OUR BUSINESSIMPORTANT INFORMATION ABOUT THIS PROSPECTUS
TheThis prospectus is part of a registration statement that we filed with the Securities and Exchange Commission (the “SEC”) allowsor SEC or Commission, utilizing a “shelf” registration process. Under this shelf process, we may, from time to time, sell the securities or combinations of the securities described in this prospectus in one or more offerings. This prospectus provides you with a general description of the securities that we may offer. Each time we offer securities, we will provide a prospectus supplement that will contain specific information about the terms of that offering including the type and amount of securities that we propose to sell and the initial public offering price of the securities. The prospectus supplement also may add, update or change information in this prospectus. Before purchasing any of our securities, we urge you to read both this prospectus and any applicable prospectus supplement together with additional information described under the heading “Where You Can Find More Information.”
You should rely only on the information contained or incorporated by reference in this prospectus and any supplement. We have not authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We will not make an offer to sell securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus, as well as information we previously filed with the SEC and have incorporated by reference, is accurate as of the date on the front cover of this prospectus only. Our business, financial condition, results of operations and prospects may have changed since that date.
We are offering the securities in places where sales of those securities are permitted. If you are in a jurisdiction where offers to sell, or solicitations of offers to purchase, the securities offered by this document are unlawful, or if you are a person to whom it is unlawful to direct these types of activities, then the offer presented in this document does not extend to you.
In this prospectus, “we,” “us,” “our” or the “Company” refers to Comstock Holding Companies, Inc. and its subsidiaries, unless we state otherwise or the context indicates otherwise. In addition, when we refer to:
“securities,” we are referring to common stock, preferred stock, debt securities and warrants, collectively;
“homes,” we are referring to single-family homes, townhouses and condominium units;
the “Washington, D.C. market,” we are referring to the Washington, D.C. Primary Metropolitan Statistical Area, as defined by the U.S. Census Bureau, which includes the District of Columbia, 17 counties and cities in northern Virginia, five counties in Maryland and the surrounding areas and Berkeley and Jefferson counties in the eastern panhandle of West Virginia;
“orders” or “sales,” we are referring to fully executed contracts with buyers of our homes, excluding contracts that were executed and cancelled;
“settlements” or “deliveries,” we are referring to the transfer of title of a home to a buyer; and
“backlog,” we are referring to orders for homes for which there has not yet been a settlement. Our backlog equals total orders less total deliveries.
FORWARD-LOOKING STATEMENTS
Some of the statements contained in this prospectus or documents we have incorporated by reference include forward-looking statements. These forward-looking statements can be identified by the use of words such as “anticipate,” “believe,” “estimate,” “plan,” “may,” “likely,” “intend,” “expect,” “will,” “should,” “seek” or other similar expressions. Forward-looking statements are based largely on our expectations and involve inherent risks and uncertainties including certain risks described in this prospectus. When considering those forward-looking statements, you should keep in mind the risks, uncertainties and other cautionary statements made in this prospectus and the reports that we have incorporated by reference. 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 directly to us. Any number of important factors which could cause actual results to differ materially from those in the forward-looking statements, including, but not limited to: general economic and market conditions, including interest rate levels; our
ability to service our debt; inherent risks in investment in real estate; our ability to compete in the markets in which we operate; regulatory actions; fluctuations in operating results; our anticipated growth strategies; shortages and increased costs of labor or building materials; the availability and cost of land in desirable areas; natural disasters; our ability to raise debt and equity capital and grow our operations on a profitable basis and our continuing relationships with affiliates. You should also carefully consider the risks and other information that may be contained in or incorporated by reference into any prospectus supplement relating to a specific offering of debt securities.
Except for our ongoing obligation to disclose information under the U.S. federal securities laws, we undertake no obligation to update publicly or revise any forward-looking statements whether as a result of new information or future events. For any forward-looking statements contained in this or any other document, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigations Reform Act of 1995 and we assume no obligation to update any such statements.
Investing in our securities involves a high degree of risk. See the “Risk Factors” section below as well as the “Risk Factors” section in our Annual Report on Form 10-K for the fiscal year ended December 31, 2013; and other risks described in any other prospectus supplement or in any of the documents incorporated by reference into this prospectus. You should read the entire prospectus and any applicable prospectus supplement carefully before you make your investment decision.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-3 to register the securities covered by this prospectus. This prospectus is a part of the registration statement and does not contain all of the information in the registration statement. You will find additional information about us in the registration statement. You may obtain a copy of the registration statement, including exhibits, from the SEC through its website at http://www.sec.gov or at the SEC offices mentioned in the following paragraph or from us through our website at http://comstockhomes.com. Any statement made in this prospectus concerning a contract or other documents of ours is likely only a summary, and you should read the documents that are filed as exhibits to “incorporatethe registration statement or otherwise filed by us with the SEC for a more complete understanding of the document or matter. Each such statement is qualified in all respects by reference to the document to which it refers.
We file annual, quarterly and current reports, proxy statements and other information with the SEC. Our SEC filings are available to the public on the SEC’s website at http://www.sec.gov and on our website at http://comstockhomes.com. You may also read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Additionally, you may obtain copies of the materials at prescribed rates by writing to the Public Reference Room at the address listed above. Please call 1-800-SEC-0330 for further information on the operation of the Public Reference Room.
This prospectus “incorporates by reference” certain informationdocuments that we file with it, whichthe SEC. This means that we can disclose important information to you by referring you to those documents.another document. The information that we incorporate by reference is an important part of this prospectus. Some information contained in this prospectus updates the information incorporated by reference, is considered to be partand information that we file subsequently with the SEC will automatically update this prospectus. In other words, in the case of a conflict or inconsistency between information set forth in this prospectus and information that we file later and incorporate by reference into this prospectus, you should rely on the information contained in the document that was filed later.
We incorporate by reference into this prospectus the following documents filed by us with the SEC will update automatically, supplementand/or supersede this information. Any statement(other than portions of documents deemed to have been furnished rather than filed in accordance with SEC rules unless otherwise specified by us):
Our Annual Report on Form 10-K for the fiscal year ended December 31, 2013 (filed on March 31, 2014);
Our Quarterly Report on Form 10-Q for the quarter ended March 31, 2014 (filed on May 15, 2014);
Our Current Report on Form 8-K filed with the SEC on May 9, 2014; and
The description of our common stock contained in a document incorporated orour registration statement on Form S-1, as amended, initially filed with the SEC on May 23, 2005 (No. 333-125166).
We also incorporate by reference each of the following documents that we will file with the SEC after the date of this prospectus and until this shelf offering terminates (other than portions of documents deemed to behave been furnished rather than filed in accordance with SEC rules unless otherwise specified by us):
Reports filed under Section 13(a) and (c) of the Securities Exchange Act of 1934, as amended, or the “Exchange Act”;
Our definitive proxy or information statements filed under Section 14 of the Exchange Act in connection with any subsequent stockholders’ meeting; and
Any reports filed under Section 15(d) of the Exchange Act.
We will provide to each person, including any beneficial owner, to whom a copy of this prospectus is delivered, a copy of any or all of the information that we have incorporated by reference into this prospectus. You may request and obtain a copy of these filings, at no cost, by writing or telephoning us at the following address or phone number:
Comstock Holding Companies, Inc.
1886 Metro Center Drive, Suite 400
Reston, Virginia 20190
Attn.: Corporate Secretary
Tel: (703) 883-1700
Except as expressly provided above, no other information, including information on our website, is incorporated by reference into this prospectus.
SUMMARY
This summary highlights selected information contained elsewhere in this prospectus or incorporated by reference in this prospectus shall be deemedand does not contain all of the information that you need to be modified or superseded for purposes of thisconsider in making your investment decision. You should carefully read the entire prospectus to the extent that a statement contained in this prospectus or in anyincluding financial statements and other document which also is or is deemed to beinformation incorporated by reference into the prospectus, the applicable prospectus supplement and any related free writing prospectus that we may authorize to be provided to you, including the risks discussed under the heading “Risk Factors” contained in thisthe applicable prospectus modifies or supersedes such statement. Any such statement so modified or superseded shall notsupplement and in any related free writing prospectus that we may authorize to be deemed, except as so modified or superseded,provided to constitute a part ofyou, and under similar headings in the other documents that are incorporated by reference into this prospectus. You should also carefully read the following summary together with the more detailed information regarding our company, our common stock andincorporated by reference into this prospectus, including our financial statements, and notesthe exhibits to those statements appearing elsewhere inthe registration statement of which this prospectus or incorporated herein by reference.
When we refer tois a part.
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| • | the “Consolidation,” we are referring to the restructuring of our corporate organization completed on December 17, 2004; |
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| • | the “Company,” “we,” “us” or “our,” for periods prior to the completion of the Consolidation, we are referring to Comstock Holding Company, Inc., Comstock Homes, Inc., Sunset Investment Corp., Inc. and Comstock Service Corp., Inc., and as of the completion of the Consolidation and thereafter, we are referring to Comstock Homebuilding Companies, Inc., together in each case with our subsidiaries and any predecessor entities unless the context suggests otherwise; |
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| • | the “Predecessor,” we are referring to Comstock Holding Company, Inc., Comstock Homes, Inc. and Sunset Investment Corp., Inc., in each case together with their respective subsidiaries as they existed prior to the Consolidation; |
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| • | “Comstock Service,” we are referring to Comstock Service, Inc. as it existed prior to the Consolidation; |
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| • | “homes,” we are referring to single-family homes, townhouses and condominium units; |
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| • | the “Washington, D.C. market,” we are referring to the Washington, D.C. Primary Metropolitan Statistical Area, as defined by the U.S. Census Bureau; |
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| • | the “Raleigh, North Carolina market,” we are referring to the six counties included in the Raleigh-Durham-Chapel Hill, North Carolina Metropolitan Statistical Area, as defined by the U.S. Census Bureau; |
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| • | the “Atlanta, Georgia market,” we are referring to the Atlanta, Georgia Metropolitan Statistical Area, as defined by the U.S. Census Bureau; |
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| • | the “Myrtle Beach, South Carolina market,” we are referring to the Myrtle Beach, South Carolina Metropolitan Statistical Area, as defined by the U.S. Census Bureau; |
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| • | the “Charlotte, North Carolina market,” we are referring to the Charlotte, North Carolina Metropolitan Statistical Area, as defined by the U.S. Census Bureau; |
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| • | “orders” or “sales,” we are referring to fully executed contracts with buyers of our homes, excluding contracts that were executed and cancelled; |
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| • | “settlements” or “deliveries,” we are referring to the transfer of title of a home to a buyer; and |
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| • | “backlog,” we are referring to orders for homes for which there has not yet been a settlement. Our backlog equals total orders less total deliveries. |
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Our Business
We areComstock Holding Companies, Inc. is a residentialmulti-faceted real estate developer that hasdevelopment and services company focused on the Washington, D.C. metropolitan area. We have substantial experience with building a diverse range of for-sale products including multi-family units, single-family homes, townhouses, mid- andmid-rise condominiums, high-rise multi-family condominiums and mixed-use developments(residential and commercial) developments. We believe that our significant experience over the past 28 years within the Washington D.C. market provides us the experience necessary to identify attractive opportunities in our core market. We believe that our focus in the Washington, D.C. market, which has historically been characterized by economic conditions less volatile than many other major homebuilding markets, should provide us with an opportunity to generate attractive returns on investment and for growth.
Our expertise in developing traditional and non-traditional housing products enables us to focus on a wide range of opportunities within our core market. We build homes and multi-family buildings in suburban communities, where we focus on low density products such as single family detached homes, townhomes and mid-rise multi-family buildings, and in urban areas, where we focus on high density urban infill areas.multi-family and mixed use products. For our homebuilding operations, we develop properties with the intent that they be sold either as fee-simple properties or condominiums to individual unit buyers or as investment properties sold to private or institutional investors. Our homebuilding products are designed to attract first-time, early move-up and secondary move-up buyers. We focus on geographic areas, products andthat we are able to offer for sale in the middle price points where we believe there is significant demand for new housing and potential for above average returns. We currently develop and build inwithin the Washington, D.C., Raleigh, North Carolina, Charlotte, North Carolina, Myrtle Beach, South Carolina and Atlanta, Georgia markets where we target a diverse range of buyers, including first-time, early move-up, secondary move-up, empty nester move-downoperate, avoiding the very low-end and active adult home buyers.high-end products. We believe our middle market strategy positions our products such that these buyers representthey are affordable to a significant and stable segment of thepotential home buyers in our markets. Since our founding in 1985, we have builtmarket. Our apartment buildings are developed as rental properties to be held and delivered over 3,375 homes valued at over $866.0 million.
Over the past several years we have successfully expanded our business model to include the development of landoperated for our home building operations as a complementown purposes, converted at some point to the purchasing of finished building lots developed by others. Our markets have generally been characterized by strong population and economic growth trends that have led to strong demand for housing. In addition, we have recently expanded into the development, redevelopment and construction of residential mid- and high-risefor-sale condominium complexes in our core market of the Washington, D.C. area. We believe that these markets provide attractive long-term growth opportunities.
Our Markets
We operate in the Washington, D.C., Raleigh, North Carolina, Charlotte, North Carolina, Myrtle Beach, South Carolina and Atlanta, Georgia markets. We believe that the new home markets in our markets are characterized by consistent demand and a limited supply of available housing. Based on our experience, we believe that in the home building industry, local economic trends and influences have a more significant impact on supply and demand, and therefore on profitability, than national economic trends and influences. According to the National Association of Home Builders, the Washington, D.C., Raleigh, North Carolina, Charlotte, North Carolina and Atlanta, Georgia metropolitan areas are each ranked in the top 25 housing markets in the country based upon single-family residential building permits issued in 2005. The Washington, D.C. metropolitan area is ranked in the top 10 housing markets in the country based upon multi-family building permits issued in 2005 and the Atlanta, Georgia market was ranked first in the country based upon residential building permits issued in 2004.
