Millrose Properties Q2 2025 Earnings Report

Millrose Properties EPS Results

• Actual EPS: $0.68
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Millrose Properties Revenue Results

• Actual Revenue: $149.00 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Millrose Properties Announcement Details

• Quarter: Q2 2025
• Date: 7/31/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, July 31, 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 Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Millrose paid its first full quarterly dividend of $0.69 per share, underscoring the reliability of its cash flow model.
• Positive Sentiment: The company raised its year-end adjusted funds from operations guidance to a run rate of $0.70–$0.73 per share, driven by stronger-than-expected third-party investment activity.
• Positive Sentiment: Third-party capital deployments grew to approximately $1.1 billion at quarter-end and have since increased to about $1.3 billion, diversifying the platform beyond its Lennar master program.
• Positive Sentiment: Millrose closed a $1 billion delayed draw term loan with Goldman Sachs and JPMorgan, enhancing liquidity and maintaining a conservative 15% debt-to-capitalization ratio.
• Negative Sentiment: Affordability constraints and waning consumer confidence are pressuring certain coastal secondary markets in Florida and Texas, though Millrose’s minimal exposure to these areas is fully protected by cross-termination pooling.

Presentation

[Operator]

Ladies and gentlemen, thank you for standing by. At this time, I would like to welcome everyone to the Millrose Properties Second 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, Milrose Head of Financial Planning and Analysis. Jesse, you may begin your conference.

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

Good morning. Thank you for joining us. With us today to discuss our second quarter twenty twenty five results are Darren Richmond, our Chief Executive Officer and President Robert Mikken, our Chief Operating Officer Garrett Rosenblum, our Chief Financial Officer and Stephen Hensley, Senior Market Risk Analyst. Before we begin, I'd like to remind everyone that this call may include forward looking statements and discuss non GAAP financial measures. Please refer to our second quarter twenty twenty five financial and operational results announcement as well as the second quarter investor presentation we released and posted on our website under the Investor Relations heading for a discussion of these matters. With that, I'll turn the call over to Darren.

[Darren Richman, CEO & President at Millrose Properties]

Thank you, Jesse, and good morning, everyone. I am pleased to discuss our second quarter results, marking our first full quarter as a public company and a period of significant growth and execution for Millrose. We continue to deliver on our strategy to redefine how homebuilders and land developers access land capital. As a pioneer in the institutionalization of land banking services, Millrose offers homebuilders a unique permanent capital solution for the acquisition and development of residential homesites. Our innovative business model enables us to efficiently enter into option contracts with our homebuilder partners that facilitate just in time delivery of finished homesites for builders and predictable cash income yield for Milrose shareholders.

[Darren Richman, CEO & President at Millrose Properties]

Our financial performance in the second quarter underscores our dedication to disciplined capital investment and reflects strong demand for our scaled solutions based approach. The payment of our first quarterly dividend reflects the visibility and consistency that our platform was purpose built to offer. This illustrates the reliability of our economic model in which cash flows from contractual monthly option payments and ongoing capital redeployment deliver attractive recurring revenues that convert into the payment of timely and predictable dividends. Following the spin off, Lennar continues to serve as our principal client, providing stable cash flows that support our financial performance. This quarter, we effectively demonstrated the value of our operational flywheel, recycling substantial proceeds from Lennar homesites, sales into new land acquisitions and development funding under the Lennar master program agreement.

[Darren Richman, CEO & President at Millrose Properties]

This capital deployment is central to our strategy, enabling us to consistently generate returns on invested capital. We also extended our partnerships with third parties with invested capital away from the Lennar Master Program Agreement increasing to approximately $1,100,000,000 as of June 30, demonstrating our value proposition to third party homebuilders. During the quarter, we continued to pioneer new use cases for Millroads as a solution provider, facilitating the first of its kind capital backstop in the take private of Lansing Home Corporation by New Home Co. Through this transaction, Millrose acquired a diversified portfolio of home sites under option with New Home with net cash funding of approximately $500,000,000 More recently, affiliates of Millrose's manager announced a significant capital partnership with Taylor Morrison to enable the growth of its industry leading build to rent brand, Yardley. This is yet another important use case for home site option arrangements as a scalable capital solution.

