The GRBK Investment Thesis Green Brick Partners (GRBK) presents a compelling investment opportunity due to a structurally advantaged business model that is difficult to replicate. As an integrated land developer and homebuilder, GRBK controls its entire supply chain, from raw land acquisition to home closing. This vertical integration, particularly its expertise in the Dallas-Fort Worth market and its use of Texas-specific financing districts (MUDs/PIDs), allows it to generate the highest gross margins in the industry, typically 5-10% above its peers. While the market favors "land-light" competitors, GRBK's land-heavy strategy provides superior cost control, a 10-year lot supply in a high-growth market, and greater visibility into future profitability. Despite these strengths and lower leverage, GRBK trades at a discount to its peers. Introduction: A Predictable, Underbuilt Industry Warren Buffett, in the 1998 Berkshire Hathaway Annual Meeting, said he looks for companies where he can reasonably know what they will look like in 10 years. I can think of few better examples than the publicly traded homebuilders. Household formation needs to average about 1.5 million per year to keep supply and demand balanced. This is due to population growth and people not wanting to live with their in-laws. Since the housing crisis, however, housing has been underbuilt, averaging just 1.1 million formations per year. Most reports put the housing shortage in the range of 4 million homes. But U.S. home building is effectively capped at about 1.7 million new homes per year due to permitting limits, input constraints, and limited skilled trades (with undocumented labor also harder to find). If this is true, that means the shortage can be reduced by 200,000 homes per year, which would take 20 years to resolve. This suggests a long runway for new homes to be built. And while it is cyclical in the short-term, long-term it is highly predictable. So this that is tailwind #1. Tailwind #2 is that public homebuilders are steadily taking market share from local builders. Many of the small players can no longer compete as they lack scale and access to financing. Because of this, the publics are consolidating market share. So, we have an industry that is irreplaceable, where demand exceeds supply, with long-term tailwinds, and where scale creates meaningful competitive advantages. That might explain why Warren Buffett has invested in the public homebuilders…as have Greg Alexander (one of the three investors Buffett said he would trust with his own money), Ed Wachenheim (author of Common Stocks and Common Sense, who compounded capital at 19% from 1998–2017), Bryan Lawrence, and Glenn Greenberg. Evolution of the Homebuilding Model The Great Financial Crisis (GFC) left homebuilders with massive land-related losses, forcing the industry to rethink its approach to balance sheet risk. In response, most shifted to a "land-light" model that avoided direct land ownership by relying on option contracts and just-in-time lot purchases from third-party developers. This strategy reduced upfront capital needs and limited write-down risk in a downturn, which Wall Street rewarded. Over time, nearly every major public builder embraced the model. But the land-light approach carries hidden costs. Builders pay 15–25% more for finished lots, must adhere to fixed takedown schedules regardless of market conditions, and remain exposed to shortages and price inflation that compress margins. NVR, the poster child for asset-light homebuilding, illustrates both the benefits and pitfalls. While its model won investor praise, its strained developer relationships during the GFC left it scrambling for years. It took more than a decade for NVR to rebuild its controlled lot count to pre-crisis levels, a reminder that outsourcing land development can weaken long-term supply security. Green Brick Partners (GRBK) has chosen a different path. By pursuing a "land-heavy" strategy—acquiring, entitling, and self-developing raw land—the company captures the full development profit and achieves industry-leading gross margins. Importantly, it controls the timing, cost, and design of its communities, ensuring flexibility across cycles. GRBK now holds a ten-year lot supply, giving it insulation from bidding wars and freedom from the contractual takedown pressures that weigh on peers. As CEO Jim Brickman put it, "We are under no pressure to purchase lots if the market slows." This divergence in strategy highlights a key competitive advantage. While most builders avoid land to have higher returns on equity, GRBK has focused on vertical integration. Its model restores the builder's role as both developer and home constructor, rather than a home manufacturer dependent on land bankers. Ironically, the very success of the asset-light trend has created scarcity and bidding wars, raising costs for nearly everyone except GRBK. As a result, GRBK stands alone among public builders in keeping lot costs flat or declining as a percentage of revenue in recent years. What Makes Green Brick Different Green Brick was formed in 2008 through a partnership between Dallas real estate titan Jim Brickman and investor David Einhorn, with the initial goal of acquiring distressed real estate. From the beginning, the company's strategy has been unapologetically land-centric. It first grew through its "Team Builder" model, acquiring controlling interests in select private builders in Dallas–Fort Worth, Atlanta, and Florida, and supplying them with the capital to scale. Over time—particularly in its core Dallas–Fort Worth market—GRBK transitioned to operating directly through its own in-house brands. Today, it stands as the only public homebuilder that functions as a fully integrated developer and builder for nearly all of its homes. This integration is a key differentiator. By self-developing its lots, GRBK captures the developer profit margin—an estimated 15–25% cost savings—while also ensuring quality and controlling delivery timing for its own construction operations. The company's credibility is reinforced by significant insider ownership, nearly 30%. David Einhorn, who chairs the board and holds GRBK as his largest position, is no ordinary insider. He is one of the most respected value investors in the world, and it is unlikely a coincidence that the only builder resisting the asset-light trend is the one backed by Einhorn's long-term capital and discipline. That contrarian stance has created a significant edge. Most public builders have shifted to an asset-light approach, competing in bidding wars for optioned land with ten or more groups often chasing the same parcel. GRBK has positioned itself differently. By buying land directly, it frequently acquires parcels without competition and keeps the profits that would otherwise go to land developers. This dynamic explains why GRBK's economics stand apart in an industry where peers are paying more, waiting longer, and fighting harder for the same dirt. Superior Financial Performance GRBK's strategy translates directly into superior and sustainable financial performance. In 2024, the company delivered an industry-leading gross margin of 34%, well above the peer average in the mid-20s. The driver is its remarkable trend in lot costs as a percentage of average selling price (ASP). Since 2016, the industry's average lot cost has increased by 36%, while GRBK's has declined by roughly 60%. This cost trajectory gives the company a structural advantage: while peers warn of margin compression, GRBK expects lot costs as a percentage of ASP to remain flat through 2025, insulating it from the headwinds facing the broader sector. Positioned in Fast-Growing Market GRBK is concentrated in Dallas–Fort Worth, where it is the third-largest builder with a 5.5% market share. Scale matters in homebuilding, and roughly 80% of the company's gross profits come from this market, one of the fastest-growing in the country. Geographic concentration provides operational leverage, purchasing power on materials, and strong trade relationships. Just as importantly, GRBK's long-standing connections with landowners and brokers provide access to off-market opportunities. Management notes the company "very rarely" faces competing bids, enabling it to secure land on favorable terms and preserve its cost advantage. Dallas–Fort Worth is one of the fastest-growing metro areas in the United States, expanding nearly four times the national average (1.9% vs. 0.5%). Within Dallas–Fort Worth, Celina, a suburb where GRBK is especially active, grew 11.5% from 2022 to 2023, more than 20 times the national average. GRBK is well positioned to capitalize on this demographic growth and the broader housing tailwinds driving the industry. Lot Control Unlike peers that are scrambling for land, GRBK controls more than ten years of lot supply in its core market. Lot control is the best predictor of future home closings, and with such a deep pipeline, GRBK can drive organic growth without being forced into costly land-buying sprees during hot markets. Texas Financing Advantage: MUDs and PIDs The company's cost advantage is further amplified by Texas's business-friendly environment. Through Municipal Utility District (MUD) and Public Improvement District (PID) financing, state-specific programs that reimburse 70–80% of infrastructure costs, GRBK reduces its cash outlay per lot by $20,000 to $40,000. These tax-exempt bonds to fund public improvements such as roads and utilities, which are repaid by homeowners through property taxes. An Overlooked Opportunity Despite shareholder alignment, industry-leading margins, low leverage, and concentration in the fastest-growing U.S. market, GRBK trades at a discount to peers. With limited sell-side coverage and a management team that provides no guidance, the company has stayed under the radar. Notes on NVR, SDHC: The true asset light model Norbert Lou has perhaps the most famous stock pitch of all time. He pitched NVR in the early 2000s, called it exactly right, and the stock went on to become one of the best performers of the following two decades. In short, Lou identified land speculation, fueled by debt, as the key industry risk ahead of the Great Financial Crisis. NVR avoided this trap by going fully land-light and outsourcing development, which kept its balance sheet clean and allowed it to navigate the downturn more smoothly than any other builder. But today that model looks increasingly outdated. Finished lot access is strained, and NVR has struggled for years to rebuild its pre-GFC lot position. Developers remain reluctant to partner under NVR's stringent terms, especially since they were the ones left holding the bag post-crisis. This explains why NVR has had so much difficulty expanding beyond the Mid-Atlantic. By refusing to self-develop, it has also given up control over input costs, product timing, and community design. In short: NVR solved the problem perfectly before the GFC, but it has not adapted to the realities of today's market. Smith Douglas Homes (SDHC) has done a better job adapting. Founded by Tom Bradbury, an Atlanta operator with a reputation for execution, SDHC has built an extremely efficient operation where homes are delivered cheaply, quickly, and with meaningful customization. Bradbury was running a version of land-light even before NVR adopted it in the 1990s, but today SDHC is willing to adapt. The company is expanding its internal development capabilities to secure land in markets where pure land-light models no longer work. This balance, low-cost build-to-order customization combined with flexible land strategy, gives SDHC a much more attractive growth outlook than NVR. That growth is critical, because the real power of a land-light approach lies in its ability to amplify returns on equity. Without reinvestment, the model stagnates.