Comstock Holding Companies, Inc. (CHCI) is an Asset-Light Compounder
There should be explosive growth in earnings over the next few years
Below is my original writeup from April 2024 when I discovered this company followed by an update after attending their annual meeting in June 2025.
The synopsis is that this debt-free company has 85% of revenue coming from recurring sources and there is a significant amount coming online in the next few years as some key properties are constructed and delivered.
Meanwhile, shares are trading a lot lower than what is typical for a company with a lot of very tangible growth coming right around the corner.
Original writeup from April 2024
Comstock Holding Companies (CHCI) is a very profitable real estate asset management company with zero debt on their balance sheet. My belief is that their ~14 year run as a very unprofitable homebuilder with absurd debt levels prior to pivoting to a completely different business model in 2018 has caused the market to overlook them.
They are also a sub-$100mm cap so this likely has something to do with it as well. It is possible the market could also be lumping them in with other debt-heavy real estate companies and have written them off due to that sector being out of favor the past few years with high interest rates.
This is a company generating very high returns on equity and assets (north of 20% over past 2 years), that has grown earnings from 2019-2023 an average of almost 56% YOY, and they seem to have much more upside on the horizon. There are also some overlooked assets. It seems to me to be wildly mispriced, unless there is something I’m missing here.
Company history
Comstock was founded in 1985 and was primarily a homebuilder until about 6 years ago. They went public in late-2004 and their price peaked at about $200/share in 2005 during the run up to the real estate market collapsing when anyone with a pulse could make money in real estate. Their pre-tax earnings were $8mm, $19.2mm and $44mm in 2003, 2004, and 2005, respectively.
From here, they proceeded to lose a cumulative $226.38mm from 2006-2012 as real estate values crashed. They held over 5,000 homes at the peak which all cratered in value. I was about to have a panic attack just from reading all these annual reports. It was ugly for them and all the lenders involved. They were primarily a builder in the greater Washington, DC area, but made a few costly errors before the crash where they acquired other builders in areas such as Atlanta, GA and Charlotte, NC. Most of the money lost were from builds in these areas that they clearly didn’t understand as well as the DC market.
In 2009 they decide to unwind all operations except for the DC area, and just focus on their backyard moving forward. 2013 seems to be a turnaround year and they made about $3mm, but then from 2014-2018 they lose a cumulative $21.88mm and decide that building homes is not the way to go.
In early 2018 they decide to pivot away from building homes to asset management, commercial development, and real estate services. Before I get into more detail on what they will focus on moving forward, some backstory is needed on their founder, Chris Clemente and another major Comstock investor, Dwight Schar.
Their founder and the convergence of 2 platforms
Chris founded the company in 1985 and is married to Tracy Schar, daughter of Dwight Schar, who founded NVR (publicly-traded national home builder). From what I have gathered, they (Chris and Dwight) own and run a “family office” type of investment company called Comstock Partners, LC., which I will refer to as “Partners” moving forward, while referring to CHCI as “Comstock.” It appears Dwight and Chris are the only owners of Partners and own it 50/50.
Partners is the owner of 3 major developments that Comstock is involved with (among some other smaller ones). The names are Reston Station, Loudoun Station and Herndon Station. These are properties along the Dulles Tech Corridor in Northern Virginia and are referred to in Comstock’s annual reports as the Anchor Portfolio. The Dulles Corridor is a transit-oriented, high-growth area near Dulles Airport. I live 10 minutes from here and actually used to work as a loan officer in 2018 in office space within the Loudoun Station development. Here is a picture of how they’ve positioned these 3 developments along the Dulles Corridor near metro stops:
These are beautiful, institutional class-A multi-phase mixed-use developments and all have metro stops at their locations, as well as Dulles Airport (IAD) being within 20 mins of all 3 developments. As of the end of Q2 2024 they have 2.3mm sf of commercial space delivered (office and retail) that is 82% leased, and 1.8mm sf multifamily residential (~1,700 units) – 97% leased. Of this Anchor Portfolio, it is slated to be almost 10mm sf of space once fully built-out.
In recent reports, Comstock talks about their focus on the flight-to-quality and believes that the class-A mixed-use developments that are positioned in highly-trafficked, high-growth areas with modern amenities will be much better insulated throughout the years.
