A N N UA L
R E P O R T
2
TA B L E O F
CO N T E N T S
0 4 LETTER FROM THE CEO AND CHAIRMAN
0 6 COMPANY CULTURE AND VALUES
1 2 FINANCIAL HIGHLIGHTS
1 9 LAND DEVELOPMENT
2 0 ENERGY EFFICIENCY
2 2 OUR BRANDS
3 2 24 QUARTER FINANCIAL SUMMARY
3 6 APPENDIX & NON-GAAP RECONCILIATION
3 8 BOARD OF DIRECTORS
4 0 OPERATING RESULTS & FORM 10K
SOUTHGATE HOMES - WINDSONG RANCH, PROSPER, TX
3
I M P O RTA N T
I N F O R M AT I O N
This annual report contains “forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements concern expectations, beliefs,
projections, plans and strategies, anticipated events or trends and similar expressions
concerning matters that are not historical facts, and they are subject to risks, uncertainties and
other important factors. See the section entitled “Forward-Looking Statements” on page 57 of
this annual report for more information.
This annual report also contains certain non-GAAP financial measures as defined by the
Securities and Exchange Commission, including pre-tax return on average invested capital,
compounded annual growth of pre-tax earnings, and certain GAAP measures adjusted for
the impact of the Tax Act. For more information on why we use these measures and for a
reconciliation of these measures to their most comparable GAAP measures, see the section
entitled “Appendix & Non-GAAP Reconciliation” on page 36 of this annual report.
CO N TAC T S
GREEN BRICK PARTNERS
2805 Dallas Parkway, Suite 400, Plano, TX 75093 | www.greenbrickpartners.com
Investor Relations: Anthony England, CPA, aengland@greenbrickpartners.com
Media Relations: Shalott Cecchini, scecchini@greenbrickpartners.com
13155 Noel Road, Suite 2200, Dallas, TX 75240 | www.rsmus.com
AUDIT, RSM US LLP
TRANSFER AGENT, BROADRIDGE FINANCIAL SOLUTIONS
51 Mercedes Way, Edgewood, NY, 11717 | www.broadridge.com
4
S H A R E H O L D E R L E T T E R
James Brickman, Co-Founder & CEO and David Einhorn, Co-Founder & Chairman
Our Best Year Ever
2020 was a year full of the unexpected. A global pandemic shut down the economy for a
period. The population responded by demanding single-family housing in low tax jurisdictions.
When it was all said and done, 2020 represented a sixth-consecutive record year for Green
Brick Partners, Inc. and we believe left us positioned for an even better 2021. We responded
quickly and embraced technology to prioritize homebuyer and employee safety including
implementing remote closings, bolstering tools for digital homebuying, and offering remote
work opportunities.
Subsidiary Team Builders
Each of our Team Builders holds a strategic and market niche advantage in its local market.
During the year, we continued to significantly enhance the operating capabilities and
efficiency in all of our eight brands.
In 2020, we significantly expanded Trophy Signature Homes in Dallas-Fort Worth where the
brand started 438 homes in the fourth quarter. We expect that Trophy will lead our growth
efforts into 2021 and beyond.
This past year our award-winning homes and neighborhoods, eight Team Builder brands,
and financial service operations produced record revenues of $976.0 million, record pre-tax
income attributable to GRBK of $138.7 million, and record diluted earnings per share of
$2.24. Our record results were reflected in our ability to deliver Total Shareholder Return of
100% during 2020, exceeding the 19.96% of Total Shareholder Return of the Russell 2000.
Building a Better HOME
Though each of our Team Builders is locally branded, managed, and unique in the locations,
architecture, and price-point of homes they build, all of our Team Builders are united by
Green Brick Partners’ common set of values we call HOME. Our Team Builders are expected
to uphold our values of Honesty, Objectivity, Maturity, and Efficiency in everything they do.
In 2020, Fortune Magazine recognized our growth by awarding us a top 100 rank in their list
of 100 fastest-growing companies in the world, and Forbes Magazine named us the 5th best
small-cap (less than $2 billion market cap) public company in the country.
For more information on HOME, we encourage you to review our company culture and
values on the following pages.
Best of all, we entered 2021 with a record backlog of $686.9 million, up 98% over the prior
year. With a record 1,004 starts in Q4 2020 and record same-period sales in January and
February 2021, we believe that we are positioned for another great year.
An Even Better Future
We are confident our shareholders should continue to see the benefits in 2021 of the
synergistic integration of our culture and operating scale in the best housing markets in the
country.
Risk and Capital Discipline
We strive to balance high growth with low risk. Our 25.6% debt to total capital ratio makes
us one of the lower leveraged public builders, which translates to lower effective interest
rates than most peers. For 2020, our pre-tax earnings were approximately 14.5 times our
interest incurred.
In the third quarter of 2020, we closed a second $37.5 million tranche of privately placed
notes with Prudential Capital Markets at a 3.35% interest rate bringing our total long-term
notes outstanding to $112.5 million as of December 31, 2020. In February 2021, we issued
$125 million seven-year senior unsecured notes in a club deal structured by Prudential
Private Capital. The institutional investors who purchased the notes were represented
by Prudential Private Capital, Barings LLC, Hartford Investment Management Company,
Securian Asset Management, Inc., and Voya Investment Management Co. LLC.
Our low-cost debt combined with our industry-leading gross margin of 24.2% has enabled
us to retain more profits to fund even faster future growth. Our lots owned and controlled
grew an outstanding 68% year over year, the highest growth recorded by any public builder
in the past 12 months. Our unending goal is to deliver the best risk-adjusted returns in the
industry and have high growth.
Thank you for being a shareholder or stakeholder, and for your interest in Green Brick
Partners. We look forward to keeping you updated on our growth in the coming year and
appreciate your support.
JAMES R. BRICKMAN
CEO and Co-Founder
Green Brick Partners
DAVID EINHORN
Chairman and Co-Founder
Green Brick Partners
5
CB JENI HOMES - MAJESTIC GARDENS, FRISCO, TX
6
CO M PA N Y C U LT U R E
National reach through local expertise
We are founded on the belief that locally-focused land development is the starting point
for a builder’s profitability and that both homebuilding and land development are best
executed on a decentralized basis.
To really succeed, a builder/developer needs a track record of creating award-winning
neighborhoods and decades of building superior local, political, and subcontractor
relationships. Green Brick and our group of controlled builders, known as Team Builders,
have outstanding local relationships in land development and are recognized by homebuyers
and our industry for our award-winning neighborhoods and homes.
Our Team Builders have typically worked decades to build their reputations, establish
brand recognition, and cultivate critical realtor and customer relationships. We work
tirelessly to preserve our Team Builders’ unique local branding and make every effort to
retain key employees. These steps help ensure builder success and increase returns. We
differentiate ourselves with low leverage and a strong capital base which we deploy with
discipline. At the same time, we create value and strengthen our Team Builders through our
GRBK-managed standardized financial and integrated operating system. This system allows
comprehensive real-time visibility to enable our Team Builders to grow their business with
access to state-of-the-art real-time data.
We only seek controlling investments or more often 100% ownership with Team Builders of
upstanding character who operate with the highest integrity. Notably, these Team Builders
share Green Brick’s values and take the “long view” in seeking to maximize economic returns.
We make a point not to run our business like our public peers, where success is measured
by short-term quarterly GAAP results that can distort the true value and economic results
of the business. We believe this often causes issues including huge employee turnover at
the division level, lower customer satisfaction, and lower realized returns in the long run.
Much of our success can be attributed to this “long view” approach.
We own 100% of Trophy Signature Homes, however, we have motivated management
with long-term incentives to grow the business in DFW, the largest homebuilding market
in the country, and possibly into other markets in the future.
TROPHY SIGNATURE HOMES - RIDGEVIEW CROSSING, ALLEN, TX
7
B R E T T W I N T E R S AWA R D
Honoring excellence in homebuilding
Each December one or two individuals employed at our Team Builders that truly embody Green Brick Partners’ values of
HOME are selected to be recipients of the Brett Winters Award. They are awarded the Brett Winters trophy and $10,000.
Brett Winters was a great CFO for CB JENI and Normandy Homes that helped take the group from a small builder to one of
the largest townhome builders in Dallas-Fort Worth (1,100 sales and 950+ closings). Though Brett passed away a few years ago
from cancer, he will always be remembered as an incredible person and dedicated father to his three children. In Q1 2021, CB
JENI and Normandy Homes will fully fund a college endowment for Brett’s three children in the amount of $250,000.
This year we had more worthy recipients than ever before, which points to the continued growth of Green Brick and our Team
Builders. In 2020, Chad Morrison of Southgate Homes and Alicia Schwarze of Trophy Signature Homes were the recipients of
this prestigious award.
We intend to continue this honored tradition and seek to continue Brett’s legacy of excellence for many years to come.
B R E T T W I N T E R S AWA R D R EC I P I E N T S
2020 WINNERS
Alicia Schwarze, Chief Financial Officer at Trophy Signature Homes
Chad Morrison, Director of Architecture at Southgate Homes
2019 WINNER
Todd Stern, Director of Purchasing at Trophy Signature Homes
2018 WINNER
Alexandra Buckley, Controller at CB JENI Homes
2017 WINNER
Troy Caldwell, Chief Operating Officer at The Providence Group
8
B U I L D I N G A B E T T E R H O M E
Our values
Green Brick Partners is committed to building strong communities designed for an exceptional quality of life. We believe that a company’s propensity for success is determined by choosing
to do the right thing day after day, for our homebuyers, shareholders, and employees.
This begins by following our guiding principles, a set of values we call HOME. This acronym, representing Honesty, Objectivity, Maturity, and Efficiency allows us to build and design homes
with a focus on quality craftsmanship, superior customer service, and an ongoing commitment to transparency.
H
O
M
E
HONESTY
OBJECTIVITY
MATURITY
EFFICIENCY
employees,
transparency,
We believe strong businesses
are built on a foundation of
honesty,
and
integrity. We strive to treat our
and
customers,
shareholders like we would like
to be treated. In our day-to-day
operations, this translates to
open-door policies, an emphasis
on relationship building, and
continuously maintaining open
lines of communication.
leadership
Objectivity drives our business
practices, and our decisions
are always made on the best
and market-driven
practices
available. While
information
our
team’s ability
to objectively manage in the
best interest of the company is
integral, we believe objectivity
and ownership of one’s work
should be stressed at all levels of
our organization.
The emotional intelligence of our
staff is critical to our success. In
order to accomplish our common
goals, we must be solution-
driven and view every challenge
as an opportunity. Emotionally
intelligent employees see the
bigger picture and strive each
to work collaboratively
day
toward a shared story of success.
Efficiency
is the end result
competent, hard-working
of
people who perform with a
competitive spirit to produce
rapid and consistent results.
We continually evaluate our
processes and systems to ensure
that we remain the most efficient
in our industry and provide our
employees the resources needed
to work smarter.
9
B U I L D I N G A B E T T E R H O M E
Our vision
With these guiding values in place, we continue to shape and define our commitments to ensure we remain national innovators in our industry. This vision extends into not just
how we build and design our homes, but how we interact with our homebuyers, as well as the opportunities and relationships we build and maintain with our employees.
OUR HOMEBUYERS
OUR HOMES
OUR PEOPLE
In 2020, we experienced unprecedented demand across
all of our core markets. The wealth of quality options our
buyers have at their disposal has made us increasingly aware
that now more than ever buyers have high expectations,
and rightfully so.
While we continue to prioritize a world-class sales and
customer service experience, our commitment to honesty
continues to underscore all our communication with our
buyers. In line with this commitment, in 2020 we continued
to expand our selection of homes with simplified, all-
upgrades included options. Our CB JENI X and Trophy
Signature Homes lines have been at the forefront of
creating an honest, easy to follow, sales experience that
seeks to offer simplified solutions with top-of-the-line
finishes included regardless of a homebuyer’s price range.
Our longstanding commitment to efficiency is best seen
in the wide selection of homes designs offered across
our brands. Regardless of location, price range, and buyer
profile, every one of our homebuilders remains committed
to delivering homes on time, with contemporary floorplans
that are continuously updated to meet our homebuyer’s
needs.
Attracting, retaining, and building talent is critical in our
business. We continue to recruit talented team members
that exhibit superior emotional intelligence. This focus on a
staff that places a strong emphasis on communication and
navigating a fast-paced environment empathetically and
judiciously enables us to operate effectively and efficiently
each day.
This past year we saw the rise of the work from home and
remote learning lifestyle. Our streamlined process and
focus on operational efficiency enabled us to react quickly,
offering updated plans with a focus on dedicated learning
and office spaces, home integrations with the newest
technology, and offering the latest in energy-efficient
solutions including tankless water heaters, high-efficiency
LED lighting, ENERGY STAR rated appliances, and low-
flow bathroom fixtures*.
We seek to establish a supportive culture that fosters a
strong sense of ownership and a continuous drive to excel.
Our goal is to not just empower our team members with the
tools needed to succeed but to create a community that
focuses on taking ownership of one’s work. Our culture
celebrates individual success, primes our employees for
growth, and is critical in maintaining our competitive edge
over our peers.
* In select plans and communities.
10
N AT I O N A L T E A M B U I L D E R S
Eight national homebuilder brands, one shared vision
TEAM BUILDER
MARKET
PRODUCTS OFFERED
PRICE RANGE
2020 REVENUE
2020 CLOSINGS
Trophy Signature Homes
Dallas-Fort Worth, TX
Single-Family
$240k - $690k
$168 Million
CB JENI Homes
Dallas-Fort Worth, TX
Townhomes
$230k - $530k
$205 Million
Normandy Homes
Dallas-Fort Worth, TX
Single-Family
$320k - $760k
$143 Million
The Providence Group of Georgia
Atlanta, GA
Townhomes
Condominiums
Single-Family
$330k - $1.0M
$188 Million
Southgate Homes
Dallas-Fort Worth, TX
Luxury Homes
$550k - $1.0M
$88 Million
Centre Living Homes
Dallas-Fort Worth, TX
GHO Homes
Treasure Coast, FL
Challenger Homes*
Colorado Springs, CO
Fort Collins, CO
Townhomes
Single-Family
Single-Family
Patio Homes
Townhomes
Patio Homes
Single-Family
$320k - $780k
$39 Million
$220k - $1.1M
$93 Million
$260k - $550k
$164 Million
457
* Green Brick has a 49.9% ownership interest in Challenger homes. Revenue and home closings are not included in Green Brick’s consolidated financial statements. Profits from this investment are shown in “Equity in income of
unconsolidated joint ventures” in our Condensed Consolidated Statement of Income.
CENTRE LIVING HOMES - THE RESERVE AT BLUFFVIEW, DALLAS, TX
447
637
314
355
129
85
241
AWA R D -W I N N I N G H O M E S
2020 GREEN BRICK PARTNERS & TEAM BUILDERS RECOGNITION
GREEN BRICK PARTNERS
Fortune Magazine’s “100 Fastest Growing Companies” list
Forbes’ “America’s Best Small Companies” list (#5)
Builder Magazine’s “Builder 100” national list (#34)
Top 10 Local Leader in Builder Magazine’s “DFW Leading Builders” list (#8)
Professional Builder Magazine‘s “2020 Housing Giants” list (#34)
TEXAS AWARDS
McSAM Award – Warranty Professional of the Year — Noah Marshall
McSAM Award – Best Special Event/Promotion – Trophy Founders Club
McSAM Award – Purchasing Team of the Year – CB JENI and Normandy Homes
McSAM Award – Best Architectural Design, Attached Home – Pecan Square
McSAM Award – Best Architectural Design — Patio Home – Winnetka Bungalows
McSAM Award – Best Design Series — Winnetka Bungalows & Estates
GEORGIA AWARDS
Gold OBIE Award – Community of the Year (Attached) – Pratt Stacks
Gold OBIE Award – Best Building Design – Harvest Park – The Harrison
Gold OBIE Award – Best Building Design – Harvest Park – The Pierce
Silver OBIE Award – Best Building Design – Pratt Stacks – The Courtland
Gold OBIE Award – Best Building Design – East of Main – The Sterling
Gold OBIE Award – Best Interior Merchandising – Harvest Park – The Harrison
Silver OBIE Award – Best Interior Merchandising – East of Main – The Sterling
Gold OBIE Award – Best Interior Merchandising – Harvest Park – The Pierce
Silver OBIE Award – Best Interior Merchandising – Pratt Stacks – The Courtland
Gold OBIE Award – Best Interior Merchandising –Pratt Stacks – The Edgewood
Silver OBIE Award – Best Social Media Campaign
FLORIDA AWARDS
TCBA Platinum Award, $260k - $290k - Larkin Grande
TCBA Platinum Award, $345k - $350k - Avalon
TCBA Platinum Award, $400k - $440k - Cordella
TCBA Platinum Award, $460k - $485k - Capistrano Grande
TCBA Platinum Award, $600k - $650k - Vanda
11
GHO HOMES - ORCHID COVE, VERO BEACH, FL
12
CO M PA N Y AT A G L A N C E
Operational excellence meets strong balance sheet
$1.16 B MARKET CAPITALIZATION
$976M 2020 COMPANY REVENUE
$138.7M PRE-TAX INCOME
ATTRIBUTABLE TO GRBK
41. 6% COMPOUNDED ANNUAL GROWTH OF
PRE-TAX INCOME ATTRIBUTABLE TO GRBK
14,46 8 LOTS OWNED AND CONTROLLED
25. 6% TOTAL DEBT TO CAPITAL
TROPHY SIGNATURE HOMES - HOLLYHOCK, FRISCO, TX
H O M E C LO S I N G S BY T E A M B U I L D E R
23% one year growth in home closings revenue by builder
13
3%
12%
4%
10%
17%
16%
18%
15%
2%
23%
Growth
22%
10%
18%
33%
20%
FY 2019 HOME CLOSINGS REVENUE
TOTAL: $752.3M
FY 2020 HOME CLOSINGS REVENUE
TOTAL: $923.9M
Normandy Homes
CB JENI Homes
Southgate Homes
Trophy Signature Homes
GHO Homes
Centre Living Homes
The Providence Group
14
H O M E B U Y E R D I V E R S I F I C AT I O N
62% two-year growth in home closings revenue by product type
In addition to managing risk by diversifying the markets where we operate, we have grown our revenues and provided stable earnings by not concentrating on any one home buyer
segment. Our diverse homebuyer customer mix has allowed for us to grow even in periods of more modest demand for specific product types.
9%
10%
3%
7%
38%
33%
62%
Growth
8%
25%
13%
10%
4%
19%
25%
FY 2018 HOME CLOSINGS REVENUE
TOTAL: $571.2M
FY 2020 HOME CLOSINGS REVENUE
TOTAL: $923.9M
Single-Family Second-Time Move-Up
Single-Family First-Time Move-Up
Entry-Level
Suburban Townhouse
Urban
Age-Targeted
15
NORMANDY HOMES - ESSEX PARK, CARROLTON, TX
16
F I N A N C I A L H I G H L I G H T S
Pre-Tax Income Attributable to Green
Pre-Tax Income Attributable to Green
Brick
Brick
(in millions)
(in millions)
Pre-Tax Income Attributable to Green
Pre-Tax Income Attributable to Green
Brick
Brick
(in millions)
(in millions)
$976.0
$138.7
$138.7
$791.7
$78.4
$78.4
$623.6
$69.4
$69.4
$458.3
$53.9
$53.9
$391.0
$39.0
$39.0
$298.8
$24.4
$24.4
$138.7
$138.7
$138.7
$68.6
$69.4
$69.4
$78.4
$78.4
$78.4
$53.9
$53.9
$53.9
$39.0
$39.0
$39.0
$24.4
$24.4
$24.4
FY2015
FY2015
FY 2016
FY 2016
FY 2017
FY 2017
FY 2018
FY 2018
FY 2019
FY 2019
FY 2020
FY 2020
FY2015
FY2015
FY 2016
FY 2016
FY 2017
FY 2017
FY 2018
FY 2018
FY 2019
FY 2019
FY 2020
FY 2020
TOTAL REVENUE (IN MILLIONS)
Pre-Tax Income Attributable to Green
Pre-Tax Income Attributable to Green
Brick
Brick
(in millions)
(in millions)
PRE-TAX INCOME ATTRIBUTABLE TO GRBK (IN MILLIONS)
Pre-Tax Income Attributable to Green
Pre-Tax Income Attributable to Green
Brick
Brick
(in millions)
(in millions)
$12.6
$10.4
$138.7
$138.7
$7.4
$7.9
$9.3
$8.2
$69.4
$69.4
$78.4
$78.4
$53.9
$53.9
$39.0
$39.0
$24.4
$24.4
96
$138.7
$138.7
66
$69.4
$69.4
86
$78.4
$78.4
54
$53.9
$53.9
47
$39.0
$39.0
41
$24.4
$24.4
FY2015
FY2015
FY 2016
FY 2016
FY 2017
FY 2017
FY 2018
FY 2018
FY 2019
FY 2019
FY 2020
FY 2020
FY2015
FY2015
FY 2016
FY 2016
FY 2017
FY 2017
FY 2018
FY 2018
FY 2019
FY 2019
FY 2020
FY 2020
BOOK VALUE PER SHARE
AVERAGE SELLING COMMUNITIES
Pre-Tax Income Attributable to Green
Pre-Tax Income Attributable to Green
Brick
Brick
(in millions)
(in millions)
$2.25
$138.7
$138.7
$1.02
$69.4
$69.4
$1.16
$78.4
$78.4
$0.68
$53.9
$53.9
$0.49
$39.0
$39.0
$0.38
$24.4
$24.4
FY2015
FY2015
FY 2016
FY 2016
*
FY 2017
FY 2017
FY 2018
FY 2018
FY 2019
FY 2019
FY 2020
FY 2020
BASIC EARNINGS PER SHARE
Pre-Tax Income Attributable to Green
Pre-Tax Income Attributable to Green
Brick
Brick
(in millions)
(in millions)
14,468
$138.7
$138.7
8,976
$78.4
$78.4
8,078
$69.4
$69.4
6,219
$53.9
$53.9
5,189
$39.0
$39.0
4,734
$24.4
$24.4
FY2015
FY2015
FY 2016
FY 2016
FY 2017
FY 2017
FY 2018
FY 2018
FY 2019
FY 2019
FY 2020
FY 2020
LOTS OWNED AND CONTROLLED
*2017 Basic EPS has been normalized to adjust for the impact of the Tax Act. See appendix.
17
SOUTHGATE HOMES - WINDSONG RANCH, PROSPER, TX
18
THE PROVIDENCE GROUP OF GEORGIA - PRATT STACKS, ATLANTA, GA
19
L A N D ACQ U I S I T I O N &
D E V E LO P M E N T
Combining strong financial resources with local Team Builders
Our land strategy consists of a hybrid model that focuses on both the most desirable as well as the
most affordable homesites in our markets. In the inventory-constrained suburbs of Dallas-Fort Worth
and Atlanta, Green Brick Partners leverages its strong relationships with land sellers and municipalities
to obtain lot positions in the most attractive locations. Green Brick Partners also utilizes its financial
strength to acquire lots in more affordable outskirt communities to address entry-level buyers seeking to
purchase quality homes at value-oriented pricing.
Through these efforts, Green Brick Partners added over 7,000 lots in the latter half of 2020, growing its
lots owned and controlled by 58% in just six months.
“In an effort to fuel further expansion and keep up with record-demand for homes, Green
Brick Partners closed on over 2,000 homesites in the DFW region during December 2020.
We have seen some of the highest housing demand in the nation in the Dallas-Fort Worth
market. Due to an increasingly limited supply of land and rising construction prices, the
average price for a new home across DFW has risen sharply. Our new developments
represent over 2,000 new homes, including a significant number of value-oriented homes
that will be optimal for first-time buyers.”
- Jim Brickman, Chief Executive Officer and Co-Founder of Green Brick Partners
20
E N E RGY F O C U S E D H O M E S
Building responsibly through energy-conscious features*
We strive to make the world a better place for not just our homebuyers, but the communities where we live, work, and build. With that in mind, we
understand that this commitment is inseparably intertwined with a need to build sustainable and responsibly.
In addition to constructing timeless homes with best-in-class materials, our homeowners benefit from myriad of energy-conscious features included in their
homes that result in both significant savings and healthier living. We partner with some of the most reputable manufacturers of cutting-edge, energy-efficient
products to give our homebuyers a quality home that will not only stand the test of time, but deliver significant savings for years to come. Some of our
energy-conscious features include:
Fresh Air Ventilation
Our homes’ Fresh Air ventilation uses an inline fan that amounts to 1/10th less energy than conventional
mechanical ventilation. This system averages 2.2 air changes per hour (ACH) by only heating and cooling air in
livable indoor areas, allowing for more energy-efficient homes.
Superior Insulation
Conventional attics can reach upwards of 140 degrees, however with our spray foam encapsulated attics,
our Team Builders are able to reach 80 degrees or less. HVAC duct work is placed in air-conditioned spaces,
improving energy efficiency and significantly slowing heat build up in the attics, resulting in an extended life of
our homeowners’ roofs.
Tankless Water Heaters
Many of our homes include standard Rheem Tankless Water Heaters that only use energy when needed. In
addition to providing the convenience of instant hot water and a longer product lifespan, tankless units are
often 20%-30% more efficient than traditional 50-gallon water heater tanks.
Energy Efficient Appliances
Energy efficient Whirlpool appliances that save homebuyers on operating costs by reducing energy use without
sacrificing performance and design are included at no additional cost in many homes. These appliances conserve
water, significantly reduce greenhouse gas emissions, and help in reducing our carbon footprint.
* Included features and products shown above vary by community and Team Builder.
21
TROPHY SIGNATURE HOMES - OAKMONT PARK, RED OAK, TX
22
O U R T E A M B U I L D E R B R A N D S
Eight brands in four major markets across the United States
The Green Brick Partners Team Builder network is composed of seven consolidated homebuilders and one homebuilder with a 49.9% ownership interest.
Our Team Builders build in the largest markets in the country including Dallas-Fort Worth, Texas and Atlanta, Georgia, and in some of the fastest growing markets including the Florida
Treasure Coast; Colorado Springs, Colorado; and Fort Collins, Colorado.
Financial Services
In addition to independently branded Team Builders, Green Brick Partners retains 100% ownership in Green Brick Title, 49.99% ownership in Green Brick Mortgage, and 49% ownership
BHome Mortgage.
GHO HOMES - ORCHID COVE, VERO BEACH, FL
23
TROPHY SIGNATURE
HOMES
Dallas-Fort Worth, Texas
Trophy Signature Homes was founded in 2018 to serve the Dallas-Fort
Worth market’s need for high quality, affordable homes with a unique
blend of functionality and design.
What sets Trophy Signature Homes apart is their commitment to a truly
representative model across all of their design series. Each model home
regardless of community, plan, and price range proudly displays all of the
luxurious features that come standard in each home. The typical upgrades
from other homebuilders are included in the price of each Trophy Signature
Home, allowing for a streamlined, no-hassle buying experience.
“All of the plans Trophy has come up with are airy, open, well-thought,
trendy and resonate with consumers from diverse backgrounds... Trophy
makes home buying effortless, less intimidating, and makes it possible
for people to buy their dream homes at a reasonable price.”
- Kiran, Trophy Signature Homes homebuyer
FA S T FAC T S
2020 REVENUE
$168 Million
2020 CLOSINGS
447
PRODUCTS OFFERED
Single-family homes
2020 PRICE RANGES
$240,000 - $690,000
STRATEGIC BENEFITS
Skilled in constructing value-oriented homes with a streamlined process.
TOP: BUFFALO RIDGE, WAXAHACHIE, TX | BOTTOM: FRISCO SPRINGS, FRISCO, TX
24
CB JENI HOM ES
Dallas-Fort Worth, Texas
CB JENI Homes was founded in 2009 to provide new home options for
an underserved portion of the market: those looking to buy moderately-
sized homes with beautiful architecture, low maintenance, and a level
of service and professionalism that puts them at ease. The homebuilder
has grown to become Dallas-Fort Worth’s largest townhome builder,
both in locations and units sold.
In 2020, CB JENI Homes debuted CB JENI X, a bespoke series of
finishes offered in select communities. With CB JENI X, homebuyers
simply select their preferred plan and choose from one of the masterfully
curated style packages, eliminating the stress of hidden fees and
countless hours spent inside of a design center.
“The whole buying experience was so thought out and buyer friendly.
We were most impressed with all players in the game trying to make our
buying experience so pleasant.”
- John, proud owner of a CB JENI Home
FA S T FAC T S
2020 REVENUE
$205 Million
2020 CLOSINGS
637
PRODUCTS OFFERED
Townhomes
2020 PRICE RANGES
$230,000 - $530,000
TOP: MAJESTIC GARDENS FRISCO, TX | BOTTOM: RIVERSET, GARLAND, TX
STRATEGIC BENEFITS
Premier lot position & leading market share of the townhome market in DFW.
25
NORMANDY HOMES
Dallas-Fort Worth, Texas
Since 2012, Normandy Homes has proudly built timeless, new homes
in premium Dallas-Fort Worth communities for discerning homebuyers.
Normandy Homes was created to provide new home offerings for those
looking to buy elevated, boutique-quality homes with thoughtfully crafted
architecture, interiors designed for contemporary living, and a hospitality-
level of service.
Driven by a rich dedication to its homebuyers, Normandy homes has
earned more than 20 homebuilding awards for its impeccable attention to
design, architecture, and superior customer service.
“Having two walkthroughs with the builder prior to close educated me
on everything about the new home. I have had previous new builds and
did not get that attention.”
- Jerry, Normandy Homes homebuyer
FA S T FAC T S
2020 REVENUE
$143 Million
2020 CLOSINGS
314
PRODUCTS OFFERED
Single-family homes
2020 PRICE RANGES
$320,000 - $760,000
STRATEGIC BENEFITS
Unbeatable lot position and value in some of DFW’s most desirable neighborhoods.
TOP: ESSEX PARK, CARROLLTON, TX | BOTTOM: EDGEWOOD, FRISCO, TX
26
THE PROVID ENC E GROUP
OF GEORG IA
Atlanta, Georgia
Built on a hometown legacy, The Providence Group is considered to be
the leading lifestyle builder in Atlanta, offering a variety of home styles
including single-family homes, townhomes, and mid-rise condominiums.
The Providence Group communities can be found in the most desirable
locations in the Atlanta area including Atlanta, Roswell, Alpharetta, Johns
Creek, Milton, Decatur, Woodstock, Canton, and Smyrna. The homebuilder
takes pride in designing innovative homes, breathtaking streetscapes, and
luxurious yet functional floorplans that homeowners will love to call home.
“We thought the search for our first home would be endless and
exhausting, until we came across The Towns at East Village... We loved
the idea of maintenance free living, being under the roof of good quality
materials, and close proximity to shops/restaurants. There was not a
home we looked at that could even compare to those in this community.”
- Courtney and Thomas, proud The Providence Group homeowners
FA S T FAC T S
2020 REVENUE
$188 Million
2020 CLOSINGS
355
PRODUCTS OFFERED
Single-family homes, townhomes, condominiums
2020 PRICE RANGES
$330,000 - $1.0 Million
TOP: BELLMOORE PARK, JOHNS CREEK GA | BOTTOM: PRATT STACKS, ATLANTA, GA
STRATEGIC BENEFITS
Ability to entitle, develop, and build complex infill & master planned neighborhoods.
27
SOUTHGATE HOMES
Dallas-Fort Worth, Texas
As a trusted local upscale homebuilder, Southgate Homes is known for homes built with distinctive
charm and unparalleled attention to detail. Southgate Homes offers generous standard features and
upgrade options to individualize every home.
This commitment to excellence across all aspects of homebuilding has led Southgate to being
recognized as one of the top luxury production home builders in the Dallas-Fort Worth metroplex.
FA S T FAC T S
2020 REVENUE
$88 Million
2020 CLOSINGS
129
PRODUCTS OFFERED
Luxury single-family homes
2020 PRICE RANGES
$550,000 - $1.0M
STRATEGIC BENEFITS
Superior lot position and value in some of DFW’s most sought after neighborhoods.
CE NTRE L IVING HOMES
Dallas-Fort Worth, Texas
Centre Living Homes is a premier residential urban infill builder dedicated to quality, solid state-of-the-
art construction, excellent craftsmanship, modern features, and service beyond the sale. Their high-
density housing developments boast world-class architecture, the latest in smart home technology,
and rooftop decks with some of Dallas’ most coveted views of the city. From its skilled design team,
award-winning builders, and world-class sales staff homebuyers can rest assured that they will receive
an exemplary home from concept to close with Centre Living Homes.
FA S T FAC T S
2020 REVENUE
$39 Million
2020 CLOSINGS
85
PRODUCTS OFFERED
Single-family homes, townhomes
2020 PRICE RANGES
$320,000 - $780,000
STRATEGIC BENEFITS
Developing and building urban, high-density homes in complex infill and suburban communities.
TOP: WINDSONG RANCH, PROSPER, TX | BOTTOM: CEDARS, DALLAS, TX
28
CHAL LENGER HOME S *
Colorado Springs and Fort Collins, Colorado
Thanks to strong core values and an unwavering commitment to its homebuyers,
Challenger Homes has grown from just one homesite into one of Colorado
Springs and Fort Collins’ most trusted new home builders.
Challenger Homes offers buyers elegant floorplans with an emphasis on large
open spaces, quality craftsmanship, and energy-efficient solutions. The builder
offers a streamlined design process that allows buyers to customize their homes
with a great deal of ease. While some homebuilders view the design process
as a way to up-sell by employing associates on commission, Challenger Homes’
salaried design team are exclusively dedicated to meeting the buyer’s needs on
their budget, creating an unparalleled level of customer service.
“Great builder with awesome communities in the Pikes Peak region. As a
Realtor, Challenger Homes is hands down one of the easiest builders to
work with - with many fantastic options!”
- Dean C, Realtor
* Green Brick has a 49.9% ownership interest in Challenger homes. Revenue and home closings are not
included in Green Brick’s consolidated financial statements. Profits from this investment are shown in
“Equity in income of unconsolidated joint ventures” in our Condensed Consolidated Statement of Income.
FA S T FAC T S
2020 REVENUE
$164 Million
2020 CLOSINGS
457
PRODUCTS OFFERED
Single-family homes, townhomes, patio homes
2020 PRICE RANGES
$260,000 - $550,000
TOP: CHAPEL HEIGHTS, COLORADO SPRINGS, CO
BOTTOM: BRANDING IRON, COLORADO SPRINGS, CO
STRATEGIC BENEFITS
Building value-rich homes catering to first-time, move-up, and military buyers.
Colorado Springs and Fort Collins, Colorado
29
GHO HOMES
Treasure Coast, Florida
GHO Homes has been building homes for over 25 years, focusing on
communities on Florida’s Treasure Coast including Vero Beach, Port. St. Lucie,
Sebastian, and Fort Pierce. In addition to offering single-family and patio
homes, GHO Homes also builds their award-winning homes on individual
homesites through their St. Lucie Collection series of homes.
All GHO Homes utilize time-tested quality materials and methods, the latest
design features, finishes, and energy efficient components. GHO Homes has
continued to raise the bar through the creation of the GHO Tailor-Made
program. This program sets GHO apart from its competitors by allowing
homebuyers to customize their homes with numerous plan options, built-ins,
and upgrades that exceed industry standards and result in custom, one-of-a-
kind homes at an outstanding value.
“An incredibly skilled builder in the area that makes quality homes and
supports the local community. With so many styles and subdivisions to
choose from there is something for everyone.”
