Jim Brickman had a goal—he wanted to retire from home building by age 50. And, in 2000 at the age of 48, he achieved that objective. But he still wasn’t happy
“I did it [retired] and get bored immediately,” he admits.
After phasing out his company, Princeton Homes, Brickman worked on an investment idea in 2002 with billionaire hedge fund manager David Einhorn, who runs Greenlight Capital. "I got interested in finance and we developed a close relationship," Brickman says.
That connection eventually led to the formation of a publicly traded home building company, called Green Brick Partners, with multiple income streams. And, it has given Brickman a chance to revisit his roots.
“I was probably the only building superintendent in Dallas in 1976 with a Master’s Degree in finance,” he says. “I learned the business from the bottom and then re-entered it again when the real estate market collapsed.”
A Life Raft
In 2009, the environment was bad for builders. But it was a great year to have home building expertise, no legacy debts, and access to cash.
“At that point in time, there was no capital in the industry,” Brickman says. “Builders were having trouble everywhere. We entered the space by buying distressed real estate notes. By 2011, that had matured to the point that we recognized there was going to be a recovery.”
As the market recovered, private builders began looking for more permanent capital, which presented Brickman with another opportunity—to buy a controlling interest in these companies. In 2011, it partnered with The Providence Group of Georgia. In 2012, it bought interest in Dallas-based CB JENI (and its subsidiary Normandy Homes) and established Dallas custom builder Centre Living Homes. And in 2013, it established Southgate Homes in Dallas.
“The day-to-day operations are separated from the planning and capital markets and the financing side of the business,” says CFO Rick Costello. “If you ask most private builders what they spend most of their time on, they would say it would be the money side of the business. Our guys don’t have to worry about that. We are their capital so they can focus exclusively on operations.”
Green Brick also sells lots to these builders. “In the mid 2000’s, there were a lot of lot developers and there was a lot more capital available to builders,” Brickman says. “But as the banks retreated and land developers went out of business, the business became very capital intensive. These guys recognized they needed somebody with a lot of capital if they wanted to compete with public builders in their markets.”
But that’s not all. Green Brick also provides its builders with almost 100% of their construction financing. The company also buys lots and sell them to its own builders and other builders, as well. “Our goal is to make a decent return on being a land developer and to make a good return on being a lender,” Brickman says. “And, we hope to juice that through our 50% controlling interest in builders as an equity kicker.”
A Public Decision
In October 2014, JBGL Capital, which stood for Jim Brickman and Greenlight, was merged to form a NASDAQ-listed company. From Brickman, it was a big transition. He went from being a fund advisor and active manager of home building businesses with JBGL to a CEO. The transaction took a lot more effort than he initially anticipated, but it raised $240 million.
“It was quite challenging just from the administrative aspect of the business,” Brickman says. “But obviously the benefit is that we have access to public capital markets. We entered it very cost effectively where we didn’t have a lot of investment banking fees. It’s been an unbelievably efficient capital raise for our investors because Greenlight Capital is a big investor for us side by side.”
While going public was relatively cost efficient for Green Brick, it did require a ramp up for staffing, SEC compliance, and internal auditors.
“We have our platform pretty fine-tuned right now as a public company in terms of reporting,” Brickman says.
With the public capital and a clean balance sheet with 11% net debt to capital, Brickman expects to make investments in more builders.
“We’re a small company and we have a lot capital to grow with,” Brickman says. “Our [low-leveraged] balance sheet, gives us a lot of growth opportunities.”
Already, Green Brick is in Dallas and Atlanta, two of the top three starts markets in the country. “There are a lot of growth opportunities,” Brickman says. “We’re still a very small player in those two markets. We do have a big runway for growth in those markets but we’re also looking at other markets.”
Brickman mentioned Nashville as a market with strong upside. But wherever Green Brick goes, it’s going to be careful.
“Right now there’s a lot of capital in the business,” Brickman says. “I’m more interested in who the operator would be in the market, what their relationships are, and their ability to acquire and entitle land.”
Unlike some other builders, Brickman says he wants to keep the team and platform in place of anyone that Green Brick buys.
"We think real estate is a local business," he says. "All things being equal, people would rather buy a home
from a well-managed and capitalized local builder."