BBX CAPITAL, INC. Except as otherwise noted or where the context otherwise requires, the terms "the Company," "we," "us," or "our" refers toBBX Capital, Inc. and its consolidated subsidiaries, and the term "BBX Capital " refers toBBX Capital, Inc. as a standalone entity. Forward-Looking Statements This Quarterly Report on Form 10-Q contains forward-looking statements based largely on current expectations of the Company that involve a number of risks and uncertainties. All opinions, forecasts, projections, future plans, or other statements, other than statements of historical fact, are forward-looking statements and can be identified by the use of words or phrases such as "plans," "believes," "will," "expects," "anticipates," "intends," "estimates," "our view," "we see," "would," and words and phrases of similar import. The forward-looking statements in this document are also forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and involve substantial risks and uncertainties. We can give no assurance that such expectations will prove to be correct. Actual results, performance, or achievements could differ materially from those contemplated, expressed, or implied by the forward-looking statements contained herein. Forward-looking statements are based largely on our expectations and are subject to a number of risks and uncertainties that are subject to change based on factors which are, in many instances, beyond our control. When considering forward-looking statements, the reader should keep in mind the risks, uncertainties, and other cautionary statements made in this report and in the Company's other reports filed with theSecurities and Exchange Commission ("SEC"). The reader should not place undue reliance on any forward-looking statement, which speaks only as of the date made. This document also contains information regarding the past performance of the Company and its respective investments and operations. The reader should note that prior or current performance is not a guarantee or indication of future performance. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, and all such information should only be viewed as historical data. Future results and the accuracy of forward-looking statements may be affected by various risks and uncertainties, including the risk factors applicable to the Company which are described herein and in "Item 1. Business - Cautionary Note Regarding Forward-Looking Statements" and "Item 1A. Risk Factors" of the Company's Annual Report on Form 10-K for the year endedDecember 31, 2020 (the "2020 Annual Report"). These risks and uncertainties also include risks relating to public health issues, including, in particular, the COVID-19 pandemic, as it is not currently possible to accurately assess the expected duration and effects of the pandemic on our business. These include required closures of retail locations, travel and business restrictions, "shelter in place" and "stay at home" orders and advisories, volatility in the global and national economies and equity, credit, and commodities markets, worker absenteeism, quarantines, and other health-related restrictions; the duration and severity of the COVID-19 pandemic and the impact on demand for the Company's products and services, levels of consumer confidence, supply chains and raw materials costs; actions taken by governments, businesses, and individuals in response to the pandemic and their impact on economic activity and consumer spending, which will impact the Company's ability to successfully resume full business operations; the pace of recovery when the COVID-19 pandemic subsides and the possibility of a resurgence; competitive conditions; the Company's liquidity and the availability of capital; the effects and duration of steps the Company takes in response to the COVID-19 pandemic, including the inability to rehire or replace furloughed employees; risks that the Company may recognize further impairment losses; the risks and uncertainties inherent in the bankruptcy proceedings ofIT'SUGAR LLC and its subsidiaries ("IT'SUGAR") and the inability to predict the effect of IT'SUGAR's reorganization and/or liquidation process on the Company and its results of operation and financial condition, including the risk that additional impairment charges may be required in the future, IT'SUGAR's ability to prosecute, confirm and consummate a plan of reorganization or liquidation, IT'SUGAR's ability, through the Chapter 11 bankruptcy process, to reach agreement with its landlords or other third parties, and the risk that creditors of IT'SUGAR may assert claims against the Company or any of their respective subsidiaries (other than IT'SUGAR) and that the Company or any such subsidiary's assets may become subject to or included in IT'SUGAR's bankruptcy case; risks related to the Company's indebtedness, including the potential for accelerated maturities and debt covenant violations; the risk of heightened litigation as a result of actions taken in response to the COVID-19 pandemic; the impact of the COVID-19 pandemic on consumers, including, but not limited to, their income, their level of discretionary spending both during and after the pandemic, and their views towards the retail industry; the risk that certain of the Company's operations, including retail locations, may not continue to generate recurring sources of cash during or following the pandemic to the extent anticipated or at all; the risk that commodity, freight, and labor price increases may adversely impact the gross margins ofBBX Capital Real Estate LLC ("BBX Capital Real Estate " or "BBXRE"),BBX Sweet Holdings, LLC ("BBX Sweet Holdings "), andRenin Holdings, LLC ("Renin"); the risk that homebuilders will not meet their obligations to acquire lots atBeacon Lake due to the impact of higher 24 -------------------------------------------------------------------------------- construction costs; and the risk that the loss of sales of products to Renin's major customers and/or Renin's efforts to maintain sales of its products to its major customers may negatively impact Renin's sales, gross margin, and profitability, require Renin to lower its prices, and result in the recognition of impairment losses related to its goodwill and long-lived assets and noncompliance with the terms of its outstanding credit facility. This Quarterly Report on Form 10-Q also contains a discussion of Renin's recent acquisition of substantially all of the assets and assumption of certain of the liabilities ofColonial Elegance, Inc. ("Colonial Elegance"), which is subject to the impact of economic, competitive and other factors affecting Renin and Colonial Elegance, including their operations, markets, marketing strategies, products and services; the risk that the integration of Colonial Elegance may not be completed on a timely basis, or as anticipated; that the anticipated expansion or growth opportunities will not be achieved or if achieved will not be advantageous; that the acquisition will not be cash accretive immediately or at all; that net income may not be generated when anticipated or at all or the acquisition may result in net losses; thatBBX Capital and/or Renin may not realize the anticipated benefits of the acquisition when or to the extent anticipated or at all; and the risks associated with the increased indebtedness incurred by Renin to finance the acquisition including, compliance with financial covenants and restrictions on Renin's activities. The risk factors described in the 2020 Annual Report, as well as the other risks and factors detailed in this report and the other reports filed by the Company with theSEC , are not necessarily all of the important factors that could cause the Company's actual results to differ materially from those expressed in any of the forward-looking statements. Other unknown or unpredictable factors could cause the Company's actual results to differ materially from those expressed in any of the forward-looking statements. As a result, the Company cautions that the foregoing factors are not exclusive. Given these uncertainties, you are cautioned not to place undue reliance on forward-looking statements, and you should read this Quarterly Report on Form 10-Q with the understanding that actual future results, levels of activity, performance, and events and circumstances may be materially different from prior results or what the Company expects. The Company qualifies all forward-looking statements by these cautionary statements. Forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q, and the Company undertakes no obligation to publicly update or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this report. Critical Accounting Policies See Item 7 - "Management's Discussion and Analysis of Financial Condition and Results of Operations" under the section "Critical Accounting Policies" in the Company's 2020 Annual Report for a discussion of the Company's critical accounting policies. New Accounting Pronouncements
See Note 1 to the Company's condensed consolidated financial statements included in Item 1 of this report for a discussion of new accounting pronouncements applicable to the Company.
Overview
The Company's goal is to build long-term shareholder value. Since many of the
Company's assets do not generate income on a regular or predictable basis, the
Company's objective is long-term growth as measured by increases in book value
and intrinsic value over time. The Company regularly reviews the performance of
its investments and, based upon economic, market, and other relevant factors,
considers transactions involving the sale or disposition of all or a portion of
its assets, investments, or subsidiaries. Further, subject to market conditions
and other factors, the Company may from time to time repurchase its outstanding
common stock.
