 31, 2020	10,156,471	102		100,938		(3,553)		(4,186)		93,301		—		—		93,301
Issuance of common stock	709,841	7		7,042		—		—		7,049		—		—		7,049
Share-based compensation	—	—		27		—		—		27		—		—		27
Distributions to investors	—	—		—		(1,310)		—		(1,310)		—		—		(1,310)
Net loss	—	—		—		—		(2,648)		(2,648)		—		—		(2,648)
Balance at June 30, 2020	10,866,312	$	109	$	108,007	$	(4,863)	$	(6,834)	$	96,419	$	—	$	—	$	96,419

See accompanying notes to condensed consolidated financial statements

Table of Contents

Cottonwood Communities, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended March 31,
2021 2020
Cash flows from operating activities:
Net loss $ (3,009,989) $ (790,050)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization 1,338,430 843,984
Equity in earnings (951,454) (240,096)
Amortization of real estate note investment issuance cost 12,562 12,110
Amortization of debt issuance costs 58,638 37,331
Noncash interest expense on preferred stock 278,506 42,047
Share based compensation 45,000 0
Changes in operating assets and liabilities:
Related party receivables (29,875) 0
Other assets 431,115 37,550
Related party payables (40,690) 267,855
Accounts payable, accrued expenses and other liabilities 1,665,551 361,147
Net cash (used in) provided by operating activities (202,206) 571,878
Cash flows from investing activities:
Acquisition of real estate 0 (53,904,597)
Capital improvements to real estate (36,262) (18,674)
Investments in unconsolidated real estate entities (2,512,338) (5,210,937)
Issuance of real estate note investment including issuance costs (823,566) (1,741,219)
Net cash used in investing activities (3,372,166) (60,875,427)
Cash flows from financing activities:
Proceeds from line of credit 3,500,000 0
Repayments of line of credit (5,000,000) 0
Proceeds from issuance of preferred stock, net of issuance costs 9,363,586 7,016,263
Proceeds from issuance of common stock 0 12,928,418
Distributions to common stockholders (1,503,402) (888,805)
Net cash provided by financing activities 6,360,184 19,055,876
Net increase (decrease) in cash and cash equivalents and restricted cash 2,785,812 (41,247,673)
Cash and cash equivalents and restricted cash, beginning of period 4,632,804 47,741,994
Cash and cash equivalents and restricted cash, end of period $ 7,418,616 $ 6,494,321
Reconciliation of cash and cash equivalents and restricted cash to
the condensed consolidated balance sheets:
Cash and cash equivalents $ 7,133,941 $ 6,305,913
Restricted cash 284,675 188,408
Total cash and cash equivalents and restricted cash $ 7,418,616 $ 6,494,321
Supplemental disclosure of non-cash investing and financing activities:
Credit facility entered into in conjunction with acquisition of real estate $ 0 $ 49,616,479
See accompanying notes to condensed consolidated financial statements


Cottonwood Communities, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)

	Six Months Ended June 30,
	2021		2020
Cash flows from operating activities:
Net loss	$	(24,410)	$	(3,437)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	15,820		3,334
Share-based compensation	466		27
Other operating	697		257
Equity in earnings of unconsolidated real estate entities	(299)		(565)
Distributions from unconsolidated real estate entities - return on capital	800		0
Changes in operating assets and liabilities:
Other assets	(1,225)		(344)
Performance participation allocation	6,455		0
Accounts payable, accrued expenses and other liabilities	7,503		1,268
Net cash provided by operating activities	5,807		540
Cash flows from investing activities:
Cash, cash equivalents and restricted cash acquired in connection with the CRII Merger	51,943		0
Acquisition of real estate	0		(53,905)
Capital expenditures and development activities	(22,322)		(57)
Investments in unconsolidated real estate entities	(11,262)		(5,211)
Contributions to investments in real-estate related loans	(6,319)		(3,286)
Proceeds from settlement of investments in real-estate related loans	9,332		0
Other investing activities	178		0
Net cash provided by (used in) investing activities	21,550		(62,459)
Cash flows from financing activities:
Principal payments on mortgage notes	(78)		0
Proceeds from revolving credit facility	3,500		12,000
Repayments on revolving credit facility	(15,000)		(4,500)
Proceeds from construction loans	16,700		0
Proceeds from issuance of Series 2019 Preferred Stock, net of issuance costs	27,264		11,483
Repurchases of preferred stock	(623)		0
Proceeds from issuance of common stock	0		19,858
Distributions to common stockholders	(3,049)		(1,906)
Distributions to noncontrolling interests - limited partners	(2,156)		0
Distributions to noncontrolling interests - partially owned entities	(1,265)		0
Net cash provided by financing activities	25,293		36,935
Net increase (decrease) in cash and cash equivalents and restricted cash	52,650		(24,984)
Cash and cash equivalents and restricted cash, beginning of period	4,633		47,742
Cash and cash equivalents and restricted cash, end of period	$	57,283	$	22,758

Reconciliation of cash and cash equivalents and restricted cash to the condensed consolidated balance sheets:
Cash and cash equivalents	$	37,507	$	22,486
Restricted cash	19,776		272
Total cash and cash equivalents and restricted cash	$	57,283	$	22,758

Table of Contents


Cottonwood Communities, Inc.
Condensed Consolidated Statements of Cash Flows (Continued)
(Unaudited)
(in thousands)
	Six Months Ended June 30,
Supplemental disclosure of non-cash investing and financing activities:	2021		2020
Fair value of assets acquired and liabilities assumed with the CRII Merger:
Real estate assets	$	1,296,241	$	0
Investments in unconsolidated real estate entities	$	118,829	$	0
Intangibles	$	32,122	$	0
Debt	$	734,852	$	0
Preferred stock	$	143,979	$	0
Other assets acquired	$	62,166	$	0
Other liabilities assumed	$	40,934	$	0
Fair value of equity issued to CRII Shareholders in the CRII Merger	$	4,658	$	0
Fair value of noncontrolling interests from the CRII Merger	$	584,934	$	0
Credit facility entered into in conjunction with acquisition of real estate	$	0	$	49,616

See accompanying notes to condensed consolidated financial statements

Cottonwood Communities, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1.Organization and Business

Cottonwood Communities, Inc. ("CCI") is a Maryland corporation formed to invest in multifamily apartment communities and real estate-related assets located throughout the United States. The Company elected to be taxed as a real estate investment trust or REIT beginning with the taxable year ending December 31, 2019. The ~~Company~~Operating Partnership, together with its subsidiaries, holds the Company's real estate interests and conducts ~~its business through its operating partnership,~~the ongoing operations of the Company. Our Operating Partnership was Cottonwood Communities O.P., LP ~~(the “Operating Partnership”~~("CCOP") prior to the CRII Merger and is Cottonwood Residential O.P., LP ("CROP") after the CRII Merger. The CRII Merger is defined and described in more detail below. CCI is the sole member of the general partner of the Operating Partnership, and owns general partners interests in our Operating Partnership alongside third party limited partners. As used herein, the term “Company”, “we”, “our” or ~~"CCOP"). Unless~~“us” includes CRII, our Operating Partnership and its subsidiaries, unless the context indicates ~~otherwise, the “Company,” “we,” “our” or “us” refers to Cottonwood Communities, Inc. and its consolidated subsidiaries, including the Operating Partnership.~~otherwise.

~~We are externally managed by~~ CC Advisors III, LLC ("CCA III"), manages our business as our external advisor and, as of ~~March 31, 2021, had 0 employees. Cottonwood Communities Management, LLC ("CCM")~~the CRII Merger described below, is the Special Limited Partner owning a special partner interest in CROP. Following the CRII Merger, we became the property manager for our stabilized multifamily apartment communities.

We have registered ~~$750,000,000~~$750.0 million in shares of common stock in an initial public offering (the "Offering"), consisting of ~~$675,000,000~~$675.0 million in shares of common stock offered in our primary offering and ~~$75,000,000~~$75.0 million in shares of common stock through our distribution reinvestment plan (the "DRP Offering”). The Offering commenced in August 2018 and ~~is currently~~was suspended ~~as of~~in December 2020 while ~~we pursue~~CCI pursued the ~~proposed~~ mergers described below. Prior to the suspension, 2 classes of common stock were available to purchase in the ~~Offering:~~Offering, Class A and Class TX (previously designated Class T) ~~at a purchase price of $10.00 per share (with discounts available to certain categories of purchasers)~~. These share classes ~~have~~had different underwriting compensation ~~structures, which compensation our advisor~~expenses that were paid on our ~~behalf. When we resume~~behalf by our Advisor. We have filed a post-effective amendment to the Registration Statement for the Offering ~~we expect~~ to register and offer three new classes of shares of common stock in the primary offering, ~~newly designated~~ Class T, Class D and Class I, and all five classes in the DRP Offering. Underwriting compensation expenses for the Offering of the new classes will effectively be paid by ~~investors through an adjustment to the purchase price~~purchasers of the ~~shares~~new classes or borne by us. ~~Refer~~

On August 12, 2021, we filed a registration statement to ~~our Current Report on~~ ~~Form 8-K~~ ~~dated April 2, 2021 as well as "Part II - Item 5. Other Information"~~register $1.0 billion in shares of ~~this report for further information regarding these new classes~~common stock in a follow-on offering, consisting of ~~shares.~~$900.0 million in shares of common stock offered in a primary offering and $100.0 million in shares of common stock through the DRP Offering.

On November 8, 2019, we launched ~~the Private Offering,~~ a private placement offering exempt from registration under the Securities Act ~~for~~(the "Private Offering") pursuant to which we ~~initially offered~~are offering a maximum of ~~$50,000,000~~$100.0 million in shares of Series 2019 Preferred Stock to accredited investors at a purchase price of $10.00 per share. Offering-related expenses in the Private Offering are paid from offering proceeds. ~~On March 23, 2021, our board of directors approved an increase in the size of the offering to $100,000,000.~~

~~At March 31,~~We own and operate a diverse portfolio of investments in multifamily apartment communities located in targeted markets throughout the United States. As of June 30, 2021, we owned 2interests in 29 multifamily apartment communities 1with a total of 8,373 units, which includes 1,079 units in ~~West Palm Beach, Florida and the second in Norwood, Massachusetts; have issued a B Note secured by a deed of trust on a~~4 multifamily ~~development project in Allen, Texas; and have made~~apartment communities under construction. In addition, we had preferred equity investments in 3 multifamily apartment developments totaling 1,073 units, a mezzanine loan in 1 multifamily apartment development, ~~projects~~2 parcels of land held for development as well as various smaller real estate investments. We also manage 20 properties for third parties, bringing the total number of multifamily apartment communities which we own interests in, ~~Ybor City, Florida, Queens, New York, and West Sacramento, California.~~invest, or manage to 55, representing 15,365 units in 13 states.

Merger with Cottonwood Residential II, Inc. and Cottonwood Residential O.P., LP

On May 7, 2021, we completed our merger with Cottonwood Residential II, Inc. ("CRII") (the "CRII Company Merger"), and the merger of ~~the Operating Partnership~~CCOP with and into ~~Cottonwood Residential O.P., LP (“CROP”)~~CROP (the “CROP ~~Partnership~~ Merger,” and together with the CRII Company Merger, the "CRII Merger") through a stock-for-stock and unit-for-unit transaction provided for pursuant to the Agreement and Plan of Merger dated January 26, 2021 by and among us, CCOP, Cottonwood Communities GP Subsidiary, LLC ("Merger Sub"), CRII and CROP.

At the effective time of the CRII Merger, each issued and outstanding share of CRII’s common stock (the “CRII Common Stock”) converted into 2.015 shares of shares of our Class A common stock, each issued and outstanding share of Series 2016 preferred stock of CRII converted into 1 share of our newly designated Series 2016 preferred stock, and each issued and outstanding share of Series 2017 preferred stock of CRII converted into 1 share of our newly designated Series 2017 preferred stock.

At the effective time of the CROP Merger, each participating partnership unit of CROP (i.e., all CROP partnership units other than preferred units) issued and outstanding immediately prior to the CROP Merger split into 2.015 participating partnership units of CROP (the “CROP Unit Split”), whereupon (i) each issued and outstanding Series 2019 preferred unit of ~~the Operating Partnership~~CCOP ("CCOP Series 2019 Preferred Stock") converted into 1 Series 2019 preferred unit of CROP, the terms of which mirrored the CCOP Series 2019 Preferred Stock, (ii) each issued and outstanding LTIP Unit of CCOP (the “CCOP LTIP Units”) was converted into the right to receive 1 LTIP Unit of CROP, the terms and conditions of which mirrored the CCOP LTIP Units, (iii) each issued and outstanding Special LTIP Unit of CCOP (the “CCOP Special LTIP Units”) converted into the right to receive ~~one~~1 Special LTIP Unit of CROP, the terms and conditions of which mirrored the

CCOP Special LTIP Units, and (iv) except as set forth above, each issued and outstanding general partner unit of ~~the Operating Partnership~~CCOP and CCOP Common Unit converted into the right to receive ~~one~~1 common limited partner unit of CROP (“CROP Common Unit”). After giving effect to the CROP Unit Split, each CROP Common Unit, general partner unit and LTIP unit issued and outstanding immediately prior to the effective time of the CROP Merger remained outstanding, and each CROP preferred unit issued and outstanding immediately prior to the effective time of the CROP Merger remained outstanding and continues to be held by the general partner, Merger Sub.

Upon consummation of the CRII Merger, the separate existence of CRII and ~~the Operating Partnership~~CCOP ceased. The CRII Merger was intended to qualify as a “reorganization” under, and within the meaning of, Section 368(a) of the Internal Revenue Code of 1986, as amended.

~~Further, as~~As a result of the CRII Merger, we acquired CRII’s ~~affiliate~~ property ~~manager~~management business and its employees ~~which currently manage over 13,000 units, including approximately 8,600 for Cottonwood affiliates (including us). In addition, we~~ as well as~~acquired~~ the personnel who ~~have~~ historically performed certain administrative and other services for us on behalf of CCA III, including legal, accounting, property development oversight and certain services relating to construction management, ~~shareholders,~~shareholder relations, human resources, renter insurance and information technology. As a result, we manage approximately 13,000 units in stabilized assets, including approximately 7,300 for Cottonwood affiliates (including us), and a 341 unit development project in the lease up stage. We also directly employ the individuals that perform the foregoing administrative ~~services as well as property management~~ services. CCA III continues to manage our operations as our external advisor pursuant to an amended and restated advisory ~~agreement discussed in~~ ~~Note 12~~ ~~"Subsequent Events."~~agreement.

Much of the historical information regarding our structure and agreements presented ~~in this Note 1 and~~ throughout ~~the rest of~~ these ~~Notes to Consolidated Financial Statements has~~condensed consolidated financial statements changed materially ~~changed~~ as a result of the CRII Merger ~~but did apply as of March 31,~~on May 7, 2021.

Change in Sponsor

Immediately prior to the consummation of the CRII Merger, CRII and its affiliates completed certain transactions to restructure the ownership of CCA III such that our sponsor ~~has~~ changed from CRII to Cottonwood Communities Advisors, LLC, the sole owner of CCA III.

~~Proposed Mergers~~CMRI Merger and CMRII Merger

In addition to the CRII Merger that closed on May 7, 2021, on January 26, 2021, we entered into separate merger agreements to acquire each of Cottonwood Multifamily REIT I, Inc. ("CMRI") ("CMRI Merger"), and Cottonwood Multifamily REIT II, Inc. ("CMRII") ("CMRII Merger")~~. The mergers are~~ in stock-for-stock ~~transactions whereby CMRI and CMRII will be merged into Merger Sub. The CMRI Merger and CMRII Merger are not contingent upon each other.~~transactions. Each merger is intended to qualify as a “reorganization” under, and within the meaning of, Section 368(a) of the Internal Revenue Code of 1986, as amended. ~~Refer to our Current Report~~The CMRI Merger and CMRII Merger both closed on ~~Form 8-K~~ ~~dated February 2, 2021 for further information regarding these mergers.~~

~~COVID-19 Pandemic~~

~~One~~July 15, 2021. Each asset held by CMRI and CMRII were owned through joint ventures with CROP. As a result of the ~~most significant risks and uncertainties facing the real estate industry generally continues to be the effect~~consummation of the ~~ongoing public health crisis of~~CMRI Merger and the ~~novel coronavirus disease (COVID-19) pandemic. During~~CMRII Merger, our ownership interest in the ~~three months ended March 31, 2021, we did not experience significant disruptions in our operations from the COVID-19 pandemic; however we continue~~properties held through joint ventures with CROP increased to ~~closely monitor the impact of the COVID-19 pandemic~~100% on ~~all aspects of our business, including how the pandemic will impact our tenants and multifamily communities.~~July 15, 2021.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. The condensed consolidated financial statements, including the condensed notes thereto, are unaudited and exclude some of the disclosures required in audited financial statements. The condensed consolidated balance sheet as of December 31, 2020 has been derived from the Company’s audited financial statements as of that date, but does not include all of the information and footnotes required by GAAP for complete financial statements.

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In the opinion of management, the accompanying condensed consolidated financial statements contain all adjustments and eliminations, consisting only of normal recurring adjustments necessary for a fair presentation in conformity with GAAP. The accompanying condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in our Annual Report on Form 10-K for the period ending December 31, 2020 filed with the SEC.

The accompanying condensed consolidated financial statements include the accounts of the Company and its subsidiaries for which we have a controlling interest. All intercompany balances and transactions have been eliminated in consolidation.

Some of our partially owned and unconsolidated properties are owned through a tenant in common (“TIC interest”) structure. TIC interests constitute separate and undivided interests in real property. TIC interests in properties for which we exercise significant influence are accounted for using the equity method of accounting until we have acquired a 100% interest in the property.

Certain amounts in the prior year condensed consolidated financial statements and notes to the condensed consolidated financial statements have been reclassified to conform to the current year presentation. Such reclassifications did not impact previously reported net loss or accumulated deficit or change net cash provided by or used in operating, investing or financing activities.

Business Combinations

We account for business combinations by recognizing assets acquired and liabilities assumed at their fair values as of the acquisition date and expensing transaction costs. Differences between the transaction price and the fair value of identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree, are accounted for as goodwill, or conversely, as a gain on bargain purchase. Transaction costs are included within general and administrative expenses on our condensed consolidated statements of operations as incurred.

Organization and Offering Costs

~~Prior to the entry into the amended and restated advisory agreement on May 7, 2021 (as discussed in Note 12 "Subsequent Events"), all~~All organization and offering costs in connection with the ~~Offering, with~~distribution of Class A and Class TX shares in the ~~exception~~primary portion of ~~costs incurred in connection with restructuring~~ the Offering ~~following the CRII Merger,~~ were the obligation of our advisor. We did not incur any liability for or reimburse our advisor for any of these organizational and offering costs, ~~as of March 31, 2021. As of March 31, 2021, our advisor had incurred approximately $14,131,000 in organizational~~which totaled $14.1 million. Organization and offering costs ~~from the issuance of common stock. Following the execution of the amended and restated advisory agreement, organizational and offering costs for the Offering,~~in connection with the ~~exception~~distribution of ~~the deferred selling commission on the~~our Class TXT, Class D and Class I shares will be paid by ~~investors through an adjustment to~~purchasers of the ~~purchase price~~shares or borne by us.

Other Assets

Other assets consist primarily of intangible assets acquired in connection with the CRII Merger, as well as receivables, deferred tax assets, prepaid expenses, equipment, related party notes, related party receivables and other assets.

Unsecured Promissory Notes

The 2017 and 2019 6% Notes and 2017 6.25% Notes are unsecured notes issued to investors outside of the United States. These unsecured promissory notes are described in Note 6. These instruments are similar in nature, have fixed interest rates and maturity dates, and are denominated in U.S. dollars.

Noncontrolling Interests

The portion of ownership interests in consolidated entities not held by CCI are reported as noncontrolling interests. Equity and net income (loss) attributable to CCI and to noncontrolling interests are presented separately on the consolidated financial statements. Changes in noncontrolling ownership interests are accounted for as equity transactions.

Noncontrolling interest – limited partners – These noncontrolling interests represent ownership interest in CROP ("OP Units") not held by CCI, the general partner. Net income or loss is allocated to these limited partners of CROP based on their ownership percentage. Issuance of additional Common Stock or OP Units to limited partners changes the ownership interests of both CCI and the limited partners of CROP.

Consistent with the 1-for-one relationship between the OP Units issued to CCI, limited partners are attributed a share of net income or loss in CROP based on their weighted-average ownership interest in CROP during the period.

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Noncontrolling interest – partially owned entities – These noncontrolling interests represent ownership interests that are not held by us in consolidated entities. Net income (loss) is allocated to noncontrolling interests in partially owned entities based on ownership percentage in those entities.

Refer to Note 11 for more information on our noncontrolling interests.

