Note 16 - Certain Relationships and Related Party Transactions
|9 Months Ended|
Sep. 30, 2023
|Notes to Financial Statements|
|Related Party Transactions Disclosure [Text Block]||
16. 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 83% of BBX Capital’s total voting power. Mr. Alan B. Levan also serves as the Chairman, Chief Executive Officer, and President of Bluegreen Vacations, and Mr. Abdo also serves as Vice Chairman of Bluegreen Vacations. Additionally, Mr. Jarett Levan and Mr. Wise serve as directors of Bluegreen Vacations.
During the three and nine months ended September 30, 2023 and 2022, the Company recognized $0.5 million and $1.5 million, respectively, of income for providing office space, risk management, and management advisory services to Bluegreen Vacations. The amounts paid or reimbursed are based on an allocation of the actual cost of providing the services or space pursuant to a Transition Services Agreement entered into by BBX Capital and Bluegreen Vacations upon the spin-off of the Company from Bluegreen Vacations in 2020. On November 5, 2023, Bluegreen Vacations entered into a merger agreement with Hilton Grand Vacations Inc. (“HGV”) providing for the acquisition of Bluegreen Vacations by HGV, and it is currently anticipated that the Transaction Services Agreement between BBX Capital and Bluegreen Vacations will be terminated upon consummation of the merger.
During the three and nine months ended September 30, 2023, the Company paid the Abdo Companies, Inc. approximately $44,000 and $135,000, respectively, for certain management services and rent. During the three and nine months ended September 30, 2022, the Company paid the Abdo Companies, Inc. approximately $44,000 and $131,000, respectively, for certain management services and rent. John E. Abdo, the Company’s Vice Chairman, is the principal shareholder and Chief Executive Officer of the Abdo Companies, Inc.
The Company provides management services to the Altman Companies for which the Company recognized $47,000 and $247,000, respectively, net of services provided to the Company by the Altman Companies, during the three and nine months ended September 30, 2022 in return for such these services. Subsequent to January 31, 2023, the fees for these services were eliminated in consolidation.
The Company earns property management and development management fees from property management agreements and development service contracts with certain real estate joint venture entities in which the Company is the managing member and other affiliated entities, including entities in which Mr. Altman holds investments. Property management and development management fees included in the Company's condensed consolidated statement of operations and comprehensive income from these affiliates during the three and nine months ended September 30, 2023 were $1.2 million and $4.5 million, respectively. The Company is also the general contractor for the construction of multifamily apartment communities for certain real estate joint ventures in which the Company is the managing member and recognized $29.1 million and $90.7 million, respectively, of revenue for these services during the three and nine months ended September 30, 2023. Included in the Company's statement of financial condition as of September 30, 2023 was $13.8 million, $21.6 million and $29.5 million, respectively, of construction contract receivables, contract assets and contract liabilities related to the performance of the above mentioned services to such affiliated entities.
Certain of the Company's executive officers (i) have made investments with their personal funds as non-managing members in the Altra Kendall joint venture that is consolidated in the Company's financial statements and (ii) may in the future make similar investments as non-managing members in real estate joint ventures sponsored by the Altman Companies. In such circumstances, the executive officers may only make such investments if such investments are offered to outside investors on similar terms, and their investments in the real estate joint ventures will be entitled to profits similar to those earned by unaffiliated, non-managing members rather than the profits to which BBXRE will be entitled as the managing member. With respect to the Altra Kendall joint venture that is consolidated in the Company’s financial statements, these investments held by the executive officers are reflected as noncontrolling interests in the Company’s condensed consolidated statement of financial position. However, the accounting for any such investments in future projects will depend on whether the managing member entity of such projects consolidates the underlying real estate joint venture. In addition, pursuant to the terms of their employment agreements, two executive officers of the Altman Companies have previously invested their personal funds in the managing member of real estate joint ventures sponsored by the Altman Companies, and their investments in the managing member of these real estate joint ventures are entitled to profits similar to those earned by the managing member.
The Altman Companies and BBX Logistics Properties have each established an employee incentive program that provides loans to employees to invest in the managing members of real estate joint ventures sponsored by the Altman Companies or BBX Logistics Properties, as applicable. The loans generally accrue interest at the Prime Rate plus a specified spread and are secured by the employees' membership interests in the managing member entities. The membership interests vest upon the achievement of certain project milestones related to the development and sale of the applicable projects, and employees must be employed by the Altman Companies or BBX Logistics Properties, as applicable, upon the achievement of such milestones. Further, the loans are payable upon the sale of the applicable projects. Membership interests in the managing members of real estate joint ventures to employees that are funded by loans provided by the Altman Companies or BBX Logistics Properties that are non-recourse either in whole or in part, are treated as equity options for accounting purposes. The Company recognizes the fair value of the arrangements at the grant date as compensation expense on a straight-line basis over the estimated service period, including the implied service period related to the applicable milestones. The compensation expense for these awards was $0.4 million and $0.7 million, respectively, for the three and nine months ended September 30, 2023, and the unrecognized compensation expense related to these awards was $0.7 million.
In connection with the spin-off of the Company from Bluegreen Vacations, 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 balance to $50.0 million. Additionally, in May 2023, the Company and Bluegreen Vacations agreed to a discounted prepayment of $15.0 million of the principal balance of the note pursuant to which the Company received proceeds of $14.1 million in return for a principal reduction of $15.0 million. The $0.9 million discount is included as a reduction to interest income in the Company's statement of operations and comprehensive income for the nine months ended September 30, 2023. As a result of the repayments, the outstanding balance of the note was further reduced to $35.0 million. Included in interest income in the Company’s condensed consolidated statement of operations and comprehensive income or loss for the three and nine months ended September 30, 2023 was $0.5 million and $1.9 million of interest income, respectively, and $0.8 and $2.3 million, respectively, for the three and nine months ended September 30, 2022. As described above, on November 5, 2023, Bluegreen Vacations entered into a merger agreement with HGV providing for the acquisition of Bluegreen Vacations by HGV, and it is currently anticipated that the outstanding balance of the note payable owed to the Company will be prepaid in full upon the consummation of the merger.
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