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CHCI Comstock Holding

Filed: 14 May 21, 4:36pm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________________________________________________
FORM 10-Q
__________________________________________________________________________
Quarterly Report Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended March 31, 2021
or
Transition Report Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from                     to                     
Commission File Number 1-32375
__________________________________________________________________________
Comstock Holding Companies, Inc.
(Exact name of registrant as specified in its charter)
__________________________________________________________________________
Delaware20-1164345
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
1900 Reston Metro Plaza, 10th Floor
Reston, Virginia 20190
(703) 230-1985
(Address, including zip code, and telephone number, including area code, of principal executive offices)
__________________________________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading
Symbol(s)
Name of each exchange on which registered
Class A common stock, par value $0.01 per shareCHCINASDAQ Capital Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ☐    No  ☒
As of May 14, 2021, 8,089,457 shares of Class A common stock, par value $0.01 per share, and 220,250 shares of Class B common stock, par value $0.01 per share, of the registrant were outstanding.


COMSTOCK HOLDING COMPANIES, INC.
FORM 10-Q
TABLE OF CONTENTS


PART I – FINANCIAL INFORMATION
Item 1.    Financial Statements

COMSTOCK HOLDING COMPANIES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
(unaudited)
March 31,
2021
December 31,
2020
ASSETS
Current assets:
Cash and cash equivalents$6,657 $7,032 
Trade receivables, net1,437 1,482 
Trade receivables - related parties4,922 3,598 
Prepaid and other assets, net327 242 
Total current assets13,343 12,354 
Equity method investments at fair value4,665 6,307 
Fixed assets, net242 266 
Goodwill1,702 1,702 
Operating lease right-of-use assets7,749 7,914 
Intangible assets, net19 36 
TOTAL ASSETS$27,720 $28,579 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accrued personnel costs$961 $2,442 
Accounts payable692 523 
Accrued liabilities1,221 964 
Short term operating lease liabilities581 569 
Short term notes payable96 
Total current liabilities3,551 4,503 
Long term notes payable - due to affiliates5,500 5,500 
Long term operating lease liabilities, net of current portion7,211 7,361 
TOTAL LIABILITIES$16,262 $17,364 
Commitments and contingencies00
STOCKHOLDERS’ EQUITY
Series C preferred stock $0.01 par value, 20,000,000 shares authorized, 3,440,690 issued and outstanding and liquidation preference of $17,203 at March 31, 2021 and December 31, 2020$6,765 $6,765 
Class A common stock, $0.01 par value, 59,779,750 shares authorized, 8,057,989 and 7,953,729 issued, and 7,972,419 and 7,868,159 outstanding at March 31, 2021 and December 31, 2020, respectively81 79 
Class B common stock, $0.01 par value, 220,250 shares authorized, issued and outstanding at March 31, 2021 and December 31, 2020
Additional paid-in capital200,141 200,147 
Treasury stock, at cost (85,570 shares Class A common stock)(2,662)(2,662)
Accumulated deficit(192,869)(193,116)
TOTAL COMSTOCK HOLDING COMPANIES, INC. EQUITY$11,458 $11,215 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY$27,720 $28,579 
The accompanying notes are an integral part of these consolidated financial statements.
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COMSTOCK HOLDING COMPANIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Three Months Ended March 31,
20212020
Revenues
     Asset management$6,840 $5,435 
     Real estate services1,477 1,531 
  Total revenue8,317 6,966 
Operating expenses
     Direct costs - asset management6,078 4,632 
     Direct costs - real estate services1,087 1,216 
     General and administrative694 727 
     Sales and marketing158 200 
Operating income300 191 
Interest expense(58)(164)
Other (loss) income, net(11)
Income before income tax expense231 36 
Income tax expense(2)(1)
Gain (loss) on equity method investments carried at fair value18 (47)
Net income (loss)$247 $(12)
Income (loss) per share
Basic net income (loss) per share$0.03 $
Diluted net income (loss) per share$0.03 $
Basic weighted average shares outstanding8,166 8,003 
Diluted weighted average shares outstanding8,977 8,003 
The accompanying notes are an integral part of these consolidated financial statements.
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COMSTOCK HOLDING COMPANIES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(in thousands)
(unaudited)

Series C
Preferred Stock
Class AClass B
Additional
paid-in
capital
Treasury
stock
Accumulated
deficit
Total
SharesAmountSharesAmountSharesAmount
Balance at December 31, 20203,441 $6,765 7,953 $79 220 $$200,147 $(2,662)$(193,116)$11,215 
Stock compensation and issuances— — 143 — — 182 — — 184 
Accrued liability settled through issuance of stock— — — — — — — 
Shares withheld related to net share settlement of restricted stock awards— — (39)— — — (195)— — (195)
Net income— — — — — — — — 247 247 
Balance at March 31, 20213,441 $6,765 8,058 $81 220 $$200,141 $(2,662)$(192,869)$11,458 


Series C
Preferred Stock
Class AClass B
Additional
paid-in
capital
Treasury
stock
Accumulated
deficit
Total
SharesAmountSharesAmountSharesAmount
Balance at December 31, 20193,441 $6,765 7,850 $78 220 $$199,372 $(2,662)$(195,198)$8,357 
Stock compensation and issuances— — 52 — — 212 — — 213 
Accrued liability settled through issuance of stock— — 11 — — — 20 — — 20 
Shares withheld related to net share settlement of restricted stock awards— — (16)— — — (31)— — (31)
Net loss— — — — — — — — (12)(12)
Balance at March 31, 20203,441 $6,765 7,897 $79 220 $$199,573 $(2,662)$(195,210)$8,547 

The accompanying notes are an integral part of these consolidated financial statements.


