Daniel Loeb (Trades, Portfolio) added 99,943 shares to his stake in Green Brick Partners Inc. (GRBK, Financial) on April 8.
Green Brick Partners (formerly known as BioFuel Energy Corp.) was incorporated as a Delaware corporation on April 11, 2006. The company began its original operations with the intention of solely investing in BioFuel Energy LLC, a limited liability company organized on Jan. 25, 2006. The company's goal was to build and operate ethanol production facilities in the Midwestern U.S.
On Nov. 22, 2013 the company disposed of its ethanol plants and all related assets. Following the disposition of these production facilities, BioFuel Energy was a public shell company with no substantial operations.
On June 14, 2014, the company entered into a definitive transaction agreement with the owners of JBGL, a real estate operator involved in the purchase and development of land for residential use, construction lending and home-building operations.
BioFuel Energy acquired JBGL for $275 million to be paid out in cash and common stock. Approximately $191.8 million was paid in cash, and the remainder, 11,108,500 shares of common stock, was paid out at approximately $7.49 per share. The cash portion of the purchase price was primarily funded from the proceeds of a $70 million rights offering conducted by the company (the $70 million includes proceeds from purchases of shares of common stock by certain funds and accounts managed by Greenlight Capital and its affiliates [“Greenlight”] and Third Point LLC and its affiliates [“Third Point”]) and $150 million of debt financing provided by Greenlight pursuant to a loan agreement.
At the time the transaction was completed, BioFuel was a nonoperating public shell corporation with nominal operations and assets consisting of cash, deferred tax assets and nominal other nonoperating assets. As a result of the transaction the owners and management of JBGL gained effective operating control of the combined company.
As a result of the transaction, Green Brick changed its business direction and is now in the real estate industry. Green Brick Partners is involved in land entitlement, construction process, with its building partners. Green Brick is uniquely experienced to optimally master plan and develop complex higher density residential neighborhoods under the company's Green Brick brand. Green Brick Partners believes that its unique architecture, superior construction and quality control ensures a superior product and gives it a differentiation advantage against its competition within its industry .
Green Brick Partners Inc has a market cap of $375.05 million, a P/E ratio of 18.86, an enterprise value of $427.54 million, a P/B ratio of 1.06 and a quick ratio of 0.27.
Below is a Peter Lynch chart for Green Brick Partners.
Green Brick has a few severe warning signs. The book value has been plummeting over the previous nine years, declining at an average rate of 12% annually during that time span. The company is also currently trading above its intrinsic value which is another warning sign for long-term value investors.
It is possible that Loeb decided to boost his stake in Green Brick Partners because the company is run by a relentless vigilant leader, David Einhorn (Trades, Portfolio). Since founding Greenlight Capital in 1996, Einhorn has had only had two losing years, in 2008 and 2015, an impressive track record.
It is also possible that Loeb increased his stake in Green Brick Partners because of the company’s financial strength. According to GuruFocus the company has a 9/10 Financial Strength rating with an interest coverage ratio of 87.31 ranking it above 81% of the 1,343 companies in the global real estate industry.
Loeb grew up in Santa Monica, California, where he attended Palisades Charter High School in Los Angeles. After graduation Loeb went on to Columbia University, where he received his bachelor's degree in science. Upon graduation, Loeb spent the next 11 years working for various firms including Warburg Pincus, a private equity firm, from 1984 to 1987. He then landed a job working as director of corporate development at Island Records, a record label where he focused on securing debt financing.
After his tenure at Island Records Loeb seized an opportunity to work as a risk arbitrage analyst at Lafer Equity Investors. He also worked as senior vice president in the distressed debt department at Jefferies LLC from 1991 to 1994. During that time Loeb increased his knowledge and experience about bankruptcy analysis, trading bank loans and selling distressed securities.
In 1995, Loeb decided he had enough experience and founded Third Point Management LLC which he founded with $3.3 million from friends and family. The investment firm owns 27 stocks with a total value of $9.86 billion.
Cheers to your investment success.
