Comstock Holding Companies Inc (CHCI) 2005 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Comstock Homebuilding Companies, Inc. second quarter 2005 earnings conference call. As a reminder, this discussion contains forward-looking statements concerning future results, performance or expectations within the meaning of the Private Securities Litigation Reform Act of 1995 and other applicable federal securities laws. These statements are based on the Company's current expectations and assumptions that are subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated. These risks and uncertainties include but are not limited to economic and other conditions in the market in which the Company operates, expansion of business offerings, future financial results, and other factors discussed in the Company's filings with the SEC.

At this time, I would like to turn the call over to Chris Clemente, Founder and CEO of Comstock. Please proceed, sir.

Good afternoon and thank you for joining us today. I am Christopher Clemente, Chairman and CEO of Comstock Homebuilding Companies, Inc. I am happy to once again be reporting results that are in keeping with our objectives for the year and that position Comstock to meet its aggressive growth plans for future periods. I am joined today by our CFO, Bruce Labovitz, who will provide a detailed review of our financial results for both the three months and the six months ended June 30, 2005, and he will discuss future expectations as well. Afterwards, we will both be available to answer any questions that you may have.

Before we start, I would like to thank every member of the Comstock team for their hard work and dedication to the growth and success of this company. I would also like to thank the investment banking teams of BankAmerica Securities, BB&T Capital Markets, Robert Baird & Co., and Ferris Baker Watts for their assistance with our follow-on offering during the period.

The second quarter was a very exciting time here at Comstock. As detailed in the press release, we continued to experience dramatic growth as compared to 2004. We generated revenues of almost $40 million, we generated gross profit of more than $10 million, and pretax income of more than $4.7 million. We sold 160 homes valued at over $59 million, bringing our total new orders for the year up to 416 units valued at more than $165 million. As of the end of the second quarter, our backlog included more than 650 future settlements valued at almost $268 million. Our backlog has grown almost 4.5 times in the trailing 12 months ended as of June 30.

During the second quarter we continued to deploy capital to gain control over additional properties for development that fit our strategy of product and submarket diversification in the Mid-Atlantic region, with a focus on the Greater Washington, D.C. area. We currently control over 5700 lots, with more than 5000 of those lots being in the Washington, D.C. market.

By now, most of you understand that Comstock is an entrepreneurial and highly opportunistic real estate developer focused on capitalizing on the best for-sale housing opportunities in our core market of Washington, D.C., and that our goal is to reach $500 million in revenue by 2007 and $1 billion of revenue by 2010.

Management is committed to my vision of growth through product diversification and submarket penetration. Accordingly, Comstock will continue to be a leader in the development of high-density urban housing in the Washington, D.C. area, where tremendous demand exists for this highly specialized type of housing product.

We are also committed to the active adult market where the aging of America's population is creating additional opportunities for significant growth. And we are continuing to be committed to the geographical expanding -- geographically expanding suburban markets in the Washington, D.C. and Raleigh, North Carolina markets, and to the Mid-Atlantic region as a whole.

It is because of our confidence in our strategy, our confidence in our land position and our markets, and the continuing strong demand we see for our products in those markets that we are raising our guidance for 2005 as noted in our press release. Now we would like to highlight some other specifics relative to the second quarter.

On June 16 we priced an $88 million combination follow-on and secondary offering in which he generated an additional $56 million of growth capital for Comstock. At the same time, we executed a controlled transfer of privately-held management and nonmanagement stock to the public. The order booked for the transaction was nearly five times oversubscribed.

Sales at all Comstock projects remained strong in the period. At one of our -- at one of them, our Penderbrook condominium community which opened for sales in April, we had already delivered 74 units by the end of the quarter. The average price of the units delivered during the period was $249,000 with gross margins on the delivered units of approximately 15%.

As we have discussed before, these condominium conversion projects tend to generate lower gross margins than some of the other development projects, while producing higher velocity of sales, and therefore, higher average rates of return on capital. That is because of the extremely short time to market for this type of product. We acquired the Penderbrook project in February of this year, and by June 30 had already delivered approximately 18% of the units and generated revenue of more than $18 million. Being able to do that within four months of acquiring a property dramatically increases the rate of return on invested capital.

Our land acquisition department succeeded in identifying and gaining control over several new properties during the period. We are committed to efficiently deploying the capital that has been invested in Comstock in a manner that will provide the best possible results for shareholders. We believe that our diversified approach to products and submarkets lowers risk while enhancing returns.