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COMSTOCK HOLDING COMPANIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three Months Ended March 31,
20212020
Cash flows from operating activities:
Net income (loss)$247 $(12)
Adjustment to reconcile net income (loss) to net cash used in operating activities
Amortization of loan discount, loan commitment and deferred financing fees24 
Amortization and depreciation expense49 65 
Amortization of right-of-use asset165 
Earnings from unconsolidated joint venture, net of distributions12 105 
Stock compensation184 213 
Change in fair value of equity method investment(18)47 
Changes in operating assets and liabilities:
Trade receivables - related parties(1,324)308 
Trade receivables45 398 
Accrued personnel costs(1,481)(2,458)
Prepaid and other assets(97)(239)
Accrued liabilities264 478 
Accounts payable169 (845)
Lease liabilities(138)
Net cash used in operating activities(1,923)$(1,908)
Cash flows from investing activities:
Purchase of fixed assets(8)(9)
Distributions from equity method investments carried at fair value1,660 144 
Net cash provided by investing activities1,652 135 
Cash flows from financing activities:
Proceeds from notes payable120 5,554 
Payments on notes payable(29)(81)
Taxes paid related to net share settlement of equity awards(195)(31)
Net cash (used in) provided by financing activities(104)5,442 
Net (decrease) increase in cash and cash equivalents(375)3,669 
Cash and cash equivalents, beginning of period7,032 3,511 
Cash and cash equivalents, end of period$6,657 $7,180 
Supplemental cash flow information:
Interest paid$58 $143 
Supplemental disclosure for non-cash investing and financing activities:
Accrued liability settled through issuance of stock$$20 
The accompanying notes are an integral part of these consolidated financial statements.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
1. ORGANIZATION AND BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of Comstock Holding Companies, Inc. and subsidiaries (“Comstock”, “CHCI” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X and other applicable rules and regulations of the Securities and Exchange Commission (“SEC”). Such financial statements do not include all of the disclosures required by GAAP for complete financial statements. In our opinion, all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair presentation have been included in the accompanying condensed consolidated financial statements. The Company has evaluated subsequent events through the date these consolidated financial statements were issued and has included all necessary adjustments and disclosures. For further information and a discussion of our significant accounting policies, other than discussed below, refer to our audited consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.
Comstock Holding Companies, Inc., incorporated in 2004 as a Delaware corporation, is a multi-faceted asset management and services company primarily focused in the Washington, D.C. Metropolitan Statistical Area. In February 2021, the Company amended the entity names for several subsidiaries as part of operational efficiency enhancements initiated in the first quarter of 2021. The entity names were changed for the following Company subsidiaries: (a) CDS Asset Management, LC is now CHCI Asset Management, LC, (b) Comstock Commercial Management, LC is now CHCI Commercial Management, LC, (c) Comstock Residential Management, LC is now CHCI Residential Management, LC, (d) CDS Capital Management, L.C. is now CHCI Capital Management, LC and (e) Comstock Real Estate Services, LC is now CHCI Real Estate Services, L.C.
The Company operates through 5 primarily real estate focused subsidiaries – CHCI Asset Management, LC (“CAM”), CHCI Residential Management, LC, CHCI Commercial Management, LC, Park X Management, LC and Comstock Environmental Services, LLC (“CES”). References in these Consolidated Financial Statements to “Comstock,” “Company”, “we,” “our” and “us” refer to Comstock Holding Companies, Inc. together in each case with our subsidiaries unless the context suggests otherwise.
The Company’s Class A common stock is traded on the NASDAQ Capital Market under the symbol “CHCI”.
Throughout this quarterly report on Form 10-Q, amounts are in thousands, except per share data, number of stock options, number of stock awards, or as otherwise noted.
The Consolidated Balance Sheet as of December 31, 2020 was derived from the audited financial statements contained in the 2020 Form 10-K.
For the three months ended March 31, 2021 and 2020, comprehensive income (loss) equaled net income (loss); therefore, a separate statement of comprehensive income (loss) is not included in the accompanying consolidated financial statements.
Certain amounts in the prior period have been reclassified to conform to the current year presentation in connection with the classification of 'General and administrative' expenses on the consolidated statement of operations and the accompanying notes to the condensed consolidated financial statements. The reclassification had no effect on the previously reported totals (e.g. operating income, income before income tax, and net income).
Recent Developments
In April 2021, the Company was notified by the Lender that the Lender had received payment in full of the PPP Loan from the United States government, and the Company's PPP Loan had been forgiven (See Note 7 – Coronavirus Aid and Relief and Economic Security Act).
Use of Estimates
Our condensed consolidated financial statements have been prepared in accordance with GAAP. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts for the reporting periods. We base these estimates and judgments on historical experience and on various other factors that we believe to be reasonable under the circumstances. We evaluate these estimates and judgments on an ongoing basis. Actual results may differ from those estimates under different assumptions or conditions. Material estimates are utilized in the valuation of deferred tax
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assets, analysis of goodwill impairment, valuation of equity-based compensation, capitalization of costs, and fair value of financial instruments (including the fair value of our equity method investments).
Recently Adopted Accounting Standards
In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes, which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in ASC 740, Income Tax and also clarifies and amends existing guidance to improve consistent application. ASU 2019-12 will be effective for public business entities for annual reporting periods beginning after December 15, 2020, and interim periods within those periods. The Company adopted ASU 2019-12 as of January 1, 2021. The adoption did not have a material impact on our condensed consolidated financial statements.
Recently Issued Accounting Standards
In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments", which modifies how companies recognize expected credit losses on financial instruments and other commitments to extend credit held by an entity at each reporting date. Existing GAAP requires an “incurred loss” methodology whereby companies are prohibited from recording an expected loss until it is probable that the loss has been incurred. ASU 2016-13 requires companies to use a methodology that reflects current expected credit losses (“CECL”) and requires consideration of a broad range of reasonable and supportable information to record and report credit loss estimates, even when the CECL is remote. Companies will be required to record the allowance for credit losses and deduct that amount from the basis of the asset. The guidance is effective for the Company for financial statement periods beginning after December 15, 2022, although early adoption is permitted. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements and related disclosures.
We assessed other accounting pronouncements issued or effective during the three months ended March 31, 2021 and deemed they were either not applicable to us or are not anticipated to have a material effect on our consolidated financial statements. Other standards previously issued and adopted by the Company have been disclosed in previous filings.
2. INVESTMENTS IN UNCONSOLIDATED ENTITIES
Investments carried at fair value
Based upon elections made at the date of investment, the Company reports the equity method investments in real estate ventures at fair value. For such investments, the Company increases or decreases the investment each reporting period by the change in the fair value and the Company reports the fair value adjustments in the Consolidated Statement of Operations in the ‘Gain (loss) on equity method investments carried at fair value’ line item. Changes in fair value of the Company's investment in Investors X (defined below) are impacted by distributions as the fair value is based on finite cash flows from the wind-down of that entity.
Investors X
The Company has elected to account for the equity method investment in Comstock Investors X, L.C. (“Investors X”), a Variable Interest Entity (“VIE”) that owns the Company’s residual homebuilding operations at fair value. Fair value is determined using a discounted cash flow model based on expected future cash flows for income and realization events of the underlying asset. Expected future cash flows includes contractually fixed revenues and expenses as well as estimates for future revenues and expenses where contracts do not currently exist. These estimates are based on prior experience as well as comparable, third party data.
As of March 31, 2021 and December 31, 2020, the fair value of the Company’s investment in Investors X is $3.5 million and $5.1 million, respectively. The Company received distributions of $1.7 million during the three months ended March 31, 2021 and recognized 0 gain or loss in fair value.
The Hartford
On December 30, 2019, the Company made an investment related to the purchase of a stabilized commercial office building located at 3101 Wilson Boulevard in the Clarendon area of Arlington County, Virginia (the “Hartford”). The Company owns a 2.5% equity interest in the asset at a cost of approximately $1.2 million. The Company has elected to account for the equity method investment in the Hartford at fair value. Fair value is determined using an income approach and sales comparable approach models. As of March 31, 2021 and December 31, 2020, the fair value of the Company’s investment in the Hartford was
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$1.2 million. The fair value of the Company's investment in the Hartford remained at approximately $1.2 million during the three months ended March 31, 2021. The Company received no distributions during the three months ended March 31, 2021.
Fair value of equity method investments are classified as Level 3 of the fair value hierarchy. As of March 31, 2021 and December 31, 2020, the Company had equity method investments in real estate ventures at fair value of $4.7 million and $6.3 million, respectively. The table below shows the change in the Company’s investments in real estate ventures reported at fair value:
Fair value of investments as of December 31, 2020$6,307 
Distributions(1,660)
Change in fair value18 
Fair value of investments as of March 31, 2021$4,665 
See Note 12 – Related Party Transactions for additional discussion of our investments in real estate ventures at fair value.
Investments using equity method
The Company accounts for its interest in its title insurance joint venture using the equity method of accounting and adjusts the carrying value for its proportionate share of earnings, losses and distributions. The investment in the unconsolidated joint venture was $17 thousand and $29 thousand as of March 31, 2021 and December 31, 2020, respectively, and is included within ‘Prepaid and other assets, net’ in the accompanying Consolidated Balance Sheets.
The Company’s share of loss for the three months ended March 31, 2021 and 2020 from this unconsolidated joint venture of $12 thousand and $3 thousand, respectively, is included in ‘Other income (loss), net’ in the accompanying Consolidated Statement of Operations. During the three months ended March 31, 2021 and 2020 the Company collected and recorded no distributions and $108 thousand, respectively, from this joint venture as a return on investment.
3. GOODWILL & INTANGIBLES
Goodwill represents the excess of the aggregate purchase price over the fair value of the net assets acquired in a business acquisition. Following an acquisition, we perform an analysis to value the acquired company’s tangible and identifiable intangible assets and liabilities. With respect to identifiable intangible assets, we consider backlog, non-compete agreements, client relationships, trade names, patents and other assets. We amortize our intangible assets based on the period over which the contractual or economic benefits of the intangible assets are expected to be realized. We assess the recoverability of the unamortized balance of our intangible assets when indicators of impairment are present based on expected future profitability and undiscounted expected cash flows and their contribution to our overall operations. Should the review indicate that the carrying value is not fully recoverable, the excess of the carrying value over the fair value of the intangible assets would be recognized as an impairment loss. As of the acquisition date, goodwill consisted primarily of synergies resulting from the combination, expected expanded opportunities for growth and production, and savings in corporate overhead costs.
As of March 31, 2021 and December 31, 2020, the balance of goodwill was $1.7 million. This goodwill is reflected within our Real Estate Services segment. There were no events indicating a potential change in recoverability of goodwill during the three months ended March 31, 2021.
Intangible assets include customer relationships which have an amortization period of four years. During the three months ended March 31, 2021 and 2020, $17 thousand of intangible asset amortization was recorded in ‘General and administrative’ expense on the Consolidated Statements of Operations, respectively.
4. LEASES
The determination of whether an arrangement contains a lease and the classification of a lease, if applicable, is made at lease commencement, at which time the Company also measures and recognizes an ROU asset, representing the Company’s right to use the underlying asset, and a lease liability, representing the Company’s obligation to make lease payments under the terms of the arrangement. For the purposes of recognizing ROU assets and lease liabilities associated with the Company’s leases, the Company has elected the practical expedient to not recognize a ROU asset or lease liability for short-term leases, which are leases with a term of twelve months or less. The lease term is defined as the non-cancelable portion of the lease term plus any periods covered by an option to extend the lease if it is reasonably certain that the option will be exercised.
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ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. The rates implicit within the Company's leases are generally not determinable; therefore, the Company's incremental borrowing rate is used to determine the present value of lease payments. The determination of the Company’s incremental borrowing rate requires judgment. The Company looks to similar corporate credit ratings and bond yields when determining the incremental borrowing rate. As of November 1, 2020, at the lease commencement of the new corporate office in Reston, VA, the Company's incremental borrowing rate was determined to be 4.25%.

