Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
☒ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Fiscal Year Ended December 31, 2022
☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Commission File Number
000-56177
BBX Capital, Inc.
(Exact name of registrant as specified in its charter)
Florida
(State or other jurisdiction of incorporation or organization)
201 East Las Olas Boulevard, Suite 1900
Fort Lauderdale, Florida
(Address of principal executive office)
82-4669146
(I.R.S Employer Identification No.)
33301
(Zip Code)
(954) 940-4900
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock
Class B Common Stock
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the
definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ Accelerated filer ☒ Non-accelerated filer ☐ Smaller reporting company ☒ Emerging growth company ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act. ☒
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under
Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error
to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive
officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant as of June 30, 2022, the last trading day of the registrant’s most recently completed second
fiscal quarter, was $57.0 million (computed by reference to the price at which the common stock was sold).
The number of shares outstanding of each of the registrant’s classes of common stock as of March 8, 2023 is as follows:
Class A Common Stock of $.01 par value, 11,423,543 shares outstanding.
Class B Common Stock of $.01 par value, 3,860,618 shares outstanding.
Documents Incorporated by Reference
Portions of the registrant’s Definitive Proxy Statement on Schedule 14A relating to the registrant’s 2023 Annual Meeting of Shareholders are incorporated by reference into Part III of this
Form 10-K.
Table of Contents
BBX Capital, Inc.
Annual Report on Form 10-K for the Year Ended December 31, 2022
TABLE OF CONTENTS
PART I
Item 1.
Item 1A
Item 1B
Item 2
Item 3
Item 4
Item 5
Item 6
Item 7
Item 7A
Item 8
Item 9
Item 9A
Item 9B
Item 10
Item 11
Item 12
Item 13
Item 14
Item 15
Item 16
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosure
PART II
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
PART III
PART IV
Exhibits, Financial Statement Schedules
Form 10-K Summary
SIGNATURES
Page
1
14
28
28
29
29
30
31
32
56
F-1 to F-52
57
57
58
59
59
59
59
59
60
63
64
Table of Contents
Company Overview
History
PART I
ITEM 1. BUSINESS
BBX Capital, Inc. and its subsidiaries (the “Company” or, unless otherwise indicated or the context otherwise requires, “we,” “us,” or “our”) is a Florida-based diversified
holding company. BBX Capital, Inc. as a standalone entity without its subsidiaries is referred to as “BBX Capital.”
Spin-Off from Bluegreen Vacations
Prior to September 30, 2020, the Company was a wholly-owned subsidiary of Bluegreen Vacations Holding Corporation (“Bluegreen Vacations”) (formerly known as BBX
Capital Corporation), whose principal holdings were Bluegreen Vacations Corporation (“Bluegreen”), BBX Capital Real Estate LLC (“BBX Capital Real Estate” or
“BBXRE”), BBX Sweet Holdings, LLC (“BBX Sweet Holdings” or "BBXSH"), and Renin Holdings, LLC (“Renin”). On September 30, 2020, Bluegreen Vacations
completed a spin-off which separated Bluegreen Vacations’ business, activities, and investments into two separate, publicly-traded companies: (i) Bluegreen Vacations,
which continues to hold its investment in Bluegreen, and (ii) BBX Capital, which continues to hold all of Bluegreen Vacations’ other businesses and investments, including
BBX Capital Real Estate, BBX Sweet Holdings, which currently owns over 90% of IT’SUGAR, LLC (“IT’SUGAR”), and Renin. The spin-off was consummated on
September 30, 2020 with the distribution by Bluegreen Vacations to its shareholders of all of the outstanding shares of BBX Capital’s Common Stock through the
distribution of one share of BBX Capital’s Class A Common Stock for each share of its Class A Common Stock and one share of BBX Capital’s Class B Common Stock for
each share of its Class B Common Stock. Accordingly, following the spin-off, Bluegreen Vacations ceased to have an ownership interest in the Company, and Bluegreen
Vacations’ shareholders who received shares of BBX Capital’s Common Stock in the distribution became shareholders of the Company.
In connection with the spin-off, BBX Capital was converted from a Florida limited liability company into a Florida corporation and changed its name from BBX Capital
Florida LLC to BBX Capital, Inc. In addition, in connection with the spin-off, Bluegreen Vacations issued a $75.0 million note payable to the Company that accrues interest
at a rate of 6% per annum and requires payments of interest on a quarterly basis. Under the terms of the note, Bluegreen Vacations has the option in its discretion to defer
interest payments under the note, with interest on the entire outstanding balance thereafter to accrue at a cumulative, compounded rate of 8% per annum until such time as
Bluegreen Vacations is current on all accrued payments under the note, including deferred interest. All outstanding amounts under the note will become due and payable on
September 30, 2025 or earlier upon certain other events. Bluegreen Vacations is permitted to prepay the note in whole or in part at any time. In December 2021, Bluegreen
Vacations prepaid $25.0 million of the principal balance of the note, reducing the outstanding balance to $50.0 million.
In October 2020, BBX Capital’s Class A Common Stock commenced trading on the OTCQX Best Market under the ticker symbol “BBXIA,” and its Class B Common
Stock commenced trading on the OTC Pink Market under the ticker symbol “BBXIB.”
Our Objectives
The Company’s goal is to build long-term shareholder value. Since many of the Company’s assets do not generate income on a regular or predictable basis, the Company’s
objective is long-term growth as measured by increases in book value and intrinsic value over time. The Company regularly reviews the performance of its investments and,
based upon economic, market, and other relevant factors, considers transactions involving the sale or disposition of all or a portion of its assets, investments, or subsidiaries.
Further, subject to market conditions and other factors, the Company has and may from time to time in the future repurchase its outstanding common stock.
1
Table of Contents
Our Businesses
Principal Investments
BBX Capital’s principal holdings are as follows:
● BBX Capital Real Estate: BBX Capital Real Estate is engaged in the acquisition, development, construction, ownership, financing, and management of real estate
and investments in real estate joint ventures, including investments in multifamily rental apartment communities, single-family master-planned for sale housing
communities, and commercial properties located primarily in Florida. Since November 2018, BBX Capital Real Estate has owned a 50% equity interest in The
Altman Companies, LLC (the “Altman Companies”), a developer and manager of multifamily rental apartment communities, and in January 2023, BBX Capital
Real Estate acquired the remaining equity interests in the Altman Companies. In addition, BBXRE manages the legacy assets acquired in connection with the
Company’s sale of BankAtlantic in 2012, including portfolios of loans receivable, real estate properties, and judgments against past borrowers. As of December 31,
2022, BBXRE had approximately $225.8 million of consolidated assets, and the carrying amount of the Company’s investment in BBXRE was approximately
$203.5 million.
● BBX Sweet Holdings: BBX Sweet Holdings is engaged in the ownership and management of operating businesses in the confectionery industry, including (i)
IT’SUGAR, a specialty candy retailer whose products include bulk candy, candy in giant packaging, and licensed and novelty items and which operates in over 100
retail locations that include a mix of high-traffic resort and entertainment, lifestyle, mall/outlet, and urban locations throughout the United States, and (ii) Las Olas
Confections and Snacks, a manufacturer and wholesaler of chocolate and other confectionery products which also operates several Hoffman’s
Chocolates retail locations in South Florida. As of December 31, 2022, BBXSH had approximately $161.3 million of consolidated assets, and the carrying amount
of the Company’s investment in BBXSH was approximately $41.6 million.
● Renin: Renin is engaged in the design, manufacture, and distribution of sliding doors, door systems and hardware, and home décor products and operates through
its headquarters in Canada and manufacturing and distribution facilities in the United States and Canada. In addition to its own manufacturing activities, Renin
sources various products and raw materials from China, Brazil, and certain other countries. As of December 31, 2022, Renin had approximately $102.6 million of
consolidated assets, and the carrying amount of the Company’s investment in Renin was approximately $33.7 million.
BBX Capital Real Estate
Business Overview
BBX Capital Real Estate is engaged in the acquisition, development, construction, ownership, financing, and management of real estate and investments in real estate joint
ventures, including investments in multifamily rental apartment communities, single-family master-planned for sale housing communities, and commercial properties
located primarily in Florida. Since November 2018, BBX Capital Real Estate has owned a 50% equity interest in the Altman Companies, a developer and manager of
multifamily rental apartment communities, and in January 2023, BBX Capital Real Estate acquired the remaining equity interests in the Altman Companies. In
addition, BBXRE manages the legacy assets acquired in connection with the Company’s sale of BankAtlantic in 2012, including portfolios of loans receivable, real estate
properties, and judgments against past borrowers.
In an effort to diversify its portfolio of real estate developments, BBXRE is also currently pursuing investment opportunities in the development of warehouse and logistics
facilities and has expanded its operating platform to include a logistics real estate division. Further, as market conditions permit, the Altman Companies may also evaluate
potential opportunities to develop multifamily apartment communities in new geographical areas, as well as multifamily apartment communities that include affordable
housing.
Strategy
BBX Capital Real Estate’s strategy is focused on:
● Identifying, acquiring, and developing real estate, including multifamily rental apartment communities, single-family master-planned for sale housing
communities, and infill speculative and build-to-suit warehouse and logistics facilities; and
● Identifying and investing in real estate joint ventures with third party developers.
2
Table of Contents
Although BBXRE historically focused on the monetization of the legacy asset portfolio formerly held by BankAtlantic through the collection or sale of loans receivable and
the development or sale of foreclosed real estate properties, the monetization of the portfolio has been largely completed. As a result, BBXRE’s long-term goal is to build a
diversified portfolio of profitable real estate investments that generate recurring earnings and cash flows primarily through the following activities:
● Continuing to expand its investments in multifamily rental apartment communities through the Altman Companies. In addition to the development and sale of
multifamily rental apartment communities through the Altman Companies, other investment opportunities may include the development of multifamily rental
apartment communities that will be owned and held over a longer term investment period and the pursuit of investment opportunities in new geographic locations
outside of Florida. Further, while BBXRE’s investments in joint ventures sponsored by the Altman Companies primarily involve investing in the managing
member of the joint ventures, BBXRE has in the past and may in the future consider opportunistically making increased equity investments in projects.
● Diversifying its portfolio of real estate developments by investing in the development of warehouse and logistics facilities through its logistics real estate division.
● Opportunistically deploying capital in real estate joint ventures with third party developers.
Investments
BBX Capital Real Estate currently holds investments in a diverse portfolio of real estate developments, including multifamily rental apartment communities, single-family
master-planned for sale communities, mixed-used properties, and other legacy assets. The following provides a description of certain of these investments.
Multifamily Rental Apartment Communities – The Altman Companies
As of December 31, 2022, BBX Capital Real Estate owned a 50% equity interest in the Altman Companies, a joint venture between BBXRE and Joel Altman engaged in the
development, construction, and management of multifamily apartment communities, and as further described below, in January 2023, BBX Capital Real Estate acquired the
remaining equity interests in the Altman Companies.
Business Overview
The Altman Companies is an integrated platform engaged in the development and sale of multifamily apartment communities. Since 1968, these companies and their
predecessors have developed and managed more than 27,000 multifamily units throughout the United States, including communities in Florida, Michigan, Illinois,
Tennessee, Georgia, Texas, and North Carolina. The Altman Companies currently operates through the following companies:
● Altman Development Company (“ADC”) – The Altman Companies owns 100% of ADC, which performs site selection and other predevelopment activities
(including project underwriting and design), identifies development financing (which is typically comprised of a combination of internal and external equity and
institutional debt), provides oversight of the construction process, and arranges for the ultimate sale of the projects upon stabilization. ADC enters into a
development agreement with each joint venture that is formed to invest in development projects originated by the platform and earns a development fee for its
services.
● Altman Management Company (“AMC”) – The Altman Companies currently owns 100% of AMC, which performs leasing and property management services for
the multifamily apartment communities developed by the Altman Companies prior to the ultimate sale of such projects. In certain cases, AMC also provides such
services to apartment communities owned by third parties and certain affiliated entities. AMC enters into a leasing and property management agreement with each
joint venture that is formed to invest in projects originated by the platform and earns a management fee for its services.
● Altman-Glenewenkel Construction (“AGC”) – The Altman Companies currently owns 60% of AGC, which performs general contractor services for a majority of
the multifamily apartment communities developed by the Altman Companies. For joint ventures formed to invest in projects originated by the platform for which a
third-party general contractor is not used, AGC enters into a general contractor agreement with each joint venture and earns a general contractor fee for its services.
Through January 31, 2023, BBXRE and Mr. Altman invested in the managing member of the joint ventures that were formed to invest in projects originated by the
platform. The managing member is typically entitled to receive an increased percentage of the joint venture distributions from the projects to the extent that the equity
investors in such ventures receive agreed-upon returns on their investments. However, as a result of BBXRE’s acquisition of Mr. Altman’s equity interests in the Altman
Companies in January 2023, as further described below, Mr. Altman’s level of investment in the managing member will decrease, and other than certain projects currently in
predevelopment, his investment in new developments will generally earn profits consistent with the non-managing members in the applicable development projects. Further,
BBXRE has in the past and may in the future consider opportunistically making increased equity investments in one or more of such projects originated by the Altman
Companies.
The Altman Companies has historically incurred operating costs in excess of the fees earned from the projects, and as a result, earnings generated by the overall platform are
generally associated with BBXRE and Mr. Altman’s receipt of promoted equity distributions from their investments in the managing member of the development joint
ventures.
BBXRE's Ownership in the Altman Companies and Acquisition of Additional Equity Interests
In November 2018, BBX Capital Real Estate acquired a 50% equity interest in the Altman Companies for cash consideration of $14.6 million, including $2.3 million in
transaction costs, with Mr. Altman retaining a 50% equity interest. While the Altman Companies was a joint venture between BBXRE and Mr. Altman, the parties shared
decision-making authority for all significant operating and financing decisions. To the extent that the parties could not reach consensus on a matter, the operating agreement
generally provided that a third party would resolve such matter; however, for certain decisions, the operating agreement provided that the venture could not proceed with
such matters without approval from both parties.
3
Table of Contents
Pursuant to the operating agreement of the Altman Companies, BBXRE also agreed to acquire an additional 40% equity interest in the Altman Companies from Mr. Altman
in January 2023 for a purchase price of $9.4 million, subject to certain adjustments (including reimbursements for predevelopment expenditures incurred at the time of the
acquisition), at which time BBXRE would also acquire control and decision-making authority for all significant operating and financing decisions related to the Altman
Companies as of and subsequent to the acquisition. Further, Mr. Altman also had the right, at his option or in other predefined circumstances, to require BBXRE to purchase
his remaining 10% equity interest in the Altman Companies for $2.4 million, at which time Mr. Altman would no longer serve as an employee of the Altman Companies and
no longer have an equity interest in the Altman Companies. However, irrespective of BBXRE’s acquisition of additional equity interests in the Altman Companies, Mr.
Altman is entitled to retain his membership interests, including his decision-making rights, in the managing member of all development joint ventures that were originated
prior to BBXRE’s acquisition of such equity interests in the Altman Companies from Mr. Altman.
On January 31, 2023 (the "Acquisition Date"), BBXRE closed on the acquisition of the additional 40% equity interests in the Altman Companies for $8.1 million, reflecting
the base purchase price of $9.4 million, an additional $0.1 million of reimbursements for predevelopment expenditures incurred at the time of the acquisition, and a
downward adjustment of $1.4 million to reflect an estimated working capital deficit calculated pursuant to the terms of the operating agreement. Pursuant to the terms of the
operating agreement, the final working capital adjustment amount will be determined by BBXRE and Mr. Altman following the closing and may result in the payment of
additional consideration to Mr. Altman or a refund to BBXRE.
In connection with the acquisition of the 40% interest from Mr. Altman, BBXRE also acquired the remaining 10% equity interest owned by Mr. Altman. Pursuant to the
terms of the modified arrangement for the acquisition of the remaining 10% equity interest, the parties agreed that Mr. Altman will remain employed by the Altman
Companies and that the remaining $2.4 million payment for the interest will be deferred until the earlier of (i) the termination of Mr. Altman’s employment from the Altman
Companies or (ii) November 30, 2028 (the “Final Payment Date”). In addition, the parties agreed to the following terms related to new development projects commencing
subsequent to the Acquisition Date:
● With respect to certain proposed development projects in predevelopment, Mr. Altman will be entitled to invest in the managing member of any joint venture
formed to invest in such projects as if his ownership percentage in the Altman Companies was still 10% if the projects commence prior to the Final Payment Date.
● With respect to certain proposed development projects that were determined to be unlikely to proceed and for which Mr. Altman did not receive reimbursement for
his share of predevelopment expenditures at closing, BBXRE agreed to reimburse Mr. Altman for his share of predevelopment expenditures if such projects
ultimately proceed at a later date prior to the Final Payment Date. Further, if the projects commence prior to the Final Payment Date, Mr. Altman will also be
entitled to invest in the managing member of any joint venture formed to invest in such projects as if his ownership percentage in the Altman Companies was still
10%.
● With respect to all other projects that commence prior to the Final Payment Date, Mr. Altman will be required to invest in the managing member of any joint venture
formed to invest in such projects as if his relative ownership percentage in the Altman Companies was 10%. However, in such case, his investment in the ventures
will be entitled to profits similar to those earned by non-managing members rather than the profits to which BBXRE will be entitled as the managing member. If Mr.
Altman does not invest in the managing member of additional joint ventures, BBXRE will be entitled to offset his required capital contribution against the deferred
$2.4 million payable to Mr. Altman.
As a result of the transaction, BBXRE is now entitled to nominate all members of the executive committee responsible for the management of the Altman Companies
(although BBXRE has continued to nominate Mr. Altman as a member of the committee) and is deemed to have acquired control and decision-making authority for all
significant operating and financing decisions related to the Altman Companies. Further, BBXRE will have decision-making authority for all significant operating and
financing decisions for any development joint venture that is sponsored and formed by the Altman Companies subsequent to the Acquisition Date. However, as discussed
above, Mr. Altman has retained his membership interests, including his decision-making rights, in the managing member of all development joint ventures that were
originated prior to BBXRE’s acquisition of the remaining equity interests in the Altman Companies from Mr. Altman.
Accounting for BBXRE's Investment in the Altman Companies
Through the Acquisition Date, the Company accounted for its investment in the Altman Companies under the equity method of accounting, as BBXRE and Mr. Altman
jointly managed the Altman Companies and shared decision-making authority for all significant operating and financing decisions through such date. Further, the Company
has accounted for its investments in the managing member of development joint ventures that were originated prior to the Acquisition Date under the equity method of
accounting, as BBXRE and Mr. Altman similarly shared decision-making authority for all significant operating and financing decisions related to the managing member of
such joint ventures.
As a result of BBXRE’s acquisition of control and decision-making authority over the Altman Companies, the Company will now consolidate the Altman Companies in its
financial statements as of the Acquisition Date using the acquisition method of accounting, which requires that the assets acquired and liabilities assumed associated with an
acquiree be recognized at their fair values at the acquisition date. As a result, the Company will remeasure the carrying value of its current equity interests in the Altman
Companies at fair value as of the Acquisition Date, with any resulting remeasurement adjustment recognized in the Company’s statement of operations. Further, the
Company expects to recognize goodwill based on the difference between (i) the fair values of the identifiable assets and liabilities of the Altman Companies at the
Acquisition Date and (ii) the aggregate of the consideration transferred (measured in accordance with the acquisition method of accounting) and the fair values of the
Company’s current equity interest and any noncontrolling interests in the Altman Companies at the acquisition date.
As a result of the acquisition, the Company expects that it will also consolidate the managing member of any new development joint ventures that are sponsored and formed
by the Altman Companies commencing as of and subsequent to the Acquisition Date. Further, while Joel Altman will generally retain his decision-making rights in the
managing member of development joint ventures that were originated prior to the Acquisition Date, the Company is continuing to evaluate its accounting for its investments
in such joint ventures as of and subsequent to the Acquisition Date under the applicable accounting guidance.
4
Table of Contents
Other Matters Related to the Altman Companies
As of December 31, 2022, BBXRE and Mr. Altman had each contributed $4.8 million to ABBX Guaranty, LLC (“ABBX”), a joint venture established to provide guarantees
on the indebtedness and construction cost overruns of development joint ventures formed by the Altman Companies. Under the terms of the operating agreement of ABBX,
BBXRE and Mr. Altman will retain their respective 50% equity interests in the joint venture until such time that the joint venture is no longer providing guarantees related
to development joint ventures originated prior to the Acquisition Date. At such time that ABBX is no longer providing guarantees related to such development joint
ventures, BBXRE will generally acquire Mr. Altman’s equity interest in ABBX based on his then outstanding capital in ABBX.
In certain circumstances, the Altman Companies may acquire the 40% membership interests in AGC that are not owned by the Altman Companies for a purchase price
based on formulas set forth in the operating agreement of AGC. Following the acquisition of Mr. Altman’s equity interests in the Altman Companies in January 2023,
BBXRE currently expects that it will exercise its right to acquire the remaining 40% membership interests in AGC in 2023. Due to the formula applicable to the option
pursuant to which BBXRE is permitted to acquire such interests, which is primarily calculated based on AGC’s working capital balance and a percentage of expected profits
from current construction projects and is not calculated based on the fair value of such interests, BBXRE does not expect to pay a significant amount of cash upon the
closing of the acquisition of such interests. However, BBXRE would assume responsibility for any working capital deficits related to AGC at the time of closing and may be
obligated to pay a percentage of profits from AGC, if any, to the seller over time.
In March 2023, the Altman Companies amended and restated the operating agreement of AMC to admit an unaffiliated property management company as a joint venture
partner. The Altman Companies is continuing to serve as the managing member of AMC, with any major decisions requiring the approval of both parties. Once the parties
have received any necessary consents related to the formation of the joint ventures as required by various stakeholders, including certain lenders, equity investors, and
regulatory agencies with jurisdiction, the unaffiliated property management company will serve as the managing member of AMC, with any major decisions continuing to
require the approval of both parties. Under the terms of the operating agreement, the parties will each be entitled to receive distributions of available cash of the joint
venture based on a proscribed formula within the operating agreement, with the parties generally each receiving 50% of distributable cash after the unaffiliated property
management company has received its initial contribution to AMC and the parties have received a return of any additional capital contributions subsequent to the formation
of the joint venture. Further, pursuant to the terms of the agreement, each party has the right to terminate the joint venture arrangement at any time, with such termination
resulting in the unaffiliated property management company transferring its ownership interests in AMC back to the Altman Companies. However, if the Altman Companies
exercises this right prior to the first anniversary of the formation of the joint venture, the Altman Companies is required to pay a penalty up to a maximum amount of $0.2
million.
Active Developments Sponsored by the Altman Companies
As of December 31, 2022, BBXRE had investments in eight active developments sponsored by the Altman Companies, which are as follows (dollars in thousands):
Project
Location
Apartment Units
Project Status at December 31, 2022
Carrying Value of
BBXRE Investment
at December 31,
2022
Altis Grand Central
Altis Ludlam Trail (1)
Altis Grand at Lake Willis Phase 1
Altis Lake Willis Phase 2
Altis Grand at Suncoast
Altis Blue Lake
Altis Santa Barbara
Altra Kendall
Tampa, Florida
Miami, Florida
Orlando, Florida
Orlando, Florida
Lutz, Florida
West Palm Beach, Florida
Naples, Florida
Kendall, Florida
$
314 Stabilized - 94% Occupied
312 Construction Completed - Currently Being Leased
329 Under Construction - Expected Completion in 2024
230 Under Construction - Expected Completion in 2024
449 Under Construction - Expected Completion in 2024
318 Under Construction - Expected Completion in 2024
242 Under Construction - Expected Completion in 2024
342 Under Construction - Expected Completion in 2024
687
12,216
850
601
4,579
647
433
5,670
(1) The carrying value of BBXRE’s investment at December 31, 2022 includes $11.6 million related to BBXRE’s investment in the preferred equity associated with the Altis Ludlam
Trail project, including the investment balance and accrued preferred return.
Rights to Joint Venture Distributions
The operating agreements governing the joint ventures sponsored by the Altman Companies generally provide that the holders of the non-managing membership interests
are entitled to distributions based on their pro-rata share of the capital contributions to the ventures until such members receive their aggregate capital contributions plus a
specified return on their capital. After such members receive such amounts, distributions are based on an agreed-upon allocation of the remaining amounts available for
distribution, with the holders of the managing membership interests receiving an increasing percentage of the distributions. As BBXRE’s investments in the above joint
ventures include investments as a managing member, BBXRE’s overall economic interest in the expected distributions from such ventures in many cases is not the same as
its pro-rata share of its contributed capital in the ventures.
Single Family Development - Beacon Lake Master Planned Development
BBXRE is the master developer of the Beacon Lake Community, a master planned community located in St. Johns County, Florida that is being developed in four phases
and expected to be comprised of 1,476 single-family homes and townhomes. BBXRE is primarily developing the land and common areas and selling finished lots to third-
party homebuilders. Other than in the case of the lots comprising Phase 4, which were sold to a homebuilder as undeveloped lots, the agreements pursuant to which BBXRE
is selling finished lots to homebuilders generally provide for a base purchase price that is paid to BBXRE upon the sale of the developed lots to the homebuilders and a
contingent purchase price that is calculated as a percentage of the proceeds that the homebuilders receive from the sale of the completed homes. While an estimated amount
of the contingent purchase price is recognized in BBXRE’s revenues upon the sale of the lots to the homebuilders, the contingent purchase price is paid to BBXRE upon the
closing of such home sales by homebuilders.
5
Table of Contents
BBXRE has substantially completed the development of the lots comprising Phases 1 through 3 of the Beacon Lake Community and previously sold the 299 undeveloped
lots comprising Phase 4 in a bulk lot sale to a single homebuilder in 2021.
The following table summarizes the status of the sale of lots to homebuilders in each phase in the development as of December 31, 2022:
Total planned lots
Lots sold to homebuilders (1)
Remaining lots to sell
Lots under contract with homebuilders
Available lots
Phase 1
Phase 2
Phase 3
Phase 4
Total
Single-family
Townhomes
302
(302)
—
—
—
479
(479)
—
—
—
196
(196)
—
—
—
200
(115)
85
(85)
—
299
(299)
—
—
—
1,476
(1,391)
85
(85)
—
(1) As further described in Item 8 - Note 2 to the Company’s consolidated financial statements included in this Annual Report, BBXRE generally recognizes revenue
related to sales of lots to homebuilders, including an estimate of any contingent purchase price expected to be collected in relation to such lots, upon the closing of
the sale of such lots to the homebuilders. Although BBXRE recognizes the expected contingent purchase price associated with such lots upon the closing of the
sale to the homebuilders, BBXRE ultimately does not receive any contingent purchase price related to a lot until the homebuilder closes on the sale of a home on
the lot and collects the proceeds from the home sale. With respect to the sale of the undeveloped lots comprising Phase 4, BBXRE received the payment of the
purchase price for the lots from the homebuilder at the time of closing, subject to certain adjustments contemplated in the agreement, but the agreement related to
the transaction does not provide for a contingent purchase price structure similar to the agreements related to the sale of developed lots in Phases 1 through 3.
As noted in the table above, BBXRE had sold all but 85 lots in the Beacon Lake Community as of December 31, 2022, and these lots are now under contract with
homebuilders. Accordingly, other than the closing on the sale of the remaining lots, BBXRE has substantially completed its primary activities as the master developer of the
Beacon Lake Community.
However, BBXRE expects to continue to collect contingent purchase price from homebuilders upon the sale of homes by the homebuilders, and as of December 31, 2022,
BBXRE had recognized contingent purchase price receivables totaling $16.9 million related to the sale of lots in the Beacon Lake Community. The following table
summarizes the status of the sale of homes by homebuilders on lots in Phases 1 through 3 previously sold by BBXRE to such homebuilders:
Lots sold to homebuilders
Homes closed
Homes remaining to close
Phase 1
Phase 2
Phase 3
Total
Single-family
Townhomes
302
301
1
479
408
71
196
185
11
115
—
115
1,092
894
198
BBXRE financed a portion of the development costs for the Beacon Lake Community through the issuance of Community Development District Bonds. Under the terms of
the agreements with the homebuilders, in connection with the sale of the finished lots, BBXRE is required to repay a portion of the bonds with proceeds from such sales,
while a portion of the bonds are assumed by the homebuilders.
Single-Family Developments with Third Party Developers
Marbella
As of December 31, 2022, BBXRE had invested $8.1 million in a joint venture with CC Homes to develop Marbella, a residential community comprised of 158 single-
family homes in Miramar, Florida. Under the terms of the operating agreement between BBXRE and CC Homes, BBXRE is entitled to receive 70.0% of the joint venture
distributions until it receives its aggregate capital contributions plus a specified return on its capital. After BBXRE and CC Homes receive a specified return and the return
of their contributed capital, any distributions thereafter are shared based on earnings, with CC Homes, as the managing member, receiving an increasing percentage of
distributions.
During the year ended December 31, 2022, the joint venture closed on the sale of 126 single-family homes, and BBXRE recognized $12.6 million of equity earnings and
received $12.5 million of distributions from the venture. As of December 31, 2022, the joint venture had closed on the sale of all 158 single-family homes in Marbella.
Sky Cove
In June 2019, BBXRE invested $4.2 million as one of a number of investors in a joint venture with Label & Co. to develop Sky Cove at Westlake, a residential community
comprised of 204 single-family homes in Loxahatchee, Florida. Under the terms of the operating agreement governing the joint venture, BBXRE is entitled to receive
26.25% of the joint venture distributions until it receives its aggregate capital contributions plus a specified return on its capital. After all investors receive a specified return
and the return of their contributed capital, any distributions thereafter are shared based on earnings, with Label & Co., as the managing member, receiving an increasing
percentage of distributions.
6
Table of Contents
During the year ended December 31, 2022, the joint venture closed on the sale of 39 single-family homes, and BBXRE recognized $0.5 million of equity earnings and
received $2.1 million of distributions from the venture. As of December 31, 2022, the joint venture had closed on the sale of all 204 single-family homes in Sky Cove.
Sky Cove South
In February 2021, BBXRE invested $4.9 million as one of a number of investors in a joint venture with Label & Co. to develop Sky Cove South at Westlake, a residential
community that is adjacent to Sky Cove at Westlake and is expected to be comprised of 197 single-family homes. BBXRE’s rights to distributions from the Sky Cove South
joint venture are substantially the same as its rights to distributions from the Sky Cove joint venture.
During the year ended December 31, 2022, the joint venture closed on the sale of 80 single-family homes, and BBXRE recognized $0.6 million of equity earnings and
received $2.1 million of distributions from the venture. As of December 31, 2022, the joint venture had executed contracts to sell 172 homes in the community and
had closed on the sale of 80 homes.
Mixed Use Development
The Main Las Olas
As of December 31, 2022, BBXRE had invested $3.8 million as one of a number of investors in The Main Las Olas joint venture, which was formed to invest in the
development of The Main Las Olas, a mixed-used project in downtown Fort Lauderdale, Florida that is comprised of an office tower with approximately 365,000 square
feet of leasable area, a residential tower with approximately 341 units, and approximately 45,000 square feet of ground floor retail. Construction was completed during
2022, and as of December 31, 2022, the office tower, residential tower, and retail space were 100%, 92%, and 91% leased, respectively.
BBX Capital leases 32,166 square feet of space in the office tower for its corporate headquarters pursuant to a lease agreement with the joint venture that has an initial term
that ends in 2032.
Legacy Assets
BBXRE owns various legacy assets, including loans receivable and real estate formerly held by BankAtlantic, with an aggregate carrying amount of approximately
$14.1 million as of December 31, 2022. The majority of the legacy assets do not generate cash flow on a regular or predictable basis and are not expected to do so until the
assets are monetized through loan repayments or transactions involving the sale, joint venture, or development of the underlying real estate.
BBXRE has generated substantial income from the legacy asset portfolio over the past decade, as the majority of the loans receivable and real estate assets within the
portfolio were impaired in prior periods to their estimated fair values during the recession that began in 2007 and 2008. Although BBXRE continues to periodically
monetize assets in the legacy asset portfolio for significant profits as a result of the improved market conditions in Florida, as evidenced by the recent sale of 119 acres of
vacant land located in St. Lucie County, Florida in December 2022 for a net gain of $23.0 million, BBXRE believes that the monetization of the portfolio is substantially
complete and does not expect or forecast significant earnings relating to the remaining assets in future periods.
BBXRE is also continuing its efforts to collect legal judgments against past borrowers held in this portfolio, and although such collection efforts have continued to generate
income for BBXRE over the past several years, there is significant uncertainty as to the collection of any additional significant amounts in future periods.
7
Table of Contents
BBX Sweet Holdings
Business Overview
BBX Sweet Holdings is engaged in the ownership and management of operating businesses in the confectionery industry, including (i) IT’SUGAR, a specialty candy
retailer whose products include bulk candy, candy in giant packaging, and licensed and novelty items and which operates in over 100 retail locations that include a mix of
high-traffic resort and entertainment, lifestyle, mall/outlet, and urban locations throughout the United States, and (ii) Las Olas Confections and Snacks, a manufacturer and
wholesaler of chocolate and other confectionery products which also operates several Hoffman’s Chocolates retail locations in South Florida
BBXSH owns over 90% of the equity interest in IT’SUGAR. Prior to September 22, 2020, the Company consolidated the financial statements of IT’SUGAR and its
subsidiaries as a result of its over 90% ownership of IT’SUGAR. However, as a result of the impact of the COVID-19 pandemic on its operations, on September 22, 2020,
IT’SUGAR and its subsidiaries filed voluntary petitions to reorganize under Chapter 11 of Title 11 of the U.S. Code (the “Bankruptcy Code”) in the U.S. Bankruptcy Court
for the Southern District of Florida (the “Bankruptcy Court”) (the cases commenced by such filings, the “Bankruptcy Cases”), and as a result of the filings and the
uncertainties surrounding the nature, timing, and specifics of the bankruptcy proceedings, the Company deconsolidated IT’SUGAR on September 22, 2020. On June 16,
2021, the Bankruptcy Court confirmed IT’SUGAR’s plan of reorganization, and the plan became effective on June 17, 2021 (the “Effective Date”). Pursuant to the terms of
the plan, BBX Sweet Holdings’ equity interests in IT’SUGAR were revested on the Effective Date, and all organizational documents of IT’SUGAR were assumed, ratified,
and reinstated. As a result of the confirmation and effectiveness of the plan and the revesting of its equity interests in IT’SUGAR, the Company was deemed to have
reacquired a controlling financial interest in IT’SUGAR and consolidated the results of IT’SUGAR into its consolidated financial statements as of the Effective Date, the
date that the Company reacquired control of IT’SUGAR. See Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 23
in Item 8 – Financial Statements and Supplementary Data for further discussion related to the Bankruptcy Cases.
Strategy
There are certain significant differences amongst BBX Sweet Holdings’ operating businesses, which have distinct business and operating strategies reflecting their
respective business models.
IT’SUGAR’s business and operating strategy is primarily focused on:
● Driving traffic and sales by creating a “retailtainment” experience for customers, including developing creative and humorous product content;
● Developing and leveraging industry relationships and establishing itself as a vehicle through which brands can market and sell their products at “retailtainment”
locations specifically focused on candy products and candy-themed merchandise;
● Expanding on the recent success of its “candy department store” concept in select high-traffic resort and entertainment locations across the United States (as
implemented in retail locations at American Dream in New Jersey and the Ala Moana Center in Honolulu, Hawaii);
● Improving the quality and remaining maturity of its store portfolio by (i) extending the lease terms of its existing successful retail locations, (ii) expanding the size
of certain existing retail locations, and (iii) closing retail locations where appropriate; and
● Opening “pop up” retail locations in select markets in order to test the markets for the viability of potential longer-term locations.
Las Olas Confections and Snacks’ business and operating strategy is primarily focused on:
● Improving its gross margin and profitability through (i) the elimination of existing products with low margins, (ii) process improvements and efficiencies, and (iii)
reductions in product and operating costs;
● Selling its Hoffman chocolate products at its six South Florida retail stores: and
● Growing its market share in certain core confectionery products, including chocolate, coconut, and taffy products.
During 2022, the Company sold Hoffman’s Chocolates’ manufacturing facility in Greenacres, Florida as part of its efforts to improve its gross margin and profitability. As a
result of the sale, substantially all of the products previously manufactured at the Hoffman’s Chocolates facility are now manufactured in the Las Olas Confections and
Snacks facility in Orlando, Florida.
Renin
Business Overview
Renin is engaged in the design, manufacture, and distribution of sliding doors, door systems and hardware, and home décor products and operates through its headquarters
in Canada and manufacturing and distribution facilities in the United States and Canada. In addition to its own manufacturing activities, Renin sources various products and
materials from China, Brazil, and certain other countries. In October 2020, Renin acquired Colonial Elegance, a supplier and distributor of building products that was
headquartered in Montreal, Canada. Colonial Elegance’s products included barn doors, closet doors, and stair parts, and its customers included big box retailers in the
United States and Canada which were complementary to and expanded Renin’s existing customer base.
8
Table of Contents
Renin’s products are primarily sold through three channels in North America:
● Retail – Includes sales to big box retailers, including Lowe’s (U.S. and Canada), Rona (Canada), Home Depot (U.S. and Canada), and Menards;
● Commercial – Includes sales to original equipment manufacturers and fabricators; and
● Direct Installation – Installation of door systems in newly constructed homes, condominiums, and apartments in the greater Toronto area.
For the year ended December 31, 2022, Renin’s retail, commercial, and direct installation channels comprised approximately 69%, 21%, and 10%, respectively, of its gross
sales.
During the year ended December 31, 2022, Renin’s total revenues included $107.1 million of trade sales to three major customers and their affiliates and $46.9 million of
revenues generated outside the United States. For the year ended December 31, 2022, revenues from the three major customers and their affiliates respectively represented
$49.6 million (or 14.5%), $37.9 million (or 11.1%,), and $19.6 million (or 5.7%) of the Company’s total revenues. Renin’s long-lived assets located outside the United
States, which includes properties, equipment, and right of use assets, had a carrying amount of $16.1 million as of December 31, 2022.
Strategy
Renin’s business and operating strategy is primarily focused on:
● Increasing sales and market share by delivering outstanding customer service;
● Lowering product and manufacturing costs through (i) improvements in product sourcing and logistics, (ii) manufacturing efficiencies, and (iii) consolidating
manufacturing and logistics facilities where appropriate;
● Balancing an appropriate mix between domestic manufacturing and global sourcing of finished goods in light of market conditions; and
● Reducing customer lead-times through improved inventory planning.
There is no assurance that the strategies of our principal holdings, as discussed above, will be successful.
Other Investments
In addition to its principal holdings, the Company has investments in other operating businesses, including a restaurant located in South Florida that was acquired through a
loan foreclosure and an insurance agency. However, in February 2023, the Company sold substantially all of the assets of its insurance agency business, although the entity
will continue to provide risk management advisory services to the Company and its affiliates, including Bluegreen Vacations.
Regulatory Matters
As a public company, the Company is subject to federal securities laws, including the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In addition, the
companies in which BBX Capital holds investments are subject to federal, state, and local laws and regulations generally applicable to their respective businesses.
The Company collects, processes, and retains large volumes of internal and customer data, including social security numbers, credit card numbers, and other personally
identifiable information of its employees and customers, in various internal information systems. The Company also transmits some of this information to third party service
providers. The regulatory environment, as well as the requirements imposed on the Company by the payment card industry surrounding information, security, and privacy is
increasingly demanding, in both the United States and other jurisdictions in which the Company operates. From time to time, information comes to our attention that our
internal information systems, including our payment processing systems, fail to fully comply with applicable requirements and regulations. Such requirements and
regulations may include, without limitation, the Florida Information Protection Act (FIPA), the Fair and Accurate Credit Transactions Act (FACTA), and the Consumer
Credit Protection Act (CCPA). Upon receipt of such information, we immediately seek to remediate the issues, both directly and with our third-party service providers.
See “Item 1A – Risk Factors” for a description of risks with respect to regulatory compliance.
Seasonality
BBX Sweet Holdings’ businesses are subject to seasonal fluctuations in trade sales, which cause fluctuations in BBX Sweet Holdings’ quarterly results of operations.
Historically, IT’SUGAR has generated its strongest retail trade sales during the months from June through August, as well as during the month of December, when families
are generally on vacation, while Las Olas Confections and Snacks has generated its strongest trade sales during the fourth quarter in connection with various holidays in the
United States.
Human Resources
As of December 31, 2022, the Company and its subsidiaries had approximately 1,553 employees, including 986 employees at IT’SUGAR. We believe that our employee
relations are satisfactory and that our employees are important to achieving our business objectives.
9
Table of Contents
BBX Capital seeks to offer competitive compensation and benefit programs for our employees in our effort to attract and retain employees. In addition to competitive base
wages, additional programs currently include: incentive compensation plans, long-term incentive plans, company matched 401(k) plans, healthcare and insurance benefits,
health savings and flexible spending accounts, paid time off, family leave, and employee assistance programs.
We are committed to foster an inclusive work environment that supports our workforce and the communities we serve, and we seek to hire the best qualified employees
regardless of gender, ethnicity, or other protected traits and to fully comply with all laws applicable to discrimination in the workplace.
We are committed to maintaining a work environment where employees are treated with dignity and respect and are free from the threat of discrimination and harassment.
We believe these same standards should apply to all stakeholders and to our interactions with customers, vendors, and independent contractors.
We are proud to be an Equal Opportunity Employer. Our policies prohibit discrimination in hiring or advancement against any individual on the basis of race, color,
religion, gender, sex, national origin, age, marital status, pregnancy, physical or mental disability, veteran status, sexual orientation, or any other characteristic protected by
applicable law.
We strive to ensure our employees have access to working conditions that provide a safe and healthy environment, free from work-related injuries and illnesses. We
encourage employees to raise concerns about actual or suspected misconduct.
Competition
The industries in which the Company conducts its business are very competitive, and BBX Capital also faces substantial competition with respect to its investment activities
from real estate investors and developers, private equity funds, hedge funds, and other institutional investors. BBX Capital competes with institutions and entities that are
larger and have greater resources than the resources available to BBX Capital.
BBXRE invests in the development of multifamily apartment communities. Due to the historically strong performance of this class of asset within the real estate market and
the recent increase in demand for housing in the markets in which BBXRE and the Altman Companies operate, BBXRE has experienced increased competition from other
real estate investors and developers, which has resulted in an increase in the cost of land and limits the number of available development opportunities in the markets in
which BBXRE and the Altman Companies operate.
Renin’s products are primarily sold to large retailers and wholesalers, and it experiences intense competition from others, including importers of foreign products.
Four unaffiliated companies in the confectionery industry currently account for the majority of the industry’s revenues, reflecting significant concentration and competition
in the industry in which BBX Sweet Holdings operates.
Implications of Being an Emerging Growth Company
We qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As an emerging growth company, we can
take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies, including reduced financial disclosure,
reduced disclosure about our executive compensation arrangements, exemption from the requirements to hold non-binding advisory votes on executive compensation or
shareholder approval of golden parachute payments, and exemption from the auditor attestation requirement in the assessment of our internal control over financial
reporting. We expect to continue to take advantage of certain of the exemptions available to emerging growth companies until December 31, 2025 (the end of the fifth fiscal
year following the initial public issuance of our common stock in connection with the spin-off from Bluegreen Vacations) or such earlier time that we no longer qualify as
an emerging growth company. We would cease to be an emerging growth company if we have more than $1.07 billion in annual revenue, more than $700.0 million in
market value of our stock is held by non-affiliates, or we issue more than $1.0 billion of non-convertible debt securities over a three-year period.
10
Table of Contents
Additional Information
The Company’s corporate website is www.bbxcapital.com. The Company’s Form 10 and Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all
amendments to those reports are available free of charge through the Company's website as soon as reasonably practicable after such material is electronically filed with, or
furnished to, the Securities and Exchange Commission (“SEC”). The Company’s website and the information contained on or connected to it are not incorporated into this
Annual Report on Form 10-K. The SEC also maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information regarding
issuers that file electronically with the SEC.
Cautionary Note Regarding Forward-Looking Statements
This document contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of
the Exchange Act. All opinions, forecasts, projections, future plans or other statements, other than statements of historical fact, are forward-looking statements. Forward-
looking statements can be identified by the use of words or phrases such as “plans,” “believes,” “will,” “expects,” “anticipate,” “intends,” “estimates,” “our view,” “we
seek,” “would,” and words and phrases of similar import. Forward-looking statements are based largely on our current expectations, and we can give no assurance that such
expectations will prove to be correct. In addition, forward-looking statements are subject to a number of risks and uncertainties that are subject to change based on factors
which are, in many instances, beyond our control. Actual results, performance, or achievements could differ materially from those contemplated, expressed, or implied by
the forward-looking statements contained herein. When considering forward-looking statements, the reader should keep in mind the risks, uncertainties, and other
cautionary statements made in this report. The reader should not place undue reliance on any forward-looking statement, which speaks only as of the date made. This
document also contains information regarding the past performance of the Company and its investments and operations. The reader should note that prior or current
performance is not a guarantee or indication of future performance. Comparisons of results for current and any prior periods are not intended to express any future trends or
indications of future performance, and all such information should only be viewed as historical data. Future results could differ materially as a result of a variety of risks and
uncertainties.
Some factors which may affect the accuracy of the forward-looking statements apply generally to the industries in which the Company operates, including the real estate
development and construction industry in which BBX Capital Real Estate operates, the home improvement industry in which Renin operates, and the confectionery industry
in which BBX Sweet Holdings operates.
With respect to the Company generally, the various factors include, but are not limited to:
● Risks and economic uncertainties, including inflationary trends, increased costs of labor, freight, shipping and materials, and increasing interest rates, and the
Company’s ability to pass along the increased costs to its customers, all of which could adversely impact the profitability of the Company’s operating businesses;
● Risks and uncertainties of supply chain disruptions on the Company’s businesses which has resulted in higher costs of inventory and may result in the Company
being unable to obtain or manufacture sufficient amounts of products or maintain sufficient inventory;
● Risks that labor shortages may result in issues relating to the hiring or retention of employees, increased employee turnover, and demands for higher wages;
● Risks related to BBX Capital’s indebtedness and the indebtedness of its subsidiaries including Renin, including the potential for accelerated maturities and required
payments necessitated by debt covenants;
● Risks and uncertainties affecting BBX Capital and its ability to successfully implement its current business strategies and its ability to generate earnings under
its current business strategies;
● The performance of entities in which BBX Capital has made investments may not be profitable or achieve anticipated results and the risk of impairment losses
associated with declines in the value of the Company’s investments in operating businesses or the Company’s inability to recover its investments;
● Risks associated with acquisitions, asset or subsidiary dispositions, or debt or equity financings which the Company may consider or pursue from time to time;
● Risks of cybersecurity threats, including the potential misappropriation of assets or confidential information, corruption of data, or operational disruptions;
● The updating of, and developments with respect to, technology, including the cost involved in updating our technology and the impact that any failure to keep pace
with developments in technology could have on our operations or competitive position and our information technology expenditures may not result in the expected
benefits;
11
Table of Contents
●
The Company’s ability to maintain the integrity of internal or customer data, the failure of which could result in damage to our reputation and/or subject us to costs,
fines or lawsuits;
● Risks associated with the compliance costs of Environmental, Social and Governance Initiatives that may be imposed on us by regulatory agencies;
● The ability of BBX Capital’s subsidiaries to compete effectively in the highly competitive industries in which they operate;
● The Company’s relationships with key customers and suppliers may be materially diminished or terminated;
● The preparation of financial statements in accordance with GAAP involves making estimates, judgments and assumptions, and any changes in estimates,
judgments and assumptions used could have a material adverse impact on the financial condition and operating results of BBX Capital or its subsidiaries;
● The impact on BBX Capital’s consolidated financial statements and internal control over financial reporting of the adoption of new accounting standards;
● Audits of BBX Capital’s or its subsidiaries’ federal or state tax returns, including that they may result in the imposition of additional taxes;
● The Company’s businesses are subject to various governmental regulations, laws and orders, compliance with which may result in significant expenses, and any
noncompliance could result in civil or criminal penalties or other liabilities;
● The outcome of litigation, inquiries, investigations, examinations or other legal proceedings is inherently uncertain and could subject the Company to significant
monetary damages or restrictions on the Company’s ability to do business;
● Any damage to physical assets or interruption of access to physical assets or operations resulting from public health issues, such as the outbreak of COVID-19, or
other pandemics, or from hurricanes, earthquakes, fires, floods, windstorms or other natural disasters, which may increase in frequency or severity due to climate
change or other factors;
● The risk that creditors of BBX Capital’s subsidiaries or other third-parties may seek to recover distributions or dividends, if any, made by such subsidiaries to BBX
Capital or other amounts owed by such subsidiaries to such creditors or third-parties; and
● If BBX Capital issues additional shares of its Class A Common Stock, Class B Common Stock or other securities, including in connection with acquisitions,
investments or financings or pursuant to equity compensation plans, BBX Capital’s shareholders would experience dilution and any preferred stock issued could
include dividend rights, conversion rights, voting rights, terms of redemption and liquidation preferences, any or all of which may be greater than the rights of
BBX Capital’s Class A Common Stock or Class B Common Stock or otherwise adversely affect the holders of BBX Capital’s Class A Common Stock or Class B
Common Stock, including the likelihood that holders of BBX Capital’s Class A Common Stock or Class B Common Stock would receive dividend payments and
payments on liquidation, or the amounts thereof.
With respect to BBX Capital Real Estate, the risks and uncertainties include, but are not limited to:
● The impact of economic, competitive, and other factors affecting BBX Capital Real Estate and its assets, including the impact of a decline in real estate values on
BBX Capital Real Estate’s business and the value of BBX Capital Real Estate’s assets;
● Risks that the benefits of the Company's investment in the Altman Companies may not be realized and that its additional investment will increase the Company’s
exposure to risks associated with the multifamily real estate development and construction industry;
● The risk that homebuilder counterparties will not meet their obligations to acquire lots or to pay contingent purchase prices due on the sale of homes;
● The risks associated with expanding its operating platform to include a logistics real estate division and investing in the development of logistics real estate assets;
● The risks associated with investments in real estate developments and joint ventures include:
○ exposure to downturns in the real estate and housing markets;
○ exposure to risks associated with real estate development activities, including severe weather conditions increasing costs, delaying construction, causing
uninsured losses or reducing demand for homes;
○ environmental liabilities, including claims with respect to mold or hazardous or toxic substances;
○ risks associated with obtaining necessary zoning and entitlements;
○ risks that joint venture partners may not fulfill their obligations and concentration risks associated with entering into numerous joint ventures with the
same joint venture partners;
○ risks relating to reliance on third-party developers or joint venture partners to complete real estate projects;
○ risk associated with increasing interest rates, as the majority of the development costs and sales of residential communities is financed and rising interest
rates also impact the availability and affordability of residential mortgages and other real estate purchase financing and increase capitalization rates
applied to sale transactions;
○ risks associated with not finding tenants for multifamily apartments or buyers for single-family homes and townhomes;
○ risk associated with finding equity partners, securing financing, and selling newly built multifamily apartments;
○ risk associated with rising land and construction costs and supply chain disruptions increasing construction costs and delaying construction schedules and
completion of projects;
○ risk that the projects will not be developed as anticipated or be profitable; and
○ risk associated with customers or vendors not performing on their contractual obligations.
12
Table of Contents
With respect to BBX Sweet Holdings, Renin, and the Company’s other operating businesses, the risks and uncertainties include, but are not limited to:
● Risks that market demand for the subsidiaries’ products may decline;
● Risks that the reorganization of certain confectionery businesses and operations may not achieve anticipated operating efficiencies and reduction in operating losses
and that the implementation of strategic alternatives, including the sale or disposal of certain operations, will result in additional losses;
● Failure of the Company’s confectionery businesses or Renin to meet financial metrics may necessitate further capital contributions or advances to the businesses by
BBX Capital or a decision not to support underperforming businesses or continued growth;
● Risks associated with increased commodity costs or a limited availability of commodities;
● Risks associated with product recalls or product liability claims;
● The risk of losses associated with excess and obsolete inventory and the risks of additional required reserves to reflect the net realizable values of the inventory;
● The risks relating to IT’SUGAR’s business plans, including, but not limited to, that IT’SUGAR may not be able to fund or otherwise open new retail locations,
including new “temporary” locations, as or when expected, or at all;
● Risks associated with the performance of vendors, commodity price volatility, shipping costs to deliver raw materials and finished products from foreign countries,
and the impact of tariffs on goods imported from Canada and Asia, particularly with respect to Renin;
● Risks associated with exposure to foreign currency exchange rates and risk of the U.S. dollar compared to the Canadian dollar;
● The amount and terms of indebtedness associated with the operations and capital expenditures of the subsidiaries may impact their financial condition and results
of operations and limit their activities;
● The risk that Renin’s efforts to maintain sales of its products to its major customers or decreased sales to Renin’s major customers would negatively impact Renin’s
sales, gross margin, and profitability, may require Renin to lower its prices and result in the recognition of impairment losses related to its goodwill and long-lived
assets, and may result in its failure to comply with the terms of its outstanding debt;
These and other risks and uncertainties disclosed in this Annual Report on Form 10-K are not necessarily all of the important factors that could cause the Company’s actual
results to differ materially from those expressed in any of the forward-looking statements. Other unknown or unpredictable factors could cause the Company’s actual results
to differ materially from those expressed in any of the forward-looking statements.
