Millrose Properties Q3 2026 net income rises to $130M
MRP acquired 1,233 rental homes and raised revolving credit commitments to $1.385 billion.
Sentiment and the balance of points
Rhea-AI Sentiment reads the wording of the document, how positive or negative its language is on a 1 to 5 scale. The balance of points shown with the takes weighs what the document actually discloses, so the two can disagree, for example when a trial that missed its main goal is described in upbeat language.
Millrose Properties, Inc. reported third-quarter 2026 revenue of $211.0 million, compared with $179.3 million a year earlier, and net income of $130.0 million, versus $105.1 million. Diluted earnings per share were $0.78, compared with $0.63.
Homesites under option contracts totaled $9.9 billion as of September 30, 2026. During the quarter, Millrose acquired 1,233 single-family rental properties from Lennar for approximately $333 million, financed with approximately $213 million of secured credit facility borrowings and cash on hand. On September 21, Millrose increased revolving credit commitments by $50 million to $1.385 billion; $635 million was outstanding at quarter-end.
After quarter-end, Millrose closed a private $1.0 billion senior-notes offering on October 6: $500 million of 6.500% notes due 2029 and $500 million of 6.750% notes due 2031. On October 20, it completed a $316.9 million second preferred-instrument purchase from Dream Finders, following the initial $170.6 million purchase.
How this balance works
Rhea-AI gives every point it takes from this document a weight. Minor counts 1, Moderate 3 and Major 9, so one Major point outweighs several Minor ones. The bar adds up the weights on each side, and when neither side holds more than 65% of the total the balance reads Mixed.
It reads the document as published, with the same rules for every company, and it does not look at what the market expected or at how the stock traded, so a point can be objectively good on a day the stock falls.
Rhea-AI Sentiment measures something else, the tone of the wording.
Positive
- Moderate pointThird-quarter revenue was $211.0 million, versus $179.3 million in 2025.
- Moderate pointThird-quarter net income was $130.0 million, versus $105.1 million in 2025.
Negative
- None.
Filing Explained
At September 30, Millrose reported $6.7 billion in future land-development commitments and 620 rental-property agreements, with possible opt-out costs.
As of
If Millrose elects not to acquire some or all of those properties, it may incur payment obligations, including potential loss of deposits.
Separately, Millrose reported
Key Figures
Key Terms
sales-type leases financial
WARM methodology financial
accordion feature financial
delayed draw term loan facility financial
FAQ
AI-generated questions and answers. How Rhea-AI works. Not financial advice.
What were MRP's third-quarter 2026 revenue and net income?
What terms did MRP's October 2026 senior notes have?
What were the terms of MRP's Dream Finders preferred instrument?
AI-generated analysis. How Rhea-AI works. Not financial advice.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended:
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
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(Zip Code) |
(
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Ticker Symbol |
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Name of each exchange on which registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act (check one):
Large accelerated filer |
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Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
The number of Class A common stock outstanding as of November 3, 2026:
The number of Class B common stock outstanding as of November 3, 2026:
TABLE OF CONTENTS
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Page |
PART I FINANCIAL INFORMATION |
||
GLOSSARY OF DEFINED TERMS |
1 |
|
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS |
3 |
|
Item 1. |
Financial Statements (Unaudited) |
4 |
|
Condensed Consolidated Balance Sheets as of September 30, 2026 and December 31, 2025 |
4 |
|
Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2026 and September 30, 2025 |
5 |
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Condensed Consolidated Statements of Stockholders' Equity for the three and nine months ended September 30, 2026 and September 30, 2025 |
6 |
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Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2026 and September 30, 2025 |
7 |
|
Notes to the Condensed Consolidated Financial Statements |
8 |
Item 2. |
Management's Discussion and Analysis of Financial Condition and Results of Operations |
27 |
Item 3. |
Quantitative and Qualitative Disclosures About Market Risk |
45 |
Item 4. |
Controls and Procedures |
46 |
PART II OTHER INFORMATION |
||
Item 1. |
Legal Proceedings |
47 |
Item 1A. |
Risk Factors |
47 |
Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds |
47 |
Item 3. |
Defaults Upon Senior Securities |
47 |
Item 4. |
Mine Safety Disclosures |
47 |
Item 5. |
Other Information |
47 |
Item 6. |
Exhibits |
48 |
|
SIGNATURE |
49 |
i
GLOSSARY OF DEFINED TERMS
In this Quarterly Report on Form 10-Q (this “Form 10-Q”), the following terms and abbreviations have the meanings listed below.
GAAP means generally accepted accounting principles in the United States.
Lennar means Lennar Corporation (including its affiliates and subsidiaries), a publicly traded Delaware corporation with Lennar Class A common stock and Lennar Class B common stock listed on the NYSE. In certain contexts (including with respect to naming parties to certain agreements), the word Lennar may refer to a subsidiary of Lennar Corporation that entered or will enter into an agreement in lieu of the ultimate parent company.
Lennar Related Ventures means any residential home construction or real estate development companies in the United States (i) in which Lennar has any amount of ownership interests or (ii) with which Lennar has any contractual business relationship, in each case, that is referred by Lennar to Millrose as a homesite option platform counterparty.
Master Option Agreement means the Master Option Agreement, dated as of February 7, 2025, by and among Millrose and certain Lennar entities, as described in “Part I, Item 1. Business —Operational Agreements with Lennar—Master Option Agreement” in the Form 10-K, as amended from time to time and as supplemented by any terms and provisions contained in any project addenda.
Master Program Agreement means the Master Program Agreement, dated as of February 7, 2025, by and among Millrose and certain Lennar entities, as described in “Part I, Item 1. Business —Operational Agreements with Lennar—Master Program Agreement” in the Form 10-K, as amended from time to time and as supplemented by any terms and provisions contained in any project addenda.
Multiparty Cross Agreement means any multiparty cross agreement between Lennar and Millrose that applies to any portion of the assets acquired in the Spin-Off from Lennar, and the Rausch Transaction, and any assets acquired pursuant to the terms of the Master Program Agreement or other applicable agreement with Lennar, as further described in “Part I, Item 1. Business —Operational Agreements with Lennar—Multiparty Cross Agreement” in the Form 10-K. As context requires, “Multiparty Cross Agreement” may also mean this same concept, but as negotiated and used by or for (or in the context of agreements with) any Lennar Related Ventures or Other Counterparties.
Other Agreements means any transaction agreements, other than the Master Program Agreement, including those entered into with Lennar Related Ventures and Other Counterparties in connection with providing Millrose’s homesite option platform or in connection with Millrose providing development loans secured by residential property intended for single-family residential use.
Other Counterparties means any residential home construction or real estate development companies in the United States, excluding Lennar and any Lennar Related Ventures, that enter into agreements or other arrangements with Millrose (through Millrose subsidiaries) to use Millrose’s homesite option platform or to obtain development loans secured by residential property intended for single-family residential use.
Predecessor Millrose Business means the business operations, including revenues and expenses, liquidity and capital resources, cash flows, balance sheet, statements of income and other information of Millrose prior to the Spin-Off, as derived from the financial statements of Lennar, since Millrose had no operations (or operating subsidiaries) of its own prior to the Spin-Off.
Property LLCs includes all of Millrose's subsidiaries that hold land assets acquired by Millrose, including those acquired in the Spin-Off from Lennar and in the Rausch Transaction, through which Millrose provides its homesite option platform to counterparties, as well as any additional subsidiaries formed for the purposes of owning other property assets.
Rausch means Rausch Coleman Companies, LLC, a privately-held U.S. homebuilder.
Rausch Transaction means Millrose’s acquisition of land consisting of approximately 25,000 homesites through the acquisition of 100% of the outstanding stock of RCH Holdings, Inc., a parent holding company of Rausch, on February 10, 2025, as further described in “Part I, Item 1. Business—Spin-Off and Other Significant Business Transactions” in the Form 10-K.
1
REIT Requirements means the requirements for qualification as a REIT under sections 856 through 860 of the Code and the applicable U.S. Treasury regulations, including various (a) organizational requirements, (b) gross income tests, (c) asset tests and (d) distribution requirements.
Spin-Off means the partial, taxable spin-off of Millrose Properties, Inc., a previously wholly-owned subsidiary of Lennar, that was effected by distributing approximately 80% of the outstanding shares of Millrose common stock to holders of Lennar common stock on February 7, 2025.
TRS means a taxable REIT subsidiary, which is a fully taxable corporation that has jointly elected with the parent REIT to be treated as a taxable REIT subsidiary, defined under section 856 of the Internal Revenue Code of 1986, as amended (the “Code”).
2
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This Form 10-Q contains forward-looking statements including, in particular, statements about Millrose Properties, Inc.’s (together with its subsidiaries (unless the context otherwise requires), “Millrose,” the “Company,” “we,” “us” or “our”) plans, strategies and objectives, as well as statements about Millrose’s business (including MPH Parent, LLC (“MPH Parent”), Millrose Properties Holdings, LLC (“Millrose Holdings”), Millrose Properties SPE LLC (“SPE LLC”), MRP Liberty, LLC (“MRP Liberty”), and any of the other Millrose subsidiaries), and Millrose’s future plans, strategies and objectives. You can generally identify forward-looking statements by our use of forward-looking terminology such as “may,” “can,” “shall,” “will,” “expect,” “intend,” “anticipate,” “estimate,” “believe,” “continue” or other similar words or the negatives thereof intended to identify forward-looking statements. However, not all forward-looking statements contain these identifying words. Specific forward-looking statements in this Form 10-Q include statements regarding:
Assumptions relating to these statements involve judgments with respect to, among other things, future macroeconomic, competitive and market conditions, future land values, future business decisions, future environmental conditions and relationships with our counterparties, all of which are difficult or impossible to accurately predict and many of which are beyond our control. All forward-looking statements included herein are based on information available to us as of the date hereof and speak only as of such date. The forward-looking statements contained in this Form 10-Q reflect our views as of the date of this Form 10-Q about future events and are subject to risks, uncertainties, assumptions, and changes in circumstances that may cause our actual results, performance, or achievements to differ significantly from those expressed or implied in any forward-looking statement. Although we believe the assumptions underlying the forward-looking statements, and the forward-looking statements themselves, are reasonable, any of the assumptions could be inaccurate, and, therefore, there can be no assurance that these forward-looking statements will prove to be accurate, and our actual results, performance and achievements may be materially different from that expressed or implied by these forward-looking statements. In light of the significant uncertainties inherent in these forward-looking statements, the inclusion of this information should not be regarded as a representation by us or any other person that our objectives and plans, which we consider to be reasonable, will be achieved.
Investing in our common stock involves a high degree of risk. You should carefully review “Part I, Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2025, as filed with the Securities and Exchange Commission (“SEC”) on March 2, 2026 (the “Form 10-K”). Except as otherwise required by federal securities laws, we do not undertake to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
3
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements
Millrose Properties, Inc.
Condensed Consolidated Balance Sheets (Unaudited)
(Dollars in thousands, except share amounts)
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September 30, |
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December 31, |
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2026 |
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2025 |
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Assets |
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Homesites under option contracts |
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$ |
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$ |
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Development loan receivables, net |
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Single-family residential properties, net |
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Preferred instruments, net |
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Cash |
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Other assets |
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Total assets |
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Liabilities and stockholders' equity |
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Builder deposits |
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Debt obligations, net |
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Single-family residential secured credit facility, net |
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Development guarantee holdback liability |
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Deferred tax liabilities |
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Other liabilities |
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Total liabilities |
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Commitments and contingencies (See Note 12) |
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Stockholders' equity |
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Preferred stock, $ |
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— |
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— |
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Class A common stock, $ |
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Class B common stock, $ |
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Additional paid-in capital |
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Distribution in excess of net income |
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( |
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( |
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Total stockholders' equity |
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Total liabilities and stockholders' equity |
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$ |
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$ |
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See Notes to the Condensed Consolidated Financial Statements.
4
Millrose Properties, Inc.
Condensed Consolidated Statements of Operations (Unaudited)
(Dollars in thousands, except share amounts)
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Three months ended September 30, |
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Nine months ended September 30, |
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2026 |
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2025 |
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2026 |
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2025 |
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Revenues: |
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Option fee revenues |
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$ |
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$ |
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$ |
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$ |
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Development loan income |
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Total revenues |
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Operating expenses: |
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Management Fee expense |
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Stock-based compensation expense |
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Provision for (benefit from) credit loss expense |
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— |
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( |
) |
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Sales, general, and administrative expenses from pre-spin periods |
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— |
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— |
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— |
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Total operating expenses |
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Income from operations |
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Other income (expense): |
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Interest income |
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Income from preferred instruments |
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— |
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— |
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Interest expense |
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( |
) |
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( |
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( |
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( |
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Other expenses |
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( |
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( |
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( |
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Total other income (expense) |
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( |
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( |
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( |
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Net income before income taxes |
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Income tax expense |
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Net income |
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$ |
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$ |
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$ |
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$ |
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Adjustment for expenses from pre-spin periods |
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— |
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— |
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— |
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Net income attributable to Millrose Properties, Inc. common stockholders |
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$ |
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$ |
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$ |
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$ |
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Basic earnings per share of Class A and Class B common stock |
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$ |
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$ |
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$ |
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$ |
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Diluted earnings per share of Class A and Class B common stock |
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$ |
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$ |
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$ |
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$ |
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Basic weighted average common shares of outstanding Class A and Class B common stock |
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Diluted weighted average common shares of outstanding Class A and Class B common stock |
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See Notes to the Condensed Consolidated Financial Statements.
5
Millrose Properties, Inc.
Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)
(Dollars in thousands, except share amounts)
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Three Months Ended September 30, 2026 |
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Class A |
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Class B |
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Preferred |
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Additional |
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Distribution in Excess of |
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Pre-Spin |
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Total |
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Shares |
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Amount |
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Shares |
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Amount |
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Shares |
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Amount |
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In Capital |
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Net Income |
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Equity |
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Equity |
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Balance at June 30, 2026 |
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$ |
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$ |
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— |
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$ |
— |
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$ |
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$ |
( |
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$ |
— |
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$ |
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Net income |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Common stock issued upon vesting of RSUs |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Dividend equivalent rights |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
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— |
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— |
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( |
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Dividends declared, ($ |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
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— |
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( |
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Stockholders' Equity at September 30, 2026 |
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$ |
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$ |
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— |
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$ |
— |
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$ |
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$ |
( |
) |
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$ |
— |
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$ |
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Three Months Ended September 30, 2025 |
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Class A |
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Class B |
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Preferred |
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Additional |
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Distribution in Excess of |
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Pre-Spin |
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Total |
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Shares |
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Amount |
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Shares |
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Amount |
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Shares |
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Amount |
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In Capital |
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Net Income |
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Equity |
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Equity |
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Balance at June 30, 2025 |
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$ |
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$ |
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— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
|
||||||
Net income |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Stock-based compensation |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Dividends declared, ($ |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Stockholders' Equity at September 30, 2025 |
|
|
|
$ |
|
|
|
|
|
$ |
|
|
|
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Nine Months Ended September 30, 2026 |
|
|||||||||||||||||||||||||||||||||||||
|
Class A |
|
|
Class B |
|
|
Preferred |
|
|
Additional |
|
|
Distribution in Excess of |
|
|
Pre-Spin |
|
|
Total |
|
|||||||||||||||||||
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
In Capital |
|
|
Net Income |
|
|
Equity |
|
|
Equity |
|
||||||||||
Balance at December 31, 2025 |
|
|
|
$ |
|
|
|
|
|
$ |
|
|
|
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
|
||||||
Net income |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Common stock issued upon vesting of RSUs |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
||
Stock-based compensation |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Dividend equivalent rights |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Dividends declared, ($ |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Stockholders' Equity at September 30, 2026 |
|
|
|
$ |
|
|
|
|
|
$ |
|
|
|
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Nine Months Ended September 30, 2025 |
|
|||||||||||||||||||||||||||||||||||||
|
Class A |
|
|
Class B |
|
|
Preferred |
|
|
Additional |
|
|
Distribution in Excess of |
|
|
Pre-Spin |
|
|
Total |
|
|||||||||||||||||||
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
In Capital |
|
|
Net Income |
|
|
Equity |
|
|
Equity |
|
||||||||||
Balance at December 31, 2024 |
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
||
Net income (loss) |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
( |
) |
|
|
|
||
Adjustment for expenses from pre-spin periods |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Common stock issued, Spin-Off |
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
||||
Common stock retained by Lennar, Spin-Off |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
||
Contribution from Lennar, Spin-Off |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Reversal of pre-spin equity |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Stock-based compensation |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Dividends declared, ($ |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Stockholders' Equity at September 30, 2025 |
|
|
|
$ |
|
|
|
|
|
$ |
|
|
|
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
|
||||||
See Notes to the Condensed Consolidated Financial Statements.
