Millrose Properties Q1 2025 Earnings Report

Millrose Properties EPS Results

• Actual EPS: $0.39
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Millrose Properties Revenue Results

• Actual Revenue: N/A
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Millrose Properties Announcement Details

• Quarter: Q1 2025
• Date: 5/14/2025
• Time: Before Market Opens
• Conference Call Date: Wednesday, May 14, 2025
• Conference Call Time: 10:00AM ET

Millrose Properties (NYSE:MRP) is a real estate investment and management company that focuses on acquiring, developing, and managing high-quality commercial properties. They are headquartered in Purchase, New York.

Millrose Properties Q1 2025 Earnings Call Transcript

Presentation

[Operator]

Ladies and gentlemen, thank you for standing by. At this time, I would like to welcome everyone to the Millrose Properties First Quarter twenty twenty five Earnings Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. I will now turn the call over to Jesse Ross, Millrose Head of Financial Planning and Analysis.

[Operator]

Jesse, you may begin the conference.

[Jesse Ross, Director - Head of FP&A Millrose Properties at Kennedy Lewis Investment Management LLC]

Good morning, everyone, and thank you for joining us for Millrose Properties' first earnings call as a publicly traded company following our spin off from Lennar Corporation on February 7. With us today to discuss our first quarter twenty twenty five results are Darren Richman, our Chief Executive Officer and President Robert Midgen, our Chief Operating Officer and Garrett Rosenblum, our Chief Financial Officer. Before we begin, I'd like to remind everyone that this call may include forward looking statements and discuss non GAAP financial measures. It should be noted that a variety of factors could cause actual results to differ materially from the anticipated results or expectations expressed in these forward looking statements. Please refer to the first quarter twenty twenty five financial and operational results announced as well as the first quarter investor presentation we released and posted on our website under the Investor Relations heading for a discussion of forward looking statements and reconciliations of non GAAP financial measures.

[Jesse Ross, Director - Head of FP&A Millrose Properties at Kennedy Lewis Investment Management LLC]

With that, I'll turn the call over to Darren.

[Darren Richman, CEO & President at Millrose Properties]

Thank you, Jessie, and good morning, everyone. It is my pleasure to welcome you to our first earnings call as a standalone company. This is an exciting milestone for us, and we're eager to share the progress we've made in our first quarter as a public company. Millroads is the first publicly traded land banking REIT that provides homebuilders with a reliable, efficient source of capital for land acquisition and development. Our innovative home option purchase platform allows us to deliver home sites to builders on a just in time basis while generating recurring predictable cash flows for our shareholders.

[Darren Richman, CEO & President at Millrose Properties]

We maintain a close, mutually beneficial relationship with Lennar Corporation, one of the nation's leading homebuilders. Lennar serves as our anchor tenant with a portfolio of approximately $6,600,000,000 in assets under purchase option agreements with a weighted average yield of 8.5% as of 03/31/2025. This relationship provides Millrose with a stable foundation as we grow and diversify our platform to serve other homebuilders. The value we bring to the market is clear. Homebuilders today face increasing challenges in managing their balance sheets while maintaining the flexibility to respond to market opportunities.

[Darren Richman, CEO & President at Millrose Properties]

Millrose is uniquely positioned to be their trusted partner, offering perpetual capital solution that alleviates balance sheet demands and unlocks enterprise value. For investors, Millrose represents a stable, tax efficient, income generating investment vehicle. Our business model is simple yet powerful. We generate consistent income from monthly option fee payments on capital deployed. Importantly, our revenue model is not tied to land value speculation or the execution of land development, which helps us to deliver highly predictable revenues, earnings and dividends.

[Darren Richman, CEO & President at Millrose Properties]

Our strategy is built with a long term success. While broader demand for homes has remained strong, the housing market continues to face pressures of high interest rates and other market uncertainties. Despite this economic backdrop, homebuilders are continuing to invest in land and land development. Looking at the longer term, strong structural tailwinds persist. We believe that there continues to be a significant shortfall in housing supply and while estimates vary the actual deficit, most estimates peg the gap in the range of 3,000,000 to 5,000,000 units.