In keeping with our strategy of product and submarket diversification, these projects include townhomes, stacked townhomes, single-family homes, mid-rise and high-rise condominiums, and condominium conversion units. They include single-family developments in Culpeper County, Virginia, Loudoun County, Virginia and Prince William County, Virginia, a stacked townhouse development in Ocean City, Maryland, a redevelopment project in Reston, Virginia, a mixed-use development in Alexandria, Virginia, and a condominium conversion development in Leesburg, Virginia.

We succeeded in commencing construction of units that were delayed from starting in the first quarter due to local jurisdictions adopting new building codes, thereby ensuring that the delays experienced in the early part of this year will not negatively impact our results for 2005 as a whole.

Our operating efficiency improved during the second quarter as our selling, general and administrative costs were lowered from 17.6% of total revenue in the first quarter of 2005 to 14.1% in the second quarter. And we expect this trend to continue.

The fundamentals of the economy in our core market of Washington, D.C. remain strong, and as a result, the demand for new housing remains strong as well. Conditions in the Raleigh, North Carolina market continued to show signs of improvement. While the summer months are typically slower times for home sales due to vacation schedules and other activities, our core markets remain among the best markets for new homes in America.

The market remained supply-constrained in Washington and inventories remained low, especially in the price bands that we target. As I have said before, the demand for new homes is fueled by job growth and population growth, and the Washington, D.C. area remains the best job market in the country. The Washington region has added an average of more than 55,000 jobs per year over the last 20 years, and it is accelerating currently.

The Center for Regional Analysis at George Mason University projects that the region will add an average of more than 60,000 jobs per year for the next 25 years. That will mean another 1.5 million jobs being created in that timeframe. Since there is typically an average of 1.5 jobs per household, that equates to demand for more than 1 million new housing units in the Washington region during the next 25 years. Accordingly, the prospects for Comstock Homebuilding Companies and our shareholders remains bright.

As CEO and as a shareholder I'm very excited about the growth potential of Comstock, and I look forward to reporting to you on the continued success of our company. I'm now going to turn the call over to Bruce Labovitz who will walk through the detailed results of the second quarter and the first half of the year. Then we will both return for questions and answers. Bruce?

Thank you, Chris. As Chris mentioned, we saw solid growth during the second quarter in our topline revenue and are well ahead of where we were at the end of the second quarter last year. While we had previously estimated $0.22 to $0.25 for the quarter, we were able to deliver $0.26 basic and diluted earnings per share.

As we mentioned in the press release, on a pro forma basis, adjusted for current quarter tax rates and share counts, earnings for the second quarter of 2004 would have been $0.16 per share on both a basic and diluted basis. With permitting delays behind us, we're looking forward to focusing on delivering results for the year that are far better than the 2.15 to 2.20 per share we originally offered at the beginning of the year.

As Chris mentioned, overhead leverage is a big part of our earnings growth story over the next few years. This quarter was a good leading indicator that the overhead leverage story is about to unfold. Since Chris has reviewed the key changes in our income statement, I'll start by discussing some of the key changes you'll see in our balance sheet when it's released with our 10-Q later this week.

On June 16, we priced an $88 million equity offering. The transaction resulted in an increase in our public float from approximately 4.5 million shares to nearly 8.3 million shares, while increasing total outstanding shares from approximately 11.6 million to just under 14.3 million shares.

As a result of the offering, the Company netted $53.4 million of new equity funding after underwriting fees. As promised, that capital lowered our leverage ratio and fortified our balance sheet, leaving us with over $123 million of shareholder equity at June 30, 2005.

Unrestricted cash at June 30, 2005 was $70.4 million, with over 60 million deployable for investment in new projects. We expect to be talking to you during the coming months about our aggressive deployment of a significant portion of that cash into new projects, just like we did immediately following our IPO. Our real estate inventory held for development and sale, which is our capitalized cost of acquisition development and construction, increased by $2 million, even in light of the nearly $30 million reduction resulting from settlements. This implies a net investment in our inventory during the period of $32 million.

Next I'll take a few minutes to break down the results of Penderbrook and Countryside, two new condominium conversion projects, since they are atypical projects for a traditional sticks and bricks production homebuilder.

At Penderbrook, gross margins on units delivered during the second quarter was 14.2%. As expected, occupancy of existing tenants at Penderbrook is dropping, making more units available for sale. To date, we've recorded $1.4 million in net operating income from the property, all of which has been accounted for as a reduction in land basis. We expect an additional $400,000 in NOI for the property before achieving full turnover.

