Note 21 - Certain Relationships and Related Party Transactions
|12 Months Ended|
Dec. 31, 2022
|Notes to Financial Statements|
|Related Party Transactions Disclosure [Text Block]||
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.
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):
No definition available.
The entire disclosure for related party transactions. Examples of related party transactions include transactions between (a) a parent company and its subsidiary; (b) subsidiaries of a common parent; (c) and entity and its principal owners; and (d) affiliates.
Reference 1: http://www.xbrl.org/2003/role/disclosureRef