Given these uncertainties, you are cautioned not to place undue reliance on forward-looking statements, and you should read this Annual Report on Form 10-K with the
understanding that actual future results, levels of activity, performance, and events and circumstances may be materially different from what the Company expects.
Forward-looking statements speak only as of the date of this Annual Report on Form 10-K, and the Company undertakes no obligation to update or revise any forward-
looking statements, including to reflect events or circumstances that may arise after the date of this report.
In addition to the risks and factors identified above, reference is also made to the other risks and factors described in this report, including the “Risk Factors” section hereof,
and the other reports filed by the Company with the SEC.
13
Table of Contents
ITEM 1A. RISK FACTORS
We are subject to various risks and uncertainties relating to or arising out of the nature of our subsidiaries’ businesses, operations and investments, and general business,
economic, financing, legal, regulatory, and other factors and conditions. New risk factors emerge from time to time, and it is not possible for management to either predict
all risk factors or assess all potential impacts of any factor, or combination of factors, on the Company or its subsidiaries, including with respect to their operations, results
and financial condition. Additional risks and uncertainties that we do not presently know about or currently believe are not material may also adversely affect our business,
financial condition and results of operations. The risks discussed below also include forward-looking statements, and actual results and events may differ substantially from
those expressed in, or implied by, the forward-looking statements. See “Cautionary Note Regarding Forward-Looking Statements” above.
Risks Related to BBX Capital and its Subsidiaries
Current economic trends, including increases in the costs of labor, freight, shipping and materials and widespread supply chain disruptions, has and could continue
to adversely impact gross margins of the Company’s operating businesses.
Headline inflation for the twelve months ended December 31, 2022 was 6.5%, and there has been broad based price increases for goods and services. The Federal Reserve
has attempted to address inflation through monetary policy, including the wind-down of quantitative easing and by increasing the Federal Funds rate. The Russian invasion
of Ukraine and the related embargoes against Russia, as well as the impact of the efforts by China to mitigate COVID-19 cases in that country and the current COVID-19
outbreak in China, have worsened supply chain issues with the potential of further exacerbating inflationary trends. It is possible that the United States and/or the global
economy generally will experience a recession of an uncertain magnitude and duration. These conditions can negatively affect our operating results by resulting in, among
other things: (i) higher interest expense on variable rate debt and any new debt, (ii) lower gross margins due to increased costs of manufactured or purchased inventory and
shipping, (iii) a decline in the availability of debt and equity capital for new real estate investments and the number of real estate development projects meeting the
Company’s investment criteria, (iv) higher overall operating expenses due to increases in labor, insurance and service costs, (v) a reduction in customer demand for our
products, (vi) a shift in customer behavior as higher prices affect customer retention and higher consumer borrowing costs, including mortgage borrowings, affect customer
demand, and (vii) increased risk of impairments as a result of declining valuations. In light of inflationary conditions, we have taken steps to increase prices; however, such
increases may not be accepted by our customers, may not adequately offset the increases in our costs, and/or could negatively impact customer retention and our gross
margin.
BBXRE has experienced a significant increase in commodity and labor prices, which has resulted in higher development and construction costs, and disruptions in the
supply chain for certain commodities and equipment have resulted in ongoing supply shortages of building materials, equipment, and appliances. These factors have
impacted the timing of certain projects currently under construction and the commencement of construction of new projects. Furthermore, homebuilders have seen a general
softening of demand, and the increase in mortgage rates have had an adverse impact on residential home sales. In addition, rising interest rates have increased the cost of the
Company’s outstanding indebtedness and any financing for new development projects. Increased rates have also had an adverse impact on the availability of financing, and
the anticipated profitability of development projects, as a majority of development costs are financed with third party debt and capitalization rates related to multifamily
apartment communities are generally impacted by interest rates. BBXRE has also recently observed a decline in the number of potential investors interested in pursuing
equity or debt financing for new multifamily apartment developments and the acquisition of stabilized multifamily apartment communities. Although such factors have not
yet materially impacted BBXRE’s results of operations, we expect that they may have an adverse impact on BBXRE’s operating results in future periods. IT’SUGAR has
experienced an increase in the cost of inventory and freight, as well as delays in its supply chain associated with inflationary pressures and ongoing disruptions in global
supply chains. While IT’SUGAR has generally been able to mitigate the impact of increased costs through increases in the prices of its products, supply chain disruptions
have impacted its ability to maintain historical inventory levels at its retail locations. To the extent that costs continue to increase, there is no assurance that IT’SUGAR will
be able to continue to increase the prices of its products without significantly impacting consumer demand and its sales volume. Further, following difficulties in
maintaining appropriate inventory levels during fiscal 2021, IT’SUGAR has increased the inventory levels at its retail locations in 2022 in an effort to ensure that it can
meet consumer demand; however, in light of current economic conditions, including a possible slowdown in consumer demand, such increased inventory levels have
increased the risk that IT’SUGAR will be unable to sell the products and the risk for inventory writedowns. IT’SUGAR has also experienced an increase in payroll costs as
a result of shortages in available labor at its retail locations.
14
Table of Contents
Global supply chain disruptions and increases in commodity prices have also contributed to a significant increase in Renin’s costs related to shipping and raw materials, as
well as delays in its supply chains, which have: (i) negatively impacted Renin’s product costs and gross margin, (ii) increased the risk that Renin will be unable to fulfill
customer orders, and (iii) negatively impacted Renin’s working capital and cash flows due to increased inventory in transit, a prolonged period between when it is required
to pay its suppliers and it is paid by its customers, and an overall decline in its gross margin. While Renin has obtained price increases for many of its products, Renin’s
gross margin has nonetheless been negatively impacted by these cost pressures. Additionally, the negotiation of increased prices with customers increases the risk that
customers will pursue alternative sources for Renin’s products, which may result in Renin losing customers or require it to lower prices in an effort to retain customers.
Increases in interest rates have and will continue to adversely impact Renin’s results. Further, Renin has recently observed a decline in consumer demand, which Renin
believes may be attributable to (i) the impact of price increases and overall inflationary pressures on consumer behavior and (ii) a shift in consumer spending away from
home improvements as the economy has reopened. In addition, following difficulties in maintaining appropriate inventory levels during 2021, Renin has increased its
inventory levels in an effort to ensure that it can meet consumer demand; however, in light of current economic conditions, including a slowdown in consumer demand,
such increased inventory levels have increased the risk of Renin being unable to sell such products and the risk of inventory writedowns. In addition, Renin has
implemented cost reduction initiatives in an effort to reduce its operating costs over time as part of Renin’s efforts to mitigate the impact of the current economic
environment on its business; however, there is no assurance that these efforts will result in the expected cost savings and will not have unanticipated impacts on Renin’s
operations, including its ability to meet customer demand.
Accordingly, there is no assurance that the Company's operating subsidiaries will be able to continue increasing prices in response to increasing costs without adversely
affecting sales, which could have a material adverse effect on the Company’s results of operations and financial condition.
Any downturn in the economic environment may also have a significant adverse impact on the gross margins of the Company’s operating businesses, particularly if an
economic downturn is prolonged in nature and impacts consumer demand, materially disrupts the supply chain for the Company’s operating businesses’ products and raw
materials, delays the production and shipment of products and raw materials from foreign suppliers or increases shipping costs.
Additionally, Renin has recently observed a decline in consumer demand, which Renin believes may be attributable to (i) the impact of price increases and overall
inflationary pressures on consumer behavior and (ii) a shift in consumer spending away from home improvements as much of the economy has fully reopened, particularly
in the United States.
Labor is one of the primary components of our expenses. A number of factors may adversely affect the labor force available to us or increase our labor costs, including labor
shortages, demand for labor to assistant in the clean-up and rebuilding of communities in Southwest Florida in the aftermath of Hurricane Ian, increased competition for
qualified employees, federal unemployment subsidies, and other government regulations. A sustained labor shortage or increased turnover rates, whether caused by COVID-
19, wage inflation or as a result of general economic conditions, natural disasters or other factors, could lead to increased costs, increased overtime pay to meet demand and
increased costs to attract and retain employees, which could in turn negatively affect our operations or adversely impact our business and results. Further, any mitigation
measures we take in response to a decrease in labor availability or an increase in labor costs may be unsuccessful and could have negative effects.
Rising interest rates could also have an adverse impact on homebuyers and home sales, the availability of financing, the affordability of residential mortgages, the
profitability of development projects as a majority of development costs are financed with third party debt, and the value of multifamily apartment communities as rising
interest rates increase capitalization rates applied to sales transactions.
BBX Capital relies on cash on hand and dividends from its subsidiaries.
BBX Capital relies on its cash and cash equivalents, interest payments received by it pursuant to the terms of the $50.0 million outstanding note owed BBX by Bluegreen
Vacations, and dividends from its subsidiaries in order to fund its operations and investments. During the year ended December 31, 2022 and December 31, 2021 cash
generated from operations was $36.3 million and $37.8 million, respectively.
If cash flow is not sufficient to fund BBX Capital’s liquidity needs or BBX Capital otherwise determines it is advisable to do so, BBX Capital might seek to liquidate some
of its investments or seek to fund its operations with the proceeds of additional equity or debt financing. Such financing may not be available on commercially reasonable
terms, if at all, and if BBX Capital chooses to liquidate its investments, it may be forced to do so at depressed prices. Further, Bluegreen Vacations may elect to defer
interest payments due under its note to BBX Capital. See the risk factor below entitled “Bluegreen Vacations may incur additional indebtedness and may defer interest
payments under its currently outstanding $50.0 million promissory note to BBX Capital.”
BBX Capital’s subsidiaries may be dependent on BBX Capital to provide liquidity.
BBX Capital’s subsidiaries may not generate sufficient cash flow or maintain liquidity to fund their respective operations and investments or to maintain compliance with
the terms of their outstanding debt in which case the subsidiaries may seek funds from BBX Capital. If BBX Capital’s cash flow is not sufficient to fund its subsidiaries’
needs or it determines not to provide such funding, then such subsidiaries might be required to liquidate some of their respective investments or fund their respective
operations with the proceeds of additional equity or debt financing. Such financing may not be available on commercially reasonable terms, if at all, and if any such
subsidiary chooses to liquidate its investments, it may be forced to do so at depressed prices.
15
Table of Contents
BBX Capital’s acquisitions and investments may generate losses, require additional financing and expose it to additional risks.
BBX Capital has made investments in and acquisitions of operating companies, including its acquisitions of the Altman Companies, Renin, IT’SUGAR and businesses in
the confectionery industry. BBX Capital may also seek to make opportunistic investments outside of its existing portfolio. Some of these investments and acquisitions may
be material. While BBX Capital seeks to make investments and acquisitions in companies that provide opportunities for growth, its investments or acquisitions may not
prove to be successful or, even if successful, may not initially generate income, or may generate income on an irregular basis or over a long time period. Accordingly, our
results of operations may vary significantly on a quarterly basis and from year to year as a result of acquisitions and investments. Acquisitions or investments expose BBX
Capital to the risks of the businesses acquired or invested in. Acquisitions and investments entail numerous risks, including:
● Risks associated with achieving profitability;
● Risks associated with the availability and costs of obtaining goods and commodities;
● Difficulties in integrating and assimilating acquired management, acquired company founders, and operations;
● Losses and unforeseen expenses or liabilities;
● Risks associated with entering new markets in which we have no or limited prior experience;
● The potential loss of key employees or founders of acquired organizations;
● Risks associated with increased indebtedness incurred to finance acquisitions;
● Risks associated with transferred assets and liabilities; and
● The incurrence of significant due diligence expenses relating to acquisitions, including with respect to those that are not completed.
BBX Capital may not be able to integrate or profitably manage acquired businesses, including Renin, businesses in the confectionery industry, Colonial Elegance and its
other operating businesses or the Altman Companies, without substantial costs, delays, or other operational or financial difficulties, including difficulties in integrating
information systems and personnel and establishing control environment processes across acquired businesses. Further, BBX Capital may not be able to adequately monitor
the day to day activities of its investments in joint ventures, and failure to do so could have a material adverse effect on its business, financial condition and results of
operations. In addition, to the extent that operating businesses are acquired outside the United States there will be additional risks related to compliance with foreign
regulations and laws including tax laws, labor laws, currency fluctuations and geographic economic conditions.
BBX Capital’s subsidiaries may not have appropriate short and long term hiring, retention, employee development and succession planning strategies.
Due to current market conditions and other variables such as increased employee turnover, there may be inadequate personnel (both in general numbers and in specific
roles) to support operations, business goals and strategies at BBX Capital’s subsidiaries. Failure to overcome these variables could adversely impact BBX Capital’s
subsidiaries' ability to successfully execute on their respective business plans and strategies.
Additionally, inadequate staff with the necessary expertise in certain matters (including, without limitation, expertise in accounting and finance) and inadequate staffing
levels to perform certain control functions and maintain daily operations and segregation of duties may result in (i) inadequate internal control over financial reporting and
(ii) regulatory, reporting and process objectives not being met timely or accurately.
Bluegreen Vacations may defer interest payments under the note it issued to BBX Capital and may not satisfy its obligations to BBX Capital.
In connection with Bluegreen Vacations’ spin-off of BBX Capital on September 30, 2020, Bluegreen Vacations issued a $75.0 million unsecured promissory note in favor of
BBX Capital. Bluegreen Vacations repaid $25 million of the promissory note in December 2021 which decreased the outstanding balance to $50.0 million. Amounts
outstanding under the note accrue interest at a rate of 6% per annum. The note requires payments of interest only on a quarterly basis; provided however that interest
payments may be deferred at the option of Bluegreen Vacations, with interest on the entire outstanding balance thereafter to accrue at a cumulative, compounded rate of 8%
per annum until such time as Bluegreen Vacations is current on all accrued payments under the note, including deferred interest. All outstanding amounts under the note will
become due and payable in September 2025 or upon certain events. As a result of the spin-off, Bluegreen Vacations is the holding company of Bluegreen and will in future
periods rely primarily on dividends from its subsidiaries in order to meet its obligations, including its debt service requirements. There is no assurance that Bluegreen
will pay regular dividends in the time frames or amounts previously paid, or at all, or pay any special cash dividends in the future. If Bluegreen Vacations does not receive
sufficient dividends from its subsidiaries, Bluegreen Vacations may be unable to satisfy its debt service obligations, including payments under the promissory note to BBX
Capital. In addition, Bluegreen Vacations may in the future seek additional funds from third party sources, which may include the incurrence of additional indebtedness.
Any such additional indebtedness would increase its debt service requirements and may impair its ability to satisfy its payment obligations under its promissory note to
BBX Capital.
BBX Capital may issue additional securities at BBX Capital or its subsidiaries and BBX Capital and its subsidiaries can incur additional indebtedness.
BBX Capital from time to time may pursue transactions involving the sale of its subsidiaries or investments, the issuance and sale of equity interests in its subsidiaries or
other transactions which would result in a decrease in BBX Capital’s ownership interest in its subsidiaries. There is no assurance that any such transactions, if pursued and
consummated, will generate a profit.
16
Table of Contents
BBX Capital may in the future also seek to raise funds through the issuance of debt or equity securities. There is generally no restriction on BBX Capital’s ability to issue
debt or equity securities which are pari passu or have a preference over its Class A Common Stock and Class B Common Stock. Authorized but unissued shares of BBX
Capital’s capital stock are available for issuance from time to time at the discretion of BBX Capital’s board of directors, and any such issuances may be dilutive to BBX
Capital’s shareholders and could cause the market price of BBX Capital’s common stock to decline.
BBX Capital and its subsidiaries have in the past and may in the future incur significant amounts of debt. Further, additional indebtedness could have important effects on
BBX Capital, including that debt service requirements will reduce cash available for operations, future investment and acquisition opportunities and payments of dividends,
if any, and that increased leverage could impact BBX Capital’s liquidity and increase its vulnerability to adverse economic or market conditions. Additionally, agreements
relating to additional indebtedness could contain financial covenants and other restrictions limiting BBX Capital’s operations and its ability to pay dividends, if any, borrow
additional funds or acquire or dispose of assets, and expose BBX Capital to the risks of being in default of such covenants.
Substantial sales of BBX Capital’s Class A Common Stock or Class B Common Stock could adversely affect the market prices of such securities.
Substantial sales of BBX Capital’s Class A Common Stock or Class B Common Stock, including sales of shares by controlling shareholders and management, or the
perception in the market that such sales will occur, could adversely affect the market prices of such securities. Other than shareholders that are affiliates of Bluegreen
Vacations, shareholders of Bluegreen Vacations who received shares of BBX Capital’s common stock in connection with the spin-off generally may sell those shares
without restriction. Shareholders may decide to sell the shares received in the spin-off for any reason, including if, among other things, BBX Capital’s common stock does
not fit their investment objectives or, in the case of index funds, if BBX Capital is not part of the index in which they invest.
Alan B. Levan, John E. Abdo, Jarett S. Levan and Seth M. Wise’s control position may adversely affect the market price of BBX Capital’s Class A Common Stock and
Class B Common Stock.
Alan B. Levan, the Chairman of BBX Capital, John E. Abdo, the Vice Chairman of BBX Capital, Jarett S. Levan, the son of Mr. Alan Levan and the Chief Executive
Officer and President and a director of BBX Capital, and Seth M. Wise, Executive Vice President and a director of BBX Capital, currently collectively beneficially own
shares of BBX Capital’s Class A Common Stock and Class B Common Stock representing approximately 82% of the total voting power of BBX Capital’s Class A Common
Stock and Class B Common Stock. Accordingly, and because holders of BBX Capital’s Class A Common Stock and Class B Common Stock vote as a single class on most
matters, including the election of directors, as described below, Mr. Alan Levan, Mr. Abdo, Mr. Jarett Levan and Mr. Wise, without the vote or consent of any other
shareholder of BBX Capital, have the voting power to elect BBX Capital’s directors and to control the outcome of any other vote of BBX Capital’s shareholders, except in
limited circumstances where Florida law mandates that the holders of BBX Capital’s Class A Common Stock vote as a separate class. This control position may have an
adverse effect on the market price of BBX Capital’s Class A Common Stock and Class B Common Stock. In addition, their interests may conflict with the interests of BBX
Capital’s other shareholders.
17
Table of Contents
BBX Capital’s Articles of Incorporation provide for fixed relative voting percentages between BBX Capital’s Class A Common Stock and Class B Common Stock.
BBX Capital’s Articles of Incorporation provide for holders of BBX Capital’s Class A Common Stock and Class B Common Stock to generally vote together as a single
class, including with respect to the election of directors, with holders of BBX Capital’s Class A Common Stock possessing in the aggregate 22% of the total voting power of
all common stock and holders of BBX Capital’s Class B Common Stock possessing in the aggregate the remaining 78% of the total voting power. These relative voting
percentages will remain fixed unless the number of shares of BBX Capital’s Class B Common Stock outstanding decreases to 360,000 shares, at which time the aggregate
voting power of BBX Capital’s Class A Common Stock will increase to 40% and the aggregate voting power of BBX Capital’s Class B Common Stock will decrease to
60%. If the number of shares of BBX Capital’s Class B Common Stock outstanding decreases to 280,000 shares, then the aggregate voting power of BBX Capital’s Class A
Common Stock will increase to 53% and the aggregate voting power of BBX Capital’s Class B Common Stock will decrease to 47%. If the number of shares of BBX
Capital’s Class B Common Stock outstanding decreases to 100,000 shares, then the fixed voting percentages will be eliminated and each share of BBX Capital’s Class A
Common Stock and Class B Common Stock will be entitled to one vote per share. The share thresholds set forth above are subject to equitable adjustment to reflect any
stock split, reverse stock split or similar transaction. The changes in the relative voting power represented by each class of BBX Capital’s common stock are based only on
the number of shares of Class B Common Stock outstanding, thus issuances of Class A Common Stock will have no effect on these provisions. If additional shares of Class
A Common Stock are issued without a comparative increase in the number of outstanding shares of Class B Common Stock, the disparity between the equity interest
represented by BBX Capital’s Class B Common Stock and its voting power will widen. In addition, shareholders who hold shares of both BBX Capital’s Class A Common
Stock and Class B Common Stock, including Alan B. Levan, John E. Abdo, Jarett S. Levan and Seth M. Wise, are able to sell shares of Class A Common Stock without
affecting in any material respect their overall voting interest. The fixed voting percentages between BBX Capital’s Class A Common Stock and Class B Common Stock may
have an adverse impact on the market price of such securities.
Provisions in BBX Capital’s Articles of Incorporation and Bylaws, BBX Capital’s rights agreement, and provisions of Florida law may make it difficult for a third party
to acquire BBX Capital and could impact the price of, or otherwise adversely impact, BBX Capital’s Class A Common Stock and Class B Common Stock.
BBX Capital’s Articles of Incorporation and Bylaws contain provisions that could delay, defer or prevent a change of control of BBX Capital or its management. These
provisions could make it more difficult for shareholders to elect directors and take other corporate actions. As a result, these provisions could limit the price that investors
are willing to pay in the future for shares of BBX Capital’s Class A Common Stock or Class B Common Stock. These provisions include:
● the provisions in BBX Capital’s Articles of Incorporation regarding the special voting rights of BBX Capital’s Class B Common Stock;
● subject to the special class voting rights of BBX Capital’s Class B Common Stock under certain circumstances, the authority of BBX Capital’s Board of Directors
to issue additional shares of common or preferred stock and to fix the relative rights and preferences of the preferred stock without shareholder approval, as
described in further detail below; and
● advance notice procedures to be complied with by shareholders in order to make shareholder proposals or nominate directors.
Additionally, pursuant to BBX Capital’s Articles of Incorporation and Florida law, subject to the separate voting rights of BBX Capital’s Class B Common Stock in certain
circumstances, BBX Capital’s Board of Directors may, without the consent of BBX Capital’s shareholders, approve the issuance of authorized but unissued shares of BBX
Capital’s securities and fix the relative rights and preferences of preferred stock. If BBX Capital issues additional shares of its Class A Common Stock, Class B Common
Stock or other securities, its shareholders would experience dilution. In addition, any preferred stock declared and issued could include dividend rights, conversion rights,
voting rights, terms of redemption and liquidation preferences, any or all of which may be greater than the rights of BBX Capital’s Class A Common Stock or Class B
Common Stock or otherwise adversely affect the holders of BBX Capital’s Class A Common Stock or Class B Common Stock, including the likelihood that holders of BBX
Capital’s Class A Common Stock or Class B Common Stock would receive dividend payments and payments on liquidation, or the amounts thereof. The issuance of
preferred stock, while providing flexibility in connection with possible acquisitions, financing transactions and other corporate purposes, could also, among other things,
have the effect of delaying, deferring or preventing a change in control or other corporate actions, and might adversely affect the market price of BBX Capital’s Class A
Common Stock or Class B Common Stock.
18
Table of Contents
In addition, as a Florida corporation, BBX Capital is also subject to the provisions of the Florida Business Corporation Act (the “FBCA”), including those limiting the
voting rights of “control shares.” Under the FBCA, subject to certain exceptions, including mergers and acquisitions effected in accordance with the FBCA, the holder of
“control shares” of a Florida corporation that has (i) 100 or more shareholders, (ii) its principal place of business, its principal office or substantial assets in Florida and (iii)
either more than 10% of its shareholders residing in Florida, more than 10% of its shares owned by Florida residents or 1,000 shareholders residing in Florida, will not have
the right to vote those shares unless the acquisition of the shares was approved by a majority of each class of voting securities of the corporation, excluding those shares
held by interested persons. “Control shares” are defined in the FBCA as shares acquired by a person, either directly or indirectly, that when added to all other shares of the
issuing corporation owned by that person, would entitle that person to exercise, either directly or indirectly, voting power within any of the following ranges: (i) 20% or
more but less than 33% of all voting power of the corporation’s voting securities; (ii) 33% or more but less than a majority of all voting power of the corporation’s voting
securities; or (iii) a majority or more of all of the voting power of the corporation’s voting securities.
BBX Capital’s Bylaws contain an exclusive forum provision, which could impair the ability of shareholders to obtain a favorable judicial forum for certain disputes
with BBX Capital or its directors, officers or other employees and be cost-prohibitive to shareholders.
BBX Capital’s Bylaws contain an exclusive forum provision which provides that, unless its Board of Directors consents to the selection of an alternative forum, the Circuit
Court located in Miami-Dade County, Florida (or, if such Circuit Court does not have jurisdiction, another Circuit Court located within Florida or, if no Circuit Court
located within Florida has jurisdiction, the federal district court for the Southern District of Florida) will be the sole and exclusive forum for “Covered Proceedings,” which
include: (i) any derivative action or proceeding brought on BBX Capital’s behalf; (ii) any action asserting a claim of breach of a fiduciary duty owed by any of BBX
Capital’s directors, officers or other employees to BBX Capital or its shareholders; (iii) any action asserting a claim against BBX Capital or any of its directors, officers or
other employees arising pursuant to any provision of the FBCA, or BBX Capital’s Articles of Incorporation or Bylaws (in each case, as may be amended or amended and
restated from time to time); and (iv) any action asserting a claim against BBX Capital or any of its directors, officers or other employees governed by the internal affairs
doctrine of the State of Florida. To the extent within the categories set forth in the preceding sentence, Covered Proceedings include causes of action under the Exchange
Act and the Securities Act. The exclusive forum provision also provides that if any Covered Proceeding is filed in a court other than a court located within Florida in the
name of any shareholder, then such shareholder shall be deemed to have consented to (a) the personal jurisdiction of the state and federal courts located within Florida in
connection with any action brought in any such court to enforce the exclusive forum provision and (b) having service of process made upon such shareholder in any such
enforcement action by service upon such shareholder’s counsel in the action as agent for such shareholder. Notwithstanding the foregoing, shareholders cannot waive
compliance with the federal securities laws and the rules and regulations thereunder. The exclusive forum provision may limit a shareholder’s ability to bring a claim in a
judicial forum that it finds favorable for disputes with BBX Capital or its directors, officers or other employees or be cost-prohibitive to shareholders, which may discourage
such lawsuits against BBX Capital or its directors, officers and other employees. However, there is uncertainty regarding whether a court would enforce the exclusive forum
provision. If a court were to find the exclusive forum provision to be inapplicable or unenforceable in an action, BBX Capital may incur additional costs associated with
resolving such action in other jurisdictions, which could adversely affect BBX Capital’s financial condition and operating results.
BBX Capital does not plan to pay dividends on its common stock.
BBX Capital does not currently anticipate paying any cash dividends for the foreseeable future. BBX Capital’s dividend policy is established by BBX Capital’s Board of
Directors based on BBX Capital’s financial condition, results of operations and capital requirements, as well as other business considerations that BBX Capital’s Board
considers relevant. Further, the terms of BBX Capital’s indebtedness may limit or prohibit the payments of dividends.
Utilizing the reduced disclosure requirements applicable to BBX Capital may make BBX Capital’s common stock less attractive to investors.
BBX Capital qualifies as an “emerging growth company” and is therefore eligible to utilize certain reduced reporting and other requirements that are otherwise applicable
generally to public companies. Pursuant to these reduced disclosure requirements, BBX Capital is not required to, among other things, provide certain disclosures regarding
executive compensation, pay versus performance requirements, hold shareholder advisory votes on executive compensation or obtain shareholder approval of any golden
parachute payments, and BBX Capital has reduced financial disclosure obligations. BBX Capital would cease to be an emerging growth company upon the earliest of: (i)
December 31, 2025; (ii) the last day of the fiscal year in which BBX Capital has $1.07 billion or more in annual revenues; (iii) the date on which BBX Capital has issued
more than $1.0 billion in non-convertible debt securities during the previous three-year period; and (iv) the date on which BBX Capital is deemed to be a “large accelerated
filer” (which is the last day of the fiscal year during which the total market value of BBX Capital’s common equity securities held by non-affiliates is $700 million or more,
calculated as of the end of the second quarter (June 30) of such fiscal year).
19
Table of Contents
Currently, BBX Capital qualifies as a “smaller reporting company,” and is eligible to utilize the reduced disclosure requirements available to smaller reporting companies.
The reduced disclosure requirements available to smaller reporting companies are similar to those available to emerging growth companies, including reduced financial and
executive compensation disclosures. Under current SEC rules, BBX Capital became a smaller reporting company on June 30, 2021, as its total market value of its common
equity securities held by non-affiliates was less than $200 million.
BBX Capital intends to utilize the reduced reporting requirements and available exemptions for so long as BBX Capital is permitted to do so. Investors may find BBX
Capital’s common stock to be less attractive as a result of its utilization of the reduced disclosure requirements and exemptions, which may have a material adverse effect on
the trading market and market price of BBX Capital’s Class A Common Stock and Class B Common Stock.
Risks Related to BBX Capital Real Estate
Some of BBX Capital Real Estate’s investments are through unconsolidated joint ventures with others, and we may be adversely impacted by a joint venture partner’s
failure to fulfill its obligations.
From time to time BBX Capital Real Estate has entered into joint ventures which reduces the amount BBX Capital Real Estate is required to invest in the development of
the real estate properties. However, joint venture partners may become financially unable or unwilling to fulfill their obligations under the joint venture agreements. Most
joint ventures borrow money to help finance their activities, and although recourse on the loans is generally limited to the managing members, joint ventures and their
properties, BBX Capital Real Estate has in some cases and may in the future provide ongoing financial support or guarantees. If joint venture partners do not meet their
obligations to the joint venture, BBX Capital Real Estate may be required to make significant expenditures, which may have an adverse effect on our operating results or
financial condition. BBX Capital Real Estate has in the past and may in the future hold investments in a number of different joint ventures with the same or related
developers, which could increase the adverse effects of any failures by such developer to fulfill its obligations. BBX Capital Real Estate has numerous investments in Altis
multifamily apartment joint ventures developed and managed by the Altman Companies and Joel Altman. Further, while BBX Capital increased its ownership in the Altman
Companies from 50% to 100% in January 2023, Joel Altman retained his membership interests and decision making rights in the managing member of all development joint
ventures originated by the Altman Companies prior to the BBX Capital's acquisition of the remaining equity interest in the Altman Companies. Additionally, BBX Capital
Real Estate has contributed $6.0 million to a joint venture with Joel Altman that guarantees the indebtedness and construction cost overruns of real estate joint ventures
established by the Altman Companies, which increases BBX Capital Real Estate’s risk of loss in connection with its real estate joint venture investments managed by the
Altman Companies.
Investments by BBX Capital Real Estate in real estate developments directly or through joint ventures expose it to market and economic risks inherent in the real estate
construction and development industry.
The real estate construction and development industry is highly competitive and subject to numerous risks which in many cases are beyond management’s control. The
success of BBX Capital Real Estate’s investments in real estate developments is dependent on many factors, including:
● Demand for or oversupply of new homes, finished lots, rental apartments and commercial real estate;
● Demand for commercial real estate tenants;
● Real estate market values;
● Changes in capitalization rates impacting real estate values;
● Availability of talented individuals in the development industry;
● Availability and reasonable pricing of labor;
● Availability and reasonable pricing of construction materials, such as lumber, framing, concrete and other building materials, including increases associated with
tariffs and supply chain disruptions;
● Changes in laws and regulations for new construction and land entitlements, including environmental and zoning laws and regulations;
● Natural disasters and severe weather conditions increasing costs, delaying construction, causing uninsured losses or reducing demand for new homes;
● Availability and cost of mortgage financing for potential purchasers;
● Inventory of foreclosed homes negatively impacting selling prices;
● Availability and cost of insurance (including the impact of insurance costs on the exit value of real estate assets);
● Mortgage loan interest rates;
● Availability of land in desirable locations at prices that result in an economically viable project;
● Availability, delays and costs associated with obtaining permits, approvals or licenses necessary to develop property;
● Construction defects and product liability claims;
● Risk of losses resulting from cost overrun guarantees in the Altman Companies’ sponsored projects that require unique high-density apartment developments in
certain markets; and
● General economic conditions.
20
Table of Contents
Any of these factors could give rise to delays in the start or completion of a project, increase the cost of developing a project, or result in reduced prices and values for BBX
Capital’s developments, including developments underlying its joint venture investments. These factors could also result in BBX Capital being unable to identify real estate
inventory opportunities which meet its investment criteria. In addition, BBX Capital’s efforts to identify additional investment opportunities, including the development of
multifamily apartment communities that will be owned over a longer term investment period and the pursuit of investment opportunities in new geographic locations may
not prove to be successful.
A significant portion of BBX Capital Real Estate’s loans and real estate assets are located in Florida, and conditions in the Florida real estate market could adversely
affect our earnings and financial condition.
Real estate held for sale, real estate held for investment, real estate developments owned or managed by BBX Capital Real Estate, and the real estate being developed by
BBX Capital Real Estate or joint ventures in which BBX Capital Real Estate has invested are primarily concentrated in Florida, and adverse changes to the Florida economy
or the real estate market may negatively impact our earnings and financial condition. As a result, BBX Capital Real Estate is exposed to geographic risks of high
unemployment rates, declines in the housing industry and declines in the real estate market in Florida. Adverse changes in laws and regulations in Florida, including
moratoriums on evictions would have a negative impact on our revenues, financial condition and business. Further, in addition to the impact of the risks and uncertainties of
the pandemic, the State of Florida is subject to the risks of natural disasters, such as tropical storms and hurricanes, which may disrupt operations, and adversely impact the
value of BBX Capital Real Estate’s portfolio of real estate, or otherwise have an adverse effect on our results of operations. The severity and impact of tropical storms,
hurricanes and other weather related events are unpredictable.
BBX Capital Real Estate’s inability to finance its real estate developments through Community Development District Bonds or obtain performance bonds or letters of
credit could adversely affect its results of operations and liquidity.
BBX Capital Real Estate is often required to provide performance bonds and letters of credit under construction contracts or development agreements. BBX Capital Real
Estate also obtained financing for the construction of infrastructure improvements for its Beacon Lake development in St. Johns County, Florida from the issuance of
Community Development Bonds. BBX Capital Real Estate’s ability to obtain performance bonds, letters of credit, or additional issuances of Community Development
Bonds is dependent on BBX Capital Real Estate’s credit rating, financial condition, and historical performance. If BBX Capital Real Estate is unable to obtain these bonds
or letters of credit or cause the issuance of Community Development Bonds when required or desirable, our results of operations and liquidity could be adversely affected.
The Company is subject to environmental laws related to its real estate activities including claims with respect to mold or hazardous or toxic substances, which could
have a material adverse impact on our financial condition and operating results.
As current or previous owners or operators of real property, the Company may be liable under federal, state and local environmental laws, ordinances and regulations for the
costs of removal or remediation of hazardous or toxic substances on, under or in the property. These laws often impose liability whether or not we knew of, or were
responsible for, the presence of such hazardous or toxic substances. The presence of such substances, or the failure to properly remediate such substances, may adversely
affect our ability to sell or lease real estate or to borrow money using such real estate or receivables generated from the sale of such property as collateral. Noncompliance
with environmental, health or safety requirements may require us to cease or alter operations at one or more of our properties. Further, we may be subject to common law
claims by third parties based on damages and costs resulting from violations of environmental regulations or from contamination associated with one or more of our
properties. The cost of investigating, remediating or removing such hazardous or toxic substances may be substantial.
Risk Related to BBX Sweet Holdings
BBX Capital’s investment in companies in the confectionery industry may result in additional losses and impairments.
The effects of the COVID-19 pandemic on demand, sales levels, and consumer behavior, as well as the current inflationary economic environment, have had and could
continue to have a material adverse effect on BBX Sweet Holdings business, results of operations, and financial condition.
21
Table of Contents
During the past three years, BBX Sweet Holdings exited its candy manufacturing facilities in Utah and South Florida, consolidated its wholesale manufacturing operations
in Orlando and centralized the management and back office activities in order to improve operating efficiencies and generate cost savings. These strategic initiatives may
not be successful, and BBX Sweet Holdings may decide to exit the remaining manufacturing operations. In the event that BBX Sweet Holdings continues to generate losses
or exits any of its businesses, this would result in additional losses and adversely affect BBX Sweet Holdings’ results of operations.
Market demand for candy products could decline.
BBX Sweet Holdings confectionery businesses operate in highly competitive markets and compete with larger companies that have greater resources. BBX Sweet Holdings
success is impacted by many factors, including the following:
● Effective retail execution;
● Effective and cost-efficient advertising campaigns and marketing programs;
● Availability of an adequate supply of commodities at a reasonable cost;
● Oversight of product safety;
● Ability to sell products at competitive prices;
● Response to changes in consumer preferences and tastes;
● Changes in consumer health concerns, including obesity and the consumption of certain ingredients; and
● Concerns related to effects of sugar or other ingredients which may be used to make its products.
22
Table of Contents
A decline in market demand for candy products could negatively affect operating results.
BBX Sweet Holdings may experience product recalls or product liability claims associated with businesses in the confectionery industry.
Selling products for human consumption involves inherent legal and other risks, including product contamination, spoilage, product tampering, allergens, or other
adulteration. BBX Sweet Holdings could decide or be required to destroy inventory, recall products or lose sales in connection with contamination, tampering, adulteration
or other deficiencies. These events could result in significant losses and may damage the reputation of our confectionery businesses, and discourage consumers from buying
products, or cause production and delivery disruptions which would adversely affect our financial condition and results of operations. BBX Sweet Holdings may also incur
losses if products cause injury, illness or death. A significant product liability claim may adversely affect both reputation and profitability, even if the claim is unsuccessful.
Risks Related to Renin
Renin’s sales are concentrated with big-box home center customers, and there is significant competition in the industry.
A significant amount of Renin’s sales are to big-box home centers. These home centers have significant negotiating leverage with their vendors, including Renin, and are
able to affect the prices of the products sold and the terms and conditions of conducting business with them. These home centers may also from time to time reduce the
number of vendors they purchase from or make significant changes in their volume of purchases. Although homebuilders, dealers and other retailers represent other
channels of distribution for Renin’s products, the loss of a home center customer or reduced sales volume at any of these home centers would have a material adverse effect
on Renin’s business. Further, Renin has substantial competition from overseas manufacturers of products similar to those sold by Renin. During the year ended December
31, 2022, Renin’s total revenues included $107.1 million of trade sales to three major customers and their affiliates and $46.9 million of revenues generated outside the
United States. Revenues from one customer of Renin represented $49.6 million or 14.5%, of the Company’s total revenues, revenues from a second customer of Renin
represented $37.9 million or 11.1% of the Company’s total revenues and revenues from a third customer of Renin represented $19.6 million or 5.7% of the Company’s total
revenues for the year ended December 31, 2022, respectively. Renin’s long-lived assets located outside the United States, which includes properties and equipment and right
of use assets, had a carrying amount of $16.1 million as of December 31, 2022.
23
Table of Contents
A significant portion of Renin’s business relies on home improvement and new home construction activity, both of which are cyclical and outside of management’s
control.
A significant portion of Renin’s business is dependent on the levels of home improvement activity, including spending on repair and remodeling projects, and new home
construction activity. Macroeconomic conditions, including consumer confidence levels, fluctuations in home prices, unemployment and underemployment levels, interest
rates, regulatory initiatives, and the availability of home equity loans and mortgage financing affect both discretionary spending on home improvement projects as well as
new home construction activity. Adverse changes in these factors or uncertainty regarding these macroeconomic conditions could result in a decline in spending on home
improvement projects and a decline in demand for new home construction, both of which could adversely affect Renin’s results of operations.
Renin’s operating results will continue to be negatively impacted if it continues to experience increased commodity costs or a limited availability of commodities.
Renin purchases various commodities to manufacture products, including steel, aluminum, glass and mirrors. Fluctuations in the availability and prices of these
commodities could increase the cost to manufacture products. Further, increases in energy costs could increase production costs, and increases in costs to transport raw
materials and finished goods have impacted and could continue to negatively affect its operating results. While Renin continued to negotiate increased prices for its products
during 2022 in response to rising costs, Renin’s existing arrangements with customers, competitive considerations or delays in deliveries and the relative negotiating power
and resistance of home center customers and big-box retailers to price increases make it difficult to increase selling prices to absorb increased production costs. If Renin is
not able to increase the prices of its products or achieve other cost savings or productivity improvements to offset increased commodity and production costs, its operating
results will be negatively impacted. Renin purchases raw materials and finished goods from sources in China, Brazil, and certain other countries. Changes in United States
trade practices, or tariffs levied on these imports, could significantly impact Renin’s results of operations and financial condition.
General Risks
The market price of BBX Capital’s Class A Common Stock and Class B Common Stock may be volatile or may decline regardless of BBX Capital’s results.
The market price of BBX Capital’s Class A Common Stock and Class B Common Stock may be volatile due to a number of factors, many of which are beyond BBX
Capital’s control, including those discussed in this “Risk Factors” section and under “Cautionary Note Regarding Forward-Looking Statements,” as well as the following:
● the failure of securities analysts to cover BBX Capital’s Class A Common Stock or Class B Common Stock, or changes in financial estimates by analysts;
● the inability to meet the financial estimates of analysts who follow BBX Capital’s Class A Common Stock or Class B Common Stock;
● variations in quarterly operating results, including seasonal fluctuations;
● additions or departures of key personnel;
● general economic and stock market conditions;
● regulatory and legal proceedings, investigations and developments;
● political developments;
● economic effects of the Russian and Ukrainian war:
● changes in accounting principles;
● changes in tax legislation and regulations;
● terrorist acts;
● accumulation of publicly held shares and the timing and amount of future purchase or sales of BBX Capital’s Class A Common Stock, Class B Common Stock or
other securities; and
● investor perceptions with respect to BBX Capital’s Class A Common Stock and Class B Common Stock relative to other investment alternatives.
24
Table of Contents
The Company’s technology requires continuous updating, the cost involved in updating the technology may be significant, and the failure to keep pace with
developments in technology could impair the Company’s operations or competitive position.
The industries in which the Company does business require the utilization of technology and systems, including technology utilized for sales and marketing, property
management, brand assurance and compliance. This technology requires continuous updating and refinements, including technology required to remain competitive and to
comply with the legal requirements such as privacy regulations and requirements established by third parties. The Company is taking steps to update its information
technology platform, which has required, and is likely to continue to require, significant capital expenditures. Older systems which have not yet been updated may increase
the risk of operational inefficiencies, financial loss and non-compliance with applicable legal and regulatory requirements, and the Company may not be successful in
updating such systems in the time frame or at the cost anticipated. Further, as a result of the rapidly changing technological environment, systems which the Company has
put in place or expects to put in place in the near term may become outdated, requiring new technology, and the Company may not be able to replace those systems as
quickly as its competition or within budgeted costs and time frames. Further, the Company may not achieve the benefits that may have been anticipated from any new
technology or system.
In addition, conversions to new information technology systems require effective change management processes and may result in cost overruns, delays or business
interruptions. If the Company’s information technology systems are disrupted, become obsolete, or do not adequately support our strategic, operational, or compliance
needs, the Company’s business, financial position, results of operations, or cash flows may be adversely affected.
Further, the development of new technologies, products and processes, and changes in customer behavior (such as the increase in online shopping), that have changed the
way in which the Company’s customers conduct business may make the Company’s existing products, services, businesses or processes obsolete or inefficient.
Information technology failures and failure to maintain the integrity of the Company’s internal or customer data could impact business decisions or result in
operational inefficiencies, damage the Company’s reputation and/or subject the Company to costs, fines, or lawsuits.
The Company relies on information technology (IT) systems, including Internet sites, data hosting facilities and other hardware and platforms, some of which are hosted by
third parties. These IT systems, like those of most companies, may be vulnerable to a variety of interruptions and risks, including, but not limited to, natural disasters,
telecommunications failures, hackers, and other security issues. Moreover, the Company’s computer systems, like those of most companies, may become subject to
computer viruses or other malicious codes, and to cyber or phishing-attacks. Although administrative and technical controls have been implemented which attempt to
minimize the risk of cyber incidents, computer intrusion efforts are becoming increasingly sophisticated, and any enhanced controls installed might be breached. If the IT
systems cease to function properly, the Company could suffer interruptions in its operations. The Company collects and retains large volumes of internal and customer data,
including social security numbers, credit card numbers and other personally identifiable information of its customers in various internal information systems and
information systems of its service providers. The Company also maintains personally identifiable information about its employees. The integrity and protection of that
customer, employee and company data is critical to the Company and faulty decisions could be made if that data is inaccurate or incomplete. The regulatory environment as
well as the requirements imposed on the Company by the payment card industry surrounding information, security and privacy is also increasingly demanding, in both the
United States and other jurisdictions in which the Company operates. The Company’s systems may be unable to satisfy changing regulatory and payment card industry
requirements and employee and customer expectations, or may require significant additional investments or time in order to do so.
The Company’s information systems and records, including those it maintains with its service providers, may be subject to security breaches, cyberattacks, system failures,
viruses, operator error or inadvertent releases of data. A significant theft, loss, or fraudulent use of customer, employee or company data maintained by the Company or by a
service provider could adversely impact the Company’s reputation and could result in remedial and other expenses, fines or litigation. A breach in the security of the
Company’s information systems or those of its service providers could lead to an interruption in the operation of the Company’s systems, resulting in operational
inefficiencies and a loss of profits. This could require the Company to incur significant costs to comply with legally required protocols and to repair or restore the security of
its systems.
The Company’s insurance policies may not cover all potential losses and the cost of insurance is expected to increase.
The Company maintains insurance coverage for liability, property and other risks with respect to its operations and activities. While the Company currently has
comprehensive property and liability insurance policies with coverage features and insured limits that it believes are customary, market forces beyond the Company’s
control may limit the scope of the insurance coverage it can obtain or ability to obtain coverage at reasonable rates. The cost of insurance may increase and coverage levels
may decrease, which may affect the Company’s ability to maintain insurance coverage and deductibles at acceptable costs. There is a limit as well as various sub-limits on
the amount of insurance proceeds the Company will receive in excess of applicable deductibles. Further, certain types of losses, such as earthquakes, hurricanes and floods,
terrorist acts, and certain environmental matters and business interruptions, may be outside the general coverage limits of the Company’s policies, subject to large
deductibles, deemed uninsurable or too cost-prohibitive to insure against. In addition, in the event of a substantial loss, the insurance coverage the Company carries may not
be sufficient to pay the full market value or replacement cost of the affected property or in some cases may not provide a recovery for any part of a loss. Further, a material
increase in insurance costs may impact the selling price of real estate assets if such costs have an adverse impact on the operating income of such assets.
25
Table of Contents
Adverse outcomes in legal or other regulatory proceedings, including claims of non-compliance with applicable regulations or development-related defects could
adversely affect the Company’s financial condition and operating results.
In the ordinary course of business, the Company is subject to litigation and other legal and regulatory proceedings, which result in significant expenses and devotion of time
and the Company may agree to indemnify third parties or its strategic partners from damages or losses associated with such risks. In addition, litigation is inherently
uncertain, and adverse outcomes in the litigation and other proceedings to which the Company is or may be subject could adversely affect its financial condition and
operating results.
BBX Capital Real Estate engages third-party contractors in its developments. However, BBX Capital Real Estate’s customers may assert claims against BBX Capital Real
Estate for construction defects or other perceived development defects, including, without limitation, structural integrity, the presence of mold as a result of leaks or other
defects, water intrusion, asbestos, electrical issues, plumbing issues, road construction, water and sewer defects and defects in the engineering of amenities. In addition,
certain state and local laws may impose liability on property developers with respect to development defects discovered in the future. BBX Capital Real Estate could have
to accrue a significant portion of the cost to repair such defects in the quarter when such defects arise or when the repair costs are reasonably estimable.
Costs associated with litigation, and the outcomes thereof, which in most instances are very difficult to predict, could adversely affect the Company’s liquidity, financial
condition and operating results.
The Company’s business may be adversely impacted by negative publicity, including information spread through social media.
The proliferation and global reach of social media continues to expand rapidly and could cause the Company to suffer reputational harm. The continuing evolution of social
media presents new challenges. Negative posts or comments about the Company, the properties it manages, the products it sells, its brands or customer experiences on any
social networking or user-generated review website, could affect consumer opinions of the Company and its products, and the Company cannot guarantee that it will timely
or adequately redress such instances.
The loss of the services of key management and personnel could adversely affect the Company’s business.
The Company’s ability to successfully implement its business strategy will depend on the ability to attract and retain experienced and knowledgeable management and other
professional staff. Additionally, the “great resignation” trend that began in 2021 in which employees voluntarily resigned from their jobs could strain our ability to retain
experienced and knowledgeable employees. If the Company is unable to retain and motivate its existing employees and efforts to retain and attract key management and
other personnel are unsuccessful, the Company’s results of operations and financial condition may be materially and adversely impacted.
Unexpected events, such as public health issues, natural disasters, geopolitical conflicts, civil unrest, severe weather and terrorist activities, may disrupt the Company’s
operations and increase our costs.
The occurrence of one or more unexpected events, including public health issues, tsunamis, hurricanes, earthquakes, floods and other forms of severe weather or civil
unrest, geopolitical conflicts (including the current conflict between Ukraine and Russia) and/or terrorist activities in countries or regions in which our customers, assets,
suppliers or our operating businesses are located could adversely affect our operations and financial performance. With respect to the current conflict between Ukraine and
Russia, if such conflict escalates or spills over to or otherwise impacts additional regions, it could heighten many of the other risk factors included in this Item 1A.
26
Table of Contents
There are inherent uncertainties involved in estimates, judgments and assumptions used in the preparation of financial statements in accordance with GAAP. Any
changes in estimates, judgments and assumptions used could have a material adverse effect on our financial condition and operating results.
The preparation of financial statements in accordance with GAAP involves making estimates, judgments and assumptions that affect reported amounts of assets (including
long-lived assets, goodwill and other intangible assets), liabilities and related reserves, revenues, expenses and income. This includes estimates, judgments and assumptions
for assessing the amortization/accretion of purchase accounting fair value differences and the impairment of long-lived assets, goodwill and other intangible assets pursuant
to applicable accounting guidance. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the
circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are often not readily apparent from other
sources. However, estimates, judgments and assumptions can be highly uncertain and are subject to change in the future, and our estimates, judgments and assumptions may
prove to be incorrect and our actual results may differ from these estimates under different assumptions or conditions. If any estimates, judgments or assumptions change in
the future, or our actual results differ from our estimates or assumptions, we may be required to record additional expenses or impairment charges, which would be recorded
as a charge against our earnings and could have a material adverse impact on our financial condition and operating results.
27
Table of Contents
None.
ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 2. PROPERTIES
BBX Capital’s principal executive office is currently located at 201 East Las Olas Boulevard, Suite 1900, Fort Lauderdale, Florida, 33301, under a lease with an expiration
date in May 2032. The lease agreement provides the Company with the right to renew the lease for three additional terms of five years following the initial term.
BBX Sweet Holdings maintains certain offices at BBX Capital’s principal executive office, including the executive offices of IT’SUGAR. IT’SUGAR operates
approximately 100 retail locations in over 25 states and Canada which are subject to leases that expire between 2023 and 2033. Hoffman’s Chocolates operates six
Hoffman’s Chocolates retail locations in South Florida which are subject to leases that expire between 2023 and 2028. BBX Sweet Holdings consolidated its manufacturing
operations in a facility in Orlando, Florida which is subject to a lease that expires in 2024, subject to three one-year renewal options that may be exercised by the Company.
Renin’s principal executive office is located at 110 Walker Drive, Brampton, Ontario and is occupied under a lease with an expiration date of December 31, 2027. Renin
also leases four manufacturing and distribution facilities in the United States and Canada, one of which is located at their principal executive office. These leases have
expiration dates of December 31, 2026, August 31, 2027, and December 31, 2027. The two leases that expire on December 31, 2026 provide Renin with the right to renew
the terms of the lease for five additional terms of five years commencing after the expiration date, and the lease that expires on August 31, 2027 provides Renin with the
right to renew the terms of the lease for five years commencing after the expiration date. In December 2022, Renin took possession of an additional manufacturing and
distribution facility in Canada under a lease with an expiration date of December 31, 2029 with the right to renew the terms of the lease for five years following the initial
term.
BBX Capital has one lease associated with a restaurant in Palm Beach County with an expiration date in 2030.
28
Table of Contents
ITEM 3. LEGAL PROCEEDINGS
In the ordinary course of business, BBX Capital and its subsidiaries are parties to lawsuits as plaintiff or defendant involving its operations and activities. Additionally, from
time to time in the ordinary course of business, the Company is involved in disputes with existing and former employees, vendors, taxing jurisdictions, and various other
parties and also receives individual consumer complaints as well as complaints received through regulatory and consumer agencies. The Company takes these matters
seriously and attempts to resolve any such issues as they arise. The Company may also become subject to litigation related to the COVID-19 pandemic, including with
respect to any actions we take, fail to take, or may be required to take in response thereof. Although BBX Capital and its subsidiaries believe that they have meritorious
defenses in all current legal actions, the outcome of litigation and regulatory matters and timing of ultimate resolution are inherently difficult to predict and uncertain.
There were no material pending legal proceedings against BBX Capital or its subsidiaries as of December 31, 2022.
Not Applicable.