Our Growth Strategy
Our business strategy is to focus on geographic areas, products and price points where we believe there is a significant demand for new housing and high profit potential. Our strategy has the following key elements:
Build in and expand with the strong growth markets within the Mid-Atlantic and Southeast regions. We believe there are significant opportunities for growth in our existing markets. We plan to maintain our business in our current markets to capitalize on the robust economies and continued population growth of these areas. We expect the growth in these markets to continue. We plan to utilize our strong regional presence and our extensive experience in these markets to expand our operations in both markets through acquisition of additional land, and we may acquire local home builders whose operations would complement ours and enhance our competitive position in the marketplace. We intend to continue to expand into selected new geographic markets in the Mid-Atlantic and Southeast United States through acquisitions of other home builders that have strategic land positions, strong local management teams, access to land and subcontractors and sound operating principles. We expect to target new markets that have favorable demographic and economic trends where we believe we will be able to achieve sufficient scale to successfully implement our business strategy. We are currently evaluating several expansion opportunities.
Acquire and develop a land inventory with potential for above-average marginsunits or returns. We believe that our market knowledge and experience in land entitlement and development enable us to
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successfully identify attractive land acquisition opportunities, efficiently manage the process of obtaining development rights and maximize land value. We have the expertise to acquire land positions in various stages of the entitlement and development process, which we believe provides us more opportunities to build land inventory than many of our competitors. We intend to continue to utilize our land acquisition and development process to further develop an attractive land inventory. As a complement to our development strategy, we will continue to grow our land inventory through acquisition of finished lots from other developers. We believe our network of relationships and broad recognition in our core markets gives us an advantage over some of our competitors in acquiring finished lots. In addition, since we can often acquire options on large numbers of finished lots with minimal deposits, this strategy allows us to cost-effectively control significant land positions with reduced risk. As such, we intend to continue to option land positions whenever possible.
Create opportunities in areas overlooked by our competitors. We believe there is a significant market opportunity for well-designed, quality homes and condominiums in urban and suburban areas in close proximity to transportation facilities. Local governments in our markets, especially the Washington, D.C. market, have modified zoning codes in response to mounting traffic concerns to allow for high-density residential development near transportation improvements. In our experience, buyers place a premium on new homes in developments within these areas. We believe that our townhouse and condominium products, along with our substantial experience in dealing with both the market and regulatory requirements of urban mixed-use developments, enable us to identify and create value in land parcels often overlooked by larger production home builders. As a result, we believe we can achieve better returns on our capital than larger production home builders who are only focused on volume. We plan to continue to focus on developing and creating these opportunities within our core markets.
Focussold on a broad segment of the home buying market. Our single-family homes, townhouses and condominiums are designed and priced to appeal to a wide segment of the home buying market. We serve a broad customer base including first-time, early move-up, secondary move-up, empty nester move-down and active adult home buyers. We refer to this as “middle market.” We believe first-time and earlymove-up home buyers are a significant portion of home buyers and have in the past, we believe, been more resistant to market downturns. We believe that the aging of the American population makes it more likely that a significant percentage of the population will continue to be attracted to secondary move-up, empty nester move-down and active adult products as well. We expect our diversified product offerings to position us to benefit from the projected population growth in our core markets and provide a degree of protection against market fluctuations.
Expand into the growing active adult market. Many localities are adopting zoning rules that encourage construction of mixed-use and active adult developments. We expect the large and aging baby boom population in the United States to fuel growth in the active adult market of the home building industry. As the baby boom generation ages, we anticipate that housing developments focused on this population will capture a larger share of the market. We believe this growing segment of the population will also likely be attracted to the urban convenience and activities available in upscale urban active adult developments. Active adult developments are often favored by local governments because they increase the tax base while requiring fewer government-funded services and infrastructure, such as schools and summer programs, as compared to traditional developments that attract families. We believe that we are well positioned to take advantage of this growing demand.
Maximize our economies of scale. We apply a production home builder approach to all of our product categories. In many instances, we utilize plans we have built numerous times which allows us to minimize cost through value engineering resulting from previous field experience. We are also able to coordinate labor and material purchasing under bulk contracts thereby reducing unit costs. As a result, we are able to realize economies of scale in the purchase of raw materials, supplies, manufactured inputs and
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labor. As we expand, we will seek to maximize these benefits through purchasing arrangements with national and regional vendors.
Our Company
We were incorporated in May 2004. Our business was started in 1985 by Christopher Clemente, our Chairman and Chief Executive Officer, as a residential land developer and home builder focused on the upscale home market in the Northern Virginia suburbs of Washington, D.C. Prior to our initial public offering in December 2004, we operated our business through four primary holding companies. In connection with our initial public offering, these primary holding companies were consolidated and merged into Comstock HomebuildingHolding Companies, Inc.
Our principal executive offices are located at 11465 Sunset Hills Road, 5th1886 Metro Center Drive, 4th Floor, Reston, Virginia 20190, and our telephone number is(703) 883-1700. Our Web sitewebsite iswww.comstockhomebuilding.com. Information http://comstockhomes.com. Our website, and the information contained on our Web siteit, does not constitute a part of this prospectus.
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The Securities We May Offer
With this prospectus, we may offer common stock, preferred stock, various series of debt securities and warrants to purchase any of such securities, separately or together in any combination of the foregoing for total gross proceeds of up to $25,000,000, from time to time under this prospectus. Each time we offer securities with this prospectus, we will provide offerees with a prospectus supplement that will contain the specific terms of the securities being offered. The following is a summary of the securities we may offer with this prospectus.
RISK FACTORS
This offeringWe may sell the securities to or through underwriters, dealers or agents or directly to purchasers. We, as well as any agents acting on our behalf, reserve the sole right to accept and an investmentto reject in whole or in part any proposed purchase of securities. Each prospectus supplement will set forth the names of any underwriters, dealers or agents involved in the sale of securities described in that prospectus supplement and any applicable fee, commission or discount arrangements with them.Common Stock
We may offer shares of our Class A common stock, involvepar value $0.01 per share and/or Class B common stock, par value $0.01 per share, either alone or underlying other registered securities convertible into or exchangeable for our common stock. Holders of our common stock are entitled to such dividends as our board of directors may declare from time to time out of legally available funds, subject to the preferential rights of the holders of any shares of our preferred stock that are outstanding or that we may issue in the future. Currently, we do not pay any dividends. Each holder of our Class A common stock is entitled to one vote per share. Each holder of our Class B common stock is entitled to 15 votes per share. Generally, all holders of common stock vote together as a single class with respect to all matters submitted to a vote of holders of shares of common stock. Holders of our common stock receive no preemptive rights under our charter documents. Upon liquidation, dissolution or winding up, holders of our common stock are entitled to share ratably in all assets remaining after payment of liabilities and the liquidation preferences of any outstanding shares of preferred stock. In this prospectus, we have summarized certain general features of our common stock under “Description of Securities We May Offer — Description of Capital Stock — Common Stock.” We urge you, however, to read the applicable prospectus supplement (and any related free writing prospectus that we may authorize to be provided to you) related to any common stock being offered.
Preferred Stock
We may issue shares of our preferred stock in one or more classes or series. Our board of directors or a committee designated by our board of directors will determine the designations, voting powers, preferences and rights of the preferred stock, as well as the qualifications, limitations or restrictions thereof, including dividend rights, conversion rights, preemptive rights, terms of redemption or repurchase, liquidation preferences and the number of shares constituting any series or the designation of any series. Convertible preferred stock will be convertible into our common stock or exchangeable for other securities. Conversion may be mandatory or at your option and would be at prescribed conversion rates.
If we sell any series of preferred stock under this prospectus and the applicable prospectus supplement, we will fix the designations, voting powers, preferences and rights of the preferred stock of each series we issue under this prospectus, as well as the qualifications, limitations or restrictions thereof, in the certificate of designation relating to that series. We will file as an exhibit to the registration statement of which this prospectus is a part, or will incorporate by reference from reports that we file with the SEC, the form of any certificate of designation that contains the terms of the series of preferred stock we are offering. In this prospectus, we have summarized certain general features of the preferred stock under “Description of Securities We May Offer — Description of Capital Stock — Preferred Stock.” We urge you, however, to read the applicable prospectus supplement (and any related free writing prospectus that we may authorize to be provided to you) related to the series of preferred stock being offered, as well as the complete certificate of designation that contains the terms of the applicable series of preferred stock.
Debt Securities
We may issue debt securities from time to time, in one or more series, as either senior or subordinated debt or as senior or subordinated convertible debt. The senior debt securities will rank equally with any other unsecured and unsubordinated debt. The subordinated debt securities will be subordinate and junior in right of payment, to the extent and in the manner described in the instrument governing the debt, to all of our senior indebtedness. Convertible debt securities will be convertible into or exchangeable for our common stock or other securities. Conversion may be mandatory or at your option and would be at prescribed conversion rates.
Any debt securities issued under this prospectus and the applicable prospectus supplement will be issued under one or more documents called indentures, which are contracts between us and a national banking association or other eligible party, as trustee. In this prospectus, we have summarized certain general features of the debt securities under “Description of Securities We May Offer — Description of Debt Securities”. We urge you, however, to read the applicable prospectus supplement (and any free writing prospectus that we may authorize to be provided to you) related to the series of debt securities being offered, as well as the complete indentures that contain the terms of the debt securities. Forms of indentures and forms of debt securities containing the terms of the debt securities being offered will be filed as exhibits to the registration statement of which this prospectus is a part or will be incorporated by reference from reports that we file with the SEC.
Warrants
We may issue warrants for the purchase of common stock, preferred stock and/or debt securities in one or more series. We may issue warrants independently or in combination with common stock, preferred stock and/or debt securities. In this prospectus, we have summarized certain general features of the warrants under “Description of Securities We May Offer — Description of Warrants.” We urge you, however, to read the applicable prospectus supplement (and any related free writing prospectus that we may authorize to be provided to you) related to the particular series of warrants being offered, as well as any warrant agreements and warrant certificates that contain the terms of the warrants. We will file as exhibits to the registration statement of which this prospectus is a part, or will incorporate by reference from reports that we file with the SEC, the form of warrant and/or the warrant agreement and warrant certificate, as applicable, that contain the terms of the particular series of warrants we are offering, and any supplemental agreements, before the issuance of such warrants.
Any warrants issued under this prospectus may be evidenced by warrant certificates. Warrants also may be issued under an applicable warrant agreement that we enter into with a warrant agent. We will indicate the name and address of the warrant agent, if applicable, in the prospectus supplement relating to the particular series of warrants being offered.
RISK FACTORS
Investing in our securities involves a high degree of risk. YouBefore purchasing our securities, you should carefully consider the following risks and all other information containedrisk factors we describe in any prospectus supplement, in any related free writing prospectus that we may authorize to be provided to you or in any report incorporated by reference into this prospectus before purchasingor such prospectus supplement, including our Class A common stock. If anyAnnual Report on Form 10-K for the year ended December 31, 2013. See “Where You Can Find More Information” for an explanation of the followinghow to get a copy of this report. Although we discuss key risks actually occur, our business, financial condition and results of operations could be materially and adversely affected, the value of our stock could decline, and you may lose all or part of your investment. Thein those risk factor descriptions, additional risks and uncertainties described below are those that wenot currently believe may materially affect us. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations.
Risks Relatingbusiness. Our subsequent filings with the SEC may contain amended and updated discussions of significant risks. We cannot predict future risks or estimate the extent to Our Business
We engage in construction and real estate activities which are speculative and involve a high degree of risk.
The home building industry is speculative and is significantly affected by changes in economic and other conditions, such as:
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| • | employment levels; |
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| • | availability of financing; |
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| • | interest rates; and |
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| • | consumer confidence. |
These factors can negatively affect the demand for and pricing of our homes and our margin on sale. We are also subject to a number of risks, many of which are beyond our control, including:
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| • | delays in construction schedules; |
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| • | cost overruns; |
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| • | changes in governmental regulations (such as slow- or no-growth initiatives); |
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| • | increases in real estate taxes and other local government fees; |
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| • | labor strikes; |
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| • | transportation costs for delivery of materials; and |
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| • | increasesand/or shortages in raw materials and labor costs. |
Fluctuations in market conditionsthey may affect our ability to sell our land and home inventories at expected prices, if at all, which could adversely affect our revenues, earnings and cash flows.
We are subject tofinancial performance. Please also read carefully the potential for significant fluctuations in the market value of our land and home inventories. We must constantly locate and acquire new tracts of undeveloped and developed land to support our home building operations. There is a lag between the time we acquire control of undeveloped land or developed home sites and the time that we can bring the communities built on that land to market and deliver our homes. This lag time varies from site to site as it is impossible to determine in advance the length of time it will take to obtain governmental approvals and building permits. The risk of owning undeveloped land, developed land and homes can be substantial. The market value of undeveloped land, buildable lots and housing inventories can fluctuate significantly as a result of changing economic and market conditions. Inventory carrying costs can be significant and can result in losses in a poorly performing development or market. Material write-downs of the estimated value of our land and home inventories could occur if market conditions deteriorate or if we purchase land or build home inventories at higher prices during stronger economic periods and the value of those land or home inventories subsequently declines during weaker economic periods. We could also be forced to sell homes, land or lots for prices that generate lower profit than we anticipate, or at a loss, and may not be able to dispose of an investment in a timely manner when we find dispositions advantageous or necessary. Furthermore, a decline in the market value of our land or home
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inventories may give rise to a breach of financial covenants contained in one or more of our credit facilities, which could cause a default under those credit facilities.
