Investments in Unconsolidated Joint Ventures

9 Months Ended

Aug. 31, 2026

Equity Method Investments and Joint Ventures [Abstract]

Investments in Unconsolidated Joint Ventures

Homebuilding. We have investments in unconsolidated joint ventures that conduct land acquisition, land development and/or other homebuilding activities in various markets where our homebuilding operations are located. We and our unconsolidated joint venture partners make initial and/or ongoing capital contributions to these unconsolidated joint ventures, typically on a pro rata basis, according to our respective equity interests. The obligations to make capital contributions are governed by each such unconsolidated joint venture’s respective operating agreement and related governing documents.

We had investments in six homebuilding unconsolidated joint ventures as of August 31, 2026 and November 30, 2025. The following table presents combined condensed information from the statements of operations for our homebuilding unconsolidated joint ventures (in thousands):


	Three Months Ended August 31,				Nine Months Ended August 31,
	2026		2025		2026		2025
Revenues	$	30,400	$	19,027	$	61,466	$	58,767
Construction and land costs	(24,129)		(14,371)		(48,397)		(44,176)
Other expense, net	(1,914)		(1,567)		(5,018)		(4,474)
Income	$	4,357	$	3,089	$	8,051	$	10,117

All the combined revenues and most of the construction and land costs for the three-month and nine-month periods ended August 31, 2026 and 2025 related to homes delivered by an unconsolidated joint venture in California.

The following table presents combined condensed balance sheet information for our homebuilding unconsolidated joint ventures (in thousands):


	August 31, 2026		November 30, 2025
Assets
Cash	$	28,074	$	14,347
Receivables	15,439		5,517
Inventories	148,542		155,015
Other assets	872		620
Total assets	$	192,927	$	175,499

Liabilities and equity
Accounts payable and other liabilities	$	22,312	$	10,063

Notes payable (a)	44,100		40,216
Equity	126,515		125,220
Total liabilities and equity	$	192,927	$	175,499

(a) As of August 31, 2026 and November 30, 2025, one of our unconsolidated joint ventures in California had $24.4 million and $40.2 million, respectively, of borrowings outstanding under a term loan with a third-party lender to finance its land acquisition, development and construction activities. Pursuant to the terms of the loan agreement, as amended, the aggregate commitment was $55.2 million at November 30, 2025 and decreased to $40.0 million on February 28, 2026. In April 2026, the loan agreement was further amended, reducing the aggregate commitment to $39.2 million, and extending the maturity date to November 30, 2027, with no option for further extension. On August 31, 2026, the loan agreement was amended again, providing for an aggregate commitment to $31.6 million. Borrowings under the term loan are secured by the underlying property and related project assets. This unconsolidated joint venture delivered homes in the three-month and nine-month periods ended August 31, 2026 and 2025.

As of August 31, 2026, another unconsolidated joint venture in California had $19.7 million of borrowings outstanding under a revolving line of credit entered into with a third-party lender on that date to finance its land acquisition, development and construction activities. The line of credit has a maximum commitment of $37.5 million, which is scheduled to decrease to $35.0 million on August 1, 2028. Borrowings under the revolving line of credit are secured by the underlying property and related project assets. The line of credit matures on August 31, 2029, unless extended or terminated pursuant to its applicable terms.

We provide certain guarantees and indemnities to the lenders in connection with the above-described term loan and revolving line of credit, including a guaranty of interest and carry costs; a guaranty to complete the construction of certain specified improvements for the projects once commenced; a guaranty against losses suffered due to certain bad acts or failures to act by the unconsolidated joint venture or its partners; and an indemnity from environmental issues. Except to the extent related to the foregoing guarantees and indemnities, we do not have a guaranty or any other obligation to repay borrowings under the term loan or revolving line of credit or to support the value of the underlying collateral. However, various financial and non-financial covenants apply under the term loan and revolving line of credit and with respect to the related guaranty and indemnity obligations, and a failure to comply with such covenants could result in a default and cause the applicable lender to seek to enforce such guaranty and indemnity obligations. As of the date of this report, we were in compliance with the relevant covenants. We do not believe that our existing exposure under our guaranty and indemnity obligations related to outstanding borrowings under the term loan and the revolving line of credit is material to our consolidated financial statements.

