Green Brick Partners Inc.

02/25/2026 | Press release | Distributed by Public on 02/25/2026 16:25

Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
For business overview and developments during the year ended December 31, 2025, refer to Part I, Item 1 of this Annual Report on Form 10-K.
Overview and Outlook
Our key financial and operating metrics are home deliveries, home closings revenue, average sales price of homes delivered, net new home orders, which refers to the number of sales contracts executed reduced by the number of sales contracts canceled during the relevant period, and homebuilding gross margin. Our results for each key financial and operating metric, as compared to the year ended December 31, 2024, are provided below:
Year Ended
December 31, 2025
New homes delivered
Increased by 4.2%
Home closings revenue
Increased by 1.0%
Average sales price of homes delivered
Decreased by 3.1%
Net new home orders
Increased by 3.1%
Homebuilding gross margin percentage
Decreased by 330 bps
The results achieved in our key metrics compared to last year are largely driven by our strategic focus on infill and infill-adjacent locations in high growth markets, our land approach to self-develop raw land into finished lots that are held on our balance sheet, and our reduced cycle times. Our home deliveries and net new home orders increased 4.2% and 3.1%, respectively. Home closings revenue remained relatively unchanged mainly due to a 3.1% decrease in the average sales price of homes delivered, which also resulted in a lower homebuilding gross margin percentage. We remain focused on disciplined land acquisition and operational efficiency to drive long-term value, even as we navigate a more competitive pricing environment.
We believe we operate in some of the most desirable housing markets in the nation and that increasing demand and supply levels in our target markets create favorable conditions for our future growth. As of October 2025, Texas, Florida and Georgia were ranked first, second and fifth, respectively, in terms of single-family building permits issued according to the National Association of Home Builders.
Results of Operations
Year Ended December 31, 2025 Compared to the Year Ended December 31, 2024
Residential Units Revenue and New Homes Delivered
The table below represents residential units revenue and new homes delivered for the years ended December 31, 2025 and December 31, 2024 (dollars in thousands):
Years Ended December 31,
2025 2024 Change %
Home closings revenue $ 2,091,258 $ 2,069,756 $ 21,502 1.0 %
Mechanic's lien contracts revenue 219 380 (161) (42.4) %
Residential units revenue $ 2,091,477 $ 2,070,136 $ 21,341 1.0 %
New homes delivered 3,943 3,783 160 4.2 %
Average sales price of homes delivered $ 530.4 $ 547.1 $ (16.7) (3.1) %
The $21.3 million increase in residential units revenue was driven by the 4.2% increase in the number of homes delivered partially offset by a 3.1% decrease in average sales price of new homes delivered. The increase in new homes delivered was primarily driven by our Trophy Signature Homes and CB JENI Homes brands. The decrease in the average sales price of homes delivered was attributable to product mix, higher incentives, discounts, and closing costs to sustain order pace.
TABLE OF CONTENTS
New Home Orders and Backlog
The table below represents new home orders and backlog related to our builder operations segments, excluding mechanic's liens contracts (dollars in thousands):
Years Ended December 31,
2025 2024 Change %
Net new home orders 3,795 3,681 114 3.1 %
Revenue from net new home orders $ 1,949,703 $ 2,010,439 $ (60,736) (3.0) %
Average selling price of net new home orders $ 513.8 $ 546.2 $ (32.4) (5.9) %
Cancellation rate 7.5 % 7.3 % 0.2 % 2.7 %
Absorption rate per average active selling community per quarter 9.3 9.1 0.2 2.2 %
Average active selling communities 102 101 1 1.0 %
Active selling communities at end of period 101 106 (5) (4.7) %
Backlog revenue $ 354,328 $ 495,883 $ (141,555) (28.5) %
Backlog units 520 668 (148) (22.2) %
Average sales price of backlog $ 681.4 $ 742.3 $ (60.9) (8.2) %
Net new home orders increased by 3.1% over the prior year while our average active selling communities remained relatively flat. Revenue from net new home orders declined $60.7 million or 3.0% consistent with the decline in the average selling price of net new home orders. The increase in net new home orders is attributable to a lower cancellation rate and higher incentives offered to drive sales orders.
