Millrose Properties, Inc. 10-K

Item 1A. Risk Factors Our business involves substantial risks. Any of the risk factors described below or elsewhere in this Form 10-K could significantly and adversely affect our business prospects, financial condition and results of operations. The risks described below are not the only ones facing us. Additional risks and uncertainties not presently known to us or that we currently deem to be immaterial may also adversely affect us. RISK FACTORS Risks Related to Our Business Model and Investment in a Newly Formed Entity We are a newly formed company with limited operating history, and you have a limited basis on which to evaluate our ability to achieve our business objectives or to even perform as a standalone and separate business. Millrose was incorporated as a Maryland corporation on March 19, 2024. Millrose Holdings, our wholly-owned subsidiary, was formed on March 13, 2024 as a limited liability company under the laws of the State of Delaware. As of the date of this Form 10-K, the majority of our business operations are comprised of the Transferred Assets, the Supplemental Transferred Assets and the Lennar Agreements. Because we have limited operating history, you have a limited basis upon which to evaluate our ability to achieve our business objectives and perform as a standalone and separate business. If we fail to achieve our business objectives, we will generate limited operating revenues which may not allow us to perform and grow as a standalone business. We have limited operating history as an independent public company, and the financial information provided herein is not necessarily representative of the results that we would have achieved as a separate, publicly traded company. Also, the Transferred Assets did not produce revenues during the periods to which the financial statements included in this Form 10-K relate. Accordingly, the financial information included in this Form 10-K does not necessarily reflect the financial condition, results of operations or cash flows that we would have achieved as a separate, publicly-traded company during the periods presented, or those that we will achieve in the future. As we have not historically been a publicly traded company, the financial information also does not reflect the additional costs required to operate as a publicly traded company and maintain compliance with all applicable laws and regulations to which publicly traded companies are subject. Additionally, in connection with the Spin-Off, we only received the Business Assets from Lennar, which does not include the carryover of any existing operations, personnel or other infrastructure. We will not benefit from administrative and support services from Lennar and will instead rely on the Manager pursuant to the terms of the Management Agreement. As such, our business, operations, facilities, personnel, infrastructure, systems and other resources are all newly formed and wholly separate from and not comparable to those of Lennar’s, except pursuant to the relationships described under the Master Program Agreement and Master Construction Agreement relating to the Lennar Services. Other factors which could materially and adversely impact our results may include, but are not limited to, the following: • We have incurred and will incur increased expenses as a newly formed, independent public company, which have been paid and will be paid for by our Manager as part of their Manager responsibilities (such expenses are expected to be covered by the Management Fee and will not be separately reimbursed by us to our Manager), except as described under “Part III, Item 13. Certain Relationships and Related Transactions, and Director Independence—Transactions with our Manager—Management Agreement.” • Initially following the Spin-Off, primary business and source of revenues have been and will continue to be from Lennar pursuant to the Lennar Agreements. While Millrose has engaged and continues to engage in discussions with other home builders who are interested in becoming new customers, there is no guarantee that Millrose will continue to be successful in negotiating agreements with additional 46 Table of Contents customers and there is no guarantee that Millrose will be able to secure any business arrangements with any home builders outside of Lennar in any given timeframe. Millrose expects that the arrangements with these other potential customers will be similar to its arrangements with Lennar, but there is no certainty that Millrose will be able to successfully negotiate for substantially all of the same terms it has in the Lennar Agreements, including with respect to pooling. • The Credit Agreement provides for a revolving credit facility with commitments in an aggregate amount of $1.335 billion and we may also pursue additional debt financing, all of which may be available to manage cash needs and reduce drag on returns, as well as for use to provide the HOPP’R to Other Customers, but there is no guarantee that such sources of additional cash will be obtained or will be sufficient to cover all of our business growth initiatives. Additionally, the ability of Millrose to obtain additional debt financing is subject to the Debt to Equity Ratio Limit. • Lennar, as the original parent company of Millrose and the initial contributor of the Business Assets to Millrose, has certain Founder’s Rights, which are exclusive to Lennar, including the Management Succession Consent Right, the Effective Equity Price Protection Right, the Enforcement Rights, the Applicable Rate Adjustment Right, the Capital Priority Right, the Secured Financing Collateral Consent Right, and the Pause Period Designation Right, among others. As such, Lennar may have influence over certain corporate matters, which may deter potential investors from investing in Millrose and may deter potential Other Customers from doing business with Millrose, as Other Customers do not have access to the same rights as Lennar. Additionally, Lennar’s Capital Priority Right limits the amount of capital Millrose has available for transactions with Other Customers, which may make it difficult to provide the HOPP’R to Other Customers. For additional information regarding Lennar’s rights, see “Part III, Item 13. Certain Relationships and Related Transactions, and Director Independence—Transactions with Lennar—Founder’s Rights Agreement.” • While the Lennar Agreements do not have an expiration date, Lennar is under no obligation to commit to any future transactions with Millrose Holdings or give Millrose Holdings any new business at all (including any referrals of Lennar Related Ventures) under the Master Program Agreement. The Lennar Agreements provide Lennar with a Capital Priority Right and contemplate an ongoing business relationship between Millrose and Lennar, whereby Millrose would provide the Recycled Capital HOPP’R to Lennar for any Future Property Assets that Millrose Holdings may acquire pursuant to the Lennar Agreements, but the Lennar Agreements do not include any exclusivity, rights of first refusal or first look or other priority rights for us with respect to any future business opportunities. This means that Lennar can decide not to offer us any additional business (beyond the Transferred Assets and the Supplemental Transferred Assets) for any reason at all, including, but not limited to, using traditional land banks or establishing another entity that operates a HOPP’R, or if the business terms of the Lennar Agreements (individually or in the aggregate) are not as competitive as others in the market. Additionally, Lennar’s Land Banking arrangements with other providers could limit how many business opportunities we will be able to receive from Lennar with respect to Future Property Assets on a going-forward basis. • Since we do not have access to any of Lennar’s internal capabilities and other resources (except for the Lennar Services), we must make investments to replicate or outsource from other providers certain facilities, systems, infrastructure and third-party consultants and experts (outside of our Manager). If the cost of these investments exceeds the Management Fee, our Manager may seek to renegotiate the Management Agreement. • Since we do not have any exclusivity terms with Lennar, Lennar’s personnel only have a contractual obligation to provide us with the Lennar Services, and they at all times remain as Lennar’s employees while carrying out these services under the Lennar Agreements. Lennar’s personnel may have competing responsibilities as they continue to perform similar services for Lennar (and potentially for Land Banking providers similar to Millrose), which could limit the time, resources and attention they have for us. 47 Table of Contents • Our cost structure, management, financing and business operations are significantly different from those of Lennar as a result of us operating as an independent public company. These costs generally are paid for by our Manager as part of their Manager responsibilities (such expenses are expected to be covered by the Management Fee and are not separately reimbursed by us to our Manager) including, but not limited to, legal, accounting, compliance and other costs associated with being a public company, and except as described under “Part III, Item 13. Certain Relationships and Related Transactions, and Director Independence—Transactions with our Manager—Management Agreement.” • We are managed by KL, which may decide to execute on different business strategies and make business decisions inconsistent with those previously made by Lennar prior to the Spin-Off, which may lead to unsuccessful business endeavors and different financial performance results. • We have no history of operating a HOPP’R, and may not develop a successful business if we are not able to successfully become (and remain) Lennar’s preferred business partner for financing the acquisition and development of land or otherwise procure HOPP’R agreements outside of the Lennar Agreements. • We are unable to use Lennar’s economies of scope and scale in procuring various services (including for internal purposes) and in obtaining and maintaining business relationships, which could have a material adverse effect on our business, financial condition and results of operations. Other significant changes may occur in our cost structure, management, financing and business operations as a result of our new status as an independent company. The Supplemental Transferred Assets Transaction included properties outside of the geographies in which Lennar has historically operated, and property values in those geographies may be different from those in which Lennar has operated. The Homesites and prospective Homesites that Millrose acquired from Rausch in connection with the Supplemental Transferred Assets Transaction are located in a number of different geographies in the United States, a substantial number of which are in states in which Lennar has not historically operated. Lennar does not have expertise and experience in purchasing land assets, developing Homesites and selling finished Homesites to homebuyers in such states, and Lennar will need to rely on the personnel from Rausch that it acquired as part of the acquisition for their expertise in such geographies. The skills and expertise of Rausch’s personnel may not be commensurate as those of existing Lennar personnel, and as such, the Lennar Services (at least with respect to the Supplemental Transferred Assets and future properties acquired in these new geographies) may not meet all expectations based on Lennar’s historical practices and results. Additionally, the differences in geographies may also impact Lennar’s decision-making with respect to its Purchase Options exercises, which could be different from how they determine their Purchase Options exercises for the Transferred Assets and any Homesites in geographies in which Lennar has traditionally operated. All these differences could impact Millrose’s business, operations and financial condition in ways that are difficult to predict. Our initial business consists primarily of owning and selling the Transferred Assets and the Supplemental Transferred Assets in connection with providing the HOPP’R to Lennar. Therefore, we are subject to risks associated with having a portfolio that is highly concentrated by one business counterparty. Initially, our business operations have been mostly limited to providing the HOPP’R for the Transferred Assets and the Supplemental Transferred Assets to Lennar, who is currently our largest counterparty. Millrose (including Millrose Holdings) was created by Lennar for the primary purpose of providing the HOPP’R to Lennar and, in the future, also to potential Lennar Related Ventures and Other Customers. As a result, we initially have had limited other customers, business partnerships, ventures, projects or workflow, and we are not guaranteed to obtain any in the near-term. We intend, through future subsidiaries, to continue to diversify our 48 Table of Contents customer portfolio and extend the HOPP’R to Lennar Related Ventures and Other Customers in the United States, but there is no guarantee to what extent this will happen, or if we will be successful in attracting and retaining more new customers even if we are able to expand our business operations. Following the Spin-Off and after the Supplemental Transferred Assets Transaction, our Real Estate Portfolio is primarily limited to the Transferred Assets and the Supplemental Transferred Assets, which are concentrated across a limited number of U.S. states. As of December 31, 2024, a significant amount of the Transferred Assets and the Supplemental Transferred Assets taken together were concentrated in three states (California, Florida and Texas), with a substantial portion located in Florida and Texas. The geographic concentration of such land assets could cause us to be more susceptible to market risks and environmental risks, as discussed elsewhere in this “Risk Factors” section. Even as we attract new customers other than Lennar, the scope of our business operations will likely be limited to providing the HOPP’R (either the Recycled Capital HOPP’R or any tailored forms of the HOPP’R with individually negotiated features, which may not be the same features as the Recycled Capital HOPP’R) or similar operations. We entered into the Credit Agreement, which provides for a revolving credit facility with commitments in an aggregate amount of $1.335 billion, and may also seek to pursue additional debt financing, all of which may be available to manage cash needs and reduce drag on returns, as well as for use to provide the HOPP’R to Other Customers, but there is no guarantee that such sources of additional cash will be obtained or will be sufficient to cover all of our business growth initiatives. See “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources Following the Spin-Off” for more information. Additionally, the ability of Millrose to obtain additional debt financing is subject to the Debt to Equity Ratio Limit. However, issuances of debt or equity required to finance any relationships to provide the HOPP’R to new customers could result in impacts to our business and to our stockholders, including increasing our debt to equity ratios, dilution for our existing stockholders (see “—Risks Related to Our Common Stock—Your voting power in Millrose may be further diluted if we issue more shares of our common stock in the future, including in connection with the acquisition of any Future Property Assets.”), and risk of default by our customers. Additionally, drawdowns on our revolving credit facility under the Credit Agreement are subject to repayment and interest, which may become costly to us in the event we are required to repay the borrowings under the facility and are not able to raise alternate financing with which to do so. Furthermore, there is no guarantee that such sources of additional capital will be obtained on acceptable terms or at all or will be sufficient to cover all of our business growth initiatives, and pursuant to the Lennar Agreements, Millrose may not enter into any third-party financing arrangements if such financing arrangement would cause the collective debt to equity ratio of Millrose and its affiliates to exceed 1:1, unless it obtains the prior approval of Lennar. This may limit our ability to provide the HOPP’R to any customers who may want us to finance their relationships with us through debt issuances. As discussed in this “Risk Factors” section, maintaining land assets is costly and exposes us to significant risks, and due to our lack of business diversification, we do not have the ability to hedge that risk through other operations. As we do not intend to diversify our business operations and only focus on growing the HOPP’R and similar operations, we may not be able to be sustainable as a business if the costs related to our risk exposures in maintaining land assets become more than what we can pay with the capital resources available to us. Additionally, if our relationship with Lennar were to deteriorate as a result of disputes regarding the management of the Transferred Assets and the Supplemental Transferred Assets, disputes under our business agreements, or for other reasons, we may not be able to enter into any new agreements to provide the HOPP’R to one or more other buyers on terms equivalent or comparable to those set forth in the Lennar Agreements, and the costs related to finding an alternate buyer for the properties may be significant and have a material impact on our business, financial condition or results of operations. There can be no assurance that we will not experience any defaults and/or terminations under the Lennar Agreements. Due to our highly concentrated portfolio with Lennar, any factors that adversely affect Lennar’s results of operations and capital resources may in turn have a significant adverse impact on our business, financial condition or results of operations, as discussed elsewhere in this “Risk Factors” section. 49 Table of Contents Our recycled capital business model is contingent on our customers electing to exercise their land purchase options. The continued sustainability of Millrose’s self-financing recycled capital business model, which is intended to generally provide Millrose with reliable, consistent and uninterrupted access to capital, is contingent in the first instance on Lennar and any Other Customers electing to exercise their land purchase options. Lennar is under no obligation to exercise its options, and we would have no ability to force Lennar to purchase Homesites if it decided not to exercise the options it has pursuant to the Lennar Agreements, which is possible in the event of a significant downturn in the market. Millrose can request (and Lennar cannot unreasonably deny such request) that Lennar build homes on behalf of Millrose on any Homesites for which it has forfeited or terminated its Purchase Options and Millrose may attempt to sell such completed Homesites to third parties. However, there is no guarantee we would be able to achieve such sales. Such construction and the subsequent resale to the third parties would require additional time and cost to Millrose, including hiring personnel and providing the capital to build the homes, that will be borne by us. The price for which we can sell homes to third parties may be significantly less than the amounts of our investments. Our agreements with Lennar involve conflicts of interest, and we might have received better terms from unaffiliated third parties than the terms we received in these agreements. We entered into the Lennar Agreements with Lennar to provide a framework for our relationship with Lennar, including the Founder’s Rights Agreement, Master Program Agreement, Master Option Agreement, Master Construction Agreement, Guaranty, various Multiparty Cross Agreements and Project Addenda, among others. See “Part III, Item 13. Certain Relationships and Related Transactions, and Director Independence—Transactions with Lennar” for a full list and summary of the Lennar Agreements. All of the Lennar Agreements, as well as the Management Agreement, have been prepared at the direction of Lennar, in consultation with Kennedy Lewis, which acted as Lennar’s strategic advisor with respect to the Spin-Off. These agreements were entered into in the context of the Spin-Off by Lennar on behalf of Millrose, as a wholly-owned subsidiary of Lennar, prior to the completion of the Spin-Off. Certain of the terms in the Lennar Agreements and the Founder’s Rights Agreement were the result of negotiations within Lennar in anticipation of, or in connection with, the Spin-Off, in which Lennar’s interests and Millrose’s interests may have differed or in which Millrose’s best interests were not considered. Certain of the rights granted to Lennar in the Founder’s Rights Agreement, which are exclusive to Lennar, may not align with the interests of Millrose’s other stockholders now that it is a publicly traded company. These rights may not reflect terms (and Bylaws provisions) that would have resulted from arm’s-length negotiations with one or more unaffiliated third parties. As a result, these rights may deter potential investors, which could depress the market price of our Class A common stock and in turn the value of our Class B common stock, and may deter potential Other Customers from doing business with Millrose, as Other Customers do not have access to certain rights that are exclusive to Lennar. Certain of the terms in the Management Agreement were the result of negotiations between Lennar and Kennedy Lewis, and there can be no assurance that Lennar negotiated the Management Agreement with Millrose’s best interests in mind. Accordingly, there may have been conflicts of interest in negotiating and finalizing these agreements. Because Millrose had no independent management or personnel prior to the Spin-Off, the preparation and finalization of all terms in any agreement Millrose or Millrose Holdings entered into have not been done at arm’s length, and Millrose (and the KL team that will be performing on Millrose’s and Millrose Holdings’ obligations under these agreements as our Manager) had not independently verified that the terms of such agreements are comparable to standard market terms. The terms of the agreements may be considered more favorable to Lennar than if Lennar had negotiated with a third-party land bank. Likewise, there can be no assurance that the terms of these agreements will be considered as favorable to Millrose or Millrose Holdings as would have resulted from arm’s-length negotiations with one or more unaffiliated third parties. Some of these agreements, including the Founder’s Rights Agreement, include rights exclusive to Lennar that Millrose is not able to grant to Other Customers, which may impact our negotiating leverage with potential Other Customers. Additionally, during the period in which the terms of those agreements were negotiated, we did not 50 Table of Contents have a board of directors that was independent of Lennar and KL had not been hired, appointed or retained. Further, KL’s parent, Kennedy Lewis, was acting as Lennar’s strategic advisor prior to the Spin-Off and was not acting in any capacity on Millrose’s behalf, including with respect to the negotiations of any of these agreements, which means that Kennedy Lewis’s interests are also not aligned with (and in some respects may be adverse to) Millrose’s and Millrose Holdings’ interests. As a result of these factors, the terms of these agreements may not reflect terms that would have resulted from arm’s-length negotiations between unaffiliated parties, or that would have resulted if we had been an active company with leverage and resources to negotiate with Lennar. Some of the terms included in these agreements also make it difficult for us to amend the agreements without undue hardship and significant costs and expenses, in addition to obtaining written consent from Lennar. Certain of the rights granted to Lennar in the Founder’s Rights Agreement are exclusive to Lennar, which will require our Board to enforce such rights. Other terms included in these agreements may hinder our ability to expand and grow our business, including with respect to attracting new customers to use the HOPP’R or being able to successfully negotiate competitive terms with customers other than Lennar. Even though we are independent from Lennar, there is no guarantee that we will be able to renegotiate, amend or terminate any agreements (or specific terms in such agreements) with Lennar that we deem not to be favorable to us or adverse to our interests as a standalone company, and our continued obligations under these agreements may have a material adverse effect on our business, growth opportunities, financial condition and results of operations. In addition, the Transferred Assets and Supplemental Transferred Assets have been placed in pools by Lennar pursuant to certain Multiparty Cross Agreements. Future Property Assets acquired pursuant to the Lennar Agreements will also be pooled in accordance with additional Multiparty Cross Agreements (or added to existing Multiparty Cross Agreements), provided that the aggregate sum of all Option Deposits Lennar has made, or is obligated to make with respect to such new pool of Future Property Assets, shall not at any time exceed $50,000,000 with respect to pools of the Transferred Assets and the Supplemental Transferred Assets and $25,000,000 with respect to pools of Future Property Assets. Pools will be established with primary consideration given to diversity within pools across geographies, communities and home types. The negotiations and decisions on the selection of the Pool Properties and the pooling of various communities together were solely done by Lennar, with input from Kennedy Lewis. As we did not have any management or personnel during this time, the discussions relating to the pooling were done for the sole benefit of Lennar and the metrics used in considering which land assets should be pooled may not be comparable to standard market pooling considerations. There can be no guarantees that the constitution of each of the pools selected by Lennar with regard to the Transferred Assets and the Supplemental Transferred Assets will be favorable to us, which may result in certain pools of assets decreasing in value at the same time as a consequence of negative impacts that may impact all of the assets in a certain pool. Although the pools should be selected according to certain broad-based principles of diversification, there remains a substantial amount of discretion and judgment in selecting the Pool Properties and setting the pools. In the future, we cannot guarantee that we will be able to negotiate better pooling conditions with Lennar or any Lennar Related Ventures, or that we will be able to negotiate any pooling conditions at all with any Other Customers. In addition, we may be limited in how much we can negotiate with Lennar: we do not have as much leverage with Lennar in negotiating the pooling of Future Property Assets as we are significantly dependent on the Lennar Agreements, and Lennar is under no obligation to offer us business following the initial transfer of the Business Assets and outside of utilizing the HOPP’R for the Transferred Assets and the Supplemental Transferred Assets. Lennar can decide to use a traditional Land Banking provider instead of Millrose if they do not like the terms they have with us (including with respect to any pooling decisions). Any exercise by Lennar of its Enforcement Rights pursuant to the Founder’s Rights Agreement may severely negatively impact our business operations and financial condition. In the event Millrose refuses to sell any Homesite to Lennar upon Lennar’s exercise of a Purchase Option, Lennar has an Enforcement Right to compel Millrose to sell Lennar the Homesite(s). If Millrose does not sell the 51 Table of Contents Homesite(s) to Lennar by the end of the 10 day cure period, Lennar has the immediate right, without penalty and without further notice, to stop payment on all Monthly Option Payment obligations with respect to all properties subject to the Lennar Agreements, and such cessation of payments is not considered a default or breach under the terms of the Lennar Agreements. However, if Millrose alleges in good faith that Lennar does not have the right to purchase the Homesites, solely because Lennar’s exercise violated specifically identified pooling cross-termination rights under the applicable Multiparty Cross Agreement(s), then Millrose must notify Lennar of the dispute prior to the end of the ten-day cure period. However, in the event of such a dispute, Millrose is still required to immediately sell the exercised Homesite(s) to Lennar, but Lennar must continue to pay the Monthly Option Payments. In other words, Millrose must still sell the Homesite(s) as if Lennar were in the right, and then litigate the issue to seek remedy and/or compensation. Such litigation could be very costly and take years to resolve, and not be economically worth pursuing, leaving Millrose without other forms of recourse to recoup any potential losses. If Millrose refuses to sell the Homesite(s) to Lennar for which the Purchase Option has been exercised, then Lennar’s Enforcement Rights allow it to immediately stop all Monthly Option Payments on all properties covered by the Lennar Agreements (and any other option agreements between Lennar and Millrose), which could jeopardize Millrose’s ability to maintain enough working capital to maintain its business operations, and could also jeopardize its ability to make distributions to stockholders that are required to maintain its REIT qualification. As such, any time there is a dispute with Lennar concerning the exercise of Purchase Options, Millrose would be in the disadvantaged position of having to give up the assets or perform the obligation before the dispute is resolved, and then go through the cost- and time-intensive exercise of litigating the matter through the courts to try and reclaim the loss (or, if it decides not to pursue litigation, it likely would need to absorb the costs). These Enforcement Rights makes any potential dispute with Lennar (with respect to Homesite takedowns) very expensive and cumbersome for Millrose, with strong financial incentives to defer to Lennar even during situations where there may be a good faith dispute with the facts in favor of Millrose. If a dispute is litigated and resolved in favor of Lennar, these Enforcement Rights and the payments required under them would be in addition to any damages that may be otherwise awarded to Lennar by the court, further enhancing the risk that any such dispute would result in material adverse impact on Millrose’s financial condition. If a dispute is resolved in Millrose’s favor, the payments set forth in the Enforcement Rights to Millrose may not be sufficient to cover the actual loss experienced by Millrose, even supplemented by the damages that a court might order. Any exercise by Lennar of its Enforcement Rights pursuant to the Founder’s Rights Agreement may therefore severely negatively impact Millrose’s business, operations and financial condition, as well as Millrose’s ability to enforce the terms of its agreements with Lennar. We have not obtained independent appraisals or fairness opinions as to the value of any of our real estate assets or any environmental reports on any of our real estate assets, including the Transferred Assets, and we rely upon Lennar and our Other Customers for certain information regarding the Homesites. No independent appraisals have been obtained to support our conclusions as to the value of our total assets or the value of any particular property. We also did not obtain any independent third-party valuation or fairness opinion as to the value of the Transferred Assets. Appraisals we may obtain in the future from third-party appraisers may be overstated or market values may decline. We are relying on Lennar as to the value of our total assets or the value of any particular property and the Transferred Assets have been conveyed to us in their then current condition. Additionally, following the Spin-Off, we received information regarding the number and location of Homesites included in the Transferred Assets, which, in some cases, remains subject to further confirmation by Lennar. We rely upon Lennar and our Other Customers for information regarding the Homesites that we acquire that may be subject to change as Lennar and Other Customers provide different or additional information as part of the acquisition process and during the period we own the Homesites. We did not obtain any Phase I or similar environmental reports completed by independent environmental consultants for the Transferred Assets in connection with the Spin-Off. Although each of the Lennar subsidiaries 52 Table of Contents that owns the Transferred Assets prior to the Spin-Off made certain representations and warranties (including with respect to title and environmental condition) to the Property LLCs with respect to the Transferred Assets, no assurances can be given that a material environmental condition does not exist as to any one or more of our land assets. There can be no assurances that any representations and warranties given in connection with any acquisitions of Future Property Assets pursuant to the agreements with Lennar will be sufficient to protect Millrose or its subsidiaries from liability or risk exposures in the event there are title or environmental issues that could result in material adverse impacts to Millrose’s business, financial condition or results of operations. Ownership of land and other real estate assets is subject to environmental risks and liabilities, which may not be covered by the representations and warranties and indemnities provided to us in the Lennar Agreements (or any future HOPP’R agreements with new customers). Ownership of land and other real estate assets is subject to risks associated with environmental hazards. Although most of the Transferred Assets have all approvals and permits, including all environmental approvals and permits, we may incur substantial liabilities and costs for environmental matters. Specifically, although Lennar, which owned the Transferred Assets prior to the Spin-Off, made certain representations and warranties (including with respect to title and environmental condition) with respect to the Transferred Assets and entered into an agreement with Millrose making certain representations and warranties with respect to the Supplemental Transferred Assets, such representations are limited to liabilities known at the time of the Spin-Off and the Supplemental Transferred Assets Transaction, respectively. As such, Millrose and Millrose Holdings are still responsible in the event anything new is discovered or in the event the original consultants missed anything in their reviews and evaluations. With respect to any Future Property Assets, there can be no assurance that such assets will already be fully entitled and have received full approvals and permits prior to our acquisition of them pursuant to the HOPP’R arrangements with Lennar, any Lennar Related Venture or Other Customers, as applicable. In such cases, unless we can separately negotiate to divert liability risk to the customer (such as the put back right that we have with Lennar with respect to certain Future Property Assets), we will likely be responsible for such risk exposures and liabilities. Under various laws, owners of land and other real estate assets may be required to investigate, clean up and remove hazardous substances present at or migrating from properties they own or operate and may be held liable for property damage or personal injuries that result from hazardous substances. These laws also expose us to the possibility that we may become liable to government agencies or third parties for costs and damages they incur in connection with hazardous substances. The costs and damages that may arise from environmental hazards may be substantial and are difficult to assess and estimate for numerous reasons, including uncertainty about the extent of contamination, alternative treatment methods that may be applied, the location of the property which subjects it to differing local laws and regulations and their interpretations, as well as the time it may take to remediate contamination. In addition, these laws also impose various requirements regarding the operation and maintenance of properties and recordkeeping and reporting requirements relating to environmental matters that require us to incur costs to comply with. Any actions we may take to comply with such requirements, as well as any actions we may take to mitigate these risks and liabilities may be costly and could impact our business, financial condition or results of operations. We are subject to a wide range of general and industry-specific laws and regulations relating to the protection of the environment which require compliance that can be burdensome and expensive. We are subject to a wide range of general and industry-specific laws and regulations relating to the protection of the environment, including silvicultural activities, including use of pesticides and herbicides, harvesting, and road building, endangered and at-risk species, stormwater and surface water management, air emissions, the cleanup of contaminated sites, health and safety matters, building codes and other related regulations. As such, and although Lennar made certain representations and warranties (including with respect to title and environmental condition) to Millrose with respect to the Transferred Assets under the Lennar Agreements, we may incur significant capital, operating and other expenditures to comply with applicable environmental laws and regulations if the provisions in the Lennar Agreements are not sufficient to adequately shift liability risk to Lennar. There can also be no assurance that we will be able to receive similar (or any) such 53 Table of Contents representations and warranties from any Lennar Related Ventures or Other Customers in the future. We also could incur in the future substantial costs, such as civil or criminal fines, sanctions and enforcement actions (including orders limiting our operations or requiring remedial actions), cleanup and closure costs, and third-party claims for property damage and personal injury as a result of violations of, or liabilities under, environmental laws and regulations on land we currently own or have owned in the past. Such costs would be incurred by Millrose directly, as they would not be paid for by our Manager pursuant to the Management Agreement. Because environmental regulations are constantly evolving, we may continue to incur costs to maintain compliance with those laws and our compliance costs could increase materially. In addition, air emissions, stormwater, and surface water management regulations may present liabilities and are subject to change. Future compliance with existing and new laws, regulations, environmental permits, and other requirements may disrupt our business operations, increase potential liabilities, and require significant expenditures. Additionally, we may be subject to conservation laws and regulations that apply to activities that would adversely impact a protected species or significantly degrade its habitat. Although permits and approvals are in place, or will be in place, for all construction sites as required with respect to protected species, certain species on the Transferred Assets or the Supplemental Transferred Assets may become protected in the future under new laws and regulations. Additionally, species protected under current laws and regulations may be discovered on the Transferred Assets or the Supplemental Transferred Assets in the future. Current or future regulations, including increased mandates for biodiversity, increased wildlife habitats, additional species classified as endangered, or if the enforcement of endangered species regulations become more restrictive, development on the Transferred Assets or the Supplemental Transferred Assets may be restricted and our business, financial condition or results of operations may be adversely impacted. There can be no assurance as to what permits and approvals may be in place with respect to any Future Property Assets. Lennar’s Work on the Transferred Assets and on any Future Property Assets we (through Millrose Holdings) acquire in connection with our ongoing relationship with Lennar may negatively impact our business. Pursuant to the Master Construction Agreement and as part of the Lennar Services, Lennar has the obligation to complete Horizontal Development of the properties comprising the Transferred Assets and any Future Property Assets we may acquire pursuant to the Lennar Agreements. Lennar’s Work does not include home construction (foundations or higher). Under the Master Option Agreement, Lennar has the option, but not the obligation, to undertake home construction on any Homesites once Horizontal Development has been completed. Pursuant to the Lennar Agreements, Millrose Holdings must finance the Horizontal Development, up to certain predetermined development cost budgets, but is not required to participate in any development activities itself. The Work done is entirely by Lennar and any third-party providers that Lennar contracts to complete the Work. The Horizontal Development budget for each Homesite project is not intended to cover amounts owed in connection with any liabilities that may arise from construction. Construction activity on the land could also result in environmental consequences that we may be required to pay for or fix, which could severely impact our available cash for operations, our ability to maintain business, financial condition or results of operations. While Lennar has previously completed Phase I reports with respect to the Transferred Assets and may be protected from liability for pre-existing environmental conditions as a result of exercising the process known as All Appropriate Inquiries (“AAI”), which process evaluates a property’s environmental conditions to assess potential liability for any contamination, we do not have any AAI or other defense to any environmental liability, which could result in significant adverse impacts to our business, financial condition or results of operations. Lennar has agreed to indemnify us against any impacts resulting from the realization of certain Horizontal Development risks. However, the indemnities provided by Lennar in the Lennar Agreements may not be sufficient to cover every liability that may be incurred, and we are still responsible for maintaining certain types of insurance with respect to the Transferred Assets, the Supplemental Transferred Assets and any Future Property Assets. Additionally, we could be held jointly and severally liable for certain environmental liabilities. Further, the value of the indemnity will be dependent on the creditworthiness of Lennar. There can also be no assurance that we will be able to successfully negotiate similar or any indemnities from any Lennar Related Ventures or Other Customers who may be future customers. 54 Table of Contents Notwithstanding Lennar’s Work, Lennar could decide at any point not to continue or finish any Horizontal Development or home construction that it has started. The Master Construction Agreement is guaranteed by Lennar (at the parent company level) and obligates specific performance for completing the Horizontal Development, but we would have no remedies against Lennar if they were to stop home construction, as the Lennar Agreements do not obligate Lennar to do any home construction and therefore do not impose any monetary penalties or obligate specific performance in the event Lennar does not finish any home construction. If Lennar defaults or otherwise does not exercise its Purchase Option on any such Homesites and there is unfinished home construction, we may have a harder time selling the Homesite to other buyers who may not be able to or may not want to finish the home construction that Lennar started. If the home construction needs to be undone before any buyer will purchase the Homesite, that would result in additional costs to us that we may not have the financial capability to manage, or that could impact our ability to continue our other operations or to maintain enough capital reserves for Future Property Asset acquisitions. If we or Lennar enter into bankruptcy, the Master Program Agreement or the Master Option Agreement may be unenforceable. In the event Lennar or Millrose would file for, or is involuntarily entered into, bankruptcy, the Master Program Agreement or the Master Option Agreement may be recharacterized as a secured financing agreement, lease, or executory contract and involuntarily amended or rejected. Given the importance of the Master Program Agreement and the Master Option Agreement for our business model and our reliance on the purchase options and the interest payments pursuant to the Master Program Agreement and the Master Option Agreement for our results of operation, we and Millrose Holdings may not be able to generate any operating revenues in the event of a bankruptcy. As a result, if Lennar enters into bankruptcy, it is likely that we will also be forced to enter into bankruptcy, unless we are able to provide the HOPP’R to or maintain other relationships with Lennar Related Ventures and Other Customers. If we cannot quickly identify, successfully negotiate and enter into new HOPP’R agreements with Lennar Related Ventures or Other Customers, which may be limited by the Capital Priority Right, our business and sources of income may suffer. Our primary land assets in our Real Estate Portfolio are the Transferred Assets and the Supplemental Transferred Assets. The properties in the Transferred Assets and the Supplemental Transferred Assets are expected to have a short cash conversion cycle. While this means that we can initially expect to regularly receive cash inflows in the form of Monthly Option Payments and payments in the amount of Takedown Prices whenever Lennar exercises its Purchase Options, we may cease to have continued cash inflows once the Transferred Assets and the Supplemental Transferred Assets have completely turned over if Lennar does not offer us new additional business (through Future Property Assets that Lennar may present to us to acquire under the Lennar Agreements or through references of Lennar Related Ventures that we would engage as new customers) and we cannot otherwise provide the HOPP’R to or secure other agreements with any Other Customers. While we have been offered and expect to be offered additional transactions from Lennar with respect to Future Property Assets, there is no certainty as to when, how often, and to what extent this will occur. While the Lennar Agreements do not have an expiration date, Lennar is under no obligation to commit to any future transactions with Millrose Holdings or give Millrose Holdings any new business at all (including any referrals of Lennar Related Ventures) under the Master Program Agreement. The Lennar Agreements provide Lennar with a Capital Priority Right and contemplate an ongoing business relationship between Millrose and Lennar, whereby Millrose would provide the Recycled Capital HOPP’R to Lennar for any Future Property Assets that Millrose Holdings may acquire pursuant to the Lennar Agreements, but the Lennar Agreements do not include any exclusivity, rights of first refusal or first look or other priority rights for us with respect to any future business opportunities. This means that Lennar can decide not to offer us any additional business (beyond the Transferred Assets and the Supplemental Transferred Assets) for any reason at all, including, but not limited to, using traditional land banks or establishing another entity that will operate a HOPP’R, or if the business terms of the Lennar Agreements (individually or in 55 Table of Contents the aggregate) are not as competitive as others in the market. Additionally, Lennar’s Land Banking arrangements with other providers could limit how many business opportunities we will be able to receive from Lennar with respect to Future Property Assets on a going-forward basis. Millrose has engaged and continues to engage in discussions with other home builders who are interested in becoming new customers, but there is no guarantee that Millrose will continue to be successful in negotiating agreements with such additional potential customers and there is no guarantee that Millrose will be able to secure any business arrangements with any home builders outside of Lennar in any given timeframe. As such, an important part of our business strategy is to seek additional customers that wish to contract with us to utilize the HOPP’R in order to diversify our customer base and grow our business. In accordance with the terms of the Lennar Agreements, Lennar may refer any Lennar Related Ventures to us, and we are obligated to enter into HOPP’R agreements on terms substantially similar to the terms of the Lennar Agreements with them if they fulfill the requirements set forth in the Lennar Agreements and described under “Part I, Item 1. Business—Land Banking Reimagined—Future HOPP’R Arrangements with Lennar and Lennar Related Ventures.” However, Lennar is under no obligation to refer any Lennar Related Ventures or Other Customers to us, and there can be no assurance as to when such referrals may happen, how often they may happen, and how many Lennar Related Ventures or Other Customers may be referred to us. There can also be no guarantee that we will be able to contract with any Lennar Related Ventures, outside of the obligatory ones that are presented to us. We also intend to identify and negotiate with potential Other Customers to further diversify our customer base and grow our business. It is our Manager’s responsibility under the Management Agreement to find, identify, evaluate and negotiate with any potential Other Customers who may wish to engage Millrose for the HOPP’R. However, there is no guarantee when or if (or to what extent) our Manager will be able to find any Other Customers and that our Manager will be able to successfully negotiate HOPP’R agreements on terms satisfactory to Millrose. Lennar’s Capital Priority Right and Lennar’s Founder’s Rights may impact our Manager’s ability to attract Other Customers, as such rights will be reserved solely for Lennar and are not intended to be offered to Other Customers in future. Furthermore, our Manager may have limitations in negotiating competitive fee structures with Other Customers because Lennar has the right to adjust its Monthly Option Payment rate for subsequent Proposed Projects to any lower rate we may negotiate with any non-Lennar customer. Additionally, many of our competitors in the more “traditional” Land Banking space have significantly larger operations and resources, a much longer operating history and developed reputation, and an established market presence. We are a newly-formed company with a limited operating history and reputation and, even though our Manager manages our operations and has an extensive experience in managing Land Banking entities, there can be no certainty as to how much credibility the market will ascribe to Millrose, purely by virtue of our Manager being the Manager. Even if our Manager does find suitable Other Customers, those new business opportunities may not be exclusive to Millrose and will be subject to our Managers’ Allocation Policy. See “Part III, Item 13. Certain Relationships and Related Transactions, and Director Independence—Transactions with our Manager—Management Agreement” for more information. If we are not able to attract Other Customers, then our risk exposures related to having all of our source of income tied to Lennar will be further heightened. If we are not able to attract new customers other than Lennar, and Lennar does not offer us new transactions, we could lose our source of revenues and income. If we are not able to attract new customers on the terms we desire, or if the terms we negotiate with any potential customers are not favorable to us or expose us to significant risks, then our business, financial condition and results of operations and our ability to perform on our other HOPP’R agreements may be materially and adversely affected. If the market value of our Real Estate Portfolio declines, our profits could decrease, and we may incur losses. Land assets are generally valued in the market using different metrics than those used to value Homesites. Inventory risk can be substantial for land assets, as the market value of such assets can fluctuate significantly as a result of changing market conditions, both in relation to the land itself and indirectly from fluctuations in the supply and demand for prospective Homesites, existing Homesites and other housing inventories. In addition, 56 Table of Contents inventory carrying costs can be significant and can result in losses in a poorly performing community or market. We may be required to write-down the value of our land assets in accordance with GAAP, and some of those write-downs could be material. Any material write-downs of assets could have a material and adverse effect on our business, financial condition and results of operations. In the event of adverse changes in economic, market or community conditions, Lennar and any Other Customers may cease further development activities in certain communities or geographical areas, restructure some or all of the existing HOPP’R agreements with us or elect not to exercise their land purchase options at all. There are contingencies built into the Lennar Agreements to allow Lennar to pause activities — including a “pause period,” based on specified changes to the market whereby for two periods of six months each Lennar may pause its Horizontal Development and “pause” any Purchase Option windows, and lower its Monthly Option Payment fee rate to 50% of the Applicable Rate. In addition, Lennar and the Millrose may mutually agree to designate two additional pause periods of up to six months each for a total of up to two years. See “Part III, Item 13. Certain Relationships and Related Transactions, and Director Independence—Transactions with Lennar—Master Option Agreement” for more information. Depending on the market for new home communities and Homesites in areas where we will own land, the value of some of the land assets we will own could decline to less than the transfer value assigned to that land. Even though the Transferred Assets, the Supplemental Transferred Assets and Future Property Assets we may acquire in the future will be subject to Lennar’s and any Other Customers’ options to purchase the Homesites, if the value of the Homesites we develop is less than the purchase prices attached to those purchase options, then Lennar and/or any Other Customers may not decide to exercise their purchase options. Lennar (and potentially certain Lennar Related Ventures in the future) is subject to certain pooling and cross-termination provisions in the Multiparty Cross Agreements, but there can be no assurance that those provisions will serve as sufficient incentive for Lennar (or anyone else subject to similar provisions in the future) not to terminate or forfeit their purchase options. There are also exceptions to the pooling and cross-termination rights we have with Lennar (such as the fee building exception), and there can be no assurance that we will be able to negotiate any form of pooling and cross-termination rights with any Type 2 Lennar Related Ventures or any Other Customers. Any termination or forfeiture of any purchase options prior to the exercise date of the applicable takedown schedule would result in a loss of monthly option payments anticipated in respect of such arrangements and the loss of potential sale of land assets to such customer at the predetermined takedown price. Accordingly, we may have to hold such land assets for many years without a potential buyer, and in some instances we may have to sell land assets for less than what Lennar or any Other Customers would have paid if they had exercised their purchase option. The failure of Lennar or any other customer to exercise their land purchase options may result in a loss that could have a material adverse effect on our business, financial condition and results of operations. Past performance by the management team who are employees of Kennedy Lewis and their respective affiliates may not be indicative of future performance of an investment in us. KL acts as the Manager and is responsible for employing all our management, employees and other personnel, and running all our business operations. KL is an affiliate and wholly-owned subsidiary of Kennedy Lewis, which has extensive experience in the Land Banking industry. However, our business differs from that of existing investment funds, accounts or other investment vehicles that are or have been managed by Kennedy Lewis or its affiliates, or by other members of Kennedy Lewis’s management team. In addition, the other entities currently managed by Kennedy Lewis in the Land Banking industry are significantly different from us in terms of targeted assets, geographical areas, regulatory structure and limitations, investment strategy and objectives and investment personnel. Further, Kennedy Lewis has no experience managing a public company. Past performance of the management team provided by KL and appointed by our Board, Kennedy Lewis itself, Lennar or any related affiliates is not a guarantee of future results, and there can be no assurance that we will achieve comparable results of those entities. Prior to the Spin-Off, Millrose was a wholly-owned subsidiary of Lennar and all financial statements and results of operations of the Predecessor Millrose Business are derived from 57 Table of Contents Lennar’s financial statements. However, Lennar’s past performance and results of operations are not an indication of Millrose’s potential future results, as we will not be managed by any Lennar personnel (except to the extent of the Lennar Services) and our business operations will not be as diversified as Lennar’s. We also cannot assure you that KL will be able to replicate the historical results achieved by entities managed by affiliates of Kennedy Lewis or members of the management team, and our business returns could be substantially lower than the returns achieved by them in prior periods. Additionally, all or a portion of the prior results may have been achieved in particular market conditions which may never be repeated. You should not rely on the historical record of the performance of KL’s management team, Kennedy Lewis, Lennar or businesses associated with them as indicative of our future performance of an investment in us or the returns we will, or are likely to, generate going forward. If we are not able to raise additional capital to fund our operations, or if we cannot access capital on attractive terms, we may not always have sufficient funding to maintain our operations. We entered into the Credit Agreement, which provides for a revolving credit facility with commitments in an aggregate amount of $1.335 billion, and may also seek to pursue additional debt financing, all of which may be available to manage cash needs and reduce drag on returns, as well as for use to provide the HOPP’R to Other Customers. However, there is no guarantee that such sources of additional cash will be obtained or will be sufficient to cover all of our business growth initiatives. See “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources Following the Spin-Off” for more information. Additionally, the ability of Millrose to obtain additional debt financing is subject to the Debt to Equity Ratio Limit. In the future, 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. Sustained high interest rates, rate hike increases, prolonged high inflation, economic downturn and possible recessions in the future may impair our ability to pay taxes and expenses to continue our operations. As a newly-formed company with limited operating history, limited assets and no guarantors, it may be difficult for us (including Millrose Holdings) to obtain sufficient sources of capital funding, particularly during times of volatile or adverse economic and market conditions. Given our lack of credit history and ratings, the structure of the Promissory Note and the nature of certain terms of the Lennar Agreements (including the Recognition Agreement), we (including Millrose Holdings) may not be able to secure additional loans on attractive terms or at all, and we may be limited in our and Millrose Holdings’ ability to access the capital markets on terms acceptable for our business. Further, our ability to pursue equity capital raises during the first 18 months following the Spin-Off may be limited by Lennar’s Effective Equity Price Protection Right, which may result in dilution and downward pressure on our Class A common stock trading price and in turn the value of our Class B common stock. Additionally, pursuant to the Lennar Agreements, we may not enter into any third-party financing arrangements if such financing arrangement would cause our debt to equity ratio to exceed 1:1, unless it obtains the prior approval of Lennar. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our existing stockholders may be diluted, and the terms of such financing transactions may include liquidation or other preferences that adversely affect the rights of our stockholders. Such capital raises would also impact how we are able to use our available capital, given Lennar’s Capital Priority Right. Debt and receivables financings may be coupled with an equity component, such as warrants to purchase shares of our common stock, which could also result in dilution of our existing stockholders’ ownership. Capital raises through the issuance of equity or debt may also impact the stock price or value of our Class A common stock and Class B common stock, and if the stock price is suppressed, we may not be able to raise the capital we need through equity issuances. We may be subject to stringent covenants and restrictions on the type of debt financing we may be able to secure in the future. If we face any challenges or obstacles in raising additional capital or securing third-party financing, including if we cannot do so on terms favorable to us or at all, our operating cash flow may be insufficient to satisfy our financial obligations. If financing is not available when we or Millrose Holdings need it, or is available on unfavorable terms, we may be unable to efficiently manage our Real Estate Portfolio, perform our obligations under our HOPP’R agreements (for example, financing the Work under the Lennar Agreements), 58 Table of Contents complete acquisitions of Future Property Assets or otherwise take advantage of business opportunities or respond to competitive pressures, any of which could materially and adversely affect our business, financial condition and results of operations. Volatility in the market may impact our ability to do business. Any sustained period of high interest rates and high inflation may increase operating costs, reduce the value of our Real Estate Portfolio, increase the cost of capital and make raising capital difficult for us and Millrose Holdings, as applicable. Typically, home demand and prices will increase in low interest rate environments, but there can be no guarantee that this will always happen or that we will be able to capitalize on the increased demand and prices if and when it does happen (and in any event, since we are not selling homes ourselves and only on behalf of our customers, so any potential benefits would be significantly limited). Changing general economic and financial market conditions could significantly reduce the value of land and other real estate assets, loans and other investments and reduce the amounts earned on those investments. As a newly-formed company, we are also likely disadvantaged in competing with traditional Land Banking providers, some of which may have greater financial resources, a more established, loyal and consistently growing customer base, and stronger ability to weather adverse or volatile economic and market conditions than we do. Many of the competitors in the Land Banking space have significantly larger operations and resources, a much longer operating history and credibility and developed reputation, and an established market capitalization. We are a brand-new company with no prior operating history or reputation and, even though KL manages our operations and has extensive experience in managing Land Banking entities, there can be no certainty as to how much credibility the market will ascribe to Millrose, purely by virtue of KL being the Manager. As such, at any time but particularly in times of market volatility, potential Land Banking customers may desire to contract with more established Land Banking providers than with us, and we cannot guarantee that we will be able to identify or attract any Other Customers who will want to utilize the HOPP’R. As a holding company, our dependence on our subsidiaries for cash flow may negatively affect our business. We are a holding company with no business operations of our own and we conduct all of our land acquisition and development operations through our subsidiaries. A separate Millrose Subsidiary will provide the Recycled Capital HOPP’R to each Other Customer. Millrose Holdings will provide the Recycled Capital HOPP’R to Lennar through the Property LLCs. Millrose Holdings may also provide the Recycled Capital HOPP’R (or other forms of the HOPP’R, as the case may be) to Lennar Related Ventures (with approval from Lennar, to be provided at Lennar’s discretion) or Millrose may provide the Recycled Capital HOPP’R to such Lennar Related Ventures through one or more Other Subsidiaries as determined by Lennar and our Manager. A new Millrose Subsidiary will be formed to provide the Recycled Capital HOPP’R to each Other Customer as such customer finalizes negotiations and commits to engaging with Millrose. All or substantially all of Millrose’s assets currently consist of (i) 100% of the membership interests of Millrose Holdings and (ii) the Promissory Note. Millrose Holdings and Other Subsidiaries will distribute to Millrose (subject to limitations on the portion of Millrose’s income that can be dividends in compliance with the REIT Requirements) (i) net earnings generated from the Monthly Option Payments after payments for taxes and expenses (including the Management Fee), and (ii) monthly interest payments on the Promissory Note (which is currently approximately $358 million annually based on a 7.5% interest rate), and such amounts will then be distributed by Millrose as dividends to Millrose’s stockholders, consistent with or in excess of the amount that would satisfy applicable REIT Requirements. Accordingly, our ability to pay our obligations is dependent upon dividends, interest payments and other distributions from our subsidiaries to us, and our subsidiaries’ ability to earn revenue is dependent on our customers’ performing its obligations under the HOPP’R agreements they have with us (which, at least initially, is solely Lennar performing its obligations under the Lennar Agreements). The ability of our operating subsidiaries, including Millrose Holdings, to pay dividends to us are expected to be restricted by REIT qualification requirements, applicable Maryland law and the terms of any outstanding debt or credit facilities, and our reliance on Lennar to continue providing us with more deals. 59 Table of Contents As a holding company, we are completely reliant on the success of the businesses operated by our subsidiaries. Millrose intends to provide the HOPP’R to each customer through a separate subsidiary. For example, Millrose Holdings provides the HOPP’R to Lennar through the Property LLCs. Millrose Holdings may also provide the HOPP’R to Lennar Related Ventures (with approval from Lennar, to be provided at Lennar’s discretion) or Millrose may provide the HOPP’R to such Lennar Related Ventures through one or more Other Subsidiaries as determined by Lennar and our Manager. Millrose has also sought to provide the HOPP’R to Other Customers for purposes of diversification and scaling business growth. To the extent we provide the HOPP’R to any Other Customers, it will be done through Other Subsidiaries and pursuant to agreements that will be negotiated on behalf of Millrose by our Manager. Additionally, in the event that Millrose provides the HOPP’R to Other Customers, it will likely need third-party financings to do so. We entered into the Credit Agreement, which provides for a revolving credit facility with commitments in an aggregate amount of $1.335 billion, and may also seek to pursue additional debt financing, all of which may be available to manage cash needs and reduce drag on returns, as well as for use to provide the HOPP’R to Other Customers. However, there is no guarantee that such sources of additional cash will be obtained or will be sufficient to cover all of our business growth initiatives. See “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources Following the Spin-Off” for more information. Additionally, the ability of Millrose to obtain additional debt financing is subject to the Debt to Equity Ratio Limit. In no event will the HOPP’R be provided to Other Customers through Millrose Holdings or any Other Subsidiaries that provide the HOPP’R to Lennar. However, this means that the sustainability of any given subsidiary will be dependent on the customer for which that subsidiary provides the HOPP’R. If one customer defaults on its obligations and fails to perform under its HOPP’R agreements with us, it may force that subsidiary into credit defaults or bankruptcy, which may impact the operations of our other subsidiaries, including Millrose Holdings, and our business, financial condition and results of operations. If the customer is significant enough (e.g., Lennar), our entire operations may be impacted and Millrose itself may need to enter into bankruptcy proceedings. Your investment return may be reduced if we are required to register as an investment company under the Investment Company Act. We intend to continue to conduct our operations so that neither we, nor Millrose Holdings nor the Property LLCs nor the Other Subsidiaries are investment companies under the Investment Company Act. However, there can be no assurance that we and our subsidiaries will be able to successfully avoid operating as an investment company. A change in the value of any of our assets could negatively affect our ability to maintain our exemption from regulation under the Investment Company Act. To maintain compliance with the applicable exemption under the Investment Company Act, we may be unable to sell assets we would otherwise want to sell and may need to sell assets we would otherwise wish to retain. In addition, we may have to acquire additional assets that we might not otherwise have acquired or may have to forego opportunities to acquire assets that we would otherwise want to acquire and would be important to our investment strategy. If we were required to register as an investment company but failed to do so, we would become subject to substantial regulation with respect to our capital structure (including our ability to use borrowings), management, operations, transactions with affiliated persons (as defined in the Investment Company Act), and portfolio composition, including disclosure requirements and restrictions with respect to diversification and industry concentration, and other matters. Compliance with the Investment Company Act would, accordingly, limit our ability to make certain investments and require us to significantly restructure our business plan, which could materially adversely affect our NAV and our ability to resume paying distributions to our stockholders. 60 Table of Contents Risks Related to Our Intellectual Property We entered into a HOPP’R License Agreement with a wholly-owned subsidiary of Lennar, which is critical to our business. The HOPP’R Rights are owned by a subsidiary of Lennar, and any changes to the HOPP’R License Agreement will impact our access to the HOPP’R Rights and may adversely impact our business. Millrose’s business consists of providing the HOPP’R to Lennar and other future customers. However, Millrose does not own the HOPP’R Rights and must rely on a HOPP’R License Agreement to access the HOPP’R Rights. In connection with the Spin-Off, a wholly-owned subsidiary of Lennar granted Millrose a non-exclusive, royalty-free, non-transferrable license to use the HOPP’R Rights solely for Millrose’s benefit. Our Manager is entitled to use Millrose’s HOPP’R Rights license in connection with the management and operation of Millrose. Millrose’s HOPP’R Rights license will be perpetual, subject to certain limited termination conditions. As such, Millrose, whether externally managed or internally managed, is expected to always have access to the benefit of the HOPP’R Rights, although there is no guarantee that this will always be the case. If Lennar’s subsidiary (or any future owner of the HOPP’R Rights) decides at any point to terminate Millrose’s HOPP’R Rights license as permitted in certain limited circumstances under Millrose’s HOPP’R License Agreement, Millrose will lose access to the HOPP’R Rights. Any loss of access to the HOPP’R Rights could disrupt Millrose’s business operations and prevent Millrose’s ability to provide the promised services under the Lennar Agreements and any other HOPP’R agreements with Other Customers in the future, heightening the risk of breach of contract claims and other lawsuits. Losing access to the HOPP’R Rights could also prevent Millrose from being able to engage new customers who want to use the HOPP’R. Any loss of access to the HOPP’R Rights could have a material impact on our business, financial condition or results of operations. Additionally, since we are the first publicly traded company to engage in large-scale recycled capital financing of land acquisition and Horizontal Development using the HOPP’R, and Lennar has historically not publicized or used the HOPP’R externally, we are responsible for promoting the use and reputation of the HOPP’R trademark in the public markets. Although the HOPP’R is identified as what we provide to our customers and be linked to our brand, quality and service experience, we do not own the trademark rights to “HOPP’R” and our license to use the HOPP’R trademark is non-exclusive. As such, we have no control over who else may have rights to use the HOPP’R trademark in the future, what the trademark will be used for, and whether the uses will be consistent with the way in which we use the HOPP’R trademark. Additionally, Lennar (through its subsidiary) as the owner of the trademark is able to set certain covenants, guidelines and standards with respect to the trademark. There can be no assurance that any such restrictions that Lennar or its subsidiary (or any successor assignee of the trademark) will maintain standards in line with the way we intend to use the HOPP’R trademark. If any covenants, guidelines or standards are be consistent with our use of the trademark, it could negatively impact our marketing strategies, which could affect our business operations and financial condition. Our business relies on our ability to provide the HOPP’R, including the Recycled Capital HOPP’R, to our customers, and we may lose our competitive advantage against other land banks as other entities in the future may also acquire a license to provide the HOPP’R to their customers. Millrose’s business consists of providing the HOPP’R to Lennar and other future customers. However, Millrose does not own the HOPP’R Rights and must rely on the HOPP’R License Agreement to access the HOPP’R Rights. Millrose’s HOPP’R Rights license is non-exclusive and will be granted by a wholly-owned subsidiary of Lennar. As such, Lennar’s subsidiary may grant from time to time a license to use the same HOPP’R Rights as Millrose to Lennar, its affiliates and any other entity it deems appropriate at its sole discretion. Because Lennar’s subsidiary (or any future owner of the HOPP’R Rights) may license the HOPP’R Rights to other land banks and other external managers that manage land banks, our business could suffer, as we might no longer be the only publicly traded entity that will engage in large-scale recycled capital financing of land acquisition and Horizontal Development using the HOPP’R. In the future, other companies may develop their own versions of the HOPP’R, 61 Table of Contents there can be no assurance that Millrose’s HOPP’R will be able to provide the same features that competitor companies providing the HOPP’R may have and at the same prices that competitor companies providing the HOPP’R may be able to offer. In turn, there can be no certainty as to whether our customers will remain with us if our future competitors that also provide the HOPP’R offer better services and/or better prices than we can. The potential loss of Millrose’s customer base, or even the expectation or appearance that we may be losing our customer base, could adversely affect Millrose’s business, financial condition and results of operations. If we lose our competitive advantage as the only publicly-traded company that provides the HOPP’R, we will need to rely on other strategies and find other distinguishing factors to market our business in this niche industry, which includes many competitors that have significantly larger operations and resources, a much longer operating history as land banks, more credibility and developed reputation in the industry and an established market capitalization. Many of these competitors are also unencumbered by some of the restrictions to which we are subject, including our Debt to Equity Ratio Limit and the Founder’s Rights, which may be viewed unfavorably by certain key stakeholders. If we are not successful in pivoting our marketing strategy and finding other ways to compete against our peers and capitalize on other advantages that we may have, there could be a material adverse impact on our business, financial condition and results of operations. Risks Related to the Land Banking Industry There are substantial risks inherent in owning land for new home construction. By providing an operational and capital solution for home builders and land development companies to finance the acquisition and development of land assets, Millrose is exposed to substantial risks in owning land assets for Lennar, and any Other Customers, which may or may not purchase these assets for home construction on the timelines we expect or at all. Because the future use of these land assets comes with inherent uncertainties due to the uncertain prospective nature of Lennar’s and any Other Customers’ development plans, the risks inherent in owning land parcels increase as consumer demand for housing decreases and the holding period increases. As a result, we may end up owning land assets on which homes cannot be profitably built and sold. In certain circumstances, a grant of entitlements or development agreements with respect to a particular parcel of land may include restrictions on the transfer of such entitlements to a buyer of such land, which could negatively impact the price of such entitled land by restricting our ability to sell it for its full entitled value. In addition, inventory carrying costs can be significant and can result in reduced margins or losses in poorly performing communities or markets. Additionally, deteriorating market conditions could cause us to record significant inventory impairment charges. The recording of a significant inventory impairment could negatively affect our earnings and negatively impact the market perception of our business. Our business is susceptible to risks from natural disasters, geopolitical events and other events outside of our control that may delay development on the land we hold for Lennar and any Other Customers. The Lennar Agreements and any similar agreements we may enter into with any Lennar Related Ventures or Other Customers in the future require us to hold land assets for our customers while they develop the Homesites before they purchase them from us. The Transferred Assets and Supplemental Transferred Assets are located in various concentrated geographical areas across the United States, and any development of such land assets may be delayed due to natural disasters and geopolitical events that happen in the areas in which these land assets are located. As such, we and our customers are subject to risks and could be exposed to additional costs from adverse weather, natural disasters and adverse impact from global climate change. For example, some of the land assets we own are in zones that are at risk for natural disasters and could be severely damaged or destroyed by such disasters, including unexpected phenomena (for example, earthquakes and landslides) and physical climate risks that could materialize as either singular extreme weather events (for example, hurricanes, tornadoes, floods, storms and wildfires) or through long-term impacts of climatic conditions (for example, precipitation frequency, weather instability and rise of sea levels). Such events may result in delays of development work on such land, which may have material impacts on our business, financial condition or results of operations. 62 Table of Contents Such events could also adversely impact Lennar or our Other Customers if there is damage resulting from such events to any existing work, or to any developments they have already performed on the land assets that we own, pending purchase by Lennar or Other Customers. Insurance may not sufficiently cover all losses sustained by our customers and their stakeholders. If we fail to adequately prepare for such events, our and our customers’ revenues, results of operations and financial condition may be impacted. Additionally, the value of the land may fluctuate over time as a result of factors outside of our control, including, but not limited to, developments on surrounding land that impact the value of our land assets, changes in zoning laws or other regulations that might impact how our customers can use these land assets, and changing trends in the movement of social populations that guide which areas are “hot spots” for development. As of December 31, 2024, a significant amount of the Transferred Assets and the Supplemental Transferred Assets were concentrated in three states (California, Florida and Texas), with a substantial portion located in Florida and Texas. The geographic concentration of such land assets could cause us to be more susceptible to adverse weather, economic or regulatory changes, or developments in the markets in which our future properties will be located than if we owned a more geographically-diverse portfolio. Further, although we are not aware of any pending material issues at this time, the Transferred Assets, the Supplemental Transferred Assets and any Future Property Assets we may acquire in the United States are subject to eminent domain, and the compensation we receive from any government entity in connection with an eminent domain acquisition may not be sufficient to cover the costs we may owe our customers in such situations. Our insurance coverage may not cover all potential losses. Our Manager, on behalf of Millrose and Millrose Holdings (including any of its Property LLCs), maintains general liability insurance policies for common liability claims from third parties, including slip and fall accidents and other common third-party risks. Our Manager may also purchase specific insurance policies for individual investments or blanket policies covering multiple investments and participants and their respective affiliates. Additionally, in accordance with the terms of the Lennar Agreements, Lennar is required to maintain certain types of insurance for the Transferred Assets, the Supplemental Transferred Assets and any Future Property Assets that Millrose Holdings acquires pursuant to the Lennar Agreements. Our Manager is responsible for confirming that the Transferred Assets, the Supplemental Transferred Assets and any Future Property Assets acquired pursuant to the Lennar Agreements are insured by Lennar consistent with industry standards, and for securing insurance for anything that is not otherwise covered by Lennar’s insurance with respect to the Transferred Assets, the Supplemental Transferred Assets and Future Property Assets. Our Manager expects to maintain insurance policies (similar to the ones subscribed by Lennar) on any Future Property Assets that Millrose, through one of its subsidiaries, may acquire in the future for any potential Lennar Related Ventures or Other Customers that would not otherwise be insured by such Lennar Related Ventures or Other Customers. It is our Manager’s responsibility to ensure that, between the insurance provided by any of our customers and the insurance our Manager secures on our behalf, our entire Real Estate Portfolio is adequately insured, consistent with industry standards, including commercial general liability insurance. Insurance that our Manager secures on our behalf is paid for by our Manager, and such costs are covered by the Management Fee. For additional information, see “Part I, Item 2. Properties—Operating Data on Real Estate Portfolio—Insurance.” However, there is no guarantee that we will always be completely covered by insurance, and there may be gaps that our Manager does not identify in time or at all, which could result in material impacts to our business. Because we are not sourcing and vetting the insurance provided by any customers (including Lennar), the existence and quality of the insurance, including the scope of coverage, is out of our control. As such, we cannot provide any assurance that we will always have sufficient insurance to cover every liability we may be exposed to, whether it be from insurance that our Manager secures for us or insurance from our contractual relationships with Lennar and any Other Customers. In the event any such insurance could lapse (either intentionally or inadvertently) by our customers, we may be negatively impacted if we cannot find adequate alternative coverage in a timely manner and on suitable terms when such lapses occur. Certain losses that may impact our Real Estate Portfolio, including losses from floods, earthquakes, acts of war, acts of terrorism or riots and pandemics, generally are not insured against or not fully insured against 63 Table of Contents because it is not deemed economically feasible or prudent to do so. If an uninsured loss or a loss in excess of insured limits occurs with respect to one or more of our properties, we could experience a significant loss of capital invested and future revenues in these land assets and could potentially remain obligated under any recourse debt associated with the land asset. Pursuant to the Lennar Agreements, Lennar is responsible for all Horizontal Development and any home construction done on the Homesites, including if anything is damaged during development. Lennar is responsible for sourcing and maintaining property insurance coverage for any such damage. However, Lennar’s insurance and responsibility for such risks and damages extends only until they determine not to exercise any Purchase Options with respect to any Homesites. Therefore, in the event Lennar decides not to exercise or forfeit its Purchase Options with respect to any Homesites, we will be fully responsible for any issues that may arise with respect to the land, any completed or in-progress Horizontal Development and home construction Lennar has already done. We may not be able to find adequate or any insurance coverage or other protection in a timely manner if this were to happen, particularly since any such decision from Lennar would impact an entire pool of properties, and not just an individual property. The lack of adequate insurance and protections may also impact our ability to sell the properties to a third-party buyer. Furthermore, we cannot be sure that insurance companies our Manager finds are able to offer products with sufficient coverage for Millrose’s business operations at commercially reasonable rates in cases where Lennar stops their insurance coverage. If we experience a loss that is uninsured or that exceeds insured limits with respect to one or more of our land assets or if the insurance companies fail to meet their coverage commitments to us in the event of an insured loss, then we could lose the capital invested in the damaged land assets, as well as the anticipated future revenues from those land assets and, if there is recourse debt, then we would remain obligated for any mortgage debt or other financial obligations related to the land assets. Any such losses or higher insurance costs could materially and adversely affect our business, financial condition and results of operations. Our inability to successfully acquire an adequate inventory of Future Property Assets at reasonable prices could adversely impact our operations. To the extent that Lennar desires that we purchase any Future Property Assets, pursuant to the Lennar Agreements, Lennar is responsible for identifying any and all Future Property Assets and is responsible for negotiating the purchase price of any such Future Property Assets. As we do not have the ability to identify Future Property Assets ourselves and cannot control the purchase price with respect to any Future Property Assets that we may acquire pursuant to the Lennar Agreements (or any substantially similar agreements that we may enter into with any Lennar Related Ventures or Other Customers in the future), we may not be able to secure any Future Property Assets at reasonable prices, which could adversely impact our operations. There is no guarantee when or if (or to what extent) Millrose, through its Other Subsidiaries, will be able to provide the HOPP’R to any Lennar Related Ventures or negotiate and enter into any similar arrangements with Other Customers. Our results of our operations may in the future depend in part upon our ability to successfully identify, acquire and own an adequate number of Future Property Assets in desirable locations. Even if we have an adequate number of HOPP’R agreements with various customers, there is no guarantee when or if (or to what extent) they will offer us new business opportunities or Future Property Asset transactions. There can also be no assurance that an adequate supply of Future Property Assets will be available to us on favorable terms, or that will make relevant land asset targets for the HOPP’R. Even if our Manager finds any appropriate Future Property Assets, it may not be presented to Millrose’s customers under the Allocation Policy, and such Future Property Assets may instead be allocated to traditional Land Banking entities that Kennedy Lewis manages (who may be our competitors in the market). An insufficient supply of Future Property Assets in one or more of our markets, any hindrance or inability to convey owned Homesites as a result of government shutdowns (or for other reasons), or our inability to purchase or finance Homesites on reasonable terms could have a material adverse effect on our business, financial condition and results of operations. Any land shortages or any decrease in the supply of suitable land at 64 Table of Contents reasonable prices could result in increased land costs. As the fair market value of properties declines from their original values at the time we enter into option agreements with any customers, we may have to reduce option exercise prices in order to induce home builders to exercise options or otherwise to purchase properties from us. Since Lennar has the right to adjust its Monthly Option Payment rate for subsequent Proposed Projects to any lower rate we may negotiate with any non-Lennar customer, a significant portion of our future Real Estate Portfolio, as well as our ability to finance the acquisition and development of land assets for our customers, will likely be impacted in the event our Manager negotiates a lower monthly option payment rate with another customer during a time of market downturns and Lennar exercises its right to adjust its Monthly Option Payments for future Proposed Projects going forward. A decline in prices of new homes could require us to write down the carrying value of land we own. Our assets consist of land that we will hold for Lennar and potentially any Other Customers, to be resold to them for use in home building operations. The value of land suitable for residential development fluctuates depending on local and national market conditions and other factors that affect demand for new homes. When demand for homes fell during the 2007-2009 recession, landowners, such as Lennar, were required to take significant write-downs of the carrying value of land inventory. If market conditions were to deteriorate significantly in the future, we could be required to make significant write-downs of the carrying value of our land assets inventory and we could be forced to reduce the purchase prices in order to induce option holders to purchase properties. Land assets and real estate investments are not as liquid as certain other types of assets, which may reduce economic returns to stockholders. Land assets and real estate investments are not as liquid as certain other types of investments, and this lack of liquidity may limit our ability to react promptly to changes in economic or other conditions. Significant expenditures associated with real estate investments, such as secured mortgage debt payments, real estate taxes and maintenance costs, are generally not reduced when circumstances cause a reduction in income from the investments. As we expect to elect REIT status, we will only be able to hold property for sale in the ordinary course of business through TRSs in order to not incur punitive taxation on any gain from the sale of such property. We may dispose of certain land assets that have been held through TRSs subject to our agreements with Lennar or any Other Customers to generate liquidity. To the extent permitted by our existing and any new business arrangements with Lennar and Other Customers, and if Lennar elects not to exercise its option to acquire certain land assets from Millrose Holdings, we may decide to sell land assets to third parties to generate proceeds to fund our capital deployment activities. The price for which we can sell properties to third parties or sell homes we build may be significantly less than the amounts of our investments. Our ability to sell land assets on advantageous terms is affected by: (i) competition from other owners of land assets that are trying to dispose of their land assets; (ii) economic and market conditions, including the capitalization rates applicable to our land assets; and (iii) other factors beyond our control, including general economic conditions. If our competitors sell assets similar to assets we intend to divest in the same markets or at valuations below our valuations for comparable assets, we may be unable to divest our assets at favorable pricing or at all. The third parties who might acquire our land assets may need to have access to debt and equity capital, in the private and public markets, in order to acquire land assets from us. Should they have limited or no access to capital on favorable terms, then dispositions could be delayed. If we (including Millrose Holdings) do not have sufficient cash available to us through our operations or sales of land assets or available credit facilities to continue operating our business as usual, we and Millrose Holdings may need to find alternative ways to increase our liquidity. Such alternatives may include, without limitation, divesting land assets at less-than-optimal terms or incurring debt. There can be no assurance, however, that such alternative ways to increase our liquidity will be available to us or that we will continue to qualify as a REIT if we pursue such alternative ways to increase our liquidity. Additionally, taking such measures to increase 65 Table of Contents our liquidity may adversely affect our business, and in particular, our distributable cash flow and debt covenants in any debt agreements that we may enter into in the future. We cannot make any assurances that our growth or expansion strategies will be successful, and we may incur a variety of costs to engage in such strategies, including through new asset acquisitions, and the anticipated benefits may never be realized. Our significant lack of diversification in our business operations and investment portfolio and our customer base severely limits how well we can compete against traditional Land Banking entities, such that we are not able to carve out a sustainable market share for ourselves and sustain our operations independently from Lennar. Currently, Lennar is our largest customer. Although we seek to identify and negotiate with additional potential Other Customers, as of the date of this Form 10-K, we only have a limited number of definitive arrangements to acquire additional assets, to form or acquire more subsidiaries, or to obtain any other business besides the existing Recycled Capital HOPP’R that Millrose Holdings and Other Subsidiaries will provide to Lennar pursuant to the Lennar Agreements. Millrose (through Millrose Holdings) intends to acquire Future Property Assets for Lennar as part of our ongoing relationship with Lennar, as contemplated and governed by the Master Program Agreement. However, there is no guarantee to what extent this will happen. While the Lennar Agreements do not have an expiration date, Lennar is under no obligation to commit to any future transactions with Millrose Holdings or give Millrose Holdings any new business at all (including any referrals of Lennar Related Ventures) under the Master Program Agreement. The Lennar Agreements provide Lennar with a Capital Priority Right and contemplate an ongoing business relationship between Millrose and Lennar, whereby Millrose would provide the Recycled Capital HOPP’R to Lennar for any Future Property Assets that Millrose Holdings may acquire pursuant to the Lennar Agreements, but the Lennar Agreements do not include any exclusivity, rights of first refusal or first look or other priority rights for us with respect to any future business opportunities. This means that Lennar can decide not to offer us any additional business (beyond the Transferred Assets and the Supplemental Transferred Assets) for any reason at all, including, but not limited to, using traditional land banks or establishing another entity that will operate a HOPP’R, or if the business terms of the Lennar Agreements (individually or in the aggregate) are not as competitive as others in the market. Additionally, Lennar’s Land Banking arrangements with other providers could limit how many business opportunities we will be able to receive from Lennar with respect to Future Property Assets on a going-forward basis. Further, as of the date of this Form 10-K, Millrose has limited business relationships with Lennar Related Ventures and Other Customers. There is no guarantee to what extent Millrose, through its Other Subsidiaries, will be able to provide the HOPP’R to additional Lennar Related Ventures or negotiate and enter into additional arrangements with Other Customers to provide the HOPP’R (either the Recycled Capital HOPP’R or any tailored forms of the HOPP’R with individually negotiated features, which may not be the same features as the Recycled Capital HOPP’R) to such Other Customers. Lennar’s Capital Priority Right may also limit the amount of available capital Millrose has to provide the HOPP’R to customers other than Lennar. While Lennar is Millrose’s largest customer as of the date of this Form 10-K, Millrose has engaged and continues to engage in discussions with other home builders who are interested in becoming new customers, but there is no guarantee that Millrose will continue to be successful in negotiating agreements with additional customers and there is no guarantee that Millrose will be able to secure additional business arrangements with additional home builders outside of Lennar in any given timeframe. In the future, if we are unable to successfully integrate new assets or businesses and manage our growth, our business, financial condition and results of operations may suffer. Lennar has the option, but not the obligation, to refer any Lennar Related Ventures to us. Although we have the obligation to contract with any qualifying Lennar Related Ventures (and the option to contract with any non-qualifying Lennar Related Ventures), there can be no assurance that Lennar will make any such referrals to us. We may not be successful in negotiating and entering into HOPP’R agreements with Other Customers and any future agreements with Other Customers may not be on similar terms to the Lennar Agreements or may be indirectly limited by Lennar Agreements (e.g., because of Lennar’s Capital Priority Right, or due to the limitations to our ability to obtain third-party financing 66 Table of Contents and issue debt because of our Debt to Equity Ratio Limit). Additionally, we may in the future significantly increase the size and/or change the mix of our Real Estate Portfolio or acquire or otherwise enter into new lines of business. We may be unable to successfully and efficiently integrate newly-acquired assets or businesses into our existing operations or otherwise effectively manage our Real Estate Portfolio or our growth effectively. In addition, increases in our Real Estate Portfolio and/or changes in the mix of our Real Estate Portfolio or additional lines of business may place significant demands on our Manager’s administrative, operational, asset management, financial and other resources. Any failure to manage increases in our size effectively could adversely affect our business, financial condition and results of operations. Real estate valuation is inherently subjective and uncertain, and is subject to change, especially during periods of volatility. The valuation of land and real estate and therefore the valuation of our land assets is inherently subjective due to, among other factors, the individual nature of each property, its location, the expected future revenues from that particular property and the valuation methodology used. As a result, the valuation of our land and other real estate assets is subject to a large degree of uncertainty and is made on the basis of assumptions and methodologies that may not prove to be accurate. Regardless of whether a valuation is accurate at the time it is completed, all valuations are subject to change, especially during periods of market volatility or reduced demand for real estate. The valuation of land assets we will hold and loans we may own in the future may not reflect the price at which such asset or loan is ultimately going to be sold (particularly given the terms of our existing agreements with Lennar, and any similar terms we may be subject to in future agreements with other customers), and the difference between that valuation and the ultimate sales price could be material. Valuation methodologies are subject to change from time to time. Additionally, real estate option contracts will be subject to local contract laws that will differ between the various jurisdictions in which we operate, and the underlying real estate to those option contracts will be subject to regulatory risk from federal, state, and local regulators. Our ability to satisfy the asset tests to qualify as a REIT depends upon our analysis of the fair market values of our TRS ownership interests. These fair market values will depend, at least in part, on the values of our TRSs’ land assets, some of which will not be susceptible to a precise determination given their undeveloped nature, and for which we will not obtain independent appraisals. Accordingly, there can be no assurance that the IRS will not contend that our TRS ownership interests cause a violation of the REIT asset tests. We may acquire Future Property Assets, and entities holding such Future Property Assets that involve risks that could adversely affect our business and financial condition. We received the Transferred Assets in connection with the Distribution and also acquired the Supplemental Transferred Assets following the closing of the Supplemental Transferred Assets Transaction. We may also acquire Future Property Assets. The acquisition of such Future Property Assets involves risks, including the risk that the acquired assets will not perform or be suitable for its intended purpose as anticipated. Under the Lennar Agreements, Lennar has the obligation to evaluate, assess and vet any Future Property Assets that it decides, at its sole discretion, to present to us. When we acquire Future Property Assets, we may have to bear the risks associated with entering a new market, such as a lack of market knowledge or understanding of the local economy, forging new business relationships in the area and unfamiliarity with local government and permitting procedures. KL, while it has extensive experience with Land Banking, also does not have experience as a home builder or real estate developer, or any business that would require extensive knowledge and expertise on land and property acquisitions. As a result, if Lennar or any other customer defaults or otherwise does not exercise its purchase option on any such Homesites following the completion of the Horizontal Development (e.g., the Work that Lennar is required to complete pursuant to the Master Construction Agreement), then we will need to either construct homes on such Homesites on our own (or, with Lennar, exercise our fee building option), engage a third party to construct the homes, or sell the Homesites without completing home construction in order to recover Millrose’s invested capital. Any such home construction and/or disposition may involve significant costs and require real estate development expertise, which KL does not have. As such, we would not be able to do any 67 Table of Contents home construction ourselves without expending significant costs in hiring new personnel who have the requisite skills and expertise, and such costs may not be covered (in part or at all) by the Management Fee we pay to KL. KL may also not be best-positioned to effectively oversee any third-party home builders, as they do not have the relevant experience or expertise in home construction. Selling assets without completing home construction will likely negatively impact the price of the assets, particularly because Lennar would be unlikely to let Purchase Options expire unless the value of the properties has become significantly less than the applicable option exercise prices. Any failure to at least recoup the amounts we have invested in developing and selling such assets would negatively impact our financial results. Additionally, there is, and it is expected there will continue to be, significant competition for land assets that meet the Program Criteria, as well as risks associated with obtaining financing for further acquisitions of land assets. We currently only have one direct subsidiary, Millrose Holdings, which provides the HOPP’R to Lennar. If we engage any new customers in the future, the HOPP’R we provide to any Lennar Related Venture or Other Customer may be provided by one or more of our Other Subsidiaries. Setting up new Other Subsidiaries and land-holding entities to provide the HOPP’R for any Other Customers may require substantial time and resources, including KL finding and hiring additional personnel to manage and operate such arrangements. There can be no assurance that we can do this in a timely manner, or that any delays or issues that arise will not jeopardize or other impact our business relationships with such Lennar Related Ventures or Other Customers. Additionally, Lennar’s extensive skillsets, knowledge, experience and expertise that will be applied to the benefit of Millrose Holdings with respect to Future Property Assets acquired pursuant to the Master Program Agreement will not be available to us for any Future Property Assets acquired for Other Customers. We may change the profile of our Real Estate Portfolio without stockholder consent. Our Real Estate Portfolio primarily includes the Transferred Assets and the Supplemental Transferred Assets. The properties in the Transferred Assets and the Supplemental Transferred Assets are expected to have a short cash conversion cycle. There can be no assurance that the profile of our Real Estate Portfolio will always be similar to that of the Transferred Assets and the Supplemental Transferred Assets. Currently, Millrose’s largest customer is Lennar. Millrose intends to engage additional future customers. Millrose expects that the land assets that it may receive in connection with such other home builders will also be current and future Homesite inventory for the current and future construction of homes, and may be similar to the Transferred Assets in terms of their shorter conversion duration, diversification of geographic markets and development-ready status, but there is no certainty that Millrose will be able to successfully negotiate for land assets that share similar characteristics with the Transferred Assets. Although we expect some of the Future Property Assets we acquire (particularly the ones that we may acquire pursuant to the Lennar Agreements or any agreements with Lennar Related Ventures or potentially Other Customers that have substantially the same terms as the Lennar Agreements) to generally match the profile of the Transferred Assets, we expect that many of the Future Property Assets that we may acquire in the course of providing the HOPP’R to Other Customers outside of Lennar and certain Lennar Related Ventures has a different profile. We may also need to make adjustments to our Real Estate Portfolio based on real estate market conditions and available business opportunities, and we may change our Investment Guidelines at any time without the consent of our stockholders, subject to the terms of our agreements with Lennar. In the future, we may make business decisions that result in us making investments in Future Property Assets that are different from, and possibly riskier than, the Transferred Assets and the Supplemental Transferred Assets described in this Form 10-K. In connection with such changes in our targeted land assets and strategies, our Board may change our policies over time. In the future, a change in our targeted land assets acquisition guidelines may occur without notice to you or without your consent, may increase our exposure to interest rate risk, default risk and real estate market fluctuations, all of which could materially adversely affect the value of our common stock, our ability to make distributions to you and our business, financial condition and results of operations. 68 Table of Contents Risks Related to Our Management Structure We depend upon key personnel of KL, and if KL cannot recruit and retain key personnel for us, our business, financial condition and results of operations could be significantly impacted. We are an externally-managed company, and therefore we do not, and will not, have any internal management capacity and we do not have any employees. We depend to a significant degree on the diligence, skill and network of business contacts of the management team and other key personnel of KL, all of whom may be difficult to replace. KL is obligated to supply us with substantially all of our senior management team, including all of the members of our management team that are named in this Form 10-K. We expect that KL will evaluate, negotiate, structure, close and monitor our Real Estate Portfolio in accordance with the terms of the Management Agreement and provide the Recycled Capital HOPP’R to Lennar pursuant to the Lennar Agreements and any of our Other Customers pursuant to any future HOPP’R agreements we may enter into with such Other Customers. As detailed in the Management Agreement with KL, as our Manager, subject to business acquisition, investment, leverage and other guidelines or policies adopted by our Board, KL has significant discretion regarding the implementation of our business and operating policies and strategies. Accordingly, we believe that our success depends significantly upon the experience, skill, resources, relationships and contacts of the senior officers and key personnel of KL. In particular, our success depends to a significant degree upon the contributions of our officers, all of whom are currently senior officers of KL. We do not have employment agreements with any of these key personnel and do not have key person life insurance on any of them. None of these key personnel are required by any agreement to dedicate a specified allocation of their time to Millrose. If any of our officers were to cease their affiliation with us or KL, KL may be unable to find suitable replacements, and our operating results could suffer. We believe that our future success will depend, in large part, upon KL’s ability to hire and retain highly skilled managerial, operational and marketing personnel. Competition for highly skilled personnel is intense, and KL may be unsuccessful in attracting and retaining such skilled personnel. If we lose or are unable to obtain the services of highly skilled personnel, our ability to implement our business strategies could be delayed or hindered, and there could be a material adverse effect on our business, financial condition and results of operations. We also depend upon the senior professionals of KL to maintain relationships with sources of potential business opportunities, and we rely upon these relationships to provide us with potential business opportunities. We cannot assure you that these individuals will remain employed by KL and continue to provide indirect business advice to us. KL is under no obligation to bring potential new business opportunities or contacts to us. If these individuals, including the members of the management team of KL, do not maintain their existing relationships with KL, maintain existing relationships or develop new relationships with other sources of business opportunities, we may not be able to successfully finance the acquisition and development of land assets or grow our portfolio in future, should we choose to expand. We are reliant on KL and their management team to maintain our existing relationships with Lennar, including pursuant to the ongoing obligations under the Lennar Agreements and the agreements that we expect to negotiate with other home builders. Kennedy Lewis and Lennar have a longtime business relationship with each other, and an adverse change in the relationship between Kennedy Lewis and Lennar could affect our relationship with Lennar because we are entirely managed by KL (which is an affiliate and wholly-owned subsidiary of Kennedy Lewis). Any such impact to our relationship with Lennar may have significant impacts to Millrose, since Lennar is our primary customer (by transaction size) and source of revenue. In addition, individuals with whom the senior professionals of KL have relationships will not necessarily provide us with business opportunities and as such, any business opportunities that are generated through those relationships will be subject to the Allocation Policy (see “Part III, Item 13. Certain Relationships and Related Transactions, and Director Independence—Transactions with our Manager—Management Agreement” for more information). Therefore, we can offer no assurance that such relationships will generate business opportunities for us. 69 Table of Contents KL can terminate the Management Agreement on 60 days’ notice under certain circumstances, and we may not be able to find a suitable replacement within that time, resulting in a disruption in our operations that could adversely affect our business, financial condition and results of operations. The Management Agreement gives the Manager the right to terminate the Management Agreement effective upon 60 days’ prior written notice of termination to Millrose in the event that Millrose defaults in the performance of any material term, condition or covenant contained in the Management Agreement and such default continues for a period of 30 days after written notice thereof specifying such default (or 45 days after written notice of such breach if Millrose takes steps to cure such breach within 30 days of the written notice), whether we have found a replacement or not. If the Manager terminates the Management Agreement, we may not be able to find a new adviser or hire internal management with similar expertise and ability to provide the same or equivalent services on acceptable terms within 60 days, or at all. In the event that we terminate the Management Agreement without cause, we would be obligated to pay a Termination Fee pursuant to the Management Agreement and may have difficulty finding a suitable replacement manager. Additionally, pursuant to Lennar’s Management Succession Consent Right included in the Founder’s Rights Agreement, if the Management Agreement is terminated for any reason (with or without cause), then Lennar will have a consent right over the appointment of a new manager, which may delay our ability to appoint a replacement manager. Lennar’s Management Succession Consent Right also gives Lennar a consent right over any management agreement that Millrose may enter into with a new or existing manager. If we are unable to appoint a replacement manager quickly, our operations are likely to experience a disruption and our financial condition, business and results of operations, as well as our ability to pay distributions, are likely to be adversely affected. In addition, the coordination of our management and business activities is likely to suffer if we are unable to identify and reach an agreement with a single institution or group of executives having the experience possessed by KL. Even if we are able to retain comparable management, the integration of such management and its lack of familiarity with our business objectives may result in additional costs and time delays that may materially adversely affect our business, financial condition and results of operations. You have limited control over changes in our policies and operations, which increases the uncertainty and risks you face as a stockholder. Our Board has discretion to determine our major policies, including the policies and guidelines described herein, subject to any existing contractual obligations and limitations described herein. Our Board may amend or revise these and other policies without your vote. Our Board’s broad discretion in setting policies and your inability to exert control over those policies increases the uncertainty and risks you face as a stockholder. Further, our Board may be constrained by the terms of the Founder’s Rights Agreement between Millrose and Lennar, pursuant to which Lennar has an approval right over certain Board actions including appointment of a replacement manager pursuant to Lennar’s Management Succession Consent Right. Additionally, our Charter includes a number of protective governance provisions, which provide that certain actions require a vote of approval of the holders of our Class B common stock, voting separately as a class, in addition to the approval of the holders of our Class A common stock and our Class B common stock, voting together without regard to class. The Founder’s Rights Agreement terms and the protective governance provisions may limit your ability as a stockholder, particularly as a holder of Class A common stock, to exert influence over Millrose’s policies and operations. KL, as our Manager, is authorized to follow broad operating and business guidelines and, therefore, has discretion in identifying and managing the land assets that are appropriate investments for us, as well as our individual operating and business decisions. Our Board periodically reviews our operating and business guidelines and our operating activities and investments, but it does not review or approve each decision made by the Manager on our behalf. In addition, in conducting periodic reviews, our Board relies primarily on information provided to it by the Manager. Furthermore, transactions entered into by KL, as our Manager, may be costly, 70 Table of Contents difficult or impossible to unwind by the time they are reviewed by our Board. Our Manager has great latitude within the broad parameters of our business acquisition guidelines in determining the types and amounts of assets in which to acquire and invest on our behalf, including consummating transactions that may result in returns that are substantially below expectations or result in losses, which would materially and adversely affect our business, financial condition and results of operations. In the future, should our business evolve and should we enter into HOPP’R agreements with Other Customers, the Board may be subject to increased limitations resulting from new agreements or alternatively our Board may have increased flexibility in our business operations. We pay substantial fees to KL, which payments increase the risk that we may not earn a profit. There is also no guarantee that KL will be successful identifying and consummating new business opportunities with Other Customers, which also increases the risk that you will not earn any returns on your investment. Pursuant to the Management Agreement, we pay significant fees to KL, including the Management Fees. Those fees include advisory and administrative fees and obligations to reimburse KL in limited circumstances as described in the Management Agreement for certain expenses they incur in connection with providing services to us (not including fees incurred in connection with extraordinary litigation and mergers and acquisitions and other events outside Millrose’s ordinary course of business, including, in certain circumstances, costs associated with the ownership and maintenance of land). However, the payment of such fees to KL does not guarantee that KL is able to successfully manage our land assets and our existing business relationship with Lennar. We rely on KL, as our Manager, to identify and consummate new business opportunities for us. However, available capital for transactions with Other Customers and Lennar Related Ventures is subject to Lennar’s Capital Priority Right. There is no guarantee when or if (or to what extent) KL will be able to successfully identify and consummate appropriate and suitable business opportunities for us. KL may not be successful in identifying opportunities and new customers that meet our criteria. Additionally, Lennar’s extensive skillsets, knowledge, experience and expertise that will be applied to the benefit of Millrose Holdings with respect to Future Property Assets acquired pursuant to the Master Program Agreement is not available to us for any Future Property Assets acquired for Other Customers. We may not be able to consummate relationships with Other Customers on satisfactory terms or at all. There is also no guarantee that KL can successfully manage any new projects added to our portfolio in future. Our ability to make investments on favorable terms may be constrained by several factors including, but not limited to, the terms and restrictions of our agreements with Lennar or competition from traditional Land Banking providers with significant capital, including other publicly-traded REITs and institutional investment funds, which may significantly increase transaction costs, and/or the inability to finance a transaction on favorable terms or at all. The failure to identify or consummate acquisitions or future dispositions of land assets with Other Customers on satisfactory terms, or at all, may impede our growth and negatively affect our cash available for distribution to our stockholders. If we internalize our management functions, we could incur significant costs associated with being self-managed. Subject to the terms of the Management Agreement, in the future, our Board may consider internalizing the functions performed for us by KL, as our Manager. The method by which we could internalize these functions could take many forms. There is no assurance that internalizing our management functions will be beneficial to us and our stockholders. Any internalizing of management could result in a dilution of your interests as a stockholder and could reduce earnings per share and adversely affect our results of operations. Additionally, we may not realize the perceived benefits, we may not be able to properly integrate a new staff of managers and employees, and we may not be able to effectively replicate the services provided previously by KL or its affiliates. Internalization transactions have, in some cases, been the subject of litigation. Even if these claims are without merit, we could be forced to spend significant amounts of money defending claims that would reduce the amount of funds available for us to invest in land assets or other investments and to pay distributions. All of these factors could have a material adverse effect on our results of operations, financial condition and ability to pay distributions. 71 Table of Contents The termination of the Management Agreement with KL may require us to pay a substantial termination fee, including in the case of a termination for unsatisfactory performance, which may limit our ability to end our relationship with KL. The terms of the Management Agreement with KL automatically extend each year for an additional one-year period. We have the right to terminate the Management Agreement, as well as the Manager in certain circumstances, as described further under “Part III, Item 13. Certain Relationships and Related Transactions, and Director Independence—Transactions with our Manager—Management Agreement.” However, if we terminate the Management Agreement without cause, as defined in the Management Agreement, we will be obligated to pay KL the Termination Fee. These provisions substantially increase the cost to us of terminating the Management Agreement without cause, which may limit our ability to end our relationship with KL as the Manager. The payment of the Termination Fee could have a material adverse effect on our financial condition, including our ability to pay distributions to our stockholders. As such, if we terminate the Management Agreement other than for cause, we are obligated to pay KL the Termination Fee which can be substantial. For these reasons, the terms of the Management Agreement, including the Termination Fee may discourage us from replacing the Manager. Any adverse changes in the financial health of KL or its affiliates or our relationship with them could hinder our operating performance and the return on your investment. We are dependent on KL to manage our operations and acquire and manage our portfolio of land and other real estate assets. Under the direction of our Board, KL makes all decisions with respect to the management of our business operations and life as a public company. KL depends upon the fees and other compensation that it receives from us in connection with managing Millrose to conduct its own operations. Any adverse changes in the financial condition of KL or its affiliates, or our relationship with KL, could hinder its ability to successfully manage our operations and our portfolio of investments, which would adversely affect us and our stockholders. There are significant potential conflicts of interest that could affect our business returns. As a result of our arrangements with KL, there may be times when KL or its affiliates have interests that differ from those of our stockholders, giving rise to a conflict of interest. For example, there may be potential conflicts of interest if we need to compete for the time and services of personnel from KL that work for us and our subsidiaries, as none of our officers are required by any agreement to dedicate a specified allocation of their time to Millrose, or if the compensation payable by us to KL for their services may not be on market terms and may be payable whether or not our stockholders receive any distributions. KL is an affiliate and wholly-owned subsidiary of Kennedy Lewis. Kennedy Lewis has a long business relationship with Lennar and has existing Land Banking engagements with Lennar through other entities. Prior to the Spin-Off, Kennedy Lewis was acting as a strategic advisor to Lennar in the structuring of the Spin-Off, the formation of Millrose and Millrose Holdings, and the preparation of the various agreements and documentation related to the Spin-Off and Millrose’s relationship with Lennar following the Spin-Off, for which it received no payment. Kennedy Lewis has also been involved in negotiating with Lennar the terms of the Management Agreement, including the amount of the Management Fee. Although Kennedy Lewis was involved in such capacities as Lennar’s strategic advisor in connection with the Spin-Off, prior to the Spin-Off, Kennedy Lewis (either directly or through KL) was not acting in any capacity on Millrose’s behalf, including with respect to the negotiations of the Lennar Agreements with Lennar and the preparation of Millrose’s organizational documents and corporate policies. As such, in each case, Kennedy Lewis’ involvement and consultation was as a strategic advisor to Lennar regarding the Spin-Off, and not on behalf of Millrose. Given Kennedy Lewis’s relationship with Lennar, who initially is our primary and largest customer and our major primary customer for the foreseeable future, there may arise significant potential conflicts of interest if KL needs to renegotiate the terms of any Lennar Agreements with Lennar. 72 Table of Contents Further, KL’s team serves or may serve as officers, directors or principals of entities that operate in the same or a related line of business as we do, or of investment funds managed by Kennedy Lewis or its affiliates. Similarly, Kennedy Lewis or its affiliates may have other customers with similar, different or competing business objectives. While KL does not intend to manage any other business or entity other than Millrose (including Millrose’s subsidiaries), Kennedy Lewis, an affiliate and parent company of KL, has other subsidiaries like KL that manage various other businesses, private funds and other entities, including those that also provide Land Banking in some capacity (including residential Land Banking). Kennedy Lewis’ fees for those services may exceed KL’s net income from acting as our Manager. In serving in these multiple capacities, Kennedy Lewis or its affiliates may have obligations to other customers or investors in those entities, the fulfillment of which may not be in the best interest of us or our stockholders. For example, the management team of KL has, and will continue to have, management responsibilities for investment funds, accounts or other investment vehicles managed or sponsored by Kennedy Lewis or its affiliates. Our business objectives may overlap with the business objectives of such affiliated investment funds, accounts or other investment vehicles. As a result, those individuals may face conflicts in the allocation of business opportunities among us and other investment funds or accounts advised by or affiliated with Kennedy Lewis. KL does directly manage any entities other than Millrose. However, Kennedy Lewis, an affiliate and the parent of KL, owns other subsidiaries that are substantially similar to KL and manage other companies, including potential competitors and companies maintaining REIT status, in the residential real estate industry, which are providing, or may provide, Land Banking. See “Part III, Item 13. Certain Relationships and Related Transactions, and Director Independence—Transactions with our Manager” for more information. We may seek business opportunities to provide the HOPP’R to Lennar Related Ventures and from Other Customers. In the event any of the HOPP’R arrangements with any Lennar Related Ventures and Other Customers requires us, or gives us the flexibility to, identify potential Future Property Assets for consideration to our customers, KL, as our Manager, is responsible for searching for and identifying such Future Property Assets and business opportunities on our behalf. These Future Property Assets and business opportunities may also represent strategic opportunities for other investment funds, accounts or investment vehicles that are advised by or affiliated with KL or Kennedy Lewis. In such cases, KL must allocate business opportunities among eligible accounts in a manner consistent with the Allocation Policy. However, we can offer no assurance that such opportunities are allocated to us fairly or equitably in the short-term or over time. Additionally, it is possible we could pursue strategic or financing transactions with affiliates of KL or with affiliates of KL acting as advisors. In the Management Agreement with KL, we acknowledge that KL may engage in other activities or businesses and act as the manager to any other person or entity (including REITs) even though such person or entity has business acquisition policies and objectives similar to our policies and objectives, and we are not entitled to preferential treatment in receiving information, recommendations and other services from KL. Because Lennar’s subsidiary (or any future owner of the HOPP’R Rights) may license the HOPP’R Rights to other land banks and other external managers that manage land banks, our business could suffer, as we might no longer be the only publicly traded entity using the HOPP’R. Our business relies on our ability to provide the HOPP’R, including the Recycled Capital HOPP’R, to our customers, and we may lose our competitive advantage against other land banks if other entities in the future also provide the HOPP’R to their customers. Accordingly, we may compete with and lose business opportunities to such other entities. We cannot be sure that our governance guidelines, or other procedural protections we adopt will be sufficient to enable us to identify, adequately address or mitigate actual or alleged conflicts of interest or ensure that our transactions with related persons are made on terms that are at least as favorable to us, as those that would have been obtained with an unrelated person. KL maintains a contractual as opposed to a fiduciary relationship with us. KL’s liability will be limited under the Management Agreement, and we have agreed to indemnify the Manager against certain liabilities. Under the Management Agreement, KL does not assume any responsibility to us other than to render the services called for under that agreement, and it is not responsible for any action of our Board in following or 73 Table of Contents declining to follow KL’s advice or recommendations as our Manager. Even though officers recommended by KL and appointed by our Board owe Millrose and its stockholders duties under Maryland law in their capacity as Millrose’s officers, which may include the duty to exercise reasonable care in the performance of such officers’ responsibilities, as well as the duties of loyalty, good faith and candid disclosure, KL as the Manager maintains a contractual as opposed to a fiduciary relationship with us. In addition, we have agreed to indemnify KL and each of its officers, directors, members, managers and employees from and against any claims or liabilities, including reasonable legal fees and other expenses reasonably incurred, arising out of or in connection with our business and operations or any action taken or omitted on our behalf pursuant to authority granted by the Management Agreement, except where attributable to gross negligence, willful misconduct, bad faith or reckless disregard of such person’s duties under the Management Agreement. These protections may lead KL to act in a riskier manner when acting on our behalf than it would when officer for its own account. We are party to transactions with related parties that may increase the risk of allegations of conflicts of interest. We are party to transactions with related parties, including Lennar and KL, which is an affiliate and wholly-owned subsidiary of Kennedy Lewis. Our agreements with related parties or in respect of transactions among related parties may not be on terms as favorable to us as they would have been if they had been negotiated among unrelated parties. Our stockholders or other related parties may challenge any such related party transactions. If any challenges to related party transactions were to be successful, we might not realize the benefits expected from the transactions being challenged. Moreover, any such challenge could result in substantial costs (and certain costs related to litigation would not be paid for by KL pursuant to the Management Agreement) and a diversion of management’s attention that could have a material adverse effect on our reputation, business and growth and could adversely affect our ability to realize the benefits expected from the transactions, whether or not the allegations have merit or are substantiated. KL faces conflicts of interest relating to the fee structure under the Management Agreement, which could result in actions that are not necessarily in the long-term best interest of our stockholders. Under the Management Agreement, because KL, as our Manager, is entitled to receive substantial compensation regardless of performance, based on the aggregate size of the Millrose Tangible Assets, KL’s interests are not wholly aligned with those of our stockholders. In that regard, KL could be motivated to recommend riskier or more speculative investments, including significant acquisition of additional land assets, that would entitle KL to higher fees. For example, because the Management Fee payable to KL is based on our total land and other real estate assets, KL may have an incentive to use a high level of leverage or to acquire land assets on less than favorable terms in order to increase the total amount of land and other real estate assets under management. In addition, KL’s ability to receive higher fees and reimbursements depends on our continued investment in land assets and other real estate assets. Therefore, the interest KL has in receiving an increased Management Fee may conflict with the interest of our stockholders in earning returns on their investment in our common stock. KL and its officers and employees face competing demands relating to their time, and this may cause our operating results to suffer. KL and its officers and employees and their respective affiliates are key personnel, general partners, sponsors, managers, owners and advisers of other land and other real estate asset investment programs, including investment products sponsored by affiliates of Kennedy Lewis, some of which have business objectives and legal and financial obligations similar to ours and may have other business interests, as well. Additionally, Kennedy Lewis manages other entities that do Land Banking that could compete with us for opportunities and resources. In particular, our Chief Executive Officer and President is a Managing Partner of Kennedy Lewis and a member of the investment committee of funds advised by Kennedy Lewis. While our Chief Executive Officer is expected to devote a substantial amount of time to Millrose, there is no requirement for our Chief Executive Officer to 74 Table of Contents dedicate a specific amount of time to Millrose. Our Chief Financial Officer is a full-time employee of Kennedy Lewis. While it is currently expected that our Chief Financial Officer does not have any other roles at Kennedy Lewis while working as our Chief Financial Officer, there is no requirement for our Chief Financial Officer to be fully dedicated to Millrose at all times. Because these persons have competing demands on their time and resources and are not required under the Management Agreement to dedicate any specified allocation of time to Millrose, they may have conflicts of interest in allocating their time between our business and these other activities. If this occurs, the returns on our investments may suffer. We may be at an increased risk for dissident stockholder activities due to perceived conflicts of interest arising from our external management structure and relationships. Companies with external management may more often be the target of dissident stockholder proposals and stockholder litigation alleging conflicts of interest in their business dealings. The various relationships noted above may precipitate such activities. Certain proxy advisory firms which have significant influence over the voting by stockholders of public companies in the future may recommend that stockholders withhold votes for the election of our incumbent directors, vote against our say on pay vote or other management proposals or vote for stockholder proposals that we oppose. These recommendations by proxy advisory firms in the future might affect the outcome of future director elections to our Board and votes on our say on pay or other stockholder votes, which may increase stockholder activism and litigation. These activities, if instituted against us, could result in substantial costs and diversion of management’s attention and could have a material adverse impact on our reputation and business. General Risk Factors Our business, financial condition and results of operations could suffer in the event of system failures or cybersecurity attacks. We rely on KL, as our Manager, for all of our internal technology systems and cybersecurity procedures and oversight. As a newly-formed corporation with no prior business operations, we will be implementing and testing our security measures and a disaster recovery plan for our internal and hosted information technology systems. Our systems may be vulnerable to damages from any number of sources, including energy blackouts, natural disasters, terrorism, war, telecommunication failures and cybersecurity attacks, such as malware, ransomware, or unauthorized access. Any system failure or accident that causes interruptions in our operations or the operations of the Manager could result in a material disruption to our business. We may incur additional costs to remedy damages caused by such disruptions. Third-party security events at our Manager or any service providers could also impact our data and operations via unauthorized access to information or disruption of services which may ultimately result in losses. Despite having training, detection systems and response procedures, an increase in cyber-attacks may create disruption to our business, financial condition and results of operations, as well as exacerbate our reputational risk. We are also depending on the relevant training, detection systems and response procedures delivered by KL to its employees. In addition, KL does not have any experience with managing a public company where public scrutiny and cyber-attacks might be more frequent. The growing frequency and sophistication of cyberattacks across the market may lead to increased costs to protect our infrastructure and respond to any events, including additional personnel, consultants and protection technologies. Any compromise of our security or KL’s security could result in a violation of applicable privacy and other laws, unauthorized access to information of ours and others, significant legal and financial exposure, damage to our reputation, loss or misuse of the information and a loss of confidence in our security measures, which could harm our business. Additionally, remediation costs for security events may not be covered by our insurance. In addition, any material cyberattacks will require us to publicly disclose such material cyberattacks in accordance with SEC rules. 75 Table of Contents ESG initiatives, requirements and market expectations may impose additional costs and expose us and our customers to new risks. There is an increasing focus from regulators, investors, and certain of our and our customers’ stakeholders concerning corporate sustainability, particularly as our business centers around land assets. For example, California recently enacted a climate focused disclosure law, and the SEC adopted (and as of the date of this Form 10-K paused the implementation of) climate disclosure regulations, both of which may require us to focus significant time and resources on behalf of ourselves and our customers to comply with these new requirements, and we may incur significant costs in compliance with such rules. Some investors may use ESG factors to guide their investment strategies and, in some cases, may choose not to invest in us, or otherwise do business with us, if they believe our or our customers’ policies relating to corporate responsibility are inadequate. Third party providers of corporate responsibility ratings and reports on companies have increased in number, resulting in varied and in some cases inconsistent standards. In addition, the criteria by which companies’ corporate responsibility practices are assessed are evolving, which could result in greater expectations of us and our customers and cause us and our customers to undertake costly initiatives to satisfy such new criteria. Alternatively, if we or our customers, including Lennar, elect not to or are unable to satisfy such new criteria or do not meet the criteria of a specific third-party provider, some investors may conclude that our or our customers’ policies with respect to corporate responsibility are inadequate. We may face reputational damage in the event that our or our customers’ corporate responsibility procedures or standards do not meet the goals or the standards set by various constituencies. If we and our customers fail to comply with ESG related regulations and to satisfy the expectations of investors and our customers’ stakeholders, or our or our customers’ announced goals and other initiatives are not executed as planned, our reputation could be adversely affected, and our business, financial condition or results of operations, and our ability to grow our business, may be negatively impacted. In addition, we may incur significant costs in attempting to comply with regulatory requirements, ESG policies or third-party expectations or demands and we may not be successful in effectively complying with regulatory requirements, ESG policies or third-party expectations. We may also receive pushback from other stakeholders regarding any initiatives related to ESG matters. For example, in January 2025, President Trump signed a number of executive orders focused on diversity, equity and inclusion matters, which indicate continued scrutiny of such initiatives and may implicate the initiatives of non-governmental entities, including publicly traded companies. If we do not successfully manage expectations across varied stakeholder interests or we experience conflicts between actual or proposed governmental regulations and stakeholder expectations, it could erode stakeholder trust or impact our reputation, and our financial results may suffer. In addition, even if we are effective at addressing such concerns, we may experience increased costs as a result of balancing competing interests related to ESG matters and executing upon any ESG goals, which costs may not be offset by any benefit to our reputation, and which could have an adverse impact on our business and financial condition. Artificial intelligence (“AI”) and other machine learning techniques could increase competitive, operational, legal and regulatory risks to our business in ways that we cannot predict. The use of AI by us and others, and the overall adoption of AI throughout society, may exacerbate or create new and unpredictable competitive, operational, legal and regulatory risks to our business. There is substantial uncertainty about the extent to which AI will result in dramatic changes throughout the world, and we may not be able to anticipate, prevent, mitigate or remediate all of the potential risks, challenges or impacts of such changes. These changes could potentially disrupt, among other things, our business model, investment strategies and operational processes. Some of our competitors may be more successful than us in the development and implementation of new technologies, including services and platforms based on AI, to improve their operations. If we are unable to adequately advance our capabilities in these areas or do so at a slower pace than others in our industry, we may be at a competitive disadvantage. 76 Table of Contents If the data we, or third parties whose services we rely on, use in connection with the possible development or deployment of AI is incomplete, inadequate or biased in some way, the performance of our business could suffer. In addition, recent technological advances in AI both present opportunities and pose risks to us. Data in technology that uses AI may contain a degree of inaccuracy and error, which could result in flawed algorithms in various models used in our business. The volume and reliance on data and algorithms also make AI more susceptible to cybersecurity threats, including data poisoning and the compromise of underlying models, training data or other intellectual property. Our personnel or the personnel of our service providers could, without being known to us, improperly utilize AI and machine learning-technology while carrying out their responsibilities. This could reduce the effectiveness of AI technologies and adversely impact us and our operations to the extent that we rely on the AI’s work product. There is also a risk that AI may be misused or misappropriated by third parties we engage. For example, a user may input confidential information, including material non-public information or personally identifiable information, into AI applications, resulting in the information becoming a part of a dataset that is accessible by third-party technology applications and users, including our competitors. Further, we may not be able to control how third-party AI that we choose to use is developed or maintained, or how data we input is used or disclosed. The misuse or misappropriation of our data could have an adverse impact on our reputation and could subject us to legal and regulatory investigations or actions or create competitive risk. In addition, the use of AI by us or others may require compliance with legal or regulatory frameworks that are not fully developed or tested, and we may face litigation and regulatory actions related to our use of AI. There has been increased scrutiny, including from global regulators, regarding the use of “big data,” diligence of data sets and oversight of data vendors. Our ability to use data to gain insights into and manage our business may be limited in the future by regulatory scrutiny and legal developments. Global economic and political instability, geopolitical conflicts, and changes in U.S. trade policies, including tariffs, could adversely affect our business, financial condition, or results of operations. Our business could be adversely affected by unstable economic and political conditions within the U.S. and foreign jurisdictions, geopolitical conflicts, and changes in trade policies. For example, the ongoing conflict between Russia and Ukraine, conflicts in the Middle East, and uncertainty regarding future trade relations between the U.S. and key trading partners could disrupt global supply chains, increase material costs, and contribute to inflationary pressures. While we do not have direct customer or supplier relationships in these regions, sanctions, export controls, cyberattacks, and disruptions to energy markets could indirectly impact our business and the cost of goods necessary for development of Homesites and related construction. In addition, recent tariffs imposed or threatened by President Trump on imported goods, including construction materials and other critical supplies, could increase our costs and reduce availability of necessary materials. These tariffs, as well as potential retaliatory measures by other countries, may further impact global trade flows, exacerbate inflation, and contribute to higher interest rates or general economic uncertainty. Such factors could negatively impact our business partners, employees, and customers or otherwise adversely affect our financial condition and results of operations. Risks Related to Our Governance Structure Our dual-class capital structure may adversely affect the market price of our Class A common stock and in turn the value of our Class B common stock. Pursuant to our Charter, we have two classes of common stock: Class A common stock and Class B common stock. Our Class A common stock is listed on NYSE and publicly traded under the symbol “MRP”. We have no intention of listing our Class B common stock at this or any other time. Our Class B common stock has ten votes for each share of Class B common stock held in the holder’s name, except when voting together with 77 Table of Contents the holders of the Class A common stock, each holder of record of Class B common stock is entitled to the greater of (i) ten votes per share and (ii) that number of votes per share of Class B common stock that would entitle the outstanding shares of Class B common stock to cast, in the aggregate, 35% of the votes entitled to be cast on the matter, whereas our Class A common stock has one vote per share. Subject to the provisions of the Charter, with respect to all matters upon which stockholders are entitled to vote, the holders of the outstanding shares of Class A common stock and the holders of the outstanding shares of Class B common stock will vote together without regard to class (other than as to the number of votes per share). Notwithstanding the foregoing, so long as there are any shares of Class B common stock outstanding, any amendment to the Charter (except for those amendments permitted to be made without stockholder approval under Maryland law or by specific provision in the Charter) must be approved by the affirmative vote of the holders of two-thirds in voting power of the Class A common stock and Class B common stock, voting together without regard to class. Once there are no longer any shares of Class B common stock outstanding, the Charter may be amended only if the amendment is approved by the affirmative vote of stockholders entitled to cast a majority of all of the votes entitled to be cast on the matter. Additionally, any merger, consolidation, sale of all or substantially all of our assets or other business combination involving Millrose that is submitted for approval of the Millrose’s stockholders must be approved by both (i) a majority of the voting power of the votes entitled to be cast by all stockholders of Class A common stock and Class B common stock, voting together without regard to class, and (ii) a majority of the total outstanding votes entitled to be cast by all stockholders of Class B common stock, voting as a separate class. In addition, so long as any shares of Class B common stock are outstanding, Millrose shall not, without the affirmative vote of at least two-thirds of the shares of Class B common stock outstanding, voting separately as a class, issue additional shares of Class B common stock (other than in connection with dividends or other distributions paid with shares of Class B common stock solely to holders of Class B common stock). As a result, holders of our Class B common stock (which is currently held almost entirely by the Miller Family, as discussed below) have the ability to prevent the Company from taking actions that may be viewed negatively by the Miller Family but might otherwise be viewed by other stakeholders as in the interests of the Company and our stockholders. As a result, the holders of our Class B common stock may have the ability to control the outcome of certain matters requiring stockholder approval for the foreseeable future, including the election of directors, even if their stock holdings represent less than a majority of the outstanding shares of our common stock. This concentration of ownership will limit the ability of other stockholders to influence corporate matters and may cause us to make strategic decisions that could involve risks to you or that may not be aligned with your interests. This influence may adversely affect the market price of our Class A common stock and in turn the value of our Class B common stock. In addition, this may prevent or discourage unsolicited acquisition proposals or offers for our common stock that you may feel are in your best interest as one of our stockholders. A significant portion of the voting power of our common stock is held by the Miller Family (taking into account the voting power allocable to the Millrose stock that Lennar retained in the form of Class A common stock, even though Lennar has agreed not to vote that stock), whose interests may differ from or conflict with the interests of our other stockholders. Our Class B common stock will convert automatically into Class A common stock, on a one-for-one basis, upon the approval of the conversion, in whole, but not in part, of all shares of Class B common stock, then outstanding by the holders of a majority of the outstanding shares of Class B common stock. If that occurs, Millrose will no longer be authorized to issue Class B common stock. Individual shares of Class B common stock cannot be converted into Class A common stock. In addition, while we do not currently expect to issue any additional shares of Class B common stock, and any such issuance requires the approval of the holders of the Class B common stock, any future issuances of Class B common stock would be dilutive to both holders of our Class A common stock and Class B common stock. Such issuances would also reduce the voting power of our Class A common stock as compared to our Class B common stock and could further concentrate the voting power of holders of our Class B common stock relative to holders of our Class A common stock. Additionally, so long as there are any shares of Class B common stock outstanding, and notwithstanding any future issuances of Class A common stock, holders of 78 Table of Contents Class A common stock will not be entitled to cast more than 65% of the votes entitled to be cast by the holders of common stock and any other classes or series of stock entitled to vote with the common stock. Holders of Class B common stock may be entitled to cast more than 35%, and holders of Class A common stock may be entitled to cast less than 65%, of the votes entitled to be cast by the holders of common stock and any other classes or series of stock entitled to vote with the common stock, if the number of outstanding shares of Class B common stock multiplied by 10 (the “Class B Initial Vote”) is greater than 35% of the number of outstanding shares of Class A common stock plus the Class B Initial Vote. It is possible that our dual-class structure, combined with the concentrated influence of our Class B common stock holders, will result in a lower or more volatile market price of our Class A common stock or in adverse publicity or other adverse consequences. Some investors may not invest in our Class A common stock as a result of our dual-class capital structure and our overall governance profile, which may adversely affect the trading price of our Class A common stock. Certain index providers have announced restrictions on including companies with multiple share class structures in certain of their indices. For example, in July 2017, FTSE Russell and Standard & Poor’s announced that they would cease to allow most newly public companies utilizing dual or multi-class capital structures to be included in their indices. Under the announced policies, our dual-class capital structure makes us ineligible for inclusion in any of these indices. Although S&P Dow Jones, a provider of widely followed stock indices, reversed its prior decision to exclude companies with multiple share classes, such as ours, in certain of their indices, and we have been included in the S&P SmallCap 600, there is no guarantee that our Class A common stock will be included in any additional Standard and Poor’s index, despite their eligibility. The Council of Institutional Investors remains strongly opposed to dual-class structures and some investors may continue to avoid investing in companies with dual-class structures like ours. In addition, several stockholder advisory firms oppose the use of multiple class structures. As a result, our Class A common stock may not be included in certain stock indices and may cause stockholder advisory firms to publish negative commentary and recommendations about our corporate governance practices (including recommendations that stockholders vote against re-election of directors) or otherwise seek to cause us to change our capital structure. Given the sustained flow of investment funds into passive strategies that seek to track certain indices, exclusion from stock indices would likely preclude investment by many of these funds and could make our Class A common stock less attractive to other investors. Additionally, any actions or publications by stockholder advisory firms critical of our corporate governance practices or capital structure could also adversely affect the value of our Class A common stock and in turn the value of our Class B common stock. As a result, the market price of our Class A common stock, and in turn the value of our Class B common stock, could be adversely affected. Lennar, as the original parent company of Millrose and the initial contributor of the Business Assets to Millrose, has certain Founder’s Rights, which are exclusive to Lennar. These rights, pursuant to the Founder’s Rights Agreement, include the Management Succession Consent Right, the Effective Equity Price Protection Right, the Enforcement Rights, the Applicable Rate Adjustment Right, the Capital Priority Right, the Secured Financing Collateral Consent Right, and the Pause Period Designation Right, among others (see “Part III, Item 13. Certain Relationships and Related Transactions, and Director Independence—Transactions with Lennar—Founder’s Rights Agreement” for a full description of the Founder’s Rights). The Founder’s Rights granted to Lennar could deter potential Other Customers from doing business with us and could deter potential investors, which could adversely affect the value of our Class A common stock and in turn the value of our Class B common stock. 79 Table of Contents The Miller Family, members of which are substantial stockholders of Lennar, has substantial voting power with regard to us, and may be able to cause us to do things that are favorable to Lennar. The Miller Family has approximately 43% voting power (not taking into account the voting power allocable to the Millrose stock that Lennar retained in the form of Class A common stock). While Millrose’s Class A common stock is listed on the NYSE, Millrose’s Class B common stock is not listed on any securities exchange or quoted on any quotation system. Shares of our Class B common stock are highly illiquid and for most investors appropriate only as a long-term investment, and therefore investors may need to hold Class B common stock indefinitely. As such, a potentially significant amount of voting power over our common stock is held by the Miller Family, whose interests may differ from or conflict with the interests of our other stockholders. The Miller Family has the ability to influence our affairs and may have the ability to exercise control over them, including the election and removal of directors and other matters submitted to our stockholders for approval, amendments to our Charter and our Bylaws, and significant transactions, if they are presented to our stockholders for approval. As long as the Miller Family has a majority voting power of our common stock, the Miller Family will also have the power to impede or cause a change in control, which could, among other things, discourage a potential acquirer from attempting to obtain control of us in a manner that provides a control premium to any stockholders other than the Miller Family. Moreover, in such a change of control, stockholders are not entitled to dissenters’ rights of appraisal under our Charter or applicable Maryland law unless our Board determines that such rights apply. In addition to its majority voting power of our common stock, the Miller Family is to exert significant influence on our affairs, including everything described above, by virtue of their relationship with Lennar and Lennar’s relationship with Kennedy Lewis. Given Mr. Miller’s role as Executive Chairman and Co-Chief Executive Officer of Lennar, it is possible that the Miller Family’s interests may, in some circumstances, conflict with the interests of our other stockholders. In addition, because of our dual-class structure, the Miller Family may exert significant influence on the election of our Board and may be able to elect the members of our Board. Pursuant to our Charter, any merger, consolidation, sale of all or substantially all of our assets and other business combinations involving Millrose that is submitted for approval of the Millrose stockholders require a majority vote of Class A common stock holders and Class B common stock holders, voting together without regard to class, and majority vote of Class B common stock holders, voting as a separate class. Given that the Class B common stock is held almost entirely by the Miller Family, the Miller Family may have significant influence over such matters. This concentrated control limits the ability of other stockholders to influence corporate matters and, as a result, we may take actions that our stockholders do not view as beneficial, which could adversely affect the market price of our Class A common stock and in turn the value of our Class B common stock. Various conflicts of interest between Lennar, the Miller Family and us could arise. Certain of our directors, even if independent, may also own stock in Lennar, and such ownership could create or appear to create potential conflicts of interest when those directors are faced with decisions that could have different implications for Lennar and us (including Millrose Holdings). Potential conflicts of interest could also arise if we enter into any new commercial arrangements with Lennar or with Mr. Miller. Millrose and Millrose Holdings entered into various agreements to govern our relationship with Lennar, including the Master Program Agreement, Master Option Agreement, Founder’s Rights Agreement and others described under “Part III, Item 13. Certain Relationships and Related Transactions, and Director Independence—Transactions with Lennar.” The agreements between Lennar, Millrose and Millrose Holdings were not based on arm’s-length negotiations and were not approved by any of our independent directors as these were executed prior to the date of the Spin-Off. In addition, Mr. Miller had significant influence in structuring the Spin-Off, along with his affiliates. It is possible that we could have negotiated more favorable terms of the Lennar Agreements if we had engaged in arm’s length negotiations with Lennar. See “Part III, Item 13. Certain Relationships and Related Transactions, and Director Independence—Transactions with Lennar.” 80 Table of Contents Our rights and the rights of our stockholders to recover claims against our directors and officers are limited, which could reduce your and our recovery against them if they cause us to incur losses. Maryland law provides that directors have no liability in their capacity as directors if they perform their duties in good faith, in a manner they reasonably believe to be in Millrose’s best interest and with the care that an ordinarily prudent person in a like position would use under similar circumstances. As permitted by the MGCL, our Charter limits the liability of our directors and officers to us and our stockholders for money damages, except for liability resulting from: • actual receipt of an improper benefit or profit in money, property or services; or • a final judgment based upon a finding of active and deliberate dishonesty by the director or officer that was material to the cause of action adjudicated. In addition, our Charter authorizes us, and our Bylaws require us, to indemnify our directors and officers and to pay or reimburse their reasonable expenses in advance of final disposition of a proceeding for losses they may incur by reason of their service in those capacities unless their act or omission was material to the matter giving rise to the proceeding and was committed in bad faith or was the result of active and deliberate dishonesty, they actually received an improper personal benefit in money, property or services or, in the case of any criminal proceeding, they had reasonable cause to believe the act or omission was unlawful. We entered into indemnification agreements with the directors and officers that are described herein. As a result, we and our stockholders may have more limited rights against our directors and officers than might otherwise exist under common law. Accordingly, in the event that actions taken by any of our directors or officers are immune or exculpated from, or indemnified against, liability but which impede our performance, our stockholders’ ability to recover damages from that director or officer will be limited. Any indemnification of our officers will also be subject to, and handled in accordance with, the Management Agreement and any ancillary agreements with KL. We may not have sufficient funds to satisfy indemnification claims of our officers and directors. Our Bylaws include indemnification protections for our officers and directors and we entered into indemnification agreements with the officers and directors that are described herein. Accordingly, any indemnification provided will be able to be satisfied by us only if we have sufficient funds. Our obligation to indemnify our officers and directors may discourage stockholders from bringing a lawsuit against our officers or directors for breach of their duties. These provisions also may have the effect of reducing the likelihood of derivative litigation against our officers and directors, even though such an action, if successful, might otherwise benefit us and our stockholders. Furthermore, a stockholder’s investment may be adversely affected to the extent we pay the costs of settlement and damage awards against our officers or directors pursuant to these indemnification provisions. Any indemnification of our officers will also be subject to, and handled in accordance with, the Management Agreement and any ancillary agreements with KL. Our Charter and Bylaws, along with applicable provisions of Maryland law, include certain anti-takeover defense measure provisions that may make a merger, tender offer or proxy context difficult, which could depress the market price of our Class A common stock and in turn the value of our Class B common stock. In addition to any applicable anti-takeover defense measure provisions afforded under Maryland law, our Charter and Bylaws include certain provisions that may discourage, delay or prevent a change in control by prohibiting us from engaging in a business combination or an acquisition of Millrose, including provisions that: • authorize our dual-class capital structure, which provides our holders of Class B common stock with the ability to significantly influence the outcome of certain matters requiring stockholder approval, even if they own less than a majority of our outstanding shares of common stock; • for so long as there are any shares of Class B common stock outstanding, require a supermajority vote of the holders of our common stock, voting together without regard to class, to amend our Charter; 81 Table of Contents • provide that vacancies on the Board be filled only by a majority of the directors then serving, even though less than a quorum and whether or not resulting from an increase in the size of the Board, and not by stockholders; • permit the removal of a director or the entire Board only by the affirmative vote of two-thirds of the holders of the votes entitled to be cast in the election of directors; • prohibit cumulative voting; • permit amendments to the Charter, without stockholder approval, to increase or decrease the aggregate number of shares of stock or the number of shares of stock of any class or series we have authority to issue; • permit issuances of authorized but unissued common stock without stockholder approval (other than, except for distributions of Class B common stock to holders of Class B common stock, additional issuances of Class B common stock); • authorize undesignated, or “blank check,” preferred stock, which may contain voting, liquidation, dividend and other rights senior to our common stock and shares of which may be issued without the approval of the holders of our common stock; • establish advance notice procedures for stockholders to nominate candidates for election as directors or to bring matters before an annual meeting or special meeting of stockholders; and • specify that only our Board, the chair of our Board, our chief executive officer or president or, upon the written request of stockholders entitled to cast not less than a majority of the votes entitled to be cast, our secretary can call special meetings of our stockholders. In addition, Lennar has a Management Succession Consent Right. However, there is no guarantee that we will not have a change in control at some point in the future. Lennar’s rights pursuant to the Founder’s Rights Agreement (as described under “Part III, Item 13. Certain Relationships and Related Transactions, and Director Independence—Transactions with Lennar—Founder’s Rights Agreement”) may allow Lennar to influence certain corporate matters and increase the risk that Lennar could use the consent right to hinder or delay Millrose’s ability to carry out its intended business and strategy. As such, the Lennar’s Founder’s Rights may deter other customers from wanting to engage in doing business with Millrose, and could also increase the risk of concern and uncertainty for potential investors, which could depress the market price of our Class A common stock and in turn the value of our Class B common stock. Maryland law may limit the ability of a third party to acquire control of us. The MGCL provides protection for Maryland corporations against unsolicited takeovers by limiting, among other things, the duties of the directors in unsolicited takeover situations. The duties of directors of Maryland corporations do not require them to (a) accept, recommend or respond to any proposal by a person seeking to acquire control of the corporation, (b) authorize the corporation to redeem any rights under, or modify or render inapplicable, any stockholder rights plan, (c) make a determination under the Maryland Business Combination Act, or (d) act or fail to act solely because of the effect the act or failure to act may have on an acquisition or potential acquisition of control of the corporation or the amount or type of consideration that may be offered or paid to the stockholders in an acquisition. Moreover, under the MGCL, the act of a director of a Maryland corporation relating to or affecting an acquisition or potential acquisition of control is not subject to any higher duty or greater scrutiny than is applied to any other act of a director. The MGCL also contains a statutory presumption that an act of a director of a Maryland corporation satisfies the applicable standards of conduct for directors under the MGCL. The MGCL also provides that, unless exempted, certain Maryland corporations may not engage in business combinations, including mergers, dispositions of 10% or more of its assets, certain issuances of shares of stock 82 Table of Contents and other specified transactions with an “interested stockholder” or an affiliate of an interested stockholder for five years after the most recent date on which the interested stockholder became an interested stockholder, and thereafter unless specified criteria are met. An interested stockholder is generally a person owning or controlling, directly or indirectly, 10% or more of the voting power of the outstanding stock of the Maryland corporation, unless the stock had been obtained in a transaction approved by its board of directors. The statute permits various exemptions from its provisions, including business combinations that are exempted by our Board prior to the time the interested stockholder becomes an interested stockholder. Our Board has adopted a resolution exempting any business combination involving us and any person from the provisions of this law, provided that such business combination is first approved by our Board, including a majority of directors who are not affiliates or associates of such person. The MGCL also provides that control shares of a Maryland corporation acquired in a control share acquisition have no voting rights except to the extent approved by a vote of stockholders entitled to cast two-thirds of the votes entitled to be cast on the matter. Shares of stock owned by the acquiror, by officers or by employees who are directors of the corporation are excluded from shares of stock entitled to vote on the matter. Control shares are generally voting shares of stock which, if aggregated with all other shares of stock owned by the acquiror or in respect of which the acquiror is able to exercise or direct the exercise of voting power (except solely by virtue of a revocable proxy), would entitle the acquiror to exercise voting power in electing directors within certain ranges of voting power, commencing at one-tenth or more of all voting power. A control share acquisition means the acquisition of issued and outstanding control shares, subject to certain exceptions. The control share acquisition statute does not apply to (1) shares of stock acquired in a merger, consolidation or share exchange if the corporation is a party to the transaction, or (2) acquisitions approved or exempted by the charter or bylaws of the corporation. Our Bylaws contain a provision exempting from the control share acquisition statute any and all acquisitions of shares of our stock by the Millers and Vanguard. These and other provisions of the MGCL could have the effect of delaying, deferring or preventing a proxy contest, tender offer, merger or other change in control, which may have a material adverse effect on our business, financial condition and results of operations. Such restrictions under Maryland law are in addition to any restrictions and limitations relating to compliance with our REIT status or Millrose Holdings’ compliance with its own status requirements. On the other hand, none of these provisions can guarantee that we will not have a change in control at some point in the future and, as discussed above, we could experience significant adverse effects to our business, financial condition and results of operations, as well as our ability to maintain operations if we do experience a change in control event and Lennar exercises its “poison pill” right. Our Bylaws designate any state court of competent jurisdiction within the State of Maryland as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or other agents. Our Bylaws currently provide that unless we consent in writing to the selection of an alternative forum, only a state court of competent jurisdiction within the State of Maryland, or, if such state courts do not have jurisdiction, the United States District Court located within the State of Maryland, will be the sole and exclusive forum for: (1) any Internal Corporate Claim, as such term is defined in the MGCL, or any successor provision thereof, and any action or proceeding asserting any Internal Corporate Claim, including without limitation: (i) any derivative action or proceeding brought on behalf of Millrose, other than any action arising under federal securities laws, (ii) any claim, or action or proceeding asserting a claim, based on an alleged breach of any duty owed by any director or officer or other employee of Millrose to Millrose or to the stockholders of Millrose, or (iii) any claim, or any action or proceeding, asserting a claim, against Millrose or any director or officer or other employee of Millrose arising under or pursuant to any provision of the MGCL or our Charter or our Bylaws, or (2) any action or proceeding asserting a claim against Millrose or any director or officer or other employee of 83 Table of Contents Millrose that is governed by the internal affairs doctrine of Maryland law. The exclusive forum provision of our Bylaws does not apply to any action for which a court sitting in the State of Maryland does not have jurisdiction. The exclusive forum provision of our Bylaws does not establish exclusive jurisdiction in the courts of Maryland for claims that arise under the Securities Act, the Exchange Act or other federal securities laws. Any person or entity purchasing or otherwise acquiring or holding any interest in our shares of common stock shall be deemed to have notice of and to have consented to these provisions of our Bylaws, as they may be amended from time to time. Risks Related to Legal, Regulatory, Tax and Accounting Compliance We might fail to qualify or remain qualified as a REIT. We intend to qualify as a REIT under the Code and believe we will qualify as a REIT. However, REIT status is dependent on compliance with complex tax rules that are subject to change and differing interpretation. Moreover, our Charter provides our Board with the power, under certain circumstances, to revoke or otherwise terminate our REIT election and cause us to be taxed as a regular corporation, without the approval of our stockholders. If we lose our status as a REIT, we will face serious income tax consequences that could substantially reduce the funds available for satisfying our obligations and for distribution to our stockholders because: • Millrose would not be allowed a deduction for distributions to stockholders in computing our taxable income and would be subject to U.S. federal income tax at regular corporate rates; • Millrose would be subject to increased state and local taxes; and • unless Millrose is entitled to relief under statutory provisions, it could not elect to be subject to tax as a REIT for four taxable years following the year during which it was disqualified. Because REIT qualification requires us to meet a number of complex requirements, it is possible that we may fail to fulfill them, and, if we do, our earnings will be reduced by the amount of U.S. federal and other income taxes owed. A reduction in our earnings would affect the amount we could distribute to our stockholders. If we do not qualify as a REIT, we will not be required to make distributions to stockholders, because a non-REIT is not required to pay dividends to stockholders in order to maintain REIT status or avoid an excise tax. In addition, if we fail to qualify as a REIT, all distributions to stockholders will continue to be treated as dividends to the extent of our current and accumulated earnings and profits, although corporate stockholders may be eligible for the dividends received deduction, and individual stockholders may be eligible for taxation at the rates generally applicable to long-term capital gains with respect to distributions. As a result of all these factors, our failure to qualify as a REIT also could impair our ability to implement our business strategy and could adversely affect the value of our common stock. Qualification as a REIT involves the application of highly technical and complex Code provisions for which there are only limited judicial and administrative interpretations. The determination of various factual matters and circumstances not entirely within our control may affect our ability to remain qualified as a REIT. Although we believe that we will qualify as a REIT beginning with our first taxable year ending December 31, 2025, we cannot assure you that we will remain qualified as a REIT for U.S. federal income tax purposes. Additionally, because we have no employees or management of our own and all our operations are run by our Manager and the employees that our Manager appoints for us, our ability to qualify for and maintain REIT status is entirely dependent on our Manager to ensure that we operate in ways that are fully compliant with all applicable REIT Requirements. The employees that our Manager assigns to us may not have extensive experience with managing a REIT or maintaining REIT status for any companies it manages, and our Board has limited recourse (including certain indemnities, limitations on activities, and termination) against KL under the Management Agreement if KL fails to ensure that we follow all applicable requirements to qualify for or maintain our status as a REIT following the Spin-Off. For a more detailed discussion of KL’s duties as our 84 Table of Contents Manager and our recourse under the Management Agreement, see “Part III, Item 13. Certain Relationships and Related Transactions, and Director Independence—Transactions with our Manager—Management Agreement.” Complying with REIT Requirements may require us to forgo otherwise attractive investments or to dispose of otherwise attractive investments. To qualify as a REIT, we must continually satisfy tests concerning, among other things, the sources of our income, the nature and diversification of our assets, the amounts we distribute to our stockholders, and the ownership of our capital stock. In order to meet these tests, we may be required to forgo investments we might otherwise make. Thus, compliance with the REIT Requirements may hinder our performance. In particular, we must ensure that at the end of each calendar quarter, at least 75% of the value of our assets consists of cash, cash items, government securities and qualified REIT real estate assets, including any mortgage loans. The remainder of our investment in securities (other than government securities, securities of Millrose Holdings and any other TRSs, and qualified real estate assets) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer. In addition, in general, no more than 5% of the value of our assets (other than government securities, securities of Millrose Holdings and other TRSs, and qualified real estate assets) can consist of the securities of any one issuer, and no more than 20% of the value of our total assets can be represented by securities of one or more TRSs. If we fail to comply with these requirements at the end of any calendar quarter, we must correct the failure within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions to avoid losing our REIT qualification and suffering adverse tax consequences. As a result, we may be required to liquidate otherwise attractive investments from our portfolio. These actions could have the effect of reducing our income and amounts available for distribution to our stockholders. Even though we intend to qualify as a REIT, we will face tax liabilities that could reduce our cash flows. Even though we intend to qualify for taxation as a REIT, all our land acquisition and development activities will be conducted through one or more TRSs. Millrose Holdings and any other TRSs that we form in the future will be subject to U.S. federal income tax at regular corporate rates, as well as state, and local income taxes. Also, we may be subject to certain U.S. federal, state, and local taxes, or non-U.S. taxes on our income and assets, including taxes on any undistributed income, tax on income from some activities conducted as a result of a foreclosure, and state or local income, property, and transfer taxes. For example, if Millrose fails to satisfy the 75% gross income test, and yet has maintained its qualification as a REIT because certain other requirements have been met, we may be subject to a 100% tax on the net income attributable to the product of (i) the amount of gross income by which it fails the 75% gross income test and (ii) a fraction intended to reflect Millrose’s profitability. We may not be able to make sufficient distributions to avoid excise taxes applicable to REITs. We may also decide to retain capital gains we earn from the sale or other disposition of our property and pay income tax directly on such income. In that event, our stockholders would be treated as if they earned that income and paid the tax on it directly. However, our stockholders that are tax-exempt entities, such as charities or qualified pension plans, would have no benefit from their deemed payment of such tax liability. State, local, and non-U.S. income tax laws may differ substantially from the corresponding U.S. federal income tax laws. Any of these taxes would decrease cash available for distributions to stockholders. Our stockholders are urged to consult their tax advisors regarding the effect of U.S. federal, state, local and non-U.S. tax laws on ownership of our common stock. Our organizational structure, including our ownership of interests in Millrose Holdings and other TRSs in the future, raises certain tax risks. Our current organizational structure consists of a parent company (Millrose), which wholly owns Millrose Holdings, a TRS. Millrose Holdings, in turn, owns, either directly or through intervening subsidiaries, the Property LLCs where all of our land assets are held. 85 Table of Contents A TRS is an entity classified as a corporation for U.S. federal income tax purposes in which a REIT directly or indirectly holds stock, and that has made a joint election with such REIT to be treated as a TRS. A TRS also includes any corporation other than a REIT with respect to which a TRS owns securities possessing more than 35% of the total voting power or value of the outstanding securities of such corporation. Other than some activities relating to lodging and health care facilities, a TRS may generally engage in any business. A TRS is subject to income tax as a regular corporation. We and Millrose Holdings will jointly elect for Millrose Holdings to be a TRS and may form or acquire additional TRSs in the future. Millrose Holdings is, and any TRS we form or acquire in the future will be, subject to corporate income tax at the U.S. federal, state, and local levels (including on taxable income attributable to land acquisition and development activities). These tax liabilities, if material, would diminish the amount of income earned through a TRS that would be distributable to Millrose and ultimately to our stockholders. U.S. federal, state and local corporate income tax rates may be increased in the future, and any such increase would further reduce the amount available for distribution by us to our stockholders from income earned through a TRS after the effective date of any increase in such tax rates. In addition, a 100% excise tax will be imposed on certain transactions between a TRS and its parent REIT that are not conducted on an arm’s-length basis. As a REIT, no more than 25% of our gross income with respect to any year may, in general, be from sources other than certain real estate-related assets. Dividends paid to us from Millrose Holdings or any other TRSs will be considered non-real estate income. We expect the interest income from the Promissory Note between Millrose and Millrose Holdings will be qualifying REIT income, and we will be relying on this income to help us qualify for and maintain Millrose’s REIT status. Therefore, we may fail to qualify as a REIT if the dividends from all of our TRSs, when aggregated with all other non-real estate income with respect to any one year, are more than 25% of our gross income with respect to such year. To continue qualifying as a REIT, we must meet annual distribution requirements, which may force us to forgo otherwise attractive opportunities or borrow funds during unfavorable market conditions. This could delay or hinder our ability to meet our business objectives and reduce your overall return. In order to qualify as a REIT, we must distribute annually to our stockholders at least 90% of our REIT taxable income (which does not necessarily equal net income as calculated in accordance with GAAP), determined without regard to the deduction for dividends paid and excluding net capital gain. We will be subject to U.S. federal income tax on any undistributed REIT taxable income or 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 (i) 85% of our ordinary income, (ii) 95% of our capital gain net income and (iii) 100% of our undistributed income from prior years. These requirements could cause us to distribute amounts that otherwise would be spent on our land acquisition and development business or other investment opportunities, and it is possible that we might be required to borrow funds, possibly at unfavorable rates, or sell assets to fund these distributions. Certain types of assets generate substantial mismatches between REIT taxable income and available cash. As a result, the requirement to distribute a substantial portion of our REIT taxable income could cause us to: (i) sell assets in adverse market conditions; (ii) offer Lennar reductions in the price of exercising its options in order to induce it to accelerate exercise, (iii) raise capital on unfavorable terms; or (iv) distribute amounts that would otherwise be invested in future acquisitions or repayment of debt, in order to comply with REIT Requirements. To the extent that we are required to sell assets in adverse market conditions or raise capital on unfavorable terms, we could be materially and adversely affected. Further, amounts distributed will not be available to fund our operations or further our business objectives. Under certain circumstances, covenants and restrictions imposed by debt facilities may prevent us from making distributions that we deem necessary to comply with REIT Requirements. It is possible that we might not always be able to make distributions sufficient to meet the annual distribution requirements and to avoid U.S. federal income and excise taxes on our earnings while we qualify as a REIT. Furthermore, our inability to make required distributions could threaten our status as a REIT and could 86 Table of Contents result in material adverse tax consequences for us and our stockholders. Alternatively, we may make taxable in-kind distributions of our own stock, which may result in our stockholders paying income taxes with respect to such distributions in excess of any cash they receive or cause us to be required to withhold taxes with respect to such distributions in excess of any cash our stockholders receive. Dividends payable by REITs generally do not qualify for the reduced tax rates available for some dividends. Income from “qualified dividends” payable to U.S. stockholders that are individuals, trusts, or estates is generally subject to tax at reduced rates. Currently, the maximum tax rate applicable to qualified dividend income payable to U.S. stockholders that are individuals, trusts or estates is 20%. Dividends payable by a REIT, however, generally are not eligible for this reduced rate, except to the extent that the REIT’s dividends are attributable to qualified dividends received by the REIT and such REIT designates that portion of its dividends as qualified dividends. Distributions from REITs that are treated as dividends but are not designated as qualified dividends or capital gain dividends are treated as ordinary income. Under currently applicable tax law, for taxable years beginning before January 1, 2026, distributions from REITs that are treated as dividends but are not designated as qualified dividends or capital gain dividends are taxed as ordinary income after the deduction under section 199A of the Code for 20% of the amount of the dividend in the case of certain U.S. non-corporate stockholders. To qualify for this deduction, the U.S. stockholder receiving such dividends must hold the dividend-paying REIT stock for at least 46 days taking into account certain special holding period rules) of the 91-day period beginning 45 days before the stock becomes ex-dividend and cannot be under an obligation to make related payments with respect to a position in substantially similar or related property. Although this does not adversely affect the taxation of REITs or dividends payable by REITs, the more favorable rates applicable to qualified dividends could cause investors who are individuals, trusts or estates to perceive investments in REITs to be relatively less attractive than investments in the stocks of non-REIT corporations that pay dividends, which could adversely affect the value of the shares of REITs, including our common stock. In addition, certain U.S. stockholders may be subject to a 3.8% Medicare tax on dividends payable by REITs. Tax rates applicable to our dividends could be changed in future legislation. The stock ownership restrictions of the Code for REITs and the stock ownership limits in our Charter may inhibit market activity in shares of our stock and restrict our business combination opportunities. Our Charter restricts the acquisition and ownership of shares of our stock above certain thresholds in order to preserve our status as a REIT. Among other limitations on ownership and transfer of shares of our stock, our Charter restricts, with certain exceptions, any person or entity from owning, beneficially or by virtue of the applicable constructive ownership provisions of the Code, more than 9%, in value or in number of shares, whichever is more restrictive, of the outstanding shares of our common stock or 9% in value of the outstanding shares of all classes or series of our stock. A person holding less than 9% of our total outstanding capital stock or common stock may become subject to our Charter restrictions if repurchases by us cause such person’s holdings to exceed 9% of our total outstanding capital stock or common stock. Our Charter provides for an Excepted Holder Limit for the Miller Family to own, beneficially or by virtue of the applicable constructive ownership provisions of the Code, up to 12.8% in the aggregate, in value or in number of shares, whichever is more restrictive, of the outstanding shares of our common stock or the outstanding shares of all classes or series of our stock. Our Charter provides that shares of our capital stock acquired or held in excess of the ownership limits will automatically be transferred to a trust for the benefit of a designated charitable beneficiary, and that any person who acquires shares of our capital stock in violation of the ownership limits is not entitled to any dividends on such shares, to vote such shares or to receive any proceeds from the subsequent sale of such shares in excess of the lesser of the price paid for such shares or the amount realized from the sale (net of any commissions and other expenses of sale). A transfer of shares of our capital stock (including our common stock) in violation of the ownership limits is void ab initio under certain circumstances. Pursuant to our Charter, our Board, by vote of a supermajority of its members, may waive these ownership limits or create new limits. Our Board has provided a waiver of this stock ownership restriction to certain stockholders in connection with the Distribution and to Lennar in connection with the shares of common stock, held in the form of Class A common stock, retained by 87 Table of Contents Lennar after the Distribution. However, our Board may not grant an exemption from these restrictions to any proposed transferee whose ownership of our outstanding stock would result in our being “closely held” within the meaning of Section 856(h) of the Code or otherwise would result in our failing to qualify as a REIT, and any waivers granted will be subject to certain initial and ongoing conditions designed to protect our status as a REIT. These restrictions on transferability and ownership will not apply, however, if our Board determines that it is no longer in our best interest to qualify as a REIT or that compliance with the restrictions is no longer required in order for us to so qualify as a REIT. The ability of the Board to revoke our REIT qualification without stockholder approval may cause adverse consequences to all of our stockholders. Our Charter provides that our Board may revoke or otherwise terminate our REIT election if it determines that it is no longer in our best interests to attempt to qualify, or to continue to qualify, as a REIT, without stockholder approval. If we cease to be a REIT, we will not be allowed a deduction for dividends paid to stockholders in computing our taxable income and will be subject to U.S. federal income tax at regular corporate rates and to state and local taxes, which may have adverse consequences on our total return to our stockholders. New legislation or administrative or judicial action, in each instance potentially with retroactive effect, could make it more difficult or impossible for us to qualify or remain qualified as a REIT. The U.S. federal income tax treatment of REITs may be modified, possibly with retroactive effect, by legislative, judicial or administrative action at any time, which could affect the U.S. federal income tax treatment of an investment in us. The U.S. federal income tax rules dealing with REITs are constantly under review by Congress, the IRS and the U.S. Department of the Treasury, which could result in statutory changes or revisions to regulations and administrative interpretations. There can be no assurance that any such future statutory or regulatory changes will not adversely impact our ability to qualify as a REIT or otherwise adversely affect our business, financial condition or results of operations. Any such changes could have a material adverse effect on an investment in shares of our common stock or on the market price thereof. We cannot predict whether, when or to what extent any new U.S. federal tax laws, regulations, or administrative interpretations will impact us or an investment in our shares. Prospective investors are urged to consult their tax advisors regarding potential future changes to the U.S. federal tax laws on an investment in our stock. Although REITs are generally taxed favorably as compared with entities taxed as regular corporations, it is possible that future legislation would result in a REIT having fewer tax advantages, and it could become more advantageous for a company that invests in real estate to elect to be treated for U.S. federal and state income tax purposes as a regular corporation. As a result, our Charter provides our Board with the power, under certain circumstances, to revoke or otherwise terminate our REIT election and cause us to be taxed as a regular corporation, without the approval of our stockholders. Risks Related to Operating as a Public Company Our Manager is required to devote substantial time to compliance with our public company responsibilities and corporate governance practices. As a public company, we are subject to the reporting requirements of applicable laws and regulations, including the Exchange Act, Sarbanes-Oxley Act and Dodd-Frank Act, and the rules and regulations of the NYSE, which impose various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices. We are entirely reliant on our Manager for compliance with our public company responsibilities. These requirements make some activities more difficult, time-consuming, and costly, and place significant strain on our personnel, systems and resources. Our Manager does not have experience managing a public company and may increase the risk of potential non-compliance. 