We expect to deliver an additional 145 to 165 units this year at Penderbrook, with the balance being delivered during the first half of 2006. We are currently projecting an average sales price over the life of the project at Penderbrook of around $260,000. Based on current projections for sales and settlement velocity, we expect to yield a 68% internal rate of return on the $21 million of invested capital we have at Penderbrook.

In July of this year, we opened for sale at Countryside, a 102-unit conversion project in Eastern Loudoun County, Virginia. If you recall, we purchased the project in early March for approximately $17 million. In the first months of selling at Countryside we have sold 20 units at an average of approximately $288,000 apiece. Deliveries are expected to begin at Countryside in late August. We expect to deliver 50 to 60 units this year with the balance being delivered in the first half of 2006.

Gross margins at Countryside are projected to be 16 to 19% based on current rent roll estimates. Based on our current projections for sales and settlement activity, we expect to yield a 60% internal rate of return on the $7 million of invested equity at Countryside. In the future, as condominium conversions and redevelopment projects become more of a staple of our business, we won't be breaking down our results quite so specifically. But for the near-term, we will continue to add that kind of information to our reports.

Of equal curiosity among our investors is the Potomac Yard project. If you recall, the Eclipse at Potomac Yard is a 465-unit high-rise in Arlington County, Virginia. Construction is on schedule at Potomac Yard. The development of the underground garage is complete and we're beginning the vertical construction.

We currently expect to deliver 350 units in the Eclipse in the second half of 2006, with the balance in the first half of 2007. With 371 units sold as of June 30, 2005, the average selling price at Potomac Yard is 393,000, and the most expensive units have still not been released for sale.

Company-wide, average revenue per settlement for the quarter was $322,000. Exclusive of Penderbrook, the average revenue per settlement was $432,000. For the first half of the year, our average revenue per settlement was $341,500, which is up 3.5% from the $330,000 for the first half of 2004. Exclusive of Penderbrook, our average revenue per settlement for the first half of the year was 391,000, an 18.5% increase over the first half of 2004.

In conclusion, I'm going to turn to guidance. In spite of the earlier than originally expected closing date of the follow-on offering, which adds some additional dilution to our weighted average share count, we're estimating that we will generate earnings for 2005 in the range of 2.68 to 2.73 per share diluted. This is an increase and a narrowing of the guidance we offered after filing to accommodate for the offering.

We're confident that we will put the proceeds of our follow-on offering to work quickly to generate increased revenue growth in 2006 and beyond. Based on our current land pipeline, we're targeting $450 million of revenue in 2006. Through the remainder of the year, we will continue to keep you posted on our progress with respect to land acquisitions and help to guide your expectations for 2006 and beyond.

With that, I ask Chris to rejoin me, and together we will be happy to answer your questions.

Thank you, Bruce.

(OPERATOR INSTRUCTIONS). Todd Vencil, BB&T Capital Markets.

Nice quarter. With regard to the 450 million in '06 of revenue that you just mentioned, can you comment on what you think the margins on that might be based on your current pipeline? You have sort of given that before.

Currently we're still consistent with what we have given before in terms of 2006. As I said, if the product mix moving forward, that could potentially add to changes. We will update that if necessary.

Can you just remind us of where we stood on that in '06?

WE were talking about achieving a 20% operating margin.

Can you tell us your breakdown between owned lots and optioned lots? Was that, I think, 5700 at the end of the quarter?

Just over 3000 of them are optioned.

About 3006

300 of them are under some form of option purchase agreement.

Keep in mind that even with the option contracts and the way we do business is we actually develop much of the property ourselves. So we take it down in sections and create the building lots as we roll through the option contract.

I know that you mentioned that you're going to be updating us as you take down any of the additional pieces of property. Can you tell us have you actually taken down any with the proceeds from the offering to date?

Since the middle of June, no. I'm sorry; we closed on a very small piece, but I would not necessarily characterize it as proceeds from the offering. It was a second piece on a piece we already owned, and it was for about 800,000. We have closed on that, but I would not necessarily characterize it as proceeds from the offering.

So not one of the six large projects that you mentioned in the --?

No.

So that's all to come and we're still talking about 450 million next year of revenue? All to come if it comes, presumably.

Let's make sure -- what we know about -- what we are confident is coming is already included -- we told you -- is included in the $450 million of revenue. I wouldn't add all of those new projects in to your revenue assumptions. Wouldn't want you to jump the gun on it.

Understood. And then, can you give us some guidance on what you think the share count is going to look like in the back half of this year and then next year?

