UNITED STATES

SECURITIES AND EXCHANGE COMMISSION



Washington, DC  20549



FORM 10-K



[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934



For the Fiscal Year Ended December 31, 2017



[   ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934



Commission File Number

001-09071



BBX Capital Corporation

(Exact name of registrant as specified in its charter)













Securities registered pursuant to Section 12(b) of the Act:

None.



Securities registered pursuant to Section 12(g) of the Act:





Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.YES [  ]  NO [X]



Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  YES [  ]  NO [X]



Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X]  NO [  ]



Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X]  No [  ]



Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   [X]

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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer [  ]Accelerated filer [X]Non-accelerated filer [  ]    Smaller reporting company [  ]

Emerging growth company [  ]



If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]



Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).YES [  ]  NO [X]

On June 30, 2017, the aggregate market value of the registrant’s voting common equity held by non-affiliates was $389.6 million computed by reference to the closing price of the registrant’s Class A Common Stock and Class B Common Stock on such date. The registrant does not have any non-voting common equity.



The number of shares outstanding of each of the registrant’s classes of common stock as of March 5, 2018 is as follows:



 

Class A Common Stock of $.01 par value, 85,709,163 shares outstanding.
Class B Common Stock of $.01 par value, 17,984,221 shares outstanding.



Documents Incorporated by Reference



Portions of the registrant’s Definitive Proxy Statement on Schedule 14A relating to the registrant’s 2018 Annual Meeting of Shareholders are incorporated by reference into Part III of this Form 10-K.





 

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PART I





Item 1.  BUSINESS





Overview



History



BBX Capital Corporation (referred to in this report together with its subsidiaries as the “Company,” “we,” “us,” or “our,” and without its subsidiaries as “BBX Capital”) is a Florida-based diversified holding company with investments in Bluegreen Vacations Corporation (“Bluegreen Vacations” or “Bluegreen”), real estate and real estate joint ventures, and middle market operating businesses.



In July 2017, the Company’s Class A Common Stock began trading on the New York Stock Exchange (“NYSE”) under the ticker symbol “BBX.” Upon commencement of trading on the NYSE, the Company’s Class A Common Stock ceased trading on the OTCQX Best Market. The Company’s Class B Common Stock continues to trade on the OTCQX under the ticker symbol “BBXTB.”



On December 15, 2016, the Company completed the acquisition of all the outstanding shares of the former BBX Capital Corporation (“BCC”) not previously owned by the Company, and following the transaction, the Company changed its name from BFC Financial Corporation to BBX Capital Corporation. The acquisition was consummated by the merger of BCC into a wholly-owned subsidiary of the Company, BBX Merger Sub, LLC. As a consequence of the merger, BCC is now a wholly-owned subsidiary of BBX Capital. The merger is described in further detail in Item 8 – Note 3 of this report.



Prior to the acquisition of all the outstanding shares of BCC, the Company had an 82% equity interest in BCC and a direct 54% equity interest in Woodbridge Holdings, LLC (“Woodbridge”), the parent company of Bluegreen, and BCC held the remaining 46% interest in Woodbridge. As a result of the acquisition of all the outstanding shares of BCC in December 2016, Woodbridge and Bluegreen became wholly-owned subsidiaries of the Company. On November 17, 2017, Bluegreen completed an initial public offering (“IPO”) of its common stock by selling to the public 3,736,723 of Bluegreen shares and Woodbridge selling 2,761,925 of Bluegreen shares as a selling shareholder. In connection with the offering, Woodbridge granted the underwriters a 30-day option to purchase up to an additional 974,797 shares from Woodbridge, and on December 5, 2017, the underwriters purchased all of the additional 974,797 option shares from Woodbridge. As a result of Bluegreen’s IPO, BBX Capital currently owns approximately 90% of Bluegreen through Woodbridge.



BCC’s principal asset until July 31, 2012 was its ownership of BankAtlantic and its subsidiaries (“BankAtlantic”).  BankAtlantic was a federal savings bank headquartered in Fort Lauderdale, Florida.  On July 31, 2012, BCC completed the sale to BB&T Corporation (“BB&T”) of all of the issued and outstanding shares of capital stock of BankAtlantic (the stock sale and related transactions described herein are collectively referred to as the “BankAtlantic Sale”).  Prior to the closing of the BankAtlantic Sale, BankAtlantic formed two subsidiaries, BBX Capital Asset Management, LLC (“CAM”) and Florida Asset Resolution Group, LLC (“FAR”) and transferred certain non-performing commercial loans, commercial real estate and previously written-off assets to these subsidiaries. The subsidiaries were transferred to BCC prior to the closing of the BankAtlantic Sale.



Operating Divisions



BBX Capital currently operates through the following divisions:















Our Strategies and Objectives



Our objective is to increase shareholder value through investments in diverse industries. The Company is largely focused on providing strategic support to its existing investments with a view to the improved performance of the organization as a whole. Additionally, we have and may in the future invest in operating businesses and in real estate developments and joint ventures for the development of residential and commercial real estate projects, including those in which our affiliates may participate.  The Company’s investments or acquisitions, and the business and investment strategies of the Company’s subsidiaries, may not prove to be successful or, even if successful, may not initially generate income or may generate income on an irregular basis, and may involve a long term investment. The Company expects to continue to experience losses in certain of the businesses in its Middle Market Division.  As a consequence, the Company’s results of operations may vary significantly on a quarterly basis.



The Company’s goal is to build long-term value. Since many of the Company’s assets do not generate income on a regular or predictable basis, our objective continues to be 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 operating businesses and based upon economic, market and other relevant factors may consider transactions involving the sale of all or a portion of its assets, investments or subsidiaries, including transactions involving Bluegreen or its Middle Market operating companies.  These include, among other alternatives, a sale or spin-off or transactions involving public or private issuances of debt or equity

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securities which decrease or dilute the Company’s ownership interest. Additionally, the Company is continuing to evaluate the operations of certain of the acquired wholesale operating businesses in BBX Sweet Holdings and may decide to exit some of those businesses, which may result in the recognition of losses.





Additional Information



The Company’s corporate website is www.bbxcapital.com. The Company’s annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports, are available free of charge through its website, as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. The Company’s website and the information contained on or connected to it are not incorporated into this Annual Report on Form 10-K.



Cautionary Note Regarding Forward-Looking Statements



This document 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 have been 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. 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, its subsidiaries and their respective investments and operations, and the reader should note that prior or current performance is not a guarantee or indication of future performance. Future results could differ materially as a result of a variety of risks and uncertainties.



Some factors which may affect the accuracy of the forward-looking statements apply generally to the industries in which the Company operates, including the resort development and vacation ownership industries in which Bluegreen operates, the real estate development and construction industry in which BBX Capital Real Estate operates, the home improvement industry in which Renin operates, and the confectionery industry in which BBX Sweet Holdings operates. 



These risks and uncertainties include, but are not limited to:



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With respect to Bluegreen, the risks and uncertainties include, but are not limited to:



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With respect to BBX Capital Real Estate, the risks and uncertainties include, but are not limited to:





With respect to the Company’s investment activities in middle market operating businesses, the risks and uncertainties include, but are not limited to:



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In addition to the risks and factors identified above, reference is also made to the other risks and factors detailed in this report and the other reports filed by the Company with the SEC. The Company cautions that the foregoing factors are not exclusive.





Divisions



The Company currently operates through three divisions: Bluegreen, BBX Capital Real Estate and Middle Market.    





Bluegreen



Strategies



The Company’s strategy to grow Bluegreen’s profitability and long-term value is focused on:





Market and Industry Data



Market and industry data used in this Annual Report on Form 10-K have been obtained from Bluegreen’s internal surveys, industry publications, unpublished industry data and estimates, discussions with industry sources and other currently available information. The sources for this data include, without limitation, the American Resort Development Association. Industry publications generally state that the information contained therein has been obtained from sources believed to be reliable, but there can be no assurance as to the accuracy or completeness of such information. Bluegreen has not independently verified such data. Similarly, Bluegreen’s internal surveys, while believed to be reliable, have not been verified by any independent sources. Accordingly, such data may not prove to be accurate. Forecasts and other forward-looking information obtained from these sources are subject to the same qualifications and uncertainties as the other forward-looking statements contained in this Annual Report on Form 10-K, as described above.



Trademarks, Service Marks and Trade Names



Bluegreen owns or has rights to use a number of registered and common law trademarks, trade names and service marks in connection with its business, including, but not limited to, Bluegreen, Bluegreen Resorts, Bluegreen Vacations, Bluegreen Traveler Plus, Bluegreen Vacation Club, Bluegreen Wilderness Club at Big Cedar and the Bluegreen Logo. This Annual Report on Form 10-K also refers to trademarks, trade names and service marks of other organizations. Without limiting the generality of the preceding sentence, World Golf Village is registered by World Golf Foundation, Inc.; Big Cedar and Bass Pro Shops are registered by Bass Pro Trademarks, LP; Ascend, Ascend Hotel Collection, Ascend Resort Collection, Choice Privileges, Comfort Inn, Comfort Suites, Quality, Sleep Inn, Clarion, Cambria, MainStay Suites, Econo Lodge and Rodeway Inn are registered by Choice Hotels International, Inc.; and Suburban

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Extended Stay Hotel is registered by Suburban Franchise Systems, Inc. All trademarks, service marks or trade names referred to in this Annual Report on Form 10-K are the property of their respective holders. Solely for convenience, the trademarks, trade names and service marks referred to in this Annual Report on Form 10-K appear without the ® and ™ symbols, but such references are not intended to indicate in any way that Bluegreen or the owner will not assert, to the fullest extent under applicable law, all rights to such trademarks, trade names and service marks.



Bluegreen’s Business



Bluegreen is a leading vacation ownership company that markets and sells VOIs and manages resorts in top leisure and urban destinations. Bluegreen’s resort network includes 43 Club Resorts (resorts in which owners in the Bluegreen Vacation Club (“Vacation Club”) have the right to use most of the units in connection with their VOI ownership) and 24 Club Associate Resorts (resorts in which owners in Bluegreen’s Vacation Club have the right to use a limited number of units in connection with their VOI ownership). Bluegreen’s Club Resorts and Club Associate Resorts are primarily located in popular, high-volume, “drive-to” vacation locations, including Orlando, Las Vegas, Myrtle Beach and Charleston, among others. Through Bluegreen’s points-based system, the approximately 213,000 owners in Bluegreen’s Vacation Club have the flexibility to stay at units available at any of its resorts and have access to almost 11,000 other hotels and resorts through partnerships and exchange networks. Bluegreen has a robust sales and marketing platform supported by exclusive marketing relationships with nationally-recognized consumer brands, such as Bass Pro and Choice Hotels. These marketing relationships drive sales within its core demographic, which is described below.



Prior to 2009, Bluegreen’s vacation ownership business consisted solely of the sale of VOIs in resorts that it developed or acquired (“developed VOI sales”). While Bluegreen continues to conduct such sales and development activities, Bluegreen now also derives a significant portion of its revenue from its capital-light business model, which utilizes Bluegreen’s expertise and infrastructure to generate both VOI sales and recurring revenue from third parties without the significant capital investment generally associated with the development and acquisition of resorts. Bluegreen’s capital-light business activities include sales of VOIs owned by third-party developers pursuant to which Bluegreen is paid a commission (“fee-based sales”) and sales of VOIs that Bluegreen purchases under just-in-time (“JIT”) arrangements with third-party developers or from secondary market sources. In addition, Bluegreen provides resorts and resort developers with other fee-based services, including resort management, mortgage servicing, title services and construction management. Bluegreen also offers financing to qualified VOI purchasers, which generates significant interest income.







Bluegreen’s Vacation Club has grown from approximately 170,000 owners as of December 31, 2012 to approximately 213,000 owners as of December 31, 2017. Bluegreen primarily serves a demographic underpenetrated within the vacation ownership industry, as the typical Vacation Club owner has an average annual household income of approximately $77,000 as compared to an industry average of $90,000. According to U.S. census data, households with an annual income of $50,000 to $100,000 represent the largest percentage of the total population (approximately 29%). Bluegreen believes that its ability to effectively scale the transaction size to suit its customer, as well as high-quality, conveniently-located, “drive-to” resorts are attractive to its core target demographic.



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Products and Services



Vacation Ownership Interests



Since entering the vacation ownership industry in 1994, Bluegreen has generated over 627,000 VOI sales transactions, including over 124,000 fee-based sales transactions. Bluegreen Vacation Club owners receive an annual or biennial allotment of “points” in perpetuity (supported by an underlying deeded VOI held in trust for the owner) that may be used to stay at any of Bluegreen’s 43 Club Resorts and 24 Club Associate Resorts. Vacation Club owners can use their points to stay in resorts for varying lengths of time, starting at a minimum of two nights. The number of points required for a stay at a resort varies depending on a variety of factors, including resort location, size of the unit, vacation season and the days of the week. Under this system, Vacation Club owners can select vacations according to their schedules, space needs and available points. Subject to certain restrictions and fees, Vacation Club owners are typically allowed to carry over any unused points for one year and to “borrow” points from the next year. Vacation Club owners may also take advantage of various other lodging and vacation opportunities available to them as described under “Value Proposition” below.



Each of Bluegreen’s Club Resorts and Club Associate Resorts is managed by a homeowners association (“HOA”), which is governed by a board of directors or trustees. This board hires a management company to which it delegates many of the rights and responsibilities of the HOA, including landscaping, security, housekeeping, garbage collection, utilities, insurance procurement, laundry and repairs and maintenance. Vacation Club owners pay annual maintenance fees which cover the costs of operating all the resorts in the Vacation Club system, including fees for real estate taxes and reserves for capital improvements. If a Vacation Club owner does not pay such charges, his or her use rights may be suspended and ultimately terminated, subject to the applicable lender’s first mortgage lien, if any, on such owner’s VOI. Bluegreen provides management services to 48 resorts and the Vacation Club through contractual arrangements with HOAs. Bluegreen has a 100% renewal rate on management contracts from Bluegreen’s Club Resorts.



“Value Proposition”



Bluegreen Vacation Club’s points-based platform offers owners significant flexibility. As reflected in the chart below, basic Vacation Club ownership entitles owners to use their points to stay at any of Bluegreen’s 43 Club Resorts and 24 Club Associate Resorts, as well as to access more than 4,300 resorts available through the Resort Condominiums International, LLC (“RCI”) exchange network. For a nominal annual fee and transaction fees, Vacation Club owners can join and utilize Bluegreen’s Traveler Plus program, which enables them to use their points to access an additional 44 direct exchange resorts, for other vacation experiences, such as cruises. Vacation Club owners can convert their Vacation Club points into Choice Privileges points. Choice Privileges points can be used for stays in Choice Hotels. In addition, Traveler Plus members can directly use their Vacation Club points for stays in Choice Hotels’ Ascend Hotel Collection properties, a network of historic and boutique hotels in the United States, Canada, Scandinavia and Latin America. Overall, there are approximately 6,800 hotels in the Choice Hotels network, located in more than 44 countries and territories, and Choice Hotels’ brands include the Ascend Hotel Collection, Comfort Inn, Comfort Suites, Quality, Sleep Inn, Clarion, Cambria Hotels and Suites, MainStay Suites, Suburban Extended Stay Hotel, Econo Lodge and Rodeway Inn. Bluegreen continuously seeks new ways to add value for Bluegreen’s Vacation Club owners, including enhanced product offerings, new resort locations, broader vacation experiences and further technological innovation, all of which are designed to increase guest satisfaction.



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Approximately 65% of Vacation Club owners are enrolled in Traveler Plus. During the year ended December 31, 2017, approximately 8% of Vacation Club owners utilized the RCI exchange network.



Vacation Club Resort Locations and Amenities



As shown in the map below, Bluegreen’s Vacation Club resorts are primarily located on the U.S. East Coast and Midwest. The 44 direct-exchange resorts available to Traveler Plus members are concentrated along the West Coast and Hawaii. Together, this provides a broad offering across the United States and the Caribbean.





Vacation Club resorts are primarily “drive-to” resort destinations and approximately 85% of Bluegreen’s Vacation Club owners live within a four-hour drive of at least one of Bluegreen’s resorts. Bluegreen resorts are located in popular vacation destinations, such as Florida, South Carolina, North Carolina, Tennessee, Virginia and Nevada, and represent

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a diverse mix of resort and urban destinations, allowing Vacation Club owners the ability to customize their vacation experience. In addition, Bluegreen offers its Vacation Club owners access to Caribbean locations, including Aruba.



Bluegreen’s resort network offers a diverse mix of experiences and accommodations. Unlike some of Bluegreen’s competitors that maintain static brand design standards across resorts and geographies, Bluegreen seeks to design resorts that capture the uniqueness of a particular location. Bluegreen’s distinctive resorts are designed to create an authentic experience and connection to their unique and varied locations.



Bluegreen’s resorts typically feature condominium-style accommodations with amenities such as fully equipped kitchens, entertainment centers and in-room laundry facilities. Many resorts feature a clubhouse (including a pool, game room, lounge), hotel-type staff and concierge services.



Bluegreen also owns a 51% interest in Bluegreen/Big Cedar Vacations, which develops, markets and sells VOIs at three premier wilderness-themed resorts adjacent to Table Rock Lake near Branson, Missouri: The Bluegreen Wilderness Club at Big Cedar, The Cliffs at Long Creek and Paradise Point. The remaining 49% interest in Bluegreen/Big Cedar Vacations is held by Big Cedar, LLC, (“BC LLC”), an affiliate of Bass Pro. As a result of Bluegreen’s controlling interest in Bluegreen/Big Cedar Vacations, our consolidated financial statements include the results of operations and financial condition of Bluegreen/Big Cedar Vacations.



Located next to the luxury Big Cedar Lodge, The Bluegreen Wilderness Club is a 40-acre resort overlooking Table Rock Lake with sprawling views of the surrounding Ozarks. Vacation Club owners enjoy a variety of amenities, including a 9,000 square foot clubhouse, lazy river and rock-climbing wall, in addition to full access to the amenities and activities of Big Cedar Lodge.  The Cliffs at Long Creek offers fully furnished homes that can accommodate up to 13 people while providing access to a clubhouse and amenities at The Bluegreen Wilderness Club. Paradise Point offers spacious vacation villas with direct access to Table Rock Lake and the Bass Pro Long Creek Marina.



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Vacation Club Resorts







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Marketing and Sale of Inventory



VOI sales are typically generated by attracting prospective customers to tour a resort and attend a sales presentation. Bluegreen’s sales and marketing platform utilizes a variety of methods to generate new owner prospects, drive tour flow and sell VOIs in its Vacation Club. Bluegreen utilizes marketing alliances with nationally-recognized brands, which provide exclusive access to venues which target consumers generally matching Bluegreen’s core demographic. In addition, Bluegreen sources sales prospects through programs which generate leads at high-traffic venues and in high-density tourist locations and events, as well as from telemarketing and referrals from existing owners and exchangers and renters staying at Bluegreen’s properties.



Many of Bluegreen’s programs involve the sale of a discounted vacation package that typically includes a two to three night stay in close proximity to one of Bluegreen’s resort sales offices and requires participation in a sales presentation (a sales tour). Vacation packages are typically sold either in retail establishments, such as Bass Pro stores and outlet malls, or via telemarketing. During the year ended December 31, 2017, Bluegreen sold over 245,000 vacation packages and 48% of Bluegreen’s VOI sales were derived from vacation packages. As of December 31, 2017, Bluegreen had a pipeline of over 199,000 vacation packages sold, which typically convert to tours at a rate of 54%.



