MRP 10-K & 10-Q changes, risk factors and insider trading
Millrose Properties, Inc. · NYSE · Real Estate · CIK 2017206 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “We are subject to risks associated with having a highly concentrated portfolio.”
New heading “We have not obtained environmental reports on all of our real estate assets, and we rely upon our counterparties for certain information regarding the homesites.”
New heading “Our counterparties’ obligation to undertake Land Development on our land assets may negatively impact our business.”
New heading “Disruptions to our technology platform could impair our ability to execute transactions and recycle capital.”
New heading “We have a substantial amount of indebtedness. Our substantial indebtedness could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry, reduce our funds available for discretionary purposes, and increase the risk that we might default on our indebtedness.”
New heading “We may not be able to generate sufficient cash to service all of our indebtedness.”
New heading “Despite our current indebtedness levels, we may still be able to incur substantially more debt, including secured indebtedness, and other obligations.”
New heading “Our debt agreements contain restrictions that limit our flexibility in operating our business.”
New heading “Our indebtedness subjects us to interest rate risk.”
New heading “We operate in a competitive and evolving industry, which could adversely affect our growth and profitability”
New heading “We pay substantial fees to KL which reduce funds we have available for distribution to stockholders.”
New heading “There is no guarantee that KL will successfully identify and consummate new business opportunities, which may impede our growth and reduce stockholder returns.”
Removed heading “Our initial business consists primarily of owning and selling the Transferred Assets and the Supplemental Transferred Assets in connection with providing the HOPP’R to Lennar. Therefore, we are subject to risks associated with having a portfolio that is highly concentrated by one business counterparty.”
Removed heading “Lennar’s Work on the Transferred Assets and on any Future Property Assets we (through Millrose Holdings) acquire in connection with our ongoing relationship with Lennar may negatively impact our business.”
Removed heading “We entered into a HOPP’R License Agreement with a wholly-owned subsidiary of Lennar, which is critical to our business. The HOPP’R Rights are owned by a subsidiary of Lennar, and any changes to the HOPP’R License Agreement will impact our access to the HOPP’R Rights and may adversely impact our business.”
Removed heading “Our business relies on our ability to provide the HOPP’R, including the Recycled Capital HOPP’R, to our customers, and we may lose our competitive advantage against other land banks as other entities in the future may also acquire a license to provide the HOPP’R to their customers.”
Removed heading “We pay substantial fees to KL, which payments increase the risk that we may not earn a profit. There is also no guarantee that KL will be successful identifying and consummating new business opportunities with Other Customers, which also increases the risk that you will not earn any returns on your investment.”
Removed heading “Lennar currently retains ownership of a certain amount of our common stock, and its decisions as to future distributions or dispositions of our common stock, which is out of our control, may have a material adverse impact on the value of our common stock.”
Removed heading “We are an “emerging growth company” and intend to take advantage of reduced disclosure requirements applicable to emerging growth companies, which could make our common stock less attractive to investors.”
Largest changes
“In the event Millrose refuses to sell any Homesite to Lennar upon Lennar’s exercise of a Purchase Option, Lennar has an Enforcement Right to compel Millrose to sell Lennar the Homesite(s). If Millrose does not sell the Homesite(s) to Lennar by the end of the 10 day cure period, Lennar has the immediate right, without penalty and without further notice, to stop payment on all Monthly Option Payment obligations with respect to all properties subject to the Lennar Agreements, and such cessation of payments is not considered a default or breach under the terms of the Lennar Agreements. …”see in full comparison
“As a holding company, we are completely reliant on the success of the businesses operated by our subsidiaries. Millrose intends to provide the HOPP’R to each customer through a separate subsidiary. For example, Millrose Holdings provides the HOPP’R to Lennar through the Property LLCs. Millrose Holdings may also provide the HOPP’R to Lennar Related Ventures (with approval from Lennar, to be provided at Lennar’s discretion) or Millrose may provide the HOPP’R to such Lennar Related Ventures through one or more Other Subsidiaries as determined by Lennar and our Manager. …”see in full comparison
“If we refuse to sell homesites to Lennar after it exercises a purchase option, Lennar has an Enforcement Right by which it can compel us to sell and, if we fail to comply within a ten-day cure period, Lennar may immediately stop all monthly option payments on all properties covered by the Lennar Agreements without penalty or breach. This could significantly reduce our cash flow and jeopardize our ability to maintain working capital and make required distributions to qualify as a REIT. …”see in full comparison
“We have a substantial amount of indebtedness. Our substantial indebtedness could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry, reduce our funds available for discretionary purposes, and increase the risk that we might default on our indebtedness.”see in full comparison
“make it more difficult for us to satisfy our obligations with respect to our indebtedness, and any failure to comply with the obligations of any of our debt instruments, including restrictive covenants, could result in an event of default under the Indentures (as defined below) and the Revolving Credit Agreement;”see in full comparison
“We entered into the Credit Agreement, which provides for a revolving credit facility with commitments in an aggregate amount of $1.335 billion, and may also seek to pursue additional debt financing, all of which may be available to manage cash needs and reduce drag on returns, as well as for use to provide the HOPP’R to Other Customers. However, there is no guarantee that such sources of additional cash will be obtained or will be sufficient to cover all of our business growth initiatives. See “Part II, Item 7. …”see in full comparison
Full comparison: every changed paragraph (341)
Risks Related to Our Business Model and Investment in a NewlyRecently Formed Entity
We are a newlyrecently formed company with limited operating history, and you have a limited basis on which to evaluate our ability to achieve our business
objectives or to even perform as a standalone and separate business.
Millrose was incorporated as a Maryland corporation on March 19, 2024 and its Class A Common Stock was listed on the NYSE on February 7, 2025 at the time of the Spin-Off from Lennar. Because we have limited operating history as an independent public company, you have a limited basis upon which to evaluate our ability to achieve our business objectives and perform as a standalone and separate business. The financial information included in this Form 10-K for the periods prior to the Spin-Off do not reflect the financial condition, results of operations or cash flows that we probably would have achieved as a separate, publicly-traded company during the pre-Spin-Off periods, or those that we are likely achieve in the future. The financial information of the Predecessor Millrose Business prior to the Spin-Off also does not reflect the additional costs required to operate as a publicly traded company and maintain compliance with all applicable laws and regulations to which publicly traded companies are subject.
Millrose was incorporated as a Maryland corporation on
March 19, 2024. Millrose Holdings, our wholly-owned subsidiary, was formed on March 13, 2024 as a limited liability company under the laws of the State of Delaware. As of the date of this Form 10-K,
the majority of our business operations are comprised of the Transferred Assets, the Supplemental Transferred Assets and the Lennar Agreements. Because we have limited operating history, you have a limited basis upon which to evaluate our ability to
achieve our business objectives and perform as a standalone and separate business. If we fail to achieve our business objectives, we will generate limited operating revenues which may not allow us to perform and grow as a standalone business.
We have limited operating history as an independent public company, and the financial information provided herein is not necessarily
representative of the results that we would have achieved as a separate, publicly traded company. Also, the Transferred Assets did not produce revenues during the periods to which the financial statements included in this Form 10-K relate. Accordingly, the financial information included in this Form 10-K does not necessarily reflect the financial condition, results of operations or cash flows that
we would have achieved as a separate, publicly-traded company during the periods presented, or those that we will achieve in the future. As we have not historically been a publicly traded company, the financial information also does not reflect the
additional costs required to operate as a publicly traded company and maintain compliance with all applicable laws and regulations to which publicly traded companies are subject. Additionally, in connection with the
Spin-Off, we only received the Business Assets from Lennar, which does not include the carryover of any existing operations, personnel or other infrastructure. We will not benefit from administrative and
support services from Lennar and will instead rely on the Manager pursuant to the terms of the Management Agreement. As such, our business, operations, facilities, personnel, infrastructure, systems and other resources are all newly formed and
wholly separate from and not comparable to those of Lennar’s, except pursuant to the relationships described under the Master Program Agreement and Master Construction Agreement relating to the Lennar Services.
OtherIf factorswe fail to achieve our business objectives, we will generate limited operating revenues which may not allow us to perform and grow as a standalone business. Factors that could materially and adversely impact our results may include, but are not limited to, the following:
The Spin-Off did not include the carryover of any existing operations, personnel or other infrastructure. We do not benefit from administrative and support services from Lennar and instead rely on the Manager pursuant to the terms of the Management Agreement. As such, our business, operations, facilities, personnel, infrastructure, systems and other resources are all recently formed and wholly separate from and not comparable to those of Lennar, except with respect to the services provided by Lennar pursuant to the Master Program Agreement.
We have incurred and will continue to incur increased expenses as a recently formed, independent public company, which have been paid and will be paid for by our Manager as part of the Manager’s responsibilities (such expenses are covered by the Management Fee and are not separately reimbursed by us to our Manager), except as described under “Part I, Item 1. Business —Our Manager.”
Since the Spin-Off, our primary business and source of revenues have been and will continue to be from Lennar pursuant to the Lennar Agreements. While Millrose has acquired other homebuilders as new counterparties, there is no guarantee that Millrose will continue to be successful in negotiating agreements with additional counterparties. Millrose expects that future arrangements will be similar to its current arrangements with counterparties, but there is no certainty that Millrose will be able to successfully negotiate for substantially all of the same terms it has in the current counterparty agreements, including with respect to pooling.
In addition to our existing debt obligations under the Revolving Credit Facility, 2030 Notes, and 2032 Notes, we may pursue additional debt financing to support our business growth initiatives. However, there can be no assurance that such financing will be obtained or will be sufficient to cover all of our planned initiatives. Additionally, our ability to obtain additional debt financing is subject to the Debt-to-Equity Ratio Limit, which may restrict the level of financing we can obtain.
Lennar, as the original parent company of Millrose and the initial contributor of assets transferred to Millrose in connection with the Spin-Off, has certain Founder’s Rights, which are exclusive to Lennar, including the Management Succession Consent Right, the Effective Equity Price Protection Right, the Enforcement Rights, the Applicable Rate Adjustment Right, the Capital Priority Right, the Secured Financing Collateral Consent Right, and the Pause Period Designation Right, among others. As such, Lennar may have influence over certain corporate matters, which may deter potential investors from investing in Millrose and may deter potential counterparties other than Lennar or Lennar Related Ventures from doing business with Millrose. Additionally, Lennar’s Capital Priority Right limits the amount of capital Millrose has available for transactions with counterparties other than Lennar or Lennar Related Ventures, which may make it difficult to provide our homesite option platform to such counterparties. For additional information regarding Lennar’s rights, see “Part I, Item 1. Business—Operational Agreements with Lennar—Founder’s Rights Agreement.”
