Cottonwood Communities, Inc. Annual Report: A Simple Breakdown

I’m here to help you understand the latest annual report for Cottonwood Communities, Inc. Let’s skip the complex financial jargon and focus on what actually matters to you as an investor.

1. What does this company do?

Cottonwood Communities is a real estate investment trust (REIT) that focuses on apartment complexes. Think of them as a professional landlord that builds, buys, and manages apartments across the U.S. As of December 31, 2025, they owned 37 apartment communities with 11,248 units and were working on 10 development projects. They focus on high-quality apartments in fast-growing areas, primarily in the Sun Belt, to grow the value of their properties and collect rent.

2. The "Big Catch" for Investors

There is one massive detail you need to know: You cannot easily sell your stock. Unlike shares of Apple or Coca-Cola, there is no public market for these shares.

The company has a "share repurchase program," which is essentially a request line to sell your shares back to them. However, they aren't required to buy them back, and they can stop this program whenever they choose. Historically, they have limited buybacks to 5% of their total shares each year. This means your money could be "locked up" for a long time, and you may not be able to get it out when you want.

3. Financial Health: Are they making money?

The company has reported a loss for three years in a row:

• 2025: Lost $12.9 million on $284.5 million in revenue.
• 2024: Lost $20.6 million on $241.2 million in revenue.
• 2023: Lost $44.9 million on $198.7 million in revenue.

While their losses are shrinking, they have a total historical deficit of $110.6 million. They rely on selling new shares to investors to keep running and to pay out "distributions" (their version of dividends). In 2025, they paid out $68 million in distributions, using money from new investors rather than profit from their apartments.

4. Major Risks

• The "New Money" Trap: Because they rely on new investors to pay current ones, they constantly need to attract new capital. If that flow slows, they may struggle to pay distributions or fund projects.
• Hidden Costs: After a recent merger, they identified mold in many buildings. Fixing this and handling legal claims has already cost over $15 million.
• Conflicts of Interest: The people running the company also own the firm that manages it. They collect fees based on the company's "Net Asset Value"—a price they calculate themselves. This gives them a financial incentive to keep that value high.
• Debt and Development: Building apartments is expensive. The company carries $1.9 billion in debt. If projects go over budget or take too long, it hurts their bottom line and increases their interest payments.

5. The Bottom Line

While the company is losing less money than in 2023, it is still not profitable. Between the difficulty of selling your shares and the reliance on new investors to pay current ones, this is a high-risk investment. Be aware that your "distributions" are often just a return of your own capital, not actual profit from the apartments.

Before you invest: Ask yourself if you are comfortable with your money being tied up for an indefinite period and if you are okay with an investment that currently relies on new capital to fund its operations rather than its own rental income.