Home prices and sales activities in the Washington, D.C., Raleigh, North Carolina and Atlanta, Georgia geographic markets have a large impact on our profitability because we conduct substantially all of our business in these markets.
Home prices and sales activities in the Washington, D.C., Raleigh, North Carolina and Atlanta, Georgia geographic markets have a large impact on our profitability because we conduct substantially all of our business in these markets. Recently these markets have begun to exhibit signs of decreasing consumer demand. Although demand in these geographic areas historically has been strong, increased rates of home price appreciation may reduce the likelihood of consumers seeking to purchase new homes which would likely have a negative impact on the pace at which we receive orders for new homes. This could adversely affect our results of operations and cash flows.
Because our business depends on the acquisition of new land, the potential limitations on the supply of land could reduce our revenues or negatively impact our results of operations and cash flows.
Due to increased demand for new homes, we have experienced an increase in competition for available land and developed home sites in the Washington, D.C., Raleigh, North Carolina and Atlanta, Georgia markets. In these markets, we have experienced competition for home sites from other, sometimes better capitalized, home builders. In the Raleigh, North Carolina market, we have recently experienced competition from large, national home builders entering the market. Our ability to continue our home building activities over the long term depends upon our ability to locate and acquire suitable parcels of land or developed home sites to support our home building operations. As competition for land increases, the cost of acquiring it may rise, and the availability of suitable parcels at acceptable prices may decline. The increased cost of land requires us to increase the prices of our homes. This increased pricing could reduce demand for our homes and, consequently, reduce the number of homes we sell and lead to a decrease in our revenues, earnings and cash flows.
Our business is subject to governmental regulations that may delay, increase the cost of, prohibit or severely restrict our development and home building projects and reduce our revenues and cash flows.
We are subject to extensive and complex laws and regulations that affect the land development and home building process, including laws and regulations related to zoning, permitted land uses, levels of density (number of dwelling units per acre), building design, access to water and other utilities, water and waste disposal and use of open spaces. In addition, we and our subcontractors are subject to laws and regulations relating to worker health and safety. We also are subject to a variety of local, state and federal laws and regulations concerning the protection of health and the environment. In some of our markets, we are required to pay environmental impact fees, use energy saving construction materials and give commitments to provide certain infrastructure such as roads and sewage systems. We must also obtain permits and approvals from local authorities to complete residential development or home construction. The laws and regulations under which we and our subcontractors operate, and our and their obligations to comply with them, may result in delays in construction and development, cause us to incur substantial compliance and other increased costs, and prohibit or severely restrict development and home building activity in certain areas in which we operate. If we are unable to continue to develop communities and build and deliver homes as a result of these restrictions or if our compliance costs increase substantially, our revenues, earnings and cash flows may be reduced.
Cities and counties in which we operate have adopted, or may adopt, slow or no-growth initiatives that would reduce our ability to build and sell homes in these areas and could adversely affect our revenues, earnings and cash flows.
From time to time, certain cities and counties in which we operate have approved, and others in which we operate may approve, various “slow-growth” or “no-growth” initiatives and other similar ballot measures. Such initiatives restrict development within localities by, for example, limiting the number of building permits
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available in a given year. Approval of slow- or no-growth measures could reduce our ability to acquire land, obtain building permits and build and sell homes in the affected markets and could create additional costs and administration requirements, which in turn could have an adverse effect on our revenues, earnings and cash flows.
Increased regulation in the housing industry increases the time required to obtain the necessary approvals to begin construction and has prolonged the time between the initial acquisition of land or land options and the commencement and completion of construction. These delays increase our costs, decrease our profitability and increase the risks associated with the land inventories we maintain.
Municipalities may restrict or place moratoriums on the availability of utilities, such as water and sewer taps. If municipalities in which we operate take actions like these, it could have an adverse effect on our business by causing delays, increasing our costs or limiting our ability to build in those municipalities. This, in turn, could reduce the number of homes we sell and decrease our revenues, earnings and cash flows.
Our ability to sell homes, and, accordingly, our results of operations, will be affected by the availability of financing to potential home buyers.
Most home buyers finance their purchases through third-party mortgage financing. Real estate demand is generally adversely affected by:
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| • | increases in interest ratesand/or related fees; |
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| • | increases in real estate transaction closing costs; |
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| • | decreases in the availability of mortgage financing; |
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| • | increasing housing costs; |
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| • | unemployment; and |
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| • | changes in federally sponsored financing programs. |
Increases in interest rates or decreases in the availability of mortgage financing could depress the market for new homes because of the increased monthly mortgage costs or the unavailability of financing to potential home buyers. Even if potential home buyers do not need financing, increases in interest rates and decreased mortgage availability could make it harder for them to sell their homes. This could adversely affect our operating results and financial condition.
The competitive conditions in the home building industry could increase our costs, reduce our revenues and earnings and otherwise adversely affect our results of operations and cash flows.
The home building industry is highly competitive and fragmented. We compete in each of our markets with a number of national, regional and local builders for customers, undeveloped land and home sites, raw materials and labor. For example, in the Washington, D.C. market, we compete against approximately 15 to 20 publicly-traded national home builders, approximately 10 to 15 privately-owned regional home builders, and many local home builders, some of whom are very small and may build as few as five to 25 homes per year. We do not compete against all of the builders in our geographic markets in all of our product types or submarkets, as some builders focus on particular types of projects within those markets, such as large estate homes, that are not in competition with our projects.
We compete primarily on the basis of price, location, design, quality, service and reputation. Some of our competitors have greater financial resources, more established market positions and better opportunities for land and home site acquisitions than we do and have lower costs of capital, labor and material than us. The competitive conditions in the home building industry could, among other things:
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| • | make it difficult for us to acquire suitable land or home sites in desirable locations at acceptable prices and terms, which could adversely affect our ability to build homes; |
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| • | require us to increase selling commissions and other incentives, which could reduce our profit margins; |
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| • | result in delays in construction if we experience delays in procuring materials or hiring trades people or laborers; |
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| • | result in lower sales volume and revenues; and |
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| • | increase our costs and reduce our earnings. |
We also compete with resales of existing homes and condominiums and available rental housing. An oversupply of competitively priced resale or rental homes in our markets could adversely affect our ability to sell homes profitably.
Our business is concentrated in a few geographic areas which increases our exposure to localized risks.
We currently develop and sell homes principally in the Washington, D.C., Raleigh, North Carolina and Atlanta, Georgia. Our limited geographic diversity means that adverse general economic, weather or other conditions in either of these markets could adversely affect our results of operations and cash flows or our ability to grow our business.
Our growth strategy to expand into new geographic areas poses risks.
We may expand our business into new geographic areas outside of the Washington, D.C., Raleigh, North Carolina and Atlanta, Georgia markets. We will face additional risks if we develop communities in geographic areas or climates in which we do not have experience or if we develop a different size or style of community than those currently being developed, including:
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| • | adjusting our construction methods to different geographies and climates; |
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| • | obtaining the necessary construction materials and labor in sufficient amounts and on acceptable terms; |
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| • | obtaining necessary entitlements and permits under unfamiliar regulatory regimes; |
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| • | attracting potential customers in a market in which we do not have significant experience; and |
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| • | the cost of hiring new employees and increased infrastructure costs. |
We may not be able to successfully manage the risks of such an expansion, which could have a material adverse effect on our revenues, earnings, cash flows and financial condition.
We may not be able to successfully identify, complete or integrate acquisitions.
As part of our business strategy, we expect to continue to review acquisition prospects in our existing markets and in new markets in the Mid-Atlantic region or elsewhere that would complement our existing business, or that might otherwise offer growth opportunities. The identification, underwriting and negotiation of such deals is an ongoing process. We recently completed the acquisitions of Parker Chandler Homes, Inc. and Capitol Homes, Inc. and we are currently engaged in either discussions, negotiation or due diligence with several other homebuilders but we have not yet entered into any binding obligations to acquire any of those operations. To the extent we complete acquisitions, we may be unable to realize the anticipated benefits because of operational factors or difficulties in integrating the acquisitions with our existing business. Acquisitions entail numerous risks, including, but not limited to:
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| • | difficulties in assimilating acquired management and operations; |
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| • | risks associated with investing the necessary resources in order to achieve profitability; |
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| • | the incurrence of significant due diligence expenses relating to acquisitions that are not completed; |
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| • | unforeseen expenses and liabilities; |
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| • | risks associated with entering new markets or sub-markets in which we have limited or no prior experience; |
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| • | the diversion of our management’s attention from our current business; |
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| • | the potential loss of key employees, including senior executives, of acquired organizations; and |
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| • | risks associated with transferred assets and liabilities. |
We may not be able to acquire or manage profitably additional businesses, or to integrate successfully any acquired businesses, properties or personnel into our business, without substantial costs, delays or other operational or financial difficulties. Our failure to do so could have a material adverse effect on our business, financial condition, results of operations and cash flows.
We are dependent on the services of certain key employees and the loss of their services could harm our business.
Our success largely depends on the continuing services of certain key employees, including our Chairman and Chief Executive Officer, Christopher Clemente, Gregory Benson, our President and Chief Operating Officer, and Bruce Labovitz, our Chief Financial Officer. Our continued success also depends on our ability to attract and retain qualified personnel. We believe that Messrs. Clemente, Benson and Labovitz each possesses valuable industry knowledge, experience and leadership abilities that would be difficult in the short term to replicate. The loss of these or other key employees could harm our operations, business plans and cash flows.
Our growth requires additional capital, which may not be available.
The real estate development industry is capital intensive and requires significant expenditures for land purchases, land development and construction as well as potential acquisitions of other homebuilders. In order to execute our growth strategy, we anticipate that we will need to obtain additional financing as we expand our operations. These funds may be obtained through public or private debt or equity financings, additional bank borrowings or from strategic alliances or joint ventures. We may not be successful in obtaining additional funds in a timely manner, on favorable terms or at all. Moreover, certain of our bank financing agreements contain provisions that limit the type and amount of debt we may incur in the future without our lenders’ consent. In addition, the availability of borrowed funds, especially for land acquisition and construction financing, may be greatly reduced, and lenders may require us to invest increased amounts of equity in a project in connection with both new loans and the extension of existing loans. If we do not have access to additional capital, we may be required to delay, scale back or abandon some or all of our acquisition plans or growth strategies or reduce capital expenditures and the size of our operations and as a result may experience a material adverse affect on our business, results of operations and cash flows.
Our growth depends on the availability of construction, acquisition and development loans.
Currently, we have multiple construction, acquisition and development loans. We are considering replacing these credit facilities with one or more larger facilities, which may reduce our aggregate debt financing costs. If we are unable to obtain a larger facility, we will need to continue to rely on our smaller credit facilities. These smaller credit facilities generally have higher costs and require significant management time to administer them. Additionally, if financial institutions decide to discontinue providing these facilities to us, we would lose our primary source of financing our operations or the cost of retaining or replacing these credit facilities could increase dramatically. Further, this type of financing is typically characterized by short-term loans which are subject to call. If our primary financing becomes unavailable or accelerated repayment is demanded, we may not be able to meet our obligations.
A significant portion of our business plan involves construction of mixed-use developments and high-rise projects with which we have less experience.
We expect to increase our construction and development of mixed-use and high-rise residential projects. Our experience is largely based on smaller wood-framed structures that are less complex than high-rise construction or the development of mixed-use projects. A mixed-use project is one that integrates residential and non-residential uses in the same structure or in close proximity to each other, on the same land. As we expand into these new product types, we expect to encounter operating, marketing, customer service, warranty and management challenges with which we have less familiarity. Although we have expanded our management
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team to include individuals with significant experience in this type of real estate development, we have not completed any projects managed by these persons. If we are unable to successfully manage the challenges of this portion of our business, we may incur additional costs and our results of operations and cash flows could be adversely affected.
If we experience shortages of labor or supplies or other circumstances beyond our control, there could be delays or increased costs in developing our projects, which would adversely affect our operating results and cash flows.
We and the home building industry from time to time may be affected by circumstances beyond our control, including:
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| • | work stoppages, labor disputes and shortages of qualified trades people, such as carpenters, roofers, electricians and plumbers; |
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| • | lack of availability of adequate utility infrastructure and services; |
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| • | transportation cost increases; |
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| • | our need to rely on local subcontractors who may not be adequately capitalized or insured; and |
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| • | shortages or fluctuations in prices of building materials. |
These difficulties have caused and likely will cause unexpected construction delays and short-term increases in construction costs. In an attempt to protect the margins on our projects, we often purchase certain building materials with commitments that lock in the prices of these materials for 90 to 120 days or more. However, once the supply of building materials subject to these commitments is exhausted, we are again subject to market fluctuations and shortages. We may not be able to recover unexpected increases in construction or materials costs by raising our home prices because, typically, the price of each home is established at the time a customer executes a home sale contract. Furthermore, sustained increases in construction costs may, over time, erode our profit margins and may adversely affect our results of operations and cash flows.
We depend on the availability and skill of subcontractors.