In a podcast that Chris was on in 2023, he mentioned that their multifamily annual rent increases have been 12% for the past few years. And while the office sector in general has taken a beating from a macro standpoint with the work-from-home movement, he mentioned that the office buildings positioned in larger mixed-use suburban developments tend to do much better and haven’t seen as much decrease in demand as opposed to the core stand-alone properties closer to downtown areas. Anecdotally, he mentioned in this podcast that they just signed a 35,000 sf office tenant that went remote during Covid and was trying to get their employees to come back to their DC office, but the employees didn’t want to go to the city due to crime and other factors. However, a suburban office with retail and a community atmosphere was perfectly fine for them so they moved here.
A similar property to the Reston Station development is called Reston Town Center. This is a development started in the 1990’s and has been developed primarily by Boston Properties (BXP). BXP is an owner-developer that owns a lot of real estate in the Reston Town Center development, to this day. I went through their 2023 10-K and their office properties here are performing great. I didn’t see a single building under 88% occupancy (a few were 100%) and these are all premier tenants (Google, Microsoft, salesforce, etc) that lease this kind of trophy office space in great areas. They also don’t have a ton of expiring leases in the near-term. Lease expirations are very evenly spread out which leads me to believe that these trophy office buildings in popular mixed-use areas are somewhat insulated from the standalone office product that has taken a beating post-Covid.
I say all this because one of my first concerns was that Partners owns a lot of office space in these developments, however it seems to performing quite well and occupancy is climbing in reading their recent quarterly reports. I look at tons of REIT’s to invest in and if I could sum up my takeaway in one sentence about the office sector, it would be that there definitely is a flight to quality and a huge gap between the trophy/class-A assets that are situated near communities/retail, and the older class-B/C assets.
Comstock Partners, L.C. (Partners) was created in 1999 by Dwight and Chris to focus on commercial development, and was run completely separate from Comstock (which was a home builder at this time). As mentioned above, in early-2018 Comstock pivoted away from home building and this is when Comstock and Partners become very intertwined by virtue of an agreement they signed. Partners and Comstock signed their first asset management agreements (AMA) in early 2018. This is when Comstock started winding down the home building business and focused solely on commercial asset management.
This was an annual cost-plus fee agreement where Partners would pay Comstock:
1. Employment costs related to services provided to Partners’ private portfolio.
2. The costs of Comstock remaining a public company.
3. A $1,000,000 fee.
In plain-speak, Partners would pay all of Comstock’s bills, and then give them a $1mm fee on top of this per year.
At the same time this new arrangement was effective, they began cleaning up and deleveraging Comstock’s messy balance sheet that was this way because of the unprofitable home building business they were unwinding. A lot of money was loaned to the company by Chris Clemente to continue operating as well. In the 2016 annual report he had a combined $15.8mm in outstanding notes to Comstock. When they pivoted and in the following years, they essentially pay off these notes by issuing shares to Chris. There is a lot of dilution during the years 2018-2023 as they unwind the home building business and deleverage, however it seems to make sense in order to get to the type of asset/balance sheet-light company they are trying to become.
In early 2019 they amend the 1st iteration of the AMA I detailed above to have Partners pay Comstock the greater of the Market Rate Fee:
1. 2.5% asset management fee based on gross revenue collected
2. 4% construction management fee based on construction costs
3. 1% property management fee based on gross revenue collected
4. 0.5% acquisition fee based on purchase price
5. 0.5% disposition fee based on sale price
Or the Cost-Plus Fee I laid out above. Whichever is the larger amount is what Comstock receives from 2019 and this were to expire in 2027. I won’t get into detail on the ways that this AMA can be cancelled as it ends up being amended again in 2022. The 2022 amended AMA is the greater of the Market Rate Fee:
1. 2.5% asset management fee based on gross revenue
2. 15% entitlement fee based on total re-zoning costs
3. 5% development (construction) fee based on construction costs
4. 1% property management fee based on gross revenue
5. 1% acquisition fee based on first $50mm purchase price; 0.5% above $50mm
6. 1% disposition fee based on first $50mm sale price; 0.5% above $50mm
Or the Cost-Plus Fee laid out above in the first AMA. In addition to either of these fees, there are incentive fees on top of this. There is one major inventive fee tied to revenue that is a little complex to explain, so I’ll refer you to the 2023 10-K or the 2022 AMA, which you can find in the exhibits if you want more info there. The other 3 incentives are straightforward:
1. Investment origination fee based on 1% of raised capital. Ie. if they raise $50mm equity the fee would be $500k.
2. Leasing fees equal to $1/sf for new leases and $0.50/sf for renewals.
3. 1% loan origination fee on debt that is placed on behalf of Partners.
