Annual report pursuant to Section 13 and 15(d)

Investments In And Advances To Unconsolidated Real Estate Joint Ventures

v3.20.4
Investments In And Advances To Unconsolidated Real Estate Joint Ventures
12 Months Ended
Dec. 31, 2020
Investments In And Advances To Unconsolidated Real Estate Joint Ventures [Abstract]  
Investments In And Advances To Unconsolidated Real Estate Joint Ventures

7.     Investments in and Advances to Unconsolidated Real Estate Joint Ventures



As of December 31, 2020, the Company had equity interests in unconsolidated real estate joint ventures primarily involved in the development of multifamily rental apartment communities, as well as single-family master planned for sale housing communities. In addition, the Company owns 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.



Investments in and advances to unconsolidated real estate joint ventures consisted of the following (in thousands):



 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

December 31,

 

 

 

 

December 31,



 

2020

 

Ownership(1)

 

2019

Altis Grand Central

 

$

2,287 

 

%

11.07 

 

$

2,653 

Altis Promenade

 

 

1,964 

 

 

6.61 

 

 

2,126 

Altis Bonterra

 

 

 —

 

 

96.73 

 

 

618 

Altis Ludlam Trial (2)

 

 

9,653 

 

 

33.30 

 

 

1,081 

Altis Grand at The Preserve (Suncoast)

 

 

1,086 

 

 

33.30 

 

 

753 

Altis Pembroke Gardens

 

 

310 

 

 

0.41 

 

 

1,277 

Altis Boca Raton

 

 

 —

 

 

0.42 

 

 

1,880 

Altis Wiregrass

 

 

163 

 

 

2.22 

 

 

1,792 

Altis Little Havana

 

 

844 

 

 

3.43 

 

 

811 

Altis Lake Willis (Vineland Pointe)

 

 

5,446 

 

 

50.00 

 

 

4,712 

Altis Miramar East/West

 

 

2,818 

 

 

5.00 

 

 

2,631 

The Altman Companies (3)

 

 

15,222 

 

 

50.00 

 

 

14,745 

ABBX Guaranty

 

 

3,750 

 

 

50.00 

 

 

3,750 

Bayview

 

 

1,563 

 

 

50.00 

 

 

1,562 

PGA Design Center

 

 

 —

 

 

40.00 

 

 

996 

Marbella

 

 

6,971 

 

 

70.00 

 

 

5,999 

Chapel Trail

 

 

153 

 

 

46.75 

 

 

1,126 

L03/212 Partners

 

 

2,462 

 

 

3.41 

 

 

2,087 

PGA Lender

 

 

 —

 

 

45.88 

 

 

2,111 

Sky Cove

 

 

3,287 

 

 

26.25 

 

 

4,178 

Other

 

 

31 

 

 

 

 

 

442 

Total

 

$

58,010 

 

 

 

 

$

57,330 



(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, LLC 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 7 regarding the Company’s acquisition of its interest in the Altman Companies, LLC.



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 power over such entities.



The Company’s maximum exposure to loss in its unconsolidated real estate joint ventures was $60.5 million as of December 31, 2020.



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 $4.1 million and $9.2 million as of December 31, 2020 and 2019, respectively, which includes (i) $4.8 million and $8.5 million associated with the Company’s investment in the Altman Companies and certain multifamily apartment developments which were acquired for cash consideration based on their estimated fair values as of the acquisition date, as described below, and (ii) $1.5 million and $0.7 million associated with the capitalization of interest on real estate development projects, partially offset by (iii) $2.2 million of impairments as of December 31, 2020, as described below.



Equity in Net Earnings of Unconsolidated Real Estate Joint Ventures



For the years ended December 31, 2020, 2019, and 2018, the Company’s equity in net earnings of unconsolidated real estate joint ventures was $0.5 million, $37.9 million, and $14.2 million, respectively.



Equity earnings for the year ended December 31, 2020 includes $1.1 million and $0.8 million in equity earnings from the Altis Boca Raton and Altis Wiregrass joint ventures, respectively, which includes the Company’s share of gains recognized by the ventures upon the sale of their respective multifamily apartment communities. Equity earnings for the year ended December 31, 2019 includes $29.2 million and $5.0 million in equity earnings from the Altis Bonterra and the Altis Lakeline joint ventures, respectively, which includes the Company’s share of gains recognized by the ventures upon the sale of their respective multifamily apartment communities. Equity earnings for the year ended December 31, 2018 includes $9.3 million in equity earnings from the Addison on Millenia joint venture, which includes the Company’s share of the gain recognized by the venture upon the sale of its multifamily apartment community.



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.