Substantially all of our construction work is done by subcontractors with us acting as the general contractor or by subcontractors working for a general contractor we select for a particular project. Accordingly, the timing and quality of our construction depends on the availability and skill of those subcontractors. We do not have long-term contractual commitments with subcontractors or suppliers. Although we believe that our relationships with our suppliers and subcontractors are good, we cannot assure that skilled subcontractors will continue to be available at reasonable rates and in the areas in which we conduct our operations. The inability to contract with skilled subcontractors or general contractors at reasonable costs on a timely basis could limit our ability to build and deliver homes and could erode our profit margins and adversely affect our results of operations and cash flows.
Product liability litigation and claims that arise in the ordinary course of business may be costly or negatively impact sales, which could adversely affect our results of operations and cash flows.
Our home building business is subject to construction defect and product liability claims arising in the ordinary course of business. These claims are common in the home building industry and can be costly. Among the claims for which developers and builders have financial exposure are property damage, environmental claims and bodily injury claims. Damages awarded under these suits may include the costs of remediation, loss of property and health-related bodily injury. In response to increased litigation, insurance underwriters have attempted to limit their risk by excluding coverage for certain claims associated with environmental conditions, pollution and product and workmanship defects. As a developer and a home builder, we may be at risk of loss for mold-related property, bodily injury and other claims in amounts that exceed available limits on our comprehensive general liability policies. In addition, the costs of insuring against
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construction defect and product liability claims are high and the amount of coverage offered by insurance companies is limited. Uninsured product liability and similar claims, claims in excess of the limits under our insurance policies and the costs of obtaining insurance to cover such claims could have a material adverse effect on our revenues, earnings and cash flows.
Increased insurance risk could negatively affect our business, results of operations and cash flows.
Insurance and surety companies have reassessed many aspects of their business and, as a result, may take actions that could negatively affect our business. These actions could include increasing insurance premiums, requiring higher self-insured retentions and deductibles, requiring additional collateral on surety bonds, reducing limits, restricting coverages, imposing exclusions, and refusing to underwrite certain risks and classes of business. Any of these actions may adversely affect our ability to obtain appropriate insurance coverage at reasonable costs, which could have a material adverse effect on our business. Additionally, coverage for certain types of claims, such as claims relating to mold, is generally unavailable. Further, we rely on surety bonds, typically provided by insurance companies, as a means of limiting the amount of capital utilized in connection with the public improvement sureties that we are required to post with governmental authorities in connection with land development and construction activities. The cost of obtaining these surety bonds is, from time to time, unpredictable and on occasion these surety bonds are unavailable. These factors can delay commencement of development projects and adversely affect revenue, earnings and cash flows.
We are subject to warranty claims arising in the ordinary course of business that could be costly.
We provide service warranties on our homes for a period of one year or more post closing and a structural warranty for five years post closing. We self-insure all of our warranties and reserve an amount we believe will be sufficient to satisfy any warranty claims on homes we sell. We also attempt to pass much of the risk associated with potential defects in materials and workmanship on to the subcontractors performing the work and the suppliers and manufacturers of the materials. In such cases, we still may incur unanticipated costs if a subcontractor, supplier or manufacturer fails to honor its obligations regarding the work or materials it supplies to our projects. If the amount of actual claims materially exceeds our aggregate warranty reservesand/or the amounts we can recover from our subcontractors and suppliers, our operating results and cash flows would be adversely affected.
Our business, revenues, earnings and cash flows may be adversely affected by adverse weather conditions or natural disasters.
Adverse weather conditions, such as extended periods of rain, snow or cold temperatures, and natural disasters, such as hurricanes, tornadoes, floods and fires, can delay completion and sale of homes, damage partially complete or other unsold homes in our inventoryand/or decrease the demand for homes or increase the cost of building homes. To the extent that natural disasters or adverse weather events occur, our business and results may be adversely affected. To the extent our insurance is not adequate to cover business interruption losses or repair costs resulting from these events, our revenues, earnings and cash flows may be adversely affected.
We are subject to certain environmental laws and the cost of compliance could adversely affect our business, results of operations and cash flows.
As a current or previous owner or operator of real property, we may be liable under federal, state, and local environmental laws, ordinances and regulations for the costs of removal or remediation of hazardous or toxic substances on, under or in the properties or in the proximity of the properties we develop. These laws often impose liability whether or not we knew of, or were responsible for, the presence of such hazardous or toxic substances. The cost of investigating, remediating or removing such hazardous or toxic substances may be substantial. The presence of any such substance, or the failure promptly to remediate any such substance, may adversely affect our ability to sell the property, to use the property for our intended purpose, or to borrow funds using the property as collateral. In addition, the construction process involves the use of hazardous and toxic materials. We could be held liable under environmental laws for the costs of removal or remediation of
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such materials. In addition, our existing credit facilities also restrict our access to the loan proceeds if the properties that are used to collateralize the loans are contaminated by hazardous substances and require us to indemnify the bank against losses resulting from such occurrence for significant periods of time, even after the loan is fully repaid.
Our Eclipse project is part of a larger development located at Potomac Yard in northern Virginia. Potomac Yard was formerly part of a railroad switching yard contaminated by rail-related activities. Remediation of the property was conducted under supervision of the U.S. Environmental Protection Agency, or EPA, in coordination with state and local authorities. In 1998, federal, state and local government agencies authorized redevelopment of the property. Our plans for development of our portion of the project are consistent with those authorizations. Although concentrations of contaminants remain on the property under the EPA-approved remediation work plan, the EPA has determined that they do not present an unacceptable risk to human health or the environment. However, it is possible that we could incur some costs to defend against any claims that might be brought in the future relating to any such contaminants.
If we are not able to develop our communities successfully, our earnings and cash flows could be diminished.
Before a community generates any revenues, material expenditures are required to acquire land, to obtain development approvals and to construct significant portions of project infrastructure, amenities, model homes and sales facilities. It can take a year or more for a community development to achieve cumulative positive cash flow. Our inability to develop and market our communities successfully and to generate positive cash flows from these operations in a timely manner would have a material adverse effect on our ability to service our debt and to meet our working capital requirements.
Our operating results may vary.
We expect to experience variability in our revenues and net income. Factors expected to contribute to this variability include, among other things:
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| • | the uncertain timing of real estate closings; |
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| • | our ability to continue to acquire additional land or options thereon on acceptable terms and the timing of all necessary regulatory approvals required for development; |
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| • | the condition of the real estate market and the general economy in the markets in which we operate; |
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| • | the cyclical nature of the home building industry; |
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| • | the changing regulatory environment concerning real estate development and home building; |
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| • | changes in prevailing interests rates and the availability of mortgage financing; and |
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| • | costs of material and labor and delays in construction schedules. |
The volume of sales contracts and closings typically varies from month to month and from quarter to quarter depending on several factors, including the stages of development of our projects, weather and other factors beyond our control. In the early stages of a project’s development, we incur significantstart-up costs associated with, among other things, project design, land acquisition and development, construction and marketing expenses. Since revenues from sales of properties are generally recognized only upon the transfer of title at the closing of a sale, no revenue is recognized during the early stages of a project unless land parcels or residential homesites are sold to other developers. Periodic sales of properties may be insufficient to fund operating expenses. Further, if sales and other revenues are not adequate to cover operating expenses, we will be required to seek sources of additional operating funds. Accordingly, our financial results will vary from community to community and from time to time.
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Acts of war or terrorism may seriously harm our business.
Acts of war, any outbreak or escalation of hostilities between the United States and any foreign power or acts of terrorism, may cause disruption to the U.S. economy, or the local economies of the markets in which we operate, cause shortages of building materials, increase costs associated with obtaining building materials, result in building code changes that could increase costs of construction, affect job growth and consumer confidence, or cause economic changes that we cannot anticipate, all of which could reduce demand for our homes and adversely impact our revenues, earnings and cash flows.
Being a public company increases our administrative costs.
We completed our initial public offering in December 2004 and a follow-on offering in June 2005. As a public company, we incur significant legal, accounting and other expenses that we did not incur as a private company. In addition, the Sarbanes-Oxley Act of 2002, as well as new rules subsequently implemented by the Securities and Exchange Commission, have required changes in corporate governance practices of public companies. In addition to final rules and rule proposals already made by the Securities and Exchange Commission, the National Association of Securities Dealers, or NASD, has adopted revisions to its requirements for companies that are listed on the Nasdaq National Market. We expect these new rules and regulations to increase our legal and financial compliance costs, and to make some activities more time consumingand/or costly. For example, in anticipation of becoming a public company we added personnel, particularly accounting staff, added independent directors, created board committees, adopted additional internal controls and disclosure controls and procedures, retained a transfer agent and a financial printer, adopted an insider trading policy and other corporate governance policies, and will have all of the internal and external costs of preparing and distributing periodic public reports in compliance with our obligations under the securities laws. We also expect these new rules and regulations to make it more expensive for us to obtain director and officer liability insurance. These new rules and regulations could also make it more difficult for us to attract and retain qualified members of our board of directors and qualified executive officers.
We do not own the Comstock brand or trademark, but use the brand and trademark pursuant to the terms of a perpetual license granted by Christopher Clemente, our Chief Executive Officer and Chairman of the Board.
Our Chief Executive Officer and Chairman of the Board, Christopher Clemente, has licensed the “Comstock” brand and trademark to us in perpetuity and free of charge. We do not own the brand or the trademark and may be unable to protect it against infringement from third parties. However, Mr. Clemente retains the right to continue using the “Comstock” brand and trademark individually and through affiliates, including in real estate development projects in our current or future markets. We will be unable to control the quality of projects undertaken by Mr. Clemente or others using the “Comstock” brand and trademark and therefore will be unable to prevent any damage to its goodwill that may occur. We will further be unable to preclude Mr. Clemente from licensing or transferring the ownership of the “Comstock” trademark to third parties, some of whom may compete against us. Consequently, we are at risk that our brand could be damaged which could have a material adverse effect on our business, operations and cash flows.
Risks Related to our Common Stock and Level of IndebtednessOur level of indebtedness may harm our financial condition and results of operations.
Our level of indebtedness will impact our future operations in many important ways, including, without limitation, by:
Requiring that a portion of our cash flows from operations be dedicated to the Securities Marketspayment of any interest or amortization required with respect to outstanding indebtedness;
Increasing our vulnerability to adverse changes in general economic and industry conditions, as well as to competitive pressure; and
Limiting our ability to obtain additional financing for working capital, acquisitions, capital expenditures, general corporate and other purposes.
At the scheduled maturity of our credit facilities or in the event of an acceleration of a debt facility following an event of default, the entire outstanding principal amount of the indebtedness under such facility, together with all other amounts payable thereunder from time to time, will become due and payable. It is possible that we may not have sufficient funds to pay such obligations in full at maturity or upon such acceleration. If we default and are not able to pay any such obligations due, our lenders have liens on substantially all of our assets and could foreclose on our assets in order to satisfy our obligations.
VolatilityOur stock price has been volatile and we expect that it will continue to be volatile.
Our stock price has been volatile, and we expect it will continue to be volatile. For example during the year ended December 31, 2013, the price of our common stock ranged from a high of $3.65 to a low of $0.48. The volatility of our stock price could adversely affect stockholders.
can be due to many factors, including:quarterly variations in our operating results;
general conditions in the home building industry;
The marketinterest rate changes;
changes in the market’s expectations about our operating results;
our operating results failing to meet the expectation of securities analysts or investors in a particular period;
changes in financial estimates and recommendations by securities analysts concerning our Company or of the home building industry in general;
operating and stock price performance of other companies that investors deem comparable to us;
news reports relating to trends in our markets;
changes in laws and regulations affecting our business;
material announcements by us or our competitors;
material announcements by our construction lenders or the manufacturers and suppliers we use;
sales of substantial amounts of our Class A common stock by our directors, executive officers or significant stockholders or the perception that such sales could fluctuate significantlyoccur; and
general economic and political conditions such as a result of:recessions and acts of war or terrorism.
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| • | quarterly variationsInvestors in our operating results; |
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| • | general conditions in the home building industry; |
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| • | interest rate changes; |
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| • | changes in the market’s expectations about our operating results; |
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| • | our operating results failing to meet the expectation of securities analysts or investors in a particular period; |
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| • | changes in financial estimates and recommendations by securities analysts concerning our Company or the home building industry in general; |
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| • | operating and stock price performance of other companies that investors deem comparable to us; |
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| • | news reports relating to trends in our markets; |
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| • | changes in laws and regulations affecting our business; |
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| • | material announcements by us or our competitors; |
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| • | material announcements by our construction lenders or the manufacturers and suppliers we use; |
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| • | sales of substantial amounts of Class A common stock by our directors, executive officers or significant stockholders or the perception that such sales could occur; and |
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| • | general economic and political conditions such as recessions and acts of war or terrorism. |
Investors may not be able to resell their shares of our Class A common stock following periods of volatility because of the market’s adverse reaction to that volatility.the volatility of the stock price. Our Class A common stock may not trade at the same levels as the stock of other homebuilders, and the market in general may not sustain its current prices.
Investors in our Class A common stock may experience dilution with the future issuances of stock, exercise of stock options and warrants, the grant of restricted stock and issuance of stock in connection with our acquisitions of other homebuilders.companies.
From time to time, we have issued and we will continue to issue stock options or restricted stock grants to employees and non-employee directors pursuant to our equity incentive plan. We expect that these options or restricted stock grants will generally vest commencing one year from the date of grant and continue vesting over a three-yearfour-year period. Investors may experience dilution as the options vest and are exercised by their holders and the restrictions lapse on the restricted stock grants. In addition, we may issue stock to raise capital to fund our growth initiatives, in connection with acquisitions of other homebuilders,companies, or warrants in connection with the settlement of obligations and or indebtedness with vendors and suppliers, which may result in investors experiencing dilution.
