UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM
For the Quarter Ended
Commission File Number
BBX Capital, Inc.
(Exact name of registrant as specified in its charter)
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Securities Registered pursuant to Section 12(b) of the Act:
None
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
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.
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).
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 ☐ | | 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
The number of shares outstanding of each of the registrant’s classes of common stock as of May 6, 2024 is as follows:
Class A Common Stock of $.01 par value,
Class B Common Stock of $.01 par value,
| TABLE OF CONTENTS |
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| Part I. |
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| Item 1. |
Financial Statements |
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| Notes to Condensed Consolidated Financial Statements - Unaudited |
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| Item 2. |
Management's Discussion and Analysis of Financial Condition and Results of Operations |
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| Item 3. |
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| Item 4. |
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| Part II. |
OTHER INFORMATION |
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| Item 1. |
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| Item 1A. |
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| Item 6. |
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PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
BBX Capital, Inc.
Condensed Consolidated Statements of Financial Condition - Unaudited
(In thousands, except share data)
| March 31, | December 31, | |||||||
| 2024 | 2023 | |||||||
| ASSETS | ||||||||
| Cash and cash equivalents ($ in 2024 and $ in 2023 in variable interest entities (VIEs)) | $ | |||||||
| Restricted cash ($ in 2024 and $ in 2023 in VIEs) | ||||||||
| Securities available for sale, at fair value | ||||||||
| Trade accounts receivable, net ($ in 2024 and $ in 2023 in VIEs) | ||||||||
| Construction contracts receivable, net | ||||||||
| Trade inventory, net | ||||||||
| Real estate ($ in 2024 and $ in 2023 held for sale and $ in 2024 and $ in 2023 rental property under development in VIEs) | ||||||||
| Investments in and advances to unconsolidated real estate joint ventures ($ in 2024 and $ in 2023 in VIEs) | ||||||||
| Note receivable from Bluegreen Vacations Holding Corporation | ||||||||
| Property and equipment, net | ||||||||
| Goodwill | ||||||||
| Intangible assets, net | ||||||||
| Operating lease assets | ||||||||
| Deferred tax asset, net | ||||||||
| Contract assets | ||||||||
| Other assets ($ in 2024 and $ in 2023 in VIEs) | ||||||||
| Total assets | $ | |||||||
| LIABILITIES AND EQUITY | ||||||||
| Liabilities: | ||||||||
| Accounts payable ($ in 2024 and $ in 2023 in VIEs) | $ | |||||||
| Accrued expenses ($ in 2024 and $ in 2023 in VIEs) | ||||||||
| Contract liabilities | ||||||||
| Other liabilities ($ in 2024 and $ in 2023 in VIEs) | ||||||||
| Operating lease liabilities | ||||||||
| Notes payable and other borrowings ($ in 2024 and $ in 2023 in VIEs) | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (See Note 14) | ||||||||
| Redeemable noncontrolling interest | ||||||||
| Equity: | ||||||||
| Class A Common Stock of $ par value; authorized shares; issued and outstanding in 2024 and in 2023 | ||||||||
| Class B Common Stock of $ par value; authorized shares; issued and outstanding in 2024 and in 2023 | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive income | ||||||||
| Total shareholders' equity | ||||||||
| Noncontrolling interests | ||||||||
| Total equity | ||||||||
| Total liabilities and equity | $ | |||||||
(1) BBX Capital's Class B Common Stock is convertible into its Class A Common Stock on a share for share basis at any time at the option of the holder.
See Notes to Condensed Consolidated Financial Statements - Unaudited
Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income – Unaudited
(In thousands, except per share data)
| For the Three Months Ended |
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| March 31, |
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| 2024 |
2023 |
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| Revenues: |
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| Trade sales |
$ | |||||||
| Sales of real estate inventory |
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| Revenue from construction contracts |
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| Real estate development and property management fees |
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| Interest income |
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| Other revenue |
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| Total revenues |
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| Costs and expenses: |
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| Cost of trade sales |
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| Cost of real estate inventory sold |
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| Cost of revenue from construction contracts |
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| Interest expense |
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| Recoveries from loan losses, net |
( |
) | ( |
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| Selling, general and administrative expenses |
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| Total costs and expenses |
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| Operating losses |
( |
) | ( |
) | ||||
| Equity in net earnings of unconsolidated real estate joint ventures |
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| Gain on the consolidation of The Altman Companies |
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| Gain on the consolidation of investment in real estate joint ventures |
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| Other income |
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| Foreign exchange gain (loss) |
( |
) | ||||||
| (Loss) income before income taxes |
( |
) | ||||||
| Benefit (provision) for income taxes |
( |
) | ||||||
| Net (loss) income |
( |
) | ||||||
| Net (income) loss attributable to noncontrolling interests |
( |
) | ||||||
| Net (loss) income attributable to shareholders |
$ | ( |
) | |||||
| Basic (loss) earnings per share |
$ | ( |
) | |||||
| Diluted (loss) earnings per share |
$ | ( |
) | |||||
| Basic weighted average number of common shares outstanding |
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| Diluted weighted average number of common shares outstanding |
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| Net (loss) income |
$ | ( |
) | |||||
| Other comprehensive (loss) income, net of tax: |
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| Unrealized (loss) gain on securities available for sale |
( |
) | ||||||
| Foreign currency translation adjustments |
( |
) | ||||||
| Other comprehensive (loss) income, net |
( |
) | ||||||
| Comprehensive (loss) income, net of tax |
( |
) | ||||||
| Comprehensive (income) loss attributable to noncontrolling interests |
( |
) | ||||||
| Comprehensive (loss) income attributable to shareholders |
$ | ( |
) | |||||
See Notes to Condensed Consolidated Financial Statements – Unaudited
BBX Capital, Inc.