3. Real Estate Assets, Net

The following table summarizes the carrying amounts of our consolidated real estate ~~assets:~~assets (in thousands):


		March 31, 2021		December 31, 2020			June 30, 2021		December 31, 2020
Building and building improvements		$	134,858,553	$	134,822,291
Land and land improvements		28,182,025		28,182,025
Land						Land	$	166,059	$	23,894
Buildings and improvements						Buildings and improvements	1,088,117		139,110
Furniture, fixtures and equipment	Furniture, fixtures and equipment	3,983,344		3,983,344		Furniture, fixtures and equipment	1,581		3,983
Intangible assets	Intangible assets	3,808,756		3,808,756		Intangible assets	37,027		3,809
Construction in progress (1)						Construction in progress (1)	196,733		0
		170,832,678		170,796,416			1,489,517		170,796
Less: Accumulated depreciation and amortization	Less: Accumulated depreciation and amortization	(11,042,852)		(9,704,422)		Less: Accumulated depreciation and amortization	(25,086)		(9,704)
Real estate assets, net	Real estate assets, net	$	159,789,826	$	161,091,994	Real estate assets, net	$	1,464,431	$	161,092

(1) Includes construction in progress for our development projects and capitalized costs for improvements not yet placed in service at our stabilized properties.						(1) Includes construction in progress for our development projects and capitalized costs for improvements not yet placed in service at our stabilized properties.

CRII Merger

On May 7, 2021, we completed the CRII Merger, which was accounted for as a business combination in accordance with ASC 805, Business Combinations ("ASC 805"). Based on an evaluation of the relevant factors and the guidance in ASC 805, Cottonwood Communities Inc. was determined to be both the legal and accounting acquirer. In order to make this consideration, various factors have been analyzed including which entity issued its equity interests, relative voting rights, existence of noncontrolling interests, control of the board of directors, management composition, relative size, transaction initiation, operational structure, relative composition of employees, and other factors. The most significant factor identified was the relative voting rights, as CCI shareholders hold the majority of the controlling financial (voting) interests. CCI also initiated the transaction and was the entity issuing common equity interests in the merger.

The consideration given in exchange for CRII (in thousands, except share and unit data) is as follows:


CRII Common stock issued and outstanding	213,434
Exchange ratio	2.015
CCI common stock issued as consideration	430,070
CCI's estimated value per share as of May 7, 2021	$	10.83
Value of CCI common stock issued as consideration	$	4,658

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The allocation of the purchase price below requires significant judgment and represents management's best estimate of the fair value as of the acquisition date. Under ASC 805 we are allowed a measurement period to complete the accounting for the CRII Merger and to make adjustments if necessary. The following table shows the preliminary purchase price allocation of CRII's identifiable asset and liabilities assumed as of May 7, 2021 (in thousands):


Assets
Real estate assets (1)	$	1,296,241
Investments in unconsolidated real estate entities	118,829
Cash and cash equivalents	31,799
Restricted cash	20,144
Other assets (2)	42,345
Total assets acquired	$	1,509,358

Liabilities
Mortgage notes, net	$	622,095
Construction loans	64,114
Preferred stock	143,979
Unsecured promissory notes	48,643
Accounts payable, accrued expenses and other liabilities	40,934
Total liabilities assumed	919,765
Consolidated net assets acquired	589,593
Noncontrolling interests (3)	(584,934)
Net assets acquired	$	4,658

(1) Real estate assets acquired in connection with the CRII Merger include $33.2 million of intangible lease assets, which have a weighted-average amortization period of 0.5 years.
(2) Other assets includes $32.1 million of intangible assets from the CRII Merger. Of this amount, $8.0 million relates to a promote asset which was removed upon the closing of the CMRI and CMR II Mergers on July 15, 2021. The remaining $24.1 million of intangible assets have a weighted-average amortization period of 8.8 years, and include $22.2 million related to the acquisition of CRII's property management and ancillary businesses (with a weighted-average amortization period of 9.2 years) and $1.9 million related to acquired disposition fees on certain properties and promotes on development assets (with a weighted-average amortization period of 3.8 years).
(3) The fair value of noncontrolling interests is based on the fair value of assets and liabilities held by the noncontrolling interests at their ownership share. These values were determined using methods similar to those used by independent appraisers, and include using replacement cost estimates less depreciation, discounted cash flows, market comparisons, and direct capitalization of net operating income.

As a result of the CRII Merger we consolidated 17 multifamily apartment communities and 4 development properties as well as added 6 multifamily apartment communities accounted for under the equity method of accounting.

The revenue and net loss generated from the assets acquired and liabilities assumed with the CRII Merger since the May 7, 2021 acquisition date to June 30, 2021 are as follows (in thousands):


Revenue	$	16,252
Net loss	$	(9,372)

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Pro Forma Financial Information (unaudited)

The following condensed pro forma operating information is presented as if the CRII Merger occurred in 2020 and had been included in operations as of January 1, 2020. The pro forma operating information excludes certain nonrecurring adjustments, such as acquisition fees and expenses incurred, to reflect the pro forma impact the acquisition would have on earnings on a continuous basis (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Pro forma revenue:
Historic results	$	19,241	$	3,129	$	22,659	$	4,740
CRII Merger (excluding those in historic results)	11,510		21,377		36,657		43,545
Total	$	30,751	$	24,506	$	59,316	$	48,285

Pro forma net loss:
Historic results	$	(21,400)	$	(2,648)	$	(24,410)	$	(3,437)
CRII Merger (excluding those in historic results)	(5,341)		(22,412)		(13,300)		(49,641)
Total	$	(26,741)	$	(25,060)	$	(37,710)	$	(53,078)

The pro forma information is not necessarily indicative of the results which actually would have occurred if the business combination had occurred on the first day of the periods presented, nor does the pro forma financial information purport to represent the results of operations for future periods. Pro forma net losses for the three and six months ended June 30, 2020 include the amortization of $33.2 million of intangible lease assets, which have a weighted-average amortization period of 0.5 years.

Asset acquisition

~~We did not have~~During the six months ended June 30, 2021, there were no asset acquisitions of consolidated real estate ~~asset acquisitions during the three months ended March 31,~~assets in 2021.

On March 19, 2020, we acquired Cottonwood One Upland, a multifamily apartment community in the Greater Boston area for ~~$103,600,000,~~$103.6 million, excluding closing costs. We funded the purchase with an initial draw of ~~$50,000,000~~$50.0 million from our ~~$67,600,000~~$67.6 million credit facility with JP Morgan and proceeds from our offerings. Acquired assets and liabilities were recorded at relative fair value as an asset acquisition.

The following table summarizes the purchase price allocation of Cottonwood One Upland ~~in 2020:~~during the six months ended June 30, 2020 (in thousands):


		Allocated Amounts													Allocated Amounts
Property	Property	Building		Land		Land Improvements		Personal Property		Intangible		Total		Property	Building		Land		Land Improvements		Personal Property		Intangible		Total
Cottonwood One Upland	Cottonwood One Upland	$	82,145,536	$	14,514,535	$	3,009,335	$	1,967,566	$	2,305,430	$	103,942,402	Cottonwood One Upland	$	82,146	$	14,515	$	3,009	$	1,967	$	2,305	$	103,942

The weighted-average amortization period for the intangible lease assets acquired in connection with the Cottonwood One Upland acquisition was 0.5 years.

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4. Investments in Unconsolidated Real Estate Entities

Our investments in unconsolidated real estate entities consist of ownership interests in stabilized properties and preferred equity investments in development ~~projects, and are summarized as follows:~~projects.

Development Location Units Commitment Date Preferred Return Total Commitment Amount Funded to Date
Lector85 Ybor City, FL 254 08/15/2019 13 % (1) $ 9,900,000 $ 9,900,000
Vernon Boulevard Queens, NY 534 07/23/2020 13 % (2) 15,000,000 15,000,000
Riverfront West Sacramento, CA 285 11/30/2020 16 % 15,091,649 5,192,486
Total $ 39,991,649 $ 30,092,486
(1) Will be reduced to 10% annually upon the later to occur of (i) stabilization of the development project or (ii) the one-year anniversary of the receipt of all temporary certificates of occupancy subject to certain financial conditions being satisfied.
(2) In addition to the preferred return, we receive a profit participation upon a liquidity event, pari passu alongside the preferred equity contribution from the Preferred Co-Investor.
Stabilized Properties

Our investments in stabilized properties and related activity is as follows (in thousands):


Property	Location	% Owned	May 7, 2021 Purchase Date Value		Investment		Equity in Earnings (Losses)		Distributions		Balance at June 30, 2021
Stabilized Assets
3800 Main	Houston, TX	50.0%	$	11,239	$	0	$	(395)	$	0	$	10,844
Cottonwood Bayview	St. Petersburg, FL	71.0%	34,401		0		(528)		(140)		33,733
Cottonwood Ridgeview	Plano, TX	90.5%	36,260		0		(530)		0		35,730
Fox Point	Salt Lake City, UT	52.8%	18,668		0		(316)		(374)		17,978
Toscana at Valley Ridge	Lewisville, TX	58.6%	11,017		0		(181)		(64)		10,772
Melrose Phase II	Nashville, TN	24.9%	4,823		498		(64)		(222)		5,035
Other			2,421		0		(26)		0		2,395
Total			$	118,829	$	498	$	(2,040)	$	(800)	$	116,487

Preferred Equity Investments

Our preferred equity investments consist of the following ($ in thousands):


Development	Location	Units	Commitment Date	Preferred Return			Total Commitment		Amount Funded to Date
Lector85	Ybor City, FL	254	08/15/2019	13	%	(1)	$	9,900	$	9,900
Vernon Boulevard	Queens, NY	534	07/23/2020	13	%	(2)	15,000		15,000
Riverfront	West Sacramento, CA	285	11/30/2020	16	%		15,092		13,444
Total							$	39,992	$	38,344

(1) Will be reduced to 10% annually upon the later to occur of (i) stabilization of the development project or (ii) the one-year anniversary of the receipt of all temporary certificates of occupancy subject to certain financial conditions being satisfied.
(2) In addition to the preferred return, we receive a profit participation upon a liquidity event, pari passu alongside the preferred equity contribution from the Preferred Co-Investor.

The preferred equity investments ~~are accounted for under the equity method of accounting. They~~ have liquidation rights and priorities that are different from ownership percentages. As such, equity in earnings is determined using the hypothetical liquidation book value ("HLBV") method. Activity for the ~~three~~six months ended ~~March 31,~~June 30, 2021 is as ~~follows:~~follows (in thousands):


		Balance at						Balance at
Development	Development	12/31/20		Contributions		Equity in Earnings		3/31/21		Development	Balance at December 31, 2020		Contributions		Equity in Earnings		Balance at June 30, 2021
Lector85	Lector85	$	11,396,026	$	0	$	321,750	$	11,717,776	Lector85	$	11,396	0		$	805	$	12,201
Vernon Boulevard	Vernon Boulevard	15,886,169		0		514,682		16,400,851		Vernon Boulevard	15,886		0		1,052		16,938
Riverfront	Riverfront	2,718,266		2,512,338		115,022		5,345,626		Riverfront	2,718		10,764		482		13,964
Total	Total	$	30,000,461	$	2,512,338	$	951,454	$	33,464,253	Total	$	30,000	$	10,764	$	2,339	$	43,103

Activity during the ~~three~~six months ended ~~March 31,~~June 30, 2020 ~~for Lector85, our only preferred equity investment during that period,~~ is as ~~follows:~~follows (in thousands):


		Balance at						Balance at
Development	Development	12/31/19		Contributions		Equity in Earnings		3/31/20		Development	Balance at December 31, 2019		Contributions		Equity in Earnings		Balance at June 30, 2020
Lector85	Lector85	$	4,961,868	$	5,210,937	$	240,096	$	10,412,901	Lector85	$	4,962	$	5,211	$	565	$	10,738

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5. ~~Real Estate~~Investments in Real-Estate Related Loans

Dolce B Note ~~Investment~~

During the three and six months ended ~~March 31,~~June 30, 2021, we issued approximately ~~$820,000~~$310,000 and $1.1 million, respectively, of our ~~$10,000,000~~$10.0 million B Note with the developer of Dolce Twin Creeks, Phase II, a 366-unit multifamily project in Allen Texas, bringing the total amount funded to ~~$9,025,995.~~approximately $9.3 million.

Net interest income from the Dolce B Note was ~~$245,352~~approximately $80,000 and ~~$71,715~~$326,000 for the three and six months ended ~~March 31,~~June 30, 2021, respectively. Net interest income from the Dolce B Note was approximately $117,000 and $189,000 for the three and six months ended June 30, 2020, respectively. NoNaN allowance was recorded on the Dolce B Note during the periods ended ~~March 31,~~June 30, 2021 or 2020.

On May 7, 2021, the borrower of the Dolce B Note prepaid in full the outstanding principal balance plus accrued interest as a result of refinancing the project upon completion.

Integra Peaks Mezzanine Loan

On June 30, 2021, we entered into a co-lender agreement to participate in a $19.5 million mezzanine loan originated for the purpose of developing a 300-unit multifamily apartment community located in Reno, Nevada. The project will consist of five 4-story elevator serviced garden-style apartments situated on a 12.1 acre site. The borrower, an unaffiliated third party, will use the mezzanine loan proceeds, along with $14.1 million in common equity and $42.5 million in construction loan proceeds to complete the project.

Pursuant to the terms of the co-lender agreement, we've committed to fund a total of $13.0 million of the mezzanine loan, with the remaining $6.5 million funded by our co-lender (an unaffiliated third party). Generally, we and our co-lender participate on parity with respect to draw requests, interest and priority in repayment at maturity. The mezzanine loan bears interest at a rate of 12.0% per annum, compounded monthly, and, subject to certain limitations and fees, may be prepaid in whole or in part.

As of June 30, 2021, the borrower had funded its entire common equity commitment and we had funded approximately $5.2 million of our commitment under the co-lender agreement. The undrawn mezzanine loan proceeds are expected to be fully drawn by the end of 2021, at which point the borrower will commence draws on the construction loan. The mezzanine loan has an original maturity date of March 30, 2024 with 2 one-year extension options.

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6. Debt

Mortgage Notes and Revolving Credit ~~Facilities~~Facility

~~Information regarding~~The following table is a summary of the mortgage notes and revolving credit facility secured ~~credit facilities~~by our properties as of ~~our wholly owned investments is as follows:~~June 30, 2021 and December 31, 2020 ($ in thousands):

Property Name Debt Issuer Maturity Date Payment Type Rate March 31, 2021 December 31, 2020
Cottonwood West Palm Berkadia Commercial Mortgage, LLC June 1, 2029 Interest Only 3.93% $ 35,995,000 (3) $ 35,995,000
Cottonwood One Upland J.P. Morgan Chase Bank, N.A.
March 19, 2023 (1)
Interest Only
Libor + 1.50-1.75% (2)
34,000,000 (4) 35,500,000
Total credit facilities 69,995,000 71,495,000
Unamortized debt issuance costs (1,116,494) (1,175,132)
Credit facilities, net $ 68,878,506 $ 70,319,868
(1) All or a portion of the amount outstanding can be prepaid at any time and the maturity date can be extended for 2 one-year periods, subject to the satisfaction of certain conditions.
(2) The spread is contingent upon certain debt yield metrics.
(3) We may finance other acquisitions through our Berkadia Credit facility. There is no limit on the amount we can draw as long as we maintain certain loan-to-value ratios and other requirements as set forth in the loan documents.
(4) We may obtain advances secured against Cottonwood One Upland up to $67,600,000 on our JP Morgan Credit Facility, as well as finance other future acquisitions up to $125,000,000 in total revolving debt capacity as long as certain loan-to-value ratios and other requirements are maintained.


			Principal Balance Outstanding
Indebtedness	Weighted-Average Interest Rate	Weighted-Average Remaining Term (1)	June 30, 2021		December 31, 2020
Fixed rate loans
Fixed rate mortgages	4.03%	4.2 Years	$	213,517	$	35,995
Total fixed rate loans			213,517		35,995
Variable rate loans (2)
Floating rate mortgages (3)	2.81%	7.0 Years	440,813		0
Variable rate revolving credit facility (4)	1.63%	3.7 Years	24,000		35,500
Total variable rate loans			464,813		35,500
Total secured loans			678,330		71,495
Unamortized debt issuance costs			(1,215)		(1,175)
Premium on assumed debt, net			3,683		0
Mortgage notes and revolving credit facility, net			$	680,798	$	70,320

(1) For loans where we have the ability to exercise extension options at our own discretion, the maximum maturity date has been assumed.
(2) The interest rate of our variable rate loans is primarily based on one-month LIBOR, which was 0.10% on June 30, 2021.
(3) Our floating rate mortgages are accompanied by interest rate cap hedging instruments as required by the lenders.
(4) We may obtain advances secured against Cottonwood One Upland up to $67.6 million on our variable rate revolving credit facility, as well as finance other future acquisitions up to $125.0 million in total revolving debt capacity, as long as certain loan-to-value ratios and other requirements are maintained.

The aggregate maturities, including amortizing principal payments on mortgage notes for years subsequent to June 30, 2021 are as follows (in thousands):

Should we finance other acquisitions through either of these credit facilities, each advance will be cross-collateralized with other advances within the respective facility. We are permitted to sell the multifamily apartment communities that are secured by the credit facilities individually, provided that certain debt coverage ratios and other requirements within the respective loan agreements are met.


Year	Total
2021	$	697
2022	2,349
2023	107,456
2024	140,373
2025	4,140
Thereafter	423,315
	$	678,330

We are in compliance with all covenants associated with our ~~outstanding~~mortgage notes and revolving credit ~~facilities~~facility as of ~~March 31,~~June 30, 2021.

Construction Loans

Information on our construction loans are as follows ($ in thousands):


Development	Interest Rate	Final Expiration Date	Loan Amount		Amount Drawn at June 30, 2021
Sugarmont	Daily Libor + 3.0%	September 30, 2022	$	63,250	$	49,344
Park Ave	Daily Libor + 1.75%	November 30, 2023	37,000		20,420
Cottonwood on Broadway	Daily Libor + 1.9%	May 15, 2024	44,625		11,050
Cottonwood on Highland	Daily Libor + 2.75% (1)	December 1, 2024	37,000		0
			$	181,875	$	80,814

(1) The Daily Libor rate for the Cottonwood on Highland construction loan is subject to a minimum floating index embedded floor rate of 0.5%, resulting in a minimum interest rate of 3.25%.

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Unsecured Promissory Notes, Net

CROP issued notes to foreign investors outside of the United States. These notes are unsecured and subordinate to all of CROP's debt. Each note has 2 one-year extension options during which the interest rate will increase 0.25% each additional period.

Information on our unsecured promissory notes are as follows ($ in thousands):


	Offering Size		Interest Rate	Maturity Date	June 30, 2021
2017 6.25% Notes	$	5,000	6.25%	December 31, 2021	$	5,000
2017 6% Notes	35,000		6.00%	December 31, 2022	20,918
2019 6% Notes	25,000		6.00%	December 31, 2023	22,725
	$	65,000			$	48,643

7. Fair Value of Financial Instruments

We estimate the fair value of our financial instruments using available market information and valuation methodologies we believe to be appropriate. As of ~~March 31,~~June 30, 2021 and December 31, 2020, the fair values of cash and cash equivalents, restricted cash, other assets, related party payables, and accounts payable, accrued expenses and other liabilities approximate their carrying values due to the short-term nature of these instruments.

Fair value measurements are determined based on the assumptions that market participants would use in pricing the asset or liability. Fair value measurements are categorized into one of three levels of the fair value hierarchy based on the lowest level of significant input used. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. Considerable judgment and a high degree of subjectivity are involved in developing these estimates. These estimates may differ from the actual amounts that we could realize upon settlement.

The fair value hierarchy is as follows:

Level 1 - Quoted (unadjusted) prices in active markets for identical assets or liabilities.

Level 2 - Other observable inputs, either directly or indirectly, other than quoted prices included in Level 1, including:

•Quoted prices for similar assets/liabilities in active markets;

•Quoted prices for identical or similar assets/liabilities in non-active markets (e.g., few transactions, limited information, non-current prices, high variability over time);

•Inputs other than quoted prices that are observable for the asset/liability (e.g., interest rates, yield curves, volatility, default rates); and

•Inputs that are derived principally from or corroborated by other observable market data.

Level 3 - Unobservable inputs that cannot be corroborated by observable market data.

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The table below includes the carrying value and fair value for our financial instruments for which it is practicable to estimate fair ~~value:~~value (in thousands):


		March 31, 2021				December 31, 2020					June 30, 2021				December 31, 2020
		Carrying Value		Fair Value		Carrying Value		Fair Value			Carrying Value		Fair Value		Carrying Value		Fair Value
Financial Asset:	Financial Asset:									Financial Asset:
Real estate note investment		$	9,025,995	$	9,025,995	$	8,205,862	$	8,205,862
Investments in real-estate related loans										Investments in real-estate related loans	$	9,026	$	9,026	$	8,206	$	8,206

Financial Liability:	Financial Liability:									Financial Liability:
Berkadia Credit Facility		$	35,995,000	$	36,790,044	$	35,995,000	$	38,658,000
JP Morgan Credit Facility		$	34,000,000	$	34,000,000	$	35,500,000	$	35,500,000
Fixed rate mortgages										Fixed rate mortgages	$	213,517	$	217,001	$	35,995	$	38,658
Floating rate mortgages										Floating rate mortgages	$	440,813	$	442,805	$	0	$	0
Variable rate revolving credit facility										Variable rate revolving credit facility	$	24,000	$	24,000	$	35,500	$	35,500
Construction loans										Construction loans	$	80,814	$	80,814	$	0	$	0
Series 2016 Preferred Stock										Series 2016 Preferred Stock	$	140,833	$	140,833	$	0	$	0
Series 2017 Preferred Stock										Series 2017 Preferred Stock	$	2,586	$	2,586	$	0	$	0
Series 2019 Preferred Stock	Series 2019 Preferred Stock	$	43,710,281	$	43,710,281	$	32,932,909	$	32,932,909	Series 2019 Preferred Stock	$	63,757	$	63,757	$	32,933	$	32,933
Unsecured promissory notes, net										Unsecured promissory notes, net	$	48,643	$	48,643	$	0	$	0

Our ~~real estate note investment, Berkadia Credit Facility, JP Morgan Credit Facility~~investments in real-estate related loans, fixed and ~~Series 2019 Preferred Stock~~floating rate mortgages, variable rate revolving credit facility, construction loans, preferred stock and unsecured promissory notes are categorized as Level 3 in the fair value hierarchy.

