Comstock Homebuilding Companies, Inc. Announces Acquisition of Capitol Homes, Inc. in Raleigh, NC
RESTON, VA, May 09, 2006 (MARKET WIRE via COMTEX News Network) -- Comstock Homebuilding Companies, Inc. (NASDAQ: CHCI) ("Comstock or
the "Company") today announced the acquisition of Capitol Homes, Inc.
("Capitol"), an established private homebuilder in the Raleigh, North
Carolina metropolitan area. The acquisition, completed on May 5,
2006, expands Comstock's existing market position in the Raleigh
market. The acquisition of Capitol Homes is the second acquisition by
Comstock in 2006 and adds approximately 1,350 lots (mostly single
family detached lots) in 13 communities to the Company's inventory of
controlled land.
Initially Comstock will maintain the Capitol Homes brand in the
Raleigh market but expects, over time, to transition the Capitol
operations to the Comstock Homes brand. Two of the three former
principals of Capitol Homes, Pablo Reiter and Glenn Hartman, will
join Comstock's Raleigh management team as Vice President of Sales
and Marketing and Vice President of Land Acquisition, respectively.
The third principal, Richard Weale, will continue with Comstock in a
consulting capacity during the transition period and will pursue
independent off-book land development opportunities for the Company.
All of Capitol Homes' 20 employees will retain their positions with
the Company.
Capitol Homes is a leading builder of affordably priced single family
homes, with prices ranging from approximately $150,000 to $300,000.
At the time of acquisition, Capitol's backlog was approximately $7.4
million on 39 sold homes. The Capitol Homes acquisition is projected
to generate approximately $25 million in revenue for the Company
during the balance of 2006. This would result in growth of over 100%
for Comstock's Raleigh division in 2006 as compared to 2005.
Comstock reported that there was no common stock issued to the
principals in connection with the acquisition and it does not expect
to record any goodwill in connection with the transaction. Based on
estimated post-closing purchase accounting adjustments to the carrying
cost of the acquired assets to fair market value, the acquisition
would be accretive to Comstock's previously issued guidance for 2006.
The Company also announced today that on May 4, 2006, in advance of
the acquisition of Capitol, the Company closed on a privately placed
30-year, $30 million junior subordinated note offering with a five
year fixed rate coupon of 9.72%. The proceeds were used in connection
with the May 5th acquisition of Capitol Homes, Inc. and to retire
substantially all of Capitol's outstanding debt.
The Company also announced today that the Company entered into
definitive purchase agreements dated May 5, 2006 (as amended on May 9,
2006) with institutional investors relating to a private placement of
$20 million gross proceeds through the issuance of 2,121,048 shares
of Class A common stock at a price of $9.43 per share and warrants to
purchase 636,316 shares of Class A common stock at an exercise price
of $11.32 per share with a five year term. J.P. Morgan Securities
Inc. was the sole placement agent of the offering. The Company will
use the proceeds from the equity offering for general corporate
purposes, including working capital, and to fund new projects and
acquisitions of assets and/or companies.
"We are excited about the acquisition of Capitol Homes and we are
privileged to have Pablo Reiter, Glenn Hartman and their team joining
the Comstock team," said Christopher Clemente, Chairman and CEO. "The
acquisition of Capitol Homes positions Comstock as a leading provider
of middle market, single family homes in the Raleigh market. Capitol's
focus on first time buyers and middle market single family products in
the Raleigh area fits well with Comstock's strategy of enhancing our
geographic and product diversification and is perfectly aligned with
Comstock's vision for growth. The principals of Capitol Homes have
more than 35 years of combined experience building affordable,
quality homes in the Raleigh area. Comstock has been in Raleigh since
1997 because we believe that Raleigh is well positioned to experience
significant growth over the next several years as other Mid-Atlantic
markets become more congested and less affordable. This acquisition
continues our plan of expanding throughout the best growth markets in
the Mid-Atlantic, Mid-South and Southeast. I am confident that this
diversification strategy will help balance the effects of changing
market conditions which we are experiencing in the Washington, D.C.
market and it reduces the impact any one sub-market or single
community can have on our results in a given period.
