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Comstock Holding Companies, Inc. Reports Third Quarter 2014 Results

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Comstock Holding Companies, Inc. (NASDAQ:CHCI) (“Comstock” or the “Company”), a leading homebuilding and multi-faceted real estate development and services company focused on the Washington, D.C. metropolitan area, today announced results for the third quarter ended September 30, 2014.

Performance highlights for the quarter include:

  • Total third quarter revenue increased to $18.4 million from $9.6 million in the third quarter 2013
  • Homebuilding revenue nearly doubled to $18.2 million from $9.2 million in the third quarter 2013
  • Quarter-end backlog of 31 units, valued at $15.9 million
  • Average backlog price increased to $513,000 from $449,000 or approximately 14% from the prior year
  • Community count increased to 17 communities open, or controlled under land purchase option contract at quarter-end 2014
  • Pipeline of controlled land inventory expanded to 831 lots at quarter-end compared to 505 lots at year-end 2013

Christopher Clemente, Chairman and Chief Executive Officer commented; “Our increased revenues, deliveries, and community count as compared to the same periods in 2013 are the result of numerous strategic initiatives implemented over the past year, including geographic expansion within the Washington DC area, the updating and expansion of our product offerings, changes to our management team, and realignment of certain key operational responsibilities. Coupled with our recently announced cheaper capital source, I believe Comstock is better positioned now for growth and profitability than at any time in recent years.”

“Our focus continues to be on achieving and maintaining the scale needed to generate positive results while achieving operational excellence. To that end we have taken many strategic steps to improve the Company’s operating performance and enhance operating margins going forward. Among the key changes implemented and in process are the following:

  • Formed Comstock Growth Fund, LC, which has enabled us to recapitalize numerous projects with more flexible, lower cost 10% mezzanine debt,
  • Implemented key management and operational changes in homebuilding division, ensuring experienced managers are focused on managing critical elements of homebuilding operations,
  • Established a dedicated and experienced purchasing team focused solely on reducing production and other costs,
  • Expanded our land acquisitions and development department with experienced management talent focused on increasing our pipeline of development opportunities and reducing time-to-market associated with entitlements and costs of land development,
  • Expanded our product line to include active adult villas, which will be introduced at the recently announced Two Rivers community in Anne Arundel County, Maryland,
  • Updated all existing products to enhance competitiveness and marketability,
  • Invested in new CRM/business management software to better manage supply chain and enhance our ability to monitor project performance.”

“I am committed to restoring Comstock’s ability to consistently deliver positive results,” Clemente continued. “I am confident that the management and operational changes implemented during the past year have resulted in the right managers being in the right seats and that our increasing community count enhances our ability to deliver significantly better results in future periods. Whereas our projected revenue from projects active or under control was $197 million at year-end 2013, total projected revenue has increased to $333 million at September 30, 2014, and we expect to add additional projects to our pipeline as we capitalize on a number of attractive opportunities.”

Exhibits 1 and 2 provide summary information on revenue and backlog by community for the third quarter of 2014 and the year to date. Exhibit 3 provides detailed information on the Company’s pipeline as of September 30, 2014 as compared to year-end 2013 and year-end 2012.

Third Quarter and Nine Month 2014 Financial Results

Revenue for the third quarter of 2014 totaled $18.4 million ($18.2 million from 35 home settlements) compared to $9.6 million for the 2013 third quarter ($9.2 million from 20 home settlements). The Company reported a consolidated net income before non-controlling interest of $1.0 million for the third quarter of 2014 compared to consolidated net income before controlling interest of $0.25 million for the 2013 period. In the third quarter of 2014, net loss attributable to Comstock Holding Companies, Inc. totaled $0.2 million, or $0.01 per diluted share, compared to a net loss of $0.7 million, or $0.03 per diluted share, in the prior-year period.

Revenue for the nine months ended September 30, 2014 totaled $38.1 million ($37.7 million from 82 settlements) compared to $33.3 million ($32.6 million from 63 settlements) for the nine months ended September 30, 2013. The Company reported a consolidated net loss before non-controlling interest of $0.5 million for the nine months ended September 30, 2014 after accounting for a severance and restructuring charge of $0.5 million related to the departure of the former Chief Operating Officer. This compared to net income before non-controlling interest of $1.4 million for the 2013 period. For the nine months ended September 30, 2014, net loss attributable to Comstock Holding Companies, Inc. totaled $3.4 million, or $0.16 per diluted share, after accounting for a severance and restructuring charge of $0.5 million related to the departure of the former Chief Operating Officer. This compared to a net loss of $0.9 million, or $0.04 per diluted share in the prior-year period.

About Comstock Holding Companies, Inc.