8. Preferred Stock

We have three classes of preferred stock outstanding, Series 2016, Series 2017 and Series 2019, each of which were offered at a price of $10.00 per share. Our Series 2016 Preferred Stock and the Series 2017 Preferred Stock were issued in connection with the CRII Merger in exchange for the corresponding series of preferred stock held at CRII. The Series 2019 Preferred Stock is currently being offered for sale in the Private Offering.

Each class of preferred stock receives a fixed preferred dividend based on a cumulative, but not compounded, annual return. Each class has a fixed redemption date ~~of December 31, 2023 (subject to 2 successive one-year extensions~~with extension options at our ~~discretion)~~discretion, subject to an increase in the preferred dividend rate, and is classified as a liability on the condensed consolidated balance sheet. Dividends to preferred stockholders ~~paid at an annual rate of 5.5%,~~ are classified as interest expense on the condensed consolidated statement of operations. We can also redeem our preferred stock early for cash plus all accrued and unpaid dividends.

Information on our preferred stock is as follows:


					Shares Outstanding at
	Dividend Rate	Extension Dividend Rate	Redemption Date	Maximum Extension Date	June 30, 2021	December 31, 2020
Series 2016 Preferred Stock	6.5%	7.0%	January 31, 2022	January 31, 2023	14,083,310	0
Series 2017 Preferred Stock	7.5%	8.0%	January 31, 2022	January 31, 2024	258,550	0
Series 2019 Preferred Stock	5.5%	6.0%	December 31, 2023	December 31, 2025	6,375,713	3,308,326

During the ~~three~~six months ended ~~March 31,~~June 30, 2021 and 2020 we raised approximately ~~$10,777,000~~$30.6 million and ~~$7,898,000~~$12.8 million of Series 2019 Preferred Stock. During the six months ended June 30, 2021 and 2020, we incurred approximately $1.2 million and $214,000 in dividends on our Series 2019 Preferred Stock, respectively. During the period from the CRII Merger closing on May 7, 2021 to June 30, 2021, we incurred approximately $1.5 million and $29,000 in dividends on our Series 2016 Preferred Stock and ~~paid approximately $488,000 and $61,000 in dividends. We had 4,387,688~~Series 2017 Preferred Stock, respectively. During the six months ended June 30, 2021, we repurchased 10,000 shares of Series 2019 Preferred Stock ~~outstanding as~~for $90,000 and during the period from the CRII Merger closing on May 7, 2021 to June 30, 2021 we repurchased 55,990 shares of ~~March 31, 2021.~~Series 2016 Preferred Stock for approximately $533,000. NaN shares of Series 2019 Preferred Stock were repurchased during the six months ended June 30, 2020.

Our preferred stock ranks senior to our common stock and on parity with each other with respect to distribution rights and rights upon liquidation, dissolution or winding up.

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9. Stockholders' Equity

~~NaN~~Other than the 430,070 of common shares issued in association with the CRII Merger, 0 shares of common stock were issued during the three or six months ended ~~March 31,~~June 30, 2021 as our offering was suspended. During the three and six months ended ~~March 31,~~June 30, 2020, we raised approximately ~~$12,977,000~~$7.0 million and $20.0 million of common ~~stock. We paid approximately $1,503,000 and $889,000 in distributions to common stockholders for the three months ended March 31, 2021 and 2020,~~stock, respectively. As of ~~March 31,~~June 30, 2021, we had ~~12,232,289~~12,662,358 of common stock outstanding, of which ~~12,214,771~~12,644,840 was Class A common stock and 17,518 was Class TX (formerly Class T) common stock.

~~LTIP Unit Awards~~

10. Related-Party Transactions

Asset Management Fee

~~On February 21,~~Under the amended and restated advisory agreement entered May 7, 2021, CROP pays our advisor a monthly management fee equal to 0.0625% of GAV (gross asset value of CROP, calculated pursuant to our valuation guidelines and reflective of the ~~compensation committee approved~~ownership interest held by CROP in such gross assets), subject to a cap of 0.125% of net asset value of CROP. Prior to May 7, 2021, we paid our advisor an annual asset management fee in an amount equal to 1.25% per annum (paid monthly) of the ~~grant~~gross book value of ~~an aggregate~~our assets as of ~~17,500 time-based LTIP Units and 52,500 performance-based LTIP units to executive officers. The grants are similar in terms to those issued in 2020. Share based compensation for all LTIP awards during~~ the ~~three months ended March 31, 2021 was $45,000.~~last day of the prior month.

~~10. Related-Party Transactions~~

Asset management fees to our advisor for the three months ended ~~March 31,~~June 30, 2021 and 2020 were ~~$886,307~~approximately $1.4 million and ~~$449,653,~~$681,000, respectively. Asset management fees ~~waived by our advisor for the three months ended March 31, 2021 and 2020 were $27,128 and $127,440, respectively.~~

~~Acquisition expenses reimbursed~~ to our advisor for the ~~three~~six months ended ~~March 31,~~June 30, 2021 and 2020 were approximately $2.3 million and $1.1 million, respectively.

Performance Participation Allocation

The Special Limited Partner, so long as the advisory agreement has not ~~significant,~~been terminated, holds a performance participation interest in CROP that entitles it to receive an allocation of CROP's total return to its capital account. Total return is defined as weall distributions accrued or paid (without duplication) on the Participating Partnership units (all units in our Operating Partnership with the exception of preferred units) plus the change in the aggregate net asset value of such Participating Partnership units. Under the Operating Partnership agreement, the annual total return will be allocated solely to the Special Limited Partner only after the other unit holders have ~~generally incurred~~received a total return of 5% (after recouping any loss carryforward amount) and such allocation will continue until the allocation between the Special Limited Partner and all other unit holders is equal to 12.5% and 87.5%, respectively. Thereafter, the Special Limited Partner will receive an allocation of 12.5% of the annual total return. The allocation of the performance participation interest is ultimately determined at the end of each calendar year, accrues monthly and will be paid ~~such expenses directly.~~in cash or Class I units at the election of the Special Limited Partner after the completion of each calendar year.

We recognized $6.5 million of performance participation expense with the approval of the June 30, 2021 NAV, as the performance hurdle was achieved. CROP's operating partnership agreement was amended with the CRII Merger to provide for the performance participation allocation. Therefore, there was no performance participation allocation prior to the CRII Merger.

Other

Reimbursable company operating expenses to our advisor or its affiliates for the three months ended ~~March 31,~~June 30, 2021 and 2020 were ~~$257,044~~approximately $74,000 and ~~$236,509,~~$233,000, respectively.

~~Property management fees~~ Reimbursable company operating expenses to our ~~property manager~~advisor or its affiliates for the ~~three~~six months ended ~~March 31,~~June 30, 2021 and 2020 were ~~$112,739~~approximately $331,000 and ~~$54,030,~~$469,000, respectively. ~~Property management fees~~As a result of the merger, employees who had previously provided services to us and were reimbursed to our ~~property manager~~Advisor are ~~classified as property operations expense on the condensed consolidated statements of operations.~~now our employees.

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11. Noncontrolling Interests

Noncontrolling Interests - Limited Partners

Common Limited OP Units and LTIP Units are CROP units not owned by CCI and collectively referred to as “Noncontrolling Interests – Limited Partners.”

Common Limited OP Units - Common Limited OP Units share in the profits, losses and cash distributions of CROP as defined in the partnership agreement, subject to certain special allocations and receive distributions equivalent to distributions declared to the holders of CCI common stock.

LTIP Units - Certain executives and key employees receive LTIP Units in CROP as equity incentive compensation. LTIP Units are a separate series of limited partnership units, which are convertible into Common Limited OP Units upon achieving certain time vesting and performance requirements. Unless otherwise provided, the time vesting LTIP Units (whether vested or unvested) entitle the holder to receive current distributions from CROP, and the performance LTIP Units (whether vested or unvested) entitle the holder to receive 10% of the current distributions from CROP during the applicable performance period. When the LTIP Units have vested and sufficient income has been allocated to the holder of the vested LTIP Units, the LTIP Units will automatically convert to Common Limited OP Units in CROP on a 1-for-one basis. LTIP Units constitute profits interests and have 0 voting rights in CROP.

In conjunction with the CRII Merger, 528,451 time vesting LTIP units were awarded to executives as retention grants. As of June 30, 2021, there were 661,391 unvested time LTIP awards and 430,851 unvested performance LTIP awards outstanding. Share-based compensation was $466,000 for the six months ended June 30, 2021. Share-based compensation was not significant during the same period in 2020. Total unrecognized compensation expense for LTIP Units at June 20, 2020 is $7.5 million and is expected to be recognized on a straight-line basis through June 2025.

Noncontrolling Interests - Partially Owned Entities

As of June 30, 2021, noncontrolling interests in entities not wholly owned by us ranged from 1% to 91%, with the average being 52%.

12. Commitments and Contingencies

~~Dolce B Note~~Riverfront

As of ~~March 31,~~June 30, 2021, we had a remaining commitment of up to approximately ~~$974,000~~$1.6 million on the ~~Dolce B-Note.~~Riverfront preferred equity investment.

~~Riverfront~~Integra Peaks Mezzanine Loan

As of ~~March 31,~~June 30, 2021, we had a remaining commitment of up to approximately ~~$9,899,000~~$7.8 million on the ~~Riverfront preferred equity investment.~~Integra Peaks Mezzanine Loan.

Litigation

AsWe are subject to a variety of ~~March 31,~~legal actions for personal injury, property damage, or other matters arising in the ordinary course of its business, most of which are covered by liability insurance. Various claims of employment and resident discrimination are also periodically brought, most of which also are covered by insurance. While the resolution of these matters cannot be predicted with certainty, as of June 30, 2021, we ~~were~~believe the final outcome of such legal proceedings and claims will not have a material adverse effect on our liquidity, financial position or results of operations.

Environmental

As an owner of real estate, we are subject to ~~any~~various federal, state and local environmental laws. Compliance with existing laws has not had a material ~~litigation nor were~~adverse effect on us. However, we ~~aware~~cannot predict the impact of ~~any material litigation threatened against us.~~new or changed laws or regulations on our properties or on properties that we may acquire in the future.

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Distribution Reinvestment Plan

We have adopted a distribution reinvestment plan whereby stockholders may elect to have us apply their dividends and other distributions to the purchase of additional shares of common stock. ~~Participants in the plan will acquire common stock at the per share price effective on the date of purchase (currently $10.00).~~ The distribution reinvestment plan was temporarily suspended in December 2020 along with the Offering. On August 10, 2021, our board of directors adopted an amended and restated distribution reinvestment plan in connection with the registration of new classes of shares in the Offering. See N o te 13 - Subsequent Events below.

Share Repurchase Programs

~~Series 2019~~

Preferred Stock

~~Upon~~Our board of directors has adopted a share repurchase program with respect to our preferred stock whereby, upon the request of a holder of our Series 2016, Series 2017 or Series 2019 ~~Preferred Stock,~~preferred stock, we may, at the sole discretion of the board of directors, repurchase their shares at the following prices, which are dependent on how long ~~a redeeming~~such preferred stockholder has held each share:


Share Purchase Anniversary						Repurchase Price
Less than 1 year						$8.80
1 year						$9.00
2 years						$9.20
3 years						$9.40
4 years						$9.60
5 years						$9.80
A stockholder’s death or complete disability, 2 years or more (Series 2019), 6 years of more (Series 2016 and Series 2017)						$10.00

~~NaN Series 2019~~Repurchase information on our Preferred Stock ~~shares were redeemed during the three months ended March 31, 2021.~~is disclosed in Note 8 above.

Common Stock

In December 2020, in conjunction with the pursuit of the mergers described in Note 1, we suspended our share repurchase program that permits holders of common stock to request, on a periodic basis, that we repurchase all or any portion of their shares.

Our board of directors ~~has adopted an amended and restated share repurchase program,~~approved the ~~terms of which will be in effect upon~~ resumption of the share repurchase ~~program. As amended~~program effective for repurchases for the month ended June 30, 2021.

Our share repurchase program provides that we may make ~~redemptions~~repurchases with an aggregate value of up to 2% of our aggregate net asset value or "NAV" each month and up to 5% of our NAV each quarter. ~~In addition, we~~We have no restrictions on the source of funds used to repurchase shares pursuant to our share repurchase program. For ~~newly designated share classes purchased after we resume~~our Class T, Class D and Class I shares, the ~~Offering, the redemption~~repurchase price will be equal to the ~~most recently disclosed monthly NAV,~~transaction price at the date of repurchase, or at 95% of the ~~most recently disclosed NAV~~transaction price on the repurchase date if the shares have been held for less than a year.

For ~~shares currently outstanding,~~ our Class A and ~~our~~ Class TX (formerly Class T) ~~common stock,~~shares, the repurchase price will ~~not change except~~be equal to the transaction price at the date of repurchase, subject to the following: (i) shares that ~~stockholders may~~ have ~~their shares~~been outstanding for at least five years and less than six years will be repurchased at ~~95%~~95.0% of the transaction price, (ii) shares that have been outstanding for at least three years and less than five years will be repurchased at 90.0% of the transaction price and (iii) shares that have been outstanding for at least one year and less than three years will be repurchased at 85.0% of the transaction price. The transaction price is the then-current offering price per share and is generally the prior month’s NAV ~~after a five-year hold period and 100% of NAV after a six-year hold period. In addition, our board made certain administrative changes to the~~per share ~~repurchase program. Our board of directors may, in its sole discretion, amend or suspend our share repurchase program~~ for ~~any reason upon 15 days’ notice to our stockholders.~~such class.

NaN shares of common stock were ~~redeemed~~repurchased during the three or six months ended ~~March 31,~~June 30, 2021 and 2020.

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~~12.~~Common Limited OP Units

Beginning one year after acquiring any Common Limited OP Units, the common limited partners have the right to request the Operating Partnership repurchase their Common Limited OP Unit as described below. We may, in our sole discretion, honor the repurchase request at the following prices, which are dependent on how long such limited partner has held each unit:

1.Beginning one year after acquisition of a Common Limited OP Unit and continuing for the three-year period thereafter, the purchase price for the repurchased Common Limited OP Unit shall be equal to 80% of the NAV of the Common Limited OP Units.

2.Beginning four years after acquisition of a Common Limited OP Unit and continuing for the two-year period thereafter, the purchase price for the repurchased Common Limited OP Units shall be equal to 85% of the NAV of the CROP Common Units.

3.Beginning six years after acquisition of a Common Limited OP Unit and continuing thereafter, the purchase price for the repurchased Common Limited OP Unit shall be equal to 90% of the NAV of the Common Limited OP Units.

Subject to our sole discretion, in the case of the death or complete disability of a limited partner, the repurchase of the Common Limited OP Units may occur at any time after acquisition of a Common Limited OP Unit and, if accepted by us, the purchase price for the repurchased Common Limited OP Units will be equal to 95% of the NAV of the Common Limited OP Units.

13. Subsequent Events

We evaluate subsequent events up until the date the condensed consolidated financial statements are issued and have determined there are none to be reported or disclosed in the condensed consolidated financial statements other than those mentioned below.

Completion of the CMRI Merger ~~with Cottonwood Residential II, Inc.~~ and ~~Cottonwood Residential O.P., LP~~CMRII Merger

On ~~May 7,~~July 15, 2021, we completed the ~~CRII~~CMRI Merger and the CMRII Merger, each through a stock-for-stock ~~and unit-for-unit~~ transaction as described in Note 1. ~~With~~At the ~~completion~~effective time of the ~~CRII~~CMRI Merger, ~~we acquired interests~~each issued and outstanding share of CMRI’s common stock converted into 1.175 shares of our Class A common stock. At the effective time of the CMRII Merger, each issued and outstanding share of CMRII’s common stock converted into 1.072 shares of our Class A common stock. We issued 10,995,210 shares of our Class A common stock upon the closing of the mergers. Each asset held by CMRI and CMRII was owned through joint ventures with CROP. As a result of the consummation of the CMRI Merger and the CMRII Merger our ownership interest in ~~22 stabilized multifamily apartment communities, 4 multifamily development projects, 1 structured investment, and land~~the properties held for development. We also acquired CRII’s property management business and its employees, which currently manage over 13,000 units, including approximately 8,600 for Cottonwood affiliates (including us), as well as through joint ventures with CROP increased to 100%.

~~personnel who have historically performed certain administrative and other services for us on behalf of CCA III.~~

Pro forma revenues and earnings have not been presented as the initial accounting for the transaction is incomplete as of the date the consolidated financial statements are issued. We are in the process of assessing the fair value of the acquired tangible assets, liabilities assumed and any applicable intangible assets and liabilities for this business combination.

~~Amended and Restated Advisory Agreement~~Distribution Reinvestment Plan

~~Upon~~On August 10, 2021, our board of directors adopted an amended and restated distribution reinvestment plan. The per share purchase price for shares purchased pursuant to the ~~closing~~distribution reinvestment plan will be equal to the transaction price for such shares in effect on the distribution date. Shares will generally be sold at the prior month’s NAV per share of the ~~CRII Merger,~~class of share being purchased (which will be our most recently disclosed NAV per share at such time). We may offer shares at a price that we ~~entered into an Amended and Restated Advisory Agreement with CCA III. The Amended and Restated Advisory Agreement includes changes~~believe reflects the NAV per share of such stock more appropriately than the prior month’s NAV per share (including by updating a previously disclosed transaction price) where we believe there has been a material change (positive or negative) to ~~reflect that upon~~our NAV per share since the ~~closing~~end of the ~~CRII Merger, we acquired~~prior month. However, our ~~property manager, including its employees, as well as personnel who historically performed certain other services for us on behalf~~board of ~~CCA III. CCA III has no obligation to perform these services as it did prior to the CRII Merger, but will continue to oversee and supplement these services to the extent CCA III, acting~~directors may determine, in its ~~fiduciary capacity, deems appropriate. The Amended~~sole discretion, to designate certain distributions as ineligible for reinvestment through the distribution reinvestment plan, without notice to participants, without suspending the plan and ~~Restated Advisory Agreement also removes a provision regarding~~without affecting the ~~use~~future operation of the ~~Cottonwood name because, following the CRII Merger, the trademark is held by us.~~

~~In addition, the Amended and Restated Advisory Agreement revises the compensation payable and the expenses that may be reimbursed~~plan with respect to ~~CCA III for its services as described below:~~

~~Asset Management Fee~~. CCA III receives a monthly asset management fee equal to 0.0625% of the gross asset value or GAV of CROP (subject to a cap of 0.125% of net asset value or NAV of the operating partnership), before giving effect to any accruals (related to the month for which the asset management fee is being calculated) for the asset management fee, distribution fees in connection with a securitiesparticipants. We will resume offering the Performance Allocation (as defined in the Fifth CROP Partnership Agreement and described below) or any distributions. The GAV and NAV of CROP is determined in accordance with the valuation guidelines adopted by the CCI Board and reflective of the ownership interest held by CROP in such gross assets. If we own assets other than through CROP, we will pay a corresponding fee.

~~The management fee may be paid, at CCA III's election, in cash or~~ shares of our common stock ~~or CROP Common Units. To~~pursuant to our distribution reinvestment plan upon effectiveness of the ~~extent that CCA III elects~~post-effective no. 6 to receive any portion of its management fee in shares of our common stock or CROP Common Units, CCA III may request that we or CROP may repurchase such shares or units at a later date. Shares of our common stock and CROP Common Units obtained by CCA III as compensationthe registration statement for the management fee payable are not subject to the repurchase limits of our share repurchase plan or any reduction or penalty for an early repurchase. Upon the request of CCA III, we or CROP will repurchase any such securities for cash unless our board of directors determines that any such repurchase would be prohibited by applicable law, our charter, the Fifth CROP Partnership Agreement, or otherwise cause our cash levels or leverage levels to be imprudent as determined by our board of directors. CROP will waive the one-year holding period requirement with respect to the “Exchange Right” provided for in the CROP Partnership Agreement. CCA III will have registration rights with respect to shares of our common stock.Offering.

~~Contingent Acquisition Fees and Contingent Financing Fees~~. If the Amended and Restated Advisory Agreement is terminated other than for cause (or non-renewal or termination by CCA III), the Contingent Acquisition Fees and Contingent Financing Fees provided for in the previous advisory agreement will be due and payable in an amount equal to approximately $22 million (if the termination occurs in year one) reduced by 10% each year thereafter.

~~Organization and Offering Expenses~~. We will reimburse CCA III for any organization and offering expenses that it incurs on our behalf as and when incurred. CCA III is no longer obligated to pay the organization and offering expenses associated with the Offering as it was prior to the CRII Merger, with the exception of the deferred selling commission

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associated with Class TX shares sold. After the termination of the primary offering, CCA III will reimburse us to the extent that the organization and offering expenses that we incur exceed 15% of the gross proceeds from any public offering.

