Comstock Considers Sale to Offset Losses

Remark by Builder's CEO Follows Accountant's Doubts About Firm's Survival

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By Allan Lengel

Washington Post Staff Writer
Wednesday, March 26, 2008; Page D04

The chief executive of Comstock Homebuilding of Reston, which is battling to stay afloat in the stormy housing market, said yesterday that he might sell the business to bolster shareholder value.

"If the best option is to sell the company, we'll sell the company," Christopher Clemente said in response to a question from an analyst during a conference call with investors.

Comstock is one of the many publicly traded home building companies that have recorded big losses since the real estate market went bust.

On Monday, Comstock reported an $87.5 million loss for 2007. It also disclosed that its accounting firm, PricewaterhouseCoopers, said that market conditions and debt created substantial doubt that the company "would continue operating as a going concern." Such an opinion is regarded as a sign of serious problems with a business.

Still, Clemente gave no indication that a sale was imminent and told shareholders and analysts that the company was "taking steps necessary to weather the downturn."

"We're in a far better position today . . . than we were since the downturn began," he said.

Yesterday, the company's stock rose 5.6 percent, or 5 cents, to close at 93 cents a share on the Nasdaq Stock Market.

Clemente said the company has cut employees "to do more with less" and has aggressively sold home inventory and unused land.

The company recently lined up a $40 million secured loan to help refinance two local projects and to restructure its unsecured debt, and in 2007 reduced debt by $124.2 million to $171.2 million.

"We believe Comstock is well positioned to benefit" early in a recovery, Clemente said.

The building industry is going through tough times. New home sales in January were down 33.9 percent from a year earlier, and the housing supply was at a bloated 9.9 months at the current sales rate. Six months is considered healthy. The government is scheduled to announce February sales statistics today.

Comstock, founded in 1985, operates in the Washington, Atlanta and Raleigh, N.C., markets. Clemente said that the Raleigh area appeared the most promising for this year.