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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2023
or
☐ 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 001-32375
Comstock Holding Companies, Inc.
(Exact name of Registrant as specified in its Charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
1900 Reston Metro Plaza, 10th Floor
Reston, VA
(Address of principal executive offices)
20-1164345
(I.R.S. Employer
Identification No.)
20190
(Zip Code)
Securities registered pursuant to Section 12(b) of the Act:
Registrant’s telephone number, including area code: (703) 230-1985
Title of each class
Class A Common Stock, $0.01 par value
Trading symbol(s)
CHCI
Name of each exchange on which registered
Nasdaq Capital Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒
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 ☒ 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
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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.
Large accelerated filer ☐
Non-accelerated filer
☒
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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the
correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the
registrant’s executive officers during the relevant recovery period pursuant to § 240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant, based on the closing price of the shares of common stock
on The Nasdaq Capital Market on June 30, 2023, was $11,911,378.
The number of shares of registrant’s common stock outstanding as of February 29, 2024, was 9,585,910 (Class A) and 220,250 (Class B).
The information required by Part III (Items 10, 11, 12, 13 and 14) will be incorporated by reference from the registrant’s definitive proxy statement for its 2024 Annual
Meeting of Stockholders, which will be filed pursuant to Regulation 14A with the United States Securities and Exchange Commission (“SEC”) within 120 days after the
end of the fiscal year to which this report relates.
DOCUMENTS INCORPORATED BY REFERENCE
Table of Contents
COMSTOCK HOLDING COMPANIES, INC.
Annual Report on Form 10-K
For the Fiscal Year Ended December 31, 2023
TABLE OF CONTENTS
PART I.....................................................................................................................................................................................
Item 1.
Item 1B.
Item 1C.
Item 2.
Item 3.
Item 4.
PART II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Business...........................................................................................................................................................
Unresolved Staff Comments............................................................................................................................
Cybersecurity...................................................................................................................................................
Properties.........................................................................................................................................................
Legal Proceedings............................................................................................................................................
Mine Safety Disclosures..................................................................................................................................
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities..........................................................................................................................................................
[Reserved]........................................................................................................................................................
Management’s Discussion and Analysis of Financial Condition and Results of Operations..........................
Quantitative and Qualitative Disclosures About Market Risk.........................................................................
Financial Statements and Supplementary Data...............................................................................................
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.........................
Controls and Procedures..................................................................................................................................
Other Information............................................................................................................................................
PART III..................................................................................................................................................................................
PART IV..................................................................................................................................................................................
Item 15.
Item 16.
Exhibit and Financial Statement Schedules...................................................................................................
10-K Summary.................................................................................................................................................
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SIGNATURES........................................................................................................................................................................
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain matters disclosed in this Annual Report on Form 10-K may include forward-looking statements. These statements can be
identified by the fact that they do not relate strictly to historical or current facts. They use words such as “aim,” “anticipate,”
“believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “project,” “should,” “will be,” “will continue,” “will likely
result,” “would,” and other words and terms of similar meaning in conjunction with a discussion of future operations or financial
performance. These forward-looking statements are based on current management expectations, which are subject to inherent
risks and uncertainties that may cause actual results to differ materially from the results expressed in, or implied by, these
forward-looking statements.
The Company acknowledges the importance of communicating future expectations to investors, however future events and
circumstances are not always able to be accurately predicted or controlled. When considering forward-looking statements,
investors should keep in mind the risks and uncertainties that may cause actual results to differ materially from the expectations
described, and consequently should place no undue reliance on any of these statements. There are several factors that may affect
the Company or the real estate industry as a whole which could impact the accuracy of forward-looking statements, including, but
not limited to: general economic and market conditions, including inflation and interest rate levels; changes in real estate markets;
inherent risks of investment in real estate; the ability to attract and retain customers; the ability to compete in the markets in which
the Company operates; regulatory actions; fluctuations in operating results; shortages and increased costs of labor or materials;
adverse weather conditions and natural disasters; public health emergencies; the ability to raise debt and equity capital and grow
operations on a profitable basis; and continuing relationships with affiliates.
Forward-looking statements speak only as of the date of this Annual Report on Form 10-K. Except as required under federal
securities laws and the rules and regulations of the Securities and Exchange Commission ("SEC"), the Company undertakes no
obligation to update any forward-looking statements to reflect events or circumstances arising after the date of this Annual Report
on Form 10-K, whether as a result of new information, future events, or otherwise, except as required by law.
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Item 1. Business
PART I
As used herein, "Comstock", "CHCI", "the Company," "we," "us," "our," and similar terms are referring to Comstock Holding
Companies, Inc. and its subsidiaries, unless the context indicates otherwise.
Overview
Comstock is a leading asset manager, developer, and operator of mixed-use and transit-oriented properties in the Washington,
D.C. region. We have become the area’s premier real estate service company by creating extraordinary places, delivering
exceptional experiences, and generating excellent results for all stakeholders.
Since 1985, we have acquired, developed, operated, and sold millions of square feet of residential, commercial, and mixed-use
properties. Our industry expertise and commitment to excellence enable us to consistently deliver best-in-class services across the
diverse assets in our managed portfolio. We specialize in supporting the seamless integration of residential, commercial, and retail
offerings into vibrant mixed-use communities, exemplified by Reston Station and Loudoun Station, two assets in our Anchor
Portfolio that are among the region's largest and most prominent mixed-use, transit-oriented developments. We maintain a
market-leading position in Northern Virginia's Dulles Corridor, which is undergoing an urban transformation as a result of the
creation and expansion of Metro's Silver Line, which connects Loudoun County and Dulles International Airport to Reston,
Tysons, Washington, D.C., and suburban Maryland.
We provide a broad suite of asset management, property management, development and construction management, and other real
estate-related services to our asset-owning clients, composed primarily of institutional real estate investors, high net worth family
offices, financial institutions, and governmental bodies seeking to enhance their surrounding communities by developing real
estate they own through public-private partnerships. We employ a talented staff of real estate professionals that are led by our
seasoned management team and are tasked with delivering high-quality services to the premium, strategically located assets in our
managed portfolio.
Our asset management services platform is anchored by a long-term full-service asset management agreement with a Comstock
affiliate that extends through 2035 and covers all of the properties in our Anchor Portfolio (the "2022 AMA" - see below for
additional details). As a vertically integrated real estate services company, we perform all property management activity through
three wholly owned operational subsidiaries: CHCI Commercial Management, LC (“CHCI Commercial”); CHCI Residential
Management, LC (“CHCI Residential”); and ParkX Management, LC (“ParkX”).
We operate a fee-based, asset-light, and substantially debt-free business model that allows us to substantially mitigate risks that
are typically associated with real estate development and operation. We have directly aligned the equity ownership of our
Company with the ownership interests of the affiliated assets that we manage in our Anchor Portfolio. This relationship, along
with the 2022 AMA that includes a baseline cost-plus feature and supplemental performance-based revenue opportunities, provide
us with a stable, streamlined business platform on which we can (i) produce consistent, positive financial results, (ii) mature and
expand our real estate service offerings, (iii) diversify and grow our managed portfolio of assets, both organically and through
additional third-party relationships, (iv) pursue strategic investments and complimentary acquisitions, and (v) deliver exceptional
value to our shareholders.
We distinguish ourselves from industry peers through an established standard of excellence that extends from who we hire to how
we deliver our broad suite of real estate services. We are able maintain this high standard because We Show Up - every day, in
person, in a collaborative environment that is structured to deliver on our mission to make a difference for our customers, our
stakeholders, and in the communities that we serve.
Significant Developments
CES Divestiture
On March 31, 2022, we completed the sale of Comstock Environmental Services, LLC ("CES"), a wholly owned subsidiary, to
August Mack Environmental, Inc. ("August Mack"). This strategic divestiture was based on the continued growth and future
prospects of our asset management business. Accordingly, we have reflected CES as a discontinued operation in our consolidated
financial statements for all periods presented, and unless otherwise noted, all amounts and disclosures relate solely to our
continuing operations. (See Note 3 in the Notes to Consolidated Financial Statements for additional information).
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Series C Preferred Stock Redemption and 2022 Asset Management Agreement
On June 13, 2022, we completed two separate significant transactions to further deleverage our balance sheet and enhance our
long-term revenue outlook and growth potential. The first one with CP Real Estate Services, LC (“CPRES”), an entity owned by
Christopher Clemente, Comstock’s Chief Executive Officer, redeemed all outstanding Series C preferred stock at a significant
discount to carrying value. Secondly, we executed a new asset management agreement with Comstock Partners, LC ("CP"), an
entity controlled by Mr. Clemente and wholly owned by Mr. Clemente and certain family members, which covers our Anchor
Portfolio of assets (the "2022 AMA"). The 2022 AMA increased the base fees we collect, expanded the services that qualify for
additional supplemental fees, extended the term through 2035, and most notably introduced a mark-to-market incentive fee based
on the imputed profit of Anchor Portfolio assets, generally as each is stabilized and as further specified in the agreement. (See
Notes 10 and 14 in the Notes to Consolidated Financial Statements for additional information).
Our Services
Our experienced team of professionals provides a comprehensive suite of services and solutions related to the acquisition,
development, and operation of real estate assets. The services we provide cover all aspects of real estate asset management,
including acquisition and disposition management, leasing, design, placemaking, property management, origination and
negotiation of debt and equity facilities, risk management, construction and development management, creation of investment
opportunities, execution of core-plus, value-add, and opportunistic strategies, and various other property-specific services.
Our asset management services platform is anchored by the 2022 AMA, which covers all the assets in our Anchor Portfolio. In
addition, we have entered into separate asset management agreements for non-Anchor Portfolio assets. All properties included in
our managed portfolio have entered into property management agreements with our three wholly owned operational subsidiaries
that provide for market-rate fees related to our services.
Our Portfolio
The following table summarizes the operating assets that are included in our managed portfolio:
Type
# of Assets
Commercial
Residential
Parking
Total
13
6
30
49
Size/Scale
2.0 million sqft.
1.8 million sqft. / ~1,700 units
18,000+ spaces
% Leased
92%
97%
In addition, we manage the following assets that are under construction and scheduled for delivery in the next 12 to 24 months:
•
•
•
•
3 commercial assets representing approximately 600,000 square feet;
1 residential asset with 420 units representing approximately 430,000 square feet;
1 JW Marriott-branded hotel/condominium with 243 keys and 95 residential units representing a total of approximately
520,000 square feet; and
2 commercial parking garages with approximately 2,900 spaces.
Our development pipeline currently includes 5 commercial assets that represent approximately 1.5 million square feet, 6
residential assets with 2,599 units that represent approximately 2.8 million square feet, and 1 hotel that will include 140 keys. At
full build out, our managed portfolio of assets is currently projected to total 68 assets that represent nearly 10 million square feet.
Anchor Portfolio
Reston Station
Reston Station is one of the largest mixed-use, transit-oriented developments in the mid-Atlantic region. Located at the Wiehle-
Reston East station on Metro’s Silver Line, the Reston Station neighborhood spans the Dulles Toll Road and covers
approximately 90 acres. The Reston Station neighborhood is being developed in phases and is composed of the following five
districts:
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• Metro Plaza District (Operating)
The Metro Plaza District is located adjacent to Wiehle Reston-East Metro Station and contains approximately 1.4 million
square feet of mixed-use development, highlighted by three Trophy-Class office buildings and BLVD Reston, a luxury
residential tower with 448 units. It is home to corporate and regional headquarters of Google, ICF Global, Spotify,
Qualtrics, Rolls-Royce of North America, Neustar, and others. All buildings in the Metro Plaza District have ground
floor retail, which has been leased to high-quality tenants, including Starbucks, CVS, Founding Farmers, Matchbox,
Scissors & Scotch, and others.
The Metro Plaza District also includes one of the largest underground commuter parking garages and bus transit facilities
in the region. The 1.7 million square foot subterranean garage and transit facility is the subject of a public-private
partnership between a Comstock affiliate and Fairfax County, Virginia. The Reston Station transit facility provides
Metro commuters with an indoor bus transit depot designed to accommodate upwards of 110 buses per hour, 2,300
commuter parking spaces operated by Fairfax County, and approximately 2,750 additional parking spaces for retail,
office, and commuter uses, a Tesla Super Charging Station and numerous other electric vehicle charging stations, secure
bicycle parking and storage facilities, substantial storm water management vaults, and state-of-the-art water treatment
systems.
•
Reston Row District (Under Construction)
The Reston Row District is currently being developed on approximately 9 acres adjacent to the Metro Plaza District. This
newest phase of the Reston Station development has entitlements in place allowing for approximately 1.5 million square
feet of mixed-use development and will include two Trophy-Class office buildings, a residential building with 420
multifamily units, over 100,000 square feet of retail, and Virginia's first JW Marriott Hotel and Condominium tower,
which will have 243 hotel rooms, 95 JW Marriott-branded condominium residences, and approximately 25,000 square
feet of meeting space.
•
Commerce District (In Development)
The Commerce District is located on approximately 16 acres adjacent to Wiehle Reston-East Metro Station, directly
across the Dulles Toll Road from the Metro Plaza District. It has entitlements in place that allow for approximately 1.5
million square feet of new mixed-use development surrounding the four existing stabilized Class-A office buildings that
represent a total of approximately 590,000 square feet. We are currently leasing and managing the four existing office
buildings and one existing retail building while finalizing plans for the permitted new development.
• Midline District (In Development)
The Midline District, located directly across Wiehle Avenue from the Reston Row District and the Metro Plaza District,
has entitlements in place that allow for approximately 1.2 million square feet of new mixed-use development on
approximately 8 acres. We are currently updating the entitlements secured by the previous owner and plan to commence
development and leasing operations after receiving the necessary permits for the new development.
• West District (In Development)
The West District currently consists of approximately 11 acres of land located adjacent to the Reston Row District and
Metro Plaza District and includes a previously developed 90,000 square foot office building owned by one of our
affiliates and an apartment building owned by a third party. In 2022, our affiliate acquired an existing 58,000 square foot
office building on an adjacent parcel that is planned for demolition and will be incorporated into the West District's
development plans, which are planned to commence after entitlements are secured. It is anticipated that entitlements will
allow for five mixed-use buildings in the West District, including the aforementioned existing apartment building.
Loudoun Station (Operating + In Development)
Loudoun Station, located in Ashburn, Virginia adjacent to Ashburn Station at the terminus of Metro’s Silver Line, is Loudoun
County’s first and only Metro-connected development. With direct rail connectivity to Dulles International Airport, Reston,
Tysons, and Washington, D.C., it represents the beginning of Loudoun County’s transformation into a transit-connected
community. Loudoun Station has more than 1.0 million square feet of mixed-use development completed and stabilized, including
nearly 700 residential units, approximately 50,000 square feet of Class-A office space, and approximately 150,000 square feet of
retail space, highlighted by an 11-screen AMC Cinema as well as multiple dining and entertainment venues. It is also home to a
1,500-space Metro commuter parking garage that is the subject of a public-private partnership between a Comstock affiliate and
Loudoun County. At full build, the Loudoun Station development will cover nearly 50 acres.
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Herndon Station (In Development)
Herndon Station will include up to approximately 340,000 square feet of residential, retail and entertainment spaces, including a
performing arts center, and an approximately 700-space commercial parking garage in the historic downtown portion of the Town
of Herndon in western Fairfax County, Virginia. The project is the focus of a public-private partnership between a Comstock
affiliate and the Town of Herndon and will include improvements to existing connections to the adjacent WO&D trail, a popular
pedestrian and bicycle route that stretches from Washington, D.C. to Loudoun County, Virginia.
Other Portfolio Assets
The following summarizes additional operating assets that are currently in our managed portfolio:
Investors X
On April 30, 2019, we entered into a Master Transfer agreement with CPRES, that provided for priority distribution of residual
cash flow from its Class B membership interest in Comstock Investors X, L.C. ("Investors X"), an unconsolidated variable
interest entity that owns Comstock’s residual homebuilding operations. As of December 31, 2022, the residual cash flow
primarily relates to anticipated proceeds from the sale of rezoned residential lots and returns of cash securing outstanding letters
of credit and cash collateral posted for land development bonds covering work performed by subsidiaries owned by Investors X.
The cash will be released to CHCI as bond release work associated with these projects is completed.
The Hartford
In December 2019, we entered into a joint venture with CP to acquire The Hartford Building ("The Hartford"), a stabilized Class-
A office building immediately adjacent to Clarendon Station on Metro’s Orange Line in Arlington County, Virginia’s premier
transit-oriented office market, the Rosslyn-Ballston Corridor. Built in 2003, the 211,000 square foot mixed-use Leadership in
Energy and Environmental Design (“LEED”) GOLD building is leased to multiple high-quality tenants. In February 2020, we
arranged for DivcoWest, an unaffiliated entity, to purchase a majority ownership stake in The Hartford and secured a $87 million
loan facility from MetLife. As part of the transaction, we entered into asset management and property management agreements to
manage the property.