~~Expense Reimbursement~~. Subject to the limitations on total operating expenses, CCA III is entitled to reimbursement of all costs and expenses incurred by it or its affiliates on our behalf, provided that CCA III is responsible for the expenses related to any and all personnel of CCA III who provide investment advisory services pursuant to the Amended and Restated Advisory Agreement (including, without limitation, each of our executive officers and any directors who are also directors, officers or employees of CCA III or any of its affiliates), including, without limitation, salaries, bonus and other wages, payroll taxes and the cost of employee benefit plans of such personnel, and costs of insurance with respect to such personnel (“Advisor Expenses”); provided that we are responsible for the personnel costs of our employees even if they are also directors or officers of CCA III or any of its affiliates except for certain costs as provided for in a reimbursement and cost sharing agreement.

~~Fifth~~Sixth Amended and Restated CROP Partnership Agreement

~~As a result~~At the effective time of the ~~CRII~~CMRI Merger and the CMRII Merger, we, through our ~~operations are now conducted through CROP. The Fifth~~wholly owned subsidiary, the sole general partner of CROP, entered the Sixth Amended and Restated ~~CROP~~Limited Partnership Agreement of CROP (the ~~"Fifth~~“Sixth OP Agreement”) by and among Merger Sub, CC Advisors III, LLC, the special limited partner and the Limited Partners set forth on Exhibit A thereto. The Sixth OP Agreement amends the previous operating partnership agreement to reflect the mergers of the operating partnerships of CMRI and CMRII into CROP ~~Partnership Agreement") entered into~~ at the ~~close~~effective time of the ~~CRII Merger amends the performance fee payable to CCA III or its affiliates as follows:~~

~~Performance Participation~~

The Fifth CROP Partnership Agreement eliminates the promotional interest in the operating partnership held by Cottonwood Communities Investor, LLC and assigned to Cottonwood Advisors Promote, LLC, and provides for the payment of a performance participation interest in CROP to CCA III (the “Special Limited Partner” for purposes of the below) as follows. So long as the advisory agreement with CCA III has not been terminated (including by means of non-renewal), the Special Limited Partner will hold a performance participation interest in CROP that entitles it to receive an allocation from CROP equal to 12.5% of the Total Return, subject to a 5% Hurdle Amount, with a Catch-Up (each term as defined below). Such allocation will be made annually and accrue monthly.

~~Specifically, the Special Limited Partner will be allocated a performance participation in an amount equal to:~~

•First, if the Total Return for the applicable period exceeds the sum of (i) the Hurdle Amount for that period and (ii) the Loss Carryforward Amount (any such excess, “Excess Profits”), 100% of such annual Excess Profits until the total amount allocated to the Special Limited Partner equals 12.5% of the sum of (x) the Hurdle Amount for that period and (y) any amount allocated to the Special Limited Partner pursuant to this clause (this is commonly referred to as a “Catch-Up”); and

•~~Second, to the extent there are remaining Excess Profits, 12.5% of such remaining Excess Profits.~~

~~“Total Return” means, for any period since the end of the prior calendar year (but for the year 2021, beginning as of the date of the CRII Merger) the sum of:~~

(i) all distributions accrued or paid (without duplication) on the participating partnership units outstanding at the end of such period since the beginning of the then-current calendar year (but for the year 2021, since the date of the CRII Merger) plus

(ii) the change in aggregate NAV of such units since the beginning of the year (but for the year 2021, since the date of the CRII Merger), before giving effect to (x) changes resulting solely from the proceeds of issuances of participating partnership units, (y) any allocation/accrual to the performance participation interest and (z) applicable distribution fee expenses (including any payments made to CCI for payment of such expenses).

For the avoidance of doubt, the calculation of Total Return will (i) include any appreciation or depreciation in the NAV of units issued during the then-current calendar year (but for the year 2021, beginning as of the date of the CRII Merger) but (ii) exclude the proceeds from the initial issuance of such units.

“Hurdle Amount” means, for any period during a calendar year, an amount that results in a 5% annualized internal rate of return on the NAV of the participating partnership units outstanding at the beginning of the then-current calendar year (but for the year 2021, beginning as of the date of the CRII Merger) and all participating partnership units issued since the beginning of the applicable calendar year (but for the year 2021, beginning as of the date of the CRII Merger), taking into account the timing and amount of all distributions accrued or paid (without duplication) on all such units and all issuances of participating

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partnership units over the period and calculated in accordance with recognized industry practices. The ending NAV of the participating partnership units used in calculating the internal rate of return will be calculated before giving effect to any allocation/accrual to the performance participation interest and applicable distribution fee expenses. For the avoidance of doubt, the calculation of the Hurdle Amount for any period will exclude any participating partnership units repurchased during such period, which units will be subject to the performance participation allocation upon repurchase as described below.

~~Except as described in Loss Carryforward below, any amount by which Total Return falls below the Hurdle Amount will not be carried forward to subsequent periods.~~

“Loss Carryforward Amount” shall initially equal zero and shall cumulatively increase by the absolute value of any negative annual Total Return and decrease by any positive annual Total Return, provided that the Loss Carryforward Amount shall at no time be less than zero and provided further that the calculation of the Loss Carryforward Amount will exclude the Total Return related to any participating partnership units repurchased during such year, which units will be subject to the performance participation allocation upon repurchase as described below. The effect of the Loss Carryforward Amount is that the recoupment of past annual Total Return losses will offset the positive annual Total Return for purposes of the calculation of the Special Limited Partner’s performance participation.

The Special Limited Partner will also be allocated a performance participation with respect to all Common Units that are repurchased at the end of any month (in connection with repurchases of our shares under our share repurchase plan) in an amount calculated as described above with the relevant period being the portion of the year for which such unit was outstanding, and proceeds for any such unit repurchase will be reduced by the amount of any such performance participation.

The performance participation interest may be payable in cash or Common Units at the election of the Special Limited Partner. If the Special Limited Partner elects to receive such distributions in Common Units, the Special Limited Partner may request CROP to repurchase such Common Units from the Special Limited Partner at a later date pursuant to the “Exchange Right” and CROP will waive the one-year-holding-period requirement.mergers.

Dividends Declared - Series 2016 Preferred Stock

On May 7, 2021, our board of directors declared cash distributions at a daily distribution rate of $0.00191781 to holders of record of our Series 2016 Preferred Stock issued in the CRII Merger for each day in the period from May 7, 2021 through May 31, 2021. On May 11,August 10, 2021, our board of directors declared cash distributions at a daily distribution rate of $0.00191781 to holders of record of our Series 2016 Preferred Stock for each day in the months of ~~June, July~~September, October and ~~August~~November 2021. The daily distribution rate is equal to 7.0% annually on the $10.00 purchase price.

Dividends Declared - Series 2017 Preferred Stock

On May 7, 2021, our board of directors declared cash distributions at a daily distribution rate of $0.00205479 to holders of record of our Series 2017 Preferred Stock issued in the CRII Merger for each day in the period from May 7, 2021 through May 31, 2021. On May 11,August 10, 2021, our board of directors declared cash distributions at a daily distribution rate of $0.00205479 to holders of record of our Series 2017 Preferred Stock for each day in the months of ~~June, July~~September, October and ~~August~~November 2021. The daily distribution rate is equal to 7.5% annually on the $10.00 purchase price.

Dividends Declared - Series 2019 Preferred Stock

On ~~May 11,~~August 10, 2021, our board of directors declared cash distributions at a daily distribution rate of $0.00150685, or 5.5% annually on the $10.00 purchase price, to holders of record of our Series 2019 Preferred Stock for each day in the months of ~~June, July~~September, October and ~~August~~November 2021.

Distributions Declared - Common Stock

Distributions Declared - CROP Units

As the sole member of the sole general partner of CROP, we declared distributions on Common Limited OP Units an Preferred OP Units to correspond to the distributions declared on our common stock and preferred stock.

Folllow-On Offering

On August 12, 2021, we filed a registration statement to register $1.0 billion in shares of common stock ~~for each day~~ in a follow-on offering, consisting of $900.0 million in shares of common stock offered in a primary offering and $100.0 million in shares of common stock through the months of June, July, and August 2021. In December 2020, our board of directors approved the suspension of our distribution reinvestment plan. All distributions are currently being paid in cash until we resume our distribution reinvestment plan offering.DRP Offering.

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~~Dolce Note Payoff~~

~~On May 7, 2021, the borrower of the Dolce B Note prepaid in full the outstanding principal balance of $9,336,338 with us plus accrued interest as a result of refinancing the project upon completion.~~

~~Executive Compensation~~

Effective immediately prior to the closing of the CRII Merger, Enzio Cassinis, Adam Larson, Susan Hallenberg and Eric Marlin were granted an aggregate of 50,000 time-based, retention LTIP Units of the Operating Partnership, which did not accelerate in connection with the CRII Merger but converted into the right to receive 1 CROP LTIP Unit, and such units continue to have, and are subject to, the same terms and conditions (including vesting terms) set forth in the applicable vesting agreement, as in effect immediately prior to the effective time of the CROP Merger. Consistent with prior time-based LTIP Units of the Operating Partnership, the units vest over four years in equal installments on an annual basis, with the first 25% vesting May 7, 2022, subject to the grantee’s continued employment with CCA III or its affiliates or us, as applicable.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

References herein to "Company," “we,” us,” and “our” refer to Cottonwood Communities, Inc. together with its subsidiaries. The following discussion of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and the related notes.

Forward-Looking Statements

This Quarterly Report on Form10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Exchange Act of 1934, as amended (the “Exchange Act”). ~~Forward looking~~Forward-looking statements include statements about our business, including, in particular, statements about our plans, strategies and objectives. You can generally identify forward-looking statements by our use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “anticipate,” “estimate,” “believe,” “continue,” or other similar words. You should not rely on these forward-looking statements because the matters they describe are subject to known and unknown risks, uncertainties and other unpredictable factors, many of which are beyond our control. Our actual results, performance and achievements may be materially different from those expressed or implied by these forward-looking statements.

The following is a summary of the principal risks that could adversely affect our business, financial condition, results of operations and cash flows and an investment in our common stock. You should interpret many of the risks identified in this summary as being heightened as a result of the ongoing and numerous adverse impacts of the novel coronavirus disease (“COVID-19”) pandemic.

•The COVID-19 pandemic, together with the resulting measures imposed to contain the virus, has had a negative impact on the economy and business activity globally. Although we have not seen a material impact on our operations to date, the extent to which the COVID-19 pandemic may impact our operations, the personal financial position of our tenants and the development projects in which we have invested remains uncertain and cannot be predicted with confidence.

•~~Risks related~~Since there is no public trading market for shares of our common stock, the repurchase of shares by us will likely be the only way for our stockholders to dispose of their shares. Our share repurchase program will provide stockholders with the ~~proposed CMRI Merger~~opportunity to request that we repurchase their shares on a monthly basis, but we are not obligated to repurchase any shares and ~~CMRII Merger,~~may choose to repurchase only some, or even none, of the shares that have been requested to be repurchased in any particular month in our discretion. In addition, repurchases will be subject to available liquidity and other significant restrictions. Further, our board of directors may modify or suspend our share repurchase program if in its reasonable judgment it deems a suspension to be in our best interest and the best interest of our stockholders, such as ~~discussed under Item 1. "Business" below, including~~when a repurchase request would place an undue burden on our liquidity, adversely affect our operations or risk having an adverse impact on the company that ~~these will not be consummated,~~would outweigh the ~~disruption~~benefit of ~~management’s attention from our ongoing business operations due to these proposed mergers, and that these mergers may not be accretive to~~ the ~~company.~~repurchase offer.

•~~We depend~~The offering price and repurchase price for shares of our common stock are generally based on our ~~advisor to identify suitable investments and to manage our investments. There is no assurance that we~~prior month’s NAV (which will be ~~able~~our most recently disclosed NAV per share at such time) plus, in the case of our offering price, applicable upfront selling commissions and dealer manager fees, and are not based on any public trading market. In addition to ~~successfully achieve~~being up to a month old when share purchases and repurchases take place, our ~~investment objectives.~~NAV does not currently represent our enterprise value and may not accurately reflect the actual prices at which our assets could be liquidated on any given day, the value a third party would pay for all or substantially all of our shares, or the price that our shares would trade at on a national stock exchange. Furthermore, our board of directors may amend our NAV procedures from time to time. While there will be independent annual appraisals of our properties, the appraisal of properties is inherently subjective and our NAV may not accurately reflect the actual price at which our properties could be liquidated on any given day.

•~~We have~~The amount of distributions we may make is uncertain. Our distributions may be paid ~~distributions~~ from sources such as borrowings, offering proceeds, advances or the deferral of fees and expense reimbursements (which may ~~continue to fund distributions with offering proceeds.~~constitute a return of capital). We have not established a limit on the amount of proceeds from ~~our~~this offering that we may use to fund distributions. ~~To the extent we fund distributions~~Distributions from sources other than our cash flow from operations ~~we will have less~~would reduce the funds available to us for ~~investment~~investments in multifamily apartment communities and multifamily real estate-related assets, ~~and the~~which could reduce your overall ~~return to our stockholders may be reduced. Distributions may also be paid from other sources such as borrowings, advances or the deferral of fees and expense reimbursements.~~return. During the early stages of our operations, ~~these distributions~~it is likely that we will use sources of funds which may constitute a return of capital to fund distributions. As of June 30, 2021, we have funded a portion of our distributions with offering proceeds.

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•In connection with our offerings, we incur fees and expenses, which decreases the amount of cash we have available for operations and new investments. In the future we may conduct other offerings of common stock (whether existing or new classes), preferred stock or of interests in our Operating Partnership. We may also amend the terms of our current offerings. We may structure or amend such offerings to attract institutional investors or other sources of capital. The costs of our offerings and future offerings may negatively impact our ability to pay distributions and your overall return.

•~~Some of our officers and certain of our directors are also officers of our sponsor,~~We depend on our advisor orand its ~~affiliates. As a result,~~affiliates to select investments and, in part, to manage our ~~officers and affiliated directors are subject to conflicts of interest.~~business.

•We pay ~~certain~~substantial fees ~~and expenses~~ to our advisor and its affiliates. These fees increase the risk that you will not earn a profit on your investment. These fees were not negotiated at arm’s length and therefore may be higher than fees payable to unaffiliated third parties.

•Certain of our officers and our directors are also officers and directors of our sponsor, advisor and their affiliates and, as a result, are subject to conflicts of interest, including conflicts arising from time constraints and the fact that the fees our advisor receives for services rendered to us are based on our NAV, which our advisor is responsible for determining.

•Development projects in which we invest will be subject to potential development and construction delays which ~~could~~will result in increased costs and risks and may hinder our operating results and ability to make distributions.

•We may incur significant debt in certain circumstances. Our use of leverage increases the risk of ~~an investment in us.~~your investment. Loans we obtain may be collateralized by some or all of our investments, which will put those investments at risk of forfeiture if we are unable to pay our debts. Principal and interest payments on these loans reduce the amount of money that would otherwise be available for other purposes.

•Volatility in the debt markets could affect our ability to obtain financing for investments or other activities related to real estate assets and the diversification or value of our portfolio, potentially reducing cash available for distribution to

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our stockholders or our ability to make investments. In addition, if any of the loans we obtain have variable interest rates, volatility in the debt markets could negatively impact such loans.

•There are limits on the ownership and transferability of our shares.

•If we fail to ~~continue to~~ qualify as a REIT ~~it would adversely affect~~and no relief provisions apply, our ~~operations~~NAV and ~~our ability to make distributions~~cash available for distribution to our stockholders ~~because we will be subject to United States federal income tax at regular corporate rates with no ability to deduct distributions made to our stockholders.~~could materially decrease.

Additional risks related to our business are discussed under the heading “Risk Factors” in our Annual Report on Form 10-K. In light of the significant uncertainties inherent in these ~~forward looking~~forward-looking statements, the inclusion of this information should not be regarded as a representation by us or any other person that our objectives and plans, which we consider to be reasonable, will be achieved. Except as otherwise required by federal securities laws, we do not undertake to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Overview

Cottonwood Communities, Inc. invests primarily in multifamily apartment communities and multifamily real estate-related assets throughout the United States. We seek to invest at least 65% of our assets in stabilized multifamily apartment communities and up to 35% in mortgage loans, preferred equity investments, mezzanine loans or equity investments in property or land which will be developed into a multifamily apartment community (including, by way of example, an existing multifamily apartment community that may require redevelopment capital for strategic repositioning within its market). ~~We do not expect to be able to achieve the balance of these allocations until we have raised substantial proceeds in the Offering (as defined below).~~ Although this is our current target portfolio, we may make adjustments to our target portfolio based on real estate market conditions and investment opportunities. We will not forego what we believe to be a good investment because it does not precisely fit our expected portfolio composition. With the CRII Merger recently consummated, we expect our board of directors to revisit our targeted portfolio allocation given the asset profile of the combined company.

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common were available to purchase in the Offering: Class A and Class TX (previously designated Class T) at a purchase price of $10.00 per share (with discounts available to certain categories of purchasers). These share classes have different underwriting compensation structures, which compensation our advisor paid on our behalf. When we resume the Offering, we expect to offer three new classes of shares of common stock in the primary offering, newly designated Class T, Class D and Class I, and all five classes in the DRP Offering. Underwriting compensation for the new classes will be paid by investors through an adjustment to the purchase price or borne by us. ~~Refer~~

On November 8, 2019, we launched a best-efforts private placement offering exempt from registration under the Securities Act for which we initially offered a maximum of ~~$50,000,000~~$50.0 million in shares of Series 2019 Preferred Stock to accredited investors at a purchase price of $10.00 per share (the "Private Offering"). Offering-related expenses in the Private Offering are paid from offering proceeds. On March 23, 2021, our board of directors approved an increase in the size of the offering to ~~$100,000,000.~~$100.0 million.

We operate under the direction of our board of directors. Our ~~board of directors has retained our~~external advisor, ~~to conduct our operations and manage our portfolio~~CC Advisors III, LLC ("CCA III"), through its team of real estate professionals selects our investments and manages our business, subject to the ~~supervision~~direction and oversight of ~~the~~our board of directors. Our advisor is an affiliate of our sponsor. ~~We have no paid employees.~~In addition, we employ 342 individuals, including our Chief Legal Officer, Chief Operating Officer, and Chief Accounting Officer, with 271 employees serving as “site” employees at our properties and the remaining being corporate-level employees supporting our operations. Our employees are responsible for performing various operational services for us, including property management, legal, accounting, property development oversight and certain services relating to construction management, shareholder relations, human resources, renter insurance and information technology.

We elected to be taxed as a REIT beginning with our taxable year ended December 31, 2019. We utilize an UPREIT organizational structure to hold all or substantially all of our assets through the Operating Partnership. Our Operating Partnership was Cottonwood Communities O.P., LP ("CCOP") prior to the CRII Merger and is Cottonwood Residential O.P., LP ("CROP") after the CRII Merger, described below. We are the sole member of the sole general partner of the Operating ~~Partnership.~~Partnership and own general partner interests in the Operating Partnership alongside third party limited partners.

As of ~~March 31,~~June 30, 2021, we have raised gross proceeds of ~~$43,710,281~~$63.7 million from the sale of Series 2019 Preferred Stock in the Private Offering and ~~$121,996,723~~approximately $122.0 million from the sale of our common stock in the Offering, including the DRP Offering. We have primarily used the net proceeds to make investments in real estate related assets as further described below under Our Investments.

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Merger with Cottonwood Residential II, Inc. and Cottonwood Residential O.P., LP

At the effective time of the CRII Merger, each issued and outstanding share of CRII’s common stock (the “CRII Common Stock”) converted into 2.015 shares of shares of our Class A common stock, each issued and outstanding share of Series 2016 preferred stock of CRII converted into one share of our newly designated Series 2016 preferred stock, and each issued and outstanding share of Series 2017 preferred stock of CRII converted into one share of our newly designated Series 2017 preferred stock.

At the effective time of the CROP Merger, each participating partnership unit of CROP (i.e., all CROP partnership units other than preferred units) issued and outstanding immediately prior to the CROP Merger split into 2.015 participating partnership units of CROP (the “CROP Unit Split”), whereupon (i) each issued and outstanding Series 2019 preferred unit of ~~the Operating Partnership~~CCOP ("CCOP Series 2019 Preferred Stock") converted into one Series 2019 preferred unit of CROP, the terms of which mirrored the CCOP Series 2019 Preferred Stock, (ii) each issued and outstanding LTIP Unit of CCOP (the “CCOP LTIP Units”) was converted into the right to receive one LTIP Unit of CROP, the terms and conditions of which mirrored the CCOP LTIP Units, (iii) each issued and outstanding Special LTIP Unit of CCOP (the “CCOP Special LTIP Units”) converted into the right to receive one Special LTIP Unit of CROP, the terms and conditions of which mirrored the CCOP Special LTIP Units,

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and (iv) except as set forth above, each issued and outstanding general partner unit of ~~the Operating Partnership~~CCOP and CCOP Common Unit converted into the right to receive one common limited partner unit of CROP (“CROP Common Unit”). After giving effect to the CROP Unit Split, each CROP Common Unit, general partner unit and LTIP unit issued and outstanding immediately prior to the effective time of the CROP Merger remained outstanding, and each CROP preferred unit issued and outstanding immediately prior to the effective time of the CROP Merger remained outstanding and continues to be held by the general partner, Merger Sub.