The Company has operating leases for its office facilities as well as for office equipment. The Company's leases have remaining terms of less than one year to 10 years. The leases can contain various renewal and termination options. The period which is subject to an option to extend the lease is included in the lease term if it is reasonably certain that the option will be exercised. The period which is subject to an option to terminate the lease is excluded if it is reasonably certain that the option will not be exercised. Lease costs related to the Company's operating leases are generally recognized as a single ratable lease cost over the lease term. See Note 12 - Related Party Transactions for rent expense paid and recognized for the corporate office to related parties.
On August 1, 2020 the Company terminated an office lease in Conshohocken, PA which it had previously determined would be reasonably certain to continue until 2022. The Company subsequently executed a month-to-month lease agreement for the office space. The Company does not expect the new month-to-month lease to continue for more than twelve months. Since the lease is less than twelve months, the Company has elected to recognize the lease payments as lease cost on a straight-line basis over the lease term.
The Company does 0t have any leases which have not yet commenced as of March 31, 2021.
5. REVENUE
The Company’s revenues consist primarily of
Asset Management;
Property Management;
Capital Markets;
Leasing;
Project & Development Services; and
Environmental Remediation
Asset Management
Asset Management primarily provides comprehensive real estate asset management services to the CDS Portfolio, representing a series of daily performance obligations delivered over time. Pricing includes a cost-plus management fee or a market-rate fee or a market-rate fee form of variable consideration. The Company earns whichever is higher. See Note 12 – Related Party Transactions.
The amount of revenue recognized is presented on a gross basis for any services provided by our employees, as we control them. This is evidenced by our obligation for their performance and our ability to direct and redirect their work, as well as negotiate the value of such services. In the instances where we do not control third-party services delivered to the client, we report revenues net of the third-party reimbursements. Consistent with the transfer of control for distinct, daily services to the customer, revenue is typically recognized at the end of each period for the fees associated with the services performed.
Property Management
Property Management provides on-site day-to-day management services for owners of office, industrial, retail, multifamily residential and various other types of properties, representing a series of daily performance obligations delivered over time. Pricing is generally in the form of a monthly management fee based upon property-level cash receipts, square footage under management or some other variable metric. Revenues from project management may also include reimbursement of payroll and related costs for personnel providing the services and subcontracted vendor costs. Project management services represent a series
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of distinct daily services rendered over time. Consistent with the transfer of control for distinct, daily services to the customer, revenue is typically recognized at the end of each period for the fees associated with the services performed.