Backlog refers to homes under sales contracts that have not yet closed at the end of the relevant period, and absorption rate refers to the rate at which net new home orders are contracted per average active selling community during the relevant period. Sales contracts may be canceled prior to closing for a number of reasons, including the inability of the homebuyer to obtain suitable mortgage financing. Accordingly, backlog may not be indicative of our future revenue.
Backlog revenue decreased by 28.5% mainly due to a decrease of 148 backlog units and a 8.2% decrease in the average sales price of backlog units compared to the prior year period. The change in backlog is due to increase in homes delivered of 160 units partially offset by an increase in new home orders of 114 units.
Our cancellation rate, which refers to sales contracts canceled divided by sales contracts executed during the respective period, was 7.5% for the year ended December 31, 2025, compared to 7.3% for the year ended December 31, 2024. Our cancellation rate remained in a historically low range under 10.0% since December 31, 2022.
TABLE OF CONTENTS
Residential Units Gross Margin
The table below represents the components of residential units gross margin (dollars in thousands):
Years Ended December 31,
2025 2024
Home closings revenue $ 2,091,258 100.0 % $ 2,069,756 100.0 %
Cost of homebuilding units 1,453,049 69.5 % 1,370,613 66.2 %
Homebuilding gross margin $ 638,209 30.5 % $ 699,143 33.8 %
Mechanic's lien contracts revenue $ 219 100.0 % $ 380 100.0 %
Cost of mechanic's lien contracts 134 61.2 % 275 72.4 %
Mechanic's lien contracts gross margin $ 85 38.8 % $ 105 27.6 %
Residential units revenue $ 2,091,477 100.0 % $ 2,070,136 100.0 %
Cost of residential units 1,453,183 69.5 % 1,370,888 66.2 %
Residential units gross margin $ 638,294 30.5 % $ 699,248 33.8 %
Residential units revenue increased by $21.3 million or 1.0% during the year ended December 31, 2025 due to the increase in home deliveries of 4.2% partially offset by a 3.1% reduction in average sales price as discussed above. Cost of residential units as a percent of residential units revenue for the year ended December 31, 2025 increased to 69.5% compared to 66.2% in the previous year due to a combination of higher discounts and closing costs.
Residential units gross margin for the year ended December 31, 2025 decreased to 30.5%, compared to 33.8% for the year ended December 31, 2024. The decrease in residential units gross margin is primarily driven by higher incentives, discounts, and closing costs.
Land and Lots Revenue
The table below represents lots closed and land and lots revenue (dollars in thousands):
Years Ended December 31,
2025 2024 Change %
Lots revenue $ 6,994 $ 14,723 $ (7,729) (52.5) %
Land revenue - 14,084 (14,084) (100.0) %
Land and lots revenue $ 6,994 $ 28,807 $ (21,813) (75.7) %
Lots closed 68 185 (117) (63.2) %
Average sales price of lots closed $ 102.9 $ 79.6 $ 23.3 29.3 %
From time to time, we will opportunistically sell finished lots to other homebuilders. Lots revenue decreased by 52.5% during the year ended December 31, 2025, driven by a 63.2% decrease in the number of lots closed partially offset by a 29.3% decrease in the average lot price. Land revenue represents sales of tracts of land during the year ended December 31, 2024.
TABLE OF CONTENTS
Selling, General and Administrative Expenses
The table below represents the components of selling, general and administrative expense (dollars in thousands):
Years Ended December 31, As Percentage of Segment Revenue
2025 2024 2025 2024
Builder operations $ 220,977 $ 218,201
Corporate, other and unallocated expense 9,225 8,083
Net builder operations 230,202 226,284 11.0 % 10.9 %
Land development 1,161 282 16.6 % 1.0 %
Total selling, general and administrative expenses $ 231,363 $ 226,566 11.0 % 10.8 %
Total selling, general and administrative expense as a percentage of revenue increased to 11.0% for the year ended December 31, 2025, which is substantially in line with 10.8% for the year ended December 31, 2024.
