UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): February 3, 2006 (January 30, 2006)
COMSTOCK HOMEBUILDING COMPANIES, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE |
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1-32375 |
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20-1164345 |
(State or
Other |
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(Commission File Number) |
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(IRS
Employer |
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11465 SUNSET HILLS ROAD, 5TH FLOOR |
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RESTON, VIRGINIA 20910 |
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(Address of principal executive offices) (Zip Code) |
Registrants Telephone Number, Including Area Code: (703) 883-1700
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a- 12 under the Exchange Act (17 CFR 240.14a- 12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 1.01. Entry into a Material Definitive Agreement.
On January 31, 2006 (the Closing Date), Comstock Carter Lake, L.C., a Virginia limited liability company (the Subsidiary), a wholly-owned subsidiary of Comstock Homebuilding Companies, Inc. (the Company) entered into a Loan Agreement (the Loan Agreement), with Bank of America, N.A. (the Lender). Pursuant to the Loan Agreement, Lender loaned $26 million to Subsidiary to provide a major portion of the financing needed to acquire a condominium conversion project in Reston, Fairfax County, Virginia. The Company is a guarantor of Subsidiarys obligations under the Loan Agreement pursuant to a Guaranty Agreement that the Company executed in favor of the Lender on the Closing Date (the Guaranty). The material terms of the Loan Agreement and the Guaranty are provided in Item 2.03 below. The disclosure provided in Items 2.01 and 2.03 of this Form 8-K is hereby incorporated by reference into this Item 1.01.
Item 2.01. Completion of Acquisition or Disposition of Assets.
The property that will be converted into a condominium was acquired pursuant to the Agreement of Purchase and Sale, dated June 23, 2005 (as amended, the Purchase Agreement), by and between Subsidiary and ER Carter, L.L.C., a Delaware limited liability company. The Purchase Agreement provides for the acquisition by Subsidiary of the 259-unit property to be converted into a 258-unit condominium or condominiums, for a purchase price of approximately $36.2 million. Subsidiarys entry into the Purchase Agreement was previously disclosed in the Companys Current Report on Form 8-K filed with the Securities and Exchange Commission on September 9, 2005.
Item 2.02. Results of Operations and Financial Conditions.
On January 30, 2006, the Company issued a press release announcing preliminary results for the three months and twelve months, respectively, ended December 31, 2005, including new orders, new order revenue, settlements and backlog information. A copy of the press release is furnished herewith as Exhibit 99.1 and this exhibit is incorporated by reference in its entirety into this Item 2.02.
The information contained in this Item 2.02 and in the accompanying exhibit shall not be deemed filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended (the Exchange Act), or incorporated by reference in any filing under the Exchange Act or the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.
Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
As provided in Item 1.01, on the Closing Date, Subsidiary entered into the Loan Agreement and the Company entered into the Guaranty. Pursuant to the Guaranty, the Company has unconditionally and irrevocably guaranteed the payment and performance obligations of Subsidiary under the Loan Agreement, including environmental issues.
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The term of the loan is for six months, beginning as of the Closing Date. The Loan Agreement requires Subsidiary to furnish evidence of Subsidiarys minimum equity investment in the conversion project in the amount of $10.25 million. The Guaranty requires the Company to maintain certain tangible net worth and also to maintain a certain leverage ratio (liabilities to net worth) at all times during the term of the loan.
The Loan Agreement contains customary covenants by Subsidiary for transactions of this type, including covenants regarding inspections by Lender, mechanics liens, real estate taxes, compliance with laws, transfer and changes in organization, financial reports and adequate insurance. The Loan Agreement contains customary events of default, including for non-payment, breaches of contract, false or a materially misleading representation or warranty, insolvency or dissolution of Subsidiary or the Company, destruction of the property, material adverse change or cross-defaults in other loans with Lender. Upon the occurrence of an event of default, the outstanding obligations under the Loan Agreement may be accelerated and become due and payable immediately.
The Lender has in the past provided the Company and its subsidiaries with other loans to finance similar projects.
The disclosure provided in Items 1.01 and 2.01 of this Form 8-K is hereby incorporated by reference into this Item 2.03.
Item 9.01. Financial Statements and Exhibits.
(c) Exhibits.
10.1 Agreement of Purchase and Sale, dated June 23, 2005, by and between Comstock Carter Lake, L.C. and E.R. Carter, L.L.C. (incorporated by reference to an exhibit to the Registrants Quarterly Report on Form 10-Q for the quarter ended September 30, 2005).