Condensed Consolidated Statements of Changes in Equity - Unaudited
For the Three Months Ended March 31, 2024 and 2023
(In thousands)
| Shares of | Accumulated | |||||||||||||||||||||||||||||||||||
| Common Stock | Common | Other | ||||||||||||||||||||||||||||||||||
| Outstanding | Stock | Additional | Comprehen- | Non- | ||||||||||||||||||||||||||||||||
| Class | Class | Paid-in | Accumulated | sive | controlling | Total | ||||||||||||||||||||||||||||||
| A | B | A | B | Capital | Earnings | Income | Interests | Equity | ||||||||||||||||||||||||||||
| Balance, December 31, 2022 | $ | |||||||||||||||||||||||||||||||||||
| Net income excluding $ of loss attributable to redeemable noncontrolling interest | — | — | ( | ) | ||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | ||||||||||||||||||||||||||||||||||
| Accretion of redeemable noncontrolling interest | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Consolidation of real estate joint venture managing members | — | — | ||||||||||||||||||||||||||||||||||
| Contributions from noncontrolling interest | — | — | ||||||||||||||||||||||||||||||||||
| Distributions to noncontrolling interests | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Share-based compensation | — | — | ||||||||||||||||||||||||||||||||||
| Balance, March 31, 2023 | $ | |||||||||||||||||||||||||||||||||||
| Shares of | ||||||||||||||||||||||||||||||||||||
| Common Stock | Common | Accumulated | ||||||||||||||||||||||||||||||||||
| Outstanding | Stock | Additional | Other | Non- | ||||||||||||||||||||||||||||||||
| Class | Class | Paid-in | Accumulated | Comprehensive | controlling | Total | ||||||||||||||||||||||||||||||
| A | B | A | B | Capital | Deficit | Income | Interests | Equity | ||||||||||||||||||||||||||||
| Balance, December 31, 2023 | $ | ( | ) | |||||||||||||||||||||||||||||||||
| Net loss excluding $ of income attributable to redeemable noncontrolling interest | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Contributions from noncontrolling interests | — | — | ||||||||||||||||||||||||||||||||||
| Distributions to noncontrolling interests | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Share-based compensation | — | — | ||||||||||||||||||||||||||||||||||
| Balance, March 31, 2024 | $ | ( | ) | |||||||||||||||||||||||||||||||||
See Notes to Condensed Consolidated Financial Statements - Unaudited
Condensed Consolidated Statements of Cash Flows - Unaudited
(In thousands)
| For the Three Months Ended | ||||||||
| March 31, |
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| 2024 |
2023 |
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| Operating activities: |
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| Net (loss) income |
$ | ( |
) | |||||
| Adjustments to reconcile net (loss) income to net cash used in operating activities: |
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| Recoveries from loan losses, net |
( |
) | ( |
) | ||||
| Depreciation, amortization and accretion |
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| Net (gain) loss 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 |
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| Gain on the consolidation of real estate joint ventures |
( |
) | ||||||
| Gain on the consolidation of The Altman Companies |
( |
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| Share-based compensation expense |
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| Provision for excess and obsolete inventory |
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| Change in deferred income tax asset, net |
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| Changes in operating assets and liabilities: |
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| Trade accounts receivable |
( |
) | ( |
) | ||||
| Construction contracts receivable |
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| Trade inventory |
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| Real estate |
( |
) | ( |
) | ||||
| Operating lease assets |
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| Operating lease liabilities |
( |
) | ( |
) | ||||
| Contract assets |
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| Other assets |
( |
) | ||||||
| Accounts payable |
( |
) | ( |
) | ||||
| Accrued expenses |
( |
) | ( |
) | ||||
| Contract liabilities |
( |
) | ( |
) | ||||
| Other liabilities |
( |
) | ( |
) | ||||
| Net cash used in operating activities |
( |
) | ( |
) | ||||
| Investing activities: |
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| Return of investment in and advances to unconsolidated real estate joint ventures |
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| Investments in unconsolidated real estate joint ventures |
( |
) | ( |
) | ||||
| Purchases of securities available for sale |
( |
) | ( |
) | ||||
| Redemptions of securities available for sale |
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| Proceeds from repayment of loans receivable |
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| Proceeds from the repayment of Bluegreen Vacations Holding Corporation note |
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| Proceeds from sales of assets |
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| Additions to real estate held-for-sale and held-for-investment |
( |
) | ( |
) | ||||
| Purchases of property and equipment |
( |
) | ( |
) | ||||
| Cash acquired in the consolidation of real estate joint ventures |
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| Cash paid for The Altman Companies acquisition, net of cash received |
( |
) | ||||||
| Decrease in cash from other investing activities |
( |
) | ( |
) | ||||
| Net cash provided by (used in) investing activities |
( |
) | ||||||
(Continued)
| For the Three Months Ended |
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| March 31, |
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| 2024 |
2023 |
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| Financing activities: |
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| Repayments of notes payable and other borrowings |
( |
) | ( |
) | ||||
| Proceeds from notes payable and other borrowings |
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| Payments for debt issuance costs |
( |
) | ( |
) | ||||
| Contributions from noncontrolling interests |
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| Distributions to noncontrolling interests |
( |
) | ( |
) | ||||
| Net cash provided by financing activities |
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| Increase (decrease) in cash, cash equivalents and restricted cash |
( |
) | ||||||
| Cash, cash equivalents and restricted cash at beginning of period |
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| Cash, cash equivalents and restricted cash at end of period |
$ | |||||||
| Supplemental cash flow information: |
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| Interest paid on borrowings, net of amounts capitalized |
$ | |||||||
| Income taxes paid |
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| Supplementary disclosure of non-cash investing and financing activities: |
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| Miscellaneous receivable from sale of assets |
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| Inventory transferred in sale of assets |
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| Assumption of Community Development District Bonds by homebuilders |
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| Operating lease assets obtained in exchange for new operating lease liabilities |
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| Reconciliation of cash, cash equivalents and restricted cash: |
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| Cash and cash equivalents |
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| Restricted cash |
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| Total cash, cash equivalents and restricted cash |
$ | |||||||
See Notes to Condensed Consolidated Financial Statements - Unaudited
Notes to Condensed Consolidated Financial Statements - Unaudited
1. Organization and Basis of Financial Statement Presentation
Organization
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” or “BBXSH”), and Renin Holdings, LLC (“Renin”).
Principal Holdings
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, warehouse and logistics facilities, and commercial properties located primarily in Florida. Since November 2018, BBX Capital Real Estate has owned a
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 which 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. Through August 2023, the Company owned over
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 also sources certain products and raw materials from China, Brazil, and certain other countries.
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 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 continues to provide risk management advisory services to the Company and its affiliates. Through January 2024, the Company's affiliates included Bluegreen Vacations Holdings Corporation ("BVH"), and the entity provided risk management advisory services to BVH. However, in January 2024, BVH was acquired by Hilton Grand Vacations Inc. ("HGV"), and although the Company's risk management entity is temporarily providing transition services related to risk management to BVH and HGV, the Company does not expect to continue providing such risk management advisory services to BVH or HGV following the temporary transition period. The fees earned by the entity for services provided to the Company are eliminated in consolidation.
Basis of Financial Statement Presentation
The condensed consolidated financial statements of the Company include the consolidated financial statements of BBX Capital and its wholly-owned subsidiaries, other entities in which BBX Capital or its wholly-owned subsidiaries hold controlling financial interests, and any 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.
In November 2018, BBX Capital Real Estate acquired a
In the Company’s opinion, the financial information furnished herein reflects all adjustments consisting of normal recurring items necessary for a fair presentation of its financial position, results of operations, and cash flows for the interim periods reported in this Quarterly Report on Form 10-Q. The condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. Accordingly, these financial statements do not include all of the information and disclosures required by GAAP for complete financial statements. Also, these unaudited condensed consolidated financial statements and related notes are presented as permitted by Form 10-Q and should be read in conjunction with the Company’s audited consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Annual Report”) filed with the SEC on March 15, 2024.
Use of Estimates
The preparation of financial statements prepared in conformity with GAAP require the Company to make estimates and assumptions, including assumptions about current and future economic and market conditions which affect reported amounts and related disclosures in the Company’s financial statements, and actual results could differ materially from those estimates.
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, and a possible recession, 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.
Impact of Current Economic Issues
The Company and the industries in which it operates have been impacted by economic trends in the U.S. and global economies, including (i) decreased consumer demand, (ii) disruptions in global supply chains, (iii) a general labor shortage and increases in wages, (iv) increased economic uncertainty, (v) inflationary pressures and higher costs to operate the Company’s businesses, including higher insurance costs, and (vi) higher interest rates. In light of the uncertain duration and impact of current economic trends, the Company has maintained significant liquidity. As of March 31, 2024, the Company’s consolidated cash and cash equivalent balances were $
Current inflationary and economic trends have and may continue to adversely impact the Company's 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 have resulted in supply chain issues, with the conflict in the Middle East further exacerbating inflationary trends and supply chain disruptions. The impact of the 525 basis point increase in the federal funds rate since March 2022 and the wind-down of quantitative easing during 2023 has resulted in economic uncertainty. These conditions negatively affect our operating results by, among other things: (i) increasing interest expense on variable rate debt and any new debt, (ii) decreasing gross margins due to increased costs of manufactured or purchased inventory and shipping, (iii) reducing 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) increasing overall operating expenses due to increases in labor and service costs, (v) decreasing customer demand for our products, (vi) shifting customer behavior as consumers experience higher borrowing costs, including mortgage borrowings, and (vii) increasing the risk of impairments as a result of declining valuations.
While we have taken steps to increase the prices of our products, 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 continue 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 real estate assets are located in Florida, and economic conditions in the Florida real estate market could adversely affect our earnings and financial condition. BBXRE has experienced a significant increase in commodity and labor prices, and a shortage of available labor, 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 financing for new development projects. Higher rates have also had an adverse impact on 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 and warehouse facilities are generally impacted by interest rates. BBXRE has also observed a decline in the number of potential investors interested in providing equity or debt financing for the development of new multifamily apartment developments and the acquisition of stabilized multifamily apartment communities. Such factors are impacting BBXRE’s results of operations, and we expect that they could continue to have an adverse impact on its operating results in future periods.
Similarly, as a result of inflationary pressures and ongoing disruptions in global supply chains, IT’SUGAR has experienced significant increases in the cost of inventory and freight, as well as delays in its supply chain that impacted its ability to maintain historical inventory levels at its retail locations. While IT’SUGAR was previously able to partially mitigate the impact of increased costs through increases in the prices of its products, IT’SUGAR has had to slow the pace of price increases due to a recent decline in consumer demand, which has resulted in declines in its selling margins. Further, IT’SUGAR previously increased the inventory levels at its retail locations in an effort to ensure that it could meet consumer demand, which has increased the risk that IT’SUGAR may be unable to sell the products timely and the risk of inventory writedowns due to the slowdown in consumer demand. In addition, while IT’SUGAR has begun to adjust the pace at which it is replenishing inventory in light of the slowdown in store sales and general economic uncertainty, IT’SUGAR will be required to closely manage its inventory levels in an effort to mitigate any negative impact on store sales. Additionally, IT’SUGAR has experienced an increase in payroll costs as a result of shortages in available labor at certain of its retail locations.
Higher interest rates on borrowings, 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 flow due to increased inventory in transit, a prolonged period between when it is required to pay its suppliers and when it is paid by its customers, and an overall decline in its gross margin. While Renin has increased the price of many of its products, Renin’s gross margin has nonetheless been negatively impacted by these cost pressures. Additionally, the negotiation of increased prices 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. Renin increased its inventory levels in an effort to ensure that it can meet customer demand. However, current economic conditions, including a slowdown in consumer demand, have increased the risk that Renin may be unable to timely sell such products and the risk of inventory writedowns.
The impact of these factors have contributed to Renin's inability to comply with covenants under its credit facility with TD Bank. In the past Renin was required to seek waivers and amendments to its facility from TD Bank. On March 13, 2024, Renin's TD Bank Credit Facility was amended and restated in its entirety. See Note 8 of the Company’s condensed consolidated financial statements included in Part 1of this report for additional information with respect to the amended TD Bank Credit Facility. If Renin is unable to maintain compliance with the covenants under its amended and restated credit facility with TD Bank, Renin may lose availability under its revolving line of credit, may be required to provide additional collateral, or may be required to repay all or a portion of its borrowings under the facility, any of which would have a material adverse effect on the Company's liquidity, financial position, and results of operations.
Recently Adopted and Future Adoption of Recently Issued Accounting Pronouncements
The Financial Accounting Standards Board ("FASB") has issued the following accounting pronouncements and guidance relevant to the Company's operations which had not been adopted as of January 1, 2024:
Accounting Standards Update ("ASU") ASU No. 2024-1, Compensation - Stock Compensations (Topic 718): Scope Application of Profits Interest and Similar Awards. This update addresses how entities determine whether a profits interest or similar award falls within the scope of ASC Topic 718, Stock Compensation or other guidance. This update is effective for annual periods beginning after December 15, 2024 and interim periods within those annual periods and should be applied either (i) retrospectively to all prior periods presented in the financial statements or (ii) prospectively to profits interest and similar awards granted or modified on or after the date at which the entity first applies the standard. BBX Capital has not yet adopted this update and is currently evaluating the potential impact of the update on its consolidated financial statements.
ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosure. This update requires that public business entities on an annual basis (i) disclose specific categories in the income tax rate reconciliation, (ii) provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income or loss by the applicable statutory income tax rate), (iii) disclose the amount of income taxes paid, net of refunds, disaggregated by federal, individual state jurisdictions, and individual foreign taxes in which the net taxes paid is equal to or greater than five percent of total income taxes paid, and (iv) disclose income or loss from continuing operations before income taxes disaggregated by domestic and foreign and income tax expense or benefit from continuing operations disaggregated by federal, state and foreign components. The update is effective for annual periods beginning after December 31, 2024, and early adoption is permitted for annual financial statements that have not yet been issued. BBX Capital has not yet adopted this update and is currently evaluating the potential impact of the update on its consolidated financial statements.
ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosure. This update enhances the disclosures about segment expenses by requiring that public entities on an annual and interim basis (i) disclose significant segment expenses that are regularly provided to the chief operating decision maker (the "CODM") and included within each reported measure of segment profit or loss (collectively referred to as the “significant expense principle”), (ii) include all annual disclosures about a reportable segment's profits or loss and assets in interim periods, (iii) disclose the title and position of the CODM and an explanation of how the CODM uses the reported measure of segment profit or loss in assessing segment performance and deciding how to allocate resources, and (iv) disclose the composition of other segment items by reportable segment that are not included in significant expenses. The update is effective for fiscal years beginning after December 31, 2023 and interim periods within years beginning after December 31, 2024. Early adoption is permitted. BBX Capital has not yet adopted this update and is currently evaluating the potential impact of the update on its consolidated financial statements.
ASU No. 2023-05, Business Combinations (Topic 805-60): Account for Joint Venture Formations - Recognition and Measurements. This update addresses the accounting for contributions made to a joint venture, upon formation, in a joint venture’s separate financial statements, as there has been diversity in practice in how a joint venture accounts for the contributions it receives upon formation. Some joint ventures initially measure their net assets at fair value at the formation date, while other joint ventures initially measure their net assets at the venturers’ carrying amounts. To reduce diversity in practice and provide decision-useful information to a joint venture’s investors, the FASB decided to require joint ventures to apply a new basis of accounting upon formation based upon the recognition and measurement guidance in ASC Topic 805, Business Combinations. This update does not amend the definition of a joint venture (or a corporate joint venture), the accounting by an equity method investor for its investment in a joint venture, or the accounting by a joint venture for contributions received after its formation. The update is effective prospectively for all joint venture formations with a formation date on or after January 1, 2025, although a joint venture that was formed before January 1, 2025 may elect to apply the amendments retrospectively if it has sufficient information. Early adoption is permitted in any interim or annual period in which financial statements have not yet been issued (or made available for issuance), either prospectively or retrospectively. BBX Capital has not yet adopted this update and is currently evaluating the potential impact of the statement on its consolidated financial statements.
2. Securities Available-for-Sale
The following table summarizes the amortized cost and fair value of securities available-for-sale and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income (in thousands):
| As of March 31, 2024 | ||||||||||||||||
| Gross | Gross | |||||||||||||||
| Amortized | Unrealized | Unrealized | Fair | |||||||||||||
| Cost | Gains | Losses | Value | |||||||||||||
| Available-for-sale | ||||||||||||||||
| U.S. Treasury and federal agency | $ | ( | ) | |||||||||||||
| Community Development District bonds | ||||||||||||||||
| Total available-for-sale | $ | ( | ) | |||||||||||||
| As of December 31, 2023 | ||||||||||||||||
| Gross | Gross | |||||||||||||||
| Amortized | Unrealized | Unrealized | Fair | |||||||||||||
| Cost | Gains | Losses | Value | |||||||||||||
| Available-for-sale | ||||||||||||||||
| U.S. Treasury and federal agency | $ | |||||||||||||||
| Community Development District bonds | ||||||||||||||||
| Total available-for-sale | $ | |||||||||||||||
Accrued interest receivable as of March 31, 2024 and December 31, 2023 was $
3. Trade Accounts Receivable and Construction Contracts Receivable
The Company’s trade receivables consisted of the following (in thousands):
| March 31, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Trade accounts receivable | $ | |||||||
| Allowance for expected credit losses | ( | ) | ( | ) | ||||
| Total trade accounts receivables | $ | |||||||
The Company’s construction contract receivables consisted of the following (in thousands):
| March 31, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Construction contracts receivable | $ | |||||||
| Allowance for expected credit losses | ||||||||
| Total construction contracts receivable | $ | |||||||
The entire balance of construction contracts receivable reflects receivables from affiliated real estate joint ventures in which the Company is the managing member.
4. Trade Inventory
The Company’s trade inventory consisted of the following (in thousands):
| March 31, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Raw materials | $ | |||||||
| Paper goods and packaging materials | ||||||||
| Work in process | ||||||||
| Finished goods | ||||||||
| Total trade inventory | ||||||||
| Inventory reserve | ( | ) | ( | ) | ||||
| Total trade inventory, net | $ | |||||||
5. Real Estate
The Company’s real estate consisted of the following (in thousands):
| March 31, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Real estate held-for-sale | $ | |||||||
| Real estate held-for-investment | ||||||||
| Real estate inventory | ||||||||
| Rental properties under development | ||||||||
| Predevelopment costs | ||||||||
| Total real estate | $ | |||||||
Rental properties under development is comprised of $
6. Investments in and Advances to Consolidated and Unconsolidated VIEs
Consolidated VIEs
Real Estate Joint Ventures Related to the Altman Companies and BBX Logistics
BBXRE invests in the managing member of real estate joint ventures sponsored by the Altman Companies and by BBX Logistics. In accordance with the applicable accounting guidance for the consolidation of VIEs, the Company analyzes its investments in the managing member of each real estate joint venture to determine if such managing member 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 structure of these entities, including the respective operating agreements governing these entities and any relevant financial agreements, the Company has determined that the managing member entities are VIEs due to the entities not having sufficient equity to finance their activities and that the Company has variable interests in these entities as a result of its equity investments in such entities. Further, the Company has determined that it is the primary beneficiary of the managing member entities and, as a result, consolidates the managing member entities. The Company’s conclusion that it is the primary beneficiary of these entities is primarily based on the determination that the Company has the power to direct activities of the entities that most significantly affect their economic performance. With respect to joint ventures sponsored by the Altman Companies, the Company prior to the Acquisition Date determined that it was not the primary beneficiary of certain managing member entities based on the fact that BBXRE and Mr. Altman shared decision-making authority for all significant operating and financing decisions related to such entities. However, as a result of the acquisition of the Altman Companies and Mr. Altman’s ongoing employment with the Altman Companies, the Company reevaluated its investments in these entities and determined that, as of and subsequent to the Acquisition Date, BBXRE and Mr. Altman constitute a related party group under the accounting guidance for VIEs that collectively is the primary beneficiary of each of these entities and that BBXRE is the primary beneficiary of the managing member entities as it is the member of the related party group whose activities are most closely associated with the entities.
As a result of the above, the Company consolidates the managing members of the following real estate joint ventures:
| ● | Altis Lake Willis Phase 1 |
| ● | Altis Lake Willis Phase 2 |
| ● | Altis Grand at Suncoast |
| ● | Altis Blue Lake |
| ● | Altis Santa Barbara |
| ● | Altis Grand Kendall | |
| ● | Altis Twin Lakes | |
| ● | Altis Grand Bay | |
| ● | BBX Park at Delray | |
| ● | BBX Park at Lakeland | |
| ● | BBX Park at Davie |
As further described below under Unconsolidated VIEs, although the Company consolidates the managing member of the various real estate joint ventures sponsored by the Altman Companies and by BBX Logistics, the Company has generally determined that, other than with respect to the Altis Grand Kendall joint venture, the real estate joint ventures in which the managing member entities hold investments are VIEs in which the managing member entities are not the primary beneficiary. However, with respect to the Altis Grand Kendall joint venture, the Company determined that the venture is a VIE in which the managing member is the primary beneficiary, as the managing member of the Altis Grand Kendall joint venture has the power to direct the activities of the joint venture that most significantly affect its economic performance and such power is not constrained by any kick-out or substantive participating rights held by the non-managing members. As a result, the Company consolidates the Altis Grand Kendall joint venture.
ABBX Guaranty, LLC (“ABBX”)
In 2018, BBXRE and Mr. Altman formed ABBX Guaranty, LLC (“ABBX”), a joint venture that provides guarantees on the indebtedness and construction cost overruns of development joint ventures sponsored 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, it is expected that BBXRE will acquire Mr. Altman’s equity interest in ABBX based on his then outstanding capital in ABBX. Prior to the Acquisition Date, the Company previously determined that ABBX was a VIE in which BBXRE was not the primary beneficiary based on the fact that BBXRE and Mr. Altman share decision-making authority for all significant operating and financing decisions related to ABBX. As a result, the Company previously accounted for its investment in ABBX using the equity method of accounting. As a result of the acquisition of the Altman Companies, BBXRE reevaluated its investment in ABBX and determined that BBXRE and Mr. Altman constituted a related party group under the accounting guidance for VIEs that collectively was the primary beneficiary of ABBX. Further, based on the Company's analysis of the facts and circumstances, the Company determined that BBXRE was the primary beneficiary of ABBX as of the Acquisition Date as it was the member of the related party group whose activities were most closely associated with ABBX. Accordingly, as of the Acquisition Date, the Company consolidated ABBX. See Note 14 for additional information regarding ABBX’s guarantees.
Altman Management
Altman Management ("AMC"), which provides property management services to the owners of multifamily apartment communities pursuant to property management agreements, including affiliates of the Altman Companies and unrelated third parties, was previously a wholly-owned subsidiary of the Altman Companies. In March 2023, the Altman Companies amended and restated the operating agreement of AMC to admit RAM Partners, LLC ("RAM") as a joint venture partner. The Altman Companies continues to serve as the managing member of AMC, but any major decisions requiring the approval of both parties. However, once the parties resolve certain ongoing matters related to the formation of the joint venture, RAM 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
Altis Grand Bay
In January 2024, BBXRE, through various consolidated subsidiaries, formed Altman 11240 Biscayne Manager, LLC (“Manager”), a wholly owned subsidiary of BBXRE, to serve as the Manager of 11240 Biscayne Manager, LLC (the “Biscayne Manager joint venture”), a joint venture formed with HB Biscayne LLC (“HB”) and Salt Air Holdings, LLC (“Salt Air”). Upon the formation of the Biscayne Manager joint venture, an affiliate of BBXRE assigned a purchase and sale agreement for the acquisition of land in Miami, Florida to the joint venture, and the Biscayne Manager joint venture will initially incur predevelopment costs related to the potential acquisition and development of a
BBX Park at Lakeland and BBX Park at Davie
In January 2024, BBX Logistics formed the BBX Park at Lakeland joint venture, a joint venture with affiliates of FRP Holdings, Inc. ("FRP"), and the joint venture entered into a contract to acquire approximately
In March 2024, BBX Logistics formed the BBX Park at Davie joint venture, a joint venture with affiliates of FRP, and the joint venture has entered into a contract to acquire approximately
The Company evaluated its investment in the managing member of the BBX Park at Lakeland and BBX Park at Davie joint ventures and determined that the managing members are VIEs and that BBX Logistics Properties is the primary beneficiary. The Company then evaluated the managing member's investment in each of the BBX Park at Lakeland and BBX Park at Davie joint ventures and determined that the joint ventures are VIEs and that the managing members are not the primary beneficiaries. The Company’s conclusion that the managing members are not the primary beneficiary of the BBX Park at Lakeland joint venture and BBX at Davie is based on the determination that the managing member of each joint venture does not have the power to direct the activities of the respective joint venture that most significantly affect its economic performance. In particular, while the managing member is the day-to-day operating manager of each joint venture, the other member has substantive participating rights in relation to all activities that most significantly impact the joint venture’s economic performance. As a result, the Company consolidates the managing members, and the managing members account for their investment in the underlying BBX Park at Lakeland and BBX Park at Davie joint ventures under the equity method of accounting.
Summary of Financial Information Related to Consolidated VIEs
The assets and liabilities of the Company's consolidated VIEs as of March 31, 2024 that are included in the Company’s consolidated statement of financial position are as follows (in thousands):
| Real Estate | ||||||||||||||||
| Joint Ventures (1) | ABBX | AMC | Total | |||||||||||||
| Cash | $ | |||||||||||||||
| Restricted cash | ||||||||||||||||
| Trade accounts receivable, net | ||||||||||||||||
| Real estate | ||||||||||||||||
| Investment in and advances to unconsolidated real estate joint ventures | ||||||||||||||||
| Other assets | ||||||||||||||||
| Total assets | $ | |||||||||||||||
| Accounts payable | ||||||||||||||||
| Accrued expenses | ||||||||||||||||
| Other liabilities | ||||||||||||||||
| Notes payable and other borrowings | ||||||||||||||||
| Total liabilities | $ | |||||||||||||||
| Noncontrolling interest | $ | |||||||||||||||
The assets and liabilities of the Company's consolidated VIEs as of December 31, 2023 that are included in the Company’s consolidated statement of financial position are as follows (in thousands):
| Real Estate | ||||||||||||||||
| Joint Ventures (1) | ABBX | AMC | Total | |||||||||||||
| Cash | $ | |||||||||||||||
| Restricted cash | ||||||||||||||||
| Trade accounts receivable, net | ||||||||||||||||
| Real estate | ||||||||||||||||
| Investment in and advances to unconsolidated real estate joint ventures | ||||||||||||||||
| Other assets | ||||||||||||||||
| Total assets | $ | |||||||||||||||
| Accounts payable | ||||||||||||||||
| Accrued expenses | ||||||||||||||||
| Other liabilities | ||||||||||||||||
| Notes payable and other borrowings | ||||||||||||||||
| Total liabilities | $ | |||||||||||||||
| Noncontrolling interest | $ | |||||||||||||||
| (1) | Represents the aggregate assets, liabilities, and noncontrolling interests of the consolidated real estate joint ventures sponsored by the Altman Companies or BBX Logistics, as described above. These real estate joint ventures have similar economic characteristics, financing arrangements, and organizational structures. |
The assets held by the consolidated VIEs in the above tables are owned by the respective VIEs and can only be used to settle obligations of such VIEs, and the liabilities in the above table are non recourse to BBX Capital and its other subsidiaries. Further, guarantees issued by ABBX are limited to the assets of ABBX and are non recourse to BBX Capital and its other subsidiaries.
Unconsolidated VIEs
As of March 31, 2024, the Company had equity interests in and advances to unconsolidated real estate joint ventures involved in the development of multifamily rental apartment communities, warehouse and logistics facilities, and single-family master planned for sale housing communities.
As a result of the consolidation of the managing members of various real estate joint ventures sponsored by the Altman Companies and by BBX Logistics, the Company’s unconsolidated real estate joint ventures as of March 31, 2024 and December 31, 2023 include the managing members’ investments in the underlying real estate joint ventures for which the Company has concluded that the managing members do not consolidate the applicable underlying joint ventures.
Investments in unconsolidated real estate joint ventures are accounted for as unconsolidated VIEs under the equity method of accounting.
The Company’s investments in and advances to unconsolidated real estate joint ventures consisted of the following (in thousands):
| March 31, | December 31, | |||||||||||||||
| 2024 | Ownership (1) | 2023 | Ownership (1) | |||||||||||||
| Altis Grand Central | % | % | ||||||||||||||
| Altis Lake Willis Phase 1 | ||||||||||||||||
| Altis Lake Willis Phase 2 | ||||||||||||||||
| Altis Grand at Suncoast | ||||||||||||||||
| Altis Blue Lake | ||||||||||||||||
| Altis Santa Barbara | ||||||||||||||||
| Altis Twin Lakes | ||||||||||||||||
| BBX Park at Delray | ||||||||||||||||
| BBX Park at Lakeland | ||||||||||||||||
| BBX Park at Davie | ||||||||||||||||
| Marbella | ||||||||||||||||
| The Main Las Olas | ||||||||||||||||
| Sky Cove | ||||||||||||||||
| Sky Cove South | ||||||||||||||||
| Other | ||||||||||||||||
| Total | $ | |||||||||||||||
| (1) | The Company’s ownership percentage in each real estate joint venture represents BBX Capital Real Estate's percentage of the contributed capital in each venture, excluding amounts attributable to noncontrolling interests. 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. |
See Note 8 to the Company’s consolidated financial statements for the year ended December 31, 2023 included in the 2023 Annual Report for the Company’s accounting policies relating to its investments in unconsolidated real estate joint ventures, including the Company’s analysis and determination that such entities are VIEs in which the Company is not the primary beneficiary.
BBX Capital's aggregate maximum loss exposure in unconsolidated VIEs, which includes joint ventures sponsored by the Altman Companies and BBX Logistics, is the amount of its equity investment in these entities and the assets of ABBX as of March 31, 2024, in the aggregate amount of $
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 $
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 Marbella joint venture (in thousands):
| March 31, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Assets | ||||||||
| Cash | $ | |||||||
| Real estate inventory | ||||||||
| Other assets | ||||||||
| Total assets | $ | |||||||
| Liabilities and Equity | ||||||||
| Total liabilities | $ | |||||||