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 (“Mr. 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. In addition, BBXRE and Mr. Altman invest in the managing member of such joint ventures based on their relative ownership percentages in the Altman Companies.



Pursuant to the operating agreement of the Altman Companies, BBXRE will acquire an additional 40% equity interest in the Altman Companies from Mr. Altman for a purchase price of $9.4 million, subject to certain adjustments, in January 2023, and Mr. Altman can also, at his option or in other predefined circumstances, require the Company to purchase his remaining 10% equity interest in the Altman Companies for $2.4 million. However, Mr. Altman will retain his membership interests, including his decision making rights, in the managing member of any development joint ventures that are originated prior to BBXRE’s acquisition of additional equity interests in the Altman Companies. In addition, in certain circumstances, BBXRE may acquire the 40% membership interests in Altman-Glenewinkel Construction that are not owned by the Altman Companies for a purchase price based on prescribed formulas in the operating agreement of Altman-Glenewinkel Construction.



Under the terms of the operating agreement of the Altman Companies, the venture is being jointly managed by BBXRE and Mr. Altman until the Company’s acquisition of the additional 40% equity interest from Mr. Altman, with the partners sharing decision making authority for all significant operating and financing decisions. To the extent that the parties cannot reach consensus on a matter, the operating agreement generally provides that a third party will resolve such matter; however, for certain decisions, the operating agreement provides that the venture cannot proceed with such matters without approval from both parties.



In connection with its investment in the Altman Companies, BBXRE acquired interests in the managing member of seven multifamily apartment developments, including four developments in which BBXRE had previously invested as a non-managing member, for aggregate cash consideration of $8.8 million. As of December 31, 2020, four of these seven joint ventures had sold their respective multifamily apartment communities. In addition, BBXRE and Mr. Altman have each contributed $3.8 million to ABBX Guaranty, LLC, 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.



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.



As a result of the COVID-19 pandemic and the related impact on the overall market, 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, during the year ended December 31, 2020 that should be recognized as an impairment loss. As part of this evaluation, the Company considered the sales at its single-family home developments (which have returned to pre-pandemic levels), continued collection of rent at its multifamily apartment developments, and indications that there has not to date been a significant decline in sales prices for single family homes or an increase in capitalization rates for multifamily apartment communities. However, 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 is developing an office tower, as the market for commercial office space has been more significantly impacted by the 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 have been 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. The Company did not record any impairment charges related to its equity method investments during the years ended December 31, 2019 and 2018.



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):







 

 

 

 

 

 



 

 

 

 

 

 



 

December 31,



 

2020

 

2019

Assets

 

 

 

 

 

 

Cash

 

$

3,100 

 

 

1,634 

Properties and equipment

 

 

363 

 

 

315 

Investment in unconsolidated subsidiaries

 

 

7,382 

 

 

6,353 

Goodwill

 

 

16,683 

 

 

16,683 

Due from related parties

 

 

2,306 

 

 

2,954 

Other assets

 

 

3,443 

 

 

209 

Total assets

 

$

33,277 

 

 

28,148 

Liabilities and Equity

 

 

 

 

 

 

Other liabilities

 

$

6,408 

 

 

2,719 

Total liabilities

 

 

6,408 

 

 

2,719 

Total equity

 

 

26,869 

 

 

25,429 

Total liabilities and equity

 

$

33,277 

 

 

28,148 







 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

For the Years Ended December 31,



 

2020

 

2019

 

2018

Total revenues

 

$

8,700 

 

 

7,242 

 

 

362 

Other expenses

 

 

(10,670)

 

 

(9,493)

 

 

(652)

Operating loss

 

 

(1,970)

 

 

(2,251)

 

 

(290)

Equity in earnings (losses) from unconsolidated investment in Altman Glenewinkel Construction, LLC

 

 

1,737 

 

 

(913)

 

 

113 

Net loss

 

 

(233)

 

 

(3,164)

 

 

(177)

Equity in net (loss) earnings of unconsolidated real estate joint venture - The Altman Companies

 

$

(117)

 

 

(1,582)

 

 

(88)



The tables below set forth financial information, including condensed statements of financial condition and operations, related to the Altis Bonterra joint venture (in thousands):





 

 

 

 

 

 



 

 

 

 

 

 



 

December 31,



 

2020

 

2019

Assets

 

 

 

 

 

 

Cash

 

$

 

 

855 

Restricted cash

 

 

 

 

559 

Real estate

 

 

 

 

 —

Other assets

 

 

 

 

 —

Total assets

 

$

 

 

1,414 

Liabilities and Equity

 

 

 

 

 

 

Notes payable

 

$

 

 

 —

Other liabilities

 

 

 

 

751 

Total liabilities

 

 

 

 

751 

Total equity

 

 

 

 

663 

Total liabilities and equity

 

$

 

 

1,414 







 

 

 

 

 

 

 

 

 



 

For the Years Ended December 31,



 

2020

 

2019

 

2018

Total revenues

 

$

 —

 

$

4,498 

 

 

6,510 

Gain on sale of real estate

 

 

 —

 

 

33,843 

 

 

 —

Other expenses

 

 

 —

 

 

(4,480)

 

 

(5,937)

Net earnings

 

$

 —

 

$

33,861 

 

 

573 

Equity in net earnings of unconsolidated real estate joint venture - Altis Bonterra

 

$

 —

 

$

29,221 

 

 

544 

 

The tables below set forth financial information, including condensed statements of financial condition and operations, related to the Altis Lakeline joint venture (in thousands):





 

 

 

 

 

 



 

 

 

 

 

 



 

December 31,



 

2020

 

2019

Assets

 

 

 

 

 

 

Cash

 

$

 —

 

$

628 

Restricted cash

 

 

 —

 

 

Real estate

 

 

 —

 

 

 —

Other assets

 

 

 —

 

 

144 

Total assets

 

$

 —

 

$

777 

Liabilities and Equity

 

 

 

 

 

 

Notes payable

 

$

 —

 

$

 —

Other liabilities

 

 

 —

 

 

 —

Total liabilities

 

 

 —

 

 

 —

Total equity

 

 

 

 

777 

Total liabilities and equity

 

$

 —

 

$

777 







 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

For the Years Ended December 31,



 

2020

 

2019

 

2018

Total revenues

 

$

 —

 

$

1,458 

 

 

5,842 

Gain on sale of real estate

 

 

 —

 

 

17,178 

 

 

 —

Other expenses

 

 

 —

 

 

(1,801)

 

 

(6,746)

Net earnings (loss)

 

$

 —

 

$

16,835 

 

 

(904)

Equity in net (loss) earnings of unconsolidated real estate joint venture - Altis Lakeline

 

$

 —

 

$

5,029 

 

 

(312)



The tables below set forth financial information, including condensed statements of financial condition and operations, related to the Chapel Trail joint venture (in thousands):







 

 

 

 

 

 



 

 

 

 

 

 



 

December 31,



 

2020

 

2019

Assets

 

 

 

 

 

 

Cash

 

$

 —

 

 

1,725 

Real estate

 

 

 —

 

 

2,134 

Other assets

 

 

 —

 

 

Total assets

 

$

 —

 

 

3,865 

Liabilities and Equity

 

 

 

 

 

 

Notes payable

 

$

 —

 

 

184 

Other liabilities

 

 

 —

 

 

357 

Total liabilities

 

 

 —

 

 

541 

Total equity

 

 

 —

 

 

3,324 

Total liabilities and equity

 

$

 —

 

 

3,865 







 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

For the Years Ended December 31,



 

2020

 

2019

 

2018

Total revenues

 

$

 —

 

 

44,988 

 

 

 —

Costs of sales

 

 

 —

 

 

(35,575)

 

 

 —

Other expenses

 

 

 —

 

 

(2,341)

 

 

(1,388)

Net earnings (loss)

 

 

 —

 

 

7,072 

 

 

(1,388)

Equity in net earnings of unconsolidated real estate joint venture - Chapel Trail

 

$

 —

 

 

3,306 

 

 

(649)



The tables below set forth financial information, including condensed statements of financial condition and operations, related to the Altis Shingle Creek joint venture (in thousands): 







 

 

 

 

 

 



 

 

 

 

 

 



 

December 31,



 

2020

 

2019

Assets

 

 

 

 

 

 

Cash

 

$

 —

 

 

 —

Real estate

 

 

 —

 

 

 —

Other assets

 

 

 —

 

 

 —

Total assets

 

$

 —

 

 

 —

Liabilities and Equity

 

 

 

 

 

 

Notes payable

 

$

 —

 

 

 —

Other liabilities

 

 

 —

 

 

 —

Total liabilities

 

 

 —

 

 

 —

Total equity

 

 

 —

 

 

 —

Total liabilities and equity

 

$

 —

 

 

 —







 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

For the Years Ended December 31,



 

2020

 

2019

 

2018

Total revenues

 

$

 —

 

 

 —

 

 

1,704 

Gain on sale of real estate

 

 

 —

 

 

 —

 

 

22,027 

Other expenses

 

 

 —

 

 

 —

 

 

(2,156)

Net earnings

 

$

 —

 

 

 —

 

 

21,575 

Equity in net earnings of unconsolidated real estate joint venture - Altis Shingle Creek

 

$

 —

 

 

 —

 

 

3,401