ITEM 4. MINE SAFETY DISCLOSURE
29
Table of Contents
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES
BBX Capital’s Class A Common Stock and Class B Common Stock have substantially identical terms, except as follows:
● Under Florida law and our Articles of Incorporation and Bylaws, holders of our Class A Common Stock and Class B Common Stock vote together as a single class
on most matters presented for a shareholder vote. On such matters, holders of our Class A Common Stock are entitled to one vote for each share held, with all
holders of Class A Common Stock possessing in the aggregate 22% of the total voting power, while holders of Class B Common Stock possess the remaining 78%
of the total voting power. If the number of shares of Class B Common Stock outstanding decreases below 360,000 shares but is greater than 280,000 shares, the
Class A Common Stock’s aggregate voting power will increase to 40%, and the Class B Common Stock will have the remaining 60%. If the number of shares of
Class B Common Stock outstanding decreases below 280,000 shares but is greater than 100,000 shares, the Class A Common Stock’s aggregate voting power will
increase to 53%, and the Class B Common Stock will have the remaining 47%. If the number of shares of Class B Common Stock outstanding decreases below
100,000 shares, the fixed voting percentages will be eliminated, and holders of our Class A Common Stock and holders of our Class B Common Stock will each be
entitled to one vote per share.
● Each share of Class B Common Stock is convertible at the option of the holder thereof into one share of Class A Common Stock.
In addition to any other approval required by Florida law, the voting structure described in the first bullet point above may not be amended without the approval of holders
of a majority of the outstanding shares of our Class B Common Stock, voting as a separate class. Holders of our Class B Common Stock also have certain other special
voting rights with respect to matters affecting our capital structure and the Class B Common Stock.
Market Information
In October 2020, BBX Capital’s Class A Common Stock commenced trading on the OTCQX Best Market under the ticker symbol “BBXIA,” and its Class B Common
Stock commenced trading on the OTC Pink Market under the ticker symbol “BBXIB.” Prior to October 2020, BBX Capital’s common stock was not publicly traded.
On March 8, 2023, there were approximately 191 record holders of our Class A Common Stock and approximately 79 record holders of our Class B Common Stock.
BBX Capital does not currently anticipate paying any cash dividends for the foreseeable future. BBX Capital’s dividend policy is established by BBX Capital’s Board of
Directors based on the Company’s financial condition, results of operations and capital requirements, as well as other business considerations that BBX Capital’s Board of
Directors considers relevant. Further, the terms of BBX Capital’s indebtedness may limit or prohibit the payment of dividends.
Issuer Purchases of Equity Securities
Tender Offers
In July 2021, BBX Capital purchased 1,402,785 shares of its Class A Common Stock pursuant to a cash tender offer commenced in May 2021 at a purchase price of $8.00
per share for an aggregate purchase price of approximately $11.4 million, including fees. At the time that the tender offer was completed, the shares purchased represented
approximately 9.3% of the total number of outstanding shares of BBX Capital’s Class A Common Stock and 7.5% of BBX Capital’s total issued and outstanding equity,
which includes the issued and outstanding shares of BBX Capital’s Class B Common Stock.
In November 2022, the Company consummated the purchase of a total of 1,200,000 shares of its Class A Common Stock pursuant to a cash tender offer commenced in
November 2022 at a purchase price of $10.00 per share for an aggregate purchase price of approximately $12.1 million, including fees. At the time that the tender offer was
completed, the shares purchased in the tender offer represented approximately 9.8% of the total number of outstanding shares of BBX Capital’s Class A Common Stock and
7.5% of BBX Capital’s total issued and outstanding equity, which includes the issued and outstanding shares of BBX Capital’s Class B Common Stock.
30
Table of Contents
October 2020 Share Repurchase Program
In October 2020, BBX Capital’s Board of Directors approved a share repurchase program which authorized the repurchase of up to $10.0 million of shares of BBX Capital’s
Class A Common Stock and Class B Common Stock. In September 2021, the Board of Directors approved an increase in the program from $10.0 million of shares to
$20.0 million of shares, and in November 2021, the Board of Directors approved an increase in the program in an amount necessary to repurchase 1,305,416 shares of Class
A Common Stock in a private transaction. As of December 31, 2021, BBX Capital had purchased 2,425,229 shares of its Class A Common Stock and 14,394 shares of its
Class B Common Stock under this program for approximately $22.8 million, and there was no remaining availability to purchase shares under the program as of December
31, 2021.
January 2022 Share Repurchase Program
In January 2022, the Board of Directors approved a new share repurchase program which authorizes the repurchase of up to $15.0 million of shares of the Company’s Class
A Common Stock and Class B Common Stock. The repurchase program authorizes the Company, in management’s discretion, to repurchase shares from time to time
subject to market conditions and other factors.
The timing, price, and number of shares which may be repurchased under the program in the future will be based on market conditions, applicable securities laws, and other
factors considered by management. Share repurchases under the program may be made from time to time through solicited or unsolicited transactions in the open market or
in privately negotiated transactions. The share repurchase program does not obligate BBX Capital to repurchase any specific amount of shares and may be suspended,
modified, or terminated at any time without prior notice. As of December 31, 2022, the Company repurchased 115,782 shares of its Class A Common Stock for
approximately $1.1 million, at an average cost of $9.27 per share, including fees under the share repurchase program. The 1,200,000 shares of Class A Common Stock
purchased in the November 2022 tender offer described above were not purchased under this repurchase program.
Information regarding BBX Capital’s purchase of its Class A and Class B Common Stock under the repurchase program during the three months ended December 31, 2022
is set forth in the table below:
Period
October 1 – October 31, 2022
November 1 – November 30, 2022
December 1 – December 31, 2022
(a) Total Number of Shares
Purchased
(b) Average Price Paid per
Share
(c) Total Number of Shares
Purchased as Part of
Publicly Announced Plans
or Programs
(d) Maximum Number (or
Approximate Dollar Value)
of Shares that May Yet Be
Purchased Under the Plans
or Programs (1)
64,800 $
—
—
7.99
—
—
64,800 $
— $
— $
13,926,696
13,926,696
13,926,696
(1) The shares purchased in October 2022 were surrendered to the Company by certain officers in satisfaction of tax withholding obligations and were not purchased under
a share repurchase program.
Rights Agreement
In September 2020, BBX Capital adopted a rights agreement (the “Rights Agreement”) in light of the significant market volatility and uncertainties associated with the
COVID-19 pandemic and the impact on the Company and the market price of BBX Capital’s Class A Common Stock and Class B Common Stock. The Rights Agreement
provides a deterrent to shareholders from acquiring a 5% or greater ownership interest in BBX Capital’s Class A Common Stock, Class B Common Stock, or total combined
common stock without the prior approval of the Board of Directors. The Rights Agreement expired on September 25, 2022.
Equity Compensation Plan Information
As of December 31, 2022, 1,128,477 shares of Class A Common Stock and 94,971 shares of Class B Common Stock were available for future issuance under the BBX
Capital, Inc. 2021 Incentive Plan. On January 17, 2023, the Compensation Committee of BBX Capital’s board of directors granted awards of 387,912 restricted shares of
BBX Capital’s Class A Common Stock to the Company’s executive officers and a total of 25,000 restricted shares of BBX Capital's Class A Common stock to certain non-
executive officers. All restricted shares of Class A Common Stock were granted under the BBX Capital, Inc. 2021 Incentive Plan and reduced the number of Class A
Common Stock remaining available for future issuance under BBX Capital's equity compensation plan to 715,565 shares of Class A Common Stock.
Not Applicable.
ITEM 6. SELECTED FINANCIAL DATA
31
Table of Contents
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read together with the Company’s audited consolidated financial statements and related notes included in Item 8 of this
Annual Report on Form 10-K, including the basis of presentation for the consolidated financial statements prior to September 30, 2020 (the date of the spin-off of the
Company from Bluegreen Vacations Holding Corporation) which reflect combined financial statements of BBX Capital, Inc. and its subsidiaries and do not necessarily
reflect what the results of operations, financial position, or cash flows would have been had BBX Capital, Inc. and its subsidiaries been a separate entity or what the results
of operations, financial position, or cash flows will be in the future. The following discussion contains forward-looking statements, including those that reflect our plans,
estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these
differences include, without limitation, those discussed below and elsewhere in this Annual Report on Form 10-K, particularly in Part 1. Item 1A “Risk Factors” and Item 1
“Cautionary Note Regarding Forward-Looking Statements.”
The Management Discussion and Analysis of this Annual Report on Form 10-K discusses 2022 and 2021 items and year-to-year comparisons between the years ended
December 31, 2022 and 2021. Discussions of 2020 items and year-to-year comparisons between 2021 and 2020 are not included in this Form 10-K and can be found in
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal
year ended December 31, 2021. Such reports and other information filed by the Company with the SEC are available free of charge on our website at www.bbxcapital.com
or with the SEC at www.sec.gov.
Overview
BBX Capital, Inc. (referred to together with its subsidiaries as the “Company,” “we,” “us,” or “our,” and without its subsidiaries as “BBX Capital”) is a Florida-based
diversified holding company whose principal holdings are BBX Capital Real Estate LLC (“BBX Capital Real Estate” or “BBXRE”), BBX Sweet Holdings, LLC (“BBX
Sweet Holdings”), and Renin Holdings, LLC (“Renin”).
As of December 31, 2022, the Company had total consolidated assets of approximately $562.8 million and shareholders’ equity of approximately $334.3 million. Net
income attributable to shareholders for the years ended December 31, 2022 and 2021 was approximately $28.0 million and $46.9 million, respectively.
Impact of Current Economic Issues and the COVID-19 Pandemic
Economic trends in the U.S. and global economies and the industries in which the Company operates, have impacted the Company by contributing to i) decreased consumer
demand, ii) disruptions in global supply chains, iii) employee absenteeism and a general labor shortage, and iv) increased economic uncertainty. In light of the uncertain
duration and impact of current economic trends, the Company has focused on maintaining significant cash balances. As of December 31, 2022, the Company’s consolidated
cash balances were $127.6 million.
Inflation for the twelve months ended December 31, 2022 was 6.5%, and there has been broad based price increases for goods and services. The Federal Reserve has sought
to address inflation through monetary policy, including the wind-down of quantitative easing and by increasing the Federal Funds rate. The Russian invasion of Ukraine and
the related embargoes against Russia, as well as the impact of the efforts by China to mitigate COVID-19 cases in that country, worsened supply chain issues with the
potential of further exacerbating inflationary trends. It is possible that the United States and/or the global economy generally will experience a recession of an uncertain
magnitude and duration as a result of monetary policies addressing inflationary trends and for other reasons. These conditions can negatively affect our operating results by
resulting in, among other things: (i) higher interest expense on variable rate debt and any new debt, (ii) lower gross margins due to increased costs of manufactured or
purchased inventory and shipping, (iii) a decline in the availability of debt and equity capital for new real estate investments and the number of real estate development
projects meeting the Company’s investment criteria, (iv) higher overall operating expenses due to increases in labor and service costs, (v) a reduction in customer demand
for our products, (vi) a shift in customer behavior as higher prices affect customer retention and higher consumer borrowing costs, including mortgage borrowings, affect
customer demand, and (vii) increased risk of impairments as a result of declining valuations.
In light of inflationary conditions, we have taken steps to increase the prices of our products; however, such increases may not be accepted by our customers, may not
adequately offset the increases in our costs, and/or could negatively impact customer retention and our gross margin. There is no assurance that the Company’s operating
subsidiaries will be able to increase prices in response to increasing costs, which could have a material adverse effect on the Company’s results of operations and financial
condition.
BBXRE has experienced a significant increase in commodity and labor prices, which has resulted in higher development and construction costs, and disruptions in the
supply chain for certain commodities and equipment have resulted in ongoing supply shortages of building materials, equipment, and appliances. These factors have
impacted the timing of certain projects currently under construction and the commencement of construction of new projects. Furthermore, homebuilders have seen a general
softening of demand, and the increase in mortgage rates have had an adverse impact on residential home sales. In addition, rising interest rates have increased the cost of the
Company’s outstanding indebtedness and any financing for new development projects. Increased rates have also had an adverse impact on the availability of financing, and
the anticipated profitability of development projects, as a majority of development costs are financed with third party debt and capitalization rates related to multifamily
apartment communities are generally impacted by interest rates. BBXRE has also recently observed a decline in the number of potential investors interested in pursuing
equity or debt financing for new multifamily apartment developments and the acquisition of stabilized multifamily apartment communities. Although such factors have not
yet materially impacted BBXRE’s results of operations, we expect that they may have an adverse impact on BBXRE’s operating results in future periods.
32
Table of Contents
Similarly, as a result of inflationary pressures and ongoing disruptions in global supply chains, IT’SUGAR experienced an increase in the cost of inventory and freight, as
well as delays in its supply chain. While IT’SUGAR has generally been able to mitigate the impact of increased costs through increases in the prices of its products, supply
chain disruptions have impacted its ability to maintain historical inventory levels at its retail locations. To the extent that costs continue to increase, there is no assurance that
IT’SUGAR will be able to continue to increase the prices of its products without significantly impacting consumer demand and its sales volume. Further, following
difficulties in maintaining appropriate inventory levels during fiscal 2021, IT’SUGAR increased the inventory levels at its retail locations in 2022 in an effort to ensure that
it can meet consumer demand; however, in light of current economic conditions, including a possible slowdown in consumer demand, increased inventory levels have
increased the risk that IT’SUGAR may be unable to sell the products timely which may among other things result in inventory writedowns. IT’SUGAR has also
experienced an increase in payroll costs as a result of shortages in available labor at its retail locations.
Global supply chain disruptions and increases in commodity prices have also contributed to a significant increase in Renin’s costs related to shipping and raw materials, as
well as delays in its supply chains, which have: (i) negatively impacted Renin’s product costs and gross margin, (ii) increased the risk that Renin will be unable to fulfill
customer orders, and (iii) negatively impacted Renin’s working capital and cash flows due to increased inventory in transit, a prolonged period between when it is required
to pay its suppliers and it is paid by its customers, and an overall decline in its gross margin. While Renin has obtained price increases for many of its products, Renin’s
gross margin has nonetheless been negatively impacted by these cost pressures. Additionally, the negotiation of increased prices with customers increases the risk that
customers will pursue alternative sources for Renin’s products, which may result in Renin losing customers or require it to lower prices in an effort to retain customers.
Increases in interest rates will also adversely impact Renin’s results. Further, Renin has recently observed a decline in consumer demand, which Renin believes may be
attributable to (i) the impact of price increases and overall inflationary pressures on consumer behavior and (ii) a shift in consumer spending away from home improvements
as the economy has reopened. In addition, following difficulties in maintaining appropriate inventory levels during 2021, Renin has increased its inventory levels in an
effort to ensure that it can meet consumer demand; however, in light of current economic conditions, including a slowdown in consumer demand, such increased inventory
levels have increased the risk of Renin being unable to sell such products and the risk of inventory writedowns. In addition, as part of Renin’s efforts to mitigate the impact
of the current economic environment on its business, Renin executed a lease agreement for a new manufacturing and distribution facility near one of its existing locations in
Canada, with the goal of substantially winding down its operations in one of its other facilities and eliminating other logistics and warehousing facilities. In connection with
these efforts, Renin expects to incur in excess of $2.0 million related to, among other things, severance expenses, relocation and freight costs to transfer inventory, and
capital expenditures for new racking for storage and equipment. However, there is no assurance that these efforts and the related upfront costs, which Renin believes will
reduce its operating costs over time, will result in the expected cost savings and will not have unanticipated impacts on Renin’s operations, including its ability to meet
customer demand.
33
Table of Contents
Summary of Consolidated Results of Operations
Consolidated Results
The following summarizes key financial highlights for the year ended December 31, 2022 compared to the same 2021 period:
● Total consolidated revenues of $342.0 million, a 9.1% increase compared to 2021.
● Income before income taxes of $42.8 million compared to $64.2 million during 2021.
● Net income attributable to common shareholders of $28.0 million compared to $46.9 million during 2021.
● Diluted earnings per share of $ 1.81 compared to $ 2.63 during 2021.
The Company’s consolidated results for the year ended December 31, 2022 compared to the same 2021 period were significantly impacted by the following:
● A net increase of $16.9 million in BBX Capital Real Estate’s income before income taxes during 2022 as compared to 2021, which reflects (i) the recognition of a
$23.0 million gain on the sale of a land parcel in St. Lucie County, Florida in December 2022 and (ii) a net increase in equity in net earnings of unconsolidated
joint ventures primarily as a result of sales activity in 2022, including the Miramar East/West joint venture’s sale of its multifamily apartment communities, the
Altis Little Havana joint venture's sale of its multifamily apartment community, BBXRE's sale of its equity interest in the Bayview joint venture, and the Marbella
joint venture’s sale of single-family homes, partially offset by (i) a decrease in net profits from BBXRE’s sale of lots to homebuilders at the Beacon Lake
Community development reflecting that BBXRE sold 178 developed lots during 2022 compared to 385 developed lots and 299 undeveloped lots during 2021, and
(ii) a net decrease in recoveries from loan losses; offset by
● A net decrease of $15.6 million in BBX Sweet Holdings’ income before income taxes during 2022 as compared to 2021, which primarily reflects the recognition of
a $15.9 million non-cash gain on the reconsolidation of IT’SUGAR in the Company’s financial statements during 2021 as a result of IT’SUGAR emerging from
Chapter 11 bankruptcy in June 2021;
● The net increase of $14.5 million in Renin’s loss before income taxes during 2022 as compared to 2021, which primarily reflects (i) a net decrease in sales as a
result of lower customer demand, (ii) a decrease in its gross margin percentage related to significant increases in costs related to freight, raw materials, and labor
and lower absorption of fixed manufacturing overhead resulting from a decline in sales volumes, and (iii) higher interest expense; and
● A net increase of $7.5 million in corporate general and administrative expenses primarily related to higher compensation expense, including the impact of restricted
stock awards granted in January 2022.
Segment Results
BBX Capital reports the results of its business activities through the following reportable segments: BBX Capital Real Estate, BBX Sweet Holdings, and Renin.
Information regarding income (loss) before income taxes by reportable segment is set forth in the table below (in thousands):
BBX Capital Real Estate
BBX Sweet Holdings
Renin
Other
Reconciling items and eliminations
Income (loss) before income taxes
(Provision) benefit for income taxes
Net income (loss)
Net loss (income) attributable to noncontrolling interests
Net income (loss) attributable to shareholders
2022
For the Years Ended December 31,
2021
2020
75,231
189
(15,444)
1,015
(18,200)
42,791
(15,149)
27,642
378
28,020
58,311
15,784
(986)
1,390
(10,258)
64,241
(17,175)
47,066
(155)
46,911
9,988
(47,473)
(3,572)
(2,915)
(14,366)
(58,338)
11,248
(47,090)
4,803
(42,287)
$
$
$
34
Table of Contents
BBX Capital Real Estate Reportable Segment
Segment Description
BBX Capital Real Estate is engaged in the acquisition, development, construction, ownership, financing, and management of real estate and investments in real estate joint
ventures, including investments in multifamily rental apartment communities, single-family master-planned for sale housing communities, and commercial properties
located primarily in Florida. Since November 2018, BBX Capital Real Estate has owned a 50% equity interest in the Altman Companies, a developer and manager of
multifamily rental apartment communities, and in January 2023, BBX Capital Real Estate acquired the remaining equity interests in the Altman Companies. In addition,
BBXRE manages the legacy assets acquired in connection with the Company’s sale of BankAtlantic in 2012, including portfolios of loans receivable, real estate properties,
and judgments against past borrowers.
In an effort to diversify its portfolio of real estate developments, BBXRE is also currently pursuing investment opportunities in the development of warehouse and logistics
facilities and has expanded its operating platform to include a logistics real estate division. Further, as market conditions permit, the Altman Companies may also evaluate
potential opportunities to develop multifamily apartment communities in new geographical areas, as well as multifamily apartment communities that include affordable
housing.
Overview
During 2021 and into the first half of 2022, BBXRE’s operations benefited from an increase in demand for single-family and multifamily apartment housing in many of the
markets in Florida in which BBXRE operates, as sales at BBXRE’s single-family home developments and leasing at its multifamily apartment developments sponsored by
the Altman Companies were exceeding prior expectations. Further, BBXRE had benefited from (i) investor demand for the acquisition of stabilized multifamily apartment
communities, as evidenced by the sale of three communities sponsored by the Altman Companies in 2021 and three additional communities sponsored by the Altman
Companies in 2022, and (ii) the availability of debt and equity capital for financing new multifamily apartment developments, as evidenced by the Altman Companies
commencing the development of three multifamily apartment communities in 2021 and two multifamily apartment communities in 2022.
However, more recently, rising interest rates have increased the cost of the Company’s outstanding indebtedness and any new financing and have also had an adverse impact
on applications for mortgage financing and home sales, the availability of financing, and the anticipated profitability of development projects, as (i) a majority of
development costs are financed with third party debt and (ii) capitalization rates related to multifamily apartment communities are generally impacted by interest rates.
BBXRE has also recently observed a decline in the number of potential investors interested in pursuing equity or debt financing for new multifamily apartment
developments and the acquisition of stabilized multifamily apartment communities, which BBXRE believes is also a result of rising interest rates and an overall decline in
economic and market conditions. In addition, there has also been a significant increase in land, commodity, and labor prices, which has resulted in higher development and
construction costs, and disruptions in supply chains for certain commodities and equipment, which has resulted in ongoing supply shortages of building materials,
equipment, and appliances. These factors have negatively impacted (i) the timing of projects currently under construction and (ii) the commencement of new development
opportunities and the anticipated profitability of such developments and may have a material adverse impact on BBXRE’s results of operations, cash flows, and financial
condition in future periods, particularly if debt and equity financing is not available for new projects or are only available on less attractive terms and (iii) the values of
multifamily apartment communities are adversely impacted by an increase in capitalization rates or a decline in the number of potential purchasers.
While BBXRE’s operating results in 2021 and 2022 significantly benefited from demand for single-family and multifamily housing, BBXRE currently expects a significant
decline in revenues and net income over the next several years as compared to 2021 and 2022 based on its current pipeline of investments, which reflects, among other
things, (i) the accelerated monetization of certain investments from future years into 2021 and 2022 as a result of market conditions, (ii) the temporary delay of the
commencement of new development projects in 2020 due to the COVID-19 pandemic, which is resulting in a decline in expected monetization of investments in the near
future, and (iii) more recently, a decrease in the number of potential development opportunities which meet its investment criteria, which is expected to result in a decline in
fee income recognized by the Altman Companies from new development projects. As a result, BBXRE continues to remain focused on the sourcing and deployment of
capital in investments in new development opportunities where supported by market conditions, including (i) the expansion of its investments in multifamily rental
apartment communities through the Altman Companies and (ii) investing in the development of warehouse and logistics facilities through its recently formed logistics real
estate division, with the ultimate goal of building long-term shareholder value and a diversified portfolio of profitable real estate investments that generate recurring
earnings and cash flows in future periods. However, due to the expected life cycle of these developments, which generally results in the monetization of an investment
approximately three years following the commencement of the development, BBXRE does not expect that its operating results will significantly benefit from these efforts in
the near term. Further, rising interest rates, increases in development costs, and a decline in economic and market conditions have more recently adversely impacted the
costs and availability of debt and equity capital and reduced the number of development projects meeting its investment criteria, and such conditions are expected to
adversely impact BBXRE’s plans to deploy capital in investments in new development opportunities.
The Altman Companies and Related Investments
As of December 31, 2022, BBX Capital Real Estate owned a 50% equity interest in the Altman Companies, a joint venture between BBXRE and Joel Altman engaged in the
development, construction, and management of multifamily apartment communities, and as further described below, in January 2023, BBX Capital Real Estate acquired the
remaining equity interests in the Altman Companies.
35
Table of Contents
BBXRE’s Ownership in the Altman Companies and Acquisition of Additional Equity Interests in 2023
In November 2018, BBX Capital Real Estate acquired a 50% equity interest in the Altman Companies for cash consideration of $14.6 million, including $2.3 million in
transaction costs, with Mr. Altman retaining a 50% equity interest. While the Altman Companies was a joint venture between BBXRE and Mr. Altman, the parties shared
decision-making authority for all significant operating and financing decisions. To the extent that the parties could not reach consensus on a matter, the operating agreement
generally provided that a third party would resolve such matter; however, for certain decisions, the operating agreement provided that the venture could not proceed with
such matters without approval from both parties.
Pursuant to the operating agreement of the Altman Companies, BBXRE also agreed to acquire an additional 40% equity interest in the Altman Companies from Mr. Altman
in January 2023 for a purchase price of $9.4 million, subject to certain adjustments (including reimbursements for predevelopment expenditures incurred at the time of the
acquisition), at which time BBXRE would also acquire control and decision-making authority for all significant operating and financing decisions related to the Altman
Companies as of and subsequent to the acquisition. Further, Mr. Altman also had the right, at his option or in other predefined circumstances, to require BBXRE to purchase
his remaining 10% equity interest in the Altman Companies for $2.4 million, at which time Mr. Altman would no longer serve as an employee of the Altman Companies and
no longer have an equity interest in the Altman Companies. However, irrespective of BBXRE’s acquisition of additional equity interests in the Altman Companies, Mr.
Altman is entitled to retain his membership interests, including his decision-making rights, in the managing member of all development joint ventures that were originated
prior to BBXRE’s acquisition of such equity interests in the Altman Companies from Mr. Altman.
On January 31, 2023 (the "Acquisition Date"), BBXRE closed on the acquisition of the additional 40% equity interests in the Altman Companies for $8.1 million, reflecting
the base purchase price of $9.4 million, an additional $0.1 million of reimbursements for predevelopment expenditures incurred at the time of the acquisition, and a
downward adjustment of $1.4 million to reflect an estimated working capital deficit calculated pursuant to the terms of the operating agreement. Pursuant to the terms of the
operating agreement, the final working capital adjustment amount will be determined by BBXRE and Mr. Altman following the closing and may result in the payment of
additional consideration to Mr. Altman or a refund to BBXRE.
In connection with the acquisition of the 40% interest from Mr. Altman, BBXRE also acquired the remaining 10% equity interest owned by Mr. Altman. Pursuant to the
terms of the modified arrangement for the acquisition of the remaining 10% equity interest, the parties agreed that Mr. Altman will remain employed by the Altman
Companies and that the remaining $2.4 million payment for the interest will be deferred until the earlier of (i) the termination of Mr. Altman’s employment from the Altman
Companies or (ii) November 30, 2028 (the “Final Payment Date”). In addition, the parties agreed to the following terms related to new development projects commencing
subsequent to the Acquisition Date :
● With respect to certain proposed development projects in predevelopment, Mr. Altman will be entitled to invest in the managing member of any joint venture
formed to invest in such projects as if his ownership percentage in the Altman Companies was still 10% if the projects commence prior to the Final Payment Date.
● With respect to certain proposed development projects that were determined to be unlikely to proceed and for which Mr. Altman did not receive reimbursement for
his share of predevelopment expenditures at closing, BBXRE agreed to reimburse Mr. Altman for his share of predevelopment expenditures if such projects
ultimately proceed at a later date prior to the Final Payment Date. Further, if the projects commence prior to the Final Payment Date, Mr. Altman will also be
entitled to invest in the managing member of any joint venture formed to invest in such projects as if his ownership percentage in the Altman Companies was still
10%.
● With respect to all other projects that commence prior to the Final Payment Date, Mr. Altman will be required to invest in the managing member of any joint
venture formed to invest in such projects as if his relative ownership percentage in the Altman Companies was 10%. However, in such case, his investment in the
ventures will be entitled to profits similar to those earned by non-managing members rather than the profits to which BBXRE will be entitled as the managing
member. If Mr. Altman does not invest in the additional joint ventures, BBXRE will be entitled to offset his required capital contribution against the deferred $2.4
million payable to Mr. Altman.
As a result of the transaction, BBXRE is now entitled to nominate all members of the executive committee responsible for the management of the Altman Companies
(although BBXRE has continued to nominate Mr. Altman as a member of the committee) and is deemed to have acquired control and decision-making authority for all
significant operating and financing decisions related to the Altman Companies. Further, BBXRE will have decision-making authority for all significant operating and
financing decisions for any development joint venture that is sponsored and formed by the Altman Companies subsequent to the Acquisition Date. However, as discussed
above, Mr. Altman has retained his membership interests, including his decision-making rights, in the managing member of all development joint ventures that were
originated prior to BBXRE’s acquisition of the remaining equity interests in the Altman Companies from Mr. Altman.
Accounting for BBXRE’s Investment in the Altman Companies and Related Investments
Through the Acquisition Date, the Company accounted for its investment in the Altman Companies under the equity method of accounting, as BBXRE and Mr. Altman
jointly managed the Altman Companies and shared decision-making authority for all significant operating and financing decisions through such date. Further, the Company
has accounted for its investments in the managing member of development joint ventures that were originated prior to the Acquisition Date under the equity method of
accounting, as BBXRE and Mr. Altman similarly shared decision-making authority for all significant operating and financing decisions related to the managing member of
such joint ventures.
As a result of BBXRE’s acquisition of control and decision-making authority over the Altman Companies, the Company will now consolidate the Altman Companies in its
financial statements as of the Acquisition Date using the acquisition method of accounting, which requires that the assets acquired and liabilities assumed associated with an
acquiree be recognized at their fair values at the acquisition date. As a result, during the three months ended March 31, 2023, the Company will remeasure the carrying
value of its current equity interests in the Altman Companies at fair value as of the Acquisition Date, with any resulting remeasurement adjustment recognized in the
Company’s statement of operations, and the Company expects to recognize goodwill based on the difference between (i) the fair values of the identifiable assets and
liabilities of the Altman Companies at the Acquisition Date and (ii) the aggregate of the consideration transferred (measured in accordance with the acquisition method of
accounting) and the fair values of the Company’s current equity interest and any noncontrolling interests in the Altman Companies at the acquisition date.
As a result of the acquisition, the Company expects that it will also consolidate the managing member of any new development joint ventures that are sponsored and formed
by the Altman Companies commencing as of and subsequent to the Acquisition Date. Further, while Joel Altman will generally retain his decision-making rights in the
managing member of development joint ventures that were originated prior to the Acquisition Date, the Company is continuing to evaluate its accounting for its investment
in such joint ventures as of and subsequent to the Acquisition Date under the applicable accounting guidance.
36
Table of Contents
Developments Monetized in 2022
During the year ended December 31, 2022, joint ventures sponsored by the Altman Companies sold: (i) Altis Little Havana, a 224-unit multifamily apartment community
located in Miami, Florida, (ii) Altis Miramar, a 320-unit multifamily apartment community located in Miramar, Florida, and (iii) Altra Miramar, a 330-unit multifamily
apartment community adjacent to Altis Miramar. As a result of these sales, BBXRE received total cash distributions of $25.8 million and recognized total equity earnings of
$22.6 million from its investments in the respective joint ventures.
New Developments
During the year ended December 31, 2022, joint ventures sponsored by the Altman Companies closed on development financing and commenced the development of (i)
Altis Santa Barbara, a planned 242-unit multifamily apartment community in Naples, Florida and (ii) Altra Kendall, a planned 342-unit multifamily apartment community
in Kendall, Florida.
In 2019, BBXRE and Joel Altman had previously invested in the Altis Lake Willis Vineland joint venture, which was sponsored by the Altman Companies to acquire land,
obtain entitlements, and fund predevelopment costs for the development of a multifamily apartment community in Orlando, Florida. In 2021, the joint venture decided to
develop the project in two phases. Accordingly, in September 2021, the Altis Lake Willis Phase 1 joint venture was formed to develop the first phase of the project, which is
expected to be comprised of a 329-unit multifamily apartment community, and the joint venture closed on its development financing and commenced development of the
community. In connection with the closing, BBXRE and Joel Altman acquired membership interests in the managing member of the Altis Lake Willis Phase 1 joint venture
and retained their respective ownership interests in the land and predevelopment costs related to the anticipated second phase of the project through the existing Altis Lake
Willis Vineland joint venture. In September 2022, the Altis Lake Willis Phase 2 joint venture was formed to develop the second phase of the project, which is expected to be
comprised of a 230-unit multifamily apartment community, and the remaining land held by the Altis Lake Willis Vineland joint venture was transferred to the Altis Lake
Willis Phase 2 joint venture in exchange for cash. In connection with the transfer of the land, BBXRE and Joel Altman also acquired membership interests in the managing
member of the Altis Lake Willis Phase 2 joint venture. As a result of the transaction, BBXRE received a cash distribution of approximately $2.3 million from the Altis Lake
Willis Vineland joint venture and recognized approximately $0.4 million of equity earnings from its investment in the venture during the year ended December 31, 2022. As
of December 31, 2022, construction activities related to the development of Altis Lake Willis Phase 2 had commenced, and the joint venture was continuing to seek debt
financing for the project.
Business Update
During 2021 and into the first half of 2022, developments sponsored by the Altman Companies benefited from an increase in demand for multifamily apartment housing in
many of the markets in Florida in which the Altman Companies operates, as the volume of new leases and rental rates at its completed developments were generally
exceeding prior expectations. Further, as evidenced by the sales of Altis Little Havana in June 2022 and Altis Miramar and Altra Miramar in July 2022, investor demand for
the acquisition of stabilized multifamily apartment communities continued to be strong. However, more recently there has been observed (i) a deceleration in the growth of
rental rates at the Altman Companies developments, as well a decline in rates in certain markets, (ii) a slowdown in investor demand for multifamily apartment communities
and indications of an increase in capitalization rates, both of which are expected to have a negative impact on the value of multifamily apartment communities, (iii) a
relative decline in the availability of debt and equity capital for new multifamily apartment developments, and (iv) a decrease in the number of potential development
projects which meet applicable investment criteria. These conditions are believed to be the result of increases in interest rates and a decline in economic and market
conditions.
With respect to its communities where construction commenced in 2021 and 2022, while the Altman Companies’ development budgets for these projects contemplated
increases in commodity and labor prices, the Altman Companies has continued to experience (i) significant volatility in development costs, including higher than anticipated
interest costs related to debt financing and unanticipated increases in commodities costs, and (ii) delays in the timing of the completion of projects. While the Altman
Companies previously anticipated that the impact of higher development costs on the profits expected to be earned on these developments would be offset to some extent by
various factors, including higher rental rates currently resulting from inflationary factors and demand for multifamily housing, the Altman Companies now believes that, in
light of a decrease in investor demand and an increase in capitalization rates, which would negatively impact the values at which these communities could be sold upon
stabilization and the timing of such sales, there is significant risk that these projects will be less profitable than previously expected or may not be profitable at all.
During 2021 and 2022, the Altman Companies also identified various new opportunities for developments but many of these development projects no longer meet the
Altman Companies’ investment criteria due to a combination of (i) significant increases in development costs, including the cost of land, commodities, labor, and property
insurance, (ii) supply chain disruptions and material shortages, (iii) the impact of higher interest rates and insurance costs on development costs and the estimated values at
which multifamily apartment communities can be sold, and (iv) the increased uncertainty related to whether growth in rental rates will be able to offset more recent
increases in development costs. In addition, the Altman Companies has observed a relative decline in the availability, as well as increases in the cost, of debt and equity
capital for new development opportunities, and uncertainty in the overall economy and compression in the profits expected to be earned from new developments has
increased the risk of the Altman Companies being unable to identify equity and/or debt financing on acceptable terms, or at all. As a result of these factors, during the year
ended December 31, 2022, the Altman Companies made a decision not to move forward with these prospective development opportunities and recognized losses related to
predevelopment expenditures for such developments. Further, the Altman Companies anticipates that its operating results will no longer include the previously anticipated
development, general contractor, and management fees related to such projects.
Other Matters
In certain circumstances, the Altman Companies may acquire the 40% membership interests in AGC that are not owned by the Altman Companies for a purchase price
based on formulas set forth in the operating agreement of AGC. Following the acquisition of Mr. Altman’s equity interests in the Altman Companies in January 2023,
BBXRE currently expects that it will exercise its right to acquire the remaining 40% membership interests in AGC in 2023. Due to the formula applicable to the option
pursuant to which BBXRE is permitted to acquire such interests, which is primarily calculated based on AGC’s working capital balance and a percentage of expected profits
from current construction projects and is not calculated based on the fair value of such interests, BBXRE does not expect to pay a significant amount of cash upon the
closing of the acquisition of such interests. However, BBXRE would assume responsibility for any working capital deficits related to AGC at the time of closing and may be
obligated to pay a percentage of profits from AGC, if any, to the seller over time.
In March 2023, the Altman Companies amended and restated the operating agreement of AMC to admit an unaffiliated property management company as a joint venture
partner. The Altman Companies is continuing to serve as the managing member of AMC, with any major decisions requiring the approval of both parties. Once the parties
have received any necessary consents related to the formation of the joint ventures as required by various stakeholders, including certain lenders, equity investors, and
regulatory agencies with jurisdiction, the unaffiliated property management company will serve as the managing member of AMC, with any major decisions continuing to
require the approval of both parties. Under the terms of the operating agreement, the parties will each be entitled to receive distributions of available cash of the joint
venture based on a proscribed formula within the operating agreement, with the parties generally each receiving 50% of distributable cash after the unaffiliated property
management company has received its initial contribution to AMC and the parties have received a return of any additional capital contributions subsequent to the formation
of the joint venture. Further, pursuant to the terms of the agreement, each party has the right to terminate the joint venture arrangement at any time, with such termination
resulting in the unaffiliated property management company transferring its ownership interests in AMC back to the Altman Companies. However, if the Altman Companies
exercises this right prior to the first anniversary of the formation of the joint venture, the Altman Companies is required to pay a penalty up to a maximum amount of $0.2
million.
37
Table of Contents
Risks Related to Current Economic Conditions
Economic and market conditions are highly uncertain as a result of various factors, including inflationary pressures and expected further increases in interest rates. An
economic recession, or significantly slower growth resulting from these factors could adversely impact rental rates, occupancy levels, and rental receipts (including an
increase in tenant delinquencies and/or requests for rent abatements), and these effects would impact (i) the amount of rental revenues generated from the multifamily
apartment communities sponsored and managed by the Altman Companies, (ii) the extent of management fees earned by the Altman Companies, and (iii) the ability of the
related joint ventures to stabilize and successfully sell such communities. Furthermore, a decline in rental revenues at developments sponsored by the Altman Companies
could require it, as the sponsor and managing member, to fund operating shortfalls in certain circumstances. In addition, as discussed above, the increases in costs of
developing and operating multifamily apartment communities, including, but not limited to, increases in commodity prices, labor prices, and property insurance costs, could
also have an adverse impact on market values and the Altman Companies’ operating results. If there is a significant adverse impact on real estate values as a result of
increased interest rates, lower rental revenues, higher capitalization rates, or otherwise, the joint ventures sponsored by the Altman Companies may be unable to sell their
respective multifamily apartment developments within the time frames previously anticipated and/or for the previously forecasted sales prices, if at all, which may impact
the profits expected to be earned by BBXRE from its investment in the managing member of such projects and the ability of the joint ventures to repay or refinance
construction loans on such projects and could result in the recognition of impairment losses related to BBXRE’s investment in such projects. Furthermore, the Altman
Companies may be unable to close on the equity and/or debt financing necessary to commence the construction of new projects, or may determine to not pursue certain
development opportunities which no longer meet its investment criteria, which could result in, among other things, (i) increased operating losses at the Altman Companies
due to a decline in development, general contractor, and management fees, (ii) the recognition of impairment losses by BBXRE and/or the Altman Companies related to
their current investments, including predevelopment expenditures related to prospective development opportunities that are abandoned, and (iii) the recognition of
impairment losses related to BBXRE’s overall investment in the Altman Companies, as the profitability and value of the Altman Companies depends on its ability to source
new development opportunities.
Beacon Lake Master Planned Development
BBXRE is the master developer of the Beacon Lake Community, a master planned community located in St. Johns County, Florida that is being developed in four phases
and expected to be comprised of 1,476 single-family homes and townhomes. BBXRE is primarily developing the land and common areas and selling finished lots to third-
party homebuilders. Other than in the case of the lots comprising Phase 4, which were sold to a homebuilder as undeveloped lots, the agreements pursuant to which BBXRE
is selling finished lots to homebuilders generally provide for a base purchase price that is paid to BBXRE upon the sale of the developed lots to the homebuilders and a
contingent purchase price that is calculated as a percentage of the proceeds that the homebuilders receive from the sale of the completed homes. While an estimated amount
of the contingent purchase price is recognized in BBXRE’s revenues upon the sale of the lots to the homebuilders, the contingent purchase price is paid to BBXRE upon the
closing of such home sales by homebuilders.
BBXRE has substantially completed the development of the lots comprising Phases 1 through 3 of the Beacon Lake Community and previously sold the 299 undeveloped
lots comprising Phase 4 in a bulk lot sale to a single homebuilder in 2021. Further, as of December 31, 2022, BBXRE has sold all but 85 lots in the Beacon Lake
Community and is under contract to sell the remaining 85 lots to homebuilders. Accordingly, other than closing on the sale of the remaining lots in Phase 3, BBXRE has
substantially completed its primary activities as the master developer of the Beacon Lake Community. However, as discussed above, BBXRE expects to continue to collect
contingent purchase price from homebuilders upon the sale of homes by the homebuilders, and as of December 31, 2022, BBXRE had recognized contingent purchase price
receivables totaling $16.9 million related to the sale of lots in the Beacon Lake Community.
During the year ended December 31, 2022, BBXRE sold 146 single-family lots and 32 townhome lots in the Beacon Lake Community, as compared to the sale of 299
undeveloped lots comprising Phase 4, 291 single-family lots, and 94 townhome lots during the year ended December 31, 2021. The decrease in the lots sold in 2022 as
compared to 2021 reflects the significant increase in demand for single-family housing in Florida following the COVID-19 pandemic, which ultimately resulted in higher
than anticipated sales in 2021 and the acceleration of the completion of the development.
BBXRE has substantially completed the development of lots at the Beacon Lake Community, and its development costs were not materially impacted by recent increases in
commodity and labor prices. However, BBXRE expects that homebuilders are experiencing increases in costs to construct homes on the developed lots throughout the
Beacon Lake Community. Further, while homebuilders have continued to sell homes in the Beacon Lake Community, BBXRE has recently observed a deceleration in the
number of prospective homebuyers and home sales as compared to 2021 and early 2022, which BBXRE believes is attributable to the impact of an increase in interest rates
on mortgage loans and uncertainty related to a potential recessionary economic environment on demand for single-family homes. In spite of these factors, BBXRE currently
believes that homebuilders are likely to continue to meet their obligations to acquire the remaining lots in the community from BBXRE pursuant to the existing agreements
between BBXRE and the homebuilders, as the impact of the increase in construction costs on the profitability of home sales has been offset to some extent by an increase in
prices for single-family homes; however, there is no assurance that homebuilders will not default on their obligations to acquire the remaining lots in the community.
Further, in many cases, BBXRE’s estimate of contingent purchase price on lots sold to homebuilders are based on executed contracts between the homebuilders and
homebuyers, and BBXRE currently believes that it is probable that it will collect its estimated contingent purchase price receivables. However, if market factors result in a
significant decline in demand and selling prices for single-family homes and/or a significant number of prospective home buyers forfeiting deposits on executed contracts to
purchase homes in the community, BBXRE’s expected contingent purchase price due from homebuilders upon the sale of homes in the community may be negatively
impacted and could result in the reversal of previously recognized revenues related to contingent purchase price receivables.
38
Table of Contents
Single -Family Development Joint Ventures
As of December 31, 2022, BBXRE had previously invested approximately $8.1 million in a joint venture with CC Homes to develop Marbella, a residential community
comprised of 158 single-family homes in Miramar, Florida. During the year ended December 31, 2022, the joint venture closed on the sale of 126 single-family homes, and
BBXRE recognized $12.6 million of equity earnings and received $12.5 million of distributions from the venture. As of December 31, 2022, the joint venture had closed on
the sale of all 158 single-family homes comprising Marbella.
In June 2019, BBXRE invested $4.2 million in the Sky Cove joint venture, which was formed to develop Sky Cove at Westlake, a residential community comprised of 204
single-family homes in Loxahatchee, Florida. During the year ended December 31, 2022, the joint venture closed on the sale of 39 single-family homes, and BBXRE
recognized $0.5 million of equity earnings and received $2.1 million of distributions from the joint venture. As of December 31, 2022, the joint venture had closed on the
sale of all 204 single-family homes comprising Sky Cove.
In February 2021, BBXRE invested $4.9 million in the Sky Cove South joint venture, which was formed to develop Sky Cove South at Westlake, a residential community
that will be adjacent to Sky Cove at Westlake and is expected to be comprised of 197 single-family homes. During the year ended December 31, 2022, the joint venture
closed on the sale of 80 single-family homes, and BBXRE recognized $0.6 million of equity earnings and received $2.1 million of distributions from the venture. As of
December 31, 2022, the joint venture had executed contracts to sell 172 homes in the community and had closed on the sale of 80 homes.
Bayview Joint Venture
In 2014, BBXRE invested in a joint venture (the “Bayview joint venture”) with an affiliate of Procacci Development Corporation (“Procacci”). At the inception of the
venture, BBXRE and Procacci each contributed $1.8 million to the venture in exchange for a 50% equity interest, and the joint venture acquired approximately three acres
of real estate in Fort Lauderdale, Florida for $8.0 million. The property was subject to a mortgage loan which had an outstanding balance of $5.0 million, and in connection
with BBXRE’s investment in the joint venture, the Company also guaranteed 50% of the outstanding balance of the mortgage loan.
In June 2022, BBXRE sold its equity interest in the Bayview joint venture to Procacci. As a result of the transaction, BBXRE received net cash proceeds of approximately
$8.8 million and recognized a net gain from the sale of its investment in the venture of approximately $7.3 million, which is included in equity in net earnings of
unconsolidated real estate joint ventures in the Company’s condensed consolidated statements of operations for the year ended December 31, 2022. In connection with the
sale, the Company and BBXRE obtained a release from the lender for any liability to the lender under the loan documents, including any obligation related to the
Company’s guaranty on the outstanding loan balance.
Other Real Estate Activities
During the years ended December 31, 2022 and 2021, BBXRE sold various real estate assets in its legacy asset portfolio, and as a result of such sales, the Company
recognized total net gains of $24.3 million and $0.6 million, respectively, and received aggregate net cash proceeds of $27.3 million and $2.4 million, respectively. Included
in the net gains on sales of real estate for the year ended December 31, 2022 was a gain of $23.0 million recognized upon the sale of 119 acres of vacant land in St. Lucie
County, Florida in December 2022.
Results of Operations
Information regarding the results of operations for BBX Capital Real Estate is set forth below (dollars in thousands):
For the Years Ended December 31,
2021
2022
2020
Change
2022 vs
2021
Change
2021 vs
2020
Sales of real estate inventory
Interest income
Net gains on sales of real estate assets
Other
Total revenues
Cost of real estate inventory sold
Recoveries from loan losses, net
Impairment losses
Selling, general and administrative expenses
Total costs and expenses
Operating profits
Equity in net earnings of unconsolidated real estate joint ventures
Other (expense) income
Income before income taxes
$
$
$
27,794
3,617
24,289
1,835
57,535
11,463
(4,835)
311
13,772
20,711
36,824
38,414
(7)
75,231
39
65,479
2,048
643
1,504
69,674
29,690
(7,774)
—
7,587
29,503
40,171
18,154
(14)
58,311
20,363
1,240
255
1,454
23,312
13,171
(8,876)
2,742
6,758
13,795
9,517
465
6
9,988
(37,685)
1,569
23,646
331
(12,139)
(18,227)
2,939
311
6,185
(8,792)
(3,347)
20,260
7
16,920
45,116
808
388
50
46,362
16,519
1,102
(2,742)
829
15,708
30,654
17,689
(20)
48,323
Table of Contents
BBX Capital Real Estate’s income before income taxes for the year ended December 31, 2022 compared to the 2021 period increased by $16.9 million primarily due to the
following:
● An increase in net gains on the sales of real estate assets primarily attributable to BBXRE's sale of 119 acres of vacant land in St. Lucie County, Florida in
December 2022, which resulted in the recognition of a net gain on sale of $23.0 million in 2022;
● A net increase in equity in net earnings of unconsolidated joint ventures primarily due to (i) the Altis Little Havana joint venture’s sale of its multifamily apartment
community in 2022, which resulted in the recognition of $8.7 million of equity earnings from BBXRE’s investment in the venture, (ii) the Altis Miramar East/West
joint venture’s sale of its multifamily apartment communities in 2022, which resulted in the recognition of $14.0 million of equity earnings from BBXRE’s
investment in the venture in 2022, (iii) BBXRE's sale of its equity interest in the Bayview joint venture in 2022, which resulted in the recognition of a gain of $7.3
million upon the sale in 2022, and (iv) the Marbella joint venture's sale of single-family homes in 2022, which resulted in the recognition of $12.6 million of equity
earnings from BBXRE’s investment in the venture in 2022, partially offset by (i) the Altis Promenade joint venture’s sale of its multifamily apartment community
in 2021, which resulted in the recognition of $5.2 million of equity earnings from BBXRE’s investment in the venture in 2021, (ii) the Altis Grand at the Preserve
joint venture’s sale of its multifamily apartment community in 2021, which resulted in the recognition of $5.0 million of equity earnings from BBXRE’s
investment in the venture in 2021, (iii) the Altis Grand Central joint venture’s recapitalization of its ownership of its multifamily apartment community in 2021,
which resulted in the recognition of $6.2 million of equity earnings from BBXRE’s investment in the venture in 2021; and (iv) BBXRE’s share of losses
recognized by the Altman Companies in 2022 primarily related to the impairment of predevelopment expenses for prospective development projects that are no
longer expected to commence;
● An increase in interest income as a result of (i) higher interest income from cash, cash equivalents, and investment securities as a result of higher balances and an
overall increase in interest rates and (ii) higher interest income from loans from a subsidiary of BBXRE to IT’SUGAR; partially offset by
● A decrease in net profits from the sale of lots to homebuilders at the Beacon Lake Community development, as BBXRE sold 146 single-family lots and 32
townhome lots in 2022 as compared to the sale of the 299 undeveloped lots comprising Phase 4, 291 single-family lots, and 94 townhome lots during the 2021
period;
● Lower recoveries from loan losses in 2022 as compared to the 2021 period; and
● An increase in selling, general, and administrative expenses primarily due to (i) new hires, which reflects the establishment of BBXRE’s logistics real estate
division, (ii) increased incentive compensation, which includes the impact of compensation related to sales activity in 2022, and (iii) the recognition of severance
expense.
BBX Sweet Holdings Reportable Segment
Segment Description
BBX Sweet Holdings is engaged in the ownership and management of operating businesses in the confectionery industry, including (i) IT’SUGAR, a specialty candy
retailer whose products include bulk candy, candy in giant packaging, and licensed and novelty items and which operates in retail locations that include a mix of high-traffic
resort and entertainment, lifestyle, mall/outlet, and urban locations throughout the United States and one location in Canada, and (ii) Las Olas Confections and Snacks, a
manufacturer and wholesaler of chocolate and other confectionery products which also operates several Hoffman’s Chocolates retail locations in South Florida.
Overview
IT’SUGAR – Emergence from Bankruptcy in 2021
BBX Sweet Holdings owns over 90% of the equity interests in IT’SUGAR. Prior to September 22, 2020, the Company consolidated the financial statements of IT’SUGAR
and its subsidiaries as a result of its over 90% ownership of IT’SUGAR. As a result of the impact of the COVID-19 pandemic on its operations, on September 22, 2020,
IT’SUGAR and its subsidiaries filed voluntary petitions to reorganize under Chapter 11 of Title 11 of the U.S. Code (the “Bankruptcy Code”) in the U.S. Bankruptcy Court
for the Southern District of Florida (the “Bankruptcy Court”) (the cases commenced by such filings, the “Bankruptcy Cases”), and as a result of the filings and the
uncertainties surrounding the nature, timing, and specifics of the bankruptcy proceedings, the Company deconsolidated IT’SUGAR on September 22, 2020. On June 16,
2021, the Bankruptcy Court confirmed IT’SUGAR’s plan of reorganization, and the plan became effective on June 17, 2021 (the “Effective Date”). On the Effective Date,
IT’SUGAR entered into a secured exit credit facility with a wholly-owned subsidiary of BBXRE (the “Exit Facility”) which provided for advances to IT’SUGAR of up to
$13.0 million, and BBXRE’s wholly-owned subsidiary advanced $13.0 million to IT’SUGAR under the Exit Facility, less the repayment of amounts under loans previously
due from IT’SUGAR to BBXRE’s wholly-owned subsidiary (which were superseded and replaced by the Exit Facility). Pursuant to the terms of the plan, BBX Sweet
Holdings’ equity interests in IT’SUGAR were revested on the Effective Date, and all organizational documents of IT’SUGAR were assumed, ratified, and reinstated. As a
result of the confirmation and effectiveness of the plan and the revesting of its equity interests in IT’SUGAR, the Company was deemed to have reacquired a controlling
financial interest in IT’SUGAR and consolidated the results of IT’SUGAR into its consolidated financial statements as of the Effective Date, the date that the Company
reacquired control of IT’SUGAR.
As a result of the reconsolidation of IT’SUGAR, BBX Sweet Holdings recognized a gain on consolidation of $15.9 million during the year ended December 31, 2021,
which reflects the remeasurement of the carrying value of BBX Sweet Holdings’ equity interests in IT’SUGAR at fair value as of the Effective Date. Further, as a result of
the deconsolidation of IT’SUGAR on September 22, 2020 and subsequent reconsolidation of IT’SUGAR on the Effective Date, IT’SUGAR’s results of operations are
excluded from the Company’s statements of operations and comprehensive income for the period from September 22, 2020 through June 16, 2021.