99.1 Press Release by Comstock Homebuilding Companies, Inc., dated January 30, 2006.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: February 3, 2006
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COMSTOCK HOMEBUILDING COMPANIES, INC. |
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By: |
/s/ Jubal R. Thompson |
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Jubal R. Thompson |
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General Counsel and Secretary |
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EXHIBIT INDEX
Exhibit No. |
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Description |
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10.1 |
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Agreement of Purchase and Sale, dated June 23, 2005, by and between Comstock Carter Lake, L.C. and E.R. Carter, L.L.C. (incorporated by reference to an exhibit to the Registrants Quarterly Report on Form 10-Q for the quarter ended September 30, 2005). |
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99.1 |
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Press Release by Comstock Homebuilding Companies, Inc., dated January 30, 2006. |
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Exhibit 99.1
Comstock Homebuilding Companies, Inc. Reports 129% Growth In Settlements for 2005
Company Reports Increases in New Orders and Year Ending Backlog
RESTON, Va., Jan. 30 / Comstock Homebuilding Companies, Inc. (Nasdaq: CHCI), today announced preliminary new order and settlement results for both the three months and twelve months ended December 31, 2005. On a year-to-date basis as of December 31, 2005 the Company posted results as follows:
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For the twelve months ended December 31, |
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2004 |
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2005 |
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%Change |
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(number in 000s except units) |
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Total new orders |
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652 |
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739 |
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13.3 |
% |
Total new order revenue |
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240,349 |
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267,888 |
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11.5 |
% |
Average new order revenue |
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368.6 |
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362.5 |
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-1.7 |
% |
Net new orders |
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608 |
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630 |
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3.6 |
% |
Net new order revenue |
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224,200 |
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229,924 |
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2.6 |
% |
Average net new order price |
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368.8 |
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365.0 |
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-1.0 |
% |
Settlements |
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263 |
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603 |
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129.3 |
% |
Backlog (1) |
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174,600 |
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190,047 |
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8.8 |
% |
Backlog units (1) |
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453 |
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474 |
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4.6 |
% |
Average backlog revenue |
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385.4 |
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400.9 |
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4.0 |
% |
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For the three months ended December 31, |
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2004 |
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2005 |
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%Change |
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(number in 000s except unit data) |
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Total new orders |
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128 |
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154 |
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20.3 |
% |
Total new order revenue |
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56,949 |
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46,560 |
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-18.2 |
% |
Average new order revenue |
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444.9 |
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302.3 |
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-32.0 |
% |
Net new orders |
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118 |
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110 |
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-6.8 |
% |
Net new order revenue |
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53,556 |
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32,560 |
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-39.2 |
% |
Average net new order price |
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453.9 |
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296.0 |
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-34.8 |
% |
Settlements |
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55 |
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200 |
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263.6 |
% |
(1) 2004 Backlog includes Raleigh, NC
As demonstrated by the significant growth we experienced in 2005 there is tremendous opportunity in our core markets, said Christopher Clemente, Chairman and CEO. Nonetheless, the rate of home price appreciation in the Washington, DC market during the past few years led to pricing resistance which negatively impacted new order rates in the region in the fourth quarter. Additionally, in many parts of the nation, cancellations by investors negatively impacted settlement activity during the period. We believe the strong demand caused by the tremendous job growth in the Washington, DC area, the absence of investors from the market, and a slower, more sustainable rate of appreciation, will lead to better balance
in the market. To address these changing market conditions we are focusing on geographic expansion into additional strong growth markets throughout the mid-Atlantic and Southeast as demonstrated by our first acquisition; Parker Chandler Homes, with operations in Georgia and the Carolinas. We believe that our strong backlog of sold units, our land position in multiple markets, and our overall focus on moderately priced products provides a solid foundation for continued healthy year over year growth in 2006 and beyond.
The Company issued updated earnings estimates for the three months ended December 31, 2005 of $0.65 diluted. As a result, the company updated its fiscal 2005 earnings estimate to $2.12 diluted, ahead of its original expectations for 2005. This current estimate includes an impairment charge on select inventory in the Companys Raleigh operation.
The company expects to report full operating results for the twelve months ended December 31, 2005 and revise its full year 2006 guidance in late February 2006. When available, the details of the release date and corresponding investor conference call will be available on the Companys website under the Investor Relations section.
About Comstock Homebuilding Companies, Inc. Comstock is a production homebuilder that develops, builds, and markets single-family homes, townhouses, mid-rise condominiums, high-rise condominiums, mixed-use developments and condominium conversions. The Company currently markets its products under the Comstock brand in the Washington, D.C. and Raleigh, North Carolina markets and under the Parker Chandler Homes brand in Atlanta, Georgia and parts of the Carolinas. The company targets a diverse range of buyers of moderately priced homes. For more information on Comstock, please visit http://www.comstockhomebuilding.com.
This press release includes forward-looking statements within the meaning of the federal securities laws, which involve uncertainties and risks. These include statements regarding events or developments that the Company expects or anticipates will occur in the future, such as statements about the Companys strategies to improve operating performance. Please refer to the Companys most recent prospectus and its other filings with the Securities and Exchange Commission for a complete discussion of these and other important factors that could cause results to differ materially from those projected by these forward-looking statements.