Bluegreen has an exclusive marketing agreement with Bass Pro, a nationally-recognized retailer of fishing, marine, hunting, camping and sports gear, that provides Bluegreen with the right to market and sell vacation packages at kiosks

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in each of Bass Pro’s retail locations. As of December 31, 2017, Bluegreen sold vacation packages in 68 of Bass Pro’s stores. Bass Pro has a loyal customer base that strongly matches Bluegreen’s core demographic. Under the agreement, Bluegreen also has the right to market VOIs in Bass Pro catalogs and on its website, and to access Bass Pro’s customer database. In exchange, Bluegreen compensates Bass Pro based on VOI sales generated through the program. No compensation is paid to Bass Pro under the agreement on sales made at Bluegreen/Big Cedar Vacations’ resorts. During the years ended December 31, 2017, 2016 and 2015, VOI sales to prospects and leads generated by the agreement with Bass Pro accounted for approximately 15%, 16% and 20%, respectively, of Bluegreen’s VOI sales volume. Bluegreen’s marketing alliance with Bass Pro originated in 2000, has been renewed twice and currently runs through 2025.



Bluegreen has an exclusive strategic relationship with Choice Hotels that covers several areas of its business, including a sales and marketing alliance that enables it to leverage Choice Hotels’ brands, customer relationships and marketing channels to sell vacation packages. Vacation packages are sold through customer reservation calls transferred to Bluegreen from Choice and through outbound telemarketing methods utilizing Choice’s customer database. In addition, 36 of Bluegreen’s resorts are part of Choice’s Ascend Hotel Collection, which provides Bluegreen with the opportunity to market to Choice Hotel guests staying at its resorts. Bluegreen’s strategic relationship with Choice Hotels originated in 2013 and was extended in August 2017 for a term of 15 years, with an additional 15-year renewal term thereafter unless either party elects not to renew the arrangement.



In addition, Bluegreen generates leads and sells vacation packages through its relationships with various other retail operators and entertainment providers. As of December 31, 2017, Bluegreen had kiosks in 19 outlet malls, strategically selected based on proximity to major vacation destinations and strong foot traffic of consumers matching its core target demographic. Bluegreen generates vacation package sales from these kiosks. Bluegreen also generates leads at malls, outlets and high-density locations or events, where contact information for sales prospects is obtained through raffles, giveaways and other attractions. Bluegreen then seeks to sell vacation packages to such prospects, including through telemarketing efforts or third-party vendors. As of December 31, 2017, Bluegreen had lead generation operations in over 500 locations.



Bluegreen believes that its diverse strategic marketing alliances (including those with Bass Pro, Choice Hotels and other retail operators and entertainment providers) deliver a strategic advantage over certain competitors that rely primarily on relationships with their affiliated hotel brands to drive lead generation and new owner growth. Bluegreen has experience in identifying marketing partners with brands that attract Bluegreen’s targeted owner demographic and building successful marketing relationships with those partners. Bluegreen also attempts to structure these marketing alliances to compensate its partners with success-based payments, rather than flat fees for the use of their brand or facilities for lead generation. Bluegreen believes that the variety in its marketing relationships has facilitated a healthy mix of new owner sales vs. existing owner sales that compare favorably to its competitors. During the year ended December 31, 2017, 51% of Bluegreen’s VOI sales were to new owners.



In addition to attracting new customers, Bluegreen also seeks to sell additional VOI points to its existing Vacation Club owners. These sales generally have lower marketing costs and result in higher operating margins than sales generated through other marketing channels. During the years ended December 31, 2017, 2016 and 2015, sales to existing Vacation Club owners accounted for 49%, 46% and 48%, respectively, of Bluegreen’s system-wide sales of VOIs, net. Bluegreen targets a balanced mix of new customer and existing Vacation Club owner sales to drive sustainable long-term growth. The number of owners in Bluegreen’s Vacation Club has increased at a 5% compound annual growth rate between 2012 and 2017, from approximately 170,000 owners as of December 31, 2012 to approximately 213,000 owners as of December 31, 2017.



Bluegreen operates 23 sales offices, typically located adjacent to its resorts and staffed with sales representatives and sales managers. As of December 31, 2017, Bluegreen had over 3,000 employees dedicated to VOI sales and marketing. Bluegreen utilizes a uniform sales process, offers ongoing training for its sales personnel and maintains strict quality control policies. During the year ended December 31, 2017, 91% of Bluegreen’s sales were generated from 16 of its sales offices, which focus on both new customer and existing Vacation Club owner sales. Bluegreen’s remaining 7 sales offices are primarily focused on sales to existing Vacation Club owners staying at the respective resort. In addition, Bluegreen utilizes its telesales operations to sell VOIs to Vacation Club owners.



Flexible Business Model



Bluegreen’s business model is designed to give it flexibility to capitalize on opportunities and adapt to changing market environments. Bluegreen has the ability to adjust its targeted mix of capital-light vs. developed VOI sales, sales to new customers vs. existing Vacation Club owners, and cash vs. financed sales. While Bluegreen may pursue opportunities that impact its short-term results, Bluegreen’s long-term goal is to achieve sustained growth while maximizing earnings and cash flow.



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Note: Cash sales represent the portion of Bluegreen’s system-wide sales of VOIs, net that is received from the customer in cash within 30 days of purchase.



VOI Sales Mix



Bluegreen’s VOI sales include:







Fee-Based Sales



Bluegreen offers sales and marketing services to third-party developers for a commission. Under these fee-based sales arrangements, which are typically entered into on a non-committed basis, Bluegreen sells the third-party developers’ VOIs as Vacation Club interests through its sales and marketing platform. Bluegreen also provides third-party developers with administrative services, periodic reporting and analytics through its proprietary software platform. Bluegreen seeks to structure the fee for these services to cover selling and marketing costs, plus an operating profit. Historically Bluegreen has targeted a commission rate of 65% to 75% of the VOI sales price. Notes receivable originated in connection with fee-based sales are held by the third-party developer and, in certain cases, are serviced by Bluegreen for an additional fee. In connection with fee-based sales, Bluegreen is not at risk for development financing and has no capital requirements, thereby increasing return on invested capital. Bluegreen also typically obtains the HOA management contract associated with these resorts.

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Just-In-Time (JIT) Sales



Bluegreen enters into JIT inventory acquisition agreements with third-party developers that allow Bluegreen to buy VOI inventory in close proximity to when Bluegreen intends to sell such VOIs. While Bluegreen typically enters into such arrangements on a non-committed basis, Bluegreen may engage in committed arrangements under certain circumstances. Similar to fee-based sales, JIT sales do not expose Bluegreen to risks for development financing. However, unlike fee-based sales, Bluegreen holds the consumer finance receivables originated in connection with JIT sales. While JIT sales accounted for only 4% of system-wide sales of VOIs, net for the year ended December 31, 2017, JIT arrangements are often entered into in connection with fee-based sales arrangements.



Secondary Market Sales



Bluegreen acquires VOI inventory from HOAs and other owners generally on a non-committed basis. These VOIs are typically obtained by the applicable HOA through foreclosure or termination in connection with HOA maintenance fee defaults. Accordingly, Bluegreen generally purchases VOIs from secondary market sources at a greater discount to retail price compared to developed VOI sales and JIT sales. During the year ended December 31, 2017, secondary market sales accounted for 16% of Bluegreen’s system-wide sales of VOIs, net.



Developed VOI Sales



Developed VOI sales are sales of VOIs in resorts that Bluegreen has developed or acquired (excluding inventory acquired pursuant to JIT and secondary market arrangements). During the year ended December 31, 2017, developed VOI sales accounted for 26% of Bluegreen’s system-wide sales of VOIs, net. Bluegreen holds the notes receivable originated in connection with developed VOI sales. Bluegreen also typically obtains the HOA management contract associated with these resorts.



Future VOI Sales



Completed VOI inventory increases or decreases from period to period due to the acquisition of inventory through JIT and secondary market arrangements, development of new VOI units, reacquisition of VOIs through notes receivable defaults and changes to sales prices and completed sales. As of December 31, 2017 and 2016, Bluegreen owned completed VOI inventory (excluding units not currently being marketed as VOIs, including model units) and had access to additional completed VOI inventory through fee-based and JIT arrangements as follows (dollars are in thousands and represent the then-estimated retail sales value):







Based on current estimates and expectations, Bluegreen believes this inventory, combined with inventory being developed by Bluegreen or its third-party developer clients, and inventory that Bluegreen may reacquire in connection with mortgage and maintenance fee defaults, can support Bluegreen’s VOI sales at its current levels for over three years. Bluegreen maintains relationships with numerous third-party developers and expect additional fee-based and JIT relationships to continue to provide high-quality VOI inventory to support its sales efforts. In addition, Bluegreen is focused on strategically expanding its inventory through development at five of its resorts over the next several years. Bluegreen intends to continue to strategically evaluate opportunities to develop or acquire VOI inventory in key strategic markets where Bluegreen identifies growing demand and has already established marketing and sales networks.



During the years ended December 31, 2017 and 2016, the estimated retail sales value and cash purchase price of the VOIs Bluegreen acquired through secondary market arrangements were as follows (dollars in thousands):





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In addition to inventory acquired through secondary market arrangements and in connection with notes receivable defaults, Bluegreen expects to acquire inventory through six JIT arrangements during 2018, four of which provide for committed purchases for 2018, and development activities. Development activities currently consist primarily of additional VOI units being developed at The Cliffs at Long Creek in Ridgedale, Missouri, and at the Fountains in Orlando, Florida.



Management and Other Fee-Based Services



Bluegreen earns recurring management fees for providing services to HOAs. These management services include oversight of housekeeping services, maintenance and certain accounting and administrative functions. Bluegreen believes its management contracts yield highly predictable cash flows that do not have the traditional risks associated with hotel management contracts that are linked to daily rate or occupancy. Bluegreen’s management contracts are typically structured as “cost-plus” management fees, which means Bluegreen generally earns fees equal to 10% to 12% of the costs to operate the applicable resort and have an initial term of three years with automatic one-year renewals. As of December 31, 2017, Bluegreen provided management services to 48 resorts. Bluegreen also earns recurring management fees for providing services to the Vacation Club. These services include managing the reservation system and providing owner billing and collection services. Bluegreen’s management contract with the Vacation Club provides for reimbursement of its costs plus a fee equal to $10 per VOI owner. Bluegreen may seek to expand its management services business, including to provide hospitality management services to hotels for third parties.



In addition to HOA and club management services, which provide a recurring stream of revenue, Bluegreen provides other fee-based services that produce revenues without the significant capital investment generally associated with the development and acquisition of resorts. These services include, but are not limited to, title and escrow services for fees in connection with the closing of VOI sales, servicing notes receivable held by third parties, typically for a fee equal to 1.5% to 2.5% of the principal balance of the serviced portfolio, and construction management services for third-party developers, typically for fees equal to 3% of the cost of construction of the project. Bluegreen also receives revenues from retail and food and beverage outlets at certain resorts.



Customer Financing



Bluegreen generally offers qualified purchasers financing for up to 90% of the purchase price of VOIs. The typical financing provides for a term of ten years and a fixed interest rate that is determined by the FICO score of the borrower, and the amount of the down payment and existing ownership. Purchasers may receive an additional 1% discount in the interest rate by participating in Bluegreen’s pre-authorized payment plan. As of December 31, 2017, 95% of Bluegreen’s serviced VOI notes receivable participated in Bluegreen’s pre-authorized payment plan. During the year ended December 31, 2017, the weighted-average interest rate on Bluegreen’s VOI notes receivable was 15.3%. Bluegreen’s typical VOI note receivable has a term of ten years, has a fixed interest rate, is fully amortizing in equal installments, and may be prepaid without penalty.



VOI purchasers are generally required to make a down payment of at least 10% of the sales price. As part of Bluegreen’s continued efforts to manage operating cash flows, Bluegreen incentivize its sales associates to encourage cash sales and higher down payments on financed sales, with a target of 40-45% of the VOI sales price collected in cash. Bluegreen also promotes a point-of-sale credit card program sponsored by a third-party financial institution. As a result of these efforts, Bluegreen has increased both the percentage of sales that are fully paid in cash and the average down payment on financed sales. Including down payments received on financed sales, approximately 39% of Bluegreen’s system-wide sales of VOIs, net during the year ended December 31, 2017 were paid in cash within approximately 30 days from the contract date.



See “Sales/Financing of Receivables” below for additional information regarding Bluegreen’s receivable financing activities.



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Loan Underwriting



Bluegreen generally does not originate financing to customers with FICO scores below 575. Bluegreen may provide financing to customers with no FICO score if the customer makes a minimum required down payment of 20%. For loans made during 2017, the borrowers’ weighted-average FICO score after a 30-day, “same as cash” period from the point of sale was 724. Further information is set forth in the following table:









Collection Policies



Financed VOI sales originated by Bluegreen typically utilize a note and mortgage. Collection efforts related to these VOI loans are managed by Bluegreen. Bluegreen’s collectors are incentivized through a performance-based compensation program.



Bluegreen generally makes collection efforts with respect to Vacation Club owners with outstanding loans secured by their VOI by mail, telephone and in certain cases, email (as early as 15 days past due). Telephone contact generally commences when an account is as few as approximately ten days past due. At 30 days past due, Bluegreen mails a collection letter to the owner, if a U.S. resident, advising that if the loan is not brought current, the delinquency will be reported to a credit reporting agency. At 60 days past due, Bluegreen mails a letter to the owner advising that he or she may be prohibited from making future reservations for lodging at a resort. At 90 days past due, Bluegreen stops the accrual of, and reverse previously accrued but unpaid, interest on the note receivable and mails a notice informing the owner that unless the delinquency is cured within 30 days, Bluegreen will terminate the underlying VOI ownership. If an owner fails to bring the account current within the given timeframe, the loan is defaulted and the owner’s VOI is terminated. In that case, Bluegreen mails a final letter, typically at approximately 120 days past due, notifying the owner of the loan default and the termination of his or her beneficial interest in the VOI property. Thereafter, Bluegreen seeks to resell the VOI to a new purchaser.



Allowance for Credit Losses



Under vacation ownership accounting rules, Bluegreen estimates uncollectible VOI notes receivable based on historical amounts for similar VOI notes receivable and do not consider the value of the underlying collateral. Bluegreen holds large pools of homogeneous VOI notes receivable and assess uncollectibility based on pools of receivables. In estimating future credit losses, Bluegreen evaluates a combination of factors, including a static pool analysis, the aging of the respective receivables, current default trends, prepayment rates by origination year and the borrowers’ FICO scores.



Substantially all defaulted VOI notes receivable result in the holder of such receivable acquiring the related VOI that secured such receivable, typically soon after default and at little or no cost. The reacquired VOI is then available for resale in the normal course of business.



See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional information about the performance of Bluegreen’s notes receivable portfolio.



Sales/Financing of Receivables



Bluegreen’s ability to sell or borrow against its VOI notes receivable has historically been an important factor in meeting its liquidity requirements. The vacation ownership business generally involves sales where a buyer is only required to pay 10% of the purchase price up front, while at the same time selling and marketing expenses related to such sales are primarily cash expenses that exceed the down payment amount. For the year ended December 31, 2017, Bluegreen’s sales and marketing expenses totaled approximately 52% of system-wide sales of VOIs, net. Accordingly, having facilities for the sale or hypothecation of VOI notes receivable, along with periodic term securitization transactions, has been a critical factor in meeting Bluegreen’s short and long-term cash needs. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional information about Bluegreen’s VOI notes receivable purchase facilities and term securitizations.

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Receivables Servicing



Receivables servicing includes collecting payments from borrowers and remitting the funds to the owners, lenders or investors in such receivables, accounting for principal and interest on such receivables, making advances when required, contacting delinquent borrowers, terminating a Vacation Club ownership in the event that defaults are not timely remedied and performing other administrative duties.



Bluegreen receives fees for servicing its securitized notes receivable and these fees are included as a component of interest income. Additionally, Bluegreen earns servicing fee income from third-party developers in connection with its servicing of their loan portfolios under certain fee-based services arrangements, which is netted against the cost of Bluegreen’s mortgage servicing operations.



Bluegreen’s Core Operating and Growth Strategies



Grow VOI sales



Bluegreen’s goal is to utilize its sales and marketing platform to continue its strong history of VOI sales growth through the expansion of existing alliances, continued development of new marketing programs and additional VOI sales to its existing Vacation Club owners. Bluegreen believes there are a number of opportunities within its existing marketing alliances to drive future growth, including the expansion of its marketing efforts with Bass Pro to include programs focused on Bass Pro’s e-commerce platform. In addition, through Bluegreen’s agreement with Choice Hotels, Bluegreen plans to enhance its marketing program through further penetration of Choice Hotels’ digital and call-transfer programs. In addition to existing programs, Bluegreen plans to utilize its sales and marketing expertise to continue to identify unique marketing relationships with nationally-recognized brands that resonate with its core demographic. In addition, Bluegreen actively seeks to sell additional VOI points to its existing Vacation Club owners, which typically involve significantly lower marketing costs and have higher conversion rates compared to sales to new customers. Bluegreen is also committed to continually expanding and updating its sales offices to more effectively convert tours generated from its marketing programs into sales. In addition, Bluegreen seeks to identify high traffic resorts where it believes increased investment in sales office infrastructure will yield strong sales results.



Continue to enhance Bluegreen’s Vacation Club experience



Bluegreen believes its Vacation Club offers owners exceptional value. Bluegreen’s Vacation Club offers owners access to its 43 Club Resorts and 24 Club Associate Resorts in premier vacation destinations, as well as access to approximately 11,000 other hotels and resorts and other vacation experiences, such as cruises, through partnerships and exchange networks. Bluegreen continuously seeks new ways to add value and flexibility to its Vacation Club membership and enhance the vacation experience of its Vacation Club owners, including the addition of new destinations, the expansion of its exchange programs and the addition of new partnerships to offer increased vacation options. Bluegreen also continuously seeks to improve its technology, including websites and applications, to enhance its Vacation Club owners’ experiences. Bluegreen believes this focus, combined with its high-quality customer service, will continue to enhance the Vacation Club experience, driving sales to new owners and additional sales to existing Vacation Club owners.



Grow high-margin, cash generating businesses



Bluegreen seeks to continue to grow its ancillary businesses, including resort management, title services and loan servicing. Bluegreen believes these businesses can grow with little additional investment in infrastructure and potentially produce high-margin revenues.



Increase sales and operating efficiencies across all customer touch-points



Bluegreen actively seeks to improve its operational execution across all aspects of its business. In Bluegreen’s sales and marketing platform, Bluegreen utilizes a variety of screening methods and data-driven analyses to attract high-quality prospects to its sales offices in an effort to increase Volume Per Guest (“VPG”), an important measure of sales efficiency. Bluegreen also continues to test new and innovative methods to generate sales prospects with a focus on increasing cost efficiency. In connection with its management services and consumer financing activities, Bluegreen will continue to leverage its size, infrastructure and expertise to increase operating efficiency and profitability. In addition, as Bluegreen expands, Bluegreen expect to gain further operational efficiencies by streamlining its support operations, such as call centers, customer service, administration and information technology.



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Maintain operational flexibility while growing the business



Bluegreen believes it has built a flexible business model that allows it to capitalize on opportunities and adapt to changing market environments. Bluegreen intends to continue to pursue growth through a balanced mix of capital-light sales vs. developed VOI sales, sales to new customers vs. sales to existing Vacation Club owners and cash sales vs. financed sales. While Bluegreen may from time to time pursue opportunities that impact its short-term results, Bluegreen’s long-term goal is to achieve sustained growth while maximizing earnings and cash flow.



Pursue strategic transactions



As part of a growth strategy, Bluegreen may seek acquisitions of other VOI companies, resort assets, sales and marketing platforms, management companies and contracts, and other assets, properties and businesses, including where Bluegreen believes significant synergies and cost savings may be available. Bluegreen may choose to pursue acquisitions directly or in partnership with third-party developers or others, including pursuant to arrangements where third-party developers purchase the resort assets and Bluegreen sell the VOIs in the acquired resort on a commission basis. Bluegreen has a long history of successfully identifying, acquiring and integrating complementary businesses, and believes its flexible sales and marketing platform enables Bluegreen to complete these transactions in a variety of economic conditions.