The Lennar Agreements do not have an expiration date; however, Lennar is not obligated to enter into future transactions with Millrose or provide any new business opportunities to Millrose, including referrals of Lennar Related Ventures. While the Lennar Agreements contemplate an ongoing business relationship and grant Lennar a Capital Priority Right, they do not provide us with exclusivity, rights of first refusal, first look, or other priorities for future opportunities. As a result, Lennar may choose not to offer us additional business for any reason, including utilizing traditional land banking arrangements, engaging other providers, or determining that the terms of the Lennar Agreements are not competitive. Additionally, Lennar’s existing land banking relationships with other providers could limit the number of opportunities available to us with respect to future property assets.
We or the Manager have made investments to outsource from other providers certain facilities, systems, infrastructure and third-party consultants and experts outside of our Manager. If the cost of these investments exceeds the Management Fee, our Manager may seek to renegotiate the Management Agreement.
KL may decide to execute on different business strategies and make business decisions different than those made in the past, which may lead to outcomes that do not achieve anticipated objectives and may adversely affect our financial performance.
We have a limited history of operating our homesite option platform. Our ability to grow depends on being a preferred partner with our counterparties for funding land acquisition and development, as well as securing additional counterparty agreements. If we are unable to achieve these objectives, our growth prospects could be adversely affected.
Other significant changes may occur in our cost structure, management, financing and business operations as a result of our new status as an
a recently independent company.
The Supplemental Transferred AssetsRausch Transaction included properties outside of the geographies in which Lennar has
historically operated, and property values in those geographies may be different from those in which Lennar has operated.
The
Homesites and prospective Homesiteshomesites that Millrosewe acquired from Rausch in connection with the Supplemental Transferred Assets Transaction are located in asome number of differentU.S. geographies in the United States, a substantial number of which are in
states in whichwhere Lennar hashad not historically operated.operated Lennar does not have expertise and experience in purchasing land assets, developing Homesites and selling finished Homesites to homebuyers in such states, and Lennar will need to rely on the
personnel from Rausch that it acquired as part of the acquisition for their expertise in such geographies. The skills and expertise of Rausch’s personnel may not be commensurate as those of existing Lennar personnel, and as such, the Lennar
Services (at least with respectprior to the SupplementalRausch TransferredTransaction. Assets and future properties acquired in these new geographies) may not meet all expectations based on Lennar’s historical practices and results. Additionally, theThe differences in
geographies may also impact Lennar’s decision-making with respect to its Purchasepurchase Optionsoption exercises, which could be different from how they determine their Purchasepurchase Optionsoption exercises for the Transferredhomesites Assetstransferred andby anyLennar Homesitesto us in geographies
the Spin-Off or those in whichmarkets where Lennar has traditionally operated.operates. All theseSuch differences could impactaffect Millrose’sour business, operations and financial condition in ways that are difficult to predict.
We are subject to risks associated with having a highly concentrated portfolio.
Our business consists primarily of owning and selling assets in connection with providing our homesite option platform to Lennar and Other Counterparties. Lennar is currently our largest counterparty and our business was initially formed to engage in land bank transactions with Lennar as well as potential Lennar Related Ventures and Other Counterparties. We do not currently intend to diversify our business operations beyond growing our homesite option platform and continuing to provide development loans to our developers. Risks associated with a highly concentrated portfolio include, but are not limited to, the following:
Although we have diversified our counterparty base since the Spin-Off and intend to continue doing so, there is no assurance that we will successfully attract or retain additional counterparties in the near term. Even as we attract new counterparties, the scope of our business operations will likely be limited to providing the homesite option platform and providing development loans.
Our Real Estate Portfolio is concentrated in three states (California, Florida and Texas), with a substantial portion located in Florida and Texas. This geographic concentration may increase our exposure to market fluctuations and environmental risks, as discussed elsewhere in this “Risk Factors” section.
Our initial business consists primarily of owning and selling the Transferred Assets and the Supplemental Transferred Assets in connection with
providing the HOPP’R to Lennar. Therefore, we are subject to risks associated with having a portfolio that is highly concentrated by one business counterparty.
Initially, our business operations have been mostly limited to providing the HOPP’R for the Transferred Assets and the Supplemental
Transferred Assets to Lennar, who is currently our largest counterparty. Millrose (including Millrose Holdings) was created by Lennar for the primary purpose of providing the HOPP’R to Lennar and, in the future, also to potential Lennar Related
Ventures and Other Customers. As a result, we initially have had limited other customers, business partnerships, ventures, projects or workflow, and we are not guaranteed to obtain any in the near-term. We intend, through future subsidiaries, to
continue to diversify our customer portfolio and extend the HOPP’R to Lennar Related Ventures and Other Customers in the United States, but there is no guarantee to what extent this will happen, or if we will be
successful in attracting and retaining more new customers even if we are able to expand our business operations. Following the Spin-Off and after the Supplemental Transferred Assets Transaction, our Real
Estate Portfolio is primarily limited to the Transferred Assets and the Supplemental Transferred Assets, which are concentrated across a limited number of U.S. states. As of December 31, 2024, a significant amount of the Transferred Assets and
the Supplemental Transferred Assets taken together were concentrated in three states (California, Florida and Texas), with a substantial portion located in Florida and Texas. The geographic concentration of such land assets could cause us to be more
susceptible to market risks and environmental risks, as discussed elsewhere in this “Risk Factors” section.
Even as we attract
new customers other than Lennar, the scope of our business operations will likely be limited to providing the HOPP’R (either the Recycled Capital HOPP’R or any tailored forms of the HOPP’R with individually negotiated features, which
may not be the same features as the Recycled Capital HOPP’R) or similar operations. We entered into the Credit Agreement, which provides for a revolving credit facility with commitments in an aggregate amount of $1.335 billion, and may
also seek to pursue additional debt financing, all of which may be available to manage cash needs and reduce drag on returns, as well as for use to provide the HOPP’R to Other Customers, but there is no guarantee that such sources of additional
cash will be obtained or will be sufficient to cover all of our business growth initiatives. See “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources
Following the Spin-Off” for more information. Additionally, the ability of Millrose to obtain additional debt financing is subject to the Debt to Equity Ratio Limit. However, issuances of debt or equity required to finance any relationships to
provide the HOPP’R to new customers could result in impacts to our business and to our stockholders, including increasing our debt to equity ratios, dilution for our existing stockholders (see “—Risks Related to Our Common
Stock—Your voting power in Millrose may be further diluted if we issue more shares of our common stock in the future, including in connection with the acquisition of any Future Property Assets.”), and risk of default by our customers.
Additionally, drawdowns on our revolving credit facility under the Credit Agreement are subject to repayment and interest, which may become costly to us in the event we are required to repay the borrowings under the facility and are not able to
raise alternate financing with which to do so. Furthermore, there is no guarantee that such sources of additional capital will be obtained on acceptable terms or at all or will be sufficient to cover all of our business growth initiatives, and
pursuant to the Lennar Agreements, Millrose may not enter into any third-party financing arrangements if such financing arrangement would cause the collective debt to equity ratio of Millrose and its affiliates to exceed 1:1, unless it obtains the
prior approval of Lennar. This may limit our ability to provide the HOPP’R to any customers who may want us to finance their relationships with us through debt issuances. As discussed in this “Risk Factors” section, maintaining land
assets is costly and exposes us to significant risks, and due to our lack of business diversification, we do not have the ability to hedge that risk through other operations. As we do not intend to diversify our business operations and only focus on
growing the HOPP’R and similar operations, we may not be able to be sustainable as a business if the costs related to our risk exposures in maintaining land assets become more than what we can pay with the capital resources available to us.
Additionally, if our relationship with Lennar were to deteriorate as a result of disputes regarding the management of the Transferred Assets and the Supplemental Transferred Assets, disputes under our business agreements, or for other reasons, we
may not be able to enter into any new agreements to provide the HOPP’R to one or more other buyers on terms equivalent or comparable to those set forth in the Lennar Agreements, and the costs related to finding an alternate buyer for the
properties may be significant and have a material impact on our business, financial condition or results of operations.
There can be no
assurance that we will not experience any defaults and/or terminations under the Lennar Agreements. Due toBecause our portfolio is highly concentrated portfolio with Lennar, any factors that adverselynegatively affect Lennar’s results of operations andor capital resources may
in turncould have a significant adverse impact on our business, financial conditioncondition, or results of operations, as discussed elsewhere in this “Risk Factors” section.
Under the Lennar Agreements, Millrose may not enter into third-party financing arrangements that would cause the combined debt-to-equity ratio of Millrose and its affiliates to exceed 1:1 without Lennar’s prior approval. This restriction may limit our ability to provide funding to counterparties who prefer to structure their relationships with us through debt issuances.
Maintaining land assets is costly and exposes us to significant risks. Because we do not intend to diversify beyond the homesite option platform and similar operations, we cannot offset these risks through other business lines. If the costs associated with maintaining land assets exceed the capital resources available to us, our ability to sustain our business could be adversely affected.
Our recycled capital business model is contingent on our customerscounterparties electing to exercise their land
purchase options.
The continued sustainability of Millrose’s self-financing recycled capital business model, which is
intended to generally provide Millrose with reliable, consistent and uninterrupted access to capital, is contingent in the first instance on Lennarour and any Other Customerscounterparties electing to exercise their land purchase options. LennarHowever, isour counterparties are under no
obligation to exercise itstheir options,land purchase options and we would have no ability to force Lennar to purchase Homesitesthe ifhomesites, itand decidedthey notmay decline to exercise the options it has pursuant to the Lennar Agreements, which is possiblethem in the event of a significant downturn in
the market. MillroseIf a counterparty forfeits or terminates their land purchase options, we can request (and Lennar cannot unreasonably deny such request) that Lennarthey build homes on our behalf of Millrose on any Homesites for which it hasthe forfeited orhomesite terminated(which itsrequest Purchasethey Optionscannot unreasonably deny) and Millrosewe may attempt to sell such
completed Homesiteshomesites to third parties. However, there is no guarantee we would be able to achieve such sales. Such constructionConstruction and the subsequent resale to the third parties would requirerequires additional time and cost to Millrose, including hiring
personnel and providing the capital to build the homes, thatwhich willwould be borne by us. The price for which we can sell homes to third parties may be significantly less than the amounts of our investments.