[Darren Richman, CEO & President at Millrose Properties]

We expect most of this opportunity will be allocated to the Millrose platform. This partnership, like most of our forward flow relationships, provides for exclusivity to provide capital at agreed terms over a defined period of time. In the case of Yardly, affiliates of our manager have agreed to provide $3,000,000,000 of land banking capital for Yardley during the two point five year term of the exclusivity agreement. With closings under the facility expected for Millrose starting in the third quarter, the partnership is anticipated to further accelerate Millrose's accretive growth and provide an important use case diversification of our end markets into rental housing. As you can see, the market demand for our capital solution across the homebuilding industry continues to be incredibly robust.

[Darren Richman, CEO & President at Millrose Properties]

We are seeing an environment where demand for Melrose's platform continues to support growing our capital base accretively. With our strong backlog, pipeline and growing opportunities, we are increasingly confident in scaling Millrose and maintaining high returns. I had previously noted a $2,000,000,000 stretch target for year end investment balance outside of the Lennar Master Program agreement. This quarter's momentum has now shifted that stretch target to our base case, and we are accordingly raising guidance as you'll hear from Garrett. Let me now take a moment to comment on recent market conditions.

[Darren Richman, CEO & President at Millrose Properties]

Stephen will have more to say in a few minutes. Our strategy is built for long term success. While the broader underlying demand for home sites remains robust, we can't overlook the impact that affordability and waning consumer confidence has had and continues to have on certain end markets. As we mentioned last quarter, if we look at the longer term, strong structural tailwinds persist. We believe that there continues to be a significant shortfall in housing supply.

[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 for future growth. Our collateral continues to hold up very well, benefited from prime locations and polling agreements. In summary, the second quarter highlighted the power of our platform, our team's execution and the significant demand for the unique capital solution that we offer. We are excited about the opportunities ahead and we remain committed to delivering value for our shareholders, homebuilder partners, and the communities we serve. With that, I will hand the call over to Rob for an operational update.

[Robert Nitkin, COO at Millrose Properties]

Thanks, Darren.

[Robert Nitkin, COO at Millrose Properties]

Good morning, everyone. Core of our business is a national platform that acquires, manages, and monetizes entitled residential home sites. A key distinction of our business versus our competitors is the investments we have made in infrastructure in terms of systems, technology, and human capital built through years of development. Today, we employ over 40 professionals dedicated to the platform. These professionals are responsible for market surveillance, rigorous due diligence, asset onboarding, asset management and asset disposition choreographed into the production schedule of our clients in order to deliver home sites on a just in time basis.

[Robert Nitkin, COO at Millrose Properties]

Their hard work and local market expertise overlaid on the philosophy of data driven insights and process optimization enables us to execute in scale with speed and precision. In today's more dynamic housing environment, we've deliberately focused on maintaining high underwriting standards. Our investment committee has enhanced its discipline around asset selection with particular scrutiny on projected gross margins, base assumptions and the trajectory of local housing fundamentals. We've applied a more stringent lens in certain markets where moderating absorption has driven increased unsold inventory, ensuring our capital is positioned in the most compelling risk adjusted opportunities. While market headlines tend to generalize, housing is inherently local.

[Robert Nitkin, COO at Millrose Properties]

Accordingly, as a key data driven filter in our underwriting process, we employ an internal MSA risk rating model to track in real time the evolving supply and demand dynamics of local housing markets. We've also continued to focus on transaction structure and terms to further mitigate risk. As you've heard, demand for our capital has accelerated. This has allowed us to maintain discipline on key contract protections on the transactions we execute, including meaningful deposits and cross termination pooling mechanisms, which further mitigate market risk. As of today, we have seen no indication of any option terminations in the portfolio.