We're at just a little over 14 million shares for the back half of this year, roughly 14.2 million shares for the back half of the year, with a weighted average expected of just over 13 million, about 13.1 for the full year. And then for 2006 I would expect it to be somewhere in the mid 14 million by the end of the year.

When you talk about (multiple speakers)

Low side of the mid 14.

I'm sorry; low side?

Yes.

And we talked about a tax rate of around 37%. Is that still good?

This quarter we had a lower tax rate, just under 36. And we're starting to see some of the benefit from the American Jobs Creation Act and would be looking more at a 36-ish tax rate going forward.

That includes the back half of this year and next year?

Yes.

I will jump back in the queue.

Charlie Place, Ferris Baker Watts.

A couple of things I just wanted to make sure I got down here as you were running through the detail of some of the data points. One is for the Eclipse, you had indicated how many units you have got in backlog right now. Was that 370 units?

I think it was 371.

It was in that general area.

Yes.

In the past you had given guidance for '05 between 265 and 275 million of revenue. Is that still a number you're comfortable with?

Yes.

Looking at -- you have the settlements that you also in this press release guided to around 715 for '05. And then when you talk about Penderbrook and Countryside, that is roughly 200-plus units. So I guess the other 300 -- I just want to make sure of my logic here, I'm following right. Around 300-plus or (indiscernible) 300 maybe a little less of those units will be single-family traditional that are the higher price points and higher margins. Is that --

When you say traditional, I wouldn't actually say single-family. They will include (multiple speakers) Ridge during the first part of the year. That was a mid-rise, a walk-up wood frame condo. Summerland is a stacked townhouse configuration. So, traditional if you mean.

I suppose the higher price point levels -- that probably would have been a better way to characterize it, but you still would have clarified it for me.

That's right.

Which is appropriate. I just wanted to make sure I had those numbers in line. I think that was pretty much just clarifying in my mind those types of things. You touched upon the tax rate, which is a little bit less than I was looking. But other than that it's a solid quarter. And I guess going forward we will keep our fingers crossed that you keep delivering what you say you're going to.

(OPERATOR INSTRUCTIONS). Chris Lucas, Robert W. Baird.

Just a couple of follow-up questions. On the use of proceeds, we are looking at Culpeper County, Prince William, Loudon, Ocean City, Reston, Leesburg, and I missed one.

There is the district (multiple speakers) you're looking at what is on our target horizon.

We are looking at all of the areas, all of the jurisdictions around the Washington area. Those are the ones where projects have been identified. The ones I spoke of earlier during my presentation are just the ones where projects have been identified and where we have control of those projects, those properties, and are moving forward towards developing them.

So are those projects that are part of the use of proceeds from the follow-on offering?

Some of them and some of them are new. They're not all completed through the study period yet. That is why we don't specifically call them out until they're completed through study, but they're under our control.

What would be the timeframe on the closing on those assets that were identified at the time of the offering?

Between those and the ones we identified, we will start settling on those during this quarter. And it can run all the way out into early part of next quarter, keeping in mind that there are phased takedowns oftentimes, so you will start by your complete study; you will advance to significant deposit; then you may have a first phase takedown, then a second phase takedown. So it's going to be strung out between now and early part of next year.

Would your expectation then be that any of these would actually add revenue to 2006?

Yes. That's why we say as we get further along with them we will continue to update the market on expectations for revenue for '06.

And then on the Eclipse, the 371 units sold. What is the timeframe on the remainder of the units in terms of when you would be marketing and selling those units?

Would you like to buy one?

Potentially.

We will not release the remaining units for sale until you can go up the elevators and see the views of downtown Washington. That will likely be late this year, early next, before we start selling those units.

There may be scattered sales in between, but we won't renew the effort until we can really get -- maximize the revenue that can be generated from the remaining units.

And then in terms of just a couple of local issues, have you guys seen any impact on your business or your opportunities from the construction moratorium going on in Montgomery County?

None. We have no projects currently that are affected by that situation. We also expect that situation, even if it had impacted us, would be cleared up relatively quickly. That was a knee-jerk reaction to a situation that I don't think will last long and have really any long-term effect on this market.

And then more longer-term, have you guys been rethinking at all your strategy related to some of the assets that you have down the I-95 corridor as it relates to the Base Realignment and Closures Commission recommendations and the move of assets or people out of Arlington, Alexandria down to Port Belvor (ph).

We have some good assets down that way. What you're seeing with BRAC, which is what it's called, is a realignment of the workforce all around. I don't think everybody's going to be leaving the Arlington corridor going down 95. I think there will be jobs created for people that don't want to move and commute. So we are remaining committed to all of the geographies around the area. We are certainly following it.