Industry Overview



The vacation ownership, or timeshare, industry is one of the fastest growing segments of the global travel and tourism sector. By purchasing a VOI, the purchaser typically acquires either (i) a fee simple interest in a property (or collection of properties) providing annual usage rights at the owner’s home resort (where the owner’s VOI is deeded), or (ii) an annual or biennial allotment of points that can be redeemed for stays at properties included in the vacation ownership company’s resort network or for other vacation options available through exchange programs. Compared to hotel rooms, vacation ownership units typically offer more spacious floor plans and residential features, such as living rooms, fully equipped kitchens and dining areas. Compared to owning a vacation home in its entirety, the key advantages of vacation ownership products typically include a lower up-front acquisition cost and annual expenses, resort-style features and services and, often, an established infrastructure to exchange usage rights for stays across multiple locations.



The vacation ownership industry was historically highly fragmented, with a large number of local and regional resort developers and operators having small resort portfolios of varying quality. Bluegreen believes that growth in the vacation ownership industry has been driven by increased interest from resort developers and globally-recognized lodging and entertainment brands, increased interest from consumers seeking flexible vacation options, continued product evolution and geographic expansion. In 2016, more than 9.2 million families (approximately 6.9% of U.S. households) owned at least one VOI and VOI sales have grown 800% over the last 30 years.



While the majority of VOI owners are over the age of 45, new owners are, on average, approximately 5 years younger. VOI owners have an average annual household income of $81,000 and 84% of VOI owners own their own home.





BBX Capital Real Estate



Overview



BBX Capital Real Estate’s primary activities include the acquisition, development, ownership, and management of real estate and investments in real estate joint ventures. BBX Capital Real Estate also manages the legacy assets acquired by BCC in connection with the BankAtlantic Sale. The legacy assets include portfolios of loans receivable, real estate properties, and loans previously charged-off by BankAtlantic.



Strategy



BBX Capital Real Estate’s strategy is focused on:





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Project Portfolio



BBX Capital Real Estate’s portfolio currently includes investments in the following real estate development projects and operating properties either through joint ventures or wholly-owned developments.  A more detailed description of each investment follows this table:











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Multifamily Apartment Developments



Altis at Kendall Square, LLC (“Altis at Kendall Square”)



In March 2013, the Company invested $1.3 million as one of a number of investors in a joint venture with The Altman Companies (“Altman”) to develop Altis at Kendall Square, a 321 unit multifamily apartment development comprised of twelve three-story apartment buildings, a retail parcel, and a clubhouse located in Kendall, Florida. During the year ended December 31, 2016, the joint venture sold the apartment buildings and clubhouse, and the Company recognized $3.1 million of equity earnings and received $3.7 million of distributions from the joint venture. The Company anticipates that the retail land will be sold in 2018.



The Addison on Millenia Investment, LLC (“The Addison on Millenia”)



In December 2015, the Company invested as one of a number of investors in a joint venture with ContraVest to develop The Addison on Millenia, a 292 unit multifamily apartment development comprised of nine apartment buildings located in Orlando, Florida. At the inception of the venture, the Company transferred land with an agreed upon value of $5.8 million and cash of $0.3 million to the joint venture in return for its membership interest. The Company is entitled to receive 48% of the joint venture distributions until it receives its aggregate capital contributions plus a specified return on its capital. After all investors receive a specified return and the return of their contributed capital, any distributions thereafter are shared based on earnings, with the managing member receiving an increasing percentage of distributions. Construction commenced in the first quarter of 2016 and was completed during 2017. The 292 apartment units were 96% leased as of December 31, 2017. 



Altis at Lakeline – Austin Investor, LLC (“Altis at Lakeline”)



In December 2014, the Company invested $5.0 million as one of a number of investors in a joint venture with Altman to develop Altis at Lakeline, a 354 unit multifamily apartment development comprised of nineteen two- and three-story apartment buildings, 38 enclosed garages, and a private resort-style 5,500 square foot clubhouse located in Cedar Park, Texas. The Company is entitled to receive 34% of the joint venture distributions until it receives its aggregate capital contributions plus a specified return on its capital. After all investors receive a specified return and the return of their contributed capital, any distributions thereafter are shared based on earnings, with the managing member receiving an increasing percentage of distributions. Construction commenced in the first quarter of 2015 and was completed during 2017. The 354 apartment units were 87% leased as of December 31, 2017. 



Altis at Bonterra – Hialeah, LLC (“Altis at Bonterra”)



In December 2015, the Company invested in a joint venture with Altman to develop Altis at Bonterra, a 314 unit  multifamily apartment development located in Hialeah, Florida. At the inception of the venture, the Company transferred property with an agreed upon value of $9.4 million and cash of $7.5 million to the joint venture in return for its membership interest. The Company is entitled to receive 95% of the joint venture distributions until it receives its aggregate capital contributions plus a specified return on its capital, and any distributions thereafter are shared based on earnings, with the managing member receiving an increased percentage of the distributions. Construction commenced

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in the first quarter of 2016 and was completed during 2017. The 314 apartment units were 87% leased as of December 31, 2017.



Altis at Shingle Creek Manager, LLC (“Altis at Shingle Creek”)



In April 2016, the Company invested $332,000 as one of a number of investors in a joint venture with Altman to develop Altis at Shingle Creek, a 356 unit multifamily apartment development located in Orlando, Florida. The Company is entitled to receive 2.5% of the joint venture distributions until it receives its aggregate capital contribution plus a specified return on its capital. After all investors receive a specified return and the return of their contributed capital, any distributions thereafter are shared based on earnings, with the managing member receiving an increasing percentage of distributions.  Construction commenced during the fourth quarter of 2016 and is anticipated to be substantially complete in the third quarter of 2018. The leasing of apartment units began during the third quarter of 2017.



Altis at Grand Central, LLC (“Altis at Grand Central”)



In September 2017, the Company invested $1.9 million as one of a number of investors in a joint venture with Altman to develop Altis at Grand Central, a 314 unit multifamily apartment development located in Tampa, Florida. The Company is entitled to receive 11% of the joint venture distributions until it receives its aggregate capital contribution plus a specified return on its capital. After all investors receive a specified return and the return of their contributed capital, any distributions thereafter are shared based on earnings, with the managing member receiving an increasing percentage of distributions. Construction commenced during the fourth quarter of 2017 and is anticipated to be substantially completed during the second quarter of 2019.



Atlis at Promenade, LLC (“Altis at Promenade”)



In December 2017, the Company invested $962,000 as one of a number of investors in a joint venture with Altman to develop Altis at Promenade, a 338 unit multifamily apartment development located in Tampa, Florida. The Company is entitled to receive 5% of the joint venture distributions until it receives its aggregate capital contribution plus a specified return on its capital. After all investors receive a specified return and the return of their contributed capital, any distributions thereafter are shared based on earnings, with the managing member receiving an increasing percentage of distributions.  Construction is anticipated to be substantially complete during the third quarter of 2019.



Single Family Developments



Hialeah Communities, LLC (“Bonterra – CC Homes”)



In July 2014, the Company invested in a joint venture with CC Homes to develop Bonterra – CC Homes, a residential community comprised of 394 homes located in Hialeah, Florida. At the inception of the venture, the Company transferred property at an agreed upon value of $15.6 million to the joint venture in exchange for cash of $2.2 million, membership interests with an agreed upon value of $4.9 million, and the venture’s assumption of an $8.3 million mortgage loan on the property. The Company is entitled to receive 57% of the joint venture distributions until it receives its aggregate capital contributions plus a specified return on capital, and any distributions thereafter are shared, with the managing member receiving an increased percentage of distributions. During the year ended December 31, 2017, the joint venture closed on the sale of 192 homes, and the Company recognized $12.1 million of equity earnings and received $14.4 million of cash distributions from the joint venture.  During the year ended December 31, 2016, the joint venture closed on the sale of 201 homes, and the Company recognized $9.5 million of equity earnings and received $11.5 million of cash distributions from the joint venture.  As of December 31, 2017, the joint venture had closed on the sale of 393 homes, with the final home closing in January 2018.



New Urban/BBX Development, LLC (“Village at Victoria Park”)



In December 2013, the Company invested $750,000 in a joint venture with New Urban Communities to develop Village at Victoria Park, a residential community comprised of 30 single-family homes located in Fort Lauderdale, Florida.  The Company is entitled to receive 50% of the joint venture distributions. The project commenced construction and sales during the third quarter of 2014. During the year ended December 31, 2017, the joint venture closed on 9 homes, and the Company recognized $940,000 of equity earnings from the joint venture. As of December 31, 2017, the joint venture had closed on the sale of 18 single-family homes and has sales contracts on eleven additional homes.  



Centra Falls, LLC (“Centra Falls”)



In August 2015, the Company invested $750,000 as one of a number of investors in a joint venture with Label & Co.  to develop Centra Falls, a residential community comprised of 89 townhomes located in Pembroke Pines, Florida.  The

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Company is entitled to receive 7.143% of the joint venture distributions until it receives its aggregate capital contributions plus a specified return on its capital. After all investors receive a specified return and the return of their contributed capital, any distributions thereafter are shared based on earnings, with the managing member receiving an increasing percentage of distributions. During the year ended December 31, 2017, the joint venture closed on 61 townhomes, and the Company recognized $286,000 of equity earnings from the joint venture. The project commenced construction during the third quarter of 2015, and as of December 31, 2017, the joint venture had closed on 79 townhomes and had executed contracts on an additional 9 townhomes.



Centra Falls II, LLC (“Centra Falls West”)



In November 2016, the Company invested $571,000 as one of a number of investors in a joint venture with Label & Co. to develop Centra Falls West, a residential community comprised of 61 townhomes located in Pembroke Pines, Florida. The Company is entitled to receive 7.143% of the joint venture distributions until it receives its aggregate capital contributions plus a specified return on its capital. After all investors receive a specified return and the return of their contributed capital, any distributions thereafter are shared based on earnings, with the managing member receiving an increasing percentage of distributions. The project commenced construction during the first quarter of 2017, and as of December 31, 2017, the joint venture had sold 48 townhomes and closings are anticipated to begin in April  2018.



Chapel Grove Townhomes (“Chapel Grove”)



In October 2017, the Company invested $4.9 million as one of a number of investors in a joint venture with Label & Co. to develop Chapel Grove, a residential community comprised of 125 town homes located in Pembroke Pines, Florida. The Company is entitled to receive 46.75% of the joint venture distributions until it receives its aggregate capital contribution plus a specified return on its capital. After all investors receive a specified return and the return of their contributed capital, any distributions thereafter are shared based on earnings, with the managing member receiving an increasing percentage of distributions. The project commenced construction during the fourth quarter of 2017, and townhome closings are anticipated to commence during the fourth quarter of 2018.  



Beacon Lake Master Planned Development



The Company has obtained entitlements to develop raw land in St. Johns County, Florida into 1,476 finished lots which will comprise the Beacon Lake Community. As part of the development, the Company is developing the land and common areas and expects to sell the finished lots to third-party homebuilders that will construct single-family homes and townhomes that are planned to range from 1,800 square feet to 4,000 square feet and priced from the high $200,000’s to the $500,000’s. Land development began in January 2017. The Company has entered into purchase agreements with homebuilders for approximately 302 finished lots in which 240 finished lots are anticipated to close during 2018, with the first finished lots closing in January 2018. The remaining 62 lots are anticipated to close during 2019.   Pursuant to the asset purchase agreements with the homebuilders, upon closing of the lots by the homebuilders. a portion of the Community Development Bond is required to be repaid through lot sales proceeds and a portion of the Community Development Bond is transferred to the homebuilder.



CCB Miramar, LLC (“Miramar – CC Homes”)



In May 2015, the Company invested in a joint venture with two separate developers relating to the acquisition of real estate in Miramar, Florida for the construction of single-family homes. The Company contributed $875,000 for an approximate 35% interest in the joint venture, and one of the developers contributed to the joint venture a contract to purchase the real estate. The City of Miramar approved the site plan in June 2017, and the Company contributed an additional $350,000 to the joint venture. The joint venture is seeking to obtain entitlements for the project and anticipates closing on the acquisition of the real estate in March 2019. However, the entitlements are subject to government approval, and these approvals may not be obtained.



Retail Developments



BBX/S Millenia Blvd Investments, LLC (“Gardens on Millenia Retail JV”)



In October 2015, the Company invested in a joint venture with Stiles Development to develop a retail center on the Gardens of Millenia site in Orlando, Florida.  At the inception of the venture, the Company transferred property with an agreed upon value of $7.0 million to the joint venture in return for $0.7 million in cash and its membership interest. The Company is entitled to receive 90% of the joint venture distributions until it receives its aggregate capital contributions plus a specified return on its capital, and any distributions thereafter are shared based on earnings, with the managing member receiving an increased percentage of the distributions. During the year ended December 31, 2017, the joint venture closed on a portion of the retail center, and the Company recognized $3.5 million of equity earnings and received

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$3.4 million of distributions from the joint venture.  The Company anticipates that the remaining retail space will be sold in March 2018.



Gardens on Millenia – Land



Gardens on Millenia consisted of 37 acres of land acquired through foreclosure located near the Mall at Millenia in a commercial center of Orlando, Florida.  During 2015, the Company obtained governmental approvals for a 300,000 square foot retail shopping center designed for multiple big-box and in-line tenants as well as two outparcel retail pads and nine rental apartment buildings totaling approximately 292 units. The Company contributed the portion of the land entitled for rental apartments to the Addison on Millenia Investment, LLC joint venture and contributed the portion of the land entitled for the retail center to the BBX/S Millenia Blvd Investments, LLC joint venture as initial capital contributions to the joint ventures. The Company developed the two outparcel retail pads and has sold one of the pads to a retailer and executed a long-term land lease on the other pad. 



Mixed Use Developments



PGA Design Center Holdings, LLC (“PGA Pod B”)



In December 2013, the Company purchased for $6.1 million a commercial property located in PGA Station in Palm Beach Gardens, Florida, with three existing buildings consisting of 145,000 square feet of mainly furniture retail space. Subsequent to the acquisition of the property, the Company entered into the PGA Design Center Holdings, LLC joint venture with Stiles Development, which acquired a 60% interest in the joint venture for $2.9 million in cash. The Company contributed the property (excluding certain residential development entitlements having an estimated value of $1.2 million) to the joint venture in exchange for $2.9 million in cash and the remaining 40% interest in the joint venture.  The Company transferred the retained residential development entitlements to adjacent parcels owned by it in PGA Station (see below for a discussion of PGA PODS A&C, the other parcels owned by the Company in PGA Station). During the year ended December 31, 2016, governmental approvals were obtained to change the use of a portion of the property from retail to office. The joint venture sold one of the buildings in February 2018 and intends to sell or lease the remaining two buildings. 



PGA Pods A&C



The Company acquired land through foreclosure located in PGA Station, in the city of Palm Beach Gardens, Florida in 2014. During the year ended December 31, 2016, the Company obtained governmental approvals to construct a 122 room limited-service suite hotel, a medical office building, and three 60,000 square foot office buildings on vacant tracts of land in PGA Station. The Company is the master developer of PGA station and intends to sell the developed land to third party developers. During the year ended December 31, 2017, the Company closed on the sale of the land on which the hotel and medical office buildings will be constructed by third party developers.



Bayview (Sunrise and Bayview Partners, LLC)



In June 2014, the Company invested in a joint venture with an affiliate of Procacci Development Corporation (“PDC”) with the Company and PDC each contributing $1.8 million to the Sunrise and Bayview Partners joint venture.  The joint venture acquired for $8.0 million approximately three acres of real estate located in Fort Lauderdale, Florida. The Company and PDC each have a 50% interest in the joint venture. There is currently an approximate 84,000 square foot office building along with a convenience store and gas station on the property. The office building has low occupancy with short term leases. The convenience store's lease ends in March 2022. The Company anticipates that the property will be redeveloped into a mixed-use project in the future.



Operating Properties



Villa San Michele



In January 2014, the Company acquired an 82-unit, 272 bed student housing project located in Tallahassee, Florida, through a contractual settlement with the borrower.  Built in 2008, Villa San Michele is located in southwest Tallahassee near Tallahassee Community College. The project includes a mix of 3 bedroom and 4 bedroom 2-story townhomes, as well as a 10.6 acre parcel of vacant land. Villa San Michele met the criteria to be classified as held-for-sale as of December 31, 2017 and was ultimately sold in January 2018 for $9.5 million.



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RoboVault



In April 2013, the Company acquired through foreclosure, RoboVault, a 155,000 square foot high-tech, robotic self-storage facility, featuring climate controlled, and high security storage. Located in Fort Lauderdale, Florida, RoboVault offers its clients museum quality storage for business, forensic property, and personal prized possessions, including art, wine collections, cars, gems, antiques, important documents and files, and other collectibles. Built in 2009, the facility is wind resistant up to 200 mph (a category 5 hurricane), stores items 30 feet above sea level, uses a biometric robotic transfer system, and offers 24 hour - 7 day access.



Legacy Assets



Legacy assets in the Company’s Consolidated Statement of Financial Condition as of December 31, 2017 consisted primarily of $19.5 million of loans receivable, $13.9 million of real estate held-for-investment, $27.8 million of real estate held-for-sale, and $7.0 million in property and equipment. PGA Pods A&C, Villa San Michele, Gardens on Millenia land, and RoboVault discussed above are included in real estate held-for-sale, real estate held-for-investment and property and equipment with a carrying value of $11.9 million, $1.2 million, and $7.0 million, respectively, as of December 31, 2017. 



The majority of the legacy assets do not generate income on a regular or predictable basis. As a consequence, BBX Capital Real Estate does not expect to generate significant revenue from the legacy assets until the assets are monetized through repayments or transactions involving the sale, joint venture or development of the underlying real estate. The cash flow from the monetization of legacy assets are generally invested in income producing real estate, real estate developments and real estate joint ventures, as well as in the Company’s middle market operating businesses. As a result of the substantial decline in real estate values during the recession which began in 2007 - 2008, the majority of legacy non-performing commercial real estate loans and foreclosed real estate were written down in prior periods to the then prevailing estimated fair values of the collateral less costs to sell. The Company believes there has been continued improvements generally in real estate markets over the prior 3 to 4 years and believes that the prior estimated fair values of the underlying collateral securing certain of its commercial real estate loans and its real estate carrying values may be below current market values. Additionally, this recovery in the real estate market has favorably affected the financial condition of borrowers, and the Company is aggressively pursuing its borrowers and/or guarantors in order to maximize recoveries through cash settlements, loan workout arrangements or participation interests in the development or performance of the collateral. If the Company is successful in its efforts, the Company expects to recognize gains to the extent that the amounts it collects exceed the carrying value of its commercial loans and foreclosed real estate as well as recoveries from the portfolio of BankAtlantic charged-off loans.





Middle Market Division



Overview 



The Middle Market Division invests in operating companies and businesses in diverse industries with revenues between $5 million and $100 million, currently including companies in the home improvement, confectionery, and retail restaurant industries.



Strategy



The business and operating strategy for the portfolio of companies in the Middle Market Division focuses on:





Portfolio Companies



Renin



Renin is engaged in the design, manufacture, and distribution of products for the home improvement industry, including specialty doors, systems and hardware, and home décor products, and operates through its headquarters in Canada and two manufacturing and distribution facilities in the United States and Canada. Following the Company’s acquisition of

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Renin in 2013, Renin, which historically generated operating losses, has become profitable, generating trade sales of $69.6 million and income before taxes of $2.2 million for the year ended December 31, 2017.