Anna T - GHO Homes homeowner
FA S T FAC T S
2020 REVENUE
$93 Million
2020 CLOSINGS
241
PRODUCTS OFFERED
Single-family homes, patio homes
2020 PRICE RANGES
$220,000 - $1.1M
STRATEGIC BENEFITS
A large array of customizable plans that cater to move-down and active adult buyers.
TOP: ARABELLA RESERVE, VERO BEACH, FL | BOTTOM: BENT PINE PRESERVE, VERO BEACH, FL
30
FINAN C IAL SERV I C ES
Supporting our Team Builders with mortgage and title solutions
Green Brick Mortgage
Much like our Team Builders have a reputation of delivering beautifully designed homes and unparalleled
customer service, Green Brick Mortgage delivers the same level of excellence by providing our buyers with
best-in-class home financing services and expertise. The company offers the powerful tools, resources, and
advice our buyers need for the best home buying experience possible.
Our homebuyers are currently able to finance their homes through Green Brick Mortgage’s preferred lender
referral program in Dallas-Fort Worth, Texas and Atlanta, Georgia.
BHome Mortgage
Launched in 2020, BHome Mortgage is a full-service mortgage banking company committed to developing
and nurturing relationships with REALTORS®, home builders and its customers. BHome Mortgage currently
services the Dallas-Fort Worth market, and offers an unmatched level of customer service for each and
every homebuyer.
Green Brick Title
Green Brick Title provides outstanding depth of experience to the residential and commercial real estate
industry in four locations across the country. In addition to partnering with our Team Builders to help
new homeowners quickly and efficiently close on their new homes, Green Brick Title works closely with
REALTORS®, banks, land brokers, builders, developers, and mortgage companies.
As part of the Green Brick Partners family, Green Brick Title’s access to resources beyond those of a
traditional title company enables us to always stay one step ahead of our competition.
*Green Brick Partners owns a 49.99% equity interest in Green Brick Mortgage LLC, a 49% equity interest in BHome
Mortgage, and 100% ownership of Green Brick Title.
31
SOUTHGATE HOMES - THE GROVE, FRISCO, TX
32
G R B K 2 4 Q UA RT E R F I N A N C I A L S U M M A RY ( 4 )
Summary Consolidated Statement of Income Data for Quarter Ended
December 31, 2020
September 30, 2020
June 30, 2020
March 31, 2020
Total revenues
$254,100
$275,821
$232,833
$213,267
Net income attributable to Green Brick Partners, Inc.
Income tax provision attributable to Green Brick Partners, Inc.
Pre-tax income attributable to Green Brick Partners, Inc.(2)
Basic EPS
Basic weighted-average number of shares outstanding
Summary Consolidated Balance Sheet Data as of
29,310
7,656
36,966
$0.58
50,617
34,819
9,968
44,787
$0.69
50,617
33,647
1,398
35,045
$0.67
50,583
15,917
5,988
21,905
$0.32
50,454
December 31, 2020
September 30, 2020
June 30, 2020
March 31, 2020
Inventory
Total assets
Borrowings on lines of credit, net
Senior unsecured notes, net
Notes payable
Term loan facility
Total debt
Total liabilities
Total Green Brick Partners, Inc. stockholders’ equity
Noncontrolling interests
Total equity
Number of shares outstanding
Total invested capital
Pre-tax return on average invested capital (3)
Home Data for Quarter Ended
New homes delivered
Net new home orders
Home Data as of
Backlog, units
Backlog, $ in millions
Units under construction
Active selling communities
Lots owned
Lots controlled
Lots owned and controlled
$844,635
$779,360
$751,121
988,847
106,687
111,056
2,125
-
219,868
325,895
640,242
9,167
649,409
50,662
860,110
17.1%
944,582
93,489
111,028
2,131
-
206,648
312,059
610,079
8,820
618,899
50,662
816,727
15.7%
910,248
143,875
73,527
4,249
-
221,651
313,818
575,759
8,186
583,945
50,662
797,410
13.0%
$770,628
975,180
242,758
73,466
-
-
316,224
409,886
542,982
10,900
553,882
50,617
859,206
10.8%
December 31, 2020
September 30, 2020
June 30, 2020
March 31, 2020
585
848
622
823
553
582
448
632
December 31, 2020
September 30, 2020
June 30, 2020
March 31, 2020
1,463
$686.9
1,780
103
8,920
5,548
14,468
1,200
$553.1
1,361
100
6,631
5,435
12,066
999
$446.6
1,273
90
5,870
3,306
9,176
970
$427.3
1,418
93
6,109
2,575
8,684
33
December 31, 2019
September 30, 2019
June 30, 2019
March 31, 2019
December 31, 2018
September 30, 2018
June 30, 2018
March 31, 2018
$230,122
$209,404
$183,506
$168,628
$185,120
$152,052
$157,312
$129,163
15,920
4,959
20,879
$0.32
50,429
15,671
5,743
21,414
$0.31
50,475
14,460
5,216
19,676
$0.29
50,655
12,605
3,794
16,399
$0.25
50,563
13,354
3,754
17,108
$0.26
50,678
12,197
4,746
16,943
$0.24
50,686
14,869
5,149
20,018
$0.29
50,664
11,203
3,335
14,538
$0.22
50,577
December 31, 2019
September 30, 2019
June 30, 2019
March 31, 2019
December 31, 2018
September 30, 2018
June 30, 2018
March 31, 2018
$753,567
$740,799
875,539
164,642
73,406
-
-
238,048
325,533
523,168
13,227
536,395
50,488
761,216
11.0%
865,789
164,792
73,358
-
-
238,150
337,087
508,715
7,778
516,493
50,488
746,865
10.6%
$719,878
832,961
232,657
-
-
-
232,657
321,809
493,470
5,173
498,643
50,696
726,127
10.5%
$690,817
793,020
206,522
-
-
-
206,522
297,068
480,869
4,788
485,657
50,676
687,391
11.2%
$668,961
784,026
200,386
-
-
-
200,386
289,863
468,351
17,281
485,632
50,583
668,737
11.4%
$648,241
771,016
198,965
-
1,045
-
200,010
292,981
455,686
14,508
470,194
50,720
655,696
11.6%
$581,368
705,049
166,395
-
1,205
-
167,600
242,845
443,324
12,208
455,532
50,720
610,924
12.1%
$528,881
641,944
133,752
-
9,914
-
143,666
202,876
428,386
10,682
439,068
50,686
572,052
11.3%
December 31, 2019
September 30, 2019
June 30, 2019
March 31, 2019
December 31, 2018
September 30, 2018
June 30, 2018
March 31, 2018
514
590
443
436
394
453
368
444
382
279
312
297
327
387
267
434
December 31, 2019
September 30, 2019
June 30, 2019
March 31, 2019
December 31, 2018
September 30, 2018
June 30, 2018
March 31, 2018
786
$346.8
1,297
95
6,419
2,557
8,976
710
$319.7
1,306
85
6,414
2,855
9,269
717
$331.3
1,214
75
6,127
3,050
9,177
658
$307.5
1,170
79
6,186
2,308
8,494
582
$264.3
1,127
76
6,235
1,843
8,078
685
$309.0
1,113
75
5,429
2,672
8,101
700
$314.2
988
69
5,248
2,402
7,650
477
$226.5
760
54
4,816
1,502
6,318
34
G R B K 2 4 Q UA RT E R F I N A N C I A L S U M M A RY ( 4 )
Summary Consolidated Statement of Income Data for Quarter Ended
December 31, 2017
September 30, 2017
June 30, 2017
March 31, 2017
Total revenues
$137,424
$114,342
$105,750
$100,734
Net income attributable to Green Brick Partners, Inc.
Income tax provision attributable to Green Brick Partners, Inc.
Pre-tax income attributable to Green Brick Partners, Inc.(2)
Basic EPS
Basic weighted-average number of shares outstanding
Summary Consolidated Balance Sheet Data as of
10,805
6,356
17,161
$0.21
50,555
9,280
5,336
14,616
$0.19
49,808
7,689
4,349
12,038
$0.16
49,047
6,197
3,855
10,052
$0.13
48,958
December 31, 2017
September 30, 2017
June 30, 2017
March 31, 2017
Inventory
Total assets
Borrowings on lines of credit, net
Senior unsecured notes, net
Notes payable
Term loan facility
Total debt
Total liabilities
Total Green Brick Partners, Inc. stockholders’ equity
Noncontrolling interests
Total equity
Number of shares outstanding
Total invested capital
Pre-tax return on average invested capital (3)
Home Data for Quarter Ended
New homes delivered
Net new home orders
Home Data as of
Backlog, units
Backlog, $ in millions
Units under construction
Active selling communities
Lots owned
Lots controlled
Lots owned and controlled
$496,054
611,003
105,773
-
9,926
-
115,699
177,965
416,347
16,691
433,038
50,599
532,046
10.8%
$478,616
605,510
94,002
-
10,204
-
104,206
167,265
424,214
14,031
438,245
50,585
528,420
10.1%
$434,938
553,616
73,293
-
10,213
-
83,506
142,165
399,944
11,507
411,451
49,108
483,450
9.9%
$406,519
532,681
61,716
-
10,223
-
71,939
126,152
392,096
14,433
406,529
49,070
464,035
9.9%
December 31, 2017
September 30, 2017
June 30, 2017
March 31, 2017
292
265
235
241
237
270
226
287
December 31, 2017
September 30, 2017
June 30, 2017
March 31, 2017
310
$151.5
736
55
4,495
1,724
6,219
337
$164.6
715
56
4,624
1,073
5,697
331
$165.2
714
54
4,283
1,111
5,394
298
$145.2
625
52
4,039
917
4,956
35
December 31, 2016
September 30, 2016
June 30, 2016
March 31, 2016
December 31, 2015
September 30, 2015
June 30, 2015
March 31, 2015
$122,004
$94,032
$103,394
$71,556
$88,789
$77,797
$72,988
$59,227
7,676
6,001
13,677
$0.16
48,910
6,243
3,624
9,867
$0.13
48,899
$6,743
4,213
10,956
$0.14
48,894
3,094
1,423
4,517
$0.06
48,814
4,693
2,915
7,608
$0.10
48,802
2,826
1,832
4,658
$0.06
48,495
3,788
2,127
5,915
$0.12
31,346
4,018
2,184
6,202
$0.13
31,346
December 31, 2016
September 30, 2016
June 30, 2016
March 31, 2016
December 31, 2015
September 30, 2015
June 30, 2015
March 31, 2015
$410,662
540,196
74,212
-
10,948
-
85,160
138,711
384,572
16,913
401,485
48,956
469,732
8.8%
$418,356
553,399
80,785
-
9,713
-
90,498
164,700
376,592
12,107
388,699
48,937
467,090
7.8%
$384,742
$505,260
$62,874
-
9,000
-
71,874
122,601
370,206
12,453
382,659
48,937
442,080
6.9%
$378,956
504,861
66,833
-
9,988
-
76,821
127,543
362,871
14,447
377,318
48,833
439,692
5.7%
$346,100
473,074
46,698
-
10,158
-
56,856
101,219
359,532
12,323
371,855
48,833
$319,098
439,745
13,575
-
11,458
-
25,033
75,705
352,791
11,249
364,040
48,814
$301,527
417,728
20,108
-
11,822
149,992
181,922
225,329
179,860
12,539
192,399
31,369
$289,852
408,589
19,087
-
10,750
149,979
179,816
220,976
175,959
11,654
187,613
31,346
416,388
377,824
361,782
355,775
December 31, 2016
September 30, 2016
June 30, 2016
March 31, 2016
December 31, 2015
September 30, 2015
June 30, 2015
March 31, 2015
275
197
196
204
212
239
161
240
194
160
154
140
162
169
145
186
December 31, 2016
September 30, 2016
June 30, 2016
March 31, 2016
December 31, 2015
September 30, 2015
June 30, 2015
March 31, 2015
237
$108.0
564
50
4,235
954
5,189
315
$138.7
665
49
4,199
870
5,069
307
$140.3
660
48
3,743
744
4,487
280
$129.2
541
44
3,736
936
4,672
201
$88.1
507
43
3,650
1,084
4,734
235
$98.3
543
42
2,889
1,232
4,121
249
$102.4
522
43
3,529
1,136
4,665
242
$92.8
517
37
3,124
752
3,876
36
A P P E N D I X & N O N - G A A P R ECO N C I L I AT I O N
Reconciliation of Non-GAAP Measures
In this annual report, we utilize certain financial measures that are non-GAAP financial
measures as defined by the Securities and Exchange Commission. We present these
measures because we believe they and similar measures are useful to management and
investors in evaluating the Company’s operating performance and financing structure. We
also believe these measures facilitate the comparison of our operating performance and
financing structure with other companies in our industry. Because these measures are not
calculated in accordance with Generally Accepted Accounting Principles (“GAAP”), they may
not be comparable to other similarly titled measures of other companies and should not be
considered in isolation or as a substitute for, or superior to, financial measures prepared in
accordance with GAAP.
(1) As a result of the comprehensive tax legislation, commonly referred to as the Tax Cuts
and Jobs Act (the “Tax Act”), enacted by the U.S. government on December 22, 2017, the
Company remeasured its DTA which resulted in additional tax expense of $19.0 million
during the three months ended December 31, 2017. Due to the effects of the Tax Act, the
net (loss) income attributable to Green Brick for the three months ended December 31,
2017 and for the year ended December 31, 2017 is not comparable to the other periods
presented in this report. As such, certain annual and quarterly amounts shown in this report
have been adjusted to a “Normalized” Non-GAAP amount as shown below.
For the quarter ended 12.31.2017:
Income Before Taxes
Income Tax Expense Attributable to Noncontrolling Interest
Income Tax Expense Attributable to Green Brick
Income Tax Provision
Net (loss) income
Less: net income attributable to noncontrolling interests
Net (loss) income attributable to Green Brick Partners, Inc.
Weighted average commons shares outstanding
Basic earnings per share
For the year ended 12.31.2017:
Income Before Taxes
Income Tax Expense Attributable to Noncontrolling Interest
Income Tax Expense Attributable to Green Brick
Income Tax Provision
Net (loss) income
Less: net income attributable to noncontrolling interests
Net (loss) income attributable to Green Brick Partners, Inc.
Weighted average commons shares outstanding
Basic earnings per share
Weighted average commons shares outstanding
Basic earnings per share
Per GAAP Financials
Adjustment
"Normalized" Non-GAAP Amount Presented
$21,017
(40)
(25,356)
(25,396)
(4,379)
(3,816)
(8,195)
50,555
$(0.16)
$-
-
19,000
19,000
19,000
-
19,000
50,555
$0.38
$21,017
(40)
(6,356)
(6,396)
14,621
(3,816)
10,805
50,555
$0.21
Per GAAP Financials
Adjustment
"Normalized" Non-GAAP Amount Presented
$64,237
(135)
(38,896)
(39,031)
25,206
(10,236)
14,970
49,597
$0.30
$-
-
19,000
19,000
19,000
-
19,000
49,597
$0.38
$64,237
(135)
(19,896)
(20,031)
44,206
(10,236)
33,970
49,597
$0.68
(2) Pre-tax income attributable to Green Brick Partners, Inc. is a non-GAAP measure reconciled by quarter
on pages 32-34 of this annual report. This measure is calculated by adding Income tax attributable to
Green Brick Partners, Inc. to Net Income attributable to Green Brick Partners, Inc. The compounded
annual growth of this figure is shown on page 12 of this annual report and calculated as follows:
Pre-tax income attributable to Green Brick Partners
Pre-tax income attributable to Green Brick Partners, Inc. for the year ended 12.31.2020
138,703
Divided by: Pre-tax income attributable to Green Brick Partners, Inc. for the year ended 12.31.2015
24,384
To the Power Of:
One
Divided by: Number of periods less one
Power
Less: one
Compounded Annual Growth Rate
5.69
1.00
5.00
0.2
1.416
(1.00)
0.416
(3) Pre-tax return on average invested capital is calculated as the sum of Pre-tax income attributable to
Green Brick Partners, Inc. for the last four quarters divided by the average of the ending invested capital
and beginning invested capital for the period included in the calculation.
(4) Certain prior period amounts have been reclassified to conform to the current period presentation;
specifically, (i) mechanic’s lien contracts revenue was reclassified from other income to revenue, (ii)
the cost of model home furnishings was reclassified from inventory to fixed assets, (iii) prepaid plans
& development costs were reclassified from other assets to inventory, and (iv) debt balances were
presented net of debt issuance costs.
37
CB JENI HOMES - FRISCO SPRINGS, FRISCO, TX
38
B OA R D O F D I R EC TO R S
David Einhorn, Chairman
Mr. Einhorn has been a director of our predecessor company since May 2006. Mr. Einhorn co-founded and has served as the President of Greenlight
Capital, Inc., since January 1996. Funds managed by Greenlight are some of our principal stockholders. Since July 2004, Mr. Einhorn has served as
Chairman of the Board of Greenlight Capital Re, Ltd. (Nasdaq: GLRE). Mr. Einhorn received a B.A. in Government from Cornell University.
Harry Brandler
Mr. Brandler previously served as the Chief Financial Officer of Greenlight Capital, Inc. Prior to joining Greenlight Capital, Inc., he served as Chief
Financial Officer of Wheatley Partners, a venture capital firm, where he oversaw the firm’s back office operations and restructured the firm’s marketing,
client relations, and technology. From 1996 to 2000, Mr. Brandler served as a Manager at Goldstein, Golub & Kessler, where he provided audit, tax, and
consulting services to investment partnerships and other financial organizations and where he was promoted to Manager in 1999. Mr. Brandler received
a B.S. in Accounting from New York University and is admitted as a Certified Public Accountant.
Kathleen Olsen
Since 2011, Ms. Olsen has been a private investor. From 1999 through 2011, Ms. Olsen served as Chief Financial Officer of Eminence Capital, LLC, a
long/short global equity fund. From 1993 to 1999, Ms. Olsen served as audit manager specializing in investment partnerships at Anchin, Block & Anchin
LLP, a public accounting firm located in New York City. Ms. Olsen received a B.S. degree with honors from the State University of New York at Albany. Ms.
Olsen is a Certified Public Accountant, a member of the American Institute of Certified Public Accountants, and a member of the New York State Society
of Certified Public Accountants.
Richard Press
Before retiring, Mr. Press was a Senior Vice President at Wellington Management from 1994 to 2006, where he started and built the firm’s insurance
asset management practice. Prior to that, Mr. Press was a Senior Vice President of Stein Roe & Farnham from 1982 to 1994. Mr. Press has been a board
member of Millwall Holdings PLC and Millwall Football Club, London since 2010; and is an emeritus member of the Board of Overseers Leadership Board
of Beth Israel Deaconess Medical Center (Boston) having served since 2007. Previously he served on various committees of the Controlled Risk Insurance
Company and the Harvard Risk Management Foundation from 2006 to 2017; served as a board member of the Housing Authority Insurance Group from
2008 to December 2014; and served as a board member and chairman of each of Transatlantic Holdings (NYSE: TRH) from August 2006 to March 2012
and Pomeroy IT Solutions (NASDAQ: PMRY) from July 2007 to November 2009. He was a founding member of the Board of Governors and the Advisory
Board of the National Pediatric Multiple Sclerosis Center, Stony Brook University and Medical School, New York (2001 – 2013). Mr Press earned a B.A. in
Economics from Brown University in 1960; and after serving in the US Army, he received his M.B.A. from Harvard Business School in 1964.
39
Elizabeth K. Blake
Before retiring, Ms. Blake served as Senior Vice President — Advocacy, Government Affairs & General Counsel of Habitat For Humanity International Inc.
from 2006 to 2014. Ms. Blake served on the Board of Patina Oil & Gas Corporation from 1998 through its sale to Noble Energy in 2005. From 2003 to
2005, Ms. Blake was the Executive Vice President — Corporate Affairs, General Counsel and Corporate Secretary for US Airways Group, Inc. She also
served as Senior Vice President and General Counsel of Trizec Properties, Inc., a public real estate investment trust. Ms. Blake served as Vice President
and General Counsel of General Electric Power Systems from 1998 to 2002. From 1996 to 1998, Ms. Blake served as Vice President and Chief of Staff
of Cinergy Corp. From 1982 to 1984, she was an associate with Frost & Jacobs, a law firm in Cincinnati, Ohio and a partner from 1984 to 1996. From
1977 to 1982, she was with the law firm of Davis Polk & Wardwell in New York. She is past Chair of the Ohio Board of Regents. Ms. Blake received a B.A.
degree with honors from Smith College and her JD from Columbia Law School, where she was a Harlan Fiske Stone Scholar. Ms. Blake was awarded an
Honorary Doctorate of Technical Letters by Cincinnati Technical College and an Honorary Doctorate of Letters from the College of Mt. St. Joseph.
John R. Farris
Since 2007, Mr. Farris has been the founder and President of Commonwealth Economics, LLC. Prior to forming Commonwealth Economics, LLC, he
served as Secretary of the Finance and Administration Cabinet for the Commonwealth of Kentucky. From 2008 to 2012, Mr. Farris served as an adjunct
Professor of Economics and Finance at Centre College in Danville, Kentucky. Mr. Farris previously worked at the Center for Economics Research at the
Research Triangle Institute, the World Bank, and the International Finance Corporation. He currently sits on the board of directors for Farmers Capital
Bank Corporation (NASDAQ: FFKT). Mr. Farris holds a B.S. from Centre College and a M.P.A. from Princeton University.
James R. Brickman
Mr. Brickman is responsible for all major investment decisions, capital allocation, strategic planning, and relationships with Green Brick Partners builders.
He was the founding manager and advisor of each of JBGL Capital LP, since 2008, and JBGL Builder Finance LLC, since 2010. Prior to forming JBGL, Mr.
Brickman was a manager of various joint ventures and limited partnerships that developed and built low- and high-rise office buildings, multi-family and
condominium homes, single-family homes, entitled land and provided property management services. He previously also served as Chairman and CEO
of Princeton Homes Ltd. and Princeton Realty Corporation, which developed land, constructed custom single-family homes, and managed apartments
it built. Mr. Brickman has over 40 years of experience in nearly all phases of real estate construction, development, and real estate finance property
management. Mr. Brickman received a B.B.A. and M.B.A degrees from Southern Methodist University.
CO M M I T T E E M E M B E R S
All Green Brick Partners committee members are independent directors.
AUDIT COMMITTEE
Kathleen Olsen, Committee Chair
John R. Farris and Richard Press
COMPENSATION COMMITTEE
GOVERNANCE & NOMINATING COMMITTEE
Richard Press, Committee Chair
Kathleen Olsen and Elizabeth K. Blake
Elizabeth K. Blake, Committee Chair
Kathleen Olsen and John R. Farris
40
O P E R AT I N G R E S U LT S A N D F O R M 1 0 - K
PART 1
ITEM 1. BUSINESS
Green Brick Partners, Inc. (formerly named BioFuel Energy Corp.) and its subsidiaries
(together, the “Company”, “we”, or “Green Brick”) is a diversified homebuilding and land
development company incorporated under the laws of the State of Delaware on April 11,
2006.
materials, offering a broad range of customization options and building well-crafted homes.
We seek to maximize value over the long term and operate our business to mitigate risks
in the event of a downturn by controlling costs and quickly reacting to regional and local
market trends.
We acquire and develop land, provide land and construction capital to our wholly owned
and controlled builders (together, “builders”) and participate in the profits of our builders.
Our core markets are in the high growth U.S. metropolitan areas of Dallas-Forth Worth
(“DFW”), Texas and Atlanta, Georgia, as well as the Treasure Coast, Florida area. We also
own a noncontrolling interest in a builder in Colorado Springs, Colorado. We are engaged
in all aspects of the homebuilding process, including land acquisition and development,
entitlements, design, construction, title and mortgage services, marketing and sales and the
creation of brand images at our residential neighborhoods and master planned communities.
We are a leading lot developer in our markets and believe that our strict operating discipline
provides us with a competitive advantage in seeking to maximize returns while minimizing risk.
We currently own or control approximately 14,500 home sites in high-growth submarkets
throughout the DFW and Atlanta metropolitan areas and the Treasure Coast, Florida market.
We are strategically positioned to either build new homes on our lots through our builders
or to sell finished lots to third-party homebuilders. We sell finished lots to our builders
or option lots from third-party developers for our builders’ homebuilding operations and
provide them with construction financing and strategic planning. Our builders provide us
with their local knowledge and relationships.
We believe we offer higher quality homes with more distinctive designs and floor plans
than those built by our competitors at comparable prices. Our communities are located in
premium locations and we seek to enhance homebuyer satisfaction by utilizing high-quality
The following table presents general information about our builders, including the types of
homes they build and their price ranges.
BUILDER
YEAR FORMED
MARKET
PRODUCTS OFFERED
PRICE RANGE
The Providence Group of Georgia LLC (“TPG”)
CB JENI Homes DFW LLC (“CB JENI”)
CLH20 LLC
(“Centre Living”)
SGHDAL LLC (“Southgate”)
GRBK GHO Homes LLC (“GRBK GHO”)
2011
2012
2012
2013
2018
Atlanta
Dallas-Fort Worth
Dallas-Fort Worth
Townhomes
Condominiums
Single Family
Townhomes
Single Family
Townhomes
Single Family
$330,000 to $1,000,000
$360,000 to $590,000
$380,000 to $880,000
$230,000 to $530,000
$320,000 to $760,000
$320,000 to $780,000
$400,000 to $650,000
Dallas-Fort Worth
Luxury Homes
$550,000 to $1,000,000
Treasure Coast
Patio Homes
Single Family
$220,000 to $350,000
$240,000 to $1,120,000
Trophy Signature Homes LLC (“Trophy”)
2018
Dallas-Fort Worth
Single Family
$240,000 to $690,000
41
Our backlog reflects the number and value of homes for which we have entered into sales contracts with customers but not yet delivered. With the exception of a normal cancellation
rate, we expect all of the backlog as of December 31, 2020 to be filled during 2021. The following table sets forth the information about selling communities and backlog of our builders.
YEAR ENDED
DECEMBER 31, 2020
DECEMBER 31, 2020
DECEMBER 31, 2019
BUILDER
AVERAGE SELLING
COMMUNITIES
SELLING
COMMUNITIES
BACKLOG, UNITS
BACKLOG, IN
THOUSANDS
SELLING
COMMUNITIES
BACKLOG, UNITS
BACKLOG IN
THOUSANDS
TPG
CB JENI
Centre Living
Southgate
GRBK GHO
Trophy
Total
23
27
6
11
16
13
96
25
25
4
12
14
23
213
470
28
167
214
371
$113,657
189,807
13,541
121,740
96,338
151,778
103
1,463
$686,861
19
28
9
11
18
10
95
104
294
14
71
147
156
786
$58,905
115,057
7,696
49,280
56,021
59,869
$346,828
For more information on recent business developments and results of operations, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” located
in Part II, Item 7 of this Annual Report on Form 10-K.
BUSINESS STRATEGY
We believe we are well-positioned for growth through the disciplined execution of the following elements of our strategy:
Combine Land Acquisition and Development Expertise with Homebuilding Operations to Maximize Profitability
Our ability to identify, acquire and develop land in desirable locations and on favorable terms is critical to our success. We evaluate land opportunities based on how we expect such
opportunities will contribute to overall profitability and returns, rather than how they might drive volume on a market basis. We identify attractive properties that are typically located in
prime neighborhood locations. We consider the existing and future supply of developable land before working to acquire the best-valued properties. Analysis includes consideration of
development costs in addition to land costs. We have found that the prime quality infill locations have limited supply competition that may result in smaller value declines in down markets.
We manage and oversee all land development with our in-house staff.
We believe our expertise in land development and planning enables us to create desirable communities that meet or exceed our target homebuyer’s expectations, while selling homes
at competitive prices. Our strategy of holding land inventory provides us with a multi-year supply of lots for future homebuilding while limiting any excess supply that would otherwise
be subject to market cycle risk. We focus on the development of entitled parcels in communities where we can generally sell all lots and homes within 24 to 60 months from the start of
sales. This focus allows us to limit exposure to land development and market cycle risk while pursuing favorable returns on our investments. We seek to minimize our exposure to land
risk through disciplined management of entitlements, the use of land and lot options and other flexible land acquisition arrangements. We are actively involved in every step of the land
entitlement, home design and construction processes with our builders.
42
Maximize Benefits of Diversified Homebuilding and Land Development Structure
Our diversified homebuilding and land development structure provides the flexibility to
monetize the value of our land assets either by building and selling homes through our
builders or developing land and selling finished lots to unaffiliated homebuilders. When
evaluating our land assets, we consider the potential contribution of each asset to our
overall performance, taking into account the timeframe over which we may monetize the
asset. While we currently expect the majority of our land to be utilized by our homebuilders,
we believe our land development and homebuilding strategy provides us with increased
flexibility to seek to maximize risk-adjusted returns as market conditions warrant.
Increase Market Positions in Housing Markets with a Favorable Growth Outlook and
Strong Demand Fundamentals
We believe that we have strategically well-located land and lot positions within our core
markets and that we have acquired our land and lot positions at attractive prices, providing
us with significant opportunity for a healthy return on our investment. We believe our core
markets exhibit attractive residential real estate investment characteristics, such as growing
economies, improving levels of employment and population growth relative to national
averages, favorable migration patterns, general housing affordability, and desirable lifestyle
and weather characteristics. We believe that increasing demand and supply constraints in
our core markets create favorable conditions for our future growth.
Increase Long-Term Value by Investing in Infrastructure
In our communities, we typically make enhanced investment in infrastructure, including
landscaping and amenity centers, and enforce higher construction standards through
our builders. We believe this creates greater long-term value for us and for our builders,
homebuyers, shareholders and the communities in which we build.
Disciplined Investment Approach
We seek to maximize value over the long-term and operate our business to mitigate risks
in the event of a downturn by controlling costs and focusing on regional and local market
trends. Our management team has gained significant operating expertise through varied
economic cycles. The perspective gained from these experiences has helped shape our
investment approach. We believe that our management team has learned to effectively
evaluate housing trends in our markets, and to react quickly and rationally to market
changes. Our cycle-tested management approach balances strategic planning with day-to-
day decision-making responsibilities, freeing up our builders to concentrate on growing our
homebuilding business rather than focusing on obtaining capital to fund their operations.
We believe that our strict operating discipline provides us with a competitive advantage in
seeking to maximize returns while minimizing risk.
We believe that there are significant opportunities to profitably expand in our core markets.
For example, we currently own or control approximately 14,500 home sites in the DFW,
Atlanta and Treasure Coast markets. In Dallas and Atlanta, we seek to acquire land with
convenient access to metropolitan areas which have diverse economic and employment
bases and demographics that we believe will support long-term growth. We continuously
review the allocation of our investments in these markets taking into account demographic
trends and the likely impact on our operating results. We use the results of these reviews to
reallocate our investments to those areas where we believe we can maximize our profitability
and return on capital. We seek to use our local relationships with land sellers, brokers and
investors to pursue the purchase of additional land parcels in our core markets. While our
primary growth strategy focuses on increasing our market position in our existing markets,
we may, on an opportunistic basis, explore expansion into attractive new markets.
Superior Design, Broad Product Range and Enhanced Homebuying Experience
Within each of our markets, we partner our expertise with that of our builders to design
attractive neighborhoods and homes to appeal to a wide variety of potential homebuyers.
One of our core operating philosophies is to create a culture which provides a positive,
CENTRE LIVING HOMES - SWISS AVENUE CROSSING, DALLAS, TX
memorable experience for our homebuyers through active engagement in the building
process. At higher price points, we provide our homebuyers with customization options to
suit their specific needs and tastes. In consultation with nationally and locally recognized
architecture firms, interior and exterior consultants and homeowner focus groups, we
research and design a diversified range of products for various levels and price points. Our
homebuilding projects include townhomes, patio homes, single family homes and luxury
semi-custom homes. We believe we can adapt quickly to changing market conditions and
optimize performance and returns while strategically reducing portfolio risk because of our
diversified product strategy.
We sell our homes through our internal sales representatives and also through independent
real estate brokers. Our in-house sales force typically works from sales offices located in
model homes near or in each community. Sales representatives assist potential buyers by
providing them with basic floor plans, price information, development and construction
timetables, tours of model homes, and the selection of customization and upgrade options.
Sales personnel are trained by us and generally have had prior experience selling new
homes in the local market. Our personnel, along with subcontracted marketing and design
consultants, carefully design the exterior and interior of each home to appeal to the lifestyles
of targeted homebuyers. Additionally, we advertise through the use of model homes, social
media, newspapers, billboards, real estate market publications, brochures, and newsletters.
43
Pursue Further Growth Through the Prudent Use of Leverage
As of December 31, 2020, our debt to total capitalization ratio was 25.6%. The debt to
total capitalization ratio is calculated as the sum of borrowings on lines of credit, the senior
unsecured notes and notes payable, net of debt issuance costs, divided by the total Green
Brick Partners, Inc. stockholders’ equity. It is our intent to prudently employ leverage to
continue to invest in our land acquisition, development and homebuilding businesses. We
target a debt to total capitalization ratio of approximately 30% to 35%, which we expect will
continue to provide us with significant additional growth capital.
Pursue Expansion of Trophy Signature Homes into New Markets
We intend to pursue expansion into new markets with Trophy Signature Homes. We believe
Trophy’s more affordable product and quicker inventory turns make its platform uniquely
scalable to expand outside of the DFW metroplex. We plan to expand Trophy into markets
compatible with our existing markets that demonstrate strong trends in demographics,
employment, and in-migration by leveraging existing relationships with land developers and
homebuilders.
Pursue Acquisitions of Additional Homebuilders
We intend to pursue the acquisition of additional homebuilders in our core and new markets.
Our preference is to continue to acquire controlling interests in homebuilders with existing
management continuing to own a significant ownership stake. We will seek to acquire and
then retain management teams which have strong local relationships with land owners and
have a positive reputation for building well-crafted homes in their markets. We expect that
our ability to provide capital discipline and strategic oversight will complement the local
skills, relationships and reputations of our future homebuilder partners.
Marketing and Sales Process
We offer a preferred lender referral program through our mortgage subsidiary to provide
lending options to homebuyers in need of financing. We offer homeowners a comprehensive
warranty on each home. Homes are generally covered by a ten-year warranty for structural
concerns, one year for defects and products used, two years for electrical, plumbing, heating,
ventilation, and air conditioning parts and labor.
Corporate Developments
Effective April 29, 2020, through a series of transactions, the Company acquired the
remaining membership and voting interests in our subsidiary, CB JENI Homes DFW LLC (“CB
JENI”). As a result, CB JENI became an indirect wholly owned subsidiary of the Company,
was no longer considered a VIE and was consolidated based on the majority voting interest
pursuant to ASC 810. As both the entity wholly owned by the Company to which CB JENI
ownership interests were assigned and CB JENI were controlled by the Company on April
29, 2020, the acquisition of the remaining membership interest was accounted for at the
carrying amounts on CB JENI’s books, pursuant to provisions of Accounting Standards
Codification (“ASC”) 805 that govern transactions between entities under common control.
In May 2020, we established a joint venture, BHome Mortgage, LLC (“BHome Mortgage”)
with First Continental Mortgage, Ltd., to provide mortgage related services to homebuyers.
The Company owns 49.0% in BHome Mortgage. In May 2020, BHome Mortgage received
initial capital contributions of approximately $0.5 million from each of its two members in
accordance with their membership interest. The investment in BHome Mortgage is treated
as an unconsolidated investment under the equity method of accounting and is included in
investments in unconsolidated entities in the Company’s consolidated balance sheets.
