Consolidated Financial Statements

December 31, 2023 and 2022

Ernst & Young LLP Suite 500 5100 Town Center Circle Boca Raton, FL 33486

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Report of Independent Auditors

 

To the Shareholders of

Bluegreen Vacations Holding Corporation

Opinion

 

We have audited the consolidated financial statements of Bluegreen Vacations Holding Corporation (the Company), which comprise the consolidated balance sheets as of December 31, 2023 and 2022, and the related consolidated statements of income, equity and cash flows for each of the three years in the period ended December 31, 2023 (collectively referred to as the “financial statements”).

 

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for the three years in the period ended December 31, 2023, in accordance with accounting principles generally accepted in the United States of America.

 

Basis for Opinion

 

We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Company and to meet our other ethical responsibilities in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

 

Responsibilities of Management for the Financial Statements

 

Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free of material misstatement, whether due to fraud or error.

 

In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for one year after the date that the financial statements are available to be issued.

Auditor’s Responsibilities for the Audit of the Financial Statements

 

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free of material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

 

In performing an audit in accordance with GAAS, we:

 

 

 

 

 

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.

March 28, 2024

 

(In thousands, except share data)

 

		Shares of Common Stock Outstanding Class								Common Stock Class								Additional Paid-in Capital				Accumulated Earnings				Total Shareholders' Equity				Non- Controlling Interests				Total Equity
		A				B				A				B
Balance, December 31, 2020			15,624				3,694			$	156			$	37			$	177,104			$	10,586			$	187,883			$	74,847			$	262,730
Distributions to noncontrolling interests			—				—				—				—				—				—				—				(4,900	)			(4,900	)
Bluegreen Vacations Corporation short- form merger			2,666				—				27				—				23,032				—				23,059				(23,682	)			(623	)
Conversion of common stock from Class B to Class A			10				(10	)			—				—				—				—				—				—				—
Share-based compensation			—				—				—				—				1,036				—				1,036				—				1,036
Purchase and retirement of common stock			(1,182	)			(19	)			(12	)			—				(27,263	)			—				(27,275	)			—				(27,275	)
Net income			—								—				—				—				58,730				58,730				14,102				72,832
Balance, December 31, 2021			17,118				3,665			$	171			$	37			$	173,909			$	69,316			$	243,433			$	60,367			$	303,800
Distributions to noncontrolling interests			—				—				—				—				—				—				—				(4,900	)			(4,900	)
Dividends			—				—				—				—				—				(9,021	)			(9,021	)			—				(9,021	)
Tender offer			(3,041	)			—				(30	)			—				(76,054	)			—				(76,084	)							(76,084	)
Conversion of common stock from Class B to Class A			1				(1	)			—				—				—				—				—				—				—
Share-based compensation			—				—				—				—				3,384				—				3,384				—				3,384
Purchase and retirement of common stock			(1,912	)			—				(19	)			—				(54,418	)			—				(54,437	)			—				(54,437	)
Net income			—				—				—				—				—				64,385				64,385				16,866				81,251
Balance, December 31, 2022			12,166				3,664			$	122			$	37			$	46,821			$	124,680			$	171,660			$	72,333			$	243,993
Distributions to noncontrolling interests			—				—				—				—				—				—				—				(9,800	)			(9,800	)
Dividends			—				—				—				—				—				(13,630	)			(13,630	)			—				(13,630	)
Conversion of common stock from Class B to Class A			14				(14)				—				—				—				—				—				—				—
Share-based compensation			—				—				—				—				14,171				—				14,171				—				14,171
Issuance of common stock from accelerated vesting of restricted stock awards, net of shares surrendered for tax withholdings			338				—				3				—				(14,739	)			—				(14,736	)			—				(14,736	)
Net income			—				—				—				—				—				42,590				42,590				18,057				60,647
Balance, December 31, 2023			12,518				3,650			$	125			$	37			$	46,253			$	153,640			$	200,055			$	80,590			$	280,645

 

 

 

Our Business

Bluegreen Vacations Holding Corporation is a Florida-based holding company which owns 100% of Bluegreen Vacations Corporation (“Bluegreen”). Bluegreen Vacations Holding Corporation as a standalone entity without its subsidiaries is referred to as “BVH”. Unless stated to the contrary or the context otherwise requires, Bluegreen Vacations Holding Corporation with its subsidiaries, including Bluegreen, is referred to herein as the “Company”, “we”, “us” or “our”.