Renin’s products include sliding bipass and bifold closet doors, room dividers, including barn-style doors and hardware, fabricated glass and home décor products. While the majority of Renin’s products are manufactured at its facilities located in the United States and Canada, a portion of its products are sourced from suppliers in China. Renin products are sold through three distinct channels in North America: retail, commercial, and direct in the metropolitan Toronto area (the “Toronto Area”). Retail currently comprises over 60% of Renin’s gross sales and includes big box retail customers such as Lowes and Home Depot. Commercial, which includes original equipment manufacturers and fabricators across North America, comprises approximately 25% of Renin’s sales, while the Toronto Area, where Renin operates an installation business, generates the remaining sales.    



BBX Sweet Holdings



BBX Sweet Holdings is engaged in the acquisition and management of operating businesses in the confectionery industry, including manufacturers, wholesalers, and retailers of chocolate, hard candy, and other confectionery products. Many of these operating businesses are in early development stages and currently generate operating losses.



In June 2017, BBX Sweet Holdings acquired IT’SUGAR, a specialty candy retailer with 95 retail locations in 26 states and Washington, DC, for a purchase price of $58.4 million, net of cash acquired. IT’SUGAR’s products include bulk candy, giant candy packaging, and novelty items that are purchased and sold at its retail locations, which include a mix of high-traffic resort and entertainment, lifestyle, mall/outlet, and urban locations across the United States. As a result of BBX Sweet Holdings’ plans to further expand IT’SUGAR by opening new retail locations, including six to seven locations during 2018. IT’SUGAR is not expected to generate net income in 2018 due to the expected costs of opening new stores and related ongoing depreciation expenses. However, the acquisition of IT’SUGAR is expected to be cash flow accretive to the Company and has significantly expanded BBX Sweet Holdings’ retail footprint in the confectionery industry.



BBX Sweet Holdings’ other existing operations include businesses that manufacture confectionery products for wholesalers, big box chains, retailers, and corporate customers. These confectionery products include fine chocolates, chocolate drenched candies, tropical snacks, and hard candies, all of which are made at facilities located in Utah and Florida. While a majority of BBX Sweet Holdings’ products are sold to retailers or distributors, its fine chocolates are also sold directly to consumers at its eight Hoffman’s Chocolates retail locations in South Florida.



Subsequent to December 31, 2017, the Company commenced the process of exiting its manufacturing facility in Utah, and it is anticipated that BBX Sweet Holdings will incur various costs in connection with this initiative, including severance costs for various employees and the recognition of lease obligations. The Company is continuing to evaluate the operations of certain other acquired operating businesses in the BBX Sweet Holdings segment, and to the extent that it decides to exit these operations, BBX Sweet Holdings may recognize impairment charges and incur additional costs in future periods. 



MOD Franchise Operations



In 2016, the Company entered into an exclusive Florida area development agreement with a subsidiary of MOD with a goal of developing up to 60 MOD franchised pizza restaurant locations throughout Florida over the next six years. The Company opened two restaurant locations during the fourth quarter of 2017 and expects to open eight to twelve additional locations in 2018. The Company’s MOD franchised pizza restaurants operate in the fast casual dining industry and sell custom artisan style pizzas, salads and beverages. These restaurants charge a set price per pizza or salad, which allows customers to choose any toppings for their pizza or salad, and the product is made-to-order through an assembly-line process in the restaurant.





Employees



Management believes that its relations with its employees are satisfactory. The Company currently maintains employee benefit programs that are considered by management to be generally competitive with programs provided by other major employers in its markets.



As of December 31, 2017, approximately 29 of Bluegreen Vacations employees were covered by collective bargaining agreements which address the terms and conditions of their employment, including pay rates, working hours, certain employee benefits and procedures for settlement of labor disputes. Further, approximately 36 installers of a Canadian

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division of Renin are unionized and are currently negotiating a collective bargaining agreement. Employees at Renin’s Brampton Plant voted against unionization; however, the union filed an Unfair Labour Practice with the Ontario Labour Board which remains pending.



As of December 31, 2017, the Company and its subsidiaries had approximately 6,914 employees, including 5,412 employees at Bluegreen.  





Competition



The industries in which the Company conducts business are very competitive, and we also face substantial competition with respect to our investment activities from real estate developers and building construction companies, and from private equity funds, hedge funds and other institutional investors. The Company competes with institutions and entities that are larger and have greater resources than the resources available to the Company.  Four unaffiliated companies in the candy and confectionery industry currently account for approximately 70% of the industry’s revenues reflecting significant concentration in the industry in which Sweet Holdings operates. Renin’s products are sold mainly to large retailers as well as to housing and building construction companies. The industry in which Renin operates experiences intense competition from foreign importers and producers.  MOD competes with established pizza brands, new entrants into the fast casual pizza category, especially in Florida, and for prime locations, with other operators.

 

Bluegreen competes with various high profile and well-established firms, many of which have greater liquidity and financial resources than Bluegreen. Many of the world’s most recognized lodging, hospitality and entertainment companies develop and sell VOIs in resort properties. Major companies that now operate, or are developing or planning to develop, vacation ownership resorts directly or through subsidiaries include Marriott Vacations Worldwide Corporation, the Walt Disney Company, Hilton Grand Vacations, Wyndham Vacation Ownership, ILG and Diamond Resorts International. Bluegreen also competes with numerous smaller owners and operators of vacation ownership resorts. In Bluegreen’s fee-based services business, Bluegreen typically competes with Hilton Grand Vacations and Wyndham Vacation Ownership. In addition to competing for sales leads, prospects and fee-based service clients, Bluegreen competes with other VOI developers for marketing, sales and resort management personnel.





Regulation



As a public company, we are subject to federal securities laws, including the Securities Exchange Act of 1934.  In addition, the companies in which we hold investments are subject to federal, state and local laws and regulations generally applicable to their respective businesses. 



Bluegreen



The vacation ownership and real estate industries are subject to extensive and complex governmental regulation. Bluegreen is subject to various federal, state, local and foreign environmental, zoning, consumer protection and other laws, rules and regulations, including those regarding the acquisition, marketing and sale of real estate and VOIs, as well as various aspects of our financing operations. At the federal level, the Federal Trade Commission has taken an active regulatory role through the Federal Trade Commission Act, which prohibits unfair or deceptive acts or unfair competition in interstate commerce. In addition, many states have what are known as “Little FTC Acts” that apply to intrastate activity.



In addition to the laws applicable to Bluegreen’s customer financing and other operations discussed below, Bluegreen is or may be subject to the Fair Housing Act and various other federal laws, rules and regulations. Bluegreen is also subject to various foreign laws with respect to La Cabana Beach Resort and Casino in Oranjestad, Aruba and Blue Water Resort at Cable Beach in Nassau, Bahamas. Additionally, in the future, VOIs may be deemed to be securities subject to regulation as such, which could have a material adverse effect on its business. The cost of complying with applicable laws and regulations may be significant, and Bluegreen may not maintain compliance at all times with all applicable laws, including those discussed below. Any failure to comply with current or future applicable laws or regulations could have a material adverse effect on Bluegreen.



Bluegreen’s vacation ownership resorts are subject to various regulatory requirements, including state and local approvals. The laws of most states require Bluegreen to file a detailed offering statement describing its business and all material aspects of the project and sale of VOIs with a designated state authority. In addition, when required by state law, Bluegreen provides its VOI purchasers with a public disclosure statement that contains, among other items, detailed information about the applicable resort, the surrounding vicinity and the purchaser’s rights and obligations as a VOI

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owner. Laws in each state where Bluegreen sells VOIs generally grant the purchaser of a VOI the right to cancel a purchase contract at any time within a specified rescission period following the earlier of the date the contract was signed or the date the purchaser received the last of the documents required to be provided by Bluegreen. Most states have other laws that regulate Bluegreen’s activities, including real estate licensure requirements, sellers of travel licensure requirements, anti-fraud laws, telemarketing laws, prize, gift and sweepstakes laws, and labor laws.



Under various federal, state and local laws, ordinances and regulations, the owner of real property is generally liable for the costs of removal or remediation of certain hazardous or toxic substances located on or in, or emanating from, the property, as well as related costs of investigation and property damage. These laws often impose liability without regard to whether the property owner knew of the presence of such hazardous or toxic substances. The presence of these substances, or the failure to properly remediate these substances, may adversely affect a property owner’s ability to sell or lease a property or to borrow using the real property as collateral. Other federal and state laws require the removal or encapsulation of asbestos-containing material when such material is in poor condition or in the event of construction, demolition, remodeling or renovation. Other statutes may require the removal of underground storage tanks. Noncompliance with any of these and other environmental, health or safety requirements may result in the need to cease or alter operations or development at a property. In addition, certain state and local laws may impose liability on property developers with respect to construction defects discovered on the property or repairs made by future owners of such property. Under these laws, Bluegreen may be required to pay for repairs to the developed property. The development, management and operation of its resorts are also subject to the Americans with Disabilities Act.



Bluegreen’s marketing, sales and customer financing activities are also subject to extensive regulation, which can include, but is not limited to: the Truth-in-Lending Act and Regulation Z; the Fair Housing Act; the Fair Debt Collection Practices Act; the Equal Credit Opportunity Act and Regulation B; the Electronic Funds Transfer Act and Regulation E; the Home Mortgage Disclosure Act and Regulation C; the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“the Dodd-Frank Act”); Unfair or Deceptive Acts or Practices and Regulation AA; the Patriot Act; the Right to Financial Privacy Act; the Gramm-Leach-Bliley Act; the Fair and Accurate Credit Transactions Act; and anti-money laundering laws. The Dodd-Frank Act contains significant changes to the regulation of financial institutions and related entities, including the creation of new federal regulatory agencies, and the granting of additional authorities and responsibilities to existing regulatory agencies to identify and address emerging systemic risks posed by the activities of financial services firms. The Consumer Financial Protection Bureau (the “CFPB”) is one such regulatory agency created pursuant to the Dodd-Frank Act. The CFPB’s mandate is to protect consumers by carrying out federal consumer financial laws and to publish rules and forms that facilitate understanding of the financial implications of the transactions consumers enter into. Consistent with this mission, the CFPB amended Regulations X and Z to establish new disclosure requirements and forms pursuant to Regulation Z for most closed-end consumer credit transactions secured by real property. The practical impact upon Bluegreen is the requirement to use a new Integrated Mortgage Disclosure Statement in lieu of the separate Good Faith Estimate and Closing Statement. No assurance can be given that Bluegreen will be in compliance with the Dodd-Frank Act or other applicable laws or that compliance with these rules or the promulgation of additional standards by the CFPB will not have an adverse impact on its business. In addition, Bluegreen’s term securitization transactions must comply with certain requirements of the Dodd-Frank Act, including risk retention rules.



Bluegreen’s management of, and dealings with, HOAs, including the purchase of defaulted inventory from HOAs in connection with secondary market arrangements, is subject to state laws and resort rules and regulations, including those with respect to the establishment of budgets and expenditures, rule-making and the imposition of maintenance assessments.



During the year ended December 31, 2017, approximately 6% of Bluegreen’s VOI sales were generated by marketing to prospective purchasers obtained through internal and third-party vendors’ outbound telemarketing efforts. Bluegreen attempts to monitor the actions and legal and regulatory compliance of these third parties, but there are risks associated with Bluegreen’s and such third parties’ telemarketing efforts. In recent years, state and federal regulators have increased regulations and enforcement actions related to telemarketing operations, including requiring the adherence to state “do not call” laws. In addition, the Federal Trade Commission and Federal Communications Commission have implemented national “do not call” legislation. These measures have significantly increased the costs associated with telemarketing. While Bluegreen continues to be subject to telemarketing risks and potential liability, Bluegreen believes its exposure to adverse impacts from this heightened telemarketing legislation and enforcement may be partially mitigated by the use of “permission marketing,” whereby Bluegreen obtains the permission of prospective purchasers to contact them in the future, thereby exempting such calls from the various “do not call” laws. Bluegreen has also implemented policies and procedures that it believes will help reduce the possibility that individuals who have requested to be placed on a “do not call” list are not contacted, but such policies and procedures may not be effective in ensuring strict regulatory compliance.



To date, no material fines or penalties have been imposed on Bluegreen as a result of telemarketing operations. However, from time to time, Bluegreen has been the subject of proceedings for violation of the “do not call” laws and other state

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laws applicable to the marketing and sale of VOIs. Bluegreen may not successfully be able to effectively market to prospective purchasers through telemarketing operations or to successfully develop alternative sources of identifying and marketing to prospective purchasers of its VOI products at acceptable costs. In addition, Bluegreen may increasingly face non-compliance issues or additional costs of compliance, which may adversely impact its results and operations in the future.



See also “Item 1A – Risk Factors” for a description of risks with respect to regulatory compliance.



See also “Item 3 - Legal Proceedings” for a description of litigation that was brought against Bluegreen and Choice Hotels in January 2018 relating to telemarketing sales activities and a description of cease and desist letters received by Bluegreen from attorney’s purporting to represent certain VOI owners.





Seasonality



Bluegreen has historically experienced, and expect to continue to experience, seasonal fluctuations in its revenues and results of operations. This seasonality has resulted, and may continue to result, in fluctuations in Bluegreen’s quarterly operating results. Although more potential customers typically visit Bluegreen’s sales offices during the quarters ending in June and September, Bluegreen’s ultimate recognition of the resulting sales during these periods may be delayed due to down payment requirements for recognition of real estate sales under GAAP or due to the timing of development and required use of the percentage-of-completion method of accounting.



BBX Sweet Holdings is subject to seasonal fluctuations in trade sales, which cause fluctuations in quarterly results of operations. Historically, the strongest wholesale and retail trade sales have occurred during the fourth quarter, which includes the Christmas holiday, and during the third quarter when families travel on vacation. 













 

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ITEM 1A. RISK FACTORS





We are subject to various risks and uncertainties relating to or arising out of the nature of our businesses, operations and investments, and general business, economic, financing, legal, regulatory, and other factors and conditions. New risk factors emerge from time to time, and it is not possible for management to either predict all risk factors or assess all potential impacts of any factor, or combination of factors, on BBX Capital Corporation or its subsidiaries, including with respect to their operations, results and financial condition. 



BBX Capital relies on dividends from Bluegreen to fund operations.



BBX Capital has relied and continues to rely primarily on dividends from Bluegreen in order to fund its operations and investments. Dividends from Bluegreen may not be paid to BBX Capital in the amounts previously paid or when anticipated or at all. Bluegreen paid dividends totaling $40.0 million during 2017 and $70.0 million during 2016. The payment of dividends by Bluegreen is subject to compliance with financial covenants under its credit facilities and certain of Bluegreen's credit facilities contain terms which may limit the payment of cash dividends without the lender's consent or waiver. Additionally, the payment of dividends by Bluegreen will be at the discretion of Bluegreen’s board of directors.  Decisions with respect to dividends by Bluegreen are generally based on, among other things, Bluegreen's operating results, financial condition, cash flow, and liquidity needs. Dividend payments to BBX Capital by any of its subsidiaries, including Bluegreen, could, in certain circumstances, be subject to claims made by creditors of such subsidiary.



If cash flow is not sufficient to fund BBX Capital's liquidity needs or BBX Capital otherwise determines it is advisable to do so, BBX Capital might seek to liquidate some of its investments or seek to fund its operations with the proceeds of additional equity or debt financing. Such financing may not be available on commercially reasonable terms, if at all, and if BBX Capital chooses to liquidate its investments, it may be forced to do so at depressed prices.



BBX Capital’s acquisitions may reduce earnings, require it to obtain additional financing and expose it to additional risks.



BBX Capital’s business strategy includes investments in or acquisitions of operating companies, such as its acquisition of Renin and the acquisitions of businesses by BBX Sweet Holdings in the confectionery industry.  BBX Capital may also seek to make opportunistic investments outside of its existing portfolio. Some of these investments and acquisitions may be material. While BBX Capital is seeking investments and acquisitions primarily in companies that provide opportunities for growth, it may not be successful in identifying these opportunities. Investments or acquisitions that it completes may not prove to be successful or, even if successful, may not initially generate income, or may generate income on an irregular basis or over a long time period. Accordingly, our results of operations may vary significantly on a quarterly basis and from year to year as a result of acquisitions. Acquisitions and investments will also expose BBX Capital, or increase BBX Capital’s exposure in the case of acquisitions of or additional investments in its portfolio companies, to the risks of any business acquired or invested in. Acquisitions entail numerous risks, including:





BBX Capital may not be able to acquire or profitably manage additional businesses, or to integrate successfully any acquired businesses, including Renin, MOD restaurants and the BBX Sweet Holdings’ operating businesses, without substantial costs, delays or other operational or financial difficulties, including difficulties in integrating information systems and personnel and establishing control environment processes across acquired businesses. The failure to do so could have a material adverse effect on its business, financial condition and results of operations. In addition, to

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the extent that operating businesses are acquired outside the United States or the State of Florida, there will be additional risks related to compliance with foreign regulations and laws including tax laws, labor laws, currency fluctuations and geographic economic conditions.



In addition, there is significant competition for investments and acquisitions, which could increase the costs associated with the investment or acquisition. Substantial costs are incurred in connection with the evaluation of potential acquisition and investment opportunities whether or not the acquisition or investment is ultimately consummated. Further, funding such investments or acquisitions may rely on additional debt or equity financing, which will subject BBX Capital to the risks and uncertainties described in these risk factors with respect to those activities in the immediately following risk factors. If BBX Capital requires additional financing in the future, the financing may not be available when needed or on favorable terms, if at all. Additionally, BBX Capital does not intend to seek shareholder approval of any investments or acquisitions unless required by law or regulation, or by BBX Capital’s Amended and Restated Articles of Incorporation or Bylaws.



In addition, BBX Capital from time to time may consider transactions involving the sale of its subsidiaries or investments or other transactions which would result in a decrease in BBX Capital’s ownership interest in its subsidiaries, and there is no assurance that any such transactions, if pursued and consummated, will generate a profit or otherwise be advantageous to BBX Capital. 



We may issue additional securities and incur additional indebtedness at BBX Capital or its subsidiaries.



BBX Capital may in the future seek to raise funds through the issuance of debt or equity securities. There is generally no restriction on BBX Capital’s ability to issue debt or equity securities which are pari passu or have a preference over its Class A Common Stock and Class B Common Stock. Authorized but unissued shares of BBX Capital’s capital stock are available for issuance from time to time at the discretion of BBX Capital’s board of directors, and any such issuance may be dilutive to BBX Capital’s shareholders.



Further, BBX Capital and its subsidiaries have in the past and may in the future incur significant amounts of debt, including at Bluegreen. Any indebtedness, including indebtedness incurred in the future could have several important effects on BBX Capital or its subsidiaries, including, without limitation, that BBX Capital or its subsidiaries may be required to use available cash for the payment of principal and interest due on its debt and that the outstanding indebtedness and leverage at BBX Capital or its subsidiaries will impact liquidity, and any negative changes in general economic and industry conditions will increase such impact.



Bluegreen is subject to the business, financial and operating risks inherent to the vacation ownership industry, any of which could adversely impact its business, prospects and results.



Bluegreen is subject to a number of business, financial and operating risks inherent to the vacation ownership industry, including, without limitation:



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Any of these factors could increase costs, limit or reduce the prices Bluegreen is able to charge for its products and services or Bluegreen’s ability to develop or acquire new resorts or source VOI supply from third parties, or otherwise adversely impact Bluegreen’s business, prospects or results.



Bluegreen’s business and operations, including its ability to market VOIs, may be adversely affected by general economic conditions and the availability of financing.