6
Millrose Properties, Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(Dollars in thousands)
|
|
Nine months ended September 30, |
|
|||||||
|
|
2026 |
|
|
2025 |
|
||||
Cash flows from (used in) operating activities |
|
|
|
|
|
|
|
|
||
Net income |
|
$ |
|
|
|
$ |
|
|
||
Adjustments to reconcile net income to net cash from operating activities |
|
|
|
|
|
|
|
|
||
Accretion of original issue discount |
|
|
|
( |
) |
|
|
|
— |
|
Amortization of deferred financing commitment fee |
|
|
|
( |
) |
|
|
|
— |
|
Provision for (benefit from) credit loss expense |
|
|
|
( |
) |
|
|
|
|
|
Sales, general, and administrative expenses from pre-spin periods |
|
|
|
— |
|
|
|
|
|
|
Interest paid-in-kind |
|
|
|
( |
) |
|
|
|
( |
) |
Stock-based compensation expense |
|
|
|
|
|
|
|
|
||
Amortization of debt issuance and financing costs |
|
|
|
|
|
|
|
|
||
Changes in assets and liabilities |
|
|
|
|
|
|
|
|
||
Other assets |
|
|
|
( |
) |
|
|
|
( |
) |
Other liabilities |
|
|
|
( |
) |
|
|
|
|
|
Deferred tax liabilities |
|
|
|
|
|
|
|
|
||
Takedowns of homesites under option contracts, net of builder deposit credits |
|
|
|
|
|
|
|
|
||
Net cash flows from operating activities |
|
|
|
|
|
|
|
|
||
Cash flows from (used in) investing activities |
|
|
|
|
|
|
|
|
||
Option deposits from Lennar, Spin-Off |
|
|
|
— |
|
|
|
|
|
|
Acquisition of Rausch land assets, net of builder deposits |
|
|
|
— |
|
|
|
|
( |
) |
Investments in homesites under option contracts, net of builder deposits |
|
|
|
( |
) |
|
|
|
( |
) |
Investments in development loans |
|
|
|
( |
) |
|
|
|
( |
) |
Paydowns of development loans |
|
|
|
|
|
|
|
|
||
Acquisition of single-family residential properties |
|
|
|
( |
) |
|
|
|
— |
|
Single-family residential property deposits |
|
|
|
( |
) |
|
|
|
— |
|
Investments in preferred instruments, net |
|
|
|
( |
) |
|
|
|
— |
|
Net cash used in investing activities |
|
|
|
( |
) |
|
|
|
( |
) |
Cash flows from (used in) financing activities |
|
|
|
|
|
|
|
|
||
Cash contribution from Lennar, Spin-Off |
|
|
|
— |
|
|
|
|
|
|
Payments for Spin-Off deal costs |
|
|
|
— |
|
|
|
|
( |
) |
Financing and issuance cost payments for debt obligations |
|
|
|
( |
) |
|
|
|
( |
) |
Proceeds from revolving credit facility and delayed draw term loan facility borrowings |
|
|
|
|
|
|
|
|
||
Repayments of revolving credit facility and delayed draw term loan facility borrowings |
|
|
|
( |
) |
|
|
|
( |
) |
Proceeds from single-family residential secured credit facility |
|
|
|
|
|
|
|
— |
|
|
Proceeds from senior notes |
|
|
|
— |
|
|
|
|
|
|
Dividends paid to stockholders |
|
|
|
( |
) |
|
|
|
( |
) |
Dividend accrual rights paid to stockholders |
|
|
|
( |
) |
|
|
|
— |
|
Payment of seller notes |
|
|
|
— |
|
|
|
|
( |
) |
Net cash flows from financing activities |
|
|
|
|
|
|
|
|
||
Net increase in cash |
|
|
|
|
|
|
|
|
||
Cash at beginning of period |
|
|
|
|
|
|
|
— |
|
|
Cash at end of period |
|
$ |
|
|
|
$ |
|
|
||
Supplemental disclosures of non-cash investing and financing activities |
|
|
|
|
|
|
|
|
||
Non-cash impacts of Millrose Spin-Off |
|
|
|
|
|
|
|
|
||
Homesites under option contracts contributed by Lennar, net of option deposits |
|
$ |
|
— |
|
|
$ |
|
|
|
Decrease in deferred tax liabilities |
|
|
|
— |
|
|
|
|
|
|
Liabilities for transaction deal costs and seller notes |
|
|
|
— |
|
|
|
|
( |
) |
Common stock issued, Spin-Off |
|
|
|
— |
|
|
|
|
( |
) |
Non-cash increase in additional paid-in capital, Spin-Off |
|
|
|
— |
|
|
|
|
( |
) |
Reversal of pre-spin equity at Spin-Off |
|
|
|
— |
|
|
|
|
|
|
Non-cash impacts of Rausch land acquisition |
|
|
|
|
|
|
|
|
||
Option deposits |
|
|
|
— |
|
|
|
|
( |
) |
Development guarantee holdback liability |
|
|
|
— |
|
|
|
|
( |
) |
Increase in deferred tax liabilities |
|
|
|
— |
|
|
|
|
( |
) |
Accrued preparation and capital costs for single-family residential properties |
|
|
|
|
|
|
|
— |
|
|
Builder deposits for homesites under option contract |
|
|
|
( |
) |
|
|
|
( |
) |
Common stock issued upon vesting of RSUs |
|
|
|
|
|
|
|
— |
|
|
Dividend equivalent accrual rights, accrued but not paid |
|
|
|
|
|
|
|
— |
|
|
Dividends declared but not paid |
|
|
|
|
|
|
|
|
||
Development loan origination fee |
|
|
|
|
|
|
|
— |
|
|
Supplemental disclosure of cash flow information |
|
|
|
|
|
|
|
|
||
Cash paid for interest |
|
$ |
|
|
|
$ |
|
|
||
Cash paid for income taxes |
|
|
|
— |
|
|
|
|
|
|
See Notes to the Condensed Consolidated Financial Statements.
7
Millrose Properties, Inc.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
Note 1. Description of Business
Millrose Properties, Inc. (“Millrose” and, together with its subsidiaries, the “Company”) is a corporation incorporated under the laws of the State of Maryland on March 19, 2024 and later spun-off (the “Spin-Off”) by Lennar Corporation (“Lennar”) to create an independent, publicly traded company. The Spin-Off was completed on February 7, 2025, at which time Millrose’s Class A common stock was listed on the New York Stock Exchange under the symbol “MRP”.
Prior to the Spin-Off, the operations and financial information that represent the business assets that were spun off to Millrose were wholly owned by and under the common control of Lennar and are collectively referred to as the “Predecessor Millrose Business”. After the Spin-Off, Millrose is an independent company that is externally managed and advised by Kennedy Lewis Land and Residential Advisors LLC (“KL” or the “Manager”), pursuant to a management agreement between Millrose and KL entered into on February 7, 2025 (as amended from time to time, the “Management Agreement”).
The Company purchases and develops residential land and sells finished homesites to homebuilders by way of option contracts with predetermined costs and takedown schedules. The Company serves as a solution for homebuilders seeking to expand access to finished homesites while implementing an asset-light strategy. The Company’s option contracts provide for the payment of recurring cash option fees in exchange for granting counterparties the right to purchase land that Millrose owns during the development period at predetermined prices and takedown schedules. As Millrose sells fully developed homesites, capital is recycled into future land acquisitions for homebuilders, providing counterparties with durable access to community growth. To a lesser extent, the Company also provides development loans secured by property intended for residential use and owns a portfolio of single-family residential rental properties.
The Company has elected to be treated as a real estate investment trust (“REIT”) for U.S. federal income tax purposes beginning with the taxable year ended December 31, 2025. Millrose is a holding company whose operations are conducted primarily through MPH Parent, LLC (“MPH Parent”), a Delaware limited liability company and a wholly owned operating subsidiary of Millrose, and other subsidiaries, including Millrose Properties Holdings, LLC (“Millrose Holdings”), a Delaware limited liability company and a wholly owned operating subsidiary of MPH Parent, and MRP Liberty, LLC (“MRP Liberty”), a Delaware limited liability company and a wholly owned operating subsidiary of Millrose through which the Company conducts its residential rental activities. Millrose and MPH Parent made a joint election to treat MPH Parent as a taxable REIT subsidiary (“TRS”) of Millrose. Accordingly, MPH Parent is subject to entity-level taxation in connection with its business operations. Similarly, the Company’s other TRSs are taxable business entities.
Note 2. Basis of Presentation and Significant Accounting Policies
Basis of Presentation
The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission for interim financial statements. Accordingly, certain footnotes or other financial information normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted. These condensed consolidated financial statements include, in the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for the fair presentation of the Company’s financial position, results of operations, and cash flows for the periods presented. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements in the Company’s Form 10-K for the year ended December 31, 2025.
The comparative information for the nine months ended September 30, 2025 includes results of the Predecessor Millrose Business prior to the Spin-Off completed on February 7, 2025. Amounts presented for the Predecessor Millrose Business have been derived from the accounting records of Lennar and prepared under the legal-entity carve-out method, as described in the Company’s Form 10-K for the year ended December 31, 2025. The condensed consolidated financial statements after the Spin-Off include the accounts of Millrose and its subsidiaries, including Millrose Holdings and other subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
Subsequent to the issuance of the Company’s Form 10-Q for the third quarter 2025, the Company corrected its previously issued Statements of Cash Flows presentation for the Sale of homesites under option contracts and other related assets. As a result, the Company has revised the prior-year comparative information presented herein to capture the impact to the nine months ended September 30, 2025. The cash flows provided by operating activities have been increased and net cash provided by investing activities have been decreased by $
8
Use of Estimates and Assumptions
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. The allowance for credit losses on development loan receivables and homesites under option contracts is a critical accounting estimate developed using a weighted average remaining maturity (“WARM”) methodology in accordance with ASC 326 Financial Instruments – Credit Losses. This methodology requires significant judgment in determining the annual charge-off rate, expected cash flows, and other qualitative adjustments. Additionally, determining whether option agreements should be accounted for under ASC 842 Leases requires the Company to apply significant judgment in evaluating the elements of control and economic benefits of the related assets.
The Company may acquire single-family residential properties which are accounted for as asset acquisitions. The allocation of the purchase price between land and building components is a critical accounting estimate developed through a purchase price allocation analysis that estimates the relative fair values of the acquired land and building assets. This estimate requires significant judgment in evaluating valuation assumptions and methodologies used to determine such relative fair values. The evaluation of single-family residential properties for impairment also requires judgment in assessing recoverability and, when necessary, estimating future cash flows and fair value.
The Company believes the estimates and assumptions underlying its condensed consolidated financial statements are reasonable and supportable based on the information available as of September 30, 2026. Actual results could differ from those estimates.
Segment Reporting
As of September 30, 2026, the Company operates as a single operating and reportable segment in accordance with ASC 280, Segment Reporting. See Note 17. Segment Reporting for additional information.
Cash
The Company considers all investments with an original maturity of three months or less to be cash and cash equivalents. Cash is recorded at cost, which approximates its fair values due to the short maturity period. As of September 30, 2026, Cash was $
Homesites Under Option Contracts
The Company enters into option agreements that grant homebuilders the right to direct the planning, use, and development of homesites subject to the option contracts. The Company evaluates its homesite option contracts at inception to determine if they contain a lease as defined under ASC 842. If the counterparty obtains substantially all of the economic benefits from use of the asset and has elements of control of the optioned assets, the Company accounts for homesites under option contracts in accordance with ASC 842. If the purchase options are reasonably certain of being exercised, the Company accounts for option fee contracts as sales-type leases under ASC 842.
Homesites under option contracts are recorded based on the Company's capital funded under the option contracts, which includes the land acquisition costs, qualifying development costs and other directly attributable costs. Option fee income is recognized over the term of the contract using an effective interest yield, which represents the effective interest component on the sales-type leases. Changes in monthly option fees due to reimbursable development costs, changes in takedown timing or volume, or other contractual adjustments are recognized prospectively through an updated effective interest yield over the term of the option contract. When a counterparty completes a takedown and homesites are transferred in accordance with the option contract, the Company derecognizes the related carrying amount from the condensed consolidated balance sheets.
The Company evaluates the contractual right to receive future payments under option contracts for expected credit losses in accordance with ASC 326. The Company uses a WARM methodology, which applies an annual loss rate to the estimated remaining life of the related contract balance and is adjusted for expected cash flows and other qualitative factors which include the counterparties' payment performance, delinquencies or defaults since inception, historical charge off rates for residential housing, and cross-collateralization features across certain counterparty arrangements. The Company also considers the credit quality of its most significant counterparties.
See Note 4. Homesites Under Option Contracts for additional information.
9
Development Loan Income
The Company earns interest income on the outstanding loan balance of development loans secured by residential property. Development loan income is recorded in accordance with ASC 310 Receivables. The Company records the revenue on a monthly basis as the interest is earned. All interest earned is paid-in-kind (“PIK”).
For the three and nine months ended September 30, 2026, Development loan income was $
Development Loan Receivables, net
Development loan receivables, net are accounted for in accordance with ASC 310, Receivables. These amounts include principal amounts due on development loans and the related interest receivable. Development loans are recorded at their amortized cost basis, representing the principal portion and capitalized PIK interest, net of principal payments and the allowance for credit losses.
The Company records an allowance for credit losses in accordance with ASC 326. The Company uses a WARM methodology which applies an annual charge-off rate to the estimated remaining life of development loans, adjusted for expected cash flows. The historical baseline is further adjusted for qualitative factors, including counterparties' consistent payment performance and broader market conditions affecting residential development activity. The Company includes accrued PIK interest in the amortized cost basis of the development loans for purposes of calculating the allowance for credit losses. As of September 30, 2026, the Company recorded an allowance for credit losses of $
Preferred Instruments, Net
As of September 30, 2026, Preferred instruments, net consisted of the Company's purchase of a preferred instrument issued by Dream Finders Homes, Inc. (“Dream Finders”), as described in Note 6. Preferred Instruments, net. The instrument is accounted for as an equity security in accordance with ASC 321, Investments – Equity Securities. As the preferred instrument does not have a readily determinable fair value, the Company elected the measurement alternative under ASC 321 and measures the investment at cost, less impairment, if any, adjusted for observable price changes in orderly transactions for an identical or similar investment of the same issuer.
The preferred instrument is a perpetual security with no stated maturity date or mandatory redemption feature. Pursuant to the terms and conditions of the certificate of designations, Dream Finders may redeem the preferred instrument beginning on the third anniversary of issuance at specified redemption prices. The Company may also convert the preferred instrument into shares of Dream Finders common stock beginning on the sixth anniversary of issuance, subject to the terms of the certificate of designations. The preferred instrument also includes certain holder redemption and conversion rights upon the occurrence of specified events as defined in the certificate of designations.
Original issue discounts associated with preferred instruments are recorded as a reduction to the carrying value of the instrument and are accreted into Income from preferred instruments in the Company’s condensed consolidated statements of operations over the estimated life of the instrument which is the earliest redemption date to Dream Finders. Commitment fees received in connection with future funding obligations are initially recorded as deferred liabilities within Other liabilities in the Company’s condensed consolidated balance sheets and are recognized into Income from preferred instruments in the Company’s condensed consolidated statements of operations over the life of the instrument which is the earliest redemption date to Dream Finders.
Single-Family Residential Properties, net
Single-family residential properties, net consist of residential properties acquired by the Company for lease as rental properties, including properties that are substantially complete and properties undergoing activities necessary to prepare the properties for rental operations. Single-family residential properties, net are carried at cost, less accumulated depreciation.
The Company accounts for acquisitions of Single-family residential properties, net as asset acquisitions in accordance with ASC 805, Business Combinations. The properties are recorded at their purchase price, including acquisition costs and other directly attributable costs. The purchase price, including capitalized acquisition costs, is allocated to land and buildings based on their relative fair values at the acquisition date. Relative fair values are determined through a purchase price allocation analysis utilizing management's assumptions and, when applicable, third-party valuation specialists.
The Company capitalizes costs directly attributable to the acquisition of residential properties. The Company also capitalizes costs incurred to prepare acquired properties for rental, as well as interest and certain carrying costs incurred during the period prior to the property being substantially complete. When the properties are substantially complete, capitalization of such costs ceases and the costs of operations, including repairs and maintenance, are expensed as incurred. Expenditures that improve or extend the useful life of a property are capitalized.
10
Single-family residential properties that are not substantially complete are not depreciated. Depreciation commences when properties are substantially complete. Depreciation of single-family residential properties in operation is recognized on a straight-line basis over the estimated useful lives of the related assets. Land is not depreciated.
The Company reviews single-family residential properties for impairment in accordance with ASC 360, Property, Plant and Equipment, whenever events or changes in circumstances indicate that the carrying amount of a property may not be recoverable. If indicators of impairment exist, the Company compares the estimated undiscounted future cash flows expected to be generated by the property to the carrying amount of the property. If the carrying amount of a property is not recoverable, the Company recognizes an impairment charge to the extent the carrying amount exceeds the property’s estimated fair value.
See Note 7. Single-Family Residential Properties, net for additional information.
Builder Deposits
Builder deposits are option deposit payments received from counterparties under the Company’s option contracts. The Company records a liability for these deposits at the time of the counterparties’ deposit payments. When the counterparties exercise their purchase option and acquire the finished homesite, the builder deposits are applied to the total takedown price owed by the counterparty. The liability is reduced as takedown payments are made and when the corresponding homesites under option contracts are derecognized from the condensed consolidated balance sheets. If counterparties do not exercise their purchase options, the deposit is forfeited as per the terms of the option contracts and recorded as income by the Company. For the three and nine months ended September 30, 2026, there were no option agreements that were terminated, forfeited, or expired without exercise. Accordingly, no income related to forfeited deposits was recognized by the Company during such periods.
The following roll forward summarizes the change in builder deposits for the nine months ended September 30, 2026:
|
|
Nine months |
|
||
(in thousands) |
|
2026 |
|
||
Beginning balance at December 31, 2025 |
|
$ |
|
|
|
Builder deposits, additions |
|
|
|
|
|
Homesite takedowns, options exercised |
|
|
|
( |
) |
Builder deposits at September 30, 2026 |
|
$ |
|
|
|
Debt Issuance and Financing Costs
The Company records debt issuance and financing costs in accordance with ASC 835 Interest.