BLVD Forty Four
In October 2021, we entered into a joint venture with CP to acquire a stabilized 15-story, luxury high-rise apartment building in
Rockville, Maryland that was built in 2015, which we rebranded as BLVD Forty Four. Located one block from the Rockville
Station on Metro's Red Line and in the heart of the I-270 Technology and Life Science Corridor, the 263-unit mixed use property
includes approximately 16,000 square feet of retail and a commercial parking garage. In connection with the transaction, we
received an acquisition fee and are entitled to receive investment related income and promote distributions in connection with our
5% equity interest in the asset. We also provide asset, residential, retail and parking property management services for the
property in exchange for market rate fees.
BLVD Ansel
In March 2022, we entered into a joint venture with CP to acquire BLVD Ansel, a newly completed 18-story, luxury high-rise
apartment building with 250 units located adjacent to the Rockville Metro Station and BLVD Forty Four in Rockville, Maryland.
BLVD Ansel features approximately 20,000 square feet of retail space, 611 parking spaces, and expansive amenities including
multiple private workspaces designed to meet the needs of remote-working residents. In connection with the transaction, we
received an acquisition fee and are entitled to receive investment related income and promote distributions in connection with our
5% equity interest in the asset. We also provide residential, retail and parking property management services for the property in
exchange for market rate fees.
Comstock 41
In December 2023, we completed the acquisition of an 18,150 square foot land parcel located at 41 Maryland Avenue in
Rockville, Maryland (“Comstock 41”) through a wholly owned subsidiary for $1.5 million. This investment property sits adjacent
to BLVD Ansel and BLVD Forty Four and is currently a surface parking lot. Comstock 41 has existing entitlements for at least
117 dwelling units and approximately 11,000 square feet of retail space.
Parking
Our wholly owned subsidiary ParkX currently manages a total of 30 commercial parking garages and spaces, including 13
commercial parking garages owned by unaffiliated parties.
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Our Business Strategy
In early 2018, we transitioned away from the development and sale of residential homes to our current business model, which
primarily focuses on driving recurring fee-based revenue streams from the asset and property management services we provide for
commercial and mixed-use real estate properties in the greater Washington, D.C. region. This significant shift took us from a high
risk, capital-intensive approach to one that is asset-light and debt-free, providing us with a stronger balance sheet that allows for
greater flexibility when it comes to exploring additional opportunities to grow our business.
We have demonstrated a proven track record of successfully managing a large-scale, diverse portfolio that contains both stabilized
and in-development assets. Our decades of experience and in-depth industry knowledge provide us with the necessary foundation
to successfully deliver on our unique business strategy, which is centered around the following strategic areas of focus:
•
Generation of stable, recurring revenue and cash flows
We primarily operate under long-term asset management and property management agreements that provide recurring
fee-based revenue streams, including the 2022 AMA and its cost-plus fee structure foundation that covers all the assets
we manage in our Anchor Portfolio. This approach, along with additional opportunities to recognize supplemental and
performance-based revenue based on provisions included in the 2022 AMA and our other management agreements,
provide us with stability and visibility that help drive consistent, predictable top-line growth and positive operating cash
flows.
•
Addition of high-quality, mixed-use and transit-oriented assets in high-growth, high-potential areas
The assets in our managed portfolio are primarily composed of high-quality, trophy-class assets located in transitioning
“sub-urban” markets found within the greater Washington D.C. region. These sub-markets, which include the Dulles
Corridor and the Rosslyn-Ballston Corridor in Northern Virginia and the I-270 Technology and Life Science Corridor in
Montgomery County, Maryland, are currently experiencing a "flight to quality" that is driving demand for the type of
premium developments and amenity-rich buildings that compose our managed portfolio. We anticipate the heightened
demand for top-tier real estate will persist across both commercial and residential markets, driven by an increasing
number of tenants who are willing to pay higher rents for top-quality assets located in mixed-use, transit-oriented
communities with access to premium amenities.
In Northern Virginia specifically, growing demand for technology and cybersecurity services has driven the proliferation
of major corporations opening operational headquarters in the region, including Amazon, Microsoft, CoStar, Nestle,
Raytheon Technologies, Boeing, and others to the region. The expansion and continued investment of these large
technology companies will benefit Northern Virginia’s employment market, further driving increased demand for the
assets we manage and the mixed-use communities we are developing.
•
Leveraging our growth platform and industry expertise to secure additional development and investment opportunities
Our stable growth platform and streamlined balance sheet provide us with insulation from significant downturns in the
commercial real estate industry. As a result, we are well positioned to pursue, and potentially capitalize on, market
disruptions that produce new attractively valued assets that would complement our existing managed portfolio. We
typically engage a joint-venture partner that will provide the majority of capital needed for our investments in real estate
ventures. This approach enables us to minimize risk and retain the flexibility to pursue additional value-add, core, and
core-plus investments and acquisitions as new opportunities emerge.
We have worked closely with our affiliates to secure public-private partnerships with local governments from Fairfax
County, Loudoun County, and the Town of Herndon in Virginia to develop and manage large-scale mixed-use, transit-
oriented developments. Our proven track record of developing and managing best-in-class properties across the region
has positioned us as an attractive partner for additional government entities looking to improve infrastructure and
enhance their surrounding communities. In addition, recent changes to the comprehensive land use plans of Fairfax
County and Loudoun County that encourage high-density and mixed-use development proximate to Metro's Silver Line
stations may further enhance our potential growth opportunities.
Our Culture
Over nearly four decades we have curated a unique culture that distinguishes us from our industry peers and is firmly rooted in
our commitment to work together - every day, in-person to drive the standard of excellence that we consider to be our baseline.
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We Show Up every day because we believe that showing up makes a difference for our customers, our stakeholders, and in the
communities that we serve. To learn more about Comstock's culture, please visit www.Comstock.com/WeShowUp.
Our Values
We are committed to pursuing environmental sustainability, social responsibility, and robust governance practices across all our
operations. We recognize that development of real estate can have significant impact, positive or negative, for the surrounding
community, the region, and the environment that we all share. We believe that companies developing real estate have a
responsibility to maximize the positive impacts while taking steps to minimize negative impacts. Supporting and fostering these
initiatives is instrumental in making our communities better places to live, work, and play while simultaneously bolstering asset
value, reducing risk, and positively impacting all stakeholders. The following are highlights from our 2023 ESG Report, the full
version of which can be found on our website: www.Comstock.com/Corporate-Responsibility.
Environmental
We believe that environmentally sound business practices are critical to the long-term success of our business and the
communities in which we operate. Our managed portfolio already includes multiple assets that are Leadership in Energy and
Environmental Design (“LEED”) and Energy Star certified, and multiple initiatives are underway to increase the percentage of
LEED and Energy Star certified buildings in our managed portfolio. We continue to expand our capabilities around monitoring
energy and utility consumption at all our properties, allowing us to better identify opportunities to maximize efficiency and
sustainability through operational and capital improvements.
In 2022, we announced a partnership with DAVIS Construction on the introduction of CarbonCure, a sustainable concrete
component, in the construction of Phase II of our Reston Station development (A/K/A Reston Row District). CarbonCure is clean
technology that produces greener concrete by recycling carbon dioxide (CO2) produced during the cement manufacturing process
and injecting the recycled CO2 into fresh concrete during mixing. Once injected, the CO2 transforms into a mineral that improves
the compressive strength of concrete and captures the recycled CO2 emissions which are never re-released into the atmosphere.
Every cubic yard of concrete produced with CarbonCure technology saves an average of 25 pounds of carbon from entering the
atmosphere, which will save millions of pounds of CO2 emissions from entering the atmosphere. Furthermore, we intend to
engage our supply chain to incorporate sustainable designs, materials, and systems into all ongoing or future developments.
Our transit-oriented developments promote the use of mass transit, ride sharing, and alternate modes of transportation. We
continue to expand the availability of electronic vehicle charging stations and bike racks at our properties to promote the reduction
of congestion and our overall carbon footprint. In recognition of the positive impacts resulting from Reston Station’s design, the
development has been awarded the designation of Best Workplaces for Commuters each year since 2020 by the Best Workplaces
for Commuters Organization, coordinated by the National Center for Transit Research at the Center for Urban Transportation
Research.
Social (Human Capital)
We strive to create extraordinary places and provide exceptional experiences in places where people live, work, and play. We
recognize the vital importance of community engagement in achieving this goal, which is why philanthropic partnerships have
always been a key focus. We host a variety of community events in the public spaces we develop, aimed at creating rich and
meaningful experiences. We support local organizations through charitable events, including Boys & Girls Club of Greater
Washington, Habitat for Humanity, St. Jude Children’s Research Hospital, multiple youth sports organizations and local schools,
and others. We partner with Cornerstones, Reston’s leading non-profit dedicated to helping underserved populations, to purchase
winter coats for children and contribute meals to those in need. We encourage all employees to participate in charitable efforts in
the community by providing paid leave to volunteer and numerous charitable contribution matching opportunities.
A key to our success is our ability to attract and retain a talented workforce that understands the numerous benefits of working in-
office rather than remotely. We employ a diverse, multi-generational staff that consisted of 172 full-time and 28 part-time
employees as of December 31, 2023. We promote collaboration, support, and innovation, providing all our employees the
opportunity to achieve their professional and wellness goals. We continuously strive to diversify our workforce, provide equal
access to opportunities to our people, and promote a working environment based on mutual trust, confidence, and respect. Our
employees have access to a comprehensive suite of benefits, including, but not limited to, medical, dental, vision, and life
insurance options; flexible and health savings accounts; 401k plan matching; and professional development reimbursement. We
offer numerous wellness initiatives and training opportunities, including diversity training and a broad suite of e-learning courses.
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Governance
Our employees, managers and officers conduct our business under the direction of our CEO and the oversight of our Board of
Directors (the “Board”) to enhance our long-term value for our stockholders. The core responsibility of our Board is to exercise its
fiduciary duty to act in the best interests of our Company and our stockholders. In exercising this obligation, our Board and its
individual committees perform several specific functions, including risk assessment, review and oversight. While management is
responsible for the day-to-day management of risk, our Board retains oversight of risk management for our company, assisting
management by providing guidance on strategic risks, financial risks, and operational risks.
We have established corporate governance guidelines and policies that promote Company values, including a code of conduct as
well as a code of ethics. Our information security team deploys an array of cybersecurity capabilities to protect our various
business systems and data. We continually invest in protecting against, monitoring, and mitigating risks across the enterprise. We
had no material publicly reportable information security incidents in the fiscal year ended December 31, 2023.
Competition
The real estate asset management and services industry is highly competitive. We compete with other businesses in the asset
management and real estate-related services businesses on the basis of price, location, experience, service and reputation. Many of
these competitors are larger than us, operate on a national or global scale, and some have access to greater technical, marketing
and financial resources. These competitors may benefit from lower costs of capital, greater business scale, enhanced operating
efficiencies, and greater immunity to localized market downturns due to their broad geographic presence. We also face numerous
competitors on a local and regional basis. Certain competitors may also possess greater access to capital, higher risk tolerance,
lower return thresholds, or less regulatory restrictions, all which could allow them to consider a broader range of investments and
to bid more aggressively for investment opportunities than we are willing to.
Technology and Intellectual Property
We utilize our technology infrastructure to facilitate the management of our client’s assets and the marketing of our services. We
use media and internet-based marketing platforms primarily in lieu of print advertisements. We believe that the prospective
renters will continue to increase their reliance on information available on the internet to help guide their decisions. Accordingly,
through our marketing efforts, we will continue to leverage this trend to lower per lease marketing costs while maximizing
potential lease transactions.
Our Chief Executive Officer and Chairman of the Board, Christopher Clemente, has licensed his ownership interest in the
“Comstock” brand and trademark to us in perpetuity. We have registered our trademarks and routinely take steps, and
occasionally take legal action, to protect against brand infringement from third parties. Mr. Clemente has retained the right to
continue to use the “Comstock” brand and trademark including for real estate development projects in our current or future
markets that are unrelated to the Company but, currently, substantially all of Mr. Clemente’s real estate development business is
conducted with Comstock, pursuant to the 2022 AMA.
Governmental Regulation and Environmental Matters
We are subject to various local, state and federal statutes, ordinances, rules and regulations concerning finance, banking,
investments, zoning, building design, construction, density requirements and similar matters. We may also be subject to periodic
delays or may be precluded entirely from developing in certain communities due to building moratoriums or “slow-growth” or
“no-growth” initiatives that could be implemented in the future in the states where we operate. Local and state governments also
have broad discretion regarding the imposition of development fees for projects in their jurisdiction.
We are also subject to a variety of local, state, and federal statutes, ordinances, rules and regulations concerning protection of the
environment. Some of the laws to which we and our properties are subject to may impose requirements concerning development
in waters of the United States, including wetlands, the closure of water supply wells, management of asbestos-containing
materials, exposure to radon and similar issues. The particular environmental laws that apply to any given real estate asset vary
based on several factors, including the environmental conditions related to a particular property and the present and former uses of
the property.
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Additional Information
Comstock Holding Companies, Inc. was incorporated in Delaware in 2004. Our principal executive offices are located at 1900
Reston Metro Plaza, 10th Floor, Reston, VA 20190, and our telephone number is 703-230-1985. Our corporate website address is
www.Comstock.com.
We maintain an investor relations page on our website where our annual reports on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K, amendments to those reports and other required SEC filings may be accessed free of charge as soon
as reasonably practicable after such material is electronically filed with, or furnished to, the SEC.
Our Internet website and the information contained therein or connected thereto are not intended to be incorporated into this
Annual Report on Form 10-K.
Item 1B. Unresolved Staff Comments
None.
Item 1C. Cybersecurity
Risk Management and Strategy
To mitigate cybersecurity risks we strive to continually assess and improve our processes and procedures. We engage with
industry-leading managed security service providers to supplement our efforts in identifying, assessing, preventing, and
responding to cybersecurity threats. We are working to align our information technology operations and information security
processes to the National Institute of Standards and Technology’s framework. We have adopted a cloud-first strategy which is a
foundational element to our overall cybersecurity posture. For essential systems, we utilize SaaS-based software partners who
annually conduct Statement on Standards for Attestation Engagements.
We have adopted a cybersecurity risk management process that is designed to identify and mitigate potential cybersecurity risks
and is currently being integrated into our overall enterprise risk management process. We regularly assess our cybersecurity
vulnerability by utilizing credible, third-party cybersecurity experts to conduct annual internal penetration tests and monthly
vulnerability scans. These threat intelligence and monitoring activities, tests, and scans help us identify potential cybersecurity
risks.
We seek to mitigate cybersecurity risks we identify through a variety of methods; however, we acknowledge that even a robust,
well-designed information technology control environment may not fully eliminate cybersecurity risk. It is possible that we will
be unable to detect certain vulnerabilities in time to remediate them, or that our implemented controls may not operate as
intended.
To date, we have not experienced any material cybersecurity incidents. We remain subject to the risks from cybersecurity threats
that, if realized, are reasonably likely to materially affect the Company’s business strategy, results of operations, or financial
condition.
Governance
Our Board of Directors considers cybersecurity as part of its risk oversight function. While management is responsible for the
day-to-day management of risk, our Board of Directors maintains oversight of management’s implementation of our cybersecurity
risk management processes. Our Board of Directors receives briefings on material cybersecurity incidents, as necessary.
Our Vice President of Information Technology provides principal oversight and guidance of our cybersecurity risk management
strategy, programs, and processes. The Vice President of Information Technology has over 30 years of experience in information
technology, leading organizations through strategic technology and process improvement initiatives, including over 15 years of
extensive experience in cybersecurity. He is supported by a team of technical experts who have received formal training and
possess relevant experience in addition to managed cybersecurity service providers who specialize in preventing, identifying, and
responding to cybersecurity threats.
As part of our annual enterprise risk assessment, technology cybersecurity risks are ranked and reviewed by management. In the
event of a cybersecurity incident, the Vice President of Information Technology would prepare a comprehensive assessment for
management that summarizes potential and actual impacts and includes any steps needed to remediate the identified issues. If the
cybersecurity incident was deemed to be material by management, the Vice President of Information Technology would brief our
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Board of Directors on the matter, at which time determinations would be made by the Board of Directors on the need to report or
disclose the cybersecurity incident to our customers or investors.
Item 2. Properties
On November 1, 2020, we executed a lease to relocate our corporate headquarters to office space located at 1900 Reston Metro
Plaza in Reston, Virginia for a ten-year term. In January 2022, we executed a lease for a remote monitoring center for ParkX, our
parking management subsidiary, and in November 2022 we executed a lease to expand our corporate headquarters, bringing the
total amount of leased space to 25,630 square feet as of December 31, 2023. We believe our properties are adequately maintained
and suitable for our needs and their intended use.