 

Bluegreen is a leading vacation ownership company that markets and sells vacation ownership interests (“VOIs”) and manages resorts in popular leisure and urban destinations. Bluegreen’s resorts are primarily located in high-volume, “drive-to” vacation locations, including Orlando, Panama City Beach, Las Vegas, the Smoky Mountains, Myrtle Beach, Charleston, the Branson, Missouri area, Nashville and New Orleans, among others. Bluegreen also earns fees for providing management services to the Bluegreen Vacation Club (“Vacation Club”) and homeowners’ associations (“HOAs”), mortgage servicing, VOI title services, reservation services, and construction design and development services. In addition, Bluegreen provides financing to qualified VOI purchasers, which generates significant interest income.

 

Prior to May 5, 2021, the Company owned approximately 93% of Bluegreen’s outstanding common stock. On May 5, 2021, the Company acquired all of the approximately 7% of the outstanding shares of Bluegreen’s common stock not previously owned by the Company through a statutory short-form merger under Florida law. In connection with the merger, Bluegreen’s shareholders (other than the Company) received 0.51 shares of the Company’s Class A Common Stock for each share of Bluegreen’s common stock that they held at the effective time of the merger (subject to the rounding up of fractional shares). BVH issued approximately 2.66 million shares of its Class A Common Stock in connection with the merger. As a result of the completion of the merger, Bluegreen became a wholly owned subsidiary of BVH and its common stock was no longer publicly traded.

On November 5, 2023, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Hilton Grand Vacations Inc. (“HGV”) and Heat Merger Sub, Inc. (“Merger Sub”), an indirect wholly-owned subsidiary of HGV. On January 17, 2024, the merger contemplated by the Merger Agreement (the “Merger”) was completed whereby, in accordance with the terms of the Merger Agreement, (i) Merger Sub merged with and into BVH, with BVH continuing as the surviving company of the Merger and becoming an indirect wholly-owned subsidiary of HGV, and (ii) each share of Class A Common Stock and Class B Common Stock of BVH outstanding at the effective time of the Merger (including each share subject to a restricted stock award outstanding at the effective time of the Merger) was canceled and converted into the right to receive $75.00 per share in cash, without interest and less any applicable withholding taxes.

 

 

Principles of Consolidation and Basis of Presentation

 

The Company’s consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of its wholly owned subsidiaries, Bluegreen/Big Cedar Vacations LLC (a joint venture in which Bluegreen is deemed to hold a controlling financial interest based on its 51% equity interest, its active role as the day-to-day manager of its activities, and Bluegreen's majority voting control of its management committee ("Bluegreen/Big Cedar Vacations")), and any variable interest entities (“VIEs) in which the Company or one of its consolidated subsidiaries is deemed the primary beneficiary of the VIE. All significant inter-company accounts and transactions have been eliminated in consolidation.

Use of Estimates

 

The Company’s financial statements are prepared in conformity with GAAP, which requires it to make estimates based on assumptions about current and, for some estimates, future economic and market conditions which affect reported amounts and related disclosures in its financial statements. Although the Company’s current estimates are based on current and expected future conditions, as applicable, actual conditions could differ from its expectations, which could materially affect its results of operations and financial position. In particular, a number of estimates have been and may continue to be affected by adverse trends affecting general economic conditions, including rising interest rates and inflation. The severity, magnitude and duration, as well as the economic consequences of these factors are uncertain, subject to change and difficult to predict. As a result, accounting estimates and assumptions may change over time. Such changes could result in, among other adjustments, incremental loan losses on notes receivable, a decrease in the carrying amount of tax assets, or an increase in other obligations as of the time of a relevant measurement event. On an ongoing basis, management evaluates its estimates, including those that relate to the estimated future sales value of VOI inventory; the recognition of revenue; the allowance for loan losses; the recovery of the carrying value of VOI inventories; the fair value of assets measured at, or compared to, fair value on a non- recurring basis; the estimate of contingent liabilities related to litigation and other claims and assessments; and deferred income taxes are reviewed on an ongoing basis. Estimates are based on historical experience and various other assumptions believed 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 not readily apparent from other sources. Actual results may differ materially from these estimates under different assumptions and conditions.

