Comstock Holding Companies, Inc. (Nasdaq:CHCI) today announced it will be transitioning its business strategy and operating platform from for-sale home building to commercial development, asset management and real estate services. Shares of the company, trading in penny stock range, jumped 8.6% in after hours trading Monday.
The company announced a long-term asset management agreement entered into by a wholly owned subsidiary of CHCI and privately held entities that own multiple mixed-use developments and stabilized assets at key Metro stations on Washington DC Metro’s Silver Line, which upon completion in 2020, will connect Dulles International Airport and Loudoun County to Tysons Corner and downtown Washington, DC. The assets under management (“AUM”) covered by the initial asset management agreement will at full build-out include more than 5 million square feet of investment-grade, mixed-use assets encompassing more than 2,500 multi-family rental units, Class A and Trophy office, retail and entertainment buildings, hotels, and parking garages located adjacent to Silver Line Metro Stations; representing an estimated AUM value of $2.5 to $3.0 Billion.
Ownership of the portfolio of assets covered by the initial asset management agreement includes the company’s Chairman/CEO and largest individual shareholder, Christopher Clemente, an unidentified “prominent high-net-worth family office,” and Daito Trust Construction, Ltd., one of the largest publicly traded Japanese developers and managers of multi-family assets.
The transition of the company’s business platform represents the integration of the previously separate for-sale home building operating platform of CHCI and the commercial development operating platform of Clemente’s private company into one public company: CHCI. The combination leverages the diverse capabilities and relationships developed over more than 30 years of Comstock’s commercial and residential development operations in the Washington, DC metropolitan area.
The enhanced operating platform of CHCI will be service focused, transitioning from an on-balance sheet for-sale homebuilder into an asset manager of investment-grade commercial real estate assets and provider of real estate services operating through two real estate focused platforms.
“The shift from a for-sale home building operation to a fee-for-service asset management model positions CHCI for greater financial stability, profitability and growth,” said Clemente. “The transition will result in a substantial reduction in short-term and long-term debt; enhancing the overall financial profile of CHCI in the near term as we complete the majority of our for-sale home building projects by year-end 2018, while also positioning CHCI to benefit from tremendous growth taking place in the Dulles Corridor of Fairfax County and Loudoun County. With our initial asset management agreement in place, CHCI is positioned to expand AUM revenue through the development of multiple properties in markets experiencing high-demand for mixed-use, transit-oriented properties that have entitlements substantially in place, while pursuing additional growth in AUM and pursuing service based revenue growth through CRES. We anticipate additional announcements in the coming months that will provide shareholders with additional details regarding our new business focus as well as visibility to the long-term growth prospects of CHCI.”