We entered into the Lennar Agreements and Management Agreement simultaneous with the Spin-Off from Lennar. These agreements were prepared at Lennar’s direction, in consultation with its strategic advisor, Kennedy Lewis. Because Lennar’s and Millrose’s interests may have differed when these agreements were negotiated, the agreements may not have fully reflected Millrose’s best interests. Risks associated with conflicts of interest in our agreements with Lennar include, but are not limited to, the following:
Because we lacked independent management prior to the Spin-Off, the agreements we entered into were not negotiated at arm’s length, and we did not independently confirm that their terms were consistent with market standards. As a result, the terms of these agreements may be more favorable to Lennar than if Lennar had negotiated with an unaffiliated third party, and we cannot assure you that they are as favorable to Millrose as would have resulted from arm’s-length negotiations.
Certain Lennar Agreements, including the Founder’s Right Agreement, include rights exclusive to Lennar that we cannot offer to Other Counterparties, which may reduce our negotiating leverage with Other Counterparties. These rights may not align with the interests of our stockholders now that we are a publicly traded company and may differ from terms (and Bylaws provisions) that we could have obtained through arm’s-length negotiations with unaffiliated third parties. As a result, these rights could limit our flexibility, deter potential investors and counterparties, and adversely affect the market price of our Class A Common Stock and in turn the value of our Class B Common Stock.
Certain terms in the Lennar Agreements may hinder our ability to expand our business, attract new counterparties to use our homesite option platform, or negotiate competitive terms with counterparties other than Lennar.
Some terms in the Lennar Agreements make it difficult for us to amend them without significant cost and effort, and without obtaining Lennar’s written consent. We cannot assure you that we will be able to renegotiate, amend, or terminate any agreements, or specific provisions, that we consider unfavorable or adverse to our interests. Our continued obligations under these agreements could materially and adversely affect our business, growth opportunities, financial condition, and results of operations.
Certain of the rights granted to Lennar in the Founder’s Rights Agreement are exclusive to Lennar, which will require our Board to enforce such rights.
Assets acquired from Lennar in connection with the Spin-Off, in the Rausch Transaction, and all other land assets acquired under the Lennar Agreements were placed into pools under certain Multiparty Cross Agreements. Future property assets acquired under the Lennar Agreements will also be pooled under additional Multiparty Cross Agreements (or added to existing Multiparty Cross Agreements). These pools were structured primarily for diversity across geographies, communities, and home types, but the selection and pooling decisions were made solely by Lennar, with input from Kennedy Lewis, before we had independent management. As a result, the criteria used may not reflect standard market practices, and we cannot assure you that the composition of these pools will be favorable to us. If assets within a pool are negatively affected by market or operational factors, the value of all assets in that pool could decline at the same time. Although pooling is intended to follow broad diversification principles, Lennar retains substantial discretion in selecting pool properties and setting pool terms. We may have limited ability to negotiate pooling conditions with Lennar or Lennar Related Ventures, and we may not be able to negotiate pooling terms at all with Other Counterparties.
We entered into the Lennar Agreements with Lennar to provide a framework for our relationship with
Lennar, including the Founder’s Rights Agreement, Master Program Agreement, Master Option Agreement, Master Construction Agreement, Guaranty, various Multiparty Cross Agreements and Project Addenda, among others. See “Part III, Item 13.
Certain Relationships and Related Transactions, and Director Independence—Transactions with Lennar” for a full list and summary of the Lennar Agreements. All of the Lennar Agreements, as well as the Management Agreement, have been prepared
at the direction of Lennar, in consultation with Kennedy Lewis, which acted as Lennar’s strategic advisor with respect to the Spin-Off. These agreements were entered into in the context of the Spin-Off by Lennar on behalf of Millrose, as a wholly-owned subsidiary of Lennar, prior to the completion of the Spin-Off. Certain of the terms in the Lennar Agreements and
the Founder’s Rights Agreement were the result of negotiations within Lennar in anticipation of, or in connection with, the Spin-Off, in which Lennar’s interests and Millrose’s interests may
have differed or in which Millrose’s best interests were not considered. Certain of the rights granted to Lennar in the Founder’s Rights Agreement, which are exclusive to Lennar, may not align with the interests of Millrose’s other
stockholders now that it is a publicly traded company. These rights may not reflect terms (and Bylaws provisions) that would have resulted from arm’s-length negotiations with one or more unaffiliated
third parties. As a result, these rights may deter potential investors, which could depress the market price of our Class A common stock and in turn the value of our Class B common stock, and may deter potential Other Customers from doing
business with Millrose, as Other Customers do not have access to certain rights that are exclusive to Lennar.
Certain of the terms in the
Management Agreement were the result of negotiations between Lennar and Kennedy Lewis, and there can be no assurance that Lennar negotiated the Management Agreement with Millrose’s best interests in mind. Accordingly, there may have been
conflicts of interest in negotiating and finalizing these agreements. Because Millrose had no independent management or personnel prior to the Spin-Off, the preparation and finalization of all terms in any
agreement Millrose or Millrose Holdings entered into have not been done at arm’s length, and Millrose (and the KL team that will be performing on Millrose’s and Millrose Holdings’ obligations under these agreements as our Manager) had
not independently verified that the terms of such agreements are comparable to standard market terms. The terms of the agreements may be considered more favorable to Lennar than if Lennar had negotiated with a third-party land bank. Likewise, there
can be no assurance that the terms of these agreements will be considered as favorable to Millrose or Millrose Holdings as would have resulted from arm’s-length negotiations with one or more unaffiliated
third parties. Some of these agreements, including the Founder’s Rights Agreement, include rights exclusive to Lennar that Millrose is not able to grant to Other Customers, which may impact our negotiating leverage with potential Other
Customers. Additionally, during the period in which the terms of those agreements were negotiated, we did not have a board of directors that was independent of Lennar and KL had not been hired, appointed or retained. Further, KL’s parent, Kennedy Lewis, was acting as Lennar’s strategic advisor
prior to the Spin-Off and was not acting in any capacity on Millrose’s behalf, including with respect to the negotiations of any of these agreements, which means that Kennedy Lewis’s interests are
also not aligned with (and in some respects may be adverse to) Millrose’s and Millrose Holdings’ interests.
As a result of
these factors, the terms of these agreements may not reflect terms that would have resulted from arm’s-length negotiations between unaffiliated parties, or that would have resulted if we had been an
active company with leverage and resources to negotiate with Lennar. Some of the terms included in these agreements also make it difficult for us to amend the agreements without undue hardship and significant costs and expenses, in addition to
obtaining written consent from Lennar. Certain of the rights granted to Lennar in the Founder’s Rights Agreement are exclusive to Lennar, which will require our Board to enforce such rights. Other terms included in these agreements may hinder
our ability to expand and grow our business, including with respect to attracting new customers to use the HOPP’R or being able to successfully negotiate competitive terms with customers other than Lennar. Even though we are independent from
Lennar, there is no guarantee that we will be able to renegotiate, amend or terminate any agreements (or specific terms in such agreements) with Lennar that we deem not to be favorable to us or adverse to our interests as a standalone company, and
our continued obligations under these agreements may have a material adverse effect on our business, growth opportunities, financial condition and results of operations.
In addition, the Transferred Assets and Supplemental Transferred Assets have been placed in pools by Lennar pursuant to certain Multiparty
Cross Agreements. Future Property Assets acquired pursuant to the Lennar Agreements will also be pooled in accordance with additional Multiparty Cross Agreements (or added to existing Multiparty Cross Agreements), provided that the aggregate sum of
all Option Deposits Lennar has made, or is obligated to make with respect to such new pool of Future Property Assets, shall not at any time exceed $50,000,000 with respect to pools of the Transferred Assets and the Supplemental Transferred Assets
and $25,000,000 with respect to pools of Future Property Assets. Pools will be established with primary consideration given to diversity within pools across geographies, communities and home types. The negotiations and decisions on the selection of
the Pool Properties and the pooling of various communities together were solely done by Lennar, with input from Kennedy Lewis. As we did not have any management or personnel during this time, the discussions relating to the pooling were done for the
sole benefit of Lennar and the metrics used in considering which land assets should be pooled may not be comparable to standard market pooling considerations. There can be no guarantees that the constitution of each of the pools selected by Lennar
with regard to the Transferred Assets and the Supplemental Transferred Assets will be favorable to us, which may result in certain pools of assets decreasing in value at the same time as a consequence of negative impacts that may impact all of the
assets in a certain pool. Although the pools should be selected according to certain broad-based principles of diversification, there remains a substantial amount of discretion and judgment in selecting the Pool Properties and setting the pools. In
the future, we cannot guarantee that we will be able to negotiate better pooling conditions with Lennar or any Lennar Related Ventures, or that we will be able to negotiate any pooling conditions at all with any Other Customers. In addition, we may
be limited in how much we can negotiate with Lennar: we do not have as much leverage with Lennar in negotiating the pooling of Future Property Assets as we are significantly dependent on the Lennar Agreements, and Lennar is under no obligation to
offer us business following the initial transfer of the Business Assets and outside of utilizing the HOPP’R for the Transferred Assets and the Supplemental Transferred Assets. Lennar can decide to use a traditional Land Banking provider instead
of Millrose if they do not like the terms they have with us (including with respect to any pooling decisions).
If we refuse to sell homesites to Lennar after it exercises a purchase option, Lennar has an Enforcement Right by which it can compel us to sell and, if we fail to comply within a ten-day cure period, Lennar may immediately stop all monthly option payments on all properties covered by the Lennar Agreements without penalty or breach. This could significantly reduce our cash flow and jeopardize our ability to maintain working capital and make required distributions to qualify as a REIT. Even if we dispute Lennar’s right to purchase based on pooling cross-termination provisions, we must still sell the homesites and then pursue litigation to recover losses. Such litigation could be costly, time-consuming, and may not be economically viable. As a result, these Enforcement Rights create strong financial pressure to comply with Lennar’s option exercises even when we believe we are not legally obligated, which could materially and adversely affect our operations and liquidity.