Further, as a result of the CRII Merger, we acquired CRII’s affiliate property manager and its employees, which currently manage ~~over~~ approximately 13,000 units in stabilized assets, including approximately ~~8,600~~7,300 for Cottonwood affiliates (including us)., and a 341 unit development project in the lease up stage. In addition, we acquired the personnel who have historically performed certain administrative and other services for us on behalf of CCA III, including legal, accounting, property development oversight and certain services relating to construction management, ~~shareholders,~~shareholder relations, human resources, renter insurance and information technology. As a result, we directly employ the individuals that perform the foregoing administrative services as well as property management services. CCA III continues to manage our operations as our external advisor pursuant to an amended and restated advisory ~~agreement discussed in~~ ~~Note 12~~ ~~"Subsequent Events."~~agreement.

~~Proposed Mergers~~CMRI Merger and CMRII Merger

On January 26, 2021, we entered into separate agreements to acquire each of Cottonwood Multifamily REIT I, Inc. ("CMRI") ("CMRI Merger"), and Cottonwood Multifamily REIT II, Inc. ("CMRII") ("CMRII Merger"). These mergers are stock-for-stock transactions whereby CMRI and CMRII will be merged into a wholly owned subsidiary of us. ~~The CMRI Merger and CMRII Merger are not contingent upon each other.~~ Each merger is intended to qualify as a “reorganization” under, and within the meaning of, Section 368(a) of the Internal Revenue Code of 1986, as amended. ~~If the~~The CMRI and CMRII Mergers were completed on July 15, 2021.

Net Asset Value

Our board of directors, including a majority of our independent directors, has adopted valuation procedures, as amended from time to time, that contain a comprehensive set of methodologies to be used in connection with the calculation of our net asset value ("NAV"). Pursuant to these valuation procedures, we computed a June 30, 2021 NAV per share for our outstanding Class A and Class TX shares of $11.7865. We had no outstanding Class T, Class D or Class I shares as of June 30, 2021. Until we sell shares of these classes, we will deem the NAV per share of these classes to be the NAV per share of our Class A and Class TX shares.

We expect that generally, within 15 calendar days after the last calendar day of each month, we will determine and disclose our NAV per share for each share class as of the last calendar day of the prior month. This NAV will be posted when available on our website at cottonwoodcommunities.com and in prospectus supplements or a Current Report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”).

Please see our Current Report on Form 8-K/A, filed with the SEC on June 8, 2021 and available on the SEC’s website at www.sec.gov, for a more detailed description of our valuation procedures, including important disclosures regarding real property valuations, debt-related asset valuations and property management business valuations provided by Altus Group U.S. Inc. (the “Independent Valuation Advisor”). All parties engaged by us in the calculation of our NAV, including our advisor, are subject to the oversight of our board of directors. As described in our valuation procedures, each real property is appraised by a third-party appraiser (the “Third-Party Appraisal Firm”) at least once per calendar year and reviewed by our advisor and the Independent Valuation Advisor. Additionally, the real property assets not appraised by the Third-Party Appraisal Firm in a given calendar month will be appraised for such calendar month by our Independent Valuation Advisor, and such appraisals are reviewed by our advisor.

CROP has certain classes or series of OP Units that are each economically equivalent to a corresponding class of shares. Accordingly, on the last day of each month, for such classes or series of OP Units, the NAV per OP Unit equals the NAV per share of the corresponding class. To the extent CROP has classes of units that do not correspond to a class of our shares, such units will be valued in a manner consistent with our valuation procedures. The NAV of CROP on the last day of each month equals the sum of the NAVs of each fully-diluted outstanding OP Unit on such day. In calculating the fully-diluted outstanding OP Units we include all outstanding vested LTIP Units, unvested time-based LTIP Units and those performance-based LTIP Units that would be earned based on the internal rate of return as of such day.

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Our total NAV in the following table includes the NAV of our Class A and Class TX common stockholders, ~~approve~~as well as the ~~respective CMRI Merger~~partnership interests of CROP held by parties other than us. The following table sets forth the components of our NAV as of June 30, 2021 (in thousands except share data):


Components of NAV*	As of 6/30/2021
Investments in Multifamily Operating Properties	$	1,237,497
Investments in Multifamily Development Properties	144,410
Investments in Real-estate Related Structured Investments	48,292
Operating Company, Land and Other Net Current Assets	53,981
Cash and Cash Equivalents	8,799
Secured Real Estate Financing	(712,187)
Subordinated Unsecured Notes	(48,643)
Preferred Equity	(207,176)
Accrued Performance Participation Allocation	(6,455)
NAV	$	518,519
Fully-diluted Shares/Units Outstanding	43,992,506

* Presented as adjusted for the Company's economic ownership percentage in each asset.

The following table provides a breakdown of our total NAV and ~~CMRII Merger,~~NAV per share/unit by class as of June 30, 2021 (in thousands, except share and ifper share data):


	Class
	A		TX		OP(1)
As of June 30, 2021
Monthly NAV	$	149,039	$	206	$	369,273
Fully-diluted Outstanding Shares/Units	12,644,840		17,518		31,330,148
NAV per Fully-diluted Share/Unit	$	11.7865	$	11.7865	$	11.7865

(1) Includes the partnership interests of CROP held by High Traverse Holdings, an entity beneficially owned by Daniel Shaeffer, Chad Christensen, Gregg Christensen and Eric Marlin and other CROP interests, including LTIP Units as described above, held by parties other than us.

Set forth below are the weighted averages of the key assumptions that were used by the Independent Valuation Advisor in the discounted cash flow methodology used in the June 30, 2021, valuations of our real property assets, based on property types.


	Discount Rate	Exit Capitalization Rate
Operating Assets	6.21%	4.82%
Development Assets	6.90%	4.65%

* Presented as adjusted for the Company's economic ownership percentage in each asset, weighted by gross value.

A change in these assumptions would impact the calculation of the value of our operating and development assets. For example, assuming all other ~~conditions~~factors remain unchanged, the changes listed below would result in the following effects on our operating and development asset values:


Sensitivities	Change	Operating Asset Values	Development Asset Values
Discount Rate	0.25% decrease	2.1%	2.6%
	0.25% increase	(2.0)%	(2.4)%
Exit Capitalization Rate	0.25% decrease	3.8%	5.0%
	0.25% increase	(3.3)%	(4.4)%

* Presented as adjusted for the Company's economic ownership percentage in each asset.

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The following table reconciles stockholders’ equity and CROP partners’ capital per our condensed consolidated balance sheet to ~~closing~~our NAV (in thousands):


	June 30, 2021
Stockholders’ equity	$	94,515
Non-controlling interests attributable to limited partners	348,604
Total partners' capital of CROP under U.S. GAAP	443,119
Adjustments at share:
Preferred offering costs	(5,609)
Goodwill	(439)
Deferred tax liabilities	3,602
Accumulated depreciation and amortization	22,108
Accumulated depreciation and amortization associated with unconsolidated real estate entities	2,643
Unrealized promote	17,012
Unrealized net real estate and debt appreciation	36,083
NAV	$	518,519

The following details the ~~mergers~~adjustments to reconcile GAAP stockholders’ equity and CROP partners' capital per our condensed consolidated balance sheet to our NAV:

–Our preferred stock is accounted for as a liability with associated issuance costs deferred and amortized under GAAP. These issuance costs are ~~satisfied or waived, it is currently expected that~~excluded for purposes of determining our NAV.

–We recorded goodwill for the ~~CMRI~~difference between the transaction price of the CRII Merger and the ~~CMRII Merger will be completed~~fair value of identifiable assets acquired, liabilities assumed, and non-controlling interests. Goodwill was not included for purposes of determining our NAV.

–We recorded deferred tax liabilities for the tax effects on the difference in the ~~third quarter~~value of ~~2021. However, there is no guarantee that~~certain assets recorded with the ~~conditions to the CMRI~~CRII Merger and their underlying tax basis. These deferred tax liabilities were excluded for purposes of determining our NAV.

–We depreciate our investments in real estate and amortize certain other assets and liabilities in accordance with GAAP. Such depreciation and amortization is not recorded for purposes of determining our NAV.

–Accumulated depreciation and amortization associated with our investments in unconsolidated real estate entities is also not recorded for purposes of determining our NAV.

–We manage properties on behalf of third parties and under certain agreements have contractual rights to receive promotional interests subject to minimum return hurdles. We do not recognize promotes under GAAP until a liquidation transaction is probable, but do include the ~~CMRII Merger will be satisfied~~fair value of promotes, using a hypothetical liquidation valuation method, for purposes of determining our NAV.

–Our investments in real estate are presented under historical cost in our GAAP consolidated financial statements. Additionally, our mortgage notes, revolving credit facility and construction loans ("Debt") are presented at their carrying value in our consolidated GAAP financial statements. As such, any increases or ~~that~~decreases in the ~~CMRI Merger~~fair market value of our investments in real estate or our Debt are not included in our GAAP results. For purposes of determining our NAV, our investments in real estate and ~~the CMRII Merger will close on the expected timeline or~~our Debt are recorded at ~~all.~~fair value.

COVID-19 Pandemic

One of the most significant risks and uncertainties facing the real estate industry generally continues to be the effect of the ongoing public health crisis of the novel coronavirus disease (COVID-19) pandemic. During the three months ended ~~March 31,~~June 30, 2021, we did not experience significant disruptions in our operations from the COVID-19 pandemic; however, we continue

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to closely monitor the impact of the COVID-19 pandemic on all aspects of our business, including how the pandemic will impact our tenants and multifamily communities.

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Our Investments

Information regarding our investments as of ~~March 31,~~June 30, 2021 is as follows:

Property Name Location Investment Type Purchase / Investment Date Number of Units Purchase Price / Funding Commitment Amount Paid / Funded to Date
Cottonwood West Palm West Palm Beach, FL Wholly Owned 05/30/2019 245 $ 66,923,500 $ 66,923,500
Cottonwood One Upland Norwood, MA Wholly Owned 03/19/2020 262 103,600,000 103,600,000
Dolce Twin Creeks, Phase II Allen, TX B Note 07/31/2019 366 10,000,000 9,025,995
Lector85 Ybor City, FL Preferred Equity 08/15/2019 254 9,900,000 9,900,000
Vernon Boulevard Queens, NY Preferred Equity 07/23/2020 534 15,000,000 15,000,000
Riverfront West Sacramento, CA Preferred Equity 11/30/2020 285 15,091,649 5,192,486
Total / Weighted Average 1,946 $ 220,515,149 $ 209,641,981
Stabilized Properties ($ in thousands)

~~Information regarding the secured credit facilities of our wholly owned investments as of March 31, 2021 is as follows:~~

Property Name Debt Issuer Maturity Date Payment Type Rate Amount Outstanding
Cottonwood West Palm Berkadia Commercial Mortgage, LLC June 1, 2029 Interest Only 3.93% $ 35,995,000 (3)
Cottonwood One Upland J.P. Morgan Chase Bank, N.A.
March 19, 2023 (1)
Interest Only
Libor + 1.5-1.75% (2)
34,000,000 (4)
Total credit facilities 69,995,000
Unamortized debt issuance costs (1,116,494)
Credit facilities, net $ 68,878,506
(1) All or a portion of the amount outstanding can be prepaid at any time and the maturity date can be extended for two one-year periods, subject to the satisfaction of certain conditions.
(2) The spread is contingent upon certain debt yield metrics.
(3) There is no limit on the amount we can draw on the Berkadia Credit Facility as long as we maintain certain loan-to-value ratios and other requirements as set forth in the loan documents.
(4) We may obtain advances secured against Cottonwood One Upland up to $67,600,000 on our JP Morgan Credit Facility, as well as finance other future acquisitions up to $125,000,000 in total revolving debt capacity as long as certain loan-to-value ratios and other requirements are maintained.

~~For additional information regarding our investments refer to the section entitled "Our Investments" in our Annual Report on~~ ~~Form 10-K~~ ~~for the period ending December 31, 2020.~~


Property Name	Location	Number of Units	Average Unit Size (Sq Ft)	Purchase Date	Purchase Date Property Value		Mortgage Debt Outstanding (1)		Physical Occupancy Rate	Percentage Owned by CROP
3800 Main	Houston, TX	319	831	May 2021	$	58,100	$	36,177	96.24%	50.00%
Alpha Mill (3)	Charlotte, NC	267	830	May 2021	69,500		36,265		97.38%	10.00%
Cason Estates	Murfreesboro, TN	262	1,078	May 2021	51,400		33,594		96.95%	100.00%
Cottonwood	Salt Lake City, UT	264	834	May 2021	47,300		21,645		96.59%	100.00%
Cottonwood Bayview	St. Petersburg, FL	309	805	May 2021	95,900		47,686		98.71%	71.00%
Cottonwood One Upland	Boston, MA	262	1,160	March 2020	103,600		24,000		97.71%	100.00%
Cottonwood Reserve	Charlotte, NC	352	1,021	May 2021	77,500		38,552		96.02%	91.14%
Cottonwood Ridgeview	Plano, TX	322	1,156	May 2021	70,000		30,098		95.65%	90.45%
Cottonwood West Palm	West Palm Beach, FL	245	1,122	May 2019	66,900		35,995		96.33%	100.00%
Cottonwood Westside (3)	Atlanta, GA	197	860	May 2021	47,900		25,655		92.39%	10.00%
Enclave on Golden Triangle	Keller, TX	273	1,048	May 2021	51,600		34,000		98.17%	98.93%
Fox Point	Salt Lake City, UT	398	841	May 2021	79,400		46,000		97.49%	52.75%
Heights at Meridian (4)	Durham, NC	339	997	May 2021	79,900		33,750		95.58%	10.00%
Melrose (6)	Nashville, TN	220	951	May 2021	67,400		47,100		95.00%	100.00%
Melrose Phase II	Nashville, TN	139	675	May 2021	40,350		21,500		94.20%	24.88%
Parc Westborough (5)	Boston, MA	249	1,008	May 2021	74,000		38,010		97.99%	35.65%
Pavilions	Albuquerque, NM	240	1,162	May 2021	61,100		37,350		98.33%	96.35%
Raveneaux	Houston, TX	382	1,065	May 2021	57,500		26,675		97.12%	96.97%
Regatta	Houston, TX	490	862	May 2021	48,100		35,367		94.68%	100.00%
Retreat at Peachtree City	Peachtree City, GA	312	980	May 2021	72,500		48,719		95.51%	100.00%
Scott Mountain	Portland, OR	262	927	May 2021	70,700		48,373		97.71%	95.80%
Stonebriar of Frisco	Frisco, TX	306	963	May 2021	59,200		36,400		97.71%	84.19%
Summer Park	Buford, GA	358	1,064	May 2021	75,500		44,620		98.04%	98.68%
The Marq Highland Park (3)(6)	Tampa, FL	239	999	May 2021	65,700		32,260		99.16%	10.00%
Toscana at Valley Ridge	Lewisville, TX	288	738	May 2021	47,700		30,700		96.53%	58.60%
Total / Weighted-Average		7,294	962		$	1,638,750	$	890,491	96.72%

(1) Mortgage debt outstanding is shown as if CROP owned 100% of the property.
(3) At June 30, 2021, CMRI owned the remaining 90% interest in the property. The property became wholly owned by CROP when the CMRI Merger closed on July 15, 2021.
(4) At June 30, 2021, CMRII owned the remaining 90% interest in the property. The property became wholly owned by CROP when the CMRII Merger closed on July 15, 2021.
(5) At June 30, 2021, CMRII owned the remaining 64.35% interest in the property. The property became wholly owned by CROP when the CMRII Merger closed on July 15, 2021.
(6) Excludes the commercial data in units count and physical occupancy.

1928

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Development Properties ($ in thousands)


Property Name	Location	Units to be Built	Average Unit Size (Sq Ft)	Purchase Date	Estimated Completion Date	Investment Amount		Percentage Owned by CROP
Cottonwood on Broadway	Salt Lake City, UT	254	817	May 2021	2Q2022	$	5,769	18.84% (1)
Park Avenue	Salt Lake City, UT	234	714	May 2021	4Q2021	5,708		23.31%(1)
Sugarmont	Salt Lake City, UT	341	904	May 2021	3Q2021	66,959		99.00%(3)
Cottonwood on Highland (2)	Millcreek, UT	250	757	May 2021	4Q2022	8,546		35.55%
Total		1,079				$	86,982

(1) Cottonwood Multifamily Opportunity Fund, Inc., a fund sponsored by a subsidiary of CROP, indirectly owns a majority of the remaining interest.
(2) Intended to qualify as a qualified opportunity zone investment. Excludes the commercial data in unit count.
(3) The one percent interest not owned by us has limited rights, including the right to control on behalf of the joint venture the prosecution and resolution of all litigation, claims, or causes of action that the joint venture has or may have against certain third parties associated with the design and construction of Sugarmont, as well as the obligation to defend any crossclaims resulting from these actions.

Structured Investments ($ in thousands)


Property Name	Location	Investment Type	Date of Initial Investment	Number of Units	Funding Commitment		Amount Funded to Date
Lector85	Ybor City, FL	Preferred Equity	August 2019	254	$	9,900	$	9,900
Vernon Boulevard	Queens, NY	Preferred Equity	July 2020	534	15,000		15,000
Riverfront	West Sacramento, CA	Preferred Equity	November 2020	285	15,092		13,444
Integra Peaks at Damonte	Reno, NV	Mezzanine Loan	June 2021	300	13,000		5,189
Total				1,373	$	52,992	$	43,533

Land Held for Development ($ in thousands)

Property Name

Location

Purchase Date

Investment Amount

Percentage Owned by CROP

Block C (1)

Salt Lake City, UT

May 2021

1,946

37.40%

Jasper

Salt Lake City, UT

June 2021

2,367

100.00%

Total

4,313

(1) Cottonwood Multifamily Opportunity Fund, Inc., a fund sponsored by a subsidiary of CROP, indirectly owns a majority of the remaining interest.

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Results of Operations

Our results of operations for the three and six months ended ~~March 31,~~June 30, 2021 and 2020 are as ~~follows:~~follows (in thousands, except share and per share data):


		Three Months Ended March 31,					Three Months Ended June 30,				Six Months Ended June 30,
		2021		2020			2021		2020		2021		2020
Revenues	Revenues					Revenues
Rental and other property revenues	Rental and other property revenues	$	3,172,181	$	1,539,577	Rental and other property revenues	$	16,843	$	3,011	$	20,015	$	4,551
Real estate note investment interest		245,352		71,715
Property management revenues						Property management revenues	2,121		—		2,121		—
Other revenues						Other revenues	277		118		523		189
Total revenues	Total revenues	3,417,533		1,611,292		Total revenues	19,241		3,129		22,659		4,740
Expenses
Operating expenses						Operating expenses
Property operations expense	Property operations expense	1,348,135		655,284		Property operations expense	6,804		1,268		8,152		1,924
Reimbursable operating expenses to related parties		257,044		236,509
Asset management fee to related party		886,307		449,653
Property management expense						Property management expense	2,552		—		2,552		—
Reimbursable operating expenses						Reimbursable operating expenses	74		233		331		469
Asset management fee						Asset management fee	1,442		681		2,328		1,130
Performance participation allocation						Performance participation allocation	6,455		—		6,455		—
Depreciation and amortization	Depreciation and amortization	1,338,430		843,984		Depreciation and amortization	14,482		2,490		15,820		3,334
General and administrative expenses	General and administrative expenses	2,246,715		230,361		General and administrative expenses	2,190		550		4,438		780
Total operating expenses	Total operating expenses	6,076,631		2,415,791		Total operating expenses	33,999		5,222		40,076		7,637
Other income (expense)
Equity in earnings of unconsolidated real estate entities		951,454		240,096
Loss from operations						Loss from operations	(14,758)		(2,093)		(17,417)		(2,897)
Equity in earnings (losses) of unconsolidated real estate entities						Equity in earnings (losses) of unconsolidated real estate entities	(652)		325		299		565
Interest income	Interest income	362		184,884		Interest income	136		5		137		190
Interest expense	Interest expense	(1,329,835)		(537,971)		Interest expense	(5,824)		(897)		(7,154)		(1,435)
Total other expense		(378,019)		(112,991)
Total expenses before asset management fee waiver		(6,454,650)		(2,528,782)
Asset management fee waived by Advisor		27,128		127,440
Net expenses after asset management fee waiver		(6,427,522)		(2,401,342)
Other (expense) income						Other (expense) income	(302)		12		(275)		140
Net loss	Net loss	$	(3,009,989)	$	(790,050)	Net loss	(21,400)		(2,648)		(24,410)		(3,437)
Net loss attributable to noncontrolling interests:						Net loss attributable to noncontrolling interests:
Limited partners						Limited partners	12,783		—		12,783		—
Partially owned entities						Partially owned entities	2,613		—		2,613		—
Net loss attributable to common stockholders						Net loss attributable to common stockholders	$	(6,004)	$	(2,648)	$	(9,014)	$	(3,437)

Weighted-average shares outstanding		12,232,289		9,483,288
Weighted-average common shares outstanding						Weighted-average common shares outstanding	12,492,221		10,520,556		12,362,973		10,001,922
Net loss per common share - basic and diluted	Net loss per common share - basic and diluted	$	(0.25)	$	(0.08)	Net loss per common share - basic and diluted	$	(0.48)	$	(0.25)	$	(0.73)	$	(0.34)

Comparison of the Three Months Ended June 30, 2021 and 2020

We incurred net losses of ~~$3,009,989~~$21.4 million and ~~$790,050~~$2.6 million for the three months ended ~~March 31,~~June 30, 2021 and 2020, respectively. The change was primarily driven by ~~a full~~the CRII Merger, which closed on May 7, 2021. The results from the quarter include property operations for the CRII portfolio after the merger date as well as results from CRII's affiliate property management business and the performance participation allocation. As part of ~~activity from Cottonwood One Upland, which was~~the merger, we acquired ~~March 19, 2020.~~ the personnel who have historically performed certain administrative and other services for us. Now we directly employ the individuals that perform these services as well as property management services. Investing activity throughout 2020 as well as the CRII Merger in the second quarter of 2021 increased gross assets, driving the increase in asset management fees and depreciation and amortization. General and administrative expenses also increased primarily due to ~~approximately $1,709,000 in~~ non-recurring legal, financial advisor, and other costs associated with the CRII Merger, the CMRI Merger and the CMRII Merger. The higher net operating loss was partially offset by an increase in equity in earnings related to income from additional funds provided to the Lector85 Investment, Vernon Boulevard Investment, and Riverfront Investment. Interest expense ~~also~~ increased due to mortgage interest on the ~~timing~~assets acquired through the CRII Merger as well as other corporate debt acquired through the merger.