Builder Operations
Selling, general and administrative expenses as a percentage of revenue for builder operations was 11.0% compared to 10.9% in the prior year period. Builder operations expenditures include salaries, sales commissions, and community costs such as advertising and marketing expenses, rent, professional fees, and non-capitalized property taxes.
Corporate, Other and Unallocated
Selling, general and administrative expense for the corporate, other and unallocated non-operating segment for the year ended December 31, 2025 was $9.2 million, compared to $8.1 million for the year ended December 31, 2024. Corporate, other and unallocated expenses generally include capitalized overhead adjustments that are not allocated to builder operations segments.
Equity in Income of Unconsolidated Entities
Equity in income of unconsolidated entities decreased to $1.0 million, or 80.3%, for the year ended December 31, 2025, compared to $5.1 million for the year ended December 31, 2024, primarily due to the winding down of our BHome Mortgage joint venture and ramping up of our wholly-owned subsidiary GRBK Mortgage during the year ended December 31, 2025. See Note 5 to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for a summary of Green Brick's share in net earnings by unconsolidated entity.
Other Income, Net
Other income, net, decreased to $27.7 million for the year ended December 31, 2025, compared to $29.8 million for the year ended December 31, 2024. The change was primarily due to gain in the sale of our investment in Challenger during the year ended December 31, 2024 partially offset by income generated from our wholly-owned mortgage subsidiary during the year ended December 31, 2025.
Income Tax Expense
Income tax expense was $94.7 million for each of the years ended December 31, 2025 and 2024. See Note 13 to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for a discussion on the Company's income tax expense for the year ended December 31, 2025.
Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023
For discussion and analysis of our results of operations for the year ended December 31, 2024 as well as for comparison to our results of operations for the year ended December 31, 2023, refer to Item 7 of Part II of our Annual Report on Form 10-K for the year ended December 31, 2024.
TABLE OF CONTENTS
Lots Owned and Under Contract
The following table presents the lots we owned or had under contract, including lot option contracts, as of December 31, 2025 and December 31, 2024. Owned lots are those for which we hold title, and have yet to start vertical construction, while lots under contract are those for which we do not hold title, but have the contractual right to acquire.
December 31, 2025 December 31, 2024
Central(1)
Southeast(2)
Total
Central(1)
Southeast(2)
Total
Lots owned
Finished lots 4,518 663 5,181 3,932 790 4,722
Lots in communities under development 26,339 1,703 28,042 22,524 1,670 24,194
Land held for future development(3)
3,800 - 3,800 3,800 - 3,800
Total lots owned 34,657 2,366 37,023 30,256 2,460 32,716
Lots under contract
Lots and land under option contracts
300 310 610 1,897 349 2,246
Adjustment to lots and land under option contracts under updated definition of controlled lots previously excluded(4)(5)
7,997 645 8,642 6,423 - 6,423
Lots under option through unconsolidated development joint ventures 2,488 65 2,553 2,614 255 2,869
Total lots under contract(6)
10,785 1,020 11,805 10,934 604 11,538
Total lots owned and under contract(7)
45,442 3,386 48,828 41,190 3,064 44,254
Percentage of lots owned 76.3 % 69.9 % 75.8 % 73.5 % 80.3 % 73.9 %
(1) The Texas market.
(2) The Atlanta and Florida markets.
(3) Land held for future development consist of raw land parcels where development activities have been postponed due to market conditions or other factors.