Bluegreen’s business is subject to risks related to general economic and industry conditions and trends.   Bluegreen’s results, operations and financial condition may be adversely affected by unfavorable general economic and industry conditions, such as high unemployment rates and job insecurity, declines in discretionary spending, declines in real estate values and the occurrence of geopolitical conflicts, including if these or other factors adversely impact the availability of financing for Bluegreen or Bluegreen’s customers or the ability of Bluegreen’s customers’ to otherwise pay amounts owed under notes receivable. Further, adverse changes affecting the vacation ownership industry, such as an oversupply of vacation ownership units, a reduction in demand for such units, changes in travel and other consumer preferences, demographic and vacation patterns, changes in governmental regulation of the industry, imposition of increased taxes by governmental authorities, the declaration of bankruptcy and/or credit defaults by other vacation ownership companies and negative publicity for the industry, could also have a material adverse effect on Bluegreen’s business. In addition, Bluegreen's operations and results may be negatively impacted if Bluegreen is unable to update its business strategy over time and from time to time in response to changing economic and industry conditions.



Bluegreen may not be able to develop or acquire VOI inventory or enter into and maintain fee-based service agreements or other arrangements to source VOI inventory, which may cause its business and results to be adversely impacted.



In addition to developed VOI sales, Bluegreen sources VOIs as part of its capital-light business strategy through fee-based service agreements with third-party developers and through JIT and secondary market arrangements. If Bluegreen is unable to develop or acquire resorts at the levels or in the time frame anticipated, or is unsuccessful in entering into agreements with third-party developers or others to source VOI inventory in connection with its capital-light business strategy, Bluegreen may experience a decline in VOI supply, which could result in a decrease in its revenues. In addition, a decline in VOI supply could result in a decrease of financing revenues that are generated when VOIs are sold and fee and rental revenues that are generated by Bluegreen’s management services.



Bluegreen’s business and properties are subject to extensive federal, state and local laws, regulations and policies. Changes in these laws, regulations and policies, as well as the cost of maintaining compliance with new or existing laws, regulations and policies and the imposition of additional taxes on operations, could adversely affect Bluegreen’s business.  In addition, results of audits of its tax returns or those of its subsidiaries may have a material adverse impact on Bluegreen’s financial condition.



The federal government and the state and local jurisdictions in which Bluegreen operates have enacted extensive regulations that affect the manner in which Bluegreen markets and sells VOIs and conducts its other business operations.  In addition, many states have adopted specific laws and regulations regarding the sale of VOIs.  Many states, including Florida and South Carolina, where certain of Bluegreen’s resorts are located, extensively regulate the creation and management of timeshare resorts, the marketing and sale of timeshare properties, the escrow of purchaser funds prior to the completion of construction and closing, the content and use of advertising materials and promotional offers, the delivery of an offering memorandum and the creation and operation of exchange programs and multi-site timeshare plan reservation systems. Moreover, with regard to sales conducted in South Carolina, the closing of real estate and mortgage loan transactions must be conducted under the supervision of an attorney licensed in South Carolina and otherwise in accordance with South Carolina’s Time Sharing Transaction Procedures Act.  Most states also have other laws that are applicable to Bluegreen’s activities, such as timeshare project registration laws, real estate licensure laws, mortgage licensure laws, sellers of travel licensure laws, anti-fraud laws, consumer protection laws, telemarketing laws, prize, gift and sweepstakes laws, and consumer credit laws.  Bluegreen's management of, and dealings with, HOAs, including Bluegreen's purchase of defaulted inventory from HOAs in connection with its secondary market sales, is also subject to state laws and resort rules and regulations, including those with respect to the establishment of budgets and expenditures, rule-making, and the imposition of maintenance assessments.

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Bluegreen currently is authorized to market and sell VOIs in all locations at which its marketing and sales are conducted.  If Bluegreen’s agents or employees violate applicable regulations or licensing requirements, their acts or omissions could cause the states where the violations occurred to revoke or refuse to renew Bluegreen’s licenses, render Bluegreen’s sales contracts void or voidable, or impose fines on Bluegreen based on past activities.



In addition, the federal government and the state and local jurisdictions in which Bluegreen conducts business have generally enacted extensive regulations relating to direct marketing and telemarketing, including the federal government’s national “do not call” list, the making of marketing and related calls to cell phone users, a significant development in light of cell phone usage rapidly becoming the primary method of communication, the Telemarketing Sales Rule, the Telephone Consumer Protection Act and the CAN-SPAM Act of 2003.  These regulations, as well as international data protection laws, have impacted Bluegreen’s marketing of VOIs. While Bluegreen has taken steps designed to ensure compliance with these new applicable regulations, these steps have increased and are expected to continue to increase Bluegreen’s marketing costs and may not prevent failures in compliance. Additionally, adoption of new state or federal laws regulating marketing and solicitation, and changes to existing laws, could adversely affect current or planned marketing activities and cause Bluegreen to change its marketing strategy.  If this occurs, Bluegreen may not be able to develop adequate alternative marketing strategies, which could affect the amount and timing of its VOI sales.  Bluegreen cannot predict the impact that these legislative initiatives or any other legislative measures that may be proposed or enacted in the future may have on Bluegreen’s marketing strategies and results.  Further, from time to time, complaints are filed against Bluegreen by individuals claiming that they received calls in violation of applicable regulations. See “Item 3 – Legal Proceedings” for a description of litigation brought against Bluegreen and Choice Hotels in January 2018 related to Bluegreen’s telemarketing sales activities.



Most states have taxed VOIs as real estate, imposing property taxes that are billed to the respective HOAs that maintain the related resorts and have not sought to impose sales tax upon the sale of the VOI or accommodations tax upon the use of the VOI.  From time to time, however, various states have attempted to promulgate new laws or apply existing laws impacting the taxation of VOIs to require that sales or accommodations taxes be collected.  Should new state or local laws be implemented or interpreted to impose sales or accommodations taxes on VOIs, Bluegreen’s business could be materially adversely affected.



From time to time, consumers file complaints against Bluegreen in the ordinary course of Bluegreen’s business.  Bluegreen could be required to incur significant costs to resolve these complaints or enter into consents with regulators regarding its activities, including that it may be required to refund all or a portion of the purchase price paid by the customer for the VOI.  Bluegreen may not remain in compliance with all applicable federal, state and local laws and regulations, and violations of applicable laws may have adverse implications on Bluegreen, including negative publicity, potential litigation and regulatory sanctions. The expense, negative publicity and potential sanctions associated with any failure to comply with applicable laws or regulations could have a material adverse effect on Bluegreen’s results of operations or financial position.



Under the Americans with Disabilities Act of 1990 and the Accessibility Guidelines promulgated thereunder (collectively, the “ADA”), all public accommodations, including properties, must meet various federal requirements related to access and use by disabled persons. Compliance with the ADA’s requirements could require removal of access barriers or other renovations, and non-compliance could result in the imposition of fines or penalties, or awards of damages, against Bluegreen. Bluegreen’s properties are also subject to various federal, state and local regulatory requirements, such as state and local fire and life safety requirements. Further, various laws govern resort management activities, including laws and regulations regarding community association management, public lodging, food and beverage services, liquor licensing, labor, employment, health care, health and safety, accessibility, discrimination, immigration, and the environment (including climate change).



Bluegreen’s lending activities are also subject to a number of laws and regulations, including laws and regulations related to consumer loans, retail installment contracts, mortgage lending, fair debt collection and credit reporting practices, consumer collection practices, contacting debtors by telephone, mortgage disclosure, lender licenses and money laundering. The Consumer Finance Protection Bureau, created under the Dodd-Frank Act, has emphasized new regulatory focus on areas of business such as consumer mortgage servicing and debt collection, credit reporting and consumer financial disclosures, all of which affect the manner in which Bluegreen may provide financing to the purchasers of VOIs and conduct lending and loan servicing operations.



In addition, VOIs may in the future be deemed to be securities under federal or state law and therefore subject to applicable securities regulation, which could have a material adverse effect on Bluegreen due to, among other things, the cost of compliance with such regulations. 

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The vacation ownership and hospitality industries are highly competitive, and Bluegreen may not be able to compete successfully.



Bluegreen competes with various high profile and well-established operators, many of which have greater liquidity and financial resources than Bluegreen.  Many of the world’s most recognized lodging, hospitality and entertainment companies develop and sell timeshare units or VOIs in resort properties.  Bluegreen also competes with numerous smaller owners and operators of vacation ownership resorts and also faces competition from alternative lodging options available to consumers through both traditional methods of delivery as well as new web portals and applications, including private rentals of homes or apartments or condominium units, which have increased in popularity in recent years. Bluegreen's ability to remain competitive and to attract and retain customers depends on its customers' satisfaction with its products and services as well as on distinguishing the quality, value, and efficiency of its products and services from those offered by its competitors.  Customer dissatisfaction with experiences at its resorts or otherwise as a member of the Bluegreen Vacation Club owner, including due to an inability to use points for desired stays, could result in negative publicity and/or a decrease in sales, or otherwise adversely impact Bluegreen's ability to successfully compete in the vacation ownership and hospitality industries. Bluegreen may not be able to timely and sufficiently identify and remediate the cause of customer dissatisfaction. Any of these events could materially and adversely impact Bluegreen's operating results and financial condition.



Bluegreen’s business and profitability may be impacted if financing is not available on favorable terms, or at all. 



In connection with sales of VOIs, Bluegreen generally offers financing to the purchaser of up to 90% of the purchase price of the VOI. However, Bluegreen incurs selling, marketing and administrative cash expenses prior to and concurrent with the sale.  These costs, along with the cost of the underlying VOI, generally exceed the down payment Bluegreen receives at the time of the sale. Accordingly, Bluegreen’s ability to borrow against or sell its notes receivable has historically been a critical factor in Bluegreen’s continued liquidity, and Bluegreen therefore has depended on funds from its credit facilities and securitization transactions to finance its operations.  If Bluegreen’s pledged receivables facilities terminate or expire and Bluegreen is unable to extend them or replace them with comparable facilities, or if Bluegreen is unable to continue to participate in securitization-type transactions and “warehouse” facilities on acceptable terms, Bluegreen’s liquidity, cash flow and profitability would be materially and adversely affected.  Credit market disruptions have in the past adversely impacted the willingness of banks and other finance companies to provide “warehouse” lines of credit for VOI notes receivable and resulted from time to time in the term securitization market being unavailable. Future credit market disruptions may have similar effects or otherwise make obtaining additional and replacement external sources of liquidity more difficult and costly.



In addition, financing for real estate acquisition and development and the capital markets for corporate debt is cyclical.  While Bluegreen has increased its focus on expanding its fee-based service business and encouraging higher down payments in connection with sales, there is no assurance that these initiatives will enhance Bluegreen’s financial position or otherwise be successful in the long term. 



Bluegreen anticipates that it will continue to seek and use external sources of liquidity, including funds that Bluegreen obtains pursuant to additional borrowings under its existing credit facilities, under credit facilities that Bluegreen may obtain in the future, under securitizations in which Bluegreen may participate in the future or pursuant to other borrowing arrangements, to:

  



Bluegreen’s ability to service or refinance its indebtedness or to obtain additional financing (including its ability to consummate future term securitizations) depends on the credit markets and on Bluegreen’s future performance, which is subject to a number of factors, including the success of Bluegreen’s business, results of operations, leverage, financial condition and business prospects, prevailing interest rates, general economic conditions, the performance of Bluegreen’s receivables portfolio, and perceptions about the vacation ownership and real estate industries.



As of December 31, 2017, Bluegreen had $19.9 million of indebtedness scheduled to become due during 2018.  Historically, much of Bluegreen’s debt has been renewed or refinanced in the ordinary course of business.  However, there is no assurance that Bluegreen will in the future be able to obtain sufficient external sources of liquidity on

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attractive terms, or at all, or otherwise renew, extend or refinance all or any portion of its outstanding debt.  Any of these occurrences may have a material adverse impact on Bluegreen’s liquidity and financial condition.



In addition, Bluegreen has and intends to continue to enter into arrangements with third-party developers pursuant to which it will sell their VOI inventory for a fee. These arrangements enable Bluegreen to generate fees from the marketing and sales services provided, and in certain cases from provisions of management services, without requiring it to fund development and acquisition costs. If these third-party developers are not able to obtain or maintain financing necessary for their development activities or other operations, Bluegreen may not be able to enter into these fee-based arrangements or have access to their VOI inventory when anticipated, which would adversely impact results.



Bluegreen would suffer substantial losses and its liquidity position could be adversely impacted if an increasing number of customers to whom Bluegreen provides financing default on their obligations.



Adverse conditions in the mortgage industry, including credit availability, borrowers’ financial profiles, prepayment rates and other factors, including those outside Bluegreen’s control, may increase the default rates Bluegreen experiences or otherwise negatively impact the performance of its notes receivable. In addition, in recent years, external parties have been discouraging certain borrowers from staying current on their note payments.  Although in many cases Bluegreen may have recourse against a buyer for the unpaid purchase price, certain states have laws that limit Bluegreen’s ability to recover personal judgments against customers who have defaulted on their loans or Bluegreen may determine that the cost of doing so may not be justified.  Historically, Bluegreen has generally not pursued such recourse against its customers.  In the case of Bluegreen’s notes receivable secured by VOIs, if Bluegreen is unable to collect the defaulted amount due, Bluegreen traditionally has terminated the customer’s interest in the Bluegreen Vacation Club and then remarketed the recovered VOI.  Irrespective of Bluegreen’s remedy in the event of a default, Bluegreen cannot recover the marketing, selling and administrative costs associated with the original sale, and such costs generally exceed the cash received by Bluegreen from the buyer at the time of the sale.  In addition, Bluegreen will need to incur such costs again in order to resell the VOI.  Bluegreen updates its estimate of such future losses each quarter, and consequently, the charge against sales in a particular period may be impacted, favorably or unfavorably, by a change in expected losses related to notes originated in prior periods.  In addition, defaults may cause buyers of, or lenders whose loans are secured by, Bluegreen’s VOI notes receivable to reduce the amount of availability or advance rates under receivables purchase and credit facilities, or to result in an increase the interest costs associated with such facilities.  In such an event, the cost of financing may increase, and Bluegreen may not be able to secure replacement or alternative financing on terms acceptable to Bluegreen, if at all, which would adversely affect Bluegreen’s earnings, financial position and liquidity.



As described above, Bluegreen’s VOI notes receivable financing facilities could be adversely affected if a particular VOI note receivable pool fails to meet certain performance ratios, which could occur if the default rate or other credit metrics of the underlying VOI notes receivable deteriorate. In addition, if Bluegreen offers financing to purchasers of VOIs with terms longer than those generally offered in the industry, Bluegreen may not be able to securitize those VOI financing receivables. Bluegreen’s ability to sell securities backed by Bluegreen’s VOI notes receivable depends on the continued ability and willingness of capital market participants to invest in such securities. Asset-backed securities issued in Bluegreen’s term securitization transactions could be downgraded by credit agencies in the future. If a downgrade occurs, Bluegreen’s ability to complete other securitization transactions on acceptable terms or at all could be jeopardized, and Bluegreen could be forced to rely on other potentially more expensive and less attractive funding sources, to the extent available. Similarly, if other operators of vacation ownership products were to experience significant financial difficulties, or if the vacation ownership industry as a whole were to contract, Bluegreen could experience difficulty in securing funding on acceptable terms. The occurrence of any of the foregoing could adversely impact Bluegreen’s business and results, including, without limitation, by reducing the amount of financing Bluegreen is able to provide to VOI purchasers, which in turn may result in a reduction in VOI sales.



In addition, under the terms of Bluegreen’s pledge and receivable sale facilities, Bluegreen may be required, under certain circumstances, to replace receivables or to pay down the loan to within permitted loan-to-value ratios.  Additionally, the terms of Bluegreen’s securitization transactions require Bluegreen to repurchase or replace loans if Bluegreen breached any of the representations and warranties Bluegreen made at the time Bluegreen sold the receivables. These agreements also often include terms providing that, in the event of defaults or delinquencies by customers in excess of stated thresholds, or if other performance thresholds are not met, substantially all of Bluegreen’s cash flow from its retained interest in the receivable portfolios sold will be required to be paid to the parties who purchased the receivables from Bluegreen. 



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Bluegreen's existing indebtedness, or indebtedness that it may incur in the future, could adversely impact its financial condition and results of operations, and the terms of Bluegreen's indebtedness may limit its activities.



Bluegreen's level of debt and debt service requirements have several important effects on Bluegreen's operations.  Significant debt service cash requirements reduce the funds available for operations and future business opportunities and increase Bluegreen's vulnerability to adverse economic and industry conditions, as well as conditions in the credit markets generally. In addition, Bluegreen's leverage position increases its vulnerability to economic and competitive pressures and may limit funds available for acquisitions, working capital, capital expenditures, dividends, and other general corporate purposes. Further, the financial covenants and other restrictions contained in indentures, credit agreements and other agreements relating to Bluegreen's indebtedness require Bluegreen to meet certain financial tests and restrict its ability to, among other things, pay dividends, borrow additional funds, dispose of assets or make investments. If Bluegreen fails to comply with the terms of its debt instruments, such debt may become due and payable immediately, which would have a material adverse impact on Bluegreen's cash position and financial condition. Significant resources may be required to monitor Bluegreen's compliance with its debt instruments (from a quantitative and qualitative perspective), and such monitoring efforts may not be effective in all cases. Bluegreen may also incur substantial additional indebtedness in the future. If new debt or other liabilities are added to its current debt levels, the related risks that it now faces, as described above, could intensify.



To the extent inflationary trends, tightened credit markets or other factors affect interest rates, Bluegreen’s debt service costs may increase. If interest rates increased one percentage point, the effect on interest expense related to Bluegreen’s variable-rate debt would be an annual increase of $2.1 million, based on balances as of December 31, 2017.    



The ratings of third-party rating agencies could adversely impact Bluegreen’s ability to obtain, renew or extend credit facilities, or otherwise raise funds.



Rating agencies from time to time review prior corporate and specific transaction ratings in light of tightened ratings criteria.  In December 2017, Standard & Poor’s Rating Services affirmed Bluegreen’s ‘B+’ credit rating.  Bluegreen’s corporate credit rating is also based, in part, on rating agencies’ speculation about Bluegreen’s potential future debt and dividend levels.  If rating agencies were to downgrade Bluegreen’s corporate credit ratings, Bluegreen’s ability to raise funds on favorable terms, or at all, and Bluegreen’s liquidity, financial condition and results of operations could be adversely impacted. See “Bluegreen would suffer substantial losses and Bluegreen’s liquidity position could be adversely impacted if an increasing number of customers to whom Bluegreen provides financing default on their obligations” above. In addition, if rating agencies downgraded their original ratings on certain bond classes in Bluegreen’s securitizations, holders of such bonds may be required to sell bonds in the marketplace, and such sales could occur at a discount, which could impact the perceived value of the bonds and Bluegreen’s ability to sell future bonds on favorable terms or at all.  While Bluegreen is not aware of any reasonably likely downgrades to its corporate credit rating or the ratings of bond classes in its securitizations, such ratings changes can occur without advance notice.



Bluegreen’s future success depends on its ability to market its products and services successfully and efficiently, and Bluegreen’s marketing expenses have increased and may continue to increase in the future.



As previously described, Bluegreen competes for customers with hotel and resort properties, other vacation ownership resorts and alternative lodging options, including private rentals of homes and apartments or condominium units.  The identification of sales prospects and leads and the marketing of Bluegreen’s products and services to them are essential to Bluegreen’s success. Bluegreen incurs expenses associated with marketing programs in advance of the closing of sales. If Bluegreen’s lead identification and marketing efforts do not yield enough leads or Bluegreen is unable to successfully convert sales leads to sales, Bluegreen may be unable to recover the expense of its marketing programs and systems and its business, operating results and financial condition would be adversely affected. In addition, Bluegreen is currently focusing and has increased its marketing efforts on selling to new customers, which typically involves a relatively higher marketing cost compared to sales to existing owners and therefore has increased and is expected to continue to increase Bluegreen’s sales and marketing expenses.  If Bluegreen is not successful in offsetting the cost increase with greater sales revenue, Bluegreen’s operating results and financial condition would be adversely impacted.  In addition, Bluegreen's marketing efforts are subject to the risk of changing consumer behavior. Changes in consumer behavior may adversely impact the effectiveness of marketing efforts and strategies which Bluegreen has in place, and Bluegreen may not be able to timely and effectively respond to such changes.