Comparison of the Six Months Ended June 30, 2021 and 2020

We incurred net losses of $24.4 million and $3.4 million for the six months ended June 30, 2021 and 2020, respectively. The change was primarily driven by the CRII Merger, which closed on May 7, 2021. The results from the most recent quarter include property operations for the CRII portfolio after the merger date as well as results from CRII's affiliate property management business and the performance participation allocation. As part of the merger, we acquired the personnel who have historically performed certain administrative and other services for us. Now we directly employ the individuals that perform these services as well as property management services. The change was also impacted by six months of activity from Cottonwood One Upland ~~acquisition.~~in the six months ended June 30, 2021 period, compared to just over three months of activity during

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the prior year equivalent period, as Cottonwood One Upland was acquired March 19, 2020. Investing activity throughout 2020 as well as the CRII Merger in the second quarter of 2021 increased gross assets, driving the increase in asset management fees and depreciation and amortization. General and administrative expenses also increased primarily due to non-recurring legal, financial advisor, and other costs associated with the CRII Merger, the CMRI Merger and the CMRII Merger. Interest expense increased due to mortgage interest on the assets acquired through the CRII Merger as well as other corporate debt acquired through the merger.

We expect our results of operations in future periods will continue to fluctuate as we deploy capital in strategic real estate investments. We are in the acquisition phase of our life cycle, and the results of our operations ~~are primarily~~will be impacted by the timing of our acquisitions and the equity raised through our offerings. In addition, our results of operations ~~will be~~have been significantly impacted in 2021 due to the significance of the CRII Merger to our portfolio. Accordingly, our operating results for the three and six months ended ~~March 31,~~June 30, 2021 and 2020 are not directly comparable, nor are our results of operations for the three and six months ended ~~March 31,~~June 30, 2021 indicative of those expected in future periods. We believe that our revenues, operating expenses and interest expense will continue to increase in future periods as a result of continued growth in our portfolio and as a result of the effect of anticipated future acquisitions of multifamily apartment communities and investments in multifamily real estate-related assets. Changes in occupancy, fluctuations due to changes in the variable interest rate on our ~~JP Morgan Credit Facility~~floating rate mortgages and our variable rate revolving credit facility and impacts of the COVID-19 pandemic as discussed above could also affect our operating results.

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~~As of March 31, 2021, Cottonwood West Palm was occupied at a rate of 98.8% and Cottonwood One Upland was occupied at a rate of 94.3%.~~

Funds from Operations

Funds from operations, or FFO, is a measure of the operating performance of a REIT and of our company. We compute FFO in accordance with the standards established by the National Association of Real Estate Investment Trusts, or NAREIT, as net income or loss (computed in accordance with GAAP), excluding gains or losses from sales of depreciable properties, the cumulative effect of changes in accounting principles, real estate-related depreciation and amortization, and after adjustments for our share of unconsolidated partnerships and joint ventures.

Our management also uses Core FFO as a measure of our operating performance. Core FFO is further adjusted from FFO for the following items included in ~~the determination of~~ GAAP net income: amortization of issuance costs associated with ~~real estate note~~ investments in real-estate related loans and debt, accretion of discounts on preferred stock, the performance participation allocation, acquisition fees and expenses, and amortization of above or below intangible lease assets and liabilities. Our calculation of Core FFO may differ from the methodology used for calculating Core FFO by other REITs and, accordingly, our Core FFO may not be comparable. We believe these measures are useful to investors because they facilitate an understanding of our operating performance after adjusting for non-cash expenses and other items not indicative of ongoing operating performance.

Neither FFO nor Core FFO is equivalent to net income or cash generated from operating activities determined in accordance with U.S. GAAP. Furthermore, FFO and Core FFO do not represent amounts available for management’s discretionary use because of needed capital replacement or expansion, debt service obligations or other commitments or uncertainties. Neither FFO nor Core FFO should be considered as an alternative to net income as an indicator of our operating performance or as an alternative to cash flow from operating activities as a measure of our liquidity.

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The following table presents the calculation of FFO and Core ~~FFO:~~FFO (in thousands, except share and per share data):

Three Months Ended March 31,
2021 2020
Net loss $ (3,009,989) $ (790,050)
Adjustments:
Real estate-related depreciation and amortization 1,338,430 843,984
FFO (1,671,559) 53,934
Adjustments:
Amortization of real estate note investment issuance costs 12,562 12,110
Accretion of discount on preferred stock 278,506 42,047
Amortization of debt issuance costs 58,638 37,331
Acquisition fees and expenses (1)
1,709,089 59,673
Core FFO $ 387,236 $ 205,095
FFO per share - basic and diluted $ (0.14) $ 0.01
Core FFO per share - basic and diluted $ 0.03 $ 0.02
Weighted average shares outstanding 12,232,289 9,483,288
(1) Acquisition fees and expenses during the three months ended March 31, 2021 consisted of non-recurring costs associated with the CRII Merger, the CMRI Merger, and the CMRII Merger.


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Net loss attributable to common stockholders	$	(6,004)	$	(2,648)	$	(9,014)	$	(3,437)
Adjustments to arrive at FFO:
Real estate related depreciation and amortization	14,043		2,490		15,382		3,334
Depreciation and amortization from unconsolidated real estate entities	2,643		—		2,643		—
Loss allocated to noncontrolling interests - limited partners	(12,783)		—		(12,783)		—
Amount attributable to above from noncontrolling interests - partially owned entities	(3,695)		—		(3,695)		—
Funds from operations attributable to common stockholders and unit holders	(5,796)		(158)		(7,467)		(103)
Adjustments:
Amortization of intangible assets	438		—		438		—
Amortization of investments in real-estate related loan issuance costs	41		12		54		24
Accretion of discount on preferred stock	448		95		726		137
Amortization of mortgage note premium/discount	(98)		59		(39)		96
Performance participation allocation	6,455		—		6,455		—
Acquisition fees and expenses (1)	1,037		294		2,746		354
Accretion of below market leases	(218)		(31)		(218)		(31)
Amount attributable to above from unconsolidated real estate entities	472		—		472		—
Other non-recurring adjustments	326		—		326		—
Amount attributable to above from noncontrolling interests - partially owned entities	(95)		—		(95)		—
Core funds from operations attributable to common stockholders and unit holders	$	3,010	$	271	$	3,398	$	477

FFO per common share and unit - basic and diluted	$	(0.18)	$	(0.02)	$	(0.34)	$	(0.01)
Core FFO per common share and unit - basic and diluted	$	0.10	$	0.03	$	0.15	$	0.05
Weighted-average common shares and units outstanding	31,471,725		10,520,556		21,942,268		10,001,922

(1) Acquisition fees and expenses during the three and six months ended June 30, 2021 and 2020 included costs associated with the CRII Merger, the CMRI Merger, and the CMRII Merger.

See “Results of Operations” above for further detail.

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Policies Regarding Operating Expenses

Our advisor must reimburse us the amount by which our aggregate total operating expenses for the four fiscal quarters then ended exceed the greater of 2% of our average invested assets or 25% of our net income, unless the conflicts committee has determined that such excess expenses were justified based on unusual and non-recurring factors. For the four consecutive quarters ended ~~March 31,~~June 30, 2021, our total operating expenses ~~represented approximately 4.59% and 441% of our average invested assets and our net loss, respectively. Excluding costs associated with~~exceeded the CRII Merger, the CMRI Merger and the CMRII Merger, total operating expenses would represent 2.59% of average invested assets and 268% of net income for the four consecutive quarters ended March 31, 2021.charter limitation.

Our conflicts committee determined that the relationship of our total operating expenses and its net assets was justified for the four fiscal quarters ended ~~March 31,~~June 30, 2021 given the costs of operating a public company, the early stage of our operations, and the costs of the CRII Merger, the CMRI Merger and the CMRII Merger. Accordingly, the conflicts committee approved total operating expenses in excess of the operating expense reimbursement obligation in the ~~first~~second quarter of 2021.

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Liquidity and Capital Resources

Our principal demands for funds during the short and long-term are and will be for the acquisition of multifamily apartment communities and investments in multifamily real estate-related assets; operating expenses, including the management fee we pay to our advisor and the performance participation allocation, capital expenditures and general and administrative expenses; payments under debt obligations; ~~redemptions~~repurchases of common and preferred stock; and payments of distributions to stockholders. We will obtain the capital required to purchase multifamily apartment communities and make investments in multifamily real estate-related assets and conduct our operations from the proceeds of the Private Offering, the Offering, from our credit facilities, other secured or unsecured financings from banks and other lenders, and from any undistributed funds from our operations, all of which may be adversely ~~effected~~affected by the impact COVID-19.

We intend to strengthen our capital and liquidity positions by continuing to focus on our core fundamentals at the property level. Factors which could increase or decrease our future liquidity include but are not limited to operating performance of the properties owned by our joint ventures, including the impact of COVID-19 on the properties owned by the joint ventures, volatility in interest rates, and the satisfaction of REIT dividend requirements.

At ~~March 31,~~June 30, 2021, we ~~had~~have $213.5 million of fixed rate debt including our Berkadia Credit Facility and $545.6 million of variable rate debt, including our JP Morgan Revolving Credit Facility and including $80.8 million of variable rate debt related to construction loans; $440.8 million, or 80.8% of our variable rate debt is accompanied by interest rate cap hedging instruments as required by the lenders. In addition, CROP has issued unsecured promissory notes in several private placement offerings, in an aggregate amount of $48.6 million at June 30, 2021.

Regarding credit facilities, at June 30, 2021, we have the Berkadia Credit Facility, secured by Cottonwood West Palm, and the JP Morgan Revolving Credit Facility, secured by Cottonwood One Upland, for which we have advances of ~~$35,995,000~~approximately $36.0 million and ~~34,000,000,~~$24.0 million, respectively. There is no limit on the amount that we can draw on the Berkadia Credit Facility so long as we maintain the loan-to-value ratio and other requirements as set forth in the loan documents. We may obtain advances secured against One Upland up to ~~$67,600,000~~$67.6 million on the JP Morgan Revolving Credit Facility, as well as finance other future acquisitions up to ~~$125,000,000~~$125.0 million in total revolving debt capacity. We can draw upon or pay down the JP Morgan Revolving Credit Facility at our discretion, subject to loan-to-value requirements, debt service coverage ratios and other covenants and restrictions as set forth in the loan documents.

We must also redeem the Series 2019 Preferred Stock for cash at a redemption price per share equal to $10.00 plus any accrued and unpaid dividends, to the extent there are funds legally available, on December 31, 2023. This date may be extended by two one-year extension options. In addition, we must also redeem the Series 2016 Preferred Stock and Series 2017 Preferred Stock issued in the CRII Merger for cash at a redemption price equal to $10.00 per share plus any accrued and unpaid dividends to the extent there are any funds legally available, on their respective redemption dates. The initial redemption date was January 31, 2021 for the Series 2016 Preferred Stock and it was extended to January 31, 2022 and may be extended for an additional one year. The redemption date for the Series 2017 Preferred Stock is January 31, 2022 and may be extended by two one-year extension options.

In addition to making investments in accordance with our investment objectives, we expect to use our capital resources to pay offering costs in connection with the Private Offering and the Offering upon its resumption, as well as make certain payments to our advisor pursuant to the terms of our advisory management agreement.

To maintain our qualification as a REIT, we will be required to make aggregate annual distributions to our stockholders of at least 90% of our REIT taxable income (computed without regard to the dividends-paid deduction and excluding net capital gain). Our board of directors may authorize distributions in excess of those required for us to maintain REIT status depending on our financial condition and such other factors as our board of directors deems relevant.

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Cash Flows

The following table provides a breakdown of the net change in our cash and cash equivalents and restricted ~~cash:~~cash (in thousands):

Three Months Ended March 31,
2021 2020
Net cash (used in) provided by operating activities $ (202,206) $ 571,878
Net cash used in investing activities (3,372,166) (60,875,427)
Net cash provided by financing activities 6,360,184 19,055,876
Net increase (decrease) in cash and cash equivalents and restricted cash $ 2,785,812 $ (41,247,673)


	Six Months Ended June 30,
	2021		2020
Net cash provided by operating activities	$	5,807	$	540
Net cash provided by (used in) investing activities	21,550		(62,459)
Net cash provided by financing activities	25,293		36,935
Net increase (decrease) in cash and cash equivalents and restricted cash	$	52,650	$	(24,984)

Net cash flows ~~used in~~provided by operating activities were ~~$202,206~~$5.8 million during the ~~three~~six months ended ~~March 31,~~June 30, 2021, ~~primarily~~ as a result of ~~payment on Series 2019 Preferred Stock interest,~~the CRII Merger which resulted in increased tenant receipts and property management fees. This is also due to income from structured investments, an increase in accounts payable ~~accrued expenses,~~ and ~~other~~accrued liabilities offset by ~~tenant receipts, interest income received on the Dolce B-Note,~~operating expenses, and ~~interest received for cash on deposits.~~payment of Preferred Stock interest. Cash flows provided by operating activities for the same period in 2020 were ~~$571,878,~~$540,000, primarily as a result of tenant receipts and interest income on the Dolce B-Note, the Lector85 Investment, and cash on deposit combined with the deferral of payment on related party payables and accounts payable, accrued expenses, and other liabilities.

Cash flows ~~used~~provided by in investing activities were ~~$3,372,166~~$21.6 million during the ~~three~~six months ended ~~March 31,~~June 30, 2021, primarily due to the cash acquired in connection with the CRII Merger, repayment on the Dolce B-Notes, offset by funding of preferred equity at Riverfront, ~~additional~~ draws on the ~~Dolce B-Notes,~~Integra Peaks mezzanine loan, capital improvements and ~~capital improvements.~~development activities. Cash flows used in investing activities were ~~$60,875,427~~$62.5 million for the same period in 2020 due to our purchase of Cottonwood One Upland, draws on the Dolce B-Note, draws on the Lector85 Investment, and capital improvements.

Cash flows provided by financing activities were ~~$6,360,184~~$25.3 million during the ~~three~~six months ended ~~March 31,~~June 30, 2021, as a result of net proceeds we received from the issuance of Series 2019 Preferred Stock, proceeds from construction loans offset partially by distributions paid to both common stockholders and noncontrolling interest holders and net repayments made on our JP Morgan Revolving Credit Facility. Cash flows provided by financing activities were ~~$19,055,876~~$36.9 million for the same period in 2020, ~~due to~~driven mainly by the net proceeds we received from the issuance of our common stock and our Series 2019 Preferred Stock ~~which were~~as well as net advances from our JP Morgan Revolving Credit Facility, offset partially by distributions paid to common stockholders.

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Distributions

~~Distributions declared,~~The following table shows distributions paid and cash flow ~~used in~~provided by (used in) operating activities ~~were as follows:~~

Distributions Paid(3)
Period
Distributions Declared(1)
Distributions Declared Per Share(1)(2)
Cash Reinvested (DRP) Total Cash Provided By
(Used In) Operating Activities
First Quarter 2021 $ 1,511,005 $0.125 $ 1,503,402 $ — $ 1,503,402 $ (202,206)
during the six months ended June 30, 2021 and the year ended December 31, 2020 (in thousands):


	Six Months Ended June 30,		Year Ended December 31, 2020
Distributions paid in cash - common stockholders	$	3,049	$	4,145
Distributions paid in cash to noncontrolling interests - limited partners	2,156		—
Distributions of DRP (reinvested)	—		1,107
Total distributions (1)	$	5,205	$	5,252

Source of distributions (2)
Paid from cash flows provided by operations	$	5,205	$	572
Paid from offering proceeds	—		3,573
Offering proceeds from issuance of common stock pursuant to the DRP	—		1,107
Total sources	$	5,205	$	5,252

Net cash provided by (used in) operating activities (2)	$	5,807	$	(2,816)

(1) Distributions are paid on a monthly basis. In general, distributions for all record dates of a given month are paid on or about the fifth business day of the following month.
(2) The allocation of total sources are calculated on a quarterly basis. Generally, for purposes of determining the source of our distributions paid, we assume first that we use positive cash flow from operating activities from the relevant or prior quarter to fund distribution payments. As such, amounts reflected above as distributions paid from cash flows provided by operations may be from a prior quarter which had positive cash flow from operations.

~~(1)~~ ~~Distributions for the periods from January 1, 2021 through March 31, 2021 were based on daily record dates and were calculated at a rate of $0.00136986 per share per day.~~

~~(2)~~ ~~Assumes share was issued and outstanding each day during the period presented.~~

~~(3)~~ ~~Distributions are paid on a monthly basis. In general, distributions for all record dates of a given month are paid on or about the fifth business day of the following month.~~

For the ~~three~~six months ended ~~March 31,~~June 30, 2021, distributions declared to common stockholders and limited partners were approximately $3.1 million and $2.3 million, respectively. For the six months ended June 30, 2021, we paid aggregate distributions to common stockholders and limited partners of ~~$1,503,402,~~approximately $3.0 million and $2.2 million, all paid in cash due to our distribution reinvestment plan being suspended. ~~Our~~For the six months ended June 30, 2021, our net loss ~~for the three months ended March 31, 2021~~ was ~~$3,009,989.~~approximately $24.4 million. Cash flows ~~used in~~provided by operating activities for the ~~three~~six months ended ~~March 31,~~June 30, 2021 was ~~$202,206. Our~~approximately $5.8 million. For the six months ended June 30, 2021, we funded our total common share distributions ~~for this period were~~ paid with ~~offering proceeds.~~cash provided by operating activities. Generally, for purposes of determining the source of our distributions paid, we assume first that we use cash flow from operating activities from the relevant or prior periods to fund distribution payments. To the extent that we pay distributions from sources other than our cash flow from operating activities, we will have less funds available for the acquisition of real estate investments, the overall return to our stockholders may be reduced and subsequent investors will experience dilution. In addition, to the extent distributions exceed cash flow from operating activities, a stockholder's basis in our stock will be reduced and, to the extent distributions exceed a stockholder's basis, the stockholder may recognize capital gain.

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Critical Accounting Policies

Please refer to Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the period ending December 31, 2020 for discussions of our critical accounting policies. As of ~~March 31,~~June 30, 2021, our ~~critical~~ accounting ~~policies have not changed from those described~~policy over investments in ~~that report.~~real estate, specifically with regards to the acquisition of real estate, continues to be considered critical. With the consummation of the CRII Merger, we also consider our accounting policy for business combinations under ASC 805 to be critical. See Note 2 of the condensed consolidated financial statements in this Part I of this report for information regarding this policy.

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Subsequent Events

Completion of the CMRI Merger ~~with Cottonwood Residential II, Inc.~~ and ~~Cottonwood Residential O.P., LP~~CMRII Merger

On ~~May 7,~~July 15, 2021, we completed the ~~CRII~~CMRI Merger and the CMRII Merger, each through a stock-for-stock ~~and unit-for-unit~~ transaction as described in ~~our Current Report on~~ ~~Form 8-K~~Note 1 ~~dated May 12, 2021 and incorporated herein by reference. With~~to our condensed consolidated financial statements included in Part I of this report. At the ~~completion~~effective time of the ~~CRII~~CMRI Merger, ~~we acquired interests~~each issued and outstanding share of CMRI’s common stock converted into 1.175 shares of our Class A common stock. At the effective time of the CMRII Merger, each issued and outstanding share of CMRII’s common stock converted into 1.072 shares of our Class A common stock. We issued 10,995,210 shares of our Class A common stock upon the closing of the mergers. Each asset held by CMRI and CMRII was owned through joint ventures with CROP. As a result of the consummation of the CMRI Merger and the CMRII Merger our ownership interest in ~~22 stabilized multifamily apartment communities, four multifamily development projects, one structured investment, and land~~the properties held for development. We also acquired CRII’s property management business and its employees, which currently manage over 13,000 units, including approximately 8,600 for Cottonwood affiliates (including us), as well as through joint ventures with CROP increased to 100%.

