BILLIONAIRE DBJ EXCLUSIVE HOW HIS MONEY Brickman settled into the plush sofa sectional in his...

NOVEMBER 6, 2015

This article appeared in the Dallas Business Journal on November 6, 2015 on page 1, 4-6 and 8. It has been reprinted by the Dallas Business Journal and further reproduction by any other party is strictly prohibited. Copyright ©2015 Dallas Business Journal, 2515 McKinney Avenue, Suite 100, Dallas TX 75201

DALLAS BUSINESS JOURNAL

Bankrolling Green Brick’s DFW building boom

BY CANDACE CARLISLE [email protected] 214-706-7121, @DBJCandace

Jim Brickman settled into the plush sofa sectional in his Highland Park home, ready to talk about his most personal piece of real estate.

With his Labradoodle Beau at his side, the 63-year-old CEO and director of Green Brick Partners Inc. reminisced about how he found the rare two-home lot four years ago in the town known for its high-end estates. His L-shaped home opens up to his daughter’s

house next door — a mirror image of his own.

He helped design the two homes and the shared backyard, giving the executive a place to play with four of his grandchildren. Building the luxury homes, naturally, was a labor of love for Brickman.

“Homes are fun to build because you can relate to them,” said Brick-man, who spoke with the Dallas Business Journal in his first inter-view since starting the founda-tion of the company seven years ago. “Even if you are designing a townhome, or someplace you aren’t going to live in, you will think about how you would live in that space.”

That passion — coupled with Brickman’s inability to retire — drove him to form Dallas-based JBGL Capital LP, a real estate invest-ment firm, with the help of hedge fund heavyweight David Einhorn.

Years later, the entity morphed into Plano-based Green Brick (Nasdaq: GRBK), which became a publicly traded company a year ago and has thrived since.

Green Brick raised $169.8 mil-lion in net proceeds from a sec-ondary offering this year, which enabled the company to repay a $150 million loan and provide sig-nificant capital to help the firm’s controlled-interest builders grow.

“We now have one of the most unlevered balance sheets of any public builder and the capital and lot positions to execute our plan for significant growth,” said Brick-

DBJ EXCLUSIVE

HOW HIS MONEY AND HIS

INABILITY TO RETIRE

An interview with the money men at

Green Brick Partners. COVER STORY, 4

are spreading Green all over DFW’s real

estate market.

BILLIONAIRE HEDGE FUND MANAGER DAVID EINHORN

VETERAN DFW DEVELOPER JIM BRICKMAN

The Plano builder, led by veteran DFW developer Jim Brickman, is backed by the deep pockets of billionaire hedge fund manager David Einhorn.

NOVEMBER 6, 2015



man. The executive also plans to develop the firm’s builder roster by adding new firms or enhancing current building operators, which include CB JENI Homes, Norman-dy Homes, Southgate Homes and Centre Living (led by Brickman’s son, Trevor) in Dallas-Fort Worth and The Providence Group in Atlanta.

Green Brick also has a land development component led by Jed Dolson called Green Brick Communities. It has about 5,000 home lots in various stages of development in Class A submar-kets, with about half of those lots in Dallas-Fort Worth and half in Atlanta.

Green Brick — whose name is a play on Einhorn’s hedge fund Greenlight Capital and Brick-man’s last name — saw a 40 per-cent increase in construction year-over-year. Brickman said he expects that growth to continue through the rest of the year, par-ticularly in the fourth quarter.

Brickman attributes Green Brick’s strong financials to hit-ting the ground at the right time in growing real estate markets in DFW and Atlanta and offering builders something they desper-

ately need: money. “We provide the capital for

builders that they wouldn’t have otherwise and, in Dallas, we pro-vide the lot development side of the business they don’t have the expertise in and keep lots ahead

of them,” he said. Not everyone is willing to take

that capital risk, such as financial institutions and home-lot devel-opers, still scorched by the last real estate cycle.

Traditionally, the housing

JAKE DEAN

In 2008, CEO Jim Brickman (left) asked billionaire hedge fund manager David Einhorn to become a lead investor in what would eventually become Green Brick Partners. Brickman said he wanted “one of the smartest guys in the room,” on his team.

GREEN BRICK PARTNERS INC. (NASDAQ: GRBK) acquires and develops land for a wide range of residential projects from townhomes to luxury homes in master-planned communities. In all, Green Brick owns or controls upwards of 5,000 home sites or land zoned for home lot development in DFW and Atlanta. “We have already bought up a lot of lots,” said CEO Jim Brickman. “Unlike a lot of companies, we are doing pretty well in terms of lot positions up until 2018.”