Issuance costs for the DDTL Credit Facility (as defined below), Senior Notes (as defined below), and SFR Secured Credit Facility (as defined below) are recorded as a direct deduction of the carrying value of the debt liability and are classified in the related liability account on the Company’s condensed consolidated balance sheets. These costs are amortized to interest expense on a straight-line basis over the contractual life of the debt as it approximates the effective interest method. As of September 30, 2026, issuance costs recorded as a direct deduction of debt, net of accumulated amortization, were $
Financing costs for the Revolving Credit Facility (as defined below) are classified as Other assets in the Company’s condensed consolidated balance sheets as the costs represent a future economic benefit which provides the Company access to capital over the contractual term. These costs are amortized to interest expense on a straight-line basis over the term of the Revolving Credit Facility as it approximates the effective interest method. As of September 30, 2026, financing costs recorded as Other assets, net of accumulated amortization, were $
For additional information, see Note 11. Debt.
Development Guarantee Holdback Liability
The Company recorded a holdback liability related to a site improvement guarantee (the “Site Improvement Guarantee Amount”) owed to Rausch Coleman Companies, LLC (“Rausch”) pursuant to terms of the transaction documents for the acquisition of the Rausch land assets by the Company (the “Transaction Documents”). The Site Improvement Guarantee Amount is due within ten business days of the date that is the later of (i) two years following February 10, 2025, and (ii) the date on which development of
11
Amount, less the aggregate amount by which actual development costs exceed the budgeted development costs for the Guaranteed Assets or such lesser amounts as may be designated in writing by Rausch. As of September 30, 2026 and December 31, 2025, the holdback liability was $
Management Fee Expense
Pursuant to the Management Agreement, the Company pays KL a management fee in an amount equal to
Except for certain reimbursable expenses, all expenses incurred by Millrose and its subsidiaries in the ordinary course of business are covered under the Management Fee, including the costs of all administrative and operating functions and systems, office space and office equipment, public company expenses, expenses incurred in maintaining the Company’s REIT status, compensation and fees paid to officers, employees, directors, vendors, consultants, advisors, and other outside professionals. All personnel are employed by KL or an affiliate of KL, and their salaries are paid by KL or the relevant affiliate of KL; therefore the Company does not record personnel-related expenses, including salaries, benefits, and share-based compensation for any employees. All cash compensation and fees paid to the Board are also paid by KL and covered by the Management Fee. The Management Fee does not cover certain offering expenses, rating agency fees, fees incurred for services in connection with extraordinary litigation and mergers and acquisitions and other events outside the Company’s ordinary course of business, certain property-level operating expenses for single-family residential properties, and, in certain circumstances, costs associated with the ownership and maintenance of land.
The Management Fee for the three months ended September 30, 2026 and 2025 was $
Property Operating and Maintenance Expenses
See Note 7. Single-Family Residential Properties, net for additional information.
Stock-Based Compensation
On December 17, 2024, the Company’s sole stockholder at the time and its Board adopted the Millrose Properties, Inc. 2024 Omnibus Incentive Plan (the “2024 Incentive Plan”). The 2024 Incentive Plan authorizes the award of stock options, restricted stock, restricted stock units (“RSUs”), stock appreciation rights, and other stock-based awards to the Company’s employees, officers, directors, consultants and advisors. As of September 30, 2026, there were
In accordance with ASC 718 Compensation- Stock Compensation, the Company accounts for stock-based compensation based on the grant date fair value and amortizes the costs on a straight-line basis over the vesting terms as stock-based compensation expense and as additional paid-in capital. See Note 15. Stock-Based Compensation Expense for additional information.
Sales, General, and Administrative Expenses from Pre-Spin Period
Sales, general, and administrative expenses from pre-spin period are costs directly attributable to the Predecessor Millrose Business prior to the Spin-Off, and include pre-Spin-Off operating and employee compensation costs for dedicated regional and divisional land teams tasked with acquiring and developing the homesites Lennar transferred to Millrose in the Spin-Off. For the nine months ended September 30, 2025, these expenses included an allocation for the period from January 1, 2025 through February 7, 2025 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 $
12
Income Taxes
The Company records income taxes using the asset and liability method set under ASC 740 Accounting for Income Taxes. Deferred tax assets and liabilities are recognized based on the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis, as well as net operating loss and tax credit carryforwards as applicable. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply in the year in which the temporary differences are expected to be recovered or paid. The effect of the change in tax rates is recognized in earnings in the period when the changes are enacted. Interest related to unrecognized tax benefits is recognized in the condensed consolidated financial statements as a component of income tax expense.
Deferred tax assets are recognized to the extent that it is more likely than not that they will be realized. The Company reviews the potential realization of deferred tax assets and establishes a valuation allowance to reduce the deferred tax assets if it is determined more likely than not that some portion, or all, of the deferred tax assets will not be realized. The Company considers all available positive and negative evidence, including recent financial performance, actual earnings (losses), future reversals of existing temporary differences, projected future taxable income, and tax planning strategies.
Millrose has elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”) beginning with the taxable year ended December 31, 2025. As a REIT, Millrose is generally not subject to U.S. federal income tax on its net income that it distributes to its stockholders. To maintain its qualification as a REIT, Millrose is required under the Code to distribute at least
Millrose has elected for its wholly owned subsidiaries MPH Parent and Millrose Holdings as well as its indirectly wholly owned subsidiary RCH Holdings, Inc. to be treated as TRSs and may form or acquire other direct or indirect wholly owned subsidiaries that may also elect to be taxed as TRSs in the future. TRSs are subject to taxation at regular corporate income tax rates.
See Note 13. Income Taxes for additional information.
Other Income (Expense)
Other income (expense) consists of interest income earned on cash balances, income related to preferred instruments, interest expense on the Company's debt obligations, and other expense items.
Other income (expense) for the three months ended September 30, 2026 and 2025 was $
Other income (expense) for the nine months ended September 30, 2026 and 2025 was $
Fair Value Measurements
Certain assets and liabilities are required to be reported at fair value under GAAP. The framework for determining fair value provided by GAAP prioritizes the inputs used in measuring fair value as follows:
13
As of September 30, 2026, the Company did not measure any assets or liabilities at fair value on a recurring or nonrecurring basis.
Other liabilities approximate their fair value due to their short-term nature. The Revolving Credit Facility, DDTL Credit Facility, and SFR Secured Credit Facility bear interest at variable rates that reset periodically; and therefore, approximate fair value.
The estimated fair value of the Company's Senior Notes are classified within Level 1 of the fair value hierarchy because it is based on quoted market prices for identical securities in active markets.
|
|
September 30, 2026 |
|
|
December 31, 2025 |
|
||||||||||||||
|
|
Carrying Value |
|
|
Fair Value |
|
|
Carrying Value |
|
|
Fair Value |
|
||||||||
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Senior Notes |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||
Recent Accounting Standards
In November 2024, the Financial Accounting Standards Board (the “FASB”) issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (“ASU 2024-03”), which requires disclosure of disaggregated information about certain income statement expense line items in the notes to the financial statements on an interim and annual basis. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The Company has elected not to early adopt and is currently evaluating the potential impact of ASU 2024-03 on its financial statements and disclosures.
In November 2025, the FASB issued ASU 2025‑08, Financial Instruments—Credit Losses (Topic 326): Purchased Loans (“ASU 2025‑08”), which amends accounting for certain acquired loans. ASU 2025‑08 expands the “gross‑up” method under ASC 326, previously limited to purchased credit-deteriorated (“PCD”) assets, to include certain purchased seasoned loans, eliminating Day 1 credit loss expense and aligning the treatment with that of PCD assets. The update is effective for interim and annual reporting periods beginning after December 15, 2026, with prospective application; early adoption is permitted. The Company is currently evaluating the potential impact of ASU 2025‑08 on its financial statements and disclosures.
In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements (“ASU 2025-11”). The amendments clarify scope and presentation guidance in Topic 270, consolidate interim disclosures, and introduce a requirement to disclose events since the end of the most recent annual reporting period that have a material impact on the entity. ASU 2025-11 is effective for interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The Company does not expect adoption to have a material impact on its financial statements and disclosures.
In December 2025, the FASB issued ASU 2025-12, Codification Improvements (“ASU 2025‑12”), which provides technical corrections, clarifications, and minor improvements to the FASB Accounting Standards Codification without introducing major changes to accounting practice. Among other items, ASU 2025-12 clarifies that lease receivables from sales-type leases are excluded from the enhanced disclosures required by ASU 2022-02-Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. ASU 2025-12 is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods. The Company does not expect adoption to have a material impact on its financial statements and disclosures.
Note 3. Business Transactions
Credit Agreement
On March 25, 2026, the Company amended and restated its credit facility with JPMorgan Chase Bank, N.A. serving as administrative agent for the lenders party thereto. The Credit Agreement (as defined below) includes a new $
14
On August 5, 2026, the Company entered into Amendment No. 1 to the Credit Agreement. The Credit Agreement was amended pursuant to Amendment No.1 to, among other things, reduce the rate at which the loans bear interest by
On September 21, 2026, the Company and the guarantors entered into the Commitment and Acceptance, by
and among the Company, the guarantors, JPMorgan Chase Bank, N.A., as administrative agent for the lenders,
and Flagstar Bank, N.A., under which the Company exercised the accordion feature under the Credit Agreement
to increase the aggregate amount of commitments of the Revolving Credit Facility by $
$
Funding for Dream Finders’ Acquisition of Beazer Homes
During the third quarter of 2026, the Company provided acquisition funding of $
See Note 6. Preferred Instruments, net and Note 18. Subsequent Events for additional information.
Residential Rental Properties
During the third quarter of 2026, the Company acquired
See Note 7. Single-Family Residential Properties, net for further description.
Single-Family Residential Secured Credit Facility
On September 30, 2026, certain subsidiaries of the Company entered into a credit agreement (the “SFR Secured Credit Facility”) with Goldman Sachs Bank USA, as administrative agent and initial lender. The SFR Secured Credit Facility provides for a revolving credit facility with commitments in an aggregate amount of up to $
See Note 11. Debt for additional information.
October 2026 Offering of Senior Notes
On September 22, 2026, the Company announced a private offering (the “October 2026 Offering”) of $
See Note 18. Subsequent Events for additional information.
Note 4. Homesites Under Option Contracts
The Company's option contracts with its counterparties are accounted for under ASC 842 because the Company transfers elements of control of the homesites to the counterparties during the option contract period. Revenues earned from homesites under option contracts are recorded as Option fee revenues in the Company's condensed consolidated statements of operations.
The option agreements grant counterparties the exclusive right to acquire homesites owned by the Company at predetermined prices and takedown schedules. Although the Company retains legal title to the land during the option agreement term, the counterparties obtain substantive rights to direct the planning, use, and development of the homesites. The Company has therefore determined that these arrangements are accounted for under ASC 842. Because the Company considers the counterparties’ purchase options to be reasonably certain of exercise, the option contracts are accounted for as sales‑type leases under ASC 842.
15
The carrying value of homesites under option contracts is recorded based on the Company's capital funded under the option contracts, which includes the land acquisition costs, qualifying development costs and other directly attributable costs incurred on the underlying land. When a counterparty completes a takedown and homesites are transferred in accordance with the option contract, the Company derecognizes the related carrying amount from the condensed consolidated balance sheets.
The Company did not recognize selling profit or loss upon commencement of its option contracts because the carrying amount of the underlying homesites approximated consideration allocated to those assets in accordance with ASC 842. For the three months ended September 30, 2026 and 2025, the Company recognized total Option fee revenues related to these option contracts of $
Because the Company's option contracts are accounted for as sales-type leases, the resulting asset, representing the Company's right to receive future takedown payments and option fees, is considered a contractual right to receive cash. Therefore, the Company evaluates expected credit losses for homesites subject to option contracts in accordance with ASC 326. Expected credit losses are estimated using a WARM methodology, which applies an annual loss rate to the estimated remaining life of the related contract balance and is adjusted for expected cash flows and relevant qualitative factors. Qualitative considerations include the counterparties' consistent payment performance, the absence of delinquencies or defaults since inception, non-refundable option deposits and contractual termination fees, and cross-collateralization features across certain counterparty arrangements. The Company also considers the credit quality of its most significant counterparties. After considering these factors, the Company determined that the risk of loss was immaterial as of September 30, 2026.
The change in Homesites under option contracts from December 31, 2025 through September 30, 2026 is as follows:
|
|
Nine months |
|
||
(in thousands) |
|
2026 |
|
||
Beginning balance at December 31, 2025 |
|
$ |
|
|
|
Investments in homesites under option contracts (1) |
|
|
|
|
|
Takedowns of homesites under option contracts |
|
|
|
( |
) |
Homesites under option contracts at September 30, 2026 |
|
$ |
|
|
|
Counterparties pay monthly option fees, which may vary over time due to additional capital invested in development, reimbursable costs, takedown timing and volume, or other contractual adjustments. These changes are recognized prospectively through an updated effective interest yield. The Company recognizes option fee revenues from these arrangements using an effective interest yield over the term of the option contract, which represents the effective interest component on sales-type leases.
Note 5. Development Loan Receivables, net
Development loan receivables as of September 30, 2026 and December 31, 2025 were as follows:
|
|
September 30, |
|
|
December 31, |
|
||||
(in thousands) |
|
2026 |
|
|
2025 |
|
||||
Development loan principal receivables |
|
$ |
|
|
|
$ |
|
|
||
Interest receivable paid-in-kind for development loans |
|
|
|
|
|
|
|
|
||
Allowance for credit losses |
|
|
|
( |
) |
|
|
|
( |
) |
Development loan receivables, net |
|
$ |
|
|
|
$ |
|
|
||
16
The following table summarizes the activity in the Company's Development loan receivables, net and the associated allowance for credit losses, which represents the Company's valuation account for these financial assets, for the nine months ended September 30, 2026:
|
|
Nine months |
|
||
(in thousands) |
|
2026 |
|
||
Development Loan Receivables (Gross) |
|
|
|
|
|
Balance at December 31, 2025 |
|
$ |
|
|
|
Investments in development loans |
|
|
|
|
|
Paydowns of development loans (1) |
|
|
|
( |
) |
Interest income on development loans |
|
|
|
|
|
Ending gross balance at September 30, 2026 |
|
$ |
|
|
|
Allowance for Credit Losses |
|
|
|
|
|
Balance at December 31, 2025 |
|
$ |
|
|
|
Adjustment: Provision for (benefit from) credit loss expense (2) |
|
|
|
( |
) |
Ending allowance for credit losses at September 30, 2026 |
|
|
|
|
|
Development loan receivables, net at September 30, 2026 |
|
$ |
|
|
|
Note 6. Preferred Instruments, net
On September 14, 2026, the Company entered into an agreement with Dream Finders to purchase a preferred instrument in two closings in connection with Dream Finders' acquisition of Beazer Homes. At the initial closing on September 14, 2026, the Company purchased a preferred instrument for $
On October 20, 2026, upon the completion of Dream Finders' acquisition of Beazer Homes, the Company completed the second closing and purchased an additional preferred instrument for $
For the three and nine months ended September 30, 2026, the Company recognized approximately $
Preferred instruments, net as of September 30, 2026 and December 31, 2025 were as follows:
|
|
September 30, |
|
|
December 31, |
|
||||
(in thousands) |
|
2026 |
|
|
2025 |
|
||||
Preferred instruments, at stated value (1) |
|
$ |
|
|
|
$ |
|
|
||
Less: Original issue discount, net of accretion (2) |
|
|
|
( |
) |
|
|
|
|
|
Preferred instruments, net |
|
$ |
|
|
|
$ |
|
|
||
The following table summarizes activity in the Company's Preferred instruments, net for the nine months ended September 30, 2026:
|
|
Nine months |
|
||
(in thousands) |
|
2026 |
|
||
Balance at December 31, 2025 |
|
$ |
|
|
|
Investments in preferred instruments, net of original issue discount |
|
|
|
|
|
Original issue discount accretion |
|
|
|
|
|
Preferred instruments, net at September 30, 2026 |
|
$ |
|
|
|
As of September 30, 2026, the Company had not identified any impairment indicators or observable price changes requiring an adjustment to the carrying value of the preferred instrument.