Financial Services. The following table presents combined condensed information from the statements of operations for our financial services unconsolidated joint venture (in thousands):


	Three Months Ended August 31,				Nine Months Ended August 31,
	2026		2025		2026		2025
Revenues	$	25,181	$	26,362	$	64,924	$	79,326
Expenses	(16,993)		(17,854)		(46,810)		(52,437)
Income	$	8,188	$	8,508	$	18,114	$	26,889

Revenues are primarily generated from fees earned on mortgage loan originations, interest earned for the period loans are held by KBHS, and gains on the sales of mortgage loans held for sale. Gains on the sales of mortgage loans held for sale include the realized and unrealized gains and losses associated with changes in the fair value of such loans and any related derivative financial instruments.

The following table presents combined condensed balance sheet information for our financial services unconsolidated joint venture (in thousands):


	August 31, 2026		November 30, 2025
Assets
Cash and cash equivalents (a)	$	23,511	$	23,393
Mortgage loans held for sale	198,888		177,068
Other assets	10,849		8,104
Total assets	$	233,248	$	208,565

Liabilities and equity
Accounts payable and other liabilities	$	14,040	$	13,394
Funding facilities	189,732		168,709

Equity	29,476		26,462
Total liabilities and equity	$	233,248	$	208,565

(a)Cash and cash equivalents included restricted cash of $.9 million at both August 31, 2026 and November 30, 2025.

Mortgage loans held for sale. Originated mortgage loans expected to be sold into the secondary market in the foreseeable future are reported as mortgage loans held for sale and carried in KBHS’ balance sheets at fair value, with changes in fair value recognized within revenues in KBHS’ statements of operations.

Interest Rate Lock Commitments (“IRLCs”). KBHS enters into IRLCs in connection with originating certain mortgage loans held for sale, at specified interest rates and within a specified period of time, with customers who have applied for a mortgage loan and meet certain credit and underwriting criteria. KBHS accounts for IRLCs as free-standing derivatives and does not designate any for hedge accounting. As a result, IRLCs are recognized in KBHS’ balance sheets at fair value, and gains or losses resulting from changes in fair value are recognized within revenues in KBHS’ statements of operations. The fair value of IRLCs is based on market prices, which includes an estimate of the fair value of the associated mortgage servicing rights, adjusted for estimated costs to originate the underlying mortgage loans as well as the probability that the mortgage loans will fund within the terms of the IRLCs. The fair value of IRLCs included in other assets in KBHS’ balance sheets was $6.9 million at August 31, 2026 and $4.6 million at November 30, 2025. The changes in the fair value of IRLCs, which were reported in revenues for the applicable periods, were gains of $1.2 million and $2.2 million for the three-month and nine-month periods ended August 31, 2026, and losses of $3.0 million and $6.6 million for the three-month and nine-month periods ended August 31, 2025.

KBHS manages the interest rate and price risk associated with its outstanding IRLCs by entering into best efforts forward sale commitments under which mortgage loans locked with a borrower are simultaneously committed to a secondary market investor at a fixed price, subject to the underlying mortgage loans being funded. These best efforts forward sale commitments do not meet the definition of derivative financial instruments and are therefore not recorded in KBHS’

balance sheets. If the mortgage loans underlying the IRLCs do not fund, KBHS does not have an obligation to fulfill the secondary market investor commitments.

Funding facilities. KBHS maintains warehouse lines of credit and master repurchase agreements with various financial institutions to fund its originated mortgage loans, with its mortgage loans held for sale pledged as collateral under these agreements. The agreements contain covenants which include certain financial requirements, including maintenance of minimum tangible net worth, minimum liquid assets, maximum debt to net worth ratio and positive net income, as defined in the agreements. KBHS was in compliance with these covenants as of August 31, 2026. In addition to its compliance with these covenants, KBHS also depends on the ability and willingness of the applicable lenders and financial institutions, including any substitute or additional lenders and financial institutions, to extend such credit facilities to KBHS to fund its originated mortgage loans. KBHS intends to renew these facilities when they expire at various dates in 2026 and 2027. The warehouse lines of credit and master repurchase agreements are not guaranteed by us or any of the subsidiaries that guarantee our senior notes, unsecured revolving credit facility with various banks (“Credit Facility”) and senior unsecured term loan agreement (“Term Loan”) (collectively, “Guarantor Subsidiaries”).