Here is the verbiage regarding the terms of the 2022 AMA from the annual report (CP stands for Comstock Partners, and is what I have been referring to throughout as “Partners.”)
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.
Cancelling this agreement is very costly as you can see. Also, Chris Clemente and Dwight Schar (Partners) own slightly over 30% of Comstock each, a little over 60% together. So, I don’t see much incentive for them to cancel these contracts. And based on how the 2nd and 3rd iteration of the original AMA kept expanding the fees collected by Comstock, I would assume it is more likely than not that they are happy with the arrangement.
I’ll get into some more value I think is being overlooked below, but this 2022 AMA in place is the most valuable asset in my opinion and is being completely overlooked by the market. Comstock is debt-free, already earning returns on tangible assets north of 20% LTM (last 24 months for that matter), and has massive upside based on the future developments of these 3 Anchor Portfolio properties. The 2022 AMA runs to 1/1/35 and there is another 6mm sf of space yet to be developed where there would be fees aplenty for Comstock to collect in the years to come.
Dwight Schar and Chris Clemente are crucial here as they own a majority of Comstock, and they own the underlying assets that the 2022 AMA is tied to. What gives me comfort is that both have been through trouble in the real estate space. NVR (Dwight’s company) filed for Chapter 11 bankruptcy in 1992 (likely from the fallout of the S&L debacle) and Chris went through it in the late 2000’s and throughout the 2010’s as a home builder losing tons of money, dealing with many foreclosures, and debt restructuring.
NVR emerged from bankruptcy in 1993 and Dwight Schar became an absolute master in reducing exposure and allocating capital to increase shareholder value. I won’t get too deep into things, but NVR began using option contracts on land that allowed them to outlay about 10% of what typical home builders (land speculators) were laying out. They reduced the amount of upside they could capture in boomtimes, but during recessions they were cash heavy and able to expand tremendously. During the 2008 collapse when many builders, including Comstock, were sucking wind, they did nothing but grow grow grow and bought back (I believe) ~60% of outstanding shares between 2009-2012. Here is a great article on how NVR (from Dwight’s leadership) positioned themselves to compound earnings like few other builders have been able to do and create tons of value.
Dwight’s capital allocation skills are clearly among the best, and he owning over 30% of Comstock and 50% of Partners is a huge asset in my opinion.
Other value drivers/signals
Equity positions in 4 properties – Comstock invested about $7.4mm in 4 properties from 2020-2023 and has AMA’s in place on all of them. These are completely separate properties with different AMA’s from the Anchor Portfolio 2022 AMA laid out above.
The Hartford – This is a ~200,000 sf office building in Arlington, VA (near where Amazon HQ2 is located) that Partners and Comstock bought in late 2019 and had a west-coast company (DivcoWest) purchase majority interest from them. Comstock invested $1.2mm for 2.5% ownership and still manages the property collecting fees on top of their economic interest. The total purchase price was $128.75mm and from one of their 10-K’s I saw they had an $87mm loan on it from several years ago. This would put them around 64-68% LTV around the time of purchase, which is pretty conservative to me.
BLVD 44 – This is a 263-unit apartment building with 16,000 sf of ground level retail. They invested $2mm for 5% ownership and manage this one. $110.75mm purchase price and I’m estimating around $75-80mm debt based on deriving a value of the equity based on what they invested. This is 66-72% LTV at purchase which also seems conservative.
BLVD Ansel – This is a 250-unit apartment building with 20,000 sf of retail + 611 parking spaces. They invested $2.7mm for 5% ownership and manage it. $129mm purchase price and estimated $80-85mm in debt which puts them at 61-66% LTV.
Comstock 41 – This is an ~18,000 sf parcel of land entitled for apartments and retail. They are exploring rezoning and adding units and parking as it is adjacent to both BLVD 44 and Ansel. This is Rockville, MD. They invested $1.564mm cash for 100% ownership with no debt.
It is hard to peg market values here as I have no financials, rent rolls, unit mixes, debt info, etc., but these are pure equity investments with no debt used by Comstock --- the debt is tied to Partners or in the case of The Hartford, it is tied to Divco West. With a pretty good understanding of multifamily, which makes up the bulk here, and having lived in the DMV area my whole life and seeing the absurd growth, I would bet that this $7.4mm was not spent in an unwise manner and at the very least should hold its value.
ParkX Segment – ParkX is one of their subsidiaries that they use to handle parking and security. This segment has been growing extremely fast and also has a ton of 3rd party clients separate from Partners. If you’ve ever been to one of their properties it is a seamless parking experience with almost no friction or headache. At the 2024 annual meeting on 6/12/24, Chris Clemente (founder/CEO) said that this is low-hanging fruit because most 3rd party parking managers are terrible. With all the parking garages in the DC area and beyond there is plenty of room to expand here. From the first 6 months of 2024 compared to the same period in 2023 they have increased revenue 66% in this segment.
Over $100mm in NOL carryforwards that begin expiring in 2027 – losing over $200mm has its perks I suppose and this is certainly an asset that eliminates federal taxes for a while, allowing them to further compound earnings.
Directors and officers own 39.5% and this doesn’t include Dwight Schar, who adds another 30.5% to this – very strong alignment of interest between shareholders and insiders.
They are committed to in-person work and always have been – even throughout Covid they stayed in person for the most part and I see a ton of value in this kind of culture where there is in-person collaboration and everyone is mission-focused together.
Real estate doing well during inflationary periods - good real estate tends to do well during inflationary periods as the debt is borrowed in today’s dollars, but paid back in tomorrow’s dollars, and rents tend to rise with other costs that go up as well. If you look at the trailing 5 year figures below, you’ll see Comstock did well during some high-inflation years. As rents and other related costs rise, so do the percentage-based fees that Comstock generates which is a good hedge against inflation.
What I dislike
1. In recent years it seems like stock options have been given out like crazy. This might have been needed to retain talent during the Covid years, and hopefully this stops or at least slows, but I am in the Warren Buffett camp about stock options and don’t like seeing them tossed around.
2. About midway through 2022 it appears they have officially retired all outstanding debt related to home building and they primarily did this by virtue of Chris Clemente receiving shares in exchange for the notes he held. During the years they were cleaning up the balance sheet from 2018-2022 dilution was expected. But from 2022-2023 based on the annual reports there is still a lot of dilution without any debt retired. I reached out to their investor relations person to try to get an answer here but haven’t heard back yet.
3. No 3rd party development clients. This isn’t as much a concern as the 2022 AMA still is where the vast amount of value would come from, regardless. But they have positioned themselves to work with other real estate developers and lend their 30+ years of experience and relationships built in the DMV area.
Why I believe the stock is trading very cheap
If I look at this from a liquidation standpoint, backing out intangibles and the ROU lease asset and liability, they have:
$24mm in cash/equivalents/receivables
$7.4mm in cash invested in real estate (this is just book value – not market value)
$(6.4mm) short term liabilities (accrued personnel expenses mainly)
$25mm net worth based on book value liquidation and market cap is $65mm. This essentially values the “goodwill” of the 2022 AMA at $40mm, which is significantly more valuable than that (in my opinion) based on the future development/management fees to be earned and the strong alignment between Partners and Comstock.
Looking at it from an earnings perspective, their 2023 earnings before taxes and an unrealized equity “loss” from the real estate investments made was $9,339,000 and their net tangible assets were $39,243,000. This is a 23.8% return on assets.
Based on the fully diluted 10,108,000 shares outstanding, that is $0.92 EPS and a P/E ratio of 7.29 as of 4/16 when the stock was trading for $6.74 (without excluding net cash). Here are the trailing 5 years relevant figures:
Here are some notes on how I calculated earnings:
2023: Adds back taxes and equity loss from real estate investments (the ones listed above) only as the equity loss is not a realized loss. Depreciation/amortization, stock-based compensation are included, and the $96k in interest income they received is excluded.
2022: Removes equity gain as this is unrealized and adds back taxes only.
2021: Removes valuation allowance for taxes only and any equity loss.
2020: Adds back taxes only and removes $112k of "other income" as this may be related to their home building operations they were winding down.
2019: Taxes were only $2k (State, not Federal) this year so this is true earnings net of interest expense and has "other" income removed.
Their P/E of 7.29 (without backing out net-cash) is low by almost any standard, but with the 2022 AMA in place and heavy alignment of interests with insiders/major shareholders, I think the odds are heavily in Comstock’s favor that the market eventually realizes this is a valuable company with significant upside on the horizon.