Substantial sales of our Class A common stock, or the perception that such sales might occur, could depress the market price of our Class A common stock.
A substantial amount of the shares of our Class A common stock are eligible for immediate resale in the public market. Any sales of substantial amounts of our Class A common stock in the public market, or the perception that such sales might occur, could depress the market price of our Class A common stock.
The holders of our Class B common stock exert control over us and thus limit the ability of other stockholders to influence corporate matters.
Messrs.Mr. Christopher Clemente, Chief Executive Officer of the Company, and Gregory V. Benson, the former President and Chief Operating Officer of the Company, own 100% of our outstanding shares of Class B common stock, which, together with their shares of Class A common stock, represent approximately 78.6%77% of the combined voting power of all classes of our voting stock.stock as of December 31, 2013. As a result, Messrs. Clemente and Benson,
acting together, have control over us, the election of our board of directors and our management and policies. Messrs. Clemente and Benson, acting together, also have control over all matters requiring stockholder approval, including the amendment of certain provisions of our amended and restated certificate of incorporation and bylaws, the approval of any equity-based employee compensation plans and the approval of fundamental corporate transactions, including mergers. In light of this control, other companies could be discouraged from initiating a potential merger, takeover or any other transaction resulting in a change of control. Such a transaction potentially could be beneficial to our business or to our stockholders. This may in turn reduce the price that investors are willing to pay in the future for shares of our Class A common stock.
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The limited voting rights of our Class A common stock could impactlimit its attractiveness to investors and its liquidity and, as a result, its market value.
The holders of our Class A common stock and Class B common stock generally have identical rights, except that holders of our Class A common stock are entitled to one vote per share and holders of our Class B common stock are entitled to 15 votes per share on all matters to be voted on by stockholders. The difference in the voting rights of the Class A common stock and Class B common stock could diminish the value of the Class A common stock to the extent that investors or any potential future purchasers of our Class A common stock ascribe value to the superior voting rights of the Class B common stock.
It may be difficult for a third party to acquire us, which could inhibit stockholders from realizing a premium on their stock price.
We are subject to the Delaware anti-takeover laws regulating corporate takeovers. These anti-takeover laws prevent Delaware corporations from engaging in business combinations with any stockholder, including all affiliates and employees of thea stockholder, who owns 15% or more of the corporation’s outstanding voting stock, for three years following the date that the stockholder acquired 15% or more of the corporation’s voting stock unless specified conditions are met.
Our amended and restated certificate of incorporation and bylaws contain provisions that have the effect of delaying, deferring or preventing a change in control of us that stockholders maycould consider favorable or beneficial. These provisions could discourage proxy contests and make it more difficult for stockholders to elect directors and take other corporate actions. These provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock. These provisions include:
a staggered board of directors, so that it would take three successive annual meetings to replace all directors;
a prohibition of stockholder action by written consent; and
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| • | a staggered board of directors, so that it would take three successive annual meetings to replace all directors; |
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| • | a prohibition of stockholder action by written consent; and |
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| • | advance notice requirements for the submission by stockholders of nominations for election to the board of directors and for proposing matters that can be acted upon by stockholders at a meeting. |
advance notice requirements for the submission by stockholders of nominations for election to the board of directors and for proposing matters that can be acted upon by stockholders at a meeting.
For additional information about the anti-takeover provisions, see “Description of Securities We May Offer — Description of Capital Stock — Anti-Takeover Effects of Certain Provisions of Delaware Law and Our Certificate of Incorporation and Bylaws,” below.
Our issuance of shares of preferred stock could delay or prevent a change of control of us.
Our board of directors has the authority to cause us to issue, without any further vote or action by the stockholders, up to 20,000,000 shares of preferred stock, par value $.01$0.01 per share, in one or more series, to designate the number of shares constituting any series, and to fix the rights, preferences, privileges and restrictions thereof, including dividend rights, voting rights, rights and terms of redemption, redemption price or prices and liquidation preferences of such series. The issuance of shares of preferred stock may have the effect of delaying, deferring or preventing a change in control of us without further action by the stockholders, even where stockholders are offered a premium for their shares. The issuance of shares of preferred stock with voting and conversion rights may adversely affect the voting power of the holders of Class A common stock, including the loss of voting control. We have no preferred stock currently outstanding nor do we have any present plans to issue any shares of preferred stock.
16
USE OF PROCEEDS
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
SomeUnless stated otherwise in an accompanying prospectus supplement or a free writing prospectus, we will use the net proceeds from the sale of
the statements containedour securities described in this prospectus
for general corporate purposes, which may include,
forward-looking statements. These forward-looking statements canbut are not limited to:refunding, repurchasing, retiring upon maturity or redeeming existing debt;
working capital;
capital expenditures;
acquisitions of or investments in businesses or assets, including acquisitions of inventory; and
redeeming non-controlling equity interests in the Company.
When a particular series of securities is offered, the accompanying prospectus supplement will set forth our intended use for the net proceeds received from the sale of those securities. Pending application for specific purposes, we may temporarily invest the net proceeds in short-term marketable securities.
PLAN OF DISTRIBUTION
We may sell the securities covered in this prospectus in any of three ways (or in any combination thereof):
through underwriters or dealers;
directly to a limited number of purchasers or to a single purchaser; or
through agents.
Each time that we use this prospectus to sell securities, we will also provide a prospectus supplement that contains the specific terms of the offering of the securities, including:
the name or names of any underwriters, dealers or agents and the amounts of any securities underwritten or purchased by each of them;
the nature of the obligation of such underwriter, dealer or agent to take the securities; and
the public offering price of the securities, the proceeds to us and any discounts, commissions or concessions allowed or reallowed or paid to such underwriters, dealers or agents.
Any public offering price and any discounts or concessions allowed or reallowed or paid to dealers may be changed from time to time.
If underwriters are used in the sale of any securities, the securities will be acquired by the underwriters for their own account and may be resold from time to time in one or more transactions, including negotiated transactions, at a fixed public offering price or at varying prices determined at the time of sale. The securities may be either offered to the public through underwriting syndicates represented by managing underwriters, or directly by underwriters. Generally, the underwriters’ obligations to purchase the securities will be subject to certain conditions precedent. The underwriters will be obligated to purchase all of the securities if they purchase any of the securities.
We may sell the securities through agents from time to time. The applicable prospectus supplement will name any agent involved in the offer or sale of the securities and any commissions we pay to them. Generally, any agent will be acting on a best efforts basis for the period of its appointment.
We may authorize underwriters, dealers or agents to solicit offers by certain purchasers to purchase the securities from us at the public offering price set forth in the applicable prospectus supplement pursuant to delayed delivery contracts providing for payment and delivery on a specified date in the future. The contracts will be subject only to those conditions set forth in the applicable prospectus supplement, and such prospectus supplement will set forth any commissions we pay for solicitation of these contracts.
Agents and underwriters may be entitled to indemnification by us against certain civil liabilities, including liabilities under the Securities Act of 1933, as amended, or to contribution with respect to payments which the agents or underwriters may be required to make in respect thereof. Agents and underwriters may be customers of, engage in transactions with, or perform services for us in the ordinary course of business.
We may enter into derivative and hedging transactions with third parties, or sell securities not covered by this prospectus to third parties in privately negotiated transactions. If the applicable prospectus supplement indicates, in connection with those derivatives, the third parties may sell securities covered by this prospectus and the applicable prospectus supplement, including in short sale transactions. If so, the third party may use securities pledged by us or borrowed from us or others to settle those sales or to close out any related open borrowings of securities, and may use securities received from us in settlement of those derivatives to close out any related open borrowings of securities. The third party in such sale transactions will be an underwriter and will be identified byin the useapplicable prospectus supplement (or a post-effective amendment).
In order to facilitate the offering of words such as “anticipate,” “believe,” “estimate,” “may,” “intend,” “expect,” “will,” “should,” “seeks”securities, the underwriters may engage in transactions that stabilize, maintain or otherwise affect the price of these securities or any other similar expressions. Forward-looking statementssecurities the prices of which may be used to determine payments on these securities. Specifically, the underwriters may over-allot in connection with the offering, creating a short position in the securities for their own accounts. In addition, to cover over-allotments or to stabilize the price of the securities or of any other securities, the underwriters may bid for, and purchase, the securities or any other securities in the open market. Finally, in any offering of the securities through a syndicate of underwriters, the underwriting syndicate may reclaim selling concessions allowed to an underwriter or a dealer for distributing the securities in the offering if the syndicate repurchases previously distributed securities in transactions to cover syndicate short positions, in stabilization transactions or otherwise. Any of these activities may stabilize or maintain the market price of the securities above independent market levels. The underwriters are based largely onnot required to engage in these activities and may end any of these activities at any time.
DESCRIPTION OF SECURITIES WE MAY OFFER
This prospectus contains summary descriptions of our expectationscommon stock, preferred stock, debt securities, and involve inherent risks and uncertainties including certain riskswarrants to purchase common stock, preferred stock or debt securities that we may offer from time to time. These summary descriptions are not meant to be complete descriptions of each security. The particular terms of any security will be described in this prospectus. When considering those forward-looking statements, you should keepthe related prospectus supplement.
DESCRIPTION OF CAPITAL STOCK
The following summary of the terms of our common and preferred stock, including our Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws (which we refer to as our “Certificate of Incorporation” and “Bylaws,” respectively) and relevant provisions of Delaware law, may not be complete and is subject to, and qualified in mindits entirety by reference to, the risks, uncertaintiesterms and other cautionary statements made in this prospectus.provisions of our Certificate of Incorporation and Bylaws and Delaware law. You should not place undue reliance on any forward-looking statement, which speaks only asrefer to, and read this summary together with, our Certificate of Incorporation and Bylaws to review all of the date made. Some factors whichterms of our capital stock that may affect the accuracybe important to you.
Common Stock
Under our Certificate of the forward-looking statements apply generallyIncorporation, our board of directors is authorized to the real estate industry, while other factors apply directlyissue, without further stockholder approval, up 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; |
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| • | our ability to service our substantial debt; |
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| • | inherent risks in investment in real estate; |
|
| • | our ability to compete in the Washington, D.C., Raleigh, North Carolina and Atlanta, Georgia real estate and home building markets; |
|
| • | regulatory actions; |
|
| • | fluctuations in operating results; |
|
| • | our anticipated growth strategies; |
|
| • | shortages and increased costs of labor or building materials; |
|
| • | the availability and cost of land in desirable areas; |
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| • | natural disasters; |
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| • | our ability to raise debt and equity capital and grow our operations on a profitable basis; |
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| • | our continuing relationship with affiliates; and |
|
| • | the other risks described under the heading “Risk Factors.” |
Many of these factors are beyond our control. For a discussion of factors that could cause actual results to differ, please see the discussion in the section of this prospectus entitled “Risk Factors.”
17
SELLING SECURITY HOLDERS
The following table provides information regarding the selling stockholders and the number of77,266,500 shares of Class A common stock,
they are offering, which includespar value $0.01 per share. As of March 31, 2014, we had 18,354,121 issued and outstanding shares
issuable upon exercise of
warrants to purchase shares ofour Class A common stock held by
approximately 36 stockholders of record. In addition, our board of directors is authorized to issue, without further stockholder approval, up to 2,733,500 shares of Class B common stock, par value $0.01 per share. As of March 31, 2014, we had 2,733,500 issued and outstanding shares of our Class B common stock held by 2 stockholders of record. All outstanding shares of our common stock are fully paid and nonassessable. Our Class A common stock is listed on the
selling stockholder. UnderNASDAQ Capital Market under the
rulessymbol “CHCI.”Dividends
Holders of shares of our common stock are entitled to participate in dividends ratably on a per share basis when our board of directors declares dividends on our common stock out of legally available funds. We do not anticipate paying any cash dividends in the foreseeable future. Future dividends, if any, will be determined by our board of directors and will be based upon our earnings, capital requirements and operating and financial condition, among other factors, at the time any such dividends are considered by our board of directors.
Voting Rights
Each share of our Class A common stock entitles the holder to one vote on all matters submitted to a vote of the SEC, beneficial ownership includesstockholders. Each share of Class B common stock entitles the holder to 15 votes on all matters submitted to a vote of stockholders (except with respect to going private transactions, with respect to which each share of Class B common stock is entitled to one vote). With certain limited exceptions (as set forth in our Certificate of Incorporation), the holders of Class A common stock and Class B common stock vote together as a single class with respect to all matters submitted to a vote of holders of shares of common stock, and such matters will pass with the affirmative vote of a majority of the votes cast.
Liquidation and Dissolution
In the event of our liquidation, dissolution or winding up, voluntarily or involuntarily, holders of our common stock will have the right to a ratable portion of the assets remaining after satisfaction in full of the prior rights of our creditors, satisfaction of all liabilities and provision for payment of any amounts payable upon shares of any preferred stock entitled to a preference, if any, over whichholders of common stock. No shares of our common stock have any preemptive or redemption rights, or the indicated beneficial owner exercises votingbenefits of any sinking fund.
Conversion Rights of Class B Common Stock
A holder of a share of our Class B common stock has the right at any time, or investment power. Sharesfrom time to time, at such holder’s option, to convert each share of his/her/its shares of Class B common stock into one fully paid and nonassessable share of Class A common stock, subject to warrantsthe terms and conditions set forth in our Certificate of Incorporation.
Transfer Agent
American Stock Transfer and Trust Company serves as the transfer agent and registrar for all of our shares of common stock.