The amount of revenue recognized is presented gross for any services provided by our employees, as we control them. This is evidenced by our obligation for their performance and our ability to direct and redirect their work, as well as negotiate the value of such services. In the instances where we do not control third-party services delivered to the client, we report revenues net of the third-party reimbursements.
Capital Markets
We offer clients commercial mortgage and structured financing services. We are compensated for our services via a fee paid upon successful commercial financing from third party lenders. The fee earned is contingent upon the funding of the loan, which represents the transfer of control for services to the customer. Therefore, we typically satisfy our performance obligation at the point in time of the funding of the loan, when there is a present right to payment.
Leasing
We provide strategic advice and execution for owners, investors, and occupiers of real estate in connection with the leasing of office, industrial and retail space. We are compensated for our services in the form of a commission. Our commission is paid upon signing of the lease by the tenant. We satisfy our performance obligation at a point in time; generally, at the time of the contractual event where there is a present right to payment.
Project & Development Services
We provide project and construction management services for owners and occupiers of real estate in connection with the management and leasing of office, industrial and retail space. The fees that we earn are typically variable based upon a percentage of project cost. We are compensated for our services in the form of management fees. Project and construction management services represent a series of performance obligations delivered over time and revenue is recognized over time.
Environmental Remediation
We provide environmental remediation services for owners of real estate. Remediation services are generally contracted and performed by Comstock Environmental. We are compensated for our services as well as for the services of subcontractors used to perform remediation services. Fees earned are generally based upon employee time spent as well as a cost-plus arrangement for subcontractors used. Generally, environmental remediation services represent a series of performance obligations delivered over time and revenue is recognized over time.
Contract Costs
Expenses, primarily employee commissions, incurred on leasing and capital markets transactions represent substantially all of our incremental costs to obtain revenue contracts. Since the amortization period is one year or less we recognize these costs as an operating expense as they are incurred.
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The following table presents the Company’s sales from contracts with customers disaggregated by categories which best represents how the nature, amount and timing and uncertainty of sales are affected by economic factors.
Three Months Ended March 31,
20212020
Revenue by customer
Related party$6,939 $5,484 
Commercial1,378 1,482 
Total Revenue by customer$8,317 $6,966 
Revenue by contract type
Fixed-price$1,732 $1,888 
Cost-plus4,290 3,434 
Time and Material2,295 1,644 
Total Revenue by contract type$8,317 $6,966 
For the three months ended March 31, 2021 and 2020, $8.3 million and $6.8 million, respectively, of our revenues were earned for contracts where revenue is recognized over time. For the three months ended March 31, 2021 and 2020, $9 thousand and $187 thousand, respectively, of our revenues were earned for contracts where revenue is recognized at a point in time.
6. DEBT
As of March 31, 2021, notes payable consisted of the following:
March 31,
2021
December 31,
2020
Notes payable - due to affiliates, unsecured5,500 5,500 
Unsecured financing96 
Total notes payable$5,596 $5,505 
As of March 31, 2021, net maturities and/or curtailment obligations of all borrowings are as follows:
2021$96 
2022
20235,500 
Total$5,596 
Unsecured financing
The Company finances its professional liability insurance policies that renew on March 1 of each year under a premium finance agreement payable within a one year term. At December 31, 2020, the balance on this loan was $5 thousand and the interest rate was 3.3%. As of March 31, 2021, the balance on this loan was $96 thousand and the interest rate was 2.4%.
Notes payable, due to affiliates – unsecured
Revolving Capital Line of Credit
On March 19, 2020, the Company entered into a Revolving Capital Line of Credit Agreement (the “Loan Documents”) with CP Real Estate Services, LC (formerly known as Comstock Development Services, LC) (“CDS”), pursuant to which the Company secured a $10.0 million capital line of credit (the “Revolver”).  Under the terms of the Loan Documents, the Revolver provides for an initial variable interest rate of the Wall Street Journal Prime Rate plus 1.00% per annum on advances made under the Revolver, payable monthly in arrears.  The five-year term facility allows for interim draws that carry a maturity date of 12
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months from the initial date of the disbursement unless a longer initial term is agreed to by CDS.  On March 27, 2020, the Company borrowed $5.5 million under the Revolver. The $5.5 million borrowed has a maturity date of April 30, 2023.
Comstock Growth Fund
On October 17, 2014, the Company entered into an unsecured promissory note with Comstock Growth Fund (“CGF”) whereby CGF made a loan to the Company in the initial principal amount of $10.0 million and a maximum amount available for borrowing of up to $20.0 million with a three year term. On December 18, 2014, the loan agreement was amended and restated to provide for a maximum capacity of $25 million. On May 23, 2018, the Company entered into a Membership Interest Exchange and Subscription Agreement (the “Membership Exchange Agreement”), together with a revised promissory note agreement, in which a note (“CGF Note”) with an outstanding principal and accrued interest balance of $7.7 million was exchanged for 1,482,300 shares of the Company’s Series C Non-Convertible Preferred Stock, par value $0.01 per share and a stated liquidation value of $5.00 per share (the “Series C Preferred Stock”), issued by the Company to CDS. The Company exchanged the preferred equity for 91.5% of CDS membership interest in the CGF promissory note. Concurrently, the face amount of the CGF promissory note was reduced to $5.7 million. The CGF Note was repaid prior to maturity during the year ended December 31, 2020.

