Fort Lauderdale-based BBX Capital, the rebirth of the former bank holding company known as BankAtlantic, has graduated from a caretaker to an active developer of South Florida properties that the former bank repossessed.
A broad recovery in commercial and residential real estate values has propelled development activity at BBX. “Certainly the market has helped us a tremendous amount,” BBX Executive Vice President Seth M. Wise told The Real Deal.
In April, a joint venture of BBX and an arm of the Carr-Codina Company obtained $34.8 million of additional financing from Florida Community Bank to start building 394 single-family homes and about 300 rental apartments at the Bonterra community development in northwest Miami-Dade County. The bank has committed to loans to the Bonterra developers, totaling $43 million for acquisition and construction. Most of the 125-acre Bonterra development is comprised of 114 acres the old BankAtlantic acquired through foreclosure.
“We’re hoping that we’ll start construction very shortly,” Wise told TRD at the BBX headquarters on Las Olas Boulevard. “We turned lemons into lemonade because this property has gone up in value significantly beyond what it was originally on our books for.”
BBX has reached another major milestone since July 2012, when its corporate predecessor BankAtlantic sold its network of bank offices and other assets to regional bank holding company BB&T. BBX recently finished repaying a $285 million loan from BB&T about four years ahead of schedule.
To clear the way for its BankAtlantic acquisition, BB&T extended the seven-year, $285 million loan to BBX to redeem outstanding BankAtlantic preferred trust securities in the same amount. Collateral for the loan consisted of a mix of assets including home loans and small business loans held by a BBX affiliate called FAR, or Florida Asset Resolution, LLC.
For every $1 that FAR has earned and paid as dividends, 95 cents has gone to BB&T in repayment of the $285 million loan and 5 cents to BBX. Now that the loan, which was set to mature in 2019, is repaid in full, BBX will get 100 percent of whatever profit the FAR assets generate.
“FAR does have [real estate] opportunities that will ripen as time goes on, and we think highly of what’s left in FAR,” Wise told TRD. “With those assets we basically paid off BB&T, and we still have quite a bit leftover.”
He said BBX is busy trying to monetize other legacy assets of the old BankAtlantic that BB&T declined to acquire: “We took all the scratch-and-dent stuff, including the REO,” or real estate owned, bank terminology for properties repossessed through foreclosure.
One of those “scratch-and-dent” assets was repossessed land in the Kendall area of southern Miami-Dade County, known as Kendall Commons. BBX sold the land to Altman Development for $8 million in 2013 and invested $1.3 million as one of several investors in an Altman project called Kendall Square, a rental community that will have 321 apartments when completed. “Seventy to 80 percent of the project is complete,” Wise said. “That was one of the legacy assets we had from the BankAtlantic days …. I think that project is going to be terrific with the new Baptist Hospital opening” nearby.
Another residential development called Village at Victoria Park is unfolding in Fort Lauderdale on a two-acre site that formerly served as a parking lot for the old BankAtlantic headquarters building, where a BB&T branch office is now located. BBX sold the two-acre site for $3.6 million to a joint venture the company formed with developer New Urban Communities to build 30 attached single-family homes on the site, located between Northeast 17th Way and Victoria Park Road, south of Sunrise Boulevard.
“Sales activity has been great,” Wise said. “We’re really anxious to get the models up. We’re hoping that by the end of summer, they’ll be done.”
BBX also has been a buyer of real estate in partnership with developers. For example, a joint venture of BBX and Procacci Development Corp. acquired three acres in Fort Lauderdale at Bayview Drive and Sunrise Boulevard, directly across from the Galleria Mall.
Wise said the joint venture with Procacci Development is considering a mixed-use redevelopment of the site that could include a residential or hotel component. The site is now occupied by an 84,000-square-foot office building with low occupancy and short-term leases, plus a combination gas station and convenience store with a lease that expires in March 2017, with a five-year extension option.
BBX also has invested in a commercial development in Orlando near the city’s Mall of the Millenia and student housing projects in Tallahassee. To offset the unpredictability of returns on real estate investments, BBX has acquired established operating companies with more predictable cash flow, including a Toronto-based closet manufacturer and a collection of companies that make chocolate and candy products.
The balanced business model hasn’t done much recently for the price of stock in BBX, which is listed on the New York Stock Exchange under ticker symbol BBX. The stock traded at $16.16 Monday at 3:15 p.m. The stock hasn’t traded higher than $19.45 since March 31, 2014.
Investor uncertainty may be a drag on the stock price. The leadership of BBX could change, following an adverse jury verdict in a federal securities case against BBX and Alan Levan, the chairman of BBX’s board of directors. The jury found in favor of BBX and Levan except for three sentences Levan uttered during a July 2007 conference call with analysts who followed the old BankAtlantic, which the jury concluded were false, following instructions from the judge.
BBX has released a statement saying that the company and Levan intend to appeal the verdict. The federal lawsuit against them was filed by the U.S. Securities and Exchange Commission, which seeks to ban Levan from serving as an officer or director of a public company.