Classification of the Board of Directors
The directors of the Company are divided into three classes. Upon election or re-election, each director serves for a three year term expiring at the third succeeding annual meeting and until his/her respective successor is duly elected and qualified.
Anti-Takeover Effects of Certain Provisions of Delaware Law and Our Certificate of Incorporation and Bylaws
The Delaware General Corporation Law
Our company is a Delaware corporation subject to Section 203 of the Delaware General Corporation Law or DGCL. Section 203 of the DGCL provides that, are currently exercisablesubject to certain exceptions, a Delaware corporation may not engage in “business combinations” with any “interested stockholder” for a three-year period following the time that the stockholder became an interested stockholder unless:
the corporation has elected in its certificate of incorporation not to be governed by Section 203 (which we have not done);
prior to that time, the board of directors of the corporation approved either the business combination or will become exercisable within 60 days are deemedthe transaction which resulted in the stockholder becoming an interested stockholder;
upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding for computingat the time the transaction commenced, excluding specified shares; or
at or subsequent to that time, the business combination is approved by the board of directors of the corporation and by the affirmative vote of at least 66 and 2/3% of the outstanding voting stock which is not owned by the interested stockholder.
The three-year prohibition also does not apply to business combinations proposed by an interested stockholder following the announcement or notification of extraordinary transactions involving the corporation and a person who had not been an interested stockholder during the previous three years or who became an interested stockholder with the approval of a majority of the corporation’s directors. The term “business combination” is defined generally to include mergers or consolidations between a Delaware corporation and an interested stockholder, transactions with an interested stockholder involving the assets or stock of the corporation or its majority-owned subsidiaries, and transactions which increase an interested stockholder’s percentage ownership of stock.
The term “interested stockholder” is defined to include any person, other than the corporation and any direct or indirect majority-owned subsidiary of the corporation, that is the owner of 15% or more of the outstanding voting stock of the corporation, or is an affiliate or associate of the corporation and was the owner of 15% or more of the outstanding voting stock of the corporation, at any time within three years immediately prior to the relevant date, or the affiliates and associates of any such person.
Section 203 makes it more difficult for a person holdingwho would be an interested stockholder to effect various business combinations with a corporation for a three-year period. The provisions of Section 203 may encourage companies interested in acquiring our company to negotiate in advance with our board of directors, because the warrants butstockholder approval requirement would be avoided if our board of directors approves either the business combination or the transaction which results in the stockholder becoming an interested stockholder. These provisions also may have the effect of preventing changes in our board of directors and may make it more difficult to accomplish transactions which stockholders may otherwise deem to be in their best interests.
Classified Board
Our Certificate of Incorporation and Bylaws provide that our board of directors be divided into three classes of directors, with each class elected for staggered three-year terms expiring in successive years. As a result, approximately one-third of our board of directors will be elected each year. The classification of directors will have the effect of making it more difficult for stockholders to change the composition of our board. Our Certificate of Incorporation and Bylaws provide that the number of directors will be fixed from time to time exclusively pursuant to a resolution adopted by the board. Our board of directors currently consists of eight members.
Removal of Directors; Vacancies
Under the DGCL, unless otherwise provided in our Certificate of Incorporation, directors serving on a classified board may be removed by the stockholders only for cause. Our Certificate of Incorporation and Bylaws provide that directors may be removed only for cause and only upon the affirmative vote of holders of at least 66 and 2/3% of the voting power of all the then outstanding shares of capital stock entitled to vote generally in the election of directors, voting together as a single class. In addition, our Certificate of Incorporation and Bylaws also provide that any vacancies on our board of directors will be filled only by the affirmative vote of a majority of the remaining directors, although less than a quorum.
No Cumulative Voting
The DGCL provides that stockholders are not deemedentitled to the right to cumulate votes in the election of directors unless our Certificate of Incorporation provides otherwise. Our Certificate of Incorporation does not provide for cumulative voting.
No Stockholder Action by Written Consent; Calling of Special Meetings of Stockholders
Our Certificate of Incorporation and Bylaws prohibit stockholder action by written consent. They also provide that special meetings of our stockholders may be called only by our board of directors pursuant to a resolution adopted by a majority of the board of directors or by the chief executive officer of the Company.
Advance Notice Requirements for Stockholder Proposals and Director Nominations
Our Bylaws provide that stockholders seeking to nominate candidates for election as directors or to bring business before an annual meeting of stockholders must provide timely notice of their proposal in writing to the corporate secretary. Generally, to be timely, a stockholder’s notice must be received at our principal executive offices not less than 90 days nor more than 120 days prior to the first anniversary date of the previous year’s annual meeting;provided, however, that in the event the annual meeting is scheduled to be held on a date more than 30 days prior to or delayed by more than 60 days after such anniversary date, notice by the stockholder must not be received more than 120 days prior to such annual meeting, and not later than 90 days prior to such annual meeting or the 10th day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure of the date of the annual meeting was made. Our Bylaws also specify requirements as to the form and content of a stockholder’s notice. These provisions may impede stockholders’ ability to bring matters before an annual meeting of stockholders or make nominations for directors at an annual meeting of stockholders.
Supermajority Provisions
The DGCL provides generally that the affirmative vote of a majority of the outstanding for computingshares entitled to vote is required to amend a corporation’s certificate of incorporation or bylaws, unless the percentage ownership for any other person. The security holders acquiredcertificate of incorporation requires a greater percentage. Our Certificate of Incorporation provides that the resale sharesfollowing provisions in the Certificate of Incorporation and Bylaws may be amended only by a vote of at least 66 2/3% of the warrants to which this prospectus relates from us in a private placement. In connection withvoting power of all of the private placement, we entered into purchase agreements, whereby we issued 2,121,048outstanding shares of our stock entitled to vote generally in the election of directors, voting together as a single class:
classified board (the number, election and term of our directors);
the removal of directors;
the prohibition on stockholder action by written consent;
the ability to call a special meeting of stockholders being vested solely in our board of directors and chief executive officer;
the ability of our board of directors to adopt, amend or repeal our Bylaws;
any provision in our Bylaws that was adopted, amended or repealed by our board of directors;
the limitation of liability of our directors and the indemnification provisions provided to our directors and officers; and
the amendment provision requiring that the above provisions be amended only with a 66 2/3% supermajority vote.
Authorized but Unissued Capital Stock
The DGCL does not require stockholder approval for any issuance of authorized shares. However, the listing requirements of the NASDAQ Capital Market, which would apply so long as our common stock is listed on the NASDAQ Capital Market, require stockholder approval of certain issuances equal to or exceeding 20% of the then-outstanding voting power or the then-outstanding number of shares of common stock. Such approval is not required, however, for any public offering for cash; any bona fide private financing, if the financing involves a sale of common stock, for cash, at a price at least as great as each of the book and market value of our common stock; and securities convertible into or exercisable for common stock, for cash, if the conversion or exercise price is at least as great as each of the book and market value of our common stock. These additional shares may be used for a variety of corporate purposes, including future public offerings, to raise additional capital or to facilitate acquisitions.
One of the effects of the existence of unissued and unreserved common or preferred stock may be to enable our board of directors to issue shares to persons friendly to current management, which issuance could render more difficult or discourage an attempt to obtain control of our company by means of a merger, tender offer, proxy contest or otherwise, and thereby protect the continuity of our management and possibly deprive the stockholders of opportunities to sell their shares of common or preferred stock at prices higher than prevailing market prices.
Effects of Offering on Class B stockholders
The two stockholders who currently hold all of our Class B common stock currently control 77% of the voting power of the Company and, therefore, can effectively control the outcome of all matters submitted to a vote of the stockholders where the holders of Class A and Class B common stock vote together as a single class other than those requiring a supermajority vote (see “Anti-Takeover Effects of Certain Provisions of Delaware Law and Or Certificate of Incorporation and Bylaws — Supermajority Provisions,” below). The issuance of a significant amount of Class A common stock, or the issuance of preferred stock with special voting rights, could cause the Class B holders to lose the ability to control the vote in this manner.
Preferred Stock
The following summary describes generally some of the terms of preferred stock that we may offer from time to time in one or more series. The specific terms of any series of preferred stock will be described in the applicable prospectus supplement and other offering material relating to that series of preferred stock along with any general provisions applicable to that series of preferred stock. In addition,The following description of our preferred stock, and any description of preferred stock in a prospectus supplement and other offering material, may not be complete and is subject to, and qualified in its entirety by reference to, the certificate of designation, preferences and rights relating to the particular series of preferred stock, which we issued warrantswill file with the SEC at or prior to purchase an additional 636,316the time of the sale of the preferred stock. You should refer to, and read this summary together with, the applicable certificate of designation, preferences and rights and the applicable prospectus supplement and other offering material to review the terms of a particular series of our preferred stock that may be important to you.
Under our Certificate of Incorporation, our board of directors or a committee designated by our board of directors is authorized to issue, without further stockholder approval, 20,000,000 shares of preferred stock, par value $0.01 per share, in one or more series. For each series of preferred stock, our Class A commonboard of directors may determine whether such preferred stock will have voting powers. Our board of directors may also determine the designations, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions of any preferred stock we issue. Our board of directors will determine these terms by resolution adopted before we issue any shares of a series of preferred stock. Pursuant
DESCRIPTION OF DEBT SECURITIES
We may issue debt securities from time to time, in one or more series, as either senior or subordinated debt or as senior or subordinated convertible debt. We will describe the purchase agreementsparticular terms of any debt securities that we executed,may offer in detail in the applicable prospectus supplement and in any related free writing prospectus that we agreedmay authorize to be distributed to you. Unless the context requires otherwise, whenever we refer to an indenture, we also are referring to any supplemental indentures that specify the terms of a particular series of debt securities.
We will issue the debt securities under an indenture that we will enter into with the trustee named in the indenture. The indenture will be qualified under the Trust Indenture Act of 1939, as amended, or the Trust Indenture Act. We will file the indenture and supplemental indentures and forms of debt securities containing the terms of the debt securities being offered, as exhibits to the registration statement of which this prospectus formsis a part or will be incorporated by reference from reports that we file with the SEC covering the resale of the offered shares. In addition, we entered into an escrow agreement, pursuantSEC.
The summary contained in any prospectus supplement is qualified in its entirety by reference to which the escrow agent held in escrow the funds paid by the purchasers for the newly issued shares of our Class A common stock and the warrants pending closing of the private placement.
We are registering the shares to permit the security holders and their pledgees, donees, transferees and othersuccessors-in-interest that receive their shares from a stockholder as a gift, partnership distribution or other non-sale related transfer after the date of this prospectus to resell the shares when and as they deem appropriate. The following table sets forth:
| | |
| • | the name of the security holders, |
|
| • | the number and percent of shares of our common stock that the security holders beneficially owned prior to the offering for resale of the shares under this prospectus, |
|
| • | the number of shares of our common stock that may be offered for resale for the account of the security holders under this prospectus, and |
|
| • | the number and percent of shares of our common stock to be beneficially owned by the security holders after the offering of the resale shares (assuming all of the offered resale shares are sold by the security holders). |
The number of shares in the column “Number of Shares Being Offered” represents all of the
sharesprovisions of the indenture applicable to a particular series of debt securities. We urge you to read the applicable prospectus supplements and any related free writing prospectuses related to the debt securities that
each security holderwe may offer under this prospectus,
includingas well as the
shares issuablecomplete indenture that contains the terms of the debt securities.We will describe in the applicable prospectus supplement the terms of the series of debt securities being offered, including:
the title of the series of debt securities;
any limit upon exercisethe aggregate principal amount that may be issued;
the maturity date or dates;
the form of the debt securities of the series;
the applicability of any guarantees;
whether or not the debt securities will be secured or unsecured, and the terms of any secured debt;
whether the debt securities rank as senior debt, senior subordinated debt, subordinated debt or any combination thereof, and the terms of any subordination;
if the price (expressed as a percentage of the aggregate principal amount thereof) at which such debt securities will be issued is a price other than the principal amount thereof, the portion of the principal amount thereof payable upon declaration of acceleration of the maturity thereof, or if applicable, the portion of the principal amount of such debt securities that is convertible into another security or the method by which any such portion shall be determined;
the interest rate or rates, which may be fixed or variable, or the method for determining the rate and the date interest will begin to accrue, the dates interest will be payable and the regular record dates for interest payment dates or the method for determining such dates;
our right, if any, to defer payment of interest and the maximum length of any such deferral period;
if applicable, the terms of any redemption rights we may have with respect to the series of debt securities;
the terms and conditions of any mandatory redemption provisions, or a description of the holder’s option to force us to repurchase the series of debt securities;
the denominations in which we will issue the series of debt securities;
any and all terms, if applicable, relating to any auction or remarketing of the debt securities of that series;
whether the debt securities of the series shall be issued in whole or in part in the form of a global security or securities; the terms and conditions, if any, upon which such global security or securities may be exchanged in whole or in part for other individual securities; and the depositary for such global security or securities;
if applicable, the terms and conditions relating to any provisions for conversion or exchange of any debt securities of the series;
if other than the full principal amount thereof, the portion of the principal amount of debt securities of the series which shall be payable upon declaration of acceleration of the maturity thereof;
covenants applicable to the particular debt securities being issued;
a description of any events of default with respect to the securities;
provisions relating to satisfaction and discharge of the indenture;
provisions relating to the modification of the indenture both with and without the consent of holders of debt securities issued under the indenture;
the currency of payment of debt securities;
whether interest will be payable in cash or additional debt securities at our or the holders’ option and the terms and conditions upon which the election may be made;
the terms and conditions, if any, upon which we will pay amounts in addition to the stated interest, premium;
any restrictions on transfer, sale or assignment of the debt securities of the series; and
any other specific terms, preferences, rights or limitations of, or restrictions on, the debt securities, and any terms that may be required by us or advisable under applicable laws or regulations.