 

Significant Accounting Policies

 

Cash and Cash Equivalents

Cash in excess of the Company’s immediate operating requirements are generally invested in cash equivalents, such as short- term time deposits and money market instruments, with original maturities at the date of purchase of three months or less. Cash and cash equivalents are maintained at various financial institutions. These financial institutions are located throughout the United States and in Aruba. However, a significant portion of the Company’s unrestricted cash is maintained with a single bank and, accordingly, the Company is subject to credit risk. Periodic evaluations of the relative credit standing of financial institutions maintaining the Company’s deposits are performed to evaluate and, if necessary, take actions in an attempt to mitigate credit risk.

 

Restricted Cash

 

Restricted cash consists primarily of customer deposits held in escrow accounts and cash collected on pledged/secured notes receivable not yet remitted to lenders.

 

Revenue Recognition

 

Sales of VOIs. Revenue is recognized for sales of VOIs after control of the VOI is deemed transferred to the customer, which is when the legal rescission period has expired on a binding executed VOI sales agreement, as the risk and rewards associated with VOI ownership are transferred to the buyer at that time, and the collectability of the note receivable from the buyer, if any, is probable. The Company records customer deposits from contracts within the legal rescission period in restricted cash and escrow deposits in its consolidated balance sheets as such amounts are refundable until the legal rescission period has expired. In cases where construction and development of developed resorts has not been completed, the Company defers all of the revenue and associated expenses for the sales of VOIs until construction is complete and the resort may be occupied. Contracts with customers may include multiple performance obligations. For such arrangements, where applicable, we allocate revenue to each performance obligation based on its relative standalone selling price.

The Company 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, is fully amortizing in equal installments and may be prepaid without penalty. For sales of VOIs for which it provides financing, the Company reduces the transaction price for expected loan losses, which it considers to be variable consideration. The Company’s estimates of the variable consideration are based on the results of its static pool analysis, which relies on historical payment data for similar VOI notes receivable. Policies regarding the estimation of variable consideration on notes receivable are discussed in further detail under “Notes Receivable” below. VOI Sales where no financing was provided do not have any significant payment terms.

 

Fee-based sales commission revenue. The Company enters into arrangements with third-party developers to sell VOIs in their developments through the Company's sales and marketing platform for which it earns a commission. Commission revenue is recognized to the extent that, it is probable that a significant reversal of such revenue will not occur, the related consumer rescission period has expired and the third-party developer receives and consumes the benefits of these services.

 

 

 

Fees received in advance are generally included in deferred income in the Company’s consolidated balance sheets until such time as the related service is rendered and revenue is recognized as stated above.

 

Under timeshare accounting rules, rental operations, including accommodations provided through the use of the sampler program, are accounted for as incidental operations whereby incremental carrying costs in excess of incremental revenue are expensed as incurred. Revenue from the sampler program is deferred and recognized as guests complete stays at the resorts. During each of the years presented, the Company’s aggregate rental and sampler operating profit was less than the aggregate carrying cost of its VOI inventory. Accordingly, it recorded such loss as a reduction to the carrying cost of VOI inventory, which is included in cost of other fee-based services in the Company’s consolidated statements of income for each year.

 

Interest Income. The Company provides financing for a significant portion of sales of its owned VOIs. It recognizes interest income from financing VOI sales on the accrual method as earned based on the outstanding principal balance, interest rate and terms stated in each individual financing agreement. See “Notes Receivable” below for further discussion of the policies applicable to VOI notes receivable.

 

Notes Receivable

The Company’s notes receivable are carried at amortized cost less an allowance for loan losses. Interest income is suspended, and previously accrued but unpaid interest income is reversed, on all delinquent notes receivable when principal or interest payments are more than 90 days contractually past due and not resumed until such loans are less than 90 days past due. As of December 31, 2023 and 2022, $33.9 million and $24.2 million, respectively, of VOI notes receivable were more than 90 days past due, and accordingly, consistent with the Company’s policy, were not accruing interest income. After approximately 127 days, VOI notes receivable are generally written off against the allowance for loan loss.

