Cottonwood Communities Inc. Merges with Cottonwood Multifamily REIT I and Cottonwood Multifamily REIT II
Cottonwood Communities Inc., a publicly registered non-traded REIT focused on multifamily apartment communities, has reportedly completed its mergers with Cottonwood Multifamily REIT I Inc. and Cottonwood Multifamily REIT II Inc, according to filings with the SEC on July 20.
Under the terms of the merger, each share of Cottonwood Multifamily REIT I will purportedly be converted into the right to receive 1.175 shares of Class A common stock of Cottonwood Communities.
Each share of Cottonwood Multifamily REIT II will reportedly be converted into the right to receive 1.072 shares of Class A common stock of Cottonwood Communities.
Cottonwood Communities reportedly recently declared a net asset value per share/unit of its common stock and operating partnership units of $11.79 as of June 30, 2021. The company notes it will announce an updated net asset value that will be published in August, as of July 31, 2021.
We reported in November that Cottonwood Multifamily REIT I was negatively impacted by the Covid-19 global pandemic.
The company noted in a report last August that as a result of shutdowns, quarantines or actual viral health issues, some of the tenants at the multifamily apartment communities of the properties “owned by our joint ventures have experienced job loss or reduced income and have or may be unable to make their rental payments.”
How Does a Merger Affect Shareholders?
Companies often merge as part of a strategic effort to boost shareholder value, often by creating new business lines and/or gaining greater market share. However, the economic environment at the time of the merger, size of the companies and management of the merger process all play a part in future returns for shareholders.
Shareholders may experience a significant loss of voting power, and while the spike in trading volume tends to inflate share prices, if economic conditions are not favorable at the time of the merger, shareholders may see significant losses.
Potential Lawsuits to Recovery Financial Losses
Non-traded REITS are considerably more complex than traditional investments and usually involve a high degree of risk. Unfortunately many investors were unaware of the risks and liquidity problems associated with non-traded REITs, when they were sold the investments. They also may come with high fees and commissions.
Broker dealers are required to perform adequate due diligence on any investment they recommend and to ensure that all recommendations are suitable for the investor. Recommendations should be in line with the investor’s age, risk tolerance, net worth, and investment experience.
If a broker dealer fails to adequately disclose risks or make unsuitable investment recommendations, it can be held liable for investment losses.
If you are concerned about your investment in Cottonwood Communities or another Cottonwood REIT, the securities attorneys at The White Law Group may be able to help you.
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