What changed in this filing

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Item 1A. Risk Factors

2026-03-06 compared with 2025-02-24 · 48 added, 38 removed, 353 unchanged (20% of the section changed)

30 unchanged sentences

As a result, we are susceptible to greater risks than if we owned a larger or more geographically diverse portfolio.

California also continues to suffer from severe budgetary constraints, which may result in the layoff or furlough of government employees, and California is regarded as more litigious and more highly regulated and taxed than

many other states.

Any adverse change in the economic, political, competitive or regulatory climate in California, or the counties and cities where our properties are located, could adversely affect our real estate development activities and have a negative impact on our financial condition and results of operations.

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For example, the wildfires that have occurred in recent years in California, along with the increasing risk of future wildfires, have resulted in increased homeowners’ insurance costs and the unavailability of private homeowners’ insurance in certain high-risk areas.

We expect these issues may be exacerbated by the recent wildfires in Southern California.

Additionally, if drought conditions occur within California, state and local authorities could enact restrictions or moratoriums on building permits and access to utilities, such as water and sewer taps, which could delay or prevent our construction activities, as well as the construction of homes and commercial buildings, even when we have obtained water rights for our communities.

We are highly dependent on homebuilders.

We are highly dependent on our relationships with homebuilders to purchase lots at our residential communities.

Our business will be adversely affected if homebuilders do not view our residential communities as desirable locations for homebuilding operations.

Also, some homebuilders may be unwilling or unable to close on previously committed land parcel purchases due to factors outside of our control.

As a result, we may sell fewer land parcels and may have lower revenues from sales, which could adversely affect our financial condition and results of operations.

We are highly dependent on our relationships with homebuilders to purchase lots at our residential communities and to use the Hearthstone Venture for their land banking needs.

Our business will be adversely affected if homebuilders do not view our residential communities as desirable locations for homebuilding operations or do not use the Hearthstone Venture for land banking services.

Also, some homebuilders may be unwilling or unable to either close on previously committed land parcel purchases or exercise their land purchase options with Hearthstone Venture-managed funds due to factors outside of our control.

As a result, we may sell fewer land parcels or the Hearthstone Venture-managed funds may acquire fewer residential projects, and we may have lower revenues from sales and Hearthstone Venture-generated management fees, which could adversely affect our financial condition and results of operations.

Title to our property may be impaired by title defects.

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In a highly inflationary environment, depending on industry and other economic conditions, we may be unable to raise prices enough to keep up with the rate of inflation, which would reduce our profit margins.

While inflation has moderated somewhat over the last year, interest rates and mortgage rates remain elevated relative to recent rate levels, which can decrease demand by homebuyers for new homes and soften demand by our guest builders for home sites.

While inflation has moderated somewhat over the last couple of years, interest rates and mortgage rates remain elevated relative to prior rate levels, which can decrease demand by homebuyers for new homes and soften demand by our guest builders for home sites.

Fluctuations in real estate values and changes in our development strategies may require us to write down (or impair) the carrying value of our real estate assets or real estate investments.

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The valuation of our real estate assets (e.g., our Valencia, Candlestick and The San Francisco Shipyard communities) or real estate investments (e.g., our investment in the Great Park Venture) is inherently subjective and based on the individual characteristics of each asset.

Factors such as competitive

market supply and demand for inventory, changes in laws and regulations, political and economic conditions and interest and inflation rate fluctuations subject our valuations to uncertainty.

Factors such as competitive market supply and demand for inventory, changes in laws and regulations, political and economic conditions and interest and inflation rate fluctuations subject our valuations to uncertainty.

Our valuations are made on the basis of assumptions that may not prove to reflect economic or demographic reality.

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Our growth strategy involves new potential joint ventures, acquisitions, investments and other transactions.

These transactions will take time to execute and may create additional costs, expose us to additional legal and compliance risks, cause disruption to our current business and impact our operating results.

Our ability to effectively pursue and manage anticipated ventures, acquisitions and investments may require significant capital and other expenditures, as well as allocation of valuable management resources, which may negatively impact our ongoing business.

Our future financial performance and ability to execute on our growth strategies will depend, in part, on our ability to effectively manage any future ventures, acquisitions or investments.

For example, we acquired the Hearthstone Venture in July 2025, and we are currently integrating its operations into our business.

These and other transactions will take time to execute and may create additional costs, expose us to additional legal and compliance risks, cause disruption to our current business and impact our operating results.

Our ability to effectively pursue and manage anticipated ventures,

acquisitions and investments may require significant capital and other expenditures, as well as allocation of valuable management resources, which may negatively impact our ongoing business.