[Robert Nitkin, COO at Millrose Properties]

At the same time, we continue to earn compelling income. Our weighted average option rate outside of the Lennar Master Program agreement stood at 11.4% as of quarter end, while our blended option rate including Lennar was 8.9%. Our discipline amidst continued rising demand for the platform is reflected in our performance this quarter. We expanded our partnerships with third parties, investing $813,000,000 in acquisitions and development outside of the Lennar Master Program Agreement and reaching a corresponding investment balance of approximately $1,100,000,000 as of June 30. The progress has continued subsequent to the end of the quarter, with the investment balance in this category at approximately $1,300,000,000 as of today, including the initial closing under the Taylor Morrison Yardley partnership. We deepened our network of builder relationships, and we're pleased to now have 11 distinct counterparties with six ranked in the top 25 of the Zonda Builder 100, a ranking of the largest homebuilders by closings. These builders represent some of the most sophisticated and well capitalized homebuilders in the country, and our ability to serve as a capital partner in their growth is a testament to our model. Our team has shown a unique capability to execute innovative strategic transactions, including those Darren mentioned: the closing of an approximately $500,000,000 home site portfolio to support New Home Company's acquisition of Landsea Homes Corporation and the execution of the Taylor Morrison Build to Rent partnership, an application of an existing transaction structure into the rental housing end market. These transactions underscore our ability to move quickly, underwrite at scale, and solve complex land needs of sophisticated counterparties.

[Robert Nitkin, COO at Millrose Properties]

Lastly, our partnership with Lennar continues to be a cornerstone of our platform. Joint investments in technology and systems have meaningfully enhanced transaction execution and operational efficiency. Of the $768,000,000 in net cash proceeds received from home site sales to Lennar in the quarter, dollars $718,000,000 was redeployed into new Lennar land acquisitions and development funding, demonstrating the flywheel effect that comes with scale, partnership and process excellence. It was a quarter marked by disciplined execution, strategic expansion and continued alignment with leading industry partners, and we look forward to continuing that momentum in the quarters ahead. With that, I'll hand it over to Milro's Senior Market Risk Analyst, Steven Hensley, will share some detail on our view of today's market.

[Stephen Hensley, Senior Market Risk Analyst at Millrose Properties]

Thanks, Rob. At Milrose, we know that disciplined underwriting requires effective market surveillance, particularly in today's dynamic US housing market in which affordability constraints and consumer confidence challenges are driving historically low housing turnover. Elevated mortgage rates have made it difficult for many prospective buyers to afford a home that meets their needs. While macroeconomic uncertainty has dampened consumer sentiment, limiting transaction activity as many wait for greater clarity before making long term financial decisions. In this context, I'd like to share some additional insights into our proprietary MSA risk rating model, which Rob alluded to.

[Stephen Hensley, Senior Market Risk Analyst at Millrose Properties]

The model utilizes monthly data points that are pertinent to the health of individual housing markets, including new home sales, new and resale prices, employment growth, and resale months of supply. Changes to these higher frequency data points help us understand directional trends at an MSA level that contribute to underwriting hurdles at a portfolio level. Over the past twelve months, our proprietary model has picked up softening market conditions across parts of Florida and Texas and more recently to other regions of the country. While this the discussion of Florida remains present in the media, we've identified the softness is most pronounced in what we would consider coastal secondary markets rather than larger core metropolitan areas. Our model has recently flagged Fort Myers, Naples, and Daytona Beach as markets to monitor.

[Stephen Hensley, Senior Market Risk Analyst at Millrose Properties]

While fundamentals are evolving in these markets, our current option exposure is minimal at roughly 1% of remaining portfolio takedown proceeds. Additionally, 100% of properties in these three markets are included in geographically diversified cross termination pooling agreements. Austin, Texas is another market where we are seeing evolving market conditions. And again, 100% of our Austin assets are pooled in cross termination agreements. I'd like to touch briefly on affordability.

[Stephen Hensley, Senior Market Risk Analyst at Millrose Properties]

While it's true that affordability remains a headwind for the industry today, there are mitigants that are acting as stabilizers. Credit quality of homebuyers remain healthy, likely due in part to more financially mature profile of today's consumers. With first time homebuyers deferring purchases until their late thirties and the typical buyer in their mid fifties. Additionally, prospective buyers are more often receiving support from older family members to make homeownership attainable. According to a survey conducted by Redfin in May, roughly 21% of Gen z and millennial homebuyers use the cash gift from family to help fund their down payment.