40
Table of Contents
IT'SUGAR – Business Update
As of December 31, 2022, IT’SUGAR was operating approximately 100 retail locations across the United States, including 12 “pop-up” retail locations.
Since its emergence from the Bankruptcy Cases (during which it permanently closed 17 retail locations, opened 10 “pop-up” retail locations in select U.S. locations, and
executed lease amendments with respect to 78 of its retail locations), IT’SUGAR has been focused on leveraging its reputation as a “retailtainment” experience for
customers to expand and improve the quality of its store portfolio through the following:
● Expanding on the recent success of its “candy department store” concept in select high-traffic resort and entertainment locations across the United States (as
implemented in retail locations at American Dream in New Jersey and the Ala Moana Center in Honolulu, Hawaii);
● Evaluating additional retail locations in targeted markets in which it believes it can opportunistically capitalize on the availability of retail space and a decline in
rental rates for retail space generally in certain markets;
● Improving the quality and remaining maturity of its store portfolio by (i) extending the lease terms of its existing successful retail locations, (ii) expanding the size
of certain existing retail locations, and (iii) closing retail locations where appropriate or where required by the terms of the lease; and
● Opening “pop up” retail locations in select markets in order to test the markets for the viability of potential longer-term locations.
The following summarizes activity within IT’SUGAR’s store portfolio of retail locations in 2022:
● IT’SUGAR opened (i) large format “pop-up” retail locations in Chicago, Illinois, San Francisco, California, and Manhattan, New York, (ii) new retail locations in
Somerville, Massachusetts, Foxborough, Massachusetts, National Harbor, Maryland, and Miami, Florida, (iii) its first international location in West Edmonton,
Canada, (iv) an Oreo Café in its “candy department store” at Ala Moana Center in Honolulu, Hawaii, (v) an expansion of an existing retail location in Coney
Island, New York, (vi) an expanded relocation of a store at an existing location in Branson, Missouri, (vii) a relocation of a store at an existing location in Orlando,
Florida, and (viii) “pop-up” retail locations in Chicago, Illinois and Maui, Hawaii;
● IT’SUGAR executed lease agreements for various locations, including (i) two “candy department stores” in high-traffic metropolitan areas, (ii) three new retail
locations, (iii) the relocation and expansion of an existing retail location, and (iv) the extension of the lease term of two existing “pop-up” retail locations; and
● IT’SUGAR closed six retail locations, including some of its “pop-up” retail locations.
During the course of the Bankruptcy Cases, IT’SUGAR opened various “pop-up” retail locations in select locations across the United States. These locations required initial
capital investments that were generally significantly lower than the investments required for IT’SUGAR’s traditional retail locations and were subject to lease agreements
with terms ranging from 13-36 months and which generally provided for the payment of rent based on a percentage of sales generated at the applicable location. Although
IT’SUGAR has been seeking to extend the term of the leases for certain of these locations, some of the landlords have indicated that they do not intend to extend the term of
the leases, and in some cases, IT’SUGAR has closed the locations. However, IT’SUGAR is continuing to seek to open additional “pop-up” retail locations and
has expanded its “pop-up” retail location concept to include large format locations that are similar in size to its “candy department stores.” Although these larger format
“pop up” locations generally require initial capital investments that are higher than its previous “pop-up” locations and are also subject to leases that include fixed rental
obligations as opposed to lease payments based on a percentage of sales, IT’SUGAR believes that these locations will generate higher sales that justify such investments.
Further, as these large format “pop-up” retail locations are generally in high-traffic metropolitan locations of interest to IT’SUGAR, these locations will allow IT’SUGAR to
test the market and evaluate whether it should incur the capital expenditures and lease obligations associated with longer-term retail locations in these locations.
As noted above, IT’SUGAR executed lease amendments with respect to 78 retail locations during the course of its bankruptcy. Although the specific terms of the executed
lease amendments vary, the amended leases generally provided for the forgiveness of IT’SUGAR’s pre-petition rent obligations, and many (but not all) of the amended
leases also provided for the payment of rent based on a percentage of sales volumes (in lieu of previously scheduled fixed lease payments), generally for a period of one to
two years from the commencement of the bankruptcy proceedings. Following such periods of time, the amended leases generally required IT’SUGAR to resume the
payment of previously scheduled fixed lease payments going forward. As the temporary rent relief provided by many of these amended leases expired in December 2021,
IT’SUGAR experienced an increase in its occupancy costs during the year ended December 31, 2022 as compared to the same 2021 period as it recommenced the payment
of previously scheduled fixed lease payments. In addition, for certain retail locations, including four locations that historically generated operating losses largely based on
the applicable fixed rental obligations prior to the amendments, the lease amendments provide for the payment of rent based on a percentage of sales volumes through the
remainder of the lease term; however, in such cases, the landlords generally have the right to terminate the lease agreements at any time following notice periods ranging
from 30 to 60 days.
41
Table of Contents
Although there is no assurance that it will be able to maintain or increase its sales levels in future periods, IT’SUGAR's revenues in 2022 have significantly increased as
compared to 2021 and 2019 reflecting an increase in comparable store sales, the revenues generated in new and expanded store locations, and price increases implemented
in response to higher inventory and freight costs, as further discussed below. The following summarizes the increase in IT’SUGAR’s comparable store sales and total
revenues during the periods indicated:
Comparable Store Sales (1)
Total Revenues
Year 2021 Compared to
Year 2019
Year 2022 Compared to
Year 2019
Year 2022 Compared to
Year 2021
14%
19%
22%
40%
11%
18%
(1) Comparable store sales represent IT’SUGAR’s sales at its retail locations excluding both the impact of e-commerce sales and changes in its store portfolio.
(2) Because IT’SUGAR’s results for the six months ended June 30, 2021 and fiscal 2020 were significantly impacted by the COVID-19 pandemic, the Company has
included a comparison of its results for 2022 and 2021 to 2019 in order to provide a comparison to periods that were not impacted by the COVID-19 pandemic.
As a result of inflationary trends and disruptions in global supply chains, IT’SUGAR has experienced an increase in the cost of inventory and freight. Although it has
experienced some compression in its selling margins, IT’SUGAR has to date been able to mitigate the impact of increased costs to some extent through increases in the
prices of its products. However, to the extent that costs continue to increase, there is no assurance that IT’SUGAR will be able to continue to increase the prices of its
products without significantly impacting consumer demand and its sales volume. In addition to an increase in its product costs, IT'SUGAR in the past experienced delays in
its supply chains which impacted the inventory levels at its retail locations. Following difficulties in maintaining appropriate inventory levels during 2021, IT’SUGAR
increased the inventory levels at its retail locations in 2022 in an effort to ensure that it can meet consumer demand. However, given economic uncertainty and volatility,
IT’SUGAR intends to closely manage its inventory levels in light of a possible slowdown in consumer demand.
In addition to the above issues, IT’SUGAR has been impacted by staffing issues and has experienced an increase in payroll costs associated with hiring and maintaining
staffing at its retail locations.
42
Table of Contents
Las Olas Confections and Snacks
During the year ended December 31, 2022, Las Olas Confections and Snacks’ revenues decreased by 4.9% as compared to its revenue during the same 2021 period. The
decline in revenue for the year ended December 31, 2022 primarily reflects lower wholesale revenues. Although Las Olas Confections and Snacks experienced a decline in
its revenues, its gross margin increased, as the decline in revenues was partially attributable to its efforts to eliminate existing products with low margins. Further, while Las
Olas Confections and Snacks has also been impacted by increased costs for raw materials, and supply chain delays as well as higher wages, it has generally mitigated the
impact of these factors through increases in the prices of certain of its products and improvements in labor efficiencies in its manufacturing facility.
During the year ended December 31, 2022, the Company sold Hoffman’s Chocolates’ manufacturing facility in Greenacres, Florida. Substantially all of the products
previously manufactured at the Hoffman’s Chocolates facility are now manufactured at the existing Las Olas Confections and Snacks facility.
Results of Operations
Information regarding the results of operations for BBX Sweet Holdings is set forth below (dollars in thousands):
For the Years Ended December 31,
2021
2022
2020
Change
2022 vs
2021
Change
2021 vs
2020
Trade sales
Cost of trade sales
Gross margin
Interest income
Other revenue
Interest expense
Impairment losses
Selling, general and administrative expenses
Total operating income (loss)
Other income
Loss on the deconsolidation of IT'SUGAR, LLC
Gain on the consolidation of IT'SUGAR, LLC
Foreign exchange loss
Income (loss) before income taxes
Gross margin percentage
SG&A as a percent of trade sales
Expenditures for property and equipment
Depreciation and amortization
Debt accretion and amortization
Pre opening and closing expenses
ASC 842 straight line rent adjustments
$
$
$
$
$
$
$
139,718
(83,307)
56,411
—
—
(1,015)
(238)
(55,617)
(459)
718
—
—
(70)
189
40.37%
39.81%
11,383
6,629
61
1,021
1,764
84,215
(52,497)
31,718
36
—
(429)
(38)
(31,524)
(237)
131
—
15,890
—
15,784
37.66%
37.43%
4,283
3,181
21
158
1,502
49,155
(41,482)
7,673
29
281
(193)
(25,303)
(26,855)
(44,368)
221
(3,326)
—
—
(47,473)
15.61%
54.63%
3,155
4,244
168
8
542
55,503
(30,810)
24,693
(36)
—
(586)
(200)
(24,093)
(222)
587
—
(15,890)
(70)
(15,595)
2.71%
2.38%
7,100
3,448
40
863
262
35,060
(11,015)
24,045
7
(281)
(236)
25,265
(4,669)
44,131
(90)
3,326
15,890
—
63,257
22.05%
(17.20)%
1,128
(1,063)
(147)
150
960
BBX Sweet Holdings income before income taxes for the year ended December 31, 2022 compared to the same 2021 period decreased by $15.6 million primarily due to the
following:
● The recognition of a $15.9 million gain on the reconsolidation of IT’SUGAR in the Company’s financial statements in the 2021 period as a result of IT’SUGAR
emerging from bankruptcy and BBX Sweet Holdings reacquiring control of IT’SUGAR in June 2021; partially offset by
● The recognition of a $0.9 million gain on the sale of property and equipment in the 2022 period associated with the Company’s sale of the Hoffman’s Chocolates
manufacturing facility in Greenacres, Florida.
43
Table of Contents
Information regarding the results of operations for IT’SUGAR that were included in the Company’s consolidated financial statements is set forth below (dollars in
thousands):
For the Years Ended December 31,
2021
2022
2020
Change
2022 vs
2021
Change
2021 vs
2020
Trade sales
Cost of trade sales
Gross margin
Interest income
Interest expense
Impairment losses
Selling, general and administrative expenses
Total operating income (losses)
Other income
Foreign exchange loss
Income (loss) before income taxes
Gross margin percentage
SG&A as a percent of trade sales
$
$
119,302
(66,915)
52,387
—
(834)
(238)
(48,732)
2,583
(206)
(70)
2,307
43.91%
40.85%
62,161
(34,423)
27,738
—
(314)
(38)
(24,915)
2,471
45
—
2,516
44.62%
40.08%
31,794
(26,923)
4,871
8
(109)
(24,948)
(21,121)
(41,299)
117
—
(41,182)
15.32%
66.43%
57,141
(32,492)
24,649
—
(520)
(200)
(23,817)
112
(251)
(70)
(209)
(0.71)%
0.77%
30,367
(7,500)
22,867
(8)
(205)
24,910
(3,794)
43,770
(72)
—
43,698
29.30%
(26.35)%
IT’SUGAR’s operating results presented in the table above reflect IT’SUGAR’s operating results for the periods in which IT’SUGAR was consolidated in the Company’s
consolidated financial statements. Accordingly, IT’SUGAR’s operating results for the year ended December 31, 2021 reflect their results for the period from June 17, 2021,
the date that the Company reconsolidated IT’SUGAR, through December 31, 2021, while its operating results presented for the year ended December 31, 2020 reflect their
results for the period from January 1, 2020 through September 22, 2020, the date that the Company deconsolidated IT’SUGAR.
The table above reflecting IT’SUGAR’s standalone operating results excludes an accrual related to a long-term incentive compensation plan implemented by BBX Sweet
Holdings for certain of IT’SUGAR’s executives. The expense related to the long-term incentive plan, which is reflected in BBX Sweet Holdings’ consolidated results, was
$1.3 million and $0.7 million for the years ended December 31, 2022 and 2021, respectively.
44
Table of Contents
Renin Reportable Segment
Segment Description
Renin is engaged in the design, manufacture, and distribution of sliding doors, door systems and hardware, and home décor products and operates through its headquarters
in Canada and manufacturing and distribution facilities in the United States and Canada. In addition to its own manufacturing activities, Renin sources various products and
materials from China, Brazil, and certain other countries. In October 2020, Renin acquired Colonial Elegance, a supplier and distributor of building products that was
headquartered in Montreal, Canada. Colonial Elegance’s products included barn doors, closet doors, and stair parts, and its customers included big box retailers in the
United States and Canada which were complementary to and expanded Renin's existing customer base.
Renin’s products are primarily sold through three channels in North America: retail, commercial, and direct installation in the greater Toronto area.
Overview
During the year ended December 31, 2022, Renin’s sales decreased as compared to the same period in 2021, and its retail channel comprised approximately 69% of its gross
sales for the 2022 period as compared to approximately 77% for the same period in 2021. Although Renin’s sales in 2022 benefited from price increases to customers
implemented in response to increased costs, as well as sales of slow-moving inventory, the impact of these factors were offset primarily by a decline in sales volume, which
reflected (i) lower customer demand in 2022, (ii) backordered inventory resulting from supply chain disruptions, and (iii) one of Renin’s major customers discontinuing its
purchase of certain products from Renin in late 2021. Further, in January 2022, Renin experienced disruptions associated with inclement weather and restrictions on
business operations as a result of increased COVID-19 infections, which also impacted its sales. With respect to the decline in customer demand, Renin believes that the
decline may be attributable to (i) the impact of price increases, rising interest rates, and overall inflationary pressures on consumer behavior, (ii) a shift in consumer
spending away from home improvements as many portions of the economy reopened following the COVID-19 pandemic, particularly in the United States, and (iii) efforts
by retailers to rationalize their inventory levels in response to slowing consumer demand. Renin has continued to observe a decline in customer demand in 2023, and
its sales may be further impacted in future periods if rising interest rates and a recessionary environment further impacts consumer demand.
In addition to a decline in sales, Renin’s gross margin percentage decreased from 10.9% during the year ended December 31, 2021 to 3.3% during the year ended December
31, 2022. Renin has continued to be negatively impacted by significant increases in costs related to shipping and raw materials and delays in its supply chains, which have
adversely impacted (i) its product costs and gross margin, (ii) its ability to fulfill customer orders, and (iii) its working capital and cash flows due to increased inventory in
transit, a prolonged period between when it is required to pay its suppliers and it is paid by its customers. While Renin has recently observed a decrease in spot rates for
shipping products from overseas, Renin’s operating results have thus far not meaningfully benefited from these decreases due to the timing of shipping products from
overseas and ultimately selling such products to its customers. Further, costs to ship products from its domestic facilities to customers and costs of raw materials remain
highly volatile, which has continued to negatively impact its gross margin. In addition, the overall decline in sales resulting from lower customer demand has increased the
impact of the manufacturing overhead costs associated with its facilities on its operating results.
In an effort to mitigate the impact of certain of these factors, Renin has sought to (i) negotiate increases in prices with its customers, (ii) maintain adequate inventory levels
in an effort to ensure that it can fulfill customer orders, (iii) diversify its global supply chains, and (iv) transfer the assembly of certain products from foreign suppliers to its
own manufacturing facilities. Further, as a result of declines in customer demand and a potential recessionary economic environment, Renin has implemented various
initiatives in an effort to reduce the costs associated with its manufacturing and distribution facilities, including the consolidation of certain of its manufacturing and
distribution facilities. As part of these efforts, Renin has (i) executed a lease agreement for a new manufacturing and distribution facility near one of its existing locations in
Toronto, Canada, (ii) transferred a substantial portion of its operations in its facility located in Montreal, Canada to its other manufacturing and distribution facilities in the
United States and Canada, and (iii) exited its primary third-party logistics and warehousing facility in January 2023. In connection with these efforts, Renin incurred costs in
excess of $2.0 million related to, among other things, severance expenses, relocation and freight costs to transfer inventory, and capital expenditures for new racking for
storage and equipment. In addition, in anticipation of declines in customer demand and a potential recessionary economic environment impacting sales volumes related to
its existing business, Renin is also actively seeking to increase its market share by expanding its product mix with new and existing customers and is also evaluating
additional initiatives to reduce costs.
Although Renin has taken steps intended to mitigate the risks it faces and is evaluating additional courses of action to further mitigate such factors, Renin’s currently
expects that its operating results and gross margin percentage will continue to be adversely impacted in 2023, particularly if it is unable to generate additional sales in 2023
by increasing its market share. In addition, in certain cases, Renin’s negotiated price increases to customers do not fully offset the increase in Renin’s costs, and as a result,
Renin’s gross margins for certain customers and products will continue to be negatively impacted unless it can negotiate additional price increases in the future and/or Renin
is able to identify and implement alternative methods to source and manufacture certain products in a more cost effective manner.
Further, Renin’s efforts to mitigate its increase in costs have had and may continue to have other negative impacts on Renin’s operations. In particular, the combination of
higher inventory levels and the increased time between its purchase of inventory and receipt of payments from customers has negatively impacted its liquidity, and Renin is
actively seeking to rationalize and lower its inventory levels in order to reduce its investment in working capital in a manner that does not disrupt its ability fulfill customer
orders. In addition, the negotiation of increased prices with customers increases the risk that customers will pursue alternative sources for Renin’s products, which may
result in Renin losing customers or require it to maintain or lower prices in an effort to retain customers. Further, while Renin is generally seeking to diversify its supply
chain and limit its exposure to specific geographic locations and suppliers, supply chain delays and the scarcity of products and raw materials have made this difficult.
Renin is also negatively impacted by increases in interest rates, as its borrowings bear interest at variable rates, and the cost of its borrowings has substantially increased as a
result of rising interest rates.
45
Table of Contents
Amendment and Restatement of TD Bank Credit Facility
In connection with the acquisition of Colonial Elegance in 2020, Renin amended and restated its credit facility with TD Bank (the “TD Bank credit facility” or the “credit
facility”) to include a term loan with an initial principal balance of $30.0 million, increase the availability under its existing revolving line of credit with TD Bank to $20.0
million, and extend the maturity of the credit facility to October 2025.
In 2021, the TD Bank credit facility was amended to temporarily increase the availability under the revolving line of credit from $20.0 million to $24.0 million through
December 31, 2022, at which time the availability under the line of credit was to revert to $20.0 million and any amounts outstanding in excess of $20.0 million was to be
repaid by Renin. The amendments to the credit facility also (i) waived the requirement for Renin to comply with certain ratios included in the financial covenants of the
credit facility, (ii) temporarily increased the maximum total leverage ratio included in the financial covenants of the facility through December 31, 2022, (iii) modified the
calculation of the maximum total leverage ratio, and (iv) included an additional financial covenant related to Renin meeting certain minimum levels of specified operating
results from November 2021 through December 2022. Further, the amendments prohibited Renin from making distributions to BBX Capital through December 31, 2022.
On January 1, 2023, the financial covenants under the facility and Renin’s ability to make distributions to the Company were to revert to the requirements under the facility
prior to the amendments in 2021.
However, as Renin was not in compliance with certain financial covenants under the facility from January through March 2022, the TD Bank credit facility was further
amended on May 9, 2022 to (i) require $13.5 million of funding from BBX Capital to provide Renin funds to prepay $10.0 million of the term loan and to provide
additional working capital to Renin of $3.5 million, (ii) waive compliance with the maximum total leverage ratio and fixed charge coverage ratio included in the financial
covenants of the facility until December 31, 2022, (iii) waive compliance with the financial covenant requiring Renin to meet certain minimum levels of specified operating
results for January through March 2022, (iv) adjust the required minimum levels of specified operating results through December 31, 2022 beginning in April 2022, and (v)
amend the modification period to the later of December 31, 2022 or upon Renin’s compliance with specified financial covenant ratios. The amendment also increased the
interest rates on amounts outstanding under the term loan and revolving line of credit during the modification period to (i) the Canadian Prime Rate plus a spread of 3.375%
per annum, (ii) the United States Base Rate plus a spread of 3.00% per annum, or (iii) Term SOFR or Canadian Bankers’ Acceptance Rate plus a spread of 4.875% per
annum. Under the terms of the amendment, the Term SOFR Rate for loans with one to six-months terms are also subject to an additional credit spread adjustment of 10 to
25 basis points per annum. Renin issued a $13.5 million promissory note to BBX Capital upon execution of the amendment on May 9, 2022, and pursuant to the terms of
the amendment, BBX Capital funded $13.5 million of the note to Renin in May 2022. BBX Capital and Renin entered into a subordination, assignment, and postponement
agreement with TD Bank that requires all present and future loans or advances from BBX Capital to Renin (including the $13.5 million promissory note) be subordinated
and repayments postponed until the TD Bank credit facility has been paid or satisfied in full.
As of June 30, 2022 and continuing through January 2023, Renin was not in compliance with the financial covenants under the credit facility which required Renin to meet
certain minimum levels of specified operating results, and while TD Bank continued to allow Renin to utilize its revolving line of credit, TD Bank sent formal notices of
default to Renin between August 2022 and January 2023.
On February 3, 2023, the credit facility was further amended effective January 31, 2023 to, among other things, (i) temporarily increase the availability under the revolving
line of credit from $20.0 million to $22.0 million from January 1, 2023 through December 31, 2023, (ii) require $8.0 million of funding from BBX Capital (including
amounts funded by BBX Capital during the period from December 2022 through the date of the amendment) to provide Renin funds to prepay the term loan by no less than
$1.5 million and to provide additional working capital to Renin, (iii) waive Renin’s non-compliance with the financial covenants under the credit facility through the date of
the amendment, (iv) establish a financial covenant requiring Renin to meet minimum levels of specified operating results from January 2023 through December 2023, (v)
redefine the maximum total leverage ratio financial covenant under the credit facility and waive the requirement to comply with the covenant until January 1, 2024, (vi)
waive the requirement to comply with the fixed charge coverage ratio financial covenant until January 1, 2024, and (vii) amend the modification period to the later of
December 31, 2023 or upon Renin’s compliance with specified financial covenant ratios. The amendment also reduced the interest rates on amounts outstanding under the
credit facility during the modification period to (i) the Canadian Prime Rate plus a spread of 2.875% per annum, (ii) the United States Base Rate plus a spread of 2.50% per
annum, or (iii) Term SOFR or Canadian Bankers’ Acceptance Rate plus a spread of 4.375% per annum. Under the terms of the amendment, the Term SOFR Rate for loans
with one to six-months terms are also subject to an additional credit spread adjustment of 10 to 25 basis points per annum. However, the amendment also increased the
interest rates on amounts outstanding under the credit facility during any periods in which the loan is in default by 50 basis points per annum.
In December 2022, BBX Capital contributed $1.0 million of capital to Renin, and in connection with the execution of the amendment, BBX Capital contributed $7.0 million
of additional capital to Renin pursuant to the terms of the amendment. Renin elected to use a portion of such funds to prepay $2.5 million of the term loan.
If Renin’s operating results and financial condition do not improve, Renin may again fall out of compliance with the terms of the TD Bank credit facility. If Renin falls out
of compliance and is unable to obtain additional waivers or modifications of the credit facility, Renin may lose availability under its revolving line of credit, be required to
provide additional collateral, or repay all or a portion of its borrowings, any of which would have a material adverse effect on the Company’s liquidity, financial position,
and results of operations.
See Note 12 to the Company's consolidated financial statements included in Item 8 of this annual report for additional information with respect to the TD Bank credit
facility.
46
Table of Contents
Supplier Dispute
In October 2020, Renin incurred approximately $6.0 million in costs for the expedited shipment of products to Renin from a foreign supplier and an additional $2.0 million
in costs for the expedited shipment of product displays from the same supplier. Renin asserted that the supplier was liable for the additional shipping costs based on the late
delivery of products and certain displays purchased from the supplier, while the supplier disputed that liability.
Renin recognized the cost of the products and related shipping costs upon the sale of such products in cost of trade sales in the Company’s statement of operations and
comprehensive income during the year ended December 31, 2020, while the costs of the displays and related shipping were deferred and are being amortized over the period
in which the Company expects to benefit from their use. In December 2021, Renin and the foreign supplier settled the dispute and outstanding amounts due to the supplier
for $4.2 million. That amount was paid by Renin to the supplier in two equal installments in December 2021 and June 2022. As Renin had previously accrued a liability of
$8.1 million for amounts due to the supplier during the year ended December 31, 2020, Renin reduced its cost of trade sales by $2.9 million for the year ended December
31, 2021 and reduced the unamortized balance of its display contract asset by $1.0 million as of December 31, 2021.
Results of Operations
Information regarding the results of operations for Renin is set forth below (dollars in thousands):
For the Years Ended December 31,
2021
2022
2020
Trade sales
Cost of trade sales
Gross margin
Interest expense
Selling, general and administrative expenses
Total operating loss
Other expense
Foreign exchange gain (loss)
Loss before income taxes
Gross margin percentage
SG&A as a percent of trade sales
Expenditures for property and equipment
Depreciation and amortization
Debt accretion and amortization
ASC 842 straight line rent adjustments
$
$
$
$
$
$
131,951
(127,623)
4,328
(3,588)
(17,077)
(16,337)
(57)
950
(15,444)
3.28%
12.94%
1,653
3,344
128
375
47
146,255
(130,366)
15,889
(1,830)
(15,857)
(1,798)
—
812
(986)
10.86%
10.84%
3,099
3,037
113
347
93,036
(83,563)
9,473
(615)
(11,735)
(2,877)
(3)
(692)
(3,572)
10.18%
12.61%
2,118
1,380
243
87
Change
2022 vs
2021
Change
2021 vs
2020
(14,304)
2,743
(11,561)
(1,758)
(1,220)
(14,539)
(57)
138
(14,458)
(7.58)%
2.10%
(1,446)
307
15
28
53,219
(46,803)
6,416
(1,215)
(4,122)
1,079
3
1,504
2,586
0.68%
(1.77)%
981
1,657
(130)
260
Table of Contents
Renin’s loss before income taxes for the year ended December 31, 2022 compared to the same 2021 period increased by $14.5 million primarily due to the following:
● A decline in Renin’s sales as compared to the same period in 2021 due to, among other things, (i) a decline in customer demand, (ii) backordered inventory
resulting from supply chain disruptions, and (iii) one of Renin’s major customers discontinuing its purchase of certain products from Renin in late 2021;
● A decrease in Renin’s gross margin percentage primarily as a result of (i) increased costs of shipping, raw materials and labor, (ii) delays in the implementation of
price increases to certain customers, and (iii) sales of slow-moving inventory at cost;
● An increase in interest expense associated with (i) an increase in interest rates from the modification of the TD Bank credit facility in May 2022, (ii) rising rates on
Renin’s variable rate debt, and (iii) interest expense associated with BBX Capital’s loan to Renin; and
● An increase in selling, general, and administrative expenses primarily due to (i) severance associated with a former executive, (ii) severance expenses related to the
transition of various operations out of Renin’s facility in Montreal, Canada, and (iii) higher labor costs and professional fees.
Other
Other in the Company’s segment information includes its investments in other operating businesses, including a restaurant located in South Florida that was acquired
through a loan foreclosure and an insurance agency.
During the years ended December 31, 2022 and 2021, the Company recognized income before income taxes related to these other businesses of $1.0 million and $1.4
million, respectively, compared to a loss from continuing operations before income taxes of $2.9 million during the year ended December 31, 2020. During the year ended
December 31, 2021, the Company reversed $0.3 million in rent expense as a result of rent abatements obtained by the restaurant located in South Florida due to the effects
of the COVID-19 pandemic on its operations.
In February 2023, the Company sold substantially all of the assets of its insurance agency business, although the entity will continue to provide risk management advisory
services to the Company and its affiliates, including Bluegreen Vacations.
Reconciling Items and Eliminations
Reconciling items and eliminations in the Company’s segment information primarily includes the following:
● BBX Capital’s corporate general and administrative expenses;
● Interest income on the note receivable from Bluegreen Vacations;
● Interest income on interest-bearing cash accounts; and
● Interest expense capitalized in connection with the development and construction of real estate.
Corporate General and Administrative Expenses
BBX Capital’s corporate general and administrative expenses for the years ended December 31, 2022, 2021, and 2020 were $22.5 million, $15.1 million, and $15.9 million,
respectively. During the years ended December 31, 2022, 2021 and the three months ended December 31, 2020, BBX Capital’s corporate general and administrative
expenses consisted of the actual costs of various support functions, including executive compensation, legal, accounting, human resources, investor relations, and executive
offices, while BBX Capital’s corporate general and administrative expenses for the periods through September 30, 2020 consisted primarily of an allocation of the cost of
services provided by Bluegreen Vacations to the Company for these support functions, most of which were transferred to BBX Capital in connection with the spin-off from
Bluegreen Vacations.
The increase in corporate general and administrative expenses for the year ended December 31, 2022 compared to the 2021 period primarily reflects higher executive
compensation, including $3.4 million in share based compensation expense from restricted stock awards granted in January 2022, and rent expense associated with the
Company’s new corporate headquarters that opened in late 2021.
Interest Income
BBX Capital’s interest income for the year ended December 31, 2022 was $4.1 million and includes (i) $3.0 million of interest income on its note receivable from
Bluegreen Vacations, (ii) $0.2 million of interest income from short-term investments, (iii) the elimination of interest income recognized by a wholly-owned subsidiary of
the Company relating to the credit facility provided to IT’SUGAR, and (iv) the elimination of interest income recognized by the Company relating to the credit facility
provided to Renin. BBX Capital’s interest income for the year ended December 31, 2021 and 2020 was $4.6 million and $1.2 million, respectively, which includes $4.5
million and $1.1 million, respectively, of interest income from its note receivable from Bluegreen Vacations.
48
Table of Contents
(Provision) Benefit for Income Taxes
The Company’s effective income tax rate was approximately 35%, 27%, and 19% during the years ended December 31, 2022, 2021, and 2020, respectively. During the year
ended December 31, 2022, the provision for income taxes was different than the expected federal income tax rate of 21% primarily due to nondeductible executive
compensation, the impact of state income taxes and an increase in the Canadian valuation allowance. The provision for income taxes was different than the expected federal
income tax rate of 21% during the year ended December 31, 2021 primarily due to the impact of state income taxes and an increase in the Canadian valuation allowance.
The difference for the year ended December 31, 2020 was due to the impact of nondeductible executive compensation and state income taxes.
Net Income Attributable to Noncontrolling Interests
Redeemable Noncontrolling Interest
During the period from January 1, 2020 to September 22, 2020, the Company’s consolidated financial statements included the results of operations and financial position of
IT’SUGAR, a majority-owned subsidiary in which it held a controlling financial interest, and as a result, the Company was required to attribute net income or loss to a
redeemable noncontrolling interest in IT’SUGAR during such periods. The net loss attributable to the redeemable noncontrolling interest in IT’SUGAR was $4.1 million for
the period from January 1, 2020 to September 22, 2020. As a result of the filing of the Bankruptcy Cases by IT’SUGAR and its subsidiaries, the Company deconsolidated
IT’SUGAR as of September 22, 2020 and derecognized the redeemable noncontrolling interest in IT’SUGAR. However, as a result of IT’SUGAR emerging from the
Bankruptcy Cases, the Company consolidated the results of IT’SUGAR into its consolidated financial statements as of June 17, 2021 and is again attributing net income or
loss to the redeemable noncontrolling interest in IT’SUGAR as of and subsequent to that date. For the years ended December 31, 2022, 2021 and 2020, the net income
attributable to the redeemable noncontrolling interest in IT’SUGAR was $20,000, $0.1 million and ($4.1 million), respectively.
Other Noncontrolling Interests
Other noncontrolling interests included in the Company’s consolidated statements of operations and comprehensive income (loss) as of December 31, 2022, 2021, and 2020
include (i) a noncontrolling equity interest in a restaurant the Company acquired through foreclosure and (ii) noncontrolling interests in IT’SUGAR FL II, LLC from
October 2021 through December 2022. In December 2022, the Company acquired the noncontrolling interests in IT’SUGAR FL II, LLC.
During the years ended December 31, 2022, 2021, and 2020, the net income (loss) to the noncontrolling interests was ($0.4 million), $14,000, and ($0.7 million),
respectively.
Consolidated Cash Flows
A summary of our consolidated cash flows is set forth below (in thousands):
Cash flows provided by (used in) operating activities
Cash flows provided by (used in) investing activities
Cash flows (used in) provided by financing activities
Net increase in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at beginning of period
Cash, cash equivalents and restricted cash at end of period
2022
For the Years Ended December 31,
2021
2020
$
$
$
36,336
578
(27,628)
9,286
119,045
128,331
37,828
36,785
(45,955)
28,658
90,387
119,045
(6,183)
(52,399)
127,682
69,100
21,287
90,387
49
Table of Contents
Cash Flows from Operating Activities
The Company’s cash provided by operating activities decreased by $1.5 million during the year ended December 31, 2022 compared to the same period in 2021 primarily
due to lower sales of real estate inventory by BBXRE and higher operating losses at Renin, partially offset by higher operating distributions from unconsolidated real estate
joint ventures.
The Company’s cash provided by operating activities increased by $44.0 million during the year ended December 31, 2021 compared to the same period in 2020 primarily
due to higher sales of real estate inventory by BBXRE, higher operating distributions from unconsolidated real estate joint ventures, and lower operating losses at BBX
Sweet Holdings, partially offset by cash used in Renin’s operating activities, including inventory purchases. The decrease in operating losses at BBX Sweet Holdings during
the 2021 period compared to the 2020 period was primarily the result of operating losses incurred by IT’SUGAR during the 2020 period as a result of the impact of the
COVID-19 pandemic on its operations.
Cash Flows from Investing Activities
Cash provided by investing activities decreased by $36.2 million during the year ended December 31, 2022 compared to the same period in 2021 primarily due to the
purchase of $34.0 million of marketable securities in the 2022 period, the receipt of a $25.0 million partial prepayment of the note receivable from Bluegreen Vacations in
the 2021 period, $7.5 million of lower distributions from unconsolidated real estate joint ventures, and $6.9 million of cash acquired in connection with the consolidation of
IT’SUGAR in the 2021 period, partially offset by $21.2 million of proceeds from the maturity of marketable securities, and a $23.5 million increase in proceeds from the
sale of real estate held-for-sale.
Cash provided by investing activities increased by $89.2 million during the year ended December 31, 2021 compared to the same period in 2020 primarily due to $42.1
million of cash paid for the acquisition of Colonial Elegance in the 2020 period, receipt of a $25.0 million partial prepayment of the note receivable from Bluegreen
Vacations in the 2021 period, higher distributions from unconsolidated real estate joint ventures, and $6.9 million of cash acquired in connection with the consolidation of
IT’SUGAR.
Cash Flows from Financing Activities
Cash used in financing activities decreased by $18.3 million during the year ended December 31, 2022 compared to the same period in 2021, which was primarily due to
$20.5 million of lower repurchases of Class A and Class B Common Stock during the 2022 period, partially offset by higher distributions to noncontrolling
interest associated with IT'SUGAR's acquisition of the noncontrolling interests in IT'SUGAR FL II, LLC.
Cash used in financing activities increased by $173.6 million during the year ended December 31, 2021 compared to the same period in 2020, which was primarily due to a
$94.3 million net transfer of cash from Bluegreen Vacations during the 2020 period, the repurchase of $34.3 million of Class A and Class B Common Stock during the 2021
period, and higher net borrowings during the 2020 period primarily as a result of borrowings to fund the acquisition of Colonial Elegance.
Commitments
As of December 31, 2022, the Company’s material commitments primarily included the required payments due on notes payable and other borrowings and commitments
under noncancelable operating leases.
The following table summarizes the contractual minimum principal and interest payments required on the Company’s outstanding debt and payments required on the
Company’s noncancelable operating leases by period due date as of December 31, 2022 (in thousands):
Contractual Obligations (1)
Notes payable and other borrowings (2)
Noncancelable operating leases
Purchase an additional 40% interest in the
Altman Companies (3)
Total contractual obligations
Interest Obligations (2)(4)
Notes payable and other borrowings
Total contractual interest
Total contractual obligations
$
$
Payments Due by Period
Less than
1 Year
1 — 3
4 — 5
Years
Years
After 5
Years
Unamortized
Debt
Issuance
Costs
Total
7,509
24,851
8,110
40,470
3,050
3,050
43,520
29,259
42,111
—
71,370
4,421
4,421
75,791
440
31,250
—
31,690
138
138
31,828
1,591
48,568
2,400
52,559
1,214
1,214
53,773
(256)
—
—
(256)
—
—
(256)
38,543
146,780
10,510
195,833
8,823
8,823
204,656
(1) The above table excludes certain additional amounts that the Company may invest in the Altman Companies or its sponsored joint ventures.
(2) Obligations under Renin’s TD Bank credit facility are presented based on the scheduled principal payments and stated maturity date of October 2025, as amended
by the amendment to the loan agreement executed in February 2023.
(3) The $8.1 million represents the amount paid by BBXRE in January 2023 for a 40% interest in the Altman Companies, which reflects the base purchase price of
$9.4 million, an additional $0.1 million of reimbursements for predevelopment expenditures incurred at the time of the acquisition, and a downward adjustment of
$1.4 million to reflect an estimated working capital deficit calculated pursuant to the terms of the operating agreement. Pursuant to the terms of the operating
agreement of the Altman Companies, the final working capital adjustment amount will be determined by BBXRE and Mr. Altman following the closing and may
result in the payment of additional consideration to Mr. Altman or a refund to BBXRE. The $2.4 million represents the amount owed to Mr. Altman relating to the
purchase of the remaining 10% in the Altman Companies in January 2023, which is payable upon the earlier of the termination of Mr. Altman's employment with
the Altman Companies or November 30, 2028.
(4) Assumes that the scheduled minimum principal payments are made in accordance with the table above and the interest rate on variable rate debt remains the same
as the rate as of December 31, 2022.
50
Table of Contents
Liquidity and Capital Resources
As of December 31, 2022, the Company had cash, cash equivalents, and short-term investments of approximately $145.4 million. Management believes that the Company
has sufficient liquidity to fund operations, including anticipated working capital, capital expenditure, and debt service requirements, and respond to the challenges related to,
inflationary trends, increased interest rates, and the current economic environment for the foreseeable future, subject to mitigation and cost reduction efforts and
management’s determination of whether and/or the extent to which it will fund the operations and commitments of its subsidiaries. As previously disclosed, management
has evaluated and will continue to evaluate the potential operating deficits, commitments, and liquidity requirements of its subsidiaries and may determine not to provide
additional funding or capital to subsidiaries whose operations it believes may not be sustainable or do not support additional investment.
The Company’s principal sources of liquidity have historically been (i) its available cash, cash equivalents, and short-term investments, (ii) distributions from
unconsolidated real estate joint ventures, and (iii) proceeds received from sales of real estate. In addition to these sources of liquidity, the Company expects to receive
quarterly interest payments on the promissory note that was issued by Bluegreen Vacations in favor of BBX Capital in connection with the spin-off of the Company. The
original principal amount of the note was $75.0 million; however, in December 2021, Bluegreen Vacations prepaid $25.0 million of the principal balance, reducing the
outstanding balance to $50.0 million. Amounts outstanding under the note accrue interest at a rate of 6% per annum, with interest payments scheduled to occur on a
quarterly basis. However, Bluegreen Vacations may elect to defer such quarterly interest payments, with interest on the entire outstanding balance thereafter to accrue at a
cumulative, compounded rate of 8% per annum until such time as Bluegreen Vacations is current on all accrued payments under the note, including deferred interest. All
outstanding amounts under the note will become due and payable on September 30, 2025 or earlier upon certain other events, and Bluegreen Vacations is permitted to
prepay the note in whole or in part at any time.
The Company believes that its current financial condition will allow it to meet its anticipated near-term liquidity needs. The Company may also seek additional liquidity
from outside sources, including traditional bank financing, secured or unsecured indebtedness, or the issuance of equity and/or debt securities. However, these alternatives
may not be available to the Company on attractive terms, or at all. The inability to raise any needed funds through the sources discussed above would have a material
adverse effect on the Company’s business, results of operations, and financial condition.
Anticipated and Potential Liquidity Requirements
The Company currently expects to use its available liquidity to fund operations (including corporate expenses, working capital, capital expenditures, debt service
requirements, and the Company’s other commitments described above) and make additional investments in real estate, its existing operating businesses, or other
opportunities, including the potential repurchase of common stock. However, as discussed above, management intends to evaluate any operating deficits, commitments, and
liquidity requirements of its subsidiaries as a result of inflationary trends, higher interest rates, and general economic conditions and, may make a determination that it will
not provide additional funding or capital to its subsidiaries.
BBX Capital
In January 2022, the Board of Directors approved a share repurchase program which authorizes the repurchase of up to $15.0 million of shares of the Company’s Class A
and Class B Common Stock. The repurchase program authorizes the Company, in management’s discretion, to repurchase shares from time to time subject to market
conditions and other factors. The timing, price, and number of shares which may be repurchased under the program in the future will be based on market conditions,
applicable securities laws, and other factors considered by management. Share repurchases under the program may be made from time to time through solicited or
unsolicited transactions in the open market or in privately negotiated transactions. The share repurchase program does not obligate the Company to repurchase any specific
amount of shares and may be suspended, modified, or terminated at any time without prior notice. During the year ended December 31, 2022, the Company repurchased
115,782 shares of its Class A Common Stock under this repurchase program at an average per share purchase price of $9.27, including fees. The Company
remained authorized under the repurchase program to purchase up to $13.9 million of shares of the Company's Class A and Class B Common Stock as of December 31,
2022.
51
Table of Contents
BBX Capital Real Estate
The Altman Companies
Since November 2018, BBX Capital Real Estate has owned a 50% equity interest in the Altman Companies, a developer and manager of multifamily rental apartment
communities.
On January 31, 2023, BBXRE closed on the acquisition of an additional 40% equity interest in the Altman Companies from Mr. Joel Altman for $8.1 million, reflecting a
base purchase price of $9.4 million, an additional $0.1 million of reimbursements for predevelopment expenditures incurred at the time of the acquisition, and a downward
adjustment of $1.4 million to reflect an estimated working capital deficit calculated pursuant to the terms of the operating agreement of the Altman Companies. Pursuant to
the terms of the operating agreement, the final working capital adjustment amount will be determined by BBXRE and Mr. Altman following the closing and may result in
the payment of additional consideration to Mr. Altman or a refund to BBXRE. In connection with the acquisition of the 40% interest from Mr. Altman, BBXRE
also acquired the remaining 10% equity interest owned by Mr. Altman. Pursuant to the terms of this acquisition, the parties agreed that Mr. Altman will remain employed by
the Altman Companies and that the $2.4 million payment for the remaining 10% equity interest will be deferred until the earlier of (i) the termination of Mr. Altman’s
employment from the Altman Companies or (ii) November 30, 2028. Under the terms of the agreement between the parties, Mr. Altman will continue to invest in
development joint ventures originated by the Altman Companies, and if Mr. Altman does not invest in certain additional joint ventures, BBXRE will be entitled to offset his
required capital contribution against the deferred $2.4 million payable to Mr. Altman.
Although the Altman Companies generates revenues from the performance of development, general contractor, leasing, and property management services to the joint
ventures that are formed to invest in the development projects that it originates, it is expected that any profits generated for BBXRE through the Altman Companies will
primarily be through the equity distributions that BBXRE receives through its investment in the managing member of such joint ventures. Therefore, as the timing of any
such distributions to BBXRE is generally contingent upon the sale or refinancing of a completed development project, it is anticipated that BBXRE will be required to
contribute capital to the Altman Companies for its ongoing operating costs and predevelopment expenditures, as well as to the managing member of newly formed joint
ventures. As previously discussed, as a result of current market conditions, many projects previously in the Altman Companies’ development pipeline no longer meet its
investment criteria, and the Altman Companies expects to incur predevelopment expenditures in 2023 in order to identify new projects for its development pipeline. Further,
previously anticipated fee income will not be generated from development projects that are no longer in its development pipeline. As a result, BBXRE currently anticipates
that it will invest in excess of $10.0 million in the Altman Companies and certain related joint ventures during the year ended December 31, 2023 for planned
predevelopment expenditures, ongoing operating costs, and potential operating shortfalls related to certain projects, and other than contributions to certain existing
development projects for which the equity contributions to the joint ventures are expected to be funded over time, BBXRE does not currently expect to invest material
amounts in the managing member of new development joint ventures during the year ended December 31, 2023 based on its current pipeline of new potential development
projects. However, if certain projects that the Altman Companies previously determined were unlikely to commence become financially viable as a result of changes in
market conditions, BBXRE expects that it would invest in the managing member of development joint ventures formed to invest in such projects.
BBX Logistics Properties
BBXRE currently expects that it may invest in excess of $10.0 million in its logistics real estate division during the year ended December 31, 2023 for investments in new
developments, predevelopment expenditures, and ongoing operating costs.
If the division commences the development of warehouse and logistics facilities, BBXRE expects that it will seek to develop such projects through joint ventures with third
party investors and that it will invest in the managing member of the joint ventures formed to invest in such development projects. While there is no assurance that this will
be the case, if joint ventures are formed to invest in projects, BBXRE expects that it will be reimbursed for all or a portion of its previously incurred predevelopment
expenditures by such ventures. Further, in the event that BBXRE closes on development financing for such projects, BBXRE expects that (i) it would be required to
contribute at least $5.0 million to a wholly-owned subsidiary that will provide guarantees on the indebtedness for the funded projects and (ii) such cash would be restricted
from being utilized in BBXRE’s other operations.
BBXRE has entered into agreements to acquire five land parcels for the purpose of developing logistics facilities for an aggregate purchase price of approximately $58.0
million. BBXRE completed due diligence on two of these parcels, which have an aggregate purchase price of approximately $35.0 million, and paid nonrefundable deposits
totaling $1.5 million on these parcels, although the deposit on one of these parcels is contingently refundable if BBXRE is unable to obtain entitlements for the
development. The agreements for the remaining three parcels are subject to the successful completion of due diligence, and the escrowed deposits paid by BBXRE in
connection with the agreements are refundable until the end of the applicable due diligence periods. As indicated above, if BBXRE moves forward with any or all of these
projects, BBXRE expects that it will develop the projects through joint ventures with third party investors and, in such case, it will assign the agreements to the applicable
joint ventures. Accordingly, if BBXRE moves forward with any or all of these projects, BBXRE expects that it would fund a portion of the land and development costs as
the managing member and would seek third party debt and equity financing for the remainder of such costs.
Other
The operating agreements of certain of real estate joint ventures in which BBXRE is an investor contain customary buy-sell provisions which could result in either the sale
of BBXRE’s interest or the use of available cash to acquire the partner’s interest, and the Company’s commitments and liquidity requirements described above do not
include amounts that the Company could pay as a result of the initiation of these provisions.
BBX Sweet Holdings
IT’SUGAR currently expects to incur in excess of $15.0 million of capital expenditures during the year ended December 31, 2023 to fund construction costs associated with
new retail locations and the expansion of existing retail locations.
52
Table of Contents
Renin
During the years ended December 31, 2022 and 2021, BBX Capital provided funds to Renin at various times to provide additional liquidity for working capital, make
partial prepayments on Renin’s term loan with TD Bank, and fund certain one-time expenditures, including payments to settle a dispute with a supplier and costs related to
the transition of operations from facility in Montreal, Canada to its other facilities.
As of December 31, 2022, the aggregate amount outstanding under Renin's TD Bank credit facility was $34.5 million, and in February 2023, BBX Capital made a $7.0
million capital contribution to Renin in order to fund a $2.5 million partial prepayment of Renin's term loan with TD Bank and to provide additional liquidity for working
capital requirements. While BBX Capital may consider providing additional funds to Renin in future periods to fund working capital and its commitments, BBX Capital’s
management will continue to evaluate the operating results, financial condition, commitments and prospects of Renin on an ongoing basis and may determine that it will not
provide additional funding or capital to Renin.
Credit Facilities with Future Availability
As of December 31, 2022, BBX Capital and certain of its subsidiaries had the following credit facilities with future availability, subject to eligible collateral and the terms of
the facilities, as applicable.
Toronto-Dominion Commercial Bank (“TD Bank”) Credit Facility. Renin has a credit facility with TD Bank that includes a $14.8 million term loan (the “Term Loan”) and
a revolving operating loan of up to $24.0 million (which amount was decreased as described below) (the “Operating Loan”), both of which mature in October 2025. As of
December 31, 2022, the outstanding amounts under the term loan and revolving credit facility were $14.7 million and $19.8 million, respectively, with effective interest
rates of 8.92% and 8.98%, respectively. As Renin was out of compliance with the financial covenants under its credit facility with TD Bank as of December 31, 2022,
Renin’s line of credit under the facility had no contractually committed availability as of December 31, 2022.
As previously described, Renin’s credit facility was amended in July 2021, November 2021, May 2022 and February 2023. As a result of such amendments, the availability
under the Operating Loan was increased from $20.0 million to $24.0 million through December 31, 2022 and decreased to $22.0 million in February 2023. As of December
31, 2023, the availability under the line of credit will revert to $20.0 million and any amounts outstanding in excess of $20.0 million must be repaid by Renin. In addition,
the February 2023 amendment to the credit facility, (i) adjusted the required minimum levels of specified operating results through December 31, 2023 beginning in
January 2023 (ii) redefined the Total Leverage Ratio financial covenant and waived compliance with this covenant until January 1, 2024, (iii) waived the Fixed Charge
Coverage Ratio financial covenant until January 1, 2024 and (iv) amended the modification period to December 31, 2023. The amendment also reduced the interest rates on
amounts outstanding under the term loan and revolving line of credit during the modification period to (i) the Canadian Prime Rate plus a spread of 2.875% per annum, (ii)
the United States Base Rate plus a spread of 2.50% per annum, or (iii) Term SOFR or Canadian Bankers’ Acceptance Rate plus a spread of 4.375% per annum. Under the
terms of the amendment, the Term SOFR Rate for loans with one to six-months terms are also subject to an additional credit spread adjustment of 10 to 25 basis points per
annum. Further, the February 2023 amendment prohibits Renin from making distributions to BBX Capital through December 31, 2023. On January 1, 2024, the financial
covenants under the facility and Renin’s ability to make distributions to BBX Capital will revert to the requirements under the facility prior to the amendments in 2021.
LOCS Credit Facility. In July 2021, BBX Sweet Holdings and certain of its subsidiaries, including Las Olas Confections and Snacks, entered into a credit agreement (the
“LOCS Credit Facility”) with IberiaBank which provides for a revolving line of credit of up to $2.5 million that matures in July 2023. Amounts outstanding under the
LOCS Credit Facility bear interest at the higher of the Wall Street Journal Prime Rate plus 50 basis points or 3.0% per annum, and the facility requires monthly payments of
interest only, with any outstanding principal and accrued interest due at the maturity date. The LOCS Credit Facility is collateralized by a blanket lien on all of the assets of
the borrowers under the facility and is guaranteed by BBX Capital. The facility contains certain financial covenants, including a minimum liquidity requirement for BBX
Capital as guarantor under the facility and a requirement that the borrowers maintain a zero balance on the facility for thirty consecutive days during each calendar year
during the term of the facility. As of December 31, 2022, the outstanding amount under the credit facility was $2.3 million, and the effective interest rate was 8.0%.
IT'SUGAR Credit Facility. In January 2023, IT'SUGAR entered into a credit agreement with Regions Bank (the “IT’SUGAR credit facility”) which provides for a
revolving line of credit of up to $5.0 million that matures in June 2024. Amounts outstanding under the IT'SUGAR credit facility bear interest at the higher of a rate equal to
the Regions Bank Prime Rate minus 1.50% per annum. or 0% per annum, and the facility requires monthly payments of interest only, with any outstanding principal and
accrued interest due at the maturity date. BBXRE pledged a $5.0 million certificate of deposit at Regions Bank to secure the repayment of the IT'SUGAR credit facility. The
facility contains various customary financial and reporting covenants.
53
Table of Contents
Off-balance-sheet Arrangements
BBX Capital guarantees certain obligations of its wholly-owned subsidiaries and unconsolidated real estate joint ventures, which are described in further detail in Item 8 –
Note 15 of this Annual Report.
The Company has investments in joint ventures involved in the development of multifamily rental apartment communities, as well as single-family master planned for sale
housing communities. The Company’s investments in these joint ventures are accounted for under the equity method of accounting, and as a result, the Company does not
recognize the assets and liabilities of these joint ventures in its financial statements. As of December 31, 2022 and 2021, the Company’s investments in these joint ventures
totaled $49.4 million and $53.0 million, respectively. These unconsolidated real estate joint ventures generally finance their activities with a combination of debt financing
and equity. The Company generally does not directly guarantee the financing of these joint ventures, other than as described in further detail in Item 8 – Note 15 of this
Annual Report on Form 10-K, and the Company’s maximum exposure to losses from these joint ventures is its equity investment. The Company is typically not obligated to
fund additional capital to its joint ventures; however, the Company’s interest in a joint venture may be diluted if the Company elects not to fund a joint venture capital call.