17
Note 7. Single-Family Residential Properties, net
During the third quarter of 2026, the Company acquired
|
|
September 30, |
|
|
December 31, |
|
||||
(in thousands) |
|
2026 |
|
|
2025 |
|
||||
Land |
|
$ |
|
|
|
$ |
|
|
||
Buildings and improvements |
|
|
|
|
|
|
|
|
||
Single-family residential properties, gross |
|
|
|
|
|
|
|
|
||
Less: Accumulated depreciation |
|
|
|
|
|
|
|
|
||
Single-family residential properties, net |
|
$ |
|
|
|
$ |
|
|
||
The following table summarizes activity in the Company's Single-family residential properties, net for the nine months ended September 30, 2026:
|
|
Nine months |
|
||
(in thousands) |
|
2026 |
|
||
Balance at December 31, 2025 |
|
$ |
|
|
|
Acquisitions of single-family residential properties |
|
|
|
|
|
Acquisition related and capitalized costs (1) |
|
|
|
|
|
Depreciation expense |
|
|
|
|
|
Single-family residential properties, net at September 30, 2026 |
|
$ |
|
|
|
As of September 30, 2026, the Company's single-family residential properties were not yet substantially complete. Accordingly,
Note 8. Related Party Transactions
The Company is externally managed and advised by KL pursuant to the Management Agreement. KL is considered a related party due to its contractual management relationship with the Company. During the three months and nine months ended September 30, 2026, the Company paid approximately $
Note 9. Other Assets
Other assets as of September 30, 2026 and December 31, 2025 were as follows:
|
|
September 30, |
|
|
December 31, |
|
||||
(in thousands) |
|
2026 |
|
|
2025 |
|
||||
Deferred financing costs (1) |
|
$ |
|
|
|
$ |
|
|
||
Earnest deposits and prepaid due diligence costs (2) |
|
|
|
|
|
|
|
|
||
Other assets (3) |
|
|
|
|
|
|
|
|
||
Other assets |
|
$ |
|
|
|
$ |
|
|
||
18
Note 10. Other Liabilities
Other liabilities as of September 30, 2026 and December 31, 2025 were as follows:
|
|
September 30, |
|
|
December 31, |
|
||||
(in thousands) |
|
2026 |
|
|
2025 |
|
||||
Dividend payable (1) |
|
$ |
|
|
|
$ |
|
|
||
Seller notes payable (2) |
|
|
|
|
|
|
|
|
||
Accrued interest payable (3) |
|
|
|
|
|
|
|
|
||
Other accrued liabilities (4) |
|
|
|
|
|
|
|
|
||
Deferred financing commitment fee (5) |
|
|
|
|
|
|
|
— |
|
|
Other liabilities |
|
$ |
|
|
|
$ |
|
|
||
Note 11. Debt
Debt Obligations
The Company’s outstanding debt obligations as of September 30, 2026 consisted of its Senior Notes, borrowings under the Revolving Credit Facility and DDTL Credit Facility, and purchase money mortgages.
|
|
September 30, |
|
|
December 31, |
|
||||
(in thousands) |
|
2026 |
|
|
2025 |
|
||||
Revolving Credit Facility maturing on |
|
$ |
|
|
|
$ |
|
|
||
DDTL Credit Facility maturing on |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|||
Purchase money mortgages |
|
|
|
|
|
|
|
|
||
Total debt obligations |
|
$ |
|
|
|
$ |
|
|
||
Debt issuance costs (1) |
|
|
|
( |
) |
|
|
|
( |
) |
Debt obligations, net |
|
$ |
|
|
|
$ |
|
|
||
Revolving Credit Facility and Delayed Draw Term Loan Facility
On
19
Prior to Amendment No. 1 (as defined below),
On August 5, 2026, the Company entered into Amendment No. 1 to the Credit Agreement (“Amendment No. 1”). Amendment No. 1 amended the Credit Agreement to, among other things, reduce each of the applicable margins used to determine the interest rate on loans thereunder by
On September 21, 2026, the Company and the guarantors entered into the Commitment and Acceptance, by
and among the Company, the guarantors, JPMorgan Chase Bank, N.A., as administrative agent for the lenders,
and Flagstar Bank, N.A., under which the Company exercised the accordion feature under the Credit Agreement
to increase the aggregate amount of commitments of the Revolving Credit Facility by $
$
As of the Effective Date, the Company’s obligations under the Credit Agreement are guaranteed by Millrose Properties SPE LLC (“SPE LLC”) and MPSAB, LLC (“MPSAB”), each a directly or indirectly wholly-owned subsidiary of the Company. In certain circumstances, the Credit Agreement requires the Company to cause certain future subsidiaries of the Company that are not Taxable REIT Subsidiaries or SPEs (each as defined in the Credit Agreement) to become guarantors.
The Credit Agreement includes affirmative and negative covenants (as further described in the Credit Agreement) and financial covenants, tested quarterly, consisting of a maximum Leverage Ratio, a minimum interest coverage ratio and a minimum tangible net worth. The Credit Agreement also requires the Company to maintain its status as a REIT. The Company was in compliance with all applicable covenants and there were no events of default under the Credit Agreement as of September 30, 2026.
The loans under the Credit Agreement may be accelerated if an event of default occurs. Events of default include (i) customary events of default and (ii) KL ceasing to be the Company’s manager and the Company failing to appoint a replacement manager reasonably acceptable to the required lenders within 90 days.
For the three and nine months ended September 30, 2026, amounts presented for the Revolving Credit Facility reflect borrowings, interest expense, and interest payments under both the Company’s prior secured revolving credit facility from January 1, 2026 through March 24, 2026 and the Revolving Credit Facility from March 25, 2026 through September 30, 2026. As of September 30, 2026, the Company had $
As of September 30, 2026, the Company had $
20
Senior Notes
The following senior notes, issued by the Company during the year ended December 31, 2025, were outstanding as of September 30, 2026 (together, the “Senior Notes”):
The Senior Notes are senior unsecured obligations of the Company and are fully and unconditionally guaranteed by SPE LLC and MPSAB. The Senior Notes bear interest at fixed annual rates of
The Senior Notes contain customary restrictive covenants, optional redemption provisions, change-of-control repurchase rights, and customary events of default. The Senior Notes rank (i) pari passu with all existing and future senior unsecured indebtedness, (ii) senior to any future subordinated indebtedness, (iii) effectively subordinated to existing and future secured indebtedness to the extent of the value of the collateral securing such indebtedness, and (iv) structurally subordinated to all existing and future indebtedness of subsidiaries that do not guarantee the Senior Notes.
There were no modifications to the Senior Notes during the three and nine months ended September 30, 2026. The Company was in compliance with all applicable covenants and there were no events of default under the indentures governing the Senior Notes.
As of September 30, 2026, the combined carrying amount of the Senior Notes, net of unamortized issuance costs of $
Purchase Money Mortgages
During 2025, the Company acquired
Principal payments of $
Single-Family Residential Secured Credit Facility
SFR Secured Credit Facility as of September 30, 2026 and December 31, 2025 was as follows:
|
|
September 30, |
|
|
December 31, |
|
||||
(in thousands) |
|
2026 |
|
|
2025 |
|
||||
SFR Secured Credit Facility maturing on |
|
$ |
|
|
|
$ |
|
— |
|
|
Debt issuance costs (1) |
|
|
|
( |
) |
|
|
|
— |
|
Single-family residential secured credit facility, net |
|
$ |
|
|
|
$ |
|
— |
|
|
On September 30, 2026, certain subsidiaries of the Company entered into a credit agreement (the "SFR Secured Credit Facility") with Goldman Sachs Bank USA, as administrative agent and initial lender. The SFR Secured Credit Facility provides for a limited recourse revolving credit facility with commitments in an aggregate amount of up to $
21
As of September 30, 2026, the Company had $
Note 12. Commitments and Contingencies
Liabilities for loss contingencies arising from claims, assessments, litigation, fines, penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated. Legal costs incurred in connection with loss contingencies, if any, are expensed as incurred. There is no material litigation nor, to management’s knowledge, any material litigation currently threatened against the Company as of September 30, 2026.
As of September 30, 2026, the Company had total future land development commitments of $
As of September 30, 2026, the Company had a remaining commitment to purchase up to an additional $
As of September 30, 2026, the Company had entered into agreements with Lennar to acquire
Note 13. Income Taxes
The provision for income taxes was as follows for the three and nine months ended September 30, 2026 and 2025:
|
|
Three months ended |
|
|
Nine months ended |
|
||||||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||||||
(in thousands) |
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||||||
Current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Federal |
|
$ |
|
( |
) |
|
$ |
|
( |
) |
|
$ |
|
— |
|
|
$ |
|
— |
|
State |
|
|
|
( |
) |
|
|
|
( |
) |
|
|
|
— |
|
|
|
|
— |
|
Total current income tax expense |
|
|
|
( |
) |
|
|
|
( |
) |
|
|
|
— |
|
|
|
|
— |
|
Deferred |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Federal |
|
|
|
|
|
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|
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|
|
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|
||||
State |
|
|
|
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|
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|
|
|
|
|
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|
||||
Total deferred income tax expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income tax expense |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||
Taxable income generated from certain activities that do not qualify under REIT provisions is earned through the Company's TRSs and is subject to U.S. federal, state, and local income and franchise taxation.
|
|
Three months ended September 30, |
|
Nine months ended September 30, |
||||||||||||||||||||||||||||||||||||
|
|
2026 |
|
|
|
2025 |
|
|
|
2026 |
|
|
|
2025 |
|
|
||||||||||||||||||||||||
(in thousands) |
|
Amount |
|
|
Percent |
|
Amount |
|
|
Percent |
|
Amount |
|
|
Percent |
|
Amount |
|
|
Percent |
||||||||||||||||||||
U.S. Federal Statutory Tax Rate |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
||||||||
State and Local Income Taxes, Net of Federal Income Tax Effect (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Effective Tax Rate |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
||||||||
22
Deferred income taxes represent the net tax effects of temporary differences between the financial statement carrying amounts of certain assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The tax effects of significant temporary differences that give rise to net deferred tax liabilities were as follows:
|
|
September 30, |
|
|
|
December 31, |
|
|||
(in thousands) |
|
2026 |
|
|
|
2025 |
|
|||
Deferred tax assets: |
|
|
|
|
|
|
|
|
||
Capitalized interest expense |
|
$ |
|
|
|
$ |
|
|
||
Capitalized Management Fee expense |
|
|
|
|
|
|
|
|
||
Net operating loss carryforward |
|
|
|
|
|
|
|
|
||
Total deferred tax assets, net of valuation allowance |
|
|
|
|
|
|
|
|
||
Deferred tax liabilities: |
|
|
|
|
|
|
|
|
||
Land basis adjustments, Spin-Off, and acquired Rausch land assets |
|
|
|
|
|
|
|
|
||
Homesite takedown adjustments |
|
|
|
|
|
|
|
|
||
Deferred option fee revenue |
|
|
|
|
|
|
|
|
||
Total deferred tax liabilities |
|
|
|
|
|
|
|
|
||
Deferred tax liabilities, net |
|
$ |
|
|
|
$ |
|
|
||
As of September 30, 2026, the Company had federal and state net operating loss (“NOL”) carryforwards of approximately $
A reduction of the carrying amounts of deferred tax assets by a valuation allowance is required if, based on available evidence, it is more likely than not that such assets will not be realized. The Company evaluated its deferred tax assets as of September 30, 2026 and concluded that it is more likely than not that the deferred tax assets will be realized. This assessment considered all available positive and negative evidence, including recent financial performance, actual earnings, future reversals of existing temporary differences, projected future taxable income, and tax planning strategies. As such, a valuation allowance was not recorded against the deferred tax assets, including the NOL, as of September 30, 2026. The Company had
There were
Note 14. Stockholders’ Equity
Authorized Capital Stock
As of September 30, 2026, Millrose had, under its Charter, authorized capital stock of (i)
Common Stock
As of September 30, 2026, Millrose had
Preferred Stock
As of September 30, 2026, there were
Dividends
On January 15, 2026, the Company paid a dividend of $
On
On
23
On
Securities Authorized for Issuance Under Equity Compensation Plans
As of September 30, 2026,
Additional Paid In Capital
As of September 30, 2026, the Company had additional paid-in capital of approximately $
Note 15. Stock-Based Compensation Expense
The Company grants RSUs to its non-employee directors under the 2024 Incentive Plan. RSUs granted on April 3, 2025 vest on the earlier of (x) the first anniversary of the grant date and (y) the date of Millrose’s annual stockholder meeting that next follows the grant date, subject to the applicable Board member's continuous service on the Board. RSUs granted on December 10, 2025 vest on the earlier of (x) April 3, 2026 and (y) the date of Millrose’s first annual stockholder meeting that next follows the grant date, and the remaining half of which vest on the earlier of (x) April 3, 2027 and (y) the date of Millrose’s second annual stockholder meeting following the grant date, in each case, subject to the applicable member of the Board's continuous service on the Board.
On May 13, 2026, the Compensation Committee of the Board granted an annual equity retainer of
The Company recognizes Stock-based compensation expense on a straight-line basis over the vesting period. Stock-based compensation expense for the three months ended September 30, 2026 and 2025 was $
The following table summarizes the Company’s nonvested shares activity for the nine months ended September 30, 2026:
|
|
Shares |
|
|
Weighted |
|
|||
Nonvested Shares as of January 1, 2026 |
|
|
|
|
|
|
|
||
Grants |
|
|
|
|
|
|
|
||
Vested |
|
|
( |
) |
|
|
|
|
|
Forfeited |
|
|
— |
|
|
|
|
— |
|
Nonvested Shares at September 30, 2026 |
|
|
|
|
|
|
|
||
The fair value of nonvested shares is determined based on the trading price of the Company’s Class A common stock on the grant date. The weighted-average grant date fair value presented in the table above is calculated by weighting the grant date fair value of each award by the number of shares underlying such awards.
On April 3, 2026,
The RSUs granted under the 2024 Incentive Plan include dividend equivalent rights (“DERs”), which entitle the holder to receive, upon vesting of the related RSUs, cash payments equal to dividends declared on the Company’s Class A common stock during the period between the grant date and the vesting date of the RSUs. The Company accrues the associated DER
24
amounts as dividends are declared, with corresponding amounts recorded as additional paid‑in capital. As of September 30, 2026, the Company accrued approximately $
Note 16. Earnings Per Share
The Company calculates earnings per share (“EPS”) in accordance with ASC 260 Earnings Per Share. Basic EPS is calculated by dividing net income attributable to common stockholders by the weighted number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if unvested RSUs were to vest and be settled in common stock, calculated using the treasury stock method.
For periods prior to the Spin-Off on February 7, 2025, the Company elected to use the number of shares of common stock issued at the Spin-Off date as the denominator for both basic and diluted EPS, which is an acceptable method under ASC 260 for entities that complete a spin-off within the financial reporting period. For the nine months ended September 30, 2025, the pre-spin net loss of $
The following table presents the computation of basic and diluted EPS for the three and nine months ended September 30, 2026 and 2025:
|
|
Three months ended |
|
|
Nine months ended |
|
||||||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||||||
(Dollars in thousands, except share amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||
Adjustment for expenses from pre-spin periods |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
Numerator for basic and diluted earnings per share |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average common shares outstanding - basic (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic earnings per share |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||
Weighted average common shares outstanding - diluted (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Diluted earnings per share |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||
Note 17. Segment Reporting
Prior to the Spin-Off, the Predecessor Millrose Business did
The Company identifies its operating segments based on the business activities for which discrete financial information is available and regularly reviewed by the Company's Chief Operating Decision Maker (the "CODM") for purposes of evaluating performance and allocating resources.
As of September 30, 2026, the Company's operations were conducted entirely in the United States with properties geographically located across 30 states. The Chief Executive Officer serves as the Company's CODM and evaluates performance and resource allocation on a portfolio basis. Additionally, the Company does not distinguish its principal business or group its operations on a geographical basis for purposes of measuring performance. Accordingly, the Company has a single operating and reportable segment (the "Reporting Segment") for disclosure purposes in accordance with GAAP.
25
statements of operations. Total assets, as presented on the Company’s condensed consolidated balance sheets, is used to measure the Reporting Segment’s assets.
The accounting policies of the Reporting Segment are the same as those described in Note 2. Basis of Presentation and Significant Accounting Policies.
Major Customer Concentration
The Company monitors major counterparties to assess potential risks to its financial position. For the three months ended September 30, 2026, Lennar represented $
Note 18. Subsequent Events
The Company has evaluated subsequent events through the issuance of these financial statements and determined that there have been no events that require adjustment or disclosure in the condensed consolidated financial statements except for the following.
October 2026 Offering of Senior Notes
On October 6, 2026, the Company completed its previously announced private offering of the 2026 Senior Notes. Net proceeds from the offering, together with borrowings under the DDTL Credit Facility, were used for general corporate purposes, including the acquisition of homesites associated with Dream Finders' acquisition of Beazer Homes and the repayment of borrowings outstanding under the Revolving Credit Facility.
Completion of Dream Finders Commitment
On October 20, 2026, Dream Finders completed its previously announced acquisition of Beazer Homes. As a result of the transaction, the Company completed the second purchase of an additional $
Share Repurchase Program
26
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following Management’s Discussion and Analysis of Financial Condition and Results of Operations in conjunction with our accompanying condensed consolidated financial statements and the notes thereto included in “Part I, Item 1. Financial Statements” in this Form 10-Q and the audited consolidated financial statements and the notes thereto included in the 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-Q, 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” in our Form 10-K and “Cautionary Statement Concerning Forward-Looking Statements” herein for a discussion of the risks, uncertainties, and assumptions associated with these statements.
As further described in Note 1. Description of Business to our condensed consolidated financial statements included in “Part I, Item 1. Financial Statements” of this Form 10-Q, 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 and Recent Transactions
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 and own a portfolio of single-family residential rental properties.
We are externally managed and advised by KL pursuant to the management agreement entered into on February 7, 2025 between Millrose and KL (as amended from time to time, the “Management Agreement”).
Credit Agreement
On March 25, 2026, the Company entered into the Credit Agreement (as defined below) that provides for (i) a four-year Revolving Credit Facility (as defined below) with commitments in an aggregate amount of $1.335 billion, (ii) a DDTL Credit Facility (as defined below) in an aggregate amount of $500 million that may be utilized during the first year following the Effective Date (as defined below), and (iii) an uncommitted accordion feature that allows the Company to seek additional loan commitments under the Credit Agreement in the future, subject to an aggregate maximum commitment amount of $2.5 billion. The net proceeds of the borrowings under the Credit Agreement will be used for general business purposes. Upon the Effective Date, the liens securing the loans under the Company’s prior secured revolving credit facility were released.
On August 5, 2026, the Company entered into Amendment No. 1 to the Credit Agreement. The Credit Agreement was amended pursuant to Amendment No.1 to, among other things, reduce the rate at which the loans bear interest by 0.25% per annum. See Note 11. Debt for further description of Amendment No. 1 to the Credit Agreement.
On September 21, 2026, the Company and the guarantors entered into the Commitment and Acceptance, by
and among the Company, the guarantors, JPMorgan Chase Bank, N.A., as administrative agent for the lenders,
and Flagstar Bank, N.A., under which the Company exercised the accordion feature under the Credit Agreement
to increase the aggregate amount of commitments of the Revolving Credit Facility by $50 million to $1.385 billion.
Funding for Dream Finders’ Acquisition of Beazer Homes
During the third quarter of 2026, the Company provided acquisition funding of $170.6 million to support Dream Finders’ acquisition of Beazer Homes USA, Inc. (“Beazer Homes”). The funding was provided through the purchase of a preferred instrument issued by Dream Finders. Subsequent to the third quarter of 2026, upon the completion of Dream Finders' acquisition of Beazer Homes, the Company provided an additional $896.9 million funding through the purchase of a preferred instrument issued by Dream Finders for $316.9 million, net of original issue discount, and through the acquisition of homesites
27
subject to option agreements with Dream Finders for $580.0 million. Total funding provided by the Company to Dream Finders was approximately $1.068 billion.
