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Debt Obligations
 6 Months Ended
Jun. 30, 2025
Debt Disclosure [Abstract]  
Debt Obligations

Note 7. Debt Obligations

Revolving Credit Facility

On February 7, 2025, the Company entered into a credit agreement (the “Revolving Credit Agreement”) with a consortium of lenders party thereto JPMorgan Chase Bank, N.A., as administrative agent for the lenders (the “Revolver Agent”). The Revolving Credit Agreement provides for a revolving credit facility (the “Revolving Credit Facility”) with commitments in an aggregate amount of $1.335 billion, of which $950 million has been borrowed, and $925 million has been repaid, as of June 30, 2025. Availability under the Revolving 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 Revolving Credit Agreement. The Revolving Credit Facility may be used by the Company to borrow loans or obtain standby letters of credit.

Loans under the Revolving Credit Agreement bear interest at the Adjusted Term SOFR Rate (as defined in the Revolving Credit Agreement) plus an applicable margin at the per annum rate of (i) 2.00%, if the Leverage Ratio (as defined in the Revolving 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 Revolving 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 Revolving Credit Agreement are secured by pledges by Millrose of (i) the promissory note of approximately $4.8 billion issued by Millrose Holdings and certain of its subsidiaries 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 Revolving Credit Agreement requires the Company to pledge (i) certain future promissory notes similar to the Promissory Note that Millrose may enter into with other subsidiaries and (ii) the equity interests of any other subsidiaries whose equity interests are not pledged for the benefit of the Promissory Note or any other similar promissory note or notes. Pursuant to an intercreditor agreement (the “ICA”), dated as of June 24, 2025, by and among the DDTL Administrative Agent (as defined below) and the Revolver Agent, the DDTL Administrative Agent and the Revolver Agent agree that certain liens on Shared Collateral (as defined in the ICA) securing the DDTL Credit Agreement (as defined below) and the Revolving Credit Agreement shall be of equal priority, and certain distributions made in respect of Shared Collateral shall be shared on a ratable basis.

As of June 30, 2025, there were no guarantors under the Revolving Credit Agreement. The Company may elect to join certain of our subsidiaries to the Revolving Credit Agreement as guarantors from time to time, and in certain circumstances, the Revolving Credit Agreement requires the Company to cause certain other subsidiaries that are not Taxable REIT Subsidiaries (as defined in the Revolving Credit Agreement) to become guarantors.

The Revolving Credit Agreement includes affirmative and negative covenants applicable to the Company and its subsidiaries, including limitations regarding liens, 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 Revolving 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 Revolving Credit Agreement also requires the Company to maintain its status as a REIT. As of June 30, 2025, the Company was in compliance with all covenants under the Revolving Credit Agreement.

The Revolving 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 (as defined in the Revolving Credit Agreement) is not appointed within 90 days.

The Revolving Credit Agreement is scheduled to mature on February 7, 2028 (the “ Revolving Maturity Date”). Principal amounts and other obligations outstanding under the Revolving Credit Facility are due in full on the Revolving 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 June 30, 2025 was $25.0 million which the Company classified as debt obligations in its unaudited condensed consolidated balance sheets. Interest expense for the three months ended June 30, 2025 was $8.9 million, which included $7.8 million of interest and $1.1 million of amortized deferred financing fees. Interest expense for the six months ended June 30, 2025 was $11.4 million, which included $10.1 million of interest and $1.3 million of amortized deferred financing fees. Interest payments for the three and six months ended June 30, 2025 were $8.2 million and $8.7 million, respectively. The outstanding interest payable at June 30, 2025 was $1.4 million and is classified in other liabilities in the Company’s unaudited condensed consolidated balance sheets.

Delayed Draw Term Loan Facility

On June 24, 2025, the Company entered into a credit agreement (the “DDTL Credit Agreement”) with the lenders party thereto and Goldman Sachs Bank USA as administrative agent for the lenders (in such capacity, the “DDTL Administrative Agent”). The DDTL Credit Agreement provides for a delayed draw term loan facility (the “DDTL Facility”) with commitments in an aggregate amount of $1.0 billion, of which $1.0 billion has been borrowed as of June 30, 2025. Proceeds of the Acquisition Tranche Loans (as defined in the DDTL Credit Agreement) were used to finance the previously announced acquisition of a portfolio of homesites on which the Company executed option agreements with New Home to support New Home’s acquisition of Landsea, which closed on June 25, 2025 (as further defined in the DDTL Credit Agreement, the “Specified Acquisition”), and the proceeds of any General Tranche Loans (as defined in the DDTL Credit Agreement) may be used for general corporate purposes (which may include, without limitation, to pay outstanding obligations under the Revolving Credit Facility).