Another “worst-case” I thought of is what if Partners sells their Anchor Portfolio, or one of the assets within it? This Anchor Portfolio delivers over 90% of their revenue. First is that Comstock is entitled to receive a 1% dispo fee up to $50mm and 0.5% dispo fee for anything above $50mm on the sale of any of these properties. The Anchor Portfolio is stated to be worth $3 billion once built out. Let’s assume they sell for only 2/3 of that (Chris and Dwight are savvy and likely would never do this). That would yield a $10,250,000 disposition fee to Comstock, and there is a chance that the new owner leaves them in place as the 2022 AMA is assignable. But even if their services aren’t retained, this fee, along with the fee to cancel the 2022 AMA is very high and gets us closer to a liquidation value around what the market cap is.
I would be very surprised if they sold these Anchor Portfolio assets though, because a lot of the debt on the various development phases is long-term agency (Fannie/Freddie) with low rates. And if they did end up selling, it would likely be when everything is built out or close to it, which is years down the road. In a lot of their filings for insider transactions and where it shows D/O’s and all 5%+ beneficial owners, it is clear that Chris (and likely Dwight as well) hold a lot of their ownership through various trusts where their children are beneficiaries. I’ve thought on this a lot and it seems highly improbable that they (Partners) would sell these Anchor Portfolio assets any time soon prior to them being fully developed. This seems to be a long-term vision of theirs that has many more years until it is fully brought to fruition.
Bottom line
This is a tale of 2 companies with their 2018 pivot away from home building and into a balance sheet-light, asset management company, I believe there is a lot of growth potential that the market will eventually understand and give them credit for.
They also have no major 3rd party asset management clients, so the addition of a few of these would be icing on the cake. They have been building out this new business for a few years at this point and are perfectly positioned to offer their valuable services to institutional developers wanting to get involved in the DC markets. With the fed likely cutting rates sometime in the near future, we will likely see a follow-the-leader resumption of real estate activity among the institutional players who’ve been on the sidelines in recent years.
Earnings have been growing fast as well, yet the stock price is not reflective of this at all, in my opinion. My belief is simply that over time the market will value this company fairly and both the earnings and earnings multiple will continue to increase, leading to a possible multibagger.
Update 6/12/25
I’ve owned this about 14 months now and have gotten to know the company better and think about the company a good bit. Essentially, if Partners (Dwight and Chris) decides to cancel the AMA, this company is dead. Without the income from Partners, there is no business here. I think that risk is heavily priced in, otherwise I see no reason for this to not trade at a multiple of its current price, given the amount of recurring fee-based revenue coming on the horizon.
At $10, this implies a 13.81% earnings yield or 7.24 EV/EBIT. A company of this nature with the earnings potential on the horizon should not trade this cheaply. (the price has risen slightly since I wrote this a couple months ago)
Even if you hypothetically assumed there were no future developments, the going-in price here is still incredibly cheap. Their recurring revenue (which was 85% of all revenues in 2024) will rise with increasing rents and be resistant to inflation eating away at real earnings power because they should ride the inflation wave when rental costs go up. If I had the funds and were offered to buy this company (assuming no future developments to manage and generate fees from) for the implied enterprise value of about $75M, it would be the quickest decision I've ever said yes to in my life. Deciding what to watch on Netflix would be an infinitely harder decision than this one.
However, there ARE future developments that will generate even more juicy recurring fees over time, making this a head scratcher as to why it is so cheap. On their 10-Q ending 3/31/25 they mention the following assets scheduled for delivery in the next 12-24 months:
· 2 commercial assets representing 266,000 sf (mainly trophy office with ground level retail)
· 1 residential asset with 420 units representing 430,000 sf (multifamily)
· 1 JW Marriott-branded hotel/condo with 247 keys and 94 residential units representing 520,000 sf
· 1 commercial parking garage with 1,300 spaces
I went to Comstock’s annual meeting yesterday on 6/11 and walked these with a couple executives. I would say delivery is more likely within 12 months, 24 months seems conservative. Either way, a lot is coming online in the next couple years.
Comstock currently manages 4.1 million sf of commercial and residential space that is operational. They will add 1.21 million sf with the deliveries of the properties mentioned above. That is more than a 29% increase in square footage. If we just assume that’ll equate to a 29% increase in top line revenue as well, and we assume they’ll maintain their ~20% operating margins, that is about 29% more operating income as well. This gives us $13.25M in operating income if we use 2024 figures. Arriving here gives us an earnings yield of 17.78% or an EV/EBIT ratio of 5.62. That low of a multiple is usually reserved for companies with shaky future prospects or no growth.
