At the end of June, a stock pick titled Strong Catalysts and Sum of the Parts Shows 170+% Potential with BBX Capital received a lot of questions and comments on Seeking Alpha and via email.

Here are the points that quickly sum up the thesis for BBX Capital Corp (NYSE:BBX).

  • Hidden Assets
  • Merger Arb
  • Unpleasant Exterior
  • below NAV
  • Catalyst Heavy
  • Clean Balance Sheet
  • Cash Flow Positive
  • Improving Metrics
  • Potential Multi-Bagger
  • Small Cap Stock

That’s a lot of catalysts and reasons so let’s get on with the second part in more detail.

BBX Capital Part Two – Overview of Legacy Assets and their Potential

BBX Capital

 

In our first article, we attempted to assign an updated value to each part of the potentially merged BBX Capital Corp (NYSE:BBX) & BFC Financial Corporation (OTCMKTS:BFCF).

Below, we will drill down using publicly available information on the assets BBX Capital currently owns.

This is the murky portion of the balance sheet but a huge driver of future value (whether the merger occurs or not). For simplicity, we won’t touch Bluegreen Corporation (NYSE:BXG) or the NOL benefits or the liabilities held against any of these assets; only the legacy BBX Capital Corporation – BankAtlantic Bancorp, Inc – BBC Capital Trust II 8.50% Trust Preferred Securities (NASDAQ:BBXT) assets.

The legacy assets within BBX Capital Corp (NYSE:BBX) ($300 mkt cap) break down as follows:

  • Renin Corporation: +$65m revenue
  • Sweet Holdings: 3 confectioneries with +$10m revenue
  • Real Estate Projects: 11 publicly disclosed projects with the potential for shared interests in:
    • 1,215 apartments
    • +617,000 sq feet of commercial space
    • 770 single family homes & lots
    • 140 hotel rooms
    • 2 high-end storage facilities
    • Plus additional raw land near many of these projects
    • Assets Held for Sale: 454 legacy loans and pieces of real estate
    • Loans held for Investment: 124 legacy assets with potential for foreclosure and development, only adding to the project list above.

*Note: The entirety of BBX, including BlueGreen, has $111m of liabilities.

The following information is pulled from the company press release with emphasis and additional comments sprinkled throughout.

About Renin Corp

81% owned by BBX Capital Corp (NYSE:BBX) and 19% by BFC Financial Corporation (OTCMKTS:BFCF).

Renin is a manufacturer of interior and closet doors, wall décor, associated systems and hardware and fabricated glass products through a portfolio of brand name and private label offerings including Erias, DSH, Acme, KingStar, TRUporte, Ramtrack and JJ Home Products. Facilities in Canada, the U.S. and the U.K.

Renin’s business had revenues of $65.6 million during 2013.

It’s difficult to get a clear earnings picture due to one-time transaction charges from the recent acquisition.

Also, we have to assume that margins are not stellar in this semi-commodity business. There is potential that this company cleans its balance sheet, pushes to expand margins then is sold to a strategic buyer.

Management has a history of buying and reselling entire companies in a private equity model.

BBX Sweet Holdings

The margins for the confectionery business should be higher than home décor manufacturing but the picture is clouded by other questions.

  • Do these companies have a lot of debt to service?
  • Will there be synergies in buying power, advertising, distribution, manufacturing, sales and administration?
  • Will this platform continue to grow via acquisition?
  • Will BBX pay reasonable prices for acquisitions?

A. Hoffman’s Chocolates

Headquartered in Lake Worth, Florida, Hoffman’s Chocolates is a manufacturer of gourmet chocolates, with several retail locations throughout South Florida which are available via its retail and online distribution channels, direct shipping throughout the U.S., and at retail locations nationwide.

Established in 1975, Hoffman’s had revenues of $4.3 million 2013.

B. Williams & Bennett

Headquartered in Boynton Beach, Florida, Williams & Bennett sells chocolate products and confections through distribution channels serving boutique retailers, big box chains, department stores, national resort properties, corporate customers, and private label brands.

Since 1992, Williams & Bennett had revenues of $4.8 million at the end of 2013.

C. Jer’s Chocolates

Headquartered in Solana Beach, California, Jer’s Chocolates, featured on the Home Shopping Network, QVC, The Food Network, and the Rachael Ray Show. Jer’s Chocolates is distributed internationally, and within the US, has customer distribution in numerous sales channels.

No revenue or earnings numbers have been published yet.

BBX Capital Real Estate Activities

Below are the projects the company is publicly discussing in the real estate segment.

All are at different stages of development. With some, construction has already started, others are developing joint ventures and seeking zoning, others are newly acquired properties where plans haven’t been discussed.

The mix of those variables makes each project difficult to value but remember, most projects are held at a written-down, recessionary value from the BankAtlantic sale.

A. Kendall Commons

In March 2013, the Company sold land to Altman Development, a third party real estate developer, for $8.0 million.

Altman contributed the land to a joint venture to develop as a multifamily rental development of 12  three-story apartment buildings, one mixed-use building and 1 clubhouse totaling 321 apartment units, and  the Company then invested $1.3 million of cash in the joint venture project as one of a number of investors.

The development is currently under construction and scheduled to begin leasing during the Q3 of 2014.

The Company is entitled to receive 13% of distributions until a 15% IRR has been attained and then will be entitled to receive 9.75% of any distributions thereafter.

B. North Flagler

In October 2013, the Company entered into a joint venture with JRG USA which they assigned to the JV a contract to purchase for $10.8 million a 4.5 acre parcel overlooking the Intracoastal Waterway in West Palm Beach, Florida.

The Company invested $0.5 million of cash.

The Company is entitled to receive 80% of any joint venture distributions until it recovers its capital investment and then will be entitled to receive 70% of any distributions thereafter.

The entitlement process is currently estimated to be concluded in 2015.

The Company also owns a 2.7 acre parcel adjacent to the 4.5 acre parcel which is the subject of the contract held by the North Flagler joint venture. The 2.7 acre parcel was acquired by the Company through foreclosure and had a carrying value of $3.2 million as of March 31, 2014.

They believe that the value of this parcel will increase if the density is increased by the approval of zoning changes referenced above.

C. PGA Design Center Holdings, LLC

In December 2013, the Company purchased for $6.1 million a commercial property in Palm Beach Gardens, Florida, with three existing buildings consisting of 145,000 square feet of mainly furniture retail space.

The property, which is located in a larger mixed use property now known as ‘PGA Place’, was substantially vacant.  Next, the Company entered into a 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 the PGA mixed use property now known as PGA Place (see below for a discussion of the other parcels).  The joint venture intends to seek approvals to change the use of a portion of the property from retail to office and subsequently sell or lease the property.

D. Gardens at Millenia

37 acres of land located in a commercial center of Orlando, Florida with a carrying

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