In August 2020, GBTM Sendera, LLC joint venture (“GBTM Sendera”) was formed by GRBK
Edgewood, LLC (“GRBK Edgewood”) and TM Sendera, LLC (“TM Sendera”) with the purpose
to acquire and develop a tract of land in Fort Worth,Texas. Each party holds a 50% ownership
interest in GBTM Sendera. GBTM Sendera had no activity in the period but it is expected
to begin its operations in the first quarter 2021. In August 2020, GBTM Sendera received
two $9.0 million initial contributions from each of its two members, GRBK Edgewood and
TM Sendera.
44
Raw Materials
Typically, all the raw materials and most of the components used in our business are readily
available in the United States. Most are standard items carried by major suppliers. However,
a rapid increase in the number of homes started could cause shortages in the availability of
such materials or in the price of services, thereby leading to delays in the delivery of homes.
We continue to monitor the supply markets to achieve the best prices available. See “Risk
Factors - Labor and raw material shortages and price fluctuations could delay or increase
the cost of land development and home construction, which could materially and adversely
affect our business.”
Seasonality
The homebuilding industry experiences seasonal fluctuations in quarterly operating results
and capital requirements. We typically experience the highest new home order activity in
spring and summer, although this activity is also highly dependent on the number of active
selling communities, timing of new community openings and other market factors. Since
it typically takes five to nine months to construct a new home, we deliver more homes in
the second half of the year as spring and summer home orders are delivered. Because of
this seasonality, home starts, construction costs and related cash outflows have historically
been highest in the second and third quarters, and the majority of cash receipts from home
deliveries occur during the third and fourth quarters. We expect this seasonal pattern to
continue over the long-term, although it may be affected by volatility in the homebuilding
industry.
Competition
Competition in the homebuilding industry is intense, and there are relatively low barriers to
entry. Homebuilders compete for, among other things, homebuyers, desirable land parcels,
financing, raw materials and skilled labor. Increased competition could hurt our business, as
it could prevent us from acquiring attractive land parcels on which to build homes or make
such acquisitions more expensive, hinder our market share expansion, and lead to pricing
pressures on our homes that may adversely impact our revenues and margins. If we are
unable to successfully compete, our business, liquidity, financial condition and results of
operations could be materially and adversely affected. Our competitors may independently
develop land and construct housing units that are superior or substantially similar to
our products. Furthermore, a number of our primary competitors are significantly larger,
have a longer operating history and may have greater resources or lower cost of capital;
accordingly, they may be able to compete more effectively in one or more of the markets
in which we operate. Many of these competitors also have longstanding relationships with
subcontractors and suppliers in the markets in which we operate. We also compete for sales
with individual resales of existing homes and with available rental housing.
Government Regulation and Environmental Matters
Our developments are subject to numerous local, state, federal and other statutes, ordinances,
rules and regulations concerning zoning, development, building design, construction and
similar matters that impose restrictive zoning and density requirements, the result of which
is to limit the number of homes that can be built within the boundaries of a particular area.
Projects that are not entitled may be subjected to periodic delays, changes in use, less
intensive development or elimination of development in certain areas due to government
regulations. We may also be subject to periodic delays or may be precluded entirely from
developing in certain communities due to building moratoriums or “slow-growth” or “no-
growth” initiatives that could be implemented in the future. Local governments also have
broad discretion regarding the imposition of development and service fees for projects in
their jurisdiction. Projects for which we have received land use and development entitlements
or approvals may still require a variety of other governmental approvals and permits during
the development process and can also be impacted adversely by unforeseen health, safety
and welfare issues, which can further delay these projects or prevent their development.
We are also subject to a variety of local, state, federal and other statutes, ordinances, rules
and regulations concerning the environment. The particular environmental laws that apply to
any given homebuilding site vary according to multiple factors, including the site’s location,
its environmental conditions and the present and former uses of the site, as well as adjoining
properties. Environmental laws and conditions may result in delays, may cause us to incur
substantial compliance and other costs, and can prohibit or severely restrict homebuilding
and land development activity in environmentally sensitive regions or areas. In addition, in
those cases where an endangered or threatened species is involved, environmental rules
and regulations can result in the restriction or elimination of development in identified
environmentally sensitive areas. From time to time, the United States Environmental
Protection Agency and similar federal or state agencies review homebuilders’ compliance
with environmental laws and may levy fines and penalties for failure to comply strictly with
applicable environmental laws or impose additional requirements for future compliance as a
result of past failures. Any such actions taken may increase our costs. Further, we expect that
increasingly stringent requirements will be imposed on homebuilders and land developers
in the future. Environmental regulations can also have an adverse impact on the availability
and price of certain raw materials such as lumber.
Under various environmental laws, current or former owners of real estate, as well as certain
other categories of parties, may be required to investigate and clean up hazardous or toxic
substances, and may be held liable to a governmental entity or to third parties for related
damages, including bodily injury, and investigation and clean-up costs incurred in connection
with the contamination. Please see “Risk Factors” located in Part I, Item 1A in this Annual
Report on Form 10-K.
Human Capital Resources
We believe the people who work for our Company are our most important resources and
are critical to our continued success. We focus significant attention toward attracting and
retaining talented and experienced individuals to manage and support our operations. We
offer our employees a broad range of company-paid benefits, and we offer our employees
a compensation package and benefits, including medical, dental, life insurance and other
health and welfare plans, that we believe are competitive.
We believe having a diverse and inclusive work environment, where everyone has a sense
of belonging, not only drives engagement but fosters innovation, which is critical to driving
growth. Our management teams are expected to exhibit and promote honest, ethical
and respectful conduct in the workplace. All of our employees must adhere to a code of
conduct that sets standards for appropriate behavior and includes required internal training
on preventing, identifying, reporting and stopping any type of discrimination. Furthermore,
our management team supports a culture of developing future leaders from our existing
workforce, enabling us to promote from within for many leadership positions. We believe this
provides long-term focus and continuity to our operations while also providing opportunities
for the growth and advancement of our employees.
We are committed to the health and safety of our employees, trade partners and homebuyers.
During fiscal 2020, as a result of the COVID-19 pandemic, we implemented additional safety
protocols to protect our employees, trade partners and homebuyers, including protocols
regarding social distancing, health checks and working remotely. Our experienced teams
adapted quickly to the changes and have managed our business successfully during this
challenging time. We are also committed to worker safety and regulatory compliance.
45
Although we subcontract certain components of our land development and construction
aspects of our homebuilding activities, we are highly dependent on our skilled employees
for critical aspects of what we do. That includes senior executives who are responsible for
our operational strategies and for approving significant land acquisitions and other major
investments we make. It also includes the people who head our homebuilding operations, as
well as the many people who are involved in design, construction oversight, marketing and
other aspects of our homebuilding business and in carrying out our other activities.
At December 31, 2020, we employed approximately 440 individuals of whom approximately
400 were involved in our homebuilding operations, with locations in Dallas-Ft. Worth, Texas,
Atlanta, Georgia and the Treasure Coast, Florida, and approximately 40 support our corporate
office. We do not have collective bargaining agreements relating to any of our associates.
Available Information
Our website address is www.greenbrickpartners.com. Our Annual Reports on Form 10-
K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to
those reports filed or furnished pursuant to Section 13 or 15(d) of the Exchange Act are
available free of charge through our website as soon as reasonably practicable after they
are electronically filed with, or furnished to, the Securities and Exchange Commission (the
“SEC”). Our website and the information contained or incorporated therein are not intended
to be incorporated into this Annual Report on Form 10-K.
TROPHY SIGNATURE HOMES - LIGHT FARMS, CELINA, TX
46
ITEM 1A. RISK FACTORS
Set forth below are the risks that we believe are material to our investors. Any of these risks could
significantly and adversely affect our business, financial condition and results of operations. You
should carefully consider the risks described below, together with the other information included
in this Annual Report on Form 10-K, including the information contained under the caption
“Forward-Looking Statements”.
Risks Related to our Business and Industry
The recent COVID-19 pandemic and resulting worldwide economic conditions are
adversely affecting, and will continue to adversely affect, our business operations,
financial condition, results of operations, and cash flows.
In December 2019, a novel strain of coronavirus, COVID-19, was identified in Wuhan,
China. This virus continues to spread globally and in March 2020, the World Health
Organization declared COVID-19 a pandemic. The COVID-19 pandemic has negatively
impacted the global economy, and disrupted global supply chains. In addition, there have
been extraordinary and wide-ranging actions taken by international, federal, state, and local
public health and governmental authorities to contain and combat the outbreak and spread
of COVID-19 in regions across the United States and the world, including quarantines and
“shelter-in-place” orders and similar mandates for many individuals to substantially restrict
daily activities and for many businesses to curtail or cease normal operations. While many
of these quarantines and “shelter-in-place” orders were lifted in the latter half of the second
quarter, based on the recent surge of COVID-19 cases in parts of the country in which we
operate, there are concerns that state and local public health and governmental authorities
could reimpose restrictions that would affect the economy in general and our operations.
Our first focus in addressing the impact of the COVID-19 pandemic was implementing
steps to minimize the risk to our employees, trade partners and customers. While residential
homebuilding is considered an essential service in each of the markets in which we operate,
we are still taking steps to increase the safety of our employees, trade partners and customers.
For example, we (1) initially closed our sales centers, model homes, and design centers to
the general public and shifted to appointment-only interactions with our customers and
have now shifted more traffic to walk-in appointments and are following recommended
social distancing and other health and safety protocols when meeting in person with a
customer, (2) modified our construction operations to enforce enhanced safety protocols
around social distancing, hygiene, and health screening and (3) modified our corporate and
division office functions in order to allow all of our employees to work remotely except for
essential minimum basic operations which could only be done in an office setting.
From a business standpoint, the initial impact of the COVID-19 pandemic and the responsive
actions taken by federal, state and local public health and governmental authorities resulted
in a significant downturn in sales activity in our operations and the homebuilding industry
as a whole. For example, in the final two weeks of March and through the end of April,
the impact of shelter-in-place/stay-at-home restrictions materially reduced our new home
sales in March and April, as compared to the same period in the prior year, and increased
cancellations. However, as stay-at-home orders and quarantines were lifted, we began to
see significant uptick in sales activity in the latter part of the second quarter and throughout
the third and fourth quarters. Nevertheless, there are still significant concerns of the long-
term impact of the COVID-19 pandemic on the economy in general and the housing market
specifically. For example, we are currently experiencing supply chain issues with the availability
of appliances, windows, and cost of lumber and may experience other adverse impacts on
our supply chain, including availability and cost, if the international flow of goods is not
normalized. These delays and additional costs could impact our ability to close sales at our
anticipated pace and reduce margins. Our financial performance and our future operational
results will depend on the duration and spread of the COVID-19 pandemic (including any
variant thereof) and related government restrictions, the impact of unemployment rates,
and other health and economic factors all of which are uncertain and cannot be predicted.
As we began to see increased market activity, we re-initiated much of the previously planned
capital expenditures that we had placed on hold in March based on market uncertainty.
Specifically, we restarted construction of unsold units, recommenced purchases of lots and
land and resumed development of land to reflect the market activity. The length and extent
of the impact of the COVID-19 pandemic on the economy and the homebuilding industry
is difficult to estimate as is the potential mitigating effects of economic relief efforts on
the U.S. economy, unemployment, consumer confidence, demand for our homes and the
mortgage market, including lending standards and secondary mortgage markets. However,
if there is a prolonged economic downturn and/or an extended rise in unemployment or
tempering of wage growth, we would expect to experience, among other things, increases
in the cancellation rates for homes in our backlog, and decreases in our net new sales
orders, homes delivered, revenues, and profitability. We could also be forced to reduce our
average selling prices in order to generate consumer demand or in reaction to competitive
pressures. Any of these actions could have a material adverse effect on our business, results
of operations and financial condition.
47
The homebuilding industry is cyclical. A severe downturn in the industry could
adversely affect our business, results of operations and stockholders’ equity.
The residential homebuilding industry is cyclical and is highly sensitive to changes in
general economic conditions such as levels of employment, consumer confidence and
income, availability of financing for acquisitions, construction and permanent mortgages,
interest rate levels, inflation and demand for housing. The U.S. housing market could be
negatively impacted by declining consumer confidence, restrictive mortgage standards
and large supplies of foreclosures, resales and new homes, among other factors. When
combined with a prolonged economic downturn, high unemployment levels, increases in the
rate of inflation and uncertainty in the U.S. economy, these conditions could contribute to
decreased demand for housing, declining sales prices and increasing pricing pressure. In the
event that demand for housing stalls or declines, we could experience declines in the market
value of our inventory and demand for our lots, homes and construction loans, which could
have a material adverse effect on our business, liquidity, financial condition and results of
operations.
Our operating performance is subject to risks associated with the real estate industry.
Real estate investments are subject to various risks and fluctuations and cycles in value and
demand, many of which are beyond our control. Certain events may decrease cash available
for operations, as well as the value of our real estate assets. These events include, but are
not limited to:
• adverse changes in international, national or local economic and demographic conditions;
• adverse changes in financial conditions of buyers and sellers of properties, particularly
residential homes and land suitable for development of residential homes;
• competition from other real estate investors with significant capital, including other real
estate operating companies and developers and institutional investment funds;
• fluctuations in interest rates, which could adversely affect the ability of homebuyers to
obtain financing on favorable terms or their willingness to obtain financing at all;
• unanticipated increases in expenses, including, without limitation, insurance costs,
development costs, real estate assessments and other taxes and costs of compliance with
laws, regulations and governmental policies; and
• changes in enforcement of laws, regulations and governmental policies, including,
without limitation, health, safety, environmental, zoning and tax laws.
Adverse changes in macroeconomic conditions in and around the markets we operate
in, and where prospective purchasers of our homes live, could reduce the demand and
adversely affect our business, results of operations, and financial condition.
Adverse changes in economic conditions in markets where we conduct our operations
and where prospective purchasers of our homes live have had and may in the future have
a negative impact on our business. Adverse changes in employment and median income
levels, job growth, consumer confidence, interest rates, perceptions regarding the strength
of the housing market, and population growth, or an oversupply of homes for sale may
reduce demand or depress prices for our homes and cause home buyers to cancel their
agreements to purchase our homes. This, in turn, could adversely affect our results of
operations and financial condition. In addition, periods of economic slowdown or recession,
rising interest rates or declining demand for real estate, or the public perception that any
of these events may occur, could result in a general decline in the purchase of homes or an
increased incidence of home order cancellations. If we cannot successfully implement our
business strategy, our business, liquidity, financial condition and results of operations will be
adversely affected.
Our business and financial results could be adversely affected by significant inflation
or deflation.
Inflation can adversely affect our homebuilding operations by increasing costs of land,
financing, materials, labor and construction. While we attempt to pass on cost increases
to homebuyers through increased prices, in a weak housing market, we may not be able
to offset cost increases with higher selling prices. In addition, significant inflation is often
accompanied by higher interest rates, which have a negative impact on housing demand.
In a highly inflationary environment, depending on industry and other economic conditions,
we may be precluded from raising home prices enough to keep up with the rate of inflation,
which could reduce our profit margins. Moreover, with inflation, the costs of capital increase
and the purchasing power of our cash resources could decline. Current or future efforts by
the government to stimulate the economy may increase the risk of significant inflation and
its adverse impact on our business or financial results.
Alternatively, a significant period of deflation could cause a decrease in overall spending
and borrowing levels. This could lead to a deterioration in economic conditions, including an
increase in the rate of unemployment. Deflation could also cause the value of our inventory
to decline or reduce the value of existing homes below the related mortgage loan balance,
which could potentially increase the supply of existing homes and have a negative impact
on our results of operations.
We are dependent on the continued availability and satisfactory performance of
subcontractors which, if unavailable, could have a material adverse effect on our
business.
We conduct our land development and homebuilding operations primarily as a general
contractor. Virtually all land development and construction work is performed by unaffiliated
third-party subcontractors. As a consequence, the timing and quality of the development
of our land and the construction of our homes depends on the availability and skill of our
subcontractors. There may not be sufficient availability of and satisfactory performance by
these unaffiliated third-party subcontractors in the markets in which we operate. If there
are inadequate subcontractor resources, our ability to meet customer demands, both timing
and quality, could be adversely affected which could have a material adverse effect on our
reputation, our future growth and our profitability.
48
Labor and raw material shortages and price fluctuations could delay or increase
the cost of land development and home construction, which could materially and
adversely affect our business.
The residential construction industry experiences labor and raw material shortages from
time to time, including shortages in qualified tradespeople and supplies such as insulation,
drywall, cement, steel and lumber. These labor and raw material shortages can be more
severe during periods of strong demand for housing or during periods when a region in which
we operate experiences a natural disaster that has a significant impact on existing residential
and commercial structures. When new home demand increases significantly, such as we
have seen since the second half of 2020, increased demand for the raw materials, products
and appliances for new homes can contribute to extended lead times, supply shortages
and price increases. For example, we have recently and may continue to experience price
increases, shortages and significant extensions to our lead time for the delivery of materials
such as lumber, appliances and windows. This has and may continue to result in longer
construction periods, delays in home closings and margin compression if we are unable to
increase our sales prices accordingly.
The cost of labor and raw materials may also be adversely affected during periods of shortage
or high inflation. Shortages and price increases could cause delays in, and increase our
costs of, land development and home construction, which we may not be able to recover
by raising home prices due to market demand and because the price for each home is
typically set prior to its delivery pursuant to the agreement of sale with the homebuyer.
In addition, the federal government has, at various times during 2019 and 2020, imposed
tariffs on a variety of imports from foreign countries and may impose additional tariffs in the
future. Significant tariffs or other restrictions are placed on raw materials that we use in our
homebuilding operation, such as lumber or steel, could cause the cost of home construction
to increase which we may not be able to recover by raising home prices or which could
slow our absorption due to being constrained by market demand. As a result, shortages
or increased costs of labor and raw materials could have a material adverse effect on our
business, prospects, financial condition and results of operations.
Failure to recruit, retain and develop highly skilled, competent employees may have a
material adverse effect on our business and results of operations.
Key employees, including management team members at both the corporate and homebuilder
subsidiary levels, are fundamental to our ability to obtain, generate and manage opportunities.
If any of the management team members were to cease employment with us, our results
of operations could suffer. Our ability to retain our management team or to attract suitable
replacements should any members of its management team leave is dependent on the
competitive nature of the employment market. The loss of services from key management
team members or a limitation in their availability could materially and adversely impact our
business, liquidity, financial condition and results of operations. Further, such a loss could
be negatively perceived in the capital markets. In addition, we do not maintain key person
insurance in respect of any member of our named executive officers.
In addition, key employees working in the land development, homebuilding and construction
industries are highly sought after. Experienced employees in the homebuilding, land
acquisition and construction industries are fundamental to our ability to generate, obtain
and manage opportunities. In particular, local knowledge and relationships are critical to our
ability to source attractive land acquisition opportunities. Failure to attract and retain such
personnel or to ensure that their experience and knowledge is not lost when they leave the
business through retirement, redundancy or otherwise may adversely affect the standards
of our service and may have an adverse impact on our business, financial conditions and
results of operations.
Our long-term success depends on our ability to acquire undeveloped land, partially
finished developed lots and finished lots suitable for residential homebuilding at
reasonable prices, in accordance with our land investment criteria.
The homebuilding industry is highly competitive for suitable land and the risk inherent in
purchasing and developing land is directly impacted by changes in consumer demand for
housing. The availability of finished and partially finished developed lots and undeveloped
land for purchase that meet our investment criteria depends on a number of factors
outside our control, including land availability, competition with other homebuilders and
land buyers, inflation in land prices, zoning, allowable housing density, the ability to obtain
building permits and other regulatory requirements. Should suitable land or lots become
more difficult to locate or obtain, the number of lots we may be able to develop and sell
could decrease, the number of homes we may be able to build and sell could be reduced
and the cost of land could increase, perhaps substantially, which could adversely impact our
results of operations.
As competition for suitable land increases, the cost of acquiring both finished and
undeveloped lots and the cost of developing owned land could rise and the availability of
suitable land at acceptable prices may decline, which could adversely impact our financial
results. The availability of suitable land assets could also affect the success of our land
acquisition strategy, which may impact our ability to increase the number of active selling
communities, to grow our revenues and margins and to achieve or maintain profitability.
If we are unable to develop communities successfully or within expected timeframes,
our results of operations could be adversely affected.
Before a community generates any revenue, time and material expenditures are required to
acquire and prepare land, entitle and finish lots, obtain development approvals, pay taxes
and construct significant portions of project infrastructure, amenities, model homes and
sales facilities. It can take several years from the time that we acquire control of a property
to the time that we make our first home sale on the site. Delays in the development of
communities expose us to the risk of changes in market conditions for homes.
49
An integral component of our growth strategy is the use of controlled builders, joint
ventures, partnerships and other strategic investments, and these counterparties’
interests may not be wholly aligned with ours or those of our investors.
Our controlled builders and the third parties with whom we enter into partnerships,
joint ventures or other strategic investments are separate and distinct entities from us.
Consequently, these counterparties may have different economic, financial and industry
positions from us which could influence their business decisions, including but not limited to
strategic decision-making which they believe to be in their best interests but which may not
be aligned with those of our shareholders. While we exercise different levels of control over
the entities in which we invest or co-invest, our rights may be limited contractually or by
statute and we may not be able to ensure that their decisions are in alignment with those of
our investors. Disputes between us and these third parties could result in legal proceedings
that would increase our expenses and prevent our officers and/or directors from focusing
their time and effort on our business. If our counterparties take actions that are not in our
best interests it could have a material adverse effect on our business and our profitability.
If we are required to either repurchase or sell a substantial portion of the equity
interest in our controlled homebuilding subsidiaries, our capital resources and liquidity
could be adversely affected.
The operating agreements governing our partially owned controlled builders contain buy-
sell provisions that may be triggered in certain circumstances. In the event that a buy-sell
event occurs, our builder will have the right to initiate a buy-sell process, which may happen
at an inconvenient time for us. In the event the buy-sell provisions are exercised at a time
when we lack sufficient capital to purchase the remaining equity interest, we may elect to
sell our equity interest in the entity. If we are forced to sell our equity interest, we will no
longer benefit from the future operations of the applicable entity. If a buy-sell provision is
exercised and we elect to purchase the interest in an entity that we do not already own,
we may be obligated to expend significant capital in order to complete such acquisition,
which may result in our being unable to pursue other investments or opportunities. If either
of these events occurs, our revenue and net income could decline or we may not have
sufficient capital necessary to implement our growth strategy.
A decline in our ability to develop and market our communities successfully and to generate
positive cash flow from these operations in a timely manner could have a material adverse
effect on our business and results of operations and on our ability to service our debt and
to meet our working capital requirements.
Real estate investments are relatively illiquid. As a result, our ability to promptly sell one
or more properties in response to changing economic, financial and investment conditions
may be limited and we may be forced to hold non-income producing assets for an extended
period of time. We cannot predict whether we will be able to sell any property for the price
or on the terms that we set or whether any price or other terms offered by a prospective
purchaser would be acceptable to us. We also cannot predict the length of time needed to
find a willing purchaser and to close the sale of a property.
We depend on the success of our partially owned controlled builders.
We participate in the homebuilding business, in part, through non-wholly owned subsidiaries,
which we refer to as our “controlled builders.” We are able to exercise control over the
operations of each controlled builder. We have entered into arrangements with these
controlled builders in order to take advantage of their local knowledge and relationships,
acquire attractive land positions and brand images, manage our risk profile and leverage
our capital base. Even though the co-investors in our controlled builders are subject to
certain non-competition provisions, the viability of our participation in the homebuilding
business depends on our ability to maintain good relationships with our controlled builders.
Our controlled builders are focused on maximizing the value of their operations and working
with a partner that can help them be successful. The effectiveness of our management,
the value of our expertise and the rapport we maintain with our controlled builders are
important factors for new builders considering doing business with us and may affect our
ability to attract homebuyers, subcontractors, employees or others upon whom our business,
financial condition and results of operations ultimately depend. Further, our relationships
with our controlled builders generate additional business opportunities that support our
growth. If we are unable to maintain good relationships with our controlled builders, we
may be unable to fully take advantage of existing agreements or expand our relationships
with these controlled builders. Additionally, our opportunities for pursuing acquisitions of
additional builders may be adversely impacted.
In Atlanta, we sell lots to our controlled builder for its homebuilding operations and provide
it loans to finance home construction. If our controlled builder fails to successfully execute
its business strategies for any reason, it may be unable to purchase lots from us, repay
outstanding construction finance loans made by us or borrow from us in the future, any of
which could negatively impact our business, financial condition and results of operations.
50
Our geographic concentration could materially and adversely affect us if the
homebuilding industry in our current markets should decline.
In the Dallas–Fort Worth metropolitan area, we principally operate in the counties of Dallas,
Collin, Denton, Ellis, Rockwall and Tarrant . In Atlanta, we principally operate in the counties
of Fulton, Gwinnett, Cobb, Forsyth, Cherokee and Dekalb. In Florida, we principally operate
in the counties of Indian River and St. Lucie. To the extent housing demand and population
growth slow in our core markets, our favorable growth outlook may not be realized.
Furthermore, we may be unable to compete effectively with the resale home market in
our core markets. Because our operations are concentrated in these areas, a prolonged
economic downturn in one or more of these areas could have a material adverse effect on
our business, liquidity, financial condition and results of operations, and a disproportionately
greater impact on us than other homebuilders with more diversified operations. Further,
slower rates of population growth or population declines in the DFW, Atlanta or Treasure
Coast markets, especially as compared to the high population growth rates in prior years,
could affect the demand for housing, causing home prices in these markets to decline and
adversely affect our business, financial condition and results of operations.
Our developments are subject to government regulation, which could cause us to
incur significant liabilities or restrict our business activities.
Our developments are subject to numerous local, state, federal and other statutes, ordinances,
rules and regulations concerning zoning, development, building design, construction and
similar matters that impose restrictive zoning and density requirements, the result of
which is to limit the number and type of homes that can be built within the boundaries
of a particular area. Projects that are not yet entitled may be subjected to periodic delays,
changes in use, less intensive development or elimination of development in certain specific
areas due to government regulations. We may also be subject to periodic delays or may be
precluded entirely from developing in certain communities due to building moratoriums
or “slow-growth” or “no-growth” initiatives that could be implemented in the future. Local
governments also have broad discretion regarding the imposition of development and
service fees for projects in their jurisdiction. Projects for which we have received land use
and development entitlements or approvals may still require a variety of other governmental
approvals and permits during the development process and can also be impacted adversely
by unforeseen health, safety and welfare issues, which can further delay these projects or
prevent their development. As a result, lot and home sales could decline and costs could
increase, which could have a material adverse effect on our current results of operations and
our long-term growth prospects.
Changes in global or regional environmental conditions and governmental actions
in response to such changes may adversely affect us by increasing the costs of or
restricting our planned or future growth activities.
There is growing concern from many members of the scientific community and the general
public that an increase in global average temperatures due to emissions of greenhouse
gases and other human activities have caused, or will cause, significant changes in weather
patterns and increase the frequency and severity of natural disasters. Government mandates,
standards or regulations intended to reduce greenhouse gas emissions or projected climate
change impacts have resulted, and are likely to continue to result, in restrictions on land
development in certain areas and increased energy, transportation and raw material costs.
Governmental requirements directed at reducing effects on climate could cause us to incur
expenses that we cannot recover or that will require us to increase the price of homes we
sell to the point that it affects demand for those homes.
Our financial condition and results of operations may be adversely affected by and
decrease in the value of our land or homes declines as well as the associated carrying
costs.
We continuously acquire land for replacement of land inventory and expansion within our
current markets, and may in the future acquire land for expansion into new markets. However,
the market value of land, building lots and housing inventories can fluctuate significantly as
a result of changing market conditions, and the measures we employ to manage inventory
risk may not be adequate to insulate our operations from a severe drop in inventory values.
If housing demand decreases below what we anticipated when we acquired our inventory,
we may not be able to generate profits consistent with those we have generated in the past
and we may not be able to recover our costs when we sell lots and homes. When market
conditions are such that land values are not appreciating, option arrangements previously
entered into may become less desirable, at which time we may elect to forgo deposits
and pre-acquisition costs and terminate such arrangements. In the face of adverse market
conditions, we may have substantially higher inventory carrying costs, may have to write
down our inventory as a result of impairment and/or may have to sell land or homes at a loss.
Any material write-downs of assets, or sales at a loss, could have a material adverse effect
on our financial condition and results of operations.
Demand for our homes and lots is dependent on the cost and availability of mortgage
financing.
Our business depends on the ability of our homebuyers, as well as the ability of those who buy
homes from the third-party homebuilding entities to which we sell lots (our “homebuilding
customers”), to obtain financing for the purchase of their homes. Many of these homebuyers
must sell their existing homes in order to buy a home from us or our homebuilding customers.
Rising interest rates, decreased availability of mortgage financing or of certain mortgage
programs, higher down payment requirements or increased monthly mortgage costs may
lead to reduced demand for our homes and lots. Increased interest rates can also hinder
our ability to realize our backlog because certain of our home purchase contracts provide
homebuyers with a financing contingency. Financing contingencies allow homebuyers to
cancel their home purchase contracts in the event that they cannot arrange for adequate
financing within a certain time period after the execution of the home purchase contracts.
As a result, rising interest rates can decrease our home sales and mortgage originations.
Any of these factors could have a material adverse effect on our business, liquidity, financial
condition and results of operations.
51
The loss or reduction of these homeowner tax deductions that have historically been
available has and could further reduce the perceived affordability of homeownership, and
therefore the demand for and sales price of new homes, including ours. In addition, increases
in property tax rates or fees on developers by local governmental authorities, as experienced
in response to reduced federal and state funding or to fund local initiatives, such as funding
schools or road improvements, or increases in insurance premiums can adversely affect the
ability of potential customers to obtain financing or their desire to purchase new homes, and
can have an adverse impact on our business and financial results.
The occurrence of severe weather, natural disasters, acts of war or terrorism could
increase our operating expenses and reduce our revenues and cash flows.
The climates and geology of the states in which we operate present increased risks of severe
weather and natural disasters. The occurrence of severe weather conditions or natural
disasters can delay new home deliveries and lot development, reduce the availability of
materials and/or negatively impact the demand for new homes in affected areas.
Additionally, to the extent that hurricanes, severe storms, earthquakes, tornadoes, droughts,
floods, wildfires or other natural disasters or similar events occur, our homes under
construction or our lots under development could be damaged or destroyed, which may
result in losses exceeding our insurance coverage. Any of these events could increase our
operating expenses, impair our cash flows and reduce our revenues. To the extent that
climate change increases the frequency and severity of weather related disasters, we may
experience increasing negative weather related impacts to our operations in the future.
Further, acts of war, any outbreak or escalation of hostilities between the United States and
any foreign power or acts of terrorism may cause disruption to the U.S. economy, or the
local economies of the markets in which we operate, cause shortages of building materials,
increase costs associated with obtaining building materials, result in building code changes
that could increase costs of construction, affect job growth and consumer confidence or
cause economic changes that we cannot anticipate, all of which could reduce demand for
our lots, homes and construction loans and adversely impact our business and results of
operations.
In addition, the federal government has a significant role in supporting mortgage lending
through its conservatorship of Federal National Mortgage Association (“Fannie Mae”) and
Federal Home Loan Mortgage Corporation (“Freddie Mac”), both of which purchase home
mortgages and mortgage-backed securities originated by mortgage lenders, and its insurance
of mortgages originated by lenders through the Federal Housing Administration (the “FHA”)
and the Veterans Administration (“VA”). The availability and affordability of mortgage loans,
including consumer interest rates for such loans, could be adversely affected by a curtailment
or cessation of the federal government’s mortgage-related programs or policies. The FHA
may continue to impose stricter loan qualification standards, raise minimum down payment
requirements, impose higher mortgage insurance premiums and other costs and/or limit the
number of mortgages it insures. Due to growing federal budget deficits, the U.S. Treasury
may not be able to continue supporting the mortgage-related activities of Fannie Mae,
Freddie Mac, the FHA and the VA at present levels, or it may revise significantly the federal
government’s participation in and support of the residential mortgage market. Because
the availability of Fannie Mae, Freddie Mac, FHA- and VA-backed mortgage financing is an
important factor in marketing and selling many of our homes, any limitations, restrictions
or changes in the availability of such government-backed financing could reduce our home
sales, which could have a material adverse effect on our business, liquidity, financial condition
and results of operations.
Any increase in unemployment or underemployment may lead to an increase in the
number of loan delinquencies and property repossessions, which would have an
adverse impact on our business.
People who are not employed, are underemployed, who have left the labor force or are
concerned about the loss of their jobs are less likely to purchase new homes, may be forced
to try to sell the homes they own and may face difficulties in making required mortgage
payments. Therefore, any increase in unemployment or underemployment may lead to an
increase in the number of loan delinquencies and property repossessions and have an adverse
impact on our business both by reducing demand for our homes, lots and construction loans
and by increasing the supply of homes for sale.
Increases in the after-tax costs of owning a home could prevent reduce demand for
our homes and lots.
On December 22, 2017, the U.S. government enacted comprehensive tax legislation
commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act made major
changes to the Internal Revenue Code that, in part, affect the after-tax cost of owning
a home. Specifically, the Tax Act limited the ability of homebuyers to deduct (i) property
taxes, (ii) mortgage interest, and (iii) state and local income taxes. Due to such changes, the
after-tax cost of owning a new home has increased for many of our potential homebuyers
and the potential homebuyers of our homebuilding customers. In addition, if the federal
government or a state government further changes its income tax laws to further eliminate
or substantially limit these income tax deductions, the after-tax cost of owning a new home
would further increase for many of our potential customers.
52
High cancellation rates may negatively impact our business.
Our backlog reflects the number and value of homes for which we have entered into non-
contingent sales contracts with homebuyers but not yet delivered. Although these sales
contracts require a cash deposit, a homebuyer may in certain circumstances cancel the
contract and receive a complete or partial refund of the deposit as a result of contract
provisions. If home prices decline, the national or local homebuilding environment or general
economy weakens, our neighboring competitors reduce their sales prices (or increase their
sales incentives), interest rates increase or the availability of mortgage financing tightens,
homebuyers may have an incentive to cancel their contracts with us, even where they might
be entitled to no refund or only a partial refund. Significant cancellations could have a
material adverse effect on our business as a result of lost sales revenue and the accumulation
of unsold housing inventory.
We may not be able to compete effectively against competitors in the homebuilding,
land development and financial services industries.
Competition in the land development and homebuilding industries is intense, and there
are relatively low barriers to entry. Land developers and homebuilders compete for, among
other things, homebuyers, desirable land parcels, financing, raw materials and skilled labor.
Increased competition could hurt our business, as it could prevent us from acquiring attractive
land parcels for development and resale or homebuilding (or make such acquisitions more
expensive), hinder our market share expansion and lead to pricing pressures that adversely
impact our margins and revenues. If we are unable to compete successfully, our business,
liquidity, financial condition and results of operations could be materially and adversely
affected. Our competitors may independently develop land and construct housing units
that are superior or substantially similar to our products. Furthermore, a number of our
primary competitors are significantly larger, have a longer operating history and may have
greater resources or lower cost of capital than us. Accordingly, competitors may be able
to compete more effectively in one or more of the markets in which we operate. Many of
these competitors also have longstanding relationships with subcontractors and suppliers in
the markets in which we operate. Our homebuilding business also competes for sales with
individual resales of existing homes and with available rental housing.