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-------------------------------------------------------------------------------- Prior toSeptember 30, 2020 , the Company was a wholly owned subsidiary of Bluegreen Vacations Holding Corporation ("Parent" or "BVH"), which was formerly known asBBX Capital Corporation . As further described in the Company's 2020 Annual Report and in Note 1 to the Company's financial statements included in Item 1 of this report, onSeptember 30, 2020 , BVH completed the spin-off of the Company as a separate, publicly-traded company. In connection with the spin-off, BVH 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, BVH 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 BVH is current on all accrued payments under the note, including deferred interest. All outstanding amounts under the note will become due and payable onSeptember 30, 2025 or earlier upon certain other events. Further, BVH is permitted to prepay the note in whole or in part at any time.
Impact of the COVID-19 Pandemic
The COVID-19 pandemic has resulted in an unprecedented disruption in theU.S. and global economies and the industries in which the Company operates due to, among other things, (i) government ordered "shelter in place" and "stay at home" orders and advisories, travel restrictions, and restrictions on business operations, (ii) government guidance and restrictions with respect to travel, public accommodations, social gatherings, and related matters, (iii) the general public's reaction to the pandemic, including impacts on consumer demand, (iv) disruptions in global supply chains, and (iv) increased economic uncertainty. The disruptions arising from the pandemic and the reaction of the general public have had a significant adverse impact on the Company's financial condition and operations, particularly with respect toBBX Sweet Holdings , as the effects of the pandemic required IT'SUGAR to temporarily close all of its retail locations in 2020 and ultimately resulted in IT'SUGAR and its subsidiaries filing petitions for Chapter 11 bankruptcy inSeptember 2020 . In addition, the Company's workforce has been significantly impacted by the pandemic as a result of, among other things, the implementation of temporary and permanent reductions in employee head count in order to manage expenses and various health and safety protocols necessary for the Company to maintain operations. Further, the Company is observing significant increases in commodity, freight, and labor costs as a result of global supply chain disruptions, and such increases have begun to impact the Company's operations and may have a material impact on its operations in future periods. The duration and severity of the pandemic and related disruptions, as well as the resulting adverse impact on economic and market conditions are uncertain, and the Company may continue to be adversely impacted by these conditions in future periods. Although the impact of the COVID-19 pandemic on the Company's principal holdings and management's efforts to mitigate the effects of the pandemic has varied,BBX Capital and its subsidiaries have sought to take steps to manage expenses through cost saving initiatives and reductions in employee head count and actions to increase liquidity and strengthen the Company's financial position, including reducing planned capital expenditures. As ofMarch 31, 2021 , the Company's consolidated cash balances were$87.8 million . The discussion below provides an update on the Company's principal holdings for the three months endedMarch 31, 2021 , including the current impacts of the COVID-19 pandemic on their operations during 2021. However, this discussion should be read in conjunction with the discussion and analysis in Item 7 - "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in the Company's 2020 Annual Report, which provides additional information related to (i) the impacts of the COVID-19 pandemic on the Company's principal holdings since the initial outbreak of COVID-19 in 2020 and (ii) the various risks and uncertainties associated with the effects of the pandemic on the Company's principal holdings, which has had, and could in future periods have, a material adverse impact on the Company's consolidated results of operations, cash flows, and financial condition.
Summary of Consolidated Results of Operations
Consolidated Results
The following summarizes key financial highlights for the three months ended
· Total consolidated revenues of
same 2020 period.
· Income from continuing operations before income taxes of
to a loss from continuing operations before income taxes of
during the same 2020 period.
· Net income attributable to common shareholders of
loss attributable to shareholders of
period.
· Diluted earnings per share from continuing operations of
diluted loss per share from continuing operations of
period.
26
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The Company's consolidated results for the three months ended
· A net increase in sales activity at
as BBXRE sold 128 developed lots to homebuilders during the 2021 period
compared to 87 lots during the 2020 period;
· A net increase in trade sales resulting primarily from Renin's acquisition of
Colonial Elegance in
Company's deconsolidation of IT'SUGAR in
filing of voluntary petitions to reorganize under Chapter 11 of the Bankruptcy
Code;
· A net decrease in selling, general and administrative expenses primarily
attributable to the deconsolidation of IT'SUGAR, partially offset by expenses
associated with Colonial Elegance, including amortization expense related to
acquired intangible assets; and
· The recognition of impairment losses of
primarily related to goodwill and long-lived assets associated with IT'SUGAR as
a result of the impact of the COVID-19 pandemic; partially offset by
· A decline in Renin's gross margin percentage as a result of increased costs
related to raw materials and the shipment of products;
· Lower recoveries from loan losses in 2021 due to a settlement with a financial
institution servicing loans for BBXRE during the 2020 period; and
· An increase in foreign currency exchange losses related to Renin.
Segment Results
Information regarding income (loss) from continuing operations before income taxes by reportable segment is set forth in the table below (in thousands):
March 31,
2021 2020 Change
BBX Capital Real Estate $ 4,918 4,051 867
BBX Sweet Holdings (417) (28,938) 28,521
Renin 841 714 127
Other 754 (2,808) 3,562
Reconciling items and eliminations (2,640) (3,628) 988
Income (loss) from continuing operations before income taxes 3,456 (30,609)
34,065
(Provision) benefit for income taxes (1,001) 5,908 (6,909) Net income (loss) from continuing operations 2,455 (24,701) 27,156 Discontinued operations - (678) 678 Net income (loss) 2,455 (25,379) 27,834 Net (income) loss attributable to noncontrolling interests (110) 3,456
(3,566)
Net income (loss) attributable to shareholders$ 2,345 (21,923) 24,268
BBX Capital Real Estate Reportable Segment
Segment DescriptionBBX Capital Real Estate (or BBXRE) is engaged in the acquisition, development, construction, ownership, financing, and management of real estate and investments in real estate joint ventures, including investments in multifamily rental apartment communities, single-family master-planned for sale housing communities, and commercial properties located primarily inFlorida . In addition, BBXRE owns a 50% equity interest in the Altman Companies, a developer and manager of multifamily apartment communities, and also manages the legacy assets acquired in connection with the Company's sale of BankAtlantic in 2012, including portfolios of loans receivable, real estate properties, and judgments against past borrowers. 27
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Overview As further described in the Company's 2020 Annual Report, BBXRE's operations that were impacted by the COVID-19 pandemic during 2020 have largely returned to pre-pandemic levels, which management believes is primarily attributable to demand for single-family and multifamily apartment housing in many of the markets inFlorida in which BBXRE operates. In particular, sales at BBXRE's single-family home developments and leasing and rent collections at its multifamily apartment developments have generally returned to pre-pandemic levels in most locations, and BBXRE believes that there has generally been a recovery in investor demand for the acquisition of stabilized multifamily apartment communities and the availability of debt and equity capital for financing new multifamily apartment developments. However, BBXRE has observed a significant increase in commodity and labor prices during the first quarter of 2021, which is expected to result in higher development and construction costs. Although such increases have not yet materially impacted BBXRE's results of operations, these increases may have a material impact on BBXRE's operating results in future periods, as described in further detail below. In addition, the effects of the COVID-19 pandemic have resulted in significant uncertainty in the overall economy, and the resulting risks and uncertainties, which are further described in the Company's 2020 Annual Report, could have a material adverse impact on BBXRE's results of operations, cash flows, and financial condition in future periods.