Critical Accounting Policies
Management views critical accounting policies as accounting policies that are important to the understanding of our financial statements and also involve estimates and
judgments about inherently uncertain matters. In preparing the financial statements, management is required to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated statements of financial condition and assumptions that
affect the recognition of income and expenses on the consolidated statements of operations and comprehensive income (loss) for the periods presented. On an ongoing basis,
management evaluates its estimates, including, but not limited to, those that relate to the determination of: the recognition of revenue; the recovery of the carrying value of
real estate inventories; the fair value of assets measured at, or compared to, fair value on a non-recurring basis, such as assets held for sale, intangible assets, other long-
lived assets, and goodwill; the valuation of assets and liabilities assumed in the acquisition of a business; the amount of deferred tax valuation allowance and accounting for
uncertain tax positions; and the estimate of contingent liabilities related to litigation and other claims and assessments. The accounting policies and estimates that we have
identified as critical accounting policies are: the recognition of revenue; evaluating goodwill for impairment; and evaluating long-lived assets and definite lived intangible
assets for impairment. Management bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances,
the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results
may differ materially from these estimates under different assumptions and conditions. If actual results significantly differ from management’s estimates, our results of
operations and financial condition could be materially and adversely impacted.
Revenue Recognition - Variable Consideration on Trade Sales and Sales of Real Estate Inventory
The Company’s trade sales are generally sold with a right of return, and the Company may provide other sales credits or incentives, such as volume discounts or rebates.
Additionally, the Company is entitled to contingent consideration on certain single-family lot sales to homebuilders. These programs are accounted for as variable
consideration when determining the amount of revenue to recognize upon transfer of control. Estimates of contingent consideration, returns, and incentives are calculated
using the expected value method and updated at the end of each reporting period when additional information becomes available. Variable consideration estimates are based
on historical experience adjusted for, among other things, current and expected economic conditions and sales trends. These estimates rely on assumptions and judgments
regarding issues where the outcome is unknown, and actual results or values may differ significantly from these estimates. A significant change in the timing of revenue
recognized could occur if actual variable consideration is significantly different than our estimates.
Evaluating Goodwill for Impairment
The process of evaluating goodwill for impairment involves the determination of the fair value of the Company’s reporting units. Inherent in such fair value determinations
are certain judgments and estimates relating to future cash flows, including the Company’s interpretation of current economic indicators and market valuations, and
assumptions about the Company’s strategic plans with regard to its operations. Due to the uncertainties associated with such evaluations, actual results could differ
materially from such estimates. The Company’s goodwill as of December 31, 2022 was $18.4 million consisting of $4.1 million and $14.3 million of goodwill in the Renin
and BBX Sweet Holdings reporting units, respectively.
54
Table of Contents
During the year ended December 31, 2020, the Company concluded that the effects of the COVID-19 pandemic, including the recessionary economic environment and the
impact on certain of the Company’s operations, indicated that it was more likely than not that the fair values of certain of its reporting units with goodwill had declined
below the respective carrying amounts of such reporting units as of March 31, 2020. As a result, the Company tested the goodwill associated with such reporting units for
impairment by estimating the fair values of the respective reporting units as of March 31, 2020 and recognized goodwill impairment losses of $20.3 million associated with
IT’SUGAR and $2.1 million associated with certain of its other reporting units. On September 22, 2020, the Company deconsolidated IT’SUGAR as a result of IT’SUGAR
filing the Bankruptcy Cases and derecognized the remaining IT’SUGAR goodwill balance of approximately $14.9 million as of that date. During the year ended December
31, 2021, IT’SUGAR emerged from bankruptcy, and the Company reconsolidated IT’SUGAR. The Company accounted for the consolidation of IT’SUGAR upon under the
acquisition method of accounting, which requires that the assets acquired and liabilities assumed associated with an acquiree be recognized at their fair values at the
consolidation date. As a result, the Company remeasured the carrying value of its equity interests in IT’SUGAR at fair value with the remeasurement adjustment recognized
in the Company’s statement of operations, and recognized goodwill based on the difference between (i) the fair values of IT’SUGAR’s identifiable assets and liabilities at
the consolidation date and (ii) the fair values of the Company’s interests in IT’SUGAR and the noncontrolling interests in IT’SUGAR. The Company recognized $14.3
million of goodwill upon the consolidation of IT’SUGAR. Inherent in the Company’s determinations of fair value of IT’SUGAR’s assets and liabilities are certain
judgments and estimates relating to future cash flows, including the Company’s assessment of current economic indicators and market valuations, and assumptions about
the Company’s strategic plans with regard to its operating businesses.
During the three months ended June 30, 2022, the Company concluded that inflationary pressures, the recent decline in market valuations, increases in interest rates, a
decline in consumer demand, the current economic and geopolitical environment, and the increased likelihood of a recessionary environment in the foreseeable future, when
combined with the ongoing nature of Renin’s margin compression and recent decline in customer demand, indicated that it was necessary to quantitatively test whether the
fair value of the Renin reporting unit had declined below its carrying amount as of June 30, 2022. As a result, the Company quantitatively tested Renin’s goodwill for
impairment by estimating the fair value of the Renin reporting unit as of June 30, 2022 and concluded that its goodwill was not impaired, as the estimated fair value of the
Renin reporting unit was in excess of the carrying amount of the reporting unit.
The Company performed its annual goodwill impairment test as of December 31, 2022 and 2021 and determined that its goodwill was not impaired.
Due to the uncertainties associated with such evaluations, changes in the assumptions could have a materially effect on such estimates, particularly in light of the ongoing
disruptions and uncertainty in the U.S. and global economics and global supply chains. In particular, the Company’s estimated fair value of the Renin reporting unit
included, among other things, various assumptions related to the impact of disruptions and uncertainty in the U.S. and global economies and global supply chains on
Renin’s operations, and the estimate of the fair value of Renin under the discounted cash flow methodology assumed that the supply chain disruptions and material
shortages that are currently having a negative impact on Renin’s gross margins will be resolved by the end of 2023. If the ongoing supply chain disruptions and material
shortages are not resolved within the anticipated timeframes or customer demand is materially impacted by current economic conditions, the estimated fair value of the
Renin reporting unit may continue to decline, and the Company may be required to record goodwill impairment charges in future periods. Similarly, with respect to
IT’SUGAR, the Company estimates that i) there will not be a material permanent decline in the demand for IT’SUGAR’s products in the future, ii) IT’SUGAR will
ultimately be able implement its long-term strategy to reinvest in and grow its business, and iii) IT’SUGAR will be able to manage supply chain and cost pressures through
price increases.
Evaluating Long-lived Assets and Definite-lived Intangible Assets for Impairment
The Company evaluates its long-lived assets and definite-lived intangible assets, including property and equipment, and real estate held-for-investment, for potential
impairment whenever events or changes in circumstances indicate that the carrying amounts of such assets may not be recoverable. The carrying amounts of assets are not
considered recoverable when the carrying amounts exceed the undiscounted cash flows estimated to be generated by those assets. As the carrying amounts of these assets
are dependent upon estimates of future earnings that they are expected to generate, these assets may be impaired if cash flows decrease significantly or do not meet
expectations, in which case they would be written down to their fair value. The estimates of useful lives and expected cash flows require us to make significant judgments
regarding future periods that are subject to a number of factors, many of which may be beyond our control. The Company determined that its long-lived assets were not
impaired as of December 31, 2022 and 2021. The Company recognized impairment losses of $5.4 million during the year ended December 31, 2020 related primarily to
leasehold improvements and right-of-use assets associated with certain of IT’SUGAR’s retail locations. The recognition of these impairment losses primarily resulted from
the effects of the COVID-19 pandemic on the estimated cash flows expected to be generated by the related assets. The Company’s property and equipment, operating lease
assets and definite-lived intangible asset balances were $35.1 million, $110.1 million and $29.4 million as of December 31, 2022, respectively.
55
Table of Contents
Market Risk
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk is defined as the risk of loss arising from adverse changes in market valuations resulting from interest rate risk, foreign currency exchange rate risk, commodity
price risk and equity price risk. The Company’s primary market risk is equity price risk, interest rate risk and commodity price risk.
Market risk associated with the Company’s real estate assets consists primarily of equity pricing risk and secondarily interest rate risk. The Company’s real estate assets are
investments in unconsolidated real estate companies, real estate held-for-investment or held-for-sale and real estate inventory. The Company’s financial condition and
earnings are affected by changes in real estate values in the markets where the real estate or real estate collateral is located and changes in interest rates which affects the
affordability of real estate. As a result, there is exposure to equity pricing and interest rate risk in the real estate market.
The Company’s results of operations are subject to foreign currency exchange risk of the U.S. dollar compared to the Canadian dollar though its ownership of Renin and to
a lesser extent an IT'SUGAR store location in Canada. Renin’s assets, liabilities, revenue and expenses that are denominated in foreign currencies will be affected by
changes in the exchange rates between the U.S. dollar and the Canadian dollar. As of December 31, 2022, the Company has not entered into any foreign exchange forward
contracts as hedges against foreign currency exchange risk.
The market price of BBX Capital’s Class A Common Stock and Class B Common are important to the valuation and financing capability of BBX Capital.
The Company is affected by changes in interest rates, which are subject to the influence of economic conditions generally, both domestic and foreign, and also to the
monetary and fiscal policies of the United States and its agencies, particularly the Federal Reserve. The nature and timing of any changes in such policies or general
economic conditions and their effect on the Company and its subsidiaries are unpredictable.
As of December 31, 2022, the Company had fixed interest rate debt of approximately $2.0 million and floating interest rate debt of approximately $36.8 million. The
floating interest rates are subject to floors and are generally based either upon the prevailing prime or Secured Overnight Financing Rate ("SOFR") rates. For floating rate
financial instruments, interest rate changes generally do not affect the market value of the debt but do impact earnings and cash flows relating to the debt, assuming other
factors are held constant. Conversely, for fixed rate financial instruments, interest rate changes affect the market value of the debt but do not impact earnings or cash flows
relating to the debt, assuming other factors are held constant.
The Company is subject to commodity pricing risk in connection with its businesses. Commodity price increases or decreases ultimately result in corresponding changes in
raw material prices which could impact the costs of producing the products we sell to our customers and also impact construction costs for real estate assets and impact our
financial condition and results of operations. We have not in the past entered into, and do not currently have any plans to enter into, commodity futures and options contracts
to reduce our commodity pricing risk.
To the extent inflationary trends, tightened credit markets or other factors affect interest rates, the Company’s debt service costs may increase. In the event of tightened
credit markets, there may be a significant tightening of availability under our existing lines, we may be unable to renew our lines of credit or obtain new
facilities. Additionally, the Company also relies upon debt financing to fund a significant portion of the development costs of real estate development projects. As a result,
instability or volatility in the financial markets restricting the availability of credit, including any tightening of the credit markets resulting from U.S. Federal Reserve
policies, or in connection with the COVID-19 pandemic may adversely impact the Company’s business, results of operations, liquidity, or financial condition.
Impact of Inflation
The financial statements and related financial data and notes presented herein have been prepared in accordance with GAAP, which requires the measurement of financial
position and operating results in terms of historical dollars without considering changes in the relative purchasing power of money over time due to inflation.
The Company believes that inflation and changing prices have had and may in the future have a material impact on its revenues and results of operations. Furthermore,
while increases in real estate construction and development costs, as well as the operating costs of real estate assets, may result in increases in rental rates and real estate
sales prices, rental rates and sales prices may not increase commensurate with the increase in costs or they may decrease, and increased construction costs may have a
material adverse impact on gross margin. In addition, inflation is often accompanied by higher interest rates which could have a negative impact on consumer demand for
housing and the costs of financing activities. Rising interest rates as well as increased materials and labor costs may reduce margins.
56
Table of Contents
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
BBX CAPITAL, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm (PCAOB ID Number 248)
Consolidated Statements of Financial Condition as of December 31, 2022 and 2021
Consolidated Statements of Operations and Comprehensive Income for each of the years in the three year period ended December 31, 2022
Consolidated Statements of Changes in Equity for each of the years in the three year period ended December 31, 2022
Consolidated Statements of Cash Flows for each of the years in the three year period ended December 31, 2022
Notes to Consolidated Financial Statements
F-2
F-3
F-4
F-5
F-8
F-10
F-1
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
BBX Capital, Inc.
Opinion on the financial statements
We have audited the accompanying consolidated statements of financial condition of BBX Capital Inc. (a Florida corporation) and subsidiaries (the “Company”) as of
December 31, 2022 and 2021, the related consolidated statements of operations and comprehensive income, changes in equity, and cash flows for each of the three years in
the period ended December 31, 2022, and the related notes (collectively referred to as 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, 2022 and 2021, and the results of its operations and its cash flows for each of the three years
in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.
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 Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be
independent with respect to the Company in accordance with the 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 audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an
audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for
the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
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.
/s/ GRANT THORNTON LLP
We have served as the Company’s auditor since 2020.
Fort Lauderdale, Florida
March 15, 2023
F-2
Table of Contents
BBX Capital, Inc.
Consolidated Statements of Financial Condition
(In thousands, except share data)
December 31,
2022
December 31,
2021
ASSETS
Cash and cash equivalents
Restricted cash
Securities available for sale, at fair value
Trade accounts receivable, net
Trade inventory
Real estate ($4,443 in 2022 and $7,679 in 2021 held for sale)
Investments in and advances to unconsolidated real estate joint ventures
Note receivable from Bluegreen Vacations Holding Corporation
Property and equipment, net
Goodwill
Intangible assets, net
Operating lease assets
Deferred tax asset, net
Contingent purchase price receivable
Other assets
Total assets
LIABILITIES AND EQUITY
Liabilities:
Accounts payable
Accrued expenses
Other liabilities
Operating lease liabilities
Notes payable and other borrowings
Total liabilities
Commitments and contingencies (See Note 15)
Redeemable noncontrolling interest
Equity:
Class A Common Stock of $0.01 par value; authorized 30,000,000 shares; issued and outstanding 10,629,613 in 2022 and
11,803,842 in 2021
Class B Common Stock of $0.01 par value; authorized 4,000,000 shares; issued and outstanding 3,723,932 in 2022 and
3,671,437 in 2021
Additional paid-in capital
Accumulated earnings
Accumulated other comprehensive income
Total shareholders' equity
Noncontrolling interests
Total equity
Total liabilities and equity
See Notes to Consolidated Financial Statements
F-3
$
$
$
$
127,581
750
18,548
19,665
48,866
12,345
49,415
50,000
35,140
18,414
29,405
110,082
4,259
16,918
21,453
562,841
17,607
34,985
5,922
126,842
38,543
223,899
4,414
106
37
312,978
20,358
823
334,302
226
334,528
562,841
118,045
1,000
5,552
29,899
41,895
22,868
52,966
50,000
30,611
18,414
31,982
90,639
3,776
19,925
15,783
533,355
12,980
33,136
5,002
103,262
54,883
209,263
1,144
118
37
310,588
9,226
1,836
321,805
1,143
322,948
533,355
Table of Contents
BBX Capital, Inc.
Consolidated Statements of Operations and Comprehensive Income
(In thousands, except per share data)
2022
For the Years Ended December 31,
2021
2020
Revenues:
Trade sales
Sales of real estate inventory
Interest income
Net gains on sales of real estate assets
Other revenue
Total revenues
Costs and expenses:
Cost of trade sales
Cost of real estate inventory sold
Interest expense
Recoveries from loan losses, net
Impairment losses
Selling, general and administrative expenses
Total costs and expenses
Operating income (losses)
Equity in net earnings of unconsolidated real estate joint ventures
Loss on the deconsolidation of IT'SUGAR, LLC
Gain on the consolidation of IT'SUGAR, LLC
Other income
Foreign exchange gain (loss)
Income (loss) before income taxes
(Provision) benefit for income taxes
Net income (loss)
Net loss (income) attributable to noncontrolling interests
Net income (loss) attributable to shareholders
Basic earnings (loss) per share
Diluted earnings (loss) per share
Basic weighted average number of common shares outstanding (1)
Diluted weighted average number of common shares outstanding (1)
Net income (loss)
Other comprehensive income, net of tax:
Unrealized (loss) gain on securities available for sale
Foreign currency translation adjustments
Other comprehensive (loss) income, net
Comprehensive income (loss), net of tax
Comprehensive loss (income) attributable to noncontrolling interests
Comprehensive income (loss) attributable to shareholders
$
$
$
$
$
$
280,125
27,794
5,993
24,289
3,844
342,045
213,721
11,463
2,399
(4,835)
549
116,215
339,512
2,533
38,414
—
—
964
880
42,791
(15,149)
27,642
378
28,020
1.81
1.81
15,471
15,508
27,642
(103)
(911)
(1,014)
26,628
378
27,006
238,078
65,479
6,413
643
2,984
313,597
185,146
29,690
1,439
(7,774)
38
76,014
284,553
29,044
18,154
—
15,890
341
812
64,241
(17,175)
47,066
(155)
46,911
2.63
2.63
17,840
17,840
47,066
3
3
6
47,072
(155)
46,917
147,210
20,363
2,399
255
3,002
173,229
127,028
13,171
237
(8,876)
30,772
65,972
228,304
(55,075)
465
(3,326)
—
290
(692)
(58,338)
11,248
(47,090)
4,803
(42,287)
(2.19)
(2.19)
19,318
19,318
(47,090)
35
241
276
(46,814)
4,803
(42,011)
(1) For periods prior to the spin-off on September 30, 2020, the number of shares is based on the shares issued in connection with the spin-off. See Note 1 for further
discussion.
See Notes to Consolidated Financial Statements
F-4
Table of Contents
Balance at December 31, 2019
Net loss excluding $4,073 of loss
attributable to redeemable
noncontrolling interest
Other comprehensive income
Distributions to noncontrolling
interest
Accretion of redeemable
noncontrolling interest
Reversal of accretion of redeemable
noncontrolling interest
Acquisition of noncontrolling interest
Net transfers from Bluegreen
Vacations
Issuance of common stock
Transfer to additional paid in capital
Balance at December 31, 2020
BBX Capital, Inc.
Consolidated Statements of Changes in Equity
For Each of the Years in the Three Year Period Ended December 31, 2022
(In thousands)
Shares of
Common Stock
Outstanding
Class
Common
Stock
Class
A
B
A
B
Bluegreen Additional
Vacations
Equity
Paid-in
Capital
Accumulated
Other
Accumulated Comprehensive Noncontrolling Total
Deficit
Income
Interest
Equity
1,001 182,236
—
— $
—
—
179,681
—
—
1,554
—
—
—
—
—
—
—
—
(38,830)
—
—
—
—
—
—
—
—
—
—
(1,248)
—
—
—
—
—
15,624
—
15,624
—
3,694
—
3,694 $
—
—
—
156
—
156
—
—
—
37
—
37
3,150
—
167,910
(193)
(310,470)
—
—
—
—
—
—
118
—
—
310,470
310,588
(3,457)
—
—
—
—
—
—
—
(3,457)
—
276
—
—
—
—
—
—
—
1,830
(730) (43,017)
276
—
(54)
(54)
—
(1,248)
—
(118)
3,150
—
— 167,910
—
—
—
—
99 309,253
See Notes to Consolidated Financial Statements
F-5
Table of Contents
BBX Capital, Inc.
Consolidated Statements of Changes in Equity
For Each of the Years in the Three Year Period Ended December 31, 2022
(In thousands)
Balance at December 31, 2020
Net income excluding $141 of income
attributable to redeemable noncontrolling
interest
Contributions from noncontrolling interests
Other comprehensive income
Conversion of common stock from Class B to
Class A
Purchase and retirement of common stock from
tender offer
Purchase and retirement of common stock
Balance at December 31, 2021
Shares of
Common Stock
Outstanding
Class
A
15,624
B
3,694 $
A
Common
Stock
Class
Additional Accumulated
Accumulated
Other
Paid-in
B
Capital
(Deficit)
Earnings
Comprehensive Noncontrolling
Total
Income
Interest
156
37
310,588
(3,457)
1,830
Equity
99 309,253
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
46,911
—
—
8
(8)
—
—
—
—
(1,403)
(2,425)
11,804
—
(15)
3,671 $
(14)
(24)
118
—
—
37
—
—
310,588
(11,417)
(22,811)
9,226
—
—
6
—
—
—
1,836
14
1,030
—
46,925
1,030
6
—
—
—
—
(11,431)
(22,835)
1,143 322,948
See Notes to Consolidated Financial Statements
F-6
Table of Contents
BBX Capital, Inc.
Consolidated Statements of Changes in Equity
For Each of the Years in the Three Year Period Ended December 31, 2022
(In thousands)
Balance at December 31, 2021
Net income excluding $20 of income attributable to
redeemable noncontrolling interest
Contributions from noncontrolling interests
Other comprehensive loss
Acquisition of noncontrolling interests
Distributions of noncontrolling interests
Accretion of redeemable noncontrolling interest
Conversion of common stock from Class B to Class A
Issuance of common stock from vesting of restricted
stock awards
Purchase and retirement of common stock for
withholding taxes on vesting of restricted stock awards
Purchase and retirement of common stock from tender
offer
Purchase and retirement of common stock
Share-based compensation
Balance at December 31, 2022
Shares of
Common Stock
Outstanding
Class
A
11,804
B
3,671 $
A
Common
Stock
Class
B
Additional
Accumulated
Other
Paid-in Accumulated Comprehensive Noncontrolling
Capital
Earnings
Interests
Income
118
37
310,588
9,226
1,836
1,143
—
—
—
—
—
—
4
191
—
—
—
—
—
—
(4)
68
—
—
—
—
—
—
—
2
(54)
(11)
(1)
(1,200)
(116)
—
10,629
—
—
—
3,724 $
(12)
(1)
—
106
F-7
—
—
—
—
—
—
—
—
—
—
—
—
37
—
—
—
(958)
—
—
—
(2)
(1)
—
—
3,351
312,978
28,020
—
—
—
—
(3,166)
—
—
(517)
(12,132)
(1,073)
—
20,358
—
—
(1,013)
—
—
—
—
—
—
—
—
—
823
(398)
52
(1)
(282)
(288)
—
—
—
—
—
—
—
226
Total
Equity
322,948
27,622
52
(1,014)
(1,240)
(288)
(3,166)
—
—
(519)
(12,144)
(1,074)
3,351
334,528
Table of Contents
BBX Capital, Inc.
Consolidated Statements of Cash Flows
(In thousands)
Operating activities:
Net income (loss)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating
activities:
2022
For the Years Ended December 31,
2021
2020
$
27,642 $
47,066 $
(47,090)
Recoveries from loan losses, net
Depreciation, amortization and accretion
Net gains on sales of real estate and property and equipment
Equity in net earnings of unconsolidated real estate joint ventures
Return on investment in unconsolidated real estate joint ventures
Loss on the deconsolidation of IT'SUGAR, LLC
Gain on the consolidation of IT'SUGAR, LLC
Impairment losses
Share-based compensation expense
(Recovery) provision for excess and obsolete inventory
Changes in operating assets and liabilities:
Deferred income tax asset, net
Trade receivables
Trade inventory
Real estate inventory
Operating lease asset and operating lease liability
Contingent purchase price receivable
Other assets
Accounts payable
Due/from to Bluegreen Vacations
Accrued expenses
Other liabilities
Net cash provided by (used in) operating activities
Investing activities:
Return of investment in unconsolidated real estate joint ventures
Investments in unconsolidated real estate joint ventures
Loan funding to IT'SUGAR, LLC, net
Purchases of securities available for sale, at fair value
Redemptions of securities available for sale
Proceeds from repayment of loans receivable
Proceeds from repayment of Bluegreen Vacations note receivable
Proceeds from sales of real estate held-for-sale
Proceeds from sales of property and equipment
Additions to real estate held-for-sale and held-for-investment
Purchases of property and equipment
Cash acquired in the consolidation of IT'SUGAR, LLC
Cash paid for acquisition, net of cash received
Decrease in cash from other investing activities
Net cash provided by (used in) investing activities
(4,835)
10,663
(24,401)
(38,414)
45,107
—
—
549
3,397
(2,389)
(483)
10,234
(4,582)
4,068
1,820
3,007
(1,018)
4,093
—
1,849
29
36,336
11,727
(12,982)
—
(34,032)
21,172
5,079
—
27,282
2,741
(656)
(14,739)
—
—
(5,014)
578
(7,774)
7,329
(696)
(18,154)
20,573
—
(15,890)
38
—
2,340
3,648
192
(9,838)
25,879
1,944
(16,990)
4,701
(51)
—
(6,161)
(328)
37,828
19,243
(16,618)
222
—
—
8,844
25,000
2,439
—
(565)
(8,526)
6,909
—
(163)
36,785
(8,876)
6,532
(255)
(465)
4,910
3,326
—
30,772
—
712
(4,737)
(7,975)
(3,957)
3,482
(621)
(1,658)
(5,144)
(1,253)
(1,362)
27,668
(192)
(6,183)
7,567
(14,276)
(3,947)
(5,000)
—
9,296
—
2,608
—
(91)
(5,345)
—
(42,133)
(1,078)
(52,399)
(Continued)
See Notes to Consolidated Financial Statements
F-8
Table of Contents
BBX Capital, Inc.
Consolidated Statements of Cash Flows
(In thousands)
2022
For the Years Ended December 31,
2021
2020
Financing activities:
Repayments of notes payable and other borrowings
Proceeds from notes payable and other borrowings
Purchase and retirement of Class A and Class B Common Stock
Purchase and retirement of Class A Common Stock from tender offers
Purchase and retirement of common stock for withholding taxes on vesting of restricted
stock awards
Payments for debt issuance costs
Contributions from noncontrolling interests
Acquisition of noncontrolling interests
Distribution to noncontrolling interests
Net transfers from Bluegreen Vacations
Net cash (used in) provided by financing activities
Increase (decrease) in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at beginning of period
Cash, cash equivalents and restricted cash at end of period
Supplemental cash flow information:
Interest paid on borrowings, net of amounts capitalized
Income taxes paid
Supplementary disclosure of non-cash investing and financing activities:
Bluegreen Vacations Holding Corporation note receivable
Construction funds receivable transferred to real estate
Increase in other assets upon issuance of Community Development District Bonds
Assumption of Community Development District Bonds by homebuilders
Operating lease assets obtained in exchange for new operating lease liabilities
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents
Restricted cash
Total cash, cash equivalents and restricted cash
$
$
$
(15,804)
3,355
(1,074)
(12,144)
(519)
—
86
(1,240)
(288)
—
(27,628)
9,286
119,045
128,331
2,025
14,953
—
450
—
4,257
40,046
127,581
750
128,331
(22,096)
9,359
(22,835)
(11,431)
—
1,048
—
—
—
(45,955)
28,658
90,387
119,045
2,503
10,628
—
861
—
6,684
32,867
118,045
1,000
119,045
(16,459)
50,136
—
—
(216)
—
—
(54)
94,275
127,682
69,100
21,287
90,387
—
330
75,000
—
827
4,170
4,721
90,037
350
90,387
See Notes to Consolidated Financial Statements
F-9
Table of Contents
1. Organization
BBX Capital, Inc.
Notes to Consolidated Financial Statements
BBX Capital, Inc. and its subsidiaries (the “Company” or, unless otherwise indicated or the context otherwise requires, “we,” “us,” or “our”) is a Florida-based diversified
holding company. BBX Capital, Inc. as a standalone entity without its subsidiaries is referred to as “BBX Capital.”
Spin-Off from Bluegreen Vacations
Prior to September 30, 2020, the Company was a wholly-owned subsidiary of Bluegreen Vacations Holding Corporation (“Bluegreen Vacations”) (formerly known as BBX
Capital Corporation), whose principal holdings were Bluegreen Vacations Corporation (“Bluegreen”), BBX Capital Real Estate LLC (“BBX Capital Real Estate” or
“BBXRE”), BBX Sweet Holdings, LLC (“BBX Sweet Holdings” or "BBXSH"), and Renin Holdings, LLC (“Renin”). On September 30, 2020, Bluegreen Vacations
completed a spin-off which separated Bluegreen Vacations’ business, activities, and investments into two separate, publicly-traded companies: (i) Bluegreen Vacations,
which continues to hold its investment in Bluegreen, and (ii) BBX Capital, which continues to hold all of Bluegreen Vacations’ other businesses and investments, including
BBX Capital Real Estate, BBX Sweet Holdings, which currently owns over 90% of IT’SUGAR, LLC (“IT’SUGAR”), and Renin. The spin-off was consummated on
September 30, 2020 with the distribution by Bluegreen Vacations to its shareholders of all of the outstanding shares of BBX Capital’s Common Stock through the
distribution of one share of BBX Capital’s Class A Common Stock for each share of its Class A Common Stock and one share of BBX Capital’s Class B Common Stock for
each share of its Class B Common Stock. Accordingly, following the spin-off, Bluegreen Vacations ceased to have an ownership interest in the Company, and Bluegreen
Vacations’ shareholders who received shares of BBX Capital’s Common Stock in the distribution became shareholders of the Company.
In connection with the spin-off, BBX Capital was converted from a Florida limited liability company into a Florida corporation and changed its name from BBX Capital
Florida LLC to BBX Capital, Inc. In addition, in connection with the spin-off, Bluegreen Vacations issued a $75.0 million note payable to the Company that accrues
interest at a rate of 6% per annum and requires payments of interest on a quarterly basis. Under the terms of the note, Bluegreen Vacations has the option in its discretion to
defer interest payments under the note, with interest on the entire outstanding balance thereafter to accrue at a cumulative, compounded rate of 8% per annum until such
time as Bluegreen Vacations is current on all accrued payments under the note, including deferred interest. All outstanding amounts under the note will become due and
payable on September 30, 2025 or earlier upon certain other events. Bluegreen Vacations is permitted to prepay the note in whole or in part at any time. In December 2021,
Bluegreen Vacations prepaid $25.0 million of the principal balance of the note, reducing the outstanding balance to $50.0 million.
In October 2020, BBX Capital’s Class A Common Stock commenced trading on the OTCQX Best Market under the ticker symbol “BBXIA,” and its Class B Common
Stock commenced trading on the OTC Pink Market under the ticker symbol “BBXIB.”
Principal Investments
The Company’s principal holdings are BBX Capital Real Estate, BBX Sweet Holdings, and Renin.
BBX Capital Real Estate
BBX Capital Real Estate is engaged in the acquisition, development, construction, ownership, financing, and management of real estate and investments in real estate joint
ventures, including investments in multifamily rental apartment communities, single-family master-planned for sale housing communities, and commercial properties
located primarily in Florida. Since November 2018, BBX Capital Real Estate has owned a 50% equity interest in The Altman Companies, LLC (the “Altman Companies”),
a developer and manager of multifamily rental apartment communities. As further described in Note 3, in January 2023, BBX Capital Real Estate acquired the remaining
equity interests in the Altman Companies. In addition, BBX Capital Real Estate manages the legacy assets acquired in connection with the Company’s sale of BankAtlantic
in 2012, including portfolios of loans receivable, real estate properties, and judgments against past borrowers.
BBX Sweet Holdings
BBX Sweet Holdings is engaged in the ownership and management of operating businesses in the confectionery industry, including (i) IT’SUGAR, a specialty candy
retailer whose products include bulk candy, candy in giant packaging, and licensed and novelty items and which operates in retail locations that include a mix of high-traffic
resort and entertainment, lifestyle, mall/outlet, and urban locations throughout the United States, and (ii) Las Olas Confections and Snacks, a manufacturer and wholesaler
of chocolate and other confectionery products which also operates several Hoffman’s Chocolates retail locations in South Florida.
BBX Sweet Holdings owns over 90% of the equity interests in IT’SUGAR. Prior to September 22, 2020, the Company consolidated the financial statements of IT’SUGAR
and its subsidiaries as a result of its over 90% ownership of IT’SUGAR. On September 22, 2020, IT’SUGAR and its subsidiaries filed voluntary petitions to reorganize
under Chapter 11 of Title 11 of the U.S. Code (the “Bankruptcy Code”) in the U.S. Bankruptcy Court for the Southern District of Florida (the “Bankruptcy Court”) (the
cases commenced by such filings, the “Bankruptcy Cases”), and as a result of the filings and the uncertainties surrounding the nature, timing, and specifics of the
bankruptcy proceedings, the Company deconsolidated IT’SUGAR on September 22, 2020. On June 16, 2021, the Bankruptcy Court confirmed IT’SUGAR’s plan of
reorganization, and the plan became effective on June 17, 2021 (the “Effective Date”). Pursuant to the terms of the plan, BBX Sweet Holdings’ equity interests in
IT’SUGAR were revested on the Effective Date, and all organizational documents of IT’SUGAR were assumed, ratified, and reinstated. As a result of the confirmation and
effectiveness of the plan and the revesting of its equity interests in IT’SUGAR, the Company was deemed to have reacquired a controlling financial interest in IT’SUGAR
and consolidated the results of IT’SUGAR into its consolidated financial statements as of the Effective Date. See Note 23 for further discussion.
F- 10
Table of Contents
Renin
Renin is engaged in the design, manufacture, and distribution of sliding doors, door systems and hardware, and home décor products and operates through its headquarters
in Canada and manufacturing and distribution facilities in the United States and Canada. In addition to its own manufacturing activities, Renin sources various products and
materials from China, Brazil, and certain other countries. In October 2020, Renin acquired substantially all of the assets and assumed certain of the liabilities of Colonial
Elegance, a supplier and distributor of building products headquartered in Montreal, Canada. Colonial Elegance’s products included barn doors, closet doors, and stair parts,
and its customers included big box retailers in the United States and Canada which were complementary to and expanded Renin’s existing customer base.
Other
In addition to its principal holdings, the Company has investments in other operating businesses, including (i) a restaurant located in South Florida that was acquired in 2018
through a loan foreclosure and (ii) an entity which provides risk management advisory services to the Company and its affiliates, including Bluegreen Vacations, and
previously acted as an insurance agent for the Company, its affiliates, and other third parties. In February 2023, the entity sold substantially all of the assets of its insurance
agency business, although it will continue to provide risk management advisory services to the Company and its affiliates, including Bluegreen Vacations.
Impact of Current Economic Issues and the COVID-19 Pandemic
Economic trends in the U.S. and global economies and the industries in which the Company operates, have impacted the Company by contributing to (i) decreased
consumer demand, (ii) disruptions in global supply chains, (iii) employee absenteeism and a general labor shortage, and (iv) increased economic uncertainty. In light of the
uncertain duration and impact of current economic trends, the Company has focused on maintaining significant cash balances. As of December 31, 2022, the Company’s
consolidated cash balances were $127.6 million.
Current inflationary and economic trends have and may continue to adversely impact our results of operations. The Federal Reserve has sought to address inflation through
monetary policy, including the wind-down of quantitative easing and by increasing the Federal Funds rate. The Russian invasion of Ukraine and the related embargoes
against Russia, as well as the impact of the efforts by China to mitigate COVID-19 cases in that country, worsened supply chain issues with the potential of further
exacerbating inflationary trends. It is possible that the United States and/or the global economy generally will experience a recession of an uncertain magnitude and duration
as a result of monetary policies addressing inflationary trends and for other reasons. These conditions can negatively affect our operating results by resulting in, among other
things: (i) higher interest expense on variable rate debt and any new debt, (ii) lower gross margins due to increased costs of manufactured or purchased inventory and
shipping, (iii) a decline in the availability of debt and equity capital for new real estate investments and the number of real estate development projects meeting the
Company’s investment criteria, (iv) higher overall operating expenses due to increases in labor and service costs, (v) a reduction in customer demand for our products, (vi) a
shift in customer behavior as higher prices affect customer retention and higher consumer borrowing costs, including mortgage borrowings, affect customer demand, and
(vii) increased risk of impairments as a result of declining valuations.
BBXRE has experienced a significant increase in commodity and labor prices, which has resulted in higher development and construction costs, and disruptions in the
supply chain for certain commodities and equipment have resulted in ongoing supply shortages of building materials, equipment, and appliances. These factors have
impacted the timing of certain projects currently under construction and the commencement of construction of new projects. Furthermore, homebuilders have seen a general
softening of demand, and the increase in mortgage rates have had an adverse impact on residential home sales. In addition, rising interest rates have increased the cost of the
Company’s outstanding indebtedness and any financing for new development projects. Increased rates have also had an adverse impact on the availability of financing, and
the anticipated profitability of development projects, as a majority of development costs are financed with third party debt and capitalization rates related to multifamily
apartment communities are generally impacted by interest rates. BBXRE has also recently observed a decline in the number of potential investors interested in pursuing
equity or debt financing for new multifamily apartment developments and the acquisition of stabilized multifamily apartment communities. Although such factors have not
yet materially impacted BBXRE’s results of operations, we expect that they may have an adverse impact on BBXRE’s operating results in future periods.
Similarly, as a result of inflationary pressures and ongoing disruptions in global supply chains, IT’SUGAR experienced an increase in the cost of inventory and freight, as
well as delays in its supply chain. While IT’SUGAR has generally been able to mitigate the impact of increased costs through increases in the prices of its products, supply
chain disruptions have impacted its ability to maintain historical inventory levels at its retail locations. To the extent that costs continue to increase, there is no assurance that
IT’SUGAR will be able to continue to increase the prices of its products without significantly impacting consumer demand and its sales volume. Further, following
difficulties in maintaining appropriate inventory levels during fiscal 2021, IT’SUGAR increased the inventory levels at its retail locations in 2022 in an effort to ensure that
it can meet consumer demand; however, in light of current economic conditions, including a possible slowdown in consumer demand, increased inventory levels have
increased the risk that IT’SUGAR may be unable to sell the products timely which may among other things result in inventory writedowns. IT’SUGAR has also
experienced an increase in payroll costs as a result of shortages in available labor at its retail locations.
Global supply chain disruptions and increases in commodity prices have also contributed to a significant increase in Renin’s costs related to shipping and raw materials, as
well as delays in its supply chains, which have: (i) negatively impacted Renin’s product costs and gross margin, (ii) increased the risk that Renin will be unable to fulfill
customer orders, and (iii) negatively impacted Renin’s working capital and cash flows due to increased inventory in transit, a prolonged period between when it is required
to pay its suppliers and it is paid by its customers, and an overall decline in its gross margin. While Renin has obtained price increases for many of its products, Renin’s
gross margin has nonetheless been negatively impacted by these cost pressures. Additionally, the negotiation of increased prices with customers increases the risk that
customers will pursue alternative sources for Renin’s products, which may result in Renin losing customers or require it to lower prices in an effort to retain customers.
Increases in interest rates will also adversely impact Renin’s results. In addition, following difficulties in maintaining appropriate inventory levels during 2021, Renin has
increased its inventory levels in an effort to ensure that it can meet consumer demand; however, in light of current economic conditions, including a slowdown in consumer
demand, such increased inventory levels have increased the risk of Renin being unable to sell such products and the risk of inventory writedowns.
F- 11
Table of Contents
Basis of Presentation
The accompanying consolidated financial statements of the Company include the consolidated financial statements of BBX Capital and its subsidiaries, including BBX
Capital Real Estate, BBX Sweet Holdings, and Renin.
Due to the deconsolidation of IT’SUGAR in September 2020 as a result of its bankruptcy filings and the Company’s reconsolidation of IT’SUGAR’s subsequent to its
emergence from bankruptcy in June 2021, the Company’s consolidated statements of operations and comprehensive income, consolidated statements of changes in equity,
and consolidated statements of cash flows for the year ended December 31, 2020 and 2021, respectively, do not include IT’SUGAR’s results of operations from September
22, 2020 to December 31, 2020 and from January 1, 2021 to June 16, 2021, respectively. The Company’s consolidated statement of operations and comprehensive
income, consolidated statement of changes in equity, and consolidated statement of cash flows for the year ended December 31, 2022 include IT’SUGAR’s results of
operations for the entirety of the period presented, and the Company's statements of financial condition as of December 31, 2022 and 2021 include IT’SUGAR’s
consolidated assets and liabilities.
The Company’s consolidated statement of operations and comprehensive income, consolidated statement of changes in equity, and consolidated statement of cash flows for
the year ended December 31, 2020 reflect the combined financial statements of the Company for the period from January 1, 2020 to September 30, 2020 (the period prior to
the spin-off from Bluegreen Vacations), which have been derived from the accounting records of Bluegreen Vacations and do not necessarily reflect what the results of
operations or cash flows would have been had the Company been a separate entity.
For the period from January 1, 2020 to September 30, 2020 (the period prior to the spin-off from Bluegreen Vacations), the majority of the revenues, expenses, and cash
flows of the Company have been identified based on the legal entities included in the spin-off transaction. However, the historical costs and expenses reflected in the
consolidated statements of operations and comprehensive income, consolidated statements of changes in equity, and consolidated statements of cash flows for
the period prior to the spin-off includes an allocation for certain corporate and shared service functions that were historically provided by Bluegreen Vacations prior to the
spin-off. These expenses have been allocated to the Company on the basis of direct usage when identifiable, while the remainder of the expenses, including costs related to
executive compensation, were allocated primarily on a pro-rata basis of the combined revenues and equity in earnings of unconsolidated joint ventures of Bluegreen
Vacations and its subsidiaries. However, the allocation of corporate expenses excludes costs specific to the spin-off and the acceleration of compensation expense in
connection with the spin-off. The Company believes that the assumptions underlying the consolidated financial statements for the period prior to the spin-off, including the
assumptions regarding the allocation of general corporate expenses from Bluegreen Vacations, are reasonable. However, the consolidated statements for the period prior to
the spin-off may not include all of the actual expenses that would have been incurred had the Company been operating as a standalone company. Actual costs that would
have been incurred if the Company operated as a standalone company would depend on multiple factors, including organizational structure, technology infrastructure, and
strategic direction. In addition, following the spin-off on September 30, 2020, the Company also incurred additional costs associated with being a public company that are
not reflected in the above statements for the period prior to the spin-off.
2. Basis of Presentation and Significant Accounting Policies
Consolidation Policy - The consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America
(“GAAP”) and include the accounts of BBX Capital’s wholly-owned subsidiaries, other entities in which BBX Capital or its subsidiaries hold controlling financial interests,
and any variable interest entities (“VIEs”) in which BBX Capital or one of its consolidated subsidiaries is deemed the primary beneficiary of the VIE. Inter-company
accounts and transactions have been eliminated in consolidation.
Use of Estimates – The preparation of GAAP financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ materially from those estimates. On an ongoing basis, management evaluates its estimates, including those that relate to the recognition of
revenue; the allowance for expected credit losses; the recovery of the carrying value of real estate; the measurement of assets and liabilities at fair value, including amounts
recognized in business combinations and items measured at fair value on a non-recurring basis, such as intangible assets, goodwill, and real estate; the amount of the
deferred tax valuation allowance and accounting for uncertain tax positions; and the estimate of contingent liabilities related to litigation and other claims and assessments.
Management bases its estimates on historical experience and on other various assumptions that it believes to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially
from these estimates under different assumptions and conditions.
Due to, among other things, the impact and potential future impact of the current inflationary and geopolitical environment, rising interest rates, labor shortages, supply
chain issues, ongoing economic uncertainty, a possible recession, and the COVID-19 pandemic, actual conditions could materially differ from the Company’s expectations
and estimates, which could materially affect the Company’s results of operations and financial condition. The severity, magnitude, and duration, as well as the economic
consequences, of the above conditions are uncertain, rapidly changing, and difficult to predict. As a result, the Company’s accounting estimates and assumptions may
change over time in response to changes in, and the impact of, such external factors. Such changes could result in, among other adjustments, future impairments of
intangible assets, long-lived assets, and investments in unconsolidated subsidiaries and additional future reserves for inventory and receivables.
F- 12
Table of Contents
Reclassifications -
Certain amounts for prior years have been reclassified to conform to the revised financial statement presentation for 2022. Marketable investment securities totaling $4.6
million and $0.9 million of community development district bonds were reclassified from other assets to securities available for sale in the statement of financial condition
as of December 31, 2021 to conform to the revised financial presentation for 2022. The reclassifications had no impact on the Company’s statements of operations and
comprehensive income.
Cash, Cash Equivalents, and Restricted Cash - Cash equivalents consist of demand deposits at financial institutions, money market funds, and other short-term investments
with original maturities at the time of purchase of 90 days or less. Cash in excess of the Company’s immediate operating requirements are generally invested in short-term
time deposits, money market instruments and treasury securities that typically have original maturities at the date of purchase of three months or less. Restricted cash
consists primarily of cash subject to contractual restrictions. Cash and cash equivalents are maintained at various financial institutions located throughout the United States
and Canada in amounts exceeding the $250,000 federally insured limit. Accordingly, the Company is subject to credit risk. Management performs periodic evaluations of
the relative credit standing of financial institutions maintaining the Company’s deposits to evaluate and, if necessary, take actions in an attempt to mitigate credit risk.
Revenue Recognition
Trade sales – Revenue is recognized on trade sales as follows:
● Revenue is recognized on wholesale trade sales when control of the products is transferred to customers, which generally occurs when the products are shipped or
the customers accept delivery. Wholesale trade sales typically have payment terms between 30 and 60 days. Certain customer trade sale contracts have provisions
for right of return, volume rebates, and price concessions. These types of discounts are accounted for as variable consideration, and the Company uses the expected
value method to calculate the estimated reduction in the trade sales revenue. The inputs used in the expected value method include historical experience with the
customer, sales forecasts, and outstanding purchase orders.
● Revenue is recognized on retail trade sales at the point of sale, which occurs when products are sold at the Company’s retail locations.
● Sales and other taxes imposed by governmental authorities that are collected by the Company from customers are excluded from revenue or the transaction price.
● Shipping and handling activities that occur after the control of goods is transferred to a customer are accounted for as fulfillment activities instead of a separate
performance obligation.
● Revenue is not adjusted for the effects of a significant financing component if the Company expects, at the contract inception, that the performance obligation will
be satisfied within one year or less.
Sales of real estate inventory - Revenue is generally recognized on sales of real estate inventory to customers when the sales are closed and title passes to the buyer. The
Company generally receives payment from the sale of real estate inventory at the date of closing. In addition, certain real estate sales contracts provide for a contingent
purchase price. The contingent purchase price in contracts pursuant to which the Company sells developed lots to homebuilders is generally calculated as a percentage of
the proceeds that the homebuilders receive from sales to their own customers, and the Company does not receive payment of such amounts until the homebuilders close on
such sales. The Company accounts for the contingent purchase price in these contracts as variable consideration and estimates the amount of such consideration that may be
recognized upon the closing of the real estate transaction based on the expected value method. The estimate of variable consideration is recognized as revenue to the extent
that it is not probable that a significant reversal in the amount of cumulative revenue recognized will occur when the uncertainty associated with the variable consideration
is subsequently resolved. The inputs used in the expected value method include current and expected sales prices (net of incentives), historical contingent purchase price
receipts, and sales contracts on similar properties.
Interest income – Interest income from loans receivable originated by the Company and the note receivable from Bluegreen Vacations is recognized on accruing loans when
management determines that it is probable that all of the principal and interest will be collected in accordance with the loan’s contractual terms. Interest income is
recognized on non-accrual loans on a cash basis. Other than the note receivable from Bluegreen Vacations, the Company’s loans receivable are included in other assets in
the Company’s consolidated statements of financial condition.
Net gains on sales of real estate assets – Net gains on sales of real estate assets represents sales of assets to non-customers. Gains (or losses) are recognized from sales to
non-customers when the control of the asset has been transferred to the buyer, which generally occurs when title passes to the buyer.
Other revenue – Other revenue is primarily comprised of rental income from properties under short-term operating leases, income from the operations of a golf course
acquired in connection with a loan foreclosure, and insurance commissions earned from insurance carriers. Rental income is recognized as rents become due, and rental
payments received in advance are deferred until earned.
F- 13
Table of Contents
Marketable Investment Securities – Marketable investment securities are classified as held to maturity, available for sale, or trading depending on the Company’s intent
with regard to its investments at the time of purchase. Debt securities that management has both the intent and ability to hold to maturity are classified as securities held to
maturity and are stated at cost, net of unamortized premiums and unaccreted discounts. Debt securities designated as held to maturity with maturities of 90 days or less at
the date of purchase are classified as cash and cash equivalents in the Company’s statements of financial condition.
Debt securities not held to maturity are classified as available for sale and are recorded at fair value. Unrealized gains and losses, after applicable taxes, resulting from
changes in fair value are recorded as a component of other comprehensive income (loss).
Securities acquired for short-term appreciation or other trading purposes are classified as trading securities and are recorded at fair value. Realized and unrealized gains and
losses resulting from such fair value adjustments and from recording the results of sales are recorded in the consolidated statements of operations in other income.
For securities classified as held to maturity, management must estimate expected credit losses over the remaining expected life and recognize this estimate as an allowance
for credit losses. Debt securities that are available for sale are analyzed quarterly for credit losses. The analysis is performed on an individual security basis for all securities
where fair value has declined below amortized cost.
Interest on securities, including the amortization of premiums and the accretion of discounts, is reported in interest income using the interest method over the lives of the
securities, adjusted for actual prepayments. Gains and losses on the sale of securities are recorded on the trade date and recognized using the specific identification method.
Trade Accounts Receivables and Allowance for Expected Credit Losses – Trade accounts receivable are stated at the amounts billed to customers for sale of goods or
services with a contractual maturity of one year or less. The Company provides an allowance for expected credit losses. This allowance is based on a review of outstanding
receivables and historical collection information and an evaluation of both existing economic conditions and reasonable and supportable forecasts of future economic
conditions impacting the Company’s customers. Accounts receivable are ordinarily due 30 to 60 days after the issuance of the invoice (based on terms) and are considered
delinquent after 30 days past the due date. These delinquent receivables are monitored and are charged to the allowance for expected credit losses based on an evaluation of
individual circumstances of the customer. Account balances are written off after collection efforts have been made and the potential recovery is considered remote.
Trade Inventory – Trade inventory is measured at the lower of cost or net realizable value. Cost includes all costs of conversions, including materials, direct labor,
production overhead, depreciation of equipment, and shipping costs. Raw materials are not written down unless the goods in which they are incorporated are expected to be
sold for less than cost, in which case, they are written down by reference to replacement cost of the raw materials. Finished goods and work in progress are stated at the
lower of cost or net realizable value determined on a first-in, first-out or average cost basis. Shipping and handling fees billed to customers are recorded as trade sales, and
shipping and handling fees paid by the Company are recorded as cost of trade sales.
In valuing inventory, the Company makes assumptions regarding write-downs required for excess and obsolete inventory based on judgments and estimates formulated
from available information. Estimates for excess and obsolete inventory are based on historical and forecasted usage. Inventory is also examined for upcoming expiration,
and write-downs are recorded where appropriate. Because the value of inventory that will ultimately be realized cannot be known with exact certainty, we rely upon both
past sales history and future sales forecasts to provide a basis for the determination of the write-down. Inventory is considered potentially obsolete if we have withdrawn
those products from the market or had no sales of the product for the past 12 months and have no sales forecasted for the next 12 months. Inventory is considered potentially
excess if the quantity on hand exceeds 12 months of expected remaining usage. The resulting potentially obsolete and excess parts are then reviewed to determine if a
substitute usage or a future need exists. Items without an identified current or future usage are written down in an amount equal to 100% of the cost of such inventory. We
review these assumptions regularly for all of our inventories which include sales demonstration and service inventories.
Real Estate – From time to time, the Company acquires real estate or takes possession or ownership of real estate through the foreclosure of collateral on loans receivable.
Such real estate is classified as real estate held-for-sale, real estate held-for-investment, or real estate inventory. When real estate is classified as held-for-sale, it is initially
recorded at fair value less estimated selling costs and subsequently measured at the lower of cost or estimated fair value less selling costs. When real estate is classified as
held-for-investment, it is initially recorded at fair value and, if applicable, is depreciated in subsequent periods over its useful life using the straight-line method. Real estate
is classified as real estate inventory when the property is under development for sale to customers and is measured at cost, including costs of improvements and amenities
incurred subsequent to acquisition, capitalized interest and real estate taxes, and other costs incurred during the construction period. Expenditures for capital improvements
are generally capitalized, while the ongoing costs of owning and operating real estate are charged to selling, general and administrative expenses as incurred. Impairments
required on loans receivable at the time of foreclosure of real estate collateral are charged to the allowance for loan losses, while impairments of real estate to reflect
subsequent declines in fair value are recorded as impairment losses in the Company’s consolidated statements of operations and comprehensive income.
Investments in and Advances to Unconsolidated Real Estate Joint Ventures - The Company uses the equity method of accounting to record its equity investments in
entities in which it has significant influence but does not hold a controlling financial interest, including equity investments in VIEs in which the Company is not the primary
beneficiary. Under the equity method, an investment is reflected on the statement of financial condition of an investor as a single amount, and an investor’s share of earnings
or losses from its investment is reflected in the statement of operations as a single amount. The investment is initially measured at cost and subsequently adjusted for the
investor’s share of the earnings or losses of the investee and distributions received from the investee. The investor recognizes its share of the earnings or losses of the
investee in the periods in which they are reported by the investee in its financial statements rather than in the period in which an investee declares a distribution. Intra-entity
profits and losses on assets still remaining with an investor or investee are eliminated.
The Company recognizes its share of earnings or losses from certain equity method investments based on the hypothetical liquidation at book value method. Under
this method, earnings or losses are recognized based on how an entity would allocate and distribute its cash if it were to sell all of its assets and settle its liabilities for their
carrying amounts and liquidate at the reporting date. This method is used to calculate the Company’s share of earnings or losses from equity method investments when the
contractual cash disbursements to the investors are different than the investors’ stated ownership percentage.