(4) We previously referred to "lots controlled", which included only lots past feasibility studies for which we did not hold title, but had the contractual right to acquire. However, as of December 31, 2025, we revised our definition of lots controlled to "lots under contract" to provide investors consistent disclosure with those of other home builders. Lots under contract include all land or lot parcels that we have a contractual right to acquire pursuant to a fully executed option contact or purchase and sale agreement. These rights are supported by sufficient consideration provided by the Company to allow meaningful control over future acquisition, including the ability to directly influence entitlements or development, even though legal title has not yet transferred.
(5) These lots would be included under "Lots and land under option contracts".
(6) As of December 31, 2025, 16.6% of the total lots under contract had refundable deposits.
(7) Total lots excludes lots with homes under construction.
Liquidity and Capital Resources Overview
As of December 31, 2025 and December 31, 2024, we had $154.6 million and $141.5 million of unrestricted cash, respectively. Our historical cash management strategy includes redeploying net cash from the sale of home inventory to acquire and develop land and lots that represent opportunities to generate desired margins and returns, and using cash to make additional investments in business acquisitions, joint ventures, or other strategic activities such as stock repurchases.
Our principal uses of capital for the year ended December 31, 2025 were home construction, land purchases, land development, repayments of lines of credit, operating expenses, payment of routine liabilities and stock repurchases. Historically, we have used funds generated by operations and available borrowings to meet our short-term working capital requirements. We remain focused on generating positive margins in our homebuilding operations and acquiring desirable land positions in order to maintain a strong balance sheet and remain poised for continued growth.
Cash flows for each of our communities depend on the community's stage in the development cycle. Early stages of development or expansion require significant cash outlays for land acquisitions, entitlements and other approvals, roads, utilities, general landscaping and other amenities, and home construction. These costs are a component of our inventory and are not recognized in our statement of income until a home closes. In the later stages of community life cycle, cash inflows may
TABLE OF CONTENTS
significantly exceed earnings reported for financial statement purposes, as the cash outflows associated with home construction and land development previously occurred.
Our homebuilding debt to total capitalization ratio, which is calculated as the sum of borrowings on lines of credit, the senior unsecured notes, and notes payable, net of debt issuance costs ("total debt"), divided by the total capitalization, which equals the sum of Green Brick Partners, Inc. stockholders' equity and total debt, was approximately 12.8% as of December 31, 2025.
Additionally, as of December 31, 2025, our net debt to total capitalization ratio, which is a non-GAAP financial measure, remained low at 8.2%. It is our intent to prudently employ leverage to continue to invest in our land acquisition, development and homebuilding activities. We target a debt to total capitalization ratio of approximately 20%, which we expect will provide us with significant additional growth capital.
Reconciliation of a Non-GAAP Financial Measure
In this Annual Report on Form 10-K, we utilize a financial measure of net debt to total capitalization ratio that is a non-GAAP financial measure as defined by the Securities and Exchange Commission ("SEC"). Net debt to total capitalization is calculated as total debt less cash and cash equivalents, divided by the sum of total Green Brick Partners, Inc. stockholders' equity and total debt less cash and cash equivalents. We present this measure because we believe it is useful to management and investors in evaluating the Company's financing structure. We also believe this measure facilitates the comparison of our financing structure with other companies in our industry. Because this measure is not calculated in accordance with U.S. Generally Accepted Accounting Principles ("GAAP"), it may not be comparable to other similarly titled measures of other companies and should not be considered in isolation, as a substitute for, or superior to, financial measures prepared in accordance with GAAP.
The closest GAAP financial measure to the net debt to total capitalization ratio is the debt to total capitalization ratio. The following table represents a reconciliation of the net homebuilding debt to total capitalization ratio as of December 31, 2025 (dollars in thousands):
Total capitalization
Homebuilding capitalization(1)
Gross Cash and cash equivalents Net Gross Cash and cash equivalents Net
Total debt, net of debt issuance costs $ 320,276 $ (154,590) $ 165,686 $ 273,878 $ (147,830) $ 126,048
Total Green Brick Partners, Inc. stockholders' equity 1,858,962 - 1,858,962 1,858,962 - 1,858,962
Total capitalization $ 2,179,238 $ (154,590) $ 2,024,648 $ 2,132,840 $ (147,830) $ 1,985,010
Debt to total capitalization ratio 14.7 % 12.8 %
Net debt to total capitalization ratio 8.2 % 6.3 %
(1)Homebuilding capitalization ratio excludes cash and debt related to our wholly owned mortgage company.