Item 3. Legal Proceedings
Currently, we are not subject to any material legal proceedings. From time to time, however, we are named as a defendant in legal
actions arising from our normal business activities. Although we cannot accurately predict the amount of our liability, if any, that
could arise with respect to legal actions filed against us, it is not anticipated that any such liability will have a material adverse
effect on our financial position, operating results, or cash flows. We believe that we have obtained adequate insurance coverage,
rights to indemnification, or where appropriate, have established reserves in connection with these legal proceedings.
Item 4. Mine Safety Disclosures
Not applicable.
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PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities
Our Class A common stock is traded on The Nasdaq Capital Market under the symbol “CHCI”. As of December 31, 2023, there
were 37 registered holders of record of our Class A common stock and 1 holder of our Class B common stock.
We have never declared or paid any dividends on our common stock. We do not anticipate paying any dividends on our common
stock during the foreseeable future and intend to retain any earnings for future growth of our business.
We did not repurchase any securities under our share repurchase program or issue any unregistered securities during the year
ended December 31, 2023.
Item 6. [RESERVED]
Not Applicable.
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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with our consolidated financial statements and related notes
and other financial information appearing elsewhere in this Annual Report on Form 10-K. All references to “2023” and “2022”
are referring to the twelve-month period ended December 31 for each of those respective fiscal years. This section of this Annual
Report on Form 10-K generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022. The
following discussion may contain forward-looking statements that reflect our plans and expectations. Our actual results could
differ materially from those anticipated by these forward-looking statements due to the factors discussed elsewhere in this Annual
Report on Form 10-K. We do not undertake, and specifically disclaim, any obligation to update any forward-looking statements
to reflect the occurrence of events or circumstances after the date of such statements except as required by law.
Overview
We are a leading asset manager, developer, and operator of mixed-use and transit-oriented properties in the Washington, D.C.
region. We have become the area’s premier real estate service company by creating extraordinary places, delivering exceptional
experiences, and generating excellent results for all stakeholders.
We provide a comprehensive suite of real estate services to our asset-owning clients, including asset management, property
management, development and construction management, and more. Our client base is composed primarily of institutional real
estate investors, high net worth family offices, financial institutions, and governmental bodies seeking to develop real estate they
own through public-private partnerships. We employ a talented staff of real estate professionals that are led by our seasoned
management team and are tasked with delivering high-quality services to the premium, strategically located assets in our managed
portfolio.
We primarily operate under long-term asset management and property management agreements that provide recurring fee-based
revenue streams. Our asset management services platform is anchored by a long-term, full-service asset management agreement
with an affiliate that includes a cost-plus fee structure and covers all of the properties in our Anchor Portfolio (the "2022 AMA" -
see below for additional details). As a vertically integrated real estate services company, we perform all property management
services through three wholly owned subsidiaries: CHCI Commercial, CHCI Residential, and ParkX Management ("ParkX"). All
properties included in our managed portfolio have entered into property management agreements with our operational subsidiaries
that provide for market-rate fees related to our services.
Our asset-light, debt-free business model allows us to substantially mitigate risks that are typically associated with real estate
development and operation. The fee-based approach we have adopted helps drive consistent, predictable top-line growth and
provides us with a streamlined balance sheet that grants us maximum flexibility to explore potential growth opportunities outside
of our core business operations.
We distinguish ourselves from industry peers through an established standard of excellence that extends from who we hire to how
we deliver our broad suite of real estate services. We are able maintain this high standard because We Show Up - every day, in
person, in a collaborative environment that is structured to deliver on our mission to make a difference for our customers, our
stakeholders, and in the communities that we serve.
Managed Portfolio
The following table summarizes the operating assets that are included in our managed portfolio:
Type
Commercial
Residential
Parking
Total
# of Assets
13
6
30 1
49
Size/Scale
2.0 million sqft.
1.8 million sqft. / ~1,700 units
18,000+ spaces
% Leased
92%
97%
1
Total includes 13 commercial parking garages owned by unaffiliated parties and managed by ParkX.
In addition, we manage the following assets that are under construction and scheduled for delivery in the next 12 to 24 months:
•
•
3 commercial assets that represent approximately 600,000 square feet;
1 residential asset with 420 units representing approximately 430,000 square feet;
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•
•
1 JW Marriott-branded hotel/condominium with 243 keys and 95 residential units representing a total of approximately
520,000 square feet; and
2 commercial parking garages with approximately 2,900 spaces.
Our development pipeline currently includes 5 commercial assets that represent approximately 1.5 million square feet, 6
residential assets with 2,599 units that represent approximately 2.8 million square feet, and 1 hotel that will include 140 keys. At
full build out, our managed portfolio of assets is currently projected to total 68 assets representing nearly 10 million square feet.
The following tables provide further details on our managed portfolio:
Anchor Portfolio
Name
Status
Description
Reston Station
Loudoun Station
Operating +
Under Construction +
In Development
Operating +
In Development
Herndon Station
In Development
Among the largest mixed-use, transit-oriented developments in the Washington, D.C.
region, covering nearly 90 acres spanning the Dulles Toll Road and surrounding the
Wiehle Reston-East Metro Station and strategically located mid-way between Tysons, Va.
and Dulles International Airport on Metro's Silver Line (Fairfax County, Va.)
Loudoun County’s first fully integrated mixed-use, transit-oriented development located at
the terminus station, Metro's Ashburn Station on the Silver Line in Ashburn, Va (Loudoun
County, Va.)
Located in the Historic Downtown District of the Town of Herndon, Va., this planned
mixed-use development is subject of a public-private partnership with the Town of
Herndon
Name
Status
The Hartford
Operating
BLVD Forty Four
Operating
BLVD Ansel
Operating
Comstock 41
Operating
Investors X
Parking
Operating
Operating
Comstock 41 - Additional Information
Other Portfolio Assets
Description
Acquired in 2019, this 211,000 square foot mixed-use building is located adjacent to the
Clarendon Station on Metro's Orange Line and is the subject of a joint venture with
DivcoWest and Comstock Partners, LC. The premier office tower in the Ballston Corridor
submarket of Arlington County, Va.
Acquired in 2021, this 15-story, mixed-use 250-unit, luxury high-rise apartment tower is
located adjacent to BLVD Ansel and just 1 block from the Rockville Station on Metro’s
Red Line in Rockville, Md (Montgomery County) and is the subject of a joint venture with
Comstock Partners, LC. The two-building complex is the premier residential offering in
Rockville Town Center.
Acquired in 2022, this 18-story, mixed-use 250-unit, luxury high-rise apartment tower is
located adjacent to BLVD Forty Four and just 1 block from the Rockville Station on
Metro’s Red Line in Rockville, Md (Montgomery County) and is the subject of a joint
venture with Comstock Partners, LC. The two-building complex is the premier residential
offering in Rockville Town Center.
Acquired in 2023, this 18,150 square foot parcel located at 41 Maryland Ave. in
Rockville, Md. and is adjacent to BLVD Forty Four; currently a surface parking lot
operated by ParkX Management, LC; provides an excellent opportunity for significant
value enhancement through by-right entitlements for approximately 117 residential units
Investment in Comstock Investors X, LC that owns legacy homebuilding assets that are
currently being monetized through market-rate sales expected to be completed in 2024
Commercial parking garages & spaces managed by ParkX Management, LC located at
affiliated properties and third-party locations
Given its proximity to BLVD 44, we plan to explore rezoning opportunities at Comstock 41 that would allow for potential
relocation of moderately-priced dwelling units from BLVD 44 to Comstock 41 as well as utilization of excess parking capacity at
both BLVD 44 and BLVD Ansel. In conjunction with the acquisition, we entered into a contingent fee agreement with BLVD 44
should these pursuits prove successful (See Note 14 in the Notes to Consolidated Financial Statements for additional information).
We intend to maintain a limited financial role in any future development activities that may occur at this site and plan to only
offer fee-based development and asset management services to any affiliate or suitable third-party financial sponsor of any
potential future developments.
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Significant Developments
CES Divestiture
On March 31, 2022, we completed the sale of Comstock Environmental Services, LLC ("CES"), a wholly owned subsidiary, to
August Mack Environmental, Inc. ("August Mack"). This strategic divestiture was based on the continued growth and future
prospects of our asset management business. Accordingly, we have reflected CES as a discontinued operation in our consolidated
financial statements for all periods presented, and unless otherwise noted, all amounts and disclosures relate solely to our
continuing operations. (See Note 3 in the Notes to Consolidated Financial Statements for additional information).
Series C Preferred Stock Redemption and 2022 Asset Management Agreement
On June 13, 2022, we completed two separate significant transactions to further deleverage our balance sheet and enhance our
long-term revenue outlook and growth potential. The first one with CP Real Estate Services, LC (“CPRES”), an entity owned by
Christopher Clemente, Comstock’s Chief Executive Officer, redeemed all outstanding Series C preferred stock at a significant
discount to carrying value. Secondly, we executed a new asset management agreement with Comstock Partners, LC ("CP"), an
entity controlled by Mr. Clemente and wholly owned by Mr. Clemente and certain family members, which covers our Anchor
Portfolio of assets (the "2022 AMA"). The 2022 AMA increased the base fees we collect, expanded the services that qualify for
additional supplemental fees, extended the term through 2035, and most notably introduced a mark-to-market incentive fee based
on the imputed profit of Anchor Portfolio assets, generally as each is stabilized and as further specified in the agreement. (See
Notes 10 and 14 in the Notes to Consolidated Financial Statements for additional information).
Outlook
We aspire to be among the most admired real estate asset managers, operators, and developers by creating extraordinary places,
providing exceptional experiences, and generating excellent results for all stakeholders. Our commitment to this mission drives
our ability to expand our managed portfolio of assets, grow revenue, and deliver value to our shareholders.
Our real estate development and asset management operations are primarily located in the greater Washington, D.C. area, where
we believe our decades of experience provides us with the best opportunity to continue developing, managing, and investing in
high-quality real estate assets and capitalizing on positive growth trends.
We plan to pursue further expansion of our wholly owned property management subsidiaries to increase recurring, fee-based
revenue streams as we continue to develop additional relationships with new customers that require the expert real estate asset
management, development management, construction management and other services that we routinely provide.
We believe that we are properly staffed for current market conditions and feel that we will maintain the ability to manage risk and
pursue additional growth across each of our operational subsidiaries. Given current market conditions, we feel more opportunities
to acquire distressed properties at below market prices may arise. We remain well-positioned to capitalize on such opportunities
due to our asset-light, debt-free business model that has strengthened our balance sheet and provided us with the flexibility to
pursue unique growth opportunities across all facets of our vertically integrated operating platform.
COVID-19 Update
On May 11, 2023, the U.S. Department of Health and Human Services declared an end to the public health emergency for
COVID-19. While we never experienced any significant impacts on our business resulting from COVID-19, future regional or
global health emergencies may have a negative impact on our results of operations and financial condition. Although the long-
term impact of the COVID-19 pandemic on the greater Washington, D.C. area real estate market remains uncertain, we believe
that our Anchor Portfolio is well positioned to withstand any future potential negative impacts.
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Results of Operations
The following tables set forth consolidated statement of operations data for the periods presented (in thousands):
Revenue
Operating costs and expenses:
Cost of revenue
Selling, general, and administrative
Depreciation and amortization
Total operating costs and expenses
Income (loss) from operations
Other income (expense):
Interest income (expense), net
Gain (loss) on real estate ventures
Other income (expense), net
Income (loss) from continuing operations before income tax
Provision for (benefit from) income tax
Net income (loss) from continuing operations
Net income (loss) from discontinued operations, net of tax
Net income (loss)
Impact of Series C preferred stock redemption
Net income (loss) attributable to common stockholders
$
$
Comparison of the Years Ended December 31, 2023 and 2022
Revenue
The following table summarizes revenue by line of business (in thousands):
Year Ended December 31,
2023
2022
$
44,721
$
39,313
33,040
2,305
212
35,557
9,164
96
(1,187)
79
8,152
368
7,784
—
7,784
—
7,784
$
$
29,371
1,784
206
31,361
7,952
(222)
121
2
7,853
125
7,728
(381)
7,347
2,046
9,393
Year Ended December 31,
2023
Amount
$
$
29,278
10,604
4,839
44,721
%
65.5 % $
23.7 %
10.8 %
100.0 % $
2022
Amount
26,680
9,398
3,235
39,313
%
67.9 % $
23.9 %
8.2 %
100.0 % $
Change
$
2,598
1,206
1,604
5,408
%
9.7 %
12.8 %
49.6 %
13.8 %
Asset management
Property management
Parking management
Total revenue
Revenue increased 13.8% in 2023. The $5.4 million comparative increase was primarily driven by the continued expansion of our
managed portfolio, which included 8 additional assets in 2023. Recurring asset management and property management fee-based
revenue increased by a combined $3.0 million, or 12.6%, and reimbursable staffing charges increased $2.1 million, or 25.3%.
Incentive fee revenue also increased 22.7% to $4.8 million, however that increase was offset by a $0.8 million decrease in
supplemental leasing, acquisition, and development fee revenue due to higher transactional volume in 2022.
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Operating costs and expenses
The following table summarizes operating costs and expenses (in thousands):
Cost of revenue
Selling, general, and administrative
Depreciation and amortization
Total operating costs and expenses
Year Ended December 31,
2023
2022
$
$
33,040
2,305
212
35,557
$
$
29,371
1,784
206
31,361
$
$
Change
$
3,669
521
6
4,196
%
12.5 %
29.2 %
2.9 %
13.4 %
Operating costs and expenses increased 13.4% in 2023. The $4.2 million comparative increase was primarily due to a $2.6 million
increase in personnel expenses from increased headcount and employee compensation. Also driving the variance were a $0.4
million increase in rent expense stemming from the corporate headquarters lease expansion that was executed in 2022, a $0.3
million increase in regulatory and compliance costs, and a $0.2 million increase in IT expenditures.
Other income (expense)
The following table summarizes other income (expense) (in thousands):
Interest income (expense), net
Gain (loss) on real estate ventures
Other income (expense), net
Total other income (expense)
Year Ended December 31,
2023
2022
$
$
$
96
(1,187)
79
(1,012) $
(222)
121
2
(99)
$
$
Change
$
318
(1,308)
77
(913)
%
(143.2) %
N/M
N/M
N/M
Other income (expense) changed by $(0.9) million in 2023, primarily driven by primarily driven by a $1.3 million net decrease in
mark-to-market valuations of equity method investments in real estate ventures, primarily due to the increased interest rate
environment. The decrease was partially offset by a $0.3 million increase in interest income (expense) that stemmed from interest
earned on money market sweep accounts in 2023 and the full pay down of our outstanding debt in 2022.
Income taxes
Provision for income tax was $0.4 million in 2023, compared to 0.1 million in 2022. The $0.3 million increase was primarily due
to higher pre-tax book income given that valuation allowance releases and the net total of book-to-tax adjustments were
comparatively flat. As of December 31, 2023, we had $122.8 million of net operating loss (“NOL") carryforwards.
Non-GAAP Financial Measures
To provide investors with additional information regarding our financial results, we prepare certain financial measures that are not
calculated in accordance with generally accepted accounting principles in the United States (“GAAP”), specifically Adjusted
EBITDA.
We define Adjusted EBITDA as net income (loss) from continuing operations, excluding the impact of interest expense (net of
interest income), income taxes, depreciation and amortization, stock-based compensation, and mark-to-market valuation gain
(loss) on equity method investments in real estate ventures.
We use Adjusted EBITDA to evaluate financial performance, analyze the underlying trends in our business and establish
operational goals and forecasts that are used when allocating resources. We expect to compute Adjusted EBITDA consistently
using the same methods each period.
We believe Adjusted EBITDA is a useful measure because it permits investors to better understand changes over comparative
periods by providing financial results that are unaffected by certain non-cash items that are not considered by management to be
indicative of our operational performance.
While we believe that Adjusted EBITDA is useful to investors when evaluating our business, it is not prepared and presented in
accordance with GAAP, and therefore should be considered supplemental in nature. Adjusted EBITDA should not be considered
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in isolation, or as a substitute for other financial performance measures presented in accordance with GAAP. Adjusted EBITDA
may differ from similarly titled measures presented by other companies.
The following table presents a reconciliation of net income (loss) from continuing operations, the most directly comparable
financial measure as measured in accordance with GAAP, to Adjusted EBITDA (in thousands):
Net income (loss) from continuing operations
$
Interest (income) expense, net
Income taxes
Depreciation and amortization
Stock-based compensation
(Gain) loss on real estate ventures
Adjusted EBITDA
$
Year Ended December 31,
2022
2023
7,784
(96)
368
212
968
1,187
10,423
$
$
7,728
222
125
206
834
(121)
8,994
Seasonality and Quarterly Fluctuations
None.
