Millrose Properties, Inc. 10-K

Item 8. Financial Statements and Supplementary Data Report of Independent Registered Public Accounting Firm To the shareholders and the Board of Directors of Millrose Properties, Inc. Opinion on the Financial Statements We have audited the accompanying balance sheets of Millrose Properties, Inc. as of December 31, 2024 and June 30, 2024 and the related notes listed in the Index at Item 8 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of Millrose Properties, Inc. as of December 31, 2024 and June 30, 2024, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of Millrose Properties, Inc.’s management. Our responsibility is to express an opinion on the Millrose Properties, Inc. financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to Millrose Properties, Inc. in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Millrose Properties, Inc. is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of Millrose Properties, Inc.’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Deloitte & Touche LLP New York, NY March 31, 2025 We have served as Millrose Properties, Inc.’s auditor since 2024. 123 Table of Contents Millrose Properties, Inc. Balance Sheets December 31, 2024 and June 30, 2024 December 31, 2024 June 30, 2024 Assets Cash $ 100 $ 100 Total assets 100 100 Liabilities and stockholders’ equity —  —  Commitments and contingencies (See Note 3) Stockholders’ equity —  —  Common Stock, $0.01 par value, 100 shares authorized; 100 shares issued and outstanding 1 1 Additional paid-in capital 99 99 Total liabilities and stockholders’ equity $ 100 $ 100 See Notes to the Balance Sheets. 124 Table of Contents Millrose Properties, Inc. Notes to the Balance Sheets 1. Organization and Description of Business Millrose Properties, Inc. (“Millrose” or the “Company”) is a corporation incorporated under the laws of the State of Maryland on March 19, 2024 for the purpose of receiving the business assets from Lennar Corporation (“Lennar”) and becoming an independent publicly traded company. Millrose provides, through its subsidiaries, an operational and capital solution for home builders and land development companies to finance the acquisition and development of land assets through the Homesite Option Purchase Platform (“HOPP’R”). The HOPP’R is a comprehensive suite of systems and procedures developed to operate and manage the acquisition, financing and development of land assets on a large scale. Millrose is a holding company without any operations of its own. Its operations are conducted through Millrose Properties Holdings, LLC (“Millrose Holdings”), a Delaware limited liability company and a wholly-owned operating subsidiary of Millrose, and other subsidiaries. Millrose is externally managed by Kennedy Lewis Land and Residential Advisors LLC (the “Manager”) with personnel provided by the Manager and officers recommended by the Manager and appointed by the Board of Directors of Millrose (the “Board”) serving as all officers and employees of, and performing all business operations for, Millrose, Millrose Holdings and any other subsidiaries. On the February 7, 2025, Lennar completed the previously announced spin-off of Millrose from Lennar and became an independent company listed on the New York Stock Exchange (the “Spin-Off”). See Note 6. Subsequent Events. Millrose intends to elect to qualify as a real estate investment trust (“REIT”), commencing with its taxable year ending December 31, 2025. 2. Basis of Presentation Summary of Significant Accounting Policies Basis of presentation As of December 31, 2024, Millrose had engaged in no business activities since inception and had nominal assets and no liabilities. The balance sheet has been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). Separate statements of operations, equity, and cash flows have not been prepared because no material substantive transactions had taken place. Cash and Cash Equivalents Cash and short-term investments with an original maturity of three months or less when acquired are considered cash and cash equivalents for the purposes of the balance sheets. Recent Accounting Pronouncements The Company considered the applicability and impact of all Accounting Standard Updates (“ASUs”) issued by the Financial Accounting Standards Board. Recently issued ASUs were assessed and determined either to be not applicable or not expected to have material impact on the Company’s financial statements. 3. Commitments and Contingencies As of December 31, 2024, the Company was not subject to any material litigation nor was the Company aware of any material litigation threatened against it. 4. Related Party Transactions As of December 31, 2024, the Company was wholly-owned subsidiary of Lennar. Following the Spin-Off, the Company is externally managed and advised by Kennedy Lewis Land and Residential Advisors LLC and Lennar owns approximately 20% of Millrose’s outstanding shares of common stock. 125 Table of Contents 5. Stockholders’ Equity The Company was capitalized with the issuance of 100 shares of common stock ($0.01 par value per share) in exchange for a $100 contribution by Lennar. As of December 31, 2024, the Company had issued 100 shares, which were held by Lennar. 