 

To the extent the Company determines that it is probable that a significant reversal of cumulative revenue recognized may occur, it records an estimate of variable consideration as a reduction to the transaction price of the sales of VOIs until the uncertainty associated with the variable consideration is resolved. Variable consideration which has not been included within transaction price is presented as an allowance for loan loss. Estimates of the variable consideration are based on the results of its static pool analysis, which relies on historical payment data for similar VOI notes receivable and tracks uncollectibles for each period’s sales over the entire life of the notes. The Company also considers whether historical economic conditions are comparable to then current economic conditions, as well as variations in underwriting standards. Revisions to estimate of variable consideration from the sales of VOIs impact the loan loss reserve and can increase or decrease revenue. The Company reviews its estimate of variable consideration on at least a quarterly basis. Loan origination costs are deferred and recognized over the life of the related notes receivable.

VOI Inventory

VOI inventory consists of completed VOIs, VOIs under construction and land held for future VOI development. Completed VOI inventory is carried at the lower of: (i) cost, including costs of improvements and amenities incurred subsequent to acquisition, capitalized interest, real estate taxes and other costs incurred during construction, or (ii) estimated fair market value, less costs to sell. VOI inventory and cost of sales are accounted for under timeshare accounting rules, which require the use of a specific method of the relative sales value method for relieving VOI inventory and recording cost of sales. Under the relative sales value method required by timeshare accounting rules, cost of sales is calculated as a percentage of net sales using a cost-of-sales percentage - the ratio of total estimated development costs to total estimated VOI revenue, including the estimated incremental revenue from the resale of VOI inventory repossessed, generally as a result of the default of the related note receivable. In addition, pursuant to timeshare accounting rules, the Company does not relieve inventory for VOI cost of sales related to anticipated loan losses. Accordingly, no adjustment is made when inventory is reacquired upon default of the related receivable. Changes in estimates within the relative sales value calculation are accounted for as VOI inventory true- ups and are included in Cost of VOI sales in the Company’s consolidated statements of income to retrospectively adjust the margin previously recognized subject to those estimates.

 

Property and Equipment

 

Property and equipment is recorded at acquisition cost. The Company records depreciation and amortization in a manner that recognizes the cost of its depreciable assets over their estimated useful lives using the straight-line method. Leasehold improvements are amortized over the shorter of the terms of the underlying leases or the estimated useful lives of the improvements.

 

The Company capitalizes the costs of software developed for internal use in accordance with the guidance for accounting for costs of computer software developed or obtained for internal use. Capitalization of software developed for internal use commences during the development phase of the project and ends when the asset is ready for its intended use. Software developed or obtained for internal use is generally amortized on a straight-line basis over 3 to 5 years and included within property and equipment on the Company’s consolidated balance sheet. Capitalized costs of software developed for internal use for the years ended December 31, 2023, 2022, and 2021 were $2.9 million, $2.0 million, and $3.0 million, respectively. Costs of internal development time and the costs of software under cloud computing arrangements that are service contracts are capitalized and included in prepaid expenses on the Company’s consolidated balance sheet. Costs of these service contracts are amortized over the life of the contract and included in selling, general and administrative expenses in the Company’s consolidated statement of income. Unamortized capital costs of software service contracts totaled $0.6 million and $1.0 million as of December 31, 2023 and 2022, respectively. Amortization expense from these service contracts for the years ended December 31, 2023, 2022, and 2021 was $0.5 million, $0.5 million, and $0.4 million, respectively.

 

Intangible Assets

Intangible assets consist primarily of indefinite-lived management contracts recognized upon the consolidation of Bluegreen in November 2009 upon the acquisition of a controlling interest in Bluegreen at that time. Management contracts are reviewed for impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. The Company did not record any impairment charges during the years ended December 31, 2023, 2022 or 2021.