~~personnel who have historically performed certain administrative and other services for us on behalf of CCA III.~~

~~Amended and Restated Advisory Agreement~~Distribution Reinvestment Plan

Upon the closing of the CRII Merger, we entered into an Amended and Restated Advisory Agreement with CCA III. The Amended and Restated Advisory Agreement includes changes to reflect that upon the closing of the CRII Merger, we acquired our property manager, including its employees, as well as personnel who historically performed certain other services for us on behalf of CCA III. CCA III has no obligation to perform these services as it did prior to the CRII Merger, but will continue to oversee and supplement these services to the extent CCA III, acting in its fiduciary capacity, deems appropriate. The Amended and Restated Advisory Agreement also removes a provision regarding the use of the Cottonwood name because, following the CRII Merger, the trademark is held by us.

~~In addition, the Amended and Restated Advisory Agreement revises the compensation payable and the expenses that may be reimbursed to CCA III for its services as described below:~~

~~Asset Management Fee~~. CCA III receives a monthly asset management fee equal to 0.0625% of the gross asset value or GAV of CROP (subject to a cap of 0.125% of net asset value or NAV of the operating partnership), before giving effect to any accruals (related to the month for which the asset management fee is being calculated) for the asset management fee, distribution fees in connection with a securities offering, the Performance Allocation (as defined in the Fifth CROP Partnership Agreement and described below) or any distributions. The GAV and NAV of CROP is determined in accordance with the valuation guidelines adopted by the CCI Board and reflective of the ownership interest held by CROP in such gross assets. If we own assets other than through CROP, we will pay a corresponding fee.

The management fee may be paid, at CCA III's election, in cash or shares of our common stock or CROP Common Units. To the extent that CCA III elects to receive any portion of its management fee in shares of our common stock or CROP Common Units, CCA III may request that we or CROP may repurchase such shares or units at a later date. Shares of our common stock and CROP Common Units obtained by CCA III as compensation for the management fee payable are not subject to the repurchase limits of our share repurchase plan or any reduction or penalty for an early repurchase. Upon the request of CCA III, we or CROP will repurchase any such securities for cash unlessOn August 10, 2021, our board of directors ~~determines~~adopted and amended and restated distribution reinvestment plan. The per share purchase price for shares purchased pursuant to the distribution reinvestment plan will be equal to the transaction price for such shares in effect on the distribution date. Shares will generally be sold at the prior month’s NAV per share of the class of share being purchased (which will be our most recently disclosed NAV per share at such time). We may offer shares at a price that ~~any~~we believe reflects the NAV per share of such ~~repurchase would be prohibited~~stock more appropriately than the prior month’s NAV per share (including by ~~applicable law,~~updating a previously disclosed transaction price) where we believe there has been a material change (positive or negative) to our ~~charter,~~NAV per share since the ~~Fifth CROP Partnership Agreement, or otherwise cause our cash levels or leverage levels to be imprudent as determined by~~end of the prior month. However, our board of ~~directors. CROP will waive~~directors may determine, in its sole discretion, to designate certain distributions as ineligible for reinvestment through the ~~one-year holding period requirement~~distribution reinvestment plan, without notice to participants, without suspending the plan and without affecting the future operation of the plan with respect to ~~the “Exchange Right” provided for in the CROP Partnership Agreement. CCA III will have registration rights with respect to shares of our common stock.~~participants.

~~Organization and Offering Expenses. We will reimburse CCA III for any organization and offering expenses that it incurs on our behalf as and when incurred. CCA III is no longer obligated to pay the organization and offering expenses~~

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associated with the Offering as it was prior to the CRII Merger, with the exception of the deferred selling commission associated with Class TX shares sold. After the termination of the primary offering, CCA III will reimburse us to the extent that the organization and offering expenses that we incur exceed 15% of the gross proceeds from any public offering.

~~Fifth~~Sixth Amended and Restated CROP Partnership Agreement

~~As a result~~At the effective time of the ~~CRII~~CMRI Merger and the CMRII Merger, we, through our ~~operations are now conducted through CROP. The Fifth~~wholly owned subsidiary, the sole general partner of CROP, entered the Sixth Amended and Restated ~~CROP~~Limited Partnership Agreement of CROP (the ~~"Fifth Crop Partnership Agreement"~~“Sixth OP Agreement”) ~~entered~~by and among Merger Sub, CCA III, the special limited partner and the Limited Partners set forth on Exhibit A thereto. The Sixth OP Agreement amends the previous operating partnership agreement to reflect the mergers of the operating partnerships of CMRI and CMRII into CROP at the ~~close~~effective time of the ~~CRII Merger amends the performance fee payable to CCA III or its affiliates as follows:~~

~~Performance Participation~~

~~Specifically, the Special Limited Partner will be allocated a performance participation in an amount equal to:~~

•~~Second, to the extent there are remaining Excess Profits, 12.5% of such remaining Excess Profits.~~

~~“Total Return” means, for any period since the end of the prior calendar year (but for the year 2021, beginning as of the date of the CRII Merger) the sum of:~~

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timing and amount of all distributions accrued or paid (without duplication) on all such units and all issuances of participating partnership units over the period and calculated in accordance with recognized industry practices. The ending NAV of the participating partnership units used in calculating the internal rate of return will be calculated before giving effect to any allocation/accrual to the performance participation interest and applicable distribution fee expenses. For the avoidance of doubt, the calculation of the Hurdle Amount for any period will exclude any participating partnership units repurchased during such period, which units will be subject to the performance participation allocation upon repurchase as described below.

~~Except as described in Loss Carryforward below, any amount by which Total Return falls below the Hurdle Amount will not be carried forward to subsequent periods.~~

Dividends Declared - Series 2016 Preferred Stock

Dividends Declared - Series 2017 Preferred Stock

Dividends Declared - Series 2019 Preferred Stock

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Distributions Declared - Common Stock

On ~~May 11, 2021,~~August 10, 2010, our board of directors declared ~~cash distributions~~a gross distribution for the month of September of $0.04333333, or $0.52 annually, for each class of our common stock ~~at a daily distribution rate of $0.00136986, or 5.0% annually on the $10.00 purchase price,~~ to holders of record on September 25, 2021, to be paid in October.. Each class of our common stock will receive the same aggregate gross distribution per share. The net distribution varies for each class ~~of common stock for each day in~~based on applicable distribution fees, which are deducted from the ~~months of June, July,~~monthly distribution per share and ~~August 2021. In December 2020, our board of directors approved~~paid directly to the ~~suspension of our distribution reinvestment plan. All distributions are currently being paid in cash until we resume our distribution reinvestment plan offering.~~applicable distributor.

26Distributions Declared - CROP Units

~~Table~~

As the sole member of ~~Contents~~the sole general partner of CROP, we declared distributions on Common Limited OP Units and Preferred OP Units to correspond to the distributions declared on our common stock and preferred stock.

~~Dolce Note Payoff~~Folllow-On Offering

On ~~May 7,~~August 12, 2021, we filed a registration statement to register $1.0 billion in shares of common stock in a follow-on offering, consisting of $900.0 million in shares of common stock offered in a primary offering and $100.0 million in shares of common stock through the ~~borrower of the Dolce B Note prepaid in full the outstanding principal balance of $9,336,338 with us plus accrued interest as a result of refinancing the project upon completion.~~DRP Offering.

~~Executive Compensation~~

Effective immediately prior to the closing of the CRII Merger, Enzio Cassinis, Adam Larson, Susan Hallenberg and Eric Marlin were granted an aggregate of 50,000 time-based, retention LTIP Units of the Operating Partnership, which did not accelerate in connection with the CRII Merger but converted into the right to receive one CROP LTIP Unit, and such units continue to have, and are subject to, the same terms and conditions (including vesting terms) set forth in the applicable vesting agreement, as in effect immediately prior to the effective time of the CROP Merger. Consistent with prior time-based LTIP Units of the Operating Partnership, the units vest over four years in equal installments on an annual basis, with the first 25% vesting May 7, 2022, subject to the grantee’s continued employment with CCA III or its affiliates or us, as applicable.

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Item 3. Quantitative and Qualitative Disclosure about Market Risk

Quantitative and qualitative disclosures about market risk have been omitted as permitted under rules applicable to smaller reporting companies.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the direction of our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of ~~March 31,~~June 30, 2021. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of ~~March 31,~~June 30, 2021, our disclosure controls and procedures were effective.

Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the quarter ended ~~March 31,~~June 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART 2 - OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we may be involved in various claims and legal actions arising in the ordinary course of business. As of ~~March 31,~~June 30, 2021, we were not involved in any material legal proceedings.

Item 1A. Risk Factors

None.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Unregistered Sales of Equity Securities

Information about the Private Offering and sales of the Series 2019 Preferred Stock in the Private Offering during the period covered by this Report has been previously furnished under Item 3.02 in Current Reports on Form 8-K as filed with the SEC.

Use of Proceeds

We have registered ~~$750,000,000~~$750.0 million in shares of common stock in an initial public offering (the "Offering"), consisting of ~~$675,000,000~~$675.0 million of shares of common stock offered in our primary offering and ~~$75,000,000~~$75.0 million in shares of common stock through our distribution reinvestment plan (the "DRP Offering”). The Offering commenced in August 2018 and is currently suspended as of December 2020. Prior to the suspension, two classes of common stock were available to purchase in the Offering: Class A and Class TX (previously designated Class T) at a purchase price of $10.00 per share (with discounts available to certain categories of purchasers). These shares had different underwriting compensation structures that our advisor paid on our behalf. When we resume the Offering we expect to offer three new classes of shares of common stock in the primary offering, newly designated Class T, Class D and Class I, and all five classes in the DRP Offering. Underwriting compensation for the new classes will be paid by investors through an adjustment to the purchase price of the shares or borne by us. ~~Refer to our Current Report on~~ ~~Form 8-K~~ ~~dated April 2, 2021 as well as "Part II - Item 5. Other Information" of this report for further information regarding these new classes of shares.~~

As of ~~March 31,~~June 30, 2021, we had sold 12,246,078 and 17,518 shares of Class A and Class TX (formerly Class T) common stock, respectively, in the Offering for aggregate gross offering proceeds of approximately ~~$121,997,000,~~$122.0 million, including 150,797 combined shares of Class A or Class TTX common stock in the DRP Offering for aggregate gross offering proceeds of ~~$1,507,968.~~approximately $1.5 million.

Prior to the entry into the amended and restated advisory agreement on May 7, 2021, all organization and offering costs in connection with the Offering, with the exception of costs incurred in connection with restructuring the Offering following the CRII Merger, were the obligation of our advisor. We did not incur any liability for or reimburse our advisor for any ~~of these~~ organizational and offering costs asthrough May 7, 2021, the date of ~~March 31, 2021.~~the CRII Merger. As of ~~March 31,~~June 30, 2021, our advisor had incurred approximately ~~$14,131,000~~$14.1 million in organizational and offering costs from the issuance of our Class A and Class TX common stock. Following the execution of the amended and restated advisory agreement, organizational and offering costs for the Offering, with the exception of the deferred selling commission on the Class TX shares, ~~will be~~are paid by investors through an adjustment to the purchase price or borne by us.

Proceeds from the Offering have been and will be used to invest directly or indirectly in multifamily apartment communities and multifamily real estate-related assets, including potential development projects, located throughout the United States. As of ~~March 31,~~June 30, 2021, we had used the proceeds from the Offering, the Private Offering, and debt financing to invest approximately ~~$210,398,000~~$210.4 million in our multifamily apartment community investments.

Share Repurchase Program

Information regarding the shares available for repurchase under our share repurchase program and the price at which we repurchase shares is found in Note 1112 to our condensed consolidated financial statements in Part I of this report.

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Item 3. Defaults Upon Senior Securities

None

Item 4. Mine Safety Disclosures

Not applicable

Item 5. Other Information

~~Articles Supplementary~~Amended and Restated Distribution Reinvestment Plan

On ~~May 12,~~August 10, 2021, our board of directors adopted an amended and restated distribution reinvestment plan. Our distribution reinvestment plan allows stockholders to have their cash distributions attributable to the class of shares owned automatically reinvested in additional shares of the same class. The per share purchase price for shares purchased pursuant to the distribution reinvestment plan will be equal to the transaction price for such shares in effect on the distribution date. Shares will generally be sold at the prior month’s NAV per share of the class of share being purchased (which will be our most recently disclosed NAV per share at such time). Although the price paid for shares of our common stock pursuant to our distribution reinvestment plan will generally be based on the prior month’s NAV per share, the NAV per share of such stock as of the date on which the shares purchased is settled may be significantly different. We may offer shares at a price that we believe reflects the NAV per share of such stock more appropriately than the prior month’s NAV per share (including by updating a previously disclosed transaction price) where we believe there has been a material change (positive or negative) to our NAV per share since the end of the prior month. However, our board of directors may determine, in its sole discretion, to designate certain distributions as ineligible for reinvestment through the distribution reinvestment plan, without notice to participants, without suspending the plan and without affecting the future operation of the plan with respect to participants.

Stockholders do not pay selling commissions or a dealer manager fees with respect to shares purchased pursuant to the distribution reinvestment plan. However, the ongoing distribution fees with respect to Class T and Class D shares are allocated on a class-specific basis and borne by all shares of such class, including shares issued under the distribution reinvestment plan with respect to such share classes. These class-specific fees may differ for each class, even when the NAV per share for each class is the same. Each class of shares may have a different NAV per share due to the allocation of distribution fees. We normally expect that the allocation of ongoing distribution fees on a class-specific basis will result in different amounts of distributions being paid to each of our share classes. However, if no distributions are authorized for a certain period, or if they are authorized in an amount less than the allocation of class-specific fees with respect to such period, then pursuant to our valuation guidelines, the class-specific fee allocations may lower the net asset value of our shares subject to a class specific expense.

Shares acquired under the distribution reinvestment plan entitle the participant to the same rights and will be treated in the same manner as shares of that class purchased in the primary offering.

Participants may terminate their participation in the distribution reinvestment plan at any time by delivering a written notice to us. Such notice must be received by us at least ten days prior to a distribution date in order for a participant’s termination to be effective for such distribution date. If we repurchase a portion of a participant’s shares, the participant’s participation in the distribution reinvestment plan with respect to the participant’s shares that were not repurchased will not be terminated unless the participant requests such termination pursuant to the distribution reinvestment plan. Our board of directors may amend, suspend or terminate the distribution reinvestment plan for any reason at any time upon ten days’ notice to participants. We may provide notice by including such information (a) in a Current Report on Form 8-K or in our annual or quarterly reports, all publicly filed with the SEC or (b) in a separate mailing to the participants. A stockholder’s participation in the plan will be terminated to the extent that a reinvestment of such stockholder’s distributions in our shares would cause the percentage ownership or other limitations contained in our charter to be violated.

Multiple Class Plan

On August 10, 2021, our board of directors adopted a multiple class plan to set forth the method by which distributions among classes of common stock shall be determined relative to each other. Under our multiple class plan, distributions are made on all classes of our common stock at the same time. The per share amount of distributions on Class T, Class D, Class I, Class A and Class TX will not be identical because of class-specific distribution fees that will be deducted from the gross distributions for certain classes. We use the record share method of determining the per share amount of distributions on each class of shares, although our board of directors may choose other methods. The record share method is one of several

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distribution calculation methods for multiple-class funds recommended, but not required, by the American Institute of Certified Public Accountants (AICPA). Under this method, the amount to be distributed on shares of our common stock is increased by the sum of all class-specific fees accrued for such period. Such amount is divided by the number of shares of our common stock outstanding on the record date. Such per share amount is reduced for each class of common stock by the per share amount of any class-specific fees allocable to such class.

Articles Supplementary

On August 11, 2021, we filed with the State Department of Assessments and Taxation of the State of Maryland (“SDAT”) articles supplementary to our Articles of Amendment and Restatement that provided for: (i) reclassifying the existing 275,000,000 shares of Class D common stock as unclassified and unissued shares of common stock; ~~and~~ (ii) reclassifying and designating 275,000,000 shares of our authorized common stock as shares of Class D common stock; (iii) reclassifying the existing 275,000,000 shares of Class T common stock as unclassified and unissued shares of common stock; (ii) reclassifying and designating 275,000,000 shares of our authorized common stock as shares of Class T common stock (the ~~“Class D Articles~~“Articles Supplementary”). The ~~Class D~~ Articles Supplementary were filed to amend the amount of Total Account-Level Underwriting Compensation (as defined in the ~~Class D~~ Articles Supplementary) which would trigger the conversion of the Class D common stock and the Class T common stock in a stockholder’s account into Class I common stock to ~~3.0%.~~8.0% or 8.5%, respectively, or with respect to both classes, a lower limit as set forth in any applicable agreement. All other terms of the Class D common stock and Class T common stock are as previously disclosed and remain unchanged by the filing of the ~~new Class D~~ Articles Supplementary. The ~~Class D~~ Articles Supplementary were effective upon filing.

The description of the ~~Class D~~ Articles Supplementary in this report dodoes not purport to be complete and ~~are~~is qualified in ~~their~~its entirety by reference to the full text of the ~~Class D~~ Articles Supplementary, which are filed as Exhibit ~~3.12~~3.13 hereto, and are incorporated by reference herein.

~~Amended and Restated Share Repurchase Program~~

~~General~~

On May 11, 2021, we adopted an amended and restated share repurchase program, which will be in effect upon resumption of our share repurchase program. Pursuant to the amended and restated share repurchase program, stockholders may continue to request that we repurchase all or any portion of their shares on a monthly basis; however, we have adopted updated procedures to reflect the fact that we intend to announce a monthly net asset value (“NAV”) per share and adjusted the repurchase pricing for our shares of Class A and Class TX shares of common stock that have been held for five years. The full terms of our amended and restated share repurchase program are as follows.

Stockholders may request that we repurchase shares of our common stock through their financial professional or directly with our transfer agent. The procedures relating to the repurchase of shares of our common stock are as follows:

•Certain broker-dealers require that their clients process repurchases through their broker-dealer, which may impact the time necessary to process such repurchase request, impose more restrictive deadlines than described under our share repurchase program, impact the timing of a stockholder receiving repurchase proceeds and require different paperwork or process than described in our share repurchase program. Stockholders should contact their broker-dealer first if they want to request the repurchase of their shares.

•Under our share repurchase program, to the extent we choose to repurchase shares in any particular month we will only repurchase shares as of the opening of the last calendar day of that month (a “Repurchase Date”). To have shares repurchased, a stockholder’s repurchase request and required documentation must be received in good order by 4:00 p.m. (Eastern time) on the second to last business day of the applicable month. Settlements of share repurchases will generally be made within three business days of the Repurchase Date. Repurchase requests received and processed by our transfer agent will be effected at a repurchase price equal to the transaction price on the applicable Repurchase Date (which will generally be equal to the most recently disclosed monthly NAV per share), subject to any Early Repurchase Deduction (as defined below).

•A stockholder may withdraw his or her repurchase request by notifying the transfer agent directly or through the stockholder’s financial intermediary on our toll-free telephone number. The line is open on each business day between the hours of 9:00 a.m. and 6:00 p.m. (Eastern time). Repurchase requests must be cancelled before 4:00 p.m. (Eastern time) on the last business day of the applicable month.

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•If a repurchase request is received after 4:00 p.m. (Eastern time) on the second to last business day of the applicable month, the repurchase request will be executed, if at all, on the next month’s Repurchase Date at the transaction price applicable to that month (subject to any Early Repurchase Deduction), unless such request is withdrawn prior to the repurchase. Repurchase requests received and processed by our transfer agent on a business day, but after the close of business on that day or on a day that is not a business day, will be deemed received on the next business day. All questions as to the form and validity (including time of receipt) of repurchase requests and notices of withdrawal will be determined by us, in our sole discretion, and such determination will be final and binding.

•Repurchase requests may be made by mail or by contacting a stockholder’s financial intermediary, both subject to certain conditions described in the share repurchase program. If making a repurchase request by contacting a stockholder’s financial intermediary, the financial intermediary may require the stockholder to provide certain documentation or information. If making a repurchase request by mail to the transfer agent, a stockholder must complete and sign a repurchase authorization form, which will be available on our website, www.cottonwoodcommunities.com. Written requests should be sent to the transfer agent as provided in our share repurchase program. Corporate investors and other non-individual entities must have an appropriate certification on file authorizing repurchases. A medallion signature guarantee will be required in connection with repurchase requests.

•For processed repurchases, stockholders may request that repurchase proceeds are to be paid by mailed check provided that the check is mailed to an address on file with the transfer agent for at least 30 days. Stockholders should check with their broker-dealer that such payment may be made via check or wire transfer, as further described below.

•Stockholders may also receive repurchase proceeds via wire transfer, provided that wiring instructions for their brokerage account or designated U.S. bank account are provided. For all repurchases paid via wire transfer, the funds will be wired to the account on file with the transfer agent or, upon instruction, to another financial institution provided that the stockholder has made the necessary funds transfer arrangements. The customer service representative can provide detailed instructions on establishing funding arrangements and designating a bank or brokerage account on file. Funds will be wired only to U.S. financial institutions (ACH network members).

•A medallion signature guarantee will be required in connection with repurchase requests. The medallion signature process protects stockholders by verifying the authenticity of a signature and limiting unauthorized fraudulent transactions. A medallion signature guarantee may be obtained from a domestic bank or trust company, broker-dealer, clearing agency, savings association or other financial institution which participates in a medallion program recognized by the Securities Transfer Association. The three recognized medallion programs are the Securities Transfer Agents Medallion Program, the Stock Exchanges Medallion Program and the New York Stock Exchange, Inc. Medallion Signature Program. Signature guarantees from financial institutions that are not participating in any of these medallion programs will not be accepted. A notary public cannot provide signature guarantees. We reserve the right to amend, waive or discontinue this policy at any time and establish other criteria for verifying the authenticity of any repurchase or transaction request.