Bluegreen generates a significant portion of its new sales prospects and leads through its arrangements with various third parties, including Bass Pro and Choice Hotels. VOI sales to prospects and leads generated by Bluegreen’s marketing arrangement with Bass Pro accounted for approximately 15% and 16% of its VOI sales volume during the years ended December 31, 2017 and 2016, respectively. If this arrangement with BassPro, or any other significant

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marketing arrangement, does not generate a sufficient number of prospects and leads or is terminated or limited and not replaced by another source of sales prospects and leads, Bluegreen may not be able to successfully market and sell its products and services at current sales levels, at anticipated levels or at levels required in order to offset the costs associated with its marketing efforts. On October 9, 2017, Bass Pro raised an issue regarding the computation of the sales commissions paid to it on the sale of VOIs. While Bluegreen believes that the amount paid was consistent with the terms and intent of the parties’ agreements, the resolution of that issue could in the future result in an increase in its marketing costs and adversely impact the Company’s operating results and financial condition. The Company recognized approximately $4.8 million in selling, general and administrative expense related to this matter during the fourth quarter of 2017.  



Bluegreen may not be successful in maintaining or expanding its capital-light business relationships, or its capital-light activities, including fee-based sales and marketing arrangements, and JIT and secondary market sales activities, and such activities may not be profitable, which may have an adverse impact on Bluegreen’s results of operations and financial condition.



Bluegreen offers fee-based marketing, sales, resort management and other services to third-party developers.  Bluegreen has over the last several years continued to expand its capital-light business strategy, which Bluegreen believes enables it to leverage its expertise in sales and marketing, resort management, mortgage servicing, construction management and title services. Bluegreen currently intends to continue its focus on its capital-light business activities as such activities generally produce positive cash flow and typically require less capital investment than Bluegreen’s traditional vacation ownership business. Bluegreen has attempted to structure these activities to cover its costs and generate a profit.  Sales of third party developers’ VOIs must generate sufficient cash to comply with the terms of their financing obligations as well as to pay the fees or commissions due to Bluegreen.  The third party developers may not be able to obtain or maintain financing necessary to meet the developer’s requirements, which could impact Bluegreen's ability to sell the developers’ inventory. While Bluegreen could attempt to utilize other arrangements, including JIT arrangements, where Bluegreen would utilize its receivable credit facilities in order to provide fee-based marketing and sales services, this would reduce the credit otherwise available to Bluegreen and impact profitability.  Bluegreen commenced its capital-light activities largely during the recession in response to poor economic conditions, and Bluegreen’s fee-based and other capital-light business activities in the future may be adversely impacted by changes in economic conditions. While Bluegreen performs fee-based sales and marketing services, Bluegreen sells VOIs in a resort developed by a third party as an interest in the Bluegreen Vacation Club.  This subjects Bluegreen to a number of risks typically associated with selling products developed by others under its own brand name, including litigation risks.  Further, these arrangements may expose Bluegreen to additional risk as it will not control development activities or timing of development completion. If third parties with whom Bluegreen enters into agreements are not able to fulfill their obligations to Bluegreen, the inventory expected to be acquired or marketed and sold on their behalf may not be available when expected or at all, or may not otherwise be within agreed-upon specifications. Further, if these third parties do not perform as expected and Bluegreen does not have access to the expected inventory or ability to obtain access to inventory from alternative sources on a timely basis, its ability to maintain or increase sales levels would be adversely impacted.



Bluegreen also sells VOI inventory through secondary market arrangements which require low levels of capital deployment.  In connection with secondary market sales, Bluegreen acquires VOI inventory from its resorts’ HOAs on a non-committed basis in close proximity to the timing of when Bluegreen intends to sell such VOIs. VOIs purchased from HOAs are typically obtained by the HOAs through foreclosure in connection with maintenance fee defaults and are generally acquired by Bluegreen at a discount. While Bluegreen intends to increase its secondary market sales efforts in the future, Bluegreen may not be successful in doing so, and these efforts may not result in Bluegreen achieving anticipated results.  Further, Bluegreen’s secondary market sale activities may subject Bluegreen to negative publicity, which could adversely impact its reputation and business. 



Bluegreen’s results of operations and financial condition may be materially and adversely impacted if Bluegreen does not continue to participate in exchange networks and other strategic alliances with third parties or if Bluegreen’s customers are not satisfied with the networks in which Bluegreen participates or Bluegreen’s strategic alliances.



Bluegreen believes that its participation in exchange networks and other strategic alliances and its Traveler Plus™ program make ownership of Bluegreen VOIs more attractive by providing owners with the ability to take advantage of vacation experiences in addition to stays at Bluegreen’s resorts. A VOI owner’s participation in the RCI exchange network allows Vacation Club owners to use their points to stay at over 4,300 participating resorts, based upon availability and the payment of a variable exchange fee.  During the year ended December 31, 2017, approximately 8% of Vacation Club owners utilized the RCI exchange network for a stay of two or more nights.  Bluegreen also has

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an exclusive strategic arrangement with Choice Hotels pursuant to which, subject to payments and conditions, certain of Bluegreen’s resorts have been branded as part of Choice Hotels’ Ascend Hotel Collection. For a nominal annual fee and transactional fee, Vacation Club owners may also participate in Bluegreen’s Traveler Plus program, which enables them to use their points to access an additional 44 direct exchange resorts, for other vacation experiences such as cruises. Vacation Club owners can convert their Vacation Club points into Choice Privileges points. Choice Privileges points can be used for stays at Choice Hotels. In addition, Traveler Plus members can directly use their Vacation Club points for stays at Choice Hotels’ Ascend Hotel Collection properties, a network of historic and boutique hotels in the United States, Canada, Scandinavia and Latin America. Bluegreen may not be able to or desire to continue to participate in the RCI or direct exchange networks in the future or maintain or extend its other marketing and strategic networks, alliances and relationships. In addition, these networks, alliances and relationships, and Bluegreen’s Traveler Plus program, may not continue to operate effectively, and its customers may not be satisfied with them. In addition, Bluegreen may not be successful in identifying or entering into new strategic relationships in the future. If any of these events should occur, Bluegreen’s results of operations and financial condition may be materially and adversely impacted.



Bluegreen is subject to certain risks associated with its management of resort properties.



Through management of resorts and ownership of VOIs, Bluegreen is subject to certain risks related to the physical condition and operation of the managed resort properties in its network, including:





Some of these risks may be more significant in connection with the properties for which Bluegreen recently acquired management agreements, particularly those management agreements which were acquired from operators in financial distress. If an uninsured loss or a loss in excess of insured limits occurs as a result of any of the foregoing, Bluegreen may be subject to significant costs.



Additionally, a number of U.S. federal, state and local laws, including the Fair Housing Amendments Act of 1988 and the ADA, impose requirements related to access to and use by disabled persons of a variety of public accommodations and facilities. A determination that managed resorts are subject to, and that they are not in compliance with, these accessibility laws could result in a judicial order requiring compliance, imposition of fines or an award of damages to private litigants. If one of Bluegreen’s managed resorts was required to make significant improvements as a result of non-compliance with these accessibility laws, assessments might be needed to fund such improvements, which additional costs may cause its VOI owners to default on their consumer loans from Bluegreen or cease making required maintenance fee or assessment payments. Also, to the extent that Bluegreen holds interests in a particular resort, it would be responsible for the pro rata share of the costs of such improvements. In addition, any new legislation may impose further burdens or restrictions on property owners with respect to access by disabled persons.



The resort properties that Bluegreen manages are subject to federal, state and local laws and regulations relating to the protection of the environment, natural resources and worker health and safety, including laws and regulations governing and creating liability relating to the management, storage and disposal of hazardous substances and other regulated materials and the cleanup of contaminated sites. The resorts are also subject to various environmental laws and regulations that govern certain aspects of their ongoing operations. These laws and regulations control such things as the nature and volume of wastewater discharges, quality of water supply and waste management practices. To the extent that Bluegreen holds interests in a particular resort, it would be responsible for the pro rata share of losses sustained by such resort as a result of a violation of any such laws and regulations.



In addition, Bluegreen may from time to time have disagreements with VOI owners and HOAs resulting from its provision of management services. Failure to resolve such disagreements may result in litigation. Further, disagreements with HOAs could also result in the loss of management contracts, which would negatively affect Bluegreen’s revenues and results and may also have an adverse impact on its ability to generate sales from existing VOI owners.



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Bluegreen’s management contracts are typically structured as “cost-plus,” with an initial term of three years and automatic one-year renewals. If a management contract is terminated or not renewed on favorable terms or is renegotiated in a manner adverse to Bluegreen, its revenues and cash flows would be adversely affected.



Maintenance fees at Bluegreen’s resorts and/or Vacation Club dues may be required to be increased, which could cause its product to become less attractive and could harm business.



The maintenance fees, special assessments and Vacation Club dues that are levied by HOAs and the Vacation Club on VOI owners may increase as the costs to maintain and refurbish properties, and to keep properties in compliance with Bluegreen’s standards, increase. Increases in such fees, assessments or dues could negatively affect customer satisfaction with Bluegreen’s Vacation Club or otherwise adversely impact VOI sales to both new customers and existing VOI owners.



Bluegreen’s strategic transactions may not be successful and may divert its management’s attention and consume significant resources.



Bluegreen intends to continue its strategy of selectively pursuing complementary strategic transactions. Bluegreen may also purchase management contracts, including from resort operators facing financial distress, and purchase VOI inventory at resorts that it does not manage, with the goal of acquiring sufficient VOI ownership at such a resort to become the manager of that resort. The successful execution of this strategy will depend on Bluegreen’s ability to identify and enter into the agreements necessary to take advantage of these potential opportunities, and to obtain any necessary financing. Bluegreen may not be able to do so successfully. In addition, Bluegreen’s management may be required to devote substantial time and resources to pursue these opportunities, which may impact their ability to manage its operations effectively.



Acquisitions involve numerous additional risks, including: (i) difficulty in integrating the operations and personnel of the acquired business or assets; (ii) potential disruption of ongoing business and the distraction of management from day-to-day operations; (iii) difficulty entering markets in which Bluegreen has limited or no prior experience and in which competitors have a stronger market position; (iv) difficulty maintaining the quality of services that Bluegreen has historically provided across new acquisitions; (v) potential legal and financial responsibility for liabilities of the acquired business or assets; (vi) potential overpayment for the acquired business or assets; (vii) increased expenses associated with completing an acquisition and amortizing any acquired intangible assets; (viii) risks associated with any debt incurred in connection with the financing of the transaction; and (ix) challenges in implementing uniform standards, controls, procedures and policies throughout an acquired business.



Bluegreen is dependent on the managers of its affiliated resorts to ensure that those properties meet its customers’ expectations.



In addition to stays at Bluegreen resorts, Vacation Club owners have access to other resorts and hotels as a result of participation in exchange programs and other strategic alliances. Accordingly, Vacation Club owners have access to resorts that Bluegreen does not manage, own or operate. If the managers of a significant number of those properties were to fail to maintain them in a manner consistent with Bluegreen’s standards of quality, Bluegreen may be subject to customer complaints and its reputation and brand could be damaged. In addition, Bluegreen’s agreements with these resorts or their owners may expire, be terminated or not be renewed, or may be renegotiated in a manner adverse to Bluegreen, and Bluegreen may be unable to enter into new agreements that provide Vacation Club owners with equivalent access to additional resorts, any or all of which could materially adversely impact Bluegreen’s business, operating results and financial condition.



The resale market for VOIs could adversely affect Bluegreen’s business.



Based on Bluegreen’s experience at its resorts and at resorts owned by third parties, Bluegreen believes that resales of VOIs in the secondary market generally are made at net sales prices below the original customer purchase prices.  The relatively lower sales prices are partly attributable to the high marketing and sales costs associated with the initial sales of such VOIs.  Accordingly, the initial purchase price of a VOI may be less attractive to prospective buyers, and Bluegreen competes with buyers who seek to resell their VOIs.  While VOI resale clearing houses or brokers currently do not have a material impact on Bluegreen’s business, the availability of resale VOIs at lower prices, particularly if an organized and liquid secondary market develops, could adversely affect Bluegreen’s level of sales and sales prices, which in turn would adversely affect Bluegreen’s business, financial condition and results of operations.



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Bluegreen is subject to the risks of the real estate market and the risks associated with real estate development, including a decline in real estate values and a deterioration of other conditions relating to the real estate market and real estate development.



Real estate markets are cyclical in nature and highly sensitive to changes in national and regional economic conditions, including:





A deterioration in general economic conditions or in the real estate market would have a material adverse effect on Bluegreen’s business.



Bluegreen expects to seek to acquire more real estate inventory in the future, and the availability of land for development of resort properties at favorable prices will be critical to Bluegreen’s profitability and the ability to cover its significant selling, general and administrative expenses, cost of capital and other expenses.  If Bluegreen is unable to acquire such land or resort properties at a favorable cost, Bluegreen’s results of operations may be materially, adversely impacted. The profitability of Bluegreen’s real estate development activities is also impacted by the cost of construction, including the costs of materials and labor and other services. Should the cost of construction materials and services rise, the ultimate cost of Bluegreen’s future resorts inventory when developed could increase and have a material, adverse impact on Bluegreen’s results of operations. Bluegreen is also exposed to other risks associated with development activities, including, without limitation:





In addition, the third-party developers from whom Bluegreen sources VOI inventory as part of its capital-light business strategy are exposed to such development-related risks and, therefore, the occurrence of such risks may adversely impact its ability to acquire VOI inventory from them when expected or at all.



Environmental liabilities, including claims with respect to mold or hazardous or toxic substances, could have a material adverse impact on Bluegreen’s financial condition and operating results.



Under various federal, state and local laws, ordinances and regulations, as well as common law, Bluegreen may be liable for the costs of removal or remediation of certain hazardous or toxic substances, including mold, located on, in or emanating from property that Bluegreen owns, leases or operates, as well as related costs of investigation and property damage at such property.  These laws often impose liability without regard to whether Bluegreen knew of, or was responsible for, the presence of the hazardous or toxic substances. The presence of such substances, or the failure to properly remediate such substances, may adversely affect Bluegreen’s ability to sell or lease its property or to borrow money using such property or receivables generated from the sale of such property as collateral.  Noncompliance with environmental, health or safety requirements may require Bluegreen to cease or alter operations at one or more of its properties.  Further, Bluegreen may be subject to common law claims by third parties based on damages and costs resulting from violations of environmental regulations or from contamination associated with one or more of Bluegreen’s properties. 

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Bluegreen’s insurance policies may not cover all potential losses.



Bluegreen maintains insurance coverage for liability, property and other risks with respect to its operations and activities. While Bluegreen has comprehensive property and liability insurance policies with coverage features and insured limits that it believes are customary, market forces beyond Bluegreen’s control may limit the scope of the insurance coverage it can obtain or ability to obtain coverage at reasonable rates. The cost of insurance may increase and coverage levels may decrease, which may affect Bluegreen’s ability to maintain customary insurance coverage and deductibles at acceptable costs. There is a limit as well as various sub-limits on the amount of insurance proceeds Bluegreen will receive in excess of applicable deductibles. If an insurable event occurs that affects more than one of its properties, the claims from each affected property may be considered together per policy provisions to determine whether the per occurrence limit, annual aggregate limit or sub-limits, depending on the type of claim, have been reached. If the limits or sub-limits are exceeded, each affected property may only receive a proportional share of the amount of insurance proceeds provided for under the policy. Further, certain types of losses, generally of a catastrophic nature, such as earthquakes, hurricanes and floods, terrorist acts, and certain environmental matters, may be outside the general coverage limits of Bluegreen’s policies, subject to large deductibles, deemed uninsurable or too cost-prohibitive to justify insuring against. In addition, in the event of a substantial loss, the insurance coverage Bluegreen carries may not be sufficient to pay the full market value or replacement cost of the affected resort or in some cases may not provide a recovery for any part of a loss. As a result, Bluegreen could lose some or all of the capital it has invested in a property, as well as the anticipated future marketing, sales or revenue opportunities from the property. Further, Bluegreen could remain obligated under guarantees or other financial obligations related to the property despite the loss of product inventory, and its VOI owners could be required to contribute toward deductibles to help cover losses.



Adverse outcomes in legal or other regulatory proceedings, including claims of non-compliance with applicable regulations or development-related defects could adversely affect Bluegreen’s financial condition and operating results.



In the ordinary course of business, Bluegreen is subject to litigation and other legal and regulatory proceedings, which result in significant expenses and devotion of time. In addition, litigation is inherently uncertain, and adverse outcomes in the litigation and other proceedings to which Bluegreen is or may be subject could adversely affect its financial condition and operating results. In addition, liabilities related to Bluegreen’s former Bluegreen Communities business that were not assumed by Southstar Development Partners, Inc. (“Southstar”) in connection with Southstar’s purchase of substantially all of the assets which comprised Bluegreen Communities during May 2012, including those relating to Bluegreen Communities’ operations prior to the closing of the transaction, remain Bluegreen’s responsibility.



Bluegreen engages third-party contractors to construct its resorts. Bluegreen also historically engaged third-party contractors to develop the communities within its former Bluegreen Communities business.  However, Bluegreen’s customers may assert claims against Bluegreen for construction defects or other perceived development defects, including, without limitation, structural integrity, the presence of mold as a result of leaks or other defects, water intrusion, asbestos, electrical issues, plumbing issues, road construction, water and sewer defects and defects in the engineering of amenities. In addition, certain state and local laws may impose liability on property developers with respect to development defects discovered in the future.  Bluegreen could have to accrue a significant portion of the cost to repair such defects in the quarter when such defects arise or when the repair costs are reasonably estimable.   



Costs associated with litigation, including claims for development-related defects, and the outcomes thereof could adversely affect Bluegreen’s liquidity, financial condition and operating results.



Failure to maintain the integrity of Bluegreen’s internal or customer data could result in faulty business decisions or operational inefficiencies, damage Bluegreen's reputation and/or subject Bluegreen to costs, fines, or lawsuits.



Bluegreen collects and retains large volumes of internal and customer data, including social security numbers, credit card numbers and other personally identifiable information of its customers in various internal information systems and information systems of its service providers. Bluegreen also maintains personally identifiable information about its employees. The integrity and protection of that customer, employee and company data is critical to Bluegreen and faulty decisions could be made if that data is inaccurate or incomplete. Bluegreen’s customers and employees also have a high expectation that Bluegreen and its service providers will adequately protect their personal information. The regulatory environment as well as the requirements imposed on Bluegreen by the payment card industry surrounding information, security and privacy is also increasingly demanding, in both the United States and other jurisdictions in which Bluegreen operates. Bluegreen’s systems may be unable to satisfy changing regulatory and

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payment card industry requirements and employee and customer expectations, or may require significant additional investments or time in order to do so.



Bluegreen’s information systems and records, including those it maintains with its service providers, may be subject to security breaches, cyber attacks, system failures, viruses, operator error or inadvertent releases of data. A significant theft, loss, or fraudulent use of customer, employee or company data maintained by Bluegreen or by a service provider could adversely impact Bluegreen’s reputation and could result in remedial and other expenses, fines or litigation. A breach in the security of Bluegreen’s information systems or those of its service providers could lead to an interruption in the operation of Bluegreen’s systems, resulting in operational inefficiencies and a loss of profits.