[Darren Richman, CEO & President at Millrose Properties]

Additionally, many of our builder clients are operating with historically high margins and strong balance sheets highlighted by low leverage levels positioning them and the industry for resilience and future growth. We believe Millrose is well positioned to capitalize on these trends. Our unique operating model allows us to scale efficiently while maintaining a conservative risk profile. We're excited about the opportunities ahead and we're committed to delivering value for our shareholders, homebuilder partners and the communities we serve. We are already proving out our investment thesis.

[Darren Richman, CEO & President at Millrose Properties]

Our first quarter of operations was highlighted by robust demand for our capital, demonstrating the power of the Millrose platform. Looking first at our Lennar portfolio, we are seeing our capital recycling model at work with receipts of $645,000,000 in cash proceeds from home site sales to Lennar and $635,000,000 redeployed into land acquisition and development funding in the quarter. We have also made progress in growing our partnerships with other homebuilders. While we don't disclose the names of our specific customers to protect the confidentiality of those counterparties, we can say that the engagement across the industry has been overwhelmingly positive. We have executed five separate programmatic partnership commitments with homebuilder counterparties, which provide the builder with defined capital availability from Millrose under pre negotiated terms.

[Darren Richman, CEO & President at Millrose Properties]

We believe this approach gives our counterparties important visibility in their land planning. During the quarter, we announced $351,000,000 of transactions outside the Lennar relationship with average yields of 11.7%. We're pleased to report that this progress has continued after the quarter end with approximately $130,000,000 of additional non Lennar transactions between the March end and today, resulting in approximately $480,000,000 of total cumulative transactions funding since the spin off. We are also excited to announce a significant new transaction. Millrose has entered into a commitment to fund approximately 700,000,000 in a traditional land banking transaction structure in partnership with the new home company to support their acquisition of Landsea Homes.

[Darren Richman, CEO & President at Millrose Properties]

This transaction, like our previously announced Rausch Coleman transaction, exemplifies Millrose's differentiated ability to facilitate large scale, capital efficient M and A in the homebuilding sector. Given this exciting increase in demand, we are increasing our full year 2025 guidance in transaction funding outside of the Lennar master plan agreement to $1,500,000,000 from the previously announced $1,000,000,000 I will share however that I've set for our team an internal stretch target of $2,000,000,000 which I do believe is achievable given the market reception we've observed thus far. Accordingly, we are also increasing our year end quarterly earnings per share run rate guidance to a range of $0.69 to $0.71 per share. To support this investment pace, we are also pleased to announce a new signed $1,000,000,000 delayed draw term loan commitment from Goldman Sachs and JPMorgan. This new capital commitment in addition to our $1,300,000,000 revolving credit facility provides us with ample capital capacity to execute on our growing opportunity set.

[Darren Richman, CEO & President at Millrose Properties]

Our performance demonstrates the power of our business model and we are excited about the future prospects as we continue to leverage the Lennar agreement while also diversifying our business and capitalizing on growing demand across the industry. Overall, we see a number of very durable sector tailwinds that should continue to advantage Melrose. They are, one, the as mentioned structural shortage of housing, mainly the result of challenges to get land permitted and entitled two, the new home market continues to pick up market share from the existing home market given the structural move in interest rates Three, the big builders continue to get bigger owing to their scale advantages. And four, more builders are shifting to just in time delivery of land and are embracing land light strategies. With that, I will now turn the call over to Rob for an operational update.

[Robert Nitkin, Chief Operating Officer at Millrose Properties]

Thank you, Darren. Good morning, everyone. I'm pleased to join you on our first earnings call and to provide an update on our operational progress for the quarter. As you can probably infer from Darren's comments, our team has been highly active since the spin off. We currently operate with 33 dedicated homebuilder finance professionals across multiple offices whose focus and execution across origination, diligence, asset management and servicing functions have been instrumental in establishing the foundation of Milrose.