[Stephen Hensley, Senior Market Risk Analyst at Millrose Properties]

Despite the near term uncertainty, we maintain a long term constructive view on the housing market, which remains structurally undersupplied. Additionally, the supply of finished developed lots remains constrained nationwide, exacerbated by the complex lengthy process of land entitlement, which supports continued stability and land values. Over time, we believe macroeconomic uncertainty will ease as domestic policy becomes more defined, helping to restore consumer confidence. On the affordability front, needed home price appreciation combined with ongoing wage growth should gradually close affordability gap. With that, I'll hand it to Garrett.

[Garett Rosenblum, CFO & Treasurer at Millrose Properties]

Thank you, Stephen, and good morning, everyone. I'm pleased to walk you through Millrose Properties' financial performance for the 2025. This first full quarter post spin from Lennar marks an important milestone as we continue to leverage our robust platform, significant liquidity and disciplined capital allocation strategy to drive attractive returns for our investors. For the quarter, we reported net income attributable to Milrose common shareholders of $112,800,000 or $0.68 per share, driven by $149,000,000 in option fees and other related income. Our annualized return on equity increased to 7.8%, a 20 basis point increase compared to the first quarter on a normalized basis, driven by continued growth of our partnerships outside of the L and R master program agreement.

[Garett Rosenblum, CFO & Treasurer at Millrose Properties]

Our book value per share at the end of the quarter stood at $35.39 Our management fee expense was $22,000,000 which is calculated transparently at 1.25% of gross tangible assets. Interest expense was $10,300,000 and income tax expense was $4,800,000 To further enhance transparency and better reflect the recurring earnings power of our business, we are introducing adjusted funds from operations or AFFO as a supplemental performance metric this quarter. AFFO adjusts for non cash and non recurring items providing a clearer view of the cash generating capacity of our platform. We believe this metric will offer investors a more accurate measure of our sustainable distributable earnings. This quarter AFFO was $115,000,000 or $0.69 per share.

[Garett Rosenblum, CFO & Treasurer at Millrose Properties]

Further details and a full reconciliation of any non GAAP measures to the most directly comparable GAAP measures are available in our earnings release and supplemental materials. We paid our first full quarter dividend of $114,500,000 or $0.69 per share demonstrating the attractive recurring yields our model generates. As we have said, we are committed to distributing our earnings back to shareholders in the form of cash dividends. Turning to our balance sheet and capitalization, Melrose maintains a conservative leverage profile, significant asset base and ample liquidity. As of June 30, we reported total assets of approximately $8,000,000,000 with a debt to capitalization ratio approximately 15%.

[Garett Rosenblum, CFO & Treasurer at Millrose Properties]

Total debt was $1,000,000,000 A significant highlight this quarter was the successful closing of our $1,000,000,000 delayed draw term loan from Goldman Sachs and JPMorgan. This new facility materially enhances our already robust capital structure, providing ample financial flexibility to support our strong investment pace and execute on our growing range of opportunities. This facility was fully drawn as of 06/30/2025, and was used to fund the new home transaction and pay down the revolving credit facility. As a reminder, we expect to adhere to a conservative maximum leverage level of 33% net debt to capitalization, underscoring our disciplined approach to capital management. Our attractive credit profile and substantial capital capacity support our efficient investment pace through the prudent utilization of all available funding resources.

[Garett Rosenblum, CFO & Treasurer at Millrose Properties]

Finally, we are raising guidance for our year end quarterly AFFO per share run rate of $0.70 to $0.73 consistent with expectations for higher transaction funding outside of the Lennar Master Program agreement. We remain focused on delivering value for 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]

To close, let me reiterate our immense confidence in Millrose and the pivotal role we are playing in the homebuilding ecosystem. Our innovative home site option purchase platform isn't just a solution. It's a fundamental shift in how capital flows to meet robust housing demand. We look forward to continuing on our mission to deliver value to the homebuilder and investor stakeholders we serve and build upon the strong foundations we have established. Thank you for your continued support, and we look forward to sharing our further progress next quarter.

[Darren Richman, CEO & President at Millrose Properties]

With that, operator, let's open the call up to Q and A.

[Operator]

All right. At this time, I would like Our first question comes from Julien Bluen with Goldman Sachs. Please go ahead.