In the event Millrose refuses to sell any Homesite to Lennar upon Lennar’s exercise of a Purchase Option, Lennar has an Enforcement Right
to compel Millrose to sell Lennar the Homesite(s). If Millrose does not sell the Homesite(s) to Lennar by the end of the 10 day cure period, Lennar has the immediate right, without penalty and without further notice, to stop payment on all Monthly Option Payment obligations
with respect to all properties subject to the Lennar Agreements, and such cessation of payments is not considered a default or breach under the terms of the Lennar Agreements. However, if Millrose alleges in good faith that Lennar does not have the
right to purchase the Homesites, solely because Lennar’s exercise violated specifically identified pooling cross-termination rights under the applicable Multiparty Cross Agreement(s), then Millrose must notify Lennar of the dispute prior to the
end of the ten-day cure period. However, in the event of such a dispute, Millrose is still required to immediately sell the exercised Homesite(s) to Lennar, but Lennar must continue to pay the Monthly Option
Payments. In other words, Millrose must still sell the Homesite(s) as if Lennar were in the right, and then litigate the issue to seek remedy and/or compensation. Such litigation could be very costly and take years to resolve, and not be
economically worth pursuing, leaving Millrose without other forms of recourse to recoup any potential losses. If Millrose refuses to sell the Homesite(s) to Lennar for which the Purchase Option has been exercised, then Lennar’s Enforcement
Rights allow it to immediately stop all Monthly Option Payments on all properties covered by the Lennar Agreements (and any other option agreements between Lennar and Millrose), which could jeopardize Millrose’s ability to maintain enough
working capital to maintain its business operations, and could also jeopardize its ability to make distributions to stockholders that are required to maintain its REIT qualification.
As such,In any time there is a dispute with Lennar concerningover the exercise of Purchasepurchase Options,options, Millrosethe terms of the Lennar Agreements would berequire in the disadvantaged position
of havingus to give up the assets or perform the obligation before the dispute is resolved, and then gopursue through the cost-time-consuming and time-intensivecostly exercise of litigating the matter through the courtslitigation to tryrecover and reclaim the losslosses (or, if itwe decidesdecide not to
pursue litigation, it likely would need to absorb the costs). These Enforcement Rights makesmake any potential dispute with Lennar (with respect to Homesite takedowns)it very expensive and cumbersomeburdensome forto Millrose,refuse withoption exercises, creating strong financial incentivespressure to defer
tohonor Lennaroption exercises even duringwhen situationswe wherebelieve therewe mayare benot alegally goodobligated faithto disputedo with the facts in favor of Millrose.so.
If a dispute is litigated
and resolved in favorLennar’s offavor, Lennar, thesethe Enforcement Rights and therelated payments required under them would be in addition to any damagescourt-awarded thatdamages, may be otherwise awarded to Lennar by the court, further enhancingincreasing the risk thatof anya such dispute would result in
material adverse impact on Millrose’sour financial condition. If a dispute is resolved in Millrose’sour favor, the payments setprovided forth inunder the Enforcement Rights to Millrose may not befully sufficientcompensate tous coverfor theour actual losslosses, experienced by Millrose,
even supplementedwhen combined with any damages awarded by the damagescourt. thatAs a courtresult, might order. Anyany exercise by Lennar of itsLennar’s Enforcement Rights pursuant tounder the Founder’s Rights Agreement may thereforecould severely negativelyand impactadversely Millrose’saffect our business, operationsoperations, financial condition, and financial
condition, as well as Millrose’sour ability to enforce the terms of itsour agreements with Lennar.
We have not obtained independent appraisals or
fairness opinions as to the value of any of our real estate assets or any environmental reports on any of our real estate assets, including those acquired in the TransferredSpin-Off Assets, and we rely uponfrom Lennar and our Other Customers for certain information regardingin the
Homesites. Rausch Transaction.
We have not obtained independent appraisals or valuations for our real estate assets, including the assets acquired in the Spin-Off and the Rausch Transaction. As a result, we cannot assure you that the values assigned to our real estate assets are accurate. In addition, any appraisals we obtain in the future may be overstated, and market values could decline. We relied on Lennar for the value of our total assets acquired in the Spin-Off, which were conveyed to us in their then current condition. We rely on our counterparties for information regarding the homesites we acquire, which are subject to change as counterparties provide different or additional information as part of the acquisition process and during the period we own the homesites.
We have not obtained environmental reports on all of our real estate assets, and we rely upon our counterparties for certain information regarding the homesites.
No independent appraisals have been obtained to support our conclusions as to the value of our total assets or the
value of any particular property. We also did not obtain any independent third-party valuation or fairness opinion as to the value of the Transferred Assets. Appraisals we may obtain in the future from third-party appraisers may be overstated or
market values may decline. We are relying on Lennar as to the value of our total assets or the value of any particular property and the Transferred Assets have been conveyed to us in their then current condition. Additionally, following the
Spin-Off, we received information regarding the number and location of Homesites included in the Transferred Assets, which, in some cases, remains subject to further confirmation by Lennar. We rely upon Lennar and our Other Customers for information
regarding the Homesites that we acquire that may be subject to change as Lennar and Other Customers provide different or additional information as part of the acquisition process and during the period we own the Homesites.
We didhave not obtain anyobtained Phase I or similar environmental reports completed byfrom independent environmental consultants for theour Transferredreal Assets
estate assets, including those acquired in connection with the Spin-Off.Spin-Off Althoughfrom eachLennar ofand in the Rausch Transaction. Going forward, we expect to obtain Phase I and similar environmental reports for newly acquired real estate assets, although we may not do so in all cases. Lennar subsidiaries that owns the Transferred Assets prior to the Spin-Off madeprovided certain representations and warranties (including with respect toregarding title and environmental
condition) for assets acquired in the Spin-Off, and Lennar agreed to theindemnify Propertyus LLCs with respect tofor the Transferredassets Assets,acquired noin assurancesthe canRausch beTransaction. givenWhile we obtain certain representations and warranties from sellers at acquisition, we cannot assure you that a material environmental conditionconditions doesdo not exist as toon any one or more of our land assets. ThereSimilarly, canwe becannot noassure assurancesyou that anyrepresentations representations
and warranties givenprovided in connection with anyfuture acquisitions of Future Property Assets pursuant to theunder agreements with Lennarour counterparties will be sufficient to protect Millrose or its subsidiariesus from liability or risk exposuresexposure in the event there areif title or
environmental issues thatarise. Any such issues could result in significant remediation costs and have a material adverse impactseffect toon Millrose’sour business, financial conditioncondition, orand results of operations.
Ownership of land and other real estate assets is subject to environmental risks and liabilities, which may not be covered by the representations and
warranties and indemnities provided to us in the Lennarcounterparty Agreements (or any future HOPP’R agreements with new customers).agreements.
Ownership of land and other real estate assets exposes us to environmental risks and liabilities that may not be fully covered by representations, warranties, or indemnities under our counterparty agreements. Although some properties in our portfolio have environmental approvals and permits, we may still incur substantial costs and liabilities for environmental matters. Representations and warranties provided by homebuilders, including Lennar, generally cover only known conditions at the time of the applicable agreement. We remain responsible for any newly discovered issues or conditions missed during prior reviews. We cannot assure you that properties we acquire will be fully entitled or have all required approvals and permits. If we cannot negotiate to shift liability to counterparties, we will likely bear these risks.
Under various laws, property owners may be required to investigate, clean up, and remove hazardous substances and may be held liable for property damage or personal injuries caused by such substances. We could also be liable to government agencies or third parties for costs and damages they incur in connection with hazardous substances. These costs can be substantial and difficult to estimate due to uncertainties about contamination, remediation methods, local regulations, and timing. In addition, environmental laws impose ongoing operational, maintenance, and reporting requirements that may require significant compliance costs. Any remediation or compliance actions could materially and adversely affect our business, financial condition, and results of operations.
Ownership of land and other real estate assets is subject to risks associated with environmental hazards. Although most of the Transferred
Assets have all approvals and permits, including all environmental approvals and permits, we may incur substantial liabilities and costs for environmental matters. Specifically, although Lennar, which owned the Transferred Assets prior to the Spin-Off, made certain representations and warranties (including with respect to title and environmental condition) with respect to the Transferred Assets and entered into an agreement with Millrose making certain
representations and warranties with respect to the Supplemental Transferred Assets, such representations are limited to liabilities known at the time of the Spin-Off and the Supplemental Transferred Assets
Transaction, respectively. As such, Millrose and Millrose Holdings are still responsible in the event anything new is discovered or in the event the original consultants missed anything in their reviews and evaluations. With respect to any Future
Property Assets, there can be no assurance that such assets will already be fully entitled and have received full approvals and permits prior to our acquisition of them pursuant to the HOPP’R arrangements with Lennar, any Lennar Related Venture
or Other Customers, as applicable. In such cases, unless we can separately negotiate to divert liability risk to the customer (such as the put back right that we have with Lennar with respect to certain Future Property Assets), we will likely be
responsible for such risk exposures and liabilities. Under various laws, owners of land and other real estate assets may be required to investigate, clean up and remove hazardous substances present at or migrating from properties they own or operate
and may be held liable for property damage or personal injuries that result from hazardous substances. These laws also expose us to the possibility that we may become liable to government agencies or third parties for costs and damages they incur in
connection with hazardous substances. The costs and damages that may arise from environmental hazards may be substantial and are difficult to assess and estimate for numerous reasons, including uncertainty about the extent of contamination,
alternative treatment methods that may be applied, the location of the property which subjects it to differing local laws and regulations and their interpretations, as well as the time it may take to remediate contamination. In addition, these laws
also impose various requirements regarding the operation and maintenance of properties and recordkeeping and reporting requirements relating to environmental matters that require us to incur costs to comply with. Any actions we may take to comply
with such requirements, as well as any actions we may take to mitigate these risks and liabilities may be costly and could impact our business, financial condition or results of operations.
We are subject to numerous general and industry-specific environmental laws and regulations, including those governing silvicultural activities, pesticide and herbicide use, harvesting, road building, endangered species protection, stormwater and surface water management, air emissions, contaminated site cleanup, health and safety, and building codes. Although certain homebuilders provide representations and warranties regarding title and environmental condition, these provisions my not fully protect us. If counterparty agreements do not adequately shift liability risk, we may incur significant expenditures to comply with applicable environmental laws and regulations. We cannot assure you that we will receive similar (or any) representations and warranties from future counterparties.
