Show Notes
Bio
Chris Clemente founded the Comstock organization in 1985 and has guided its growth and diversification since its inception. Mr. Clemente managed the growth of Comstock as a private enterprise until the 2004 initial public offering of Comstock Homebuilding Companies, Inc. (NASDAQ: CHCI), now known as Comstock Holding Companies®, Inc. (“Comstock” or “Company”). Since the IPO, Mr. Clemente has served as Chairman of the Board and Chief Executive Officer of Comstock and is the largest individual stockholder of the Company. Mr. Clemente chairs Comstock’s Executive Committee, which charts strategic direction, evaluates acquisition opportunities, and oversees strategic partnerships, including multiple public-private partnerships. Mr. Clemente is also Managing Member of Comstock Partners, LC (“Partners”), a family-owned, private company founded by Mr. Clemente in 1999 to focus on commercial real estate development and investment.
Following its IPO, Comstock expanded its for-sale homebuilding operation into multiple key markets in the southeastern United States, while the commercial development operation of Partners remained focused on the Washington, DC market. Following the Great Recession, Comstock scaled back its for-sale homebuilding operation to focus solely on the Washington, DC market. Mr. Clemente managed the two companies as separate firms with distinct management teams and investment objectives until early 2018, when Comstock announced its plan to wind-down its for-sale homebuilding operation and refocus on commercial development, real estate asset management, and real estate related services. To execute this strategic plan, the operating platforms of Comstock and Partners were combined and changes were made to the management team. To anchor the transition, Partners entered into a long-term, cost-plus asset management agreement covering its portfolio of commercial properties, which had grown to include millions of square feet of stabilized buildings and development assets strategically located at key transit stations on Metro’s new Silver Line in the Dulles Corridor of Northern Virginia that have an estimated value at full build out of approximately $3 billion.
Key assets included in the portfolio of managed assets, include; Reston Station, a 4.5 million square foot transit-oriented and mixed-use development covering nearly 40 acres surrounding the terminus station of Phase I of the Silver Line in Reston, Virginia, and Loudoun Station, a 2+ million square foot transit-oriented and mixed-use development located adjacent to the terminus station of Phase II of the Silver Line in Ashburn, Virginia.
Mr. Clemente attended the University of Wisconsin and George Mason University where he studied Business and Psychology. Mr. Clemente and his wife, Tracy Schar, have been long-time supporters of numerous charitable organizations in the Washington, DC region that support international adoptions, foster care programs, and that provide educational, housing and other assistance to families and children in-need.
Show Notes
- Business structure is Comstock Holding Company, which is a public company, that before it was made public its mission was to sell everything that was developed until 2007 when it became a service company and Comstock Partners is a private company that owns the assets (5:15)
Origins and Education
- Born in New York and was raised in Wisconsin (8:30)
- Parents divorced when he was 4 yrs. old
- They moved to DC right before this time
- Attended Madison High School (9:20)
- When he was young he became a laborer on construction site (9:30)
- Attended Virginia Wesleyan in Norfolk, VA and wrote a business plan to manage labor on construction sites (10:30)
- Transferred to the University of Wisconsin after building his business had built in the summer time (11:45)
- Told a story about considering medical school and told a story about a cadaver revelation and was a psychology major (12:45)
- The business grew to the point where he needed to move back and transfer to George Mason University and was so busy with his construction labor business he did not finish (14:00)
Comstock- Homebuilding
- Joined his Father to do workouts with banks and worked on a project that was a good learning experience (16:00)
- Epic Financial– Tom Billman acquired model homes and leased them back (17:15)
- Chris worked a pre-sale to Tom Billman
- Purchased a subdivision from Reed Wills for 50 townhouses with a contract from Epic Financial in 1984 (18:20)
- United Savings Bank– Howard Orebaugh lent him the money to develop the townhouses with a participation structure (19:00)
- Hazel Land did the land development (20:00)
- Epic went under in 1985 and the takeout was then wiped out, so Chris needed to sell the townhouses (22:00)