Loans under the DDTL Credit Agreement bear interest at the Adjusted Term SOFR Rate (as defined in the DDTL Credit Agreement, the “DDTL Adjusted Term SOFR Rate”) plus an applicable margin at the per annum rate of: (i) from (and including) the initial draw date through (and including) 89 days after the initial draw date (a) 2.00% if the Leverage Ratio (as defined in the DDTL Credit Agreement, the “DDTL Leverage Ratio”) is less than or equal to 0.30 to 1.00, (b) 2.25% if the DDTL Leverage Ratio is greater than 0.30 to 1.00 and less than or equal to 0.40 to 1.00, and (c) 2.50% if the DDTL Leverage Ratio is greater than 0.40 to 1.00; (ii) from (and including) 90 days after the initial draw date through (and including) 179 days after the initial draw date (a) 2.25% if the DDTL Leverage Ratio is less than or equal to 0.30 to 1.00, (b) 2.50% if the DDTL Leverage Ratio is greater than 0.30 to 1.00 and less than or equal to 0.40 to 1.00, and (c) 2.75% if the DDTL Leverage Ratio is greater than 0.40 to 1.00; (iii) from (and including) 180 days after the initial draw date through (and including) 269 days after the initial draw date (a) 2.50% if the DDTL Leverage Ratio is less than or equal to 0.30 to 1.00, (b) 2.75% if the DDTL Leverage Ratio is greater than 0.30 to 1.00 and less than or equal to 0.40 to 1.00, and (c) 3.00% if the DDTL Leverage Ratio is greater than 0.40 to 1.00; and (iv) from (and including) 270 days after the initial draw date and thereafter (a) 2.75% if the DDTL Leverage Ratio is less than or equal to 0.30 to 1.00, (b) 3.00% if the DDTL Leverage Ratio is greater than 0.30 to 1.00 and less than or equal to 0.40 to 1.00, and (c) 3.25% if the DDTL 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 DDTL Credit Agreement, the “DDTL Alternate Base Rate”) plus an applicable margin at the per annum rate of 1.00% lower than the applicable margin for DDTL Adjusted Term SOFR Rate loans set forth above, in each case based upon the DDTL Leverage Ratio and the time after initial draw.

Obligations under the DDTL Credit Agreement are secured by pledges by the Company of (i) the Promissory Note, and (ii) the equity interests of Millrose Holdings. In addition, the DDTL Credit Agreement requires the Company to pledge (i) certain future promissory notes similar to the Promissory Note that Millrose may enter into with other subsidiaries and (ii) the equity interests of any other subsidiaries whose equity interests are not pledged for the benefit of the Promissory Note or any other similar promissory note or notes. Pursuant to the ICA, the DDTL Administrative Agent and the Revolver Agent agree that certain liens on Shared Collateral (as defined in the ICA) securing the DDTL Credit Agreement and the Revolving Credit Agreement shall be of equal priority, and certain distributions made in respect of Shared Collateral shall be shared on a ratable basis.

As of June 30, 2025, there were no guarantors under the DDTL Credit Agreement. The Company may elect to join certain of our subsidiaries to the DDTL Credit Agreement as guarantors from time to time and, in certain circumstances, the DDTL Credit Agreement requires the Company to cause certain other subsidiaries of the Company that are not Taxable REIT Subsidiaries (as defined in the DDTL Credit Agreement) to become guarantors.

The DDTL Credit Agreement includes mandatory prepayments applicable to the Company and its subsidiaries in the event net cash proceeds are received from certain debt issuances, certain issuances of capital stock, and certain non-ordinary course dispositions of assets.

The DDTL Credit Agreement includes affirmative and negative covenants applicable to the Company and its subsidiaries, including limitations regarding liens, 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 DDTL Credit Agreement contains financial covenants, tested quarterly, consisting of a maximum DDTL Leverage Ratio, a minimum interest coverage ratio, and a minimum tangible net worth. The DDTL Credit Agreement also requires the Company to maintain its status as a REIT. As of June 30, 2025, the Company was in compliance with all covenants under the DDTL Credit Agreement.

The DDTL 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 (as defined in the DDTL Credit Agreement) is not appointed within 90 days.

The DDTL Credit Agreement is scheduled to mature on June 23, 2026 (the “DDTL Maturity Date”). Principal amounts and other obligations outstanding under the DDTL Credit Agreement are due in full on the DDTL 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 Company records the outstanding balance, net of financing costs which are recorded as a direct reduction of the debt obligation, as debt obligations in its unaudited condensed consolidated balance sheets. The debt obligation at June 30, 2025 was $986.1 million, which includes the outstanding balance of $1.0 billion and deferred financing costs of $13.8 million. Interest expense for the three and six months ended June 30, 2025 was $1.4 million, which included $1.2 million of interest and $0.2 million of amortized deferred financing fees. There were no interest payments for the three and six months ended June 30, 2025. The outstanding interest payable at June 30, 2025 was $1.2 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 June 30, 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 June 30, 2025.