The proliferation and global reach of social media continues to expand rapidly and could cause Bluegreen to suffer reputational harm. The continuing evolution of social media presents new challenges and requires it to keep pace with new developments, technology and trends. Negative posts or comments about Bluegreen, the properties it manages or its brands on any social networking or user-generated review website, including travel and vacation property websites, could affect consumer opinions of Bluegreen and its products, and Bluegreen cannot guarantee that it will timely or adequately redress such instances. Inadequate or failed technologies could lead to interruptions in Bluegreen’s operations, which may materially adversely affect its business, financial position, results of operations or cash flows.



In addition, conversions to new information technology systems require effective change management processes and may result in cost overruns, delays or business interruptions. If Bluegreen’s information technology systems are disrupted, become obsolete or do not adequately support its strategic, operational or compliance needs, its business, financial position, results of operations or cash flows may be adversely affected.



Bluegreen’s technology requires updating, the cost involved in updating the technology may be significant, and the failure to keep pace with developments in technology could impair Bluegreen's operations or competitive position.



The vacation ownership and hospitality industries require the utilization of technology and systems, including technology utilized for sales and marketing, mortgage servicing, property management, brand assurance and compliance, and reservation systems. This technology requires continuous updating and refinements, including technology required to remain competitive and to comply with the legal requirements such as privacy regulations and requirements established by third parties. Bluegreen is taking steps to update its information technology platform, which has required, and is likely to continue to require, significant capital expenditures. Older systems which have not yet been updated may increase the risk of operational inefficiencies, financial loss and non-compliance with applicable legal and regulatory requirements, and Bluegreen may not be successful in updating such systems in the time frame or at the cost anticipated. Further, as a result of the rapidly changing technological environment, systems which Bluegreen has put in place or expects to put in place in the near term may become outdated, requiring new technology, and Bluegreen may not be able to replace those systems as quickly as its competition or within budgeted costs and time frames.  Further, Bluegreen may not achieve the benefits that may have been anticipated from any new technology or system.



Bluegreen’s intellectual property rights, and the intellectual property rights of its business partners, are valuable, and the failure to protect those rights could adversely affect its business.



Bluegreen’s intellectual property rights, including existing and future trademarks, trade secrets and copyrights, are and will continue to be valuable and important assets of its business. Bluegreen believes that its proprietary technology, as well as its other technologies and business practices, are competitive advantages and that any duplication by competitors would harm Bluegreen’s business. Measures taken to protect Bluegreen’s intellectual property may not be sufficient or effective. Additionally, intellectual property laws and contractual restrictions may not prevent misappropriation of Bluegreen’s intellectual property. Finally, even if Bluegreen is able to successfully protect its intellectual property, others may develop technologies that are similar or superior to Bluegreen’s technology. Bluegreen also generates a significant portion of new sales prospects and leads through arrangements with third parties, including Bass Pro. The failure by these third parties to protect their intellectual property rights could also harm Bluegreen’s business.



The loss of the services of Bluegreen’s key management and personnel could adversely affect its business.



Bluegreen’s ability to successfully implement its business strategy will depend on its ability to attract and retain experienced and knowledgeable management and other professional staff, and Bluegreen may not be successful in doing so. If efforts to retain and attract key management and other personnel are unsuccessful, Bluegreen’s business, prospects, results of operations and financial condition may be materially and adversely impacted.

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BBX Capital and its subsidiaries are subject to environmental laws related to their real estate activities and the cost of compliance could adversely affect our businesses.



As current or previous owners or operators of real property, BBX Capital and its subsidiaries, including Bluegreen, may be liable under federal, state and local environmental laws, ordinances and regulations for the costs of removal or remediation of hazardous or toxic substances on, under or in the property. These laws often impose liability whether or not we knew of, or were responsible for, the presence of such hazardous or toxic substances. The cost of investigating, remediating or removing such hazardous or toxic substances may be substantial.



In connection with the sale of BankAtlantic to BB&T during July 2012, we acquired nonperforming loans and foreclosed real estate, and our results of operations and financial condition may be adversely affected if these criticized assets are monetized below their current book values.



As a result of the BankAtlantic Sale, we maintain and manage a portfolio of foreclosed real estate and non-performing loans. As a consequence, our financial condition and results of operations will be dependent on our ability to successfully manage and monetize these legacy assets. Further, our loan portfolio and real estate may not be easily salable in the event we decide to liquidate an asset through a sale transaction. If the legacy assets are not monetized at or near the current book values ascribed to them, or if these assets are liquidated for amounts less than book value, our financial condition and results of operations would be adversely affected.  Because a majority of these legacy assets do not generate income on a regular basis, we do not expect to generate significant revenue or income with respect to these assets until such time as an asset is monetized through repayments or we consummate transactions involving the sale, joint venture or development of the underlying real estate or investments.



Some of our operations are through unconsolidated joint ventures with unaffiliated third parties, and we may be adversely impacted by a joint venture partner’s failure to fulfill its obligations. 



By entering into joint ventures, we may be successful in reducing the amount we invest in the ownership and development of real estate properties. However, joint venture partners may become financially unable or unwilling to fulfill their obligations under the joint venture agreements. Most joint ventures borrow money to help finance their activities, and although recourse on the loans is generally limited to the managing members, joint ventures and their properties, we have in some cases and may in the future provide ongoing financial support or guarantees. If joint venture partners do not meet their obligations to the joint venture, we may be required to make significant expenditures, which may have an adverse effect on our operating results or financial condition. We have in the past and may in the future hold investments in a number of different joint ventures with the same or related developers, which could increase the adverse effects of any failures by such developer to fulfil its obligations.



Investments by BBX Capital’s real estate division in real estate developments directly or through joint ventures expose us to market and economic risks inherent in the real estate construction and development industry.



The real estate construction and development industry is highly competitive and subject to numerous risks which in many cases are beyond management’s control. The success of our investments in real estate developments is dependent on many factors, including:



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Any of these factors could give rise to delays in the start or completion of a project, increase the cost of developing a project, or could result in reduced prices and values for BBX Capital’s developments, including developments underlying its joint venture investments.  



A significant portion of our loans and real estate assets are located in Florida, and economic conditions in the Florida real estate market could adversely affect our earnings and financial condition.



The legacy assets retained by us in the BankAtlantic Sale and the real estate investments made by us are primarily in Florida, and adverse changes to the Florida economy or the real estate market may negatively impact our earnings and financial condition. Our real estate investment business is primarily concentrated in Florida. As a result, we are exposed to geographic risks of high unemployment rates, declines in the housing industry and declines in the real estate market in Florida. Adverse changes in laws and regulations ‘in Florida would have a negative impact on our revenues, financial condition and business. Declines in the Florida housing markets may negatively impact the credit performance of our loans and result in significant asset impairments. Further, the State of Florida is subject to the risks of natural disasters, such as tropical storms and hurricanes, which may disrupt our operations, adversely impact the ability of our borrowers to timely repay their loans, adversely impact the value of any collateral securing loans and our portfolio of real estate, or otherwise have an adverse effect on our results of operations. The severity and impact of tropical storms, hurricanes and other weather related events are unpredictable.



Renin’s sales are concentrated with two significant customers, and there is significant competition in the industry.  



A significant amount of Renin’s sales are to big-box home centers. These home centers in many instances have significant negotiating leverage with their vendors, including Renin, and are able to affect the prices of the products sold and the terms and conditions of conducting business with them.  These home centers may also reduce the number of vendors they purchase from or make significant changes in their volume of purchases. Although homebuilders, dealers and other retailers represent other channels of distribution for Renin’s products, the loss of a home center customer or reduced sales volume at any of these home centers would have a material adverse effect on Renin’s business. Further, Renin has substantial competition from overseas manufacturers of products similar to those sold by Renin.



A significant portion of Renin’s business relies on home improvement and new home construction activity, both of which are cyclical and outside of management’s control.



A significant portion of Renin’s business is dependent on the levels of home improvement activity, including spending on repair and remodeling projects, and new home construction activity. Macroeconomic conditions, including consumer confidence levels, fluctuations in home prices, unemployment and underemployment levels, interest rates, regulatory initiatives, and the availability of home equity loans and mortgage financing affect both discretionary spending on home improvement projects as well as new home construction activity. Adverse changes in these factors or uncertainty regarding these macroeconomic conditions could result in a decline in spending on home improvement projects and a decline in demand for new home construction, both of which could adversely affect Renin’s results of operations.



The operating results of Renin and BBX Sweet Holdings would be negatively impacted if they experience increased commodity costs or a limited availability of commodities.



Our middle market operating businesses purchase various commodities to manufacture products, including steel, aluminum, glass and mirror in the case of Renin, and sugar and cocoa in the case of BBX Sweet Holdings. Fluctuations in the availability and prices of these commodities could increase the cost to manufacture products. Further, increases in energy costs could increase production costs as well as transportation costs, each of which could negatively affect their operating results.  Renin’s and BBX Sweet Holdings’ existing arrangements with customers, competitive considerations and the relative negotiating power and resistance of home center customers and big-box retailers to price increases make it difficult to increase selling prices to absorb increased production costs. If Renin and BBX Sweet Holdings are not able to increase the prices of its products or achieve other cost savings or productivity improvements to offset any increased commodity and production costs, our operating results could be negatively impacted. Many of the raw materials purchased by Renin and BBX Sweet Holdings are sourced from China, Mexico

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and other countries.  Changes in United States trade practices, or taxes levied on these imports, could significantly impact the results of these operating companies.



Market demand for chocolate and candy products could decline.



BBX Sweet Holdings and its acquired businesses operate in highly competitive markets and compete with larger companies that have greater resources. The success of these businesses is impacted by many factors, including the following:





A decline in market demand for chocolate and candy products could negatively affect operating results.



BBX Sweet Holdings may experience product recalls or product liability claims.



Selling products for human consumption involves inherent legal and other risks, including product contamination, spoilage, product tampering, allergens, or other adulteration. BBX Sweet Holdings could decide or be required to destroy inventory, recall products or lose sales in connection with contamination, tampering, adulteration or other deficiencies. These events could result in significant losses and may damage BBX Sweet Holdings’ reputation, and discourage consumers from buying products, or cause production and delivery disruptions which would adversely affect BBX Sweet Holdings’ financial condition and results of operations.  BBX Sweet Holdings may also incur losses if products cause injury, illness or death. A significant product liability claim may adversely affect both reputation and profitability, even if the claim is unsuccessful.



FFTRG operations require ongoing compliance with its area development and franchise agreements with MOD.



The Company’s area development agreement with MOD provides the Company with the exclusive right to open MOD franchised pizza restaurant locations in the state of Florida. The agreement requires the Company to open its restaurant locations based on a predetermined development schedule, and failure to comply with the schedule gives MOD the right to terminate the agreement. In connection with such a termination, the Company will have no right to open additional MOD franchised pizza restaurant locations, and MOD may grant franchise rights to competitors in the state of Florida. As a result, to remain compliant with the development schedule, the Company may decide to develop restaurants in less desirable locations. Furthermore, if the Company lost its exclusive development rights, our inability to open additional locations could prevent us from scaling our infrastructure and operations, and our existing locations may face increased competition from additional MOD locations.



In addition, the Company’s franchise agreements with MOD require the Company to comply with various operating programs designed and established by MOD. These programs include the adoption of price discounts and promotions, the implementation of menu changes, and the funding of various ongoing operating expenses and capital expenditures, including the requirement to periodically remodel restaurant locations.



These requirements and the related risks of compliance could ultimately have an adverse effect on the operating results of the Company’s MOD franchise operations.



Information technology failures and data security breaches could harm our business. 



The Company relies on information technology (IT) systems, including Internet sites, data hosting facilities and other hardware and platforms, some of which are hosted by third parties. These IT systems, like those of most companies, may be vulnerable to a variety of interruptions, including, but not limited to, natural disasters, telecommunications failures, hackers, and other security issues. Moreover, the Company’s computer systems, like those of most companies, may become subject to computer viruses or other malicious codes, and to cyber or phishing-attacks. Although administrative and technical controls have been implemented which attempt to minimize the risk of cyber

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incidents, computer intrusion efforts are becoming increasingly sophisticated, and any enhanced controls installed might be breached. If the IT systems cease to function properly, the Company could suffer interruptions in its operations. If the cyber-security is breached, unauthorized persons may gain access to our proprietary or confidential information, including information about borrowers, employees or investments. This could require the Company to incur significant costs to comply with legally required protocols and to repair or restore the security of its systems.



Substantial sales of BBX Capital’s Class A Common Stock or Class B Common Stock could adversely affect the market prices of such securities.



Substantial sales of BBX Capital’s Class A Common Stock or Class B Common Stock, including sales of shares by controlling shareholders and management, could adversely affect the market prices of such securities. Management has in the past and may in the future enter into Rule 10b5-1 plans pursuant to which a significant number of shares are sold into the open market.



Alan B. Levan and John E. Abdo's control position may adversely affect the market price of BBX Capital's Class A Common Stock and Class B Common Stock.



Alan B. Levan, the Chairman and Chief Executive Officer of BBX Capital, and John E. Abdo, the Vice Chairman of BBX Capital, collectively beneficially own shares of BBX Capital’s Class A Common Stock and Class B Common Stock representing approximately 77% of the general voting power of BBX Capital. In addition, each of Mr. Alan Levan and Mr. Abdo has been granted restricted securities of BBX Capital which are scheduled to vest over time. Further, Mr. Alan Levan and Mr. Abdo are parties to an agreement pursuant to which Mr. Alan Levan has agreed to vote his shares of BBX Capital’s Class B Common Stock in favor of the election of Mr. Abdo to BBX Capital’s board of directors for so long as he is willing and able to serve as a director of BBX Capital, and Mr. Abdo has agreed to vote the shares of BBX Capital’s Class B Common Stock he owns in the same manner that Mr. Alan Levan votes his shares of BBX Capital’s Class B Common Stock. Mr. Abdo has also agreed, subject to certain exceptions, not to transfer certain of his shares of BBX Capital’s Class B Common Stock and to obtain the consent of Mr. Alan Levan prior to the conversion of certain of his shares of BBX Capital’s Class B Common Stock into shares of BBX Capital’s Class A Common Stock. Because BBX Capital’s Class A Common Stock and Class B Common Stock vote as a single class on most matters, Mr. Alan Levan and Mr. Abdo effectively have the voting power to elect the members of BBX Capital’s board of directors and to control the outcome of any other vote of BBX Capital’s shareholders, except in those limited circumstances where Florida law mandates that the holders of BBX Capital’s Class A Common Stock vote as a separate class. Mr. Alan Levan’s and Mr. Abdo’s control position may have an adverse effect on the market price of BBX Capital’s Class A Common Stock and Class B Common Stock. In addition, their interests may conflict with the interests of BBX Capital’s other shareholders.



Provisions in BBX Capital's Amended and Restated Articles of Incorporation and Bylaws, as well as BBX Capital's shareholder rights plan, may make it difficult for a third party to acquire BBX Capital and could impact the price of BBX Capital's Class A Common Stock and Class B Common Stock.



BBX Capital's Amended and Restated Articles of Incorporation and Bylaws contain provisions that could delay, defer or prevent a change of control of BBX Capital or its management. These provisions could make it more difficult for shareholders to elect directors and take other corporate actions. As a result, these provisions could limit the price that investors are willing to pay in the future for shares of BBX Capital's Class A Common Stock or Class B Common Stock. These provisions include:





In addition, BBX Capital’s rights agreement, which was adopted and is designed to preserve certain tax benefits available to BBX Capital, may have an anti-takeover effect because the rights agreement provides a deterrent to investors from acquiring a 5% or greater ownership interest in BBX Capital’s Class A Common Stock and Class B Common Stock.



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Holders of BBX Capital’s Class A Common Stock and Class B Common Stock may not receive dividends in the amounts anticipated, when anticipated, or at all.



During each of March 2017, June 2017, September 2017 and December 2017, BBX Capital’s board of directors declared a cash dividend of $0.0075 per share on BBX Capital’s Class A Common Stock and Class B Common Stock. BBX Capital has indicated its intention to declare regular quarterly dividends on its Class A Common Stock and Class B Common Stock. However, future dividends are subject to approval and declaration by BBX Capital’s board of directors and, accordingly, BBX Capital may not make dividend payments in the future, whether in the amount anticipated, on a regular basis or as anticipated, or at all. The payment of dividends, if any, by BBX Capital will depend on many factors considered by its board of directors, including, without limitation, our financial condition and results of operations, liquidity requirements, market opportunities, and contractual constraints. Further, over time, the Company’s cash needs may change significantly from its current needs, which could affect whether BBX Capital pays dividends and the amount of any dividends it may pay in the future. The terms of BBX Capital’s indebtedness may also restrict it from paying cash dividends on its stock under certain circumstances. In addition, BBX Capital pays regular quarterly cash dividends of $187,500 with respect to its outstanding 5% Cumulative Preferred Stock. BBX Capital may not pay or set apart for payment any dividend or other distribution (other than a dividend or distribution payable solely in common stock) on its Class A Common Stock or Class B Common Stock until such time as all accrued and unpaid dividends on BBX Capital’s 5% Cumulative Preferred Stock have been or contemporaneously are declared or paid and a sum is set apart sufficient for payment of such accrued and unpaid dividends.



The provisional tax impacts resulting from the Tax Cuts and Jobs Act are based on interpretations and assumptions the Company has made. Any changes in interpretations and assumptions or the issuance of additional regulatory guidance may have a material adverse impact on our tax rate in fiscal years 2018 and beyond.



On December 22, 2017, U.S. federal tax legislation, commonly referred to as the Tax Cuts and Jobs Act (the “Tax Reform Act”), was signed into law, significantly changing the U.S. Internal Revenue Code. These changes include, among other things, lowering the corporate income tax rate, subjecting certain future foreign subsidiary earnings, whether or not distributed, to U.S. tax under a Global Intangible Low-Taxed Income provision, imposing a new alternative “Base Erosion and Anti-Abuse Tax” on U.S. corporations that limits deductions for certain amounts payable to foreign affiliates, imposing significant additional limitations on the deductibility of interest payable to related and unrelated lenders, further limiting deductible executive compensation, and imposing a one-time repatriation tax on deemed repatriated earnings of foreign subsidiaries through the end of 2017. We continue to analyze how the Tax Reform Act may impact our results of operations.  The SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed in reasonable detail to complete the accounting for certain income tax effects of the Tax Reform Act. The Company has recognized the provisional tax impacts related to the revaluation of deferred tax assets and liabilities and included these amounts in its consolidated financial statements for the year ended December 31, 2017. The ultimate impact may differ from these provisional amounts, possibly materially, due to, among other things, additional analysis, changes in interpretations and assumptions the Company has made, additional regulatory guidance that may be issued, and actions the Company may take as a result of the Tax Reform Act. This continued analysis and resulting uncertainty, along with many of the changes effected pursuant to the Tax Reform Act, may have an adverse or volatile effect on our tax rate in fiscal years 2018 and beyond, thereby affecting our results of operations. 



There are inherent uncertainties involved in estimates, judgments and assumptions used in the preparation of financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Any changes in estimates, judgments and assumptions used could have a material adverse effect on our financial position and operating results.



The consolidated financial statements included in the periodic reports we file with the SEC, including this Annual Report on Form 10-K, are prepared in accordance with GAAP. The preparation of financial statements in accordance with GAAP involves making estimates, judgments and assumptions that affect reported amounts of assets (including goodwill and other intangible assets), liabilities and related reserves, revenues, expenses and income. This includes estimates, judgments and assumptions for assessing the amortization/accretion of purchase accounting fair value differences and the impairment of goodwill and other intangible assets pursuant to applicable accounting guidance. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are often not readily apparent from other sources. However, estimates, judgments and assumptions can be highly uncertain and are subject to change in the future, and our estimates, judgments and assumptions may prove to be incorrect and our actual results may differ from these estimates under different assumptions or conditions.