"While we believe that debt can be a very efficient way to capitalize
our business we also believe that it is prudent to manage our
leverage," continued Clemente. "Accordingly, we combined the PIPE
offering and the junior subordinated note offering to enhance our
balance sheet and position Comstock well for continued growth into
2007 and beyond."
"We are excited to become a Comstock Homebuilding company," said
Pablo Reiter, former principal of Capitol Homes. "Comstock is a well
respected brand in the Raleigh market and their organization
complements ours in many ways. We feel that as one team we will be
able to grow into a dominant force in Raleigh homebuilding."
Comstock will be holding an investor call on Thursday, May 11, 2006
at 8:45 a.m. Eastern Time. The Company plans to release its financial
results for the three months ended March 31, 2006 after the market
closes on Wednesday, May 10, 2006. To participate by telephone, the
dial-in number is 866-406-5408 and the conference ID is 7326932.
Investors are advised to join at least five minutes prior to the call
to register. This investor call will be available via a live webcast
on the Comstock Homebuilding Companies' website at
http://www.comstockhomebuilding.com in the "Investor Relations"
section.
About Comstock Homebuilding Companies, Inc.
Established in 1985, Comstock Homebuilding Companies, Inc. is a
diversified real estate development firm with a focus on moderately
priced for-sale residential products. Comstock builds and markets
single-family homes, townhouses, mid-rise condominiums, high-rise
condominiums, mixed-use urban communities and active adult
communities. The company currently markets its products under the
Comstock Homes brand in the Washington, D.C. and Raleigh, North
Carolina markets, under the Capitol Homes brand in Raleigh, North
Carolina and under the Parker Chandler Homes brand in Atlanta,
Georgia and parts of the Carolinas. Comstock develops mixed-use,
urban communities and active-adult communities under the Comstock
Communities brand. Comstock Homebuilding Companies, Inc. trades on
Nasdaq as CHCI. For more information on Comstock Homebuilding
Companies, Inc., please visit http://www.comstockhomebuilding.com.
Cautionary Statement Regarding Forward-Looking Statements
This release contains "forward-looking" statements that are made
pursuant to the Safe Harbor provisions of the Private Securities
Litigation Reform Act of 1995. Statements that are predictive in
nature, that depend upon or refer to future events or conditions, or
that include words such as "may," "will," "expects," "projects,"
"anticipates," "estimates," "believes," "intends," "plans," "should,"
"seeks," and similar expressions, including statements related to
Comstock's expected future financial results and anticipated growth
in the Washington, D.C. housing market, are forward-looking
statements. Forward-looking statements involve known and unknown
risks and uncertainties that may cause actual future results to
differ materially from those projected or contemplated in the
forward-looking statements. These risks and uncertainties include,
but are not limited to, economic, market and competitive conditions
affecting Comstock and its operations and products, risks and
uncertainties relating to the market for real estate generally and in
the areas where Comstock has projects, the availability and price of
land suitable for development, materials prices, labor costs,
interest rates, Comstock's ability to service its significant debt
obligations, fluctuations in operating results, anticipated growth
strategies, continuing relationships with affiliates, environmental
factors, government regulations, the impact of adverse weather
conditions or natural disasters and acts of war or terrorism.
Additional information concerning these and other important risks and
uncertainties can be found under the heading "Risk Factors" in
Comstock's Annual Report on Form 10-k for the year ended December 31,
2005, as filed with the Securities and Exchange Commission on March
16, 2006. Comstock specifically disclaims any obligation to update or
revise any forward-looking statements, whether as a result of new
information, future developments or otherwise.
Media Contact:
Bryan Murray
Investor Relations
Contact via http://www.marketwire.com/mw/emailprcntct?id=1D491A7D8B2E5E33
703.883.1700 ext. 217
SOURCE: Comstock Homebuilding Companies, Inc.