The Altman Companies and Related Investments
In 2018, BBXRE acquired a 50% membership interest in the Altman Companies, a joint venture between the Company andJoel Altman engaged in the development, construction, and management of multifamily apartment communities. As ofMarch 31, 2021 , BBXRE had investments in seven active developments sponsored by the Altman Companies, which are summarized as follows: Carrying Value of BBXRE Apartment Project Status at Investment at March 31, Project Location Units March 31, 2021 2021 Altis Grand Tampa, Florida 314 Stabilized - 96% Occupied $ 2,166 Central Altis Promenade Tampa, Florida 338 Stabilized - 96% Occupied 1,952 Altis Grand at The Preserve Odessa, Florida 350 Lease Up - 77% Occupied 1,132 (Suncoast) Altis Little Miami, Florida 224 Under Construction - Expected 851 Havana Completion in 2021 Altis Miramar Miramar, Florida 650 Under Construction - Expected 2,841 East/West Completion in 2021 Altis Ludlam Trail Miami, Florida 312 Under Construction - Expected 9,931 (1) Completion in 2022 Altis Lake Willis Orlando, Florida TBD Predevelopment 5,829 (Vineland Pointe) (1) The carrying value of theBBXRE Investment atMarch 31, 2021 includes$9.4
million related to BBXRE's investment in the preferred equity associated with
the
preferred return.
As previously described in the Company's 2020 Annual Report, following temporary
disruptions in its operations during 2020 as a result of the COVID-19 pandemic,
the operations related to the existing developments sponsored by the Altman
Companies have generally returned to pre-pandemic levels. In particular, the
Altman Companies collected in excess of 98% of the rents at the multifamily
apartment communities under its management during the first quarter of 2021, and
the volume of new leases at its communities have generally returned to, and in
some cases have exceeded, pre-pandemic levels and expectations. Further, based
on the progress of construction at its communities currently under construction,
the Altman Companies does not at the current time expect the observed increases
in commodity and labor prices to have a material impact on the costs of
developing these communities. The Altman Companies has also observed increased
investor demand for the acquisition of stabilized multifamily apartment
communities, as evidenced by the Altis Pembroke joint venture's sale of its
multifamily apartment community during the first quarter of 2021 and recent
investor interest in projects currently being marketed for sale by the Altman
Companies.
28
-------------------------------------------------------------------------------- In addition to its existing development portfolio, the Altman Companies has been focused on the identification of new opportunities for its development pipeline. In this regard, it has identified various new potential development opportunities, which are primarily located inSouth Florida and the greaterTampa, Florida area, both of which are experiencing increased demand for multifamily housing, and it has also observed what it believes to be an increase in the availability of debt and equity capital for new developments. However, as it relates to these new development opportunities, the Altman Companies has observed a significant increase in commodity and labor prices, as well as supply chain disruptions and material shortages, all of which are expected to impact the costs of developing new multifamily apartment communities. Although the Altman Companies is continuing to evaluate the ultimate impact of these costs on the overall profitability of its potential future developments, a significant increase in development costs could have a material impact on the Altman Companies' operations, including, but not limited to, (i) an inability to close on the equity and/or debt financing necessary to commence the construction of new projects as a result of a decrease in projected investor profits and (ii) a decrease in the profits expected to be earned by the BBXRE andJoel Altman as the managing member of projects that ultimately commence. These factors could result in, among other things, (i) increased operating losses at the Altman Companies due to a decline in development, general contractor, and management fees, (ii) the recognition of impairment losses by BBXRE and/or the Altman Companies related to their current investments in predevelopment expenditures and land acquired for development, including the land held by theAltis Lake Willis joint venture, and (iii) the recognition of impairment losses related to BBXRE's overall investment in the Altman Companies, as the profitability and value of the Altman Companies is directly correlated with its ability to source new development opportunities.
BBXRE is the master developer of theBeacon Lake Community , a master planned community located inSt. Johns County, Florida that is expected to be comprised of 1,476 single-family homes and townhomes. BBXRE is primarily developing the land and common areas and selling finished lots to third-party homebuilders who are constructing single-family homes and townhomes that are planned to range from 1,400 square feet to 4,400 square feet and priced from the high$200,000 's to the$600,000 's. The agreements pursuant to which BBXRE is selling finished lots to homebuilders generally provide for a base purchase price that is paid to BBXRE upon the sale of the developed lots to the homebuilders and a contingent purchase price that is calculated as a percentage of the proceeds that the homebuilders receive from the sale of the completed homes and paid to BBXRE upon the closing of such home sales. BBXRE has substantially completed the development of the lots comprising Phases 1 and 2 of theBeacon Lake Community and commenced the development of the lots comprising Phase 3 during the second quarter of 2021. The following table summarizes the status of the sale of lots to homebuilders in each phase in the development as ofMarch 31, 2021 : Phase 2 Phase 1 Single-family Townhomes Phase 3 Phase 4 Total Total planned lots 302 479 196 200 299 1,476 Lots sold to homebuilders (1) (302) (237) (118) - - (657) Remaining lots to sell - 242 78 200 299 819 Lots under contract with homebuilders - (242) (78) (68) (299)(2) (687) Available lots (3) - - - 132 - 132
(1) As further described in Note 2 to the Company's consolidated financial
statements included in the 2020 Annual Report, BBXRE generally recognizes
revenue related to sales of lots to homebuilders, including an estimate of
any contingent purchase price expected to be collected in relation to such
lots, upon the closing of the sale of such lots to the homebuilders. Although
BBXRE recognizes the expected contingent purchase price associated with such
lots upon the closing of the sale to the homebuilders, BBXRE ultimately does
not receive any contingent purchase price related to a lot until the
homebuilder closes on the sale of a home on such lot and collects the
proceeds from the home sale.
(2) BBXRE has entered into an agreement with an unaffiliated homebuilder to sell
all of the undeveloped lots comprising Phase 4 in a single transaction. Such
agreement provides for the payment of a base purchase price to BBXRE but does
not provide for the payment of a contingent purchase price.
(3) BBXRE is exploring investment alternatives for the remaining lots in Phase 3,
including the possible construction, leasing, and management of a portfolio
of rental homes.
During the three months ended March 31, 2021 , BBXRE sold 80 single-family lots
and 48 townhome lots compared to 49 single-family lots and 38 townhomes lots
sold during the three months ended March 31, 2020 .