Key Sources of Liquidity
Our key sources of liquidity were funds generated by operations and provided by borrowings during the year ended December 31, 2025.
Cash Flows
The following summarizes our primary sources and uses of cash for the year ended December 31, 2025 as compared to the year ended December 31, 2024:
•Operating activities. Net cash provided by operating activities for the year ended December 31, 2025 was $213.2 million, compared to $25.9 million during the year ended December 31, 2024. The net cash inflows for the year ended December 31, 2025 were primarily generated from business operations of $343.5 million, partially offset by an increase in inventory of $160.3 million.
TABLE OF CONTENTS
•Investing activities. Net cash used in investing activities for the year ended December 31, 2025 increased to $43.6 million compared to cash provided by investing activities of $27.8 million for the year ended December 31, 2024. The cash outflows were primarily used for investments in unconsolidated entities of $38.8 million and the purchase of property and equipment, net of disposals of $4.8 million during the year ended December 31, 2025.
•Financing activities. Net cash used in financing activities for the year ended December 31, 2025 was $138.4 million, compared to a $93.5 million during the year ended December 31, 2024. The cash outflows for the year ended December 31, 2025 were primarily for share repurchases of $83.8 million, net repayments on our lines of credit of $21.0 million and distributions to noncontrolling interests of $27.1 million.
For discussion and analysis our cash flows for the year ended December 31, 2024 as well as for comparison to our cash flows for the year ended December 31, 2023, refer to Item 7 of Part II of our Annual Report on Form 10-K for the year ended December 31, 2024.
Debt Instruments
Borrowings on lines of credit outstanding, net of debt issuance costs, as of December 31, 2025 and December 31, 2024 consisted of the following (in thousands):
December 31, 2025 December 31, 2024
Secured Revolving Credit Facility $ - $ -
Unsecured Revolving Credit Facility - 25,000
Warehouse facilities 46,398 -
Debt issuance costs, net of amortization (2,465) (2,355)
Total borrowings on lines of credit, net $ 43,933 $ 22,645
Secured Revolving Credit Facility - As of December 31, 2025 and 2024, we had no outstanding amounts under our Secured Revolving Credit Facility. On May 1, 2025, the Company entered into the Tenth Amendment to the Secured Revolving Credit Facility to extend its maturity date to May 1, 2028. Outstanding borrowings under the amended Secured Revolving Credit Facility bear interest payable monthly at a floating rate per annum equal to SOFR plus 2.25%, but in no event less than 3.15% per annum or more than the lesser of 18% and the highest maximum rate allowed by applicable law. The entire unpaid principal balance and any accrued but unpaid interest is due and payable on the maturity date.
Unsecured Revolving Credit Facility - As of December 31, 2025, we had no amounts outstanding under our Unsecured Revolving Credit facility compared to $25 million as of December 31, 2024. On December 10, 2025, the Company entered into the Thirteenth Amendment to this credit agreement. The Credit Agreement was amended (i) to reduce the SOFR spread and base rate spread, (ii) to allow the Company to request a revolving credit advance using Daily SOFR (as defined in the Credit Agreement) and (iii) for other administrative changes. The total commitments remain at $330 million. The maturity of all commitments under the facility have been extended to December 14, 2028.
Senior Unsecured Notes - As of December 31, 2025, we had four series of senior unsecured notes outstanding which were each issued pursuant to a note purchase agreement. The aggregate amount of senior unsecured notes outstanding was $262.0 million as of December 31, 2025, compared to $299.1 million as of December 31, 2024, respectively, net of issuance costs.
