What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-05-12 compared with 2024-11-07 · 50 added, 81 removed, 132 unchanged (50% of the section changed)

Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with our Consolidated Financial Statements and the notes thereto and Management’s Discussion and Analysis included in our 2023 Annual Report on Form 10-K and our Condensed Consolidated Financial Statements and the notes thereto included elsewhere in this document.

Unless otherwise indicated, references to “2024” refer to the three and nine months ended September 30, 2024 and references to “2023” refer to the three and nine months ended September 30, 2023.

The following discussion and analysis should be read in conjunction with our consolidated financial statements, the related notes thereto, and Management’s Discussion and Analysis included in our 2024 Annual Report on Form 10-K, as well as our condensed consolidated financial statements and the related notes thereto included elsewhere in this document.

Unless otherwise indicated, references to “2025” refer to the three months ended March 31, 2025 and references to “2024” refer to the three months ended March 31, 2024.

The following discussion may contain forward-looking statements that reflect our plans and expectations.

7 unchanged sentences

We primarily operate under long-term asset management and property management agreements that provide recurring fee-based revenue streams.

Our asset management services platform is anchored by a long-term, full-service asset management agreement with Comstock Partners, LC ("CP"), an affiliate entity controlled by our Chief Executive Officer Christopher Clemente, which includes a cost-plus fee structure and covers all of the properties in our Anchor Portfolio (the "2022 AMA" - See Note 12 in the Notes to Condensed Consolidated Financial Statements for additional information).

• Our asset management services platform is anchored by a long-term, full-service asset management agreement with Comstock Partners, LC ("CP"), an affiliate entity controlled by our Chief Executive Officer Christopher Clemente, which includes a cost-plus fee structure and covers all of the properties in our Anchor Portfolio (the "2022 AMA" - See Note 13 in the Notes to Consolidated Financial Statements for additional information).

We have entered into separate asset management agreements for non-Anchor Portfolio assets.

We provide asset management services for market-rate fees to all the commercial and residential assets in our managed portfolio, as well as to certain assets managed by ParkX (see below).

• As a vertically integrated real estate services company, we perform all property management services through three wholly owned subsidiaries:

CHCI Commercial, CHCI Residential, and ParkX Management ("ParkX").

All properties included in our managed portfolio have entered into property management agreements with our operational subsidiaries that provide for market-rate fees related to our services.

All properties in our managed portfolio have entered into property management agreements that provide for market-rate fees related to our services.

Our asset-light, debt-free business model allows us to substantially mitigate risks that are typically associated with real estate development and operation.

The fee-based approach we have adopted helps drive consistent, predictable top-line growth and provides us with a streamlined balance sheet that grants us maximum flexibility to explore potential growth opportunities outside of our core business operations.

We distinguish ourselves from industry peers through an established standard of excellence that extends from who we hire to how we deliver our broad suite of real estate services.

We are able maintain this high standard because We Show Up - every day, in person, in a collaborative environment that is structured to deliver on our mission to make a difference for our customers, our stakeholders, and in the communities that we serve.

The fee-based approach we have adopted helps drive consistent top-line growth that, along with our streamlined balance sheet, provides maximum flexibility to explore growth opportunities outside of our core business operations.

We have directly aligned the equity ownership of our Company with the ownership interests of the affiliated assets that we manage in our Anchor Portfolio.

This relationship, along with the baseline cost-plus feature and supplemental performance-based revenue opportunities provided by the 2022 AMA, provides us with a stable business platform on which we can (i) produce consistent, positive financial results, (ii) mature and expand our real estate service offerings, (iii) diversify and grow our managed portfolio of assets, both organically and through additional third-party relationships, (iv) pursue strategic investments and complimentary acquisitions, and (v) deliver exceptional value to our shareholders.

We distinguish ourselves from industry peers through an established standard of excellence that extends from who we hire to how we deliver our comprehensive suite of real estate services.

We are able to maintain this high standard because We Show Up - every day, in person, in a collaborative environment that is structured to deliver on our mission to make a difference for our customers, our stakeholders, and in the communities that we serve.

Managed Portfolio

The following table summarizes the operating assets that were included in our managed portfolio as of September 30, 2024:

The focus of our managed portfolio revolves primarily around high quality, mixed-use real estate properties and developments that are strategically located adjacent to Metro rail stations, providing convenient access to public transportation.

Our Anchor Portfolio (see below for details) includes, or will soon include, millions of square feet of Trophy and Class A office towers, luxury multi-family residential buildings, luxury hotels with branded condominium residences, high-end retail and entertainment options, associated public spaces, and commercial parking garages to serve all the properties.

Over the twelve months of fiscal year 2024, Anchor Portfolio assets generated well over $100.0 million of gross revenue for the property owners.