For the three months ended March 31, 2021 and 2020, the Company made interest payments for all debt facilities of $58 thousand and $143 thousand, respectively.
During the three months ended March 31, 2021, the Company did 0t make principal payments for the Revolver. During the three months ended March 31, 2020, the Company retired $5.7 million of outstanding borrowings for the CGF Note.
7. CORONAVIRUS AID RELIEF AND ECONOMIC SECURITY ACT
Paycheck Protection Plan Loan
In response to the COVID-19 pandemic, the Paycheck Protection Program (the “PPP”) was established under the CARES Act and administered by the U.S. Small Business Administration (“SBA”). Companies who met the eligibility requirements set forth by the PPP could qualify for PPP loans provided by local lenders, which supports payroll, rent and utility expenses (“qualified expenses”). If the loan proceeds are fully utilized to pay qualified expenses over the covered period, as further defined by the PPP, the full principal amount of the PPP loan may qualify for loan forgiveness, subject to potential reduction based on the level of full-time employees maintained by the organization during the covered period as compared to a baseline period.
In April 2020, the Company received proceeds of $1.95 million under the PPP (the "PPP Loan") provided by Mainstreet Bank (the “Lender”). Based on the term and conditions of the loan agreement, the term of the PPP loan is two years with an annual interest rate of 1% and principal and interest payments will be deferred for the first six-months of the loan term, which has been updated according to the Paycheck Protection Program Flexibility Act of 2020 (“Flexibility Act”). The Company recognized PPP funding as a contra-expense during the three months ended June 30, 2020, when qualified expenses were incurred. The Lender received notice that the PPP Loan was fully forgiven by the SBA in April 2021.
Deferral of Social Security Tax Payments
Pursuant to sections 2302(a)(1) and (a)(2) of the CARES Act, the Company has elected to defer payments of its share of Social Security tax due during the "payroll tax deferral period". The payroll tax deferral period began on August 1, 2020 and ended December 31, 2020. At March 31, 2021 the total amount of such deferral was $193 thousand and is reflected within 'Accrued personnel costs' on our consolidated balance sheet. Per the terms of the deferral program, 50% of the deferred amount is due on December 31, 2021, and the remaining 50% is due on December 31, 2022 at 0% interest.
8. COMMITMENTS AND CONTINGENCIES
Litigation
Currently, we are not subject to any material legal proceedings. From time to time, we are named as a defendant in legal actions arising from our normal business activities. Although we cannot accurately predict the amount of our liability, if any, that could arise with respect to legal actions pending against us, we do not believe it is reasonably possible that such liability will have a material adverse effect on our financial position, operating results and cash flows. We believe that we have obtained adequate insurance coverage, rights to indemnification, or where appropriate, have established appropriate reserves in connection with any such legal proceedings.
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9. FAIR VALUE DISCLOSURES
The carrying amounts reported in the consolidated balance sheets for cash equivalents, accounts receivable, and accounts payable are reasonable estimates of their fair values based on their short maturities. The fair value of fixed and floating rate debt is based on unobservable market rates (Level 3 inputs). The fair value of the fixed and floating rate debt was estimated using a discounted cash flow analysis on the blended borrower rates currently available to the Company for loans with similar terms. The following table summarizes the carrying amount and the corresponding fair value of fixed and floating rate debt.
March 31,
2021
December 31,
2020
Carrying amount$5,596 $5,505 
Fair value$5,579 $5,485 
Fair value estimates are made at a specific point in time, based on relevant market information about the financial instruments. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
Investments in Real Estate Ventures at Fair Value
We report our two investments in real estate ventures at fair value. For such investments, we increase or decrease our investment each reporting period by the change in the fair value and we report these fair value adjustments in the Consolidated Statements of Operations.
For our investments in real estate ventures at fair value, we estimate the fair value using the level 3 Income Approach or a sales comparable approach to determine a fair value. Critical inputs to fair value estimates include various level 3 inputs such as valuations of the underlying real estate assets and borrowings, which incorporate investment-specific assumptions such as discount rates, capitalization rates, rental and expense growth rates, and asset-specific market borrowing rates. As of March 31, 2021 and December 31, 2020, investments in the real estate ventures at fair value were approximately $4.7 million and $6.3 million, respectively.
Non-Recurring Fair Value Measurements
The Company may also value its non-financial assets and liabilities, including items such as long-lived assets, at fair value on a non-recurring basis if it is determined that impairment has occurred. Such fair value measurements use significant unobservable inputs and are classified as Level 3.
10. RESTRICTED STOCK, STOCK OPTIONS AND OTHER STOCK PLANS
During the three months ended March 31, 2021, the Company issued 0 stock options and 165,809 restricted stock awards to employees. During the three months ended March 31, 2020, the Company issued 0 stock options and 630,352 restricted stock awards to employees.
Stock-based compensation expense associated with restricted stock and stock options is recognized based on the grant date fair value of the award over its vesting period. The following table reflects the statements of operations line items for stock-based compensation for the periods presented:
Three Months Ended March 31,
20212020
General and administrative - real estate services$31 $22 
General and administrative - asset management153 191 
$184 $213 
Under net settlement procedures currently applicable to our outstanding restricted stock awards for employees, upon each settlement date and election by the employees, restricted stock awards are withheld to cover the required withholding tax, which is based on the value of the restricted stock award on the settlement date as determined by the closing price of our Class A common stock on the trading day immediately preceding the applicable settlement date. The remaining amounts are delivered to the recipient as shares of our Class A common stock.
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As of March 31, 2021, the weighted-average remaining contractual term of unexercised stock options was 5 years. As of March 31, 2021 and December 31, 2020, there was $1.4 million and $1.1 million, respectively, of unrecognized compensation cost related to stock options and restricted stock awards.
The Company intends to issue new shares of its Class A common stock upon vesting of restricted stock grants or the exercise of stock options.
11. INCOME (LOSS) PER SHARE
The weighted average shares and share equivalents used to calculate basic and diluted (loss) income from continuing operations for the three months ended March 31, 2021 and 2020 are presented in the accompanying consolidated statements of operations. Restricted stock awards, stock options and warrants for the three months ended March 31, 2021 and 2020 are included in the diluted income (loss) per share calculation using the treasury stock method and average market prices during the periods, unless their inclusion would be anti-dilutive.
The following share equivalents have been excluded from the continuing operations dilutive share computation for the three months ended March 31, 2021 and 2020 as their inclusion would be anti-dilutive:
Three Months Ended March 31,
20212020
Restricted stock awards174 
Stock options46 255 
Warrants149 726 
195 1,155 
12. RELATED PARTY TRANSACTIONS
Lease for Corporate Headquarters
The Company previously leased its corporate headquarters from an affiliate controlled and owned by our CEO and family. On November 1, 2020, the Company relocated its corporate headquarters to a new office space pursuant to a ten year lease agreement with an affiliate controlled and owned by our Chief Executive Officer and family, as landlord. Future minimum lease payments under this lease, which expires on October 31, 2030, is $9.6 million. The Company is also responsible for the pro-rata share of common area maintenance costs to the landlord.
For the three months ended March 31, 2021 and 2020, total rental payments made were $298 thousand and $142 thousand, respectively. This is reflected within 'Direct costs - asset management' as it is a reimbursable cost under the 2019 AMA.
Asset Management Agreement ("AMA")
On March 30, 2018, CAM, an entity wholly owned by the Company, entered into the AMA with CDS. The effective date of the AMA is January 2, 2018. Pursuant to the AMA, CDS has engaged CAM to manage and administer the CDS’ commercial real estate portfolio and the day to-day operations of CDS and each property-owning subsidiary of CDS (the "CDS Portfolio"). Pursuant to the terms of the AMA, CAM will provide investment advisory, development and asset management services necessary to build out, stabilize and manage certain assets.
Pursuant to the AMA, CDS will pay CAM an annual cost-plus fee (the “Annual Fee”) in an aggregate amount equal to the sum of (i) the employment expenses of personnel dedicated to providing services to the CDS Portfolio pursuant to the AMA, (ii) the costs and expenses of the Company related to maintaining the listing of its shares on a securities exchange and complying with regulatory and reporting obligations as a public company, and (iii) a fixed annual payment of $1,000,000.
As of March 31, 2021 and December 31, 2020, the Company had $4.9 million and $3.6 million, respectively, of receivables from related parties, primarily related to the 2019 AMA. The Company does not record an allowance for doubtful accounts due to the related party nature of the receivables.
2019 Amended Asset Management Agreement ("2019 AMA")
On April 30, 2019, CAM entered into the 2019 AMA with CDS, which amends and restates in its entirety the AMA. Pursuant to the 2019 AMA, CDS will engage CAM to manage and administer the Anchor Portfolio and the day to-day operations
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of CDS and each property-owning subsidiary of CDS (collectively, the “CDS Entities”). The “Anchor Portfolio” consists of a majority of the properties we currently manage.
Pursuant to the 2019 AMA, the Company provides asset management services related to the build out, lease-up and stabilization, and management of the Anchor Portfolio. CDS pays the Company and its subsidiaries annual fees equal to the greater of either (i) an aggregate amount equal to the sum of (a) an asset management fee equal to 2.5% of revenues generated by properties included in the Anchor Portfolio; (b) a construction management fee equal to 4% of all costs associated with Anchor Portfolio projects in development; (c) a property management fee equal to 1% of the Anchor Portfolio revenues, (d) an acquisition fee equal to up to 0.5% of the purchase price of acquired assets; and (f) a disposition fee equal to 0.5% of the sales price of an asset on disposition; or (ii) an aggregate amount equal to the sum of (x) the employment expenses of personnel dedicated to providing services to the Anchor Portfolio pursuant to the 2019 AMA, (y) the costs and expenses of the Company related to maintaining the public listing of its shares and complying with related regulatory and reporting obligations, and (z) a fixed annual payment of $1,000,000.  
In addition to the annual payment of the greater of either the Market Rate Fee or the Cost Plus Fee (as defined in the 2019 AMA), the Company  also is entitled on an annual basis to the following additional fees: (i) an incentive fee equal to 10% of the free cash flow of each of the real estate assets comprising the Anchor Portfolio after calculating a compounding preferred return of 8% on CDS invested capital; (ii) an investment origination fee equal to 1% of raised capital, (iii) a leasing fee equal to $1.00/sf for new leases and $0.50/sf for renewals; and (iv) mutually agreeable loan origination fees related to the Anchor Portfolio.
The 2019 AMA will terminate on December 31, 2027 (“Initial Term”), an extension from the original termination date of December 31, 2022, and will automatically renew for successive additional one year terms (each an “Extension Term”) unless CDS delivers written notice of non-renewal of the 2019 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 2019 AMA, CDS is entitled to terminate the 2019 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 2019 AMA, CDS is required to pay a termination fee equal to (i) the Market Rate Fee or the Cost Plus Fee paid to CAM for the calendar year immediately preceding the termination , and (ii) a one-time payment of the Incentive Fee (as defined in the 2019 AMA) as if the CDS Portfolio were liquidated for fair market value as of the termination date; or the continued payment of the Incentive Fee as if a termination had not occurred.
Residential, Commercial and Parking Property Management Agreements
The Company entered into separate residential property management agreements with properties owned by CDS Entities under which the Company receives fees to manage and operate the properties, including tenant communications, leasing of apartment units, rent collections, building maintenance and day-to-day operations, engagement and supervision of contractors and vendors providing services for the buildings, and budget preparation and oversight.
The Company entered into separate commercial property and parking management agreements with properties owned by CDS Entities under which the Company receives fees to manage and operate the office and retail portions of the properties, including tenant communications, rent collections, building maintenance and day-to-day operations, engagement and supervision of contractors and vendors providing services for the buildings, and budget preparation and oversight.
These property management agreements are each for one year initial terms with successive, automatic one year renewal terms, unless sooner terminated. The Company generally receives base management fees under these agreements based upon a percentage of gross rental revenues for the portions of the buildings being managed in addition to reimbursement of specified expenses, including employment expenses of personnel employed by the Company in the management and operation of each property.
Construction Management Agreements
The Company has construction management agreements with properties owned by CDS Entities under which the Company receives fees to provide certain construction management and supervision services, including construction supervision and management of the buildout of certain tenant premises.  The Company receives a flat construction management fee for each engagement under a work authorization based upon the construction management or supervision fee set forth in the applicable tenant’s lease, which fee is generally 1% to 4% of the total costs (or total hard costs) of construction of the tenant’s improvements in its premises, or as otherwise agreed to by the parties.