29
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The following table summarizes the status of the sale of homes by homebuilders on lots previously sold by BBXRE to such homebuilders:
Phase 2
Phase 1 Single-family Townhomes TotalLots sold to homebuilders 302 237 118 657 Homes closed 293 121 61 475 Homes remaining to close 9 116 57 182 At the current time, BBXRE does not expect the observed increases in commodity and labor prices to significantly impact its costs to develop the lots in Phase 3 but does expect that the costs to construct homes on the developed lots throughout theBeacon Lake Community will be impacted. At the current time, BBXRE believes that homebuilders are likely to continue to meet their obligations to acquire lots from BBXRE pursuant to the existing agreements between BBXRE and the homebuilders, as the impact of the increase in construction costs on the profitability of home sales is being offset to some extent by an increase in prices for single-family homes. However, there is no assurance that this will be the case, and the increase in construction costs could result in requests by homebuilders to extend the timing of their purchase of developed lots and/or failure of the homebuilders to meet their obligations under these contracts. Other Joint Venture Activity InJune 2019 , BBXRE invested$4.2 million in the Sky Cove joint venture, which was formed to developSky Cove at Westlake, a residential community comprised of 204 single-family homes inLoxahatchee, Florida . During the three months endedMarch 31, 2021 , the joint venture closed on 28 single-family homes, and BBXRE recognized$0.3 million of equity earnings and received$0.5 million of distributions from the venture. As ofMarch 31, 2021 , the joint venture has executed sales contracts on an additional 115 single-family homes, and closings on sales are expected in 2021. InFebruary 2021 , BBXRE invested$4.9 million in the Sky Cove South joint venture, which was formed to develop Sky Cove South at Westlake, a residential community that will be adjacent toSky Cove at Westlake and is expected to be comprised of 197 single-family homes. As ofMarch 31, 2021 , BBXRE had an investment of$4.8 million in a joint venture withCC Homes to develop Marbella, a residential community comprised of 158 single-family homes inMiramar, Florida . As ofMarch 31, 2021 , the joint venture had entered into contracts to sell 124 single-family homes, and closings on sales are expected to commence during the second half of 2021. Although the above joint ventures expect to incur increased costs to construct homes in their respective communities, BBXRE does not currently believe such increases will have a material adverse impact on the expected profitability of these investments, as the impact of the increase in construction costs on the profitability of home sales is expected to be offset to some extent by the increase in prices for single-family homes as a result of higher demand. 30
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Results of Operations
Information regarding the results of operations for BBXRE is set forth below
(dollars in thousands):
For the Three Months Ended
March 31,
2021 2020 Change
Sales of real estate inventory $ 13,535 6,439 7,096
Interest income 475 104
371
Net gains (losses) on sales of real estate assets 105 (47) 152 Other 398 460 (62) Total revenues 14,513 6,956 7,557 Cost of real estate inventory sold 7,858 4,632
3,226
Recoveries from loan losses, net (508) (3,512) 3,004 Selling, general and administrative expenses 1,974 2,336 (362) Total costs and expenses 9,324 3,456 5,868 Operating income 5,189 3,500 1,689 Equity in net (losses) earnings of unconsolidated joint ventures (271) 551 (822) Income from continuing operations before income taxes$ 4,918 4,051 867
BBXRE's income from continuing operations before income taxes for the three
months ended
· An increase in net profits from the sale of developed lots to homebuilders at
the
the 2021 period and 87 developed lots during the 2020 period, and an increase
in the estimated contingent purchase price receivable from homebuilders that is
calculated as a percentage of the sales price of completed homes on the sold
lots as a result of improvements in the market for single-family housing during
the 2021 period;
· An increase in interest income associated with loans receivable from IT'SUGAR
and BBXRE's preferred equity investment in the
venture; and
· A decrease in selling, general and administrative expenses primarily associated
with lower incentive bonuses and professional fees; partially offset by,
· A net decrease in recoveries from loan losses in 2021 due to a settlement with
a financial institution servicing loans for BBXRE during the 2020 period.
BBX Sweet Holdings Reportable Segment
Segment DescriptionBBX Sweet Holdings is engaged in the ownership and management of operating businesses in the confectionery industry, including Hoffman's Chocolates, a retailer of gourmet chocolates with retail locations inSouth Florida , and Las Olas Confections and Snacks, a manufacturer and wholesaler of chocolate and other confectionery products.BBX Sweet Holdings also owns approximately 93% of the equity interests in IT'SUGAR, a specialty candy retailer whose products include bulk candy, candy in giant packaging, and licensed and novelty items. Prior toSeptember 22, 2020 , the Company consolidated the financial statements of IT'SUGAR and its subsidiaries based on its 93% ownership of IT'SUGAR. However, as a result of the impact of the COVID-19 pandemic on its operations, onSeptember 22, 2020 , IT'SUGAR and its subsidiaries filed voluntary petitions to reorganize under Chapter 11 of Title 11 of theU.S. Code (the "Bankruptcy Code") in theU.S. Bankruptcy Court for the Southern District of Florida (the "Bankruptcy Court ") (the cases commenced by such filings, the "Bankruptcy Cases"), and as a result of the filings and the uncertainties surrounding the nature, timing, and specifics of the bankruptcy proceedings, the Company deconsolidated IT'SUGAR onSeptember 22, 2020 . 31
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Overview IT'SUGAR
As further described in the Company's 2020 Annual Report, on
At the current time, IT'SUGAR is continuing to operate its retail locations under the supervision of theBankruptcy Court and the participation of the Creditors' Committee, and it submitted its proposed Reorganization Plan inApril 2021 within its exclusivity period and with the support of the Creditors' Committee. IT'SUGAR's proposed Reorganization Plan generally provides for (i) the full payment of administrative expenses, professional fees, and certain pre-petition claims, including priority claims, claims secured by construction liens, and its senior secured notes payable to a subsidiary ofBBX Capital , which had an aggregate balance of$10.1 million as ofMarch 31, 2021 , and (ii) the payment of 15% of allowed outstanding pre-petition claims to IT'SUGAR's general unsecured creditors. IT'SUGAR is currently soliciting its creditors for their approval of its proposed Reorganization Plan, and theBankruptcy Court has established a preliminary date inJune 2021 on which it may confirm the Reorganization Plan if the plan is ultimately approved by IT'SUGAR's creditors. The approval of IT'SUGAR's proposed Reorganization Plan will require, among other things, at least half of IT'SUGAR's general unsecured creditors whose claims are deemed to be impaired to approve the plan, and the approval of such creditors must also comprise at least two-thirds of the dollar amount of the total claims of the general unsecured creditors. Based on its current estimates and the terms of its proposed Reorganization Plan, IT'SUGAR expects that it will require exit financing of up to approximately$13.0 million if the plan is approved by its creditors. As the Company's existing secured advances to IT'SUGAR would be addressed in connection with IT'SUGAR's proposed Reorganization Plan, the Company currently expects that it would need to advance an incremental net amount of approximately$3.0 million to IT'SUGAR if the proposed Reorganization Plan is approved