[Robert Nitkin, Chief Operating Officer at Millrose Properties]

As Darren noted, in the quarter we redeployed over $600,000,000 in Lennar home site sale proceeds into newly underwritten Lennar transactions and development funding. This is in addition to the previously disclosed $859,000,000 Rausch Coleman transaction that closed shortly after the spin off in which we acquired approximately 24,000 home sites and simultaneously executed option agreements with Lennar. I'd like to recognize the entire Lennar team and their work to ensure a seamless transition and stewardship of these mission critical home site assets and a highly successful post spin operating relationship. Beyond our Lennar relationship, we have executed on strong demand from third party homebuilders enabling us to deploy capital at attractive risk adjusted returns. During the quarter, we underwrote, diligent and closed $351,000,000 in third party transactions and this momentum has continued post quarter end as Darren noted.

[Robert Nitkin, Chief Operating Officer at Millrose Properties]

As of today, we have closed or committed to close transactions with seven counterparties apart from Lennar, the majority of whom are publicly traded homebuilders. I'm also pleased to elaborate on Darren's mention of our exciting transaction with the New Home Group. Melrose has entered into a $700,000,000 land banking funding commitment in support of the Landsea Homes acquisition recently announced by New Home Company, a leading homebuilder owned by funds affiliated with Apollo Global Management. While New Home will acquire Landsea's operating business, Millrose will acquire a significant portion of its home site assets and enter into corresponding option agreements with New Home. The $700,000,000 commitment includes up to a $600,000,000 commitment for land acquisition, is expected to fund in the third quarter of twenty twenty five and an additional up to $100,000,000 in subsequent land development funding.

[Robert Nitkin, Chief Operating Officer at Millrose Properties]

The transaction represents an attractive home site portfolio, but also the creation of a stronger builder counterparty, including a $650,000,000 additional equity contribution by Apollo. We have great respect for the management of Matt Vates and the entire New Home team, whom we've enjoyed a mutually beneficial relationship historically. As our pipeline continues to grow, we are investing heavily in the expansion of our underwriting, diligent asset management and servicing teams as well as our technology platform to support scalable growth and transaction capacity. With that, I'll turn the call over to Garrett for a financial update.

[Garett Rosenblum, CFO & Treasurer at Millrose Properties]

Thank you, Rob, and good morning, everyone. I'm pleased to walk you through Millrose Properties' financial performance for the first quarter of twenty twenty five. This quarter marks an important milestone as we establish ourselves as a standalone REIT with a strong platform, significant liquidity and a disciplined capital allocation strategy. For the quarter, we reported net income attributable to Millrose common shareholders of $64,800,000 after an adjustment for expenses from the pre spin period or $0.39 per share driven by $82,700,000 in option fees. Our book value per share at the end of the quarter stood at $35.4 Our management fee expense was $12,100,000 which is calculated transparently at 1.25% of gross tangible assets.

[Garett Rosenblum, CFO & Treasurer at Millrose Properties]

Interest expense was $2,500,000 and income tax expense was $4,400,000 We plan to distribute 100 of our earnings back to shareholders. In the quarter, we paid an inaugural dividend of $63,100,000 or $0.38 per share. The $0.38 dividend per share is the prorated portion for the stub period, which would equate to $0.65 per share on a normalized quarterly basis. Turning briefly to our balance sheet. Millrose is currently capitalized with $7,200,000,000 of total assets with a debt to capitalization ratio of approximately 5%.

[Garett Rosenblum, CFO & Treasurer at Millrose Properties]

We ended the quarter with $350,000,000 in total debt and ample liquidity of approximately $1,100,000,000 which includes availability under our revolving credit facility and cash. Going forward, we expect to maintain a conservative maximum leverage target of 33% net debt to capitalization. Finally, turning to guidance. We are increasing our guidance for full year 2025 transaction funding outside of Master Program agreement to $1,500,000,000 and increasing our year end quarterly earnings per share run rate guidance to a range of $0.69 to $0.71 per share. Once again, Millrose plans to distribute 100% of earnings back to shareholders in the form of cash dividends.

[Garett Rosenblum, CFO & Treasurer at Millrose Properties]

We remain focused on delivering value to our shareholders through consistent earnings, prudent capital allocation and a conservative balance sheet. With that, I'll turn the call back to Darren.

[Darren Richman, CEO & President at Millrose Properties]

Thank you, Garrett. To close, I want to reiterate how excited we are about the opportunities ahead for Millrose. Our innovative approach to land banking is transforming the way homebuilders access capital while providing stable, predictable returns for our investors. We're confident in our strategy and we're committed to delivering value for all our stakeholders. Thank you for your support and we look forward to sharing our progress in the quarters ahead.

[Darren Richman, CEO & President at Millrose Properties]

Operator, that concludes our prepared remarks. We are now ready to take questions.

[Operator]

We will now begin the question and answer session. Our first question comes from the line of Julien Blumen with Goldman Sachs. Please go ahead.

[Julien Blouin, Vice President at Goldman Sachs]

Thank you for taking my question and congratulations on the quarter team. Can you help us think about the kinds of yields you look for on some of these larger deals like the Lansing new home deal? Just trying to understand if it's more roughly consistent with the non deals or sort of the Lennar preferential rate?

[Darren Richman, CEO & President at Millrose Properties]

Yes. No, Julien. Thanks for joining us. It is definitely the non Lennar. And again, we've talked about this in the past, just given the demand for this capital versus the supply, we we, you know, are getting consistent rates with what we've reported.

[Darren Richman, CEO & President at Millrose Properties]

Now they might be a little bit lower than the 11.7 because in some of these in many of these, we actually are getting cross collateralization. And so there is, a give up on rate for more credit enhancement, which the builders many of the builders are moving towards.

[Julien Blouin, Vice President at Goldman Sachs]

Okay. Great. Thank you. And maybe bigger picture, can you help us understand how crucial Millrose's participation was to unlocking for Apollo and New Home? And how should we think about the opportunities out there to support other transactions within homebuilding and maybe also beyond?

[Darren Richman, CEO & President at Millrose Properties]

Yeah. Think Ralph Coleman really sets a standard for using Millrose as a tool to effectuate m and a. And there's a lot of buzz right now, from the more of the mid sized builders as they're trying to outrun their lack of scale. And so there's there's a lot of activity more in the mid market, part of the, homebuilder sector. And to get right to the heart of your question, Millrose is very front and center as a tool now in the toolbox to effectuate M and A.

[Darren Richman, CEO & President at Millrose Properties]

We are very excited about that. And in part, that's that's that's part of the reason why our stretch goal is more towards 2,000,000,000 than 1,500,000,000.0 because we do think, given the activity in the sector right now, we are going to be a participant in more and more conversations and ultimately in in more M and A. And and M and A, look, we all know it's it's hard to achieve given cultural and valuation, issues, but, we have we are now a tool in the toolbox for M and A.

[Julien Blouin, Vice President at Goldman Sachs]

Okay, great. I'll get back in the queue.

[Operator]

Our next question comes from the line of Eric Wolf with Citi. Please go ahead.

[Eric Wolfe, Director at Citi]

Hey, thanks. For your guidance of $0.69 to $0.71 of EPS run rate at year end, can you just talk about what's embedded in that in terms of total transaction funding, the weighted average yield on that funding, the mix between Lennar master program versus non master program and just anything else that you think is important to get to that sort of $0.70 of run rate by year end?

[Robert Nitkin, Chief Operating Officer at Millrose Properties]

Yes, sure. Thanks for the question Eric. Happy to. So that would be consistent with the $1,500,000,000 non Lennar target. So think of that as the existing balance of Lennar deals and that $1,500,000,000 of non Lennar.

[Robert Nitkin, Chief Operating Officer at Millrose Properties]

It assumes a yield on the non Lennar that's about 50 basis points more conservative than the 11.7 that we realized in the first quarter and cost of debt that's about 50 basis points more conservative wider than our cost of debt today. So hopefully that helps.