•In August 2019, we issued $75.0 million of senior unsecured notes (the "2026 Notes"). Interest accrues at an annual rate of 4.0% and is payable quarterly. The final principal payment of $50.0 million is due on August 8, 2026.
•In August 2020, we issued $37.5 million of senior unsecured notes (the "2027 Notes"). Interest accrues at an annual rate of 3.35% and is payable quarterly. Principal on the 2027 Notes is due on August 26, 2027.
•In February 2021, we issued $125.0 million of senior unsecured notes (the "2028 Notes"). Interest accrues at an annual rate of 3.25% and is payable quarterly. The remaining principal on the 2028 Notes is due in increments of $25.0 million annually on February 25 in each of 2026, 2027, and 2028.
•In December 2021, we issued $100.0 million of senior unsecured notes (the "2029 Notes"). Interest accrues at an annual rate of 3.25% and is payable quarterly. A required principal prepayment of $30.0 million is due on December 28, 2028. The remaining unpaid principal balance is due on December 28, 2029.
The senior unsecured notes allow optional prepayment is allowed with payment of a "make-whole" premium that fluctuates depending on market interest rates. Interest is payable quarterly in arrears.
TABLE OF CONTENTS
Our debt instruments require us to maintain specific financial covenants, each of which we were in compliance with as of December 31, 2025. Specifically, under the most restrictive covenants, we are required to maintain the following:
•a minimum interest coverage (consolidated EBITDA to interest incurred) of no less than 2.0 to 1.0. As of December 31, 2025, our interest coverage on a last 12 months' basis was 32.8 to 1.0;
•a Consolidated Tangible Net Worth of no less than approximately $1,169.0 million. As of December 31, 2025, our Consolidated Tangible Net Worth was $1,858.1 million; and
•a maximum debt to total capitalization rolling average ratio of no more than 40.0%. As of December 31, 2025, we had a rolling average ratio of 15.0%.
Warehouse Facilities
GRBK Mortgage, LLC, a wholly owned subsidiary of the Company, is party to warehouse facilities to fund its origination of mortgage loans (the "Warehouse Facilities") as follows (in thousands):
Outstanding Balance As of
Maturity Date
Maximum Aggregate Commitment
December 31, 2025 December 31, 2024
January 29, 2026(1)
$ 40,000 $ 16,828 $ -
December 15, 2027 40,000 29,570 -
$ 80,000 $ 46,398 $ -
(1)On January 23, 2026, the warehouse facility with a maturity date of January 29, 2026 was extended to January 29, 2027.
The Warehouse Facilities provide for an aggregate uncommitted amount of $80.0 million. The Warehouse Facilities are (i) secured by the underlying mortgage loans and bear interest at a variable rate based on SOFR plus a margin ranging from 1.75% to 2% and (ii) guaranteed by Green Brick. The facilities are subject to annual renewal and contain customary covenants and conditions regarding minimum net worth, leverage, profitability and liquidity. The Company was in compliance with the financial covenants under the Warehouse Facilities as of December 31, 2025.
Under the Warehouse Facilities, banks purchase a participation interest in individual mortgage loans, with GRBK Mortgage providing the remainder of the principal of the mortgage, typically up to 2% depending on the loan product. The mortgage loans, with the servicing rights, are then sold, typically within 14 to 60 days, to a third party investor and the bank is repaid its participation interest plus interest and the remainder is remitted to GRBK Mortgage. If a third party investor has not purchased the mortgage loan within the anticipated timeframes then GRBK Mortgage is required to repurchase the mortgage loan for the full amount of the participation interest plus interest.
As of December 31, 2025, we believe that our cash on hand, capacity available under our lines of credit and cash flows from operations for the next twelve months will be sufficient to service our outstanding debt during the next twelve months and fund our operations. For more detailed information on our lines of credit, refer to Note 8 to the Consolidated Financial Statements located in Part II, Item 8 of this Annual Report on Form 10-K.