Comstock is a homebuilding and multi-faceted real estate development and services company that builds a wide range of housing products under its Comstock Homes brand through its wholly owned subsidiary, Comstock Homes of Washington, LC. Our track record of developing numerous successful new home communities and more than 5,500 homes, together with our substantial experience in building a diverse range of products including apartments, single-family homes, townhomes, mid-rise condominiums, high-rise condominiums and mixed-use (residential and commercial) developments has positioned Comstock as a leading residential developer and homebuilder in the Washington, D.C. metropolitan area. Comstock is a publicly traded company, trading on NASDAQ under the symbol CHCI. For more information about Comstock or its new home communities, please visit www.comstockhomes.com.

Cautionary Statement Regarding Forward-Looking Statements

This release includes “forward-looking” statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by the use of words such as “anticipate,” “believe,” “estimate,” “may,” “intend,” “expect,” “will,” “should,” “potential,” “seeks” or other similar expressions. Forward-looking statements are based largely on our expectations and involve inherent risks and uncertainties, many of which are beyond our control. You should not place undue reliance on any forward-looking statement, which speaks only as of the date made. Some factors which may affect the accuracy of the forward-looking statements apply generally to the real estate industry, while other factors apply directly to us. Any number of important factors which could cause actual results to differ materially from those in the forward-looking statements include, without limitation: general economic and market conditions, including interest rate levels; our ability to service our debt; inherent risks in investment in real estate; our ability to compete in the markets in which we operate; economic risks in the markets in which we operate, including actions related to government spending; delays in governmental approvals and/or land development activity at our projects; regulatory actions; fluctuations in operating results; our anticipated growth strategies; shortages and increased costs of labor or building materials; the availability and cost of land in desirable areas; adverse weather conditions or natural disasters; our ability to raise debt and equity capital and grow our operations on a profitable basis; and our continuing relationships with affiliates. Additional information concerning these and other important risk and uncertainties can be found under the heading “Risk Factors” in our Annual Report on Form 10-K, as filed with the Securities and Exchange Commission, for the fiscal year ended December 31, 2013. Our actual results could differ materially from these projected or suggested by the forward-looking statements. Comstock claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 for all forward-looking statements contained herein. Comstock specifically disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, future developments or otherwise.

Exhibit 1

Settled Revenue by Community
Three Months Ended September 30, 2014 (000’s) Nine Months Ended September 30, 2014 (000’s)
Community Settled

Settled
Revenue

Community Settled

Settled
Revenue

The Hampshires – Singles 5 $ 3,782 Eastgate Villas 13 $ 5,158
The Hampshires – Towns 9 4,992 The Hampshires – Singles 8 5,988
Falls Grove – Towns 10 3,053 The Hampshires – Towns 21 11,412
Maxwell Square 2 857 Falls Grove – Towns 29 8,757
Shady Grove – TH 9 5,541 Maxwell Square 2 857
Shady Grove – TH 9 5,541
Total 35 $ 18,225
Total 82 $ 37,713

Exhibit 2

Backlog by Community

As of September 30, 2014

Community Backlog Units

Backlog
Revenue

The Hampshires – Singles 5 $ 3,909
The Hampshires – Towns 3 1,643
Falls Grove – Singles 3 1,584
Falls Grove – Towns 7 2,160
Maxwell Square 7 2,938
Shady Grove – TH 5 3,178
Hallcrest – TH 1 484
Total 31 $ 15,896

Exhibit 3

CHCI Homebuilding Pipeline

Pipeline Report as of September 30, 2014
Project State

Product Type
(1)

Estimated
Units at
Completion

Units
Settled

Units
Owned
Unsettled

Units Under
Control (2)

Total Units Owned
and Under Control

Projected
Revenue Per
Unit (000’s)

Total Projected
Revenue (000’s)

Project Life
(3)

City Homes at the Hampshires DC SF 38 28 10 10 725 $ 7,250 2012-2015
Townes at the Hampshires (4) DC TH 73 34 39 39 525 20,475 2012-2015
Estates at Falls Grove VA SF 19 19 19 480 9,120 2013-2015
Townes at Falls Grove VA TH 110 29 81 81 300 24,300 2013-2016
Townes at Shady Grove Metro MD TH 36 9 27 27 625 16,875 2013-2015
Townes at Shady Grove Metro (5) MD SF 3 3 3 350 1,050 2015
Momentum | Shady Grove Metro (6) MD Condo 117 117 117 340 39,780 2015-2017
Estates at Emerald Farms MD SF 84 78 6 6 452 2,712 2015-2016
Townes at Maxwell Square MD TH 45 2 43 43 390 16,770 2014-2016
Townes at Hallcrest VA TH 42 42 42 455 19,110 2014-2015
Estates at Leeland VA SF 24 24 24 400 9,600 2014-2016
Villas | Preserve at Two Rivers 28′ MD TH 66 66 66 425 28,050 2014-2018
Villas | Preserve at Two Rivers 32′ MD TH 54 54 54 460 24,840 2014-2017
Villas at New Design Road MD TH 78 78 78 375 29,250 2016-2018
Estates at Popkins Lane VA SF 12 12 12 750 9,000 2015-2016
Townes at Richmond Station VA TH 70 70 70 365 25,550 2015-2018
Richmond Station Multi-family VA MF 103 103 103 320 32,960 2016-2019
Townes at Somerville VA TH 37 37 37 450 16,650 2016-2017
Total 1,011 180 411 420 831 $ 333,342

(1)

“SF” means single family home, “TH” means townhome, “Condo” means condominium, “MF” means multi-family.