Acquisitions may result in additional valuation risks, including the risk of impairing goodwill.

We recorded goodwill in connection with our acquisition of the assets and operations of the Hearthstone Venture in 2025.

We assess goodwill for impairment each year, and more frequently if circumstances suggest an impairment may have occurred.

If we are unable to successfully integrate an acquisition or there is a decline in the expectation of future performance, we may be required to recognize an impairment charge on our existing goodwill or goodwill acquired in a future acquisition.

Our future financial performance and ability to execute on our growth strategies will depend, in part, on our ability to effectively integrate and manage the Hearthstone Venture and any future ventures, acquisitions or investments.

There are no guarantees that we will be able to do so in an effective or timely manner, or at all.

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These competitive conditions could make it difficult to sell properties at desirable prices and could adversely affect our financial condition and results of operations.

In addition, the Hearthstone Venture competes with other land banking providers across the U.S.

These competitors may offer lower pricing to homebuilders than Hearthstone Venture-managed funds, which could negatively impact the ability of the funds to acquire residential parcels and, in turn, the ability to attract capital partners for further investments.

These conditions could make it difficult for the Hearthstone Venture to generate asset management fees and could adversely affect our financial condition and results of operations.

Our property taxes could increase due to rate increases or reassessments or the imposition of new taxes or assessments, which may adversely impact our financial condition and results of operations.

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These regulations often provide broad discretion to the administering governmental authorities as to the conditions for our projects being approved, if approved at all.

Further, if the terms and conditions of our existing development agreements with the Cities of Irvine and San Francisco are not complied with, existing entitlements under those agreements could be lost, including (in the case of San Francisco) the right to acquire certain portions of the land on which development activity is expected.

Further, if the terms and conditions of our existing development agreements with the County of Los Angeles and the Cities of Irvine and San Francisco are not complied with, existing entitlements under those agreements could be lost, including (in the case of San Francisco) the right to acquire certain portions of the land on which development activity is expected.

New housing and commercial developments are often subject to determinations by the administering governmental authorities as to the adequacy of water and sewage facilities, roads and other local services, and may also be subject to various assessments for schools, parks, streets, affordable housing and other public improvements.

As a result, the development of properties may be subject to periodic delays in certain areas due to the conditions imposed by the administering governmental authorities.

Due to building moratoriums, zoning changes or “slow-growth” or “no-growth” initiatives that could be implemented in the future in the areas in which our properties are located, our communities may also be subject to periodic delays, or we could be precluded entirely from developing in certain communities or otherwise restricted in our business activities.

communities or otherwise restricted in our business activities.

Such moratoriums or zoning changes can occur either prior or subsequent to commencement of our development operations, without notice or recourse.

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Projects for which we have received land use and development entitlements or approvals may still require a variety of other governmental approvals and permits during the development process and can also be impacted adversely by unforeseen health, safety, and welfare issues, which can further delay these projects or prevent their development.

In addition, federal or state government shutdowns, funding lapses, or budgetary constraints could result in delays in processing permits, approvals, or other governmental actions required for our development activities, which could adversely affect our project timelines and financial condition.

As a result, revenue from land sales or leasing of retail or other commercial space may be adversely affected, or costs may increase, which could negatively affect our financial condition and results of operations.

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Under these and other environmental requirements, as a property owner or operator, we may be required to investigate and clean up hazardous or toxic substances or chemical releases at our communities or properties currently or formerly owned or operated by us, including as a result of the current and former oil and gas leasing operations at Valencia or as a result of prior activities conducted at the El Toro Base or The San Francisco Shipyard.

Some of our properties have been or may be impacted by contamination arising from these or other prior uses of these properties or adjacent properties.

Some of our properties have been or may be impacted by contamination arising from these or other prior

uses of these properties or adjacent properties.

In this regard, certain portions of the El Toro Base and The San Francisco Shipyard have been or currently are listed on the USEPA’s National Priorities List as sites requiring cleanup under federal environmental law.

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Compliance with such laws could have a material adverse effect on our results of operations and competitive position in the future.

Increasing scrutiny and evolving expectations from investors, regulators, and other stakeholders regarding our environmental, social and governance practices and reporting may impose additional costs on us or expose us to new or additional risks.

Evolving expectations from investors, regulators, and other stakeholders regarding our environmental, social and governance practices and reporting may impose additional costs on us or expose us to new or additional risks.

Companies are facing increasing scrutiny related to corporate responsibility practices and reporting.

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We may from time to time be subject to various claims and routine litigation arising in the ordinary course of business.