But it's also coming out towards Loudon. It's really --

Within our market it's a reallocation and not a loss.

We don't see that having any negative impact on any of our business in Virginia or Maryland or in the District of Columbia as we enter that market.

Any thoughts on your existing land positions, so down in that area, in terms of your current thinking relative to how it might have changed over the last couple of months?

I don't think there's anything significant in our change (indiscernible). We've always been very bullish on Prince William County and the South I-95 corridor and continue to be.

If anything it will simply increase the population growth in that part of the Washington market. Keep in mind that when they move 18,000 jobs out of the closer-in locations where they exist now, that space will get backfilled. The demand for office space in the Washington market remains among the best in the nation. The job growth in general in this area is the best in the country bar-none. So in essence, they're not reducing the number of jobs that are in the closer-in suburbs, they're just adding to the number of jobs that exist in Prince William County.

Todd Vencil, BB&T Capital Markets.

Your previous guidance where you gave detail for the quarterly expectations sort of indicated that for the back half of the year there was going to be about a 40/60 split between EPS from Q3 to Q4, which is to say about 40% of the second half expected EPS was going to be from Q3 -- within the Q3 guidance, and then the 60% was in Q4. Does that remain about the right mix?

Yes. I would say that at the moment we're still feeling that is about the right mix. I would think that what we have added is going to be more a fourth-quarter phenomenon than a third-quarter phenomenon. We've got all the units. The shift -- and the guidance is around where the delayed units are going to settle in. They're all under production now. It isn't a question of whether they will. We currently see them as being able to deliver hopefully in the third quarter. If we get to a point where we see that shifting 30 days, we will let you now.

Okay. Finally just more generally, you said that demand is tight and inventories remain really low, particularly at your price points. There was an article in the Washington Post that --

What did you say?

I said that you said that inventory is low, particularly at your price point. And I just wanted to mention there was an article in the Washington Post about the market maybe leveling out, or use whatever term you want. And they talk about particularly the higher price points. Can you guys comment maybe on sort of price point differentiation in the Washington market in terms of inventories and level of demand?

Keep in mind, the Washington Post is known for picking on the negative of any situation because that is what sells newspapers. I think if the article -- if you're talking about the article I saw the other day, it said that the inventory -- and it was a big headline that oh know, the housing market is slowing down in Washington. And their measure was that inventory had increased from 14 days on market average to 15 days.

That is the same article. That's right.

So tell me where in America a 15-day average days on market is a problem and then the headline might make sense. We are also in the middle of the summer when inventories do tend to stay on the market longer because there's less buyers in the market as people go out of town on vacation. In fact, in my travels around Washington this time of year I often feel like there is no traffic congestion in this area. It's only after the summer is over that you realize that it was only a temporary respite.

(multiple speakers) you will see that the inventories in the higher end of the market may begetting a little bit larger, but in the affordable end of the market we're still seeing a strong move through in inventory.

Frank Fisk (ph), Pilot Advisors.

I got on the call a little late. Could you just explain to me why the operating margins were down just in this quarter? And obviously (indiscernible) your guidance are going straight back up. And is all that really just this condo conversion, and I guess there's going to be less of it going forward? Could you just explain that to me?

You're talking about operating or are you talking about gross margin?

Well, gross -- I read about the gross. But, yes; it's both. If you could talk about both things.

On the gross margin level we've talked about that product mix directly affects gross margin for us, and that as we see some of these high velocity condo jobs go through, they are lower margin business, but they are -- the higher velocity, they are higher return on a yield basis for us. And that is going to it. In whatever quarter we are in, that is going to affect the margin. Last quarter we talked about being in the 30s on a gross margin -- in the high 30s, and then expecting for the year to settle in at around a 30 overall, which we had to come below in order to average out there. And this was the quarter we expected it, because some of the higher-margin jobs that we're doing got pushed into the third and fourth quarter from the delay in permits.

So had there been a different mix this quarter you would have seen a different margin scenario overall on both the gross side. We did see quarter-to-quarter an increase in operating margin from first to second quarter. So a reduction in overhead as a percentage of revenue. That is really the trend that we're going to be seeing going forward, as revenues -- when you look at our guidance for the third and -- the previously issued guidance for the third and fourth quarter and where we're going to end up for the year, the revenues are going to go up. And we've talked about overheads that will level out in the $20 million area, and to expect operating margin to expand as a result.