(2)

Under land option purchase contract, not owned.

(3)

Project life reflects the projected timeline from commencement of development activity through settling the final units.

(4)

3 of these units are subject to statuatory affordable dwelling unit program.

(5)

Units are subject to statuatory moderately priced dwelling unit program.

(6)

16 of these units are subject to statuatory moderately priced dwelling unit program.

Pipeline Report as of December 31, 2013
Project State

Product Type
(1)

Estimated
Units at
Completion

Units
Settled

Units
Owned
Unsettled

Units Under
Control (2)

Total Units Owned
and Under Control

Projected
Revenue Per
Unit (000’s)

Total Projected
Revenue (000’s)

City Homes at the Hampshires DC SF 38 20 18 18 710 $ 12,780
Townes at the Hampshires (3) DC TH 73 13 60 60 516 30,960
Villas at Eastgate VA Condo 66 53 13 13 392 5,096
Estates at Falls Grove VA SF 19 19 19 452 8,588
Townes at Falls Grove VA TH 110 110 110 277 30,470
Townes at Shady Grove Metro MD TH 36 36 36 600 21,600
Townes at Shady Grove Metro (4) MD SF 3 3 3 350 1,050
Momentum | Shady Grove Metro (5) MD Condo 117 117 117 300 35,100
Estates at Emerald Farms MD SF 84 78 6 6 445 2,670
Townes at Maxwell Square MD TH 45 45 45 390 17,550
Townes at Hallcrest VA TH 42 42 42 425 17,850
Estates at Leeland VA SF 24 24 24 225 5,400
Estates at Popkins Lane VA SF 12 12 12 675 8,100
Total 669 164 493 12 505 $ 197,214

(1)

“SF” means single family home, “TH” means townhome, “Condo” means condominium, “MF” means multi-family.

(2)

Under land option purchase contract, not owned.

(3)

3 of these units are subject to statuatory affordable dwelling unit program.

(4)

Units are subject to statuatory moderately priced dwelling unit program.

(5)

16 of these units are subject to statuatory moderately priced dwelling unit program.

Pipeline Report as of December 31, 2012
Project State

Product Type
(1)

Estimated
Units at
Completion

Units
Settled

Units
Owned
Unsettled

Units Under
Control (2)

Total Units Owned
and Under Control

Projected
Revenue Per
Unit (000’s)

Total Projected
Revenue (000’s)

Eclipse on Center Park VA Condo 465 446 19 19 570 $ 10,830
Penderbrook Square VA Condo 424 422 2 2 180 360
City Homes at the Hampshires DC SF 38 38 38 688 26,144
Townes at the Hampshires (3) DC TH 73 73 73 514 37,522
Villas at Eastgate VA Condo 66 66 66 353 23,298
Estates at Falls Grove VA SF 19 19 19 445 8,455
Townes at Falls Grove VA TH 110 110 110 270 29,700
Townes at Shady Grove Metro MD TH 36 36 36 580 20,880
Townes at Shady Grove Metro (4) MD SF 3 3 3 350 1,050
Momentum | Shady Grove Metro (5) MD Condo 117 117 117 300 35,100
Estates at Emerald Farms MD SF 84 78 6 6 740 4,440
Total 1,435 946 360 129 489 197,779

(1)

“SF” means single family home, “TH” means townhome, “Condo” means condominium, “MF” means multi-family.

(2)

Under land option purchase contract, not owned.

(3)

3 of these units are subject to statuatory affordable dwelling unit program.

(4)

Units are subject to statuatory moderately priced dwelling unit program.

(5)

16 of these units are subject to statuatory moderately priced dwelling unit program.