GREEN BRICK COMMUNITIES (formerly JBGL Communities) is Green Brick’s land acquisition and home lot development group affiliate. It owns a controlling interest in six homebuilders:

R CB JENI HOMES 2nd largest townhome builder in DFW

R NORMANDY HOMES Plano-based builder specializes in homes from $400,000 to $600,000

R SOUTHGATE HOMES LLC Dallas-based luxury homebuilder specializes in homes ranging from $600,000 to $3 million

R CENTRE LIVING HOMES The Dallas-based homebuilder also builds amenity centers for Green Brick and other developers

R THE PROVIDENCE GROUP One of Atlanta’s largest builders, it builds a variety of homes priced from the $300,000s to more than $3 million

R PROVIDENCE LUXURY HOMES Luxury division of The Providence Group specializes in homes ranging from $800,000 to over $4 million in Atlanta

GREEN BRICK’S PARTNERS

industry has had a low barrier to entry, but that changed after the last recession. Even as North Texas enjoys steady job growth and new residents continue to flood into the region needing homes, it’s not easy being a builder.

Lot developers have left the industry; banks have also restrict-ed lending for land development, which requires a significant amount of capital. With only the large build-ers able to compete in this evolving market segment, the highly frag-mented industry has continued to consolidate.

“There needs to be more capi-tal because the banks have lost so much and they don’t want to take the risk,” said Brickman. “If you have a large private homebuild-ing company, you need tens of millions of dollars — and private builders just don’t have it.”

Brickman’s strategy

Long before Brickman became the top executive at Green Brick, he was a 115-pound wrestler at his Illinois high school. Despite his

small stature, he quickly learned that technique was just as impor-tant as strength.

Brickman left Illinois to attend school at Southern Methodist Uni-versity and quickly took to the welcoming environment in Tex-as, where he also learned how to make some successful bets on the stock market.

After completing his MBA at SMU, Brickman jumped into the construction industry and quickly found his stride in developing resi-dential and commercial real estate.

In that time, Brickman survived the savings and loan crisis in the 1980s, in part because of the rela-tionships he built with his lend-ers. The experience helped shape Brickman’s outlook on real estate. As a result, he has become a more cautious investor.

Over the decades, Brickman built up his development career until he retired in 2000. But three months into his retirement, Brick-man became bored.

He bought up some distressed debt and made some other real estate investments, but he wanted

to do more. By 2001, someone sug-gested he sit on the Dallas credi-tors committee, which is a group of people that represents a com-pany’s creditors in a bankruptcy proceeding.

The pay was nominal — the equivalent of a school teacher’s salary — but it ended up being a great experience.

“You never know where life is going to take you and it ended up being something better than I ever would’ve expected at that point in time,” he said.

The Einhorn effect

In the early 2000s, Brickman began liquidating Amresco, which has one of the largest Small Busi-ness Administration lending plat-forms in the nation. He was later chairman of Amresco’s Liquidat-ing Trust.

In the process, he found a white paper written by billionaire inves-tor Einhorn on the overvaluation of Allied Capital because he thought SBA lending platform BLX Capital, which drove Allied’s earnings, was

NOVEMBER 6, 2015



Q&A WITH DAVID EINHORN & JIM BRICKMAN

The Green Brick Partners entity was once an ethanol-producing firm. How did it transition?Einhorn: Green Brick Partners was never in the energy industry. The publicly traded shell was a biofuel company, which was a business that did not succeed and the assets were turned over to the lenders and as a result, was a publicly traded shell with a tax asset, which was ultimately merged by buying Green Brick Partners and became a public company a year ago.

What kind of real estate do you sell?Brickman: Our average selling price is $430,000 and that’s where the bell curve of buyers is. We generally build more upscale product in each price point, which we call lifestyle product.

How much money do you have earmarked for M&A activity right now?Brickman: Because we are unleveraged, we have the ability to do significant M&A activity if we chose to do so.Einhorn: I think the strategy is flexible and it’s a question of what opportunities will come. I think the business started as pretty much nothing just six years ago. Jim and his team have built it into a really substantial operation already with just terrific positions in two markets and if the opportunities exist to expand into other markets the company would like to do that. If it doesn’t materialize, and we simply grow out our operations in the markets we’re already in, I think that will be very attractive as well.

Why did you come back to the Dallas real estate community after retirement?Brickman: Really it was the opportunity to work with David and his team at Greenlight, which wasn’t in homebuilding. I really enjoyed working with David and I thought it was a great way to finish my career.