•~~If a stockholder has made multiple purchases of shares of our common stock, any repurchase request will be processed on a first in/first out basis unless otherwise requested in the repurchase request.~~

~~Minimum Account Repurchases~~

In the event that any stockholder fails to maintain the minimum balance of $500 of shares of our common stock, we may repurchase all of the shares held by that stockholder at the repurchase price in effect on the date we determine that the stockholder has failed to meet the minimum balance, less any Early Repurchase Deduction. Minimum account repurchases will apply even in the event that the failure to meet the minimum balance is caused solely by a decline in our NAV. Minimum account repurchases are subject to the Early Repurchase Deduction.

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~~Sources of Funds for Repurchases~~

We may fund repurchase requests from sources other than cash flow from operations, including, without limitation, the sale of assets, borrowings, return of capital or offering proceeds (including from sales of our common stock or operating partnership units to the special limited partner), and we have no limits on the amounts we may use to fund repurchases from such sources.

~~Repurchase Limitations~~

We may repurchase fewer shares than have been requested in any particular month to be repurchased under our share repurchase program, or none at all, in our discretion at any time. In addition, the total amount of aggregate repurchases of Class T, Class D, Class I, Class A and Class TX shares will be limited to no more than 2% of our aggregate NAV per month and no more than 5% of our aggregate NAV per calendar quarter.

In the event that we determine to repurchase some but not all of the shares submitted for repurchase during any month, shares submitted for repurchase during such month will be repurchased on a pro rata basis. All unsatisfied repurchase requests must be resubmitted after the start of the next month or quarter, or upon the recommencement of the share repurchase program, as applicable.

In the transitional quarter of 2021, which is the first quarter in which this amended and restated share repurchase program is in effect, we will allow repurchases in up to the maximum permitted as if the share repurchase program had been effective and open the entire quarter (taking into consideration repurchases under our prior share repurchase program in the quarter).

If the transaction price for the applicable month is not made available by the tenth business day prior to the last business day of the month (or is changed after such date), then no repurchase requests will be accepted for such month and stockholders who wish to have their shares repurchased the following month must resubmit their repurchase requests.

Should repurchase requests, in our judgment, place an undue burden on our liquidity, adversely affect our operations or risk having an adverse impact on our company as a whole, or should we otherwise determine that investing our liquid assets in real properties or other illiquid investments rather than repurchasing our shares is in the best interests of our company as a whole, we may choose to repurchase fewer shares in any particular month than have been requested to be repurchased, or none at all. Further, our board of directors may modify or suspend our share repurchase program if in its reasonable judgment it deems a suspension to be in the best interest of us and our stockholders. Material modifications, including any amendment to the 2% monthly or 5% quarterly limitations on repurchases, to and suspensions of the share repurchase program will be promptly disclosed to stockholders in a prospectus supplement (or post-effective amendment if required by the Securities Act) or special or periodic report filed by us. Material modifications will also be disclosed on our website. In addition, we may determine to suspend the share repurchase program due to regulatory changes, changes in law or if we become aware of undisclosed material information that we believe should be publicly disclosed before shares are repurchased. Once the share repurchase program is suspended, our board of directors will be required to consider at least quarterly whether the continued suspension of this share repurchase program is in the best interest of us and our stockholders. Our board of directors must affirmatively authorize the recommencement of the program before stockholder requests will be considered again. Our board of directors cannot terminate our share repurchase program unless shares of our common stock were to list on a national securities exchange or where otherwise required by law.

~~Early Repurchase Deduction~~

There is no minimum holding period for the repurchase of the Class T, Class D and Class I shares and holders of such shares can request that we repurchase their shares at any time. Holders of Class A and Class TX shares must hold their shares at least one year before they are eligible to be repurchased. Repurchases will be made at the transaction price in effect on the Repurchase Date, with the following exceptions (collectively, the “Early Repurchase Deduction”): (i) Class T, Class D and Class I shares that have not been outstanding for at least one year will be repurchased at 95% of the transaction price, (ii) Class A and Class TX shares that have been outstanding for at least five years and less than six years will be repurchased at 95% of the transaction price, (iii) Class A and Class TX shares that have been outstanding for at least three years and less than five years will be repurchased at 90% of the transaction price and (iv) Class A and Class TX shares that have been outstanding for at least one year and less than three years will be repurchased at 85% of the transaction price. For purposes of the Early Repurchase Deduction, the holding period is measured as of the subscription closing date immediately following the prospective repurchase date provided that the subscription closing date for holders of Class A shares who acquired their shares pursuant to a merger transaction will be the date the holder acquired the corresponding share that was exchanged in the merger

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transaction. Additionally, the holding period for stockholders who received shares of our common stock in exchange for their operating partnership units is measured as of the date the exchange occurred and they received shares of our common stock. The Early Repurchase Deduction will also generally apply to minimum account repurchases. The Early Repurchase Deduction will not apply to shares acquired through our distribution reinvestment plan or issued pursuant to a stock dividend.

In connection with repurchases resulting from death or qualifying disability, we may, from time to time, waive the Early Repurchase Deduction with respect to the Class T, Class D and Class I shares that have been outstanding for less than a year and the Class A and Class TX shares that have been outstanding for at least two years, and reduce the Early Repurchase Deduction for Class A and Class TX shares that have been outstanding for less than two years such that the shares are repurchased at 95% of the transaction price. In addition, we may, from time to time, waive the Early Repurchase Deduction with respect to all classes of shares in the event that a stockholder’s shares are repurchased because the stockholder has failed to maintain the $500 minimum account balance.

As set forth above, we may waive or reduce the Early Repurchase Deduction in respect of the repurchase of shares resulting from the death of a stockholder who is a natural person, subject to the conditions and limitations described above, including shares held by the stockholder through a revocable grantor trust or an individual retirement plan or other retirement or profit-sharing plan, after receiving written notice from the estate of the stockholder, the recipient of the shares through bequest or inheritance, or, in the case of a revocable grantor trust, the trustee of such trust, who will have the sole ability to request repurchase on behalf of the trust. We must receive the written repurchase request within 12 months after the death of the stockholder in order for the requesting party to rely on any of the special treatment described above that may be afforded in the event of the death of a stockholder. Such a written request must be accompanied by a certified copy of the official death certificate of the stockholder. If spouses are joint registered holders of shares, the request to repurchase the shares may be made if either of the registered holders dies. If the stockholder is not a natural person, such as certain trusts or a partnership, corporation or other similar entity, the right of repurchase upon death does not apply.

Furthermore, as set forth above, we may waive or reduce the Early Repurchase Deduction in respect of the repurchase of shares held by a stockholder who is a natural person who is deemed to have a qualifying disability (as such term is defined in Section 72(m)(7) of the Code), subject to the conditions and limitations described above, including shares held by such stockholder through a revocable grantor trust, or an individual retirement account or other retirement or profit-sharing plan, after receiving written notice from the stockholder, provided that the condition causing the qualifying disability was not pre-existing on the date that the stockholder became a stockholder. We must receive the written repurchase request within 12 months of the initial determination of the stockholder’s disability in order for the stockholder to rely on any of the waivers described above that may be granted in the event of the disability of a stockholder. If spouses are joint registered holders of shares, the request to repurchase the shares may be made if either of the registered holders acquires a qualifying disability. If the stockholder is not a natural person, such as certain trusts or a partnership, corporation or other similar entity, the right of repurchase upon disability does not apply.

~~Items of Note~~

~~Stockholders should note the following when a request to have shares repurchased is made:~~

•~~stockholders requesting that some but not all of their shares be repurchased should keep their balance above $500 to avoid minimum account repurchase, if applicable;~~

•~~stockholders will not receive interest on amounts represented by uncashed repurchase checks;~~

•~~under applicable anti-money laundering regulations and other federal regulations, repurchase requests may be suspended, restricted or canceled and the proceeds may be withheld; and~~

•all shares of our common stock requested to be repurchased must be beneficially owned by the stockholder of record making the request or his or her estate, heir or beneficiary, or the party requesting the repurchase must be authorized to do so by the stockholder of record of the shares or his or her estate, heir or beneficiary, and such shares of common stock must be fully transferable and not subject to any liens or encumbrances. In certain cases, we may ask the requesting party to provide evidence satisfactory to us that the shares requested for repurchase are not subject to any liens or encumbrances. If we determine that a lien exists against the shares, we will not be obligated to repurchase any shares subject to the lien.

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IRS regulations require us to determine and disclose on Form 1099-B the adjusted cost basis for shares of our stock sold or repurchased. Although there are several available methods for determining the adjusted cost basis, unless a stockholder elect otherwise, which a stockholder may do by contacting our transfer agent at our toll-free telephone number, we will utilize the first-in-first-out method.

~~Frequent Trading and Other Policies~~

We may reject for any reason, or cancel as permitted or required by law, any purchase orders for shares of our common stock. For example, we may reject any purchase orders from market timers or investors that, in our opinion, may be disruptive to our operations. Frequent purchases and sales of our shares can harm stockholders in various ways, including reducing the returns to long-term stockholders by increasing our costs, disrupting portfolio management strategies and diluting the value of the shares of long-term stockholders.

~~In general, stockholders may request that we repurchase their shares of our common stock once every 30 days. However, we prohibit frequent trading. We define frequent trading as follows:~~

•~~any stockholder who requests that we repurchase its shares of our common stock within 30 calendar days of the purchase of such shares;~~

•~~transactions deemed harmful or excessive by us (including, but not limited to, patterns of purchases and repurchases), in our sole discretion; and~~

•~~transactions initiated by financial professionals, among multiple stockholder accounts, that in the aggregate are deemed harmful or excessive.~~

~~The following are excluded when determining whether transactions are excessive:~~

•~~purchases and requests for repurchase of our shares in the amount of $2,500 or less;~~

•~~purchases or repurchases initiated by us; and~~

•~~transactions subject to the trading policy of an intermediary that we deem materially similar to our policy.~~

At the dealer manager’s discretion, upon the first violation of the policy in a calendar year, purchase and repurchase privileges may be suspended for 90 days. Upon a second violation in a calendar year, purchase and repurchase privileges may be suspended for 180 days. On the next business day following the end of the 90- or 180-day suspension, any transaction restrictions placed on a stockholder may be removed.

~~Mail and Telephone Instructions~~

We and our transfer agent will not be responsible for the authenticity of mail or phone instructions or losses, if any, resulting from unauthorized stockholder transactions if they reasonably believe that such instructions were genuine. Our transfer agent has established reasonable procedures to confirm that instructions are genuine including requiring the stockholder to provide certain specific identifying information on file and sending written confirmation to stockholders of record no later than five days following execution of the instruction. Stockholders, or their designated custodian or fiduciary, should carefully review such correspondence to ensure that the instructions were properly acted upon. If any discrepancies are noted, the stockholder, or its agent, should contact his, her or its financial professional as well as our transfer agent in a timely manner, but in no event more than 60 days from receipt of such correspondence. Failure to notify such entities in a timely manner will relieve us, our transfer agent and the financial professional of any liability with respect to the discrepancy.

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Item 6. Exhibits


Exhibit Number			Exhibit Description
2.1			Agreement and Plan of Merger, dated as of January 26, 2021, by and among the Company, Cottonwood Communities O.P., LP, Cottonwood Communities GP Subsidiary, LLC, Cottonwood Residential O.P., LP and Cottonwood Residential II, Inc., incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed February 1, 2021
2.2			Agreement and Plan of Merger, dated as of January 26, 2021, by and among the Company, Cottonwood Communities O.P, LP, Cottonwood Communities GP Subsidiary, LLC, Cottonwood Multifamily REIT I O.P., LP and Cottonwood Multifamily REIT I, Inc., incorporated by reference to Exhibit 2.2 to the Company’s Current Report on Form 8-K filed February 1, 2021
2.3			Agreement and Plan of Merger, dated as of January 26, 2021, by and among the Company, Cottonwood Communities O.P., LP, Cottonwood Communities GP Subsidiary, LLC, Cottonwood Multifamily REIT II O.P., LP and Cottonwood Multifamily REIT II, Inc., incorporated by reference to Exhibit 2.3 to the Company’s Current Report on Form 8-K filed February 1, 2021
3.1			Articles of Amendment and Restatement, incorporated by reference to Exhibit 3.1 to Pre-Effective Amendment No. 3 to the Company’s Registration Statement on Form S-11 (No. 333-215272)filed June 27, 2018
3.2			Bylaws, incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-11 ~~(No.~~ (No. 333-215272)filed December 22, 2016
3.3			Articles Supplementary for the Class A shares of common stock, incorporated by reference to Exhibit 3.1 on Form 8-K ~~(No.~~(No. 333-215272) filed August 19, 2019
3.4			Articles Supplementary for the Class T shares of common stock, incorporated by reference to Exhibit 3.2 on Form 8-K ~~(No.~~(No. 333-215272) filed August 19, 2019
3.5			Articles of Amendment, incorporated by reference to Exhibit 3.3 on Form 8-K ~~(No.~~(No. 333-215272) filed August 19, 2019
3.6			Article Supplementary – Preferred Stock, incorporated by reference to Exhibit 3.6 to the Company’s Quarterly Report on Form 10-Q filed November 13, 2019
3.7			Articles Supplementary for the Series 2016 Preferred Stock, incorporated by reference to Exhibit 3.1 on Form 8-K (No. 000-56165) filed April 2, 2021
3.8			Articles Supplementary for the Series 2017 Preferred Stock, incorporated by reference to Exhibit 3.2 on Form 8-K (No. 000-56165) filed April 2, 2021
3.9			Articles Supplementary for the Series 2019 Preferred Stock, incorporated by reference to Exhibit 3.3 on Form 8-K (No. 000-56165) filed April 2, 2021
3.10			Articles of Amendment for the Class TX shares of common stock, incorporated by reference to Exhibit 3.4 on Form 8-K (No. 000-56165) filed April 2, 2021
3.11			Articles Supplementary for the Class D, Class I and Class T shares of common stock, incorporated by reference to Exhibit 3.5 on Form 8-K (No. 000-56165) filed April 2, 2021
3.12			Articles Supplementary for the Class D shares of common stock, incorporated by referenced to Exhibit 3.12 to the Company’s Registration Statement on Form S-4/A (file no. 333-255171) filing dated May 13, 2021
3.13			Articles Supplementary for the Class D and Class T shares of common stock, incorporated by reference to Exhibit 3.1 to the Company's Post-Effective Amendment no. 7 to its Registration Statement on Form S-11 (No. 333-215272) filed August 11, 2021
4.1			Statement regarding restrictions on transferability of shares of common stock (to appear on stock certificate or to be sent upon request and without charge to stockholders issued shares without certificates), incorporated by reference to Exhibit 4.2 to Pre-Effective Amendment No. 3 to the Company’s Registration Statement on Form S-11 ~~(No.~~ (No. 333-215272)filed June 27, 2018
4.2			~~Amended and Restated~~ Distribution Reinvestment Plan, incorporated by reference to Appendix A to ~~Appendix B~~ to the prospectus included in the Company’s Post-Effective Amendment No. 5 6 to the Company’s Registration Statement on Form S-11 ~~(No.~~ (No. 333-215272)filed ~~April 20, 2020~~A ugust 2, 2021
4.3			Multiple Class Plan, incorporated by reference to Exhibit 4.1 to the Company's Post-Effective Amendment no. 7 to its Registration Statement on Form S-11 (No. 333-215272) filed August 11, 2021
10.1			Amended and Restated Advisory Agreement by and among the Company, Cottonwood Residential O.P., LP and CC Advisors III, LLC dated May 7, 2021, incorporated by reference to Exhibit 10.1 ~~to the~~ ~~Company’s Registration Statement~~ ~~on Form~~ ~~S-4/A (file no. 333-255171) filing dated May 12, 2021~~
~~10.2~~			~~Voting Agreement, by and among the Company, Daniel Schaeffer, Chad Christens~~e ~~n, Gregg Christens~~e n, Eric Marlin, Cottonwood Residential Holdings, LLC and High Traverse Holdings, LLC, dated January 26, 2021, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed February 1, 2021
~~10.3~~			Second Amended and Restated Three-Party Agreement by and among the Company, Cottonwood Communities O.P., LP and CC Advisors III, LLC, dated January 26, 2021, incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed February 1, 2021

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~~10.4~~			Master Credit Facility Agreement by and among CW Apartments, LLC, CW Alpha Mills Apartments, LLC, CW Westside Apartments, LLC and Berkadia Commercial Mortgage, LLC dated August 3, 2016, incorporated by reference to Exhibit 1U-6 to Cottonwood Multifamily REIT I, Inc.’s Current Report on Form 1-U (No. 24R-00023) filed August 9, 2016
~~10.5~~			~~Tax Protection Agreement between Cottonwood Residential O.P., LP and High Traverse Holdings, LLC dated January 26, 2021, incorporated by reference to Exhibit 10.9~~ to the Company’s Registration Statement on Form S-4/A (file no. 333-255171) filing dated May 12, 2021
~~10.6~~10.2			Reimbursement and Cost Sharing Agreement between Cottonwood Capital Management, Inc. and Cottonwood Communities Advisors, LLC dated May 7, 2021, incorporated by reference to Exhibit 10.10 to the Company’s Registration Statement on Form S-4/A (file no. 333-255171) filing dated May 12, 2021

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~~10.7~~10.3			Trademark License Agreement by and among the Company, Cottonwood Residential O.P., LP and CC Advisors III, LLC dated May 7, 2021, incorporated by reference to Exhibit 10.11 to the Company’s Registration Statement on Form S-4/A (file no. 333-255171) filing dated May 12, 2021
~~10.8~~10.4			~~Fifth~~Sixth Amended and Restated Limited Partnership Agreement of Cottonwood Residential O.P., LP dated ~~May 7,~~July 15 2021, incorporated by reference to Exhibit ~~10.12~~10.1 1 to the Company’s Post-Effective Amendment no. 6 to its Registration Statement on Form ~~S-4/A~~S-11 (file no. ~~333-255171)~~333-215272 ) filing dated May 12, 2021
~~10.9~~10.5			Form of Performance-Based CROP LTIP Unit Award Agreement, incorporated by reference to Exhibit 10.13 to the Company’s Registration Statement on Form S-4/A (file no. 333-255171) filing dated May 12, 2021
~~10.10~~10.6			Form of Time-Based CROP LTIP Unit Award Agreement, incorporated by reference to Exhibit 10.14 to the Company’s Registration Statement on Form S-4/A filing (file no. 333-255171) dated May 12, 2021
31.1*			Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*			Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*			Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002
32.2*			Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002
99.1			~~Amended and Restated~~ Share Repurchase Program ~~incorporated~~Effective as of June 29, 2021 (incorporated by reference to Exhibit 99.1 ~~to the Company’s Registration Statement~~ on Form ~~S-4/A~~8-K filed June 29, ~~(No.~~ ~~333-255171) filing dated~~ ~~May~~ ~~12,~~ 2021
101.INS*			Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
101.SCH*			Inline XBRL Taxonomy Extension Schema Document
101.CAL*			Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*			Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*			Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*			Inline XBRL Taxonomy Extension Presentation Linkbase Document
104*			Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

*Filed herewith

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			COTTONWOOD COMMUNITIES, INC.

			By:			/s/ Daniel Shaeffer
						Daniel Shaeffer, Chief Executive Officer

			By:			/s/ Adam Larson
						Adam Larson, Chief Financial Officer

Dated: ~~May 17,~~August 16, 2021

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Property Name	Debt Issuer	Maturity Date	Payment Type	Rate	March 31, 2021			December 31, 2020
Cottonwood West Palm	Berkadia Commercial Mortgage, LLC	June 1, 2029	Interest Only	3.93%	$	35,995,000	(3)	$	35,995,000
Cottonwood One Upland	J.P. Morgan Chase Bank, N.A.	March 19, 2023 (1)	Interest Only	Libor + 1.50-1.75% (2)	34,000,000		(4)	35,500,000
Total credit facilities					69,995,000			71,495,000
Unamortized debt issuance costs					(1,116,494)			(1,175,132)
Credit facilities, net					$	68,878,506		$	70,319,868

(1) All or a portion of the amount outstanding can be prepaid at any time and the maturity date can be extended for 2 one-year periods, subject to the satisfaction of certain conditions.
(2) The spread is contingent upon certain debt yield metrics.
(3) We may finance other acquisitions through our Berkadia Credit facility. There is no limit on the amount we can draw as long as we maintain certain loan-to-value ratios and other requirements as set forth in the loan documents.
(4) We may obtain advances secured against Cottonwood One Upland up to $67,600,000 on our JP Morgan Credit Facility, as well as finance other future acquisitions up to $125,000,000 in total revolving debt capacity as long as certain loan-to-value ratios and other requirements are maintained.


				Distributions Paid(3)
Period	Distributions Declared(1)		Distributions Declared Per Share(1)(2)	Cash		Reinvested (DRP)		Total		Cash Provided By (Used In) Operating Activities
First Quarter 2021	$	1,511,005	$0.125	$	1,503,402	$	—	$	1,503,402	$	(202,206)