Liquidity and Capital Resources
Liquidity is defined as the current amount of readily available cash and the ability to generate adequate amounts of cash to meet
the current needs for cash. We assess our liquidity in terms of our cash and cash equivalents on hand and the ability to generate
cash to fund our operating activities.
Our principal sources of liquidity as of December 31, 2023, were our cash and cash equivalents of $18.8 million and our
$10.0 million of available borrowings on our Credit Facility.
Significant factors which could affect future liquidity include the adequacy of available lines of credit, cash flows generated from
operating activities, working capital management and investments.
Our primary capital needs are for working capital obligations and other general corporate purposes, including investments and
capital expenditures. Our primary sources of working capital are cash from operations and distributions from investments in real
estate ventures. We have historically financed our operations with internally generated funds and borrowings from our credit
facilities. (See Note 7 in the Notes to Consolidated Financial Statements for additional information).
We believe we currently have adequate liquidity and availability of capital to fund our present operations and meet our
commitments on our existing debt.
Cash Flows
The following table summarizes our cash flows for the periods indicated (in thousands):
Continuing operations
Net cash provided by (used in) operating activities
Net cash provided by (used in) investing activities
Net cash provided by (used in) financing activities
Total net increase (decrease) in cash - continuing operations
Discontinued operations, net
Net increase (decrease) in cash and cash equivalents
Year Ended December 31,
2023
2022
Change ($)
$
$
9,003
(1,547)
(390)
7,066
—
7,066
$
$
8,397
(2,099)
(10,068)
(3,770)
(331)
(4,101)
$
$
606
552
9,678
10,836
331
11,167
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Operating Activities
The $0.6 million variance in net operating cash activity was primarily driven by a $1.9 million increase in net income from
continuing operations after adjustments for non-cash items, partially offset by a $1.3 million incremental cash outflow stemming
from changes to our net working capital that was primarily due to decreased accrued personnel costs.
Investing Activities
The $0.6 million variance net investing cash activity was primarily driven by a $1.1 million decrease in investments in real estate
ventures and a $0.4 million decrease in fixed asset purchases, partially offset by $1.0 million in proceeds received from the CES
divestiture that was finalized in the first quarter of fiscal year 2022.
Financing Activities
The $9.7 million variance in net financing cash activity was primarily driven by a $4.0 million cash payment made in 2022 related
to the early redemption of Series C Preferred Stock and a $5.5 million payment made in 2022 to satisfy the outstanding balance of
our credit facility.
Off-Balance Sheet Arrangements
From time to time, we may have off-balance-sheet unconsolidated investments in real estate ventures and other unconsolidated
arrangements with varying structures. (See Note 5 in the Notes to Consolidated Financial Statements for additional information).
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with GAAP. Accounting policies, methods and estimates are an
integral part of the preparation of consolidated financial statements in accordance with U.S. GAAP and, in part, are based upon
management’s current judgments. Those judgments are normally based on knowledge and experience with regard to past and
current events and assumptions about future events. Certain accounting policies, methods and estimates are particularly sensitive
because of their significance to the consolidated financial statements and because of the possibility that future events affecting
them may differ from management’s current judgments. While there are a number of accounting policies, methods and estimates
affecting our consolidated financial statements, areas that are particularly significant include:
•
•
•
Investments in real estate ventures
Revenue - Incentive Fees
Income taxes
Investments in real estate ventures
For investments in real estate ventures that we have elected to report at fair value, we maintain an investment account that is
increased or decreased each reporting period by contributions, distributions, and the difference between the fair value of the
investment and the carrying value as of the balance sheet date. These fair value adjustments are reflected as gains or losses in our
consolidated statements of operations. The fair value of these investments as of the balance sheet date is generally determined
using a discounted cash flow analysis, income approach, or sales-comparable approach, depending on the unique characteristics of
the real estate venture.
In addition, we perform a two-step analysis to determine if our investments in real estate ventures qualify as a variable interest
entity (“VIE”) and need to be consolidated. We first analyze if the entity lacks sufficient equity to finance its activities without
additional subordinated financial support or if the equity holders, as a group, lack the characteristics of a controlling financial
interest in order to determine VIE qualification. If an entity is determined to be a VIE, we then analyze if it is the primary
beneficiary to determine if the entity needs to be included in its consolidated financial results. The primary beneficiary has both (i)
the power to direct the activities that most significantly impact the VIE’s economic performance, and (ii) the obligation to absorb
losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the entity. We consider a
variety of factors in identifying the entity that holds the power to direct matters that most significantly impact the VIE’s economic
performance, including evaluating the nature of relationships and activities of the parties involved and, where necessary,
determining which party within a related-party group is most closely associated with the VIE and would therefore be considered
the primary beneficiary. We determine primary beneficiary status of a VIE at the time of investment and perform ongoing
reassessments to evaluate whether changes in the entity’s capital structure or changes in the nature of its involvement with the
entity result in a change to the VIE designation or a change to its consolidation conclusion.
17
Table of Contents
We have minority voting and economic interests in our investments in real estate ventures that we have elected to report at fair
value and do not control the activities that most significantly impact their economic performance. We have determined we are not
the primary beneficiary in these investments, and therefore do not consolidate them into our balance sheets as of December 31,
2023 and 2022 or into our statements of operations for the years ended December 31, 2023 and 2022.
Revenue - Incentive Fees
Pursuant to the 2022 AMA, we are entitled to earn incentive compensation fees revenue ("Incentive Fees") on certain managed
real estate assets if defined triggering events, which are differentiated based on the classification of the assets, are achieved. (See
Note 14 for additional information).
Incentive Fees are calculated as a percentage of the imputed profit that would be realized upon the hypothetical sale or
recapitalization of the asset (or assets) for which triggering event criteria were met. The calculation of imputed profit is based on a
fair market value assessment that includes highly variable financial inputs and must also consider macro-economic and
environmental factors that may affect fair market value. Due to the subjective and potentially volatile nature of this variable
consideration, we only recognize revenue on Incentive Fees for each managed asset when 1) any material uncertainties associated
with the valuation of real estate assets that drive Incentive Fees are substantially resolved and 2) it is probable that a significant
reversal in the amount of related cumulative Incentive Fee revenue recognized will not occur. As a result, we only recognize
Incentive Fees at or near each asset's respective triggering event (as detailed in the 2022 AMA) when imputed profit could be
reasonably calculated and relied upon to not materially change.
For the years ended December 31, 2023 and 2022, we recognized revenue from Incentive Fees of $4.8 million and $3.9 million,
respectively. These operating asset triggering events are part of a series of annual operating asset triggering events that began on
October 1, 2022, and are scheduled each October 1 through 2024. Subsequent to these scheduled triggering events, and in
accordance with terms pursuant to the 2022 AMA, incentive fees may be recognized on assets currently under development upon
the achievement of future triggering events tied to various metrics that indicate stabilization, such as occupancy and leasing rates.
(See Note 14 in the Notes to Consolidated Financial Statements for additional information).
Income taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for future
tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and
their respective tax basis. The deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax
rates on the deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. We provide a
valuation allowance when we consider it “more likely than not” (greater than a 50% probability) that a deferred income tax asset
will not be fully recovered. Adjustments to the valuation allowance are a component of the income tax provision or benefit in our
consolidated statements of operations.
For the years ended December 31, 2023 and 2022, we recorded net decreases to our deferred tax valuation allowance of $1.5
million and $1.1 million, respectively.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
18
Table of Contents
Item 8. Financial Statements and Supplementary Data
COMSTOCK HOLDING COMPANIES, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm (PCAOB ID #248).................................................................
Consolidated Balance Sheets at December 31, 2022 and 2021...........................................................................................
Consolidated Statements of Operations for the Years Ended December 31, 2022 and 2021..............................................
Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2022 and 2021...........
Consolidated Statements of Cash Flows for the Years Ended December 31, 2022 and 2021.............................................
Notes to Consolidated Financial Statements........................................................................................................................
Page
F-1
F-3
F-4
F-5
F-6
F-7
19
Table of Contents
Report of Independent Registered Public Accounting Firm
Board of Directors and Stockholders
Comstock Holding Companies, Inc.
Opinion on the financial statements
We have audited the accompanying consolidated balance sheets of Comstock Holding Companies, Inc. (a Delaware corporation)
and subsidiaries (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations, changes
in stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2023, and the related notes
(collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash
flows for each of the two years in the period ended December 31, 2023, in conformity with accounting principles generally
accepted in the United States of America.
Basis for opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the
Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company
Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error
or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial
reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for
the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly,
we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis for our opinion.
Critical audit matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was
communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are
material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and
we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the
accounts or disclosures to which it relates.
Realizability of Deferred Tax Assets and Valuation Allowance Assessment
As described further in Note 12 to the consolidated financial statements, the Company assesses available positive and negative
evidence to estimate whether sufficient future taxable income will be generated to permit use of existing deferred tax assets. The
Company continues to record valuation allowances against deferred tax assets when it is considered more likely than not that the
deferred tax asset will not be realized prior to expiration. During 2023, after weighing all available positive and negative
evidence, the Company released $1.5 million of the valuation allowance as management deemed estimated future taxable income
to be sufficient to realize additional deferred tax assets related to net operating loss and tax credit carryforwards.
The principal consideration for our determination that the realizability of deferred tax assets is a critical audit matter is that the
estimate of future taxable income is an accounting estimate subject to a high level of estimation uncertainty. There is inherent
uncertainty and subjectivity related to management’s judgments and assumptions regarding the Company’s future taxable income,
the determination of which is complex in nature and may be affected by future operations of the Company and market or
economic conditions. As such, significant auditor judgment was required.
F-1
Table of Contents
Our audit procedures related to the realizability of deferred tax assets included the following, among others.
• We obtained an understanding of the design and tested implementation of controls relating to the evaluation of the
realizability of deferred tax assets and the estimation of future taxable income;
• We evaluated management’s assumptions regarding the Company’s estimated future taxable income, including
comparison of previous forecasts to actual results and obtained support for incremental changes applied to the prior
forecast;
• With the assistance of our income tax specialists, we evaluated the nature of each of the deferred tax assets, including
their expiration dates and their projected utilization when compared to projections of future taxable income.
/s/ GRANT THORNTON LLP
We have served as the Company’s auditor since 2020.
Arlington, Virginia
March 21, 2024
F-2
Table of Contents
COMSTOCK HOLDING COMPANIES, INC.
Consolidated Balance Sheets
(In thousands, except per share data)
Assets
Current assets:
Cash and cash equivalents
Accounts receivable, net
Accounts receivable - related parties
Prepaid expenses and other current assets
Total current assets
Fixed assets, net
Intangible assets
Leasehold improvements, net
Investments in real estate ventures
Operating lease assets
Deferred income taxes, net
Deferred compensation plan assets
Other assets
Total assets
Liabilities and Stockholders' Equity
Current liabilities:
Accrued personnel costs
Accounts payable and accrued liabilities
Current operating lease liabilities
Total current liabilities
Deferred compensation plan liabilities
Operating lease liabilities
Total liabilities
Commitments and contingencies (Note 8)
Stockholders' equity:
$
$
$
December 31,
2023
2022
$
$
$
18,788
496
4,749
353
24,386
478
144
89
7,077
6,790
10,885
53
37
49,939
4,681
838
854
6,373
77
6,273
12,723
11,722
504
3,291
264
15,781
421
144
119
7,013
7,625
11,355
—
15
42,473
4,959
742
791
6,492
—
7,127
13,619
Series C preferred stock; $0.01 par value; 20,000 shares authorized; none issued or
outstanding as of December 31, 2023 and 2022
Class A common stock; $0.01 par value; 59,780 shares authorized; 9,525 issued and
9,440 outstanding as of December 31, 2023; 9,337 issued and 9,252 outstanding as of
December 31, 2022
Class B common stock; $0.01 par value; 220 shares authorized, issued, and
outstanding as of December 31, 2023 and 2022
Additional paid-in capital
Treasury stock, at cost (86 shares of Class A common stock)
Accumulated deficit
Total stockholders' equity
Total liabilities and stockholders' equity
—
94
2
202,112
(2,662)
(162,330)
37,216
—
93
2
201,535
(2,662)
(170,114)
28,854
$
49,939
$
42,473
See accompanying Notes to Consolidated Financial Statements.
F-3
Table of Contents
COMSTOCK HOLDING COMPANIES, INC.
Consolidated Statements of Operations
(In thousands, except per share data)
Revenue
Operating costs and expenses:
Cost of revenue
Selling, general, and administrative
Depreciation and amortization
Total operating costs and expenses
Income (loss) from operations
Other income (expense):
Interest income (expense), net
Gain (loss) on real estate ventures
Other income (expense), net
Income (loss) from continuing operations before income tax
Provision for (benefit from) income tax
Net income (loss) from continuing operations
Net income (loss) from discontinued operations, net of tax
Net income (loss)
Impact of Series C preferred stock redemption
Net income (loss) attributable to common stockholders
Weighted-average common stock outstanding:
Basic
Diluted
Net income (loss) per share:
Basic - Continuing operations
Basic - Discontinued operations
Basic net income (loss) per share
Diluted - Continuing operations
Diluted - Discontinued operations
Diluted net income (loss) per share
Year Ended December 31,
2022
2023
$
44,721
$
39,313
33,040
2,305
212
35,557
9,164
96
(1,187)
79
8,152
368
7,784
—
7,784
—
7,784
9,629
10,108
0.81
—
0.81
0.77
—
0.77
$
$
$
$
$
$
29,371
1,784
206
31,361
7,952
(222)
121
2
7,853
125
7,728
(381)
7,347
2,046
9,393
8,974
9,575
1.09
(0.04)
1.05
1.02
(0.04)
0.98
$
$
$
$
$
$
See accompanying Notes to Consolidated Financial Statements.
F-4
Table of Contents
COMSTOCK HOLDING COMPANIES, INC.
Consolidated Statements of Changes in Stockholders' Equity
(In thousands)
Balance as of December 31, 2021
Issuance of common stock, net of shares
withheld for taxes
Redemption of Series C preferred stock
Stock-based compensation
Net income (loss)
Balance as of December 31, 2022
Issuance of common stock, net of shares
withheld for taxes
Stock-based compensation
Net income (loss)
Balance as of December 31, 2023
Series C
Preferred Stock
Class A
Common Stock
Shares
3,441
Amount
$ 6,765
Shares
8,102
Amount
81
$
—
(3,441)
—
—
—
—
—
—
—
—
(6,765)
—
—
—
—
—
—
—
$
$
235
1,000
—
—
9,337
188
—
—
9,525
$
$
2
10
—
—
93
1
—
—
94
Class B
Common Stock
Shares
Amount
220
$
—
—
—
—
220
—
—
—
220
$
$
2
—
—
—
—
2
—
—
—
2
APIC
$ 200,617
(570)
709
779
—
$ 201,535
(391)
968
—
$ 202,112
Treasury
stock
Accumulated
deficit
Total
$
(2,662)
$
(179,507)
$
25,296
—
—
—
—
(2,662)
—
—
—
(2,662)
$
$
$
$
—
2,046
—
7,347
(170,114)
—
—
7,784
(162,330)
$
$
(568)
(4,000)
779
7,347
28,854
(390)
968
7,784
37,216
See accompanying Notes to Consolidated Financial Statements.
F-5
Table of Contents
COMSTOCK HOLDING COMPANIES, INC.
Consolidated Statements of Cash Flows
(In thousands)
Operating Activities - Continuing Operations
Net income (loss) from continuing operations
Adjustments to reconcile net income (loss) from continuing operations to net cash provided by
(used in) operating activities:
Year Ended December 31,
2023
2022
$
7,784
$
7,728
Depreciation and amortization
Stock-based compensation
(Gain) loss on real estate ventures
Distributions from real estate ventures
Deferred income taxes
Accrued interest income
(Gain) loss on disposal of fixed assets
(Gain) loss on deferred compensation plan
Changes in operating assets and liabilities:
Accounts receivable
Prepaid expenses and other current assets
Accrued personnel costs
Accounts payable and accrued liabilities
Deferred compensation plan liabilities
Other assets and liabilities
Net cash provided by (used in) operating activities
Investing Activities - Continuing Operations
Investments in real estate ventures
Proceeds from sale of CES
Distributions from real estate ventures
Purchase of deferred compensation plan securities
Purchase of fixed assets/leasehold improvements/intangibles
Net cash provided by (used in) investing activities
Financing Activities - Continuing Operations
Payments under credit facility - due to affiliates
Redemption of Series C Preferred Stock
Payment of taxes related to the net share settlement of equity awards
Net cash provided by (used in) financing activities
Discontinued Operations
Operating cash flows, net
Investing cash flows, net
Financing cash flows, net
Net cash provided by (used in) discontinued operations
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
Supplemental Cash Flow Information
Net cash paid (received) for:
Interest
Income taxes
Supplemental Disclosure of Non-Cash Investing and Financing Activities
Issuance of Series A common stock to redeem Series C preferred stock
Right of use assets and lease liabilities at commencement
212
968
1,187
44
470
(48)
9
1
(1,450)
(41)
(278)
26
75
44
9,003
(1,583)
—
335
(52)
(247)
(1,547)
$
—
—
(390)
(390)
—
—
—
—
7,066
11,722
18,788
$
(48)
26
$
$
$
—
—
206
834
(121)
162
(55)
—
—
—
(1,932)
(67)
1,491
(41)
—
192
8,397
(2,709)
1,016
220
—
(626)
(2,099)
(5,500)
(4,000)
(568)
(10,068)
(305)
—
(26)
(331)
(4,101)
15,823
11,722
222
92
4,230
1,224
$
$
$
See accompanying Notes to Consolidated Financial Statements.