6. Subsequent Events The Company has evaluated subsequent events through the filing of this Form 10-K, and determined that there have been no events that have occurred that would require adjustments to our disclosures in the financial statements except for the following: Completion of Spinoff of Millrose On February 7, 2025, the Company completed the Spin-Off of Millrose from Lennar and became an independent company listed on the New York Stock Exchange under the symbol “MRP”. The Spin-Off was completed through a distribution of approximately 80% of Millrose’s stock to Lennar’s stockholders. Each holder of Lennar Class A common stock or Lennar Class B common stock received one share of Class A common stock or Class B common stock for every two shares of Lennar Class A common stock or Lennar Class B common stock held as of the close of business on January 21, 2025, the record date of the Spin-Off. Lennar has temporarily retained 33,200,053 shares, approximately 20% of Millrose’s outstanding shares of common stock. In connection with the Spin-Off, Lennar contributed $5.5 billion in land assets and cash of $1 billion to the Company. After the Spin-Off, Millrose is a holding company without any operations of its own. Its operations are conducted through Millrose Holdings and its subsidiaries. The Company is externally managed the Manager, an affiliate of Kennedy Lewis Investment Management LLC. Additionally, in connection with the Spin-Off, on the Distribution Date, the Company entered into a credit agreement (the “Credit Agreement”) with the lenders thereto and JPMorgan Chase Bank, N.A as a lender and as administrative agent for the lenders, which provides for a revolving credit facility of up to $1.335 billion, scheduled to mature on February 7, 2028. The Company has borrowed $450 million under the revolving credit facility as of March 25, 2025. Acquisition of Rausch Coleman Homes Land Assets On February 10, 2025, the Company completed its acquisition of land assets consisting of approximately 24,000 homesites through the acquisition of 100% of the outstanding stock of RCH Holdings, Inc., a newly formed parent holding company of Rausch Coleman Companies, LLC, for approximately $876 million in cash, which is net of option deposits funded by Lennar and other holdbacks (the “Supplemental Transferred Assets Transaction”). The Company funded the Supplemental Transferred Assets Transaction using cash on hand. Declaration of Dividend On March 17, 2025, the Board declared a dividend of $0.38 to be paid to holders of Class A common stock and Class B common stock as of the close of business on April 4, 2025. The dividend will be paid on April 15, 2025. 126 Table of Contents Report of Independent Registered Public Accounting Firm To the shareholders and the Board of Directors of Millrose Properties, Inc. Opinion on the Financial Statements We have audited the accompanying combined balance sheets of the Predecessor Millrose Business (as derived from the financial statements of Lennar prior to the Spin-Off) as described in Notes 1 and 2 to the combined financial statements as of December 31, 2024 and 2023, the related combined statements of operations, changes in equity and cash flows for the years then ended, and the related notes listed in the Index at Item 8 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Predecessor Millrose Business as of December 31, 2024 and 2023, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Predecessor Millrose Business management. Our responsibility is to express an opinion on the Predecessor Millrose Business financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to Predecessor Millrose Business. in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Predecessor Millrose Business is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Predecessor Millrose Business internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Deloitte & Touche LLP New York, NY March 31, 2025 We have served as the Predecessor Millrose Business auditor since 2024. 127 Table of Contents Predecessor Millrose Business Combined Balance Sheets December 31, 2024 and 2023 (In thousands) December 31, December 31, 2024 2023 Assets Inventories Land and land under development $ 2,978,807 $ 2,914,993 Finished homesites 2,486,483 1,829,129 Total Inventories 5,465,290 4,744,122 Total assets 5,465,290 4,744,122 Liabilities Accounts payable and accrued expenses 282,730 252,554 Debt 24,188 32,607 Total liabilities 306,918 285,161 Commitments and contingencies (See Note 4) Equity Net parent investment 5,158,372 4,458,961 Total equity 5,158,372 4,458,961 Total liabilities and equity $ 5,465,290 $ 4,744,122 See Notes to Combined Financial Statements. 128 Table of Contents Predecessor Millrose Business Combined Statements of Operations Years Ended December 31, 2024 and 2023 (In thousands) Years Ended December 31, 2024 2023 Revenues $ —  $ —  Cost of sales —  —  Gross profit —  —  Salaries, general and administrative expenses (246,221 ) (209,792 ) Loss before income taxes (246,221 ) (209,792 ) Income taxes —  —  Loss $ (246,221 ) $ (209,792 ) See Notes to Combined Financial Statements. 129 Table of Contents Predecessor Millrose Business Combined Statements of Equity Years Ended December 31, 2024 and 2023 (In thousands) Net Parent Investment/ Total Equity Balance, December 31, 2022 $ 3,774,853 Loss (209,792 ) Stock-based compensation 10,093 Contributions from Parent 883,807 Balance, December 31, 2023 4,458,961 Loss (246,221 ) Stock-based compensation 14,937 Contributions from Parent 930,695 Balance, December 31, 2024 $ 5,158,372 See Notes to Combined Financial Statements. 