We are subject to a wide range of general and industry-specific laws and
regulations relating to the protection of the environment, including silvicultural activities, including use of pesticides and herbicides, harvesting, and road building, endangered and at-risk species,
stormwater and surface water management, air emissions, the cleanup of contaminated sites, health and safety matters, building codes and other related regulations. As such, and although Lennar made certain representations and warranties (including
with respect to title and environmental condition) to Millrose with respect to the Transferred Assets under the Lennar Agreements, we may incur significant capital, operating and other expenditures to comply with applicable environmental laws and
regulations if the provisions in the Lennar Agreements are not sufficient to adequately shift liability risk to Lennar. There can also be no assurance that we will be able to receive similar (or any) such representations and warranties from any Lennar Related Ventures or Other Customers in the future. We also could incur in the future substantial costs, such as civil or criminal fines, sanctions
and enforcement actions (including orders limiting our operations or requiring remedial actions), cleanup and closure costs, and third-party claims for property damage and personal injury as a result of violations of, or liabilities under,
environmental laws and regulations on land we currently own or have owned in the past. Such costs would be incurred by Millrose directly, as they would not be paid for by our Manager pursuant to the Management Agreement. Because environmental
regulations are constantly evolving, we may continue to incur costs to maintain compliance with those laws and our compliance costs could increase materially. In addition, air emissions, stormwater, and surface water management regulations may
present liabilities and are subject to change. Future compliance with existing and new laws, regulations, environmental permits, and other requirements may disrupt our business operations, increase potential liabilities, and require significant
expenditures.
Additionally, weWe may be subject to conservation laws and regulations that apply torestrict activities thataffecting would adversely impact a
protected species or significantlytheir degrade its habitat.habitats. Although permits and approvals are in place,place or will be in place,obtained for allcurrent construction sites as required with respect to protected species, certain species on the Transferred Assets or the
Supplemental Transferred Assets may become protected in the future undersites, new laws andcould regulations.designate Additionally,additional species as protected, or previously undiscovered protected underspecies current laws and regulations maycould be discoveredfound on theour Transferredproperties. Assets or the Supplemental Transferred Assets
in the future. Current or futureFuture regulations, includingsuch as increased mandatesbiodiversity formandates, biodiversity, increasedexpanded wildlife habitats, additional species classified as endangered, or if thestricter enforcement of endangered species regulationsrules, becomecould morelimit restrictive,
development on theour Transferred Assets or the Supplemental Transferred Assets may be restrictedproperties and adversely affect our business, financial conditioncondition, orand results of operationsoperations. mayWe becannot adverselyassure impacted.you There can be no assurance as to whatthat permits and approvals may
will be in place with respect tofor any Futureproperties Propertywe Assets.acquire in the future.
Our counterparties’ obligation to undertake Land Development on our land assets may negatively impact our business.
Under our counterparty agreements, our counterparties are obligated to complete Horizontal Development, which excludes home construction, and may choose, but are not required, to undertake home construction after the Horizontal Development is completed. We have also, in certain circumstances, extended development to Vertical Development on certain owned homesites. Pursuant to the counterparty agreements, Millrose provides capital for land within predetermined budgets but does not perform development activities itself. All construction work is carried out by counterparties and their third-party contractors. Risks associated with our counterparties construction activities include, but are not limited to, the following:
Predetermined development budgets do not cover liabilities arising from construction, and construction activity could result in environmental consequences that we may be required to remediate, which could significantly reduce our available cash and adversely affect our business, financial condition, and results of operations.
Management's Discussion & Analysis (MD&A)
New heading “The Spin-Off and Related Transactions”
New heading “New Home Transaction”
New heading “Invested Capital as of December 31, 2025”
New heading “Invested Capital Activity for the Three Months Ended December 31, 2025”
New heading “Properties as of December 31, 2025”
New heading “Components of Results of Operations”
New heading “Results of Operations for the Years Ended December 31, 2025, 2024, and 2023”
New heading “Year Ended December 31, 2025 Versus Year Ended December 31, 2024”
New heading “Overview of Net Income (Loss)”
New heading “Option Fee Revenues”
New heading “Development Loan Income”
New heading “Management Fee Expense”
New heading “Stock-based Compensation Expense”
New heading “Provision for Credit Loss Expense”
New heading “Other Income (Expense)”
New heading “Net Income (Loss) Before Income Taxes”
New heading “Income Tax Expense”
New heading “Year Ended December 31, 2024 Versus Year Ended December 31, 2023”
New heading “Adjusted Funds from Operations”
New heading “Cash Flows from Investing Activities”
New heading “Revolving Credit Facility”
New heading “Delayed Draw Term Loan Facility”
New heading “August 2025 Offering of Senior Notes”
New heading “September 2025 Offering of Senior Notes”
New heading “Purchase Money Mortgages”
New heading “Predecessor Millrose Business Debt”
New heading “Effects of Inflation and Seasonality”
New heading “Promissory Notes”
New heading “Homesites Under Option Contracts”
New heading “Development Loan Receivables, Net”
New heading “Recent Accounting Standards”
Removed heading “Business Overview and Background”
Removed heading “Millrose Prior to the Spin-Off”
Removed heading “Millrose Following the Spin-Off”
Removed heading “Components of Results of Operations Following the Spin-Off”
Removed heading “General and Administrative Expenses”
Removed heading “Liquidity and Capital Resources Following the Spin-Off”
Removed heading “Credit Agreement”
Removed heading “Emerging Growth Company”
Removed heading “Land and Impairment”
Removed heading “Accounting Treatment for the Spin-Off”
Largest changes
“The 2030 Notes Indenture includes certain restrictive covenants that limit the Company’s and certain of its subsidiaries’ ability to, among other things: (i) create certain liens, (ii) engage in certain sale and leaseback transactions, and (iii) effect certain mergers or consolidations, or sell all or substantially all of its assets. These covenants are subject to a number of important qualifications and exceptions as set forth in the 2030 Notes Indenture. …”see in full comparison
“The 2032 Notes Indenture includes certain restrictive covenants that limit the Company’s and certain of its subsidiaries’ ability to, among other things: (i) create certain liens (ii) engage in certain sale and leaseback transactions, and (iii) effect certain mergers or consolidations, or sell all or substantially all of its assets. These covenants are subject to a number of important qualifications and exceptions as set forth in the 2032 Notes Indenture. …”see in full comparison
“Operating Expenses: Our operating expenses after the Spin-Off include Management Fees paid to KL for management and advisory services. The Management Fee is calculated as 1.25% of Tangible Assets (as defined in the Management Agreement). All personnel are employed by the Manager or an affiliate of the Manager, and their salaries are paid by the Manager or affiliate, as relevant; therefore, we do not record personnel-related expenses, including salaries, benefits, and share-based compensation for any employees. …”see in full comparison
“The DDTL Credit Agreement contained events of default, including if KL ceased to be the Company’s manager and a replacement manager reasonably acceptable to the Required Lenders (as defined in the DDTL Credit Agreement) was not appointed within 90 days.”see in full comparison
“We did not declare or pay any cash dividends on our common stock in the year ended December 31, 2024. We intend to make regular dividend payments of at least 90% of our REIT taxable income to holders of our common stock out of assets legally available for this purpose. However, under currently applicable IRS guidance, approximately 80% of these dividends may be paid in the form of stock dividends, rather than in cash. …”see in full comparison
“Liquidity and Capital Resources Following the Spin-Off”see in full comparison
Full comparison: every changed paragraph (258)
You should read the following Management’s Discussion and Analysis of Financial Condition and
Results of Operations in conjunction with the accompanying audited combinedconsolidated financial statements of the Predecessor Millrose Business and the notes thereto included elsewhere in this Form 10-K. Some of the
information contained in this discussion and analysis constitutes forward-looking statements that involve risks and uncertainties. Actual results could differ materially from those discussed in these forward-looking statements. Factors that could
cause or contribute to these differences include, but are not limited to, those discussed below and elsewhere in this Form 10-K, particularly under the section titled “Cautionary Statement Concerning
Forward-Looking Statements.” The matters discussed in these forward-looking statements are subject to risks, uncertainties, and other factors that could cause actual results to differ materially from those made, projected, or implied in the
forward-looking statements. See the sections titled “Part I, Item 1A. Risk Factors” and “Cautionary Statement Concerning Forward-Looking Statements” for a discussion of the risks, uncertainties, and assumptions associated with
these statements.
As further described in Note 1. Description of Business to our consolidated financial statements included in “Part II, Item 8. Financial Statements and Supplementary Data” of this Form 10-K, we completed the Spin-Off from Lennar on February 7, 2025. The financial information presented herein (i) for the periods prior to the February 7, 2025 Spin-Off is that of the Predecessor Millrose Business and is derived from the consolidated financial statements and accounting records of Lennar, and (ii) for the periods after the February 7, 2025 Spin-Off is that of Millrose and its subsidiaries. Millrose was formed on March 19, 2024 and has operated as an independent company since the Spin-Off on February 7, 2025.
Our Business
Millrose is a corporation incorporated under the laws of the State of Maryland on March 19, 2024. Millrose became an independent, publicly traded company on February 7, 2025 following the Spin-Off from Lennar and its Class A Common Stock is listed on the NYSE under the symbol “MRP”. We purchase and develop residential land and sell finished homesites to homebuilders by way of option contracts with predetermined costs and takedown schedules. We serve as a solution for homebuilders seeking to expand access to finished homesites while implementing an asset-light strategy. As fully developed homesites are sold by Millrose, capital is recycled into future land acquisitions for homebuilders, providing counterparties with durable access to community growth. Our option contracts provide for the payment of recurring option fees paid by our counterparties through the term of the applicable contract. To a lesser extent, we also provide development loans secured by property intended for single-family use to certain third-party counterparties. We are externally managed and advised by KL pursuant to the Management Agreement.
The Spin-Off and Related Transactions
On the Distribution Date, we completed our Spin-Off from Lennar through a distribution of approximately 80% of Millrose’s outstanding Common Stock to holders of Lennar Common Stock as of the close of business on January 21, 2025. In connection with the Spin-Off, we received a contribution from Lennar of approximately $5.5 billion in land assets, representing approximately 87,000 homesites, and cash of approximately $1.0 billion, which included $585 million of cash deposit liabilities related to option contracts with Lennar.
On February 10, 2025, we completed the acquisition of land consisting of approximately 25,000 homesites through the acquisition of 100% of the outstanding stock of RCH Holdings, Inc., a recently formed parent holding company of Rausch, for approximately $859 million in cash, which is net of option deposits funded by Lennar and other holdbacks.
