A 10-year-old Atlanta-area builder that, like many others in that market these days, found itself in workout situations with its lenders, got a new lease on life recently when a Dallas-based private equity firm spent $30 million to acquire land, lots, and completed homes to form a new home-building enterprise that’s being managed by the same executive team as the old builder.
The buyer, JBGL Builder Finance, is a limited liability company of JBGL Capital, a 3½-year-old boutique real estate investment firm. It has provided capital requirements and developed land in Colorado, Texas, and North Carolina for several builders, including David Weekley Homes, PulteGroup, Meritage Homes, and Harmony Homes. Much of the land it acquires is REO property from banks.
The land portfolio that JBGL Builder Finance acquired in the Atlanta area includes 565 lots and 114 completed single-family homes, townhouses, and condos in four communities. It also bought land for 11 custom home sites, and owns or has optioned 414 lots in four other Atlanta-area communities on behalf of its new home-building entity, The Providence Group of Georgia LLC.
The Providence Group was the name used by a Suwanee, Ga.-based builder that Jolly Development launched in 2001. Providence had emerged as Atlanta’s fourth-largest builder, having closed more than 570 homes over the past three years. But as the recession shrank Atlanta’s housing market, Providence found itself looking for ways to deploy its assets more effectively and pay down debt. Last fall, for example, Providence and a group of investors spent $310,000 to convert a slab that was meant for condo building in an Atlanta suburb into a park serving the other condo buildings in that community.
Under its new agreement with JBGL Builder Finance, whose real estate purchases took the better part of last year to complete, The Providence Group “hopes to see daylight,” including finishing several of its projects, says Warren Jolly, Providence’s CEO. Jolly and Matt Baynham, a principal with JBGL Builder Finance, spoke with Builder on Thursday.
Providence builds single-family homes, townhouses, and condos priced from the low $100s to the $400s in 17 communities around Atlanta’s metropolis. Three of those communities are closing out and four are just getting started. Jolly says his company, going forward, will focus on single-family home construction because, he explains, “it’s hard for condo buyers to get financing these days.”
The “desirable locations” of Providence’s communities were what attracted JBGL to this builder, along with the “honesty and reputation” of Jolly and his son, Pete, says Baynham. “Providence was the only builder we looked at that hadn’t been sued by its lenders. That counts for something in this market.”
Baynham notes that his company’s relationship with Providence is “unique,” because JBGL is taking an ownership position in the builder and because “there are a lot of reset opportunities located on Main and Main in Atlanta,” meaning that there is still choice property available at discounted prices.
Indeed, JBGL has committed up to $50 million to help Providence expand. Jolly says the builder and its financial partner are looking at a number of deals, and at presstime were close to acquiring a project with 15 vacant lots in Alpharetta, Ga., which are owned by a bank. For the moment, Providence intends to confine its growth to the Atlanta area. But Jolly says it’s possible that it might look beyond that metro in the future.
John Caulfield is senior editor for Builder magazine.
Learn more about markets featured in this article: Atlanta, GA.