See Note 6. Preferred Instruments, net and Note 18. Subsequent Events, to the condensed consolidated financial statements included in Part I, Item 1, Financial Statements of this Form 10-Q for additional information.
JPI Multifamily Housing Development
On July 30, 2026, the Company announced the closing of the first acquisition in a new land banking facility established by JPI, a premier developer of multifamily communities and subsidiary of Sumitomo Forestry Co., Ltd., and Kennedy Lewis Investment Management, to fund Class A multifamily land acquisition and development across JPI’s target markets. The land banking facility represents the Company’s first multifamily land banking partnership, under which it will acquire and fund development of homesites and execute option agreements with JPI during the development period.
Residential Rental Properties
During the third quarter of 2026, the Company acquired 1,233 single-family residential properties from Lennar for approximately $333 million, inclusive of acquisition costs and capitalized property costs, which was financed with borrowings of approximately $213 million under our SFR Secured Credit Facility and cash on hand. The Company has engaged a third-party service provider to support property management, real estate development, and asset management activities for these properties.
The Company has entered into agreements with Lennar to acquire 620 additional single-family residential properties for an aggregate purchase price of approximately $150.3 million, with an expected net investment of approximately $50 million after anticipated asset-level limited recourse financing. In the event that the Company elects not to acquire some or all of the properties, the Company may incur certain payment obligations in connection there-with, including potential loss of deposits.
See Note 7. Single-Family Residential Properties, net to our condensed consolidated financial statements included in “Part I, Item 1. Financial Statements” of this Form 10-Q for further description.
Single-Family Residential Secured Credit Facility
On September 30, 2026, certain subsidiaries of the Company entered into the SFR Secured Credit Facility. The SFR Secured Credit Facility provides for a revolving credit facility with commitments in an aggregate amount of up to $235.0 million. Lenders may agree to (a) increase the aggregate commitments up to $1.0 billion, or (b) make advances in excess of the committed amount but not to exceed a total outstanding balance of $1.0 billion. As of September 30, 2026, the Company had $213.1 million of outstanding borrowings under the SFR Secured Credit Facility.
See below for additional information regarding the SFR Secured Credit Facility.
October 2026 Offering of Senior Notes
On September 22, 2026, the Company announced a private offering (the “October 2026 Offering”) of $1.0 billion aggregate principal amount of senior notes in two separate tranches, one consisting of $500.0 million aggregate principal amount of 6.500% senior notes due 2029 (the “2029 Notes”) and the other consisting of $500.0 million aggregate principal amount of 6.750% senior notes due 2031 (the “2031 Notes” and, together with the 2029 Notes, the “2026 Senior Notes”), which closed on October 6, 2026. Net proceeds from the offering, together with borrowings under the DDTL Credit Facility (as defined below), were used for general corporate purposes, including the acquisition of homesites associated with Dream Finders’ acquisition of Beazer Homes, and to repay borrowings outstanding under the Revolving Credit Facility. The Company received the net proceeds from the October 2026 Offering upon the closing of the offering on October 6, 2026.
See below for additional information regarding the October 2026 Offering.
Invested Capital Activity as of September 30, 2026
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 condensed consolidated financial statements related to (i) homesites under option contracts, (ii) development loans receivable, (iii) preferred instruments, and (iv) liabilities. The most directly comparable GAAP financial measure is homesites under option contracts as presented in the Company’s condensed 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,
28
and should not be viewed as, a substitute for GAAP measures, and should be viewed in conjunction with our GAAP financial measures.
The table below reconciles GAAP reported homesites under option contracts to Invested Capital as of September 30, 2026 and summarizes Invested Capital activity for the three months ended September 30, 2026:
|
|
Three Months Ended September 30, 2026 |
|
||||||||||||
(in thousands) |
|
Master |
|
|
Other |
|
|
Total |
|
||||||
Invested Capital Reconciliation of GAAP to Non-GAAP |
|
|
|
|
|
|
|
|
|
|
|
|
|||
GAAP reported homesites under option contracts as of September 30, 2026 |
|
$ |
|
6,314,994 |
|
|
$ |
|
3,587,367 |
|
|
$ |
|
9,902,361 |
|
Add: Development loan receivables (gross) |
|
|
|
— |
|
|
|
|
53,112 |
|
|
|
|
53,112 |
|
Add: Preferred instruments (gross) |
|
|
|
— |
|
|
|
|
175,000 |
|
|
|
|
175,000 |
|
Remove: Interest receivable on development loans |
|
|
|
— |
|
|
|
|
(319 |
) |
|
|
|
(319 |
) |
Remove: Due from counterparties (1) |
|
|
|
(34,265 |
) |
|
|
|
(36,012 |
) |
|
|
|
(70,277 |
) |
Remove: Net deferred tax assets and deferred tax liabilities from homesite inventories |
|
|
|
(56,824 |
) |
|
|
|
— |
|
|
|
|
(56,824 |
) |
Remove: Earnest deposits from homesites under option contracts |
|
|
|
7,560 |
|
|
|
|
— |
|
|
|
|
7,560 |
|
Remove: Homesites under option contracts acquired through purchase money mortgages |
|
|
|
(33,000 |
) |
|
|
|
— |
|
|
|
|
(33,000 |
) |
Add: Development holdback liability |
|
|
|
(100,000 |
) |
|
|
|
— |
|
|
|
|
(100,000 |
) |
Add: Builder deposit liabilities |
|
|
|
(224,236 |
) |
|
|
|
(407,977 |
) |
|
|
|
(632,213 |
) |
Total Invested Capital as of September 30, 2026 |
|
$ |
|
5,874,229 |
|
|
$ |
|
3,371,171 |
|
|
$ |
|
9,245,400 |
|
Invested Capital |
|
|
|
|
|
|
|
|
|
|
|
|
|||
Invested Capital as of June 30, 2026 (2) |
|
$ |
|
5,949,365 |
|
|
$ |
|
2,849,634 |
|
|
$ |
|
8,798,999 |
|
Takedown Proceeds (3) |
|
|
|
(620,867 |
) |
|
|
|
(192,814 |
) |
|
|
|
(813,681 |
) |
Land Acquisition and Development Funding (4) |
|
|
|
545,731 |
|
|
|
|
714,351 |
|
|
|
|
1,260,082 |
|
Invested Capital as of September 30, 2026 |
|
$ |
|
5,874,229 |
|
|
$ |
|
3,371,171 |
|
|
$ |
|
9,245,400 |
|
(in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|||
Weighted Average Yield as of September 30, 2026 (5) |
|
|
|
8.5 |
% |
|
|
|
10.8 |
% |
|
|
|
9.3 |
% |
Implied Quarterly Income Run Rate as of September 30, 2026 (6) |
|
$ |
|
128 |
|
|
|
|
93 |
|
|
$ |
|
221 |
|
Weighted Average Remaining Life as of September 30, 2026 (7) |
|
|
3.8 years |
|
|
|
2.4 years |
|
|
|
3.3 years |
|
|||
Weighted Average Maturity as of September 30, 2026 (8) |
|
|
62 months |
|
|
|
35 months |
|
|
|
53 months |
|
|||
During the three months ended September 30, 2026, we funded $545.7 million for land acquisition and development and received $620.9 million in net takedown proceeds under the Master Program Agreement at a weighted average yield of 8.5%. We funded $714.4 million for land acquisition and development and received $192.8 million in net takedown proceeds for Other Agreements during this period at a weighted average yield of 10.8%. On a total portfolio basis, the weighted average yield was 9.3% as of September 30, 2026.
Properties as of September 30, 2026
As of September 30, 2026, homesite assets consisted of 834 properties (also known as communities) in 30 states across the United States, totaling approximately 156,729 homesites, with an approximate aggregate value of $9.9 billion of homesites under option contracts. Of the homesites owned as of September 30, 2026, we expect the total takedown prices of all homesites to be approximately $16.5 billion, and the total estimated development costs of homesites to be approximately $6.7 billion.
Approximately 53% of the property assets are concentrated in three states (California, Florida, Texas) and approximately 44% 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).
29
The below table shows the location, number of properties, number of underlying homesites and expected total takedown prices of our properties as of September 30, 2026:
State Location |
|
Number of Properties (1) |
|
|
Number of Underlying Homesites (2) |
|
|
|
Total Takedown Prices |
|
|||
Alabama |
|
|
37 |
|
|
|
4,311 |
|
|
$ |
|
280,529,872 |
|
Arizona |
|
|
32 |
|
|
|
4,034 |
|
|
|
|
496,153,687 |
|
Arkansas |
|
|
36 |
|
|
|
4,632 |
|
|
|
|
303,550,345 |
|
California |
|
|
60 |
|
|
|
12,735 |
|
|
|
|
3,378,570,212 |
|
Colorado |
|
|
20 |
|
|
|
5,483 |
|
|
|
|
682,268,862 |
|
Delaware |
|
|
8 |
|
|
|
1,483 |
|
|
|
|
178,929,004 |
|
Florida (3) |
|
|
115 |
|
|
|
23,480 |
|
|
|
|
2,075,476,914 |
|
Georgia |
|
|
60 |
|
|
|
5,718 |
|
|
|
|
581,054,000 |
|
Idaho |
|
|
6 |
|
|
|
388 |
|
|
|
|
58,327,227 |
|
Illinois |
|
|
8 |
|
|
|
803 |
|
|
|
|
77,838,611 |
|
Indiana |
|
|
6 |
|
|
|
1,201 |
|
|
|
|
126,571,920 |
|
Kansas |
|
|
6 |
|
|
|
733 |
|
|
|
|
63,525,448 |
|
Maryland |
|
|
7 |
|
|
|
4,672 |
|
|
|
|
585,550,593 |
|
Minnesota |
|
|
27 |
|
|
|
1,795 |
|
|
|
|
144,444,571 |
|
Missouri |
|
|
4 |
|
|
|
670 |
|
|
|
|
42,761,071 |
|
Nevada |
|
|
11 |
|
|
|
1,284 |
|
|
|
|
233,200,573 |
|
New York |
|
|
1 |
|
|
|
383 |
|
|
|
|
80,726,681 |
|
New Jersey |
|
|
2 |
|
|
|
256 |
|
|
|
|
43,211,267 |
|
North Carolina |
|
|
40 |
|
|
|
5,987 |
|
|
|
|
851,753,146 |
|
Oklahoma |
|
|
59 |
|
|
|
10,620 |
|
|
|
|
634,170,630 |
|
Oregon |
|
|
6 |
|
|
|
424 |
|
|
|
|
47,747,759 |
|
Pennsylvania |
|
|
1 |
|
|
|
322 |
|
|
|
|
51,258,079 |
|
South Carolina |
|
|
41 |
|
|
|
9,715 |
|
|
|
|
964,274,954 |
|
Tennessee |
|
|
33 |
|
|
|
3,065 |
|
|
|
|
443,272,555 |
|
Texas |
|
|
173 |
|
|
|
46,113 |
|
|
|
|
3,113,365,957 |
|
Utah |
|
|
2 |
|
|
|
1,104 |
|
|
|
|
136,004,322 |
|
Virginia |
|
|
15 |
|
|
|
2,904 |
|
|
|
|
451,037,237 |
|
Washington |
|
|
10 |
|
|
|
1,215 |
|
|
|
|
243,402,825 |
|
Wisconsin |
|
|
2 |
|
|
|
30 |
|
|
|
|
1,190,536 |
|
West Virginia |
|
|
6 |
|
|
|
1,169 |
|
|
|
|
107,505,657 |
|
Total |
|
|
834 |
|
|
|
156,729 |
|
|
$ |
|
16,477,674,514 |
|
The below table is a summary of our pools of properties included in our property assets as of September 30, 2026 (dollar amounts are presented in billions):
|
|
Total |
|
|
Number of Homesites (1) |
|
|
156,729 |
|
Lennar |
|
|
122,213 |
|
Other Agreements |
|
|
34,516 |
|
|
|
|
|
|
Invested Capital ($ in billions) (2) |
|
|
9.2 |
|
Lennar |
|
|
5.8 |
|
Other Agreements |
|
|
3.4 |
|
|
|
|
|
|
Number of Counterparties |
|
|
22 |
|
Number of Pools |
|
|
76 |
|
Portfolio Pooled % (3) |
|
|
93 |
% |
Quarterly Homesites Delivered |
|
|
7,985 |
|
Number of Terminated Properties |
|
|
— |
|
As of September 30, 2026, we had 156,729 homesites with 22 counterparties, which were included in 76 separate pools, in accordance with the applicable Multiparty Cross Agreements. As of September 30, 2026, 93% of our invested capital balance was pooled under pooling arrangements, of which 100% was pooled under the Master Program Agreement.
30
Components of Results of Operations
The following is a summary of the key components of our operations for the three and nine months ended September 30, 2026:
Revenues
Our primary source of revenue is income generated from holding land under option contracts. The Company accounts for these contracts under ASC 842 Leases because the Company transfers elements of control of the homesites to the counterparties during the option contract period. The Company owns title to and holds land during the development period and grants our counterparties under these contracts exclusive options to purchase land at predetermined prices and takedown schedules. In return the Company earns income on our homesites under option contracts through recurring option fees paid by our counterparties through the term of the applicable option contract. We also derive development loan income from interest earned on the outstanding loan balance of development loans secured by residential property. We expect to generate rental revenue from residential lease agreements associated with single-family residential properties.
Costs
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) per annum (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 certain offering expenses, rating agency fees, fees incurred for services in connection with extraordinary litigation and mergers and acquisitions and other events outside the Company’s ordinary course of business, certain property-level operating expenses for single-family residential properties, and, in certain 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.
Certain operating and maintenance costs incurred in connection with the Company's single-family residential properties are capitalized as a component of Single-family residential properties, net until the properties are substantially complete. Thereafter, such costs are generally recognized as operating expenses. Our operating expenses also will include depreciation expense related to single-family residential properties. Single-family residential properties that are not substantially complete are not depreciated. Once properties are substantially complete, capitalization of costs associated with preparing the property for rental operations ceases, and depreciation commences. As of September 30, 2026, the Company's single-family residential properties were not yet substantially complete. Accordingly, no depreciation expense was recognized during the three and nine months ended September 30, 2026.
Our operating expenses include stock-based compensation for restricted stock units (“RSUs”) granted to each member of the Board through the quarter ended September 30, 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 nine months ended September 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 (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. We also derive income from the preferred instrument purchased from Dream Finders. Income from preferred instruments consists of dividend income, original issue discount accretion and amortized commitment fee income related to the preferred instrument.
31
Results of Operations
The following discussion describes the results of operations for the three and nine months ended September 30, 2026 versus the three and nine months ended September 30, 2025. The financial data for the nine months ended September 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 |
|
|
Nine months ended |
|
||||||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||||||
(in thousands) |
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Option fee revenues |
|
$ |
|
209,480 |
|
|
$ |
|
170,326 |
|
|
$ |
|
590,180 |
|
|
$ |
|
391,491 |
|
Development loan income |
|
|
|
1,524 |
|
|
|
|
8,934 |
|
|
|
|
12,605 |
|
|
|
|
19,469 |
|
Total revenues |
|
|
|
211,004 |
|
|
|
|
179,260 |
|
|
|
|
602,785 |
|
|
|
|
410,960 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Management Fee expense |
|
|
|
30,264 |
|
|
|
|
25,895 |
|
|
|
|
88,325 |
|
|
|
|
59,959 |
|
Stock-based compensation expense |
|
|
|
289 |
|
|
|
|
189 |
|
|
|
|
1,198 |
|
|
|
|
370 |
|
Provision for (benefit from) credit loss expense |
|
|
|
— |
|
|
|
|
340 |
|
|
|
|
(907 |
) |
|
|
|
340 |
|
Sales, general, and administrative expenses from pre-spin periods |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
24,960 |
|
Total operating expenses |
|
|
|
30,553 |
|
|
|
|
26,424 |
|
|
|
|
88,616 |
|
|
|
|
85,629 |
|
Income from operations |
|
|
|
180,451 |
|
|
|
|
152,836 |
|
|
|
|
514,169 |
|
|
|
|
325,331 |
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest income |
|
|
|
1,045 |
|
|
|
|
2,450 |
|
|
|
|
3,282 |
|
|
|
|
5,356 |
|
Income from preferred instruments |
|
|
|
996 |
|
|
|
|
— |
|
|
|
|
996 |
|
|
|
|
— |
|
Interest expense |
|
|
|
(47,093 |
) |
|
|
|
(43,748 |
) |
|
|
|
(126,319 |
) |
|
|
|
(56,569 |
) |
Other expenses |
|
|
|
(513 |
) |
|
|
|
(616 |
) |
|
|
|
(984 |
) |
|
|
|
(1,483 |
) |
Total other income (expense) |
|
|
|
(45,565 |
) |
|
|
|
(41,914 |
) |
|
|
|
(123,025 |
) |
|
|
|
(52,696 |
) |
Net income before income taxes |
|
|
|
134,886 |
|
|
|
|
110,922 |
|
|
|
|
391,144 |
|
|
|
|
272,635 |
|
Income tax expense |
|
|
|
4,884 |
|
|
|
|
5,862 |
|
|
|
|
12,377 |
|
|
|
|
15,009 |
|
Net income |
|
$ |
|
130,002 |
|
|
$ |
|
105,060 |
|
|
$ |
|
378,767 |
|
|
$ |
|
257,626 |
|
Adjustment for expenses from pre-spin periods |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
24,960 |
|
Net income attributable to Millrose Properties, Inc. common stockholders |
|
$ |
|
130,002 |
|
|
$ |
|
105,060 |
|
|
$ |
|
378,767 |
|
|
$ |
|
282,586 |
|
Three Months Ended September 30, 2026 Versus Three Months Ended September 30, 2025
Overview of Net Income
Net income was $130.0 million for the three months ended September 30, 2026, compared to $105.1 million for the three months ended September 30, 2025. The increase in net income was primarily driven by (i) higher option fee revenues, (ii) a lower provision for credit losses, (iii) lower income tax expense, and (iv) income from preferred instruments. These increases were partially offset by (i) lower development loan income resulting from the payoff of the development loan with an unaffiliated party during the second quarter of 2026, (ii) lower interest income, (iii) higher management fee expense, and (iv) higher interest expense related to the Company's debt obligations.