Preferred Equity
As of December 31, 2025 and December 31, 2024 we had 2,000,000 Depositary Shares issued and outstanding, each representing 1/1000 of a share of our 5.75% Series A Cumulative Perpetual Preferred Stock (the "Series A Preferred Stock"). We pay cumulative cash dividends on the Series A Preferred Stock, when and as declared by the Board, at the rate of 5.75% of the $25,000 liquidation preference per share. Dividends are payable quarterly in arrears. During each of the years ended December 31, 2025, 2024, and 2023, we paid dividends of $2.9 million on the Series A Preferred Stock. On February 18, 2026, the Board declared a quarterly cash dividend of $0.359 per depositary share on the Series A Preferred Stock. The dividend is payable on March 13, 2026 to stockholders of record as of March 2, 2026.
Registration Statements
In September 2023, we filed with the SEC an automatic shelf registration statement on Form S-3 which enables us to issue shares of common stock, preferred stock or debt securities either separately or represented by warrants, or depositary shares as well as units that include any of these securities. Under the rules governing shelf registration statements, we will file a prospectus supplement and advise the SEC of the amount and type of securities each time we issue securities under this
TABLE OF CONTENTS
registration statement. The Company has not issued any securities under this registration statement through the date of this filing.
Off-Balance Sheet Arrangements
Land and Lot Option Contracts
In the ordinary course of business, we enter into land purchase contracts in order to procure lots for the construction of our homes in the future. We are subject to customary obligations associated with such contracts. These purchase contracts typically require an earnest money deposit, and the purchase of properties under these contracts is generally contingent upon satisfaction of certain requirements, including obtaining applicable property and development entitlements.
We also utilize option contracts with lot sellers as a method of acquiring lots in staged takedowns, which are the schedules that dictate when lots must be purchased to help manage the financial and market risk associated with land holdings, and to reduce the use of funds from our corporate financing sources. Lot option contracts generally require us to pay a non-refundable deposit for the right to acquire lots over a specified period of time at pre-determined prices that typically include escalations in lot prices over time.
Our utilization of lot option contracts is dependent on, among other things, the availability of land sellers willing to enter into these arrangements, the availability of capital to finance the development of optioned lots, general housing market conditions and local market dynamics. Options may be more difficult to procure from land sellers in strong housing markets and are more prevalent in certain geographic regions.
We generally have the right, at our discretion, to terminate our obligations under both purchase contracts and option contracts by forfeiting the earnest money deposit with no further financial responsibility to the seller.
As of December 31, 2025, we had earnest money deposits of $14.8 million at risk associated with contracts to purchase 9,633 lots with an aggregate purchase price of approximately $377.6 million.
Letters of Credit and Performance Bonds
Refer to Note 18 in the accompanying Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K for details of letters of credit and performance bonds outstanding.
Critical Accounting Policies and Estimates
The preparation of financial statements in accordance with GAAP requires management to use judgment and make estimates that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues, costs and expenses during the reporting period. Management bases estimates and judgments on historical experience and on various other factors that we believe to be reasonable under the circumstances. Actual results may differ from estimates under different assumptions or conditions. Management believes that the following accounting area is most critical to the portrayal of our financial condition and results of operations and requires the most subjective or complex judgments.
Impairment of Inventory
We value inventory at cost unless the carrying value is determined to be not recoverable in which case the affected inventory is written down to fair value. In accordance with Accounting Standards Codification 360, Property, Plant, and Equipment ("ASC 360"), we evaluate our inventory for indicators of impairment by individual community and development during each reporting period.
For our builder operations segments, during each reporting period, contribution margins on closed homes and homes under construction, and forecasted margins for future starts are reviewed at a community level by management. In the event that this review suggests higher potential for losses at a specific community, the Company monitors such communities by adding them to our "watchlist" communities, and, when an impairment indicator is present, further analysis is performed.