The Company capitalizes interest expense on investments in and advances to or loans to real estate joint ventures accounted for under the equity method that have
commenced qualifying activities, such as real estate development projects. The capitalization of interest expense ceases when the investee completes its qualifying
activities, and total capitalized interest expense cannot exceed interest expense incurred.
F- 14
Table of Contents
The Company reviews its investments on an ongoing basis for indicators of other-than-temporary impairment. This determination requires significant judgment in which the
Company evaluates, among other factors, the fair market value of its investments, general market conditions, the duration and extent to which the fair value of an
investment is less than cost, and the Company’s intent and ability to hold an investment until it recovers. The Company also considers specific adverse conditions related to
the financial health and business outlook of the investee, including industry and market performance, rating agency actions, and expected future operating and financing
cash flows. If a decline in the fair value of an investment is determined to be other-than-temporary, an impairment loss is recorded to reduce the investment to its fair value,
and a new cost basis in the investment is established.
Property and Equipment, net – Property and equipment is stated at cost less accumulated depreciation and amortization. Depreciation is computed using the straight-line
method over the estimated useful lives of the assets, which is generally 3 to 5 years for computer equipment and software, 5 years for furniture and fixtures, and 7 to 10
years for manufacturing equipment. The cost of leasehold improvements is depreciated using the straight-line method over the shorter of the term of the related lease or the
estimated useful lives of the improvements. Expenditures for new property, leasehold improvements, and equipment, as well as major renewals and betterments, are
capitalized, while expenditures for maintenance and repairs are expensed as incurred. Gains or losses on the disposal of property and equipment are reflected in current
operations in selling, general and administrative expenses.
Goodwill – The Company recognizes goodwill upon the acquisition of a business when the fair values of the consideration transferred and any noncontrolling interests in
the acquiree are in excess of the fair value of the acquiree’s identifiable net assets. The Company tests goodwill for potential impairment on an annual basis as of
December 31 or during interim periods if impairment indicators exist. Each period and for each reporting unit the Company can elect to first assess qualitatively whether it
is necessary to perform goodwill impairment testing. If the Company believes, as a result of its qualitative assessment, that it is not more likely than not that the fair value of
any reporting unit containing goodwill is less than its carrying amount, the quantitative goodwill impairment test is unnecessary. If the Company elects to bypass the
qualitative assessment option, or if the qualitative assessment was performed and resulted in the Company being unable to conclude that it is not more likely than not that
the fair value of a reporting unit containing goodwill is greater than its carrying amount, the Company will perform the quantitative goodwill impairment test.
The Company evaluates various factors affecting a reporting unit in its qualitative assessment, including, but not limited to, macroeconomic conditions, industry and market
considerations, cost factors, and financial performance. If the Company concludes from its qualitative assessment that goodwill impairment testing is required or if the
Company bypasses the qualitative test, the fair value of the reporting unit is compared to its carrying amount. If the carrying amount of a reporting unit exceeds its fair
value, the Company records an impairment loss for the excess amount, although the impairment loss is limited to the amount of goodwill allocated to the reporting unit.
The Company generally applies an income approach utilizing a discounted cash flow methodology and a market approach utilizing a guideline public company and
transaction methodology to estimate the fair value of its reporting units. The estimated fair values obtained from the income and market approaches are compared and
reviewed for reasonableness to determine a best estimate of fair value. The Company’s discounted cash flow methodology establishes an estimate of fair value by estimating
the present value of the projected future cash flows to be generated from a reporting unit. The discount rate applied to the projected future cash flows to arrive at the present
value is intended to reflect all risks of ownership and the associated risks of realizing the stream of projected future cash flows. The Company generally uses a five to ten-
year period in computing discounted cash flow values. The most significant assumptions used in the discounted cash flow methodology are generally the terminal value, the
discount rate, and the forecast of future cash flows. The guideline public company methodology establishes an estimate of fair value based upon the trading prices of
publicly traded companies that are similar to the applicable reporting unit, while the guideline transaction methodology establishes an estimate of fair value based on
acquisitions of companies that are similar to the applicable reporting unit. Under these methods, the Company develops multiples of revenue and earnings before interest,
taxes, depreciation, and amortization (“EBITDA”) based upon the indicated enterprise value, revenues, and EBITDA of the guideline companies and makes adjustments to
such multiples based on various considerations, including the financial condition, operating performance, and relative risk of the guideline companies. The adjusted
multiples are then applied to the revenues and EBITDA of the reporting unit to develop an estimated fair value of the reporting unit. Depending on the facts and
circumstances applicable to the reporting unit and the guideline companies, the Company may place greater emphasis on the income or market approach to determine its
best estimate of fair value.
Inherent in the Company’s determinations of fair value are certain judgments and estimates relating to future cash flows, including the Company’s assessment of current
economic indicators and market valuations, and assumptions about the Company’s strategic plans with regard to its operating businesses. Due to the uncertainties associated
with such evaluations, actual results could differ materially from such estimates.
Intangible Asset, net – Intangible assets in the Company’s financial statements primarily consist of intangible assets acquired in connection with certain business
combinations, including acquired customer relationships, trademarks, and noncompetition agreements. These definite-lived intangible assets are recognized at fair value
upon acquisition and amortized on a straight-line basis over their respective estimated useful lives.
F- 15
Table of Contents
Operating Lease Assets and Operating Lease Liabilities – The Company recognizes right-of-use assets and lease liabilities associated with lease agreements with an initial
term of greater than 12 months, while lease agreements with an initial term of 12 months or less are not recorded in the Company’s consolidated statements of financial
condition. The Company determines if an arrangement is a lease at inception. Operating lease assets represent the Company’s right to use an underlying asset for the lease
term, and operating lease liabilities represent the Company’s obligation to make lease payments. Operating lease assets and liabilities are recognized when the Company
takes possession of the underlying asset based on the present value of lease payments over the lease term. The Company generally does not include lease payments
associated with renewal options that are exercisable at its discretion in the measurement of its operating lease assets and operating lease liabilities as it is not reasonably
certain that such options will be exercised. The Company generally recognizes lease costs associated with its operating leases on a straight-line basis over the lease term,
while variable lease payments that do not depend on an index or rate are recognized as variable lease costs in the period in which the obligation for those payments is
incurred. The Company recognizes accrued straight-line rent and unamortized tenant allowances received from landlords associated with its operating leases as a reduction
of the operated lease assets associated with such leases. The Company has lease agreements with lease and non-lease components which it generally accounts for as a single
lease component for lease classification, recognition, and measurement purposes.
Impairment of Long-Lived Assets – The Company evaluates its long-lived assets, including property and equipment, definite-lived intangible assets, and right-of-use assets
associated with its lease agreements, for potential impairment whenever events or changes in circumstances indicate that the carrying amount of an asset (or asset group)
may not be recoverable. Factors which could indicate that an asset (or asset group) may not be recoverable include, but are not limited to, significant underperformance
relative to historical or projected future operating results, significant changes in the manner of use of the assets or the strategy for the overall business, a significant decrease
in the market value of the assets, and significant negative industry or economic trends. The carrying amount of an asset (or asset group) is not considered recoverable when
the carrying amount exceeds the sum of the undiscounted cash flows expected to result from the use of the asset (or asset group). To the extent that the carrying amount of
an asset (or asset group) exceeds the sum of such undiscounted cash flows, an impairment loss is measured and recorded based on the amount by which the carrying amount
of the asset (or asset group) exceeds its fair value. Impairment losses associated with an asset group are allocated to long-lived assets within the asset group based on their
relative carrying amounts; however, the carrying amounts of individual long-lived assets within an asset group are not reduced below their individual fair values.
To the extent that impairment testing is required, the Company generally estimates the fair values of its long-lived assets utilizing a discounted cash flow methodology
which estimates the present value of the projected future cash flows expected to be generated from the applicable assets or asset groups. When estimating the fair value of
asset groups related to a retail location, the Company’s estimated fair value considers the relevant market participants and the highest and best use for the location, including
whether the value of the location would be maximized by operating the location in its current use or by permanently closing the location and subleasing it. To the extent
applicable, the Company estimates the fair value of right-of-use assets associated with its retail locations using a discounted cash flow methodology which estimates the
present value of market rental rates applicable to such right-of-use assets. When estimating the fair value of intangible assets, the Company uses a form of the income
approach relevant to the applicable asset or asset group. The Company uses the relief from royalty valuation method, a form of the income approach, to estimate the fair
value of trademarks. Under this method, the fair value of trademarks is determined by calculating the present value using a risk-adjusted discount rate of the estimated
future royalty payments that would have to be paid if the trademarks were not owned. The Company uses the multi-period excess earnings method, a form of the income
approach, to estimate the fair value of customer relationships. Under this method, the fair value of customer relationships is determined by isolating the expected cash flows
attributable to the customer relationship intangible asset and discounting these cash flows using a risk-adjusted discount rate.
As the carrying amounts of the Company’s long-lived assets are dependent upon estimates of future cash flows that they are expected to generate, these assets may be
impaired if cash flows decrease significantly or do not meet expectations, in which case they would be written down to their estimated fair values. The estimates of useful
lives and expected cash flows require the Company to make significant judgments regarding future periods that are subject to a number of factors, many of which are
beyond the Company’s control.
Deferred Financing Costs – Deferred financing costs are comprised of costs incurred in connection with obtaining financing from third-party lenders and are presented in
the Company’s consolidated statements of financial condition as other assets or as a direct deduction from the carrying amount of the associated debt liability. These costs
are capitalized and amortized to interest expense over the terms of the related financing arrangements.
Income Taxes – Subsequent to September 30, 2020, BBX Capital and its subsidiaries in which it owns 80% or more of the voting power and value of the subsidiary’s stock
file a consolidated U.S. Federal and Florida income tax return. Other than in Florida, BBX Capital and its subsidiaries file separate or unitary state income tax returns for
each jurisdiction. Subsidiaries in which BBX Capital owns less than 80% of the outstanding equity are not included in the Company’s consolidated U.S. Federal or Florida
state income tax return. Prior to September 30, 2020, the Company was a wholly owned subsidiary of Bluegreen Vacations, and its activities were included in Bluegreen
Vacations’ tax return filings. While it was a wholly owned subsidiary of Bluegreen Vacations, the Company accounted for income taxes on a separate return basis.
F- 16
Table of Contents
The Company accounts for income taxes using the asset and liability method. Accordingly, deferred tax assets and liabilities are recognized for the future tax consequences
attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in the tax rate is recognized in income or expense in the period that the change is effective. Income tax benefits are
recognized when it is probable that the deduction will be sustained. A valuation allowance is established when it is more likely than not that all or a portion of a deferred tax
asset will either expire before the Company is able to realize the benefit, or that future deductibility is uncertain. If a valuation allowance is recorded, a subsequent change
in circumstances that causes a change in judgment about the realization of the related deferred tax amount could result in the reversal of the deferred tax valuation
allowance.
An uncertain tax position is defined as a position taken or expected to be taken in a tax return that is not based on clear and unambiguous tax law and which is reflected in
measuring current or deferred income tax assets and liabilities for interim or annual periods. The Company may recognize the tax benefit from an uncertain tax position only
if it believes that it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The
Company measures the tax benefits recognized based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution. The Company
recognizes interest and penalties related to unrecognized tax benefits in its provision for income taxes. The Company has not identified any uncertain tax positions as of
December 31, 2022.
Noncontrolling Interests – Noncontrolling interests reflect third parties’ ownership interests in entities that are consolidated in the Company’s financial statements but are
less than 100% owned by the Company. Noncontrolling interests are recognized as equity in the consolidated statements of financial condition and presented separately
from the equity attributable to BBX Capital’s shareholders, while noncontrolling interests that are redeemable for cash at the holder’s option or upon a contingent event
outside of the Company’s control are classified as redeemable noncontrolling interests and presented in the mezzanine section between total liabilities and equity in the
consolidated statements of financial condition. The Company measures redeemable noncontrolling interests on an ongoing basis by accreting changes in the estimated
redemption value of such interests from the date of issuance to the earliest redemption date and adjusts the carrying amount of such interests to the calculated value in the
event that it is in excess of the carrying amount of such interests at such time.
A change in the ownership interests of a subsidiary is accounted for as an equity transaction if the Company retains its controlling financial interest in the subsidiary.
The amounts of consolidated net income and comprehensive income attributable to BBX Capital’s shareholders and noncontrolling interests are separately presented in the
Company’s consolidated statements of operations and comprehensive income.
Cost of Trade Sales – Cost of trade sales includes the cost of inventory, shipping and handling, warehousing, and occupancy expenses related to the Company’s retail
locations and manufacturing facilities.
Advertising – The Company expenses advertising and marketing costs as incurred. Advertising and marketing costs, which are included as selling, general and
administrative expenses in the accompanying consolidated statements of operations and comprehensive income, were $1.6 million, $1.4 million, and $1.1 million for the
years ended December 31, 2022, 2021, and 2020, respectively.
Accounting for Loss Contingencies – Loss contingencies, including those arising from legal actions, are recorded as liabilities when the likelihood of loss is probable and
an amount or range of loss can be reasonably estimated.
Earnings Per Share – Basic and diluted earnings per share is computed by dividing net income attributable to BBX Capital’s shareholders by the weighted average shares
outstanding. For period prior to the spin-off on September 30, 2020, the weighted average shares outstanding was based on the shares issued in connection with the spin-off,
while for periods subsequent to spin-off, the shares outstanding was based on the actual weighted average number of shares outstanding.
F- 17
Table of Contents
Recently Adopted and Future Adoption of Recently Issued Accounting Pronouncements
There were no accounting pronouncements adopted during the year ended December 31, 2022 and no recent Standards Updates issued by the Financial Accounting
Standards Board (“FASB”) that are relevant to the Company's operations. The Company has adopted all relevant FASB pronouncements and guidance as of December 31,
2022
3. Acquisition
Acquisition of Colonial Elegance
On October 22, 2020, Renin acquired substantially all of the assets and assumed certain of the liabilities of Colonial Elegance, Inc (“Colonial Elegance”), a supplier and
distributor of building products that was headquartered in Montreal, Canada. Colonial Elegance’s products included barn doors, closet doors, and stair parts, and its
customers included various big box retailers in the United States and Canada.
The base purchase price for the acquisition was $38.8 million. In addition to the base purchase price, Renin acquired excess working capital for $4.3 million, which resulted
in total purchase consideration of $43.1 million. Renin paid substantially all of the purchase consideration in cash at closing, which was funded by Renin with proceeds
from its amended and restated credit facility with TD Bank and a $5.0 million capital contribution from BBX Capital.
The consolidated net assets and results of operations of Colonial Elegance are included in the Company’s consolidated financial statements commencing on October 22,
2020 and resulted in the following impact to trade sales and income before income taxes from the acquisition date to December 31, 2020 (in thousands):
Trade sales
Income before income taxes
F- 18
October 22, 2020
to December 31,
2020
$
$
12,393
722
Table of Contents
Purchase Price Allocation
The Company accounted for the acquisition of Colonial Elegance using the acquisition method of accounting, which requires that the assets acquired and liabilities assumed
associated with an acquiree be recognized at their fair values at the acquisition date.
The following table summarizes fair values of the assets acquired and liabilities assumed at the acquisition date (in thousands):
Cash
Trade accounts receivable
Trade inventory
Property and equipment
Identifiable intangible assets (1)
Operating lease asset (2)
Other assets
Total assets acquired
Accounts payable
Other liabilities
Operating lease liability
Total liabilities assumed
Fair value of identifiable net assets
Goodwill
Purchase consideration
Less: cash acquired
Less: consideration payable
Cash paid for acquisition less cash acquired
Acquisition-related costs included in selling, general and administrative expenses
$
$
$
557
10,244
12,133
1,007
21,795
3,919
650
50,305
(5,619)
(3,524)
(2,213)
(11,356)
38,949
4,140
43,089
(557)
(194)
42,338
441
(1)
(2)
Identifiable intangible assets were comprised of $2.9 million, $18.7 million and $0.2 million associated with Colonial Elegance’s trademark, customer relationships, and
noncompetition agreements, respectively. The identifiable intangible assets are amortized over their expected useful lives of 5 years for noncompetition agreements and 13 years for
trademarks and customer relationships.
Includes an intangible asset of $1.7 million related to below market rents associated with the lease for a distribution facility that is expected to be recognized over the lease term of
approximately seven years.
The fair values reported in the above table were estimated by the Company using available market information and applicable valuation methods. As considerable judgment
is involved in estimates of fair value, the fair values presented above are not necessarily indicative of the amounts that the Company could realize in a current market
exchange. The use of different market assumptions and/or estimation methods would have a material effect on the estimated fair value amounts.
The following summarizes the Company’s methodologies for estimating the fair value of certain assets and liabilities associated with Colonial Elegance:
Trade Accounts Receivables
Trade accounts receivables were recorded at fair value using the cost approach. The inputs used were trade receivable balances, allowances, charge-offs, sales discounts and
volume of returned merchandise. The cost approach was used for the valuation of trade accounts receivables due to their short maturities.
Trade Inventories
Raw materials were fair valued using the cost approach. Raw material items replaced on a regular basis were recorded at fair value based on historical costs. Finished goods
inventory was recorded at fair value by adding a gross margin based on earnings before income taxes from building product distributors to the finished goods historical cost
amounts in order to estimate a reasonable profit margin for selling finished goods.
Identifiable Intangible Assets and Liabilities
The fair value of the acquired trademark was estimated using the relief-from-royalty method, a form of the income approach. Under this approach, the fair value was
estimated by calculating the present value using a risk-adjusted discount rate of the expected future royalty payments that would have to be paid if the Colonial Elegance
trademark was not owned.
F- 19
Table of Contents
The fair value of the acquired customer relationships was estimated using the multi-period excess earnings method. The multi-period excess earnings method isolates the
expected cash flows attributable to Colonial Elegance’s customer relationships and discounts these cash flows at a risk-adjusted discount rate.
Goodwill
The goodwill recognized in connection with the acquisition reflects the difference between the estimated fair value of the net assets acquired and the consideration paid by
Renin to acquire Colonial Elegance. The goodwill recognized in the acquisition is deductible for income tax purposes.
Pro Forma Information (unaudited)
The following unaudited pro forma financial data presents the Company’s revenues and earnings for the year ended December 31, 2020 as if the acquisition was completed
on January 1, 2019 (in thousands):
Trade sales
(Loss) income from continuing operations before income taxes
(Loss) income from continuing operations
Net (loss) income attributable to shareholders
For the Year Ended December 31, 2020
Unaudited Pro
Forma
Actual
$
$
$
$
188,146
(55,619)
(45,035)
(40,306)
147,210
(57,947)
(46,703)
(41,974)
The unaudited pro forma financial data for the year ended December 31, 2020 includes estimated interest expense of $1.5 million associated with borrowings used to fund
the acquisition of Colonial Elegance.
The pro forma financial data reported in the above table does not purport to represent what the actual results of the Company’s operations would have been assuming that
the acquisition date was January 1, 2019, nor does it purport to predict the Company’s results of operations for future periods.
Acquisition of The Altman Companies
In November 2018, BBX Capital Real Estate acquired a 50% equity interest in the Altman Companies. Pursuant to the operating agreement of the Altman Companies,
BBXRE also agreed to acquire an additional 40% equity interest in the Altman Companies from Mr. Altman in January 2023 for a purchase price of $9.4 million, subject to
certain adjustments (including reimbursements for predevelopment expenditures incurred at the time of the acquisition), at which time BBXRE would also acquire control
and decision-making authority for all significant operating and financing decisions related to the Altman Companies as of and subsequent to the acquisition. Further, Mr.
Altman also had the right, at his option or in other predefined circumstances, to require BBXRE to purchase his remaining 10% equity interest in the Altman Companies for
$2.4 million, at which time Mr. Altman would no longer serve as an employee of the Altman Companies and no longer have an equity interest in the Altman Companies.
However, irrespective of BBXRE’s acquisition of additional equity interests in the Altman Companies, Mr. Altman is entitled to retain his membership interests, including
his decision-making rights, in the managing member of all development joint ventures that were originated prior to BBXRE’s acquisition of such equity interests in the
Altman Companies from Mr. Altman.
On January 31, 2023 (the “Acquisition Date”), BBXRE closed on the acquisition of the additional 40% equity interests in the Altman Companies for $8.1 million, reflecting
the base purchase price of $9.4 million, an additional $0.1 million of reimbursements for predevelopment expenditures incurred at the time of the acquisition, and a
downward adjustment of $1.4 million to reflect an estimated working capital deficit calculated pursuant to the terms of the operating agreement. Pursuant to the terms of the
operating agreement, the final working capital adjustment amount will be determined by BBXRE and Mr. Altman following the closing and may result in the payment of
additional consideration to Mr. Altman or a refund to BBXRE.
In connection with the acquisition of the 40% interest from Mr. Altman, BBXRE acquired the remaining 10% equity interest owned by Mr. Altman. Pursuant to the terms of
the modified arrangement for the acquisition of the remaining 10% equity interest, the parties agreed that Mr. Altman will remain employed by the Altman Companies and
that the remaining $2.4 million payment for the interest will be deferred until the earlier of (i) the termination of Mr. Altman’s employment from the Altman Companies or
(ii) November 30, 2028 (the “Final Payment Date”). In addition, the parties agreed to the following terms related to new development projects commencing subsequent to
the Acquisition Date:
● With respect to certain proposed development projects in predevelopment, Mr. Altman will be entitled to invest in the managing member of any joint venture
formed to invest in such projects as if his ownership percentage in the Altman Companies was still 10% if the projects commence prior to the Final Payment Date.
● With respect to certain proposed development projects that were determined to be unlikely to proceed and for which Mr. Altman did not receive reimbursement for
his share of predevelopment expenditures at closing, BBXRE agreed to reimburse Mr. Altman for his share of predevelopment expenditures if such projects
ultimately proceed at a later date prior to the Final Payment Date. Further, if the projects commence prior to the Final Payment Date, Mr. Altman will also be
entitled to invest in the managing member of any joint venture formed to invest in such projects as if his ownership percentage in the Altman Companies was still
10%.
● With respect to all other projects that commence prior to the Final Payment Date, Mr. Altman will be required to invest in the managing member of any joint
venture formed to invest in such projects as if his relative ownership percentage in the Altman Companies was 10%. However, in such case, his investment in the
ventures will be entitled to profits similar to those earned by non-managing members rather than the profits to which BBXRE will be entitled as the managing
member. If Mr. Altman does not invest in the managing member of additional joint ventures, BBXRE will be entitled to offset his required capital contribution
against the deferred $2.4 million payable to Mr. Altman.
F- 20
Table of Contents
As a result of the transaction, BBXRE is now entitled to nominate all members of the executive committee responsible for the management of the Altman Companies
(although BBXRE has continued to nominate Mr. Altman as a member of the committee) and is deemed to have acquired control and decision-making authority for all
significant operating and financing decisions related to the Altman Companies. Further, BBXRE will have decision-making authority for all significant operating and
financing decisions for any development joint venture that is sponsored and formed by the Altman Companies subsequent to the Acquisition Date. However, as discussed
above, Mr. Altman has retained his membership interests, including his decision-making rights, in the managing member of all development joint ventures that were
originated prior to the Acquisition Date.
Accounting for BBXRE’s Investment in the Altman Companies and Related Investments
Through the Acquisition Date, the Company accounted for its investment in the Altman Companies under the equity method of accounting, as BBXRE and Mr. Altman
jointly managed the Altman Companies and shared decision-making authority for all significant operating and financing decisions through such date. Further, the Company
has accounted for its investments in the managing member of development joint ventures that were originated prior to the Acquisition Date under the equity method of
accounting, as BBXRE and Mr. Altman similarly shared decision-making authority for all significant operating and financing decisions related to the managing member of
such joint ventures.
As a result of BBXRE’s acquisition of control and decision-making authority over the Altman Companies, the Company will now consolidate the Altman Companies in its
financial statements as of the Acquisition Date using the acquisition method of accounting, which requires that the assets acquired and liabilities assumed associated with an
acquiree be recognized at their fair values at the acquisition date. As a result, during the three months ended March 31, 2023, the Company will remeasure the carrying
value of its current equity interests in the Altman Companies at fair value as of the Acquisition Date, with any resulting remeasurement adjustment recognized in the
Company’s statement of operations and comprehensive income.
Further, as a result of the acquisition, the Company expects that it will also consolidate the managing member of any new development joint ventures that are sponsored and
formed by the Altman Companies commencing as of and subsequent to the Acquisition Date. Further, while Joel Altman will generally retain his decision-making rights in
the managing member of development joint ventures that were originated prior to the Acquisition Date, the Company is continuing to evaluate its accounting for its
investments in such joint ventures as of and subsequent to the Acquisition Date under the applicable accounting guidance.
In addition, the Altman Companies owns 60% of the membership interests in Altman-Glenewinkel Construction (“AGC”), which generates revenues from the performance
of general contractor services to joint ventures that are formed to invest in development projects originated by the Altman Companies. Pursuant to the operating agreement
of AGC, the Altman Companies may acquire the 40% membership interests in AGC that are not owned by the Altman Companies for a purchase price based on formulas set
forth in the operating agreement, including a purchase price in one formula that is primarily calculated based on AGC’s working capital balance and a percentage of
expected profits from current construction projects and is not calculated based on the estimated fair value of such interests. As a result of BBXRE’s acquisition of control
and decision-making authority over the Altman Companies and its ability to acquire the remaining 40% membership interests in AGC for an amount that is not calculated
based on the estimated fair value of such interests, the Company is also continuing to evaluate the accounting for the Altman Companies’ investment in AGC as of
Acquisition Date.
The initial accounting for BBXRE's acquisition of financial control of the Altman Companies was incomplete at the time the financial statements for the year ended
December 31, 2022 were available to be issued due to the timing of the acquisition and the Company is therefore unable to disclose certain information required by ASC
805, including pro forma information. However, during the three months ended March 31, 2023, the Company expects to recognize goodwill based on the difference
between (i) the fair values of the identifiable assets and liabilities of the Altman Companies at the Acquisition Date and (ii) the aggregate of the consideration transferred
(measured in accordance with the acquisition method of accounting) and the fair values of the Company’s current equity interest and any noncontrolling interests in the
Altman Companies at the acquisition date.
4. Securities Available for Sale, at Fair Value
The following table summarizes the amortized cost and fair value of securities available-for-sale at December 31, 2022 and 2021 and the corresponding amounts of gross
unrealized gains and losses recognized in accumulated other comprehensive income (in thousands):
Available-for-sale
U.S. Treasury and federal agency
Community Development District bonds
Corporate bonds
Total available-for-sale
Available-for-sale
U.S. Treasury and federal agency
Community Development District bonds
Corporate bonds
Total available-for-sale
Amortized
Cost
As of December 31, 2022
Gross
Gross
Unrealized
Unrealized
Losses
Gains
Fair
Value
13,080
820
4,670
18,570
11
—
—
11
—
(7)
(26)
(33)
13,091
813
4,644
18,548
Amortized
Cost
As of December 31, 2021
Gross
Gross
Unrealized
Unrealized
Losses
Gains
Fair
Value
—
820
4,671
5,491
—
94
—
94
—
—
(33)
(33)
—
914
4,638
5,552
$
$
All U.S. Treasury and federal agency securities and corporate bonds available-for-sale have maturities of less than one year. The Community Development District bonds
mature after ten years.
5. Trade Accounts Receivables, net
The Company’s trade accounts receivables consisted of the following (in thousands):
Trade accounts receivables
Allowance for expected credit losses
Total trade accounts receivables
F- 21
December 31,
2022
December 31,
2021
$
$
19,735
(70)
19,665
30,124
(225)
29,899
Table of Contents
6. Trade Inventory
The Company’s trade inventory consisted of the following (in thousands):
Raw materials
Paper goods and packaging materials
Work in process
Finished goods
Total trade inventory
Inventory reserve
Total trade inventory, net
December 31,
2022
December 31,
2021
$
$
9,130
2,185
1,736
37,108
50,159
(1,293)
48,866 $
8,545
1,777
955
34,300
45,577
(3,682)
41,895
Renin reviews its slow-moving and obsolete inventory for potential write-downs on a quarterly basis. During the fourth quarter of 2021, Renin commenced a strategic
initiative to exit and consolidate certain warehouse facilities, and as a result of this initiative, Renin determined that it would discount various slow-moving inventories to
accelerate the sale of such inventories. As a result of this determination, Renin recognized a $2.4 million write-down on certain slow-moving inventories, which is included
in cost of trade sales for the year ended December 31, 2021, in order to reflect such inventories at their estimated realizable value based upon the expected discounts
necessary to sell the inventories within the desired timeframes.
7. Real Estate
The Company’s real estate consisted of the following (in thousands):
Real estate held-for-sale
Real estate held-for-investment
Real estate inventory
Total real estate
December 31,
2022
December 31,
2021
$
$
4,443
6,723
1,179
12,345
7,679
6,113
9,076
22,868
During the years ended December 31, 2022, 2021, and 2020, the Company sold various real estate assets that were classified as held-for-sale. As a result of these sales, the
Company recognized total net gains on sales of real estate of $24.3 million, $0.6 million, and $0.3 million, respectively, and received aggregate net proceeds of $27.3
million, $2.4 million, and $2.6 million, respectively. Included in the net gains on sales of real estate for the year ended December 31, 2022 was a gain of $23.0 million
recognized upon the sale of 119 acres of vacant land in St. Lucie County, Florida in December 2022. The vacant land was a legacy asset acquired by a predecessor of
BBXRE and had a carrying value of approximately $0.4 million on the sale date.
The Company’s real estate inventory is primarily comprised of land and development costs related to BBXRE’s Beacon Lake Community development. During the year
ended December 31, 2022, BBXRE sold 146 single-family lots and 32 townhome lots in its Beacon Lake Community development, as compared to 299 undeveloped lots,
291 single-family lots, and 94 townhome lots during the year ended December 31, 2021 and 157 single-family lots and 70 townhome lots during the year ended December
31, 2020. During the years ended December 31, 2022, 2021, and 2020, the Company recognized gross profits related to these sales of $16.3 million, $35.8 million, and
$7.2 million, respectively.
Impairment Testing
As a result of economic and market conditions, including disruptions and uncertainty in the U.S. and global economies that arose in 2020 as a result of, among other things,
the COVID-19 pandemic and disruptions in global supply chains, as well as the rise in interest rates and inflationary pressures, the Company evaluated various factors,
including asset-specific factors and overall economic and market conditions and concluded that there had not been a significant decline in the fair value of BBXRE's real
estate assets during the years ended December 31, 2022, 2021, and 2020, respectively, that required the Company to recognize any material impairment losses. As part of
this evaluation, the Company considered the excess of the expected profits associated with BBXRE’s real estate assets in relation to their carrying amounts, sales at
BBXRE’s single-family home developments, sales of its multifamily apartment communities, and appraisals of certain of its real estate held-for-sale and held-for-
investment.
8. Investments in and Advances to Unconsolidated Real Estate Joint Ventures
As of December 31, 2022, the Company had equity interests in and advances to unconsolidated real estate joint ventures involved in the development of multifamily rental
apartment communities, as well as single-family master planned for sale housing communities. In addition, the Company owned a 50% equity interest in the Altman
Companies, a developer and manager of multifamily apartment communities.
Investments in unconsolidated real estate joint ventures are accounted for as unconsolidated VIEs under the equity method of accounting.
F- 22
Table of Contents
Investments in and advances to unconsolidated real estate joint ventures consisted of the following (in thousands):
Altis Grand Central
Altis Ludlam Trail (2)
Altis Grand at The Preserve
Altis Little Havana
Altis Lake Willis Phase 1
Altis Lake Willis Phase 2
Altis Vineland Pointe
Altis Miramar East/West
Altis Grand at Suncoast
Altis Blue Lake
Altis Santa Barbara
Altra Kendall
The Altman Companies(3)
ABBX Guaranty
Bayview
Marbella
The Main Las Olas
Sky Cove
Sky Cove South
Other
Total
December 31,
2022
687
12,216
—
—
850
601
151
—
4,579
647
433
5,670
11,992
5,978
—
1,064
1,117
24
3,241
165
49,415
$
Ownership (1)
1.49%
33.30
33.30
3.43
1.23
3.50
50.00
5.00
11.00
1.22
3.50
13.70
50.00
50.00
50.00
70.00
3.41
26.25
26.25
$
December 31,
2021
730
10,831
194
1,021
437
—
2,538
2,878
2,780
260
—
—
16,716
3,750
1,308
974
1,990
1,686
4,708
165
52,966
(1) The Company’s ownership percentage in each real estate joint venture represents the Company’s percentage of the contributed capital in each venture. The operating agreements for
many of these ventures provide for a disproportionate allocation of distributions to the extent that certain investors receive specified returns on their investments, and as a result,
these percentages do not necessarily reflect the Company’s economic interest in the expected distributions from such ventures.
(2) Ownership percentage represents the Company's ownership of the managing member of the joint venture and excludes its preferred interest accounted for as a loan receivable from
the joint venture.
(3) The investment in the Altman Companies includes $2.3 million of transaction costs that were incurred in connection with the formation of the joint venture. See additional
information below in this Note 8 regarding the Company’s acquisition of its interest in the Altman Companies and the additional information in Note 3 regarding the Company's
acquisition of the remaining 50% equity interest in the Altman Companies in January 2023.
Unconsolidated Variable Interest Entities
In accordance with the applicable accounting guidance for the consolidation of VIEs, the Company analyzes its investments in real estate joint ventures to determine if such
entities are VIEs, and to the extent that such entities are VIEs, if the Company is the primary beneficiary. Based on the Company’s analysis of the forecasted cash flows and
structure of these ventures, including the respective operating agreements governing these entities and any relevant financial agreements, such as financing arrangements,
the Company has determined that its real estate joint ventures are VIEs in which the Company is not the primary beneficiary, and therefore, the Company accounts for its
investments in the real estate joint ventures under the equity method of accounting. The Company’s conclusion that it is not the primary beneficiary of these entities is
primarily based on the determination that the Company does not have the power to direct activities of the entities that most significantly affect their economic performance.
In certain joint ventures, the Company is not the operating manager and has limited protective rights under the operating agreements, while in other joint ventures, the
investors share decision-making authority in a manner that prevents any individual investor from exercising control over such entities.
The Company’s maximum exposure to loss in its unconsolidated real estate joint ventures was $49.4 million as of December 31, 2022.
Basis Differences
The aggregate difference between the Company’s investments in unconsolidated real estate joint ventures and its underlying equity in the net assets of such ventures was
$2.0 million and $2.5 million as of December 31, 2022 and 2021, respectively, which includes (i) $2.3 million associated with the Company’s investment in the Altman
Companies for both periods presented and (ii) $0.8 million and $1.2 million associated with the capitalization of interest on real estate development projects for the
respective periods, partially offset by (iii) $1.0 million of impairments for both periods presented, as described below.
Equity in Net Earnings and Distributions of Certain Unconsolidated Real Estate Joint Ventures
For the years ended December 31, 2022, 2021, and 2020, the Company’s equity in net earnings of unconsolidated real estate joint ventures was $38.4 million, $18.2 million,
and $0.5 million, respectively.
F- 23
Table of Contents
Equity earnings for the year ended December 31, 2022 includes (i) $8.7 million and $14.0 million of equity earnings from the Altis Little Havana and Altis Miramar
East/West joint ventures, respectively, which includes BBXRE’s share of gains recognized by the ventures upon the sale of their respective multifamily apartment
communities and (ii) $12.6 million of equity earnings from the Marbella joint venture, which includes BBXRE’s share of net income from the sale of single family homes
by the venture. Equity earnings for the year ended December 31, 2022 also includes a net gain of $7.3 million recognized upon BBXRE’s sale of its equity interest in the
Bayview joint venture to its joint venture partner.
Equity earnings for the year ended December 31, 2021 includes (i) $5.2 million and $5.0 million of equity earnings from the Altis Promenade and Altis Grand at Preserve
joint ventures, respectively, which includes BBXRE’s share of gains recognized by the ventures upon the sale of their respective multifamily apartment communities and (ii)
$6.2 million of equity earnings from the Altis Grand Central joint venture, which reflects the recapitalization of its ownership interest in its multifamily apartment
community.
Equity earnings for the year ended December 31, 2020 includes $1.1 million and $0.8 million of equity earnings from the Altis Boca Raton and Altis Wiregrass joint
ventures, respectively, which includes BBXRE’s share of gains recognized by the ventures upon the sale of their respective multifamily apartment communities.
Altis Ludlam Trail Joint Venture
As of December 31, 2019, BBXRE had invested $1.1 million in the Altis Ludlam Trail joint venture to acquire land, obtain entitlements, and fund predevelopment costs for
a potential multifamily apartment development in Miami, Florida. In June 2020, the joint venture obtained entitlements, closed on development financing, and commenced
development of a 312 unit multifamily apartment community with 7,500 square feet of retail space. In connection with the closing, BBXRE received a $0.5 million
distribution from the joint venture as a reimbursement of predevelopment costs and invested an additional $8.5 million in the joint venture as preferred equity. Pursuant to
the applicable operating agreement for the Altis Ludlam Trail joint venture, distributions from the joint venture are required to be paid to BBXRE on account of its preferred
equity interest until it receives its $8.5 million investment and a preferred return of 11.9% per annum (subject to a minimum payment of $11.9 million). Following such
payment, all remaining distributions will be paid to the other members, including the managing member in which BBXRE holds an interest. Further, BBXRE’s preferred
interest is required to be redeemed by the joint venture for a cash amount equal to its preferred return and initial investment in December 2023, although the joint venture
has the option to extend the redemption for three one-year periods, subject to certain conditions. As BBXRE’s preferred membership interest in the joint venture is
mandatorily redeemable, the Company is accounting for its preferred interest in the joint venture as a loan receivable from the Altis Ludlam Trail joint venture, while the
Company’s remaining investment in the managing member of the joint venture is being accounted for under the equity method of accounting. BBXRE’s preferred interest,
including the preferred return, in the joint venture was $11.6 million and $10.3 million as of December 31, 2022 and 2021, respectively.
The Altman Companies, LLC
In November 2018, BBXRE acquired a 50% equity interest in the Altman Companies, a joint venture between BBXRE and Joel Altman engaged in the development,
construction, and management of multifamily apartment communities, for cash consideration of $14.6 million, including $2.3 million in transaction costs.
The Altman Companies owns 100% of the membership interests in Altman Development Company and Altman Management Company and 60% of the membership
interests in Altman-Glenewinkel Construction and generates revenues from the performance of development, general contractor, leasing, and property management services
to joint ventures that are formed to invest in development projects originated by the Altman Companies. Further, pursuant to the operating agreement between BBXRE and
Mr. Altman, the parties invested in the managing member of such joint ventures based on their relative ownership percentages in the Altman Companies. Under the terms of
the operating agreement between BBXRE and Mr. Altman, the venture was being jointly managed by BBXRE and Mr. Altman, with the partners sharing decision making
authority for all significant operating and financing decisions. To the extent that the parties could not reach consensus on a matter, the operating agreement generally
provided that a third party will resolve such matter; however, for certain decisions, the operating agreement provided that the venture could not proceed with such matters
without approval from both parties.
From November 2018 through January 2023, the Company accounted for its investment in the Altman Companies under the equity method of accounting. However, on the
Acquisition Date, BBXRE acquired the remaining equity interests in the Altman Companies, and as a result, the Company will consolidate the Altman Companies in its
consolidated financial statements as of and subsequent to the Acquisition Date. See Note 3 for additional information related to the consolidation of the Altman Companies.
F- 24
Table of Contents
BBXRE and Mr. Altman have also each contributed $4.8 million to ABBX Guaranty, LLC ("ABBX"), a joint venture established to provide guarantees on the indebtedness
and construction cost overruns of new real estate joint ventures formed by the Altman Companies. Under the terms of the operating agreement of ABBX, BBXRE and Mr.
Altman will retain their respective 50% equity interests in the joint venture until such time that the joint venture is no longer providing guarantees related to development
joint ventures originated prior to the Acquisition Date. At such time that ABBX is no longer providing guarantees related to such development joint ventures, BBXRE will
generally acquire Mr. Altman’s equity interest in ABBX based on his then outstanding capital in ABBX.
Impairment Testing
As described in Note 2, the Company evaluates its equity method investments for impairment when events or changes in circumstances indicate that the fair values of the
investments may be below the carrying values. When a decline in the fair value of an investment is determined to be other-than-temporary, an impairment loss is recorded to
reduce the carrying amount of the investment to its fair value. The Company’s determination of whether an other-than-temporary impairment has occurred requires
significant judgment in which the Company evaluates, among other factors, the fair value of an investment, general market conditions, the duration and extent to which the
fair value of an investment is less than cost, and the Company’s intent and ability to hold an investment until it recovers. The Company also considers specific adverse
conditions related to the financial health and business outlook of the investee, including industry and market performance and expected future operating and financing cash
flows.
During the years ended December 31, 2022, 2021 and 2020, as a result of economic and market conditions, including disruptions and uncertainty in the U.S. and global
economies that arose in 2020 as a result of, among other things, the COVID-19 pandemic and disruptions in global supply chains, as well as the more recent inflationary
environment and rising interest rates, the Company evaluated various factors, including asset-specific factors, overall economic and market conditions, and the excess of the
expected profits associated with BBXRE’s real estate assets in relation to their carrying amounts, and concluded that, except as discussed below, there had not been a
significant decline in the fair value of most of BBXRE’s real estate assets, including its investments in unconsolidated real estate joint ventures, that should be recognized as
an impairment loss. As part of this evaluation, the Company considered, among other things, sales at its single-family home developments and sales of its multifamily
apartment communities. Further, as a result of the impact of market conditions on the Altman Companies’ pipeline of prospective development projects in December 2022,
the Company estimated the fair value of its investment in the Altman Companies utilizing a discounted cash flow methodology which estimated the present value of the
projected future cash flows expected to be generated by the Altman Companies, including the generation of development, management, and general contractor fees and
profits from investments in the managing member of prospective development projects. As a result of this analysis, the Company determined that the estimated fair value of
its investment in the Altman Companies was greater than the carrying amount of its investment as of December 31, 2022.
During the year ended December 31, 2020, the Company recognized $2.2 million of impairment losses related to a decline in the estimated fair values of certain of
BBXRE’s investments in unconsolidated real estate joint ventures, including (i) a joint venture that was developing an office tower, as the market for commercial office
space during the year ended December 31, 2020 had been more significantly impacted by the COVID-19 pandemic compared to the single-family and multifamily markets
in which BBXRE primarily invests, and (ii) a joint venture invested in a multifamily apartment community in which BBXRE purchased its interest following the
stabilization of the underlying asset at a purchase price calculated based on assumptions related to the timing and pricing of the sale of the asset, both of which were
adversely impacted by the COVID-19 pandemic. The Company estimated the fair value of these investments utilizing a discounted cash flow methodology which estimated
the present value of the projected future cash flows expected to be generated from such investments. During the years ended December 31, 2022 and 2021, the Company did
not record any impairment charges related to its equity method investments.
F- 25
Table of Contents
Summarized Financial Information of Certain Unconsolidated Real Estate Joint Ventures
The tables below set forth financial information, including condensed statements of financial condition and operations, related to the Altman Companies joint venture (in
thousands):
Assets
Cash
Properties and equipment
Investment in unconsolidated subsidiaries
Goodwill
Due from related parties
Predevelopment costs
Other assets
Total assets
Liabilities and Equity
Notes payable
Due to related parties
Other liabilities
Total liabilities
Total equity
Total liabilities and equity
December 31,
2022
2021
$
$
$
$
968
20
5,020
16,683
7,089
4,253
1,393
35,426
2,500
643
10,769
13,912
21,514
35,426
Total revenues
Other expenses
Operating loss
Gain from forgiveness of related party loan
Equity in (losses) earnings from unconsolidated investment in Altman Glenewinkel
Construction, LLC
Net loss
Equity in net loss of unconsolidated real estate joint venture - The Altman Companies
$
$
9,106
(18,555)
(9,449)
2,026
(2,318)
(9,741)
(5,491)
8,577
(11,755)
(3,178)
—
321
(2,857)
(1,429)
2022
For the Years Ended December 31,
2021
2020
995
387
7,153
16,683
4,462
6,036
2,626
38,342
3,250
—
5,213
8,463
29,879
38,342
8,700
(10,670)
(1,970)
—
1,737
(233)
(117)
The tables below set forth financial information, including condensed statements of financial condition and operations, related to the Marbella joint venture (in thousands):
Assets
Cash
Real estate inventory
Other assets
Total assets
Liabilities and Equity
Notes payable
Customer deposits
Other liabilities
Total liabilities
Total equity
Total liabilities and equity
December 31,
2022
2021
$
$
$
$
3,508
1,706
526
5,740
—
—
3,611
3,611
2,129
5,740
Total revenues
Cost of real estate inventory sold
Other expenses
Net earnings (loss)
Equity in net earnings of unconsolidated real estate joint venture - Marbella
$
$
$
110,914
(81,610)
(3,601)
25,703
12,594
24,676
(18,732)
(2,187)
3,757
2,558
2022
For the Years Ended December 31,
2021
2020
4,371
49,928
1,673
55,972
30,987
21,255
2,698
54,940
1,032
55,972
—
—
(858)
(858)
601
The tables below set forth financial information, including condensed statements of financial condition and operations, related to the Altis Little Havana joint venture (in
thousands):
Assets
Cash
Real estate
Other assets
December 31,
2022
2021
$
718
—
411
40
58,254
610
Total assets
Liabilities and Equity
Notes payable
Other liabilities
Total liabilities
Total equity
Total liabilities and equity
$
$
$
1,129
—
270
270
859
1,129
Total revenues
Gain on sale of real estate
Other expenses
Net earnings (loss)
Equity in net earnings of unconsolidated real estate joint venture - Altis Little Havana
$
$
$
255
59,023
(2,369)
56,909
8,689
—
—
(82)
(82)
—
F- 26
2022
For the Years Ended December 31,
2021
2020
58,904
32,536
3,116
35,652
23,252
58,904
—
—
—
—
—
Table of Contents
The tables below set forth financial information, including condensed statements of financial condition and operations, related to the Altis Miramar East/West joint venture
(in thousands):
Assets
Cash
Real estate
Construction in progress
Other assets
Total assets
Liabilities and Equity
Notes payable
Other liabilities
Total liabilities
Total equity
Total liabilities and equity
December 31,
2022
2021
$
$
$
$
433
—
—
438
871
—
118
118
753
871
Total revenues
Gain on sale of real estate
Other expenses
Net earnings
Equity in net earnings of unconsolidated real estate joint venture - Altis Miramar East/West
$
$
$
5,049
143,217
(7,101)
141,165
13,950
1,269
—
(532)
737
(34)
2022
For the Years Ended December 31,
2021
2020
138
42,613
103,413
1,773
147,937
88,077
6,785
94,862
53,075
147,937
—
—
—
—
—
The tables below set forth financial information, including condensed statements of financial condition and operations, related to the Altis Promenade joint venture (in
thousands):
Assets
Cash
Other assets
Total assets
Liabilities and Equity
Other liabilities
Total liabilities
Total equity
Total liabilities and equity
December 31,
2022
2021
$
$
$
—
—
—
—
—
—
—
2022
For the Years Ended December 31,
2021
2020
Total revenues
Gain on sale of real estate
Other expenses
Net earnings (loss)
Equity in net earnings of unconsolidated real estate joint venture - Altis Promenade
$
$
$
—
—
—
—
230
2,589
40,010
(2,635)
39,964
5,178
F- 27
1,197
208
1,405
1,405
1,405
—
1,405
3,795
—
(6,238)
(2,443)
(161)
Table of Contents
The tables below set forth financial information, including condensed statements of financial condition and operations, related to the Altis Grand Central joint venture (in
thousands):
Assets
Cash
Real estate
Investment in Altis Grand Central JV
Other assets
Total assets
Liabilities and Equity
Notes payable
Other liabilities
Total liabilities
Total equity
Total liabilities and equity
December 31,
2022
2021
$
$
$
$
—
—
4,589
—
4,589
—
—
—
4,589
4,589
2022
For the Years Ended December 31,
2021
2020
Total revenues
Gain on sale of equity interest in joint venture
Total expenses
Net earnings (loss)
Equity in net earnings of unconsolidated real estate joint venture - Altis Grand Central
$
$
—
—
—
—
—
5,735
53,537
(7,180)
52,092
6,182
—
—
4,879
—
4,879
—
—
—
4,879
4,879
2,630
—
(6,294)
(3,664)
(406)
The tables below set forth financial information, including condensed statements of financial condition and operations, related to the Altis Grand at the Preserve joint
venture (in thousands):
Assets
Cash
Real estate
Other assets
Total assets
Liabilities and Equity
Notes payable
Other liabilities
Total liabilities
Total equity
Total liabilities and equity
December 31,
2022
2021
$
$
$
$
—
—
—
—
—
—
—
—
—
2022
For the Years Ended December 31,
2021
2020
Total revenues
Gain on sale of real estate
Other expenses
Net earnings (loss)
Equity in net earnings of unconsolidated real estate joint venture - Altis Grand at the Preserve $
$
—
—
—
—
114
1,965
37,675
(3,476)
36,164
4,977
F- 28
1,400
—
—
1,400
—
100
100
1,300
1,400
399
—
(1,645)
(1,246)
(35)
Table of Contents
9. Property and Equipment
The Company’s property and equipment consisted of the following (in thousands):
Land, building and building improvements
Leasehold improvements
Construction in progress
Office equipment, furniture, fixtures and software
Transportation
Accumulated depreciation
Property and equipment, net
December 31,
2022
2021
$
$
—
29,001
1,039
27,722
366
58,128
(22,988)
35,140
2,286
22,523
367
22,075
407
47,658
(17,047)
30,611
During the years ended December 31, 2022, 2021, and 2020, the Company recognized approximately $7.9 million, $4.1 million, and $5.1 million, respectively, of
depreciation expense related to its property and equipment which is reflected in selling, general and administrative expenses and cost of trade sales in the Company’s
statements of operations and comprehensive income.
During the year ended December 31, 2022, the Company recognized a $0.9 million gain on the sale of the Hoffman's Chocolates manufacturing facility in Greenacres,
Florida.
Renin's long-lived assets located outside the United States, which includes properties and equipment and right of use assets, had a carrying amount of $16.1 million as of
December 31, 2022.
As described in Note 2, the Company tests its long-lived assets, including property and equipment, for recoverability whenever events or changes in circumstances indicate
that the carrying amount of such assets or asset groups may not be recoverable.
During the year ended December 31, 2020, the Company concluded that the effects of the COVID-19 pandemic indicated that the carrying amount of certain of its property
and equipment may not be recoverable, including asset groups associated with certain of its retail locations which were temporarily closed as a result of the pandemic. In
such circumstances, the Company compared its estimated undiscounted cash flows expected to result from the use of such assets or asset groups with their respective
carrying amounts, and to the extent that such carrying amounts were in excess of the related undiscounted cash flows, the Company estimated the fair values of the
applicable assets or asset groups and recognized impairment losses based on the excess of the carrying amounts of such assets or asset groups over their estimated fair
values.
As a result of the Company’s testing of its property and equipment for impairment, the Company recognized impairment losses of $1.3 million during the year ended
December 31, 2020 related primarily to leasehold improvements associated with certain of IT’SUGAR’s retail locations. The recognition of these impairment losses
primarily resulted from the effects of the COVID-19 pandemic on the estimated cash flows expected to be generated by the related assets.
During the year ended December 31, 2022, the Company recorded impairment losses related to property and equipment of $238,000, which primarily related to leasehold
improvements associated with an IT’SUGAR retail location for which the estimated cash flows from the location are below the carrying amount of the related asset group.
F- 29
Table of Contents
10. Goodwill and Intangible Assets
Goodwill
The activity in the balance of the Company’s goodwill was as follows (in thousands):
Balance, beginning of period
Acquisitions
Deconsolidation of IT'SUGAR
IT'SUGAR emergence from bankruptcy
Impairment losses
Colonial Elegance acquisition adjustments to goodwill
Balance, end of period
2022
For the Years Ended December 31,
2021
2020
$
$
18,414
—
—
—
—
—
18,414
8,277
—
—
14,274
—
(4,137)
18,414
37,248
8,277
(14,864)
—
(22,384)
—
8,277
In June 2021, IT’SUGAR emerged from Chapter 11 bankruptcy pursuant to a plan of reorganization confirmed by the Bankruptcy Court. As a result of the confirmation and
effectiveness of the plan and the revesting of its equity interests in IT’SUGAR, the Company was deemed to have reacquired a controlling financial interest in IT’SUGAR
and consolidated the results of IT’SUGAR into its consolidated financial statements as of the Effective Date. The Company applied the acquisition method of accounting to
the consolidation of IT’SUGAR on the Effective Date and recognized $14.3 million of goodwill which is included in the Company's BBX Sweet Holdings reporting unit.
See Note 23 for further discussion of the IT’SUGAR bankruptcy proceedings and the Company’s application of the acquisition method of accounting to the consolidation of
IT’SUGAR. The goodwill associated with reacquiring a controlling financial interest in IT’SUGAR is included in the BBX Sweet Holdings category for segment reporting.