and confirmed. In connection with the Bankruptcy Cases, IT'SUGAR has executed lease amendments in relation to 72 of its retail locations. Other than 17 retail locations which have been closed during the Bankruptcy Cases, IT'SUGAR expects to continue to operate substantially all of its remaining locations and assume the existing lease agreements and amendments. However, the assumption of the lease agreements and any amendments are ultimately subject to confirmation of IT'SUGAR's proposed Reorganization Plan. IT'SUGAR has opened 9 "temporary" retail locations in selectU.S. locations. These "temporary" retail locations required initial capital investments that were significantly lower than the investments required for IT'SUGAR's typical retail locations, as IT'SUGAR repurposed retail spaces that were recently vacated by the prior tenants and utilized in many cases existing fixtures from certain of its other recently closed locations, and are being leased pursuant to lease agreements which have terms ranging from 13-21 months and provide for the payment of rent based on a percentage of sales. IT'SUGAR is currently evaluating additional locations in which to potentially open similar "temporary" retail locations, including 3 additional locations that are currently expected to open during the second quarter of 2021 and up to 4-6 additional locations that IT'SUGAR is projecting to open in 2021. In addition, IT'SUGAR is also evaluating a potential "large format" retail location that is similar in size to its candy department store at American Dream inNew Jersey and is currently projected to open in late 2021. However, all new lease agreements for new retail locations are subject to approval by theBankruptcy Court while the Bankruptcy Cases are ongoing, and there is no assurance that IT'SUGAR will be able to fund and open any new retail locations during the expected time frames, if at all. Although IT'SUGAR's sales volumes continue to be impacted by the effects of the COVID-19 pandemic and there is no assurance that its sales will not decline in future periods, IT'SUGAR's sales since the filing of the Bankruptcy Cases have steadily improved. While IT'SUGAR's total revenues for the three months endedSeptember 30, 2020 had declined by approximately 50% as compared to the comparable period in 2019, IT'SUGAR's comparable store sales (which exclude the impact of e-commerce sales and changes in the store portfolio) and total revenues for the three months endedDecember 31, 2020 had declined by approximately 32% and 23%, respectively, as compared to the comparable period in 2019. Further, its comparable store sales for the three months endedMarch 31, 2021 were approximately 10% lower than the comparable period in 2019, while its total revenues for the three months endedMarch 31, 2021 were approximately 11% higher than the comparable period in 2019. In addition, forApril 2021 , IT'SUGAR's comparable store sales were consistent withApril 2019 , while its total revenues were approximately 12% higher thanApril 2019 . (Because the 2020 periods were impacted by the closure of IT'SUGAR's locations inMarch 2020 ,BBX Sweet Holdings does not believe that IT'SUGAR's results from that period provide a meaningful comparison in relation to its operating results for 2021.) 32 -------------------------------------------------------------------------------- However, as a result of the effects of the pandemic on global supply chains, IT'SUGAR has experienced an increase in inventory and freight costs, as well as delays in its supply chains. To date, IT'SUGAR has been able to mitigate the impact of increased costs through increases in the prices of its products; however, supply chain disruptions have impacted its ability to maintain historical inventory levels at its retail locations. It is not possible to predict the ultimate effect of the reorganization process on IT'SUGAR's business and creditors or when, or if, IT'SUGAR may emerge from bankruptcy. While the reorganization process may improve IT'SUGAR's result of operations, cash flows, and financial condition if it obtains relief in relation to its pre-petition liabilities and the amendments to its lease agreements that it has negotiated are confirmed as part of its proposed Reorganization Plan, there is no assurance that it will obtain such relief, and the ultimate impact of the Bankruptcy Cases and the reorganization process on IT'SUGAR and its results of operations, cash flows, or financial condition remains uncertain. Further, the effects of the COVID-19 pandemic on demand, sales levels, and consumer behavior, as well as a recessionary economic environment, increased inventory, freight, and labor costs, and general supply chain disruptions, have had and could continue to have a material adverse effect on IT'SUGAR's business, results of operations, and financial condition during the bankruptcy proceedings and thereafter.
Hoffman's Chocolates and Las Olas Confections and Snacks
Hoffman's Chocolates has continued to be impacted by the effects of the COVID-19 pandemic on demand, sales levels, and consumer behavior. In particular, while all of its retail locations are open for operations, Hoffman's Chocolates' revenues were$1.5 million during the three months endedMarch 31, 2021 compared to$2.1 million during the same 2020 period. Las Olas Confections and Snacks' operations have not been significantly impacted by the effects of the COVID-19 pandemic, and its sales during the three months endedMarch 31, 2021 increased by approximately 9.7% as compared to its sales during the same 2020 period. However, it has begun to experience the impacts of global supply chain disruptions, including increased costs for raw materials and supply chain delays. Results of Operations
Information regarding the results of operations for
For the Three Months Ended March 31,
Other Businesses IT'SUGAR Total Change
2021 2020 2020 2020 2021 vs 2020
Trade sales $ 4,982 5,341 15,988 21,329 (16,347)
Cost of trade sales (3,828) (4,060) (10,710) (14,770) 10,942
Gross margin 1,154 1,281 5,278 6,559 (5,405)
Interest income - 6 8 14 (14)
Other revenue - 119 - 119 (119)
Interest expense (26) (21) (40) (61) 35
Impairment losses - (354) (24,354) (24,708) 24,708
Selling, general and
administrative expenses (1,571) (1,903) (8,997) (10,900) 9,329
Total operating losses (443) (872) (28,105) (28,977) 28,534
Other income 26 18 21 39 (13)
Loss from continuing
operations before income
taxes $ (417) (854) (28,084) (28,938) 28,521
Gross margin percentage % 23.16 23.98 33.01 30.75 (7.59)
SG&A as a percent of trade
sales % 31.53 35.63 56.27 51.10 (19.57)
BBX Sweet Holdings loss from continuing operations before income taxes for the
three months ended March 31, 2021 compared to the same 2020 period decreased by
$28.5 million primarily due to the following:
· The recognition of impairment losses in the 2020 period due to a decline in the
estimated value of the goodwill and long-lived assets associated with
Holdings' reporting units, including IT'SUGAR, as a result of the impact of the
COVID-19 pandemic on market conditions; and
· An overall decrease in operating losses associated with IT'SUGAR due to the
deconsolidation of IT'SUGAR in September 2020 .
33
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Renin Reportable Segment Segment Description Renin is engaged in the design, manufacture, and distribution of sliding doors, door systems and hardware, and home décor products and operates through its headquarters inCanada and three manufacturing and distribution facilities inthe United States andCanada . In addition to its own manufacturing, Renin also sources various products and materials fromChina ,Brazil , and certain other countries. InOctober 2020 , Renin acquired substantially all of the assets and assumed certain of the liabilities of Colonial Elegance. Headquartered inMontreal, Canada , Colonial Elegance is a supplier and distributor of building products, including barn doors, closet doors, and stair parts, and its customers include various big box retailers inthe United States andCanada which are complementary to and expand Renin's existing customer base.
Renin's products are sold through three channels in
Overview As ofMarch 31, 2021 , Renin has continued to operate its manufacturing and distribution facilities in spite of the ongoing effects of the COVID-19 pandemic. During the three months endedMarch 31, 2021 , Renin's sales have increased as compared to the same period in 2020 as a result of the acquisition of Colonial Elegance and an increase in customer demand, particularly in Renin's retail channel, and its retail channel comprised approximately 80% of its gross sales for the three months endedMarch 31, 2021 as compared to approximately 60% for the same period in 2020, which reflects, among other things, the acquisition of Colonial Elegance, which expanded Renin's retail customers to include Menards, Lowe'sCanada , and Home Depot Canada. However, as a result of the effects of the pandemic on global supply chains, Renin has experienced a significant increase in costs related to raw materials and the shipment of products and raw materials, which has impacted its product costs and gross margin, as well as delays in its supply chains, which has increased the risk of Renin being unable to fulfill customer orders. In an effort to mitigate the impact of these factors, Renin has been negotiating increases in prices with its customers, exploring the diversification of its global supply chains, and transferring the assembly of certain products from foreign suppliers to its own manufacturing facilities. Although the steps Renin has taken are intended to mitigate some of the impact of these factors, Renin's product costs and gross margin are expected to continue to be adversely impacted by these factors in 2021. Further, Renin's efforts to mitigate the increase in costs may have other negative impacts on Renin's operations. In particular, although the increase in product and shipping costs is impacting the entire industry in which Renin operates, which has generally resulted in an overall increase in prices to customers, the negotiation of increased prices with customers increases the risk of customers exploring alternative sources for Renin's products, which may result in Renin losing customers and/or lowering prices in an effort to retain customers. In addition, while Renin has generally been engaged in efforts to diversify its supply chain and limit its exposure to geographic locations and suppliers, supply chain delays and the scarcity of products and raw materials has inhibited Renin's efforts to maintain a diversified supply chain. InApril 2021 , Renin was notified by one of its major customers that the customer will no longer be purchasing certain products from Renin commencing in late 2021. These products were previously estimated to comprise approximately 7% of Renin's estimated net sales for fiscal 2021. Further, Renin understands that the customer is also evaluating alternative sources for certain other products previously estimated to comprise approximately 6% of Renin's estimated net sales for fiscal 2021. With respect to the products currently being evaluated by the customer, Renin is seeking to maintain its sales of these products to the customer but expects that do to so it will be required to lower its pricing for the products. Renin expects that these events will negatively impact its sales, gross margin, and profitability and could also result in (i) the recognition of impairment losses related to its goodwill and long-lived assets and (ii) noncompliance with the terms of its outstanding credit facility with TD Bank. If Renin is required to seek a waiver from the bank as a result of noncompliance with the terms of its credit facility and is unable to obtain a waiver, it may lose availability under its line of credit, be required to provide additional collateral, and/or repay all or a portion of its borrowings, any of which would have a material adverse effect on the Company's liquidity, financial position, and results. 34
-------------------------------------------------------------------------------- In addition to the above, although Renin's manufacturing and distribution facilities have to date remained open throughout the pandemic, recent increases in COVID-19 cases inCanada may result in closures in its facilities located inCanada . Further, while consumer demand for Renin's products has generally remained strong throughout the COVID-19 pandemic, which Renin believes may be attributable to a consumer focus on home improvements, it is possible that consumer demand may shift away from home improvements as many portions of the economy reopen, particularly inthe United States . The risks and uncertainties resulting from the matters described above and the significant uncertainty in the overall economy resulting from the COVID-19 pandemic, which is also further described in the Company's 2020 Annual Report, could have a material adverse impact on Renin's results of operations, cash flows, and financial condition in future periods. Results of Operations Information regarding the results of operations for Renin is set forth below (dollars in thousands): For the Three Months Ended March 31, 2021 2020 Change Trade sales$ 38,691 17,446 21,245 Cost of trade sales (32,656) (14,275) (18,381) Gross margin 6,035 3,171 2,864 Interest expense (410) (114) (296) Selling, general and administrative expenses (4,304) (2,618) (1,686) Total operating income 1,321 439 882 Other expense - (3) 3 Foreign exchange (loss) gain (480) 278 (758) Income from continuing operations before income taxes $ 841 714 127 Gross margin percentage % 15.60 18.18 (2.58) SG&A as a percent of trade sales % (11.12) (15.01) 3.89
Renin's income from continuing operations before income taxes for the three
months ended
· An increase in Renin's trade sales and gross margin resulting primarily from
the acquisition of Colonial Elegance in
· A decrease in Renin's gross margin percentage as a result of increased costs
related to raw materials and the shipment of products and raw materials;
· An increase in interest expense associated with Renin's use of its credit
facility with TD Bank to fund a significant portion of the purchase price for
the Colonial Elegance acquisition;
· An increase in selling, general, and administrative expenses primarily due to
ongoing expenses associated with Colonial Elegance, including amortization
expense related to acquired intangible assets; and
· An increase in foreign currency exchange losses due to the impact of changes in
foreign exchange rates between the
overall increase in assets and liabilities denominated in Canadian dollars as
of March 31, 2021 as compared to March 31, 2020 as a result of the acquisition
of Colonial Elegance.
35
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Other Other in the Company's segment information includes its investments in other operating businesses, including a restaurant located inSouth Florida that was acquired through a loan foreclosure and an insurance agency. During the three months endedMarch 31, 2021 , the Company recognized income from continuing operations before income taxes related to these other businesses of$0.8 million , as compared to a loss before income taxes of$2.8 million for the three months endedMarch 2020 . During the three months endedMarch 31, 2021 , the Company reversed$0.3 million of rent expense as a result of rent abatements obtained due to the effects of COVID-19 pandemic on the restaurant located inSouth Florida . During the three months endedMarch 31, 2020 , the Company recognized$2.7 million of impairment losses related to certain of these investments primarily resulting from the effects of the COVID-19 pandemic on the estimated value of the businesses.
Reconciling Items and Eliminations
Reconciling items and eliminations in the Company's segment information includes the following:
·
· Interest income on the
· Interest income on interest-bearing cash accounts; and
· Interest expense capitalized in connection with the development and
construction of real estate.
Corporate General and Administrative Expenses
During the three months endedMarch 31, 2020 ,BBX Capital's corporate general and administrative expenses consisted primarily of an allocation of the cost of services provided by BVH to the Company for various support functions, including executive compensation, legal, accounting, human resources, investor relations, and executive offices, while during the three months endedMarch 31, 2021 , its corporate general and administrative expenses consisted of the actual costs of these functions, as many of these functions were transferred toBBX Capital in connection with the spin-off from BVH.BBX Capital's corporate general and administrative expenses for the three months endedMarch 31, 2021 and 2020
were
Interest IncomeBBX Capital's interest income for the three months endedMarch 31, 2021 and 2020 was$1.2 million and$0 , respectively. During the three months endedMarch 31, 2021 ,BBX Capital recognized$1.1 million of interest income from its$75.0 million note receivable from BVH and$50,000 of interest income from interest bearing accounts at financial institutions.BBX Capital had no interest income during three months endedMarch 31, 2020 , as BVH issued the$75.0 million note toBBX Capital and transferred most of its cash and short-term investments toBBX Capital in connection with the spin-off onSeptember 30, 2020 . Provision for Income Taxes The Company estimates its effective annual income tax rate on a quarterly basis based on current and forecasted operating results for the annual period and applies the estimated effective income tax rate to its income or loss before income taxes reduced by net income or loss attributable to noncontrolling interests in joint ventures taxed as partnerships. The Company's effective income tax rate was approximately 29% and 19% during the three months endedMarch 31, 2021 and 2020, respectively. The Company's effective income tax rates for the three months endedMarch 31, 2021 and 2020 were impacted by the Company's nondeductible executive compensation and state income taxes. The effective income tax rate for the 2020 period reflects an estimated ordinary taxable loss for the year endedDecember 31, 2020 resulting primarily from the effects of the COVID-19 pandemic. 36
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Discontinued Operations As described in Note 1 to the Company's condensed consolidated financial statements included in Item 1 of this report, Food forThought Restaurant Group ("FFTRG"), a wholly-owned subsidiary of the Company, previously entered into area development and franchise agreements with MOD Pizza related to the development of MOD Pizza franchised restaurant locations throughoutFlorida and, through 2019, had opened nine restaurant locations. InSeptember 2019 , the Company entered into an agreement with MOD Pizza to terminate the area development and franchise agreements and transferred seven of its restaurant locations, including the related assets, operations, and lease obligations, to MOD Pizza. In addition, the Company closed the remaining two locations and terminated the related lease agreements.
The Company recognized a pre-tax loss from discontinued operations of
Net Income or Loss Attributable to Noncontrolling Interests
During the three months endedMarch 31, 2020 , the Company's condensed consolidated financial statements included the results of operations and financial position of IT'SUGAR, a partially-owned subsidiary in which it held a controlling financial interest, and as a result, the Company was previously required to attribute net income or loss to a redeemable noncontrolling interest in IT'SUGAR. As a result of the filing of the Bankruptcy Cases by IT'SUGAR and its subsidiaries, the Company deconsolidated IT'SUGAR as ofSeptember 22, 2020 and derecognized the related noncontrolling interest in IT'SUGAR.