 

Impairment of Long-Lived Assets

The Company evaluates the recoverability of the carrying amounts of its long-lived assets under the guidelines of ASC 360, Property, Plant and Equipment (“ASC 360”), which provides guidance relating to the accounting for the impairment or disposal of long-lived assets. The Company reviews the carrying amounts of the Company’s long-lived assets for possible impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. The Company assesses impairment by comparing the undiscounted cash flows of the assets to their carrying amounts. If estimated cash flows are insufficient to recover the investment, an impairment loss is recognized to write-down the carrying value of the asset to the estimated fair value.

 

Deferred Financing Costs

 

Deferred financing costs are comprised of costs incurred in connection with obtaining financing from third-party lenders and are presented in the consolidated balance sheets as other assets or as a direct deduction from the carrying value of the associated debt liability. These costs are capitalized and amortized using the effective yield method to interest expense over the terms of the related financing arrangements. As of December 31, 2023 and 2022, unamortized deferred financing costs totaled $13.1 million and $13.3 million, respectively. Interest expense from the amortization of deferred financing costs for the years ended December 31, 2023, 2022, and 2021 was $3.8 million, $3.1 million and $3.3 million, respectively.

Advertising Expense

 

The Company expenses advertising costs, which are primarily marketing costs, as incurred. Advertising expense was $187.5 million, $195.0 million and $151.5 million for the years ended December 31, 2023, 2022 and 2021, respectively, and is included in selling, general and administrative expenses in the accompanying consolidated statements of income.

 

Bluegreen has entered into marketing arrangements with various third parties. Bluegreen had an exclusive marketing agreement through 2024 with Bass Pro that provided the Company with the right to market and sell vacation packages at kiosks in each of Bass Pro’s retail locations and through other means. For the years ended December 31, 2023, 2022, and 2021, sales of VOIs to prospects and leads generated by Bluegreen’s marketing agreement with Bass Pro accounted for approximately 16%, 17% and 19%, respectively, of total VOI sales volume. In connection with the Merger Transaction with HGV, HGV entered into a new ten year marketing agreement with Bass Pro.

Income Taxes

Income tax expense is recognized at applicable U.S. tax rates. Certain revenue and expense items may be recognized in one period for financial statement purposes and in a different period for income tax purposes. The tax effects of such differences are reported as deferred income taxes. Valuation allowances are recorded in periods in which it is determined that the realization of deferred tax assets does not meet the more likely than not recognition threshold.

 

Noncontrolling Interests

 

Noncontrolling interests reflect third parties’ ownership interests in entities that are consolidated in the Company’s financial statements but are less than 100% owned by the Company. Noncontrolling interests are recognized as equity in the Company’s consolidated balance sheet and presented separately from the equity attributable to its shareholders. The amounts of consolidated net income and comprehensive income attributable to the Company’s shareholders and noncontrolling interests are separately presented in the Company’s consolidated statements.

 

Stock-Based Compensation

 

Compensation cost for unvested restricted stock awards is based on the fair value of the award on the measurement date, which is generally the grant date, and is recognized on a straight-line basis over the requisite service period of the award, which is generally four to ten years for unvested restricted stock awards with forfeitures recognized as incurred. The fair value of restricted stock awards is generally determined based on the market price of the Company’s common stock on the grant date. In contemplation of the Merger, in December 2023 the Company's Compensation Committee approved the early acceleration of vesting of certain of the Company's restricted stock awards and the balance of the restricted stock awards were vested in consummation of the Merger in January 2024. See Note 13.

Recently Adopted Accounting Pronouncements

 

In March 2022, the FASB issued ASU 2022-02, “Financial Instruments – Credit Losses (Topic 326) – Troubled Debt Restructurings and Vintage Disclosures” (“ASU-2022-02”), which eliminates the recognition and measurement guidance applicable to troubled debt restructurings for creditors and enhances disclosure requirements with respect to loan modifications for borrowers experiencing financial difficulty. ASU 2022-02 also requires disclosure of current-period gross write-offs by year of origination to be presented in the vintage disclosures for VOI notes receivable. The Company adopted ASU 2022-02 as of January 1, 2023. The adoption of this standard did not have a material effect on the Company’s financial statements or disclosures other than disclosure related to changes in vintage disclosures relating to VOI notes receivable.