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Business Management Agreement
On April 30, 2019, CAM entered into a Business Management Agreement (the “BMA”) with Investors X, whereby CAM will provide Investors X with asset and professional services related to the wind down of the Company’s divested homebuilding operations and the continuation of services related to the Company’s divested land development activities. The aggregate fee payable to CAM from Investors X under the Management Agreement is $937,500, payable in 15 quarterly installments of $62,500 each.
The Hartford Investment
On December 30, 2019, the Company made an investment related to the purchase of the Hartford, a stabilized commercial office building located at 3101 Wilson Boulevard in the Clarendon area of Arlington County, Virginia. The Company’s initial investment related to the purchase of the Hartford is $1.2 million.
In conjunction with the investment, the Company entered into an operating agreement (“Original Operating Agreement”) with Comstock Partners, LC ("Partners") to form Comstock 3101 Wilson, LC (the “Hartford Owner”), to purchase the Hartford. Pursuant to the Original Operating Agreement, the Company holds a minority membership interest in the Hartford Owner and the remaining membership interests of the Hartford Owner is held by Partners, who is further the Manager of the Hartford Owner. At the closing of the acquisition of the Hartford, the Company received an acquisition fee of $500 thousand and is entitled to asset management, property management, construction management and leasing fees for its management of the Property pursuant to separate agreements between the Hartford Owner, or its affiliates, and the Company, or its affiliates. The Company is also entitled to an incentive fee related to the performance of the investment.
On February 7, 2020, the Company, Partners and DWF VI 3101 Wilson Member, LLC (“DWF”), an unaffiliated, third party, equity investor in the Hartford, entered into a limited liability company agreement (the “DWC Operating Agreement”) to form DWC 3101 Wilson Venture, LLC (“DWC”) to, among other things, acquire, own and hold all interests in the Hartford Owner. In furtherance thereof, on February 7, 2020, the Original Operating Agreement for the Hartford Owner was amended and restated (the “A&R Operating Agreement”) to memorialize the Company’s and Partners’ assignment of 100% of its membership interests in the Hartford Owner to DWC. As a result thereof, DWC is the sole member of the Hartford Owner. The Company and Partners, respectively, hold minority membership interests in, and DWF holds the majority membership interest in, DWC. The Company’s ownership interest in the Hartford remains at 2.5%.
Private Placements and Promissory Notes
On March 19, 2020, the Company entered into a Revolving Capital Line of Credit Agreement (the “Loan Documents”) with CDS, pursuant to which the Company secured a $10.0 million capital line of credit (the “Revolver”).  Under the terms of the Loan Documents, the Revolver provides for an initial variable interest rate of the WSJ Prime Rate plus 1.00% per annum on advances made under the Revolver, payable monthly in arrears.  The five-year term facility allows for interim draws that carry a maturity date of 12 months from the initial date of the disbursement unless a longer initial term is agreed to by CDS. On March 27, 2020 the Company borrowed $5.5 million under the Revolver. On April 10, 2020, the capital provided to the Company by the Revolver was utilized to retire all of the Company’s 10% corporate indebtedness owed to CGF.
See Note 6 - Debt for further description of the CGF Private Placement and the Revolver.
Revenues from Related Parties
The following table details the revenue earned from related parties:
Three Months Ended March 31,
20212020
Revenue by customer
Related party$6,939 $5,484 
Commercial1,378 1,482 
Total revenue$8,317 $6,966 
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13. INCOME TAXES
For the three months ended March 31, 2021 and 2020, the Company recognized deferred income tax expense of $2 thousand and $1 thousand, respectively. The effective tax rate for the three months ended March 31, 2021 and 2020 is 0.59% and (5.12)%, respectively.
The Company currently has approximately $146 million in federal and state NOLs. If unused, these NOLs will begin expiring in 2027. Under Internal Revenue Code Section 382 (“Section 382”), if a change in ownership is triggered, the Company’s NOL assets and possibly certain other deferred tax assets may be impaired.
The Company assesses uncertain tax positions and has 0t recorded any accruals related to uncertain tax positions as of March 31, 2021 and 2020. We file U.S. and state income tax returns in jurisdictions with varying statutes of limitations. The 2017 through 2020 tax years remain subject to examination by federal and most state tax authorities.
14. SEGMENT DISCLOSURES
We operate our business through 2 segments: Asset Management, and Real Estate Services.
In our Asset Management segment, we focus on providing management services to a wide range of real estate owners and businesses that include a variety of commercial real estate uses, including apartments, hotels, office buildings, commercial garages, leased lands, retail stores, mixed-use developments, and urban transit-oriented developments. The properties and businesses we currently manage are located primarily along the Washington, D.C. Metro Silver Line in Fairfax and Loudoun Counties, but we also manage projects in other jurisdictions including Maryland and Virginia.
In our Real Estate Services segment, our experienced management team provides a wide range of real estate services in the areas of strategic corporate planning, capital markets, brokerage services, and environmental and design-based services. Our environmental services group provides consulting and engineering services, environmental studies, remediation services and provides site specific solutions for any project that may have an environmental impact, from environmental due diligence to site-specific assessments and remediation. The Real Estate Services segment operates in the Mid-Atlantic Region.
The following table includes the Company’s 2 reportable segments of Asset Management and Real Estate Services, excluding discontinued operations, for the three months ended March 31, 2021 and 2020.
Asset
Management
Real Estate
Services
Total
Three Months Ended March 31, 2021
Gross revenue$6,840 $1,477 $8,317 
Gross profit762 390 1,152 
Net income403 (156)247 
Total assets23,778 3,942 27,720 
Three Months Ended March 31, 2020
Gross revenue$5,435 $1,531 $6,966 
Gross profit803 315 1,118 
Net loss284 (296)(12)
Total assets19,661 3,129 22,790 