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If any estimates, judgments or assumptions change in the future, or our actual results differ from our estimates or assumptions, we may be required to record additional expenses or impairment charges, which would be recorded as a charge against our earnings and could have a material adverse impact on our financial condition and operating results.  Our goodwill was tested for impairment on December 31, 2017 (annual testing date) and the goodwill assigned to one of BBX Sweet Holdings reporting units was determined to be impaired.  The goodwill assigned to another BBX Sweet Holdings reporting unit was determined not to be impaired.  If BBX Sweet Holdings’ reporting units do not meet expectations or if there is a downturn in the confectionery industry, we may recognize goodwill impairment charges in future periods.



Unexpected events, such as natural disasters, severe weather and terrorist activities, may disrupt the Company’s operations and increase our costs.



The occurrence of one or more unexpected events, including tsunamis, hurricanes, earthquakes, floods and other forms of severe weather or terrorist activities in countries or regions in which our assets, suppliers or our operating businesses are located could adversely affect our operations and financial performance.



Natural disasters, acts or threats of war or terrorism, or other unexpected events could result in temporary or long-term disruption in the delivery or supply of necessary raw materials and component products from suppliers, which would disrupt production capabilities and likely increase our cost of doing business.



Legal proceedings and the impact of any finding of liability or damages could adversely impact us and our financial condition and operating results.



BBX Capital and its subsidiaries have in the past and may in the future be subject to legal proceedings, including numerous legal proceedings against Bluegreen with respect to its operations. The impact of any finding of liability or damages could adversely impact the Company’s financial condition and operating results and the costs of defending pending or threatened legal proceedings could be significant.



The loss of the services of key management and personnel could adversely affect the Company’s business.



The Company’s ability to successfully implement its business strategy will depend on the ability to attract and retain experienced and knowledgeable management and other professional staff. If the Company is unable to retain and motivate its existing employees and efforts to retain and attract key management and other personnel are unsuccessful, the Company’s results of operations and financial condition may be materially and adversely impacted.









 

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ITEM 1B.  UNRESOLVED STAFF COMMENTS





None.









ITEM 2.  PROPERTIES





The principal executive office of the Company is located at 401 East Las Olas Boulevard, Suite 800, Fort Lauderdale, Florida, 33301, and is occupied under a lease with an expiration date of June 30, 2021. The Company has the right to renew the terms of the lease for two additional terms of five years commencing as of the expiration date. 



Bluegreen’s principal executive office is located at 4960 Conference Way North, Suite 100, Boca Raton, Florida 33431, and consists of approximately 120,838 square feet of leased space with an expiration date of December 31, 2023. At December 31, 2017, Bluegreen also maintained sales offices at or near 23 of its resorts as well as regional administrative offices in Orlando, Florida and Indianapolis, Indiana. For information regarding Bluegreen’s resort properties, that are part of the Bluegreen Vacation Club, please see Item 1 Business —Products – Vacation Club Resorts.



IT’SUGAR’s principal executive office is located at 3155 Southwest 10th Street, Deerfield, Florida and is occupied under a lease with an expiration date of October 31, 2019. IT’SUGAR leases 95 retail locations in 26 states and Washington DC, with lease expirations from 2018 to 2030.  The retail leases typically have a 10 year original term.



Renin’s principal executive office is located at 110 Walker Drive, Brampton, Ontario and is occupied under a lease with an expiration date of December 31, 2024. Renin leases its manufacturing facilities in the United States and Canada which have lease expiration dates of December 31, 2019 and December 31, 2024, respectively.



BBX Sweet Holdings leases the following manufacturing facilities in Utah and Florida and retail locations in Florida:





BBX Sweet Holdings also owns a chocolate manufacturing facility located at 5190 Lake Worth Road, Greenacres, Florida. The facility is comprised of a 4,000 square foot office and store front area and an 11,526 square foot manufacturing area. 



FFTRG has executed the following retail leases to operate MOD Super-Fast Pizza restaurants in Florida:





These retail leases typically have a 10 year term with the right to renew the terms of the lease for two additional terms of five years commencing as of the expiration date.





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ITEM 3.  LEGAL PROCEEDINGS





In the ordinary course of business, BBX Capital and its subsidiaries are parties to lawsuits as plaintiff or defendant involving its operations and activities. Although BBX Capital and its subsidiaries believe that they have meritorious defenses in all current legal actions, the outcome of litigation and regulatory matters and timing of ultimate resolution are inherently difficult to predict and uncertain. Set forth below are descriptions of material pending legal proceedings.



In the ordinary course of business, Bluegreen becomes subject to claims or proceedings from time to time relating to the purchase, sale, marketing, or financing of VOIs or Bluegreen’s other business activities.  Bluegreen is also subject to certain matters relating to the Bluegreen Communities’ business, substantially all of the assets of which were sold by Bluegreen on May 4, 2012. Additionally, from time to time in the ordinary course of business, Bluegreen becomes involved in disputes with existing and former employees, vendors, taxing jurisdictions and various other parties and Bluegreen receives individual consumer complaints, as well as complaints received through regulatory and consumer agencies, including Offices of State Attorneys General. Bluegreen takes these matters seriously and attempts to resolve any such issues as they arise. 





BBX Capital Litigation



Shiva Stein, on behalf of herself and all others similarly situated, v. BBX Capital Corp., John E. Abdo, Norman H. Becker, Steven M. Coldren, Willis N. Holcombe, Jarett S. Levan, Anthony P. Segreto, Charlie C. Winningham, II, BFC Financial Corporation and BBX Merger Subsidiary LLC, Case No. CACE16014713, Circuit Court of the 17th Judicial Circuit in and for Broward County, Florida.



On August 10, 2016, Shiva Stein filed a lawsuit against the Company, BBX Merger Sub, LLC (“Merger Sub”), BCC and the members of BCC’s board of directors, which seeks to establish a class of BCC’s shareholders and challenges the Merger between BCC and BBX Capital (“the Merger”). The plaintiff asserts that the Merger consideration undervalues BCC and is unfair to BCC’s public shareholders, that the sales process was unfair and that BCC’s directors breached their fiduciary duties of care, loyalty and candor owed to the public shareholders of BCC because, among other reasons, they failed to take steps to maximize the value of BCC to its public shareholders and instead diverted consideration to themselves. The lawsuit also alleges that BBX Capital, as the controlling shareholder of BCC, breached its fiduciary duties of care, loyalty and candor owed to the public shareholders of BCC by utilizing confidential, non-public information to formulate the Merger consideration and not acting in the best interests of BCC’s public shareholders. In addition, the lawsuit includes a cause of action against BCC, the Company and Merger Sub for aiding and abetting the alleged breaches of fiduciary duties. The lawsuit requested that the court grant an injunction blocking the proposed Merger or, if the proposed Merger is completed, rescind the transaction or award damages as determined by the court.  On September 15, 2016, the Defendants filed a Motion to Dismiss the amended complaint. On November 21, 2016, the Court issued an order granting the Motion to Dismiss with prejudice. Plaintiff appealed the Court’s order dismissing the amended complaint to the Fourth District Court of Appeals, and on January 9, 2018, the Fourth District of Appeals held oral argument on the appeal. The Company believes that the appeal is without merit and intends to continue vigorously defending the action.





Bluegreen Litigation



“Cease and Desist” Letters



Commencing in 2015, it came to Bluegreen’s attention that its collection efforts with respect to its VOI notes receivable were being impacted by a then emerging, industry-wide trend involving the receipt of “cease and desist” letters from attorneys purporting to represent certain VOI owners.  Following receipt of these letters, Bluegreen is unable to contact the owners unless allowed by law. Bluegreen believes these attorneys have encouraged such owners to become delinquent and ultimately default on their obligations and that such actions and Bluegreen’s inability to contact the owners are a primary contributor to the increase in its annual default rates.  Bluegreen’s average annual default rates have increased from 6.9% in 2015 to 8.5% in 2017. Bluegreen also estimates that approximately 9.3% of the total delinquencies on its VOI notes receivable as of December 31, 2017 related to VOI notes receivable subject to these letters.  Bluegreen has in a number of cases pursued, and may in the future pursue, legal action against the VOI owners.



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Whitney Paxton and Jeff Reeser, on behalf of themselves and all others similarly situated, v. Bluegreen Vacations Unlimited, Inc., Phillip Hicks and Todd Smith, Case No. 3:16-CV-523-HSM-HBG, United States District Court, Eastern District of Tennessee at Knoxville



On August 24, 2016, Whitney Paxton and Jeff Reeser filed a lawsuit against Bluegreen Vacations Unlimited, Inc. (“BVU”), a wholly-owned subsidiary of Bluegreen, and certain employees of BVU (collectively, the “Defendants”), seeking to establish a class action of former and current employees of BVU and alleging violations of plaintiffs’ rights under the Fair Labor Standards Act of 1938 (the “FLSA”) and breach of contract. The lawsuit also claims that the Defendants terminated plaintiff Whitney Paxton as retaliation for her complaints about alleged violations of the FLSA. The lawsuit seeks damages in the amount of the unpaid compensation owed to the plaintiffs. During July 2017, a magistrate judge entered a report and recommendation that the plaintiffs’ motion to conditionally certify collective action and facilitate notice to potential class members be granted with respect to certain employees and denied as to others. During September 2017, the judge accepted the recommendation and granted preliminary approval of class certification. Management believes that the lawsuit is without merit and intends to vigorously defend the action. 



Stephen Potje, Tamela Potje, Sharon Davis, Beafus Davis, Matthew Baldwin, Tammy Baldwin, Arnor Lee, Angela Lee, Gretchen Brown, Paul Brown, Jeremy Estrada, Emily Estrada, Guillermo Astorga Jr., Michael Oliver, Carrie Oliver, Russell Walters, Elaine Walters, and Mike Ericson, individually and on behalf of all other similarly situated, v Bluegreen Corporation, Case No.: 9:17-cv-81055, United States District Court, Southern District of Florida



On September 22, 2017, the plaintiffs named in the caption above filed a lawsuit against Bluegreen which asserts claims for alleged violations of the Florida Deceptive and Unfair Trade Practices Act and the Florida False Advertising Law. In the complaint, the plaintiffs allege the making of false representations in connection with Bluegreen’s sales of VOIs, including representations regarding the ability to use points for stays or other experiences with other vacation providers, the ability to cancel VOI purchases and receive a refund of the purchase price, the ability to roll over unused points and that annual maintenance fees would not increase. The complaint seeks to establish a class of consumers who, since the beginning of the applicable statute of limitations, have purchased VOIs from Bluegreen, had their annual maintenance fees relating to Bluegreen VOIs increased, or were unable to roll over their unused points to the next calendar year. The lawsuit alleges damages in excess of $5,000,000 and seeks damages in the amount alleged to have been improperly obtained by Bluegreen, as well as any statutory enhanced damages, attorneys’ fees and costs, and equitable and injunctive relief. On November 20, 2017, Bluegreen moved to dismiss the complaint and, in response, the plaintiffs filed an amended complaint dropping the claims relating to the Florida Deceptive and Unfair Trade Practices Act and adding claims for fraud in the inducement and violation of the Florida Vacation Plan and Timesharing Act. Bluegreen filed a motion to dismiss the amended complaint which is currently pending before the court. Bluegreen’s management believes that the lawsuit is without merit and intends to vigorously defend the action.



Gordon Siu, individually and on behalf of all others similarly situated, v. Bluegreen Vacations Unlimited, Inc., Choice Hotels International, Inc., et al., Case No. 3:18-CV-00022, U.S. District Court for the Southern District of California



On January 4, 2018, the plaintiff named in the caption above filed a lawsuit alleging that Bluegreen Vacations and Choice Hotels violated California state privacy laws by recording and/or monitoring a telemarketing call to the plaintiff without his consent. The plaintiff claims the individual making the call requested that the plaintiff provide personal and private information and did not disclose that the call was being recorded until after making such request. The plaintiff seeks certification of a class of persons in California whose telephone conversations were monitored, recorded and/or eavesdropped upon without their consent by Bluegreen and/or Choice Hotels and damages of $5,000 per violation.  Bluegreen believes that the lawsuit is without merit and intends to vigorously defend the action.





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ITEM 4.  MINE SAFETY DISCLOSURES





Not Applicable.









PART II





ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES





The Company’s Class A Common Stock and Class B Common Stock have substantially identical terms, except as follows:





In addition to any other approval required by Florida law, the voting structure described in the first bullet point above may not be amended without the approval of holders of a majority of the outstanding shares of our Class B Common Stock, voting as a separate class.  Holders of our Class B Common Stock also have certain other special voting rights with respect to matters affecting our capital structure and the Class B Common Stock.





Market Information



On July 13, 2017, the Company’s Class A Common Stock began trading on the New York Stock Exchange (“NYSE”) under the ticker symbol “BBX.” Upon commencement of trading on the NYSE, the Company’s Class A Common Stock ceased trading on the OTCQX Best Market. On February 3, 2017, the Company’s Class B Common Stock began trading on the OTCQX Best Market under the ticker symbol “BBXTB”. 



From February 3, 2017 through July 12, 2017, our Class A Common Stock were quoted on the OTCQX Best Market under the ticker symbol “BBXT”.  Prior to February 3, 2017, our Class A and Class B Common Stock were quoted on the OTCQB market tier of the OTC Markets (“OTCQB”) under the ticker symbol names “BFCF” and “BFCFB,” respectively. 



On March 6, 2018, there were approximately 371 record holders of our Class A Common Stock and approximately 135 record holders of our Class B Common Stock.



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The following table sets forth, for the indicated periods, the high and low trading prices for our Class A Common Stock and Class B Common Stock as quoted on the applicable exchange.











Dividends



Prior to June 2016, no cash dividends were paid on the Company’s common stock.  Since June 2016, the Company’s board of directors has declared quarterly cash dividends on the Company’s Class A and Class B Common Stock as follows:  









Future declaration and payment of cash dividends with respect to the Company’s common stock, if any, will be determined in light of the then-current financial condition of the Company and other factors deemed relevant by the board of directors.



See the “Liquidity and Capital Resources” section of “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a discussion regarding the dependence of BBX Capital on dividends from Bluegreen and the ability of Bluegreen to pay dividends to the Company, as well as restrictions pertaining thereto.





Issuer Purchases of Equity Securities



On September 21, 2009, our board of directors approved a share repurchase program which authorized the repurchase of up to 20,000,000 shares of the Company’s Class A Common Stock and Class B Common Stock at an aggregate cost

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of up to $10 million. On June 13, 2017, our board of directors approved a share repurchase program which replaced the September 2009 share repurchase program and authorizes the repurchase of up to 5,000,000 shares of the Company’s Class A Common Stock and Class B Common Stock at an aggregate cost of up to $35 million. The June 2017 repurchase program authorizes management, at its discretion, to repurchase shares from time to time subject to market conditions and other factors. During April 2017, the Company repurchased 1.0 million shares of its Class A Common Stock under the September 2009 share repurchase program for approximately $6.2 million. During April 2016, the Company repurchased 1.0 million shares of its Class A Common Stock under the September 2009 share repurchase program for approximately $3.0 million.



As of December 31, 2017, 321,593 shares of the Company’s Class A Common Stock have been repurchased for approximately $2.4 million under the June 2017 share repurchase program.



From September 30, 2017 through October 8, 2017, a total of 2,394,492 shares of the Company’s Class A Common Stock and 176,132 shares of the Company’ Class B Common Stock previously owned by certain executive officers were surrendered to the Company by the executive officers as payment in satisfaction of tax withholding obligations relating to the vesting of certain previously reported restricted stock awards and units granted to the executive officers. Further information regarding these repurchases during the quarter ended December 31, 2017, is set forth in the table below:













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Equity Compensation Plan Information



The following table lists awards previously granted and outstanding, and securities authorized for issuance, under the Company’s equity compensation plans at December 31, 2017:











The Company assumed BCC’s equity compensation plans upon consummation of the acquisition of all the outstanding shares of BCC not owned by the Company pursuant to a merger agreement on December 15, 2016. Pursuant to the merger agreement for this transaction, awards outstanding under the BCC Equity Compensation Plan at December 15, 2016 continue to be outstanding and governed by the BBX Capital 2005 Restricted Stock and Option Plan, and the BBX Capital 2014 Stock Incentive Plan, except that such awards were converted into awards that are eligible to be settled in shares of the Company’s Class A Common Stock resulting in the issuance of 5,090,354 restricted shares of the Company’s Class A Common Stock and non-qualifying stock options to acquire 35,716 shares of the Company’s Class A Common Stock at December 15, 2016.  No further awards will be granted under the BCC equity compensation plans.





Shareholder Return Performance Graph



Set forth below is a graph comparing the cumulative total returns (assuming reinvestment of dividends) for the Company’s Class A Common Stock, the Standard and Poor’s 500 Stock Index and Standard and Poor’s Small-Cap Stock Index and assumes $100 was invested on December 31, 2012.











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The Company is not able to identify a group of peer companies or industry or line of business index which it believes is comparable to the Company and its current activities. Accordingly, the Company selected the Standard and Poor’s Small-Cap Stock Index based on the Company’s market capitalization.



The performance graph should not be deemed “filed” for purposes of Section 18 of the Exchange Act, or incorporated by reference into any filing of the Company under the Securities Act or the Exchange Act, except as expressly set forth by specific reference in such filing.







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ITEM 6.  SELECTED FINANCIAL DATA





The following table sets forth selected historical consolidated financial data as of and for the periods indicated below.  The selected historical consolidated statements of operations for fiscal years 2017, 2016 and 2015 and the selected consolidated statements of financial conditions as of December 31, 2017 and 2016 are derived from our audited consolidated financial statements included in Item 8 of this report.  The selected historical consolidated statements of operations for fiscal years 2014 and 2013 and the selected consolidated statements of financial condition as of December 31, 2015, 2014 and 2013 set forth below are derived from our previously filed audited consolidated financial statements not included in this report and have been updated to conform to the current presentation.







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ITEM 7.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS





Overview



BBX Capital Corporation (referred to together with its subsidiaries as the “Company,” “we,” “us,” or “our,” and without its subsidiaries as “BBX Capital”) is a Florida-based diversified holding company with investments in Bluegreen Vacations Corporation (“Bluegreen”), real estate and real estate joint ventures, and middle market operating businesses. Bluegreen is a sales, marketing and management company focused on the vacation ownership industry. The Company’s real estate investments include real estate joint ventures and the acquisition, development, ownership, financing, and management of real estate. The Company’s investments in middle market operating businesses include Renin Holdings, LLC (“Renin”), a company that manufactures products for the home improvement industry, investments in confectionery businesses through its wholly-owned subsidiary, BBX Sweet Holdings, LLC (“BBX Sweet Holdings”), and more recently, its activities as a franchisee of MOD Super Fast Pizza, LLC (“MOD”).



As of December 31, 2017, the Company had total consolidated assets of approximately $1.6 billion and shareholders’ equity of approximately $573.2 million. Net income attributable to shareholders for the years ended December 31, 2017, 2016 and 2015 was approximately $82.2 million, $28.4 million and $122.5 million, respectively.





Summary of Consolidated Results of Operations



Consolidated Results



The following summarizes key financial highlights for the year ended December 31, 2017:





The Company’s consolidated results for 2017 were significantly impacted by the following events:





Segment Results



We currently report the results of our business activities through the following reportable segments: Bluegreen, BBX Capital Real Estate, Renin and BBX Sweet Holdings.



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Information regarding income before income taxes by reportable segment for the years ended December 31, 2017, 2016 and 2015 is set forth in the table below (in thousands):