For our land development segment, we perform a quarterly review for indicators of impairment for each project which involves comparing anticipated lot sale revenues to projected costs (i.e. lot gross margins). For lots designated for our builders, we review land for indicators of impairment on a consolidated level, looking at overall projected home contribution margins. In determining the allocation of costs to a particular land parcel, we rely on project budgets which are based on a variety of assumptions, including assumptions about development schedules and future costs to be incurred. It is common that actual
TABLE OF CONTENTS
results differ from budgeted amounts for various reasons, including delays, changes in costs that have not been committed, unforeseen issues encountered during project development that fall outside the scope of existing contracts, or items that ultimately cost more or less than the budgeted amount. We apply procedures to maintain best estimates in our budgets, including assessing and revising project budgets on a periodic basis, obtaining commitments from subcontractors and vendors for future costs to be incurred and utilizing the most recent information available to estimate costs.
Each reporting period, management reviews each real estate asset with an indicator of impairment to determine whether the estimated remaining undiscounted future cash flows are more or less than the asset's carrying value. The estimated cash flows are determined by projecting the remaining revenue from closings based on the contractual lot takedowns remaining, future projected lot takedowns, or historical and projected home sales or delivery absorptions for homebuilding operations and then comparing such projections to the remaining projected expenditures for development or home construction. Remaining projected expenditures are based on the most current pricing/bids received from subcontractors for current phases or homes under development. For future phases of land development, management uses its judgment to project potential cost increases. In determining the estimated cash flows for land held for sale, management considers recent comparisons to market comparable transactions, bona fide letters of intent from outside parties, executed sales contracts, broker quotes, and similar information. When projecting revenue, management does not assume improvement in market conditions.
If the estimated undiscounted cash flows are more than the asset's carrying value, no impairment adjustment is required. However, if the estimated undiscounted cash flows are less than the asset's carrying value, the asset is deemed impaired and will be written down to fair value. These impairment evaluations require us to make estimates and assumptions regarding future conditions, including the timing and amounts of development costs and sales prices of real estate assets, to determine if expected future cash flows will be sufficient to recover the asset's carrying value.
Fair value is determined based on estimated future cash flows discounted for inherent risks associated with real estate assets. These discounted cash flows are impacted by expected risk based on estimated land development activities, construction and delivery timelines, market risk of price erosion, uncertainty of development or construction cost increases, and other risks specific to the asset or market conditions where the asset is located when the assessment is made. These factors are specific to each community and may vary among communities. When deemed appropriate, we use recent comparisons to market comparable transactions, bona fide letters of intent from outside parties, executed sales contracts, broker quotes, or similar information as inputs to estimate the fair value of certain real estate assets.
When estimating cash flows of a community, management makes various assumptions, including: (i) expected sales prices and sales incentives to be offered, including the number of homes available, pricing and incentives being offered by us or other builders, and future sales price adjustments based on market and economic trends; (ii) expected sales pace and cancellation rates based on local housing market conditions, competition and historical trends; (iii) costs expended to date and expected to be incurred including, but not limited to, land and land development costs, home construction costs, interest costs, indirect construction and overhead costs, and selling and marketing costs; (iv) alternative product offerings that may be offered that could have an impact on sales pace, sales price and/or building costs; and (v) alternative uses for the property.
Many assumptions are interdependent and a change in one may require a corresponding change to other assumptions. For example, increasing or decreasing sales absorption rates has a direct impact on the estimated per unit sales price of a home, the level of time-sensitive costs (such as indirect construction, overhead and carrying costs), and selling and marketing costs (such as model home maintenance costs and advertising costs). Due to uncertainties in the estimation process, the volatility in demand for new housing and the long life cycle of many communities, actual results could differ significantly from such estimates.
Refer to Note 1 to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for further description of our significant accounting policies.
Recent Accounting Pronouncements
See Note 1 to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for recent accounting pronouncements.
Green Brick Partners Inc. published this content on February 25, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on February 25, 2026 at 22:25 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]