DESCRIPTION OF WARRANTS
We may issue warrants to purchase common stock or preferred stock or warrants to purchase debt securities. Warrants may be issued independently or together with other securities. The following description, together with the additional information that we include in any applicable prospectus supplement and in any related free writing prospectus that we may authorize to be distributed to you, summarizes the material terms and provisions of the warrants held by each selling stockholder. We do not know how longthat we may offer under this prospectus, which may be issued in one or more series. The following description of warrants will apply to the security holders will hold the shares before selling them or how many shares they will sell, and we currently have no agreements, arrangements or understandings with any of the security holders regarding the sale of any of the resale shares. We have had no relationship with any of the selling security holders, except in connection with the private placement as set forth herein. The shareswarrants offered by this prospectus unless we provide otherwise in the applicable prospectus supplement. The applicable prospectus supplement for a particular series of warrants may specify different or additional terms.
We will file as exhibits to the registration statement of which this prospectus is a part, or will incorporate by reference from reports that we file with the SEC, the form of warrant and/or the warrant agreement and warrant certificate, as applicable, that contain the terms of the particular series of warrants we are offering, and any supplemental agreements, before the issuance of such warrants.
This summary and that contained in any prospectus supplement is qualified in its entirety by reference to all of the provisions of the warrant and/or the warrant agreement and warrant certificate, as applicable, applicable to a particular series of debt securities. We urge you to read the applicable prospectus supplements and any related free writing prospectuses related to the warrants that we may offer under this prospectus, as well as the complete warrant and/or the warrant agreement and warrant certificate, as applicable, that contains the terms of the warrants.
We will set forth in the applicable prospectus supplement or free writing prospectus a description of any warrants that may be offered fromunder this prospectus, and such description will include:
the amount of securities called for by such warrants;
the period during which and the price at which the warrants are exercisable;
the amount of warrants outstanding;
provisions for changes to or adjustments in the exercise price; and
any other material terms of such warrants.
Before exercising their warrants, holders of warrants will not have any of the rights of holders of the securities purchasable upon such exercise, including:
in the case of warrants to purchase debt securities, the right to receive payments of principal of, or premium, if any, or interest on, the debt securities purchasable upon exercise or to enforce covenants in the applicable indenture; or
in the case of warrants to purchase common stock or preferred stock, the right to receive dividends, if any, or, payments upon our liquidation, dissolution or winding up or to exercise voting rights, if any.
Each warrant will entitle the holder to purchase the securities that we specify in the applicable prospectus supplement at the exercise price that we describe in such prospectus supplement. The warrants may be exercised as set forth in the prospectus supplement relating to the warrants offered. Unless we otherwise specify in the applicable prospectus supplement, warrants may be exercised at any time up to time by the security holders listed below.
18close of business on the expiration date set forth in the prospectus supplement relating to the warrants offered thereby. After the close of business on the expiration date, unexercised warrants will become void.
This table is prepared solely based on information supplied to us byUpon receipt of payment and the
listed security holderswarrant or warrant certificate, as applicable, properly completed and
assumesduly executed at the
salecorporate trust office of
the warrant agent, if any, or any other office, including ours, indicated in the prospectus supplement, we will, as soon as practicable, issue and deliver the securities purchasable upon such exercise. If less than all of the
resale shares. Thewarrants (or the warrants represented by such warrant certificate) are exercised, a new warrant or a new warrant certificate, as applicable,
percentageswill be issued for the remaining warrants.Each warrant agent, if any, will act solely as our agent under the applicable warrant agreement and will not assume any obligation or relationship of beneficial ownership are based on an aggregateagency or trust with any holder of 13,387,111 sharesany warrant. A warrant agent may act as warrant agent for more than one issue of our Classwarrants. A common stock issued and outstanding on June 30, 2006, adjusted aswarrant agent will have no duty or responsibility in case of any default by us under the applicable warrant agreement or warrant, including any duty or responsibility to initiate any proceedings at law or otherwise, or to make any demand upon us. Any holder of a warrant may, be required by rules promulgated bywithout the SEC.
| | | | | | | | | | | | | | | | | | | | | |
| | | Shares Beneficially Owned
| | | Number of
| | | Shares Beneficially Owned
| |
| | | Prior to Offering | | | Shares Being
| | | After Offering(2) | |
Security Holders(3) | | Number | | | Percent | | | Offered(1) | | | Number | | | Percent | |
| |
| HBK Fund L.P.(4)(5) | | | 1,272,534 | | | | * | | | | 1,654,295 | | | | — | | | | — | |
| Leonidas Opportunity Fund, LP(6) | | | 53,022 | | | | * | | | | 68,929 | | | | — | | | | — | |
| Fort Mason Master, LP(7) | | | 550,713 | | | | * | | | | 715,927 | | | | — | | | | — | |
| Fort Mason Partners, LP(7) | | | 35,713 | | | | * | | | | 46,427 | | | | — | | | | — | |
| Portside Growth and Opportunity Fund(4)(8) | | | 159,066 | | | | * | | | | 206,786 | | | | — | | | | — | |
| Arthur I. Tsiamis | | | 25,000 | | | | * | | | | 32,500 | | | | — | | | | — | |
| Ronald C. Devine | | | 26,000 | | | | * | | | | 33,500 | | | | 1,000 | | | | * | |
| Total | | | 2,122,048 | | | | 15.85 | % | | | 2,758,364 | | | | 1,000 | | | | * | |
| | |
* | | Less than 1% of the outstanding shares of Class A common stock. |
|
(1) | | Includes shares of Class A common stock issued and outstanding as of the date of this prospectus and shares of Class A common stock issuable upon exercise of warrants to purchase shares of Class A common stock. The warrants become exercisable beginning on November 10, 2006 through November 10, 2011. |
|
(2) | | Assumes the selling security holders sell all of the shares being offered by this prospectus. |
|
(3) | | As of date of the purchase of the shares of Class A common stock related to this prospectus, the selling security holders have not informed us of any agreements, understandings or arrangements with any broker-dealer to distribute such shares. |
| | |
(4) | | The selling security holder is an affiliate of a registered broker-dealer and purchased the shares of Class A common stock related to this prospectus in the ordinary course of business. |
| | |
(5) | | HBK Investments L.P. may be deemed to have sole voting and sole dispositive power over the securities pursuant to an Investment Management Agreement between HBK Investments L.P. and HBK Fund L.P. Additionally, the following individuals may be deemed to have control over HBK Investments L.P.: Kenneth M. Hirsh, Laurence H. Lebowitz, William E. Rose, David C. Haley and Jamiel A. Akhtar. |
|
(6) | | SKIRITAI Capital, LLC is the manager of Leonidas Opportunity Fund, LP and may be deemed to have sole voting and sole dispositive power over the securities. Additionally, the following individuals may be deemed to have control over SKIRITAI Capital, LLC.: Lyron Bentovim and Russ Silvestri. |
|
(7) | | Fort Mason Capital, LLC serves as the general partner of each of Fort Mason Master, L.P. and Fort Mason Partners, L.P. (collectively, the “Fort Mason Funds”) and, in such capacity, exercises sole voting and investment authority with respect to such shares. Mr. Daniel German serves as the sole managing member of Fort Mason Capital, LLC. Fort Mason Capital, LLC and Mr. German each disclaim beneficial ownership of such shares, except to the extent of its or his pecuniary interest therein, if any. |
|
(8) | | Ramius Capital Group, L.L.C. (“Ramius Capital”) is the investment adviser of Portside Growth and Opportunity Fund (“Portside”) and consequently has voting control and investment discretion over securities held by Portside. Ramius Capital disclaims beneficial ownership of the securities shares held by Portside. Peter A. Cohen, Morgan B. Stark, Thomas W. Strauss and Jeffrey M. Solomon are the sole managing members of C4S & Co., L.L.C., which is the sole managing member of Ramius Capital. As a result, Messrs. Cohen, Stark, Strauss and Solomon may be considered beneficial owners of any shares deemed to be beneficially owned by Ramius Capital. Messrs. Cohen, Stark, Strauss and Solomon disclaim beneficial ownership of these shares. |
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PLAN OF DISTRIBUTION
We are registering the shares of our Class A common stock on behalfconsent of the selling stockholders. A selling stockholder is a person named inrelated warrant agent or the section entitled “Security Holders” and also includes any donee, pledgee, transferee or othersuccessor-in-interest selling shares received after the date of this prospectus from a selling stockholder as a gift or other non-sale related transfer.
We do not knowholder of any
plan of distribution forother warrant, enforce by appropriate legal action its right to exercise, and receive the
resale of our common stock by the selling stockholders. We will not receive any of the proceeds from the sale by the selling stockholders of any of the resale shares. We will, in the ordinary course of business, receive proceeds from the issuance of sharessecurities purchasable upon exercise of,
its warrants.LEGAL MATTERS
Unless otherwise indicated in the warrants described in this prospectus.
The selling stockholders may, from time to time, sell any or all of their shares of Class A common stock on any stock exchange, market or trading facility on whichapplicable prospectus supplement, the shares are traded or in private transactions. These sales may be at fixed or negotiated prices. The selling stockholders may use any one or morelegality and validity of the following methods when selling shares:
| | |
| • | ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers; |
|
| • | block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction; |
|
| • | purchases by a broker-dealer as principal and resale by the broker-dealer for its account; |
|
| • | an exchange distribution in accordance with the rules of the applicable exchange; |
|
| • | privately negotiated transactions; |
|
| • | short sales; |
|
| • | broker-dealers may agree with the selling stockholders to sell a specified number of such shares at a stipulated price per share; |
|
| • | a combination of any such methods of sale; and |
|
| • | any other method permitted pursuant to applicable law. |
The selling stockholders may also sell shares under Rule 144 under the Securities Act, if available, rather than under this prospectus.
Broker-dealers engaged by the selling stockholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the selling stockholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated. The selling stockholders do not expect these commissions and discounts to exceed what is customary in the types of transactions involved. Any profits on the resale of shares of common stock by a broker-dealer acting as principal might be deemed to be underwriting discounts or commissions under the Securities Act. Discounts, concessions, commissions and similar selling expenses, if any, attributable to the sale of shares will be borne by a selling stockholder. The selling stockholders may agree to indemnify any agent, dealer or broker-dealer that participates in transactions involving sales of the shares if liabilities are imposed on that person under the Securities Act.
The selling stockholders may from time to time pledge or grant a security interest in some or all of the shares of common stock owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties shall be deemed selling stockholders who may offer and sell the shares of common stocksecurities offered from time to time under this prospectus.
20
The selling stockholders also may transfer the shares of common stock in other circumstances, in which case the transferees, pledgees or other successors in interest will be deemed the selling beneficial owners for purposes of this prospectus and may sell the shares of common stock from time to time under this prospectus. Under such circumstances, thisany applicable prospectus will be supplemented and such supplement will be filed with the Securities and Exchange Commission.
The selling stockholders and any broker-dealers or agents that are involved in selling the shares of Class A common stock may be deemed to be “underwriters” within the meaning of the Securities Act in connection with such sales. In such event, any commissions receivedpassed upon by such broker-dealers or agents and any profit on the resale of the shares of common stock purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act.
We are required to pay all fees and expenses incident to the registration of the shares of Class A common stock. We have agreed to indemnify the selling stockholders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act.
The selling stockholders have not informed us that they have entered into any agreements, understandings or arrangements with anyAlston & Bird LLP, Washington, D.C. Any underwriters or broker-dealers regarding the sale of their shares of Class A common stock, nor are we aware of any underwriter or coordinating broker acting in connection with a proposed sale of shares of common stock by any selling stockholder. If we are notified by any selling stockholder that any material arrangement has been entered into with a broker-dealer for the sale of shares of Class A common stock, if required, we will supplement this prospectus. If the selling stockholders use this prospectus for any sale of the shares of common stock, they will be subjectadvised about issues related to the prospectus delivery requirements of the Securities Act.
The anti-manipulation rules of Regulation M under the Securities Exchange Act of 1934 may apply to sales of our Class A common stock and activities of the selling stockholders.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the resale sharesoffering by the selling stockholders. All proceeds from the resale sharestheir own legal counsel, which will be solely for the accounts of the selling stockholders. We will,named in the ordinary course of business, receive proceeds from the issuance of shares upon exercise of the warrants described in thisapplicable prospectus which we will use for general corporate purposes.
supplement.
VALIDITY OF COMMON STOCKEXPERTS
Greenberg Traurig, LLP, Washington, D.C., will provide us an opinion relating to the validity of the Class A common stock offered by this prospectus.
EXPERTS
The financial statements and management’s assessment of the effectiveness of internal control over the financial reporting (which is included in Management’s Report on Internal Control Over Financial Reporting) incorporated in this Prospectusprospectus by reference to the Annual Report onForm 10-K for the year ended December 31, 20052013 have been so incorporated in reliance on the report of PricewaterhouseCoopers LLP, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.
21
WHERE YOU CAN FIND MORE INFORMATION
This prospectus is part of a registration statement we filed with the SEC. You should rely only on the information contained in this prospectus or incorporated by reference. We have not authorized anyone else to provide you with different information. We are not making an offer of these securities in any state where the offer is not permitted. You should not assume that the information in this prospectus is accurate as of any date other than the date on the front page of this prospectus, regardless of the time of delivery of this prospectus or any sale of common stock.
