Noncontrolling Interests

9 Months Ended

Sep. 30, 2025

NONCONTROLLING INTERESTS

The Operating Company

The Holding Company’s wholly owned subsidiary is the managing general partner of the Operating Company, and at September 30, 2025, the Holding Company and its wholly owned subsidiary owned approximately 62.8% of the outstanding Class A Common Units and 100% of the outstanding Class B Common Units of the Operating Company. The Holding Company consolidates the financial results of the Operating Company and its subsidiaries and records a noncontrolling interest for the remaining 37.2% of the outstanding Class A Common Units of the Operating Company that are owned separately by affiliates of Lennar, GFFP, which in October 2024 acquired all of the interests previously owned by affiliates of Castlelake, L.P. (“Castlelake”), and an entity controlled by Emile Haddad, the Company’s Chairman Emeritus of the Board of Directors (the “Management Partner”).

After a 12 month holding period, holders of Class A Common Units of the Operating Company may exchange their units for, at the Company’s option, either (i) Class A common shares on a one-for-one basis (subject to adjustment in the event of share splits, distributions of shares, warrants or share rights, specified extraordinary distributions and similar events), or (ii) cash in an amount equal to the market value of such shares at the time of exchange. In either situation, an equal number of that holder’s Class B common shares will automatically convert into Class A common shares, at a ratio of 0.0003 Class A common shares for each Class B common share. Other than GFFP, which is subject to the 12 month holding period, this exchange right is currently exercisable by all holders of outstanding Class A Common Units of the Operating Company.

With each exchange of Class A Common Units of the Operating Company for Class A common shares, the Holding Company’s percentage ownership interest in the Operating Company and its share of the Operating Company’s cash distributions and profits and losses will increase. Additionally, other issuances of common shares of the Holding Company or common units of the Operating Company result in changes to the noncontrolling interest percentage. Such equity transactions result in an adjustment between members’ capital and the noncontrolling interest in the Company’s condensed consolidated balance sheet and statement of capital to account for the changes in the noncontrolling interest ownership percentage as well as any change in total net assets of the Company.

During the nine months ended September 30, 2025 and 2024, the Holding Company’s ownership interest in the Operating Company changed as a result of net equity transactions related to the Company’s share-based compensation plan.

The terms of the Operating Company’s Limited Partnership Agreement (“LPA”) provide for the payment of tax distributions to the Operating Company’s partners in an amount equal to the estimated income tax liabilities resulting from taxable income or gain allocated to those parties. The tax distribution provisions in the LPA were included in the Operating Company’s governing documents adopted prior to the Company’s initial public offering and were designed to provide funds necessary to pay tax liabilities for income that might be allocated, but not paid, to the partners.

Tax distributions to the partners of the Operating Company for the three and nine months ended September 30, 2025 and 2024, were as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2025		2024		2025		2024
Management Partner	$	448	$	221	$	448	$	221
Other partners (excluding the Holding Company)	2,653		1,378		2,653		1,378
Total tax distributions	$	3,101	$	1,599	$	3,101	$	1,599

Generally, tax distributions are treated as advance distributions under the LPA and are taken into account when determining the amounts otherwise distributable under the LPA.

On October 13, 2025, the Management Partner exchanged 3,137,134 Class A Common Units of the Operating Company, and in exchange therefor, received 1,109,172 Class A common shares of the Holding Company. The remaining 2,027,962 Class A Common Units owned by the Management Partner were returned to the Operating Company in accordance with the dilution provisions of the LPA and were canceled.

The San Francisco Venture

The San Francisco Venture has three classes of units—Class A, Class B and Class C units. The Operating Company owns all of the outstanding Class B units of the San Francisco Venture. All of the outstanding Class A units are owned by Lennar and GFFP, which in October 2024 acquired all of the interests previously owned by Castlelake. The Class A units of the San Francisco Venture are intended to be substantially economically equivalent to the Class A Common Units of the Operating Company. The Class A units of the San Francisco Venture represent noncontrolling interests to the Operating Company.

Holders of Class A units of the San Francisco Venture can redeem their units at any time and receive Class A Common Units of the Operating Company on a one-for-one basis (subject to adjustment in the event of share splits, distributions of shares, warrants or share rights, specified extraordinary distributions and similar events). If a holder requests a redemption of Class A units of the San Francisco Venture that would result in the Holding Company’s ownership of the Operating Company falling below 50.1%, the Holding Company has the option of satisfying the redemption with Class A common shares instead. The Company also has the option, at any time, to acquire outstanding Class A units of the San Francisco Venture in exchange for Class A Common Units of the Operating Company. The 12 month holding period for any Class A Common Units of the Operating Company issued in exchange for Class A units of the San Francisco Venture is calculated by including the period that such Class A units of the San Francisco Venture were owned. Other than GFFP, which is subject to the 12 month holding period, this exchange right is currently exercisable by all holders of outstanding Class A units of the San Francisco Venture.