- Learned not to pick subcontractors from Yellow Pages (24:30)
- Found more projects in Herndon and Vienna VA. Broke up with his partner, Trent Taylor (25:15)
- Epic Financial– Tom Billman acquired model homes and leased them back (17:15)
- Met Tracy Schar, his wife, via his Dad who knew her father, Dwight Schar (25:50)
- Acquired a 3 acre site from Terrabrook in Reston in 1999 and negotiated with Tracy Graves and Dwight Schar came in on the deal with him and that is how Comstock Partners started (29:00)
- Business was strong up until 1989 when the markets shut down and United Savings Bank went under (32:00)
- Was recommended to file bankruptcy and was uncomfortable with the process and went to each of his bankers (33:00)
- Took two years to get projects resolved (33:45)
- Volume dropped dramatically and he laid off all but four people in company (34:00)
- Every home sale was the source of paychecks along with ATMs and 10-12 credit cards (34:30)
- Tax Refunds and 24% interest rate loans from credit card debt for 2+ years (36:15)
- He and his wife moved 5 times in one year with two children (36:45)
Going Public
- By 1993 things got better and Greg Benson became his partner and he began building houses again and they built up the market value of the company to the point in 2004 when they went public as Comstock Holdings (38:00)
- Two week road show aimed at secondary markets with BB&T Financial as their investment bank (39:00)
- Dwight told him to keep “B” Shares separately (39:30)
- Public company went out at $16/ share and then shot up to $32/ share in 2007. (41:20)
- Selling houses like candy- lay people were making deals and it became evident that the housing market was way over bought (42:00)
- Board of Directors said that they should hire a consulting company to decide what to do after the 2008 crash (43:45)
- Goal was to get to 2000 units per year and sell the company (44:30)
- Went through same process in 2009-12 that he did in 1990-92 for restructuring and the banks did not foreclose, yet they were forbearing through (45:15)
- In 2012, he hired a new CFO, Joe Squeri, who was at Choice Hotels, and company’s market cap had dropped to around $10MM. Joe helped buying companies to diversify their revenue stream and create scale. (47:00)
- Bought only one company…an engineering firm, which was sold last year (49:00)
- Pivoted toward services business and merged in operating platform from commercial property activities (50:00)
- Methodically sold out of the residential projects including land and finished homes- Drees and Miller & Smith were the buyers in 2018 through 2022 (51:00)
Comstock Partners- Private Company
- Comstock Partners grew from the single Reston office building to then acquire a property in Ashburn, VA and they decided to “mothball” it until the Silver Line Metro was announced (52:15)
- Eric Segal told him about a prospective Metro Station in Ashburn, VA (53:00)
- Dwight told him “Better To Be Lucky than Smart” (55:30)
- Needed to rezone the property to accommodate a TOD development plan next to a Metro station in 2004, then the Loudoun County Board tried to overturn it, yet was constrained by a judge (55:45)
- He managed both Comstock Holdings and Comstock Partners coterminously (59:30)
Fairfax County RFP Became Reston Station
- Fairfax County RFP in 2005 to trade the land for a Metro garage on the site they were in, yet Comstock decided to offer a ground lease for the property and let the County pay for the garage underground and get significant density to develop (1:00:00)
- Went to Doug Carter of Davis Carter Scott to devise the strategy for Reston Station with the design and financial structure (1:02:50)
- Preliminary agreement with the County was nullified and put back out to market in 2007. (1:03:45)
- They bid on it again in 2008 and won the deal (1:04:45)
- He is surprised that the County’s partnership with them has worked so well (1:05:00)
- Formed an REA and Development Agreement (1:05:45)
- Rob Stalzer at Fairfax County kept the deal going (1:06:15)
- The final agreement was set in 2009 anticipating the Metro station opening of 2013 (1:07:00)
- Jim Davis was the General Contractor (1:07:45)
- Broke ground in 2011 and delivered garage in 2013. (1:08:15)
- Apartments started in 2014 and the 3,500 space garage was then full every day when Metro opened (1:09:00)
- Financed privately with Bank of America after Fairfax County bonds (1:11:30)
- Audited construction job (1:12:30)
- Carbon Cure technology in Phase 2 for the project (1:13:00)
- Discusses process of Carbon Cure (1:14:00)
- Building codes have not caught up with new technology
- Shows me carbon fiber rebar that never rusts is only used for paving (1:18:30)