Do you have any plans to buy or purchase an equity stake in any new builders?Brickman: I think the best way to describe that is we are going to deploy capital wherever we think it’s most profitably deployed and that’s one alternative we are looking at right now.

What does the future hold for Green Brick Partners?Brickman: We have the opportunity to do a lot more than we are doing right now because of our balance sheet, but we are prudently looking at all those alternatives.Einhorn: We are seven years into this investment and I think we’re just getting going.

Green Brick has flown under the radar for the past few years. Has this hurt you in growing a new company?Brickman: Now that we’re a public company, it’s our débutante party. But those relationships have been there for decades.

It’s been a year since Green Brick Partners launched its initial public offering and the stock has performed well over the past year, up more than 34 percent. CEO Jim Brickman and hedge fund manager David Einhorn — who is also the chairman of the board for Green Brick Partners — recently sat down with the Dallas Business Journal at Green Brick’s office to answer questions about their partnership and what lies ahead for the Plano-based homebuilder:

Homebuilder’s CEO, chairman discuss M&A, future plans

Chairman of the bored: Retirement didn’t suit Brickman at all

NOVEMBER 6, 2015



a fraud.Brickman thought the white

paper was “right on,” and contact-ed David, later chatting with him over the phone and then in person. The duo quickly became friends and spent inordinate amounts of time conferring about the over-valuation of investment firms on Wall Street.

After a highly public five-year battle with Allied Capital that included him short selling its stock, Einhorn wrote “Fooling Some of the People All of the Time,” in which he famously called the pri-vate-equity firm a Ponzi scheme. Allied eventually settled with the SEC without admitting fault.

The activist investor also men-tions Brickman, who shares simi-lar values as Einhorn, in the book.

“Jim is tireless and has terrific business ethics and terrific judg-ment and is able to suss out oppor-tunities as they are and figure out when ones need to be pursued,” Einhorn told the Dallas Business Journal.

In 2008, Brickman asked Ein-horn to become a lead investor in two JBGL funds, which was the genesis for Green Brick. In part, Brickman said he wanted “one of the smartest guys in the room,” on his team.

Einhorn, 46, is the chairman of the board for Green Brick and

helped assemble the board, which helped take the company public in October 2014. Einhorn’s hedge fund, Greenlight Capital, owns about 49 percent of Green Brick and has enjoyed the Plano com-pany’s stock performance over the past year: up nearly 34 percent.

The hot stock has cooled recent-ly, mostly because the company lowered its guidance for the year. Green Brick said last week that it will only turn a profit of $22 mil-lion to $24 million in 2015, instead of the expected return of $29 mil-lion to $32 million. Additionally, Green Brick announced that COO John Jason Corley was no longer an executive at the company.

GREEN BRICK’S NOTABLE NORTH TEXAS DEVELOPMENTS

HERITAGE CREEKSIDEWhat: $900 million, 156-acre development Location: Near North Central Expressway and George Bush Turnpike in PlanoHomes: 140

MONTGOMERY FARM IN ALLENWhat: The 500-acre master-planned residential community in West Allen has conservation-focused designs.Location: Near Bethany Road and U.S. 75 in AllenHomes: 150

THE VILLAGE AT TWIN CREEKSWhat: It is one of the largest master-planned communities underway in North Texas. The community includes a resort-style pool, fitness center and clubhouse with sports courts.Location: Near Exchange Parkway and N. Watters Road in AllenHomes: More than 900

CYPRESS MEADOWSWhat: An 80-acre community in Allen near shopping at Watters Creek and Twin Creeks Golf Course.Location: Near the intersection of McDermott Drive and Custer RoadHomes: 280

AUSTIN WATERSWhat: The 78-acre community in Carrollton featuring wide-open green spaces with backyard views of a natural creek. Location: Near the intersection of Plano Parkway and Parker Road in CarrolltonHomes: 19

THE CANALS AT GRAND PARKWhat: An urban, mixed-use village that at completion will bring more than 2,000 homes and apartments to Frisco.Location: Near the intersection of Cotton Gin and Legacy DriveHomes: About 100

MUSTANG PARKWhat: The residential community straddles the Plano and Carrollton city lines with amenities ranging from a resort-style pool to hike-and-bike trails. Location: Near the intersection of Plano Parkway and Parker RoadHomes: 177 townhomes; 389 homes

STACY CROSSINGWhat: The 102-acre mixed-use community sits in McKinney with townhome and single family homes.Location: At the southeast corner of Alma Road and Stacy RoadHomes: 145 townhomes

THE ESTATES OF WILLOW CREST

What: The West Plano community has architecturally enhanced home with a broad mix of floor plans and designs to give residents a low-maintenance lifestyle.Location: Near Ohio Drive and McDermott RoadHomes: 171 townhomes and 157 patio homes