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COMSTOCK HOLDING COMPANIES, INC.
ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this report. This discussion and analysis contains forward-looking statements that involve risks and uncertainties. Please see “Cautionary Notes Regarding Forward-looking Statements” for more information. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors including, but not limited to, those discussed below and elsewhere in this report, particularly under the headings “Cautionary Notes Regarding Forward-looking Statements.” References to dollar amounts are in thousands except per share data, or as otherwise noted.
Cautionary Notes Regarding Forward-looking Statements
This report includes forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by the use of words such as “anticipate,” “believe,” “estimate,” “may,” “likely,” “intend,” “expect,” “will,” “should,” “seeks” or other similar words or expressions. Forward-looking statements are based largely on our expectations and involve inherent risks and uncertainties, many of which are beyond our control. You should not place undue reliance on any forward-looking statement, which speaks only as of the date made. Some factors which may affect the accuracy of the forward-looking statements apply generally to the real estate industry, while other factors apply specifically to us.
Any number of important factors which could cause actual results to differ materially from those in the forward-looking statements include: general economic and market conditions, including interest rate levels; changes in the real estate markets; inherent risks in investment in real estate; our ability to attract and retain clients; our ability to compete in the markets in which we operate; regulatory actions; fluctuations in operating results; shortages and increased costs of labor or materials; adverse weather conditions and natural disasters; public health emergencies, including potential risks and uncertainties relating to the coronavirus (COVID-19) pandemic; our ability to raise debt and equity capital and grow our operations on a profitable basis; and our continuing relationships with affiliates.
Our actual results could differ materially from these projected or suggested by the forward-looking statements. The Company undertakes no obligation to update publicly or revise any forward-looking statements in light of new information or future events, except as required by law.
We make available, free of charge, on our website, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, as soon as reasonably practicable after these forms are filed with, or furnished to, the SEC. The information on or accessible through our website, www.comstockcompanies.com, is not incorporated by reference into this Quarterly Report on Form 10-Q.
Overview
Comstock Holding Companies, Inc. (“CHCI” or “the Company”) is a developer, operator, and asset manager of mixed-use and transit-oriented development properties in the greater Washington, D.C. metropolitan area, where we focus primarily on select high-growth urban and transitioning “sub-urban” markets. We provide a broad range of real estate asset management services, including development and construction management services, leasing and property management services, debt and equity financing origination, and other real estate related services. Our customers primarily include private and institutional owners and investors in the real estate properties that we manage and various governmental bodies that have a vested interest in public-private partnerships responsible for the development of certain properties that we develop and manage. We also invest capital on behalf of our asset management clients and institutional real estate investors in office, retail, residential and mixed-use properties, generally retaining an economic interest for the Company and providing management services to those properties, thereby enabling the Company to increase its assets under management (“AUM”)  in order to realize competitive advantages of scale and enhance our overall returns. The Company also provides additional fee-based real estate services, including corporate planning, capital markets, brokerage, title insurance, design, and environmental consulting and engineering services, to properties in the Company’s managed portfolio and to other clients in the U.S. Mid-Atlantic Region.
As of March 31, 2021, our AUM consisted of 26 operating assets comprising 13 commercial assets totaling approximately 1.9 million square feet and 4 multifamily assets totaling 1,123 units, and 9 commercial garages comprised of over
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8,000 parking spaces. Additionally, we have: (i) one commercial asset currently under-construction and scheduled for delivery in 2022 totaling approximately 250,000 square feet that is 99% pre-leased; and (ii) 18 development pipeline assets consisting of approximately 2.0 million square feet of additional planned commercial development, approximately 1,700 multifamily units and 2 hotel assets that will include 370 keys.
As a vertically integrated real estate operating and investment company, we earn revenue from multiple sources, including fees generated from asset management services that we provide to our managed portfolio of real estate assets on behalf of our asset management clients, and fees from additional real estate related services, including environmental consulting and engineering services provided to our managed properties and unrelated third party clients in the Mid-Atlantic Region.
The services we provide pursuant to the asset management agreements covering our AUM properties vary by property, and include property management, development and construction management, leasing management, acquisition and disposition management, origination and negotiation of debt and equity facilities, risk management, and various other property-specific services. Substantially all of the properties included in our managed portfolio are covered by full-service asset management agreements encompassing substantially all aspects of development, construction, and operations management relating to the subject properties. Our long-term asset management contracts generally include material early termination payments to us in the event the contract is prematurely terminated by the asset owner. A limited number of properties in our managed portfolio are covered by service-specific asset management contracts that focus our services on defined critical elements of operations, such as marketing, leasing, and construction management, where the property owner continues to manage other operating functions. Our limited-service asset management agreements generally are anticipated to be short term in nature and do not include material early termination penalties.
Anchoring the Company’s asset management services platform is a long-term full service asset management agreement (the “2019 AMA”) with an affiliated company owned by the Company’s Chief Executive Officer, Christopher Clemente, that encompasses the majority of the properties we currently manage, including two of the largest transit-oriented, mixed-use developments in the Washington, DC area: Reston Station, a 5 million square foot transit-oriented, mixed-use development located in Reston, VA, and Loudoun Station, a nearly 2.5 million square foot transit-oriented, mixed-use development in Ashburn, VA, as well as other additional development assets, which together constitute our anchor portfolio (the “Anchor Portfolio”). The 2019 AMA for our Anchor Portfolio is a long-term agreement with an original term of 10 years that provides for significant financial payments to Comstock in the case of early termination by the asset owner.
In addition to the various recurring asset management fee-based revenue received by the Company, we also generate additional revenue from co-investments with our investment partners in certain property acquisitions and expect to receive performance-based incentive compensation from assets in our Anchor Portfolio and other assets in our managed portfolio. The Company can earn these incentive-based fees upon the occurrence of certain transaction-related events, including asset acquisitions or dispositions, asset related capital market transactions, leasing, marketing and property management, development and construction management, real title services, and environmental services, and when the performance of a subject property meets defined performance metrics. The co-investment business plans are property specific and therefore vary in expected duration but are generally expected to be between four and seven years; but may be accelerated or extended depending upon market conditions or the strategic objectives of the subject joint venture.


Outlook

Although the long-term impact of the COVID-19 pandemic on the commercial real estate market in the greater Washington, DC area remains uncertain, we believe that our Anchor Portfolio is well positioned to withstand potential negative impact of the COVID-19 pandemic. We also believe that our management team is properly aligned with the interests of the Company and its shareholders and is committed to the Company’s objectives of providing exceptional experiences for those that we do business with while enhancing shareholder value. Further, we believe that we are properly staffed for current market conditions and the foreseeable future and that our Company has the ability to manage risk and pursue opportunities for additional growth as market conditions warrant. Our real estate development and management operations are primarily focused on the greater Washington, D.C. region, where we believe our 30-plus years of experience provides us the best opportunity to continue leveraging our significant experience acquiring, developing, and managing high quality real estate assets and capitalizing on positive growth trends, while our environmental consulting and remediation management services business is well positioned to capitalize on opportunities to continue its recent growth throughout the entire U.S. Mid-Atlantic region.




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Managed Portfolio

Reston Station
Reston Station, located at the terminus of Phase I of Metro’s Silver Line, is strategically located midway between Tysons Corner and Dulles International Airport. Reston Station is among the largest mixed-use, transit-oriented developments in the Washington, DC area and the Reston Station neighborhood spans the Dulles Toll Road and surrounds the first, and currently only, Metro rail station in the Dulles Corridor. Covering a total of approximately 60 acres, assets included in Comstock’s managed portfolio cover approximately 37 of the 60-acre neighborhood and will, upon full build-out, include approximately five million square feet of mixed-used development. Currently, Comstock’s managed portfolio of Reston Station has approximately 1.7 million square feet of mixed-use development completed, including 448 residential units, approximately 1.2 million square feet of office, approximately 40,000 square feet of retail and more than 6,000 parking spaces, including one of the largest underground commuter parking garages and bus transit facilities in the region. The Company is providing a wide variety of its real estate and asset management services to the project pursuant to the 2019 AMA, including development and construction management services, leasing management services, property management services, capital markets services, and environmental services.

Loudoun Station
Loudoun Station, located at the terminus of Phase II of Metro’s Silver Line, is Loudoun County’s first Metro connected development and represents Loudoun County’s beginning transformation into a transit connected community with direct metro rail connectivity to Dulles International Airport, Reston, Tysons Corner, and downtown Washington, D.C. Currently, Loudoun Station has approximately 1,000,000 square feet of mixed-use development completed, including 675 residential units, approximately 50,000 square feet of Class-A office space, approximately 150,000 thousand square feet of retail spaces including an 11-sceen AMC Cinema, and a 1,500-space Metro commuter parking garage. The Metro Garage is the focus of a public-private partnership between an affiliate of the Company and Loudoun County, Virginia and is managed by a subsidiary of the Company. Phase II of Metro’s Silver Line is under construction and expected to commence passenger service in late 2021 or early 2022. The Company is providing a variety of its real estate and asset management services related to the existing buildings and the future development pursuant to the 2019 AMA, including development and construction management services, leasing management services, property management services, and capital markets services.