[Eric Wolfe, Director at Citi]

Yes, that's helpful. And then you just gave the rates, I guess, 11.2% on the $1,500,000,000 But could you maybe just talk about sort of average duration on that, option deposit, termination fees, cross collateralization, anything you just think is important from a risk mitigation point of view? And then to the extent that your underwriting perhaps has changed over the last couple months, given a little bit more of a uncertain environment, can you just talk about sort of how you've adjusted your underwriting based on the current environment?

[Robert Nitkin, Chief Operating Officer at Millrose Properties]

Yes, sure. So, in general that pipeline, it varies in terms of deposit and cross collateralization pooling. I think you're going to see a mix of some pooling some others based on what Darren alluded to with builders seeing the cross termination pooling and higher deposits as a tool to bring down their yield and we're happy with that dynamic. Generally speaking, the overall deposit, you know, on this this category of deals is, higher than in the Lennar category. And, you know, generally speaking, we are very focused on risk mitigation, particularly given what you mentioned in the market.

[Robert Nitkin, Chief Operating Officer at Millrose Properties]

We're seeing plenty of demand, but it hasn't changed our underwriting process, which is continued to be as rigorous as it ever was. Not only the real estate diligence, but the vetting of gross margin ASP assumptions that, we believe to be consistent with the correct market. So, we continue to be rigorous in our underwriting.

[Eric Wolfe, Director at Citi]

Thank you.

[Operator]

Our next question is a follow-up from the line of Julien Blumen with Goldman Sachs. Please go ahead.

[Julien Blouin, Vice President at Goldman Sachs]

Thank you. And maybe following up on that, we noticed that the weighted average duration for the new third party deployments was quite a bit longer than the deployments for Lennar. Can you sort of help us understand what's driving that difference? And then how do you get comfortable around that longer duration given maybe the lack of cross collateralization on some of those third party deals? Does the higher yield help make up for that?

[Robert Nitkin, Chief Operating Officer at Millrose Properties]

Yes. I would say I actually wouldn't characterize that duration on third party deals as longer duration. Remember that's the final home site takedown. So the weighted average life of the deal is much less than that maybe around half of that. So in the fifty ish month sort of total last takedown we're very comfortable with that duration.

[Robert Nitkin, Chief Operating Officer at Millrose Properties]

And what you're keying in on is that you're right, the duration, again for final takedown of the new Lennar deals we've done is shorter, which is consistent with what Lennar has said, this is a tool for work in progress shorter term home site inventory.

[Julien Blouin, Vice President at Goldman Sachs]

Got it. Thank you.

[Operator]

Our next question is a follow-up from the line of Eric Wolf with Citi. Please go ahead.

[Eric Wolfe, Director at Citi]

Thanks. It looks like you're assuming around the average takedown per site of, call it, around $100,000 Could you just talk about how that relates to sort of the total estimated sort of home prices that you're assuming, the margins that you're assuming the homebuilders get? I'm just trying to understand sort of what that represents relative to sort of total home sale and the profit that you're expecting the homebuilder to take down from that?

[Robert Nitkin, Chief Operating Officer at Millrose Properties]

Yes, sure. So if you think about call it $450,000 home sale that would mean a total lot price of $100,000 And so the balance of that would be the vertical build cost and the gross margin assumptions where we're generally underwriting as we've talked about to a gross margin consistent with the builders' targets that they reported.

[Eric Wolfe, Director at Citi]

Okay. And I guess as far as the the new delayed draw term loan, I think you said something about it was 50 basis points wide of your line of credit. I don't know if I heard that right, but maybe just, you know, walk us through the the LTV on that loan. I'm trying to understand something like the the asset base that it's secured by, as well as the rate and anything else that you think sort of important for us to understand about the about that loan.

[Darren Richman, CEO & President at Millrose Properties]

Yeah. This is Aaron. It the the rate is actually consistent with the revolver and has many of the same terms and conditions as in the revolver.

