Despite tallying only three net orders in the third quarter, Reston, Va.-based Comstock Homebuilding Cos. CFO Bruce Labovitz remains optimistic about his company's future.
The company reported preliminary sales and settlement results on October 12. Comstock recorded 81 net sales but had 78 cancellations. During the same quarter last year, the company reported 93 orders. Its pivotal Eclipse mixed-use project in Arlington, Va. was hardest hit, posting 13 new sales against 67 cancellations.
"The second tower came on the market in late June, and the fallout came in July," Labovitz said. "There were contracts that would be a year old or more. The industry reports sales and cancellations as if they were the same period event. The cancellations were from long ago. We look at it as if we have 81 new contracts that were written during the course of the quarter that will be coming to settlement in the future."
Net sales were at least positive in Comstock's Atlanta and Raleigh markets, which posted 21 and 20 net sales, respectively. Overall, the company posted $24.5 million in gross new order revenue and $47.7 million in settlement revenue.
"Given how turbulent the summer was in the market and how negative all of the information circulating was, that we continued to be able to write contracts and we continued to be able to deliver units during the quarter was encouraging to us," Labovitz said.
Still, Labovitz admits the market will continue to be challenging in the near future.
"There will be further impairments of our inventory and potential write offs of feasibility costs and option deposits," he said. "We don't believe we're in a market now where we have pricing power and high consumer confidence. We're not acquisitive."
Comstock continues to reduce debt (it shed $70 million in debt between the fourth quarter of 2006 and the second quarter of 2007) and is in the process of negotiating with its lenders to modify existing covenants.
"We've been able to reduce debt organically through reduction in inventory to our home building customers," Labovitz said. "We've also done it by strategically selling off assets that we felt either had cash equity tied up in them that we wanted to get back or where the leverage was going to problematic for us."
Comstock stock (NASAQ: CHCI) fell 4.69% to $1.83 on moderate volume on Friday.