In connection with the Colonial Elegance acquisition, as of December 31, 2020, the Company reported a provisional purchase price allocation related to Renin’s acquisition
of Colonial Elegance and recognized $8.3 million of goodwill based on the Company’s preliminary estimates of the fair values of the assets acquired and liabilities assumed
at the acquisition date. During the year ended December 31, 2021, the Company finalized its valuation associated with Colonial Elegance and updated its purchase price
allocation based on the final valuation, which resulted in the reduction of the goodwill associated with the acquisition of Colonial Elegance acquisition to $4.1 million
which is included in the Company's Renin reporting unit. The goodwill associated with the Colonial Elegance acquisition is included in the Renin category for segment
reporting.
Impairment Testing
As described in Note 2, the Company tests goodwill for potential impairment on an annual basis as of December 31 or during interim periods if impairment indicators exist.
The evaluation of goodwill for impairment includes estimates, judgments and assumptions that we believe are reasonable under the circumstances; however, actual results
may differ from these estimates and assumptions, particularly in light of current economic and market conditions, which have been impacted by (i) disruptions and
uncertainty in the U.S. and global economies that arose in 2020 as a result of, among other things, the COVID-19 pandemic and disruptions in global supply chains, and (ii)
the more recent inflationary environment and rise in interest rates.
During the three months ended June 30, 2022, the Company concluded that inflationary pressures, the recent decline in market valuations, increases in interest rates, a
decline in consumer demand, the current economic and geopolitical environment, and the increased likelihood of a recessionary environment in the foreseeable future, when
combined with the ongoing nature of Renin’s margin compression and recent decline in customer demand, indicated a triggering event and that it was necessary to
quantitatively test whether the fair value of the Renin reporting unit had declined below its carrying amount as of June 30, 2022. As a result, the Company tested Renin’s
goodwill for impairment by estimating the fair value of the Renin reporting unit as of June 30, 2022 and concluded that its goodwill was not impaired, as the estimated fair
value of the Renin reporting unit was in excess of the carrying amount of the reporting unit.
During the years ended December 31, 2022 and 2021, the Company determined that its goodwill was not impaired. As of December 31, 2022, the Company estimated the
fair values of its Renin and IT’SUGAR reporting units. As part of these estimates, the Company applied an income approach utilizing a discounted cash flow methodology
and a market approach utilizing a guideline public company and transaction methodology to estimate the fair values of the respective reporting units, and the estimated fair
values obtained from the income and market approaches were compared and reviewed for reasonableness to determine a best estimate of the fair value of each reporting
unit. The Company’s assessment of these reporting units for impairment required the Company to make estimates based on facts and circumstances as of December 31,
2022 and assumptions about current and future economic and market conditions. With respect to the Renin reporting unit, these assumptions included, among other things,
(i) the stabilization of Renin’s gross margins over time, including an improvement in 2023 and a return to gross margins closer to historical averages thereafter, (ii) a long-
term increase in sales resulting from Renin increasing its market share in various products by leveraging its 2020 acquisition of Colonial Elegance, and (iii) the attribution
of value to Renin’s current working capital levels as compared to expected normalized working capital levels. With respect to the IT’SUGAR reporting unit, these
assumptions included that, among other things, (i) there will not be a material permanent decline in the demand for IT’SUGAR’s products in the future, (ii) IT’SUGAR will
be able to continue to implement its long-term strategy to reinvest in and grow its business, and (iii) IT’SUGAR will be able to manage supply chain and cost pressures
through price increases. However, as there is significant uncertainty in the current economic environment and how it may evolve and the potential for a prolonged economic
recession, the estimates and assumptions in the Company’s estimated value of its reporting units may change over time, which may result in the recognition of impairment
losses related to the Company’s reporting units in a future period that would be material to the Company’s financial statements. Changes in assumptions that could
materially impact the Company’s estimates related that could result in the recognition of impairment losses in future periods include, but are not limited to, (i) a further
decline in market valuations resulting in a further increase to the discount rate applied in the income approach and/or a decrease in the multiple of earnings applied in the
market approach, (ii) a material longer term or permanent decline in demand for the products and/or product margins of the Company’s reporting units, and/or (iii) Renin
being unable to increase its market share in various products.
During the year ended December 31, 2020, the Company concluded that the effects of the COVID-19 pandemic, including the recessionary economic environment and the
impact on certain of the Company’s operations, indicated that it was more likely than not that the fair values of certain of its reporting units with goodwill had declined
below the respective carrying amounts of such reporting units as of March 31, 2020. As a result, the Company tested the goodwill associated with such reporting units for
impairment by estimating the fair values of the respective reporting units as of March 31, 2020 and recognized goodwill impairment losses of $20.3 million associated with
the IT’SUGAR reporting unit and $2.1 million associated with certain of its other reporting units. The Company primarily utilized a discounted cash flow methodology to
estimate the fair values of these reporting units and used the relevant market approaches to support the reasonableness of its estimated fair values under the income
approach. Further, on September 22, 2020, the Company deconsolidated IT’SUGAR as a result of IT’SUGAR filing the Bankruptcy Cases and derecognized the remaining
IT’SUGAR goodwill balance of approximately $14.9 million as of that date.
The decline in the estimated fair values of these reporting units from December 31, 2019 primarily resulted from the effects of the COVID-19 pandemic on these
businesses. In particular, the decline in the estimated fair value of IT’SUGAR during the year ended December 31, 2020 reflected the impact on the Company’s estimated
future cash flows of the temporary closure of IT’SUGAR’s retail locations commencing in March 2020, including the significant liabilities incurred by IT’SUGAR during
the shutdown, and considered scenarios in which IT’SUGAR’s business and sales volumes would stabilize following the phased reopening of its retail locations. The
Company’s estimated discount rate applicable to IT’SUGAR’s cash flows was also increased to reflect, among other things, changes in market conditions, the uncertainty of
the duration and severity of the economic downturn, uncertainty related to the retail environment and consumer behavior, uncertainty related to IT’SUGAR’s ability to
stabilize its operations and implement its long-term strategies for its business, and the deterioration in IT’SUGAR’s financial condition as a result of the effects of the
COVID-19 pandemic, including its lack of sufficient liquidity for its operations during 2020.
F- 30
Table of Contents
Intangible Assets
The Company’s intangible assets consisted of the following (in thousands):
Trademarks
Customer relationships
Other
Accumulated amortization
Total intangible assets
December 31,
2022
2021
$
$
16,762
18,752
269
35,783
(6,378)
29,405
16,762
18,752
379
35,893
(3,911)
31,982
Trademarks and customer relationships are amortized using the straight-line method over their expected useful lives, which range from 12 to 20 years.
Amortization Expense
During the years ended December 31, 2022, 2021, and 2020, the Company recognized approximately $2.6 million, $2.3 million and $0.7 million, respectively, of
amortization expense related to its intangible assets which is reflected in selling, general and administrative expenses in the Company’s consolidated statements of
operations and comprehensive income.
The table below sets forth the estimated aggregate amortization expense of intangible assets during each of the five years subsequent to December 31, 2022 (in thousands):
Years Ending December 31,
2023
2024
2025
2026
2027
Impairment Testing
Total
$
2,575
2,575
2,565
2,528
2,528
As described in Note 2, the Company tests its long-lived assets, including amortizable intangible assets and asset groups that include amortizable intangible assets, for
recoverability whenever events or changes in circumstances indicate that the carrying amount of such assets or assets groups may not be recoverable. The Company tested
certain asset groups associated with certain of its businesses that included amortizable intangible assets for recoverability during the years ended December 31, 2022, 2021
and 2020, and determined that the estimated undiscounted future cash flows exceeded the carrying amounts of the asset groups. Accordingly, the Company did not
recognize any impairment losses associated with its intangible assets during the years ended December 31, 2022, 2021 and 2020.
11. Leases
BBX Capital and its subsidiaries are lessees under various operating leases for retail stores, office space, equipment, and vehicles. Many of the Company’s lease agreements
include one or more options to renew, with renewal terms that can extend the lease term from one to seven years, and the exercise of such renewal options is generally at the
Company’s discretion. Certain of the Company’s lease agreements include rental payments based on a percentage of sales generated at the leased location, including in
some cases based on a specified percentage of all sales at the leased location and in other cases based on a specified percentage of sales over contractually specified sales
levels. Further, other lease agreements include rental payments adjusted periodically for inflation. The Company’s lease agreements do not contain material residual value
guarantees or material restrictive covenants.
The Company recognizes right-of-use assets and lease liabilities associated with lease agreements with an initial term of 12 months or greater, while lease agreements with
an initial term of 12 months or less are not recorded in the Company’s statement of financial condition. The Company generally does not include lease payments associated
with renewal options that are exercisable at its discretion in the measurement of its right-of-use assets and lease liabilities as it is not reasonably certain that such options
will be exercised. The table below sets forth information regarding the Company’s lease agreements which had an initial term of greater than 12 months (dollars in
thousands):
Operating lease assets
Operating lease liabilities
Weighted average remaining lease term (years)
Weighted average discount rate (1)
As of
December 31, 2022
110,082
$
126,842
$
6.3
4.9%
As of
December 31, 2021
90,639
103,262
7.2
4.2%
(1) As most of the Company’s lease agreements do not provide an implicit rate, the Company estimates incremental secured borrowing rates corresponding to the maturities of its lease
agreements to determine the present value of future lease payments. To estimate incremental borrowing rates applicable to BBX Capital and its subsidiaries, the Company considers
various factors, including the rates applicable to its recently issued debt and credit facilities and prevailing financial market conditions.
F- 31
Table of Contents
The Company generally recognizes lease costs associated with its operating leases on a straight-line basis over the lease term, while variable lease payments that do not
depend on an index or rate are recognized as variable lease costs in the period in which the obligation for those payments is incurred. The table below sets forth information
regarding the Company’s lease costs which are included in cost of trade sales and selling, general, and administrative expenses in the Company’s consolidated statements of
operations and comprehensive income (in thousands):
Fixed lease costs
Short-term lease costs
Variable lease costs
Total operating lease costs
For the Years Ended
December 31, 2022 December 31, 2021
10,973
$
1,582
6,291
18,846
22,909
1,459
9,103
33,471
$
Included in the Company’s statement of cash flows under operating activities for the years ended December 31, 2022, 2021 and 2020 was $20.7 million, $9.2 million and
$7.6 million, respectively, of cash paid for amounts included in the measurement of lease liabilities. During the years ended December 31, 2022 and 2021, the Company
obtained $40.0 million and $32.9 million, respectively, of right-of-use assets in exchange for operating lease liabilities.
The table below sets forth information regarding the maturity of the Company’s operating lease liabilities as of December 31, 2022 (in thousands):
Period Ending December 31,
2023
2024
2025
2026
2027
After 2027
Total lease payments
Less: interest
Present value of lease liabilities
$
$
24,851
21,768
20,343
16,947
14,303
48,568
146,780
19,938
126,842
The above operating lease payments exclude $5.1 million of legally binding minimum lease payments for lease agreements executed but not yet commenced, as the
Company has not received possession of the leased property.
Impairment Testing
As described in Note 2, the Company tests its long-lived assets, including right-of-use assets and asset groups that include right-of-use assets, for recoverability whenever
events or changes in circumstances indicate that the carrying amount of such assets or asset groups may not be recoverable. During the year ended December 31, 2020, the
Company concluded that the effects of the COVID-19 pandemic indicated that the carrying amount of certain of its asset groups that include right-of-use assets may not be
recoverable, including asset groups associated with certain of its retail locations which were temporarily closed as a result of the pandemic. In such circumstances, the
Company compared its estimated undiscounted cash flows expected to result from the use of such asset groups with their respective carrying amounts, and to the extent that
such carrying amounts were in excess of the related undiscounted cash flows, the Company estimated the fair values of the applicable asset groups and recognized
impairment losses based on the excess of the carrying amounts of such asset groups over their estimated fair values. In certain circumstances, the Company estimated the
fair value of individual assets within its asset groups, including right-of-use assets associated with its retail locations, to determine the extent to which an impairment loss
should be allocated to such assets.
As a result of the Company’s testing of certain of its right-of-use assets for impairment, the Company recognized impairment losses of $4.1 million during the years ended
December 31, 2020 related primarily to right-of-use assets associated with certain of IT’SUGAR’s retail locations. The recognition of these impairment losses primarily
resulted from the effects of the COVID-19 pandemic on the estimated cash flows expected to be generated by the related asset groups.
The Company did not record any impairment losses related to right-of-use assets during the years ended December 31, 2022 and 2021.
F- 32
Table of Contents
12. Notes Payable and Other Borrowings
The table below sets forth information regarding the Company’s notes payable and other borrowings (dollars in thousands):
Community Development District Obligations
TD Bank Term Loan and Line of Credit
IberiaBank Revolving Line of Credit (2)
IberiaBank Note (3)
Other
Unamortized debt issuance costs
Total notes payable and other borrowings
December 31, 2022
December 31, 2021
Carrying
Amount of
Debt
Balance
Interest
Rate
Pledged
Assets
Debt
Balance
Interest
Rate
Carrying
Amount of
Pledged
Assets
$
$
2,031 2.40 - 3.75%
8.95%
34,509
8.00%
2,250
—
—
4.22%
9
(256)
38,543
(5) $
(1)
(4)
—
—
$
7,657 2.40 - 6.00% $
3.78%
44,363
3.75%
2,041
3.50%
1,418
4.22%
26
(622)
54,883
9,669
(1)
(4)
1,802
—
(1) The collateral is a blanket lien on Renin’s assets and the Company’s ownership interest in Renin.
(2) BBX Capital is the guarantor on the line of credit.
(3) BBX Capital was the guarantor on the note.
(4) The collateral is a blanket lien on BBX Sweet Holdings’ assets.
(5) Pledged assets consist of 85 lots in Phase 3 of the Beacon Lake Community Development.
Community Development District Obligations
A community development district or similar development authority (“CDD”) is a unit of local government created under various state and/or local statutes to encourage
planned community development and allow for the construction of infrastructure improvements through alternative financing sources, including the tax-exempt bond
markets. A CDD is generally created through the approval of the local city or county in which the CDD is located and is controlled by a board of supervisors representing
the landowners within the CDD. In connection with BBXRE’s development of the Beacon Lakes Community, The Meadow View at Twin Creeks CDD (the “Beacon Lakes
CDD”) was formed by St. Johns County, Florida to use bond financing to fund the construction of infrastructure improvements at the Beacon Lakes Community. The
Beacon Lakes CDD issues bonds periodically to fund ongoing construction of the Beacon Lakes Community, and in November 2021, May 2020, February 2019, November
2018, and November 2016, the Beacon Lakes CDD issued bonds in the amount of $5.1 million, $8.6 million, $8.1 million, $16.5 million, and $21.4 million, respectively.
The obligation to pay principal and interest on the bonds issued by the Beacon Lakes CDD is assigned to each parcel within the CDD, and the Beacon Lakes CDD has a lien
on each parcel. If the owner of the parcel does not pay this obligation, the Beacon Lakes CDD can foreclose on the lien. The CDD bond obligations, including interest and
the associated lien on the property, are typically payable, secured, and satisfied by revenues, fees, or assessments levied on the property benefited. The assessments to be
levied by the CDD are fixed or determinable amounts.
The CDD bond obligations outstanding as of December 31, 2022 have fixed interest rates ranging from 2.40% to 3.75% and mature at various times during the years 2026
through 2052. The Company at its option has the ability to repay a specified portion of the bonds at the time that it sells developed lots in the Beacon Lakes Community.
Upon the issuance of CDD bond obligations by the Beacon Lakes CDD, the Company records an obligation for the CDD bond obligations with a corresponding increase in
other assets. The CDD bonds are secured by a lien on the Beacon Lakes property. The Company relieves the CDD bond obligation associated with a particular parcel when
the purchaser of the property assumes the obligation, which occurs automatically upon such purchaser’s acquisition of the property, or upon the repayment of the obligation
by the Company. Included in other assets in the Company’s consolidated statements of financial condition as of December 31, 2022 and 2021 was $0.1 million and
$0.6 million, respectively, of construction funds receivable from the issuance of CDD bond obligations that the Company does not have the right of setoff on its CDD bond
obligations. Construction funds receivable associated with the CDD bond obligations are reduced with a corresponding increase in real estate inventory when the CDD
disburses the funds to contractors for the construction of infrastructure improvements.
Toronto-Dominion Bank (“TD Bank”)
Since May 2017, Renin has maintained a credit facility with TD Bank, and in October 2020, Renin amended and restated the facility in connection with the acquisition of
Colonial Elegance.
F- 33
Table of Contents
Under the terms and conditions of the initial credit facility, TD Bank provided loans under a revolving operating loan for up to approximately $16.3 million based on
available collateral, as defined in the facility, and subject to Renin’s compliance with the terms and conditions of the facility, including certain specific financial covenants.
Through February 2020, the credit facility also provided for term loans for up to $1.7 million. However, in February 2020, the credit facility was amended to replace the
existing debt service coverage ratio with an interest coverage ratio, and in connection with the amendment to the credit facility, Renin repaid the outstanding balance of the
term loans with borrowings from the revolving operating loan. In July 2020, the credit facility was also amended to extend the maturity date of the facility from September
2020 to September 2022.
In connection with the acquisition of Colonial Elegance in 2020, Renin amended and restated the credit facility with TD Bank (the “TD Bank credit facility” or the “credit
facility”) to include a term loan with an initial principal balance of $30.0 million increase the availability under its existing revolving line of credit with TD Bank to $20.0
million, and extend the maturity of the credit facility to October 2025. Renin utilized $30.0 million of proceeds under the term loan and approximately $8.0 million of
proceeds under the revolving line of credit in connection with the acquisition of Colonial Elegance.
In July 2021, Renin’s credit facility with TD Bank was amended effective June 30, 2021 to temporarily increase the availability under the revolving line of credit from
$20.0 million to $24.0 million through December 31, 2021. In addition, the amendment to the credit facility temporarily increased the maximum total leverage ratio
included in the financial covenants of the facility but prohibited Renin from making distributions to BBX Capital through July 1, 2022, at which time the leverage ratio and
Renin’s ability to make distributions to the Company was to revert to the requirements under the facility immediately prior to the amendment.
In November 2021, the TD Bank credit facility was further amended effective September 30, 2021 to extend the prior increase in the availability under the revolving line of
credit from $20.0 million to $24.0 million through December 31, 2022, at which time the availability under the line of credit was to revert to $20.0 million and any amounts
outstanding in excess of $20.0 million was to be repaid by Renin. The amendments to the credit facility also (i) waived the requirement for Renin to comply with certain
ratios included in the financial covenants of the credit facility, (ii) temporarily increased the maximum total leverage ratio included in the financial covenants of the facility
through December 31, 2022, (iii) modified the calculation of the maximum total leverage ratio, and (iv) included an additional financial covenant related to Renin meeting
certain minimum levels of specified operating results from November 2021 through December 2022. Further, the amendments prohibited Renin from making distributions
to BBX Capital through December 31, 2022. On January 1, 2023, the financial covenants under the facility and Renin’s ability to make distributions to the Company were
to revert to the requirements under the facility prior to the amendments in 2021.
However, as Renin was not in compliance with certain financial covenants under the facility from January through March 2022, the TD Bank credit facility was further
amended on May 9, 2022 to (i) require $13.5 million of funding from BBX Capital to provide Renin funds to prepay $10.0 million of the term loan and to provide
additional working capital to Renin of $3.5 million, (ii) waive compliance with the maximum total leverage ratio and fixed charge coverage ratio included in the financial
covenants of the facility until December 31, 2022, (iii) waive compliance with the financial covenant requiring Renin to meet certain minimum levels of specified operating
results for January through March 2022, (iv) adjust the required minimum levels of specified operating results through December 31, 2022 beginning in April 2022, and (v)
amend the modification period to the later of December 31, 2022 or upon Renin’s compliance with specified financial covenant ratios. The amendment also increased the
interest rates on amounts outstanding under the term loan and revolving line of credit during the modification period to (i) the Canadian Prime Rate plus a spread of 3.375%
per annum, (ii) the United States Base Rate plus a spread of 3.00% per annum, or (iii) Term SOFR or Canadian Bankers’ Acceptance Rate plus a spread of 4.875% per
annum. Under the terms of the amendment, the Term SOFR Rate for loans with one to six-months terms are also subject to an additional credit spread adjustment of 10 to
25 basis points per annum. Renin issued a $13.5 million promissory note to BBX Capital upon execution of the amendment on May 9, 2022, and pursuant to the terms of
the amendment, BBX Capital funded $13.5 million of the note to Renin in May 2022. BBX Capital and Renin entered into a subordination, assignment, and postponement
agreement with TD Bank that requires all present and future loans or advances from BBX Capital to Renin (including the $13.5 million promissory note) be subordinated
and repayments postponed until the TD Bank credit facility has been paid or satisfied in full.
As of June 30, 2022 and continuing through January 2023, Renin was not in compliance with the financial covenants under the credit facility which required Renin to meet
certain minimum levels of specified operating results, and while TD Bank continued to allow Renin to utilize its revolving line of credit, TD Bank sent formal notices of
default to Renin between August 2022 and January 2023.
On February 3, 2023, the credit facility was further amended effective January 31, 2023 to, among other things, (i) temporarily increase the availability under the revolving
line of credit from $20.0 million to $22.0 million from January 1, 2023 through December 31, 2023, (ii) require $8.0 million of funding from BBX Capital (including
amounts funded by BBX Capital during the period from December 2022 through the date of the amendment) to provide Renin funds to prepay the term loan by no less than
$1.5 million and to provide additional working capital to Renin, (iii) waive Renin’s non-compliance with the financial covenants under the credit facility through the date of
the amendment, (iv) establish a financial covenant requiring Renin to meet minimum levels of specified operating results from January 2023 through December 2023, (v)
redefine the maximum total leverage ratio financial covenant under the credit facility and waive the requirement to comply with the covenant until January 1, 2024, (vi)
waive the requirement to comply with the fixed charge coverage ratio financial covenant until January 1, 2024, and (vii) amend the modification period to the later of
December 31, 2023 or upon Renin’s compliance with specified financial covenant ratios. The amendment also reduced the interest rates on amounts outstanding under the
credit facility during the modification period to (i) the Canadian Prime Rate plus a spread of 2.875% per annum, (ii) the United States Base Rate plus a spread of 2.50% per
annum, or (iii) Term SOFR or Canadian Bankers’ Acceptance Rate plus a spread of 4.375% per annum. Under the terms of the amendment, the Term SOFR Rate for loans
with one to six-months terms are also subject to an additional credit spread adjustment of 10 to 25 basis points per annum. However, the amendment also increased the
interest rates on amounts outstanding under the credit facility by 50 basis points per annum during any periods in which the loan is in default.
In December 2022, BBX Capital contributed $1.0 million of capital to Renin, and in connection with the execution of the amendment, BBX Capital contributed $7.0 million
of additional capital to Renin pursuant to the terms of the amendment. Renin elected to use a portion of such funds to prepay $2.5 million of the term loan.
If Renin again falls out of compliance and is unable to obtain additional waivers or modifications of the credit facility, Renin may lose availability under its revolving line of
credit, be required to provide additional collateral, or repay all or a portion of its borrowings, any of which would have a material adverse effect on the Company’s liquidity,
financial position, and results of operations.
As of December 31, 2022, the amounts outstanding under the TD Bank credit facility were $19.8 million under the revolving line of credit and $14.7 million under the term
loan.
Renin has guaranteed the obligations of the borrowers under the credit facility, and the facility is collateralized by all of Renin’s assets. In addition, the Company entered
into a Pledge Agreement pursuant to which it pledged all of its membership interests in Renin as security for the borrower’s obligations under the amended and restated
credit facility.
F- 34
Table of Contents
IberiaBank Revolving Line of Credit - LOCS Credit Facility
In July 2021, BBX Sweet Holdings and certain of its subsidiaries, including Las Olas Confections and Snacks, entered into a credit agreement (the “LOCS Credit Facility”)
with IberiaBank which provides for a revolving line of credit of up to $2.5 million that matures in July 2023. Amounts outstanding under the LOCS Credit Facility bear
interest at the higher of the Wall Street Journal Prime Rate plus 50 basis points or 3.0% per annum, and the facility requires monthly payments of interest only, with any
outstanding principal and accrued interest due at the maturity date. The LOCS Credit Facility is collateralized by a blanket lien on all of the assets of the borrowers under
the facility and is guaranteed by BBX Capital. The facility contains certain financial covenants, including a minimum liquidity requirement for BBX Capital as guarantor
under the facility and a requirement that the borrowers must maintain a zero balance on the facility for thirty consecutive days during each calendar year during the term of
the facility. As of December 31, 2022, BBX Sweet Holdings was in compliance with all financial covenants under the LOCS Credit Facility.
IberiaBank Note
In August 2021, BBX Sweet Holdings and certain of its subsidiaries, including The Hoffman Commercial Group, Inc., borrowed $1.4 million from IberiaBank and issued a
note payable to IberiaBank (the “IberiaBank Note”). The IberiaBank Note was secured by land and buildings owned by The Hoffman Commercial Group, Inc. and was
guaranteed by BBX Capital. In March 2022, The Hoffman Commercial Group, Inc. closed on the sale of the land and building held as collateral, and the IberiaBank Note
was repaid-in-full.
Regions Bank Revolving Line of Credit - IT'SUGAR Credit Facility
In January 2023, IT'SUGAR entered into a credit agreement (the “IT'SUGAR Credit Facility”) with Regions Bank which provides for a revolving line of credit of up to
$5.0 million that matures in June 2024. Amounts outstanding under the IT'SUGAR Credit Facility bear interest at the higher of a rate equal to the Regions Bank Prime Rate
minus 1.50% per annum or 0% per annum, and the facility requires monthly payments of interest only, with any outstanding principal and accrued interest due at the
maturity date. BBXRE pledged a $5.0 million certificate of deposit at Regions Bank to secure the repayment of the IT'SUGAR Credit Facility. The facility contains various
financial and reporting covenants.
Scheduled Minimum Principal Payments on Notes Payable and Other Borrowings
The table below sets forth the contractual minimum principal payments of the Company’s notes payable and other borrowings during each of the five years subsequent to
December 31, 2022 and thereafter (in thousands):
2023
2024
2025
2026
2027
Thereafter
Total
Notes Payable and
Other Borrowings
7,509
4,500
24,759
440
—
1,591
38,799
$
$
The minimum contractual payments set forth in the table above may differ from actual payments due to the timing of principal payments required upon the sale of real
estate assets or other assets that serve as collateral on certain debt.
13. Income Taxes
The Company’s United States and foreign components of income (loss) before income taxes are as follows (in thousands):
U.S.
Foreign
Total
2022
For the Years Ended December 31,
2021
2020
$
$
51,437
(8,646)
42,791
66,575
(2,334)
64,241
(59,187)
849
(58,338)
F- 35
Table of Contents
The Company’s provision (benefit) for income taxes consisted of the following (in thousands):
Current:
Federal
State
Deferred:
Federal
State
Provision (benefit) for income taxes
2022
For the Years Ended December 31,
2021
2020
$
$
12,117
3,630
15,747
(251)
(347)
(598)
15,149
10,672
2,855
13,527
3,234
414
3,648
17,175
(5,912)
(599)
(6,511)
(3,800)
(937)
(4,737)
(11,248)
The table below sets forth a reconciliation of the difference between the provision (benefit) for income taxes and the amount that results from applying the federal statutory
tax rate of 21% to income (loss) before income taxes (dollars in thousands):
Income tax provision (benefit) at expected federal income tax rate (1)
Increase (decrease) resulting from:
Provision (benefit) for state taxes, net of federal effect
Taxes related to noncontrolling interests in subsidiaries not consolidated for income tax
purposes
Nondeductible IT'SUGAR's bankruptcy costs
Nondeductible goodwill
Nondeductible executive compensation
Increase (decrease) in valuation allowance
Other – net
Provision (benefit) for income taxes
$
$
(1) Expected tax is computed based upon income (loss) before income taxes.
The Company’s deferred income taxes consisted of the following significant components (in thousands):
2022
For the Years Ended December 31,
2021
2020
8,986
2,521
72
460
—
1,451
2,048
(389)
15,149
13,491
2,670
31
248
—
—
427
308
17,175
2022
As of December 31,
2021
2020
Deferred federal and state tax assets:
Net operating loss carryforwards
Book reserves for credit losses, inventory, real estate and property and equipment
Expenses recognized for books and deferred for tax
Operating lease liabilities
Investment in IT'SUGAR, LLC
Intangible assets
Other assets
Total gross federal and state deferred tax assets
Less deferred tax asset valuation allowance
Total deferred tax assets
Deferred federal and state tax liabilities:
Tax over book depreciation
Operating lease assets
Intangible assets
Other liabilities
Total gross deferred federal and state tax liabilities
Net federal and state deferred tax assets
$
$
10,570
1,257
3,439
8,156
458
—
334
24,214
(9,248)
14,966
(1,735)
(7,965)
(231)
(776)
(10,707)
4,259
7,943
1,450
1,288
2,407
2,060
180
332
15,660
(7,199)
8,461
(1,727)
(2,610)
—
(348)
(4,685)
3,776
(12,251)
(1,219)
854
—
437
773
(142)
300
(11,248)
7,275
1,324
1,860
317
3,510
226
835
15,347
(6,772)
8,575
(456)
(288)
—
(407)
(1,151)
7,424
The Company’s income tax provision (benefit) and current and deferred income taxes were calculated on a separate return basis through September 30, 2020, the date of the
spin-off from Bluegreen Vacations. The Company became a tax filer when it converted from a Florida limited liability company into a Florida corporation as of
September 29, 2020.
F- 36
Table of Contents
The Company’s effective income tax rate was approximately 35%, 27%, and 19% during the years ended December 31, 2022, 2021, and 2020, respectively. During the
year ended December 31, 2022, the provision for income taxes was different than the expected federal income tax rate of 21% primarily due to nondeductible executive
compensation, the impact of state income taxes and an increase in the Canadian valuation allowance. The provision for income taxes was different than the expected federal
income tax rate of 21% during the year ended December 31, 2021 primarily due to the impact of state income taxes and an increase in the Canadian valuation allowance.
The difference for the year ended December 31, 2020 was due to the impact of nondeductible executive compensation and state income taxes.
The Company evaluates its deferred tax assets to determine if valuation allowances are required. In the evaluation, management considers expectations of sufficient future
taxable income, trends in earnings, existence of taxable income in recent years, the future reversal of temporary differences, and available tax planning strategies that could
be implemented, if required. Valuation allowances are established based on the consideration of all available evidence using a more likely than not standard. Based on the
Company’s evaluation, a deferred tax valuation allowance was established for $5.7 million of federal and state net operating loss carryforwards (“NOL”) and $3.5 million of
Canadian NOL and other temporary differences as of December 31, 2022.
As of December 31, 2022, the Company had federal and Florida NOL carryforwards that can only be utilized if the separate entity that generated them has separate
company taxable income (the “SRLY Limitation”). These carryforwards cannot be utilized against most of the Company’s subsidiaries’ taxable income. As such, a full
valuation allowance has been established for these carryforwards. The Company’s Canadian operations have had cumulative taxable losses in recent years, and as a result, a
full valuation allowance has been applied to the NOL carryforwards as of December 31, 2022 and 2021. In addition, one of the Canadian subsidiaries has a capital loss
carryforward that can only be used to reduce capital gains, and the tax on Canadian capital gains is 50% of the Canadian tax rate. Canadian capital loss carryforwards do not
expire. A full valuation allowance is maintained for the Canadian capital loss carryforward as it is unlikely that the Canadian subsidiary will generate capital gains in the
future. Federal and Florida NOLs subject to SRLY limitations expire in the years 2026-2034, and the Canadian NOLs expire in the years 2033-2042.
The Company recognizes liabilities for uncertain tax positions. An uncertain tax position is defined as a position in a previously filed tax return or a position expected to be
taken in a future tax return that is not based on clear and unambiguous tax law and which is reflected in measuring current or deferred income tax assets and liabilities for
interim or annual periods. The Company may recognize the tax benefit from an uncertain tax position only if it believes that it is more likely than not that the tax position
will be sustained on examination by the taxing authorities based on the technical merits of the position. The Company measures the tax benefits recognized based on the
largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution. The Company recognizes interest and penalties related to unrecognized tax
benefits in its provision for income taxes. The Company has not identified any uncertain tax positions as of December 31, 2022.
The Company was previously a party to an Agreement to Allocate Consolidated Income Tax Liability and Benefits with Bluegreen Vacations. Under this tax
sharing agreement, the parties calculated their respective income tax liabilities and attributes as if each of them was a separate filer. If any tax attributes were used by
another party to the agreement to offset its tax liability, the party providing the benefit would receive an amount for the tax benefits realized. However, this tax sharing
agreement was terminated with respect to the Company upon the consummation of the spin-off. During the years ended December 31, 2020, Renin paid Bluegreen
Vacations $0.3 million in accordance with this tax sharing agreement. As of December 31, 2022 and 2021, no amounts were due to Bluegreen Vacations pursuant to the tax
sharing agreement.
14. Revenue Recognition
The table below sets forth the Company’s revenue disaggregated by category (in thousands):
Trade sales - wholesale
Trade sales - retail
Sales of real estate inventory
Revenue from customers
Interest income
Net gains on sales of real estate assets
Other revenue
Total revenues
2022
For the Years Ended December 31,
2021
2020
$
$
149,129
130,996
27,794
307,919
5,993
24,289
3,844
342,045
164,315
73,763
65,479
303,557
6,413
643
2,984
313,597
106,508
40,702
20,363
167,573
2,399
255
3,002
173,229
F- 37
Table of Contents
As of December 31, 2022 and 2021, the contingent purchase price receivable of $16.9 million and $19.9 million included in the Company’s consolidated statements of
financial condition, respectively, represents estimated variable consideration related to the contingent purchase price due from homebuilders in connection with the sale of
real estate inventory to the homebuilders. As of December 31, 2022 and 2021, the Company’s other liabilities in its consolidated statements of financial condition included
$0.6 million of variable consideration related to the estimated contingent purchase price due to a homebuilder in connection with the sale of real estate inventory to the
homebuilder.
During the year ended December 31, 2022, Renin’s total revenues included $107.1 million of trade sales to three major customers and their affiliates and $46.9 million of
revenues generated outside the United States. Revenues from one customer of Renin represented $49.6 million, $50.3 million, and $34.2 million, of the Company’s total
revenues for the years ended December 31, 2022, 2021 and 2020, respectively, which represented 14.5%, 16.0% and 19.7% of the Company’s total revenues for the
respective periods. Revenue from a second customer of Renin represented $37.9 million, $42.8 million and $29.4 million of the Company’s total revenues for the years
ended December 31, 2022, 2021 and 2020, respectively, which represented 11.1%, 13.6% and 17.0% of the Company’s total revenues during the respective periods.
Revenue from a third customer of Renin represented $19.6 million and $30.4 million, of the Company’s total revenues for the years ended December 31, 2022 and
December 31, 2021, respectively, which represented 5.7% and 9.7 % of the Company's total revenues for the respective periods.
15. Commitments and Contingencies
Litigation Matters
In the ordinary course of business, the Company is party to lawsuits as plaintiff or defendant involving its operations and activities. Additionally, from time to time in the
ordinary course of business, the Company is involved in disputes with existing and former employees, vendors, taxing jurisdictions, and various other parties and also
receives individual consumer complaints as well as complaints received through regulatory and consumer agencies. The Company takes these matters seriously and
attempts to resolve any such issues as they arise.
Reserves are accrued for matters in which management believes it is probable that a loss will be incurred and the amount of such loss can be reasonably estimated.
Management does not believe that the aggregate liability relating to known contingencies in excess of the aggregate amounts accrued will have a material impact on the
Company’s results of operations or financial condition. However, litigation is inherently uncertain, and the actual costs of resolving legal claims, including awards of
damages, may be substantially higher than the amounts accrued for these claims and may have a material adverse impact on the Company’s results of operations or financial
condition.
Adverse judgments and the costs of defending or resolving legal claims may be substantial and may have a material adverse impact on the Company’s financial statements.
Management is not at this time able to estimate a range of reasonably possible losses with respect to matters in which it is reasonably possible that a loss will occur. In
certain matters, management is unable to estimate the loss or reasonable range of loss until additional developments provide information sufficient to support an assessment
of the loss or reasonable range of loss. Frequently in these matters, the claims are broad, and the plaintiffs have not quantified or factually supported their claims.
There were no material pending legal proceedings against BBX Capital or its subsidiaries as of December 31, 2022.
Renin Supplier Dispute
In October 2020, Renin incurred approximately $6.0 million in costs for the expedited shipment of products to Renin from a foreign supplier and an additional $2.0 million
in costs for the expedited shipment of product displays from the same supplier. The supplier had failed to deliver both the products and displays on the contractually agreed
upon delivery schedule, and Renin incurred these costs, which were significantly in excess of the shipping costs that would have been incurred had such products been
delivered on schedule, based on its belief that the costs were necessary in order for Renin to meet its obligations to one of its major customers. The products were committed
to be sold by Renin in connection with the customer’s November 2020 holiday sale program, while the displays were required to be delivered in connection with the rollout
of new products with the customer. Renin believed that the supplier was liable to Renin for damages related to the increased costs pursuant to the terms of the agreements
between Renin and the supplier and notified the supplier that it is exercising a right of offset of the costs against outstanding amounts due to the supplier of approximately
$8.1 million in order to recover its damages. The supplier disputed that it was liable for the additional shipping costs.
Since there was no assurance regarding the ultimate resolution of the matter and whether Renin’s assertion that it is entitled to damages would be sustained, Renin
recognized the cost of the products and related shipping costs upon the sale of such products in cost of trade sales in the Company’s statement of operations and
comprehensive income during the year ended December 31, 2020, while the costs of the displays and related shipping were deferred and are being amortized over the period
in which the Company expects to benefit from their use. In December 2021, Renin and the foreign supplier settled the dispute and outstanding amounts due to the supplier
for $4.2 million to be paid by Renin to the supplier in two equal installments in December 2021 and June 2022. As Renin had accrued a $8.1 million liability for amounts
due to the supplier during the year ended December 31, 2021, Renin reduced its cost of trade sales by $2.9 million for the year ended December 31, 2021 and reduced the
unamortized balance of its display contract asset by $1.0 million as of December 31, 2021. BBX Capital contributed a total of $4.0 million of capital to Renin to fund the
December 2021 and June 2022 settlement payments to the foreign supplier.
F- 38
Table of Contents
Other Commitments, Contingencies, and Guarantees
BBX Capital guarantees certain obligations of its wholly-owned subsidiaries and unconsolidated real estate joint ventures, including the following:
● BBX Capital is guarantor on a lease agreement executed by IT’SUGAR which expires in January 2023 with respect to base rents of $0.1 million, as well as
common area costs, under the lease.
● BBX Capital is a guarantor on a lease agreement executed by Renin which expires November 2029 with respect to base rents of $8.0 million, as well as common
area costs, under the lease.
● BBX Capital is a guarantor on certain notes payable by its wholly-owned subsidiaries. See Note 12 for additional information regarding these obligations.
BBX Capital was previously a guarantor of 50% of the outstanding balance of a third-party mortgage loan to the Bayview joint venture which had an outstanding balance
of $5.0 million as of December 31, 2021. In June 2022, the Company sold its equity interest in the joint venture to its joint venture partner. In connection with the sale, the
Company obtained a release from the lender under the mortgage loan for any liability to the lender under the loan documents, including any obligation related to the
Company’s guaranty of the outstanding loan balance.
16. Employee Benefit Plans and Incentive Compensation Program
Defined Contribution 401(k) Plan
The sponsorship of three of the BBX Capital Corporation Employee Retirement Plans under Internal Revenue Code Section 401(k) was transferred to the Company on
September 30, 2020 in connection with the spin-off. Although there are variations in the eligibility requirements under such plans, employees who have completed 90 days
of service and have reached the age of 21 are generally eligible to participate in the Company’s 401(k) plans. For the year ending December 31, 2022, an eligible employee
under the plans is entitled to contribute up to $20,500, while an eligible employee over 50 years of age was entitled to contribute up to $27,000. The Company generally
matches 100% of the first 3% of employee contributions and 50% of the next 2% of employee contributions, and the match amounts generally vest immediately. For the
years ended December 31, 2022 and 2021, the Company recorded expenses of approximately $538,000 and $400,000 for contributions to its 401(k) plans, respectively.
Prior to September 30, 2020, the expenses for 401(k) contributions were allocated to the Company on a pro-rata basis based on the combined revenues and equity in
earnings of unconsolidated joint ventures of Bluegreen Vacations and its subsidiaries.
17. Common Stock
Common Stock
BBX Capital’s Articles of Incorporation authorize BBX Capital to issue both Class A Common Stock, par value $.01 per share, and Class B Common Stock, par value $.01
per share. Under Florida law and the Company’s Articles of Incorporation, holders of Class A Common Stock and Class B Common Stock vote together as a single class on
most matters presented to a vote of BBX Capital’s shareholders. On such matters, holders of Class A Common Stock are entitled to one vote for each share held, with all
holders of Class A Common Stock possessing in the aggregate 22% of the total voting power, while holders of Class B Common Stock possess the remaining 78% of the
total voting power. If the number of shares of Class B Common Stock outstanding decreases below 360,000 shares but is greater than 280,000 shares, the Class A Common
Stock’s aggregate voting power will increase to 40%, and the Class B Common Stock will have the remaining 60%. If the number of shares of Class B Common Stock
outstanding decreases below 280,000 shares but is greater than 100,000 shares, the Class A Common Stock’s aggregate voting power will increase to 53%, and the Class B
Common Stock will have the remaining 47%. These relative voting percentages will remain fixed unless the number of shares of Class B Common Stock outstanding
decreases to 100,000 shares or less, at which time the fixed voting percentages will be eliminated, and holders of Class A Common Stock and holders of Class B Common
Stock would then each be entitled to one vote per share held. Each share of Class B Common Stock is convertible into one share of Class A Common Stock at any time at
the option of the holder. The percentage of total common equity represented by Class A and Class B common stock was 74% and 26%, respectively, at December 31, 2022.
Rights Agreement
On September 25, 2020, BBX Capital adopted a rights agreement (the “Rights Agreement”) in light of the significant market volatility and uncertainties associated with the
COVID-19 pandemic and the impact on the Company and the market price of BBX Capital’s Class A Common Stock and Class B Common Stock. The Rights Agreement
provided a deterrent to shareholders from acquiring a 5% or greater ownership interest in BBX Capital’s Class A Common Stock, Class B Common Stock or total combined
common stock without the prior approval of the board of directors. The Rights Agreement expired on September 25, 2022.
F- 39
Table of Contents
Tender Offers
In May 2021, BBX Capital commenced a cash tender offer to purchase up to 4,000,000 shares of its Class A Common Stock at a purchase price of $6.75 per share, and in
June 2021, BBX Capital amended the terms of the tender offer to increase the purchase price from $6.75 per share to $8.00 per share and reduce the number of shares
sought to be purchased from 4,000,000 shares to 3,500,000 shares. In July 2021, BBX Capital purchased 1,402,785 shares of its Class A Common Stock pursuant to the
cash tender offer at a purchase price of $8.00 per share for an aggregate purchase price of approximately $11.4 million, including fees. At the time that the tender offer was
completed, the shares purchased in the tender offer represented approximately 9.3% of the total number of outstanding shares of BBX Capital’s Class A Common Stock and
7.5% of BBX Capital’s total issued and outstanding equity, which includes the issued and outstanding shares of BBX Capital’s Class B Common Stock.
In November 2022, BBX Capital commenced a cash tender offer to purchase up to 1,000,000 shares of its Class A Common Stock at a purchase price of $10.00 per share. In
accordance with the terms and conditions of the tender offer, including the Company’s right to accept the tender of additional shares up to an amount equal to two percent of
the outstanding shares of the Company’s Class A Common Stock outstanding upon the commencement of the tender offer, the Company purchased a total of 1,200,000
shares of its Class A Common Stock at a purchase price of $10.00 per share for an aggregate purchase price of approximately $12.1 million, including fees. At the time that
the tender offer was completed, the shares purchased in the tender offer represented approximately 9.8% of the total number of outstanding shares of BBX Capital’s Class A
Common Stock and 7.5% of BBX Capital’s total issued and outstanding equity, which includes the issued and outstanding shares of BBX Capital’s Class B Common Stock.
Share Repurchase Programs
In October 2020, BBX Capital’s board of directors approved a share repurchase program which authorized the repurchase of up to $10.0 million of shares of BBX Capital’s
Class A Common Stock and Class B Common Stock. In September 2021, BBX Capital’s board of directors approved an increase in the Company’s share repurchase
program from $10 million of shares to $20 million of shares. On November 19, 2021, the Company’s Board of Directors approved the Company’s repurchase of
approximately 1,300,000 shares of the Company’s Class A Common Stock from an unaffiliated shareholder in a privately negotiated transaction for a total purchase price of
approximately $14.5 million. In connection therewith, the Board approved an increase in the share repurchase program in the amount necessary to consummate the privately
negotiated transaction under the program. As a result of the shares repurchased in November 2021, there was no remaining availability under the then-existing share
repurchase program as of December 31, 2021. During the year ended December 31, 2021, the Company purchased 2,425,229 shares of its Class A Common Stock and
14,394 of its Class B Common Stock for approximately $22.8 million under the share repurchase program at an average cost of $9.36 per share, including fees.
In January 2022, the Board of Directors approved a new share repurchase program which authorizes the repurchase of up to $15.0 million of shares of the Company’s Class
A Common Stock and Class B Common Stock. The repurchase program authorizes the Company, in management’s discretion, to repurchase shares from time to time
subject to market conditions and other factors.
The timing, price, and number of shares which may be repurchased under the program in the future will be based on market conditions, applicable securities laws, and other
factors considered by management. Share repurchases under the program may be made from time to time through solicited or unsolicited transactions in the open market or
in privately negotiated transactions. The share repurchase program does not obligate the Company to repurchase any specific amount of shares and may be suspended,
modified, or terminated at any time without prior notice. During the year ended December 31, 2022, the Company repurchased 115,782 shares of its Class A Common Stock
for approximately $1.1 million, under this share repurchase program at an average cost of $9.27 per share, including fees.
BBX Capital 2021 Incentive Plan
In May 2021, BBX Capital’s shareholders approved the BBX Capital 2021 Incentive Plan (the “2021 Plan”) which allows for the issuance of restricted stock awards of the
Company’s Class A Common Stock and Class B Common Stock, the grant of options to purchase shares of the Company’s Class A Common Stock and Class B Common
Stock, and the grant of performance-based cash awards. The 2021 Plan, as subsequently amended in May 2022, permits the issuance of awards for up to 1,700,000 shares of
the Company’s Class A Common Stock and up to 300,000 shares of the Company’s Class B Common Stock. There were no stock awards granted in 2021.
On January 18, 2022, the Compensation Committee of BBX Capital’s board of directors granted awards of 571,523 restricted shares of BBX Capital’s Class A Common
Stock to the Company’s executive and non-executive officers and 205,029 restricted shares of BBX Capital’s Class B Common Stock to an executive officer of the
Company under the 2021 Plan. The aggregate grant date fair value of the January 2022 awards was $8.0 million (a weighted average per share fair value of $10.34), and the
shares vest ratably in annual installments of approximately 258,850 shares over three periods beginning on October 1, 2022. As of December 31, 2022, the unrecognized
compensation expense associated with the awards was $4.7 million.
On October 1, 2022, 190,505 restricted shares of Class A Common Stock and 68,343 restricted shares of Class B Common Stock vested at a fair value of $1.5 million and
$0.5 million, respectively, based on the fair value of BBX Capital’s Class A Common Stock as of September 30, 2022 of $7.99 per share. In October 2022, award recipients
surrendered a total of 53,552 shares of Class A Common Stock and 11,248 shares of Class B Common Stock to BBX Capital to satisfy a tax withholding obligation of
$0.5 million associated with the vesting. The Company retired the surrendered shares.
BBX Capital had 381,018 and 136,686 of unvested restricted shares of Class A Common Stock and Class B Common Stock outstanding at December 31, 2022. The
weighted average remaining service period for the outstanding unvested restricted stock awards was 15 months at December 31, 2022. There were 1,128,477 and 94,971
shares of Class A Common Stock and Class B Common Stock available to be issued under the BBX Capital 2021 Incentive Plan as of December 31, 2022.
On January 17, 2023, the Compensation Committee of BBX Capital’s board of directors granted awards of 412,912 restricted shares of Class A Common Stock to the
Company’s executive and non-executive officers under the 2021 Plan. The aggregate grant date fair value of the January 2023 awards was $3.8 million (a weighted average
per share fair value of $9.10), and the shares vest ratably in annual installments of approximately 137,637 shares over three periods beginning on October 1, 2023.
Compensation cost for restricted stock awards is based on the fair value of the award on the measurement date, which is generally the grant date. The fair value of restricted
stock awards is generally based on the market price of the Company’s common stock on the grant date. For awards that are subject only to service conditions, the Company
recognizes compensation costs on a straight-line basis over the requisite service period of the awards, and the impact of forfeitures are recognized when they occur.
F- 40
Table of Contents
18. Noncontrolling Interests and Redeemable Noncontrolling Interest
Redeemable Noncontrolling Interest
The redeemable noncontrolling interest included in the Company’s consolidated statements of financial condition as of December 31, 2022 and 2021 of $4.4 million and
$1.1 million, respectively, is comprised of a redeemable noncontrolling interest associated with IT’SUGAR. The Company owns over 90% of IT’SUGAR’s Class B Units,
while the remaining Class B units are a noncontrolling interest held by an executive officer of IT’SUGAR and may be redeemed for cash at the holder’s option upon a
contingent event outside of the Company’s control.
As a result of the filing of the Bankruptcy Cases by IT’SUGAR and its subsidiaries, the Company deconsolidated IT’SUGAR as of September 22, 2020 and derecognized
the related redeemable noncontrolling interest in IT’SUGAR. However, as a result of IT’SUGAR emerging from the Bankruptcy Cases in June 2021 and the revesting of
BBX Sweet Holdings’ equity interests in IT’SUGAR, the Company consolidated the results of IT’SUGAR into its consolidated financial statements as of June 17, 2021 and
again recognized the redeemable noncontrolling interest in IT'SUGAR as of that date.
During the period from January 1, 2020 to September 22, 2020, the Company’s consolidated financial statements included the results of operations and financial position of
IT’SUGAR, a majority-owned subsidiary in which it held a controlling financial interest, and as a result, the Company was required to attribute net income or loss to a
redeemable noncontrolling interest in IT’SUGAR during such periods. The net loss attributable to the redeemable noncontrolling interest in IT’SUGAR was $4.1 million for
the period from January 1, 2020 to September 22, 2020. As a result of the filing of the Bankruptcy Cases by IT’SUGAR and its subsidiaries, the Company deconsolidated
IT’SUGAR as of September 22, 2020 and derecognized the related redeemable noncontrolling interest in IT’SUGAR. However, as a result of IT’SUGAR emerging from
the Bankruptcy Cases in June 2021 and the revesting of BBX Sweet Holdings’ equity interest in IT’SUGAR, the Company consolidated the results of IT’SUGAR into its
consolidated financial statements as of June 17, 2021 and is again attributing net income or loss to the redeemable noncontrolling interest in IT’SUGAR as of and
subsequent to that date. The net income (loss) attributable to the redeemable noncontrolling interest in IT’SUGAR was $20,000, $0.1 million and ($4.1 million) for years
ended December 31, 2022, 2021 and 2020.
Other Noncontrolling Interest
The noncontrolling interests included in the Company’s consolidated statements of financial condition as of December 31, 2022 and 2021 of $0.2 million and $1.1 million,
respectively, are comprised of (i) a noncontrolling equity interest in a restaurant the Company acquired through foreclosure and (ii) as of December 31, 2021, an $0.8
million noncontrolling interest in IT’SUGAR FL II, LLC. In October 2020, the Company acquired an additional 28% equity interest in the restaurant, which decreased the
noncontrolling interests from 47% at December 31, 2020 to 19% as of December 31, 2022 and 2021.
IT’SUGAR FL II, LLC operates IT’SUGAR’s location in Hawaii and was a consolidated variable interest entity. In December 2022, IT'SUGAR acquired the noncontrolling
interest in IT’SUGAR FL II, LLC and IT’SUGAR FL II, LLC was a wholly owned subsidiary of IT'SUGAR as of December 31, 2022.
During the years ended December 31, 2022, 2021 and 2020, the Company attributed net income (loss) to the other noncontrolling interests of ($0.4 million), $14,000, and
($0.7 million), respectively.
19. Earnings Per Common Share
The table below sets forth the computations of basic and diluted earnings per common share (in thousands, except per share data):
Basic and diluted earnings (loss) per common share
Numerator:
Net income (loss)
Net loss (income) attributable to noncontrolling interests
Net income (loss) available to shareholders
Denominator:
Weighted average number of common shares outstanding
Basic earnings (loss) per share:
Diluted earnings (loss) per share:
Numerator:
Net income (loss) available to shareholders
Denominator:
Basic weighted average number of common shares outstanding
Effect of dilutive restricted stock awards
Diluted weighted average number of common shares outstanding
Diluted earnings (loss) per common share:
2022
For the Years Ended December 31,
2021
2020
$
$
$
$
27,642
378
28,020
15,471
1.81
47,066
(155)
46,911
17,840
2.63
(47,090)
4,803
(42,287)
19,318
(2.19)
28,020
46,911
(42,287)
15,471
37
15,508
1.81
17,840
—
17,840
2.63
19,318
—
19,318
(2.19)
For periods prior to the spin-off on September 30, 2020, the weighted average shares outstanding was based on the number of shares issued in connection with the spin-off,
while for periods subsequent to spin-off, the weighted average shares outstanding is based on the actual weighted average number of shares outstanding.