88 Table of Contents We are relying on the Manager in continuing to evaluate these rules and regulations and cannot predict or estimate the amount of additional costs or the timing of such costs. These rules and regulations are often subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. Our business could be adversely impacted if we have deficiencies in our disclosure controls and procedures or internal control over financial reporting. Under the Sarbanes-Oxley Act, we must maintain effective disclosure controls and procedures and internal control over financial reporting, which require significant resources and management oversight. Ensuring that we have adequate internal financial and accounting controls and procedures in place so that we can produce accurate financial statements on a timely basis is a costly and time-consuming effort that needs to be re-evaluated frequently. Internal control over financial reporting is complex and may be revised over time to adapt to changes in our business, or changes in applicable accounting rules. While the Manager will be responsible for ensuring that we have adequate internal controls over financial reporting, which will be paid for by our Manager and covered under the Management Fee, we will be directly impacted if the Manager fails to identify and implement appropriate internal control procedures. The Management Agreement requires the Manager to ensure that we have internal controls over financial reporting that meet the requirements of federal securities laws. Such internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with generally accepted accounting principles. Our Manager is responsible for ensuring our internal controls and procedures are compliant with applicable laws and regulations, including the Exchange Act, Sarbanes-Oxley Act and Dodd-Frank Act, which requires annual management assessment of the effectiveness of our internal control over financial reporting. Implementing any appropriate changes to our internal controls may distract the Manager and its officers and employees from their business operations, entail substantial costs to modify our existing processes and take significant time to complete. These changes may not, however, be effective in maintaining the adequacy of our internal controls, and the design and effectiveness of our disclosure controls and procedures and internal control over financial reporting may not prevent all errors, misstatements or misrepresentations. The Manager may not have the required experience in monitoring the adequacy of our internal controls as a public company. We cannot assure you that our internal control over financial reporting will be effective in the future or that a material weakness will not be discovered with respect to a prior period for which we had previously believed that internal controls were effective. Any failure to maintain that adequacy, or consequent inability to produce accurate financial statements on a timely basis, could increase our operating costs and harm our business. Deficiencies, including any material weakness, in our internal control over financial reporting that may occur in the future could result in misstatements or restatements of our financial statements or a decline in the price of our securities, which could lead to a loss of investor confidence in us and in the reliability of our financial statements. Matters impacting our internal controls may also cause us to be unable to report our financial data on a timely basis, or may cause us to restate previously issued financial data, and thereby subject us to adverse regulatory consequences, including sanctions or investigations by the SEC, or violations of applicable stock exchange listing rules. If our investors perceive that our internal controls are inadequate or that we are unable to produce accurate and reliable financial statements on a timely basis, we may see negative impacts on the trading price of our Class A common stock and in turn on the value of our Class B common stock, on our ability to raise additional capital, and on our ability to effectively market and sell our service to new and existing customers. Additionally, when we no longer qualify as an emerging growth company, our independent registered public accounting firm is required pursuant to Section 404(b) of the Sarbanes-Oxley Act to attest to the effectiveness of our internal control over financial reporting on an annual basis. If we cannot maintain effective procedures or 89 Table of Contents internal control over financial reporting, or our independent registered public accounting firm cannot provide an unqualified attestation report on the effectiveness of our internal control over financial reporting, investor confidence and, in turn, the market price of our Class A common stock and in turn the value of our Class B common stock could decline. KL does not have prior experience in managing publicly traded companies. While KL has significant experience and expertise in the Land Banking industry and has worked with Lennar in the past in situations related to Land Banking, it does not have prior experience in managing publicly traded companies. Lennar’s selection of KL as the Manager was solely based on their prior working relationship with them and their reliance on KL’s expertise in offering Land Banking. Lennar did not engage in a competitive selection process to evaluate KL against other potential manager candidates, including managers with relevant experience in managing public companies. Kennedy Lewis was engaged to advise Lennar as a strategic advisor in structuring the Spin-Off with the intention that KL would be retained to manage Millrose following the Spin-Off. We rely solely on our Manager for services related to ensuring our compliance with all laws, regulations, rules, policies and practices applicable to public companies (including corporate governance practices). As discussed above, we do not have independent management, employees or other personnel. Except for the relationships described in the Lennar Agreements, following the Spin-Off, Millrose no longer has access to any of Lennar’s support and resources, including Lennar’s operating and governance systems, controls and procedures, as well as Lennar’s infrastructure, personnel and capital resources and insurance coverage except for the Lennar Services. Except for the contractual obligations set forth in the Lennar Agreements, Lennar has no fiduciary, contractual or other obligations or duties to Millrose (or any of its subsidiaries). We are entirely reliant on our Manager to provide us with management services. These services extend beyond management of operations at the Millrose Holdings level and, subject to supervision of the Board, include governance and compliance services at the Millrose level, which is subject to all applicable laws, regulations, rules, policies and practices for publicly traded companies, as well as applicable laws, regulations and other requirements for maintaining our status as a REIT. We engage outside counsel, advisors and experts to assist with our public company compliance, including with respect to reporting and disclosure requirements, controls and compliance requirements, stock exchange rule requirements, among others; however, there can be no assurance that we will be fully compliant with all legal, regulatory, rule and policy requirements to which we are subject at all times. If our Manager fails to adequately manage Millrose and ensure full compliance, or if we are found to be significantly behind traditional Land Banking entities in adopting and implement corporate governance best practices, our business, financial condition or results of operations, along with our reputation, may be impacted. For example, if we are not fully compliant with applicable reporting and disclosure requirements, we may face investigations and enforcement action from the SEC; if we are not compliant with applicable stock exchange listing requirements, we may we face delisting from the NYSE; and if our governance practices are found or perceived to be inconsistent with those of traditional Land Banking entities or other public companies, we could face scrutiny, backlash and suits from our stockholders. Risks Related to Our Common Stock There is currently a limited history of an active trading market for our Class A common stock, which may restrict your ability to sell your shares. There is currently a limited history of an active trading market for our Class A common stock. Furthermore, a robust active trading market for our securities may never develop or, if developed, it may not be sustained. You may be unable to sell your securities unless a market can be established and sustained. Whether an active public 90 Table of Contents trading market for shares of our Class A common stock will develop will depend on a number of factors, including the extent of institutional investor interest in us, the reputation of REITs generally and the attractiveness of their equity securities in comparison to other equity securities (including securities issued by other real estate-based companies), our actual and projected financial results, our distribution policy and general stock and market conditions. Therefore, purchasers of our Class A common stock should have a long-term investment intent and should recognize that it may be difficult to sell the shares, notwithstanding the fact that they are not restricted securities. Our Class B common stock is not listed on any exchange or in any other organized market, and may not trade at all. Our Class B common stock is not listed on any exchange and we have no intent to list it in the future. Without an active market, our Class B common stock might be illiquid assets for which there is not expected to be any secondary market nor is it expected that any will develop in the future. Your ability to transfer shares of Class B common stock may be limited as result. As such, you may need to bear the risks of your investment in Class B common stock indefinitely. Individual shares of Class B common stock cannot be converted into Class A common stock. However, the holders of a majority of the outstanding Class B common stock can cause the entire class to be converted into Class A common stock. If that occurs, Millrose will no longer be authorized to issue Class B common stock. The market price and trading volume of our Class A common stock may be volatile and may face negative pressure, including as a result of future sales or distributions of our Class A common stock. As discussed above, there is a limited history of an active trading market for our Class A common stock. There may be significant fluctuations in the price of our Class A common stock, at least initially, and it is not possible to accurately predict how our Class A common stock will trade. Further, the lack of public company peers may also increase volatility in the market price of our common stock. For many reasons, including the risks identified in this Form 10-K, the market price of our Class A common stock may volatile. These factors may result in short or long-term negative pressure on the value of our common stock. Following the Spin-Off, Lennar owns approximately 20% of the outstanding shares of Millrose’s common stock (in the form of Class A common stock) and expects to dispose of this stock through a subsequent spin-off, split-off, public offering, private sale or any combination of these potential transactions. Additionally, other stockholders may decide to dispose of some or all of our Class A common stock that they received in the Spin-Off, which may generally be sold immediately in the public market. Further, as described under “Part III. Item 13. Certain Relationships and Related Transactions, and Director Independence—Transactions with Lennar—Founder’s Rights Agreement,” Lennar has an Effective Equity Price Protection Right, whereby in the event that Millrose issues additional shares of Class A common stock (or any other equity securities in a manner consistent with its Charter) within 18 months of the date of the Distribution to any Other Customer in exchange for Future Property Assets in a transaction consistent with the Applicable Rate Adjustment Right and with an aggregate value in excess of $500 million at a price per share lower than the price per share received by Lennar for the Business Assets, Millrose must issue an additional number of shares of Class A common stock to Millrose stockholders equal to the number of additional shares the Lennar stockholders who received Millrose common stock at the Distribution Date would have received if the Distribution had been executed at the same price per share as what the Other Customer received in connection with the Subsequent Bulk Assets Contribution, as calculated in the manner described under “Part III, Item 13. Certain Relationships and Related Transactions, and Director Independence—Transactions with Lennar—Founder’s Rights Agreement” and distribute such shares to its stockholders in a stock dividend, subject to approval by the Board and in compliance with Maryland law. Additionally, Millrose and Lennar entered into a Registration Rights Agreement, pursuant to which Lennar has certain demand registration rights to ensure that the Millrose common stock that Lennar temporarily retains will be registered and freely tradeable. If too many Lennar stockholders sell our Class A common stock at the same time or if the Effective Equity Price Protection Right is exercised, our stock price might become overly depressed 91 Table of Contents with the influx of supply, especially if the number of shares being sold saturates the market and there is not enough corresponding demand. The sales of significant amounts of our Class A common stock, or the perception in the market that this may occur, may result in the lowering of the market price of our Class A common stock, and in turn the value of our Class B common stock, which may have a material adverse effect on our business, financial condition and results of operations. In particular, the Effective Equity Price Protection Right is effective for the 18-month period following the Spin-Off, which is a time when the stock price of newly public companies is likely to already be depressed, and so an issuance of a potentially significant amount of additional Class A common stock to Millrose’s stockholders, many of whom may decide to sell into the market following such distribution, would further depress an already likely depressed stock price, potentially leading to a prolonged period of volatility and delay until the stock price increases (if ever). Your voting power in Millrose may be further diluted if we issue more shares of our common stock in the future, including in connection with the acquisition of any Future Property Assets. Although we currently do not have any plans to issue more shares of our common stock (other than pursuant to equity awards pursuant to our 2024 Incentive Plan (as defined below)) or preferred stock, our Charter allows us to issue up to the amount authorized and still unissued as set forth in our Charter without stockholder approval, except that any future issuances of shares of Class B common stock requires approval by the holders of a majority of the Class B common stock then outstanding. We are not required to offer any such additional stock to existing holders of common stock on a preemptive basis. Holders of shares of preferred stock, if authorized and issued, will generally be entitled to receive distributions, both current and in connection with any liquidation, dissolution or winding up, prior to the holders of our common stock. Our Board may elect for us to issue shares of our stock in future public or private offerings, particularly if we require raising additional capital in the market. In accordance with Lennar’s Effective Equity Price Protection Right, Millrose must issue an additional number of shares of Class A common stock to Millrose stockholders equal the number of additional shares the Lennar stockholders who received Millrose common stock at the Distribution Date would have received if the Distribution had been executed at the same price per share as what the Other Customer received in connection with the Subsequent Bulk Assets Contribution, and such shares must be distributed to Millrose’s stockholders in a stock dividend (subject to approval by the Board and in compliance with Maryland law), which could result in an issuance of a significant amount of additional Class A Common stock and further dilution for existing stockholders. See “Part III, Item 13. Certain Relationships and Related Transactions, and Director Independence—Transactions with Lennar—Founder’s Rights Agreement,” for more information. The full calculation of the Effective Equity Price Protection Right can be found in the Founder’s Rights Agreement attached as Exhibit 10.2 to this Form 10-K. We may also issue additional shares of our common stock (our Class A common stock, in most if not all cases) in connection with acquiring any Future Property Assets when entering into new agreements or as part of any ongoing relationships we may have in the future. Any future issuances of common stock, including in connection with future agreements with Other Customers and with equity awards pursuant to our 2024 Incentive Plan (as described under “Part III, Item 11. Executive Compensation—2024 Omnibus Incentive Plan”) or any other incentive plan, or preferred stock, will dilute the holdings and voting power of all existing holders. The perception that we may issue additional common stock may impact the trading price of our Class A common stock and the value of our Class B common stock. In addition, our Board may amend our Charter to increase or decrease the number of authorized shares of stock, or the number of shares of any class or series of stock designated, or reclassify any unissued shares into other classes or series of stock without the necessity of obtaining stockholder approval. All such shares may be issued in the sole discretion of our Board, subject to any NYSE rules and the restrictions on issuing Class B common stock summarized above. We cannot assure you of our ability to pay dividends in the future. As a newly-formed publicly traded company, we have not paid any dividends to date. On March 17, 2025, the Board declared a dividend of $0.38 to be paid to the holders of Class A common stock and Class B common 92 Table of Contents stock as of the close of business on April 4, 2025 and will be paid on April 15, 2025. We intend for our annual dividend to be more than 90% of our REIT taxable income on an annual basis, determined without regard to the dividends paid deduction and excluding any net capital gains. Our ability to pay dividends may be adversely affected by a number of factors, including the risk factors described in this Form 10-K. Dividends will be authorized by our Board and declared by us based upon a number of factors, including actual results of operations, restrictions under Maryland law or applicable debt covenants, our financial condition, our taxable income, the annual distribution requirements under the REIT provisions of the Code, our operating expenses and other factors our Board deems relevant. We cannot assure you that we will achieve investment results that will allow us to make a specified level of cash dividends or year-to-year increases in cash dividends in the future. Furthermore, while we are required to pay dividends in order to maintain our REIT status (as described under “Part II, Item 5. Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities—Dividends”), we may elect not to maintain our REIT status, in which case we would no longer be required to pay such dividends. Moreover, even if we do elect to maintain our REIT status, we may elect to comply with the applicable distribution requirements by distributing, under certain circumstances, a portion of the required amount in the form of shares of our common stock in lieu of cash. If we elect not to maintain our REIT status or to satisfy any required distributions in shares of common stock in lieu of cash, such action could negatively affect our business and financial condition as well as the market price of our common stock. Notwithstanding our current REIT status and any current plans or announcements with respect to dividends, no assurance can be given that we will pay any dividends on shares of our common stock in the future. Our ability to pay dividends is limited by the requirements of Maryland law. Our ability to pay dividends on our common stock is limited by the laws of Maryland. Under Maryland law, a Maryland corporation generally may not make a distribution (including a dividend or redemption) if, after giving effect to the distribution, the corporation would not be able to pay its debts as the debts become due in the usual course of business, or the corporation’s total assets would be less than the sum of its total liabilities plus, unless the corporation’s charter provides otherwise, the amount that would be needed, if the corporation were dissolved at the time of the dividend, to satisfy the preferential rights upon dissolution of stockholders whose preferential rights are superior to those receiving the distribution. Accordingly, we generally may not make a distribution if, after giving effect to the distribution, we would not be able to pay our debts as they become due in the usual course of business or our total assets would be less than the sum of our total liabilities plus, unless our Charter provides otherwise, the amount that would be needed to satisfy the preferential rights upon dissolution of stockholders whose preferential rights are superior to those receiving the distribution. Any dividends or redemption payments may be delayed or prohibited. As a result, the trading price of our Class A common stock and in turn the value of our Class B common stock may decrease, which may have a material adverse effect on our business, financial condition and results of operations. Lennar currently retains ownership of a certain amount of our common stock, and its decisions as to future distributions or dispositions of our common stock, which is out of our control, may have a material adverse impact on the value of our common stock. Lennar owns approximately 20% of the outstanding shares of Millrose’s common stock, in the form of Class A common stock. Lennar will not exercise its voting rights with respect to this stock for as long as it retains the shares, and Lennar expects to dispose of this stock through a subsequent spin-off, split-off, public offering, private sale or any combination of these potential transactions. Lennar has the sole and absolute discretion, subject to applicable law, to determine the terms of, and whether and when to proceed with, any subsequent disposition of the shares of Class A common stock owned by Lennar. Even if Lennar intends to hold Class A common stock for only a limited period of time, we do not have any control over Lennar’s decisions with respect to the Class A common stock they own, and we will be required to cooperate with Lennar to effect any such subsequent disposition pursuant to the Registration Rights Agreement. Even though Lennar has agreed to pay for all related expenses, cooperating with Lennar to effect any distributions or other dispositions could be costly to 93 Table of Contents Millrose if Lennar defaults on its promise does not agree to reimburse us for expenses incurred in connection with such cooperation and we either have to assume the costs ourselves or incur costs to dispute the claims against Lennar. Lennar’s decision to distribute shares of our Class A common stock to its shareholders, or effect a split-off, public offering or other sales or dispositions of our Class A common stock, or the public perception of such sales or dispositions whether or not they take place, may also impact the price of our Class A common stock and the value of our Class B common stock. We are an “emerging growth company” and intend to take advantage of reduced disclosure requirements applicable to emerging growth companies, which could make our common stock less attractive to investors. We qualify as an “emerging growth company” under SEC rules. We could remain an “emerging growth company” until the earliest of (1) the end of the fiscal year following the fifth anniversary of the date of the first sale pursuant to the registration statement related to the Distribution and declared effective on January 17, 2025, (2) the last day of the fiscal year in which our annual gross revenues exceed $1.235 billion, (3) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (4) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period. As an emerging growth company, we are permitted and rely on certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a registration statement under the Securities Act declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. Section 107 of the JOBS Act provides that an emerging growth company can take advantage of an extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised financial accounting standards. We have elected not to opt in to such extended transition period. 94 Table of Contents