Equity Method Investments in Real Estate Ventures at Fair Value

9 Months Ended

Sep. 30, 2020

Equity Method Investments and Joint Ventures [Abstract]

Equity Method Investments in Real Estate Ventures at Fair Value

EQUITY METHOD INVESTMENTS IN REAL ESTATE VENTURES AT FAIR VALUE

Based upon elections made at the date of investment, the Company reports the equity method investments in real estate ventures at fair value. For such investments, the Company increases or decreases the investment each reporting period by the change in the fair value and the Company reports the fair value adjustments in the Consolidated Statement of Operations in the ‘loss on equity method investments carried at fair value’ line item. Changes in fair value of the Company's investment in Investors X (defined below) are impacted by distributions as the fair value is based on finite cash flows from the wind-down of that entity.

Fair value of equity method investments are classified as Level 3 of the fair value hierarchy. As of September 30, 2020 and December 31, 2019, the Company had equity method investments in real estate ventures at fair value of $7.0 million and $8.4 million, respectively. The table below shows the change in the Company’s investments in real estate ventures reported at fair value.


	Nine Months Ended September 30, 2020
Fair value of investments as of December 31, 2019	$	8,421
Distributions	(1,322)
Change in fair value	(134)
Fair value of investments as of September 30, 2020	$	6,965

See Note 15 – Related Party Transactions for additional discussion of our investments in real estate ventures at fair value.

Investors X

The Company has elected to account for the equity method investment in Comstock Investors X, L.C. (“Investors X”), a Variable Interest Entity (“VIE”) that owns the Company’s residual homebuilding operations at fair value. Fair value is determined using a discounted cash flow model based on expected future cash flows for income and realization events of the

underlying asset. Expected future cash flows includes contractually fixed revenues and expenses as well as estimates for future revenues and expenses where contracts do not currently exist. These estimates are based on prior experience as well as comparable, third party data.

As of September 30, 2020 and December 31, 2019, the fair value of the Company’s investment in Investors X is $5.8 million and $7.2 million, respectively. The Company received distributions of $581 thousand and $1,239 thousand during the three and nine months ended September 30, 2020, respectively, and recognized a loss in fair value of $47 thousand and $161 thousand, respectively.

Summarized Financial Information for Investors X (unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Statement of Operations:
Total revenue	$	5,078	$	3,072	$	12,276	$	3,072
Direct costs	4,653		3,750		10,915		3,750
Net income (loss)	$	425	$	(678)	$	1,361	$	(678)
Comstock Holding Companies, Inc. share of net income (loss)	$	425	$	(678)	$	1,361	$	(678)

The Hartford

On December 30, 2019, the Company made an investment related to the purchase of a stabilized commercial office building located at 3101 Wilson Boulevard in the Clarendon area of Arlington County, Virginia (the “Hartford”). The Company owns a 2.5% equity interest in the asset at a cost of approximately $1.2 million. The Company has elected to account for the equity method investment in the Hartford at fair value. Fair value is determined using an income approach and sales comparable approach models. As of September 30, 2020 and December 31, 2019, the fair value of the Company’s investment in the Hartford was $1.1 million. The fair value of the Hartford remained at approximately $1.2 million during the three and nine months ended September 30, 2020. The Company received distributions of $24 thousand and $83 thousand during the three and nine months ended September 30, 2020, respectively.

Summarized Financial Information for the Hartford (unaudited)


	Three Months Ended September 30,		Nine Months Ended September 30,
	2020		2020
Statement of Operations:
Total revenue	$	2,486	$	6,544
Direct costs	814		1,966
Other costs	2,366		6,257
Net loss	$	(694)	$	(1,679)
Comstock Holding Companies, Inc. share of net loss	$	(17)	$	(42)