Shares of Comstock Homebuilding Companies (NASDAQ: CHCI) have been trading higher since Monday, after the National Association of Homebuilders/Wells Fargo confidence index climbed to 18, matching forecasts by economists and reaching its highest level since June 2008.
“Inventory is being cleared and that is starting to benefit the new-home market,” Julia Coronado, a senior U.S. economist at BNP Paribas in New York, told Bloomberg. “With a few months’ lag, that will lead to a turnaround in construction activity.”
Comstock Homebuilding Companies, Inc. could be in a great position to take advantage of the turnaround in the housing market. The Virginia-based real estate development company reached a foreclosure agreement with Wachovia Bank that will eliminate $17.8 million of debt. The announcement sent shares soaring more than 140 percent higher in morning trading Friday.
The agreement calls for Comstock to foreclose on several real estate holdings, and Wachovia to release the company of obligations and guarantees pertaining to $17.8 million of the company’s $77.2 million secured debt.
“We are very pleased to have finalized an agreement with Wachovia that will reduce the balance due to Wachovia from approximately $17.8 million to approximately $425,000.00 while also facilitating delivery of certain backlog units,” said Comstock’s Chairman and Chief Executive Officer, Christopher Clemente in a statement,
In addition to the foreclosure on properties, the terms of the agreement also provide for the concurrent execution of a non-interest bearing unsecured deficiency note in the amount of approximately $1.8 million. However, the deficiency note is reduced by the principal payments related to certain homes conveyed by Comstock prior to September 30, 2009. Based on current sales backlog, the September 30, 2009 deficiency note balance is expected to be in the range of $425,000.00, subject to increase or decrease based on additional sales or cancellations.
Comstock’s foreclosed assets include raw land, several single family farm units, and condominium and real estate developments in North Carolina, Virginia and Georgia. The foreclosures are expected to be completed between the last quarter of 2009 and the first quarter of 2010.
“We remain focused on reaching similar amicable agreements with our other secured lenders and we will continue to take the steps necessary to position Comstock for a return to profitability as market conditions improve.”