[Darren Richman, CEO & President at Millrose Properties]

Julian?

[Operator]

Julian, are you there?

[Julien Blouin, VP - Real Estate Investment Research at Goldman Sachs]

Yes. Can you hear me?

[Operator]

Yes.

[Darren Richman, CEO & President at Millrose Properties]

Go ahead. Yes.

[Julien Blouin, VP - Real Estate Investment Research at Goldman Sachs]

So there's been a lot of talk recently about homebuilders potentially starting to put pressure on land banking partners to write down land values and restructure their agreements. Do you see this as a risk for you? And I guess more generally, what are you hearing from your land banking partners about how they view Millrose as a partner amidst this more sort of challenging environment?

[Darren Richman, CEO & President at Millrose Properties]

Julien. This is Darren. Look. There are two reasons why a home builder would use a land banking counterpart. One is for capital efficiency, and the other is for risk mitigation.

[Darren Richman, CEO & President at Millrose Properties]

And for and and I think as you know, and we've been very clear, our role in providing capital is really for capital efficiency. Working with our homeowner clients to buy land on their behalf so they can get the benefits of, that efficiency increasing their asset returns. There are still home builders out there though that are using intermediaries for risk mitigation, where they're leveraging the balance sheet of third parties to kinda offload risk. And in it's really in those situations that we're hearing the same thing. And we know we know which builders are looking for capital efficiency because those are the builders that are willing to give us additional credit enhancements.

[Darren Richman, CEO & President at Millrose Properties]

And so that's that's really the role. That's more of a modernization of land banking is to be one of capital efficiency. And because of the credit enhancements that we benefit from, we haven't seen any slippage in our portfolio nor do we expect to see any slippage. Don't Rob, there's anything you'd like to add. No. That's right.

[Julien Blouin, VP - Real Estate Investment Research at Goldman Sachs]

Great. And maybe as a follow-up on those sort of credit enhancements, I appreciate the additional color in this quarter's presentation around cross asset pooling. Can you sort of walk us through the success you're seeing on being able to pool properties on the non Lennar deals you've been closing? And are there still some partners, that you're working with that are maybe still hesitant around pooling?

[Darren Richman, CEO & President at Millrose Properties]

Yes, Julien. I'd say, again, it's more of a modernization that folks are willing to entertain pulling, and it really does speak to how hard it is to get land approved for development in grade a locations that we are helping to finance. And so we are we are it it really started with our relationship with Lennar. They they really helped to pioneer the pulling concept. We are seeing more widespread adoption of other builders joining that.

[Darren Richman, CEO & President at Millrose Properties]

Right now, we we we did the math overnight. About 97% of our portfolio is pulled. So that gives you some sense for the adoption, not just from, you know, our primary client Lennar, but the other builders that have, have chosen to do business with us. It's it's something we're very proud of that not only are we growing accretively, but we're actually benefiting from strong credit enhancements as we're constructing the portfolio.

[Julien Blouin, VP - Real Estate Investment Research at Goldman Sachs]

Great. And maybe if I can sneak in the last one. How should we think about the yields on an agreement like the Taylor Morrison Yardley deal? Is it more similar to the sort of Apollo New Home Co. Yield, I.

[Julien Blouin, VP - Real Estate Investment Research at Goldman Sachs]

E, a little bit lower than what we saw you do on a smaller sort of one off basis in the first quarter. And I assume based on what you've sort of just walked us through that these Yardley agreements do include cross asset pooling on those properties?

[Darren Richman, CEO & President at Millrose Properties]

I don't want to talk about specific transactions really, you know, with counterparts. But what I will say is we do expect the, our average yield to compress maybe closer to 11%. That's kind of what we've guided to, as we grow our portfolio. And really, trade off is we're willing to give some, rate relief to get the credit enhancements. And as we drive more adoption in the portfolio, we do see that blended rate coming down probably closer to 11, but I'd I'd rather not specifically talk to any of any of our clients.

[Robert Nitkin, COO at Millrose Properties]

Yeah. And, Julian, it's Rob.

