Quarterly report pursuant to Section 13 or 15(d)

Leases

v3.21.2
Leases
9 Months Ended
Sep. 30, 2021
Leases [Abstract]  
Leases

8. 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):

As of

As of

September 30, 2021

December 31, 2020

(2)

Operating lease assets

$

76,913

$

13,488

Operating lease liabilities

$

88,091

$

14,141

Weighted average remaining lease term (years)

6.6

7.0

Weighted average discount rate (1)

4.35

%

5.36

%

(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.

(2)Excludes IT’SUGAR’s operating leases. On September 22, 2020, the Company deconsolidated IT’SUGAR as a result of IT’SUGAR filing the Bankruptcy Cases and derecognized its operating lease assets and liabilities.

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 (in thousands):

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

2021

2020

2021

2020

Fixed lease costs

$

4,308

$

4,298

$

6,604

$

13,306

Short-term lease costs

327

38

942

36

Variable lease costs

2,384

933

3,216

3,231

Total operating lease costs

$

7,019

$

5,269

$

10,762

$

16,573

Included in the Company’s statement of cash flows under operating activities for the nine months ended September 30, 2021 and 2020 was $5.5 million and $11.8 million, respectively, of cash paid for amounts included in the measurement of lease liabilities. During the nine months ended September 30, 2021 and 2020, the Company obtained $10.9 million and $4.9 million, respectively, of right-of-use assets in exchange for operating lease liabilities.

The table below sets forth the approximate minimum future rental payments (excluding executory costs) under the Company’s lease agreements (including IT’SUGAR’s lease obligations) during the periods subsequent to September 30, 2021 related to agreements that were executed as of September 30, 2021 (in thousands):

Period Ending December 31,

2021

$

3,405

2022

17,003

2023

17,183

2024

14,717

2025

13,361

After 2025

36,803

Total lease payments

102,472

Less: interest

14,381

Present value of lease liabilities

$

88,091

The above operating lease payments exclude an aggregate of $10.5 million of legally binding minimum lease payments for lease agreements executed but not yet commenced as of September 30, 2021, as the Company had not received possession of the leased property as of that date.