Option Fee Revenues
Option fee revenues were $209.5 million for the three months ended September 30, 2026, compared to $170.3 million for the three months ended September 30, 2025, reflecting continued growth in our business as a result of geographic expansion and counterparty diversification.
Development Loan Income
Development loan income was $1.5 million for the three months ended September 30, 2026, compared to $8.9 million for the three months ended September 30, 2025. The decrease was primarily due to the payoff of a $284 million development loan with an unaffiliated party on April 1, 2026, resulting in lower interest income during the current-year period.
32
Management Fee Expense
Management Fee expense was $30.3 million for the three months ended September 30, 2026, compared to $25.9 million for the three months ended September 30, 2025. The increase was due to a higher Tangible Asset base resulting from growth in homesites subject to option contracts during the current-year period compared to the prior-year period.
Stock-based Compensation Expense
Stock-based compensation expense related to RSUs granted to the Board was $0.3 million for the three months ended September 30, 2026, compared to $0.2 million for the three months ended September 30, 2025. The increase was primarily attributable to compensation expense recognized on RSUs granted on December 10, 2025 and May 13, 2026, compared to the prior-year period, which reflected compensation expense related to RSUs granted on April 3, 2025.
Other Income (Expense)
Other income (expense) for the three months ended September 30, 2026 and 2025 was $45.6 million net expense and $41.9 million net expense, respectively. Other income (expense) for the three months ended September 30, 2026 consisted of interest expense of $47.1 million related to the Company’s debt obligations and other expenses of $0.5 million, partially offset by income from preferred instruments of $1.0 million and interest income of $1.0 million related to cash balances. Income from preferred instruments consisted of dividend income of $0.9 million, original issue discount accretion of $0.04 million and commitment fee amortization of $0.02 million. Other income (expense) for the three months ended September 30, 2025 consisted of interest expense of $43.7 million for the Company’s debt obligations and, other expenses of $0.6 million, partially offset by interest income of $2.4 million related to cash balances. No income from preferred instruments was recognized during the three months ended September 30, 2025.
Other income (expense) consists of interest income earned on cash balances, income related to preferred instruments, interest expense on the Company's debt obligations, and other expense items.
Income Tax Expense
The provision for income taxes for the three months ended September 30, 2026 was $4.9 million, compared to $5.9 million for the three months ended September 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 three months ended September 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 September 30, 2025. See Note 13. Income Taxes in the condensed consolidated financial statements for more information.
Nine Months Ended September 30, 2026 Versus Nine Months Ended September 30, 2025
Overview of Net Income
Our net income was $378.8 million for the nine months ended September 30, 2026, compared to $257.6 million for the nine months ended September 30, 2025. Net income for the nine months ended September 30, 2025 included post Spin-Off income of $282.6 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 option fee revenues, (ii) a reduction in the allowance for credit losses related to the payoff of a development loan with an unaffiliated third party, (iii) lower income tax expense, and (iv) the absence of pre-Spin-Off sales, general and administrative expenses recognized during the prior-year period. These increases were partially offset by (i) lower development loan income resulting from the payoff of a development loan with an unaffiliated third party, (ii) higher management fee expense, and (iii) higher interest expense related to the Company's debt obligations.
33
Option Fee Revenues
Option fee revenues were $590.2 million for the nine months ended September 30, 2026, compared to $391.5 million for the nine months ended September 30, 2025. The increase was primarily attributable to (i) a full nine months of post-Spin-Off operations in the current-year period compared to a partial post-Spin-Off period in the prior-year period and (ii) continued growth in the Company's business through geographic expansion and counterparty diversification. Prior to the Spin-Off, the Predecessor Millrose Business did not generate option fee revenues because its homesite inventory was 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, which sold such homesites to Lennar counterparties.
Development Loan Income
Development loan income was $12.6 million for the nine months ended September 30, 2026, compared to $19.5 million for the nine months ended September 30, 2025. The decrease was primarily due to the payoff of a $284 million 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.
Management Fee Expense
Management Fee expense was $88.3 million for the nine months ended September 30, 2026, compared to $59.9 million for the nine months ended September 30, 2025. The increase was primarily attributable to (i) a full nine months of the Management Agreement being in effect during the current-year period compared to a partial post-Spin-Off period in the prior-year period and (ii) growth in Tangible Assets resulting from a higher number of homesites subject to option contracts.
Stock-based Compensation Expense
Stock-based compensation expense related to RSUs granted to Board members was $1.2 million for the nine months ended September 30, 2026, compared to $0.4 million for the nine months ended September 30, 2025. The increase was primarily attributable to compensation expense recognized on additional RSU awards granted on December 10, 2025 and May 13, 2026.
Sales, general and administrative expenses of the Predecessor Millrose Business included $8.9 million of stock-based compensation expense for the nine months ended September 30, 2025. Such amounts were allocated to the Predecessor Millrose Business on a specific identification basis or using a proportional cost allocation methodology, 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 nine months ended September 30, 2025. For the nine months ended September 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) for the nine months ended September 30, 2026 and 2025 was $123.0 million net expense and $52.7 million net expense, respectively. Other income (expense) for the nine months ended September 30, 2026 consisted of interest expense of $126.3 million related to the Company’s debt obligations and other expenses of $1.0 million, partially offset by income from preferred instruments of $1.0 million and interest income of $3.3 million related to cash balances. Income from preferred instruments consisted of dividend income of $0.9 million, original issue discount accretion of $0.04 million and commitment fee amortization of $0.02 million. Other income (expense) for the nine months ended September 30, 2025 consisted of interest expense of $56.6 million for the Company’s debt obligations, and other expenses of $1.5 million, partially offset by interest income of $5.4 million related to cash balances. No income from preferred instruments was recognized during the nine months ended September 30, 2025.
Income Tax Expense
The provision for income taxes for the nine months ended September 30, 2026 was $12.4 million, compared to $15.0 million for the nine months ended September 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 nine months ended September 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 nine months ended September 30, 2025. See Note 13. Income Taxes in the condensed consolidated financial statements for more information.
34
Adjusted Funds from Operations
Our reported results are presented in accordance with GAAP. We also disclose Adjusted Funds from Operations (“AFFO”), which is a non-GAAP financial measure and should not be viewed as an alternative to net income calculated in accordance with GAAP as a measurement of our operating performance. We believe that AFFO is useful to investors because it is a widely accepted industry measure used by analysts and investors to compare the operating performance of REITs.
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. As shown in the tables below, certain non-recurring and non-cash transactions added back for the three and nine months ended September 30, 2026 and 2025 include non-cash components of compensation expense, 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, provision for (benefit from) credit loss expense, and non-recurring rating agency expenses related to the Spin-Off.
Other REITs may not define AFFO in the same manner as we do and therefore our calculation of AFFO may not be comparable to such other REITs. You should also not consider AFFO to be an alternative to net income or as a reliable measure of our operating performance.
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 September 30, 2026 and 2025:
|
|
Three Months Ended |
|
|||||||
(in thousands, except share amounts) |
|
September 30, 2026 |
|
|
September 30, 2025 |
|
||||
Net income attributable to Millrose Properties, Inc. common stockholders |
|
$ |
|
130,002 |
|
|
$ |
|
105,060 |
|
Adjustments: |
|
|
|
|
|
|
|
|
||
Add: Amortization of deferred financing and issuance costs (1) |
|
|
|
2,781 |
|
|
|
|
16,359 |
|
Add: Stock-based compensation expense (2) |
|
|
|
289 |
|
|
|
|
189 |
|
Add: Provision for (benefit from) credit loss expense (3) |
|
|
|
— |
|
|
|
|
340 |
|
Add: Rating agency expenses (4) |
|
|
|
447 |
|
|
|
|
550 |
|
Total adjustments |
|
|
|
3,517 |
|
|
|
|
17,438 |
|
AFFO attributable to Millrose Properties, Inc. common stockholders |
|
$ |
|
133,519 |
|
|
$ |
|
122,498 |
|
AFFO basic earnings per share of Class A and Class B common stock |
|
$ |
|
0.80 |
|
|
$ |
|
0.74 |
|
AFFO diluted earnings per share of Class A and Class B common stock |
|
$ |
|
0.80 |
|
|
$ |
|
0.74 |
|
|
|
|
|
|
|
|
|
|
||
Reconciliation of GAAP earnings per share to AFFO per share |
|
|
|
|
|
|
|
|
||
GAAP reported basic and diluted earnings per share of Class A and Class B common stock |
|
$ |
|
0.78 |
|
|
$ |
|
0.63 |
|
Adjustments: |
|
|
|
|
|
|
|
|
||
Add: Amortization of deferred financing and issuance costs (1) |
|
|
|
0.02 |
|
|
|
|
0.10 |
|
Add: Stock-based compensation (2) |
|
|
|
0.00 |
|
|
|
|
0.00 |
|
Add: Provision for (benefit from) credit loss expense (3) |
|
|
|
- |
|
|
|
|
0.00 |
|
Add: Rating agency expenses (4) |
|
|
|
0.00 |
|
|
|
|
0.01 |
|
AFFO basic and diluted earnings per share of Class A and Class B common stock |
|
$ |
|
0.80 |
|
|
$ |
|
0.74 |
|
Basic weighted average common shares outstanding of Class A and Class B common stock |
|
|
|
166,047,927 |
|
|
|
|
166,003,497 |
|
Diluted weighted average common shares outstanding of Class A and Class B common stock |
|
|
|
166,064,538 |
|
|
|
|
166,031,797 |
|
35
The table below is a reconciliation of GAAP net income to AFFO and GAAP earnings per share to AFFO earnings per share for the nine months ended September 30, 2026 and 2025:
|
|
Nine Months Ended |
|
|||||||
(in thousands, except share amounts) |
|
September 30, 2026 |
|
|
September 30, 2025 |
|
||||
Net income attributable to Millrose Properties, Inc. common stockholders |
|
$ |
|
378,767 |
|
|
$ |
|
282,586 |
|
Adjustments: |
|
|
|
|
|
|
|
|
||
Add: Amortization of deferred financing and issuance costs (1) |
|
|
|
7,491 |
|
|
|
|
17,879 |
|
Add: Stock-based compensation expense (2) |
|
|
|
1,198 |
|
|
|
|
370 |
|
Add: Provision for (benefit from) credit loss expense (3) |
|
|
|
(907 |
) |
|
|
|
340 |
|
Add: Rating agency expenses (4) |
|
|
|
447 |
|
|
|
|
1,117 |
|
Total adjustments |
|
|
|
8,229 |
|
|
|
|
19,706 |
|
AFFO attributable to Millrose Properties, Inc. common stockholders |
|
$ |
|
386,996 |
|
|
$ |
|
302,292 |
|
AFFO basic earnings per share of Class A and Class B common stock |
|
$ |
|
2.33 |
|
|
$ |
|
1.82 |
|
AFFO diluted earnings per share of Class A and Class B common stock |
|
$ |
|
2.33 |
|
|
$ |
|
1.82 |
|
|
|
|
|
|
|
|
|
|
||
Reconciliation of GAAP earnings per share to AFFO per share |
|
|
|
|
|
|
|
|
||
GAAP reported basic and diluted earnings per share of Class A and Class B common stock |
|
$ |
|
2.28 |
|
|
$ |
|
1.70 |
|
Adjustments: |
|
|
|
|
|
|
|
|
||
Add: Amortization of deferred financing and issuance costs (1) |
|
|
|
0.05 |
|
|
|
|
0.11 |
|
Add: Stock-based compensation (2) |
|
|
|
0.01 |
|
|
|
|
0.00 |
|
Add: Provision for (benefit from) credit loss expense (3) |
|
|
|
(0.01 |
) |
|
|
|
0.00 |
|
Add: Rating agency expenses (4) |
|
|
|
0.00 |
|
|
|
|
0.01 |
|
AFFO basic and diluted earnings per share of Class A and Class B common stock |
|
$ |
|
2.33 |
|
|
$ |
|
1.82 |
|
Basic weighted average common shares outstanding of Class A and Class B common stock |
|
|
|
166,032,954 |
|
|
|
|
166,003,497 |
|
Diluted weighted average common shares outstanding of Class A and Class B common stock |
|
|
|
166,054,887 |
|
|
|
|
166,025,174 |
|
36
Liquidity and Capital Resources
Liquidity is a measure of our ability to meet potential cash requirements, including ongoing commitments to fund investments and operations, make distributions to our stockholders and meet other general business needs.
As of September 30, 2026, we had $64.5 million cash on hand and approximately $750 million capacity under our Revolving Credit Facility, $3.1 million capacity under our DDTL Credit Facility and $21.9 million capacity under our SFR Secured Credit Facility. Our primary sources of liquidity are cash flows from operations and debt financing under our Revolving Credit Facility of $1.385 billion, our DDTL Credit Facility of $500 million, our Senior Notes of $2.0 billion, and our SFR Secured Credit Facility of $235 million . As discussed under "Our Business and Recent Transactions" and Note 11. Debt to our condensed consolidated financial statements included in "Part I, Item 1. Financial Statements" of this Form 10-Q, on October 6, 2026, we completed the issuance of an additional $1.0 billion aggregate principal amount of senior notes, which further enhanced our liquidity and capital resources.
On October 26, 2026, our Board approved a share repurchase program whereby, from time to time, the Company may repurchase up to $250 million of the Company’s Class A common stock.
We believe that our existing cash on hand, cash generated from operations and available capacity under the Revolving Credit Facility, DDTL Credit Facility, SFR Secured Credit Facility and 2026 Senior Notes will be sufficient to meet our liquidity needs in the short and long term. In the future, we may seek to further raise capital or engage in other forms of borrowings in order to fund future investments or to refinance existing indebtedness. Our ability to satisfy our liquidity requirements depends on our future operating performance, which is affected by prevailing economic conditions, market conditions in the real estate industry and other factors, many of which are beyond our control.
Cash Flows
Our cash flows for the nine months ended September 30, 2026 and 2025 were as follows:
|
|
Nine months ended September 30, |
|
|||||||
(in thousands) |
|
|
2026 |
|
|
|
2025 |
|
||
Cash flows from (used in) |
|
|
|
|
|
|
|
|
||
Operating activities |
|
$ |
|
2,558,409 |
|
|
$ |
|
2,535,829 |
|
Investing activities |
|
|
|
(3,369,202 |
) |
|
|
|
(4,390,372 |
) |
Financing activities |
|
|
|
840,282 |
|
|
|
|
2,097,121 |
|
Net increase in cash |
|
$ |
|
29,489 |
|
|
$ |
|
242,578 |
|
Cash Flows from Operating Activities
Net cash from operating activities was $2.558 billion for the nine months ended September 30, 2026. Operating cash inflows primarily consisted of cash generated from takedowns of homesites under option contracts, net of deposit credits, option fees related to homesites under option contracts, interest received on development loan agreements, and interest earned on cash balances held in the Company's operating bank accounts. Operating cash outflows primarily consisted of Management Fee payments, interest payments on debt obligations and other operating expenses.
Net cash from operating activities was $2.535 billion for the nine months ended September 30, 2025. Operating cash inflows primarily consisted of cash generated from takedowns of homesites under option contracts, net of deposit credits, option fees related to homesites under option contracts, interest received on development loan agreements, and interest earned on cash balances held in the Company's operating bank accounts. Operating cash flows also reflected the Predecessor Millrose Business pre-Spin-Off net loss of $25.0 million. Operating cash outflows primarily consisted of Management Fee payments and interest payments on debt obligations.
The increase in cash provided by operating activities for the nine months ended September 30, 2026, compared to the nine months ended September 30, 2025, was primarily driven by higher cash generated from option fees as a result of growth in homesites under option contracts. This increase was partially offset by (i) higher interest payments on debt obligations and (ii) higher Management Fee payments resulting from growth in Tangible Assets associated with an increase in homesites under option contracts.
Cash Flows from Investing Activities
Net cash used in investing activities was $3.369 billion for the nine months ended September 30, 2026. Investing cash outflows consisted primarily of cash used to acquire homesites for our homesite option platform, net of option deposits, loans made to counterparties under our development loan agreements, cash used for the acquisition of single-family residential
37
properties, investments in preferred instruments, and property-related deposits. These investing cash outflows were partially offset by principal payments received from counterparties under our development loan agreements.
Net cash used in investing activities was $4.390 billion for the nine months ended September 30, 2025. Investing cash outflows consisted of cash paid to acquire the Rausch homesites, cash used to acquire homesites net of option deposits, and loans made to counterparties under our development loan agreements. These investing cash outflows were partially offset by option deposit payments received related to the inventory contributed by Lennar at the Spin-Off and principal payments received from counterparties under our development loan agreements.
The lower cash used in investing activities for the nine months ended September 30, 2026, compared to the nine months ended September 30, 2025, was primarily driven by the Rausch Transaction in the prior-year period, lower development loans funded to counterparties, lower investments in homesites under option contracts, and higher principal payments received from counterparties under our development loan agreements, including the $284 million payoff of a development loan on April 1, 2026. These decreases were partially offset by the cash paid for the acquisition of single-family residential properties and the purchase of the preferred instrument issued by Dream Finders, as well as lower option deposit payments received related to inventory contributed by Lennar in connection with the Spin-Off during the prior-year period.
