Reston Va.-based Comstock Homebuilding Companies said it generated 110 gross sales valued at $31.0 million during the fourth quarter and had 31 cancellations for net new orders of 79 valued at $21.5 million. The company did not provide comparable numbers from 2006.
For the year ended December 31, 2007, the company said it generated 827 gross new orders valued at $198.1 million (including the sale of its Bellemeade condominium project in June 2007) with 216 order cancellations, leaving net new orders at 611 valued at $111.7 million. It also did not provide comparable numbers for 2006, but according to its earnings release of March 12, 2007, it delivered 940 homes during 2006.
Comstock also said it generated approximately $52.5 million of total revenue for the fourth quarter and approximately $265.5 million of total revenue for the year ended December 31, 2007. It did not provide further information.
Backlog at December 31, 2007 was $22.8 million on 70 backlog units.
Comstock, meanwhile, may be getting a big break on one of its loans. That's if it has enough capital to take advantage of the opportunity.
Comstock announced that it made an agreement with the holder of its $30 million senior unsecured notes that gives the builder two options to reduce its debt. Under the first option, Comstock can retire the $30 million senior secured notes in full by paying $15 million. Under the second option, it can secure a $15 million reduction in the outstanding principal amount of the notes by paying $8 million in cash and issuing the noteholder a warrant for the purchase of one million shares of the Company's Class A Common Stock with a seven-year term at an exercise price of $0.70 per share. Under the second option, Comstock's $7 million balance would have a five-year maturity, and it would have less restrictive covenants (with compliance waived until June 30, 2008) and no prepayment penalties.
"[Comstock¹s decision] is going to be based on whether we have the cash flow or access to capital required to post $15 million," said Bruce Labovitz, Comstock¹s CFO. "If the best we can do is come up with $8 million, you end up with a residual, but the covenants are dramatically reduced. It¹s not a bad alternative."
Under the terms of the agreement the Company posted a non-refundable deposit of $250,000 to be applied at closing. Comstock can also choose neither option and continue to negotiate with the bank. It has until Feb. 29 to choose which option, if any, to go with.
"It's obviously in our interest to try and execute on one of those two options," said Labovitz. "We're going to assess our liquidity and the rest of our leverage position and determine what the best alternative is for us. There are many demands on our liquidity now. The question is: Are you hoarding cash or using it to pay off another opportunity? Who else needs to get paid off, and what other opportunities are there?"
The lender Comstock is working with is not the loan's originator. That original lender is in a workout situation, and Comstock's notes went back to the warehouse lender. That lender didn't have the patience for a 10-year hold time.
"That plays into the willingness of a lender to make a deal," Labovitz said."These guys were in a workout situation of their own."
Without an agreement, the warehouse lender would probably try to sell the notes on the open market.
"In the open market, these are worth somewhat less than what we are willing to pay, but we would like to be the ones in control of the them, not some third party," Labovitz said. "The company is the greatest the believer in itself. We have the most confidence in our abilities, so we would pay more to maintain control."