On October 10, 2025, Lennar exercised its registration rights pursuant to the Registration Rights Agreement and commenced the Exchange Offer. On November 26, 2025, Lennar announced the results of the Exchange Offer through which Lennar accepted an aggregate of 8,049,594 shares of Lennar Class A common stock in exchange for 33,298,754 shares of Class A Common Stock of Millrose. The Exchange Offer was completed on November 28, 2025. As a result, Lennar now owns a de minimis amount of Common Stock following the completion of the Exchange Offer.
New Home Transaction
On May 12, 2025, the Company entered into a commitment with New Home for Millrose to provide land banking capital of up to $700 million to support New Home’s acquisition of Landsea. On June 25, 2025, New Home completed the acquisition of Landsea and the Company funded land banking capital of $494.5 million at closing for the acquisition of a portfolio of homesites on which the Company executed option agreements with New Home. As a result of the transaction, the Company acquired $522.8 million in land assets, consisting of 4,186 homesites for $494.5 million in cash, which is net of deposits of $28.3 million related to the option contracts.
In connection with the New Home transaction, on June 24, 2025, the Company entered into the DDTL Credit Agreement that provided for a delayed draw term loan facility with commitments in the aggregate amount of $1.0 billion that was scheduled to mature on June 23, 2026. Proceeds of the DDTL Credit Agreement were used to fund the New Home acquisition of Landsea and any remaining proceeds were available for general corporate purposes. On September 11, 2025, the DDTL Credit Agreement was terminated and all obligations thereunder were repaid in full (as further described below).
Senior Notes
On August 7, 2025, the Company completed the offering of $1.25 billion aggregate principal amount of the 2030 Notes (the “August 2025 Offering”). Net proceeds of the August 2025 Offering were used to repay $500 million principal amount outstanding under the DDTL Credit Facility and $450 million principal amount outstanding under the Revolving Credit Facility, and the remainder was used for general corporate purposes.
On September 11, 2025, the Company completed the offering of $750 million aggregate principal amount of the 2032 Notes (the “September 2025 Offering”). Net proceeds of the September 2025 Offering were used to repay the entire $500 million remaining principal amount outstanding under the DDTL Credit Facility, and related expenses. The remainder was used for general corporate purposes.
Invested Capital as of December 31, 2025
Invested Capital is a non-GAAP financial measure that represents the balance on which monthly cash option fees are paid by counterparties. Invested Capital includes certain components of our consolidated financial statements related to (i) homesites under option contracts, (ii) development loans receivable, and (ii) liabilities. The most directly comparable GAAP financial measure is homesites under option contracts as presented in the Company’s consolidated balance sheets. Management uses Invested Capital as a measure of the capital deployed and believes that the figure is useful to investors because it serves as the basis for generating option fees and other related income. This non-GAAP measure is presented solely to permit investors to understand how our management assesses underlying performance and is not, and should not be viewed as, a substitute for GAAP measures, and should be viewed in conjunction with our GAAP financial measures.
Business Overview and Background
Millrose is a corporation incorporated under the laws of the State of Maryland on March 19, 2024. Our Company was formed in connection
with the Spin-Off from Lennar to create an independent, publicly-traded company that provides the HOPP’R to Lennar, Lennar Related Ventures and Other Customers. Through various subsidiaries, we hold
finished homesites with homes under construction, finished homesites imminently ready for construction, land under development, land ready for development and land not yet ready for development. We are externally managed and advised by KL, pursuant
to the Management Agreement between Millrose and KL.
We intend to elect to be classified and to qualify as a REIT for U.S. federal income
tax purposes, effective the taxable year ending December 31, 2025. Millrose Holdings, our wholly-owned subsidiary, through its various subsidiaries, will hold all of the land inventories and manage the HOPP’R. Millrose intends to elect for
Millrose Holdings to be taxable as a TRS and may elect to form other wholly-owned subsidiaries that will also elect to be taxed as taxable REIT subsidiaries in the future. Taxable REIT subsidiaries are subject to taxation at regular corporate income
tax rates.
Millrose Prior to the Spin-Off
The following discussion describes the results of operations, liquidity and capital resources, cash flows and
off-balance sheet arrangements of the Predecessor Millrose Business prior to the Spin-Off, which information is derived from the financial results of Lennar. The periods
covered in this discussion include the years ended December 31, 2024 and 2023. Millrose was not formed until March 19, 2024 and has operated as an independent company only since the Spin-Off on
February 7, 2025. Millrose is a holding company with no operations of its own and operates through its subsidiaries, including Millrose Holdings.
The accompanying audited combined financial statements included in Part II, Item 8 of this Form 10-K
relate to the Predecessor Millrose Business and were derived from the combined financial statements and accounting records of Lennar. These audited financial statements reflect the combined historical results of operations, financial position and
cash flows of the Predecessor Millrose Business as they were historically managed by Lennar in conformity with GAAP. Therefore, the historical combined financial information may not be indicative of Millrose’s future performance and does not
necessarily reflect what Millrose’s combined results of operations, financial condition and cash flows would have been had Millrose operated as a separate, publicly traded company during the periods presented, particularly because of changes
that Millrose expects to experience in the future as a result of its separation from Lennar, including changes in the financing, cash management, operations and cost structure of Millrose. The audited financial statements include certain assets and
liabilities that were historically held at the Lennar parent level, but are specifically identifiable or otherwise allocable to the Predecessor Millrose Business. For further discussion, see Note 2 to the Combined Audited Financial Statements of the
Predecessor Millrose Business.
ResultsInvested ofCapital OperationsActivity for the YearsYear Ended December 31, 2024 and 20232025
The table below reconciles GAAP reported homesites under option contracts to Invested Capital as of December 31, 2025 and summarizes invested capital activity for the year ended December 31, 2025:
Includes option fees received from counterparties in the subsequent month.
Includes homesites under option contracts contributed by Lennar at Spin-Off and acquired from Rausch, less option earning deposits and other holdbacks.
Reduction in investment balance for the year ended December 31, 2025 from (a) homesite takedowns pursuant to option agreements, net of deposit credits adjusted for non-option earning deposits, and (b) repayment of development loans.
Includes acquisitions of homesites under option contracts, net of option earnings deposits, and development loan funding for the year ended December 31, 2025.
(5)
Based on average option rate and/or loan interest rate weighted by investment balance, assumes SOFR rate as of September 26, 2025.
(6)
Calculated by multiplying Invested Capital balance at end of period by weighted average yield as of December 31, 2025.
(7)
Calculated by taking weighted average life per each community weighted by investment balance.
(8)
Calculated by taking months until the final scheduled homesite sale per each community weighted by investment balance.
During the year ended December 31, 2025, we funded $2.862 billion for land acquisition and development and received $3.168 billion in net takedown proceeds under the Master Program Agreement at a weighted average yield of 8.5%. We funded $2.623 billion for land acquisition and development and received $254.9 million in net takedown proceeds for Other Agreements during this period at a weighted average yield of 11%. On a total portfolio basis, the weighted average yield was 9.2% as of December 31, 2025.
Invested Capital Activity for the Three Months Ended December 31, 2025
The table below reconciles GAAP reported homesites under option contracts to Invested Capital as of December 31, 2025 and summarizes invested capital activity for the three months ended December 31, 2025:
Includes option fees received from counterparties in the subsequent month.
Includes (a) homesite under option contracts contributed by Lennar at Spin-Off and acquired from Rausch, less option earning deposits and other holdbacks, and (b) takedown, land acquisition and development funding activity through September 30, 2025.
Reduction in investment balance for the three months ended December 31, 2025 from (a) homesite takedowns pursuant to option agreements, net of deposit credits adjusted for non-option earning deposits, and (b) repayment of development loans.
Includes acquisitions of homesites under option contracts, net of option earnings deposits, and development loan funding for the three months ended December 31, 2025.
(5)
Based on average option rate and/or loan interest rate weighted by investment balance, assumes SOFR rate as of September 26, 2025.
(6)
Calculated by multiplying Invested Capital balance at end of period by weighted average yield as of December 31, 2025, adjusted for the number of days in the fourth quarter 2025.
(7)
Calculated by taking weighted average life per each community weighted by investment balance.
(8)
Calculated by taking months until the final scheduled homesite sale per each community weighted by investment balance.
During the three months ended December 31, 2025, we funded $650.9 million for land acquisition and development and received $884.7 million in net takedown proceeds under the Master Program Agreement at a weighted average yield of 8.5%. We funded $689.4 million for land acquisition and development and received $139.3 million in net takedown proceeds for Other Agreements during this period at a weighted average yield of 11%. On a total portfolio basis, the weighted average yield was 9.2% as of December 31, 2025.
Properties as of December 31, 2025
As of December 31, 2025, our homesite assets consisted of 933 properties (also known as communities) in 30 states across the United States, totaling approximately 142,139 homesites, with an approximate aggregate value of $8.9 billion of homesites under option contracts. Of the homesites owned as of December 31, 2025, we expect the total takedown prices of all homesites to be approximately $16.1 billion, and the total estimated development costs of homesites to be approximately $6.8 billion.
As of December 31, 2025, our property assets are collectively located across 30 U.S. states. Approximately 50% of the property assets are concentrated in three states (California, Florida, Texas) and approximately 41% are located in two strong housing market states: Florida and Texas (where we believe the market has healthy underlying demographic and/or economic trends primarily driven by generally steadily growing population).
The below table shows the location, number of properties, number of underlying homesites and expected total takedown prices of our properties as of December 31, 2025:
Or prospective homesites if fully entitled, as applicable.
Excludes properties, homesites, and takedown prices for investments associated with development loans.
The below table is a summary of our pools of properties included in our property assets as of December 31, 2025:
Number of homesites excludes investments associated with development loans.
What changed in the latest 10-Q
Risk Factors
In addition to the other information set forth in this Form 10-Q, you should carefully consider the risks contained in “Part I, Item 1A. Risk Factors” of our Form 10-K and in other documents we file with the SEC, in evaluating Millrose and its business. There have been no material changes in our risk factors from those described in our Form 10-K. The risks described in the Form 10-K are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition or future results.
No wording changes found in this section.