We file annual, quarterly and special reports, proxy statements and other information with the SEC. You may read, without charge, and copy the documents we file at the SEC’s public reference rooms in Washington, D.C., New York, New York and Chicago, Illinois. You can request copies of these documents by writing to the SEC and paying a fee for the copying cost. Please call the SEC at1-800-SEC-0330 for further information on the public reference rooms. Our SEC filings are also available to the public at no cost from the SEC’s website at http://www.sec.gov.
We incorporate by reference the filed documents listed below, except as superseded, supplemented or modified by this prospectus, and any future filings we will make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”):
| | |
| • | our Quarterly Report onForm 10-Q for the quarter ended March 31, 2006; |
|
| • | our Annual Report onForm 10-K for the fiscal year ended December 31, 2005; |
|
| • | our definitive Proxy Statement for our Annual Meeting of Stockholders to be held on June 1, 2006; |
|
| • | our Current Report onForm 8-K filed on June 2, 2006; |
|
| • | our Current Report onForm 8-K filed on May 10, 2006; |
|
| • | our Current Report onForm 8-K filed on February 3, 2006; and |
|
| • | our Current Report onForm 8-K filed on January 25, 2006. |
|
| • | the description of our capital stock contained in our registration statement onForm S-3 initially filed with the SEC on May 23, 2005, including any amendments or reports filed for the purpose of updating such description. |
The reports and other documents that we file after the date of this prospectus will update, supplement and supersede the information in this prospectus. You may request and obtain a copy of these filings, at no cost, by writing or telephoning us at the following address or phone number:
Comstock Homebuilding Companies, Inc.
11465 Sunset Hills Road, Suite 510
Reston, Virginia 20190
Attn.: Corporate Secretary
Tel:(703) 883-1700
22
No dealer, salesperson or other person is authorized to give any information or to represent anything not contained in this prospectus. You must not rely on any unauthorized information or representations. This prospectus is an offer to sell only the shares offered hereby, and only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of its date.
TABLE OF CONTENTS
2,757,364 Shares
Comstock Homebuilding
Companies, Inc.
Class A Common Stock
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
| |
| Item 14. | Other Expenses of Issuance and Distribution |
The expenses payable by us in connection with the saleissuance and distribution of the Class A common stocksecurities offered in this registration statement, other than potential underwriting discounts and commissions, are as follows:
| | | | | |
| Securities and Exchange Commission registration fee | | $ | 2,266 | |
| Printing and engraving expenses | | | 5,000 | |
| Legal fees and expenses | | | 15,000 | |
| Accounting fees and expenses | | | 5,000 | |
| Miscellaneous | | | 734 | |
| | | | | |
| Total | | $ | 28,000 | |
All expenses are estimated except for the SEC registration fee.
| | | | |
SEC registration fee | | $ | 3,220 | |
Legal fees and expenses | | | | * |
Accounting fees and expenses | | | | * |
Printing expenses | | | | * |
Trustee’s fees and expenses | | | | * |
Transfer agent’s fees and expenses | | | | * |
Miscellaneous | | | | * |
| | | | |
Total | | $ | 3,220 | |
| | | | |
| * | Estimates of these fees are not presently known. Estimates of the fees and expenses in connection with the sale and distribution of the securities being offered will be included in the applicable prospectus supplement. |
| Item 15. | Indemnification of Directors and Officers |
Section 145 of the Delaware General Corporation Law (the “DGCL”) provides, in effect, that any person made a party to any action by reason of the fact that he or she is or was a director, officer, employee or agent of Comstockthe Company may and, in certain cases, must be indemnified by Comstockthe Company against, in the case of a non-derivative action, judgments, fines, amounts paid in settlement and reasonable expenses (including attorneys’ fees) incurred by him or her as a result of such action, and in the case of a derivative action, against expenses (including attorneys’ fees), if in either type of action he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of Comstock.the Company. This indemnification does not apply, (i) in a derivative action, to matters as to which it is adjudged that the director, officer, employee or agent is liable to Comstock,the Company, unless upon court order it is determined that, despite such adjudication of liability, but in view of all the circumstances of the case, he or she is fairly and reasonably entitled to indemnity for expenses, and, (ii) in a non-derivative action, to any criminal proceeding in which such person had reasonable cause to believe his or her conduct was unlawful.
Article VI of Comstock’s certificateour Certificate of incorporationIncorporation provides that no director of Comstockthe Company shall be liable to Comstockthe Company or its stockholders for monetary damages for breach of fiduciary duty as a director to the fullest extent permitted by the DGCL.
Article VII of Comstock’s certificateour Certificate of incorporationIncorporation also provides that Comstockthe Company shall indemnify, to the fullest extent permitted by Delaware law, any and all of its directors and officers, or former directors and officers, or any person who may have served at Comstock’sthe Company’s request as a director or officer of another corporation, partnership, joint venture, trust or other enterprise.
ComstockThe Company has entered into indemnification agreements with each directorof its directors and certain officers, of Comstock, a form of which is filed as an Exhibit to the registration statement onForm S-1, as amended, initially filed on August 13, 2004(No. (No. 333-118193). Pursuant to such agreements, Comstock will bethe Company is obligated, to the extent permitted by applicable law, to indemnify such directors and officers against all expenses, judgments, fines and penalties incurred in connection with the defense or settlement of any actions brought against them by reason of the fact that they were
II-1
directors or officers of Comstockthe Company or assumed certain responsibilities at the direction of Comstock. Comstock also intends to purchase directorsthe Company. The Company has director and officersofficer liability insurance in order to limit its exposure to liability for indemnification of directors and officers.
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| |
| Item 16. | Exhibits and Financial Statement Schedules |
| | | | | |
Exhibit
| | |
Number | | Exhibit |
| |
| | 3 | .1(2) | | Amended and Restated Certificate of Incorporation |
| | 3 | .2(2) | | Amended and Restated Bylaws |
| | 4 | .1(1) | | Specimen Stock Certificate |
| | 4 | .2(3) | | Form of Warrant |
| | 5 | .1** | | Opinion of Greenberg Traurig, LLP |
| | 10 | .1(3) | | Form of Purchase Agreement by and among Comstock Holding Companies, Inc. and the purchasers set forth on the signature pages thereto. |
| | 23 | .1* | | Consent of PricewaterhouseCoopers LLP |
| | 23 | .1** | | Consent of Greenberg Traurig, LLP (contained in Exhibit 5.1) |
| | 24 | .1* | | Power of Attorney (power of attorney for Messrs. Perfall, MacCutcheon, Chirite, Pincus and Verses previously included in the signature page to this Registration Statement onForm S-3.) |
See Exhibit Index.
| Item 17. | | |
* | | Filed herewith. |
|
** | | Previously filed.Undertakings |
| | |
(1) | | Incorporated by reference to the Registrant’s Registration Statement onForm S-1, as amended, initially filed with the Commission on August 13, 2004(No. 333-118193). |
|
(2) | | Incorporated by reference to the Registrant’s Annual Report onForm 10-K, filed with the Commission on March 31, 2005. |
|
(3) | | Incorporated by reference to the Registrant’s Current Report onForm 8-K, filed with the Commission on May 10, 2005. |
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the Securities Act;
Act of 1933;(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement;
and(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;
provided,Provided, however, that:, that
(A) the information required to be included in a post-effective amendment by paragraphs (a)(1)(i) and (a)(1)(ii) above may be contained in periodic reports filed with or furnished to the Commission by the Company pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference ininto the registration statement.
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(B) the information required to be included in a post-effective amendment by paragraphs (a)(1)(i), (a)(1)(ii) and (a)(1)(iii) above may be contained in periodic reports filed with or furnished to the Commission by the Company pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference into the registration statement, or is contained in a form of prospectus filed pursuant to Rule 424(b) that is part of the registration statement.(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initialbona fideoffering thereof.
(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
(4) That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser:
(i) Each prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and
(ii) Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for the purpose of providing the information required by section 10(a) of the Securities Act of 1933 shall be deemed to be part of and included in the registration statement as of the
II-2
earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initialbona fide offering thereof. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date.
(5) That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
(i) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424 (§ 230.424 of this chapter);
(ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
(iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
(iv) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
(b) The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant’s annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to Section 15(d) of the Securities Exchange Act)Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initialbona fideoffering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Companyregistrant pursuant to the foregoing provisions, described above, or otherwise, the Companyregistrant has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. IfIn the event that a claim for indemnification against such liabilities (other than the payment by the Companyregistrant of expenses incurred or paid by a director, officer or controlling person of the Companyregistrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Companyregistrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.
(d) The undersigned registrant hereby undertakes to file an application for the purpose of determining the eligibility of the trustee to act under subsection (a) of Section 310 of the Trust Indenture Act in accordance with the rules and regulations prescribed by the Commission under Section 305(b)(2) of the Trust Indenture Act.
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SIGNATURES
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Reston, Virginia on July 5, 2006.
May 23, 2014.COMSTOCK HOMEBUILDING COMPANIES, INC.
| | |
| COMSTOCK HOLDING COMPANIES, INC. |
| |
| By: | | /s/ Christopher Clemente |
| | Christopher Clemente |
| | Chairman and Chief Executive Officer |
| |
| By: | | /s/ Joseph M. Squeri |
| | Joseph M. Squeri |
| | Chief Financial Officer |
Christopher Clemente
Chairman and Chief Executive Officer
Know All Men By These Presents,KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Christopher Clemente and Bruce LabovitzJoseph M. Squeri and each of them acting alone, his or her true and lawfulattorneys-in-fact and agents, with full power of substitution and revocation, for him or her and in his or her name, place and stead, in any and all capacities, to sign (i) any and all amendments (including post-effective amendments) to this registration statement and to file the same with all exhibits thereto, and other documents in connection therewith and (ii) any registration statement and any and all amendments thereto, relating to the offer covered hereby filed pursuant to Rule 462(b) under the Securities Act of 1933, with the Securities and Exchange Commission, granting unto saidattorneys-in-fact and agents, full power and authority to do and perform each and every act and thing requisite and necessary to be done as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that saidattorneys-in-fact and agents, or his or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the date indicated.
| | | | |
Signature | | Title | | | | Date |
Signature
| | Title
| | Date
|
|
Christopher Clemente | | Chairman and Chief Executive Officer (Principal Executive Officer) | | July 5, 2006May 23, 2014 |
| Christopher Clemente | | | | |
| | |
/s/ Bruce Labovitz
Bruce LabovitzJoseph M. Squeri | | Chief Financial Officer
(Principal (Principal Financial Officer) | | July 5, 2006May 23, 2014 |
| Joseph M. Squeri | | | | |
/s/ Jason Parikh
Jason Parikh | | Chief Accounting Officer
(Principal Accounting Officer) | | July 5, 2006 |
| | | | |
/s/ Gregory Benson
Gregory Benson | | President and Chief Operating Officer, Director | | July 5, 2006 |
| | | | |
/s/ Bruce Labovitz*
A. Clayton Perfall | | Director | | July 5, 2006May 23, 2014 |
| Gregory V. Benson | | | | |
David M. Guernsey | | |
/s/ A. Clayton Perfall | | Director | | May 23, 2014 |
| A. Clayton Perfall | | | | |
| | | | |
| | |
/s/ Bruce Labovitz*
James A. MacCutcheonDavid M. Guernsey | | Director | | July 5, 2006May 23, 2014 |
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| David M. Guernsey | | | | | | |
Signature
| | Title
| | Date
|
|
| | | | |
Norman D. ChiriteJames A. MacCutcheon | | Director | | July 5, 2006May 23, 2014 |
| James A. MacCutcheon | | | | |
| | |
/s/ Bruce Labovitz*
Robert P. PincusNorman D. Chirite | | Director | | July 5, 2006May 23, 2014 |
| Norman D. Chirite | | | | |
/s/ Bruce Labovitz*
Socrates Verses | | |
| | Director | | July 5, 2006May 23, 2014 |
| Robert P. Pincus | | | | |
| | |
/s/ Socrates Verses | | Director | | May 23, 2014 |
| Socrates Verses | | | | |
EXHIBIT INDEX
| | |
*Exhibit
Number | | Exhibit |
| |
Pursuant 3.1(1) | | Amended and Restated Certificate of Incorporation |
| |
| 3.2(1) | | Amended and Restated Bylaws |
| |
| 4.1(2) | | Specimen Stock Certificate |
| |
| 4.2* | | Form of Senior Indenture |
| |
| 4.3* | | Form of Senior Subordinated Indenture |
| |
| 4.4(1) | | Rights Agreement |
| |
| 5.1* | | Opinion of Alston & Bird LLP |
| |
| 23.1* | | Consent of PricewaterhouseCoopers LLP |
| |
| 23.2* | | Consent of Alston & Bird LLP (contained in Exhibit 5.1) |
| |
| 24.1* | | Power of Attorney (see signature page to a powerthis Registration Statement on Form S-3) |
| |
| 25.1* | | Statement of attorney.Eligibility and Qualification of Trustee under the Trust Indenture Act of 1939, as amended, on Form T-1 of Wilmington Trust Corporation, as trustee under the Senior Indenture and Senior Subordinated Indenture. |
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| (1) | Incorporated by reference to Exhibits 3.2 and 3.4, respectively, to Amendment No. 5 to the Registrant’s Registration Statement on Form S-1, filed with the Commission on December 7, 2004 (No. 333-118193). |
| (2) | Incorporated by reference to Exhibit 4.1 of Amendment No. 6 to the Registrant’s Registration Statement on Form S-1, filed with the Commission on December 9, 2004 (No. 333-118193). |