The net income attributable to noncontrolling interests of
reflects income attributed to a 19% noncontrolling equity interest in a restaurant the Company acquired through foreclosure. The net loss attributable to noncontrolling interests of$3.5 million during the three months endedMarch 31, 2020 was primarily due to the recognition of impairment losses related to goodwill and long-lived assets as a result of the COVID-19 pandemic, including$2.7 million in losses attributed to the redeemable noncontrolling interest in IT'SUGAR. Consolidated Cash Flows
A summary of our consolidated cash flows is set forth below (in thousands):
For the Three Months Ended
March 31,
2021 2020
Cash flows provided by (used in) operating
activities $ 3,790 (4,477)
Cash flows used in investing activities (1,778)
(2,659)
Cash flows (used in) provided by financing activities (4,242)
4,052
Net decrease in cash, cash equivalents and restricted cash$ (2,230)
(3,084)
Cash, cash equivalents and restricted cash at beginning of period 90,387
21,287
Cash, cash equivalents and restricted cash at end of period$ 88,157 18,203
Cash Flows from Operating Activities
The Company's cash provided by operating activities increased by$8.3 million during the three months endedMarch 31, 2021 compared to the same 2020 period primarily due to higher sales of real estate inventory by BBXRE, higher operating income at Renin, and lower operating losses atBBX Sweet Holdings . The decrease in operating losses atBBX Sweet Holdings during the 2021 period compared to the 2020 period was primarily the result of IT'SUGAR's operating losses during the 2020 period.
Cash Flows from Investing Activities
The Company's cash used in investing activities decreased by$0.9 million during the three months endedMarch 31, 2021 compared to the same 2020 period primarily due to a decline in purchases of property and equipment, partially offset by lower proceeds from the repayment of loans. 37
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Cash Flows from Financing Activities
The Company's cash used in financing activities increased by$8.3 million during the three months endedMarch 31, 2021 compared to the same 2020 period, which was primarily due to a$4.6 million decrease in borrowings in 2021 as compared to the 2020, the repurchase of$1.7 million of Class A Common Stock during the 2021 period, and$3.4 million of net transfers from Parent during the 2020 period, partially offset by$1.4 million of lower repayments of notes payable and other borrowings. SeasonalityBBX Sweet Holdings' businesses are subject to seasonal fluctuations in trade sales, which cause fluctuations inBBX Sweet Holdings' quarterly results of operations. Historically, IT'SUGAR generated its strongest retail trade sales during the months from June through August, as well as during the month of December, when families are generally on vacation.BBX Sweet Holdings' other operating businesses generate their strongest trade sales during the fourth quarter in connection with various holidays inthe United States . Commitments
The Company's material commitments as of
The following table summarizes the contractual minimum principal and interest payments required on the Company's outstanding debt and payments required on the Company's non-cancelable operating leases by period due date as ofMarch 31, 2021 (in thousands): Payments Due by Period Unamortized Debt Less than 1 - 3 4 - 5 After 5 Issuance Contractual Obligations (1) 1 year Years Years Years Costs Total Notes payable and other borrowings$ 2,077 7,765 40,856 19,136 (887) 68,947 Noncancelable operating leases 2,313 4,661 4,037 5,384 - 16,395 Total contractual obligations 4,390 12,426 44,893 24,520 (887) 85,342 Interest Obligations (2) Notes payable and other borrowings 2,792 5,548 4,861 14,664 - 27,865 Total contractual interest 2,792 5,548 4,861 14,664 - 27,865 Total contractual obligations$ 7,182 17,974 49,754 39,184 (887) 113,207
(1) Does not include BBXRE's obligation under the Altman Companies' operating
agreement to purchase an additional 40% equity interest in
purchase price, subject to certain adjustments, of
amounts it may invest in the Altman Companies or its sponsored joint
ventures. In addition, does not include contractual obligations of IT'SUGAR,
which is no longer consolidated by the Company as a result of its filing of
the Bankruptcy Cases on
(2) Assumes that the scheduled minimum principal payments are made in accordance
with the table above and the interest rate on variable rate debt remains the
same as the rate at March 31, 2021 .
Liquidity and Capital Resources
As ofMarch 31, 2021 , the Company had cash, cash equivalents, and short-term investments of approximately$91.4 million . Management believes that the Company has sufficient liquidity to fund operations, including anticipated working capital, capital expenditure, and debt service requirements, and respond to the challenges related to the COVID-19 pandemic and current economic environment for the foreseeable future, subject to mitigation and cost reduction efforts and management's determination of whether and/or the extent to which it will fund the operations and commitments of its subsidiaries. As previously disclosed, management has evaluated and will continue to evaluate the potential operating deficits and liquidity requirements of its subsidiaries and may determine not to provide additional funding or capital to subsidiaries whose operations it believes may not be sustainable. 38 --------------------------------------------------------------------------------
The Company's principal sources of liquidity have historically been its available cash and short-term investments, distributions from unconsolidated real estate joint ventures, proceeds received from sales of real estate, including lot sales at theBeacon Lake Community development, and contributions from BVH. However, as a result of the spin-off ofBBX Capital from BVH, the Company will no longer receive capital contributions from BVH. As a result, the Company believes that its primary source of liquidity for the foreseeable future will be its available cash, cash equivalents, and short-term investments, distributions from unconsolidated real estate joint ventures, and proceeds received from sales of real estate. In addition, the Company expects to receive quarterly interest payments on the$75.0 million promissory note that was issued by BVH in favor ofBBX Capital in connection with the spin-off. Amounts outstanding under the note accrue interest at a rate of 6% per annum, with interest payments scheduled to occur on a quarterly basis. However, BVH may elect to defer such quarterly interest payments, with interest on the entire outstanding balance thereafter to accrue at a cumulative, compounded rate of 8% per annum until such time as BVH is current on all accrued payments under the note, including deferred interest. The Company believes that its current financial condition will allow it to meet its anticipated near-term liquidity needs. The Company may also seek additional liquidity from outside sources, including traditional bank financing, secured or unsecured indebtedness, or the issuance of equity and/or debt securities. However, these alternatives may not be available to the Company on attractive terms, or at all. The inability to raise funds through the sources discussed above would have a material adverse effect on the Company's business, results of operations, and financial condition.
Anticipated and Potential Liquidity Requirements
The Company currently expects to use its available liquidity to fund operations (including corporate expenses, working capital, capital expenditures, debt service requirements, and the Company's other commitments described above) and make additional opportunistic investments in real estate, its existing operating businesses, or other opportunities. However, as discussed above, the Company's management intends to evaluate any operating deficits and liquidity requirements of its subsidiaries as a result of the impact of the COVID-19 pandemic on operations and general economic conditions and may make a determination that it will not provide additional funding or capital to its subsidiaries. InNovember 2018 , BBXRE acquired a 50% membership interest in the Altman Companies, a joint venture between BBXRE andJoel Altman engaged in the development, construction, and management of multifamily apartment communities. Although the Altman Companies generates revenues from the performance of development, general contractor, leasing, and property management services to the joint ventures that are formed to invest in the development projects that it originates, it is expected that any profits generated for BBXRE andJoel Altman would primarily be through the equity distributions that BBXRE andJoel Altman receive through their investment in the managing member of such joint ventures. Therefore, as the timing of any such distributions to BBXRE andJoel Altman is generally contingent upon the sale or refinancing of a completed development project, it is anticipated that BBXRE andJoel Altman will be required to contribute capital to the Altman Companies for its ongoing operating costs and predevelopment expenditures, as well as to the managing member of newly formed joint ventures. At the current time, BBXRE anticipates that it will invest approximately$7.0 million to$8.0 million in the Altman Companies and certain related joint ventures during the remainder of 2021 relating to planned predevelopment expenditures, ongoing operating costs, and potential operating shortfalls related to certain projects, although BBXRE currently expects to receive a reimbursement of predevelopment expenditures in connection with the commencement of a new project that would partially offset these expected contributions if the project is commenced. Further, based on its current pipeline of new potential development projects, BBXRE currently estimates that it may invest an additional$7.0 million to$8.0 million in the managing member of newly formed joint ventures for new projects during the remainder of 2021. However, the timing of the commencement of such projects may result in such estimated investments occurring in a later period. As previously disclosed, BBXRE may also consider opportunistically making increased equity investments in one or more of such new projects originated by the Altman Companies. Furthermore, if the Altman Companies closes on development financing for additional projects, BBXRE expects that it would be required to contribute an estimated additional$1.25 million toABBX Guaranty, LLC , a joint venture between BBXRE andJoel Altman that provides guarantees on the indebtedness and construction cost overruns of new real estate joint ventures formed by the Altman Companies. Based on its current pipeline of new potential development projects, BBXRE currently expects that it will make this contribution toABBX Guaranty, LLC in 2022. 39
-------------------------------------------------------------------------------- Pursuant to the operating agreement of the Altman Companies, BBXRE will also acquire an additional 40% equity interest in the Altman Companies fromJoel Altman for a purchase price of$9.4 million , subject to certain adjustments, inJanuary 2023 , whileJoel Altman can also, at his option or in other predefined circumstances, require BBXRE to purchase his remaining 10% equity interest in the Altman Companies for$2.4 million . In addition, in certain circumstances, BBXRE may acquire the 40% membership interests inAltman-Glenewinkel Construction that are not owned by the Altman Companies for a purchase price based on prescribed formulas in the operating agreement ofAltman-Glenewinkel Construction . In addition to BBXRE's anticipated investments in the Altman Companies and related joint ventures, BBXRE expects that it may be required to contribute additional capital of approximately$1.0 million to$2.0 million to its existing joint ventures during the next twelve to twenty-four months based on the current plans and estimates associated with the related development projects. InOctober 2020 ,BBX Capital's board of directors approved a share repurchase program which authorized the repurchase of up to$10.0 million of shares ofBBX Capital's Class A Common Stock and Class B Common Stock. The stock repurchase authorization does not obligate the Company to repurchase any specific number of shares and may be suspended, modified, or terminated at any time byBBX Capital's board of directors without prior notice. As ofMarch 31, 2021 , 338,897 shares of the Company's Class A Common Stock have been purchased for approximately$2.1 million under the share repurchase program, which reflects an average cost of$6.30 per share, including fees. The Company owns all of IT'SUGAR's Class A Preferred Units and 90.4% of its Class B Common Units and has loans outstanding to IT'SUGAR of approximately$10.1 million , including$4.0 million of DIP financing provided to IT'SUGAR in connection with its bankruptcy proceedings. The Company may advance additional funds to IT'SUGAR, including a net amount of$3.0 million in additional financing in connection with the potential confirmation of IT'SUGAR's proposed Reorganization Plan, as further described above.
Credit Facilities with Future Availability
As ofMarch 31, 2021 , Renin had the following credit facility: Toronto-Dominion Commercial Bank Credit Facility ("TD Bank "). Renin has a credit facility with TD Bank that includes a$30.0 million term loan (the "Term Loan") and a revolving operating loan of up to$20.0 million (the "Operating Loan"), both of which mature inOctober 2025 . As ofMarch 31, 2021 , the outstanding amounts under the Term Loan and Operating Loan were$29.4 million and$17.3 million , respectively, with effective interest rates of 3.25% and 3.56%, respectively. As ofMarch 31, 2021 , Renin had availability of approximately$2.7 million under the Operating Loan, subject to eligible collateral and the terms of the facility. However, the potential effects of the current economic environment, including increased costs and the potential loss of customers as a result of the inflationary environment, could impact its ability to remain in compliance with the financial covenants under its credit facility, which could limit the extent of availability under the Operating Loan in future periods and/or require Renin to repay all or a portion of these borrowings with TD Bank. As described in Note 11 to the Company's condensed consolidated financial statements included in Item 1 of this report, Renin is currently engaged in a dispute with one of its suppliers and recognized costs related to this dispute during the year endedDecember 31, 2020 . As ofMarch 31, 2021 , this matter did not impact Renin's compliance with the financial covenants under its outstanding credit facility with TD Bank. However, if Renin is unable to sustain its assertion that it is entitled to damages from the supplier and is ultimately required to pay the supplier for outstanding amounts due to it, Renin may be unable to comply with its covenants. If Renin is unable to comply with its covenants, it would be required to seek a waiver from TD Bank, and if unable to obtain a waiver, might lose availability under its Operating Loan, be required to provide additional collateral, and/or repay all or a portion of its borrowings, any of which could have a material adverse effect on the Company's liquidity, financial position, and results.
Off-balance-sheet Arrangements
BBX Capital guarantees certain obligations of its wholly-owned subsidiaries and unconsolidated real estate joint ventures as described in further detail in Note 11 to the Company's condensed consolidated financial statements included in Item 1 of this report. 40
-------------------------------------------------------------------------------- The Company has investments in joint ventures involved in the development of multifamily rental apartment communities, as well as single-family master planned for sale housing communities. The Company's investments in these joint ventures are primarily accounted for under the equity method of accounting, and as a result, the Company does not recognize the assets and liabilities of these joint ventures in its financial statements. As ofMarch 31, 2021 andDecember 31, 2020 , the Company's investments in these joint ventures totaled$60.4 million and$58.0 million , respectively. These unconsolidated real estate joint ventures generally finance their activities with a combination of debt financing and equity. The Company generally does not directly guarantee the financing of these joint ventures, other than as described in Note 11 to the Company's condensed consolidated financial statements included in Item 1 of this report, and the Company's maximum exposure to losses from these joint ventures is its equity investment. The Company is typically not obligated to fund additional capital to its joint ventures; however, the Company's interest in a joint venture may be diluted if the Company elects not to fund a joint venture capital call. The Company owns all of IT'SUGAR's Class A Preferred Units and 90.4% of its Class B Common Units and accounts for its$23.2 million investment in and advances to IT'SUGAR at cost. Although the Company is not obligated to finance the activities of IT'SUGAR in bankruptcy, inOctober 2020 , a subsidiary of the Company provided a$4.0 million DIP credit facility to IT'SUGAR, and the Company may advance additional funds to IT'SUGAR. In the future, the Company may decide not to advance additional funds to IT'SUGAR during the pendency of the Bankruptcy Cases, which could result in a dilution of the Company's investment in IT'SUGAR if funding is provided by others and result in additional impairment charges.
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