Full comparison: every changed paragraph (0)
Management's Discussion & Analysis (MD&A)
New heading “Six Months Ended June 30, 2026 Versus Six Months Ended June 30, 2025”
New heading “Overview of Net Income”
New heading “Option Fee Revenues”
New heading “Development Loan Income”
New heading “Management Fee Expense”
New heading “Stock-based Compensation Expense”
New heading “Sales, General and Administrative Expenses from Pre-Spin Periods”
New heading “Other Income (Expense)”
New heading “Income Tax Expense”
Removed heading “Sales, General and Administrative Expenses from pre-Spin-Off Periods”
Removed heading “Net Income (Loss) Before Income Tax Expense”
Largest changes
“Sales, General and Administrative Expenses from pre-Spin-Off Periods”see in full comparison
“Six Months Ended June 30, 2026 Versus Six Months Ended June 30, 2025”see in full comparison
Full comparison: every changed paragraph (87)
On April 1, 2026, the Company received a payoff of approximately $284 million related to one of its development loans with an unaffiliated third party. The payment settled all outstanding principal, accrued interest, and fees associated with the loan. As a result, the Company derecognized the outstanding principal and accrued interest balances related to the development loan from its condensed consolidated balance sheets. In addition, the Company reduced its allowance for credit losses to reflect the removal of the loan from its development loan portfolio.
Invested Capital Activity as of MarchJune 31,30, 2026
The table below reconciles GAAP reported homesites under option contracts to Invested Capital as of MarchJune 31,30, 2026 and summarizes Invested Capital activity for the three months ended MarchJune 31,30, 2026:
Includes (a) homesite under option contracts contributed by Lennar at Spin-Off and acquired from Rausch, less option earning deposits and other holdbacks, and (b) takedown, land acquisition and development funding activity through DecemberMarch 31, 2025.2026.
Reduction in investment balance for the three months ended MarchJune 31,30, 2026 from (a) homesite takedowns pursuant to option agreements, net of deposit credits adjusted for non-option earning deposits, and (b) repayment of development loans.
(4)
Includes acquisitions of homesites under option contracts, net of option earnings deposits, and development loan funding for the three months ended MarchJune 31,30, 2026.
Based on average option rate and/or loan interest rate weighted by investment balance, assumes SOFR rate as of DecemberMarch 29,27, 2025.2026.
Calculated by multiplying Invested Capital balance at end of period by weighted average yield as of MarchJune 31,30, 2026, adjusted for the number of days in the firstsecond quarter 2026.
During the three months ended MarchJune 31,30, 2026, we funded $524.3$566 million for land acquisition and development and received $652.9$590 million in net takedown proceeds under the Master Program Agreement at a weighted average yield of 8.5%. We funded $464.6$555 million for land acquisition and development and received $99.4$438 million in net takedown proceeds for Other Agreements during this period at a weighted average yield of 10.7%.10.6%. On a total portfolio basis, the weighted average yield was 9.2% as of MarchJune 31,30, 2026.
Properties as of MarchJune 31,30, 2026
As of MarchJune 31,30, 2026, our homesite assets consisted of 904877 properties (also known as communities) in 30 states across the United States, totaling approximately 143,347143,771 homesites, with an approximate aggregate value of $9.2$9.6 billion of homesites under option contracts. Of the homesites owned as of MarchJune 31,30, 2026, we expect the total takedown prices of all homesites to be approximately $16.2$16.3 billion, and the total estimated development costs of homesites to be approximately $7.2$6.9 billion.
As of MarchJune 31,30, 2026, our property assets are collectively located across 30 U.S. states. Approximately 51% of the property assets are concentrated in three states (California, Florida, Texas) and approximately 42% are located in two strong housing market states: Florida and Texas (where we believe the market has healthy underlying demographic and/or economic trends primarily driven by generally steadily growing population).
The below table shows the location, number of properties, number of underlying homesites and expected total takedown prices of our properties as of MarchJune 31,30, 2026:
Communities owned as of MarchJune 31,30, 2026 including communities associated with future purchases; and excluding homesites associated with investments in development loans.
The below table is a summary of our pools of properties included in our property assets as of MarchJune 31,30, 2026 (dollar amounts are presented in billions):
As of MarchJune 31,30, 2026, we had 143,347143,771 homesites with 1719 counterparties, which were included in 6973 separate pools, in accordance with the applicable Multiparty Cross Agreements. As of MarchJune 31,30, 2026, 95% of our invested capital balance was pooled under pooling arrangements, of which 100% was pooled under the Master Program Agreement.
The following is a summary of the key components of our operations for the three and six months ended MarchJune 31,30, 2026:
Operating Expenses: Our operating expenses after the Spin-Off include Management Fees (as defined below) paid to KL for management and advisory services. The management fee is calculated as 1.25% of Tangible Assets (as defined in the Management Agreement) (the “Management Fee”). All personnel are employed by the Manager or an affiliate of the Manager, and their salaries are paid by the Manager or its affiliate, as applicable; therefore, we do not record personnel-related expenses, including salaries, benefits, and share-based compensation for any employees. All cash compensation paid to our Board of Directors (the “Board”) and certain general and administrative expenses are covered by the Management Fee. The Management Fee does not cover offering expenses, costs incurred for services in connection with extraordinary litigation and mergers and acquisitions and other events outside of Millrose’s ordinary course of business, and, in some circumstances, costs associated with the ownership and maintenance of land. Any such expenses that are not covered by the Management Fee are paid for by Millrose and are recorded as general and administrative expenses or other expenses, as appropriate under GAAP. Certain of our option agreements provide (and new option agreements in the future may provide) for reimbursement by the counterparties of our transaction and/or asset management expenses, including third-party legal, diligence and servicing costs, and may include certain amounts paid by such counterparties directly to affiliates of the Manager in connection with related services provided to by such affiliates to the applicable counterparties. Our operating expenses include stock-based compensation for restricted stock units (“RSUs”) granted to each member of the Board duringthrough the fiscal yearquarter ended DecemberJune 31,30, 2025.2026. The Company records the RSU award costs on a straight-line basis over the RSU vesting period as stock-based compensation in operating expenses. The Company also records a provision for (benefit from) credit losses in accordance with ASC 326 Financial Instruments – Credit Losses.
For the three and six months ended MarchJune 31,30, 2025, our operating expenses included an allocation of salaries, general, and administrative expenses for the Predecessor Millrose Business prior to the Spin-Off for the period of January 1, 2025 through February 7, 2025. These expenses have been allocated from Lennar based on a reasonable proportional cost allocation method primarily based directly on headcount, usage, or other allocation methods depending on the nature of the services. The allocation was calculated as (i) the average daily expense allocated and recorded for the twelve months ended December 31, 2024, applied to (ii) days in the first quarter 2025 prior to the Spin-Off. Sales, general, and administrative expenses from pre-spin period were $25.0 million for the period of January 1, 2025 through February 7, 2025.
Other Income and Expenses(Expense): We record interest income earned on our cash balances held with financial institutions as other income as it is not part of the primary activities of the business. Other expenses also include (i) interest expense related to our debt obligations, and (ii) other expenses which may include rating agency fees, legal fees, audit fees, and bank fees.
The following discussion describes the results of operations for the three and six months ended MarchJune 31,30, 2026 versus the three and six months ended MarchJune 31,30, 2025. The financial data for the threesix months ended MarchJune 31,30, 2025 includes the combined results of operations for the Predecessor Millrose Business prior to the Spin-Off. We have a single operating and reportable segment in accordance with GAAP and our operations are conducted in the United States.
Three Months Ended MarchJune 31,30, 2026 Versus Three Months Ended MarchJune 31,30, 2025
Overview of Net Income (Loss)
Our net income was $125.9 million for the three months ended June 30, 2026, compared to $112.8 million for the three months ended June 30, 2025. The increase in net income was primarily driven by (i) higher option fee revenues in the current-year period, (ii) a reduction to the allowance for credit losses related to the payoff of a development loan with an unaffiliated third party, and (iii) lower income tax expense. These increases were partially offset by (i) lower development income related to the payoff of the development loan, (ii) higher Management Fee expense, and (iii) higher interest expenses related to the Company’s debt obligations.
Our net income was $122.9 million for the three months ended March 31, 2026, compared to $39.8 million for the three months ended March 31, 2025. The increase in net income was primarily driven by higher revenues in the current-year period, reflecting (i) a full quarter of post Spin-Off operations compared to a partial post Spin-Off period in the prior-year period and (ii) continued growth in our business as a result of geographic expansion and counterparty diversification. Net income also benefited from lower operating expenses under our Management Fee structure versus the prior-year period which included the allocated costs of the Predecessor Millrose Business prior to the Spin-Off and the Management Fee for the period after the Spin-Off. These increases in net income were partially offset by higher net other expense and higher tax provision.
Option fees revenues were $195.4 million for three months ended June 30, 2026, compared to $141.1 million for the three months ended June 30, 2025, reflecting continued growth in our business as a result of geographic expansion and counterparty diversification.
Option fees revenues were $185.3 million for three months ended March 31, 2026, compared to $80.1 million for the three months ended March 31, 2025. The increase in option fee revenues is due to a full quarter of operations compared to partial quarter operations post Spin-Off in the prior year period. In the prior-year period prior to the Spin-Off, the Predecessor Millrose Business did not generate option fee revenues because its inventories were not subject to purchase option contracts with homebuilders. The principal operating activities related to finished homesites were conducted by the Predecessor Millrose Business’s parent company, who sold those homesites to Lennar counterparties.
Development loan income for the three months ended June 30, 2026 was $1.5 million, compared to $7.9 million for the three months ended June 30, 2025. The decrease in development loan income is due to the $284 million payoff of a development loan with an unaffiliated party on April 1, 2026, which resulted in lower interest income earned under the development loan agreement during the current-year period.
Development loan income for the three months ended March 31, 2026 was $9.6 million, compared to $2.6 million for the three months ended March 31, 2025. The increase in development loan income is due to (i) an increase in development loan agreements, and (ii) a full quarter of operations compared to partial quarter operations post Spin-Off in the prior year period. In the prior-year period prior to the Spin-Off, the Predecessor Millrose Business did not generate development loan income because it did not engage in principal operating activities related to development loans. The remaining increase in development loan income in the current-year period is due to higher development loan balances versus the prior-year period.
Management Fee expense for the three months ended MarchJune 31,30, 2026 was $28.2$29.9 million, compared to $12.1$22.0 million for the three months ended MarchJune 31,30, 2025. Management Fee expense was higher due to (i) a full quarter of the Management Agreement being in effect in the current-year period compared to only the period following the Spin-Off in the prior-year period, and (ii) higher Tangible Assets as a result of higher homesites under option contracts in the current-year period versus the prior-year period.
Stock-based compensation expense related to RSUs granted to the Board was $0.7$0.2 million for the three months ended MarchJune 31,30, 2026.2026, Forcompared to $0.2 million for the three months ended MarchJune 31,30, 2025, there was no stock-based compensation for RSUs, and there was no stock-based compensation expenses allocated to the Predecessor Millrose Business prior to the Spin-Off.2025.
