Alan B. Levan, CEO of Fort Lauderdale, Fla.-based BBX Capital (NYSE: BBX) talks with the Opportunist’s Managing Editor Leslie Stone about his company’s recent restructuring, its goals and objectives for the New Year and why he believes the real estate market has finally reached a plateau.
BBX Capital (NYSE: BBX), formerly known as BankAtlantic Bancorp, is a diversified investment and asset management company in the business of real estate ownership, direct acquisition and joint venture equity in real estate, specialty finance, and the acquisition of controlling and non-controlling investments in operating businesses.
Opportunist: What prompted your company’s recent name change?
Levan: Because our predecessor, BankAtlantic Bancorp, which owned BankAtlantic, a 100 branch, $6.5 billion bank, and a Florida real estate lender, was greatly affected by the recession over the last five years. So, we decided to downsize and ultimately sell the banking franchise. We sold off our Tampa branches to PNC bank, and then we sold the rest of the banking institution to BB&T Corp. On July 31, 2012, we officially changed our name to BBX Capital.
Opportunist: Were you pleased with the outcome?
Levan: Yes. Our sale to BB&T received one of the highest premiums that any bank had received during the five-year recession. The consideration that the company received was primarily retaining approximately $600 million in real estate and real estate loans from the portfolio. Since we were no longer a holding company for a banking institution, we totally changed our operating strategy. We did, however, keep the core philosophy of credit, excellent customer service and community involvement. BankAtlantic, which was founded in 1952, was extremely well known for its superior customer service, community involvement and commercial real estate lending. In fact, in 2010 the company won the J.D. Power and Associates award for customer service in its retail branches.
Opportunist: What is BBX Capital’s mission?
Levan: BBX Capital is a diversified investment and asset management company. Our business includes real estate ownership, direct acquisition and joint venture equity in real estate, specialty finance and the acquisition of controlling and non-controlling investments in operating businesses. Interestingly, on August 1—the day after the sale—the company started as a new business with almost $600 million in assets and a net worth of approximately $300 million—but with no infrastructure. Because the bank hosted all of the infrastructure operations such as IT, human resources, asset management and so forth, the company had to build from scratch each segment of its new infrastructure in order to run its business.
Opportunist: That sounds like a huge undertaking. How did you accomplish that?
Levan: Most companies start relatively small and gradually build their infrastructure. In our particular case, we had to build the infrastructure while we were operating a large, dynamic, active company. For starters, we brought about 40 employees with us who previously worked for BankAtlantic and built or outsourced the necessary infrastructure. We retained our NYSE listing and during that period of 2012, the stock of BBX Capital increased about 100 percent. Obviously, the marketplace has given strong approval to the banking transaction we did as well as our subsequent emergence as an operating company in this diversified investment and asset management space. As we conclude 2012, we have monetized over $100 million of assets and we have moved into new quarters in downtown Fort Lauderdale.
Opportunist: We understand your company prides itself on participating in Florida’s economic recovery. What are some of the steps you have taken to facilitate that?
Levan: In the month of November, for example, we announced that we have committed $60 million in cash to participate in the purchase of Bluegreen Corporation (NYSE: BXG), a NYSE company in the timeshare and resort hospitality business. Bluegreen has about $350 million in sales, 40 resorts and about 5,000 employees. We are participating in that purchase together with our parent company, BFC Financial Corporation (OTC: BFCF). BFC, a public company traded on the OTC Market, already owns approximately 50 percent of Bluegreen Corporation and also owns 50 percent of our company, BBX Capital.
Additionally, while we are actively divesting the existing BBX Capital portfolio of real estate, we are also active buyers of real estate in Florida. Our experience in Florida real estate goes back to the 1970s and tells us that Florida real estate has bottomed out. We are now seeing significant interest and liquidity in the market, which is firming up the value of real estate throughout the state. Florida is uniquely positioned to attract large migrations of domestic as well as international residents—as well as their money. That gives us reason to believe the real estate market here has plateaued.
Opportunist: Do you believe the rest of the country will follow suit?
Levan: I think the real estate market is improving nationally but still a little spotty. I believe that real estate in Florida will generally increase in value faster than the rest of the country because of its attractiveness and continual influx of new people. We have already seen a resurgence of home building in all parts of the state as well as the announcement of dozens of new projects of multifamily, residential and condominium properties. Our company operated with an approximate $2 billion commercial real estate loan portfolio and a $3 billion residential portfolio for decades, and we have a unique skill set to understand the Florida marketplace and to take advantage of low-hanging fruit, so to speak, and unique opportunities.
Opportunist: What is your role in the company?
Levan: I have been the chairman and CEO of BBX Capital (formerly BankAtlantic Bancorp) for the last 25 years and I am also the chairman and CEO of BFC Financial Corporation as well as chairman of Bluegreen Corporation.
Opportunist: What is your background? How did you get into your current field?
Levan: I was born in Brooklyn and grew up in Miami. I went to Tulane University and after graduation went into the real estate investment and asset management business. During the 1970s and early 1980s, my colleagues and I raised approximately $200 million dollars through our holding company, BFC Financial Corporation, to invest in real estate throughout the Southeast. In 1984, BFC invested in BankAtlantic and ultimately assumed control of the bank in 1987. We transitioned our real estate expertise to operating the bank and built BankAtlantic into one of the largest and best banking franchises in the state. In 1984, I also partnered with John E. ‘Jack’ Abdo. Jack and I have been partners in all of our ventures since then and he serves as vice chairman of all of the companies. During the last 25 years at BankAtlantic, the bank has not only been an active lender but also set up subsidiaries to do residential development and build multifamily housing. In 2007, my son Jarett Levan became the president and CEO of BankAtlantic. He is credited with the growth of the bank and the customer service accolades we received subsequent to his appointment.