Now, a couple things are likely. The first is that the revenue per sf is higher for these properties than it is for the existing portfolio. The reason being is that the assets will be newer and they’ll be able to sign new leases marked to market, whereas older ones might have more loss to lease. If this is true then revenue added as a percentage would be higher than sf added, making my previous numbers on the conservative side.
Another thing is that margins will more than likely improve a bit. If we go back to 2019, when Comstock did ~$25M in revenue, their operating margin was 8.99%. In 2024, when they did ~$51M in revenue, it was 20.05%. Because of this, their revenue doubled since 2019, but operating income went up about 4.5x. Being that they already manage assets that are spitting distance from the ones soon to be delivered, it is likely they pick up some scale efficiencies and margins improve a bit.
Beyond these near-term deliveries, they have another ~5 million sf in the development pipeline, which is more than double what they currently have operating. There is a lot of embedded room for growth here from the looks of it.
Capital redeployment with 3rd parties
With about $30M in the bank with no debt, which makes up almost 1/3 of their current market cap, a great question is what are they going to do with this growing cash pile?
This question was asked at the annual meeting and I also got to speak with Chris Clemente about this after the meaning in more detail. Essentially, this cash is earmarked for them to deploy into acquisitions/developments with 3rd party owners. An example of this is the Hartford deal.
A common setup is where an out-of-market institutional investor wanting exposure to real estate in the DMV area will put up around 90-95% of the equity needed, guarantee the debt, and Comstock will put in the balance of the equity. Comstock will participate in the economics of the deal via their investment, but will also generate fees for various roles such as construction management, asset management, property management, etc.
Since rates ran up in 2022 the majority of these kinds of buyers have been on the sidelines, but Chris spoke at the meeting about more groups expressing an interest in doing deals. This should bode well for Comstock given that they have all the “infrastructure” in place to provide valuable services to these kinds of investors, that generate recurring fee income.
What are Comstock’s existential threats?
In my view, the existential threat as of now is Partners deciding they want to do all of this “in house” and cancel the arrangement with Comstock. The problem with this is that both entities are so interconnected that it seems unlikely, if not impossible for this to occur.
Comstock prides themselves on the talent they have, and if you go to any of their developments, it is very evident that they are a group of A-players. Stock options are given out and they use this as a means of keeping talent and aligning everyone’s interests. I’ve now been to 2 annual meetings and this is not some sloppy OTC company casually operating. Excellence is shown in everything they do and it would seem crazy for them to upend all that out of nowhere. It also appears that Comstock is Chris Clemente and vice versa. He’s a force of nature as a developer and these major developments (Reston Station, Loudoun Station, etc.) are his masterpieces that he is constantly tweaking to improve. This was my observation.
For anyone that has read Zen and the Art of Motorcycle Maintenance, this comes to mind. It is hard to describe the quality and thoughtfulness that Comstock delivers into their developments, but when you walk them in person you can feel it. When you see their fully-developed vision on the scale model and how they are executing on it, you can feel it. While I’m mainly a quantitative hard asset kind of guy that would typically roll my eyes when someone says this, I truly believe that looking at their filings alone does not do them justice.
Chris talked with me after the meeting and shared how back in 2004 when they IPO’d their initial plan was to sell the homebuilding business, and transition into what they are doing now a lot earlier. Unfortunately, the GFC wrecked them and they spent the next decade-plus dealing with that. It wasn’t until 2015 that they started piecing everything together and late 2017 that they publicly began speaking about this pivot into their asset-light model they operate now.
He also answered my question during the meeting about why they don’t take this private, and then spoke to me in more detail afterwards. His answer was that having a publicly traded entity allows them to show credibility to potential partners, lenders, etc., in a much easier manner than if they were private. He also desires to get the value of the company higher than it was back in 2004 when it was around ~$500M.
Final thoughts
Comstock has been earning high returns on capital, and it doesn’t seem like that will slow down soon. It also doesn’t appear likely to me that there are any existential threats on the horizon; they own and manage premier assets in the DMV area, which will likely continue growing in population over time. With this growth from their existing assets and the addition of new ones on the horizon, my belief is that Comstock offers a great opportunity to compound in value over time.
Important: This information is for general purposes only and is not financial advice. Always seek professional guidance for investment decisions. Any opinions expressed are solely those of the author.