THE LANDINGSWhat: The single-family home community sits in West Allen near the Allen Outlet Mall.Location: 1913 Douglas AvenueHomes: 229

BRICK ROWWhat: The luxury townhome community will surround an urban-like shopping village.Location: 744 Brick Row, RichardsonHomes: 175 townhomes

LAKESIDE DFWWhat: 150-acre mixed-use, urban-style community on the shoreline of Lake Grapevine in Flower Mound.Location: 2300 Lakeside ParkwayHomes: 260

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NOVEMBER 6, 2015



Meanwhile, Einhorn’s hedge fund, which has about $11 billion in assets, is down more than 16 percent this year.

But Green Brick remains a bright spot in his portfolio — and it is a long-term play, with both Einhorn and Brickman making a bet together on an ever-changing housing industry.

“David believes you don’t have to be the toughest, or the most ruthless guy to succeed, but you have to stick to your knitting and know what you are doing,” said Brickman. “You have to be persis-tent and do things that are com-mon sense things and that’s how he approaches being our chairman of the board. We think the same way.”

For a small private builder, it can be difficult to source $3 mil-lion to $5 million to start new deals, said Ted Wilson, principal of Dallas-based Residential Strat-egies Inc., which analyzes the resi-dential real estate market in North Texas.

That need has caused some consolidation and partnerships in North Texas. In 2013, The Ryland Group of California has acquired Carrollton-based Lions-Gate Homes. In the past few years, Japan-based Sumitomo Forestry America also acquired an equi-ty stake in Addison-based Gehan Homes, Southlake-based Bloom-field Homes and MainVue Homes.

“For several of the smaller build-ers, the capital requirements to acquire lots and grow in this type of an environment is difficult,” Wilson said. “The amount of cap-ital it takes to grow in the market is stiff and you can’t find a lot of legacy lots left from the last real estate cycle.”

Locating a capital partner is imperative for a builder, said Dol-son, who leads Green Brick’s home lot development division.

That was certainly the case for CB JENI Homes, said Bruno Pas-quinelli, president and founder of the Plano-based homebuilding company.

When Pasquinelli started his company in 2009 he had two employees and a line of credit for about $2 million, which isn’t a lot of money in the business.

A year later, he saw an opportu-nity at The Estates of Willow Crest and was hopeful to land upwards of $7 million to get homes under-way in the Plano community, but it was more difficult than Pasqui-nelli anticipated.

“I got up everyday and put on a suit and tie and would tell my wife I was trying to get kissed and tak-en to the prom,” said Pasquinelli. “I met with a lot of people trying to get money and ultimately met Jim and we ended up doing a large deal together.”

That was at the bottom of the real estate cycle, Pasquinelli said.

“Jim kept telling me when the market turns, the companies with the capital will be able to take advantage of the cycle and those without it will get pushed out of the food bowl,” he said. Pasquinel-li later decided to join forces with Brickman’s firm in 2012.

In the past six years, CB JENI has grown from two employees work-ing in a spec house to 75 employ-ees with revenue exceeding $100 million.

In the last 30 days, Brickman has met with 15 different investors from New York to Chicago to Bos-ton to Dallas. Each of them wants to see the communities developed

by the firm’s building partners. And it’s those premium neigh-

borhoods that set Green Brick apart, said Brickman.

“The land side of the business is very relationship oriented and we seek out sellers that are also rela-tionship oriented and may have additional phases where we can bring value to their properties,” he said.

In particular, Green Brick Part-ners closed on more than 17 acres of land to develop 135 home sites at Heritage Creekside, a high-profile $900 million, 156-acre mixed-use development near the intersection of North Central Expressway and the President George Bush Turn-pike by State Farm Insurance’s new regional hub in Richardson.

And this won’t be Green Brick’s last deal to land in Dallas-Fort Worth and Atlanta this year.

“We have a lot of deals we are looking at right now and a big one that’s going to close in Decem-ber right here in Dallas,” he said. “As opportunities avail themselves, we’ll probably take advantage of them.”

The deal is expected to be three times the size of Green Brick’s play in Heritage Creekside and will have a build-out value of $150 million.

Green Brick, with a market cap of around $413 million, has been focused on organic growth. But Brickman said he said he is also exploring other markets.

“We are looking at other build-ers and benching them against what those returns would be and possibly generate versus grow-ing organically. Right now, we are playing all ends against the mid-dle. We have a lot of excess capi-tal and we are going to prudently deploy it as we think best.”

Einhorn dives into evolving housing industry with Brickman

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