No restricted stock awards were outstanding during the years ended December 31, 2021 and 2020.
F- 41
Table of Contents
20. Fair Value Measurement
Fair value is defined as the price that would be received on the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the
measurement date.
There are three main valuation techniques to measure the fair value of assets and liabilities: the market approach, the income approach and the cost approach. The market
approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. The income approach uses
financial models to convert future amounts to a single present amount and includes present value and option-pricing models. The cost approach is based on the amount that
currently would be required to replace the service capacity of an asset and is often referred to as current replacement cost.
The accounting guidance for fair value measurements defines an input fair value hierarchy that has three broad levels and gives the highest priority to quoted prices
(unadjusted) in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The input fair value hierarchy is
summarized below:
Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities
Level 2: Unadjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are
not active, or inputs other than quoted prices that are observable for the asset or liability
Level 3: Unobservable inputs for the asset or liability
There were no material assets or liabilities measured at fair value on a recurring or nonrecurring basis in the Company’s consolidated financial statements as of December
31, 2022 and 2021 except for securities available for sale as further described in Note 4.
Financial Disclosures about Fair Value of Financial Instruments
The tables below set forth information related to the Company’s consolidated financial instruments (in thousands):
Fair Value Measurements Using
Carrying
Amount
As of
Fair Value
As of
December 31,
December 31,
2022
2022
Quoted Prices
in Active
Markets
for Identical
Assets
(Level 1)
Significant
Other
Observable
Significant
Unobservable
Inputs
(Level 2)
Inputs
(Level 3)
Financial assets:
Cash and cash equivalents
Restricted cash
Certificate of deposit
Securities available for sale
Note receivable from Bluegreen Vacations
Financial liabilities:
Notes payable and other borrowings
$
127,581
750
5,000
18,548
50,000
127,581
750
5,000
18,548
46,635
127,581
750
—
13,091
—
—
—
5,000
5,457
—
—
—
—
—
46,635
38,543
37,997
—
—
37,997
Fair Value Measurements Using
Carrying
Amount
As of
Fair Value
As of
December 31,
December 31,
2021
2021
Quoted Prices
in Active
Markets
for Identical
Assets
(Level 1)
Significant
Other
Observable
Significant
Unobservable
Inputs
(Level 2)
Inputs
(Level 3)
Financial assets:
Cash and cash equivalents
Restricted cash
Securities available for sale
Note receivable from Bluegreen Vacations
Financial liabilities:
Notes payable and other borrowings
$
118,045
1,000
5,552
50,000
118,045
1,000
5,552
50,340
118,045
1,000
—
—
—
—
5,552
—
—
—
—
50,340
54,883
56,360
—
—
56,360
Management has made estimates of fair value that it believes to be reasonable. However, because there is no active market for many of these financial instruments, the fair
values of the majority of the Company’s financial instruments have been derived using the income approach technique with Level 3 unobservable inputs. Estimates used in
net present value financial models rely on assumptions and judgments regarding issues in which the outcome is unknown, and actual results or values may differ
significantly from these estimates. The Company’s fair value estimates do not consider the tax effect that would be associated with the disposition of the assets or liabilities
at their fair value estimates. As such, the estimated value upon sale or disposition of the asset may not be received, and the estimated value upon disposition of the liability
in advance of its scheduled maturity may not be paid.
F- 42
Table of Contents
The amounts reported in the consolidated statements of financial condition for cash and cash equivalents and restricted cash approximate fair value.
The estimated fair values of the Company’s securities available for sale and certificate of deposit were measured using the market approach with Level 2 inputs for
corporate bonds and certificate of deposit based on estimated market prices of similar financial instruments and Level 1 inputs for treasury securities.
The estimated fair value of the Company’s note receivable from Bluegreen Vacations was measured using the income approach with Level 3 inputs by discounting the
forecasted cash inflows associated with the note using an estimated market discount rate.
The fair values of the Company’s Community Development Bonds, which are included in notes payable and other borrowings above, were measured using the market
approach with Level 3 inputs obtained based on estimated market prices of similar financial instruments.
The fair values of the Company’s notes payable and other borrowings (other than Community Development Bonds above) were measured using the income approach with
Level 3 inputs by discounting the forecasted cash outflows using estimated market discount rates.
The Company’s financial instruments also include trade accounts receivable, accounts payable, and accrued liabilities. The carrying amount of these financial instruments
approximate their fair values due to their short-term maturities.
The Company is exposed to credit related losses in the event of non-performance by counterparties to the financial instruments with a maximum exposure equal to the
carrying amount of the assets. The Company’s exposure to credit risk consists of accounts receivable balances and its Bluegreen Vacations note receivable.
21. Certain Relationships and Related Party Transactions
The Company may be deemed to be controlled by Alan B. Levan, the Company’s Chairman, John E. Abdo, the Company’s Vice Chairman, Jarett S. Levan, the Company’s
Chief Executive Officer and President, and Seth M. Wise, the Company’s Executive Vice President. Together, they may be deemed to beneficially own shares of BBX
Capital’s Class A Common Stock and Class B Common Stock representing approximately 82% of BBX Capital’s total voting power. Mr. Alan B. Levan serves as the
Chairman, Chief Executive Officer, and President of Bluegreen Vacations, Mr. Abdo serves as Vice Chairman of Bluegreen Vacations, Mr. Jarett Levan serves as a director
of Bluegreen Vacations and Mr. Wise serves as a director of Bluegreen Vacations.
During the years ended December 31, 2022, 2021 and 2020, respectively, the Company recognized $2.0 million, $1.2 million, and $1.0 million, respectively, of income for
providing office space, risk management, and management advisory services to Bluegreen Vacations. During the year ended December 31, 2021, the Company
paid $158,000 for office space provided by Bluegreen Vacations to the Company. Bluegreen Vacations ceased providing office space to the Company in March 2021, and
the Company began providing office space to Bluegreen Vacations in November 2021. The amounts paid or reimbursed are an allocation of the actual cost of providing the
services or space.
The Company provides management services to the Altman Companies for which the Company recognized $0.3 million, $0.3 million and $0.2 million, respectively, net of
services providing to the Company by the Altman Companies for the years ended December 31, 2022, 2021 and 2020 in return for such services. The Company began
providing office space to the Altman Companies in June 2022 and accrued $210,000 of amounts due from the Altman Companies related to such space for the year ended
December 31, 2022.
During the years ended December 31, 2022 and 2021 and the three months ended December 31, 2020, the Company paid Abdo Companies, Inc. approximately $175,000,
$160,000 and $38,000, respectively, for certain management services and rent. John E. Abdo, the Company’s Vice Chairman, is the principal shareholder and Chief
Executive Officer of Abdo Companies, Inc.
A subsidiary of BBXRE recognized $0.3 million interest income on loans receivable from IT’SUGAR for the year ended December 31, 2021, which was eliminated in
consolidation. Interest income of $0.1 million on loans receivable from IT’SUGAR for the period beginning on January 1, 2021 to June 16, 2021 was not eliminated in
consolidation as the Company did not consolidate IT’SUGAR during this period. See Note 23 for further discussion.
Certain of the Company's executive officers have made investments with their own funds in real estate joint ventures in which BBXRE has invested in the managing
member. The executive officers' investments in the real estate joint ventures will be entitled to profits similar to those earned by non-managing members rather than the
profits to which BBXRE will be entitled as the managing member.
Prior to the spin-off of BBX Capital on September 30, 2020, expenses related to certain support functions paid for by Bluegreen Vacations, including executive services,
treasury, tax, accounting, legal, internal audit, human resources, public and investor relations, general management, shared information technology systems, corporate
governance activities, and centralized managed employee benefit arrangements, were allocated to the Company on the basis of direct usage when identifiable, while the
remainder of the expenses, including costs related to executive compensation, were allocated primarily on a pro-rata basis of combined revenues and equity in earnings of
unconsolidated joint ventures of Bluegreen Vacations and its subsidiaries. The expenses related to these support functions allocated to the Company and included in selling,
general and administrative expenses in the Company’s consolidated statements of operations and comprehensive loss or income for the year ended December 31,
2020 was $12.7 million. The allocated support function costs were recognized as contributed capital in the Company’s consolidated statements of financial condition for the
year ended December 31, 2020.
Upon the consummation of the spin-off, all agreements with Bluegreen Vacations were terminated and replaced with a Transition Services Agreement, Tax Matters
Agreement, and Employee Matters Agreement.
F- 43
Table of Contents
The Transition Services Agreement generally sets out the respective rights, responsibilities and obligations of Bluegreen Vacations and BBX Capital with respect to the
support services to be provided to one another after the spin-off, as may be necessary to ensure an orderly transition. The Transition Services Agreement establishes a
baseline charge for certain categories or components of services to be provided, which will be at cost unless the parties mutually agree to a different charge. The Transition
Services Agreement was effective on September 30, 2020 and will continue for a minimum term of one year, provided that after that year, Bluegreen Vacations or BBX
Capital may terminate the Transition Services Agreement with respect to any or all services provided thereunder at any time upon thirty (30) days prior written notice to the
other party. Either party may renew or extend the term of the Transition Services Agreement with respect to the provision of any service which has not been previously
terminated.
The Tax Matters Agreement generally sets out the respective rights, responsibilities, and obligations of Bluegreen Vacations and BBX Capital with respect to taxes
(including taxes arising in the ordinary course of business and taxes incurred as a result of the spin-off), tax attributes, tax returns, tax contests, and certain other related tax
matters. The Tax Matters Agreement allocates responsibility for the preparation and filing of certain tax returns (and the payment of taxes reflected thereon). Under the Tax
Matters Agreement, Bluegreen Vacations will generally be liable for its own taxes and taxes of all of its subsidiaries (other than the taxes of BBX Capital and its
subsidiaries, for which BBX Capital shall be liable) for all tax periods (or portion thereof) ending on September 30, 2020, the effective date of the spin-off. BBX Capital
will be responsible for its taxes, including for taxes of its subsidiaries, as well as for taxes of Bluegreen Vacations arising as a result of the spin-off (including any taxes
resulting from an election under Section 336(e) of the Internal Revenue Code of 1986, as amended (the “Code”) in connection with the spin-off). BBX Capital will bear
liability for any transfer taxes incurred in the spin-off. Each of Bluegreen Vacations and BBX Capital will indemnify each other against any taxes to the extent paid by one
party but allocated to the other party under the Tax Matters Agreement, or arising from any breach of its covenants thereunder, and related out-of-pocket costs and expenses.
The Employee Matters Agreement sets out the respective rights, responsibilities, and obligations of Bluegreen Vacations and BBX Capital with respect to the transfer of
certain employees of the businesses of BBX Capital and related matters, including benefit plans, terms of employment, retirement plans and other employment-related
matters. Under the Employee Matters Agreement, BBX Capital or its subsidiaries will generally assume or retain responsibility as employer of employees whose duties
primarily relate to their respective businesses as well as all obligations and liabilities with respect thereto.
The Company was also previously a party to an Agreement to Allocate Consolidated Income Tax Liability and Benefits with Bluegreen Vacations and Bluegreen that was
terminated in connection with the spin-off. See Note 13 for further discussion.
As further described in Note 1, in connection with the spin-off, Bluegreen Vacations also issued a $75.0 million note payable to BBX Capital that accrues interest at a rate of
6% per annum and requires payments of interest on a quarterly basis. Under the terms of the note, Bluegreen Vacations has the option in its discretion to defer interest
payments under the note, with interest on the entire outstanding balance thereafter to accrue at a cumulative, compounded rate of 8% per annum until such time as
Bluegreen Vacations is current on all accrued payments under the note, including deferred interest. All outstanding amounts under the note will become due and payable on
September 30, 2025 or earlier upon certain other events. Bluegreen Vacations is permitted to prepay the note in whole or in part at any time, and in December 2021,
Bluegreen Vacations made a $25.0 million prepayment of the note reducing the outstanding note balance from $75.0 million to $50.0 million. Included in interest income in
the Company’s consolidated statement of operations and comprehensive income for the years ended December 31, 2022, 2021 and 2020 was $3.0 million, $4.5 million and
$1.1 million, respectively, relating to accrued interest on the note receivable from Bluegreen Vacations.
The components of net transfers from Bluegreen Vacations in the consolidated statements of changes in equity consisted of the following (in thousands):
Cash pooling
Corporate overhead allocations
Asset transfers
Income taxes
Net transfers from Bluegreen Vacations
22. Segment Reporting
For the Year Ended
December 31,
2020
$
$
81,581
12,694
75,320
(1,685)
167,910
Operating segments are defined as components of an enterprise about which separate financial information is available that is regularly reviewed by the chief operating
decision maker (“CODM”) in assessing performance and deciding how to allocate resources. Reportable segments consist of one or more operating segments with similar
economic characteristics, products and services, production processes, type of customer, distribution system or regulatory environment.
F- 44
Table of Contents
The information provided for segment reporting is obtained from internal reports utilized by the Company’s CODM, and the presentation and allocation of assets and results
of operations may not reflect the actual economic costs of the segments as standalone businesses. If a different basis of allocation were utilized, the relative contributions of
the segments might differ, but the relative trends in the segments’ operating results would, in management’s view, likely not be impacted.
The Company’s three reportable segments are its principal investments: BBX Capital Real Estate, BBX Sweet Holdings, and Renin. See Note 1 for a description of the
Company’s reportable segments.
In the segment information for the years ended December 31, 2022, 2021, and 2020, amounts set forth in the column entitled “Other” include the Company’s investments in
various operating businesses, including a controlling financial interest in a restaurant acquired in connection with a loan receivable default. The amounts set forth in the
column entitled “Reconciling Items and Eliminations” include unallocated corporate general and administrative expenses, interest income on the note receivable from
Bluegreen Vacations, and elimination adjustments related to transactions between consolidated subsidiaries that are required to be eliminated in consolidation.
The Company evaluates segment performance based on segment income or loss before income taxes.
The table below sets forth the Company’s segment information as of and for the year ended December 31, 2022 (in thousands):
BBX Capital
Real Estate
BBX Sweet
Holdings
Renin
Other
Reconciling
Items and
Eliminations
Segment Total
Revenues:
Trade sales
Sales of real estate inventory
Interest income
Net gains on sales of real estate assets
Other revenue
Total revenues
Costs and expenses:
Cost of trade sales
Cost of real estate inventory sold
Interest expense
Recoveries from loan losses, net
Impairment losses
Selling, general and administrative expenses
Total costs and expenses
Operating income (losses)
Equity in net earnings of unconsolidated real estate joint ventures
Other (expense) income
Foreign exchange (loss) gain
Income (loss) before income taxes
Total assets
Expenditures for property and equipment
Depreciation and amortization
Debt accretion and amortization
Cash and cash equivalents
Investments in and advances to unconsolidated real estate joint ventures
Goodwill
Notes payable and other borrowings
$
$
$
$
$
$
$
$
$
$
—
27,794
3,617
24,289
1,835
57,535
—
11,463
—
(4,835)
311
13,772
20,711
36,824
38,414
(7)
—
75,231
225,786
—
(271)
261
107,069
49,415
—
1,946
F- 45
139,718
—
—
—
—
139,718
83,307
—
1,015
—
238
55,617
140,177
(459)
—
718
(70)
189
161,337
11,383
6,629
61
7,246
—
14,274
18,150
131,951
—
—
—
—
131,951
127,623
—
3,588
—
—
17,077
148,288
(16,337)
—
(57)
950
(15,444)
102,601
1,653
3,344
128
1,060
—
4,140
47,838
8,470
—
—
—
2,572
11,042
2,805
—
2
—
—
7,224
10,031
1,011
—
4
—
1,015
7,134
110
140
—
2,643
—
—
9
(14)
—
2,376
—
(563)
1,799
(14)
—
(2,206)
—
—
22,525
20,305
(18,506)
—
306
—
(18,200)
65,983
1,593
371
—
9,563
—
—
(29,400)
280,125
27,794
5,993
24,289
3,844
342,045
213,721
11,463
2,399
(4,835)
549
116,215
339,512
2,533
38,414
964
880
42,791
562,841
14,739
10,213
450
127,581
49,415
18,414
38,543
Table of Contents
The table below sets forth the Company’s segment information as of and for the year ended December 31, 2021 (in thousands):
BBX Capital
Real Estate
BBX Sweet
Holdings
Renin
Other
Reconciling
Items and
Eliminations
Segment Total
Revenues:
Trade sales
Sales of real estate inventory
Interest income
Net gains on sales of real estate assets
Other revenue
Total revenues
Costs and expenses:
Cost of trade sales
Cost of real estate inventory sold
Interest expense
Recoveries from loan losses, net
Impairment losses
Selling, general and administrative expenses
Total costs and expenses
Operating income (losses)
Equity in net earnings of unconsolidated real estate joint
ventures
Other (expense) income
Gain on the consolidation of IT'SUGAR, LLC
Foreign exchange gain
Income (loss) before income taxes
Total assets
Expenditures for property and equipment
Depreciation and amortization
Debt accretion and amortization
Cash and cash equivalents
Investments in and advances to unconsolidated real estate
joint ventures
Goodwill
Notes payable and other borrowings
$
$
$
$
$
$
$
$
$
$
—
65,479
2,048
643
1,504
69,674
—
29,690
—
(7,774)
—
7,587
29,503
40,171
18,154
(14)
—
—
58,311
179,619
—
—
737
66,558
52,966
—
7,312
84,215
—
36
—
—
84,251
52,497
—
429
—
38
31,524
84,488
146,255
—
—
—
—
146,255
130,366
—
1,830
—
—
15,857
148,053
(237)
(1,798)
—
131
15,890
—
15,784
143,916
4,283
3,181
21
9,792
—
14,274
14,421
—
—
—
812
(986)
101,647
3,099
3,037
113
1,369
—
4,140
44,124
7,616
—
—
—
2,045
9,661
2,291
—
2
—
—
5,978
8,271
1,390
—
—
—
—
1,390
7,745
185
118
—
2,937
—
—
26
(8)
—
4,329
—
(565)
3,756
(8)
—
(822)
—
—
15,068
14,238
(10,482)
—
224
—
—
(10,258)
100,428
959
122
—
37,389
—
—
(11,000)
238,078
65,479
6,413
643
2,984
313,597
185,146
29,690
1,439
(7,774)
38
76,014
284,553
29,044
18,154
341
15,890
812
64,241
533,355
8,526
6,458
871
118,045
52,966
18,414
54,883
(1) The above segment information includes the operations of IT’SUGAR as of June 17, 2021, the date the Company reconsolidated IT’SUGAR.
F- 46
Table of Contents
The table below sets forth the Company’s segment information as of and for the year ended December 31, 2020 (in thousands):
BBX Capital
Real Estate
BBX Sweet
Holdings
Renin
Other
Reconciling
Items and
Eliminations
Segment Total
Revenues:
Trade sales
Sales of real estate inventory
Interest income
Net gains on sales of real estate assets
Other revenue
Total revenues
Costs and expenses:
Cost of trade sales
Cost of real estate inventory sold
Interest expense
Recoveries from loan losses, net
Impairment losses
Selling, general and administrative expenses
Total costs and expenses
Operating income (losses)
Equity in net earnings of unconsolidated real estate joint
ventures
Loss on the deconsolidation of IT'SUGAR, LLC
Other income (expense)
Foreign exchange loss
Income (loss) before income taxes
Total assets
Expenditures for property and equipment
Depreciation and amortization
Debt accretion and amortization
Cash and cash equivalents
Real estate equity method investments
Goodwill
Notes payable and other borrowings
$
$
$
$
$
$
$
$
$
$
—
20,363
1,240
255
1,454
23,312
—
13,171
—
(8,876)
2,742
6,758
13,795
9,517
465
—
6
—
9,988
165,732
—
—
287
31,133
58,010
—
26,762
49,155
—
29
—
281
49,465
41,482
—
193
—
25,303
26,855
93,833
(44,368)
—
(3,326)
221
—
(47,473)
28,668
3,155
4,244
168
1,163
—
—
1,417
93,036
—
—
—
—
93,036
83,563
—
615
—
—
11,735
95,913
(2,877)
—
—
(3)
(692)
(3,572)
104,654
2,118
1,380
243
2,438
—
8,277
45,261
5,019
—
1
—
1,461
6,481
1,983
—
10
—
2,727
4,684
9,404
(2,923)
—
—
8
—
(2,915)
7,096
72
106
—
1,539
—
—
43
—
—
1,129
—
(194)
935
—
—
(581)
—
—
15,940
15,359
(14,424)
—
—
58
—
(14,366)
141,506
—
104
—
53,764
—
—
—
147,210
20,363
2,399
255
3,002
173,229
127,028
13,171
237
(8,876)
30,772
65,972
228,304
(55,075)
465
(3,326)
290
(692)
(58,338)
447,656
5,345
5,834
698
90,037
58,010
8,277
73,483
(2) The above segment information excludes the operations of IT’SUGAR as of September 22, 2020, the date the Company deconsolidated IT’SUGAR.
23. IT’SUGAR Bankruptcy
In March 2020, as a result of various factors, including government-mandated closures and Center for Disease Control and the World Health Organization advisories in
connection with the COVID-19 pandemic, IT’SUGAR closed all of its retail locations and furloughed all store employees and the majority of its corporate employees.
Between May 2020 and September 2020, IT’SUGAR reopened nearly all of its approximately 100 locations that were open prior to the pandemic as part of a phased
reopening plan which included revised store floor plans, increased sanitation protocols, and the gradual recall of furloughed store and corporate employees to full or part-
time employment.
IT’SUGAR ceased paying rent to the landlords of its closed locations in April 2020 and engaged in negotiations with its landlords for rent abatements, deferrals, and other
modifications for both the period of time that the locations were closed and the subsequent period that the locations had been opened and operating under conditions which
had been affected by the pandemic. In addition to its unpaid rental obligations, IT’SUGAR ceased paying various outstanding obligations to its vendors.
F- 47
Table of Contents
Although IT’SUGAR was able to reopen its retail locations and received an advance of $2.0 million from a subsidiary of BBX Capital under an existing credit facility,
IT’SUGAR was unable to maintain sufficient liquidity to sustain its operations. In particular, although a significant portion of its retail locations were reopened during the
three months ended September 30, 2020, IT’SUGAR’s total revenues for the period declined by approximately 50.4% as compared to the comparable period in 2019. As a
result, on September 22, 2020, IT’SUGAR and its subsidiaries filed voluntary petitions to reorganize under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court.
In connection with the Bankruptcy Cases, on October 7, 2020, IT’SUGAR obtained approval by the Bankruptcy Court of a $4.0 million debtor-in-possession (“DIP”) credit
facility to be made available by a wholly-owned subsidiary of the Company, and the entire $4.0 million available under the DIP credit facility was funded to IT’SUGAR
during the three months ended December 31, 2020.
As a result of the filings, the uncertainties surrounding the nature, timing, and specifics of the Bankruptcy Cases, and the Company’s resulting loss of control and significant
influence over IT’SUGAR, the Company determined that IT’SUGAR is a VIE in which the Company is not the primary beneficiary and deconsolidated IT’SUGAR in
connection with the filings. In connection with the deconsolidation of IT’SUGAR, the Company recognized a noncontrolling equity investment in IT’SUGAR at its
estimated fair value of $12.7 million and a $3.3 million loss based upon the difference between the carrying amount of IT’SUGAR (including its assets and liabilities and
the redeemable noncontrolling interest in it) and the Company’s estimated fair value of its noncontrolling equity investment.
Following the deconsolidation of IT’SUGAR, the Company’s noncontrolling equity investment in IT’SUGAR was being accounted for at cost less impairment, if any, plus
or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Equity investments are
accounted for at cost less impairment when the investor does not have significant influence over the investee and the equity investment has no readily determinable fair
value. Under this method, equity investments are accounted for at historical cost and adjusted if there is evidence that the fair market value of the equity investment has
declined below the historical cost.
IT’SUGAR’s results of operations, and cash flows through September 22, 2020 are included in the Company’s financial statements, as the Company continued to hold a
substantive equity investment in IT’SUGAR during that period.
F- 48
Table of Contents
The following table summarizes the assets, liabilities, and net equity of IT’SUGAR as of September 22, 2020, the date it was deconsolidated from the Company’s financial
statements (in thousands):
ASSETS
Cash and cash equivalents
Restricted cash
Trade accounts receivable, net
Trade inventory
Property and equipment, net
Goodwill
Intangible assets, net
Operating lease assets
Other assets
Total assets
LIABILITIES AND EQUITY
Liabilities:
Accrued expenses
Operating lease liabilities
Notes payable and other borrowings
Total liabilities
Equity:
Additional paid-in capital
Accumulated earnings
Noncontrolling interests
Total equity
Total liabilities and equity
September 22,
2020
1,045
20
103
6,213
22,162
14,864
3,222
64,889
1,707
114,225
13,441
80,388
6,199
100,028
59,809
(50,102)
4,490
14,197
114,225
$
$
$
Included in total liabilities in the above table are approximately $11.7 million of pre-petition liabilities, of which $7.7 million are pre-petition lease payments and
$4.0 million are pre-petition obligations to other creditors, including supplies and vendors.
Emergence from Bankruptcy and Reconsolidation of IT’SUGAR
Emergence from Bankruptcy
In April 2021, IT’SUGAR filed its proposed plan of reorganization with the Bankruptcy Court. Following approval of the proposed plan by IT’SUGAR’s unsecured
creditors, the Bankruptcy Court entered an order (the “Confirmation Order”) on June 16, 2021 confirming the plan of reorganization filed by IT’SUGAR, as modified by the
Confirmation Order (the “Plan”), and the Plan became effective on June 17, 2021 (the “Effective Date”).
Pursuant to the terms of the Plan, claims against IT’SUGAR were treated as follows:
● The $4.0 million DIP credit facility and a $6.0 million pre-petition line of credit held by the Company’s wholly-owned subsidiary were repaid in full through the
Exit Facility (as defined and described below);
● A secured equipment note held by the Company’s wholly-owned subsidiary was assumed, ratified, and reinstated on the Effective Date;
● Each holder of an allowed construction / mechanic’s lien claim received payment in full in cash on the Effective Date or, in some cases, received such payment as
promptly as was practicable after the Effective Date;
● Each holder of an allowed general unsecured claim received, in full satisfaction of such claims, a one-time lump sum distribution equal to 15% of its claim on the
Effective Date or, in some cases, received such payment soon after the Effective Date; and
● Holders of subordinated claims did not receive any distributions in respect thereof.
Payments of claims made pursuant to the Plan, along with the payment of administrative expenses and professional fees, were funded by IT’SUGAR’s cash on-hand and net
proceeds from the Exit Facility provided by the Company.
F- 49
Table of Contents
Exit Facility
On the Effective Date, the Company’s wholly-owned subsidiary entered into a secured exit credit facility with IT’SUGAR (the “Exit Facility”) which provided for advances
to IT’SUGAR of up to $13.0 million. The Company’s wholly-owned subsidiary advanced $13.0 million to IT’SUGAR under the Exit Facility, less the repayment of the
$4.0 million DIP credit facility due from IT’SUGAR and the $6.0 million pre-petition line of credit due from IT’SUGAR (both of which were superseded and replaced by
the Exit Facility). Amounts outstanding under the Exit Facility bear interest at 5% per annum. In addition to monthly payments of interest due under the facility, the Exit
Facility requires monthly payments of principal of $325,000 commencing on January 1, 2022. The Exit Facility matures on April 1, 2025. The Exit Facility had an
outstanding balance of $7.1 million and $11.0 million as of December 31, 2022 and 2021 which was eliminated in the Company’s consolidated financial statements as of
December 31, 2022 and 2021, respectively.
Ownership and Reconsolidation of IT’SUGAR
Pursuant to the terms of the Plan, the Company’s equity interests in IT’SUGAR were revested on the Effective Date, and all organizational documents of IT’SUGAR were
assumed, ratified, and reinstated.
As a result of the confirmation and effectiveness of the Plan and the revesting of its equity interests in IT’SUGAR, the Company was deemed to have reacquired a
controlling financial interest in IT’SUGAR and consolidated the results of IT’SUGAR into its consolidated financial statements as of the Effective Date, the date that the
Company reacquired control of IT’SUGAR.
Allocation of IT’SUGAR’s Fair Value upon Consolidation
The Company accounted for the consolidation of IT’SUGAR upon the revesting of its equity interests under the acquisition method of accounting, which requires that the
assets acquired and liabilities assumed associated with an acquiree be recognized at their fair values at the consolidation date. As a result, the Company remeasured the
carrying value of its equity interests in IT’SUGAR at fair value as of the Effective Date, with the remeasurement adjustment recognized in the Company’s statement of
operations, and recognized goodwill based on the difference between (i) the fair values of IT’SUGAR’s identifiable assets and liabilities at the consolidation date and (ii) the
fair values of the Company’s interests in IT’SUGAR and the noncontrolling interests in IT’SUGAR.
The following table summarizes the fair value of the assets acquired and liabilities assumed of IT’SUGAR at the consolidation date (in thousands):
Cash
Trade accounts receivable
Trade inventory
Property and equipment
Identifiable intangible assets (1)
Operating lease assets (2)
Other assets
Total assets acquired
Accounts payable
Accrued expenses
Other liabilities
Operating lease liabilities
Notes payable and other borrowings(3)
Total liabilities assumed
Fair value of identifiable net assets
Fair value of net assets acquired
Fair value of redeemable noncontrolling interest
Fair value of IT'SUGAR
Goodwill
Gain on the consolidation of IT'SUGAR(4)
$
$
$
6,909
584
5,337
19,291
9,670
54,253
3,323
99,367
(2,517)
(8,445)
(124)
(62,975)
(10,054)
(84,115)
15,252
28,590
936
29,526
14,274
15,890
(1)
(2)
Identifiable intangible assets primarily represents the estimated fair value of IT’SUGAR’s trademark, which is being amortized over an estimated expected useful life of 15 years.
Includes a net intangible liability of $8.7 million related to off market rents related to certain of IT’SUGAR’s retail locations that is expected to be recognized over a weighted
average lease term of approximately 8 years.
(3) Notes payable and other borrowings reflects amounts due to the Company’s wholly-owned subsidiary that have been eliminated in consolidation as of and subsequent to the
consolidation date.
(4) The gain is comprised of the remeasurement of the Company’s equity interest in IT’SUGAR at fair value.
F- 50
Table of Contents
The fair values reported in the above table were estimated by the Company using available market information and applicable valuation methods. As considerable judgment
is involved in estimates of fair value, the fair values presented above are not necessarily indicative of the amounts that the Company could realize in a current market
exchange. The use of different market assumptions and/or estimation methods could have a material effect on the estimated fair value amounts.
The following summarizes the Company’s methodologies for estimating the fair values of certain assets and liabilities associated with the consolidation of IT’SUGAR and
the fair value of BBX Capital’s existing investment in IT’SUGAR.
Property and Equipment – Property and equipment acquired consists primarily of leasehold improvements at IT’SUGAR’s retail locations. The fair value of IT’SUGAR’s
property and equipment was estimated based on the replacement cost approach.
Identifiable Intangible Assets – The primary identifiable intangible asset acquired consists of IT’SUGAR’s trademark. The fair value of the acquired trademark was
estimated using the relief-from-royalty method, a form of the income approach. Under this approach, the fair value was estimated by calculating the present value using a
risk-adjusted discount rate of the expected future royalty payments that would have to be paid if the IT’SUGAR trademark was not owned.
Operating Lease Assets and Lease Liabilities – Operating lease assets and lease liabilities were measured based on the present value of the fixed lease payments included in
IT’SUGAR’s lease agreements pursuant to the provisions of Accounting Standards Codification 842, Leases. In addition, IT’SUGAR’s operating lease assets have been
adjusted to reflect an estimate of favorable or unfavorable terms of IT’SUGAR’s lease agreements when compared with market terms. These adjustments were estimated by
calculating the present value using a risk-adjusted discount rate of the difference between the contractual amounts to be paid pursuant to the lease agreements and the
estimate of market lease rates at the consolidation date.
Goodwill – Goodwill recognized in connection with the consolidation of IT’SUGAR reflects the difference between the (i) the fair values of IT’SUGAR’s identifiable assets
and liabilities at the consolidation date and (ii) the fair values of the Company’s existing interests and any noncontrolling interests in IT’SUGAR at the consolidation date.
Remeasurement of Existing Investment in IT’SUGAR – As part of the acquisition method of accounting, the Company is required to remeasure the carrying value of its
existing interests in IT’SUGAR at fair value as of the consolidation date, with the remeasurement adjustment recognized in the Company’s consolidated statement of
operations and comprehensive income. The Company applied an income approach utilizing a discounted cash flow methodology to estimate the fair value of its investment
in IT’SUGAR as of the consolidation date. The Company’s discounted cash flow methodology established an estimate of the fair value of IT’SUGAR by estimating the
present value of the projected future cash flows to be generated from IT’SUGAR. The discount rate applied to the projected future cash flows to arrive at the present value
is intended to reflect all risks of ownership and the associated risks of realizing the stream of projected future cash flows associated with IT’SUGAR. The most significant
assumptions used in the discounted cash flow methodology to estimate the preliminary fair value of IT’SUGAR were the terminal value, the discount rate, and the forecast
of future cash flows.
Redeemable Noncontrolling Interest – Redeemable noncontrolling interest represents a 9.65% interest in IT'SUGAR’s Class B Units adjusted for the cumulative Class A
Units preferred return outstanding.
The results of operations of IT’SUGAR are included in the Company’s consolidated statement of operations and comprehensive income for the year ended December 31,
2022, but are not included in the Company's consolidated statement of operations and comprehensive income during the year ended December 31, 2021 for the period from
January 1, 2021 to June 16, 2021 and not included in the Company's consolidated statement of operations and comprehensive income during the year ended December 31,
2020 for the period from September 20, 2020 to December 31, 2020. The following table shows IT’SUGAR’s trade sales and income before income taxes included in the
Company’s consolidated statements of operations and comprehensive income for the dates indicated (in thousands):
Trade sales
Income (loss) before income taxes
2022
For the Years Ended December 31,
2021
2020
$
$
119,302
2,307
62,161
2,516
31,794
(41,182)
F- 51
Table of Contents
The following unaudited financial data presents the Company's actual revenues and earnings for the year ended December 31, 2022 and the Company's pro forma revenues
and earnings for the years ended December 31, 2021 and 2020 as if the Company consolidated IT’SUGAR as a result of its emergence from bankruptcy on January 1, 2020
(in thousands):
Trade sales
Income (loss) before income taxes
Income (loss)
Net income (loss) income attributable to shareholders
Actual
2022
Unaudited Pro Forma
For the Years Ended December 31,
2021
2020
$
$
$
$
280,125
42,791
27,642
28,020
277,769
52,788
39,690
39,146
162,056
(62,156)
(49,093)
(43,596)
The unaudited pro forma financial data for the year ended December 31, 2020 includes $3.7 million in legal, advisory, and other costs related to the bankruptcy
proceedings, while the unaudited pro forma financial data for the year ended December 31, 2021 excludes gains related to the extinguishment of certain of IT’SUGAR’s
obligations pursuant to the Plan and the gain recognized by the Company upon the consolidation of IT’SUGAR.
The unaudited pro forma financial data reported in the above table does not purport to represent what the actual results of the Company’s operations would have been
assuming that the consolidation date was January 1, 2020, nor does it purport to predict the Company’s results of operations for future periods.
24. Subsequent Events
Subsequent events have been evaluated through the date the financial statements were issued. As of such date, other than described elsewhere herein, there were no
subsequent events identified that required recognition or disclosure.
F- 52
Table of Contents
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
Evaluation of Disclosure Controls and Procedures
ITEM 9A. CONTROLS AND PROCEDURES
We have established disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) to make known material information concerning the
Company, including its subsidiaries, to those officers who certify our financial reports and to other members of our senior management. As of December 31, 2022, our
management evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, our disclosure controls and procedures. Based on that evaluation,
our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2022, our disclosure controls and procedures were effective to ensure that
information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods
specified in the rules and forms of the Securities and Exchange Commission and is accumulated and communicated to our management, including our Chief Executive
Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures and internal control over
financial reporting will prevent all errors and all improper conduct. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute,
assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of
controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all
control issues and instances of improper conduct, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty
and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or
more people, or by management override of the control. Further, the design of any control system is based in part upon assumptions about the likelihood of future events,
and there can be no assurance that any such design will succeed in achieving its stated goals under all potential future conditions.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange Act Rules 13a-15(f) and 15d-
15(f). Our 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 accounting principles generally accepted in the United States of America. As of December 31, 2022, our
management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our internal control over financial reporting
based on the framework in Internal Control – Integrated Framework – 2013 issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Based on such evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2022.
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.
Changes in Internal Control Over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the quarter ended December 31, 2022 that has materially affected, or is reasonably
likely to materially affect, our internal control over financial reporting.
57
Table of Contents
None
ITEM 9B. OTHER INFORMATION
58
Table of Contents
PART III
The remaining information required by Items 10 through 14 of Part III of Form 10-K will be provided by incorporating such information by reference to our Definitive
Proxy Statement on Schedule 14A relating to our 2023 Annual Meeting of Shareholders in the event it is filed with the Securities and Exchange Commission by no later
than 120 days after December 31, 2022. Alternatively, we may provide the information required by Items 10 through 14 of Part III of Form 10-K in an amendment to this
Annual Report on Form 10-K under cover of Form 10-K/A, in which case such amendment will be filed with the Securities and Exchange Commission by the end of such
120 day period.
59
Table of Contents
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
a) Documents Filed as Part of this Report:
1) Financial Statements
The following consolidated financial statements of BBX Capital, Inc. and its subsidiaries are included herein under Part II, Item 8 of this Report.
Reports of Independent Registered Public Accounting Firm.
Consolidated Statements of Financial Condition as of December 31, 2022 and 2021.
Consolidated Statements of Operations and Comprehensive Income for each of the years in the three year period ended December 31,
2022.
Consolidated Statements of Changes in Equity for each of the years in the three year period ended December 31, 2022.
Consolidated Statements of Cash Flows for each of the years in the three year period ended December 31, 2022.
Notes to Consolidated Financial Statements.
2) Financial Statement Schedules
All schedules are omitted as the required information is either not applicable or presented in the financial statements or related notes.
3) Exhibits
60
Table of Contents
The following exhibits are either filed as a part of or furnished with this report or are incorporated herein by reference to documents previously filed as indicated below:
Exhibit
Number
Description
2.1
Asset Purchase Agreement, dated as of October 22, 2020, by and among Renin Canada Corp., Renin US LLC, and the
Toronto-Dominion Bank
3.1
Form of Articles of Incorporation of the Registrant
3.2
Form of Bylaws of the Registrant
4.1
Rights Agreement, dated as of September 25, 2020, between BBX Capital Florida LLC and American Stock Transfer &
Trust Company, LLC, as Rights Agent
Loan Agreement by and among Renin Canada Corp. and Renin US LLC, as borrowers, and The Toronto-Dominion
Bank, as lender, dated May 12, 2017, as amended by Amending Agreement, dated September 22, 2017, as further
amended by Amending Agreement, dated March 29, 2018, as further amended by Amending Agreement dated
October 1, 2018, as further amended by Amending Agreement, dated September 23, 2019, as further amended by
Amending Agreement, dated February 26, 2020, and as further amended by Amending Agreement, dated June 5, 2020
Credit Facility Agreement, dated as of October 22, 2020, by and among Renin Canada Corp., Renin US LLC, and The
Toronto-Dominion Bank
First Amendment to the 2020 TD Bank Credit Facility Agreement, dated as of July 13, 2021, by and among Renin
Canada Corp., Renin US LLC, and The Toronto-Dominion Bank
10.4
10.5
10.6
10.61
Second Amendment to the 2020 TD Bank Credit Facility Agreement, dated as of November 9, 2021, by and among
Renin Canada Corp., Renin US LLC, and the Toronto-Dominion Bank
10.62
Fifth Amendment to 2020 TD Bank Credit Facility Agreement
10.7
10.8
Operating Agreement of The Altman Companies, LLC, by and among, The Altman Companies, LLC, BBX Altman
Operating Entities, LLC, Joel L. Altman, AMC Holdings Florida, Inc., Altman Development Corporation, and The
Altman Companies, Inc., dated November 30, 2018
Separation and Distribution Agreement, dated September 25, 2020, between BBX Capital Corporation and BBX Capital
Florida LLC
10.9
Tax Matters Agreement, dated September 25, 2020, between BBX Capital Corporation and BBX Capital Florida LLC
10.10
Employee Matters Agreement, dated September 25, 2020, between BBX Capital Corporation and BBX Capital Florida
LLC
10.11
Transition Services Agreement, dated September 25, 2020, between BBX Capital Corporation and BBX Capital Florida
LLC
61
Reference
Exhibit 2.1 to Registrant’s Current
Report on Form 8-K filed
October 27, 2020
Exhibit 3.1 of Registrant’s Form 10
Amendment No. 2 filed August 27,
2020
Exhibit 3.2 of Registrant’s Form 10
Amendment No. 2 filed August 27,
2020
Exhibit 4.1 of Registrant’s Current
Report on Form 8-K filed
September 29, 2020
Exhibit 10.7 of Registrant’s Form 10
Amendment No. 2 filed August 27,
2020
Exhibit 10.1 of Registrant’s Current
Report on Form 8K filed October 22,
2020
Exhibit 10.1 of Registrant’s Current
Report on Form 8K filed July 19,
2021
Exhibit 10.1 of Registrant’s Form
10Q filed November 15, 2021
Exhibit 10.1 of the Registrant's
Current Report on Form 8K filed on
February 9, 2023
Exhibit 10.8 of Registrant’s Current
Report on Form 10 Amendment No.
2 filed August 27, 2020
Exhibit 10.1 of Registrant’s Current
Report on Form 8-K filed
September 29, 2020
Exhibit 10.2 of Registrant’s Current
Report on Form 8K filed
September 29, 2020
Exhibit 10.3 of Registrant’s Current
Report on Form 8K filed
September 29, 2020
Exhibit 10.4 of Registrant’s Current
Report on Form 8K filed
September 29, 2020
Table of Contents
10.12
Promissory Note dated September 30, 2020 issued by Bluegreen Vacations Holding Corporation in favor of BBX
Capital, Inc.
10.13
Employment Agreement between the Company and Alan B. Levan
10.14
Employment Agreement between the Company and John E. Abdo
10.15
Employment Agreement between the Company and Jarett S. Levan
10.16
Employment Agreement between the Company and Seth M. Wise
10.17
Employment Agreement between the Company and Brett Sheppard
10.18
Exit Credit Facility Term Loan Agreement Between IT’SUGAR and SHL Holdings, Inc.
10.19
Exit Credit Facility Term Loan Agreement Between IT’SUGAR and SHL Holdings, Inc.
10.20
Exit Financing Security Agreement Between IT’SUGAR and SHL Holdings, Inc.
10.21 Bankruptcy Court Order Confirming the Plan of Reorganization for IT’SUGAR, LLC.
10.22
IT’SUGAR, LLC Plan of Reorganization.
10.23 BBX Capital 2021 Incentive Plan
62
Exhibit 10.1 of Registrant’s Current
Report on Form 8K filed October 2,
2020
Exhibit 10.1 of Registrant’s Current
Report on Form 8K filed on May 21,
2021
Exhibit 10.2 of Registrant’s Current
Report on Form 8K filed on May 21,
2021
Exhibit 10.3 of Registrant’s Current
Report on Form 8K filed on May 21,
2021
Exhibit 10.4 of Registrant’s Current
Report on Form 8K filed on May 21,
2021
Exhibit 10.5 of Registrant’s Current
Report on Form 8K filed on May 21,
2021
Exhibit 10.1 of Registrant’s Current
Report on Form 8K filed on June 17,
2021
Exhibit 10.2 of Registrant’s Current
Report on Form 8K filed on June 17,
2021
Exhibit 10.3 of Registrant’s Current
Report on Form 8K filed on June 17,
2021
Exhibit 10.4 of Registrant’s Current
Report on Form 8K filed on June 17,
2021
Exhibit 10.5 of Registrant’s Current
Report on Form 8K filed on June 17,
2021
Appendix A to the Registrant’s
Definitive Proxy Statement on
Schedule 14A filed on April 16, 2021
Table of Contents
32.2
32.1
21.1
23.1
31.1
31.2
Filed with this Report
Subsidiaries of the Registrant
Consent of Grant Thornton LLP
Filed with this Report
Certification of Principal Executive Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended Filed with this Report
Certification of Principal Financial Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended Filed with this Report
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL
tags are embedded within the Inline XBRL document
101.SCH Inline XBRL Taxonomy Extension Schema Document
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB Inline XBRL Taxonomy Extension Labels Linkbase Document
101.PRE
104
Inline XBRL Taxonomy Extension Presentation Linkbase Document
Cover Page Interactive Data File (formatted in inline XBRL and contained in Exhibit 101)
Filed with this Report
Filed with this Report
Filed with this Report
Filed with this Report
Filed with this Report
Filed with this Report
101.INS
Furnished with this Report
Furnished with this Report
Item 16. Form 10-K Summary
None
63
Table of Contents
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.
March 15, 2023
BBX CAPITAL, Inc.
By:
/s/ Jarett S. Levan
Jarett S. Levan, Chief Executive Officer and
President
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.
Signature
Title
/s/ Alan B. Levan
Alan B. Levan
/s/ John E. Abdo
John E. Abdo
/s/ Jarett S. Levan
Jarett S. Levan
/s/ Seth M. Wise
Seth M. Wise
/s/Brett Sheppard
Brett Sheppard
/s/Marcia Barry-Smith
Marcia Barry-Smith
/s/Norman H. Becker
Norman H. Becker
/s/Andrew R. Cagnetta, Jr
Andrew R. Cagnetta, Jr
/s/Steven M. Coldren
Steven M. Coldren
/s/Gregory A. Haile
Gregory A. Haile
/s/Willis N. Holcombe
Willis N. Holcombe
/s/Tony P. Segreto
Tony P. Segreto
/s/ Neil A. Sterling
Neil A. Sterling
Chairman of the Board
Vice Chairman of the Board
Chief Executive Officer and President
Executive Vice President and Director
Chief Financial Officer
Director
Director
Director
Director
Director
Director
Director
Director
64
Date
March 15, 2023
March 15, 2023
March 15, 2023
March 15, 2023
March 15, 2023
March 15, 2023
March 15, 2023
March 15, 2023
March 15, 2023
March 15, 2023
March 15, 2023
March 15, 2023
March 15, 2023
Subsidiaries of BBX Capital, Inc.
Eden Services, Inc.
I.R.E. Property Analysts, Inc.
I.R.E. Energy 1981, Inc.
Kingsway Services Inc.
Risk Management Services, LLC
BFC/CCC, Inc.
B-D2 Holdings, LLC
B-DJ Holdings, LLC
B-26 Holdings, LLC
D-2 Acquisition
LAS Trademark, LLC
PF Program Partnership, LP
PF Program GP, LLC
Confections by Design, LLC
BBX Capital Real Estate, LLC
BBX Capital Partners, LLC
BBX Sweet Holdings, LLC
Food for Thought Restaurant Group – Florida, LLC
Renin Holdings, LLC
BBX Partners, Inc.
BBX Capital Asset Management, LLC
Florida Asset Resolution Group, LLC
BBX Altman Operating Entities, LLC
BBX Capital Real Estate Investments, LLC
BBX Las Olas Investments, LLC
BBX Altman Holdings, LLC
BBX Sky Cove, LLC
BBX Logistics Properties, LLC
BBX Altis Projects, LLC
Heartwood Partners 1, LLC
Heartwood Partners 2, LLC
Heartwood Partners 3, LLC
Subsidiaries of BBX Capital Real Estate, LLC
Subsidiaries of BBX Altman Holdings, LLC
Subsidiaries of BBX Partners Inc.
Exhibit 21.1
Jurisdiction of
Organization
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Delaware
Delaware
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
BBX Miramar, LLC
FL Cell Tower, LLC
Banc Servicing Center, LLC
Fidelity Tax, LLC
Heartwood 3, LLC
Heartwood 4, LLC
Heartwood 11, LLC
FL Billboards, LLC
Heartwood 18, LLC
Heartwood 21, LLC
Heartwood 23, LLC
Heartwood 24, LLC
Heartwood 42, LLC
Heartwood 44, LLC
Heartwood 47, LLC
Heartwood 50, LLC
Heartwood 88, LLC
Heartwood 91, LLC
Heartwood 91-2, LLC
Heartwood 91-3, LLC
BBX Grand Central, LLC
BBX Promenade, LLC
JX Palm Coast Land, LLC
Unique Restaurant of Mizner Park Inc.
BBX Industrial Guaranty, LLC
BBX Altis Projects 2021, LLC
BBX Altis Projects 2022, LLC
BBX Equity Partners 2021, LLC
BBX Equity Partners 2022, LLC
BBX Altis Suncoast Investor, LLC
BBX Altra Kendall Investor, LLC
BBX Altis Lake Willis II Investor, LLC
Heartwood 58, LLC
FAR Holdings Group, LLC
Subsidiaries of BBX Capital Asset Management, LLC
Subsidiary of Heartwood 4, LLC
Subsidiary of Heartwood 91-2, LLC
Subsidiary of BBX Capital Real Estate Investments, LLC
Subsidiaries of Altis Projects, LLC
Subsidiaries of Florida Asset Resolution Group, LLC
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Subsidiaries of Heartwood 58, LLC
Subsidiaries of FAR Holdings Group, LLC
FT Properties, LLC
Sunrise Atlantic, LLC
Heartwood 45, LLC
Heartwood 56, LLC
Heartwood 57, LLC
Heartwood 2, LLC
Heartwood 43, LLC
Heartwood 55, LLC
FAR 2, LLC
FAR 4, LLC
FAR 5, LLC
FAR 6, LLC
SHL Holdings, Inc
Las Olas Confections and Snacks, LLC
IT’SUGAR Holdings. LLC
Hoffman’s Chocolates and Sweets, LLC
The Hoffman Commercial Group, Inc.
Anastasia Confections, Inc.
Subsidiaries of BBX Sweet Holdings, LLC
Subsidiary of Las Olas Confections and Snacks, LLC
Subsidiaries of Hoffman’s Chocolates and Sweets, LLC
Subsidiaries of Hoffman Commercial Group, LLC
Good Fortunes East, LLC
Boca Bons East, LLC
B&B Bons, LLC
S&F Good Fortunes, LLC
Hoffman's Florida I, LLC
IT’SUGAR, LLC
IT’Sugar Atlantic City, LLC
IT’Sugar FLGC, LLC
IT’Sugar FL I, LLC
IT’Sugar FL II, LLC
IT'Sugar FL III, LLC
IT'Sugar Canada Inc.
IT'SOreo, LLC
Renin US, LLC
Renin Canada Corporation
Renin UK Corporation
Subsidiary of IT’SUGAR Holdings, LLC
Subsidiaries of IT’SUGAR, LLC
Subsidiaries of Renin Holdings, LLC
Subsidiaries of Renin Canada Corporation
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Delaware
Florida
Florida
Florida
Florida
Florida
Florida
Mississippi
Canada
United Kingdom
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Exhibit 23.1
We have issued our report dated March 15, 2023 with respect to the consolidated financial statements included in the Annual Report of BBX Capital, Inc. on Form 10-K for
the year ended December 31, 2022. We consent to the incorporation by reference of said report in the Registration Statements of BBX Capital, Inc. on Form S-8 (File
No. 333-258881 and 333-265770).
/s/ GRANT THORNTON LLP
Fort Lauderdale, Florida
March 15, 2023
I, Jarett S. Levan, certify that:
1)
I have reviewed this annual report on Form 10-K of BBX Capital, Inc.;
Exhibit 31.1
2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made,
in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4) The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal
quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5) The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s
auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to
adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over
financial reporting.
Date: March 15, 2023
By: /s/Jarett S. Levan
Jarett S. Levan,
Chief Executive Officer and President
I, Brett Sheppard, certify that:
1)
I have reviewed this annual report on Form 10-K of BBX Capital, Inc.;
Exhibit 31.2
2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made,
in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4) The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal
quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5) The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s
auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to
adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over
financial reporting.
Date: March 15, 2023
By: /s/Brett Sheppard
Brett Sheppard,
Chief Financial Officer
Certification Pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 32.1
In connection with the Annual Report on Form 10-K of BBX Capital, Inc. (the “Company”) for the year ended December 31, 2022 as filed with the Securities and Exchange
Commission on the date hereof (the “Report”), I, Jarett S. Levan, Chief Executive Officer and President of the Company, certify, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: March 15, 2023
By:/s/Jarett S. Levan
Name: Jarett S. Levan
Title: Chief Executive Officer and President
Certification Pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 32.2
In connection with the Annual Report on Form 10-K of BBX Capital, Inc. (the “Company”) for the year ended December 31, 2022, as filed with the Securities and
Exchange Commission on the date hereof (the “Report”), I, Brett Sheppard, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: March 15, 2023
By:/s/Brett Sheppard
Name: Brett Sheppard
Title: Chief Financial Officer