Our construction financing business competes with other lenders, including national,
regional and local banks and other financial institutions, some of which have greater access
to capital or different lending criteria and may be able to offer more attractive financing to
potential homebuyers.
Our future growth may include additional strategic investments, joint ventures,
partnerships and/or acquisitions of companies that may not be as successful as
we anticipate and could disrupt our ongoing businesses and adversely affect our
operations.
Our investments in our homebuilding subsidiaries have contributed to our historical growth
and similar investments may be a component of our growth strategy in the future.
We may make additional strategic investments, enter into new joint venture or partnership
arrangements or acquire businesses, some of which may be significant. These endeavors may
involve significant risks and uncertainties, including distraction of management from current
operations, significant start-up costs, insufficient revenues to offset expenses associated
with these new investments and inadequate return of capital on these investments, any
of which may adversely affect our financial condition and results of operations. Our failure
to successfully identify and manage future investments, joint ventures, partnerships or
acquisitions could harm our results of operations.
We are subject to environmental laws and regulations, which may increase our costs,
limit the areas in which we can build homes and develop land and delay completion
of our projects.
We are subject to a variety of local, state, federal and other statutes, ordinances, rules and
regulations concerning the environment. The particular environmental laws that apply to
any given homebuilding or development site vary according to multiple factors, including
the site’s location, its environmental conditions and the present and former uses of the site,
as well as adjoining properties. Environmental laws and conditions may result in delays, may
cause us to incur substantial compliance and other costs and can prohibit or severely restrict
homebuilding and land development activity in environmentally sensitive regions or areas. In
addition, in those cases where an endangered or threatened species is involved, environmental
rules and regulations can result in the restriction or elimination of development in identified
environmentally sensitive areas. From time to time, the United States Environmental
Protection Agency and similar federal or state agencies review homebuilders’ compliance
with environmental laws and may levy fines and penalties for failure to comply strictly with
applicable environmental laws or impose additional requirements for future compliance as
a result of past failures. Any such actions taken with respect to our business may increase
our costs. Environmental regulations can also have an adverse impact on the availability and
price of certain raw materials such as lumber. Further, we expect that increasingly stringent
requirements will be imposed on homebuilders and land developers in the future.
Under various environmental laws, current or former owners of real estate may be required
to investigate and clean up hazardous or toxic substances, and may be held liable to a
governmental entity or to third parties for related damages, including for bodily injury,
and for investigation and clean-up costs incurred by such parties in connection with the
contamination.
A major health and safety incident relating to our business could be costly in terms of
potential liabilities and reputational damage.
Building sites are inherently dangerous, and operating in the land development and
homebuilding industries poses certain inherent health and safety risks. Due to health and
safety regulatory requirements, health and safety performance is critical to the success of
our business. Any failure in health and safety performance may result in penalties for non-
compliance with relevant regulatory requirements, and a failure that results in a major or
53
significant health and safety incident is likely to be costly in terms of potential liabilities
incurred as a result. Such a failure could generate significant negative publicity and have a
corresponding impact on our reputation, our relationships with relevant regulatory agencies
or governmental authorities and our ability to attract employees, subcontractors and
homebuyers, which in turn could have a material adverse effect on our business, financial
condition and results of operations.
Poor relations with the residents of our communities, or with local real estate agents,
could negatively impact our home sales, which could cause our revenues or results of
operations to decline.
Residents of communities we develop rely on us to resolve issues or disputes that may arise
in connection with the operation or development of their communities. Efforts made by us
to resolve these issues or disputes could be deemed unsatisfactory by the affected residents
and subsequent actions by these residents could adversely affect sales or our reputation. In
addition, we could be required to make material expenditures related to the settlement of
such issues or disputes or to modify community development plans, which could adversely
affect our results of operations. Most of our potential homebuyers engage local real estate
agents who are unaffiliated with us in connection with their search for a new home. If we
do not maintain good relations with, and a good reputation among, these real estate agents,
the agents may not encourage potential homebuyers to consider, or may actively discourage
homebuyers from considering, our communities, which could adversely affect our results of
operations.
Information technology failures and data security breaches could harm our business.
We use information technology and other computer resources to carry out operational
We use information technology and other computer resources to carry out operational
and marketing activities, as well as to maintain our business records. As part of our normal
business activities, we may collect and store certain confidential information, including
information about employees, homebuyers, customers, vendors and suppliers and may
share information with vendors who assist us with certain aspects of our business. Many of
these resources are provided to us and/or maintained on our behalf by third-party service
providers pursuant to agreements that specify certain security and service level standards.
Our ability to conduct our business may be impaired if these resources are compromised,
degraded, damaged or fail, whether due to a virus or other harmful circumstance, intentional
penetration or disruption of our information technology resources by a third-party, natural
disaster, hardware or software corruption or failure or error (including a failure of security
controls incorporated into or applied to such hardware or software), telecommunications
system failure, service provider error or failure, intentional or unintentional personnel
actions (including the failure to follow our security protocols) or lost connectivity to
networked resources. There has been an increase in cyber-attacks during the COVID-19
pandemic. Breaches of our data security systems, including by cyber-attacks, could result in
the unintended public disclosure or the misappropriation of our proprietary information or
personal and confidential information, about our employees, consumers who view our homes,
homebuyers or business partners, requiring us to incur significant expense to address and
resolve such issues. The release of confidential information may also lead to identity theft
and related fraud, litigation or other proceedings against us by affected individuals and/or
business partners and/or regulators, and the outcome of such proceedings, which could
include penalties or fines, and any significant disruption of our business could have a material
and adverse effect on our reputation and cause us to lose homebuyers, customers, sales and
revenue. We maintain insurance coverage for potential breaches but the costs to remedy a
breach may not be fully covered by our insurance. We provide employee awareness training
of cybersecurity threats and utilize information technology security experts to assist us in
our evaluations of the effectiveness of the security of our information technology systems,
and we regularly enhance our security measures to protect our systems and data. We use
various encryption, tokenization and authentication technologies to mitigate cybersecurity
risks and have increased our monitoring capabilities to enhance early detection and rapid
response to potential cyber threats.
Product liability claims and litigation and warranty claims that arise in the ordinary
course of business may be costly, which could adversely affect our business.
As a homebuilder, we are subject to construction defect and home warranty claims arising
in the ordinary course of business. These claims are common in the homebuilding industry
and can be costly. In addition, the costs of insuring against construction defect and product
liability claims are high. This coverage may be restricted and become more costly in the
future. If the limits or coverages of our current and former insurance programs prove
inadequate, or we are not able to obtain adequate, or reasonably priced, insurance against
these types of claims in the future, or the amounts currently provided for future warranty
or insurance claims are inadequate, we may experience losses that could negatively impact
our financial results.
Our business is seasonal in nature, so our quarterly results of operations may fluctuate.
The homebuilding industry experiences seasonal fluctuations in quarterly results of
operations and capital requirements. We typically experience the highest new home order
activity in spring and summer, although this activity is also highly dependent on the number
of active selling communities, timing of new community openings and other market factors.
Since it typically takes five to nine months to construct a new home, we deliver more homes
in the second half of the year as spring and summer home orders convert to home deliveries.
Because of this seasonality, home starts, construction costs and related cash outflows have
historically been highest in the second and third quarters, and the majority of cash receipts
from home deliveries occurs during the second half of the year. We expect this seasonal
pattern to continue over the long-term, although we may also be affected by volatility in the
homebuilding industry. Additionally, weather-related problems may occur, delaying starts
or closings or increasing costs and reducing profitability. In addition, delays in opening new
communities or new sections of existing communities could have an adverse impact on
home sales and revenues. Expenses are not incurred and recognized evenly throughout the
year. Because of these factors, our quarterly results of operations may be uneven and may
be marked by lower revenues and earnings in some quarters compared with others.
54
Shortages or extreme fluctuation in availability of natural resources and utilities
could have an adverse effect on our operations.
The markets in which we operate may in the future be subject to utility or other resource
shortages, including significant changes to the availability of electricity and water. Shortages
of natural resources in our markets, particularly of water, may make it more difficult for us to
obtain regulatory approval of new developments. We may experience material fluctuations in
utility and resource costs across our markets, and we may incur additional costs and may not
be able to complete construction on a timely basis if such fluctuations arise. Furthermore,
these shortages and interest rate fluctuations may adversely affect the regional economies
in which we operate, which may reduce demand for our homes, lots and construction loans
and negatively affect our business and results of operations.
Our business and financial results could be adversely affected by the failure of persons
who act on our behalf to comply with applicable regulations and guidelines.
Although we expect all of our employees, officers and directors to comply at all times with
all applicable laws, rules and regulations, there may be instances in which subcontractors or
others through whom we do business engage in practices that do not comply with applicable
regulations or guidelines. Should we learn of practices relating to homes we build, lots we
develop or financing we provide that do not comply with applicable regulations or guidelines,
we would move actively to stop the non-complying practices as soon as possible and would
take disciplinary action with regard to employees who were aware of the practices and did
not take steps to address them, including in some instances terminating their employment.
However, regardless of the steps we take after we learn of practices that do not comply with
applicable regulations or guidelines, we can in some instances be subject to fines or other
governmental penalties, and our reputation can be injured, due to the practices having taken
place.
We may suffer uninsured losses or suffer material losses in excess of insurance limits.
We could suffer physical damage to property or incur liabilities resulting in losses that may
not be fully recoverable by insurance. In addition, certain types of risks, such as personal
injury claims, may be, or may become in the future, either uninsurable or not economically
insurable, or may not be currently or in the future covered by our insurance policies or
otherwise be subject to significant deductibles or limits. Should an uninsured loss or a loss in
excess of insured limits occur or be subject to deductibles, we could sustain financial loss or
lose capital invested in the affected property as well as anticipated future income from that
property. In addition, we could be liable to repair damage or meet liabilities caused by risks
that are uninsured or subject to deductibles. We may be liable for any debt or other financial
obligations related to affected property. Material losses or liabilities in excess of insurance
proceeds may occur in the future.
Products supplied to us and work done by subcontractors can expose us to risks that
could adversely affect our business.
We rely on subcontractors to perform the actual construction of our homes, and, in some
cases, to select and obtain building materials. Despite our detailed specifications and quality
control procedures, in some cases, subcontractors may use improper construction processes
or defective materials. Defective products widely used by the homebuilding industry can
result in the need to perform extensive repairs to large numbers of homes. The cost of
complying with our warranty obligations may be significant if we are unable to recover the
cost of repairs from subcontractors, materials suppliers and insurers.
Laws and regulations governing the residential mortgage industry could have an
adverse effect on our business and financial results.
In 2018 and 2020, we established joint ventures, Green Brick Mortgage and BHome
Mortgage, respectively, to provide mortgage related services to homebuyers. The residential
mortgage lending industry remains under intense scrutiny and is heavily regulated at the
federal, state and local levels. Although we do not originate mortgages, we are directly or
indirectly subject to certain of these regulations. Changes to existing laws or regulations
or adoption of new laws or regulations could require our joint venture to incur significant
compliance costs. A material failure to comply with any of these laws or regulations could
result in the loss or suspension of required licenses or other approvals, the imposition of
monetary penalties, and restitution awards or other relief. Any of these outcomes could
have an adverse effect on our results of operations.
GHO HOMES - ARABELLA RESERVE, VERO BEACH, FL
55
Risks Related to Our Financing and Capital Structure
Changes in the method pursuant to which LIBOR rates are determined and potential
phasing out of LIBOR after 2021 may affect our financial results.
The United Kingdom Financial Conduct Authority (the “FCA”), which regulates the London
Interbank Offered Rate (“LIBOR”) has announced that the FCA intends to stop compelling
banks to submit rates for the calculation of LIBOR after 2021 (the “FCA Announcement”).
The FCA Announcement indicates that the continuation of LIBOR on the current basis
cannot and will not be guaranteed after 2021. Following the implementation of any
reforms to LIBOR or the methods pursuant to which LIBOR rates are determined, or other
benchmark rates that may be enacted in the United Kingdom or elsewhere, the manner
of administration of such benchmarks may change, with the result that such benchmarks
may perform differently than in the past, such benchmarks could be eliminated entirely,
or there could be other consequences which cannot be predicted. Under our Unsecured
Revolving Credit Facility, LIBOR may be used to set the fluctuating interest rate (the “Base
Rate”) and the interest rate for any Eurodollar Rate Advance. If LIBOR is phased out, we
may be required to renegotiate with our lender to establish a new interest rate (the “LIBOR
Successor Rate”). We can give no assurance that we and our lender will be able to agree on
a LIBOR Successor Rate. If we and our lender cannot agree on a LIBOR Successor Rate, our
ability to draw upon the Unsecured Revolving Credit Facility may be materially impacted.
We may be unable to obtain suitable bonding for the development of our housing
projects.
We are periodically required to provide bonds to governmental authorities and others to
ensure the completion of our projects. Depending on market conditions, surety providers
may be reluctant to issue new bonds and may request credit enhancements (such as cash
deposits or letters of credit) in order to maintain existing bonds or to issue new bonds. If we
are unable to obtain required bonds for our future projects, or if we are required to provide
credit enhancements with respect to our current or future bonds, our business, liquidity,
financial condition and results of operations could be materially and adversely affected.
Difficulty in obtaining sufficient capital could result in an inability to acquire land
for our developments or increased costs and delays in the completion of development
projects.
The homebuilding industry is capital-intensive and requires significant up-front expenditures
to acquire land parcels and begin development. Land acquisition, development and
construction activities may be adversely affected by any shortage or increased cost of
financing or the unwillingness of third parties to engage in partnerships, joint ventures or
other alternative arrangements.
In addition to the financing provided by the senior unsecured notes, we currently have
access to a senior secured revolving credit facility and a senior unsecured revolving credit
facility. We cannot ensure that we will be able to extend the maturity of these credit facilities
or arrange another facility on acceptable terms or at all.
Furthermore, in the future, we may seek additional capital in the form of equity or debt
financing from a variety of potential sources, including additional bank financings and/or
securities offerings. The availability of borrowed funds, especially for land acquisition and
construction financing, may be greatly reduced nationally, and the lending community may
require increased amounts of equity to be invested in a project by borrowers in connection
with both new loans and the extension of existing loans. The credit and capital markets are
subject to volatility. If we are required to seek additional financing to fund our operations,
volatility in these markets may restrict our flexibility to access such financing. If we are not
successful in obtaining sufficient capital to fund our planned capital and other expenditures,
we may be unable to acquire land for our housing developments and/or to develop the
housing. Any difficulty in obtaining sufficient capital for planned development expenditures
could also cause project delays and any such delay could result in cost increases. Any one or
more of the foregoing events could have a material adverse effect on our business, liquidity,
financial condition and results of operations.
Our debt instruments contain limitations and restrictions that could prevent us from
capitalizing on business opportunities and could adversely affect our growth.
Our revolving credit facilities and the terms of our senior unsecured notes impose certain
restrictions on our and certain of our subsidiaries’ operations and activities and require us to
maintain certain financial covenants. The most significant restrictions relate to debt incurrence
(including non-recourse indebtedness), creation of liens, repayment of certain indebtedness
prior to its respective stated maturity, sales of assets, cash distributions (including paying
dividends), capital stock repurchases, and investments by us and certain of our subsidiaries.
These restrictions may prevent us from capitalizing on business opportunities and could
adversely affect our growth.
The restrictions in our debt instruments could prohibit or restrict our and certain of our
subsidiaries’ activities, such as undertaking capital raising or restructuring activities or
entering into other transactions. In addition, if we fail to comply with these restrictions, an
event of default could occur and our debt under these debt instruments could become due
and payable prior to maturity. Any such event of default could lead to cross defaults under
certain of our other debt or negatively impact other covenants. In any of these situations,
we may be unable to amend the applicable instrument or obtain a waiver without significant
additional cost, or at all. Any such situation could have a material adverse effect on our
liquidity and financial condition.
56
Risks Related to Ownership of Our Common Stock
The price of our common stock may continue to be volatile.
The trading price of our common stock is highly volatile and could be subject to future
fluctuations in response to a number of factors beyond our control. In recent years the stock
market has experienced significant price and volume fluctuations. These fluctuations may
be unrelated to the operating performance of particular companies. These broad market
fluctuations may cause declines in the market price of our common stock. The price of our
common stock could fluctuate based upon factors that have little or nothing to do with our
company or its performance, and those fluctuations could materially reduce our common
stock price. If we fail to meet expectations related to future growth, profitability or other
market expectations, our stock price may decline significantly, which could have a material
adverse impact on investor confidence and our stock price.
Certain large stockholders own a significant percentage of our shares and exert
significant influence over us. Their interests may not coincide with ours and they may
make decisions with which we may disagree.
Greenlight Capital, Inc. and its affiliates (“Greenlight”) and James R. Brickman own approximately
34% and 4%, respectively, of the voting power of the Company. These large stockholders,
acting together, could determine substantially all matters requiring stockholder approval,
including the election of directors and approval of significant corporate transactions, such
as a sale or other change of control transaction. In addition, this concentration of ownership
may delay or prevent a change in control of our company and make some transactions more
difficult or impossible without the support of these stockholders. The interests of these
stockholders may not always coincide with our interests as a company or the interests of
other stockholders. Accordingly, these stockholders could cause us to enter into transactions
or agreements that you would not approve or make decisions with which you may disagree.
We do not intend to pay dividends on our common stock for the foreseeable future.
We have not paid any dividends since our inception and do not anticipate paying any cash
dividends on our common stock in the foreseeable future. Any payment of future dividends
will be at the discretion of our Board of Directors (the “Board”) and will depend upon, among
other things, our earnings, financial condition, capital requirements, levels of indebtedness,
statutory and contractual restrictions applying to the payment of dividends or contained in
our financing instruments and other considerations that the Board deems relevant. Investors
must rely on sales of their common stock after price appreciation, which may never occur, as
the only way to realize a return on their investment. Investors seeking cash dividends should
not purchase our common stock.
Certain large stockholders’ shares have been and may in the future be sold into the market,
which could cause the market price of our common stock to decrease significantly.
We believe that a significant portion of our common stock beneficially owned by Greenlight
and Mr. Brickman are “restricted securities” within the meaning of the federal securities laws.
We entered into registration rights agreements with each of these parties in 2014 which
provide these parties the right to require us to register the resale of their shares under certain
circumstances. In December 2020, 24,118,668 shares held by Greenlight were registered
for resale on Form S-3 in accordance with the registration rights agreement. Following the
recent offering, Greenlight beneficially owned 17,418,668 shares of our common stock.
After a customary lockup period expires, these shares may be sold in the market, subject to
compliance with securities laws. If these holders sell substantial amounts of these shares,
the price of our common stock could decline. In addition, the sale of these shares could
impair our ability to raise capital through the sale of additional equity securities.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
We lease our principal executive office located at 2805 Dallas Parkway, Suite 400, Plano,
Texas, 75093. Our homebuilding and title division offices are located in leased space in
the markets where we conduct business. We believe that such properties are suitable and
adequate to meet the needs of our businesses. Because of the nature of our homebuilding
operations, we and our builders hold significant amounts of property as inventory in
connection with our homebuilding business. We discuss these properties in the discussion
of our homebuilding operations in Part I, Item 1 and Part II, Item 7 of this Annual Report on
Form 10-K.
ITEM 3. LEGAL PROCEEDINGS
We are involved in various claims and litigation arising in the ordinary course of business.
We do not believe that any such claims and litigation will have a material adverse effect
upon our results of operations or financial position.
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable.
57
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our common stock trades on The Nasdaq Capital Market under the symbol “GRBK”.
Holders of Record
On February 26, 2021, there were 17 stockholders of record of our common stock. We
believe the number of beneficial owners of our common stock is substantially greater than
the number of record holders because a large portion of our outstanding common stock is
held of record in broker “street names” for the benefit of individual investors. As of February
26, 2021, there were 50,661,919 common shares outstanding.
Dividends
We have not paid any dividends since our inception and do not anticipate declaring or paying
any cash dividends on our common stock in the foreseeable future. We currently anticipate
that we will retain all of our available cash for general corporate purposes. Payment of future
dividends, if any, will be at the discretion of our Board and will depend on many factors,
including general economic and business conditions, our strategic plans, our financial results
and condition, legal requirements and other factors as our Board deems relevant.
ITEM 6. RESERVED
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains “forward-looking statements” within the
meaning of the securities laws. These forward-looking statements are subject to a number
of risks and uncertainties, many of which are beyond our control. All statements other than
statements of historical facts included or incorporated by reference in this Annual Report
on Form 10-K, including the statements regarding our strategy, future operations, financial
position, estimated revenues, projected costs, prospects, plans, and objectives, are forward-
looking statements. When used in this Annual Report, the words “will,” “believe,” “anticipate,”
“plan,” “intend,” “estimate,” “expect,” “project,” and similar expressions are intended to identify
forward-looking statements, although not all forward-looking statements contain these
identifying words. Although we believe that our plans, intentions, and expectations reflected
in or suggested by the forward-looking statements we make in this Annual Report on Form
10-K are reasonable, we cannot assure you that these plans, intentions, or expectations
will be achieved. Forward-looking statements included or incorporated by reference in this
Annual Report on Form 10-K include statements concerning (1) our balance sheet strategy
and belief that we have ample liquidity; (2) our goals and strategies and their anticipated
benefits, including expansion into new markets; (3) the effects of COVID-19 pandemic
on the homebuilding industry and our results of operations, business and liquidity; (4) our
intentions and the expected benefits and advantages of our product and land positioning
strategies; (5) our expectations regarding the timing of backlog fulfillment; (6) expectations
regarding our industry and our business in 2021 and beyond; (7) the contribution of certain
market factors to our growth; (8) our land and lot acquisition strategy; (9) the sufficiency
of our capital resources to support our business strategy and to service our debt; (10) the
impact of new accounting standards and changes in accounting estimates; (11) trends and
expectations regarding sales prices, sales orders, cancellations, construction costs, gross
margins, land costs and profitability and future home inventories; (12) our future cash needs;
(13) our strategy to utilize leverage to invest in our business; (14) seasonal factors and
the impact of seasonality in future quarters; and (15) our expectations regarding access to
additional growth capital.
These forward-looking statements reflect our current views about future events and are
subject to risks, uncertainties and assumptions. We wish to caution readers that certain
important factors may have affected and could in the future affect our actual results and
could cause actual results to differ significantly from what is anticipated by our forward-
looking statements. These risks include, but are not limited to: (1) continuing impacts
from the COVID-19 pandemic, (2) general economic conditions, seasonality, cyclicality
and competition in the homebuilding industry; (3) changes in macroeconomic conditions,
including interest rates and unemployment rates, that could adversely impact demand for
new homes or the ability of our buyers to qualify; (4) shortages, delays or increased costs of
raw materials, especially in light of COVID-19, or increases in the Company’s other operating
costs, including costs related to labor, real estate taxes and insurance, which in each case
exceed our ability to increase prices; (5) a shortage of labor, (6) an inability to acquire land
in our markets at anticipated prices or difficulty in obtaining land-use entitlements; (7) our
inability to successfully execute our strategies, including an inability to expand our Trophy
brand; (8) a failure to recruit, retain or develop highly skilled and competent employees;
(9) government regulation risks; (10) a lack of availability or volatility of mortgage financing
or a rise in interest rates; (11) severe weather events or natural disasters; (12) difficulty in
obtaining sufficient capital to fund our growth; (13) our ability to meet our debt service
obligations; (14) a decline in the value of our inventories and resulting write-downs of the
carrying value of our real estate assets; (15) changes in accounting standards that adversely
affect our reported earnings or financial condition.
Please see “Risk Factors” located in Part I, Item 1A in this Annual Report on Form 10-K for
a further discussion of these and other risks and uncertainties which could affect our future
results. We undertake no obligation to revise any forward-looking statements to reflect
events or circumstances after the date of those statements or to reflect the occurrence of
anticipated or unanticipated events, except to the extent we are legally required to disclose
certain matters in SEC filings or otherwise.
58
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
For business overview and developments during the year ended December 31, 2020, refer
to Part I, Item 1 of this Annual Report on Form 10-K.
Results of Operations
Overview and Outlook
Our key financial and operating metrics are home deliveries, home closings revenue, average
sales price of homes delivered, and net new home orders, which refers to sales contracts
executed reduced by the number of sales contracts canceled during the relevant period.
Our results for each key financial and operating metric, as compared to the year ended
December 31, 2019, are provided below:
Home deliveries
Home closings revenue
YEAR ENDED DECEMBER 31, 2020
Increased by 28.4%
Increased by 22.8%
Year Ended December 31, 2020 Compared to the Year Ended December 31, 2019
Residential Units Revenue and New Homes Delivered
The table below represents residential units revenue and new homes delivered for the years
ended December 31, 2020 and December 31, 2019 (dollars in thousands):
YEARS ENDED DECEMBER 31,
2020
2019
CHANGE
%
Home closings revenue
$923,901
$752,273 $171,628
22.8%
Average sales price of homes delivered
Decreased by 4.4%
Mechanic’s lien contracts revenue
6,275
7,557
(1,282)
(17.0)%
Net new home orders
Increased by 50.0%
The United States has been impacted by the coronavirus (“COVID-19”) pandemic. While
response to the COVID-19 outbreak continues to rapidly evolve, during March and the
second quarter of 2020 these steps included stay-at-home orders and social distancing
guidelines that have seriously disrupted activities in many other segments of the economy.
However, throughout the pandemic, we have continued to build, close and sell homes in
our markets. While uncertainty caused by COVID-19 dramatically slowed net new home
orders in late March and April 2020, during May and June 2020, our sales rebounded. Our
rate of sales accelerated in the third and fourth quarters with an increase in net sales of
88.8.% and 43.7% over the corresponding periods in the prior year, respectively. The initial
recovery and expansion of our sales activity since May is attributable to the steady growth
and strong performance of our new Trophy brand division, an increase in average selling
communities as well as the impact of macroeconomic factors such as low interest rates, an
influx of millennial first-time home buyers and demand for suburban homes from apartment
dwellers in response to COVID-19.
2020 Developments
From October 2019 to October 2020, homes in the DFW and Atlanta markets appreciated
by 6.5% and 6.8%, respectively (Source: S&P Dow Jones Indices & CoreLogic, December
2020). We believe that we operate in two of the most desirable housing markets in the
nation and that increasing demand and supply constraints in our target markets create
favorable conditions for our future growth.
Residential units revenue
$930,176
$759,830 $170,346
22.4%
New homes delivered
2,208
1,719
489
28.4%
Average sales price of homes delivered
$418.4
$437.6
$(19.2)
(4.4)%
The $170.3 million increase in residential units revenue was driven by the 28.4% increase
in the number of homes delivered, which was primarily due to an organic increase in the
number of active selling communities and an increase in our absorption rate for net new
home orders per average active selling community during the year ended December 31,
2020. The 4.4% decline in the average sales price of homes delivered for the year ended
December 31, 2020 was attributable to our growth in revenues which was substantially
from Trophy Signature Homes and CB JENI Homes—Townhome Division, that both sell
homes at average sales prices that are below the average sales price for the Company.
59
New Home Orders and Backlog
The table below represents new home orders and backlog related to our builder operations
segments, excluding mechanic’s liens contracts (dollars in thousands):
believes a cancellation rate in the range of 15% to 20% is representative of an industry
average cancellation rate. Our cancellation rate is on the lower end of the industry average,
which we believe is due to favorable market conditions through December 31, 2020.
Net new home orders
Cancellation rate
YEARS ENDED DECEMBER 31,
2020
2019
CHANGE
%
2,885
1,923
962
50.0%
13.0%
12.9%
0.1%
0.8%
Absorption rate per average active selling
community per quarter
Average active selling communities
Active selling communities at end of period
7.5
96
103
5.6
86
95
1.9
33.9%
10
8
11.6%
8.4%
Backlog
Backlog (units)
$686,861 $346,828 $340,033
98.0%
1,463
786
677
86.1%
Average sales price of backlog
$469.5
$441.3
$28.2
6.4%
Net new home orders increased by 50.0% over the prior year period. The increase reflects
the strong performance of our new Trophy brand division, an 11.6% increase in average
selling communities as well as the impact of macroeconomic factors such as low interest
rates, an influx of millennial first-time buyers and demand for suburban homes from
apartment dwellers in response to COVID-19. Our absorption rate per average active
selling community increased 33.9% year over year. While uncertainty caused by COVID-19
dramatically slowed net new home orders in late March and April 2020, during May and
June 2020, our sales rebounded. Our rate of sales accelerated in both the third and fourth
quarters with an increase in net sales of 88.8.% and 43.7% over the corresponding periods
in the prior year, respectively.
Backlog refers to homes under sales contracts that have not yet closed at the end of the
relevant period, and absorption rate refers to the rate at which net new home orders
are contracted per average active selling community during the relevant period. Upon a
cancellation, the escrow deposit may be returned to the prospective purchaser. Accordingly,
backlog may not be indicative of our future revenue.
The $340.0 million increase in value of backlog was due to the 86.1% increase in the number
of homes in backlog and the 6.4% increase in the average sales price of backlog. The 86.1%
increase in the number of homes in backlog was due to a 33.9% increase in the absorption
rate per average active selling community and a 11.6% increase in the number of average
active selling communities. The increase of the average sales price of homes in backlog was
the result of lower incentives offered and price increases.
Residential Units Gross Margin
The table below represents the components of residential units gross margin (dollars in
thousands):
YEARS ENDED DECEMBER 31,
2020
2019
Home closings revenue
$923,901
100.0% $752,273
100.0%
Cost of homebuilding units
700,771
75.8%
591,321
78.6%
Homebuilding gross margin
$223,130
24.2% $160,952
21.4%
Mechanic’s lien contracts revenue
$6,275
100.0%
$7,557
100.0%
Cost of mechanic’s lien contracts
5,095
81.2%
6,563
86.8%
Mechanic’s lien contracts gross margin
$1,180
18.8%
$994
13.2%
Residential units revenue
$930,176
100.0% $759,830
100.0%
Cost of residential units
705,866
75.9%
597,884
78.7%
Residential units gross margin
$224,310
24.1% $161,946
21.3%
Cost of residential units for the year ended December 31, 2020 increased by $108.0 million,
or 18.1%, compared to the year ended December 31, 2019, primarily due to the 28.4%
increase in the number of new homes delivered and a change in mix of homes delivered.
Our cancellation rate, which refers to sales contracts canceled divided by sales contracts
executed during the relevant period, was 13.0% for the year ended December 31, 2020,
compared to 12.9% for the year ended December 31, 2019. Sales contracts relating to
homes in backlog may be canceled by the prospective purchaser for a number of reasons,
such as the prospective purchaser’s inability to obtain suitable mortgage financing. Upon a
cancellation, the escrow deposit may be returned to the prospective purchaser. Management
Residential units gross margin for the year ended December 31, 2020 increased to 24.1%,
compared to 21.3% for the year ended December 31, 2019 primarily because of a decrease in
sales incentives offered to customers, price increases to homes sold in certain communities,
and an increase in building homes on lots developed by the Company where our lower land
cost increases our profitability.
60
Land and Lots Revenue
The table below represents lots closed and land and lots revenue (dollars in thousands):
Lots revenue
Land revenue
YEARS ENDED DECEMBER 31,
2020
2019
CHANGE
%
45,461
$31,820
$13,641
42.9%
384
10
374
3,740.0%
Land and lots revenue
$45,845
$31,830
$14,015
44.0%
Lots closed
375
211
164
77.7%
Average sales price of lots closed
$121.2
$150.8
$(29.6)
(19.6)%
The 42.9% increase in lots revenue was driven by the 77.7% increase in the number of lots
closed, partially offset by the 19.6% decrease in the average lot price. The average lot price
decreased by 19.6% due to a higher number of entry level lots sold.
Selling, General and Administrative Expenses
The table below represents the components of selling, general and administrative expense
(dollars in thousands):
YEARS ENDED
DECEMBER 31,
AS PERCENTAGE OF
SEGMENT REVENUE
2020
2019
2020
2019
Land Development
The 2.3% decrease in selling, general and administrative expense as a percentage of revenue
for land development was primarily attributable to an increase in land development segment
revenues.
Corporate, Other and Unallocated
Selling, general and administrative expense for the corporate, other and unallocated non-
operating segment for the year ended December 31, 2020 was $2.3 million, compared to
$2.4 million for the year ended December 31, 2019.
Equity in Income of Unconsolidated Entities
Equity in income of unconsolidated entities increased to $16.7 million, or 69.8%, for the
year ended December 31, 2020, compared to $9.8 million for the year ended December
31, 2019, primarily due to an increase in earnings from GB Challenger, LLC and Green Brick
Mortgage, LLC.
Other Income, Net
Other income, net, decreased to $4.1 million for the year ended December 31, 2020,
compared to $8.1 million for the year ended December 31, 2019. The decrease is primarily
due to $1.5 million of allowances for option deposits and pre-acquisition costs caused by
COVID-19 pandemic considerations, and the impact of customer earnest money deposit of
$5.0 million on the sale of finished lots forfeited during the year ended December 31, 2019,
which were partially offset by an increase in title closing and settlement services of $2.6
million arising from higher volume of closings during the period.
Builder operations
$108,436
$93,636
11.6%
12.3%
Land development
1,411
1,730
Corporate and other unallocated
2,287
2,409
3.3%
—%
5.6%
—%
Total selling, general and
administrative expense
$112,134
$97,775
11.5%
12.4%
Income Tax Expense
Income tax expense increased to $25.0 million for the year ended December 31, 2020 from
$20.0 million for the year ended December 31, 2019. The increase was due to a higher
taxable income substantially offset by a lower effective tax rate due to estimated savings
from federal energy efficient homes tax credits for the 2020 tax year and for amending prior
year tax returns for federal energy efficient homes tax credits.
The 0.9% decrease of total selling, general and administrative expense as a percentage of
revenue was driven by headcount reductions and higher revenues partially offset by an
increase in commission expenses.
Builder Operations
Selling, general and administrative expense as a percentage of revenue for builder operations
decreased by 0.7%. due to a higher degree of operating leverage driven by increased sales
volume. Builder operations expenditures include salary expenses, sales commissions, and
community costs such as advertising and marketing expenses, rent, professional fees, and
non-capitalized property taxes.
Year Ended December 31, 2019 Compared to the Year Ended December 31, 2018
For discussion and analysis of the Company’s results of operations for the year ended
December 31, 2019 as well as for comparison to the Company’s results of operations for
the year ended December 31, 2018, refer to Item 7 of Part II of the Company’s Annual
Report on Form 10-K for the year ended December 31, 2019.
Lots Owned and Controlled
The following table presents the lots we owned or controlled, including lot option contracts,
as of December 31, 2020 and December 31, 2019. Owned lots are those for which we hold
title, while controlled lots are lots past feasibility studies for which we do not hold title but
have the contractual right to acquire title.
DECEMBER 31, 2020
DECEMBER 31, 2019
Lots owned
Central
Southeast
Total lots owned
Lots controlled(1)
Central
Southeast
Total lots controlled
Total lots owned and controlled (1)
Percentage of lots owned
(1) Total lots excludes lots with homes under construction.
6,823
2,097
8,920
4,398
1,150
5,548
14,468
61.7%
4,223
2,196
6,419
1,410
1,147
2,557
8,976
71.5%
The following table presents additional information on the lots we controlled as of December
31, 2020 and December 31, 2019.
DECEMBER 31, 2020 DECEMBER 31, 2019
Lots under third party option contracts
Land under option for future acquisition
and development
Lots under option through unconsolidated
development joint ventures
Total lots controlled
2,970
740
1,838
5,548
1,574
431
552
2,557
The following table presents additional information on the lots we owned as of December
31, 2020 and December 31, 2019.
DECEMBER 31, 2020 DECEMBER 31, 2019
Total lots owned
Land under option for future acquisition
and development
Lots under option through unconsolidated
development joint ventures
Total lots self-developed
Self-developed lots as a percentage of total
lots owned and controlled
8,920
740
1,838
11,498
79.5%
6,419
431
552
7,402
82.5%
61
Liquidity and Capital Resources Overview
As of December 31, 2020 and December 31, 2019, we had $19.5 million and $33.3
million of unrestricted cash, respectively. Our historical cash management strategy includes
redeploying net cash from the sale of home inventory to acquire and develop land and lots
that represent opportunities to generate desired margins and using cash to make additional
investments in business acquisitions, joint ventures, or other strategic activities. In response
to the extraordinary circumstances created by the economic impacts of the COVID-19
pandemic, during the latter part of the first quarter of 2020 management took measures
to significantly curtail land and lot acquisitions. However, as we began to see increased
market activity commencing in May and accelerating into June, we re-initiated much of the
previously planned capital expenditures. Specifically, we restarted construction of unsold
units, recommenced purchases of lots and land and resumed development of land to reflect
the market activity. We have continued moderate product price increases to offset some
cost input increases like lumber and expect to maintain our industry leading high margins.
We continue to monitor our fixed costs to position us to be responsive to the changing
market conditions and have delivered this growth without returning to prior overhead levels.
Our principal uses of capital for the year ended December 31, 2020 were home construction,
land purchases, land development, operating expenses, and payment of routine liabilities.
We used funds generated by operations and available borrowings to meet our short-term
working capital requirements. We remain focused on generating positive margins in our
builder operations segments and acquiring desirable land positions in order to maintain a
strong balance sheet and remain poised for continued growth.
Cash flows for each of our communities depend on the community’s stage in the
development cycle and can differ substantially from reported earnings. Early stages of
development or expansion require significant cash outlays for land acquisitions, entitlements
and other approvals, roads, utilities, general landscaping and other amenities. These costs
are a component of our inventory and are not recognized in our statement of income until a
home closes. In the later stages of community development, cash inflows may significantly
exceed earnings reported for financial statement purposes, as the cash outflows associated
with home construction and land development previously occurred.
Our debt to total capitalization ratio, which is calculated as the sum of borrowings on lines
of credit, the senior unsecured notes and notes payable, net of debt issuance costs, divided
by the total Green Brick Partners, Inc. stockholders’ equity, was approximately 25.6% as of
December 31, 2020. In addition, as of December 31, 2020, our net debt to total capitalization
ratio, which is a non-GAAP financial measure, remained low at 23.8%. It is our intent to
prudently employ leverage to continue to invest in our land acquisition, development and
homebuilding businesses. We target a debt to total capitalization ratio of approximately 30%
to 35%, which we expect will provide us with significant additional growth capital.
62
Reconciliation of a Non-GAAP Financial Measure
In this Annual Report on Form 10-K, we utilize a financial measure of net debt to total
capitalization ratio that is a non-GAAP financial measure as defined by the Securities and
Exchange Commission. Net debt to total capitalization is calculated as the total debt less cash
and cash equivalents, divided by the sum of total Green Brick Partners, Inc. stockholders’
equity and total debt less cash and cash equivalents. We present this measure because we
believe it is useful to management and investors in evaluating the Company’s financing
structure. We also believe this measure facilitates the comparison of our financing structure
with other companies in our industry. Because this measure is not calculated in accordance
with U.S. Generally Accepted Accounting Principles (“GAAP”), it may not be comparable to
other similarly titled measures of other companies and should not be considered in isolation
or as a substitute for, or superior to, financial measures prepared in accordance with GAAP.
The closest GAAP financial measure to the net debt to total capitalization ratio is the debt
to total capitalization ratio. The following table represents a reconciliation of the net debt to
total capitalization ratio to the closest GAAP financial measure as of December 31, 2020.
GROSS
CASH AND
EQUIVALENTS
NET
Total debt, net of debt issuance costs
$219,868
$(19,479)
$200,389
Total Green Brick Partners, Inc.
stockholders’ equity
$640,242
-
$640,242
Total capitalization
$860,110
$(19,479)
$840,631
Key Sources of Liquidity
The Company’s key sources of liquidity were funds generated by operations and provided by
lines of credit and issuance of senior unsecured notes during the year ended December 31,
2020. Borrowings on lines of credit outstanding, net of debt issuance costs, as of December
31, 2020 and December 31, 2019 consisted of the following (in thousands):
DECEMBER 31, 2020 DECEMBER 31, 2019
Secured Revolving Credit Facility
Unsecured Revolving Credit Facility
Debt issuance costs, net of amortization
$7,000
101,000
(1,313)
$38,000
128,000
(1,358)
Total borrowings on lines of credit, net
$106,687
$164,642
As of December 31, 2020, we had $7.0 million outstanding under our Secured Revolving
Credit Facility, down from $38.0 million as of December 31, 2019. Borrowings under the
Secured Revolving Credit Facility have a maturity date of May 1, 2022 and bear interest at a
floating rate per annum equal to the rate announced by Bank of America, N.A. as its “Prime
Rate” less 0.25%. Notwithstanding the foregoing, the interest may not, at any time, be less
than 4% per annum or more than the lesser amount of 18% and the highest maximum
rate allowed by applicable law. As of December 31, 2020, the interest rate on outstanding
borrowings under the secured revolving credit facility was 4.00% per annum.
Debt to total capitalization ratio
25.6%
Net debt to total capitalization ratio
23.8%
As of December 31, 2020, we had $101.0 million outstanding under our Unsecured
Revolving Credit facility, down from $128 million as of December 31, 2019.
CHALLENGER HOMES - SKYLINE COLLECTION AT ENCLAVES AT MOUNTAIN VISTA, COLORADO SPRINGS, CO
Based on the unprecedented disruptions to the credit and economic markets arising from
the COVID-19 pandemic, we drew the unutilized portion of our Unsecured Revolving
Credit Facility during the three months ended March 31, 2020. However, these amounts
were repaid in June 2020 once it was apparent that our access to liquidity in the financial
markets was not compromised. Borrowings on the Unsecured Revolving Credit Facility
have a maturity date of December 14, 2021 for $11.4 million, December 14, 2022 for
$28.6 million, and December 14, 2023 for $61.0 million, respectively, and bear interest at
a floating rate equal to either (a) for base rate advances, the highest of (1) the lender’s base
rate, (2) the federal funds rate plus 0.5% and (3) the one-month LIBOR plus 1.0%, in each
case plus 1.5%; or (b) in the case of Eurodollar rate advances, the reserve adjusted LIBOR
plus 2.5%. As of December 31, 2020, the interest rates on outstanding borrowings under
the unsecured revolving credit facility ranged from 2.64% to 2.65% per annum.
During the three months ended September 30, 2020, we issued $37.5 million in senior
unsecured notes pursuant to a Note Purchase Agreement with The Prudential Insurance
Company of America and Prudential Universal Reinsurance Company. The Company received
net proceeds of $37.4 million and incurred debt issuance costs of approximately $0.1 million
that were deferred and reduced the amount of debt on our consolidated balance sheet. The
Company used the net proceeds from the issuance of the Notes to repay borrowings under
the Company’s existing revolving credit facilities and for general corporate purposes.
We had an aggregate $111.1 million and $73.4 million in senior unsecured notes as of
December 31, 2020 and December 31, 2019, respectively. Principal of $75.0 million of the
senior unsecured notes is required to be paid in increments of $12.5 million on August 8,
2024 and $12.5 million on August 8, 2025. The final principal payment of $50.0 million is
due on August 8, 2026. Optional prepayment is allowed with payment of a “make-whole”
premium which fluctuates depending on market interest rates. Interest, which accrues at a
fixed rate of 4.00% per annum, is payable quarterly in arrears commencing November 8,
2019. Principal of $37.5 million of the senior unsecured notes is due on August 26, 2027.
Interest, which accrues at a fixed rate of 3.35% per annum is payable quarterly in arrears
commencing on November 26, 2020.
Our debt instruments require us to maintain specific financial covenants, each of which we
were in compliance with as of December 31, 2020. Specifically, under the most restrictive
covenants, we are required to maintain (1) a minimum interest coverage (consolidated
EBITDA to interest incurred) of no less than 2.0 to 1.0 and, as of December 31, 2020, our
interest coverage on a last 12 months’ basis was 15.60 to 1.0, (2) a Consolidated Tangible
Net Worth of no less than approximately $412.5 million and, as of December 31, 2020, we
had $638.3 million and (3) maximum debt to total capitalization rolling average ratio of no
more than 40.0% and, as of December 31, 2020, we had a rolling average ratio of 26.8%. As
of December 31, 2020, we believe that our cash on hand, capacity available under our lines
of credit and cash flows from operations for the next twelve months will be sufficient to
service our outstanding debt during the next twelve months. For more detailed information
on the Company’s lines of credit, refer to Note 7 to the Consolidated Financial Statements
located in Part II, Item 8 of this Annual Report on Form 10-K.
63
Registration Statements
In December 2020, we filed with the SEC a shelf registration statement on Form S-3
registering up to $500 million of securities, including shares of our common stock, preferred
stock or debt securities either separately or represented by warrants, or depositary shares as
well as units that include any of these securities. Under the rules governing shelf registration
statements, we will file a prospectus supplement and advise the SEC of the amount and type
of securities each time we issue securities under this registration statement. No securities
were issued under this registration statement through the date of this filing.
Cash Flows
The following summarizes our primary sources and uses of cash for the year ended December
31, 2020 as compared to the year ended December 31, 2019:
• Operating activities. Net cash provided by operating activities for the year ended
December 31, 2020 was $35.1 million, compared to $22.1 million cash used in operating
activities during the year ended December 31, 2019. The net cash inflows for the year
ended December 31, 2020 were primarily driven by $119.6 million of cash generated
from business operations, the deferral of expense payments through the increase in
accrued expenses of $15.8 million, and an increase in customer builder deposits of
$14.2 million, partially offset by an increase in inventory of $90.3 million, a $9.1 million
decrease in earnest money deposits, expense payments of $5.5 million through a
decrease in accounts payable and a $5.3 million payment of contingent consideration
related to the acquisition of GRBK GHO in excess of acquisition date fair value
•
Investing activities. Net cash used in investing activities for the year ended December
31, 2020 increased to $13.3 million compared to $7.9 million for the year ended December
31, 2019. The increase in cash outflows was primarily driven by a $9.0 million investment
in joint venture GBTM Sendera, a $0.5 million investment into a newly formed equity
investee BHome Mortgage LLC and acquisitions of property and equipment of $2.9 million.
• Financing activities. Net cash used in financing activities for the year ended December
31, 2020 was $25.9 million, compared to $25.9 million source of cash during the year
ended December 31, 2019. The cash outflows for the year ended December 31, 2020
were primarily due to net payments on lines of credit of $58.0 million, and $6.8 million of
distributions to noncontrolling interests partners, partially offset by borrowings from senior
unsecured notes of $37.5 million.
For discussion and analysis of the Company’s cash flows for the year ended December 31,
2019 as well as for comparison to the Company’s cash flows for the year ended December
31, 2018, refer to Item 7 of Part II of the Company’s Annual Report on Form 10-K for the
year ended December 31, 2019.
64
Off-Balance Sheet Arrangements
Land and Lot Option Contracts
In the ordinary course of business, we enter into land purchase contracts with third-party
developers in order to procure lots for the construction of our homes in the future. We are
subject to customary obligations associated with such contracts. These purchase contracts
typically require an earnest money deposit, and the purchase of properties under these
contracts is generally contingent upon satisfaction of certain requirements, including
obtaining applicable property and development entitlements.
We also utilize option contracts with lot sellers as a method of acquiring lots in staged
takedowns, which are the schedules that dictate when lots must be purchased to help
manage the financial and market risk associated with land holdings, and to reduce the use
of funds from our corporate financing sources. Lot option contracts generally require us to
pay a non-refundable deposit for the right to acquire lots over a specified period of time at
pre-determined prices which typically include escalations in lot prices over time.
Guarantee
Refer to Note 5 in the accompanying Notes to the consolidated financial statements
included in this Annual Report on Form 10-K for details of our guarantee in relation to our
joint venture with EJB River Holdings, LLC (“EJB River Holdings”).
Critical Accounting Policies
The preparation of financial statements in accordance with United States generally accepted
accounting principles (“GAAP”) requires management to use judgment and make estimates
that affect the reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues, costs and expenses during the reporting
period. Management bases estimates and judgments on historical experience and on various
other factors that we believe to be reasonable under the circumstances. Actual results may
differ from estimates under different assumptions or conditions. Management believes that
the following accounting area is most critical to the portrayal of our financial condition and
results of operations and requires the most subjective or complex judgments.
Our utilization of lot option contracts is dependent on, among other things, the availability of
land sellers willing to enter into these arrangements, the availability of capital to finance the
development of optioned lots, general housing market conditions and local market dynamics.
Options may be more difficult to procure from land sellers in strong housing markets and are
more prevalent in certain geographic regions.
Impairment of Inventory
The Company values inventory at cost unless the carrying value is determined to be not
recoverable in which case the affected inventory is written down to fair value. In accordance
with Accounting Standards Codification 360, Property, Plant, and Equipment (“ASC 360”),
we evaluate our inventory for indicators of impairment by individual community and
development during each reporting period.
We generally have the right, at our discretion, to terminate our obligations under both
purchase contracts and option contracts by forfeiting the earnest money deposit with no
further financial responsibility to the land seller. During the three months ended March 31,
2020, management determined to increase the allowance for certain option contracts due
to the impact of the COVID-19 pandemic on the homebuilding industry and projected future
demand for homes in certain markets and/or locations. However, management subsequently
reassessed the market situation based on new information available. As a result, reversal of
allowances for earnest money deposits and pre-acquisition costs related to option contracts
reflected a net loss of $1.5 million and $0.9 million for the years ended ended December
31, 2020 and December 31, 2019, respectively.
As of December 31, 2020, the Company had earnest money deposits of $29.0 million at risk
associated with contracts to purchase 4,722 lots past feasibility studies with an aggregate
purchase price of approximately $324.9 million.
Letters of Credit and Performance Bonds
Refer to Note 17 in the accompanying Notes to the consolidated financial statements
included in this Annual Report on Form 10-K for details of letters of credit and performance
bonds outstanding.
For our builder operations segments, during each reporting period, community gross margins
on closed homes, average margins of homes within backlog, and community outlook factors
are reviewed by management. In the event that this review suggests higher potential for
losses at a specific community, the Company monitors such communities by adding them to
its “watchlist” communities, and, when an impairment indicator is present, further analysis
is performed.
For our land development segment, we perform a quarterly review for indicators of
impairment for each project which involves comparing anticipated lot sale revenues to
projected costs (i.e. lot gross margins). For lots designated for our builders, we review land
for indicators of impairment on a consolidated level, looking at overall projected home
gross margins. In determining the allocation of costs to a particular land parcel, we rely on
project budgets which are based on a variety of assumptions, including assumptions about
development schedules and future costs to be incurred. It is common that actual results
differ from budgeted amounts for various reasons, including delays, changes in costs that
have not been committed, unforeseen issues encountered during project development that
fall outside the scope of existing contracts, or items that ultimately cost more or less than
the budgeted amount.
65
We apply procedures to maintain best estimates in our budgets, including assessing and
revising project budgets on a periodic basis, obtaining commitments from subcontractors
and vendors for future costs to be incurred and utilizing the most recent information
available to estimate costs.
For each real estate asset that has an indicator of impairment, we analyze whether the
estimated remaining undiscounted future cash flows are more or less than the asset’s
carrying value. The estimated cash flows are determined by projecting the remaining revenue
from closings based on the contractual lot takedowns remaining or historical and projected
home sales or delivery absorptions for homebuilding operations and then comparing such
projections to the remaining projected expenditures for development or home construction.
Remaining projected expenditures are based on the most current pricing/bids received from
subcontractors for current phases or homes under development. For future phases of land
development, management uses its judgment to project potential cost increases. When
projecting revenue, management does not assume improvement in market conditions.
If the estimated undiscounted cash flows are less than the asset’s carrying value, the asset
is deemed impaired and will be written down to fair value less associated costs to sell. These
impairment evaluations require us to make estimates and assumptions regarding future
conditions, including the timing and amounts of development costs and sales prices of real
estate assets, to determine if expected future cash flows will be sufficient to recover the
asset’s carrying value.
Fair value is determined based on estimated future cash flows discounted for inherent risks
associated with real estate assets. These discounted cash flows are impacted by expected
risk based on estimated land development activities, construction and delivery timelines,
market risk of price erosion, uncertainty of development or construction cost increases,
and other risks specific to the asset or market conditions where the asset is located when
the assessment is made. These factors are specific to each community and may vary among
communities.
When estimating cash flows of a community, management makes various assumptions,
including: (i) expected sales prices and sales incentives to be offered, including the number
of homes available, pricing and incentives being offered by us or other builders, and future
sales price adjustments based on market and economic trends; (ii) expected sales pace and
cancellation rates based on local housing market conditions, competition and historical
trends; (iii) costs expended to date and expected to be incurred including, but not limited
to, land and land development costs, home construction costs, interest costs, indirect
construction and overhead costs, and selling and marketing costs; (iv) alternative product
offerings that may be offered that could have an impact on sales pace, sales price and/or
building costs; and (v) alternative uses for the property.
Many assumptions are interdependent and a change in one may require a corresponding
change to other assumptions. For example, increasing or decreasing sales absorption rates
has a direct impact on the estimated per unit sales price of a home, the level of time-sensitive
costs (such as indirect construction, overhead and carrying costs), and selling and marketing
costs (such as model home maintenance costs and advertising costs). Due to uncertainties
in the estimation process, the volatility in demand for new housing and the long life cycle of
many communities, actual results could differ significantly from such estimates.
Refer to Note 1 to our consolidated financial statements included in Part II, Item 8 of this
Annual Report on Form 10-K for further description of the Company’s significant accounting
policies.
Recent Accounting Pronouncements
See Note 1 to our consolidated financial statements included in Part II, Item 8 of this Annual
Report on Form 10-K for recent accounting pronouncements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable to smaller reporting companies.
TROPHY SIGNATURE HOMES - LAKEPOINTE, LAVON, TX
66
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Green Brick Partners, Inc.
subjective, or complex judgments. The communication of critical audit matters does not alter
in any way our opinion on the consolidated financial statements, taken as a whole, and we
are not, by communicating the critical audit matter below, providing a separate opinion on
the critical audit matter or on the accounts or disclosures to which it relates.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Green Brick Partners,
Inc. and its subsidiaries (the Company) as of December 31, 2020 and 2019, the related
consolidated statements of income, stockholders’ equity and cash flows for each of the three
years in the period ended December 31, 2020, and the related notes to the consolidated
financial statements (collectively, the financial statements). In our opinion, the financial
statements present fairly, in all material respects, the financial position of the Company as of
December 31, 2020 and 2019, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 2020, in conformity with accounting
principles generally accepted in the United States of America. We have also audited, in
accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the Company’s internal control over financial reporting as of December
31, 2020, based on criteria established in Internal Control - Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway Commission in 2013, and our
report dated March 8, 2021 expressed an unqualified opinion on the effectiveness of the
Company’s internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on the Company’s financial statements based on our
audits. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with U.S. federal securities laws
and the applicable rules and regulations of the Securities and Exchange Commission and
the PCAOB. We conducted our audits in accordance with the standards of the PCAOB.
Those standards require that we plan and perform the audits to obtain reasonable assurance
about whether the financial statements are free of material misstatement, whether due to
error or fraud. Our audits included performing procedures to assess the risks of material
misstatement of the financial statements, whether due to error or fraud, and performing
procedures that respond to those risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the financial statements. Our audits
also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the financial statements. We
believe that our audits provide a reasonable basis for our opinion.
Evaluation of Inventory for Impairment
As described in Notes 1 and 4 to the consolidated financial statements, the Company’s
inventory, including homes completed or under construction and land and lots inventory
was $845 million as of December 31, 2020. The Company performs impairment testing
quarterly to determine whether events or changes in circumstances indicate the carrying
amount of its inventory may not be recoverable. If future results are not consistent with
the Company’s assumptions and estimates, including future events such as deterioration of
market conditions or significant changes in the absorption rates, changes in the assumptions
could have a significant impact of the determination of indicators of potential impairment.
We identified the evaluation of potential indicators of impairment for inventory as a critical
audit matter. This is due to a high degree of auditor judgment that was involved in evaluating
management’s assumptions and judgments regarding whether changes in market conditions
at a location in which the Company operates would indicate a significant decrease in the fair
value of the inventory.
Our audit procedures related to the Company’s evaluation of potential indicators of
impairment for inventory include the following primary procedures, among others to address
this critical audit matter:
a. We obtained an understanding of the relevant controls related to the evaluation of
inventory for impairment and tested such controls for design and operating effectiveness,
including controls related to the Company’s process to evaluate its inventory for impairment.
b. We performed an independent assessment of the impact of changes in market conditions
on inventory by comparing third party data to the operating performance of the Company’s
inventory. We then compared the results of our assessment to the Company’s analysis.
c. We tested management’s process for evaluating changes in market conditions and
operating performance to determine if potential indicators of impairment exist, as well as
determining the impact of industry, regulatory, and macroeconomic factors on the significant
inputs used to determine the fair value of its communities, by recalculating certain key inputs
utilized and agreeing those key inputs, on a sample basis, to source documents.
d. We tested management’s process of identifying potential indicators of impairment by
comparing actual contribution margins on closed homes to management’s target contribution
margin to identify communities averaging below the target and identifying communities with
significantly declining margins and or increasing costs.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period
audit of the consolidated financial statements that was communicated or required to be
communicated to the audit committee and that: (i) relates to accounts or disclosures that are
material to the consolidated financial statements and (ii) involved our especially challenging,
/s/ RSM US LLP
We have served as the Company’s auditor since 2016.
Dallas, Texas
March 8, 2021
67
CB JENI HOMES - MERIDIAN AT SOUTHGATE, MCKINNEY, TX
GREEN BRICK PARTNERS, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except share data)
ASSETS
AS OF DECEMBER 31,
2020
2019
68
Cash and equivalents
Restricted cash
Receivables
Inventory
Investments in unconsolidated entities
Right-of-use assets - operating leases
Property and equipment, net
Earnest money deposits
Deferred income tax assets, net
Intangible assets, net
Goodwill
Other assets
Total assets
Liabilities:
Accounts payable
Accrued expenses
Customer and builder deposits
Lease liabilities - operating leases
Borrowings on lines of credit, net
Senior unsecured notes, net
Notes payable
Contingent consideration
Total liabilities
Commitments and contingencies
LIABILITIES AND EQUITY
Redeemable noncontrolling interest in equity of consolidated subsidiary
Equity:
Green Brick Partners, Inc. stockholders’ equity
Preferred stock, $0.01 par value: 5,000,000 shares authorized; none issued and outstanding
Common stock, $0.01 par value: 100,000,000 shares authorized; 51,053,858 and 50,879,949 issued and 50,661,919 and 50,488,010 outstanding as of December 31,
_._2020 and December 31, 2019, respectively
Treasury stock, at cost, 391,939 shares
Additional paid-in capital
Retained earnings
Total Green Brick Partners, Inc. stockholders’ equity
Noncontrolling interests
Total equity
Total liabilities and equity
The accompanying notes are an integral part of these consolidated financial statements.
$ 19,479
$ 33,269
14,156
5,224
4,416
4,720
844,635
753,567
46,443
30,294
2,538
3,595
22,242
15,376
622
680
3,462
4,309
14,686
15,262
707
680
13,857
10,167
$ 988,847
$ 875,539
$ 24,521
$ 30,044
40,416
38,131
2,591
24,656
23,954
3,564
106,687
164,642
111,056
73,406
2,125
368
-
5,267
325,895
325,533
13,543
13,611
-
511
-
509
(3,167)
(3,167)
293,242
290,799
349,656
235,027
640,242
523,168
9,167
13,227
649,409
536,395
988,847
$ 875,539
GREEN BRICK PARTNERS, INC. CONSOLIDATED STATEMENT OF INCOME (In Thousands, Except Share Data)
AS OF DECEMBER 31,
2020
2019
2018
$ 930,176
$ 759,830
$ 578,893
69
Residential units revenue
Land and lots revenue
Total revenues
Cost of residential units
Cost of land and lots
Total cost of revenues
Total gross profit
Selling, general and administrative expense
Change in fair value of contingent consideration
Equity in income of unconsolidated entities
Other income, net
Income before income taxes
Income tax expense
Net income
Less: Net income attributable to noncontrolling interests
45,845
976,021
705,866
35,551
741,417
234,604
(112,134)
(368)
16,654
4,057
142,813
25,016
117,797
4,104
31,830
791,660
597,884
24,694
622,578
169,082
(97,775)
(4,906)
9,809
8,119
84,329
20,027
64,302
5,646
44,754
623,647
433,279
36,166
469,445
154,202
(80,039)
(1,693)
7,259
1,942
81,671
17,136
64,535
12,912
Net income attributable to Green Brick Partners, Inc.
$ 113,693
$ 58,656
$ 51,623
Net income attributable to Green Brick Partners, Inc. per common share:
Basic
Diluted
Weighted average common shares used in the calculation of net income attributable to Green Brick Partners, Inc.
per common share:
Basic
Diluted
$ 2.25
$ 2.24
50,568
50,795
$ 1.16
$ 1.16
50,530
50,636
$ 1.02
$ 1.02
50,652
50,751
The accompanying notes are an integral part of these consolidated financial statements.
70
GREEN BRICK PARTNERS, INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (In thousands, except share data)
COMMON STOCK
TREASURY STOCK
SHARES
AMOUNT
SHARES
AMOUNT
50,598,901
$ 506
ADDITIONAL
PAID-IN
CAPITAL
RETAINED
EARNINGS
TOTAL GREEN BRICK
PARTNERS, INC.
STOCKHOLDERS’
EQUITY
NONCOTROLLING
INTERESTS
TOTAL
STOCKHOLDERS’
EQUITY
$ 289,938
$ 125,903
$ 416,347
$ 16,691
$ 433,038
Balance at December 31, 2017
Share-based compensation
Issuance of common stock under 2014
Omnibus Equity Incentive Plan
Withholdings from vesting of restricted stock awards
(39,228)
Amortization of deferred share-based compensation
Common stock issued in connection with the investment
in Challenger
Stock repurchases
Contributions
Distributions
Net income
Balance at December 31, 2018
Share-based compensation
Issuance of common stock under 2014
Omnibus Equity Incentive Plan
—
140,211
—
20,000
—
—
—
—
—
219,181
Withholdings from vesting of restricted stock awards
(59,116)
Amortization of deferred share-based compensation
Stock repurchases
Accretion of redeemable noncontrolling interest
Increase in ownership in Southgate Homes
Increase in ownership in Centre Living Homes
Contributions
Distributions
Net income
—
—
—
—
—
—
—
—
—
1
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
— (136,756)
(981)
—
—
—
—
—
—
—
—
—
288
1,081
(412)
404
—
—
—
—
—
—
—
—
—
—
—
—
—
51,623
—
3
(1)
—
—
—
—
—
—
—
—
—
— (255,183)
(2,186)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
236
1,463
(543)
489
—
(2,145)
—
—
—
—
—
—
—
—
—
—
—
(891)
(264)
—
—
58,656
50,719,884
$ 507
(136,756)
(981)
$ 291,299
$ 177,526
Balance at December 31, 2019
50,879,949
$ 509
(391,939)
(3,167)
$ 290,799
$ 235,027
Issuance of common stock under 2014
Omnibus Equity Incentive Plan
249,617
Withholdings from vesting of restricted stock awards
(75,708)
Amortization of deferred share-based compensation
Change in fair value of redeemable noncontrolling interest
Increase in ownership in CB JENI Homes
Contributions
Distributions
Net income
—
—
—
—
—
—
3
(1)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,597
(591)
497
940
—
—
—
—
—
—
—
—
936
—
—
113,693
Balance at December 31, 2020
51,053,858
$ 511
(391,939)
$ (3,167)
$ 293,242
$ 349,656
The accompanying notes are an integral part of these consolidated financial statements.
288
1,082
(412)
404
—
(981)
—
—
51,623
$ 468,351
236
1,466
(544)
489
(2,186)
(2,145)
(891)
(264)
—
—
58,656
$ 523,168
1,600
(592)
497
940
936
—
—
113,693
$ 640,242
—
—
—
—
—
—
5
288
1,082
(412)
404
—
(981)
5
(10,747)
11,332
$ 17,281
(10,747)
62,955
$ 485,632
—
—
—
—
—
—
891
264
3,600
(10,993)
2,184
236
1,466
(544)
489
(2,186)
(2,145)
—
—
3,600
(10,993)
60,840
$ 13,227
$ 536,395
—
—
—
—
(936)
400
(5,251)
1,727
$ 9,167
1,600
(592)
497
940
—
400
(5,251)
115,420
$ 649,409
GREEN BRICK PARTNERS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
71
YEARS ENDED DECEMBER 31,
2020
2019
2018
CONTINUED
YEARS ENDED DECEMBER 31,
2020
2019
2018
Cash flows from financing activities:
$ 117,797
$ 64,302
$ 64,535
Borrowings from lines of credit
354,500
224,000
165,000
Borrowings from senior unsecured notes
37,500
75,000
—
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization expense
Share-based compensation expense
Change in fair value of contingent consideration
Deferred income taxes, net
3,666
2,097
368
(114)
3,079
2,191
4,906
1,237
Equity in income of unconsolidated entities
(16,654)
(9,809)
Allowances for option deposits and pre-acquisition costs
Distributions of income from unconsolidated entities
1,513
10,936
884
5,084
2,943
1,774
1,693
14,712
(7,259)
663
4,623
Repayments of lines of credit
Proceeds from notes payable
Repayments of notes payable
Payments of debt issuance costs
Payment of contingent consideration
Payments of withholding tax on vesting of
restricted stock awards
Stock repurchases
Contributions from noncontrolling interests
Distributions to redeemable noncontrolling interest
(504)
122
(3,029)
Distributions to noncontrolling interests
(90,345)
(83,970)
(129,291)
Net cash (used in) provided by financing activities
(25,851)
25,862
71,769
Changes in operating assets and liabilities:
(Increase) decrease in receivables
Increase in inventory
(Increase) decrease in earnest money deposits
Increase in other assets
(Decrease) increase in accounts payable
(Increase) decrease in accrued expenses
Payment of contingent consideration in excess of
acquisition date fair value
(Increase) decrease in customer and builder deposits
(14,177)
(8,024)
1,458
Net cash provided by (used in) operating activities
35,099
(22,063)
(39,476)
Restricted cash, end of period
(9,069)
(3,739)
(5,523)
15,760
2,107
(1,525)
3,953
(4,384)
2,119
(2,741)
(483)
9,470
(5,267)
(1,332)
—
Net (decrease) increase in cash and cash equivalents
and restricted cash
Cash and cash equivalents, beginning of period
Restricted cash, beginning of period
Cash and cash equivalents and restricted cash,
beginning of period
Cash and cash equivalents, end of period
Cash and cash equivalents and restricted cash, end
of period
Cash flows from investing activities:
Business combination, net of acquired cash
—
—
(26,861)
Investments in unconsolidated entities
Purchase of property and equipment
Net cash used in investing activities
(10,431)
(2,867)
(13,298)
(5,300)
(2,569)
(7,869)
(755)
(3,211)
(30,827)
Consolidated statement of cash flow continued on right
Supplemental disclosure of cash flow information:
Cash paid for interest, net of capitalized interest
—
—
—
Cash paid for income taxes, net of refunds
$ 20,541
$ 14,313
$ 4,611
( 412,500)
(260,000)
(70,000)
10,714
(8,590)
(527)
—
(592)
—
400
(1,505)
(5,251)
—
(10,226)
(1,974)
(514)
(544)
(2,186)
3,600
(527)
(870)
—
(412)
(981)
5
—
(10,993)
(10,747)
(4,050)
(4,070)
1,466
33,269
4,416
38,315
3,440
36,684
3,605
$ 37,685
$ 41,755
$ 40,289
19,479
14,156
33,269
4,416
38,315
3,440
$ 33,635
$ 37,685
$ 41,755
The accompanying notes are an integral part of these consolidated financial statements.
72
GREEN BRICK PARTNERS,
STATEMENTS
INC. NOTES TO CONSOLIDATED FINANCIAL
Summary of significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance
with United States generally accepted accounting principles (“GAAP”) as set forth in the
Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”)
and applicable regulations of the Securities and Exchange Commission (“SEC”).
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of Green Brick
Partners, Inc., its controlled subsidiaries, and variable interest entities in which Green Brick
Partners, Inc. or one of its controlled subsidiaries is deemed to be the primary beneficiary
(together, the “Company”, “we”, or “Green Brick”).
The Company evaluated its wholly-owned subsidiaries and controlled builder under ASC
810, Consolidation (“ASC 810”) and concluded that its controlled builder is a variable interest
entity (“VIE”). The Company owns a 50% equity interest and a 51% voting interest in its
controlled builder. In addition, the Company appoints two of the three board managers of its
controlled builder and is able to exercise control over its operations. The Company accounts
for its controlled builder under the variable interest model and is the primary beneficiary of
its controlled builder in accordance with ASC 810.
All intercompany balances and transactions have been eliminated in consolidation. The
Company uses the equity method of accounting for its investments in unconsolidated
entities over which it exercises significant influence but does not have a controlling interest.
Under the equity method, the Company’s share of the unconsolidated entities’ earnings or
losses is included in the consolidated statements of income.
Use of Estimates
The preparation of the consolidated financial statements in conformity with GAAP requires
management of the Company to make estimates and assumptions that affect the amounts
reported in the consolidated financial statements and accompanying notes, including the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the consolidated financial statements and the reported amounts of revenue
and expenses during the reporting periods. Actual results could differ from those estimates.
Reclassifications
Certain prior period amounts have been reclassified to conform to the current period
presentation with no impact to net income in any period.
Cash and Cash Equivalents
The Company considers all highly liquid investments with original maturities of three months
or less at the time of purchase to be cash equivalents. The cash balances of the Company
are held with multiple financial institutions. At times, cash balances at certain banks and
financial institutions may exceed insurable amounts. The Company believes it mitigates this
risk by monitoring the financial stability of institutions holding material cash balances. The
Company has not experienced any losses in such accounts and believes that the risk of loss
is minimal.
Restricted Cash
Restricted cash primarily relates to cash held in escrow for sales of developed lots to third
parties and customer deposits from homebuyers.
Receivables
Receivables consist of amounts collectible from manufacturing rebates earned by our
homebuilders during the normal course of business, amounts collectible from third-party
escrow agents related to closings on land, lots and homes, amounts collectible related to
mechanic’s lien contracts, as well as income tax receivables. As of December 31, 2020 and
2019, all amounts are considered fully collectible and no allowance for doubtful accounts is
recorded. Any allowance for doubtful accounts is estimated based on our historical losses,
the existing economic conditions, and the financial stability of our customers. Receivables
are written off in the period that they are deemed uncollectible.
Inventory and Cost of Revenues
Inventory consists of undeveloped land, raw land scheduled for development, land in the
process of development, land held for sale, developed lots, homes completed and under
construction, and model homes. Inventory is valued at cost unless the carrying value is
determined to be not recoverable in which case the affected inventory is written down to
fair value. Cost includes any related pre-acquisition costs that are directly identifiable with a
specific property so long as those pre-acquisition costs are anticipated to be recoverable at
the sale of the property.
Residential lots held for sale and lots held for development include the initial cost of acquiring
the land as well as certain costs capitalized related to developing the land into individual
residential lots including direct overhead, interest and real estate taxes.
Land development and other project costs, including direct overhead, interest and property
taxes incurred during development and home construction, are capitalized. Land development
and other common costs that benefit an entire community are allocated to individual lots
or homes based on relative sales value. The costs of completed lots are transferred to work
in process when home construction begins. Home construction costs and related carrying
charges (principally interest and real estate taxes) are allocated to the cost of individual homes.
73
Inventory costs for completed homes are expensed upon closing and delivery of the homes.
Changes to estimated total land development costs subsequent to initial home closings
in a community are generally allocated to the unclosed homes and lots in the community
on a pro-rata basis. The life cycle of a community generally ranges from 24 to 72 months,
commencing with the acquisition of land, continuing through the land development phase,
construction, and concluding with the sale and delivery of homes. We recognize costs as
incurred on our mechanic’s lien contracts.
based on the most current pricing/bids received from subcontractors for current phases
or homes under development. For future phases of land development, management uses
its judgment to project potential cost increases. In determining the estimated cash flows
for land held for sale, management considers recent comparisons to market comparable
transactions, bona fide letters of intent from outside parties, executed sales contracts,
broker quotes, and similar information. When projecting revenue, management does not
assume improvement in market conditions.
Impairment of Inventory
In accordance with ASC 360, Property, Plant, and Equipment (“ASC 360”), we evaluate our
inventory for indicators of impairment by individual community and development during
each reporting period.
For our builder operations segments, during each reporting period, community gross margins
on closed homes, average margins of homes within backlog, and community outlook factors
are reviewed by management. In the event that this review suggests higher potential for
losses at a specific community, the Company monitors such communities by adding them to
its “watchlist” communities, and, when an impairment indicator is present, further analysis
is performed.
For our land development segment, we perform a quarterly review for indicators of
impairment for each project which involves comparing anticipated lot sale revenues to
projected costs (i.e. lot gross margins). For lots designated for our builders, we review land
for indicators of impairment on a consolidated level, looking at overall projected home
gross margins. In determining the allocation of costs to a particular land parcel, we rely on
project budgets which are based on a variety of assumptions, including assumptions about
development schedules and future costs to be incurred. It is common that actual results
differ from budgeted amounts for various reasons, including delays, changes in costs that
have not been committed, unforeseen issues encountered during project development that
fall outside the scope of existing contracts, or items that ultimately cost more or less than
the budgeted amount. We apply procedures to maintain best estimates in our budgets,
including assessing and revising project budgets on a periodic basis, obtaining commitments
from subcontractors and vendors for future costs to be incurred and utilizing the most
recent information available to estimate costs.
If the estimated undiscounted cash flows are more than the asset’s carrying value, no
impairment adjustment is required. However, if the estimated undiscounted cash flows are
less than the asset’s carrying value, the asset is deemed impaired and will be written down
to fair value less associated costs to sell. These impairment evaluations require us to make
estimates and assumptions regarding future conditions, including the timing and amounts
of development costs and sales prices of real estate assets, to determine if expected future
cash flows will be sufficient to recover the asset’s carrying value.
Fair value is determined based on estimated future cash flows discounted for inherent risks
associated with real estate assets. These discounted cash flows are impacted by expected
risk based on estimated land development activities, construction and delivery timelines,
market risk of price erosion, uncertainty of development or construction cost increases,
and other risks specific to the asset or market conditions where the asset is located when
the assessment is made. These factors are specific to each community and may vary among
communities.
When estimating cash flows of a community, management makes various assumptions,
including: (i) expected sales prices and sales incentives to be offered, including the number
of homes available, pricing and incentives being offered by us or other builders, and future
sales price adjustments based on market and economic trends; (ii) expected sales pace and
cancellation rates based on local housing market conditions, competition and historical
trends; (iii) costs expended to date and expected to be incurred including, but not limited
to, land and land development costs, home construction costs, interest costs, indirect
construction and overhead costs, and selling and marketing costs; (iv) alternative product
offerings that may be offered that could have an impact on sales pace, sales price and/or
building costs; and (v) alternative uses for the property.
Each reporting period, management reviews each real estate asset which has an indicator
of impairment in order to determine whether the estimated remaining undiscounted future
cash flows are more or less than the asset’s carrying value. The estimated cash flows are
determined by projecting the remaining revenue from closings based on the contractual
lot takedowns remaining or historical and projected home sales or delivery absorptions for
homebuilding operations and then comparing such projections to the remaining projected
expenditures for development or home construction. Remaining projected expenditures are
Many assumptions are interdependent and a change in one may require a corresponding
change to other assumptions. For example, increasing or decreasing sales absorption rates
has a direct impact on the estimated per unit sales price of a home, the level of time-sensitive
costs (such as indirect construction, overhead and carrying costs), and selling and marketing
costs (such as model home maintenance costs and advertising costs). Due to uncertainties
in the estimation process, the volatility in demand for new housing and the long life cycle of
many communities, actual results could differ significantly from such estimates.
74
Capitalization of Interest
The Company capitalizes interest costs incurred to inventory during development and other
qualifying activities. Interest capitalized as cost of inventory is charged to cost of revenues
as related homes, land and lots are closed. Interest incurred on undeveloped land is directly
expensed and included in interest expense in our consolidated statements of income.
the Company is considered to be the primary beneficiary, if any, are consolidated in the
Company’s consolidated financial statements. The noncontrolling interests attributable to
other beneficiaries of the VIEs are included as noncontrolling interests in the Company’s
consolidated financial statements.
Investments in Unconsolidated Entities
In accordance with ASC 323, Investments - Equity Method and Joint Ventures (“ASC 323”),
the Company uses the equity method of accounting for its investments in unconsolidated
entities over which it exercises significant influence but does not have a controlling interest.
The equity method of accounting requires the investment to be initially recorded at cost
and subsequently adjusted for the Company’s share of equity in the unconsolidated
entity’s earnings or losses. The Company evaluates the carrying amount of the investments
in unconsolidated entities for impairment in accordance with ASC 323. If the Company
determines that a loss in the value of the investment is other than temporary, the Company
writes down the investment to its estimated fair value. Any such losses are recorded to
equity in income of unconsolidated entities in the Company’s consolidated statements of
income. Due to uncertainties in the estimation process and the volatility in demand for new
housing, actual results could differ significantly from such estimates.
The Company has made an election to classify distributions received from unconsolidated
entities using the nature of the distribution approach. Distributions received are classified as
cash inflows from operating activities based on the nature of the activities of the investee
that generated the distribution.
Variable Interest Entities
The Company accounts for variable interest entities (“VIEs”) in accordance with ASC 810.
In accordance with ASC 810, an entity is a VIE when: (a) the equity investment at risk in
the entity is not sufficient to permit the entity to finance its activities without additional
subordinated financial support provided by other parties, including the equity holders; (b)
the entity’s equity holders as a group either (i) lack the direct or indirect ability to make
decisions about the entity, (ii) are not obligated to absorb expected losses of the entity or
(iii) do not have the right to receive expected residual returns of the entity; or (c) the entity’s
equity holders have voting rights that are not proportionate to their economic interests,
and the activities of the entity involve or are conducted on behalf of the equity holder with
disproportionately few voting rights. If an entity is deemed to be a VIE pursuant to ASC
810, the enterprise that has both (i) the power to direct the activities of the VIE that most
significantly impacts the entity’s economic performance and (ii) the obligation to absorb
the expected losses of the entity or right to receive benefits from the entity that could be
potentially significant to the VIE is considered the primary beneficiary and must consolidate
the VIE. In accordance with ASC 810, the Company performs ongoing reassessments of
whether it is the primary beneficiary of a VIE. The financial statements of the VIEs for which
Property and Equipment, Net
Property and equipment are stated at cost less accumulated depreciation. Depreciation is
computed over the estimated useful lives of the assets using the straight-line method. The
estimated useful lives of assets range from 1 to 15 years. Repairs and maintenance are
expensed as incurred.
Impairment of Long-Lived Assets
In accordance with ASC 360, our property and equipment and right-of-use assets related
to operating leases are reviewed for possible impairment if there are indicators that their
carrying amounts are not recoverable. The carrying amount of a long-lived asset is considered
not recoverable if it exceeds the sum of the undiscounted cash flows expected to result
from the use and eventual disposition of the asset. An impairment loss shall be measured as
the amount by which the carrying amount of a long-lived asset exceeds its fair value.
Earnest Money Deposits
In the ordinary course of business, the Company enters into land and lot option contracts in
order to procure land for the construction of homes in the future. Pursuant to these option
contracts, the Company generally provides a deposit to the seller as consideration for the
right to purchase land at different times in the future, usually at predetermined prices. Such
contracts enable the Company to defer acquiring portions of properties owned by third
parties or unconsolidated entities until the Company has determined whether and when to
exercise its option, which reduces the Company’s financial risk associated with long-term land
holdings. Option deposits and pre-acquisition costs (such as environmental testing, surveys,
engineering, and entitlement costs) are capitalized if the costs are directly identifiable with
the land under option and acquisition of the property is probable. Such costs are reflected
in earnest money deposits and are reclassified to inventory upon taking title to the land.
The Company writes off deposits and pre-acquisition costs if it becomes probable that the
Company will not proceed with the project or recover the capitalized costs. Such decisions
take into consideration changes in local market conditions, the timing of required land
takedowns, the availability and best use of necessary incremental capital, and other factors.
Under ASC 810, a non-refundable deposit paid to an entity is deemed to be a variable
interest that will absorb some or all of the entity’s expected losses if they occur and, as
such, the Company’s land and lot option contracts are considered variable interests. The
Company’s option contract deposits along with any related pre-acquisition costs represent
the Company’s maximum exposure to the land seller if the Company elects not to purchase
the optioned property. Therefore, whenever the Company enters into an option or purchase
75
contract with an entity and makes a non-refundable deposit, a VIE assessment is performed.
However, the Company generally has little control or power to direct the activities that most
significantly impact the VIE’s economic performance due to the Company’s lack of an equity
interest in them. Additionally, creditors of the VIE typically have no material recourse against
the Company, and the Company does not provide financial or other support to these VIEs
other than as stipulated in the option contracts. In accordance with ASC 810, the Company
performs ongoing reassessments of whether the Company is the primary beneficiary of a VIE.
Intangible Assets
Intangible assets, net consists of the estimated fair value of the acquired trade name, net of
amortization. The trade name has a definite life and is amortized over ten years.
Intangible assets are tested for impairment whenever events or circumstances indicate that
the carrying amount of an asset may not be recoverable. An impairment loss would be
recognized if the carrying amount of the asset exceeds the estimated undiscounted future
cash flows expected to result from the use of the asset and its eventual disposition. The
impairment loss recorded would be the excess of the asset’s carrying value over its fair value.
Fair value would be determined using a discounted cash flow analysis or other valuation
technique.
Goodwill
The excess of the purchase price of a business acquisition over the net fair value of assets
acquired and liabilities assumed is capitalized as goodwill in accordance with ASC 805,
Business Combinations (“ASC 805”). Goodwill is assessed for impairment at least annually
in the fourth quarter, or more frequently if certain impairment indicators are present. A
goodwill impairment loss is recognized for the amount by which the carrying amount of the
reporting unit, including goodwill, exceeds its fair value.
The Company reviews goodwill at the reporting unit level for impairment. The Company
first performs a qualitative assessment to determine whether it is more likely than not
that fair value of the reporting level is less than its carrying amount. Qualitative factors
include adverse macroeconomic conditions, industry and market conditions, overall financial
performance, reporting unit specific events and entity specific events. If, after completing a
qualitative assessment, the Company concludes that it is more likely than not that the fair
value of the reporting unit is less than its carrying amount, the Company must perform a
quantitative test to evaluate goodwill for impairment.
For the quantitative impairment test, the Company calculates the fair value of the reporting
unit and compares that amount to the reporting unit’s carrying value. The fair value of the
reporting unit is determined by using generally accepted valuation techniques, including
discounted cash flow models and market multiple analysis. The Company’s valuation
methodology for assessing impairment would require management to make judgments and
assumptions based on historical experience and projections of future operating performance.
The Company recognizes goodwill impairment, if any, as the excess of the reporting unit’s
carrying value over its fair value, not to exceed the total amount of goodwill allocated to the
reporting unit.
Warranties
The Company accrues an estimate of its exposure to warranty claims based on both
current and historical home closings data and warranty costs incurred. The Company offers
homeowners a comprehensive third-party warranty on each home. Homes are generally
covered by a ten-year warranty for qualified and defined structural defects, one year for
defects and products used, and two years for electrical, plumbing, heating, ventilation, and
air conditioning parts and labor. Warranty accruals are included within accrued expenses on
the consolidated balance sheets. Any legal costs associated with loss contingencies related
to warranties are expensed as incurred.
Debt Issuance Costs
Debt issuance costs represent costs incurred related to the senior unsecured notes and
revolving secured and unsecured credit facilities, including amendments thereto, and reduce
the carrying amount of debt on the consolidated balance sheets. These costs are subject to
capitalization to inventory over the term of the related debt facility using the straight-line
method.
Business Combinations
Acquisitions are accounted for in accordance with ASC 805. Following the determination
that control of a business and its inputs, processes and outputs were obtained in exchange
for consideration, all material assets and liabilities of the business, including contingent
consideration, are measured and recognized at fair value as of the date of the acquisition to
reflect the purchase price. Depending on the fair value of net assets acquired, the purchase
price allocation may or may not result in goodwill. Contingent consideration is subsequently
remeasured to fair value at each reporting date until the contingency is resolved, with any
change in fair value recognized in the consolidated statements of income.
Redeemable Noncontrolling Interest in Equity of Consolidated Subsidiary
Redeemable noncontrolling interest in equity of consolidated subsidiary represents equity
related to a put option held by a minority shareholder of a subsidiary. Based on the put
option structure, the minority shareholder’s interest in the controlled subsidiary is classified
as a redeemable noncontrolling interest on the consolidated balance sheets. The accretion
of the redeemable noncontrolling interest to its estimated redemption value is recorded in
additional paid-in capital on the consolidated balance sheets if the estimated redemption
value, net of accretion, is greater than the current value of the noncontrolling interest capital
account.
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Revenue Recognition
Contracts with Customers
The Company derives revenues from two primary sources: the closing and delivery of
homes through our builder operations segments and the closing of lots sold to homebuilders
through our land development segment. All of our revenue is from contracts with customers.
Contract Liabilities
The Company requires homebuyers to submit a deposit for home purchases and requires
third-party builders to submit a deposit in connection with land sale or lot option contracts.
The non-refundable deposits serve as an incentive for performance under homebuilding and
land sale or development contracts. Cash received as customer deposits, if held in escrow,
is reflected as restricted cash and as customer and builder deposits on the consolidated
balance sheets.
Performance Obligations
The Company’s contracts with homebuyers contain a single performance obligation. The
performance obligation is satisfied when homes are completed and legal title has been
transferred to the buyer. The Company does not have any variable consideration associated
with home sales transactions.
Revenue from mechanic’s lien contracts in which the Company serves as the general
contractor for custom homes where the customer, and not the Company, owns the
underlying land and improvements is recognized based on the input method, where progress
toward completion is measured by relating the actual cost of work performed to date to the
estimated total cost of the respective contracts.
Lot option contracts contain multiple performance obligations. The performance obligations
are satisfied as lots are closed and legal title has been transferred to the builder. For lot
option contracts, individual performance obligations are accounted for separately. The
transaction price is allocated to the separate performance obligations on a relative stand-
alone selling price basis. Certain lot option contracts require escalations in lot price over
the option period. Any escalator is not collectible until the lot closing occurs. While we
recognize lot escalators as variable consideration within the transaction price, we do not
recognize escalator revenue until a builder closes on a lot subject to an escalator as the
escalator relates to general inflation and holding costs.
Occasionally, the Company sells developed and undeveloped land parcels. If the land parcel
is developed prior to the sale of the land, the revenue is recognized at closing since we
deliver a single performance obligation in the form of a developed parcel. We also recognize
revenue at closing on undeveloped land parcel sales as there are no other obligations beyond
delivering the undeveloped land.
Homebuyers are not obligated to pay for a home until the closing and delivery of the home.
The selling price of a home is based on the contract price adjusted for any change orders,
which are considered modifications of the contract price.
Homebuilders are not obligated to pay for developed lots prior to control of the lots and any
associated improvements being transferred to them. The term of our lot option contracts is
generally based upon the number of lots being purchased and an agreed upon lot takedown
schedule, which can be in excess of one year. Lots cannot be taken down until development
is substantially complete. There is no significant financing component related to our third-
party lot sales.
The Company does not sell warranties outside of the customary workmanship warranties
provided on homes or developed lots at the time of sale. The warranties offered to homebuyers
are short term, with the exception of ten-year warranties on structural concerns for homes.
As these are assurance-type warranties, there is no separate performance obligation related
to warranties provided to homebuyers or homebuilder.
Significant Judgments and Estimates
There are no significant judgments involved in the recognition of residential units revenue.
The performance obligation of delivering a completed home is satisfied upon the sale closing
when title transfers to the buyer.
There are no significant judgments involved in the recognition of land and lots revenue. The
performance obligation of delivering land and lots is satisfied upon the closing of the sale
when title transfers to the homebuilder.
Contract Costs
The Company recognizes an asset for the incremental costs of obtaining a contract with
a customer if it expects to recover those costs. The Company pays sales commissions to
employees and/or outside Realtors related to individual home sales which are expensed as
incurred at the time of closing. Commissions on the sale of land parcels are also expensed
as incurred upon closing. Sales commissions on the sale of homes are included in the selling,
general, and administrative expenses in the consolidated statements of income.
The Company also pays builder incentives to employees which are based on the time it
takes to build individual homes, as well as quality inspection completion and customer
satisfaction. The builder incentives do not represent incremental costs that would require
capitalization as we would incur these costs whether or not we sold the home. As such, we
recognize builder incentives as expense at the time they are incurred and paid.
Advertising costs, sales salaries and certain costs associated with model homes, such as
signage, do not qualify for capitalization under ASC 340-40, Other Assets and Deferred
Costs - Contracts with Customers, as they are not incremental costs of obtaining a contract.
As such, we expense these costs to selling, general and administrative expense as incurred.
Costs incurred related to model home furnishings and sales office construction are capitalized
and included in property and equipment, net on the consolidated balance sheets.
Selling, General and Administrative Expense
Selling, general and administrative expense represents salaries, benefits, share-based
compensation, property taxes on finished homes, sales commissions, depreciation,
amortization, advertising and marketing, rent, and other administrative items, and is recorded
in the period incurred.
Advertising Expense
The Company expenses advertising costs as incurred. Advertising costs are included
in selling, general and administrative expense in the consolidated statements of income.
Advertising expense for the years ended December 31, 2020, 2019 and 2018 totaled $2.2
million, $2.1 million and $1.5 million, respectively.
Interest Expense
Interest expense consists primarily of interest costs incurred on our debt that are not
capitalized, and amortization of debt issuance costs. We capitalize interest costs incurred
to inventory during development and other qualifying activities. Debt issuance costs are
capitalized to inventory over the term of the underlying debt using the straight-line method,
in accordance with our interest capitalization policy. All interest costs were capitalized during
the years ended December 31, 2020, 2019 and 2018.
Net Income Attributable to Green Brick Partners, Inc. per Share
The Company’s restricted stock awards have the right to receive forfeitable dividends on
an equal basis with common stock and therefore are not considered participating securities
that must be included in the calculation of net income per share using the two-class method.
Basic earnings per share is computed by dividing net income by the weighted average
number of common shares outstanding during each period, adjusted for non-vested shares
of restricted stock awards during each period. Diluted earnings per share is calculated using
the treasury stock method and includes the effect of all dilutive securities, including stock
options and restricted stock awards.
Cost Recognition
Lot acquisition, materials, direct costs, interest and indirect costs related to the acquisition,
development, and construction of lots and homes are capitalized. Direct and indirect costs
of developing residential lots are allocated evenly to all applicable lots. Capitalized costs
of residential lots are charged to earnings when the related revenue is recognized. Non-
capitalizable costs in connection with developed lots and completed homes and other selling
and administrative costs are charged to earnings when incurred.
77
TROPHY SIGNATURE HOMES - RIDGEVIEW CROSSING, ALLEN, TX
78
Share-Based Compensation
The Company measures and accounts for share-based awards in accordance with ASC 718,
Compensation - Stock Compensation. The Company expenses share-based payment awards
made to employees and directors, including stock options and restricted stock awards.
Share-based compensation expense associated with stock options and restricted stock
awards with vesting contingent upon the achievement of service conditions is recognized
on a straight-line basis, net of estimated forfeitures, over the requisite service period over
which the awards are expected to vest. The Company estimates the value of stock options
with vesting contingent upon the achievement of service conditions as of the date the
award was granted using the Black-Scholes option pricing model. The Black-Scholes option
pricing model requires the use of certain input variables, such as expected volatility, risk-free
interest rate and expected award life.
The Company regularly reviews historical and anticipated future pre-tax results of operations
to determine whether we will be able to realize the benefit of deferred tax assets. A valuation
allowance is required to reduce the deferred tax asset when it is more-likely-than-not that
all or some portion of the deferred tax asset will not be realized due to the lack of sufficient
taxable income. The Company assesses the recoverability of deferred tax assets and the
need for a valuation allowance on an ongoing basis. In making this assessment, management
considers all available positive and negative evidence and available income tax planning
to determine whether it is more-likely-than-not that some portion or all of the deferred
tax assets will be realized in future periods. This assessment requires significant judgment
and estimates involving current and deferred income taxes, tax attributes relating to the
interpretation of various tax laws, historical bases of tax attributes associated with certain
assets and limitations surrounding the realization of deferred tax assets.
Income Taxes
The Company accounts for income taxes using the asset and liability method, under which
deferred tax assets and liabilities are recognized for the future tax consequences attributable
to temporary differences between financial statement carrying amounts of existing assets
and liabilities and their respective tax bases, operating losses and tax credit carryforwards.
Deferred tax assets and liabilities are measured using enacted tax rates expected to apply
to taxable income in years in which temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized
in income in the period that includes the enactment date.
We establish accruals for uncertain tax positions that reflect our best estimate of deductions
and credits that may not be sustained on a more-likely-than-not basis. We recognize interest
and penalties related to uncertain tax positions in the income tax expense in the consolidated
statements of income. Accrued interest and penalties, if any, are included within accrued
expenses on the consolidated balance sheets. In accordance with ASC 740, Income Taxes,
the Company recognizes the effect of income tax positions only if those positions have
a more-likely-than-not chance of being sustained by the Company. Recognized income
tax positions are measured at the largest amount that is greater than 50% likely of being
realized. Changes in recognition or measurement are reflected in the period in which the
change in judgment occurs.
GHO HOMES - TIMBERLAKE, VERO BEACH, FL
Fair Value Measurements
The Company has adopted and implemented the provisions of ASC 820-10, Fair Value
Measurements, with respect to fair value measurements of: all elected financial assets and
liabilities and any nonfinancial assets and liabilities that are recognized or disclosed in the
consolidated financial statements at fair value on a recurring basis (at least annually). Under
ASC 820-10, fair value is defined as an exit price, or the amount that would be received
to sell an asset or paid to transfer a liability in an orderly transaction between market
participants as of the measurement date. These provisions establish a three-tiered fair value
hierarchy that prioritizes inputs to valuation techniques used in fair value calculations. The
three levels of input are defined as follows:
Level 1 — unadjusted quoted prices for identical assets or liabilities in active markets
accessible by the Company;
Level 2 — inputs that are observable in the marketplace other than those classified as Level
1; and
Level 3 — inputs that are unobservable in the marketplace and significant to the valuation.
Entities are encouraged to maximize the use of observable inputs and minimize the use of
unobservable inputs. If a financial instrument uses inputs that fall in different levels of the
hierarchy, the instrument will be categorized based upon the lowest level of input that is
significant to the fair value calculation.
Our valuation methods may produce a fair value calculation that may not be indicative of
net realizable value or reflective of future fair values. Furthermore, while we believe our
valuation methods are appropriate and consistent with other market participants, the use
of different methodologies or assumptions to determine the fair value of certain financial
instruments could result in a different fair value measurement at the reporting date.
Transfers between levels of the fair value hierarchy are deemed to have occurred on the
date of the event or change in circumstances that caused the transfer.
Segment Information
In accordance with ASC 280, Segment Reporting (“ASC 280”), an operating segment is
defined as a component of an enterprise for which discrete financial information is available
and reviewed regularly by the chief operating decision maker (“CODM”), or decision-making
group, to evaluate performance and make operating decisions.
A reportable segment is an operating segment, either separately defined or aggregated
from several operating segments based on similar economic and other characteristics, that
exceeds certain quantitative thresholds of ASC 280.
79
The Company identifies its CODM as three key executives - the Chief Executive Officer,
the Chief Financial Officer, and the Chief Operating Officer, who was promoted from his
previous role as President of the Texas Region effective September 10, 2020. In determining
the reportable segments, the CODM considers similar economic and other characteristics,
including geography, class of customers, product types, and production processes.
Recent Accounting Pronouncements
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic
326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which
changes the impairment model for most financial assets and certain other instruments from
an “incurred loss” approach to an “expected credit loss” methodology. The Company adopted
the standard on January 1, 2020 using the full retrospective application. The adoption of
ASU 2016-13 had no impact on the Company’s consolidated financial statements.
In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic
350): Simplifying the Test for Goodwill Impairment (“ASU 2017-04”), which removes Step
2 of the goodwill impairment test. A goodwill impairment will now be determined by the
amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the
carrying amount of goodwill. The Company adopted the standard on January 1, 2020. The
adoption of ASU 2017-04 had no financial impact on the Company’s consolidated financial
statements.
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying
Accounting for Income Taxes (“ASU 2019-12”), which simplifies the accounting for income
taxes by eliminating certain exceptions to the guidance in ASC 740, Income Taxes related to
the approach for intraperiod tax allocation, the methodology for calculating income taxes in
an interim period and the recognition of deferred tax liabilities for outside basis differences.
ASU 2019-12 also simplifies aspects of the accounting for franchise taxes and enacted
changes in tax laws or rates and clarifies the accounting for transactions that result in a step-
up in the tax basis of goodwill. ASU 2019-12 is effective for annual reporting periods, and
interim periods therein, beginning after December 15, 2020, with early adoption permitted.
The Company does not expect the adoption of ASU 2019-12 to have a material impact on
the Company’s consolidated financial statements.
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INTANGIBLE ASSETS, GOODWILL, CONTINGENT CONSIDERATION, AND
2.
REDEEMABLE NONCONTROLLING INTEREST
Intangible Assets
On April 26, 2018 (the “Acquisition Date”), following a series of transactions, the Company
acquired substantially all of the assets and assumed certain liabilities of GHO Homes
Corporation and its affiliates (“GHO”) through a newly formed subsidiary, GRBK GHO
Homes, LLC (“GRBK GHO”), in which the Company holds an 80% controlling interest.
Intangible assets related to the acquired trade name were recognized in this business
combination. The amortization of the acquired intangible assets of $0.2 million for the
period from April 26, 2018 through December 31, 2018 was recorded in selling, general
and administrative expense in the consolidated statements of income. The accumulated
amortization of the acquired intangible assets was $0.2 million as of December 31, 2018. The
amortization of the acquired trade name of $0.1 million for each of the years ended December
31, 2020 and 2019, respectively, was recorded in selling, general and administrative expense
in the consolidated statements of income. The accumulated amortization of the acquired
trade name was $0.2 million and $0.1 million as of December 31, 2020 and December 31,
2019, respectively. The estimated amortization expense related to the acquired trade name
for each of the next five years as of December 31, 2020 is as follows (in thousands):
2021
2022
2023
2024
2025
Total
$ 85
85
85
85
85
$ 425
Goodwill
The allocation to goodwill represents the excess of the purchase price, including contingent
consideration, over the estimated fair value of assets acquired and liabilities assumed.
Goodwill results primarily from operational synergies expected from the business
combination. The Company performed its annual goodwill impairment testing during the
fourth quarter of 2020 by first completing a qualitative assessment in accordance with ASC
350. The Company determined that it was not more likely than not that the reporting unit’s
estimated fair value was less than its carrying value and, therefore, a quantitative impairment
test was unnecessary. The Company did not record any goodwill impairment during the
years ended December 31, 2020, 2019 and 2018.
Contingent Consideration
In connection with this business combination, the Company may be obligated to pay
contingent consideration to our partner if certain annual performance targets are met over
the three-year period following the Acquisition Date. The performance targets specified in
the purchase agreement were met for the period from April 26, 2018 through December
31, 2018, and contingent consideration of $1.8 million was earned by the minority partner
and paid by the Company in April 2019 in addition to a $0.5 million distribution of income.
The performance targets specified in the purchase agreement were met for the period from
January 1, 2019 through December 31, 2019, and the contingent consideration of $5.3
million was earned by the minority partner and paid by the Company in April 2020 in addition
to a $1.5 million distribution of income. The performance targets specified in the purchase
agreement were met for the period from January 1, 2020 through December 31, 2020,
and the contingent consideration of $0.4 million was earned by the minority partner. As of
December 31, 2020, the estimate of the undiscounted contingent consideration payouts
for the period from January 1, 2021 through April 26, 2021 was $0.0 million. The change in
the range of estimates of the undiscounted contingent consideration compared to the range
of estimates disclosed in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2018 was due to revision of the Company’s forecasts of GRBK GHO profits
and capital requirements.
Redeemable Noncontrolling Interest in Equity of Consolidated Subsidiary
As part of the GRBK GHO business combination, we entered into a put/call agreement
(“Put/Call Agreement”) with respect to the equity interest in the joint venture held by the
minority partner. The Put/Call Agreement provided that the 20% ownership interest in
GRBK GHO held by the minority partner would be subject to put and purchase options
starting in April 2024. The exercise price would be based on the financial results of GRBK
GHO for the three years prior to exercise of the option. If the minority partner does not
exercise the put option, we have the option, but not the obligation, to buy the 20% interest
in GRBK GHO from our partner.
Based on the nature of the put/call structure, the noncontrolling interest attributable to
the 20% minority interest owned by our Florida-based partner is included as redeemable
noncontrolling interest in equity of consolidated subsidiary in the Company’s consolidated
financial statements.
The following table shows the changes in redeemable noncontrolling interest in equity of
consolidated subsidiary during the year ended December 31, 2020 (in thousands):
YEARS ENDED DECEMBER 31,
2020
2019
Redeemable noncontrolling interest, beginning of period
$ 13,611
$ 8,531
Net income attributable to redeemable noncontrolling interest partner
2,377
Distributions of income to redeemable noncontrolling interest partner
Change in fair value of redeemable noncontrolling interest
(1,505)
(940)
3,462
(527)
2,145
Redeemable noncontrolling interest, end of period
$ 13,543
$ 13,611
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3. VARIABLE INTEREST ENTITIES
Effective November 30, 2019, we, through our wholly owned subsidiary, SGHDAL LLC
(“Southgate”), acquired the remaining membership and voting interests in our subsidiary,
Southgate Homes DFW LLC. As a result, Southgate became an indirect wholly owned
subsidiary of the Company, was no longer considered a VIE and was consolidated based on
the majority voting interest pursuant to ASC 810.
builder has the power to direct the activities that significantly impact the controlled builder’s
economic performance. Pursuant to the Company’s agreement with this controlled builder,
the Company has the ability to appoint two of the three members to the controlled builder’s
board of managers. A majority of the board of managers constitutes a quorum to transact
business. No action can be approved by the board of managers without the approval from at
least one individual whom the Company has appointed at the controlled builder.
Effective December 31, 2019, we, through our wholly owned subsidiary, CLH20, LLC
(“Centre Living”), acquired the remaining membership and voting interests in our subsidiary,
Centre Living Homes, LLC, and we contributed certain real estate inventory assets to Centre
Living. As both Centre Living, to which ownership interests were assigned and assets and
liabilities were transferred, and Centre Living Homes, LLC were controlled by the Company
on December 31, 2019, the acquisition of the remaining membership interest and the
contribution of the real estate inventory assets were accounted for at carrying amounts on
Centre Living Homes, LLC’s books on the date of the transfer, pursuant to provisions of ASC
805 that govern transactions between entities under common control.
The Company has the ability to control the activities of the controlled builder that most
significantly impact the controlled builder’s economic performance. Such activities include,
but are not limited to, involvement in the day to day capital and operating decisions, the
ability to determine the budget and plan, the ability to control financing decisions, and the
ability to acquire additional land or dispose of land. In addition, the Company has the right
to receive the expected residual returns and obligation to absorb the expected losses of
the controlled builder through the pro rata profits and losses we are allocated based on
our ownership interest. Therefore, the financial statements of the Atlanta-based controlled
builder are consolidated in the Company’s consolidated financial statements following the
variable interest model.
Subsequently, the prior owner of a portion of the membership and voting interests in
Centre Living Homes, LLC acquired a ten percent membership and voting interest in Centre
Living for $3.6 million. As a result, as of December 31, 2019, Centre Living was an indirect
subsidiary in which the Company owned a ninety percent membership interest and a ninety
percent voting interest, was no longer considered a VIE and was consolidated based on the
majority voting interest pursuant to ASC 810. During the three months ended March 31,
2020, the minority interest owner made a $0.4 million cash contribution to Centre Living.
The aggregated carrying amounts of assets and liabilities of TPG following the variable
interest model were $131.9 million and $125.5 million, respectively, as of December 31,
2020 and $126.8 million and $116.8 million, respectively, as of December 31, 2019. The
noncontrolling interest attributable to the 50% minority interest owned by the Atlanta-based
controlled builder was included as noncontrolling interests in the Company’s consolidated
financial statements. The creditors of the above controlled builder have no recourse against
the Company.
On April 29, 2020, through a series of transactions, the Company acquired the remaining
membership and voting interests in our subsidiary, CB JENI Homes DFW LLC (“CB JENI”).
As a result, CB JENI became an indirect wholly owned subsidiary of the Company, was no
longer considered a VIE and was consolidated based on the majority voting interest pursuant
to ASC 810. As both the entity wholly owned by the Company to which CB JENI ownership
interests were assigned and CB JENI were controlled by the Company on April 29, 2020, the
acquisition of the remaining membership interest was accounted for at the carrying amounts
on CB JENI’s books, pursuant to provisions of ASC 805 that govern transactions between
entities under common control.
Consolidated VIEs
The Providence Group of Georgia LLC (“TPG”), the controlled builder based in Atlanta, in
which the Company owns a 50% equity interest, is deemed to be a VIE for which the Company
is considered the primary beneficiary. We sell finished lots and option lots from third-party
developers to this controlled builder for their homebuilding operations and provide them
with construction financing and strategic planning. The board of managers of this controlled
Unconsolidated VIEs
Please refer to Note 5 for information on the Company’s VIE evaluation of its joint ventures
with EJB River Holdings, LLC and GBTM Sendera, LLC.
