Green Brick Partners : Challenger Homes partners with Green Brick

The following story was originally published by the Colorado Springs Business Journal.

Green Brick Partners Inc., a large-scale homebuilder and developer based in Plano, Texas, announced Aug. 15 a partnership with Challenger Homes in Colorado Springs. This is the sixth partnership for Green Brick, which has controlled ownership in four homebuilding companies in Dallas and one in Atlanta.

Through the partnership, Green Brick acquired nearly 1.5 million new shares and, through a wholly-owned subsidiary, came away with 49.9 percent non-controlled interest ownership of Challenger.

The investment was formed through the new entity, GB Challenger LLC.

Challenger was founded in 2000 by Brian Bahr and his wife Heather, and has become one of the largest building companies in Colorado Springs. Bahr said the partnership will support growth for both companies.

'The partnership strengthens Challenger in our current operations,' said Bahr. 'It provides support for our team members to grow, not just within Challenger but within Green Brick, and positions Challenger Homes for expansion and growth into other markets.'

Challenger Homes is evaluating other markets to determine beneficial opportunities, but has not made any definitive decisions, Bahr added.

Jim Brickman, CEO of Green Brick, said the partnership will by synergistic.

'We're very excited because they provide lower price point homes than any other builders provide in their markets. … They can learn from us and we can learn from them. We're going to have a very successful return on our equity investment in business,' said Brickman.

Bahr said he has never seen the Colorado Springs housing market as strong as it is right now.

'When I look at the number of homes being sold and the available inventory, we're very out of balance,' he said. 'We don't have enough supply for current demand of housing. In my mind that's really the indicator that this is the strong market.'

The staff at Green Brick are one of the main reasons this partnership was appealing to Bahr.

'I'm tremendously impressed by Brickman and the staff he's assembled at Green Brick,' he said. 'I'm pleased with their culture and feel it's a great fit for the Challenger Homes culture.'

Bahr said the feelings are mutual between Challenger and Green Brick.

'[Green Brick] liked our culture - they felt we had a very experienced and well-rounded management team and that we had positioned ourselves with control of thousands of lots that would be able to fuel out growth for years to come,' Bahr said.

Colorado Springs is a strong market, Brickman said, adding, 'We're in a state that is very strong from a housing perspective, so we as locals have the potential to not only continue performing well in Colorado Springs, but expanding into other areas of Colorado.'

According to Brickman, Green Brick will have controlled ownership of Challenger Homes in three years.

Green Brick is a publicly traded company with assets equalling $554.3 million, according to its filing with the Securities and Exchange Commission. The company says it has liabilities totaling $142.8 million. The Colorado Springs acquisition is its first outside the Atlanta and Dallas markets. In the past year, it's completed purchases in Atlanta of Glens at Sugarloaf, undeveloped property on Academy Street and Suwanne Station, where it plans townhomes and other dwellings.

According to its SEC filings, Green Brick specializes in purchasing lots, building homes with partners and then selling the homes for a portion of the proceeds.

'We acquire and develop land, provide land and construction financing to our controlled builders,' according to the company's quarterly filings. 'Our core markets are in the high-growth U.S. metropolitan areas of Dallas, Texas and Atlanta, Georgia. We are engaged in all aspects of the homebuilding process … We sell finished lots or option lots from third-party developers to our controlled builders for their homebuilding operations and provide them with construction financing and strategic planning. Our controlled builders provide us with their local knowledge and relationships. We support our controlled builders by financing their purchases of land from us at an unlevered internal rate of return ('IRR') of at least 20 percent and by providing construction financing at approximately a 13.8 percent interest rate. Our income is further enhanced by our 50 percent equity interest in the profits of our controlled builders. In addition, the land we sell to third-party homebuilders also typically generates an unlevered IRR targeted at 20 percent or greater.'

The company is currently riding the wave of a recovered real estate market. According to its reports, it has increased new home deliveries by more than 24 percent and revenue from home sales increased by 20.8 percent for the first six months of 2017 compared to 2016 numbers. Average selling prices in the Atlanta and Dallas markets decreased by 2.7 percent, but net new home orders were up by 16.3 percent, the filing said.