Redeemable Noncontrolling Interest (San Francisco Class C units)

In 2019, the San Francisco Venture issued 25.0 million Class C units to an affiliate of Lennar in exchange for a contribution of $25.0 million to the San Francisco Venture. Provided that Lennar completes the construction of a certain number of new homes in Candlestick as contemplated under purchase and sale agreements with the Company, the San Francisco Venture is required to redeem the Class C units if and when the Company receives reimbursements from the Mello-Roos community facilities district formed for the development, in an aggregate amount equal to 50% of any reimbursements received up to a maximum amount of $25.0 million. The San Francisco Venture also maintains the ability to redeem the then outstanding balance of Class C units for cash at any time. Upon a liquidation of the San Francisco Venture, the holders of Class C Units are entitled to a liquidation preference. The maximum amount payable by the San Francisco Venture pursuant to redemptions or liquidation of the Class C units is $25.0 million. The holders of Class C units are not entitled to receive any other forms of distributions and are not entitled to any voting rights. In connection with the issuance of the Class C units, the San Francisco Venture agreed to spend $25.0 million on the development of infrastructure and/or parking facilities at the Company’s Candlestick development. At each of September 30, 2025 and December 31, 2024, $25.0 million of Class C units were outstanding and included in redeemable noncontrolling interests on the condensed consolidated balance sheets.

Redeemable Noncontrolling Interest (Hearthstone Venture)

Interests in the Hearthstone Venture include Class A Units and Class B Units of HRH. The Class A Units represent common equity interests that participate in profits and losses proportionately, while the Class B Units represent a separate class of nonvoting preferred interests. The Class B Units have a stated value of $1,000 per unit and accrue a preferred return at a rate equal to 10% per annum or less, as defined in HRH’s operating agreement. The Class B interests are entitled to receive distributions of unpaid preferred return and capital prior to any distributions to the Class A Unit members. At September 30, 2025, the Company held 75% of the outstanding Class A Units and other members of HRH held 25% of the outstanding Class A Units and 10,472 Class B Units representing 100% of the outstanding Class B Units. In the event HRH calls capital, the portion attributable to the Class A Units held by the other members will be satisfied by automatic conversion of Class B Units into Class A Units at a value of $1,000 per Class B Unit, until all Class B Units are fully converted.

The Class A Units and Class B Units held by other members of HRH are redeemable at the option of the Company or the other members after July 31, 2031, and upon the occurrence of certain events prior to July 31, 2031. The redemption value of the Class A Units will be fair market value as of the redemption date, while the redemption value of Class B Units will be equal to $1,000 per unit plus any unpaid preferred return. Class A Units and Class B Units held by other members are included in redeemable noncontrolling interests on the condensed consolidated balance sheets. The redeemable noncontrolling interests are measured at the greater of carrying amount or redemption value at each reporting date.

HRH consolidates subsidiary investment management entities (collectively, the “Hearthstone Professional Entities”). Each of the Hearthstone Professional Entities is governed by a limited liability company agreement under which HRH serves as managing member, and legacy members hold minority ownership interests. The legacy members are entitled to receive distributions of profits and fees generated from legacy investment and management activities, including certain promote fees, in accordance with the terms of their respective operating agreements. These distribution rights are limited to historical projects and diminish over time as the related investments in those projects are realized or liquidated. The legacy member interests will be fully redeemed once all distributions and allocations to which they are entitled have been made. The legacy member interests are included in redeemable noncontrolling interests on the condensed consolidated balance sheets.

The carrying amount of the Hearthstone Venture redeemable noncontrolling interests as of July 31, 2025, the Acquisition Date, and September 30, 2025 were as follows (in thousands):


	HRH Class A Unit Noncontrolling Interests		HRH Class B Unit Noncontrolling Interests		Hearthstone Professional Entities Noncontrolling Interests		Total Hearthstone Venture Redeemable Noncontrolling Interests
BALANCE - July 31, 2025	$	19,188	$	12,072	$	12,982	$	44,242
Hearthstone Venture net income allocation	162		188		—		350
Class B Unit conversions	1,600		(1,600)		—		—
Distributions and redemptions	—		—		(65)		(65)
BALANCE - September 30, 2025	$	20,950	$	10,660	$	12,917	$	44,527