Land and lot option purchase contracts
The Company evaluates all option contracts to purchase land and lots to determine whether
they are VIEs and, if so, whether the Company is the primary beneficiary of counterparts
of these option contracts. Although the Company does not have legal title to the optioned
land or lots, if the Company is deemed to be the primary beneficiary of or makes a significant
deposit for optioned land or lots, it may need to consolidate the land or lots under option at
the purchase price of the optioned land or lots.
As of December 31, 2020 and 2019, the Company’s exposure to loss related to its option
contracts with third parties primarily consisted of its non-refundable option deposits.
Following VIE evaluation, it was concluded that the Company was not the primary beneficiary
in any of the VIEs related to land or lot option contracts as of December 31, 2020 and 2019.
82
4. INVENTORY
A summary of inventory is as follows (in thousands):
Homes completed or under construction
$ 356,706
$ 314,966
DECEMBER 31, 2020 DECEMBER 31, 2019
5. INVESTMENTS IN UNCONSOLIDATED ENTITIES
A summary of the Company’s investments in unconsolidated entities is as follows (in
thousands):
GB Challenger, LLC
$ 29,488
$2 3,822
DECEMBER 31, 2020 DECEMBER 31, 2019
Land and lots - developed and under development
482,371
437,553
GBTM Sendera, LLC
Land held for sale
Total inventory
5,558
1,048
EJB River Holdings, LLC
Green Brick Mortgage, LLC
$ 844,635
$ 753,567
BHome Mortgage, LLC
Providence Group Title, LLC
9,846
5,296
1,207
606
—
—
5,299
1,124
—
49
A summary of interest costs incurred, capitalized and expensed is as follows (in thousands):
Total inventory
$ 46,443
$ 30,294
YEARS ENDED DECEMBER 31,
2020
2019
2018
Interest capitalized at beginning of period
$ 18,596
$ 14,780
$ 10,474
Interest incurred
9,823
12,140
9,003
Interest charged to cost of revenues
(10,899)
(8,324)
(4,697)
Interest capitalized at end of period
$ 17,520
$ 18,596
$ 14,780
As of December 31, 2020, the Company reviewed the performance and outlook for all of
its communities for indicators of potential impairment and performed detailed impairment
analysis when necessary. As of December 31, 2020, the Company performed further
impairment analysis of the selling communities with indicators of impairment with a
combined corresponding carrying value of approximately $2.8 million.
For the years ended December 31, 2020, 2019 and 2018, the Company recorded a de
minimis impairment adjustment, $0.1 million, and $0.1 million, respectively, to reduce the
carrying value of impaired communities to fair value. The recorded impairment adjustments
related to real estate inventory in our builder operations segments and were included in
cost of residential units in our consolidated statements of income.
Challenger
The Company holds two of the five board of managers (the “Managers”) seats of GB
Challenger, LLC (“Challenger”). Challenger’s six officers, who are employees of the
Challenger entities, were designated by the Managers for the purpose of managing the
day to day operations. The Company does not have a controlling financial interest in
Challenger as the Company has less than 50% of the voting interests in Challenger. The
Company’s investment in Challenger is treated as an unconsolidated investment under the
equity method of accounting and is included in investments in unconsolidated entities in
the Company’s consolidated balance sheets. The Company’s investment in Challenger is
carried at cost, as adjusted for the Company’s share of income or losses and distributions
received, as well as for adjustments related to basis differences between the Company’s
cost and the Company’s underlying equity in net assets recorded in Challenger’s financial
statements as of the date of acquisition.
As of December 31, 2020, the carrying value of the investment in Challenger was $29.5
million, whereas the underlying 49.9% equity in net assets of Challenger was $26.5
million. The $3.0 million difference represents the premium paid for the Company’s equity
interest in excess of Challenger’s carrying value. This basis difference primarily relates to
the estimated fair value of inventory, as well as the Challenger Homes trade name and
capitalized acquisition costs. The amortization of the basis differences related to inventory
is recorded as a reduction of equity in income of unconsolidated entities as homes are
closed on and delivered to homebuyers. The basis difference related to the trade name
is amortized over ten years as a reduction of equity in income of unconsolidated entities.
The Company recognized $11.9 million, $8.3 million, and $7.0 million related to Challenger
in equity in income of unconsolidated entities during the years ended December 31, 2020,
2019, and 2018, respectively.
Providence Title
In March 2018, the Company formed a joint venture with a title company in Georgia to
provide title closing and settlement services to our Atlanta-based builder. The Company,
through its controlled builder, The Providence Group of Georgia, L.L.C. (“TPG”), owned a
49% equity interest in Providence Group Title, LLC (“Providence Title”). The Company’s
investment in Providence Title was treated as an unconsolidated investment under the
equity method of accounting and included in investments in unconsolidated entities in
the Company’s consolidated balance sheets. In December 2020, this joint venture was
terminated and the Company incurred a de minimis loss upon dissolution.
Green Brick Mortgage
In June 2018, the Company formed a joint venture with PrimeLending to provide mortgage
loan origination services to our builders. The Company owns a 49% equity interest in
Green Brick Mortgage, LLC (“Green Brick Mortgage”) which initiated mortgage loan
origination activities in September 2018. The Company determined that the investment
in Green Brick Mortgage should be treated as an unconsolidated investment under the
equity method of accounting and included in investments in unconsolidated entities in the
Company’s consolidated balance sheets. On September 1, 2020, the Company increased
its ownership interest in GRBK Mortgage, LLC from 49.00% to 49.99%.
EJB River Holdings
In December 2018, EJB River Holdings joint venture was formed by TPG with the purpose
to acquire and develop a tract of land in Gwinnett County, Georgia to be called Waterside.
In May 2019, East Jones Bridge, LLC, a Georgia limited liability company (“EJB”) was
admitted as a member of EJB River Holdings, which resulted in TPG and EJB each having
a 50% ownership interest in EJB River Holdings. EJB River Holdings had no activity in the
period from its formation until October 2019.
In October 2019, EJB River Holdings received two $5.0 million initial contributions from
its two members, TPG and EJB. In December 2019, two additional contributions of $0.3
million were made by TPG and EJB to EJB River Holdings. Per EJB River Holdings’ operating
agreement, TPG and EJB share equally in the profits and losses of EJB River Holdings, with
the exception of certain customary fees.
In October 2019, EJB River Holdings issued two loans with the total maximum amount of
borrowings of $21.9 million to finance its land acquisition and development in Gwinnett
County, Georgia. One of the investors in EJB issued a personal guarantee on one of the
loans in the amount of $9.4 million. Subsequently, in October 2019, a wholly owned
subsidiary of the Company provided a limited $2.0 million guarantee to the investor in
EJB. The approximate term of the guarantee is 35 months. In the event EJB River Holdings
defaults on its $9.4 million loan and the investor in EJB makes the $9.4 million payment
under his personal guarantee, the maximum potential amount of future payments that
the Company could be required to make under its limited guarantee is $2.0 million. As
83
of December 31, 2020, the Company has no current liability related to the guarantee
obligation as the payment risk of the guarantee has been assessed to be very low.
Following the analysis of the above facts and provisions of EJB River Holdings’ operating
agreement, the Company has determined that EJB River Holdings is a VIE in which the
Company is not the primary beneficiary. Therefore, the investment in EJB River Holdings
was treated as an unconsolidated investment under the equity method of accounting and
was included in investments in unconsolidated entities in the Company’s consolidated
balance sheets.
As of December 31, 2020, the carrying amounts of assets and liabilities of EJB River
Holdings were $29.2 million and $18.6 million, respectively. Assets were comprised of
real estate inventory and cash, whereas the liabilities were comprised of loans and interest
payable. As of December 31, 2020, the Company’s maximum exposure to loss as a result
of its involvement with EJB River Holdings was $7.3 million, represented by the sum of the
Company’s investment in EJB River Holdings of $5.3 million and the $2.0 million limited
guarantee described above.
BHome Mortgage
In May 2020, we established a joint venture, BHome Mortgage, LLC (“BHome Mortgage”)
with First Continental Mortgage, Ltd., to provide mortgage related services to homebuyers.
The Company owns 49.0% in BHome Mortgage. In May 2020, BHome Mortgage received
initial capital contributions of approximately $0.5 million from its two members in
accordance with their membership interest.
The Company determined that the investment in BHome Mortgage should be treated
as an unconsolidated investment under the equity method of accounting and included
in investments in unconsolidated entities in the Company’s consolidated balance sheets.
CHALLENGER HOMES - REVEL AT WOLF RANCH, COLORADO SPRINGS, CO
84
GBTM Sendera, LLC
In August 2020, GBTM Sendera, LLC joint venture (“GBTM Sendera”) was formed by
GRBK Edgewood, LLC (“GRBK Edgewood”) and TM Sendera, LLC (“TM Sendera”) with the
purpose to acquire and develop a tract of land in Fort Worth,Texas. Each party holds a 50%
ownership interest in GBTM Sendera. GBTM Sendera had no activity in the period but it
is expected to begin its operations in the first quarter of 2021.
Liabilities:
Accounts payable
Accrued expenses and other liabilities
In August 2020, GBTM Sendera received two $9.0 million initial contributions from each
of its two members, GBRK Edgewood and TM Sendera. Per the GBTM Sendera company
agreement, GRBK Edgewood and TM Sendera share equally in the profits and losses of
GBTM Sendera, with the exception of certain customary fees.
Following the analysis of the above facts and provisions of the GBTM Sendera company
agreement, the Company has determined that GBTM Sendera is a joint venture to be
evaluated under the voting interest model. Therefore, the investment in GBTM Sendera
is treated as an unconsolidated investment under the equity method of accounting and is
included in investments in unconsolidated entities in the Company’s consolidated balance
sheets.
As of December 31, 2020, the carrying amount of GBTM Sendera net assets was $19.7
million. Assets were comprised of real estate inventory and cash, whereas the liabilities
were comprised of accounts payable. As of December 31, 2020, the Company’s maximum
exposure to loss as a result of its involvement with GBTM Sendera was $9.8 million,
represented by the sum of the Company’s investment in GBTM Sendera of $9.0 million and
an additional $0.8 million contribution made each by GBRK Edgewood and TM Sendera.
A summary of the financial information of the unconsolidated entities that are accounted
for by the equity method, as described above, is as follows (in thousands):
DECEMBER 31, 2020 DECEMBER 31, 2019
Notes payable
Total liabilities
Owners’ equity:
Green Brick
Others
Total owners’ equity
Total liabilities and owners’ equity
DECEMBER 31, 2020 DECEMBER 31, 2019
$ 7,171
11,148
60,642
$ 1,726
7,784
58,223
$ 78,961
$ 67,733
$ 43,451
43,836
$ 87,287
$ 166,248
$ 25,910
28,031
$ 53,941
$ 121,674
YEARS ENDED DECEMBER 31,
2020
2019
2018
Revenues
$ 181,724
$ 166,368
$ 166,102
Costs and expenses
145,525
144,097
148,222
Net earnings of unconsolidated entities
$ 36,199
$ 22,271
$ 17,880
Company’s share in net earnings of unconsolidated
entities
$ 16,654
$ 9,809
$ 7,259
A summary of the Company’s share in net (losses) earnings by unconsolidated entity is as
follows (in thousands):
Assets:
Cash
Accounts receivable
Bonds and notes receivable
Loans held for sale, at fair value
Inventory
Other Assets
Total assets
$ 12,765
$ 11,699
1,815
5,942
14,530
122,819
8,377
3,252
5,864
23,143
73,704
4,012
$ 166,248
$ 121,674
GB Challenger, LLC
Green Brick Mortgage, LLC
Providence Group Title, LLC
EJB River Holdings, LLC
BHome Mortgage, LLC
GBTM Sendera, LLC
Total net earnings from unconsolidated entities
YEARS ENDED DECEMBER 31,
2020
2019
$ 11,899
$ 8,309
4,727
12
(2)
18
—
1,053
448
(1)
—
—
$ 16,654
$ 9,809
Summary of financial information of the unconsolidated entities continued on right
During the years ended December 31, 2020, 2019, and 2018, the Company did not
identify indicators of impairment for its investments in unconsolidated entities.
6. PROPERTY AND EQUIPMENT
The following is a summary of property and equipment by major classification and related
accumulated depreciation as of December 31, 2020 and 2019 (in thousands):
DECEMBER 31, 2020 DECEMBER 31, 2019
Land
Building
Model home furnishings and capitalized sales
office costs
Office furniture and equipment
Leasehold improvements
Computers and equipment
Vehicles and field trailers
Less: accumulated depreciation
Total property and equipment, net
$ —
—
7,362
486
1,996
724
561
11,129
(7,534)
$ 3,595
$ 763
180
6,090
424
1,824
912
357
10,550
(6,241)
$ 4,309
Depreciation expense for the years ended December 31, 2020, 2019 and 2018 totaled
$3.6 million, $2.9 million, and $2.7 million, respectively, and is included in selling, general
and administrative expense in our consolidated statements of income.
2021
2022
2023
2024
2025
Thereafter
Total
$ 11,434
35,585
60,981
12,500
12,500
87,500
$ 220,500
Lines of Credit
Borrowings on lines of credit outstanding, net of debt issuance costs, as of December 31,
2020 and 2019 consist of the following (in thousands):
Secured Revolving Credit Facility
Unsecured Revolving Credit Facility
Debt issuance costs, net of amortization
DECEMBER 31, 2020 DECEMBER 31, 2019
$ 7,000
101,000
(1,313)
$ 38,000
128,000
(1,358)
Total borrowings on lines of credit, net
$ 106,687
$ 164,642
85
CB JENI HOMES - THE CANALS AT GRAND PARK, FRISCO, TX
86
Secured Revolving Credit Facility
On July 30, 2015, the Company entered into a secured revolving credit facility (the
“Secured Revolving Credit Facility”) with Inwood National Bank, which initially provided for
up to $50.0 million. Amounts outstanding under the Secured Revolving Credit Facility are
secured by mortgages on real property and security interests in certain personal property
(to the extent that such personal property is connected with the use and enjoyment of the
real property) that is owned by certain of the Company’s subsidiaries.
On May 22, 2020, the Company amended the Secured Credit Facility to reduce the
aggregate commitment amount of $75.0 million to $35.0 million. Amounts outstanding
under the Secured Revolving Credit Facility are secured by mortgages on real property and
security interests in certain personal property (to the extent that such personal property is
connected with the use and enjoyment of the real property) that is owned by certain of the
Company’s subsidiaries. The entire unpaid principal balance and any accrued but unpaid
interest is due and payable on the maturity date. As of December 31, 2020, the maturity
date of the Secured Revolving Credit Facility was May 1, 2022. As of December 31,
2020, letters of credit outstanding totaling $1.5 million reduced the aggregate maximum
commitment amount to $33.5 million.
As of December 31, 2020, outstanding borrowings under the amended Secured Revolving
Credit Facility bear interest payable monthly at a floating rate per annum equal to the
rate announced by Bank of America, N.A., from time to time, as its “Prime Rate” (the
“Index”) with such adjustments to the interest rate being made on the effective date of
any change in the Index, less 0.25%. Notwithstanding the foregoing, the interest may not,
at any time, be less than 4% per annum or more than the lesser amount of 18% and the
highest maximum rate allowed by applicable law. As of December 31, 2020, the interest
rate on outstanding borrowings under the Secured Revolving Credit Facility was 4.00%
per annum. As of December 31, 2020, the amended Secured Revolving Credit Facility was
subject to a borrowing base limitation equal to the sum of 50% of the total value of land
and 65% of the total value of lots owned by certain of the Company’s subsidiaries, each
as determined by an independent appraiser, with the value of land being restricted from
being more than 65% of the borrowing base. As of December 31, 2020, the amended
Secured Revolving Credit Facility was also subject to a non-usage fee equal to 0.25% of
the average unfunded amount of the commitment amount over a trailing 12 month period.
Under the terms of the amended Secured Revolving Credit Facility, the Company is
required, among other things, to maintain minimum multiples of tangible net worth in
excess of the outstanding Secured Revolving Credit Facility balance, minimum interest
coverage and maximum leverage. The Company was in compliance with these financial
covenants under the Secured Revolving Credit Facility as of December 31, 2020.
Facility amendments. These costs are deferred and reduce the carrying amount of debt in
our consolidated balance sheets. The Company capitalizes these costs to inventory over
the term of the Secured Revolving Credit Facility using the straight-line method.
Unsecured Revolving Credit Facility
On December 15, 2015, the Company entered into a credit agreement (the “Credit
Agreement”) with Citibank, N.A. and Credit Suisse AG, Cayman Islands Branch (“Credit
Suisse”) as lenders, and Citibank, N.A. as administrative agent, providing for a senior,
unsecured revolving credit facility with initial aggregate lending commitments of up to
$40.0 million (the “Unsecured Revolving Credit Facility”).
The Unsecured Revolving Credit Facility provides for interest rate options on advances at
rates equal to either: (a) in the case of base rate advances, the highest of (1) Citibank’s base
rate, (2) the federal funds rate plus 0.5%, and (3) the one-month LIBOR plus 1.0%, in each
case plus 1.5%; or (b) in the case of Eurodollar rate advances, the reserve adjusted LIBOR
plus 2.5%. Interest on amounts borrowed under the Unsecured Revolving Credit Facility
is payable in arrears on a monthly basis. As of December 31, 2020, the interest rates on
outstanding borrowings under the Unsecured Revolving Credit Facility ranged from 2.64%
to 2.65% per annum. The Company pays the lenders a commitment fee on the amount of
the unused commitments on a quarterly basis at a rate per annum equal to 0.45%.
Outstanding borrowings under the Unsecured Revolving Credit Facility are subject to,
among other things, a borrowing base. The borrowing base limitation is equal to the sum
of: 100% of unrestricted cash in excess of $15.0 million; 85% of the book value of model
homes, construction in progress homes, completed sold and speculative homes (subject to
certain limitations on the age and number of speculative homes and model homes); 65%
of the book value of finished lots and land under development; and 50% of the book value
of entitled land (subject to certain limitations on the value of entitled land and land under
development as a percentage of the borrowing base).
Following amendments to the Credit Agreement and the addition of Flagstar Bank,
FSB (“Flagstar Bank”), JPMorgan Chase Bank, N.A. (“JPMorgan”) and Chemical Financial
Corporation (“Chemical”) as lenders, the aggregate lending commitment available under
the Unsecured Revolving Credit Facility as of December 31, 2020 was $265.0 million,
the maximum aggregate amount of the Unsecured Revolving Credit Facility was $275.0
million, and the termination date with respect to commitments under the Unsecured
Revolving Credit Facility was December 14, 2021 for $30.0 million, December 14, 2022
for $75.0 million and December 14, 2023 for $160.0 million out of the aggregate lending
commitment of $265.0 million.
De minimis fees and other debt issuance costs were incurred during each of the years
ended December 31, 2020, 2019 and 2018, associated with the Secured Revolving Credit
Fees and other debt issuance costs of $0.5 million, $0.3 million and $0.9 million were
incurred during the years ended December 31, 2020, 2019 and 2018, respectively,
associated with the amendments, term extensions and increases in lenders’ commitments.
87
These costs are deferred and reduce the carrying amount of debt in our consolidated
balance sheets. The Company capitalizes these costs to inventory over the term of the
Unsecured Revolving Credit Facility using the straight-line method.
Based on the unprecedented disruptions to the credit and economic markets arising from
the COVID-19 pandemic, we drew the full amount of our Unsecured Revolving Credit
Facility during the three months ended March 31, 2020. During the three months ended
June 30, 2020, we paid our Unsecured Revolving Credit Facility down to prior levels once
it was apparent that the Company’s access to liquidity in the financial markets was not
compromised. Under the terms of the Unsecured Revolving Credit Facility, the Company
is required to maintain compliance with various financial covenants, including a maximum
leverage ratio, a minimum interest coverage ratio, and a minimum consolidated tangible
net worth. The Company was in compliance with these financial covenants under the
Unsecured Revolving Credit Facility as of December 31, 2020.
Senior Unsecured Notes
On August 8, 2019, the Company issued $75.0 million aggregate principal amount of
senior unsecured notes due on August 8, 2026 at a fixed rate of 4.00% per annum to
Prudential Private Capital in a Section 4(a)(2) private placement transaction and received
net proceeds of $73.3 million. A brokerage fee of approximately $1.5 million associated
with the issuance was paid at closing. The brokerage fee, and other debt issuance costs
of approximately $0.2 million, were deferred and reduced the amount of debt on our
consolidated balance sheet. The Company used the net proceeds from the issuance of
the senior unsecured notes to repay borrowings under the Company’s existing revolving
credit facilities.
Principal on the senior unsecured notes is required to be paid in increments of $12.5 million
on August 8, 2024 and $12.5 million on August 8, 2025. The final principal payment of
$50.0 million is due on August 8, 2026. Optional prepayment is allowed with payment of
a “make-whole” premium which fluctuates depending on market interest rates. Interest is
payable quarterly in arrears commencing November 8, 2019.
On August 26, 2020, the Company entered into a Note Purchase Agreement with The
Prudential Insurance Company of America and Prudential Universal Reinsurance Company
to issue a $37.5 million aggregate principal amount of senior unsecured notes due on
August 26, 2027 at a fixed rate of 3.35% per annum in a Section 4(a)(2) private placement
transaction. The Company received net proceeds of $37.4 million and incurred debt
issuance costs of approximately $0.1 million that were deferred and reduced the amount
of debt on our consolidated balance sheet. The Company used the net proceeds from the
issuance of the Notes to repay borrowings under the Company’s existing revolving credit
facilities and for general corporate purposes. Interest is payable quarterly in arrears and
commenced on November 26, 2020.
Under the terms of the senior unsecured notes, the Company is required, among other
things, to maintain compliance with various financial covenants, including maximum
leverage ratios, a minimum interest coverage ratio, and a minimum consolidated tangible
net worth. The Company was in compliance with these financial covenants under the Senior
Unsecured Notes as of December 31, 2020. The senior unsecured notes are guaranteed
on an unsecured senior basis by the Company’s significant subsidiaries and certain other
subsidiaries. The senior unsecured notes will rank equally in right of payment with all of
the Company’s existing and future senior unsecured and unsubordinated indebtedness.
CB JENI HOMES - SILVERADO, MCKINNEY, TX
88
8. STOCKHOLDERS’ EQUITY
Common Stock
Pursuant to the Company’s amended and restated certificate of incorporation (“Certificate
of Incorporation”), the Company is authorized to issue up to 100,000,000 shares of common
stock, par value $0.01 per share. As of December 31, 2020, there were 51,053,858 shares
of common stock issued and 50,661,919 outstanding.
On March 16, 2018, 20,000 shares of common stock were issued as additional consideration
for the investment in Challenger upon resolution of terms for such holdback shares.
Preferred Stock
Pursuant to the Company’s Certificate of Incorporation, the Company is authorized to
issue up to 5,000,000 shares of preferred stock, par value $0.01 per share. The Board
of Directors (the “Board”) has the authority, subject to any limitations imposed by law or
Nasdaq rules, without further action by the stockholders, to issue such preferred stock
in one or more series and to fix the voting powers (if any), the preferences and relative,
participating, optional or other special rights or privileges, if any, of such series and the
qualifications, limitations or restrictions thereof. These rights, preferences and privileges
may include, but are not limited to, dividend rights, conversion rights, voting rights, terms
of redemption, liquidation preferences, sinking fund terms and the number of shares
constituting any series or the designation of that series. As of December 31, 2020, there
were no shares of preferred stock issued and outstanding.
Share Repurchase Programs
In October 2018, the Company’s Board authorized a share repurchase program for the
period beginning on October 3, 2018 and ending on October 3, 2020 of the Company’s
common stock for an aggregate price not to exceed $30.0 million (the “2018 Share
Repurchase Program”). The timing, volume and nature of share repurchases are at the
discretion of management and dependent on market conditions, corporate and regulatory
requirements, available cash and other factors, and may be suspended or discontinued
at any time. Authorized repurchases may be made from time to time in the open market,
through block trades or in privately negotiated transactions. No assurance can be given
that any particular amount of common stock will be repurchased. All or part of the
repurchases may be implemented under a trading plan under Rule 10b5-1 or Rule 10b-18
established by the SEC, which would allow repurchases under pre-set terms at times when
the Company might otherwise be prevented from doing so under insider trading laws
or because of self-imposed blackout periods. This repurchase program may be modified,
extended or terminated by the Board at any time. The Company intends to finance any
repurchases with available cash and proceeds from borrowings under lines of credit.
In December 2018, the Company repurchased 136,756 shares for approximately $1.0
million. On December 31, 2018, the Company’s Board authorized implementation of share
repurchases in accordance with a trading plan under Rule 10b5-1 (the “December 2018
Trading Plan”) within the 2018 Share Repurchase Program. The trading plan was effective
from January 2, 2019 until March 30, 2019. In January 2019, the Company repurchased
7,862 shares for approximately $0.1 million under the December 2018 Trading Plan.
In June 2019, the Company’s Board authorized discrete repurchases under the 2018 Share
Repurchase Program of 39,320 shares for approximately $0.3 million. On June 27, 2019,
the Company’s Board authorized implementation of share repurchases in accordance with
a trading plan under Rule 10b5-1 (the “June 2019 Trading Plan”) within the 2018 Share
Repurchase Program. The trading plan was effective from July 1, 2019 until August 5,
2019. In July 2019, the Company repurchased 144,584 shares for approximately $1.2
million under the June 2019 Trading Plan.
In September 2019, the Company’s Board authorized discrete repurchases under the 2018
Share Repurchase Program of 63,417 shares for approximately $0.6 million. The 2018
Share Repurchase Program expired on October 3, 2020. No shares were repurchased
during the year ended December 31, 2020.
THE PROVIDENCE GROUP - EAST OF MAIN, ALPHARETTA, GA
9. SHARE-BASED COMPENSATION
2014 Omnibus Equity Incentive Plan
On October 17, 2014, the Company’s stockholders approved the Green Brick Partners,
Inc. 2014 Omnibus Equity Incentive Plan (the “2014 Equity Plan”). The purpose of the
2014 Equity Plan is to provide a means for the Company to attract and retain key personnel
and to provide a means whereby current and prospective directors, officers, employees,
consultants and advisors can acquire and maintain an equity interest in the Company, or
be paid incentive compensation, which may (but need not) be measured by reference
to the value of the Company’s common stock, thereby strengthening their commitment
to the welfare of the Company and aligning their interests with those of the Company’s
stockholders. The 2014 Equity Plan will terminate automatically on the tenth anniversary
of the date it became effective. No awards will be granted under the 2014 Equity Plan
after that date, but awards granted prior to that date may extend beyond that date.
Under the 2014 Equity Plan, awards of stock options, including both incentive stock
options and nonqualified stock options, stock appreciation rights, restricted stock and
restricted stock units, other share-based awards and performance compensation awards,
may be granted. The maximum number of shares of the Company’s common stock that
is authorized and reserved for issuance under the 2014 Equity Plan is 2,350,956 shares,
subject to adjustment for certain corporate events or changes in the Company’s capital
structure.
In general, the Company’s employees or those reasonably expected to become the
Company’s employees, consultants and directors, are eligible for awards under the 2014
Equity Plan, provided that incentive stock options may be granted only to employees. The
Company has six non-employee directors and approximately 440 employees (including
employees of our builders) who are eligible to receive awards under the 2014 Equity Plan.
Written agreements between the Company and each participant evidence the terms of
each award granted under the 2014 Equity Plan.
If any award under the 2014 Equity Plan expires or otherwise terminates, in whole or in
part, without having been exercised in full, the common stock withheld from issuance
under that award will become available for future issuance under the plan. If shares issued
under the 2014 Equity Plan are reacquired by the Company pursuant to the terms of any
forfeiture provision, those shares will become available for future awards under the plan.
Awards that can only be settled in cash will not be treated as shares of common stock
granted for purposes of the 2014 Equity Plan. The maximum amount that can be paid to
any single participant in any one calendar year pursuant to a cash bonus award under the
2014 Equity Plan is $2.0 million.
As of December 31, 2020, 1,482,794 shares remain available for future grant of awards
under the 2014 Equity Plan.
89
Share-Based Award Activity
During the years ended December 31, 2020, 2019 and 2018 the Company granted
restricted stock awards (“RSAs”) under the 2014 Equity Plan to Executive Officers (“EOs”)
and non-employee members of the Board. The RSAs granted to EOs were 100% vested
and non-forfeitable on the grant date. Some members of the Board elected to defer up to
100% of their annual retainer fee in the form of common stock. The RSAs granted to the
Board will become fully vested on the earlier of (i) the first anniversary of the date of grant
of the shares of restricted common stock or (ii) the date of the Company’s 2020 Annual
Meeting of Stockholders. The fair value of the RSAs granted to EOs and non-employee
members of the Board were recorded as share-based compensation expense on the grant
date and over the vesting period, respectively.
During the years ended December 31, 2020, 2019 and 2018, the Company withheld
75,708; 59,116; and 39,228 shares, respectively, of common stock from EOs, at a total
cost of $0.6 million, $0.5 million, and $0.4 million, for the respective periods, to satisfy
statutory minimum tax requirements upon grant of the RSAs.
NUMBER OF SHARES
(IN THOUSANDS)
WEIGHTED AVERAGE GRANT
DATE FAIR VALUE PER SHARE
Nonvested, December 31, 2017
Granted
Vested
Forfeited
Nonvested, December 31, 2018
Granted
Vested
Forfeited
Nonvested, December 31, 2019
Granted
Vested
Forfeited
Nonvested, December 31, 2020
38
140
(144)
—
34
219
(194)
—
59
250
(264)
—
45
$10.25
$10.45
$10.03
—
$12.00
$9.14
$9.67
—
$9.05
$8.63
$8.10
—
$12.33
90
Stock Options
Stock options granted to date were not granted under the 2014 Equity Plan. The stock
options outstanding as of December 31, 2020 vested and became exercisable in five
substantially equal installments on each of the first five anniversaries of the grant date
and expire 10 years after the date on which they were granted. Compensation expense
related to these options was expensed on a straight-line basis over the 5 years year service
period. All of the stock options outstanding as of December 31, 2020 are vested. We
utilized the Black-Scholes option pricing model for estimating the grant date fair value of
the stock options. There were no stock options granted during the years ended December
31, 2020, 2019 and 2018.
A summary of stock option activity during the year ended December 31, 2020 is as follows:
NUMBER OF SHARES
(IN THOUSANDS)
WEIGHTED AVERAGE EXERCISE
PRICE PER SHARE
WEIGHTED AVERAGE REMAINING
CONTRACTUAL TERM (IN YEARS)
AGGREGATE INTRINSIC VALUE
(IN THOUSANDS)
Options outstanding, December 31, 2019
Granted
Exercised
Forfeited
Options outstanding, December 31, 2020
Options exercisable, December 31, 2020
500
—
—
—
500
500
$ 7.49
—
—
—
$ 7.49
$ 7.49
3.82
3.82
$ 7,735
$ 7,735
Share-Based Compensation Expense
Share-based compensation expense was $2.1 million, $2.2 million and $1.8 million for the
years ended December 31, 2020, 2019 and 2018, respectively.
Recognized tax benefit related to share-based compensation expense was $0.4 million,
$0.5 million and $0.4 million for the years ended December 31, 2020, 2019 and 2018,
respectively.
As of December 31, 2020, the estimated total remaining unamortized share-based
compensation expense related to unvested RSAs, net of forfeitures, was $0.3 million
which is expected to be recognized over a weighted-average period of 0.5 years. The total
fair value of RSAs vested during the years ended December 31, 2020, 2019 and 2018 was
$2.1 million, $1.9 million and $1.4 million, respectively.
As of December 31, 2020, there was no remaining unamortized share-based compensation
expense related to stock options.
TROPHY SIGNATURE HOMES - FRISCO SPRINGS, FRISCO, TX
10. REVENUE RECOGNITION
Disaggregation of Revenue
The following reflects the disaggregation of revenue by primary geographic market, type of customer, product type, and timing of revenue recognition (in thousands):
91
2020
2019
2018
YEARS ENDED DECEMBER 31,
RESIDENTIAL UNITS
REVENUE
LAND AND LOTS
REVENUE
RESIDENTIAL
UNITS REVENUE
LAND AND LOTS
REVENUE
RESIDENTIAL UNITS
REVENUE
LAND AND LOTS
REVENUE
$ 644,976
$ 43,788
$ 396,900
$ 31,080
$ 281,868
$ 40,184
285,200
2,057
362,930
750
297,025
4,570
$ 930,176
$ 45,845
$ 759,830
$ 31,830
$ 578,893
$ 44,754
$ 930,176
—
$ 759,830
—
45,845
—
$ 185
31,645
$ 578,893
—
$ 670
44,084
$ 930,176
$ 45,845
$ 759,830
$ 31,830
$ 578,893
$ 44,754
$ 930,176
$ —
$ 759,830
$ —
$ 578,893
—
45,845
—
31,830
—
$ —
44,754
$ 930,176
$ 45,845
$ 759,830
$ 31,830
$ 578,893
$ 44,754
Primary Geographical Market
Central
Southeast
Total revenues
Type of Customer
Homebuyers
Homebuilders
Total revenues
Product Type
Residential units
Land and lots
Total revenues
Timing of Revenue Recognition
Transferred at a point in time
$ 923,901
$ 45,845
$ 752,273
$ 31,830
$ 571,177
$ 44,754
Transferred over time
Total revenues
6,275
—
7,557
—
7,716
—
$ 930,176
$ 45,845
$ 759,830
$ 31,830
$ 578,893
$ 44,754
Revenue recognized over time represents revenue from mechanic’s lien contracts.
92
Contract Balances
Opening and closing contract balances included in customer and builder deposits on the
consolidated balance sheets are as follows (in thousands):
DECEMBER 31, 2020
DECEMBER 31, 2019
Our contracts with homebuyers have a duration of less than one year. As such, the
Company uses the practical expedient as allowed under ASC 606 and has not disclosed
the transaction price allocated to remaining performance obligations as of the end of the
reporting period.
Customer and builder deposits
$ 38,131
$ 23,954
11. SEGMENT INFORMATION
The difference between the opening and closing balances of customer and builder deposits
results from the timing difference between the customer’s payment of a deposit and the
Company’s performance, impacted slightly by terminations of contracts.
The Company has three reportable segments - Builder operations Central, Builder
operations Southeast, and Land development. Builder operations Central represents
operations of our builders in Texas, whereas Builder operations Southeast represents
operations of our builders in Georgia and Florida.
The amount of deposits on residential units and land and lots held as of the beginning of
the period and recognized as revenue during the years ended December 31, 2020 and
2019 are as follows (in thousands):
Type of Customer
Homebuyers
Homebuilders
Total deposits recognized as revenue
2020
2019
$ 14,149
5,929
$ 8,981
3,417
$ 20,078
$ 12,398
As a result of the GRBK GHO business combination, customer deposits from homebuyers
in the amount of $9.1 million were acquired, of which $8.2 million was recognized during
the period from April 26, 2018 through December 31, 2018.
Performance Obligations
There was no revenue recognized during the years ended December 31, 2020, 2019 and
2018 from performance obligations satisfied in prior periods.