Cash Flows from Financing Activities
Net cash from financing activities was $840.3 million for the nine months ended September 30, 2026. Financing cash inflows consisted of proceeds received under the Revolving Credit Facility (including proceeds under the Company’s prior revolving credit facility before March 25, 2026), the DDTL Credit Facility and proceeds from the SFR Secured Credit Facility. These financing cash inflows were partially offset by financing costs related to our debt obligations, dividends paid to our stockholders, and dividend equivalent rights paid to our stockholders.
Net cash provided by financing activities was $2.097 billion for the nine months ended September 30, 2025. Financing cash inflows primarily consisted of cash contributed by Lennar in connection with the Spin-Off and proceeds from borrowings under the Company's debt obligations. These financing cash inflows were partially offset by Spin-Off-related costs, dividends paid to stockholders and payments on a seller note related to a community acquired from Lennar.
The decrease in net cash provided by financing activities for the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025 was primarily driven by lower proceeds from debt borrowings, higher dividends paid to stockholders and the cash contribution from Lennar received in connection with the Spin-Off during the prior-year period. These decreases were partially offset by lower repayments of debt obligations and the absence of Spin-Off-related costs and seller note payments incurred in the prior-year period.
Revolving Credit Facility and Delayed Draw Term Loan Facility
On March 25, 2026 (the “Effective Date”), the Company entered into an Amended and Restated Credit Agreement (the “Credit Agreement”) with the lenders party thereto, the issuing banks party thereto and JPMorgan Chase Bank, N.A., as administrative agent for the lenders, which amended and restated the Company’s prior secured revolving credit agreement entered into on February 7, 2025. The Credit Agreement provides for (i) a four-year revolving credit facility (the “Revolving Credit Facility”) with commitments in an aggregate amount of $1.335 billion, (ii) a delayed draw term loan facility (the “DDTL Credit Facility”) in an aggregate amount of $500 million that may be utilized during the first year following the Effective Date, and (iii) an uncommitted accordion feature that allows the Company to seek additional loan commitments under the Credit Agreement in the future, subject to an aggregate maximum commitment amount of $2.5 billion. Borrowings under the Credit Agreement are subject to compliance with a borrowing base, which is a function of the values from time to time of the properties of the Company and its subsidiaries. The revolving loans and any delayed draw term loans borrowed under the Credit Agreement will mature on March 25, 2030. The net proceeds of the borrowings under the Credit Agreement will be used for general business purposes. The Credit Agreement is unsecured. Upon the Effective Date, the liens securing the loans under the Company’s prior secured revolving credit facility were released.
Prior to Amendment No.1 (as defined below), loans under the Credit Agreement bore interest at the Adjusted Term SOFR Rate (as defined in the Credit Agreement) plus an applicable margin at the per annum rate of (i) 2.00%, if the Leverage Ratio (as defined in the Credit Agreement) is less than or equal to 0.30 to 1.00, (ii) 2.25% if the Leverage Ratio is greater than 0.30 to 1.00 and less than or equal to 0.40 to 1.00, and (iii) 2.50% if the Leverage Ratio is greater than 0.40 to 1.00. At the Company’s option, loans may instead bear interest at the Alternate Base Rate (as defined in the Credit Agreement) plus an applicable margin at the per annum rate of 1.00% lower than the applicable margin for Adjusted Term SOFR Rate loans set forth above, in each case, based upon the Leverage Ratio.
On August 5, 2026, the Company entered into Amendment No. 1 to the Credit Agreement (“Amendment No. 1”). Amendment No. 1 amended the Credit Agreement to, among other things, reduce each of the applicable margins used to determine the interest rate on loans thereunder by 0.25% per annum. Accordingly, effective August 5, 2026, the applicable
38
margin for loans bearing interest at the Adjusted Term SOFR Rate is (i) 1.75% if the Leverage Ratio is less than or equal to 0.30 to 1.00, (ii) 2.00% if the Leverage Ratio is greater than 0.30 to 1.00 and less than or equal to 0.40 to 1.00, and (iii) 2.25% if the Leverage Ratio is greater than 0.40 to 1.00. Loans bearing interest at the Alternate Base Rate remain subject to margins that are 1.00% lower than the applicable margins for Adjusted Term SOFR Rate loans.
On September 21, 2026, the Company and the guarantors entered into the Commitment and Acceptance, by
and among the Company, the guarantors, JPMorgan Chase Bank, N.A., as administrative agent for the lenders,
and Flagstar Bank, N.A., under which the Company exercised the accordion feature under the Credit Agreement
to increase the aggregate amount of commitments of the Revolving Credit Facility by $50 million to
$1.385 billion.
As of the Effective Date, the Company’s obligations under the Credit Agreement are guaranteed by SPE LLC and MPSAB, LLC (“MPSAB”), each a directly or indirectly wholly-owned subsidiary of the Company. In certain circumstances, the Credit Agreement requires the Company to cause certain future subsidiaries of the Company that are not Taxable REIT Subsidiaries or SPEs (each as defined in the Credit Agreement) to become guarantors.
The Credit Agreement includes affirmative and negative covenants applicable to the Company and its subsidiaries, including, without limitation, covenants regarding indebtedness, liens, dividends and other restricted payments, investments, asset sales, transactions with affiliates, negative pledges, mergers and other fundamental changes, permitted lines of business, financial contracts and designation of unrestricted subsidiaries. The Credit Agreement contains financial covenants, tested quarterly, consisting of a maximum Leverage Ratio, a minimum interest coverage ratio and a minimum tangible net worth. The Credit Agreement also requires the Company to maintain its status as a REIT.
The loans under the Credit Agreement may be accelerated if an event of default occurs. Events of default include (i) customary events of default and (ii) KL ceasing to be the Company’s manager and the Company failing to appoint a replacement manager reasonably acceptable to the required lenders within 90 days.
August 2025 Offering of Senior Notes
On August 7, 2025, the Company issued $1.25 billion aggregate principal amount of its 6.375% Senior Notes due 2030 (the “2030 Notes”). The 2030 Notes were issued at par value. The Company received net proceeds of approximately $1.23 billion, after deducting the initial purchasers’ discounts and commissions and offering expenses.
The 2030 Notes were issued pursuant to the 2030 Notes Indenture, among the Company, the subsidiary guarantors from time to time party thereto and Citibank, N.A., as trustee. The 2030 Notes are fully and unconditionally guaranteed on a senior unsecured basis by SPE LLC and MPSAB.
The 2030 Notes and the guarantee are the Company’s and the guarantors’ general senior unsecured obligations and are (i) pari passu in right of payment with all of the Company’s and the guarantors’ existing and future senior indebtedness, including the indebtedness under the Revolving Credit Facility and the 2032 Notes (as defined below), (ii) senior in right of payment to any future subordinated indebtedness of the Company and the guarantors, (iii) effectively subordinated to all of the Company’s and the guarantors’ existing and future secured indebtedness, including the indebtedness under the Revolving Credit Facility, to the extent of the value of the assets securing such indebtedness, and (iv) structurally subordinated to all existing and future indebtedness and other liabilities of the Company’s subsidiaries that do not guarantee the 2030 Notes.
The 2030 Notes mature on August 1, 2030, and interest is payable semi-annually on February 15 and August 15 of each year, beginning on February 15, 2026.
The Company has the option to redeem some or all of the 2030 Notes on or after August 1, 2027 at the redemption prices specified in the 2030 Notes Indenture. Prior to August 1, 2027, the Company may redeem some or all of the 2030 Notes at a redemption price of 100% of the principal amount thereof plus accrued and unpaid interest on the 2030 Notes being redeemed plus a “make-whole” premium. In addition, prior to August 1, 2027, the Company may redeem up to 40% of the 2030 Notes with cash in an amount not to exceed the net cash proceeds from certain equity offerings at a redemption price equal to 106.375% of the principal amount being redeemed plus accrued and unpaid interest on the 2030 Notes being redeemed.
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. Additionally, upon the occurrence of a Change of Control Triggering Event (as defined in the 2030 Notes Indenture), the Company must offer to repurchase all of the 2030 Notes at 101% of their principal amount, plus accrued and unpaid interest, if any, to the date of purchase. The 2030 Notes Indenture also provides for customary events of default.
39
As of September 30, 2026, the aggregate principal amount outstanding under the 2030 Notes was $1.25 billion. The Company was in compliance with all covenants under the 2030 Notes Indenture and there were no events of default. There were no material changes to the 2030 Notes during the three months ended September 30, 2026.
See Note 11. Debt to our condensed consolidated financial statements included in “Part I. Item 1 Financial Statements” of this Form 10-Q for further description.
September 2025 Offering of Senior Notes
On September 11, 2025, the Company issued $750 million aggregate principal amount of its 6.250% Senior Notes due 2032 (the “2032 Notes”, together with the 2030 Notes, the “Senior Notes”). The 2032 Notes were issued at par value. The Company received net proceeds of approximately $737.5 million, after deducting the initial purchasers’ discounts and commissions and offering expenses.
The 2032 Notes were issued pursuant to the 2032 Notes Indenture, among the Company, the subsidiary guarantors from time to time party thereto and Citibank, N.A., as trustee. The 2032 Notes are fully and unconditionally guaranteed on a senior unsecured basis by SPE LLC and MPSAB.
The 2032 Notes and the guarantee are the Company’s and the guarantors’ general senior unsecured obligations and are (i) pari passu in right of payment with all of the Company’s and the guarantors’ existing and future senior indebtedness, including the indebtedness under the Revolving Credit Facility and the 2030 Notes, (ii) senior in right of payment to any future subordinated indebtedness of the Company and the guarantors, (iii) effectively subordinated to all of the Company’s and the guarantors’ existing and future secured indebtedness, including the indebtedness under the Revolving Credit Facility, to the extent of the value of the assets securing such indebtedness, and (iv) structurally subordinated to all existing and future indebtedness and other liabilities of the Company’s subsidiaries that do not guarantee the 2032 Notes.
The 2032 Notes mature on September 15, 2032, and interest is payable semi-annually on March 15 and September 15 of each year, beginning on March 15, 2026.
The Company has the option to redeem some or all of the 2032 Notes on or after September 15, 2028 at the redemption prices specified in the 2032 Notes Indenture. Prior to September 15, 2028, the Company may redeem some or all of the 2032 Notes at a redemption price of 100% of the principal amount thereof plus accrued and unpaid interest on the notes being redeemed plus a “make-whole” premium. In addition, prior to September 15, 2028, the Company may redeem up to 40% of the 2032 Notes with cash in an amount not to exceed the net cash proceeds from certain equity offerings at a redemption price equal to 106.250% of the principal amount being redeemed plus accrued and unpaid interest on the 2032 Notes being redeemed.
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. Additionally, upon the occurrence of a Change of Control Triggering Event (as defined in the 2032 Notes Indenture), the Company must offer to repurchase all of the 2032 Notes at 101% of their principal amount, plus accrued and unpaid interest, if any, to the date of purchase. The 2032 Notes Indenture also provides for customary events of default.
As of September 30, 2026, the aggregate principal amount outstanding under the 2032 Notes was $750 million. The Company was in compliance with all covenants under the 2032 Notes Indenture and there were no events of default. There were no material changes to the 2032 Notes during the three months ended September 30, 2026.
See Note 11. Debt to our condensed consolidated financial statements included in “Part I. Item 1 Financial Statements” of this Form 10-Q for further description.
Single-Family Residential Secured Credit Facility
On September 30, 2026, certain subsidiaries of the Company entered into the SFR Secured Credit Facility with Goldman Sachs Bank USA, as administrative agent and initial lender. The SFR Secured Credit Facility provides for a revolving credit facility with commitments in an aggregate amount of up to $235.0 million. Lenders may agree to (a) increase the aggregate commitments up to $1.0 billion, or (b) make advances in excess of the committed amount but not to exceed a total outstanding balance of $1.0 billion.The SFR Secured Credit Facility matures on September 29, 2028, subject to a one-year extension option. Borrowings under the SFR Secured Credit Facility bear interest at a rate equal to one-month Term SOFR plus an applicable margin of 1.20% per annum, subject to a 0.50% floor and adjustments upon certain events.
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The SFR Secured Credit Facility is secured by, among other things, a pledge of equity in the subsidiary borrowers, cash derived from eligible financed properties and, upon certain events, mortgages on the financed properties themselves. The SFR Secured Credit Facility also benefits from a limited guaranty provided by the Company.
As of September 30, 2026, the aggregate principal amount outstanding under the SFR Secured Credit Facility was $213.1 million. The Company was in compliance with all covenants and there were no events of default.
See Note 11. Debt to our condensed consolidated financial statements included in “Part I. Item 1 Financial Statements” of this Form 10-Q for further description.
October 2026 Offering of Senior Notes
On October 6, 2026, the Company issued the 2026 Senior Notes. The 2026 Senior Notes were issued at par value. The Company received net proceeds of approximately $991.2 million, after deducting the initial purchasers' discounts and commissions and offering expenses.
The 2029 Notes were issued pursuant to an indenture (the “2029 Notes Indenture”), dated as of October 6, 2026, by and among the Company, the subsidiary guarantors party thereto and Citibank, N.A., as trustee. The 2031 Notes were issued pursuant to an indenture, dated as of October 6, 2026, by and among the Company, the subsidiary guarantors party thereto and Citibank, N.A., as trustee (the “2031 Notes Indenture” and, together with the 2029 Notes Indenture, the “Indentures”). The 2026 Senior Notes are fully and unconditionally guaranteed on a senior unsecured basis by SPE LLC and MPSAB. Interest on each of the 2029 Notes and the 2031 Notes accrues from October 6, 2026 and is payable in arrears on April 15 and October 15 of each year, commencing on April 15, 2027.
Each Indenture contains customary restrictive covenants, optional redemption provisions, change-of-control repurchase rights and customary events of default. The 2026 Senior Notes rank (i) pari passu with all existing and future senior unsecured indebtedness, (ii) senior to any future subordinated indebtedness, (iii) effectively subordinated to existing and future secured indebtedness to the extent of the value of the collateral securing such indebtedness, and (iv) structurally subordinated to all existing and future indebtedness of subsidiaries that do not guarantee the 2026 Senior Notes.
The October 2026 Offering closed on October 6, 2026. Accordingly, the 2026 Senior Notes were not outstanding as of September 30, 2026 and were not reflected in the Company's condensed consolidated balance sheets as of that date.
Purchase Money Mortgages
During 2025, the Company acquired two land parcels totaling $33 million which were financed through property-level, purchase-money arrangements which are fully indemnified by a counterparty. Both obligations are non-recourse to the Company and are secured solely by the respective underlying properties. The counterparty is responsible for all debt service related to the interest on the purchase money mortgages until their maturity dates in March 2026 and December 2027, respectively, at which time the Company intends to enter into an option agreement on these properties with the counterparty.
Principal payments of $4 million are due during the fourth quarter of 2026, and $29 million are due in 2027. See Note 11. Debt to our condensed consolidated financial statements included in this Form 10-Q for further description.
Debt to Equity Ratio Limit Right
In addition to the Credit Agreement and Senior Notes, Millrose may seek to pursue other debt and expects to have access to a certain amount of debt and equity capital at least a portion of which is intended to be available for use in financing transactions with new counterparties. Millrose may also seek additional third-party financing to satisfy any additional capital needs or raise capital through equity and debt issuances into the market. Additionally, any third-party financing arrangements Millrose enters into may not cause its debt to equity ratio to exceed 1:1 (the “Debt to Equity Ratio Limit”) unless Millrose obtains the prior approval of Lennar.
Secured Financing Collateral Consent Right
From time to time, Millrose may enter into various “secured financing arrangements,” which may include but are not limited to secured or collateralized loans, or any other transactions where assets may be pledged or used as collateral to secure the financing instrument, whether or not the security interest is perfected. In such cases, Millrose may use the land assets it holds through its subsidiaries in its real estate portfolio or the proceeds from counterparties’ exercises of purchase options relating to the land assets in Millrose’s real estate portfolio as collateral to secure the financing. While Millrose may, at its discretion, enter into any secured financing arrangements it so chooses (subject to the Debt to Equity Ratio Limit), Millrose is prohibited from granting or selling any security interest whereby the assets pledged pursuant to such security interest include
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both assets acquired from Lennar and homesites of Other Counterparties (i.e., mixing the assets into one collateral pool) without Lennar’s prior written consent.
Dividends
On January 15, 2026, the Company paid a dividend of $0.75 to holders of our Class A common stock and our Class B common stock as of the close of business on January 5, 2026, as declared by the Board on December 22, 2025. On April 15, 2026, the Company paid a dividend of $0.76 to holders of our Class A common stock and our Class B common stock as of the close of business on April 3, 2026, as declared by the Board on March 23, 2026. On July 15, 2026, the Company paid a dividend of $0.77 to holders of our Class A common stock and our Class B common stock as of the close of business on July 6, 2026, as declared by the Board on June 23, 2026. On September 23, 2026, the Company declared a dividend of $0.79 to Class A common stockholders and Class B common stockholders of record as of the close of business October 5, 2026. This dividend was paid on October 15, 2026.
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. While we do not plan to do so, under currently applicable Internal Revenue Service guidance, approximately 80% of these dividends may be paid in the form of stock dividends, rather than in cash. Dividends will be authorized by our Board and declared by us based on a number of factors including actual results of operations, dividend restrictions under Maryland law or applicable debt covenants, our liquidity and financial condition, our taxable income, the annual distribution requirements under the REIT Requirements, our operating expenses and any other factors our Board deems relevant. Subject to certain exceptions, distributions received from us will not be qualified dividends and will therefore be taxed at ordinary income rates to the extent of our current or accumulated earnings and profits.