 

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effect of Reference Rate Reform on Financial Reporting” (“ASU 2020-04”), which provides relief for companies preparing for the discontinuation of LIBOR in response to the Financial Conduct Authority (the regulatory authority over LIBOR) plan for a phase out of regulatory oversight of LIBOR interest rate indices to allow for an orderly transition to an alternate reference rate. The Company adopted this standard effective January 1, 2023. The adoption of this standard did not have a material effect on the Company’s financial statements or disclosures.

 

 

The table below sets forth the Company’s disaggregated revenue by category from contracts with customers (in thousands):

As of December 31, 2023 and 2022, the Company had commission receivables, net of an allowance, of $5.3 million and $10.3 million, respectively, related to sales of third-party VOIs, which are included in other assets on the consolidated balance sheets. Commission receivables relate to contracts with customers including amounts associated with the Company’s contractual right to consideration for completed performance obligations and are settled when the related cash is received. Commission receivables are recorded when the right to consideration becomes unconditional and is only contingent on the passage of time.

 

Contract liabilities include payments received or due in advance of satisfying performance obligations, including points awarded to customers as an incentive for the purchase of VOIs that may be redeemed in the future, advance deposits on owner programs for future services, and deferred revenue on prepaid vacation packages for future stays at the Company’s resorts or nearby hotels. Both points incentives and owner programs are recognized upon redemption, and deferred revenue for vacation packages are recognized net of sales of marketing expenses upon customer stays. Contract liabilities are included in deferred income in the Company’s consolidated balance sheets.

 

The following table sets forth the Company’s contract liabilities as of December 31, 2023 and 2022 (in thousands):

 

4. Notes Receivable

The table below provides information relating to the Company’s notes receivable and its allowance for loan losses (in thousands):

		As of December 31,
		2023				2022
Notes receivable secured by VOIs:
VOI notes receivable - non-securitized		$	291,528			$	279,888
VOI notes receivable - securitized			663,611				483,913
Gross VOI notes receivable			955,139				763,801
Allowance for loan losses - non-securitized			(79,835	)			(81,801	)
Allowance for loan losses - securitized			(188,909	)			(129,510	)
Allowance for loan losses			(268,744	)			(211,311	)
VOI notes receivable, net		$	686,395			$	552,490
Allowance as a % of Gross VOI notes receivable			28	%			28	%

The weighted-average interest rate charged on the Company’s notes receivable secured by VOIs was 15.1% and 15.3% at December 31, 2023, and 2022, respectively.  All of the Company’s VOI loans bear interest at fixed rates.  The Company’s VOI notes receivable are primarily secured by VOIs located in Florida, Missouri, South Carolina, Tennessee, Nevada and Virginia.

Future principal payments due to the Company from notes receivable as of December 31, 2023 are as follows (in thousands):

2023		$	$87,907
2024			86,798
2025			92,361
2026			98,278
2027			103,639
Thereafter			486,156
Total		$	955,139

Allowance for Loan Losses

The activity in the Company’s allowance for loan losses was as follows (in thousands):

		For the Year Ended December 31,
		2023				2022
Balance, beginning of period		$	211,311			$	163,107
Provision for loan losses			151,095				100,431
Less: Write-offs of uncollectible receivables			(93,662	)			(52,227	)
Balance, end of period		$	268,744			$	211,311

The table below represents the gross write-offs of financing receivables by year of origination (in thousands):

		For the Year Ended
		December 31, 2023
2023		$	8,265
2022			37,934
2021			24,474
2020			7,638
2019			6,436
Prior			8,915
Total		$	93,662

The Company monitors the credit quality of its receivables on an ongoing basis.  The Company holds large amounts of homogeneous VOI notes receivable and assesses uncollectibility based on pools of receivables as it does not believe that there are significant concentrations of credit risk with any borrower or groups of borrowers.  In estimating loan losses, the Company does not use a single primary indicator of credit quality but instead evaluate its VOI notes receivable based upon a static pool analysis that incorporates the aging of the respective receivables, default trends and prepayment rates by origination year, as well as the FICO scores of the borrowers. The Company records the difference between its VOI notes receivable and the variable consideration included in the transaction price for the sale of the related VOI as an allowance for loan losses and records the VOI notes receivables net of the allowance.

Adverse changes in economic conditions, including rising interest rates and inflationary trends, have had and may continue to have, an adverse impact on the collectability of our VOI notes receivable and we are continuing to evaluate the impact they may have on our default and/or delinquency rates.  Our estimates may not prove to be correct and our allowance for loan losses may not prove to be adequate.

Additional information about the Company’s VOI notes receivable by year of origination is as follows as of December 31, 2023 (in thousands):

		Year of Origination
		2023			2022				2021				2020				2019				2018 and Prior				Total
FICO Score of Borrower
701+		$	334,408			$	130,383			$	53,853			$	21,639			$	27,577			$	41,915			$	609,775
601-700			123,983				77,337				39,942				16,362				16,473				32,138				306,235
<601 (1)			9,409				4,674				2,003				1,464				2,047				3,009				22,606
Other			643				2,621				2,764				1,405				2,456				6,634				16,523
Total		$	468,443			$	215,015			$	98,562			$	40,870			$	48,553			$	83,696			$	955,139

(1)	Includes VOI notes receivable attributable to borrowers without a FICO score (who are primarily foreign borrowers).

Additional information about the Company’s VOI notes receivable by year of origination is as follows as of December 31, 2022 (in thousands):

(1)	Includes VOI notes receivable attributable to borrowers without a FICO score (who are primarily foreign borrowers).

The percentage of gross notes receivable outstanding by FICO score of the borrower at the time of origination were as follows:

		As of December 31,
		2023			2022
FICO Score
701+			65	%		59	%
601-700			32			38
<601			2			2
No Score (1)			1			1
Total			100	%		100	%

(1)	Primarily foreign borrowers.

The Company’s notes receivable are carried at amortized cost less allowance for loan losses.  Interest income is suspended, and previously accrued but unpaid interest income is reversed, on all delinquent notes receivable when principal or interest payments are more than 90 days contractually past due and not resumed until such loans are less than 90 days past due.  As of December 31, 2023 and 2022, $33.9 million and $24.2 million, respectively, of our VOI notes receivable were more than 90 days past due, and accordingly, consistent with our policy, were not accruing interest income.  After approximately 127 days past due, VOI notes receivable are generally written off against the allowance for loan loss.  Accrued interest was $7.7 million and $5.8 million as of December 31, 2023 and 2022, respectively, and is included within other assets in the Company’s consolidated balance sheets herein.

The following shows the delinquency status of the Company’s VOI notes receivable as of December 31, 2023 and 2022 (in thousands):

5.Variable Interest Entities

The Company sells VOI notes receivable through special purpose finance entities. These transactions are generally structured as non-recourse to Bluegreen and are designed to provide liquidity and to transfer the economic risks and benefits of the notes receivable to third parties. In a securitization, various classes of debt securities are issued by the special purpose finance entities and are generally collateralized by a single tranche of transferred assets, which consist of VOI notes receivable.

In these securitizations, the Company generally retains a portion of the securities and continues to service the securitized notes receivable for a fee pursuant to servicing agreements negotiated with third parties based on market conditions at the time of the securitization. Under these arrangements, the cash payments received from obligors on the receivables sold are generally applied monthly to pay fees to service providers, make interest and principal payments to investors, and fund required reserves, if any, with the remaining balance of such cash retained by the Company; however, to the extent the portfolio of receivables fails to satisfy specified performance criteria (as may occur due to, among other things, an increase in default rates or credit loss severity) or other trigger events occur, the funds received from obligors are required to be distributed on an accelerated basis to investors. Depending on the circumstances and the transaction, the application of the accelerated payment formula may be permanent or temporary until the trigger event is cured. As of December 31, 2023 and 2022, Bluegreen was in compliance with all material terms under its securitization transactions, and no trigger events had occurred.

In accordance with applicable accounting guidance for the consolidation of VIEs, the Company analyzes its variable interests, which may consist of loans, servicing rights, guarantees, and equity investments, to determine if an entity in which it has a variable interest is a VIE. The analysis includes a review of both quantitative and qualitative factors. The Company bases its quantitative analysis on the forecasted cash flows of the entity, and it bases its qualitative analysis on the structure of the entity, including its decision-making ability and authority with respect to the entity, and relevant financial agreements. The Company also uses its qualitative analysis to determine if it must consolidate a VIE as the primary beneficiary. In accordance with applicable accounting guidance, the Company has determined these securitization entities to be VIEs of which it is the primary beneficiary and, therefore, the Company consolidates the entities into its financial statements.

Under the terms of certain VOI notes receivable sales, the Company has the right to repurchase or substitute a limited amount of defaulted notes for new notes at the outstanding principal balance plus accrued interest.  Voluntary repurchases and substitutions of defaulted notes during 2023, 2022 and 2021 were $39.6 million, $11.4 million and $14.6 million, respectively. The Company’s maximum exposure to loss relating to its non-recourse securitization entities is the difference between the outstanding VOI notes receivable and the notes payable, plus cash reserves and any additional residual interest in future cash flows from collateral.

The assets and liabilities of the Company’s consolidated VIEs were as follows (in thousands):

		As of December 31,
		2023				2022
Restricted cash		$	23,570 $			$	19,461
Securitized notes receivable, net		$	474,702 $			$	354,403
Receivable backed notes payable - non-recourse		$	603,791 $			$	440,781

The restricted cash and the securitized notes receivable balances disclosed in the table above are restricted to satisfy obligations of the VIEs.

6. VOI Inventory

The Company’s VOI inventory consists of the following (in thousands):

		As of December 31,
		2023				2022
Completed VOI units		$	281,834			$	317,492
Construction-in-progress			127,321				8,537
Real estate held for future development			66,297				63,835
		$	475,452			$	389,864

Construction-in-progress consists primarily of additional VOI units being developed in Orlando, Florida, Panama City Beach, Florida, Pigeon Forge, Tennessee, and Vail, Colorado.

In April 2023, Bluegreen/Big Cedar Vacations purchased a resort close to Branson, Missouri for $7.1 million, including transaction costs. The transaction was accounted for as an asset acquisition with the purchase price allocated to VOI inventory in the Company’s consolidated balance sheet as of December 31, 2023.

In May 2023, the Company purchased the property and other assets of a resort located in Nashville, Tennessee for approximately $53.6 million, including transaction costs.  The transaction was accounted for as an asset acquisition. Of the purchase price, $51.6 million was allocated to VOI inventory and $2.0 million was allocated to certain property and equipment in the Company’s consolidated balance sheet as of December 31, 2023.

In November 2023, Bluegreen/Big Cedar Vacations purchased a resort in Stone County, Missouri for $12.6 million, including transaction costs. The transaction was accounted for as an asset acquisition with the purchase price allocated to VOI inventory in the Company’s consolidated balance sheet as of December 31, 2023.

7. Leases

The Company is the lessee under various operating leases for certain sales offices, call centers, office space, equipment and vehicles. Some leases include one or more options to renew the leases, at the Company’s discretion, for terms of one year or more. Certain of the Company’s lease agreements include rental payments based on a percentage of sales generated at the location, and others include rental payments adjusted periodically for inflation. The Company’s lease agreements do not contain residual value guarantees or restrictive covenants which the Company believes to be material.

The Company recognizes operating lease assets and operating lease liabilities associated with lease agreements with an initial term of 12 months or greater, while lease agreements with an initial term of 12 months or less are not recorded in the Company’s consolidated balance sheets. The Company generally does not include lease payments associated with renewal options, including those that are exercisable at its discretion, in the measurement of its operating lease assets and liabilities as it is not reasonably certain that such options will be exercised.  The table below sets forth information regarding the Company’s lease agreements with an initial term of greater than 12 months (dollars in thousands):

		As of December 31,
		2023				2022
Operating Lease Asset		$	20,737			$	22,963
Operating Lease Liability			25,038				27,716
Weighted Average Lease Term (in years) (1)			2.31				2.42
Weighted Average Discount Rate (2)			4.31	%			3.76	%

The Company generally recognizes lease costs associated with its operating leases on a straight-line basis over the lease term, while variable lease payments that do not depend on an index or rate are recognized as variable lease costs in the period in which the obligation for those payments is incurred.  The table below sets forth information regarding the Company’s lease costs, which are included as selling, general and administrative expenses in the Company’s consolidated statements of income for the periods presented (in thousands):