F-6
Table of Contents
1. Company Overview
COMSTOCK HOLDING COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands, except per share data or otherwise indicated)
Comstock Holding Companies, Inc. ("Comstock" or the "Company"), founded in 1985 and incorporated in the state of Delaware
in 2004, is a leading asset manager, developer, and operator of mixed-use and transit-oriented properties in the Washington, D.C.
metropolitan area.
On March 31, 2022, the Company completed the sale of Comstock Environmental Services, LLC ("CES"), a wholly owned
subsidiary, to August Mack Environmental, Inc. ("August Mack") for approximately $1.4 million of total consideration. (See Note
3 for additional information).
On June 13, 2022, the Company completed two separate significant transactions to further deleverage its balance sheet and
enhance its long-term revenue outlook and growth potential. The first one with CP Real Estate Services, LC (“CPRES”), an entity
owned by Christopher Clemente, Comstock’s Chief Executive Officer, redeemed all outstanding Series C preferred stock at a
significant discount to carrying value. Secondly, the Company executed a new asset management agreement with Comstock
Partners, LC ("CP"), an entity controlled by Mr. Clemente and wholly owned by Mr. Clemente and certain family members,
which covers its Anchor Portfolio of assets (the "2022 AMA"). (See Notes 10 and 14 for additional information).
The Company operates through four primarily real estate-focused subsidiaries – CHCI Asset Management, LC (“CAM”); CHCI
Residential Management, LC; CHCI Commercial Management, LC; and Park X Management, LC.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting
principles in the United States of America (“GAAP”) and include the accounts of the Company and its consolidated subsidiaries.
Intercompany balances and transactions have been eliminated. Certain prior period amounts have been reclassified to conform to
current period presentation.
The Company has reflected CES as a discontinued operation in its consolidated statements of operations for all periods presented.
Unless otherwise noted, all amounts and disclosures throughout these Notes to Consolidated Financial Statements relate to the
Company's continuing operations. (See Note 3 for additional information).
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that
affect the reported amounts in the financial statements and accompanying notes. Significant items subject to such estimates
include, but are not limited to, the valuation of equity method investments, incentive fee revenue recognition, and the valuation of
deferred tax assets. Assumptions made in the development of these estimates contemplate both the macroeconomic landscape and
the Company's anticipated results, however actual results may differ materially from these estimates.
Fiscal Year
Comstock uses a fiscal reporting calendar which begins on January 1 and ends on December 31. The fiscal years presented are the
years ended December 31, 2023 (“2023”) and December 31, 2022 (“2022”). Each of the Company’s fiscal quarters ends on the
last day of the calendar month.
Segment Information
Operating segments are defined as components of a business that can earn revenue and incur expenses for which discrete financial
information is evaluated on a regular basis by the chief operating decision maker (“CODM”) in order to decide how to allocate
resources and assess performance. The Company's CODM, its chief executive officer, primarily reviews consolidated results of
operations to assess performance and make decisions on how to allocate resources, therefore the Company views its operations
and manages its business as one reportable operating segment.
F-7
Table of Contents
Cash and Cash Equivalents
Cash and cash equivalents are comprised of cash and short-term investments with maturities of three months or less when
purchased. The Company’s cash and cash equivalents include holdings in checking and overnight sweep investment accounts, all
of which have daily maturities. The carrying amount of cash equivalents approximates fair value due to the short-term maturity of
these investments.
Accounts Receivable
Accounts receivable are recorded at the amount invoiced. The Company records an allowance for doubtful accounts on an as-
needed basis to reduce the trade accounts receivables balance by the estimated amounts that may become uncollectible in the
future. The allowance for doubtful accounts estimate is based on the accounts receivable aging report, historical collection
experience, and the payee's general financial condition. The Company does not record an allowance for doubtful accounts on
accounts receivable from related parties due to the nature of the receivables and collection history. As of December 31, 2023, the
Company's allowance for doubtful accounts was $0.2 million.
Concentrations of Credit Risk
Financial instruments that subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents, and
accounts receivable from related parties. The Company invests a significant portion of its excess cash position into U.S. Treasury-
based funds through an automated overnight sweep investment account program administered by a brokerage firm affiliated with
the bank at which the majority of our cash deposits are held. The Company maintains cash and cash equivalents in financial
institutions that management believes to be financially sound and with minimal credit risk. At times, the Company's deposits
exceed federally insured limits, however management believes that the Company’s credit risk exposure is mitigated by the
financial strength of the banking institutions in which the deposits are held. The Company does a significant amount of business
with related parties, demonstrated by related parties accounting for 97.4% of its consolidated revenue and 90.5% of its accounts
receivable in 2023. The Company generally does not obtain collateral or other security to support financial instruments subject to
credit risk and monitors the credit standing of its related party entities.
Investments in Real Estate Ventures
The Company holds investments in certain real estate ventures that qualify for equity method accounting treatment. Based on
elections made at the investment date, the Company has elected to record certain equity method investments at fair value. With
this treatment, investments are recorded at fair value on the consolidated balance sheets and subsequently remeasured at each
reporting period. The fair value of these investments as of the balance sheet date is generally determined using a discounted cash
flow analysis, income approach, or sales-comparable approach, depending on the unique characteristics of the real estate venture.
Assumptions about the discount rate are based on a weighted average cost of capital built up from various interest rate
components applicable to the Company. Assumptions about the growth rate and future financial performance of a reporting unit
are based on the Company's forecasts, business plans, economic projections and anticipated future cash flows. Market multiples
are derived from recent transactions among comparable real estate properties of similar size, construct, and location. The net
change in the fair value of the investments is recorded on the consolidated statements of operations as other income (expense).
In addition, the Company performs an analysis on its investments in real estate ventures to determine if they qualify as a variable
interest entity (“VIE”). For an entity in which we have acquired an interest, the entity will be considered a VIE if either of the
following characteristics are met: (i) the entity lacks sufficient equity to finance its activities without additional subordinated
financial support, or (ii) equity holders, as a group, lack the characteristics of a controlling financial interest. If an entity is
determined to be a VIE, the Company then determines if it is the primary beneficiary to determine if the entity needs to be
included in its consolidated financial results. The primary beneficiary has both (i) the power to direct the activities that most
significantly impact the VIE’s economic performance, and (ii) the obligation to absorb losses of the VIE or the right to receive
benefits from the VIE that could potentially be significant to the entity. The Company considers a variety of factors in identifying
the entity that holds the power to direct matters that most significantly impact the VIE’s economic performance, including
evaluating the nature of relationships and activities of the parties involved and, where necessary, determining which party within a
related-party group is most closely associated with the VIE and would therefore be considered the primary beneficiary. The
Company determines primary beneficiary status of a VIE at the time of investment and performs ongoing reassessments to
evaluate whether changes in the entity’s capital structure or changes in the nature of its involvement with the entity result in a
change to the VIE designation or a change to its consolidation conclusion. (See Note 5 for additional information).
F-8
Table of Contents
Fixed Assets
Fixed assets are carried at cost less accumulated depreciation and are depreciated on a straight-line basis over their estimated
useful lives, which are as follows:
Asset Class
Leasehold improvements
Furniture and fixtures
Office equipment
Vehicles
Computer equipment
Capitalized software
Estimated Useful Life
Shorter of asset life or related lease term
7 years
5 years
5 years
3 years
3 years
Evaluation of Long-Lived Assets
The Company evaluates the recoverability of its long-lived assets for impairment whenever events or circumstances indicate that
the carrying amount of the assets may not be recoverable. Recoverability is measured by comparing the carrying amount of the
asset to the future undiscounted cash flows the asset is expected to generate. If the asset is considered to be impaired, the amount
of any impairment is measured as the difference between the carrying value and the fair value of the impaired asset.
Goodwill and Intangible Assets
On an annual basis, and at interim periods when circumstances require, the Company tests the recoverability of any goodwill and
intangible assets balances that exist at that time and reviews for indicators of impairment. The Company performs impairment
assessments at the reporting unit level, which is defined as an operating segment or one level below an operating segment, also
known as a component. To test for the recoverability of goodwill and indefinite-lived intangible assets, the Company first
performs a qualitative assessment based on economic, industry and company-specific factors for all or selected reporting units to
determine whether the existence of events and circumstances indicates that it is more likely than not that the goodwill or
indefinite-lived intangible asset is impaired. Based on the results of the qualitative assessment, two additional steps in the
impairment assessment may be required. The first step would require a comparison of each reporting unit’s fair value to the
respective carrying value. If the carrying value exceeds the fair value, a second step is performed to measure the amount of
impairment loss on a relative fair value basis, if any.
Fair Value Measurement
The Company applies fair value accounting for all financial assets and liabilities that are reported at fair value in the financial
statements on a recurring basis. Fair value is defined as the price that would be received from selling an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement date. The accounting guidance establishes a
defined three-tier hierarchy to classify and disclose the fair value of assets and liabilities on both the date of their initial
measurement as well as all subsequent periods. The hierarchy prioritizes the inputs used to measure fair value by the lowest level
of input that is available and significant to the fair value measurement. The three levels are described as follows:
•
•
•
Level 1: Observable inputs. Quoted prices in active markets for identical assets and liabilities;
Level 2: Observable inputs other than the quoted price. Includes quoted prices for similar instruments, quoted prices for
identical or similar instruments in inactive markets and amounts derived from valuation models where all significant
inputs are observable in active markets; and
Level 3: Unobservable inputs. Includes amounts derived from valuation models where one or more significant inputs are
unobservable and require the Company to develop relevant assumptions.
The Company evaluates its financial assets and liabilities subject to fair value measurements on a recurring basis to determine the
appropriate level of classification as of each reporting period.
Leases
The determination of whether an arrangement contains a lease and the classification of a lease, if applicable, is made at lease
commencement, at which time the Company also measures and recognizes a right-of-use ("ROU") asset, representing the
Company’s right to use the underlying asset, and a lease liability, representing the Company’s obligation to make lease payments
under the terms of the arrangement. Operating lease assets and operating lease liabilities are recognized based on the present value
of the future minimum lease payments (e.g., rent) over the lease term beginning at the commencement date. The operating lease
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assets are adjusted for lease incentives, deferred rent, and initial direct costs, if incurred. The related lease expense is recognized
on a straight-line basis over the lease term.
The Company's leases generally do not include an implicit rate; therefore, an incremental borrowing rate is used that is based on
information available at the lease commencement date in determining the present value of future minimum lease payments. The
Company typically looks to floating interest rates charged under existing arrangements or current market interest rates at the time
of lease commencement when determining the incremental borrowing rate.
For the purpose of recognizing operating lease assets and liabilities, the Company has elected the practical expedient to not
recognize an asset or lease liability for short-term leases, which are leases with a term of twelve months or less. The lease term is
defined as the non-cancelable portion of the lease term plus any periods covered by an option to extend the lease if it is reasonably
certain that the option will be exercised.
Revenue
The Company’s revenue streams, revenue recognition policies, and cost of revenue details are summarized by the following:
Asset Management/Property Management/Parking
Asset management pricing associated with the 2022 AMA includes a cost-plus management fee or a market-rate fee form of
variable consideration, and the Company earns whichever is higher. Revenue for other asset management contracts is generally in
the form of a monthly fee based upon property-level cash receipts or leasing agreements executed at the managed properties.
Property Management pricing is generally in the form of a monthly management fee based upon property-level cash receipts,
square footage under management, or some other variable metric. Parking management pricing is generally in the form of a fixed
monthly management fee to include additional fixed fees for accounting, remote monitoring, ticketing, insurance, and various
other site-level services. In addition, property management and parking revenue includes reimbursable expenses such as payroll
and other employee costs for those performing services at managed properties.
Asset management, property management, and parking services represent a series of distinct daily services rendered over time.
The revenue these services is presented gross for any services provided by the Company's employees and presented net of third-
party reimbursements in instances where the Company does not control third-party services delivered to the client. Consistent
with the transfer of control for distinct, daily services to the customer, revenue is typically recognized at the end of each period for
the fees associated with the services performed.
Financing
Compensation for commercial mortgage and structured financing services is received via fees paid upon successful commercial
financing from third-party lenders. The earned fees are contingent upon the funding of the loan, which represents the transfer of
control for services to the customer. Therefore, the Company's performance obligation is satisfied at the point in time of the
funding of the loan when there is a present right to payment.
Leasing
Compensation for providing strategic advice and execution for owners, investors, and occupiers is received in the form of a
commission. The commission is paid upon signing of the lease by the tenant, therefore the Company's performance obligation is
satisfied at the time of the contractual event, when there is a present right to payment.
Construction & Development
Fees for project and development services for owners and occupiers of real estate are typically variable and based on a percentage
of the total project cost. Project and development services represent a series of performance obligations delivered over time;
therefore, the Company recognizes revenue over time for these services accordingly.
Incentive Fees
Pursuant to the 2022 AMA, incentive compensation fees revenue ("Incentive Fees") may be earned on certain managed real estate
assets if defined triggering events, which are differentiated based on the classification of the assets, are achieved. (See Note 14 for
additional information).
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Incentive Fees are calculated as a percentage of the imputed profit that would be realized upon the hypothetical sale or
recapitalization of the asset (or assets) for which triggering event criteria were met. The calculation of imputed profit is based on a
fair market value assessment that includes highly variable financial inputs and must also consider macro-economic and
environmental factors that may affect fair market value. Due to the subjective and potentially volatile nature of this variable
consideration, revenue is only recognized on Incentive Fees for each managed asset when 1) any material uncertainties associated
with the valuation of real estate assets that drive Incentive Fees are substantially resolved and 2) it is probable that a significant
reversal in the amount of related cumulative Incentive Fee revenue recognized will not occur. As a result, the Company only
recognizes Incentive Fees at or near each asset's respective triggering event (as detailed in the 2022 AMA) when imputed profit
can be reasonably calculated and relied upon to not materially change.
Cost of Revenue
Cost of revenue is composed primarily of employment expenses for personnel dedicated to providing services to the Anchor
Portfolio as well as the costs and expenses of the Company related to maintaining the public listing of its shares and complying
with related regulatory and reporting obligations pursuant to the 2022 AMA. It also includes payroll and other reimbursable
expenses incurred under the Company's various property management agreements.
Stock-Based Compensation
Stock-based compensation expense for restricted stock units is measured based on the fair value of the Company’s common stock
on the grant date. The Company utilizes the Black-Scholes option pricing model to estimate the grant-date fair value of stock
option awards. The exercise price of stock option awards is set to equal the quoted closing market price of the underlying
common stock at the date of the grant. The following weighted-average assumptions are also used to calculate the estimated fair
value of stock option awards:
•
•
•
•
Expected volatility: The expected volatility of the Company’s shares is estimated using the historical stock price
volatility over the most recent period commensurate with the estimated expected term of the awards.
Expected term: The Company determines the expected term by calculating the weighted-average period of time between
the grant date and exercise or post-vesting cancellation date of all outstanding stock options.
Dividend yield: The Company has not paid dividends and does not anticipate paying a cash dividend in the foreseeable
future and, accordingly, uses an expected dividend yield of zero.
Risk-free interest rate: The Company bases the risk-free interest rate on the implied yield available on a U.S. Treasury
note with a term equal to the estimated expected term of the awards.
The Company applies the graded vesting attribution method to recognize compensation expense for stock-based awards. Using
this method, the estimated grant-date fair value of the award is recognized over the requisite service period for each separately
vesting tranche as though each tranche of the award is, in substance, a separate award. This advanced recognition expense from
future vesting tranches results in the accelerated recognition of the overall compensation cost related to the award. The Company
has elected to account for forfeitures as they occur. For awards with a performance-based vesting condition, the Company accrues
stock-based compensation expense if it is probable that the performance condition will be achieved.
Interest Income
Interest income from our automated overnight "sweep account" program investments is recognized on an accrual basis. Interest
income is included in "interest income (expense), net" on our consolidated statements of operations.