Opportunist: Can you tell us about BBX Capital’s existing portfolio?
Levan: Yes. We categorized our $600 million portfolio into three separate buckets consisting of (1) sell today, (2) hold for future value appreciation, and (3) joint venture development.
Opportunist: What does each of these segments involve?
Levan: If we make the decision to sell some particular real estate ‘today,’ it is because our analysis shows we can maximize value today from an internal rate of return (IRR) standpoint versus holding it for sale at a later date. That might include land that was originally designed for residential housing but which is a further distance from the urban core than is attractive today. We have sold off for cash more than 25 parcels in the last year, generating in excess of $100 million. Our second bucket contains real estate that we will hold for future appreciation. This is real estate we believe has taken some very steep reduction in value in the last five years but that, as the market comes back, will see significant appreciation. This category would include land within the urban core suitable for residential or multifamily that we believe will be in strong demand in the next two or three years. It might also include existing apartments or warehouses where rents have been reduced and are now rising. Our third bucket is joint venture development. This is land that is ripe for development now and for which we are lining up partners to develop that land with us today. This includes primarily residential and multifamily sites.
Opportunist: Are any joint ventures currently in the works?
Levan: We haven’t announced any specific transactions yet but we are working with numerous residential and apartment developers to joint venture. We also are a very active bridge and mezzanine specialty lender. Because we know the Florida real estate market quite well, we are able to provide funds to entrepreneurs on a very quick basis for them to acquire assets they believe to be low-hanging fruit. There is a significant amount of opportunity in that particular space. Many of the banks have finally reached stability in their capital position and are now willing to sell off assets at distressed prices. So, there are a significant number of entrepreneurs in Florida who are in a position to buy those assets but need some bridge or swing financing to complete the gap between their own equity and traditional financing. Lastly, just like our Bluegreen investment, we are actively looking for opportunities to invest in controlling or non-controlling middle market operating companies. The middle market is defined as companies with $5 million to $50 million in sales.
Opportunist: What is your greatest accomplishment?
Levan: I would say that my greatest accomplishment is the fact that we have been privileged with strong management teams in all the companies I have been involved with. We take great pleasure in that BankAtlantic not only became one of the largest and best banking franchises in Florida, but also that we were able to transition through the Great Recession with strong capital and, ultimately, sell the franchise at a top price to a high quality buyer.
Additionally, BBX and its predecessor have always been quite active in the community. We expect to continue to do that. We’ve built almost 100 Habitat for Humanity homes and we have been extremely active in Junior Achievement and the cultural arts and education in Florida—not only with our money but also with our volunteerism. We believe that corporate responsibility is an important aspect of building communities.
Opportunist: How did your company survive the Great Recession?
Levan: As we entered the recession, we focused on three primary objectives: first, keeping our capital strong; second, focusing on credit—we tightened our credit, worked with our borrowers and tried to help them survive through the recession, and, third, we focused on core operating income.
We also turned a deaf ear to all the negativity in the marketplace. During that five-year recession period there was a significant amount of noise in the marketplace regarding regulatory changes, litigation and loan charge offs and we just filtered out all of that noise to focus on capital, credit and core operating earnings. As a result, not only did we survive but we also continued to build one of the best banking franchises in Florida. When we sold the bank, we received a top-of-the-market price and BB&T ended up with a great franchise at a fair price, which I believe was accretive to them from the moment of their acquisition.
Our company today basically has four executive partners: Alan Levan, Jack Abdo, Jarett Levan and Seth Wise. It was the four of us working as a team through the period of the last five years that has provided the opportunity for us today to build BBX Capital.
Opportunist: Which aspect of your work do you enjoy the most?
Levan: I have been blessed with high energy, the ability to work long hours, and I have always found my work to be extremely interesting and stimulating—whether dealing with a customer opening a retail bank account or structuring a complex financial transaction. I just love the business of business.
Opportunist: What is on target for BBX Capital to achieve in 2013?
Levan: 2012 was quite an active year for us. Jack Abdo and I were on the Benihana Restaurant chain board of directors and we led the sale of that company during 2012. We also, as I mentioned previously, sold BankAtlantic’s Tampa branches to PNC and sold the bank to BB&T. Each of those transactions was at the top of the market, in terms of pricing. We monetized $100 million of real estate and we also announced our acquisition of Bluegreen Corp. Additionally, the stock of BBX Capital went up almost 100 percent, BFC Financial’s stock increased approximately 250 percent, and the stock of Bluegreen Corporation went up over 200 percent. All in all, a pretty extraordinary year!
Our new name and business model has only been in operation since August 1, 2012, and our current objective is to let the marketplace know that we are open for business in these areas of specialty. In 2013, we will continue to implement our exciting business plans.
Leslie Stone is an award-winning writer/editor with more than two decades of experience covering business, finance and lifestyle issues for newspapers, magazines and online publications. Originally from Virginia, she currently resides in the Orlando area.
BBX Capital - http://www.bbxcapital.com/