Herndon Station
Herndon Station will include up to approximately 340,000 square feet of residential, retail and entertainment spaces, including a performing arts center, and an approximately 700 space parking garage in the historic downtown portion of the Town of Herndon in western Fairfax County, Virginia. The commercial Garage is the focus of a public private partnership between an affiliate of the Company and the Town of Herndon. The development will also include improvements to existing connections to the adjacent WO&D trail, a popular pedestrian and bicycle route managed by Northern Virginia Regional Parks Authority and Fairfax County Parks Department. The Company is providing a variety of asset management and development services related to the Herndon Station development pursuant to the 2019 AMA.

International Gateway
Since 2018 the Company has, pursuant to an asset management agreement with an unaffiliated property owner, provided asset management, property management, leasing management, and consulting services for a privately owned portfolio of two mixed-use retail/office buildings in Tysons Corner, Virginia, known as International Gateway.

The Hartford Building
In late 2019, the Company partnered with Comstock Partners, LC (“Partners”), an entity that is controlled by our CEO, and wholly owned by Mr. Clemente and certain family members, to acquire a Class-A office building immediately adjacent to Clarendon Station on Metro’s Orange Line in Arlington County’s premier transit-oriented office market, the Rosslyn-Ballston Corridor. Built in 2003, the 211,000 square foot mixed-use LEED GOLD building is approximately 78% leased to multiple high-quality tenants. In February 2020, the Company arranged for DivcoWest to purchase a majority ownership stake in the Hartford Building and secured a $87 million loan facility from MetLife. As part of the transaction, the Company entered into asset management and property management agreements to manage the property.




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Results of Operations
Three months ended March 31, 2021 compared to the three months ended March 31, 2020
Revenue – asset management
Revenue from asset management for the three months ended March 31, 2021 and 2020 was $6.8 million and $5.4 million, respectively. This represents an increase of $1.4 million, or 25.9%, compared to prior year. Revenue increased primarily due to costs that are reimbursable from CDS under the 2019 AMA and recognized as revenue along with the growth in assets under management.
Revenue – real estate services
Revenue from real estate services for the three months ended March 31, 2021 and 2020 was $1.48 million and $1.53 million, respectively. The slight decrease in quarter over quarter revenues of $54 thousand or 4% was primarily attributable to non-recurring COVID-19 environmental remediation projects in the three months ended March 31, 2020.
Direct costs – asset management
Direct costs – asset management for the three months ended March 31, 2021 and 2020 was $6.1 million and $4.6 million, respectively. This 31.2% increase amounts to a $1.45 million increase to direct costs - asset management was primarily attributable to an increase in personnel expenses due to the growth of our property management business.
Direct costs – real estate services
Direct costs – real estate services for the three months ended March 31, 2021 and 2020 was $1.1 million and $1.2 million, respectively. For the three months ended March 31, 2021 direct costs - real estate services decreased $0.1 million or 10.6% primarily due to decreased personnel and subcontractor costs associated with non-recurring COVID-19 environmental remediation projects.
General and administrative
General and administrative expenses for the three months ended March 31, 2021 and 2020 was $694 thousand and $727 thousand, respectively. For the three months ended March 31, 2021, general and administrative costs decreased $33 thousand or 4.5% primarily attributable to a decrease in headcount within our Real Estate Services segment.
Selling and Marketing
Selling & marketing expenses for the three months ended March 31, 2021 and 2020 was $158 thousand and $200 thousand, respectively. The decrease is attributable to a slight decrease in selling and marketing expenses for our Environmental business unit.
Interest Expense
For the three months ended March 31, 2021 and 2020, the Company’s interest expense was $58 thousand and $164 thousand, respectively. The 64.6% reduction to interest expense quarter over quarter amounts to an $106 thousand decrease in interest expense primarily related to the retiring of the Comstock Growth Fund loan during the three months ended June 30, 2020.
Income taxes
For the three months ended March 31, 2021 and 2020, the Company recognized deferred income tax expense of $2 thousand and $1 thousand, respectively.
Liquidity and Capital Resources
We finance our Asset Management and Real Estate Services operations, capital expenditures, and business acquisitions with internally generated funds, distributions from our equity method investments, and borrowings from our credit facilities. See Note 6 in the accompanying consolidated financial statements for more details on our debt and credit facilities.
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Cash Flow
For the three months ended March 31, 2021, net cash used in operating activities was $1.9 million, primarily related to the increase in related party receivables and the payment of accrued personnel costs. For the three months ended March 31, 2020, net cash used in operating activities was $1.9 million, primarily related to payment of accrued personnel costs and accounts payable.
Net cash provided by investing activities of $1.7 million and $135 thousand for the three months ended March 31, 2021 and 2020, respectively was primarily related to distributions from equity method investments.
Net cash used in financing activities for the three months ended March 31, 2021 was $104 thousand which was primarily related to taxes paid related to net share settlement of equity awards net of proceeds from notes payable. Net cash provided by financing activities was $5.4 million for the three months ended March 31, 2020 which was primarily related to proceeds from the Revolver of $5.5 million.
Critical Accounting Policies and Estimates
There have been no other significant changes to our critical accounting policies and estimates during the three months ended March 31, 2021 from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020.
Recently Issued Accounting Standards
See Note 1 - Organization and Basis of Presentation to the accompanying consolidated financial statements included in this Quarterly Report on Form 10-Q.
Off Balance Sheet Arrangements
None.
ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable.
ITEM 4.    CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We have evaluated, with the participation of our Chief Executive Officer and our Chief Financial Officer, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of March 31, 2021. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of March 31, 2021.
Limitations on the Effectiveness of Controls
We do not expect that our disclosure controls and internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, a control may become inadequate because of changes in conditions or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected.
Changes in Internal Control over Financial Reporting
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No changes have occurred in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the quarter ended March 31, 2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II – OTHER INFORMATION
ITEM 1.    LEGAL PROCEEDINGS
Information regarding legal proceedings is incorporated by reference from Note 8 - Commitments and Contingencies to the accompanying condensed consolidated financial statements included in Part I of this Quarterly Report on Form 10-Q.





















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ITEM 6.    EXHIBITS
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
4.1
31.1*
31.2*
32.1*
101.INS*Inline XBRL Instance Document
101.SCH*Inline XBRL Taxonomy Extension Schema Document
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document.
101,DEFInline XBRL Taxonomy Extension Definition Linkbase Document.
101.LABInline XBRL Taxonomy Extension Label Linkbase Document
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document
104The cover page from the Company's Annual Report on Form 10-K for the year ended December 31, 2020, formatted in Inline XBRL (included in Exhibit 101)
*    Filed herewith.
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SIGNATURES
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 thereunto duly authorized.
COMSTOCK HOLDING COMPANIES, INC.
Date: May 14, 2021By:/s/ CHRISTOPHER CLEMENTE
Christopher Clemente
Chairman and Chief Executive Officer
(Principal Executive Officer)
Date: May 14, 2021By:/s/ CHRISTOPHER GUTHRIE
Christopher Guthrie
Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)
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