130 Table of Contents Predecessor Millrose Business Combined Statements of Cash Flows Years Ended December 31, 2024 and 2023 (In thousands) Years Ended December 31, 2024 2023 Cash flows used in operating activities Loss $ (246,221 ) $ (209,792 ) Adjustments to reconcile loss to net cash used in operating activities Stock-based compensation 14,937 10,093 Amortization of discount (13 ) —  Changes in assets and liabilities: Inventories (716,073 ) (641,864 ) Accounts payable and accrued expenses 30,176 (23,557 ) Net cash used in operating activities (917,194 ) (865,120 ) Cash flows from financing activities Principal payments on debt (13,501 ) (18,687 ) Net cash transfers from parent 930,695 883,807 Net cash from financing activities 917,194 865,120 Change in cash —  —  Cash, beginning of year —  —  Cash, end of year $ —  $ —  Supplemental disclosure of non-cash financing activities Reduction of debt for inventories financed by sellers $ (13,905 ) $ —  Purchases of inventories financed by sellers $ 19,000 $ 13,500 See Notes to Combined Financial Statements. 131 Table of Contents Predecessor Millrose Business Notes to the Combined Financial Statements 1. Background and Description of Business Prior to the Spin-Off (as defined in Note 8. Subsequent Events) of the Predecessor Millrose Business (as defined below) to Millrose Properties, Inc. (“Millrose” or the “Company”), and as of December 31, 2024, the Predecessor Millrose Business was wholly owned by Lennar Corporation (“Lennar” or the “Predecessor”). Such operations and financial information that represent the business assets that were spun off to Millrose are collectively referred to as the “Predecessor Millrose Business.” Millrose provides, through its subsidiaries, an operational and capital solution for home builders and land development companies to finance the acquisition and development of land assets through the Homesite Option Purchase Platform (“HOPP’R”). The HOPP’R is a comprehensive suite of systems and procedures developed to operate and manage the acquisition, financing and development of land assets on a large scale. Millrose is a holding company without any operations of its own. Millrose’s operations are conducted through Millrose Properties Holdings, LLC, a Delaware limited liability company (“Millrose Holdings”) a wholly-owned operating subsidiary of Millrose, and other subsidiaries. The Company is externally managed by Kennedy Lewis Land and Residential Advisors LLC (the “Manager”) with personnel provided by the Manager and officers recommended by the Manager and appointed by the Board of Directors of Millrose (the “Board”) serving as all officers and employees of, and performing all business operations for, Millrose, Millrose Holdings and any other subsidiaries. On February 7, 2025, the Company completed the previously announced Spin-Off of Millrose from Lennar and became an independent company listed on the New York Stock Exchange. See Note 8. Subsequent Events. Millrose intends to elect to qualify as a real estate investment trust (“REIT”), commencing with its taxable year ending December 31, 2025. 2. Basis of Presentation and Summary of Significant Accounting Policies Basis of Presentation These Combined Financial Statements of the Predecessor Millrose Business were prepared to reflect the historical financial position, results of operations, and cash flows of the Predecessor Millrose Business for the periods presented and were derived from the consolidated financial statements and accounting records of Lennar. The Combined Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The Combined Financial Statements may not be indicative of Millrose’s future performance as an independent, publicly traded Company following the Spin-Off and do not necessarily reflect what the financial position, results of operations, and cash flows would have been had Millrose operated as a separate, publicly traded company during the periods presented. These Combined Financial Statements have been prepared to reflect assets of an active business and amounts may change as Lennar completes and delivers homes. These Combined Financial Statements have been prepared under the legal entity method of preparing carve out financial statements. The amounts presented herein have been prepared on the basis that all of the assets held by the Predecessor Millrose Business are conveyed by Lennar in the Spin-Off. The Combined Financial Statements of the Predecessor Millrose Business include land inventory assets that represent the Transferred Assets (as defined in Note 8. Subsequent Events), and related liabilities and operations from the Transferred Assets included in the Spin-Off. References to Lennar in the notes to these Combined Financial Statements refer to Lennar prior to the Spin-Off. 132 Table of Contents Predecessor Millrose Business Notes to the Combined Financial Statements (Continued) The Combined Statements of Operations include all costs directly attributable to the Predecessor Millrose Business, which include operating and employee compensation costs for dedicated regional and divisional land teams tasked with acquiring and developing the Transferred Assets prior to the Spin-Off. These expenses have been allocated to the Predecessor Millrose Business on a specific identification basis or, when specific identification is not practicable, we have determined that a proportional cost allocation method primarily based directly on headcount, usage, or other allocation methods depending on the nature of the services is a reasonable method to allocate costs. The costs reflected in these Combined Financial Statements may not be indicative of the actual costs that would have been incurred had Millrose operated on a standalone basis. Additionally, the future results of operations, financial position, and cash flows could differ significantly from the historical results presented herein. The Combined Financial Statements of the Predecessor Millrose Business prior to the Spin-off represent a combination of entities under common control that have been “carved out” from Lennar’s consolidated financial statements. Historically, financial statements of the Predecessor Millrose Business have not been prepared as it was not operated separately from Lennar. These Combined Financial Statements reflect the expenses of the Predecessor Millrose Business and include certain assets and liabilities that will be included in the Spin-Off, which have been reflected at Lennar’s historical basis. All intercompany transactions have been eliminated. The aggregate net effect of transactions between the Predecessor Millrose Business and Lennar that are not historically settled in cash have been reflected as net Parent investment in the Combined Balance Sheets. Transactions between the Predecessor Millrose Business and Lennar not historically settled in cash are presented as net cash transfers (to) from Parent in the Combined Statements of Cash Flows. Use of Estimates and Assumptions The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts reported in the Combined Financial Statements and accompanying notes. Estimates and assumptions are based upon historical factors, current circumstances and the experience and judgment of the Predecessor Millrose Business’s management. Actual results could differ from those estimates. Inventories Land Finished homesites and land under development are included within inventories. Inventories are stated at cost unless the inventory within a community is determined to be impaired, in which case the impaired inventory is written down to fair value. Inventories also include horizontal development costs, capitalized interest and real estate taxes. Impairment The carrying amounts of land are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. At each reporting date, an assessment is made for indicators of impairment. If an indication of impairment exists, recoverability is tested by comparing the carrying amount of the asset to the net undiscounted cash flows expected to be generated from the asset. If those net undiscounted cash flows do not exceed the carrying amount (i.e., the asset is not recoverable), the Predecessor Business determines the fair value of the asset using management’s assumptions, such as the projected margins and timing of future land sales, as well as an appropriate discount rate, and record an impairment charge, if any. 133 Table of Contents Predecessor Millrose Business Notes to the Combined Financial Statements (Continued) Accounts Payable and Accrued Expenses Accounts payable and accrued expenses are carried at cost, which approximates the fair value because of their short-term or highly liquid nature. Accounts payable and accrued expenses include accrued horizontal development costs, accrued wages, bonuses and benefits, and other payables. Debt The Predecessor Millrose Business’s debt consists of promissory notes for the acquisition of land and community development district bonds. Refer to Note 6. Debt for additional information. Net Parent Investment Net Parent investment in the Combined Balance Sheets represents Lennar’s historical investment in the Predecessor Millrose Business and allocations from Lennar. Sales, General and Administrative Expenses Sales general, and administrative expenses are costs directly attributable to the Predecessor Millrose Business, and include operating and employee compensation costs for dedicated regional and divisional land teams tasked with acquiring and developing the Transferred Assets prior to the Spin-Off. See further explanation in Note 3. Related Party Transactions. Income Taxes The Predecessor Millrose Business records income taxes under the asset and liability method, whereby deferred tax assets and liabilities are recognized based on the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and attributable to operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply in the years in which the temporary differences are expected to be recovered or paid. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in earnings in the period when the changes are enacted. Interest related to unrecognized tax benefits is recognized in the financial statements as a component of income tax expense. A reduction of the carrying amounts of deferred tax assets by a valuation allowance is required if, based on the available evidence, it is more likely than not that such assets will not be realized. Accordingly, the need to establish valuation allowances for deferred tax assets is assessed each reporting period by the Predecessor Millrose Business based on the consideration of all available positive and negative evidence using a “more- likely-than-not” standard with respect to whether deferred tax assets will be realized. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, actual earnings (losses), forecasts of future profitability, the duration of statutory carryforward periods, the Predecessor Millrose Business’s experience with loss carryforwards not expiring unused and tax planning alternatives. Following the Spin-Off, Millrose intends to make an election to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”), commencing with its taxable year ending December 31, 2025. So long as Millrose qualifies as a REIT, Millrose generally will not be subject to U.S. federal income tax on its net income that it distributes to its stockholders. To maintain its qualification as a REIT, Millrose will be required under the Code to distribute at least 90% of its REIT taxable income (without regard to the deduction for dividends paid and excluding net capital gains) to its stockholders and meet certain other requirements. If Millrose fails to maintain its qualification as a REIT in any taxable year, Millrose will then be subject to federal income taxes on its taxable income at regular corporate rates and will not be permitted to 134 Table of Contents Predecessor Millrose Business Notes to the Combined Financial Statements (Continued) qualify for treatment as a REIT for federal income tax purposes for four years following the year during which qualification is lost unless the Internal Revenue Service grants Millrose relief under certain statutory provisions. Such an event could have a material adverse effect on its net income and net cash available for distribution to its members. Millrose intends to elect for its wholly-owned subsidiary Millrose Holdings to be taxable as a taxable REIT subsidiary (“TRS”) and may elect to form other wholly-owned subsidiaries that will also elect to be taxed as taxable REIT subsidiaries in the future. Taxable REIT subsidiaries are subject to taxation at regular corporate income tax rates. Recently Adopted Accounting Pronouncements In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (“ASU 2024-03”), which requires disclosure of disaggregated information about certain income statement expense line items in the notes to the financial statements on an interim and annual basis. ASU 2024-03 will be effective annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. The Predecessor Millrose Business had been evaluating ASU 2024-03 impact on its combined financial statements. Millrose will continue to evaluate the potential impact of ASU 2024-03 on its financial statements. In December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-09 (“ASU 2023-09”) Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 requires public companies to annually (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income or loss by the applicable statutory income tax rate). ASU 2023-09 will be effective for the annual reporting periods in fiscal years beginning after December 15, 2024. The Predecessor Millrose Business had been evaluating ASU 2023-09 and did not expect it to have a material effect on the Predecessor Millrose Business’s combined financial statements. Millrose will continue to evaluate the potential impact of ASU 2023-09 on its financial statements. In November 2023, the FASB issued ASU 2023-07, “Improvements to Reportable Segment Disclosures” (“ASU 2023-07”). ASU 2023-07 requires disclosure of significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and included within the segment measure of profit or loss, an amount and description of its composition for other segment items to reconcile to segment profit or loss, and the title and position of the entity’s CODM. ASU 2023-07 will be applied retrospectively and is effective for annual reporting periods in fiscal years beginning after December 15, 2023, and interim reporting periods in fiscal years beginning after December 31, 2024. For the year ended December 31, 2024, the Predecessor Millrose Business did not operate as separate operating and reporting segment. Starting in the year ended December 31, 2025, Millrose will operate as one operating and reporting segment. The adoption of ASU 2023-07 did not have a material impact on the Predecessor Millrose Business’s combined financial statements. 3. Related Party Transactions These Combined Financial Statements have been derived from the consolidated financial statements and accounting records of Lennar. 135 Table of Contents Predecessor Millrose Business Notes to the Combined Financial Statements (Continued) Cost Allocations For the purposes of preparing these Combined Financial Statements, a portion of Lennar’s expenses for the regional and divisional land teams tasked with acquiring and developing the land inventories have been allocated to the Predecessor Millrose Business. See Note 2. Basis of Presentation and Summary of Significant Accounting Policies for a discussion of the methodology used to allocate such costs for the purpose of preparing these Combined Financial Statements. These allocations included primarily salaries and expenses for professional services, which are reflected in the Combined Statements of Operations as follows: Twelve Months Ended December 31, (In thousands) 2024 2023 Salaries, general and administrative expenses $ 246,221 $ 209,792 4. Commitments and Contingencies Liabilities for loss contingencies arising from claims, assessments, litigation, fines, penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated. Legal costs incurred in connection with loss contingencies, if any, are expensed as incurred. There is no material litigation nor to management’s knowledge is any material litigation currently threatened against the Predecessor Millrose Business other than routine litigation, claims and administrative proceedings arising in the ordinary course of business. 5. Stock-Based Compensation Stock-based compensation was allocated to the Predecessor Millrose Business on a specific identification basis or using a proportional cost allocation method, as applicable. The fair value of shares granted was determined based on the trading price of Lennar’s class A common stock on the grant date. The allocated amounts were not material for the years ended December 31, 2024 and 2023, respectively. 6. Debt The Predecessor Millrose Business’s intercompany debt at December 31, 2024 and December 31, 2023 was $24.2 million and $32.6 million, respectively, with the interest rate of 0.0% and various maturity dates through 2028. 7. Income taxes The Predecessor Millrose Business did not have income taxes during the years ended December 31, 2024 and 2023 due to offsetting changes in valuation allowance against its deferred taxes that reduced income taxes and effective tax rate to zero. A reconciliation of the statutory rate and the effective tax rate was as follows: Percentage of Pretax Income 2024 2023 Statutory rate 21.0 % 21.0 % State income taxes (net of federal income tax benefit) 4.3 % 4.3 % Valuation allowance (25.3 %) (25.3 %) Effective rate 0 % 0 % 136 Table of Contents Predecessor Millrose Business Notes to the Combined Financial Statements (Continued) Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of the assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. As of December 31, 2024 and 2023, the Predecessor Millrose Business had federal and state income tax net operating loss (“NOL”) carryforwards related to operations of approximately $649.1 million and $210 million, respectively, that may be carried forward from 10 to 20 years, or indefinitely, depending on the tax jurisdiction. A reduction of the carrying amounts of deferred tax assets by a valuation allowance is required if, based on the available evidence, it is more likely than not that such assets will not be realized. Accordingly, the need to establish valuation allowances for deferred tax assets is assessed each reporting period by the Predecessor Millrose Business based on the consideration of all available positive and negative evidence using a “more- likely-than-not” standard with respect to whether deferred tax assets will be realized. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, actual earnings, forecasts of future profitability, the duration of statutory carryforward periods, the Predecessor Millrose Business’s experience with loss carryforwards not expiring unused and tax planning alternatives. Based on this assessment, we have determined that the Predecessor Millrose Business will not be able to realize its net operating loss carryforwards, and have recorded a valuation allowance against its deferred tax asset, which also has reduced income taxes and effective tax rate to zero. As of December 31, 2024 and 2023, the Predecessor Millrose Business had no gross unrecognized tax benefits. 8. Subsequent Events The Company has evaluated subsequent events through the filing of this Form 10-K, and determined that there have been no events that have occurred that would require adjustments to our disclosures in the financial statements except for the following: Completion of Spinoff of Millrose On February 7, 2025, the Company completed the spin-off of Millrose from Lennar (the “Spin-Off”) and became an independent company listed on the New York Stock Exchange under the symbol “MRP”. The Spin-Off was completed through a distribution of approximately 80% of Millrose’s stock to Lennar’s stockholders. Each holder of Lennar Class A common stock or Lennar Class B common stock received one share of Class A common stock or Class B common stock for every two shares of Lennar class A common stock or Lennar class B common stock held as of the close of business on January 21, 2025, the record date of the Spin-Off. Lennar has temporarily retained 33,200,053 shares, approximately 20% of Millrose’s outstanding shares of common stock. In connection with the Spin-Off, Lennar contributed $5.5 billion in land assets and cash of $1 billion to the Company. After the Spin-Off, Millrose is a holding company without any operations of its own. Its operations are conducted through Millrose Holdings and its subsidiaries. The Company is externally managed by the Manager, an affiliate of Kennedy Lewis Investment Management LLC. Additionally, in connection with the Spin-Off, on the Distribution Date, the Company entered into a credit agreement (the “Credit Agreement”) with the lenders thereto and JPMorgan Chase Bank, N.A as a lender and as administrative agent for the lenders, which provides for a revolving credit facility of up to $1.335 billion, scheduled to mature on February 7, 2028. The Company has borrowed $450 million under the revolving credit facility as of March 25, 2025. 137 Table of Contents Predecessor Millrose Business Notes to the Combined Financial Statements (Continued) Acquisition of Rausch Coleman Homes Land Assets On February 10, 2025, the Company completed its acquisition of land assets consisting of approximately 24,000 homesites through the acquisition of 100% of the outstanding stock of RCH Holdings, Inc. for approximately $876 million in cash, which is net of option deposits funded by Lennar and other holdbacks (the “Supplemental Transferred Assets Transaction”). The Company funded the Supplemental Transferred Assets Transaction using cash on hand. Declaration of Dividend On March 17, 2025, the Board declared a dividend of $0.38 to be paid to holders of Class A common stock and Class B common stock as of the close of business on April 4, 2025. The dividend will be paid on April 15, 2025. 138 Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.