Sales, General and Administrative Expenses from pre-Spin-Off Periods
Sales, general and administrative expenses from pre-Spin-Off periods were $25.0 million for the three months ended March 31, 2025. There were no sales, general and administrative expenses recorded during the first quarter of 2026.
Other Income and (Expense)
Other income (expense) was a net expense of $38.2$39.3 million for the three months ended MarchJune 31,30, 2026, compared to a net expense of $1.4$9.3 million for the three months ended MarchJune 31,30, 2025. Other income and (expense) for the three months ended MarchJune 31,30, 2026 includes (i) interest expense for the Credit Agreement (including interest incurred under the Company’s prior revolving credit facility before March 25, 2026) and Senior Notes (as defined below) of $39.2$40.0 million, and (ii) other expenses of $0.1$0.4 million, which was partially offset by interest income of $1.1 million earned on cash balances held in the Company’s operating bank accounts. Other income (expense) for the three months ended MarchJune 31,30, 2025 consisted of (i) interest expense of $2.5$10.3 million for the RevolvingCompany’s Creditdebt Facility,obligations, and (ii) other expenses of $0.8 million, which was partially offset by interest income of $1.1$1.8 million related to cash balances.
Net Income (Loss) Before Income Tax Expense
Net income before income tax expense was $127.9 million for the three months ended March 31, 2026, compared to $44.2 million for the three months ended March 31, 2025. The increase in net income before income tax expense was primarily driven by higher revenues in the current-year period, reflecting (i) a full quarter of post Spin-Off operations compared to a partial post Spin-Off period in the prior-year period and (ii) continued growth in our business as a result of geographic expansion and counterparty diversification. Net income also benefited from lower operating expenses under our Management Fee structure versus the prior-year period which included the allocated costs of the Predecessor Millrose Business prior to the Spin-Off and the Management Fee for the period after the Spin-Off. These increases in net income were partially offset by higher net interest expense, a higher tax provision, and higher other expenses.
The provision for income taxes for the three months ended MarchJune 31,30, 2026 was $5.0$2.5 million, compared to $4.4$4.8 million for the three months ended MarchJune 31,30, 2025. TheIncome increasetax isexpense due to higher net income asdecreased compared to the priorprior-year yearperiod period.primarily due to changes in the allocation of taxable income among our TRSs resulting from updated market-based assumptions of certain intercompany financing arrangements. The tax provision for the three months ended MarchJune 31,30, 2026, as determined and calculated from the activities in our TRSs, resulted in an overall effective tax rate of 24.9%, compared to 24.8% for the three months ended MarchJune 31,30, 2025. See Note 10. Income Taxes in the condensed consolidated financial statements for more information.
Six Months Ended June 30, 2026 Versus Six Months Ended June 30, 2025
Overview of Net Income
Our net income was $248.8 million for the six months ended June 30, 2026, compared to $152.5 million for the six months ended June 30, 2025. Net income for the six months ended June 30, 2025 included post Spin-Off income of $177.5 million, partially offset by pre-spin net loss of $25.0 million related to sales, general, and administrative expenses attributable to the Predecessor Millrose Business.
The increase in net income was primarily driven by (i) higher revenues in the current-year period, (ii) a reduction in the allowance for credit losses related to the payoff of a development loan with an unaffiliated third party, and (iii) lower income tax expense. These increases in net income were partially offset by (i) higher interest expense related to the Company’s debt obligations, and (ii) higher stock-based compensation expense for RSUs granted to the Board members.
Option Fee Revenues
Option fees revenues were $380.7 million for six months ended June 30, 2026, compared to $221.2 million for the six months ended June 30, 2025, reflecting (i) a full two quarters of post Spin-Off operations compared to a partial post Spin-Off period in the prior-year period, and (ii) continued growth in our business as a result of geographic expansion and counterparty diversification. In the prior-year period prior to the Spin-Off, the Predecessor Millrose Business did not generate option fee revenues because its inventories were not subject to purchase option contracts with homebuilders. The principal operating activities related to finished homesites were conducted by the Predecessor Millrose Business’s parent company, who sold those homesites to Lennar counterparties.
Development Loan Income
Development loan income for the six months ended June 30, 2026 was $11.1 million, compared to $10.5 million for the six months ended June 30, 2025. The increase in development loan income is due to (i) an increase in development loan agreements, and (ii) a full quarter of operations compared to partial quarter operations post Spin-Off in the prior year period. In the prior-year period prior to the Spin-Off, the Predecessor Millrose Business did not generate development loan income because it did not engage in principal operating activities related to development loans. The remaining increase in development loan income in the current-year period is due to higher development loan balances versus the prior-year period.
Management Fee Expense
Management Fee expense for the six months ended June 30, 2026 was $58.1 million, compared to $34.1 million for the six months ended June 30, 2025. Management Fee expense was higher due to (i) a full quarter of the Management Agreement being in effect in the current-year period compared to only the period following the Spin-Off in the prior-year period, and (ii) higher Tangible Assets as a result of higher homesites under option contracts in the current-year period versus the prior-year period.
Stock-based Compensation Expense
Stock-based compensation expense related to RSUs granted to the Board members was $0.9 million for the six months ended June 30, 2026, compared to $0.2 million for the six months ended June 30, 2025. The increase was primarily attributable to stock-based compensation recognized in connection with additional RSUs granted on December 10, 2025 and May 13, 2026, compared to the prior-year period, which included RSUs granted on April 3, 2025.
Sales, general, and administrative expenses for the Predecessor Millrose Business included $8.9 million of stock-based compensation expense for the six months ended June 30, 2025. Stock-based compensation expense was allocated to the Predecessor Millrose Business on a specific identification basis or using a proportional cost allocation method, as applicable, as disclosed in the Form 10-K.
Sales, General and Administrative Expenses from Pre-Spin Periods
Sales, general and administrative expenses from pre-spin periods were $25.0 million for the six months ended June 30, 2025. For the six months ended June 30, 2025, the expenses were allocated by Lennar for the period from January 1, 2025 to the Spin-Off. There were no sales, general and administrative expenses recorded after the Spin-Off.
Other Income (Expense)
Other income (expense) was a net expense of $77.5 million for the six months ended June 30, 2026, compared to a net expense of $10.7 million for the six months ended June 30, 2025. Other income (expense) for the six months ended June 30, 2026 includes (i) interest expense for the Credit Agreement (including interest incurred under the Company’s prior revolving credit facility before March 25, 2026) and Senior Notes of $79.2 million, and (ii) other expenses of $0.5 million, which was partially offset by interest income of $2.2 million earned on cash balances held in the Company’s operating bank accounts. Other income (expense) for the six months ended June 30, 2025 consisted of interest expense of $12.8 million for the Company’s debt obligations and, other expenses of $0.8 million, partially offset by interest income of $2.9 million related to cash balances.
Income Tax Expense
The provision for income taxes for the six months ended June 30, 2026 was $7.5 million, compared to $9.1 million for the six months ended June 30, 2025. Income tax expense decreased compared to the prior-year period primarily due to changes in the allocation of taxable income among our TRSs resulting from updated market-based assumptions of certain intercompany financing arrangements. The tax provision for the six months ended June 30, 2026, as determined and calculated from the activities in our TRSs, resulted in an overall effective tax rate of 24.9%, compared to 24.8% for the six months ended June 30, 2025. See Note 10. Income Taxes in the condensed consolidated financial statements for more information.
We calculate AFFO by starting with Nareit’s definition of funds from operations (“FFO”), which is the net income (computed in accordance with GAAP), excluding gains (or losses) from sales of property, plus real estate depreciation, as applicable. During this period, there were no applicable adjustments to net income of the Company to calculate FFO. We then calculate AFFO by adjusting net income to eliminate the impact of non-recurring items that are not reflective of operations and certain non-cash items that reduce or increase net income (loss) in accordance with GAAP, and also adjusted for income tax expense (other than income tax expenses of our TRS) that will not be incurred following our election and qualifications to be subject to tax as a REIT for U.S. federal income tax purposes. As shown in the tables below, certain non-recurring and non-cash transactions added back for the three and six months ended MarchJune 31,30, 2026 and 2025 include non-cash components of compensation expense andexpense, amortization of financing and issuance costs for our Credit Agreement (including issuance costs incurred under the Company’s prior revolving credit facility before March 25, 2026) and Senior Notes.Notes, provision for (benefit from) credit loss expense, and non-recurring rating agency expenses related to the Spin-Off.
The table below is a reconciliation of GAAP net income to AFFO and GAAP earnings per share to AFFO earnings per share for the three months ended MarchJune 31,30, 2026 and 2025:
MRP insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 6 Form 4 filings (5 insiders, 6 trade dates, 246,372 shares, about $6.7M) and open-market sales in 0 filings. Net open-market shares: 246,372 (purchases minus sales); net value about $6.7M.Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-08-10 | Gorson Matthew B. |
Open-market purchase | 3,000 | $28.80 | $86.4K |
| 2026-08-07 | Migoya Carlos A. |
Open-market purchase | 1,000 | $29.18 | $29.2K |
| 2026-05-18 | Gorson Matthew B. |
Open-market purchase | 4,500 | $26.97 | $121.4K |
| 2026-05-13 | Presa Rachel |
Open-market purchase | 307 | $26.62 | $8.2K |
| 2026-05-13 | Mincey Mary Alison |
Grant/award | 5,639 | — | — |
| 2026-05-13 | Lynch Kathleen B. |
Grant/award | 5,639 | — | — |
| 2026-05-13 | Gorson Matthew B. |
Grant/award | 5,639 | — | — |
| 2026-05-13 | Migoya Carlos A. |
Grant/award | 5,639 | — | — |
| 2026-05-13 | Bartels Patrick J Jr |
Grant/award | 5,639 | — | — |
| 2026-05-12 | Nitkin Robert |
Open-market purchase | 1,840 | $26.60 | $48.9K |
| 2026-05-11 | Presa Rachel |
Open-market purchase | 725 | $27.18 | $19.7K |
| 2026-05-11 | Richman Darren |
Open-market purchase | 40,000 | $27.31 | $1.1M |
| 2026-05-11 | Richman Darren |
Open-market purchase | 195,000 | $27.31 | $5.3M |
Well-known investors holding MRP (13F)
None of the 59 investors we track reported a position in their latest 13F.