Income Taxes
Income taxes are accounted for under the asset and liability method in accordance with ASC 740. Deferred tax assets and
liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or
settled. The effect of a change in tax rates on the deferred tax assets and liabilities is recognized in income in the period that
includes the enactment date. We provide a valuation allowance when we consider it “more likely than not” (greater than 50%
probability) that a deferred income tax asset will not be fully recovered. Adjustments to the valuation allowance are a component
of the deferred income tax expense or benefit in the consolidated statements of operations.
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For interim periods, an income tax provision (benefit) is recognized based on the estimated annual effective tax rate expected for
the entire fiscal year. The interim annual estimated effective tax rate is based on the statutory tax rates then in effect, as adjusted
for estimated changes in permanent differences, and excludes certain discrete items whose tax effect, when material, is recognized
in the interim period in which they occur. These changes in permanent differences and discrete items result in variances to the
effective tax rate from period to period. Impacts from significant pre-tax, non-recognized subsequent events are excluded from the
interim estimated annual effective rate until the period in which they occur.
Net Income (Loss) per Share
Basic net income (loss) per share is calculated by dividing net income (loss) attributable to common stockholders by the
weighted-average number of common shares outstanding during the period, without consideration for common share equivalents
or any impacts from Preferred Stock activity. Common share equivalents consist of the incremental common shares issuable upon
the exercise of stock options and vesting of restricted stock unit awards. Diluted net income (loss) per common share is calculated
by dividing net income (loss) attributable to common stockholders by the fully diluted weighted-average number of common
shares outstanding during the period. The diluted weighted-average common shares outstanding amount includes the impact of
common share equivalents, which are the incremental shares of common stock that would be issuable upon the hypothetical
exercise of stock options and vesting of restricted stock unit awards. The common stock equivalents are calculated using the
treasury stock method and average market prices during the periods and are included in the diluted net income (loss) per share
calculation unless their inclusion would be anti-dilutive.
Recent Accounting Pronouncements - Adopted
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses: Measurement of Credit Losses on
Financial Instruments.” This guidance is intended to introduce a revised approach to the recognition and measurement of credit
losses, emphasizing an updated model based on current expected credit losses ("CECL") rather than incurred losses. The
Company adopted the standard effective January 1, 2023, and determined that adoption of the standard had no material impact on
its consolidated financial statements and related disclosures.
Recent Accounting Pronouncements - Not Yet Adopted
In March 2023, the FASB issued ASU 2023-01, “Leases (Topic 842) – Common Control Arrangements.” This guidance amends
certain provisions of ASC 842, specifically those that apply to leasing arrangements between related parties under common
control. The standard will become effective for fiscal years beginning after December 15, 2023, and early adoption is permitted.
The Company does not expect the adoption of this standard to have a material impact on the Company’s consolidated financial
statements and related disclosures.
In October 2023, the FASB issued ASU 2023-06, “Disclosure Improvements – Codification Amendments in Response to the
SEC’s Disclosure Update and Simplification Initiative.” This guidance affects a wide variety of topics in the Codification. The
effective date for each amendment will be the date on which the removal of the respective related disclosures from Regulation S-
X or Regulation S-K becomes effective. Early adoption is prohibited. The Company does not expect the adoption of this standard
to have a material impact on the Company’s consolidated financial statements and related disclosures.
In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improving Reportable Segment
Disclosures.” This guidance is intended to improve reportable segment disclosure requirements, primarily through enhanced
disclosures about significant expenses. The standard requires disclosures to include significant segment expenses that are
regularly provided to the chief operating decision maker ("CODM"), a description of other segment items by reportable segment,
and any additional measures of a segment's profit or loss used by the CODM when deciding how to allocate resources. The
standard also requires all annual disclosures currently required by ASC Topic 280 to be included in interim periods. This standard
is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December
15, 2024, with early adoption permitted and requires retrospective application to all prior periods presented in the financial
statements. The Company is currently evaluating the impact of this standard on its consolidated financial statements and related
disclosures.
In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” This
guidance is a final standard on improvements to income tax disclosures and requires disaggregated information about a reporting
entity's effective tax rate reconciliation as well as information on income taxes paid. This standard is effective for fiscal years
beginning after December 15, 2024, with early adoption permitted and should be applied prospectively. The Company is currently
evaluating the impact of this standard on its consolidated financial statements and related disclosures.
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3. Discontinued Operations
On March 31, 2022, the Company completed the sale of CES to August Mack in accordance with the Asset Purchase Agreement
for approximately $1.4 million of total consideration, composed of $1.0 million in cash and $0.4 million of cash held in escrow
that is subject to net working capital and other adjustments. The Company executed this divestiture to enhance its focus and
pursue continued growth initiatives for its core asset management business.
The following table reconciles major line items constituting pretax income (loss) from discontinued operations to net income
(loss) from discontinued operations as presented in the consolidated statements of operations (in thousands):
Revenue
Cost of revenue
Selling, general, and administrative
Other income (expense)
$
Pre-tax income (loss) from discontinued operations
Provision for (benefit from) income tax
Net income (loss) from discontinued operations
$
Year Ended December 31,
2022
2023
—
—
—
—
—
—
—
$
$
1,460
(1,562)
(403)
87
(418)
(37)
(381)
The Company recognized a net loss of $0.2 million on the divestiture of CES, calculated by comparing the final adjusted purchase
price to the carrying value of the net assets sold in the transaction as of March 31, 2022. These amounts reflect the finalized
transaction costs and net working capital adjustments.
4. Fixed Assets & Intangible Assets
The following table provides a detailed breakout of fixed assets, by type (in thousands):
Computer equipment and capitalized software
Furniture and fixtures
Office equipment
Vehicles
Total fixed assets
Accumulated depreciation
Total fixed assets, net
December 31,
2023
2022
444
115
67
193
819
(341)
478
$
$
538
80
60
83
761
(340)
421
$
$
Depreciation expense for the years ended December 31, 2023 and 2022 was $0.2 million and $0.2 million, respectively.
On May 6, 2022, the Company purchased the rights to the www.comstock.com domain name for $0.1 million. The Company has
recorded the domain name purchase as an indefinite-lived intangible asset on its consolidated balance sheets that will be tested
annually for impairment.
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5. Investments in Real Estate Ventures
The following table summarizes the Company's investments in real estate ventures that are recorded on the consolidated balance
sheets (in thousands):
Investment
Investors X
The Hartford
BLVD Forty Four
BLVD Ansel
Total investments recorded at fair value
Comstock 41
Total investments in real estate ventures
Ownership %
50.0%
2.5%
5.0%
5.0%
100.0%
$
$
December 31,
2023
2022
976
610
1,837
2,090
5,513
1,564
7,077
$
$
1,369
953
2,135
2,556
7,013
—
7,013
Accounting Method
Fair Value
Fair Value
Fair Value
Fair Value
Consolidated
The Company’s maximum loss exposure on each of its investments in real estate ventures is equal to the carrying amount of the
investment. Additional details on each investment are as follows:
Investors X
On April 30, 2019, the Company entered into a master transfer agreement with CPRES which entitled the Company to priority
distribution of residual cash flow from its Class B membership interest in Comstock Investors X, L.C. ("Investors X"), an
unconsolidated variable interest entity that owns the Company's residual homebuilding operations. As of December 31, 2023, the
residual cash flow primarily relates to anticipated proceeds from the sale of rezoned residential lots. The cash will be released as
land development work associated with these projects is completed and lots are sold. (See Note 14 for additional information).
The Hartford
In December 2019, the Company entered into a joint venture with CP to acquire The Hartford Building ("The Hartford"), a Class-
A office building adjacent to Clarendon Station on Metro’s Orange Line in Arlington County’s premier transit-oriented office
market, the Rosslyn-Ballston Corridor. Built in 2003, the 211,000 square foot mixed-use Leadership in Energy and Environmental
Design (“LEED”) GOLD building is being leased to multiple high-quality tenants. In February 2020, the Company arranged for
DivcoWest to purchase a majority ownership stake in The Hartford Building and secured a $87.0 million loan facility from
MetLife. As part of the transaction, the Company entered into asset management and property management agreements to manage
the property in exchange for market-rate fees, for which it recognized $0.9 million of revenue for the year ended December 31,
2023. Fair value is determined using an income approach and sales comparable approach models. As of December 31, 2023, the
Company’s ownership interest in The Hartford was 2.5%. (See Note 14 for additional information).
BLVD Forty Four
In October 2021, the Company entered into a joint venture with CP to acquire a stabilized 15-story, luxury high-rise apartment
building in Rockville, Maryland that was rebranded as BLVD Forty Four. Located one block from the Rockville Station on
Metro's Red Line and in the heart of the I-270 Technology and Life Science Corridor, the 263-unit mixed use property built in
2015 includes approximately 16,000 square feet of retail and a commercial parking garage. In connection with the transaction, the
Company received an acquisition fee and is entitled to receive investment-related income and promote distributions in connection
with its equity interest in the asset. The Company also provides asset, residential, retail and parking property management services
for the property in exchange for market-rate fees, for which it recognized $1.3 million of revenue for the year ended
December 31, 2023. Fair value is determined using an income approach and sales comparable approach models. As of
December 31, 2023, the Company’s ownership interest in BLVD Forty Four was 5.0%. (See Note 14 for additional information).
BLVD Ansel
In March 2022, the Company entered into a joint venture with CP to acquire BLVD Ansel, a newly completed 18-story, luxury
high-rise apartment building with 250 units located adjacent to the Rockville Metro Station and BLVD Forty Four in Rockville,
Maryland. BLVD Ansel features approximately 20,000 square feet of retail space, 611 parking spaces, and expansive amenities
including multiple private workspaces designed to meet the needs of remote-working residents. In connection with the
transaction, the Company received an acquisition fee and is entitled to receive investment-related income and promote
distributions in connection with its equity interest in the asset. The Company also provides asset, residential, retail and parking
property management services for the property in exchange for market rate fees, for which it recognized $1.1 million of revenue
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for the year ended December 31, 2023. Fair value is determined using an income approach and sales comparable approach
models. As of December 31, 2023, the Company’s ownership interest in BLVD Ansel was 5.0%. (See Note 14 for additional
information).
The following table below summarizes the activity of the Company’s unconsolidated investments in real estate ventures that are
reported at fair value (in thousands):
Balance as of December 31, 2021
Investments
Distributions
Change in fair value
Balance as of December 31, 2022
Investments
Distributions
Change in fair value
Balance as of December 31, 2023
$
$
$
4,702
2,709
(382)
(16)
7,013
89
(379)
(1,210)
5,513
Comstock 41
In December 2023, the Company completed the acquisition of an 18,150 square foot land parcel located at 41 Maryland Avenue
in Rockville, Maryland (“Comstock 41”) through a wholly owned subsidiary for $1.5 million. This investment property sits
adjacent to BLVD Ansel and BLVD Forty-Four and is currently a surface parking lot. Comstock 41 has existing entitlements for
at least 117 dwelling units and approximately 11,000 square feet of retail space. (See Note 14 for additional information).
Other Investments
In addition, the Company has a joint venture with Superior Title Services, Inc. ("STS") to provide title insurance to its clients. The
Company records this co-investment using the equity method of accounting and adjusts the carrying value of the investment for
its proportionate share of net income and distributions. The carrying value of the STS investment is recorded in "other assets" on
the Company's consolidated statement of balance sheets. The Company's proportionate share of net income and distributions are
recorded in gain (loss) on real estate ventures in the consolidated statements of operations and was immaterial for the years ended
December 31, 2023 and 2022, respectively.
Investment Financial Information
The following tables summarize the combined summarized statements of operations information for our unconsolidated
investments in real estate ventures (in thousands):
Combined Statements of Operations:
Revenue
Operating income (loss)
Net income (loss)
Year Ended December 31,
2022
2023
$
$
$
24,877
13,251
(10,506)
20,825
11,550
(7,360)
6. Leases
The Company has operating leases for office space leased in various buildings for its own use. The Company's leases have
original terms ranging from 5 to 10 years. The Company's lease agreements do not contain any residual value guarantees or
material restrictive covenants. Lease costs related to the Company's operating leases are primarily reflected in "cost of revenue" in
the consolidated statements of operations, as they are a reimbursable cost under the Company's respective asset management
agreements. (See Note 14 for additional information).
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The following table summarizes operating lease costs, by type (in thousands):
Operating lease costs
Fixed lease costs
Variable lease costs
Total operating lease costs
Year Ended December 31,
2022
2023
$
$
1,186
458
1,644
$
$
1,045
361
1,406
The following table presents supplemental cash flow information related to the Company's operating leases (in thousands):
Cash paid for lease liabilities:
Operating cash flows from operating leases
Year Ended December 31,
2022
2023
$
1,588
$
1,350
As of December 31, 2023 the Company's operating leases had a weighted-average remaining lease term of 6.76 years and a
weighted-average discount rate of 4.64%.
The following table summarizes future lease liability payments (in thousands):
Year Ending December 31,
2024
2025
2026
2027
2028
Thereafter
Total future lease payments
Imputed interest
Total lease liabilities
Operating Leases
$
$
1,167
1,194
1,222
1,203
1,233
2,336
8,355
(1,228)
7,127
The Company does not have any lease liabilities which have not yet commenced as of December 31, 2023.
7. Debt
Credit Facility - Due to Affiliates
On March 19, 2020, the Company entered into a Revolving Capital Line of Credit Agreement with CPRES, pursuant to which the
Company secured a $10.0 million capital line of credit (the “Credit Facility”) that will expire in March 2025. The Credit Facility
provides for an initial variable interest rate of the Wall Street Journal Prime Rate plus 1.00% per annum on advances made under
the Credit Facility, payable monthly in arrears. The Company made a $5.5 million initial draw on the Credit Facility in the form
of a note with an April 30, 2023, maturity date.
On September 30, 2022, the Company paid down its $5.5 million outstanding principal balance on the Credit Facility in full. As
of December 31, 2023, the Credit Facility remained available for use and the Company had no outstanding debt or financing
arrangements for which future payments are due.
8. Commitments and Contingencies
The Company maintains certain non-cancelable operating leases that contain various renewal options. (See Note 6 for additional
information)
The Company is subject to litigation from time to time in the ordinary course of business; however, the Company does not expect
the results, if any, to have a material adverse impact on its results of operations, financial position, or liquidity. The Company
records a contingent liability when it is both probable that a liability has been incurred and the amount can be reasonably
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estimated; however, the Company is not aware of any reasonably possible losses that would have a material impact on its results
of operations, financial position, or liquidity. The Company expenses legal defense costs as they are incurred.
9. Fair Value Disclosures
As of December 31, 2023, the carrying amount of cash and cash equivalents, accounts receivable, other current assets, and
accounts payable approximated fair value because of the short-term nature of these instruments.
As of December 31, 2023, deferred compensation plan assets, which are Company-funded investments that are meant to correlate
with participant-directed hypothetical investments in stock and bond mutual funds, are measured using quoted prices in active
markets based on the market price per unit multiplied by the number of units held (Level 1). Corresponding deferred
compensation plan liabilities reflect the fair value of the aforementioned hypothetical investments and are based on inputs derived
principally from observable market data (Level 2) through their direct correlation with the deferred compensation plan assets.
As of December 31, 2023, the Company had certain equity method investments in real estate ventures that it elected to record at
fair value using significant unobservable inputs (Level 3). (See Note 5 for additional information).
The Company may also value its non-financial assets and liabilities, including items such as long-lived assets, at fair value on a
non-recurring basis if it is determined that impairment has occurred. Such fair value measurements typically use significant
unobservable inputs (Level 3), unless a quoted market price (Level 1) or quoted prices for similar instruments, quoted prices for
identical or similar instruments in inactive markets, or amounts derived from valuation models (Level 2) are available.
10. Stockholders' Equity
Common Stock
The Company's certificate of incorporation authorizes the issuance of Class A common stock and Class B common stock, each
with a par value of $0.01 per share. Holders of Class A common stock and Class B common stock are entitled to dividends when,
as and if, declared by the Company's board of directors, subject to the rights of the holders of all classes of stock outstanding
having priority rights to dividends. Holders of Class A common stock are entitled to one vote per share and holders of Class B
common stock are entitled to fifteen votes per share. Shares of our Class B common stock are convertible into an equivalent
number of shares of our Class A common stock and generally convert into shares of our Class A common stock upon transfer. As
of December 31, 2023, the Company had not declared any dividends.
Preferred Stock
The Company's certificate of incorporation authorizes the issuance of Series C non-convertible preferred stock with a par value of
$0.01 per share. Series C Preferred Stock has a discretionary, non-cumulative, dividend feature and is redeemable by holders in
the event of liquidation or change in control of the Company.