[Robert Nitkin, Chief Operating Officer at Millrose Properties]

Yeah. So so said differently, my sort of more conservative assumptions in that full year target, that was, you know, that assumption was not that was more conservative, than, you know, the rate on that delayed return one.

[Eric Wolfe, Director at Citi]

Got it. And is that secured by, Lennar, I guess, Lennar, homesites and just anything in terms of the the LTV, on on that? So if it's, you know, call it billion dollars, like, what's the sort of leverage profile?

[Darren Richman, CEO & President at Millrose Properties]

It yeah. The the spin out was, Lennar's assets, which are themselves unlevered. So this would be a corporate loan against all of our assets, inclusive of Lennar's and other third parties now. So did hopefully, that answers your question.

[Eric Wolfe, Director at Citi]

Yes. It does. Sorry. I thought when you instead of secured, I thought it was secured by, like, a certain percentage of assets, but I got it. It's it's it's by everything.

[Eric Wolfe, Director at Citi]

At the corporate level. And right. Makes sense. And then, you know, in terms of your decision, I guess, to distribute 100% of earnings back to shareholders, could you just sort of talk us through sort of, you know, that decision, I guess, to the extent that there's any sort of timing mismatches in the future related to take down proceeds versus deploying capital, would you slightly lower the dividend or you just fund the excess through the line of credit? Like, how did you come up with decision to fund exactly 100% of your earnings distributed back to to shareholders?

[Darren Richman, CEO & President at Millrose Properties]

Yeah. This is meant to be a cash yielding instrument. The this capital as you know, the reason why the REIT was was chosen is really to repatriate as much capital annually as we produce. And and and so that the decision is really consistent with that. The extra between 90% and a % would be taxable anyway.

[Darren Richman, CEO & President at Millrose Properties]

So we don't really get any capital advantages inside of the REIT, to recycle and reuse those proceeds. If you if you think about the dividend, then 10% of at at a % and then 90% of that, it's really a small amount of capital on a $8,000,000,000 or so balance sheet. And so it doesn't really do much from a capital deployment perspective, but it does a lot to move the needle from a, effective yield. And that's what we're really trying to do is drive our accretive growth, drive that yield as high as we can and repatriate as much capital to shareholders as we produce.

[Eric Wolfe, Director at Citi]

Understood. That's helpful. And the last question, thanks for letting me ask all these. I think, as part of your initial agreement with Lennar, you're receiving option fee payments or you are receiving option fee payments on around $580,000,000 of funding that was funded with their deposits. Are you assuming that some of that comes off to get to that, call it, zero seven year end run rate?

[Eric Wolfe, Director at Citi]

And what's a good assumption how that should come off over time?

[Robert Nitkin, Chief Operating Officer at Millrose Properties]

Yeah. It has a small impact that that, you know, won't be meaningful. I think you'll see all the reconciliations on, the materials in both the 10 Q and the presentation. But, you know, I don't think it's particularly meaningful.

[Eric Wolfe, Director at Citi]

Okay. Got it. Alright. Thank you.

[Darren Richman, CEO & President at Millrose Properties]

Thank you.

[Operator]

That will conclude our question and answer session. I'll hand the call back to management for any closing comments.

[Darren Richman, CEO & President at Millrose Properties]

Yeah. We'd like to thank everybody for joining us today. We're very excited about our progress that we've made thus far and the momentum that we have as a business, as an organization, and really our role in the sector. Thank you, and we look forward to, doing these again in the future. Take care.

[Operator]

This will conclude today's call. Thank you all for joining. You may now disconnect.

Participants

Executives

• Darren Richman, CEO & President
• Robert Nitkin, Chief Operating Officer

Analysts

• Jesse Ross, Director - Head of FP&A Millrose Properties at Kennedy Lewis Investment Management LLC
• Garett Rosenblum, CFO & Treasurer at Millrose Properties
• Julien Blouin, Vice President at Goldman Sachs
• Eric Wolfe, Director at Citi