Debt Obligations

3 Months Ended

Mar. 31, 2025

Debt Disclosure [Abstract]

Debt Obligations

Note 7. Debt Obligations

Revolving Credit Facility

On February 7, 2025, the Company entered into a credit agreement with a consortium of lenders with JPMorgan Chase Bank, N.A., as administrative agent for the lenders (the “Credit Agreement”). The Credit Agreement provides for a revolving credit facility (the “Revolving Credit Facility”) with commitments in an aggregate amount of $1.335 billion. Availability under the Credit Agreement is subject to a borrowing base updated quarterly (or, at the Company’s option, monthly), which is calculated by reference to the value of certain real property assets, with advance rates that vary by asset category, and unrestricted cash and cash equivalents, with adjustments as specified in the Credit Agreement. The Revolving Credit Facility may be used by the Company to borrow loans or obtain standby letters of credit.

Loans under the Credit Agreement bear 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 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%, 1.25% or 1.50%, depending upon the Leverage Ratio.

Obligations under the Credit Agreement are secured by pledges by Millrose of (i) the promissory note of approximately $4.8 billion issued by Millrose Holdings to Millrose (the “Promissory Note”) as part of the recapitalization of Millrose Holdings prior to the Spin-Off, and (ii) the equity interests of Millrose Holdings. In addition, the Credit Agreement requires the Company to pledge (i) certain future promissory notes similar to the Promissory Note that Millrose may enter into with future subsidiaries and (ii) the equity interests of any future subsidiaries whose equity interests are not pledged for the benefit of the Promissory Note or any other similar promissory note or notes.

As of March 31, 2025, there were no guarantors under the Credit Agreement. The Company may elect to join certain of our subsidiaries to the Credit Agreement as guarantors from time to time, and in certain circumstances, the Credit Agreement requires the Company to cause certain future subsidiaries of its future that are not Taxable REIT Subsidiaries (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 limitations regarding indebtedness, liens, dividends and other restricted payments, investments, asset sales, transactions with affiliates, restrictive agreements, 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 all REIT requirements. As of March 31, 2025, the Company was in compliance with all covenants under the Credit Agreement.

The Credit Agreement contains events of default, including if KL shall cease to be the Company’s manager and a replacement manager reasonably acceptable to the required lenders is not appointed within 90 days.

The Credit Agreement is scheduled to mature on February 7, 2028 (the “Maturity Date”). Principal amounts outstanding under the Revolving Credit Facility are due in full on the Maturity Date. Interest on each drawdown is due quarterly for loans bearing interest at the Alternate Base Rate and on the last day of the applicable interest payment date for loans bearing interest at the Adjusted Term SOFR Rate.

The outstanding principal balance at March 31, 2025 was $350.0 million which the Company classified as debt obligations in its unaudited condensed consolidated balance sheets. Interest expense for the three months ended March 31, 2025 was $2.5 million, which included $2.4 million of interest and $0.1 million of amortized deferred financing fees. Interest payments for the three months ended March 31, 2025 were $0.6 million, the outstanding interest payable at March 31, 2025 was $1.8 million and is classified in other liabilities in the Company’s unaudited condensed consolidated balance sheets.

Predecessor Millrose Business Debt

The Predecessor Millrose Business’s debt as of March 31, 2024 consisted of promissory notes for the acquisition of land and community development district bonds. There was no outstanding Predecessor Millrose Business debt recorded on the Company’s unaudited condensed consolidated financial statements as of March 31, 2025.