Alan Levan: on BBX’s real estate investments as legal fight with SEC drags on

Alan B. Levan, chairman and CEO of Fort Lauderdale-based BBX Capital Corp., may be near the end of a five-year legal fight with the U.S. Securities and Exchange Commission over the company’s public disclosures of loan quality when it owned BankAtlantic.

But the legal issues haven’t kept BBX from investing in multiple real estate projects in South Florida and elsewhere since the sale of BankAtlantic in 2012 – the same year the SEC charged Levan and BBX with violations of securities laws in a lawsuit.

“We are doing business with high-quality developers on excellent sites,” Levan told The Real Deal. “The advantage of being in the banking business is knowing who the good guys are. Those are the people we chose to be our partners.”

Among its projects, BBX is working on a two-phase townhouse development in Pembroke Pines called Centra Falls with Harry Posen, a former executive of Minto Communities. “We provided some seed capital as an investor in that project,” Levan said. He described Posen as a “good guy with a world of experience … He’s just an expert at what he does.”

When BankAtlantic was sold, Levan said BBX took out and held onto the doubtful loans and foreclosed properties that had been on BankAtlantic’s books. “What we kept was what everyone called the junk. But … it turned out to be gold,” he said.

BBX has since purchased some properties for development and has acquired others by foreclosing on loans that BankAtlantic originated.

In 2014, for example, BBX acquired 114 acres of land in Hialeah now known as the Bonterra development by foreclosing on a loan to a company headed by home builder Sergio Pino, Levan said. BBX subsequently sold a third of the land to Lennar Corp., the Miami-based home builder, and put the rest of the land into housing development ventures with two partners, Coral Gables-based Codina-Carr Company and Boca Raton-based Altman Development.  

BBX collected $11.5 million of cash distributions last year from its home-building joint venture with Codina-Carr, called CC Bonterra, according to an annual report that publicly-held BBX filed this month with the SEC.

BBX also disclosed in its annual report that it collected $3.7 million in distributions last year from its investment in Altis at Kendall Square, a 321-unit apartment in Kendall developed by Altman Development. Altman sold the property in December.

“We financed the land for Altman Development, and when Joel [Altman] was ready to build that, we wanted to participate [as an investor] in that project,” Levan said. “So, we put a portion of our land into the development. Altman did a great job in building that and selling it.”

Outside South Florida, BBX has been developing 37 acres near the Mall at Millenia in Orlando. The company acquired the land by foreclosing on a loan that BankAtlantic had originated. BBX sold part of the land to Costco, which has opened a store on its site. BBX also entered a joint venture with Fort Lauderdale-based Stiles Corp. to develop a 300,000-square-foot shopping center on another site within the 37-acre property. BBX is part of a joint venture to build apartments there, too.  

BBX and Stiles also are partners in a project to sell developable land at PGA Station, a mixed-use development in Palm Beach Gardens. They have a contract to sell part of the land to a hotel developer, a deal expected to close by mid-year, Levan said.

A second federal trial by jury pitting the SEC against Levan and BBX will start next week. The judge in the first trial told the jury that Levan lied about the quality of BankAtlantic’s loan portfolio during a conference call with stock analysts. The judge ordered Levan to pay a $1.3 million fine and BBX to pay a $4.5 million fine. He also banned Levan from serving as an officer or director of BBX or any other public company for two years.

But the fines were rescinded, and Levan rejoined BBX as chairman and CEO, after he and the company successfully appealed the trial judge’s partial summary judgment that Levan lied during the July 2007 conference call.  

The Eleventh Circuit Court of Appeals ruled that the trial judge should have allowed the jury to decide for itself whether Levan lied in a three-sentence statement during the conference call.

So, another jury trial is scheduled to start Monday – more than five years after the federal agency sued the executive and his company in January 2012 for allegedly violating securities laws in disclosures of loan quality.

Eric Bustillo, the regional SEC director in Miami, declined to comment on the upcoming trial: “I don’t comment on pending litigation,” he said.

The focus of the second trial will be Levan’s three-sentence statement during the July 2007 conference call, Gene Stearns, Levan’s attorney, told TRD.

Stearns said the jury in the first trial rejected the SEC’s allegations that BankAtlantic made false statements about the quality of its loans in written documents filed with the SEC.

Stearns also said Levan simply summarized these written disclosures in his three-sentence statement during the July 2007 conference call.

“The judge told the jury that he found before the trial that the three sentences were false and misleading. They [the jurors] had to accept that. We lost that issue, of course. We won everything else,” Stearns said. “We’re going back [to court] because we have to try that part of the case we didn’t win the first time, even though we won everything else.”