The simple way to think of it is our strategy is -- I'm not sure what time you got into the call, but I've talked a little bit about our strategy to have product diversification and submarket diversification in the Washington region. As a result, we have products that are all over the map in terms of what they are. The condo conversion products are typically lower-margin products that sell much faster. The reason for that -- much faster than the to-be-built projects.

The reason for that is twofold. Number one, they're already built. So you're only repositioning the projects and cosmetically upgrading or improving them. Number two, we tend to focus on the condominium conversion projects that are the older properties where they can be priced in such a way that there is no competition for the project, hence there's more velocity of sales. And for instance, the Penderbrook project Bruce was speaking about is located in Fairfax County, Virginia. It had an average price -- the first 70-some sales in the project averaged $249,000 a unit. At our recently completed Wescott condominium project within a couple of miles of Penderbrook, similar type product; $100,000 more in average price -- new built project that like I said we just completed. So we like the condominium conversion projects that are the older buildings that are in the better locations where there is no competition for that kind of product in the price bands that we're able to deliver them at.

And do you see -- is it mostly the existing tenants that buy, or not necessarily?

It's a relatively small percentage of existing tenants that buy. It can range anywhere from 10 to 25% of the units get sold to residents. The vast majority of them get sold to people in the market that recognize the value that is being created.

Tom Lightcap (ph), Value Holdings.

I was wondering if you could give me the owner's equity figure again for the quarter. I missed that one.

That was $123 million.

Are you disclosing how much interest you expensed this quarter to cost of sales?

That will be in the 10-Q when it is released.

I'm just trying to get on the same page for your revenue guidance for the year. You said about 265 to 270 million?

That's what we have given, yes.

So looking at your current backlog, you're looking to settle about 75% of that backlog?

Our backlog -- because our backlog contains longer-term projects -- so if you just take Potomac Yard as an example, all of that backlog revenue we'll deliver next year, we actually have some significant selling ahead of us for the year that will settle in here, just like the way you saw 74 units sell and settle at Penderbrook all during the second quarter.

Some of the condominium conversion units never even hit backlog because they sell and settle in the same period. So actually, we believe one of the benefits of our backlog is the diverse nature of the products, and therefore, the schedules that go along with it and the visibility that is created into 2006 and beyond.

Can you give a little more color then on which other projects you expect to maybe hit the settlement line by year-end but that are not currently on the backlog?

Well, there will be units at Countryside which we started selling in July that haven't made backlog as of the end of June, Countryside projects. The additional units at Penderbrook that have been selling since the end of the quarter will also make the delivery list. We've got units at Summerland and Blooms Mill that are still selling that are deliverable during the course of this year, and Emerald Farm. There are a number of communities where you can still see settling. It's only July 1st in terms of what is reported backlog. There's still plenty of time to be selling and delivering.

Would you guys want to venture a guess then on which percentage of the backlog will be settled by the year-end?

I wouldn't want to venture a guess on it. What I would tell you is that --

Hold on one second as we look that up.

It's not something I would want to venture a guess on in this forum, (indiscernible) in a subsequent release (indiscernible) talk to.

Just one final question about long-term strategy. Any plans to diversify the geographic mix out of just the D.C. and Raleigh areas?

The first part of our expansion strategy is to expand within the region that is the Washington market. And that -- we've talked about this before. We have seen the Washington market expand geographically over the years, such that today demand for new homes that exists from people that are actively living or working in the Washington market now stretches into four states, including West Virginia and Southern Pennsylvania, as well as Virginia, Maryland, and including in addition the District of Columbia.

I mentioned earlier that one of the projects we are excited to have gained control over in this past quarter is actually located in Ocean City, Maryland. So we are stretching the field from the Northern Virginia market, if you will, or the close-in Maryland suburbs, and we're doing that because the demand that exists in that area and in the crossover of the marketing that we can do for products in a location like that to buyers in the Greater Washington area, as well as the Philadelphia area and Southern New Jersey.

That concludes our question-and-answer session. I would like to turn it back over to you for any further closing remarks.

Unless there's any other questions we'll end the call just by telling you again that we're very excited about the potential for growth of Comstock Homebuilding Companies and in shareholder value that we believe we will create over the next couple of years. We are excited by the investor base that we have that seems to have a long-term vision in their investment in Comstock and in real estate operations in general. And we are excited about what is going to come next. Thank you very much for being involved in our conference call and for your confidence in our company.

Thank you so very much for your participation in today's conference. This concludes your presentation. You may now disconnect. Have a great day.