Among other things, we are, and are likely to continue to be, affected by litigation against governmental agencies related to

environmental and similar approvals that we receive or seek to obtain or relating to historical contamination at our properties that have had prior industrial uses, such as The San Francisco Shipyard.

Among other things, we are, and are likely to continue to be, affected by litigation against governmental agencies related to environmental and similar approvals that we receive or seek to obtain or relating to historical contamination at our properties that have had prior industrial uses, such as The San Francisco Shipyard.

For additional information on recent litigation relating to our properties, see “Item 3.

Legal Proceedings.”

Legal Proceedings.” In addition, we and our subsidiaries manage joint ventures and land banking funds on behalf of third-party capital partners.

To the extent our capital partners suffer losses resulting from our fraud, gross negligence, or willful misconduct, such partners may have contractual or other remedies against us.

Litigation and other claims may result in potentially significant defense costs, settlements, fines or judgments against us, some of which may not be covered by insurance.

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In addition, certain litigation or the resolution of certain litigation may affect the availability or cost of some of our insurance coverage and adversely affect our results of operations, expose us to increased risks that would be uninsured or adversely impact our ability to attract officers and directors.

Such litigation could adversely affect the length of time and the cost required to obtain the necessary governmental approvals.

Such litigation could adversely affect the length of time and the cost required to obtain the necessary governmental

In addition, adverse decisions or publicity arising from any litigation could increase the cost and length of time to obtain ultimate approval of a project, could require us to abandon all or portions of a project, could adversely affect the design, scope, plans and profitability of a project, and could result in reputational harm that may impair the ability of the Hearthstone Venture to maintain existing capital partner relationships and attract new capital in the future, any of which could negatively affect our financial condition and results of operations.

We may be subject to increased costs of insurance or limitations on coverage.

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Accordingly, we incur income taxes on our proportionate share of any net taxable income of the operating company.

Under the terms of the limited partnership agreement for the operating company, the operating company is obligated to make tax distributions to its partners, including us, subject to the restrictions

described below.

Under the terms of the limited partnership agreement for the operating company, the operating company is obligated to make tax distributions to its partners, including us, subject to the restrictions described below.

These tax distributions are generally made on a pro-rata basis.

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As of December 31, 2025, Lennar owned Class A common shares and Class B common shares representing approximately 39% of our outstanding voting interests.

One of our directors is the Executive Chairman and Co-Chief Executive Officer of Lennar.

One of our directors is the Executive Chairman and Chief Executive Officer of Lennar.

Lennar is one of the nation’s largest homebuilders and has in the past purchased properties from us.

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Simultaneously with the completion of the formation transactions, we entered into a TRA with the holders of Class A units of the operating company and the holders of Class A units of the San Francisco Venture.

The TRA provides for payments by us to such

investors or their successors equal to 85% of the amount of cash savings, if any, in income tax we realize as a result of the structure of the formation transactions.

The TRA provides for payments by us to such investors or their successors equal to 85% of the amount of cash savings, if any, in income tax we realize as a result of the structure of the formation transactions.

We expect that during the expected term of the TRA, the payments that we make to the parties to the TRA could be substantial.

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Due to the various factors that will affect the amount and timing of the tax benefits we will receive, it is not possible to determine the exact amount of payments that will be made under the TRA.

If the TRA had been terminated on December 31, 2024, we estimate that the termination payment would have been approximately $110.6 million, assuming no material changes to the relevant tax law, that the aggregate value of our properties is equal to the value implied by such per share price and that SOFR is 4.24%.

If the TRA had been terminated on December 31, 2025, we estimate that the termination payment would have been approximately $123.9 million, assuming no material changes to the relevant tax law, that the aggregate value of our properties is equal to the value implied by such per share price and that the adjusted SOFR is 4.16%.

However, this is merely an estimate, and the actual payments made under the TRA in the event that it is terminated or otherwise could be significantly greater.

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Our substantial indebtedness may have a material adverse effect on our business, our financial condition and results of operations and our ability to secure additional financing in the future.

As of December 31, 2024, we had approximately $525.0 million of total indebtedness, comprised of $523.5 million of our 10.500% initial rate senior notes due January 2028 and $1.5 million of our 7.875% senior notes due November 2025.

As of December 31, 2025, we had $450.0 million of total indebtedness, comprised of $450.0 million of our 8.000% rate senior notes due October 2030.

We also had $217.5 million available to be borrowed under our revolving credit facility as of December 31, 2025.

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In addition, an event of default under the credit agreement governing our revolving credit facility would permit the lenders to terminate commitments to extend further credit under that facility.