The following table summarizes the operating assets that were included in our managed portfolio as of March 31, 2025:

Type # of Assets Size/Scale % Leased

4 unchanged sentences

ParkX - Garages 32 ~25,000 spaces

ParkX - Security & Other 20 ~1,700 hrs/week

Includes terminated leases that have been substantially prepaid or prepaid in full

% leased reflects Q124 delivery of a new office tower located in The Row at Reston Station.

Excluding this recently delivered property, the % leased for stabilized assets the Commercial portfolio is 94%.

ParkX - Security & Other (2)

24 ~3,000 hrs/week

Commercial % leased includes Q1 2024 delivery of a new office tower located in The Row at Reston Station.

Excluding that impact, the % leased for stabilized assets is 93%.

# of assets total excludes 14 properties where both parking & other services are provided to avoid double-counting.

In addition, we manage the following assets that are under construction and scheduled for delivery in the next 12 to 24 months:

14 unchanged sentences

Loudoun Station Operating +

In Development Loudoun County’s first fully integrated mixed-use, transit-oriented development located at the terminus station, Metro's Ashburn Station on the Silver Line in Ashburn, Va (Loudoun County, Va.)

Herndon Station In Development Located in the Historic Downtown District of the Town of Herndon, Va., this planned mixed-use development is subject of a public-private partnership with the Town of Herndon

In Development Loudoun County’s first and only mixed-use, Metro-connected development that is located adjacent to Ashburn Station at the terminus of Metro's Silver Line in Ashburn, Va (Loudoun County, Va.)

Other Portfolio Assets

11 unchanged sentences

provides an excellent opportunity for significant value enhancement through by-right entitlements for approximately 117 residential units

Investors X Operating Investment in Comstock Investors X, LC that owns legacy homebuilding assets that are currently being monetized through market-rate sales that were completed in March 2024

Parking Operating Commercial parking garages & spaces managed by ParkX Management, LC located at affiliated properties and third-party locations

Investors X Operating Investment in Comstock Investors X, LC that owns legacy homebuilding assets that were monetized through market-rate sales that were completed in March 2024

ParkX Operating Commercial parking garages & spaces managed by ParkX Management that are located at/around affiliated managed properties as well as a growing number of third-party locations

Comstock 41 - Additional Information

Given its proximity to BLVD 44, we plan to explore rezoning opportunities at Comstock 41 that would allow for potential relocation of moderately-priced dwelling units from BLVD 44 to Comstock 41 as well as utilization of excess parking capacity at both BLVD 44 and BLVD Ansel.

In conjunction with the acquisition, we entered into a contingent fee agreement with BLVD 44 should these pursuits prove successful.

Given its proximity to BLVD Forty Four, we acquired Comstock 41 with the intention to explore rezoning opportunities for this property that would allow for potential relocation of moderately-priced dwelling units from BLVD Forty Four to Comstock 41 as well as utilization of excess parking capacity at both BLVD Forty Four and BLVD Ansel.

In conjunction with the acquisition, we entered into a contingent fee agreement with BLVD Forty Four should these pursuits prove successful.

(See Note 12 in the Notes to Condensed Consolidated Financial Statements for additional information).

We intend to maintain a limited financial role in any future development activities that may occur at this site and plan to only offer fee-based development and asset management services to any affiliate or suitable third-party financial sponsor of any potential future developments.

In November 2024, we entered into a definitive purchase agreement for Comstock 41 with SCG Development Holdings, LLC ("SCG") that is contingent upon the successful rezoning of the property to allow for the development of an affordable housing project at the site.

Upon closing, we will enter into an operating agreement and a development agreement with SCG, under which we will provide construction management services for the affordable housing project that will be fully financed by SCG.

We will also be entitled to provide property management services once the development is ready for occupancy.

Our management team is committed to executing our goal to provide exceptional experiences to those we do business with while maximizing shareholder value.

We believe that we are properly staffed for current market conditions and the foreseeable future and feel that we will maintain the ability to manage risk and pursue opportunities for additional growth as market conditions warrant.

We believe that we are properly staffed for current and foreseeable market conditions and will maintain the ability to manage risk and pursue additional growth as opportunities arise.

Our real estate development and asset management operations are primarily focused on the greater Washington, D.C.

area, where we believe our decades of experience provides us with the best opportunity to continue developing, managing, and investing in high-quality real estate assets and capitalizing on positive growth trends.

Our growth will continue to be fueled by our Anchor Portfolio, which will continue to generate revenue as development and construction efforts are completed for all the planned Anchor Portfolio assets, allowing us to then lease, stabilize, and arrange permanent financing for each property.

Importantly, the long-term asset management agreements covering the properties included in the Anchor Portfolio, when combined with our asset-light and debt-free business model, provide us with visibility to future revenue and earnings growth while mitigating the risk for potential losses.

We aspire to be among the most admired real estate asset managers, operators, and developers by creating extraordinary places, providing exceptional experiences, and generating excellent results for all stakeholders.

2 unchanged sentences

The following tables set forth consolidated statement of operations data for the periods presented (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

Three Months Ended March 31,

Revenue $ 12,639 $ 10,638

12 unchanged sentences

Net income (loss) $ 1,589 $ 910

Comparison of the Three Months Ended September 30, 2024 and 2023

The following table summarizes revenue by line of business (in thousands):

Three Months Ended September 30,

2024 2023 Change

Amount % Amount % $ %

Asset management $ 7,380 56.8 % $ 10,606 73.3 % $ (3,226) (30.4) %

Property management 3,253 25.0 % 2,605 18.0 % 648 24.9 %

Parking management 2,362 18.3 % 1,252 8.7 % 1,110 88.7 %

Total revenue $ 12,995 100.0 % $ 14,463 100.0 % $ (1,468) (10.2) %

Revenue decreased 10.2% in 2024.

The $1.5 million comparative decrease was primarily driven by a $4.8 million decrease in incentive fees earned.

A previously scheduled October 1, 2024 incentive fee trigger event date for seven specified managed portfolio assets was deferred.

(See Note 12 in the Notes to Condensed Consolidated Financial Statements for additional information).

Partially offsetting the decrease was a $1.8 million, or 154%, increase in recurring, fee-based revenue from our property and parking management subsidiaries that was driven by the continued expansion of our managed portfolio, as well as a $1.1 million increase in supplemental lease termination fees.

Operating costs and expenses

The following table summarizes operating costs and expenses (in thousands):

Three Months Ended September 30, Change

2024 2023 $ %

Cost of revenue $ 9,583 $ 8,557 $ 1,026 12.0 %

Selling, general, and administrative 507 575 (68) (11.8) %

Depreciation and amortization 77 74 3 4.1 %

Total operating costs and expenses $ 10,167 $ 9,206 $ 961 10.4 %

Operating costs and expenses increased 10.4% in 2024.

The $1.0 million comparative increase was primarily due to a $0.9 million net increase in personnel-related expenses stemming from increased headcount and employee compensation.

Other income (expense)

The following table summarizes other income (expense) (in thousands):

Three Months Ended September 30, Change

2024 2023 $ %

Interest income $ 169 $ — $ 169 N/M

Gain (loss) on real estate ventures (75) (241) 166 (68.9) %

Other income (expense), net 23 1 22 N/M

Total other income (expense) $ 117 $ (240) $ 357 (148.8) %

Other income (expense) changed by $0.4 million in 2024, primarily driven by a $0.2 million net increase in interest income stemming from interest earned on money market sweep accounts that were not active in 2023 and a combined net $0.2 million improvement in mark-to-market valuation impacts of equity method investments in real estate ventures.

Provision for income tax was $0.6 million in 2024, compared to $0.3 million in 2023.

The $0.3 million increase primarily stems from a significantly higher annualized estimated tax rate in the current period due to the impact of approximately $1.0 million of additional valuation allowance reversals that occurred in 2023.

The impact of the rate increase was partially offset by a decrease in taxable income.

Comparison of the Nine Months Ended September 30, 2024 and 2023

Comparison of the Three Months Ended March 31, 2025 and 2024

The following table summarizes revenue by line of business (in thousands):

Nine Months Ended September 30,

Three Months Ended March 31,

2025 2024 Change

6 unchanged sentences

The $2.0 million comparative increase was primarily driven by a $0.8 million, or 40.8%, increase in recurring, fee-based revenue from our property and parking management subsidiaries that was driven by the continued expansion of our managed portfolio.

Also contributing to the increase was $1.1 million of additional supplemental lease termination fees and a $0.5 million increase in reimbursable staffing charges.

Partially offsetting these increases was a $4.8 million decrease in incentive fees earned.

A previously scheduled October 1, 2024 incentive fee trigger event date for seven specified managed portfolio assets was deferred.

(See Note 12 in the Notes to Condensed Consolidated Financial Statements for additional information).

Also contributing to the increase was $0.6 million of additional supplemental leasing fees.

Operating costs and expenses

The following table summarizes operating costs and expenses (in thousands):

Nine Months Ended September 30, Change

Three Months Ended March 31, Change

2025 2024 $ %

4 unchanged sentences

Operating costs and expenses increased 14.9% in 2025.

The $2.7 million increase was primarily due to a $1.7 million net increase in personnel expenses stemming from increased headcount and employee compensation and a net $1.0 million increase in reimbursable/billable expenses.

The $1.4 million increase was primarily due to a $1.3 million net increase in personnel expenses stemming from increased headcount and employee compensation.