On June 13, 2022, the Company entered into a Share Exchange and Purchase Agreement ("SEPA") with CPRES, pursuant to
which the Company acquired from CPRES all outstanding shares of its non-convertible and non-redeemable Series C preferred
stock for (i) 1.0 million shares of the Company’s Class A common stock, valued at the consolidated closing bid price of the Class
A shares on Nasdaq on the business day immediately preceding the entry into the SEPA and (ii) $4.0 million in cash. The SEPA
was unanimously approved by the independent directors of the Company. Upon completion of the transaction, all shares of Series
C preferred stock were immediately cancelled and fully retired.
At the time of the transaction, the total carrying value of the Series C preferred stock (including the related additional paid-in
capital) was $10.3 million. The share exchange was accounted for as a redemption; therefore, the $2.0 million difference between
the carrying value and the $8.3 million fair value of the consideration paid upon redemption was added to net income to arrive at
income attributable to common stockholders and calculate net income (loss) per share for the Company's fiscal year ended
December 31, 2022. (See Note 13 for additional information).
Stock-based Compensation
On February 12, 2019, the Company approved the 2019 Omnibus Incentive Plan (the “2019 Plan”), which replaced the 2004
Long-Term Compensation Plan (the “2004 Plan”). The 2019 Plan provides for the issuance of stock options, stock appreciation
rights ("SARs"), restricted stock, restricted stock units, dividend equivalents, performance awards, and stock or other stock-based
awards. The 2019 Plan mandates that all lapsed, forfeited, expired, terminated, cancelled and withheld shares, including those
from the predecessor plan, be returned to the 2019 Plan and made available for issuance. The 2019 Plan originally authorized
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2.5 million shares of the Company's Class A common stock for issuance. As of December 31, 2023, there were 1.4 million shares
of Class A common stock available for issuance under the 2019 Plan.
During the years ended December 31, 2023 and 2022, the Company recorded stock-based compensation expense of $1.0 million
and $0.8 million, respectively. Stock-based compensation costs are included in selling, general, and administrative expense on the
Company's consolidated statements of operations. As of December 31, 2023, there was $0.8 million of total unrecognized stock-
based compensation, which is expected to be recognized over a weighted-average period of 1.9 years.
Restricted Stock Units
Restricted stock unit (“RSU”) awards granted to employees are subject to continued employment and generally vest in four
annual installments over the four years period following the grant dates. The Company also grants certain RSU awards to
management that contain additional vesting conditions tied directly to a defined performance metric for the Company (“PSUs”).
The actual number of PSUs that will vest can range from 60% to 120% of the original grant target amount, depending upon actual
Company performance below or above the established performance metric targets. The Company estimates performance in
relation to the defined targets when calculating the related stock-based compensation expense.
The following table summarizes all restricted stock unit activity (in thousands, except per share data):
Balance as of December 31, 2022
Granted
Released
Canceled/Forfeited
Balance as of December 31, 2023
RSUs
Outstanding
Weighted-
Average
Grant Date Fair
Value
702
279
(257)
(53)
671
$
$
2.95
4.03
2.71
3.90
3.42
The total intrinsic value of RSUs that vested during the years ended December 31, 2023 and 2022 was $1.1 million and $1.0
million, respectively.
Stock Options
Non-qualified stock options generally expire 10 years after the grant date and, except under certain conditions, the options are
subject to continued employment and vest in four annual installments over the four-year period following the grant dates.
The following table summarizes all stock option activity (in thousands, except per share data and time periods):
Balance as of December 31, 2022
Granted
Exercised
Canceled/Forfeited
Expired
Balance as of December 31, 2023
Exercisable as of December 31, 2023
Options
Outstanding
Weighted-
Average
Exercise
Price
131
—
—
—
(15)
116
116
$
$
$
4.08
—
—
—
11.81
3.07
3.07
Weighted-
Average
Remaining
Contractual
Term (Years)
4.4
Aggregate
Intrinsic
Value
$
172
3.9
3.9
$
$
192
192
There were no stock option exercises during the year ended December 31, 2023. The total intrinsic value of stock options
exercised during the year ended December 31, 2022, was $0.6 million.
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Table of Contents
11. Revenue
All the Company's revenue was for the years ended December 31, 2023 and 2022 was generated in the United States.
The following tables summarize the Company’s revenue by line of business, customer type, and contract type (in thousands):
Revenue by Line of Business
Asset management
Property management
Parking management
Total revenue
Revenue by Customer Type
Related party
Commercial
Total revenue
Revenue by Contract Fee Type1
Fixed-price
Cost-plus
Variable
Total revenue
Year Ended December 31,
2022
2023
29,278
10,604
4,839
44,721
$
$
26,680
9,398
3,235
39,313
Year Ended December 31,
2022
2023
43,568
1,153
44,721
$
$
38,719
594
39,313
Year Ended December 31,
2023
2022
6,255
$
26,170
12,296
44,721
$
7,048
22,652
9,613
39,313
$
$
$
$
$
$
1
Certain contracts contain multiple revenue streams with characteristics that lend to classification in more than one category.
For the years ended December 31, 2023, and 2022 the Company recognized revenue from incentive fees of $4.8 million and $3.9
million, respectively. The incentive fee revenue recognized in both periods stemmed from scheduled annual triggering events for
operating assets that began on October 1, 2022, and are scheduled each October 1 through 2024, pursuant to the terms of the 2022
AMA. All Incentive Fees recognized to date have been related to services performed in prior periods for which revenue
recognition criteria were previously constrained. Subsequent to these scheduled triggering events, and in accordance with terms
pursuant to the 2022 AMA, incentive fees may be recognized on assets currently under development upon the achievement of
future triggering events tied to various metrics that indicate stabilization, such as occupancy and leasing rates. (See Note 14 in the
Notes to Consolidated Financial Statements for additional information).
F-19
Table of Contents
12. Income Tax
The following table summarizes the components of the provision for (benefit from) income tax (in thousands):
Current:
Federal
State
Total current taxes
Deferred:
Federal
State
Total deferred taxes
Other:
Valuation allowance
Year Ended December 31,
2022
2023
$
$
—
(102)
(102)
1,839
178
2,017
—
180
180
1,281
(195)
1,086
(1,547)
(1,141)
Provision for (benefit from) income taxes
$
368
$
125
The following table presents a reconciliation the statutory federal income tax rate to the Company's effective income tax rate:
Federal statutory rate
State income taxes, net of federal benefit
Permanent differences
Return to provision
Change in valuation allowance
Change in state tax rate
Other
Effective tax rate
Year Ended December 31,
2022
2023
21.00 %
4.64 %
0.50 %
(0.99) %
(18.99) %
(0.21) %
(1.44) %
4.51 %
21.00 %
5.67 %
(2.40) %
0.00 %
(14.54) %
(5.70) %
(2.45) %
1.59 %
The Company's effective tax rates for the years ended December 31, 2023 and 2022 differ from the U.S. federal statutory tax rate
of 21%, primarily due to state income taxes and the impact of valuation allowance releases of $1.5 million and $1.1 million,
respectively.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income tax purposes. The Company has recorded valuation allowances
for certain tax attributes and deferred tax assets due to the existence of sufficient uncertainty regarding the future realization of
those deferred tax assets through future taxable income. Based on its recent financial performance and current forecasts of future
operating results, the Company conducts a quarterly analysis to determine if it is more likely than not that a portion of the deferred
tax assets related to its net operating loss carryforwards will be utilized in future periods. The Company's effective tax rate in any
given period is directly impacted by the timing and magnitude of any partial valuation allowance releases.
F-20
Table of Contents
The following table summarizes the components of the Company's deferred tax assets and liabilities (in thousands):
$
Deferred tax assets:
Net operating loss and tax credit carryforwards
Stock-based compensation
Investments in affiliates
Right of use lease liability
Bonus accrual
Goodwill amortization
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Right of use lease asset
Depreciation and amortization
Total deferred tax liabilities
December 31,
2023
2022
$
31,465
471
1,395
1,825
1,172
—
(23,666)
12,662
(1,739)
(38)
(1,777)
33,532
481
1,237
2,017
1,246
(1)
(25,214)
13,298
(1,943)
—
(1,943)
Net deferred income tax assets (liabilities)
$
10,885
$
11,355
As of December 31, 2023, the Company had $122.8 million of net operating loss (“NOL") carryforwards. These NOLs, if unused,
will begin expiring in 2028. Under Code Section 382 (“Section 382”) rules, if a change of ownership is triggered, the Company’s
NOL assets and possibly certain other deferred tax assets may be impaired. Given Section 382’s broad definition, an ownership
change could be the unintended consequence of otherwise normal market trading in the Company’s stock that is outside of the
Company’s control. In an effort to preserve the availability of these NOLs, the Company has adopted a Section 382 rights
agreement that is scheduled to expire on March 27, 2025. The Section 382 rights agreement helps to reduce the likelihood of an
unintended “ownership change”, thus preserving the value of these future tax benefits. We estimate that as of December 31, 2023,
the three-year cumulative shift in ownership of the Company’s stock had not triggered a limitation in the use of our NOL asset.
As of December 31, 2023, there were no uncertain tax positions that, if recognized, would affect the Company's effective tax rate.
We file U.S. and state income tax returns in jurisdictions with varying statutes of limitations. All of our income tax returns remain
subject to examination by federal and state tax authorities due to the availability of our NOL carryforwards.
F-21
Table of Contents
13. Net Income (Loss) Per Share
The following table sets forth the calculation of basic and diluted net income per share (in thousands, except per share data):
Numerator:
Net income (loss) from continuing operations - Basic and Diluted
Impact of Series C preferred stock redemption
Net income (loss) from continuing operations attributable to common stockholders -
Basic and Diluted
Net income (loss) from discontinued operations - Basic and Diluted
Net income (loss) attributable to common shareholders - Basic and Diluted
Denominator:
Weighted-average common shares outstanding - Basic
Effect of common share equivalents
Weighted-average common shares outstanding - Diluted
Net income (loss) per share:
Basic - Continuing operations
Basic - Discontinued operations
Basic net income (loss) per share
Diluted - Continuing operations
Diluted - Discontinued operations
Diluted net income (loss) per share
Year Ended December 31,
2022
2023
$
$
$
$
$
$
7,784
—
7,784
—
7,784
9,629
479
10,108
0.81
—
0.81
0.77
—
0.77
$
$
$
$
$
$
7,728
2,046
9,774
(381)
9,393
8,974
601
9,575
1.09
(0.04)
1.05
1.02
(0.04)
0.98
The following common share equivalents have been excluded from the computation of diluted net income (loss) per share because
their effect was anti-dilutive (in thousands):
Restricted stock units
Stock options
Warrants
Year Ended December 31,
2023
2022
2
29
46
6
35
89
14. Related Party Transactions
On June 13, 2022, CHCI Asset Management, L.C. (“CAM”), an entity wholly owned by the Company, entered into a new master
asset management agreement with CP (the “2022 AMA”) that superseded in its entirety the previous asset management agreement
between CAM and CPRES dated April 30, 2019 (the “2019 AMA”). Entry into the 2022 AMA was unanimously approved by the
independent directors of the Company.
Consistent with the structure of the 2019 AMA, the 2022 AMA engages CAM to manage and administer CP’s commercial real
estate portfolio (the "Anchor Portfolio") and the day to-day operations of CP and each property-owning subsidiary of CP
(collectively, the “CP Entities”). CAM will provide investment advisory, development, and asset management services necessary
to build out, stabilize and manage the Anchor Portfolio, which currently consists primarily of two of the larger transit-oriented,
mixed-use developments located on Washington D.C. Metro’s Silver Line (Reston Station and Loudoun Station) that are owned
by CP Entities and ultimately controlled by Mr. Clemente.
Pursuant to the fee structures set forth in both the 2022 AMA and 2019 AMA, CAM is entitled to receive an annual payment
equal to the greater of the "Cost-Plus Fee" or the "Market Rate Fee". The Cost-Plus Fee is equal to the sum of (i) the
comprehensive costs incurred by or for providing services to the Anchor Portfolio, (ii) the costs and expenses of the Company
related to maintaining the listing of its shares on a securities exchange and complying with regulatory and reporting obligations of
F-22
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a public company, and (iii) a fixed annual payment of $1.0 million. The Market Rate Fee calculation is defined in the respective
asset management agreements as the sum of the fees detailed in the following table:
Description
2022 AMA
2019 AMA
Asset Management Fee
2.5% of Anchor Portfolio revenue
Entitlement Fee
15% of total re-zoning costs
Development and Construction Fee
Property Management Fee
Acquisition Fee
Disposition Fee
5% of development costs (excluding
previously charged Entitlement Fees)
1% of Anchor Portfolio revenue
1% on first $50 million of purchase price;
0.5% above $50 million
1% on first $50 million of sale price; 0.5%
above $50 million
2.5% of Anchor Portfolio revenue
Encompassed in Development and
Construction Fee
4% of development costs
1% of Anchor Portfolio revenue
0.5% of purchase price
0.5% of sale price
In addition to the annual payment of either the Market Rate Fee or the Cost-Plus Fee, CAM is also entitled on an annual basis to
receive certain supplemental fees, as detailed for the respective asset management agreements in the following table:
Description
2022 AMA
2019 AMA
When receiving Market Rate Fee:
On a mark-to-market basis, equal to 20%
of the imputed profit of certain real estate
assets comprising the Anchor Portfolio for
which a Triggering Event1 has occurred,
after calculating a compounding preferred
return of 8% on CP invested capital (the
“Market Incentive Fee”)
When receiving the Cost-Plus Fee:
On a mark-to-market basis, an incentive
fee equal to 10% of the imputed profit of
certain real estate assets comprising the
Anchor Portfolio for which a Triggering
Event1 has occurred, after calculating a
compounding preferred return of 8% on CP
invested capital (the “Base Incentive Fee”)
1% of raised capital
$1/per sqft. for new leases and $0.50/ per
sqft. for lease renewals
1% of any Financing Transaction or other
commercially reasonable and mutually
agreed upon fee
10% of the free cash flow of each of the
real estate assets comprising the Anchor
Portfolio after calculating a compounding
preferred return of 8% on CPRES invested
capital
1% of raised capital
$1/ per sqft. for new leases and $0.50/ per
sqft. for lease renewals
1% of any Financing Transaction or other
commercially reasonable and mutually
agreed upon fee
Incentive Fee
Investment Origination Fee
Leasing Fee
Loan Origination Fee
1 Triggering events are differentiated between operating assets (i.e., those already in service) and assets under development. Operating asset
triggering events are scheduled for specific dates, whereas triggering events for assets under development are tied to various metrics that
indicate stabilization, such as occupancy and leasing rates.
The 2022 AMA will terminate on January 1, 2035 (“Initial Term”) and will automatically renew for successive additional one
year terms (each an “Extension Term”) unless CP delivers written notice of non-renewal of the 2022 AMA at least 180 days prior
to the termination date of the Initial Term or any Extension Term. Twenty-four months after the effective date of the 2022 AMA,
CP is entitled to terminate the 2022 AMA without cause upon 180 days advance written notice to CAM. In the event of such a
termination and in addition to the payment of any accrued annual fees due and payable as of the termination date under the 2022
AMA, CP is required to pay a termination fee equal to two times the Cost-Plus Fee or Market Rate Fee paid to CAM for the
calendar year immediately preceding the termination.
Residential, Commercial, and Parking Property Management Agreements
The Company entered into separate residential property management agreements with properties owned by CP Entities under
which the Company receives fees to manage and operate the properties, including tenant communications, leasing of apartment
units, rent collections, building maintenance and day-to-day operations, engagement and supervision of contractors and vendors
providing services for the buildings, and budget preparation and oversight.
F-23
Table of Contents
The Company entered into separate commercial property and parking management agreements with several properties owned by
CP Entities under which the Company receives fees to manage and operate the office and retail portions of the properties,
including tenant communications, rent collections, building maintenance and day-to-day operations, engagement and supervision
of contractors and vendors providing services for the buildings, and budget preparation and oversight. These property
management agreements each have initial terms of one year with successive, automatic one-year renewal terms. The Company
generally receives base management fees under these agreements based upon a percentage of gross rental revenues for the
portions of the buildings being managed in addition to reimbursement of specified expenses, including employment expenses of
personnel employed by the Company in the management and operation of each property.
Construction Management Agreements
The Company has construction management agreements with properties owned by CP Entities under which the Company receives
fees to provide certain construction management and supervision services, including construction supervision and management of
the buildout of certain tenant premises. The Company receives a flat construction management fee for each engagement under a
work authorization based upon the construction management or supervision fee set forth in the applicable tenant’s lease, which
fee is generally 1% to 4% of the total costs (or total hard costs) of construction of the tenant’s improvements in its premises, or as
otherwise agreed to by the parties.
Lease Procurement Agreements
The Company has lease procurement agreements with properties owned by CP Entities under which the Company receives certain
finders' fees in connection with the procurement of new leases for such properties where an external broker is not engaged on
behalf of the CP Entities. Such leasing fees are supplemental to the fees generated from the Company's management agreements
referenced above and are generally 1-2% of the future lease payments to be received by the CP Entity from the executed lease.
Business Management Agreements
On April 30, 2019, CAM entered into a Business Management Agreement with Investors X, whereby CAM provides Investors X
with asset and professional services related to the wind down of the Company’s divested homebuilding operations and the
continuation of services related to the Company’s divested land development activities. The aggregate fee payable to CAM from
Investors X under the Business Management Agreement, which ended on December 31, 2022, was $0.9 million payable in 15
quarterly installments of $0.1 million each. The Company considers Investors X to be a variable interest entity over which it does
not have the power to direct activities that most significantly impact economic performance, therefore it is not the primary
beneficiary of Investors X and does not have to consolidate the entity into its financial results. (See Note 5 for additional
information).
On July 1, 2019, CAM entered into a Business Management Agreement (the “BC Management Agreement”) with CPRES,
whereby CAM provides CPRES with professional management and consultation services, including, without limitation,
consultation on land development and real estate transactions, for a residential community located in Monteverde, Florida. On
January 1, 2023, a successor contract for the BC Management Agreement was executed by DCS Real Estate Investments, LC, an
entity controlled by a member of CP. The BC Management Agreement is structured in successive renewable one-year terms. The
BC Management Agreement provides that DCS Real Estate Investments, LC will pay CAM an annual management fee equal to
$0.4 million, payable in equal monthly installments and will reimburse CAM for certain expenses.
The Hartford
In December 2019, the Company made an investment related to the purchase of The Hartford Building ("The Hartford"), a
stabilized commercial office building located at 3101 Wilson Boulevard in the Clarendon area of Arlington County, Virginia. In
conjunction with the investment, the Company entered into an operating agreement with CP to form Comstock 3101 Wilson, LC,
to purchase The Hartford. Pursuant to the operating agreement, the Company held a minority membership interest of The
Hartford, and the remaining membership interests of The Hartford are held by CP.
In February 2020, the Company, CP and DWF VI 3101 Wilson Member, LLC (“DWF”), an unaffiliated, third party, equity
investor in The Hartford, entered into a limited liability company agreement (the “DWC Operating Agreement”) to form DWC
3101 Wilson Venture, LLC (“DWC”) to, among other things, acquire, own and hold all interests in The Hartford. In furtherance
thereof, on February 7, 2020, the original operating agreement was amended and restated (the “A&R Operating Agreement”) to
memorialize the Company’s and CP’s assignment of 100% of its membership interests in The Hartford to DWC. As a result,
DWC is the sole member of The Hartford Owner. The Company and CP, respectively, hold minority membership interests in, and
DWF holds the majority membership interest in, DWC. (See Note 5 for additional information).
F-24
Table of Contents
BLVD Forty Four/BLVD Ansel
In October 2021 and March 2022, the Company entered into joint ventures with CP to acquire BLVD Forty Four and BLVD
Ansel, respectively, two adjacent mixed-use luxury high-rise apartment buildings located near the Rockville Metro Station in
Montgomery County, Maryland. The Company considers BLVD Forty Four and BLVD Ansel to be variable interest entities upon
which it exercises significant influence; however, considering key factors such as the Company’s ownership interest, participation
in policy-making decisions, and oversight of management services by majority equity holders, the Company concluded that the
power to direct activities that most significantly impact economic performance is shared. Given that the Company is not the entity
most closely associated with the properties, it concluded that it is not the primary beneficiary and does not have a controlling
financial interest in either property. (See Note 5 for additional information).
In conjunction with the acquisition of Comstock 41, the Company entered into an amendment to the existing asset management
agreement with CP to introduce an acquisition pursuit fee of $0.1 million and contingent entitlement success fee to pursue
potential relocation of moderately-priced dwelling units ("MPDUs") from BLVD Forty Four to Comstock 41. The acquisition
pursuit fee was earned and recognized as revenue for the year ended December 31, 2023, upon the completion of the Comstock 41
acquisition. The entitlement success fee, if earned, will equal 25% of the economic value created by the relocation of the MPDUs
(subject to reasonable agreed upon changes at the time of the calculation) and due upon approval of a finalized amendment to the
existing project development plan by local government agencies. (See Note 5 for additional information).
Corporate Leases
On November 1, 2020, the Company relocated its corporate headquarters to office space located at 1900 Reston Metro Plaza in
Reston, Virginia, pursuant to a ten-year lease agreement with an affiliate controlled and owned by Christopher Clemente, its Chief
Executive Officer, and his family. On November 1, 2022, the Company executed a 3,778 square foot lease expansion agreement
with terms that align with the original agreement. (See Note 6 for additional information).
On January 1, 2022, ParkX Management, LC, a subsidiary of the Company, entered into a five-year lease agreement for its
parking operations monitoring center with an affiliate controlled and owned by Mr. Clemente and his family. (See Note 6 for
additional information).
Series C Preferred Stock Redemption
On June 13, 2022, the Company entered into the SEPA with CPRES, pursuant to which the Company acquired from CPRES all
outstanding shares of its non-convertible and non-redeemable Series C preferred stock at a significant discount to carrying value.
(See Note 10 for additional information).
15. Employee Benefit Plans
The Company maintains defined contribution plans covering all full-time employees of the Company who have 90 days of service
and are at least 21 years old. An eligible employee may elect to make a before-tax contribution of between 1% and 90% of his or
her compensation through payroll deductions, not to exceed the annual limit set by law. The Company currently matches the first
3% of participant contributions limited to 3% of a participant’s gross compensation (maximum Company match is 4%). The
combined total expense for this plan was $0.6 million and $0.5 million for the years ended December 31, 2023 and 2022,
respectively.
In addition, the Company adopted a non-qualified deferred compensation plan ("NQDC Plan") in November 2023. The NQDC
Plan allows certain eligible employees to defer, on a pre-tax basis, a portion of their base annual salary and/or their annual bonus
and earn tax-deferred earnings on these deferrals. The NQDC Plan also provides for matching Company contributions that vest
over a three-year period. In the NQDC Plan, a participant's deferrals, together with Company matching credits, are “invested” at
the direction of the employee in a hypothetical portfolio of investments which are tracked by an administrator. The Company,
through a broker partner affiliated with the NQDC Plan administrator, directly funds investments that are meant to correlate with
participant-directed hypothetical investments in stock and bond mutual funds in an effort to directly provide for its future NQDC
Plan liabilities. NQDC Plan assets and liabilities are marked-to-market each quarter. Fair value changes to NQDC Plan liabilities
are recorded as a benefit plan-related operating expense and the net investment income (loss) from NQDC Plan assets is recorded
as other income (expense) in our condensed consolidated statements of income. As of December 31, 2023, total NQDC plan
assets and liabilities were $0.1 million and 0.1 million, respectively. For the year ended December 31, 2023, there were no
distributions from the Company's NQDC Plan.
F-25
Table of Contents
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of
our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as
amended (“Exchange Act”), as of December 31, 2023. Disclosure controls and procedures are designed to ensure that information
required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated
to management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions
regarding required disclosure. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that
our disclosure controls and procedures were effective as of December 31, 2023.
Management’s Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over our financial reporting, as such term is
defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act.
We conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2023, based
on the Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission. Based on this evaluation, management concluded that our internal control over financial reporting was effective as
of December 31, 2023.
Limitations on the Effectiveness of Controls
We do not expect that our disclosure controls and internal controls will prevent all error and all fraud. A control system, no matter
how well conceived and operated, can provide only assurance, at the reasonable assurance level, that the objectives of the control
system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of
controls must be considered relative to their costs. Due to its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and
there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time,
a control may become inadequate because of changes in conditions or the degree of compliance with the policies or procedures
may deteriorate. Due to the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur
and may not be detected.
Changes in Internal Control Over Financial Reporting
No change has occurred in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the
Exchange Act) during our last fiscal quarter ended December 31, 2023, that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.
The certifications of our principal executive officer and principal financial officer pursuant to Rules 13a-14(a) and 15d-14(a) of
the Exchange Act are filed with this Annual Report on Form 10-K as Exhibits 31.1 and 31.2. The certifications of our principal
executive officer and principal financial officer pursuant to 18 U.S.C.1350 are furnished with this Annual Report on Form 10-K
as Exhibit 32.1.
Item 9B. Other Information
None.
18
Table of Contents
PART III
The information required by Items 10 through 14 of this section is incorporated herein by reference to the definitive proxy
statement for our 2024 Annual Meeting of Stockholders to be filed pursuant to Regulation 14A of the Exchange Act within 120
days after the close of our fiscal year-end. These items include:
•
•
•
•
•
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accountant Fees and Services
19
Table of Contents
PART IV
Item 15. Exhibit and Financial Statement Schedules
(a) The following documents are filed as part of this Annual Report on Form 10-K:
1. Consolidated Financial Statements
See Index to Consolidated Financial Statements in Part II, Item 8 of this report.
2. Financial Statement Schedules
Financial statement schedules have been omitted because they are not applicable, or the information required to be set
forth therein is included in the Consolidated Financial Statements or Notes thereto.
3. Exhibits
Exhibit
Number
Description
3.1
3.2
3.3
3.4
3.5
4.1
4.2
Incorporated by Reference
Form Exhibit
Filing Date
10-Q
10-K
3.1
3.2
November 16, 2015
March 31, 2005
8-K
3.1
March 28, 2017
8-K
S-1
10-K
3.1
4.1
4.2
February 19, 2019
August 13, 2004
March 31, 2022
S-1/A
10.10
December 7, 2004
S-1/A
10.12
December 7, 2004
Amended and Restated Certificate of Incorporation
Amended and Restated Bylaws
Certificate of Designation of Series C Non-Convertible Preferred Stock of Comstock
Holding Companies, Inc., filed with the Secretary of the State of Delaware on
March 22, 2017
Certificate of Amendment of Certificate of Designation of Series C Non-Convertible
Preferred Stock of Comstock Holding Companies, Inc. filed with the Secretary of State
of the State of Delaware on February 15, 2019
8-K
3.2
February 19, 2019
Certificate of Amendment of Amended and Restated Certificate of Incorporation of
Comstock Holding Companies, Inc.
Specimen Stock Certificate
Description of Capital Stock
10.1
Form of Indemnification Agreement
10.2+
2004 Long-Term Incentive Compensation Plan
10.3+
Form of Stock Option Agreement under the 2004 Long-Term Incentive Compensation
Plan
S-1/A
10.13
December 7, 2004
10.4
10.5
10.6
10.7
10.8
Trademark License Agreement
S-1/A
10.23
December 7, 2004
Form of warrant issued in connection with private placement by Comstock Growth
Fund, L.C.
10-K
10.91
April 14, 2015
Section 382 Rights Agreement between Comstock Holding Companies, Inc. and
American Stock Transfer & Trust Company, LLC dated March 27, 2015
8-K
4.1
March 27, 2015
Form of Subscription Agreement and Operating Agreement dated August 15, 2016,
between Comstock Investors X, L.C. and [-], with accompanying Schedule A
identifying subscribers
10-Q
10.99
November 14, 2016
Amendment to the Operating Agreement, dated October 13, 2017, between Comstock
Investors X, L.C. and CP Real Estate Services, LC (formerly Comstock Development
Services, LC)
10-Q
10.62
November 16, 2017
10.9+
Comstock Holding Companies, Inc. 2019 Omnibus Incentive Plan
DEF
14A
Annex
B
January 22, 2019
20
Table of Contents
10.10+
10.11+
10.12
Form of Time-Based Restricted Stock Unit Agreement under the 2019 Omnibus
Incentive Plan
10-K
10.26
April 15, 2020
Form of Performance Based Restricted Stock Unit Agreement under the 2019 Omnibus
Incentive Plan
10-K
10.27
April 15, 2020
Revolving Capital Line of Credit Agreement dated March 19, 2020, Comstock Holding
Companies, Inc. and CP Real Estate Services, LC (formerly Comstock Development
Services, LC)
10-Q
10.29
May 28, 2020
10.13
Promissory Note dated March 27, 2020, between Comstock Holding Companies, Inc.
and CP Real Estate Services, LC (formerly Comstock Development Services, LC)
10-Q
10.30
May 28, 2020
10.14+
Amended and Restated Employment Agreement dated April 27, 2020, between
Comstock Holding Companies, Inc. and Christopher Clemente
10-Q
10.2
August 14, 2020
10.15
10.16
10.17
Amended and Restated Limited Liability Company Agreement of Comstock 3101
Wilson, LC dated February 7, 2020
10-Q
10.3
August 14, 2020
Deed of Lease dated November 1, 2020, between CRS Plaza I, LC and Comstock
Holding Companies, Inc.
10-K
10.32
March 31, 2021
Business Management Agreement dated July 1, 2019 by and between CHCI Asset
Management, L.C. (formerly CDS Asset Management, L.C) and CP Real Estate
Services, LC (formerly Comstock Development Services, LC)
10-K
10.22
March 31, 2022
10.18
Operating Agreement of Comstock 44 Maryland, L C dated October 20, 2021.
10-K
10.30
March 31, 2022
10.19+
Consultant Agreement dated November 3, 2021, by and between Comstock Holding
Companies, Inc. and Ivy Zelman.
10-K
10.31
March 31, 2022
10.20
10.21
10.22
10.23
10.24
10.25*
10.26*
14.1
21.1*
23.1*
31.1*
Deed of Lease dated January 1, 2022, by and between Comstock Reston Station
Holdings, LC and ParkX Management, LC
10-Q
10.1
May 16, 2022
Limited Liability Company Operating Agreement of Comstock 33 Monroe Holdings,
LC dated March 21, 2022
10-Q
10.2
May 16, 2022
Asset Purchase Agreement dated March 31, 2022, among Comstock Holding
Companies, Inc., Comstock Environmental Services, LLC and August Mack
Environmental, Inc.
10-Q
10.3
May 16, 2022
Master Asset Management Agreement between Comstock Partners, LC and CHCI
Asset Management, LC, dated June 13, 2022
10-Q
10.1
August 15, 2022
Share Exchange and Purchase Agreement between Comstock Holding Companies, Inc.
and CP Real Estate Services, L.C., dated June 13, 2022
10-Q
10.2
August 15, 2022
Purchase and Sale Agreement among Comstock Holding Companies, Inc. and
Comstock 41 Maryland, LLC, dated August 31, 2023
Success Fee Agreement among Comstock 41 Maryland, LLC, CHCI Asset
Management, LC, and Comstock 44 Maryland, LC, dated November 10, 2023
Code of Ethics
List of subsidiaries
Consent of Grant Thornton, LLP
Certification of Chief Executive Officer pursuant to Section 302 of Sarbanes-Oxley Act
of 2002
10-K
14.1
March 31, 2005
21
Table of Contents
31.2*
32.1*
Certification of Chief Financial Officer pursuant to Section 302 of Sarbanes-Oxley Act
of 2002
Certification of Chief Executive Officer and Chief Financial Officer pursuant to
Section 906 of Sarbanes-Oxley Act of 2002
97*
Executive Compensation Recoupment Policy
101.INS*
101.SCH*
101.CAL*
101.DEF*
101.LAB*
101.PRE*
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.
Inline XBRL Taxonomy Extension Schema Document
Inline XBRL Taxonomy Extension Calculation Linkbase Document
Inline XBRL Taxonomy Extension Definition Linkbase Document
Inline XBRL Taxonomy Extension Label Linkbase Document
Inline XBRL Taxonomy Extension Presentation Linkbase Document
104*
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit
101)
* Filed herewith
+ Management contracts, compensatory plans, or arrangements
Item 16. 10-K Summary
None.
22
Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: March 21, 2024
COMSTOCK HOLDING COMPANIES, INC.
By:
/s/ CHRISTOPHER CLEMENTE
Christopher Clemente
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the date indicated.
SIGNATURE
TITLE
DATE
/s/ CHRISTOPHER CLEMENTE
Christopher Clemente
Chairman of the Board of Directors and
Chief Executive Officer (Principal Executive Officer)
March 21, 2024
/s/ CHRISTOPHER GUTHRIE
Christopher Guthrie
Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)
March 21, 2024
/s/ DAVID M. GUERNSEY
David M. Guernsey
/s/ THOMAS J. HOLLY
Thomas J. Holly
/s/ JAMES A. MACCUTCHEON
James A. MacCutcheon
/s/ ROBERT P. PINCUS
Robert P. Pincus
/s/ SOCRATES VERSES
Socrates Verses
/s/ IVY ZELMAN
Ivy Zelman
March 21, 2024
March 21, 2024
March 21, 2024
March 21, 2024
March 21, 2024
March 21, 2024
Director
Director
Director
Director
Director
Director
23