Homesites Under Option Contracts

12 Months Ended

Dec. 31, 2025

Revenue from Contract with Customer [Abstract]

Homesites Under Option Contracts

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 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.

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 balance sheet.

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 year ended December 31, 2025, the Company recognized total option fee income of $570.9 million related to these option contracts. The aggregate homesites under option contract was $8.9 billion as of December 31, 2025. For the years ended December 31, 2024 and 2023, the Predecessor Millrose Business did not generate option fee revenues because the inventories of the Predecessor Millrose Business were not subject to purchase option contracts with homebuilder.

Because the Company's option contracts are accounted for as sales-type leases, the resulting asset, representing the Company's right to received 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 December 31, 2025.

Total homesites under option contracts was $8.9 billion as of December 31, 2025. The change in homesites under option contracts from the Spin-Off date through December 31, 2025 is as follows:

	Year ended December 31,
(in thousands)	2025
Beginning balance as of February 7, 2025 Spin-Off date	$	—
Homesites under option contracts contributed by Lennar in Spin-Off (1)		5,496,126
Land acquired from Rausch (2)		1,158,303
Investments in homesites under option contracts (3)		5,599,376
Takedowns of homesites under option contracts		(3,381,110	)
Total homesites under option contracts	$	8,872,695

(1)Includes land contributed of $5.556 billion, less deferred tax asset adjustment of $59.8 million.

(2)Includes land acquired of $1.049 billion plus deferred tax liability adjustment of $116.7 million, less earnest deposits of $7.6 million.

(3)Includes land acquired of $3.914 billion and development costs of $1.686 billion. Land acquired includes $522.8 million of land assets acquired in the New Home transaction and $33 million of land acquired under purchase money mortgages. See Note 8. Debt Obligations for a description of the purchase money mortgage obligations.

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 income from these arrangements using an effective interest yield over the term of the option contract.

The following table represents the expected undiscounted option fee cash flows related to homesites that are under option contracts with counterparties as of December 31, 2025. Expected undiscounted option fee cash flows do not include new homesites that are acquired or development costs that are incurred after December 31, 2025.

(in thousands)	Amount
2026	$	791,993
2027		726,124
2028		524,686
2029		331,822
2030		224,414
Thereafter		516,525

For the year ended December 31, 2025, approximately 88% of the Company's total option fee revenues were earned from Lennar. See Note 5. Related Party Transactions for additional information related to transactions and balances with Lennar for homesites under option agreements.