Effects of Inflation and Seasonality
See discussion in the section “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Form 10-K.
Promissory Notes
MPH Parent and other TRSs have issued to Millrose promissory notes that are secured by a pledge of all equity interests in the Property LLCs and unrecorded mortgages on certain of our real property assets (the “Promissory Notes”). In the event that MPH Parent or another TRS of Millrose acquires additional land assets, the Promissory Notes may be further amended to reflect such acquisitions. Alternatively, MPH Parent or another TRS of Millrose may issue one or more additional promissory notes that are similar to the Promissory Notes.
Mortgages
In connection with the Promissory Notes, each of the Property LLCs delivered fully executed mortgages (the “Mortgages”) with respect to the homesites that they own in favor of Millrose to secure the Promissory Notes. The Mortgages were not recorded initially, but each Property LLC is required to comply with Millrose’s request to amend the Mortgages so that they may be recorded if Millrose so requests.
The homesites covered by the Mortgages will automatically be released from the applicable Mortgage upon (a) payment in full of the applicable Promissory Note or (b) the occurrence of a closing of such homesite in accordance with the Master Option Agreement or Other Agreements. Additionally, any new real property that the Property LLCs acquire while any portion of the Promissory Notes remains unpaid or unsatisfied shall automatically be subject to the lien of the Mortgages or of similar mortgages or deeds of trust.
Pledge and Security Agreements
In connection with the Promissory Notes, MPH Parent and certain other TRSs entered into the pledge and security agreements with Millrose (the “Pledge and Security Agreements”), pursuant to which such TRSs pledged a first priority perfected, continuing security interest in and lien on 100% of its membership interests in each Property LLC and in all proceeds thereof (the “Pledged Collateral”) as collateral for the note borrower’s performance of its obligations under the Promissory Notes and Mortgages. Except during the continuance of a Promissory Note event of default, note borrower will have the right to receive all distributions, interest and proceeds in respect of the Pledged Collateral.
In the event that a TRS of Millrose acquires additional land assets, the Pledge and Security Agreements may be further amended to reflect such acquisitions. Alternatively, MPH Parent or another TRS of Millrose may enter into one or more additional pledge and security agreements that are similar to the Pledge and Security Agreements.
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REIT Tax Election and Income Taxes
We have elected to be taxed as a REIT under Sections 856 through 860 of the Code beginning with the taxable year ended December 31, 2025. To qualify as a REIT, we must meet a number of organizational and operational requirements, including a requirement that we distribute at least 90% of our “REIT taxable income,” as defined by the Code, to our stockholders. Taxable income from certain non-REIT qualifying activities is derived through our TRSs and is subject to applicable U.S. federal, state, and local income and franchise taxes. During the three and nine months ended September 30, 2026, we recorded consolidated income tax expense of $4.9 million and $12.4 million, respectively, which was attributable to our TRSs. During the three and nine months ended September 30, 2025, we recorded consolidated income tax expense of $5.9 million and $15.0 million, respectively, which was attributable to our TRSs.
We believe we qualify for taxation as a REIT under the Code, and we intend to continue to be organized and to operate in a manner that will permit us to qualify as a REIT. To qualify as a REIT, we must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of our annual REIT taxable income to stockholders. As a REIT, we will be subject to U.S. federal income tax on our undistributed REIT taxable income and net capital gain and to a 4% nondeductible excise tax on any amount by which distributions we pay with respect to any calendar year are less than the sum of (1) 85% of our ordinary income, (2) 95% of our capital gain net income and (3) 100% of our undistributed income from prior years. In addition, our TRSs are subject to applicable U.S., federal, state, and local income and franchise taxes.
If we fail to qualify as a REIT in any taxable year, we will be subject to U.S. federal income tax on our taxable income at regular corporate income tax rates, and dividends paid to our stockholders would not be deductible by us in computing taxable income. Any resulting corporate liability could be substantial and could materially and adversely affect our net income and net cash available for distribution to stockholders. Unless we were entitled to relief under certain Code provisions, we also would be disqualified from re-electing to be taxed as a REIT for the four taxable years following the year in which we failed to qualify to be taxed as a REIT.
We evaluate the tax positions taken or expected to be taken in the course of preparing our tax returns to determine whether the tax positions are “more-likely-than-not” (greater than 50 percent probability) of being sustained by the applicable tax authority. Tax positions not deemed to meet the “more-likely-than-not” threshold would be recorded as a tax benefit or expense in the current year. Our management is required to analyze all open tax years, as defined by the applicable statute of limitations, for all major jurisdictions, which include federal and certain states. We have no examinations in progress and none are expected at this time. We evaluate our tax positions using a two-step process. First, we determine whether a tax position is more likely than not to be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. Second, we determine the amount of benefit to recognize and record the amount that is more likely than not to be realized upon ultimate settlement. We had no material unrecognized tax benefit or expense, accrued interest or penalties as of September 30, 2026 or December 31, 2025. Our TRSs are subject to U.S. federal income tax as well as income tax of various state and local jurisdictions. When applicable, we recognize interest and/or penalties related to uncertain tax positions on our consolidated statements of operations.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Critical Accounting Estimates
The preparation of the financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of our financial statements and the reported amount of revenues and expenses during the reporting period. Our critical accounting estimates are those that involve a high degree of judgment and uncertainty and for which changes in assumptions could have a material impact on our condensed consolidated financial statements. Our significant accounting policies are described in Note 2, Basis of Presentation and Significant Accounting Policies of the notes to the condensed consolidated financial statements included in “Part I. Item 1 Financial Statements” of this Form 10-Q. The following are the critical accounting estimates that require us to exercise our business judgment or make significant estimates:
Homesites Under Option Contracts
We evaluate our homesite option contracts at inception to determine if they contain a lease as defined under ASC 842. Determining whether these option agreements should be accounted for under ASC 842 required management to apply significant judgment, including assumptions about whether the homebuilders (i) obtain substantially all of the economic benefits from use of the asset and (ii) have elements of control of the optioned assets. Changes in these assumptions could significantly affect the timing of revenue recognition in the Company’s condensed consolidated financial statements. The Company's option contracts with its counterparties grant the counterparties the exclusive right to acquire homesites owned by
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the Company at predetermined prices and takedown schedules. Although the Company retains legal title to the land during the option agreement term, the counterparties obtain substantive rights to direct the planning, use, and development of the homesites.
Because the Company transfers elements of control of the homesites to the counterparties during the option contract period, we account for homesites under option contract under ASC 842. The Company accounts for option fee contracts as sales-type leases under ASC 842 because the Company concluded that the purchase options are reasonably certain of being exercised. Option fee income is recognized over the term of the contract using an effective interest yield. Monthly option fees may vary over time based on reimbursable development costs, changes in takedown timing or volume, or other contractual adjustments, and such changes are recognized prospectively through an updated effective interest yield over the term of the option contract.
Homesites under option contracts consist of land and related development costs associated with homesites subject to option contracts. The carrying value of homesites under option contracts is recorded based on the Company's capital funded under the option contracts, which includes the land acquisition costs, qualifying development costs and other directly attributable costs incurred on the underlying land. When a counterparty completes a takedown and homesites are transferred in accordance with the option contract, the Company derecognizes the related carrying amount from the condensed consolidated balance sheets.
Because our option contracts are accounted for as sales-type leases, the resulting asset, representing our right to receive future takedown payments and option fees, is considered a contractual right to receive cash. Therefore, the Company evaluates expected credit losses for homesites subject to option contracts in accordance with ASC 326. Expected credit losses are estimated using a weighted average remaining maturity (“WARM”) methodology, which applies an annual loss rate to the estimated remaining life of the related contract balance and is adjusted for expected cash flows and relevant qualitative factors. Qualitative considerations include the counterparties' consistent payment performance, the absence of delinquencies or defaults since inception, historical charge off rates for residential housing, and cross-collateralization features across certain counterparty arrangements. The Company also considers the credit quality of its most significant counterparties. After considering these factors, the Company determined that the risk of loss was immaterial as of September 30, 2026.
Development Loan Receivables, Net
Development loan receivables, net are recorded at amortized cost, which includes principal amounts due and PIK interest, net of principal repayments and an allowance for credit losses. We estimate expected credit losses on development loan receivables in accordance with ASC 326, using a WARM methodology. Under this approach, we apply an annual charge-off rate to the estimated remaining life of the development loan portfolio, adjust for expected cash flows, and further adjust the historical baseline for qualitative factors, including current economic conditions and reasonable and supportable forecasts of future economic conditions. Accrued PIK interest is included in the amortized cost basis of the development loans for purposes of calculating the allowance for credit losses.
The allowance for credit losses is a critical accounting estimate because it requires significant judgment in determining the annual charge-off rate, expected cash flows, and the qualitative adjustments applied to reflect current conditions and forward-looking information. These judgments are informed by ongoing monitoring of borrower and project performance and broader market conditions affecting residential development activity. Changes in borrower performance, collateral values, expected cash flows, portfolio composition, or macroeconomic conditions could result in changes to the allowance for credit losses and the provision for (benefit from) credit losses in future periods.
Single-Family Residential Properties, net
The purchase price allocation for single-family residential properties is a critical accounting estimate because it requires judgment in evaluating the assumptions and methodologies used to determine the relative allocation of cost between land and building components. Differences in these assumptions or methodologies could result in a different allocation between land and building assets and, accordingly, affect the amount of depreciation expense recognized over the lives of the acquired properties. The Company engaged a third-party valuation specialist to assist in the purchase price allocation analysis used to allocate the portfolio's cost basis between non-depreciable land and depreciable building assets.
Recent Accounting Standards
For discussion of recently issued accounting standards, see Note 2. Basis of Presentation and Significant Accounting Policies of the notes to the condensed consolidated financial statements included in “Part I. Item 1 Financial Statements” of this Form 10-Q.
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Item 3. Quantitative and Qualitative Disclosures about Market Risk
We are exposed to market risk related to changes in interest rates and other market factors that affect our debt obligations and market sensitive investments. Interest rate changes may affect (i) the market for new homes, and therefore the likelihood that purchase options will be exercised, (ii) our debt obligations under the Revolving Credit Facility, DDTL Credit Facility, SFR Secured Credit Facility and Senior Notes, and (iii) our ability to obtain other long-term debt used to maintain liquidity, fund capital expenditures and expand our investment portfolio and operations.
Market fluctuations in real estate financing may affect the availability and cost of funds needed to expand our investment portfolio. Restrictions upon the availability of real estate financing or high interest rates for real estate loans could also adversely affect our ability to dispose of real estate in the future. We seek to limit the impact of interest rate changes on earnings and cash flows and to lower our overall borrowing costs. In the future, we may use derivative financial instruments to hedge exposures to changes in interest rates on loans secured by our assets and on the value of the land we own.
Borrowings under our Revolving Credit Facility and DDTL Credit Facility bear interest at the Adjusted Term SOFR Rate (as defined in the Credit Agreement), plus an applicable per annum spread rate of 1.75%-2.25% based on the Leverage Ratio (as defined in the Credit Agreement). At the Company’s option, loans may instead bear interest at the Alternate Base Rate (as defined in the Credit Agreement) plus an applicable margin at the per annum rate of 1.00% lower than the applicable margin for Adjusted Term SOFR Rate loans set forth above, in each case, based upon the Leverage Ratio. Borrowings under the SFR Secured Credit Facility bear interest at a rate equal to one-month Term SOFR plus an applicable margin of 1.20% per annum, subject to a 0.50% floor and adjustments upon certain events. Changes in interest rates related to the Adjusted Term SOFR Rate generally do not affect the fair value of outstanding borrowings under our variable-rate debt facilities but do affect our earnings and cash flows.
As of September 30, 2026, we had $1.345 billion of outstanding borrowings under the Revolving Credit Facility, DDTL Credit Facility, and SFR Secured Credit Facility. Assuming no change in the amount outstanding as of September 30, 2026, a one percent (1%) increase or decrease in interest rates would result in a corresponding increase or decrease in quarterly and annual interest expense of approximately $3.4 million and $13.5 million, respectively.
Fixed rate debt related to our 2030 Notes and 2032 Notes bear interest of 6.375% and 6.250%, respectively. Changes in market interest rates generally affect the fair value of these instruments, but not our earnings or cash flows. Outstanding debt for Senior Notes, net of unamortized issuance costs, was approximately $1.974 billion as of September 30, 2026, and their carrying value approximates their fair value.
As of September 30, 2026, we did not engage in hedging activities and did not hold any derivative instruments or other financial contracts for hedging purposes. If we were to enter into hedging arrangements in the future, those instruments could expose us to market risk, including the potential effects of changes in interest rates.
The sensitivity analysis above is based on variable-rate borrowings outstanding as of September 30, 2026 and assumes no changes in debt balances, no hedging activities, and a parallel change in interest rates. Actual impacts may differ due to changes in borrowings and repayments during the period, future financings, the timing of cash flows, changes in reference rates and spreads (including SOFR), and actions we may take to manage our exposure. Comparative market risk information for 2025 is not presented because the predecessor period did not have material market risk exposures and the information is not comparable.
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Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) of the Securities Exchange Act of 1934, as amended (“Exchange Act”)) as of the end of the period covered by this Form 10-Q as required by paragraph (b) of Rule 13a-15 or 15d-15 of the Exchange Act. Based upon such evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2026 and provided reasonable assurance that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) that occurred during the quarter ended September 30, 2026, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Prior to the Spin-Off, the Predecessor Millrose Business relied on processes and internal controls over financial reporting performed by Lennar. After the Spin-Off, Millrose became an independent company and responsibility for these processes and controls were transferred to KL, the Manager for Millrose. These changes are not expected to materially affect or have an adverse impact on our ability to maintain adequate internal controls over financial reporting. Following the Spin-Off, new corporate and governance functions were and continue to be implemented in order to meet the regulatory requirements of a stand-alone company.
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PART II—OTHER INFORMATION
Item 1. Legal Proceedings
On October 9, 2026, a securities class action complaint was filed against the Company and certain of its officers in the United States District Court for the Southern District of Florida by Leon Rubenstein and Sylvia Rubenstein, individually and on behalf of a putative class of purchasers of the Company's securities between February 7, 2025 and October 2, 2026. The complaint alleges violations of Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder and Section 20(a) of the Exchange Act with respect to claims concerning the Company's business activities and objectives. According to the filed complaint, the plaintiffs are seeking certification of the matter as a class action under Rule 23 of the Federal Rules of Civil Procedure, unspecified damages, attorneys’ fees and other costs incurred related to the lawsuit, and such other relief as the court may deem just and proper. The Company believes the claims are without merit and intends to defend the matter vigorously.
Item 1A. 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.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
During the three months ended September 30, 2026, none of Millrose’s directors or officers
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Item 6. Exhibits
(a) Exhibits
Exhibit |
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Description
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3.1 |
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Articles of Amendment and Restatement of Millrose Properties, Inc., dated February 6, 2025 (incorporated by reference to Exhibit 3.1 to Millrose's Current Report on Form 8-K filed with the SEC on February 7, 2025) |
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3.2 |
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Amended and Restated Bylaws of Millrose Properties, Inc., dated February 7, 2025 (incorporated by reference to Exhibit 3.2 to Millrose's Current Report on Form 8-K filed with the SEC on February 7, 2025) |
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4.1 |
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Indenture relating to the 6.500% senior notes due 2029, dated as of October 6, 2026, among Millrose Properties, |
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4.2
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Indenture relating to the 6.750% senior notes due 2031, dated as of October 6, 2026, among Millrose Properties, Inc., the subsidiary guarantors party thereto and Citibank, N.A., as trustee (incorporated by reference to Exhibit 4.2 to Millrose's Current Report on Form 8-K filed with the SEC on October 6, 2026) |
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10.1
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Amendment No. 1 to Amended and Restated Credit Agreement, dated as of August 5, 2026, among Millrose Properties, Inc., the guarantors party thereto, the lenders and issuing banks party thereto and JPMorgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 to Millrose’s Current Report on Form 8-K filed with the SEC on August 5, 2026) |
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10.2 |
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Amendment to Founder’s Rights Agreement, dated as of August 27, 2026, by and among Millrose Properties, Inc., U.S. Home, LLC, Lennar Homes Holding, LLC and CalAtlantic Group, LLC (incorporated by reference to Exhibit 10.1 to Millrose’s Current Report on Form 8-K filed with the SEC on September 1, 2026) |
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10.3 |
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Amendment to Management Agreement, dated as of August 27, 2026, by and between Millrose Properties, Inc. and Kennedy Lewis Land and Residential Advisors LLC (incorporated by reference to Exhibit 10.2 to Millrose’s Current Report on Form 8-K filed with the SEC on September 1, 2026) |
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10.4 |
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Commitment and Acceptance, dated as of September 21, 2026, by and among the Company, Millrose Properties SPE LLC, a Delaware limited liability company, MPSAB, LLC, a Delaware limited liability company, JPMorgan Chase Bank, N.A., as administrative agent, and Flagstar Bank, N.A. (incorporated by reference to Exhibit 10.1 to Millrose’s Current Report on Form 8-K filed with the SEC on September 21, 2026) |
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31.1* |
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Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
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31.2* |
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Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
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32.1** |
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Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
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32.2** |
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Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
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101.INS |
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Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
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101.SCH |
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Inline XBRL Taxonomy Extension Schema Document |
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104 |
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Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101) |
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* Filed herewith.
** Furnished herewith.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
MILLROSE PROPERTIES, INC. |
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By: |
/s/ Garett Rosenblum |
Name: |
Garett Rosenblum |
Title: |
Chief Financial Officer and Treasurer |
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(Principal Financial and Accounting Officer and Duly Authorized Signatory) |
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Date: November 4, 2026 |
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