- Momentum continuing in spite of the pandemic and aftermath (1:21:15)
- Suggests that his team is the reason (1:21:30)
- Relationships with Bank of America and Merrill Lynch (1:22:00)
- Dwight Schar’s relationships and net worth allows for them to keep projects going (1:22:20)
- Users have demonstrated demand (1:23:15)
- Google and other tenants have filled up their three buildings with leases, not occupants (1:23:30)
- Permanent financing from Blackstone (1:23:45)
- Comstock moved into their space to accommodate another tenant (1:24:30)
- Reston Station
- First building built 20 yrs. ago (1:26:15)
- 8 acres is the PPP with Fairfax County (1:26:30)
- Phase 2 was acquired from condominium office owners- 32 owners- Took five years to negotiate to acquire 8 acres (1:26:45)
- Phase 3 is JBG’s former land on east side of Wiehle Ave. (EYA acquired)
- Phase 4 was also land that JBG and Vornado owned and they are reworking the zoning with the County across the Dulles Toll Road to the south (1:28:00)
- Looking at similar density on both sides of the Dulles Toll Road (1:31:00)
- Rents comparable to Reston Town Center because demand couldn’t be satisfied there (1:32:00)
- Demand evident for both Reston Station and Town Center (1:32:30)
- 150,000 s.f. absorption in Reston Station in the first quarter (1:34:00)
- Demand for amenity filled locations and “place” (1:35:00)
- Working on a grocery deal in the project (1:35:30)
- Now covers more than 80 acres of land (1:35:45)
- More compact than Reston Town Center (1:37:15)
- Been able to achieve comparable rents and quality tenants (1:37:30)
- ICF, Neustar, and Clarabridge are new tenants (1:38:00)
- Data center growth (1:39:30)
Company Employment & Inspirations
- Comstock employees (1:41:15)
- Started with 3rd party management (1:41:30)
- Decided to grow property management group (1:41:45)
- Commercial (Managed by a woman who was with Tishman)
- Residential (Managed by a former Greystar employee)
- Parking management entity that manages current portfolio and other properties via 3rd party (ParkX Management) (1:43:00)
- Hiring (1:44:15)
- Experience, Knowledge & Commitment to work hard
- Lean group
- Inspirations (1:45:00)
- Dwight Schar, both as a partner and a mentor (1:45:10)
- Grew up with his Mom and learned what he didn’t want to be (1:45:30)
- Comstock Holdings is really only a service company and does not own real estate. (1:47:15)
- Hartford Building acquisition in partnership with Divco West (1:48:00)
- AECOM is lead tenant
- Comstock Partners now owns all of the real estate that Comstock Holdings manages (1:49:30)
- Jubal Thompson, General Counsel, has helped in structuring the companies (1:50:15)
- Wears two hats (1:51:15)
- Anchor portfolio is 10 million s.f. (1:51:30)
- Sometimes complicated structure (1:52:00)
- Third party work may potentially expand (1:52:30)
- ESG- LIbrary of things they do (1:54:30)
- LEED Silver at a minimum
Personal & Philosophy
- Personal
- Family- Has 8 children (4 naturally and 4 adopted) (1:56:30)
- Bill Kent and his wife had two adopted children and told him and his wife how to adopt a South Korean child (Maddie) (1:57:30)
- Went back to adoption agency to adopt a child and adopted an Ethiopian child (Hayley) (1:59:00)
- Last two adoptions came from the Marshall Islands (Matteo & Kai) (2:00:00)
- Giving Back (2:07:45)
- Boys & Girls Club (2:08:00)
- Adoption
- Helping Mothers in need (2:08:30)
- Public schools predominantly, yet post pandemic, Parochial schools (2:08:45)
- Family- Has 8 children (4 naturally and 4 adopted) (1:56:30)
- Loss- Early 1990s a Tysons project was in risk of foreclosure due to FIRREA restrictions at that time by Sovran Bank (2:09:45)
- Win- RFP win with Fairfax County for Reston Station development (2:11:00)
- Coordination with Fairfax County, the contractors and Comstock was extraordinary
- Putting everyone in one room to meet the Metro deadline (2:13:00)
- Surprise- Team leader that they had won the RFP (2:15:15)
- Advice to 25 Yr. Old self- “Keep more of what you built,” would have built more income producing properties than “for sale” (2:16:00)
- Billboard Statement- “Perseverance.” “Whether you think you can or you think you can’t, you’re right” (2:18:00)
Postscript
- Kevin Dean’s Takeaways
- Incredible story through 1980s, 1990s up to today
- Moving around 5 times in a single year and negotiating with banks
- Eye opening story about perseverance in business
- How do I get myself out of a tough situation?
- Pushing through the financial crisis
- Pivoting business
- Fairfax County RFP
- Corporate change feat
- Set on a completely new path
- Ashburn project- in order to get lucky you have to be in the game
- Took advantage to accept overflow demand from Reston Town Center at Reston Station
- 20-25 years of runway left