Transaction Price Allocated to Remaining Performance Obligations
The aggregate amount of transaction price allocated to the remaining performance
obligations on our land sale and lot option contracts is $16.7 million. The Company will
recognize the remaining revenue when the lots are taken down, or upon closing for the
sale of a land parcel, which is expected to occur as follows (in thousands):
2021
2022
Total
$ 14,825
1,826
$ 16,651
The operations of the Company’s builders were aggregated in these three reportable
segments based on similar economic characteristics, including geography, housing
products, class of homebuyer, regulatory environments, and methods used to construct
and sell homes. The Company believes such presentation is consistent with the objective
and basic principles of ASC 280 and provides the most meaningful information about the
types of business activities in which the Company engages and the economic environments
in which it operates.
Corporate operations are reported as a non-operating segment and include activities
which support the Company’s builder operations, land development, title and mortgage
operations through centralization of certain administrative functions, such as finance,
treasury, information technology and human resources, as well as development of
strategic initiatives. Unallocated corporate expenses are reported in the corporate, other
and unallocated segment as these activities do not share a majority of aggregation criteria
with either the builder operations or land development segments.
While the operations of Challenger meet the criteria for an operating segment, they do
not meet the quantitative thresholds of ASC 280 to be separately reported and disclosed.
As such, Challenger’s results are included within the corporate, other and unallocated
segment.
Green Brick Title, LLC (“Green Brick Title”), Providence Group Title, and Green Brick
Mortgage operations are not economically similar to either builder operations or land
development and do not meet the quantitative thresholds of ASC 280 to be separately
reported and disclosed. As such, these entities’ results are included within the corporate,
other and unallocated segment.
The timing of lot takedowns is contingent upon a number of factors, including customer
needs, the number of lots being purchased, receipt of acceptance of the plat by the
municipality, weather-related delays, and agreed-upon lot takedown schedules.
Operations of EJB River Holdings and GBTM Sendera do not meet the criteria for an
operating segment, and they do not meet the quantitative thresholds of ASC 280 to be
separately reported and disclosed. As such, these results are included within the corporate,
other and unallocated segment.
Segment information for the year ended December 31, 2018 has been restated to conform
with the revised segment presentation for the years ended December 31, 2020 and
2019. Financial information relating to the Company’s reportable segments is as follows.
Operational results of each reportable segment are not necessarily indicative of the results
that would have been achieved had the reportable segment been an independent, stand-
alone entity during the periods presented.
(IN THOUSANDS)
Inventory:
Builder operations
Central
Southeast
YEARS ENDED DECEMBER 31,
2020
2019
2018
Total builder operations
Land development
Corporate, other and unallocated (5)
Total inventory
$ 645,475
$ 396,900
$ 282,218
Goodwill: (6)
93
DECEMBER 31, 2020
DECEMBER 31, 2019
$ 421,477
$ 251,677
183,623
605,100
213,555
25,980
168,140
419,817
308,071
25,679
$ 844,635
$ 753,567
(IN THOUSANDS)
Revenues: (1)
Builder operations
Central
Southeast
Total builder operations
Land development
Total revenues
Gross profit:
Builder operations
Central
Southeast
Total builder operations
Land development
Corporate, other and unallocated (2)
Total gross profit
Interest expense: (3)
Builder operations
Central
Southeast
Total builder operations
Corporate, other and unallocated
Total interest expense
Income before income taxes:
Builder operations
Central
Southeast
Total builder operations
Land development
Corporate, other and unallocated (4)
287,257
932,732
43,289
363,680
760,580
31,080
301,595
583,813
39,834
$ 976,021
$ 791,660
$ 623,647
$ 172,341
77,121
249,462
10,877
(25,735)
$ 88,480
92,088
180,568
8,050
(19,536)
$ 75,006
82,935
157,941
9,334
(13,073)
$ 234,604
$ 169,082
$ 154,202
$ —
15,635
15,635
(15,635)
$ —
$ 99,624
41,061
140,685
9,512
(7,384)
$ 24,072
15,686
39,758
(39,758)
$ —
$ 18,207
12,795
31,002
(31,002)
$ —
$ 34,801
$ 36,191
46,268
81,069
13,469
(10,209)
$ 84,329
46,297
82,488
8,439
(9,256)
$ 81,671
Income before income taxes
$ 142,813
Builder operations - Southeast
$ 680
$ 680
(1) The sum of Builder operations Central and Southeast segments’ revenues does not
equal residential units revenue included in the consolidated statements of income in
periods when our builders have revenues from land or lot closings, which for the years
ended December 31, 2020, 2019 and 2018 were $2.6 million, $0.8 million and $4.9
million, respectively.
(2) Corporate, other and unallocated gross loss is comprised of capitalized overhead and
capitalized interest adjustments that are not allocated to builder operations and land
development segments.
(3) Interest expense of Builder operations Central and Southeast segments represents
an interest expense charged by Corporate, other and unallocated segment in relation to
financing purchases of land and construction of some of the Company’s Dallas and Atlanta
builders. Intercompany interest revenue of the Corporate, other and unallocated segment
is eliminated in consolidation.
(4) Corporate, other and unallocated loss before income taxes includes results from Green
Brick Title, LLC and investments in unconsolidated subsidiaries.
(5) Corporate, other and unallocated inventory consists of capitalized overhead and
interest related to work in process and land under development.
94
12. INCOME TAXES
On March 27, 2020, the United States enacted the Coronavirus Aid, Relief, and Economic
Security Act, or the CARES Act, as a response to the economic uncertainty resulting from
the COVID-19 pandemic, which, among other things, included several temporary changes
to corporate income tax provisions. The CARES Act did not have a significant impact on
our expense for income taxes for the year ended December 31, 2020. We will continue to
assess the effect, if any, the CARES Act will have on our income taxes
On December 22, 2017, the U.S. government enacted comprehensive tax legislation
commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act made major
changes to the Internal Revenue Code. The Company recognized the income tax effects
of the Tax Act in its financial statements in accordance with Staff Accounting Bulletin 118
which provides SEC staff guidance for the application of ASC 740, Income Taxes. The
Company finalized its accounting for the income tax effects of the Tax Act in the fourth
quarter of 2018 with no adjustments recorded during the measurement period.
Effective Income Tax Rate Reconciliation
The income tax expense differs from the amount that would be computed by applying
the statutory federal income tax rates of 21% for each of the years ended December
31, 2020, 2019 and 2018, respectively, to income before income taxes as a result of the
following (amounts in thousands):
YEARS ENDED DECEMBER 31,
2020
2019
2018
Tax on pre-tax book income (before reduction of
noncontrolling interests)
$ 29,991
$ 17,709
$ 17,151
Tax effect of non-controlled earnings
(862)
(1,252)
(2,743)
State income tax expense, net of federal benefit
3,606
2,706
1,940
Income Tax Expense
The components of current and deferred income tax expense are as follows (in thousands):
Adjustments to deferred tax assets related to state net
operating losses
YEARS ENDED DECEMBER 31,
Change in valuation allowance
—
—
1,063
283
(1,063)
283
2020
2019
2018
Tax credits
(8,088)
—
—
Current income tax expense (benefit):
Federal
State
$ 20,968
$ 15,980
$ (569)
4,162
2,810
2,993
Other
369
864
788
Total income tax expense
$ 25,016
$ 20,027
$ 17,136
Total current income tax expense
25,130
18,790
2,424
Effective income tax rate
17.5%
23.7%
21.0%
Deferred income tax expense (benefit):
Federal
State
(354)
774
15,023
240
463
(311)
The change in the effective tax rate for the year ended December 31, 2020 relates
primarily to the tax benefit of $8.1 million, net of the required basis adjustment, from the
enactment of the Taxpayer Certainty and Disaster Tax Relief Act of 2019 (“the Act”). The
Act retroactively reinstated the federal energy efficient homes tax credit that expired on
December 31, 2017 to homes closed from January 1, 2018 to December 31, 2020.
Total deferred income tax expense
(114)
1,237
14,712
Total income tax expense
$ 25,016
$ 20,027
$ 17,136
Deferred Income Taxes
The primary differences between the financial statement and tax bases of assets and
liabilities are as follows (in thousands):
DECEMBER 31, 2020 DECEMBER 31, 2019
$ 8,163
$ 9,212
Deferred tax assets:
Basis in partnerships
Accrued expenses
Inventory
Change in fair value of contingent consideration
Lease liabilities - operating leases
Stock-based compensation
Other
Deferred tax assets, gross
Valuation allowance
Deferred tax assets, net
Deferred tax liabilities:
Right-of-use assets - operating leases
Prepaid insurance
Other
Deferred tax liabilities
Total deferred income tax assets, net
2,979
2,585
1,385
601
392
349
16,454
—
$ 16,454
$ (581)
(372)
(125)
$ (1,078)
$ 15,376
95
Uncertain Tax Positions
The Company establishes accruals for uncertain tax positions that reflect management’s
best estimate of deductions and credits that may not be sustained on a more-likely-than-
not basis. In accordance with ASC 740, Income Taxes, the Company recognizes the effect
of income tax positions only if those positions have a more-likely-than-not chance of
being sustained by the Company. Recognized income tax positions are measured at the
largest amount that is considered greater than 50% likely of being realized. Changes in
recognition or measurement are reflected in the period in which the change in judgment
occurs. There were no uncertain tax positions as of December 31, 2020.
There were no expenses for interest and penalties related to uncertain tax positions for
the years ended December 31, 2020, 2019, and 2018. There were no accrued liabilities
related to uncertain tax positions as of December 31, 2020 and 2019, respectively.
2,206
2,316
1,444
832
408
191
16,609
—
$ 16,609
Statutes of Limitations
The U.S. federal statute of limitations remains open for our 2017 and subsequent tax
years. Due to the carryover of the federal net operating losses for years 2009 and forward,
income tax returns going back to the 2009 tax year are subject to adjustment.
The Colorado and Minnesota statutes of limitations remain open for our 2016 and
subsequent tax years. The Nebraska statute of limitations remains open for our 2017 and
subsequent tax years.
$ (818)
(419)
(110)
(1,347)
The Company’s subsidiaries file returns in Texas, Georgia and Florida and Colorado.
$ 15,262
Net Operating Losses and Valuation Allowances
As of December 31, 2020, all federal net operating loss carryforwards were fully utilized.
The Texas statute of limitations remains open for the 2016 and subsequent tax years. Any
Texas adjustments relating to returns filed by the subsidiary partnerships would be borne
by the subsidiary partnership entities.
During the year ended December 31, 2019, the Company decided to write off its gross
state net operating loss carryforwards in Minnesota of $13.7 million, as well as the related
deferred tax asset and valuation allowance. Management believes on a more-likely-than-
not basis that the Minnesota net operating loss carryforwards would not have been
utilized.
The rollforward of valuation allowance is as follows (amounts in thousands):
Valuation allowance at beginning of the year
Write-off of state net operating losses
Expiration of state net operating losses
Valuation allowance at end of the year
DECEMBER 31, 2020 DECEMBER 31, 2019
$ —
—
—
$ —
1,063
(1,063)
—
$ —
The Georgia statute of limitations remains open for the 2017 and subsequent tax years.
Any Georgia adjustments relating to returns filed by the subsidiary partnerships would be
borne by the partner.
The Florida statute of limitations will remain open for the 2018 and subsequent tax years.
Any Florida adjustments relating to returns filed by the subsidiary partnerships would be
borne by the partner.
The Company is not presently under examination by the Internal Revenue Service or state
tax authority.
96
13. EMPLOYEE BENEFITS
We have a qualifying 401(k) defined contribution plan that covers all employees of the
Company. Each year, we may make discretionary matching contributions equal to a
percentage of the employees’ contributions. The Company contributed $0.9 million, $0.8
million and $0.6 million of matching contributions to the 401(k) plan during the years
ended December 31, 2020, 2019 and 2018.
14. EARNINGS PER SHARE
The Company’s restricted stock awards have the right to receive forfeitable dividends
on an equal basis with common stock and therefore are not considered participating
securities that must be included in the calculation of net income per share using the
two-class method. Basic earnings per share is computed by dividing net income by the
weighted average number of common shares outstanding during each period, adjusted
for non-vested shares of restricted stock awards during each period. Diluted earnings per
share is calculated using the treasury stock method and includes the effect of all dilutive
securities, including stock options and restricted stock awards.
The computation of basic and diluted net income attributable to Green Brick Partners, Inc.
per share is as follows (in thousands, except per share amounts):
YEARS ENDED DECEMBER 31,
2020
2019
2018
Net income attributable to Green Brick Partners, Inc.
$ 113,693
$ 58,656
$ 51,623
Weighted-average number of shares
outstanding - basic
Basic net income attributable to Green Brick
Partners, Inc. per share
50,568
50,530
50,652
$ 2.25
$ 1.16
$ 1.02
Weighted-average number of shares
outstanding - basic
50,568
50,530
50,652
Dilutive effect of stock options and restricted stock
awards
227
106
99
The following shares that could potentially dilute earnings per share in the future are not
included in the determination of diluted net income attributable to Green Brick Partners,
Inc. per common share (in thousands):
Antidilutive options to purchase common stock and restricted stock awards
10
14
8
YEARS ENDED DECEMBER 31, 2020 2019 2018
15. FAIR VALUE MEASUREMENTS
Fair Value of Financial Instruments
The Company’s financial instruments, none of which are held for trading purposes, include
cash, restricted cash, receivables, earnest money deposits, other assets, accounts payable,
accrued expenses, customer and builder deposits, borrowings on lines of credit, senior
unsecured notes, and contingent consideration liability. Per the fair value hierarchy, level
1 financial instruments include: cash, restricted cash, receivables, earnest money deposits,
other assets, accounts payable, accrued expenses, and customer and builder deposits due
to their short-term nature. The Company estimates that, due to the short-term nature
of the underlying financial instruments or the proximity of the underlying transaction
to the applicable reporting date, the fair value of level 1 financial instruments does not
differ materially from the aggregate carrying values recorded in the consolidated financial
statements as of December 31, 2020 and 2019. Level 2 financial instruments include
borrowings on lines of credit and senior unsecured notes. Due to the short-term nature
and floating interest rate terms, the carrying amounts of borrowings on lines of credit are
deemed to approximate fair value. The estimated fair value of the senior unsecured notes
as of December 31, 2020 was $125.2 million.
The fair value of the contingent consideration liability related to the GRBK GHO business
combination was estimated using an internally developed discounted cash flow analysis. As
the measurement of the contingent consideration is based primarily on significant inputs
not observable in the market, it represents a level 3 measurement. Key inputs in measuring
the fair value of the contingent consideration liability are management’s projections of
GRBK GHO’s net income and debt, and the annual discount rate of 16.5% that reflects the
risk associated with achieving the milestones of the contingent consideration payments.
The reconciliation of the beginning and ending balances for level 3 measurements is as
follows (in thousands):
CARRYING
VALUE
ESTIMATED
FAIR VALUE
Weighted-average number of shares
outstanding - diluted
50,795
50,636
50,751
Payment of contingent consideration in excess of acquisition date fair
value
Diluted net income attributable to Green Brick
Partners, Inc. per share
$ 2.24
$ 1.16
$ 1.02
Expiration of state net operating losses
Valuation allowance at end of the year
(5,267)
(5,267)
368
$ 368
368
$ 368
Contingent consideration liability, balance as of December 31, 2019
$ 5,267
$ 5,267
97
There were no transfers between the levels of the fair value hierarchy for any of our
financial instruments as of December 31, 2020 when compared to December 31, 2019.
Warranties
Warranty activity, included in accrued expenses in our consolidated balance sheets,
consists of the following (in thousands):
Fair Value of Nonfinancial Instruments
Nonfinancial assets and liabilities include inventory which is measured at cost unless the
carrying value is determined to be not recoverable in which case the affected instrument is
written down to fair value. Per the fair value hierarchy, these items are level 3 nonfinancial
instruments. For additional information on the Company’s inventory, refer to Note 4.
16. RELATED PARTY TRANSACTIONS
During 2020, 2019 and 2018, the Company had the following related party transactions
through the normal course of business.
Corporate Officers
Trevor Brickman, the son of Green Brick’s Chief Executive Officer, is the President of
Centre Living. Following a series of transactions described in Note 3, effective December
31, 2019, Green Brick’s ownership interest in Centre Living is 90% and Trevor Brickman’s
ownership interest is 10%. Green Brick has 90% voting control over the operations
of Centre Living. As such, 100% of Centre Living’s operations are included within our
consolidated financial statements. During the year ended December 31, 2020, Trevor
Brickman made cash contributions to Centre Living of $0.4 million.
GRBK GHO
GRBK GHO leases office space from entities affiliated with the president of GRBK GHO.
During the years ended December 31, 2020 and 2019, and during the period from April
26, 2018 through December 31, 2018, GRBK GHO incurred lease costs of $0.1 million
in each period, under such lease agreements. As of December 31, 2020, there were no
amounts due to the affiliated entities related to such lease agreements. GRBK GHO
receives title closing services on the purchase of land and third-party lots from an entity
affiliated with the president of GRBK GHO. During the years ended December 31, 2020
and 2019, and during the period from April 26, 2018 through December 2018, GRBK
GHO incurred de minimis fees related to such title closing services. As of December 31,
2020, no amounts were due to the title company affiliate.
17. COMMITMENTS AND CONTINGENCIES
Letters of Credit and Performance Bonds
During the ordinary course of business, certain regulatory agencies and municipalities
require the Company to post letters of credit or performance bonds related to development
projects. As of December 31, 2020 and 2019, letters of credit and performance bonds
outstanding were $9.8 million and $14.4 million, respectively. The Company does not
believe that it is likely that any material claims will be made under a letter of credit or
performance bond in the foreseeable future.
Warranty accrual, beginning of period
Warranties issued
Changes in liability for existing warranties
Settlements
Warranty accrual, end of period
DECEMBER 31, 2020 DECEMBER 31, 2019
$ 3,840
4,553
(26)
(1,960)
$ 6,407
$ 2,980
3,358
37
(2,535)
$ 3,840
Operating Leases
The Company has leases associated with office and design center space in Georgia, Texas,
and Florida that, at the commencement date, have a lease term of more than 12 months
and are classified as operating leases. The exercise of any extension options available in
such operating lease contracts is not reasonably certain.
Operating lease cost of $1.3 million and $1.3 million for these leases for the years
ended December 31, 2020 and 2019, respectively, is included in selling, general and
administrative expense in the consolidated statements of income. For the years ended
December 31, 2020 and 2019, cash paid for amounts included in the measurement of
operating lease liabilities was $1.3 million and $1.2 million, respectively.
Rental expense for these leases totaled $1.2 million for the year ended December 31,
2018 and was included in selling, general and administrative expense in the consolidated
statements of income. As of December 31, 2020, the weighted-average remaining lease
term and the weighted-average discount rate used in calculating our lease liabilities were
3.0 years and 4.85%, respectively.
The future annual undiscounted cash flows in relation to the operating leases and a
reconciliation of such undiscounted cash flows to the operating lease liabilities recognized
in the consolidated balance sheet as of December 31, 2020 are presented below (in
thousands):
2021
2022
2023
2024
2025
Thereafter
Total future lease payments
Less: Interest
Present value of lease liabilities
$ 1,093
816
1,216
86
87
$ 66
$ 3,364
$ 773
$ 2,591
98
The Company elected the short-term lease recognition exemption for all leases that, at the
commencement date, have a lease term of 12 months or less and do not include an option
to purchase the underlying asset that the Company is reasonably certain to exercise. For
such leases, the Company does not recognize right-of-use assets or lease liabilities and
instead recognizes lease payments in the consolidated income statements on a straight-
line basis. Short-term lease costs of $0.4 million for each of the years ended December
31, 2020 and 2019, related to such lease contracts are included in selling, general and
administrative expense in the consolidated statements of income.
Legal Matters
Lawsuits, claims and proceedings may be instituted or asserted against us in the normal
course of business. The Company is also subject to local, state and federal laws and
regulations related to land development activities, house construction standards, sales
practices, title company regulations, employment practices and environmental protection.
As a result, the Company may be subject to periodic examinations or inquiry by agencies
administering these laws and regulations.
The Company records an accrual for legal claims and regulatory matters when they are
probable of occurring and a potential loss is reasonably estimable. The Company accrues
for these matters based on facts and circumstances specific to each matter and revises
these estimates when necessary.
In view of the inherent difficulty of predicting outcomes of legal claims and related
contingencies, the Company generally cannot predict their ultimate resolution, related
timing or eventual loss. If evaluations indicate loss contingencies that could be material
are not probable, but are reasonably possible, the Company will disclose their nature with
an estimate of the possible range of losses or a statement that such loss is not reasonably
estimable. We believe that the disposition of legal claims and related contingencies will
not have a material adverse effect on our results of operations and liquidity or on our
financial condition.
18. SUBSEQUENT EVENTS
Note Purchase Agreement
On February 25, 2021, the Company entered into a Note Purchase Agreement with
the several purchasers pursuant to which the Company issued $125 million aggregate
principal amount of senior unsecured notes (the “2028 Notes”) due on February 25, 2028
at a fixed rate of 3.25% per annum. The Company expects to use the proceeds from the
issuance of the 2028 Notes to repay borrowings under the Company’s existing revolving
credit facilities, to pay fees and expenses incurred in connection with the transaction and
for general corporate purposes. Interest will be payable quarterly in arrears commencing
on May 25, 2021.
Share Repurchase Program
On March 1, 2021, the Company’s Board of Directors authorized a new $50 million
stock repurchase program. This plan authorizes the Company to purchase, from time to
time, until March 1, 2023, up to $50 million of our outstanding common stock through
open market repurchases in compliance with Rule 10b-18 under the Exchange Act and/
or in privately negotiated transactions at management’s discretion based on market and
business conditions, applicable legal requirements and other factors. Shares repurchased
will be retired. The plan may be modified or terminated by the Company’s Board of
Directors at any time in its sole discretion.
SOUTHGATE HOMES - WINDSONG RANCH, PROSPER, TX
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Company has established disclosure controls and procedures that are designed to
ensure that information required to be disclosed in reports filed or submitted under the
Exchange Act, as amended, is recorded, processed, summarized and reported within the
time periods specified in the rules and forms of the SEC and, as such, is accumulated
and communicated to the Company’s management, including our Chief Executive Officer
(“CEO”) and Chief Financial Officer (“CFO”), as appropriate to allow timely decisions
regarding required disclosure. Management, together with our CEO and CFO, evaluated
the effectiveness of the Company’s disclosure controls and procedures, as defined in Rule
13a-15(e) of the Exchange Act, as of December 31, 2020. Based on our evaluation, the
CEO and CFO concluded that our disclosure controls and procedures were effective as of
December 31, 2020.
Management’s Report on Internal Control over Financial Reporting
The Company’s management is responsible for establishing and maintaining adequate
internal control over financial reporting, as such term is defined in Exchange Act Rule
13a-15(f). Internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with GAAP. Because of its
inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may deteriorate. Under
the supervision and with the participation of our management, including the CEO and
CFO, we conducted an evaluation of the effectiveness of our internal control over
financial reporting as of December 31, 2020 based upon Internal Control-Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission. Based on this evaluation, our management concluded that our internal
control over financial reporting was effective as of December 31, 2020. RSM US LLP, the
Company’s independent registered public accounting firm, has audited our consolidated
financial statements included in this report and has issued an attestation report on the
Company’s internal control over financial reporting, which is included herein.
Changes in Internal Control over Financial Reporting
During the quarter ended December 31, 2020, there were no changes in our internal
controls that have materially affected or are reasonably likely to have a material effect on
our internal control over financial reporting.
99
GHO HOMES - STONEY BROOK FARM, VERO BEACH, FL
100
To the Stockholders and the Board of Directors of Green Brick Partners, Inc.
Report of Independent Registered Public Accounting Firm
Opinion on the Internal Control Over Financial Reporting
We have audited Green Brick Partners, Inc. and subsidiaries’ (the Company) internal control over financial reporting as of December 31, 2020, based on criteria established in Internal
Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. In our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission in 2013.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements of the
Company and our report dated March 8, 2021 expressed an unqualified opinion.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial
reporting in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over
financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance
with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting,
assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also
included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies
and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles,
and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ RSM US LLP
Dallas, Texas
March 8, 2021
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE
Information required by Part III, Item 10, is incorporated herein by
reference to the Company’s proxy statement for its 2021 annual meeting
of shareholders (“Proxy Statement”) to be filed with the SEC no later than
120 days after the end of the Company’s fiscal year.
ITEM 11. EXECUTIVE COMPENSATION
Information required by Part III, Item 11, is incorporated herein by reference
to the Company’s Proxy Statement to be filed with the SEC no later than
120 days after the end of the Company’s fiscal year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Information required by Part III, Item 12, is incorporated herein by reference
to the Company’s Proxy Statement to be filed with the SEC no later than
120 days after the end of the Company’s fiscal year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,
AND DIRECTOR INDEPENDENCE
Information required by Part III, Item 13, is incorporated herein by reference
to the Company’s Proxy Statement to be filed with the SEC no later than
120 days after the end of the Company’s fiscal year.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Information required by Part III, Item 14, is incorporated herein by reference
to the Company’s Proxy Statement to be filed with the SEC no later than
120 days after the end of the Company’s fiscal year.
101
CENTRE LIVING HOMES - RESERVE AT BLUFFVIEW, DALLAS, TX
102
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following documents are filed as part of this Annual Report on Form 10-K:
(1) Financial Statements
See Part II, Item 8 of this Annual Report on Form 10-K.
(2) Financial Statement Schedules
Financial statements schedules are omitted because they are not required or applicable or the required information is included in the consolidated financial statements or notes thereto.
(3) Exhibits
The following exhibits are filed with this Annual Report on Form 10-K or are incorporated herein by reference:
NUMBER
EXHIBIT DESCRIPTION
3.1
3.2
4.1
4.2
10.1
10.2
10.3
10.4†
10.5†
Amended and Restated Certificate of Incorporation, (incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K filed October 31, 2014).
Amended and Restated Bylaws of BioFuel Energy Corp, dated as of March 20, 2009, (incorporated by reference to Exhibit 3.2 to the Company’s Form 8-K filed March 23,
2009).
Specimen Common Stock Certificate, (incorporated by reference to Exhibit 4.1 to the Company’s Form 8-K filed October 31, 2014).
Description of Capital Stock, (incorporated by reference to Exhibit 4.2 to the Company’s Form 10-K filed March 6, 2020).
Amended and Restated Limited Liability Company Operating Agreement of The Providence Group of Georgia, L.L.C., dated as of July 1, 2011 (incorporated by reference to
Exhibit 10.20 to the Company’s Registration Statement on Form S-1 (File No. 333-197446) filed on July 16, 2014).
Second Amended and Restated Company Agreement of CB JENI Homes DFW LLC, dated as of January 1, 2018, (incorporated by reference to Exhibit 10.2 to the
Company’s Form 10-K filed March 6, 2020).
Amended and Restated Limited Liability Company Operating Agreement of JBGL A&A, LLC, dated November 15, 2011 (incorporated by reference to Exhibit 10.23 to the
Company’s Registration Statement on Form S-1 (File No. 333-197446) filed on July 16, 2014).
Green Brick Partners, Inc. 2014 Omnibus Equity Incentive Plan (incorporated by reference to Exhibit 10.14 to the Company’s Annual Report on Form 10-K filed March 31,
2015).
Employment Agreement, dated as of July 22, 2019, between the Company and James R. Brickman (incorporated by reference to Exhibit 10.1 to the Company’s Current
Report on Form 8-K filed July 26, 2019).
103
NUMBER
EXHIBIT DESCRIPTION
10.6†
Green Brick Partners, Inc. Stock Option Agreement, dated as of October 27, 2014, between the Company and James R. Brickman (incorporated by reference to Exhibit
10.16 to the Company’s Current Report on Form 8-K filed October 31, 2014).
10.7†
Employment Agreement, dated as of October 26, 2020, between the Company and Richard A. Costello (incorporated by reference to Exhibit 10.7 to the Company’s
Current Report on Form 8-K filed January 22, 2021).
10.8†
Employment Agreement, dated as of September 10, 2020, between the Company and Jed Dolson (incorporated by reference to Exhibit 10.8(a) to the Company’s Quarterly
Report on Form 10-Q filed October 29, 2020).
10.9
Promissory Note, dated as of October 13, 2011, by JBGL Builder Finance LLC for the benefit of Inwood National Bank (incorporated by reference to Exhibit 10.25 to the
Company’s Registration Statement on Form S-1 (File No. 333-197446) filed on July 16, 2014).
10.10
Promissory Note, dated October 13, 2012, by JBGL Builder Finance LLC for the benefit of Inwood National Bank (incorporated by reference to Exhibit 10.26 to the
Company’s Registration Statement on Form S-1 (File No. 333-197446) filed on July 16, 2014).
10.11
Second Renewal, Extension and Modification of Promissory Note and Second Amendment to Business Loan Agreement, dated as of October 13, 2013, by and between
JBGL Builder Finance LLC and Inwood National Bank (incorporated by reference to Exhibit 10.27 to the Company’s Registration Statement on Form S-1 (File No. 333-
197446) filed on July 16, 2014).
10.12
Commercial Security Agreement, dated as of October 13, 2011, by and between JBGL Builder Finance LLC and Inwood National Bank (incorporated by reference to Exhibit
10.28 to the Company’s Registration Statement on Form S-1 (File No. 333-197446) filed on July 16, 2014).
10.32
Amendment No. 2 to the Credit Agreement, dated as of December 1, 2016, by and among Green Brick Partners, Inc., the lenders named therein, and Citibank, N.A., as
agent (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed December 1, 2016).
10.33
Third Amendment to the Credit Agreement, dated as of September 1, 2017, by and among Green Brick Partners, Inc., the lenders named therein, Flagstar Bank, FSB, as
successor administrative agent, and Citibank, N.A., as existing administrative agent (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form
8-K filed September 6, 2017).
10.34
Amendment No. 4 to the Credit Agreement, dated as of December 1, 2017, by and among Green Brick Partners, Inc., the lenders named therein, and Flagstar Bank, FSB, as
agent (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed December 4, 2017).
10.35
Fifth Amendment to the Credit Agreement, dated as of November 2, 2018, by and among Green Brick Partners, Inc., the lenders named therein, Flagstar Bank, FSB, as
administrative agent (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed November 5, 2018).
10.36
Third Modification of Promissory Note, dated as of October 26, 2018 (incorporated by reference to Exhibit 10.52 to the Company’s Annual Report on Form 10-K filed
March 8, 2019).
104
NUMBER
EXHIBIT DESCRIPTION
10.37†
Form of Other Stock-Based Award Award Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed April 3, 2018).
10.38†
Form of Performance Compensation Award Award Agreement (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed April 3, 2018).
10.39
Note Purchase Agreement, dated as of August 8, 2019 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed August 9, 2019).
10.40
Subsidiary Guaranty Agreement, dated as of August 8, 2019 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed August 9,
2019).
10.41
Note Purchase Agreement, dated as of August 26, 2020, by and among Green Brick Partners, Inc., Prudential Universal Reinsurance Company and The Prudential Insurance
Company of America (incorporated by reference to Exhibit 10.41 to the Company’s Quarterly Report on Form 10-Q filed October 29, 2020).
10.42
Guaranty Agreement, dated as of August 26, 2020, by and among certain subsidiaries of Green Brick Partners, Inc. (incorporated by reference to Exhibit 10.42 to the
Company’s Quarterly Report on Form 10-Q filed October 29, 2020).
10.43
Seventh Amendment to the Credit Agreement, dated December 22, 2020, by and among Green Brick Partners, Inc., the lenders named therein, and Flagstar Bank, FSB, as
administrative agent (incorporated by reference to Exhibit 10.43 to the Company’s Current Report on Form 8-K filed December 30, 2020).
10.44
Registration Rights Agreement, dated as October 27, 2014, by and among the Company and JBGL Exchange (Offshore), LLC, JBGL Willow Crest (Offshore), LLC, JBGL
Hawthorne (Offshore), LLC, JBGL Inwood (Offshore), LLC, JBGL Chateau (Offshore), LLC, JBGL Castle Pines (Offshore), LLC, JBGL Lakeside (Offshore), LLC, JBGL Mustang
(Offshore), LLC, JBGL Kittyhawk (Offshore), LLC, JBGL Builder Finance (Offshore), LLC, Greenlight Capital Qualified, LP, Greenlight Capital, LP, Greenlight Capital Offshore
Partners, Greenlight Reinsurance, Ltd., Greenlight Capital (Gold), LP, Greenlight Capital Offshore Master (Gold), Ltd., Scott L. Roberts, L. Loraine Brickman Revocable Trust,
Roger E. Brickman GST Marital Trust, James R. Brickman, Blake Brickman, Jennifer Brickman Roberts, Trevor Brickman and Natalie Brickman, (incorporated by reference to
Exhibit 10.4 to the Company’s Current Report on Form 8-K filed October 31, 2014).
10.45
Note Purchase Agreement, dated February 25, 2021, by and among Green Brick Partners, Inc. and the several purchasers named therein (incorporated by reference to
Exhibit 10.45 to the Company’s Current Report on Form 8-K filed March 3, 2021).
10.46
Guaranty Agreement, dated as of February 25, 2021, by and among certain subsidiaries of Green Brick Partners, Inc. (incorporated by reference to Exhibit 10.46 to the
Company’s Current Report on Form 8-K filed March 3, 2021).
21*
List of Subsidiaries of the Company.
23*
Consent of RSM US LLP, Independent Registered Public Accounting Firm to the Company.
31.1*
Certification of the Company’s Chief Executive Officer Pursuant To Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 7241).
NUMBER
EXHIBIT DESCRIPTION
31.2*
Certification of the Company’s Chief Financial Officer Pursuant To Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 7241).
32.1*
Certification of the Company’s Chief Executive Officer Pursuant To Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350).
32.2*
Certification of the Company’s Chief Financial Officer Pursuant To Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350).
105
101.INS**
XBRL Instance Document.
101.SCH** XBRL Taxonomy Extension Schema Document.
101.CAL**
XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF** XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB**
XBRL Taxonomy Extension Label Linkbase Document.
101.PRE**
XBRL Taxonomy Extension Presentation Linkbase Document.
104**
Cover Page Interactive Data File (embedded within the Inline XBRL document contained in Exhibit 101).
* Filed with this Annual Report on Form 10-K.
** Submitted electronically herewith.
† Management Contract or Compensatory Plan.
# The Company hereby undertakes to furnish a copy of any omitted schedule or exhibit to such agreement to the SEC upon request.
ITEM 16. FORM 10-K SUMMARY
None.
106
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized on March 8, 2021.
Green Brick Partners, Inc.
/s/ James R. Brickman
By: James R. Brickman
ts: Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities
and on the dates indicated below.
SIGNATURE
/s/ James R. Brickman
James R. Brickman
Chief Executive Officer and Director
(Principal Executive Officer)
TITLE
DATE
/s/ Richard A. Costello
Richard A. Costello
Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)
/s/ Elizabeth K. Blake
Elizabeth K. Blake
/s/ Harry Brandler
Harry Brandler
/s/ David Einhorn
David Einhorn
/s/ John R. Farris
John R. Farris
/s/ Kathleen Olsen
Kathleen Olsen
/s/ Richard S. Press
Richard S. Press
Director
Director
Chairman of the Board
Director
Director
Director
March 8, 2021
March 8, 2021
March 8, 2021
March 8, 2021
March 8, 2021
March 8, 2021
March 8, 2021
March 8, 2021
107
TROPHY SIGNATURE HOMES - PRAIRIE RIDGE, MIDLOTHIAN, TX
Green Brick Partners
Mailing Address: 2805 Dallas Pkwy Suite 400 Plano, TX 75093
Website: www.greenbrickpartners.com