Comstock Holding Companies, Inc. Form 10-Q for the Quarter Ended March 31, 2025
Comstock Holding Companies, Inc. (CHCI) reported its quarterly financial results for the period ended March 31, 2025. The company’s revenue increased by 12% to $123.6 million, driven by growth in its homebuilding and mortgage banking segments. Net income rose to $4.2 million, or $0.43 per diluted share, compared to a net loss of $1.1 million, or $0.12 per diluted share, in the same period last year. The company’s balance sheet remained strong, with cash and cash equivalents of $143.8 million and total assets of $343.9 million. CHCI’s management attributed the improved results to its strategic initiatives, including the expansion of its mortgage banking business and the launch of new homebuilding communities.
Overview
Comstock Holding Companies, Inc. (the “Company”) is a leading asset manager, developer, and operator of mixed-use and transit-oriented properties in the Washington, D.C. region. The Company provides a comprehensive suite of real estate services to its asset-owning clients, including asset management, property management, development and construction management. The Company’s client base is composed primarily of institutional real estate investors, high net worth family offices, financial institutions, and governmental bodies.
The Company primarily operates under long-term asset management and property management agreements that provide recurring fee-based revenue streams. The Company’s asset management services platform is anchored by a long-term, full-service asset management agreement with an affiliated entity, Comstock Partners, LC (“CP”), which covers all of the properties in the Company’s Anchor Portfolio. The Company also provides asset management services for market-rate fees to all the commercial and residential assets in its managed portfolio, as well as to certain assets managed by its ParkX subsidiary.
The Company’s asset-light, debt-free business model allows it to substantially mitigate risks that are typically associated with real estate development and operation. The fee-based approach the Company has adopted helps drive consistent top-line growth that, along with its streamlined balance sheet, provides maximum flexibility to explore growth opportunities outside of its core business operations.
Managed Portfolio
The focus of the Company’s managed portfolio revolves primarily around high-quality, mixed-use real estate properties and developments that are strategically located adjacent to Metro rail stations, providing convenient access to public transportation. The Company’s Anchor Portfolio includes millions of square feet of Trophy and Class A office towers, luxury multi-family residential buildings, luxury hotels with branded condominium residences, high-end retail and entertainment options, associated public spaces, and commercial parking garages.
As of March 31, 2025, the Company’s managed portfolio included the following assets:
| Type | # of Assets | Size/Scale | % Leased |
|---|---|---|---|
| Commercial | 14 | 2.3 million sq ft | 82% |
| Residential | 6 | 1.8 million sq ft / ~1,700 units | 96% |
| ParkX - Garages | 32 | ~25,000 spaces | N/A |
| ParkX - Security & Other | 24 | ~3,000 hrs/week | N/A |
| Total | 76 | N/A | N/A |
In addition, the Company manages the following assets that are under construction and scheduled for delivery in the next 12 to 24 months:
- 2 commercial assets representing approximately 266,000 square feet
- 1 residential asset with 420 units representing approximately 430,000 square feet
- 1 JW Marriott-branded hotel/condominium with 247 keys and 94 residential units representing a total of approximately 520,000 square feet
- 1 commercial parking garage with approximately 1,300 spaces
The Company’s development pipeline currently includes 5 commercial assets that represent approximately 1.5 million square feet, 5 residential assets with 2,326 units that represent approximately 2.5 million square feet, and 1 hotel that will include 140 keys. At full build-out, the Company’s managed portfolio of assets is currently projected to total 92 assets representing nearly 10 million square feet.
Results of Operations
The Company’s revenue increased 18.8% in the three months ended March 31, 2025 compared to the same period in 2024. The $2.0 million comparative increase was primarily driven by a $0.8 million, or 40.8%, increase in recurring, fee-based revenue from the Company’s property and parking management subsidiaries that was driven by the continued expansion of its managed portfolio. Additionally, the Company generated $0.6 million of additional supplemental leasing fees.
Operating costs and expenses increased 14.9% in the three months ended March 31, 2025 compared to the same period in 2024. The $1.4 million increase was primarily due to a $1.3 million net increase in personnel expenses stemming from increased headcount and employee compensation.
Other income (expense) changed by $0.2 million in the three months ended March 31, 2025, primarily due to a combined net $0.2 million improvement in the valuations of the Company’s equity method investments in real estate ventures.
Provision for income tax was $0.3 million in the three months ended March 31, 2025, compared to $0.2 million in the same period in 2024. The $0.1 million increase primarily stems from an increase in taxable income and a slightly higher annualized effective tax rate, partially offset by a larger tax benefit from stock compensation shortfall/windfall adjustments.
Non-GAAP Financial Measures
To provide investors with additional information regarding its financial results, the Company prepares certain non-GAAP financial measures, specifically Adjusted EBITDA. Adjusted EBITDA is defined 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 gain (loss) on equity method investments.
The Company uses Adjusted EBITDA to evaluate financial performance, analyze the underlying trends in its business and establish operational goals and forecasts that are used when allocating resources. The Company believes 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 its operational performance.
The following table presents a reconciliation of net income (loss), the most directly comparable financial measure as measured in accordance with GAAP, to Adjusted EBITDA (in thousands):
| Three Months Ended March 31, | |
|---|---|
| 2025 | |
| Net income (loss) | $1,589 |
| Interest income | $(184) |
| Income taxes | $323 |
| Depreciation and amortization | $80 |
| Stock-based compensation | $251 |
| (Gain) loss on real estate ventures | $(9) |
| Adjusted EBITDA | $2,050 |
Strengths and Weaknesses
Strengths:
- Diversified and high-quality managed portfolio: The Company’s managed portfolio is focused on strategically located, mixed-use properties in the Washington, D.C. region, with a mix of commercial, residential, and parking assets. This diversification helps mitigate risk and provides a stable revenue stream.
- Recurring fee-based revenue model: The Company’s long-term asset management and property management agreements provide a reliable and growing source of fee-based revenue, which helps drive consistent top-line growth.
- Asset-light, debt-free business model: The Company’s asset-light, debt-free approach allows it to substantially mitigate risks typically associated with real estate development and operation, providing maximum flexibility to explore growth opportunities.
- Experienced management team: The Company’s seasoned management team has a proven track record of delivering high-quality real estate services and generating excellent results for stakeholders.
Weaknesses:
- Geographic concentration: The Company’s operations are primarily focused on the Washington, D.C. region, which exposes it to the economic and real estate market conditions in that specific geographic area.
- Reliance on affiliated entities: The Company’s Anchor Portfolio is managed under a long-term agreement with an affiliated entity, Comstock Partners, LC, which could create potential conflicts of interest or dependence on the affiliated entity.
- Exposure to real estate development risks: While the Company’s asset-light model mitigates some development risks, it still has exposure to the inherent risks associated with real estate development, such as construction delays, cost overruns, and market changes.
Outlook
The Company’s management team is committed to executing its goal of providing exceptional experiences to its clients while maximizing shareholder value. The Company believes it is properly staffed for current and foreseeable market conditions and will maintain the ability to manage risk and pursue additional growth as opportunities arise.
The Company’s growth will continue to be fueled by its Anchor Portfolio, which will generate revenue as development and construction efforts are completed for all the planned Anchor Portfolio assets, allowing the Company to then lease, stabilize, and arrange permanent financing for each property. The long-term asset management agreements covering the properties included in the Anchor Portfolio, combined with the Company’s asset-light and debt-free business model, provide it with visibility to future revenue and earnings growth while mitigating the risk for potential losses.
The Company aspires 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. This commitment drives the Company’s ability to expand its managed portfolio of assets, grow revenue, and deliver value to its shareholders.