COMSTOCK HOLDING COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except per share data)

September 30,
2014

December 31,
2013

ASSETS (unaudited)
Cash and cash equivalents $ 4,927 $ 11,895
Restricted cash 2,828 2,458
Trade receivables 335 346
Real estate inventories 41,573 39,843
Property, plant and equipment, net 260 243
Other assets 4,495 2,094
TOTAL ASSETS $ 54,418 $ 56,879
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable and accrued liabilities $ 11,723 $ 7,506
Notes payable – secured by real estate inventories 25,459 22,701
Notes payable – due to affiliates, unsecured 4,350 4,687
Notes payable – unsecured 2,193 2,580
Income taxes payable 73 346
TOTAL LIABILITIES 43,798 37,820
Commitments and contingencies (Note 8)
STOCKHOLDERS’ EQUITY
Class A common stock, $0.01 par value, 77,266,500 shares authorized, 18,872,104
and 18,629,638 issued and outstanding, respectively 189 186
Class B common stock, $0.01 par value, 2,733,500 shares authorized, issued and outstanding 27 27
Additional paid-in capital 171,180 170,811
Treasury stock, at cost (426,633 shares Class A common stock) (2,480 ) (2,480 )
Accumulated deficit (167,781 ) (164,379 )
TOTAL COMSTOCK HOLDING COMPANIES, INC. EQUITY 1,135 4,165
Non-controlling interest 9,485 14,894
TOTAL EQUITY 10,620 19,059
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 54,418 $ 56,879
COMSTOCK HOLDING COMPANIES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data)
Three Months Ended September 30, Nine Months Ended September 30,
2014 2013 2014 2013
Revenues
Revenue-homebuilding $ 18,225 $ 9,211 $ 37,713

$

32,594
Revenue-other 142 361 408 748
Total revenue 18,367 9,572 38,121 33,342
Expenses
Cost of sales-homebuilding 15,021 6,850 30,736 25,267
Cost of sales-other 80 59 258 556
Impairment reversal (722 )
Sales and marketing 600 477 1,697 1,434
General and administrative 1,626 1,719 5,833 4,978
Interest, real estate taxes and indirect costs related to inactive projects 18 61 23 405
Operating income (loss) 1,022 406 (426 ) 1,424
Other income, net 106 41 173 199
Income (loss) before income tax expense 1,128 447 (253 ) 1,623
Income tax expense (137 ) (197 ) (268 ) (197 )
Net income (loss) 991 250 (521 ) 1,426
Net income attributable to non-controlling interests 1,150 989 2,881 2,280
Net income (loss) attributable to Comstock Holding Companies, Inc. $ (159 ) $ (739 ) $ (3,402 ) $ (854 )
Basic net loss per share $ (0.01 ) $ (0.03 ) $ (0.16 ) $ (0.04 )
Diluted net loss per share $ (0.01 ) $ (0.03 ) $ (0.16 ) $ (0.04 )
Basic weighted average shares outstanding 21,147 20,739 21,058 20,646
Diluted weighted average shares outstanding 21,147 20,739 21,058 20,646
COMSTOCK HOLDING COMPANIES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands, except per share data)
Nine Months Ended September 30,
2014 2013
Cash flows from operating activities:
Net (loss) income $ (521 ) $ 1,426
Adjustment to reconcile net (loss) income to net cash (used in) provided by operating activities
Amortization of loan discount and deferred financing fees 234 359
Depreciation expense 73 47
Provision for bad debt 20 (22 )
Gain from extinguishment of notes payable (27 )
Earnings from unconsolidated joint venture, net of distributions (34 ) (16 )
Impairment reversal (722 )
Amortization of stock compensation 195 392
Changes in operating assets and liabilities:
Restricted cash – purchaser deposits (39 ) (504 )
Trade receivables (9 ) (248 )
Real estate inventories (1,711 ) (10,825 )
Other assets (2,254 ) (36 )
Accrued interest 660 (13 )
Accounts payable and accrued liabilities 4,411 4,006
Income taxes payable (273 ) 197
Net cash provided by (used in) operating activities 752 (5,986 )
Cash flows from investing activities:
Investment in unconsolidated joint venture (7 )
Purchase of property, plant and equipment (90 ) (75 )
Notes receivable (181 )
Restricted cash (331 )
Proceeds from sale of Cascades multi-family – operating real estate, net 279
Net cash (used in) provided by investing activities (602 ) 197
Cash flows from financing activities:
Proceeds from notes payable 23,528 22,984
Payments on notes payable (22,154 ) (23,893 )
Loan financing costs (166 ) (188 )
Distributions to non-controlling interests (8,290 ) (367 )
Contributions from non-controlling interests 7,909
Proceeds from exercise of stock options 26 1
Taxes paid related to net share settlement of equity awards (62 ) (8 )
Net cash (used in) provided by financing activities (7,118 ) 6,438
Net (decrease) increase in cash and cash equivalents (6,968 ) 649
Cash and cash equivalents, beginning of period 11,895 3,539
Cash and cash equivalents, end of period $ 4,927 $ 4,188
Supplemental disclosure for non-cash activity:
Interest paid, net of interest capitalized $ (660 ) $ 184
Increase in class A common stock par value in connection with vesting and issuance of stock compensation $ 2 $ 8
Accrued liability settled through issuance of stock $ 194 $

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