Other income (expense)

The following table summarizes other income (expense) (in thousands):

Nine Months Ended September 30, Change

Three Months Ended March 31, Change

2025 2024 $ %

Interest income $ 476 $ — $ 476 N/M

Interest income $ 184 $ 141 $ 43 30.5 %

Gain (loss) on real estate ventures 9 (193) 202 104.7 %

1 unchanged sentence

Total other income (expense) $ 175 $ (30) $ 205 683.3 %

Other income (expense) changed by $0.8 million in 2024, primarily due to a $0.5 million increase in interest income stemming from interest earned on money market sweep accounts that were not active in 2023 and a combined net $0.4 million improvement in mark-to-market valuation impacts of equity method investments in real estate ventures.

Other income (expense) changed by $0.2 million in 2025, primarily due to a combined net $0.2 million improvement in the valuations of our equity method investments in real estate ventures.

Provision for income tax was $0.3 million in 2025, compared to $0.2 million in 2024.

The $0.5 million increase primarily stems from a significantly higher annualized estimated tax rate in the current period due to the impact of approximately $1.0 million of additional valuation allowance reversals that occurred in 2023.

The impact of the rate increase was partially offset by a decrease in taxable income.

The $0.1 million increase primarily stems from an increase in taxable income and a slightly higher annualized effective tax rate, partially offset by a larger tax benefit from stock compensation shortfall/windfall adjustments.

Non-GAAP Financial Measures

8 unchanged sentences

The following table presents a reconciliation of net income (loss), the most directly comparable financial measure as measured in accordance with GAAP, to Adjusted EBITDA (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

Three Months Ended March 31,

Net income (loss) $ 1,589 $ 910

5 unchanged sentences

Adjusted EBITDA $ 2,050 $ 1,486

The decreases in Adjusted EBITDA for the three and nine months ended September 30, 2024 are primarily driven by higher net income in 2023 due to the recognition of material supplemental incentive fee revenue, which was partially offset by the significant increases in recurring fee-based property and parking management revenue in 2024.

The increase in Adjusted EBITDA for the three months ended March 31, 2025 is primarily driven by significant increases in recurring fee-based property and parking management revenue and supplemental asset management fee revenue.

Liquidity and Capital Resources

1 unchanged sentence

We assess our liquidity in terms of our cash and cash equivalents on hand and the ability to generate cash to fund our operating activities.

Our principal sources of liquidity as of September 30, 2024 were our cash and cash equivalents of $21.1 million and our $10.0 million of available borrowings on our credit facility.

Our principal sources of liquidity as of March 31, 2025 were our cash and cash equivalents of $28.3 million and our $10.0 million of available borrowings on our Credit Facility.

(See Note 5 in the Notes to Consolidated Financial Statements for additional information).

Significant factors which could affect future liquidity include the adequacy of available lines of credit, cash flows generated from operating activities, working capital management, and investments.

1 unchanged sentence

Our primary sources of working capital are cash from operations and distributions from investments in real estate ventures.

We have historically financed our operations with internally generated funds and, more rarely and only when necessary, borrowings from our credit facilities.

(See Note 5 in the Notes to Condensed Consolidated Financial Statements for additional information).

We have historically financed our operations with internally generated funds and, more rarely and only when necessary, borrowings from our Credit Facility.

We believe we currently have adequate liquidity and availability of capital to fund our present operations.

The following table summarizes our cash flows for the periods indicated (in thousands):

Nine Months Ended September 30,

Three Months Ended March 31,

2025 2024 Change

4 unchanged sentences

Operating Activities

The $3.3 million increase in net operating cash activity was primarily driven by a $4.9 million incremental cash inflow stemming from changes to our net working capital, partially offset by $1.6 million decrease in net income after adjustments for non-cash items.

The $2.8 million variance in net operating cash activity was primarily driven by a $2.2 million incremental cash inflow stemming from changes to our net working capital and a $0.6 million increase in net income after adjustments for non-cash items.

The net working capital increase was primarily influenced by increased accounts receivable collections.

Investing Activities

The 0.1 million increase in net cash used in investing activities was primarily driven by a $0.4 million increase in purchases of securities to fund non-qualified deferred compensation plan liabilities, partially offset by a $0.3 million increase in distributions received from investments in real estate ventures.

The $0.6 million variance in net investing cash activity was primarily driven by a $0.6 million decrease in distributions received from investments in real estate ventures.

Financing Activities

The $0.1 million increase in n et cash used in financing activities was due to a $0.2 million increase in cash paid for taxes related to the net share settlement of equity awards, partially offset by $0.1 million of collected proceeds stemming from the issuance of common stock related to equity awards.

The $0.1 million increase in n et cash used in financing activities was primarily driven by a $0.1 million increase in cash paid for taxes related to the net share settlement of equity awards.

Quantitative and Qualitative Disclosures About Market Risk

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis