On Friday, global freight transportation equipment supplier Greenbrier announced the launch of a new leasing joint venture, GBX Leasing, with alternative assets investor Longwood Group. The companies will jointly develop an owned portfolio of leased railcars, most of them built by Greenbrier.
Based in Chicago, Longwood is a Chicago-based transportation equipment advisory and asset management firm serving institutional investors and financial sponsors seeking to invest in leased transportation.
GBX Leasing will buy approximately $200 million of newly-built and leased railcars from Greenbrier each year. Most of this initial portfolio for GBX Leasing will consist of leased railcars on Greenbrier’s balance sheet or in its backlog. GBX Leasing will observe Greenbrier’s established, strict portfolio standards for long-term investment, including credit quality, asset diversity, balanced maturities and asset liquidity.
Last month, Greenbrier reported results for its first fiscal quarter ended November 30, 2020, including a diversified new railcar backlog of 23,900 units valued at an estimated $2.35 billion, including orders for 2,900 railcars valued at around $260 million received during the quarter.
Upon announcing those results, which included a net loss of $10 million on revenue of $403 million, Greenbrier CEO William Furman said, “Although a challenging operating environment persists at least through the first half of fiscal 2021, our $2.35 billion backlog provides a baseload for our manufacturing operations and visibility into forward production requirements. We will continue to adjust our manufacturing footprint based on our outlook, while also ensuring we do not constrain our ability to scale capacity as demand increases.”
A logical bolt-on
Commenting on the new venture on Friday, Furman called the JV “a logical bolt-on to Greenbrier’s leasing platform and commercial strategy.”
“The railcar portfolio built by GBX Leasing will create a new annuity stream of tax-advantaged cash flows while reducing Greenbrier’s exposure to the new railcar order and delivery cycle. This move bolsters Greenbrier’s value proposition for its customers and shareholders,” he said.
Greenbrier will beneficially own about 95 percent of GBX Leasing, the balance of which will be owned by Longwood. Greenbrier will provide lease originations, remarketing and railcar administrative services to GBX Leasing. Longwood will provide strategic and investment guidance, portfolio management and management oversight.
Longwood CEO D. Stephen Menzies, who will serve as Chairman and CEO of GBX Leasing, was hailed by Greenbrier’s Furman as a “leader and innovator in the rail industry,” with more than 30 years in rail equipment, leasing, financing and manufacturing.
Menzies formed Longwood in 2018 to pursue a range of commercial investments in freight rail equipment and adjacent transportation markets. Prior to Longwood, Menzies was Senior Vice President of Trinity Industries and Group President of Trinity’s railcar leasing, manufacturing and services businesses. Under his leadership, leased railcar assets under ownership or management grew to more than $10 billion while he also led Trinity’s North American manufacturing operations and expanding services business.
“I am excited to expand our relationship and to partner with Greenbrier in this important strategic development. Based on my experience, I am confident that GBX Leasing will deliver strong value to Greenbrier customers and its investors,” Menzies said.
Greenbrier, which currently owns a lease fleet of 8,400 railcars and performs management services for 407,000 railcars, operates a number of strategic joint ventures in global markets.
These include a majority (75 percent) stake in Greenbrier Astra Rail, Europe’s largest end-to-end freight railcar business, with Germany’s Astra Holding GmBH. It also holds a majority stake in Brazilian freight railcar manufacturer Greenbrier Maxion, which today holds a 70 percent market share in the South American freight railcar market. And it maintains a 50/50 joint venture with Sumitomo Corporation of Americas, GB Summit, which is the only railcar axle machining facility on the U.S. West Coast.
In 2019, Greenbrier acquired the manufacturing operations of Missouri-based American Railcar Industries (today known as American Industrial Transport) from industrial real assets investor ITE Management LP for $400 million. The deal was aimed at strengthening Greenbrier’s North American product base, providing cost savings through supply chain efficiencies and lower transportation costs to key markets and broadening its access to new customers.