In addition, we may incur contingent liabilities in relation to investment funds and joint ventures that we manage, including land banking funds.

From time to time, we and our subsidiaries have entered into, and may in the future enter into, non-recourse carveout guaranties with financial institutions in relation to indebtedness incurred by such funds or joint ventures, which guaranties typically cover fraud, gross negligence, willful misconduct and other customary wrongful acts.

To the extent that such guaranties are enforced against us, it could have a material adverse effect on our business, financial condition and results of operations.

If we do not have sufficient funds to repay our debt at maturity or upon an earlier acceleration, it may be necessary to refinance the debt through additional debt or equity financings.

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If we are unable to refinance our debt on acceptable terms, we may be forced to dispose of our assets on disadvantageous terms, postpone investments in the development of our properties or default on our debt.

In addition, to the extent we

cannot meet any future debt service obligations, we will risk losing some or all of our assets that are pledged to secure such obligations.

In addition, to the extent we cannot meet any future debt service obligations, we will risk losing some or all of our assets that are pledged to secure such obligations.

We may increase leverage in executing our development plan, which could further exacerbate the risks associated with our substantial indebtedness.

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Although our Class A common shares are listed on the NYSE, an active trading market for our Class A common shares may not be sustained.

Accordingly, no assurance can be given as to the liquidity of any market for our Class A common shares, the ability

of our shareholders to sell their Class A common shares or the price at which such shares may be sold.

Accordingly, no assurance can be given as to the liquidity of any market for our Class A common shares, the ability of our shareholders to sell their Class A common shares or the price at which such shares may be sold.

In addition, the trading market for our Class A common shares is influenced by whether industry or securities analysts publish research and reports about us, our business, our market or our competitors and, if any analysts do publish such reports, what they publish in those reports.

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In addition, because we are a holding company and our only investment is our interest in the operating company, we will only be able to pay distributions from funds we receive from the operating company.

Our board of directors has the authority to issue one or more series of preferred shares

without action of our shareholders.

Our board of directors has the authority to issue one or more series of preferred shares without action of our shareholders.

The issuance of preferred shares could have the effect of limiting distributions on our Class A common shares.

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Cyber-attacks or acts of cyber-terrorism could disrupt our business operations and information technology systems or result in the loss or exposure of confidential or sensitive employee or company information.

Our business operations and information technology systems, and the information technology systems we use that are provided or managed by third-party service providers, may be attacked by individuals or organizations intending to disrupt our business operations and information technology systems and those of our third-party service providers, whether through cyber-attacks or cyber-intrusions over the Internet, malware, computer viruses, attachments to e-mails, persons inside our organization, or persons with access to systems inside our organization.

The risk of a security breach or disruption, particularly through cyber-attacks or cyber-intrusion, including by computer hackers, foreign governments, and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased.

Our business operations and information technology systems, and the information technology systems we use that are provided or managed by third-party service providers, including artificial intelligence resources, may be attacked by individuals or organizations intending to disrupt our business operations and information technology systems and those of our third-party service providers, whether through cyber-attacks or cyber-intrusions over the Internet, malware, computer viruses, attachments to e-mails, persons inside our organization, or persons with access to systems inside our organization.

The risk of a security breach or disruption, particularly through cyber-attacks or cyber-intrusion, including by computer hackers, foreign governments, and cyber terrorists, has generally increased as the sophistication of artificial intelligence and the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased.

We rely on information technology systems to conduct important operational activities and to maintain our business and employee records and financial data.

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The financial markets and the global economy may also be adversely affected by the current or anticipated impact of military conflict, terrorism or other geopolitical events.

Sanctions or tariffs imposed by the United States and other countries in response to such conflicts or events may also adversely impact the financial markets and the global economy, and any economic countermeasures by the affected countries or others could exacerbate market and economic instability.

Sanctions or tariffs imposed by the United States and other countries may also adversely impact the financial markets and the global economy, and any economic countermeasures by the affected countries or others could exacerbate market and economic instability.

For example, on February 20, 2026, the United States Supreme Court issued a ruling striking down certain tariffs previously imposed under the International Emergency Economic Powers Act of 1977.

Following the Supreme Court’s decision, President Trump stated that he intends to use other authorities to invoke other laws to collect tariffs and announced new tariffs on imports from all countries.

There remains substantial uncertainty regarding the duration of existing and newly announced tariffs, potential changes or pauses to such tariffs, tariff levels, and whether further additional tariffs or other retaliatory actions may be imposed, modified, or suspended.

If the current equity and credit markets deteriorate, it may make any necessary debt or equity financing more difficult, more costly and more dilutive.

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors