Note 16 - Certain Relationships and Related Party Transactions

9 Months Ended

Sep. 30, 2024

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 82% of BBX Capital’s total voting power. Mr. Alan B. Levan previously also served as the Chairman, Chief Executive Officer, and President of BVH, Mr. Abdo previously also served as Vice Chairman of BVH, and Mr. Jarett Levan and Mr. Seth M. Wise also previously served as directors of BVH. On January 17, 2024, BVH was acquired by HGV. Upon the consummation of the acquisition, Mr. Alan Leven, Mr. Abdo, Mr. Jarett Levan, and Mr. Wise resigned as directors and officers of BVH. 

John E. Abdo, the Company’s Vice Chairman, is the principal shareholder and Chief Executive Officer of the Abdo Companies, Inc. During the three and nine months ended September 30, 2024,the Company paid the Abdo Companies, Inc. approximately $44,000 and $131,000, respectively, for certain management services and rent. 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 each of the three and nine months ended September 30, 2024, the Company provided Mr. Abdo certain administrative services for which Mr. Abdo reimbursed the Company, at cost, $29,000 and $62,000, respectively. 

During each of the three and nine months ended September 30, 2024, the Company provided Mr. Alan B. Levan certain administrative services, and Mr. Alan Levan reimbursed the Company, at cost, $36,000 and $79,000, respectively, for such services. 

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 as well as certain 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 entities during the three and nine months ended September 30, 2024 were $1.2 million and $3.7 million, respectively, and 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 $15.2 million and $46.6 million, respectively, of revenue for these services during the three and nine months ended September 30, 2024 and $29.1 million and $90.7 million, respectively, during the three and nine months ended September 30, 2023. Included in the Company's statement of financial condition as of September 30, 2024 and December 31, 2023 was $15.3 million, $8.3 million and $18.6 million, respectively, and $13.5 million, $20.8 million and $28.6 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 Altis Grand 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 Altman Living. 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 Altman will be entitled as the managing member. With respect to the Altis Grand Kendall joint venture that is consolidated in the Company’s financial statements, the 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 Altman Living have previously invested their personal funds in the managing member of real estate joint ventures sponsored by Altman Living, 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. 

Altman Living and Altman Logistics have each established a separate employee incentive program that provides loans to employees to invest in the managing members of real estate joint ventures sponsored by Altman Living or Altman Logistics, 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 Altman Living or Altman Logistics, 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 held by employees that are funded by loans provided by Altman Living or Altman Logistics 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 $0.2 million and $0.6 million, respectively, for the three and nine months ended September 30, 2024, and $0.4 million and $0.7 million, respectively, for the same 2023 periods, and the unrecognized compensation expense related to these awards was $1.1 million as of September 30, 2024.

Upon the consummation of the spin-off of the Company from BVH, all agreements with BVH were terminated and replaced with a Transition Services Agreement, Tax Matters Agreement, and Employee Matters Agreement. Upon the acquisition of BVH by HGV in January 2024, these agreements were terminated. Although the Company temporarily provided certain transition services related to risk management to BVH and HGV following the termination of the Transition Services Agreement, the Company is no longer providing such risk management advisory services to BVH or HGV.

During the three and nine months ended September 30, 2024, the Company recognized $0 and $0.4 million, respectively, of income for providing office space, risk management, and management advisory services to BVH, including income related to temporary transition services provided to BVH and HGV subsequent to the acquisition of BVH by HGV in January 2024. During the three and nine months ended September 30, 2023, the Company recognized $0.5 million and $1.5 million, respectively, of income for providing office space, risk management, and management advisory services to BVH. The amounts paid or reimbursed were based on an allocation of the actual cost of providing the services or space. The amount receivable from BVH related to such services was $0 and $0.3 million as of September 30, 2024 and December 31, 2023, respectively.

In connection with the spin-off of the Company, BVH issued a $75.0 million note payable to BBX Capital that accrued interest at a rate of 6% per annum and required payments of interest on a quarterly basis. All outstanding amounts under the note were to become due and payable on September 30, 2025 or earlier upon certain other events. In  December 2021, BVH made a $25.0 million prepayment of the note reducing the outstanding note balance from $75.0 million to $50.0 million. Additionally, in May 2023, the Company and BVH 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. As a result of the repayments, the outstanding balance of the note was further reduced to $35.0 million. In connection with the acquisition of BVH by HGV, the $35.0 million outstanding balance of the note payable owed to the Company was repaid in full. Included in interest income in the Company’s consolidated statement of operations and comprehensive (loss) income for the three and nine months ended September 30, 2023 was $0.5 million and $1.9 million, respectively, relating to accrued interest on the note receivable from BVH, compared to $0 and $0.1 million during the three and nine months ended September 30, 2024, respectively.