[Robert Nitkin, COO at Millrose Properties]

I mean, I I would just note, you know, it's worth reiterating given the dynamics you mentioned and, you know, and and admittedly, you know, it it is a notable home builder environment right now where we're focused every day on downside protection just much or even more so if we're focused on yield. So just as Darren said, you know, our incremental yield on the nonlinear transactions was lower, and that is directly related to a focus on, a, doing business with the right builders, like Darren mentioned, as well as cross termination pooling everywhere we can get it and, being focused on downside protection. Our yields probably would be higher, if we didn't have those structural risk mitigants. But, it's a balance that we're focused on.

[Julien Blouin, VP - Real Estate Investment Research at Goldman Sachs]

Okay, great. Thank you so much, team.

[Darren Richman, CEO & President at Millrose Properties]

Thanks, Julian.

[Operator]

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

[Eric Wolfe, Director at Citi]

Maybe to follow-up on Taylor Morrison. Can you just talk about how you and Kenny Lewis will decide how the 3,000,000,000 gets split up and whether there's a different underwriting process that you go through in evaluating build to rent communities versus for sale?

[Robert Nitkin, COO at Millrose Properties]

Well, start with the second part, which is evaluating build to rent. Ultimately, we're relying on a lot of the same basic data around the strength of the housing market, employment trends, migration, and the overall economic strength of, you know, the the tenant slash home buyer in that market. But there is definitely a specific overlay as it relates to our, you know, our our build to rent evaluation on on yield and expenses and, you know, much more of a operating income relative to basis analysis, typical of of rental real estate as opposed to for sale. So it's very similar, but certainly nuanced. Maybe I'll just touch on the allocation of Kennedy Lewis versus Melrose.

[Robert Nitkin, COO at Millrose Properties]

So, you know, obviously, it's the same people like Kennedy Lewis and Melrose. Kennedy Lewis, we are the external manager of Melrose. And so while the agreement is with Kennedy Lewis, subject to the publicly available allocation policy and the management agreement, there is an allocation that goes between both vehicles for a period of time. However, as we've noted, that, available capital for this business at the Kennedy Lewis Fund, it's finite and will burn off over time. Until longer term, we expect the majority of this product to be in Melrose.

[Darren Richman, CEO & President at Millrose Properties]

Yeah. And one and one thing I'd add on the Taylor Morrison is, look, we're we really appreciate our relationship with Taylor Morrison. It's really an amazing use case for Morerose to be providing capital to their built to rent product. Their product really speaks to the affordability gap. Usually, this product was on the edge of the master plan community that Telemarsen is already associated with.

[Darren Richman, CEO & President at Millrose Properties]

And what I really like about it is it not only is it a new use case, but because we're not just financing the land, but we're financing the vertical construction, we this is more of a derisked portfolio opportunity for us. Not that we don't like land and all the cross collateralization that we get, but this is yet another use case, which I think is is yet an evolution and where the derisked use case because it's not just the land that we're financing, but we're financing the vertical as well.

[Eric Wolfe, Director at Citi]

Yep. Makes sense and and understand, on the opportunity there. Guess, you know, when you look at your underwriting, I guess, you assuming that the that the builder or the developer, eventually just pays you back with borrowing on the community? Because, obviously, there's no sellout, of the community. And assuming that's the case, I guess, these agreements structured in such a way that it'd be a little bit longer than a normal, agreement with a for sale builder, as I would assume it takes one to two years to kind of stabilize that community?

[Robert Nitkin, COO at Millrose Properties]

No. It's actually, you know, I would say a similar tenor or even shorter, but, than than the typical four. So community, it's structured in exactly the same way as our normal course agreements. The only difference is there is, you know, one tax slot as as opposed to multiple platter tax slots, in a rental community. And so there is one take, if you will, at the end of the contract, and that take is generally, you know, sooner than the last take of our other contracts.

[Robert Nitkin, COO at Millrose Properties]

But, we're just relying on the builder, in this case, Taylor Morrison, to use its capital, you know, to repurchase, as you said, the asset from us just like we do, you know, in the for sale scenario. And, you know, again, Taylor Morrison's case, the strength and credit quality of that organization, we have no concerns with its ability to do that, obviously. And then this is a really meaningful, important business line for Taylor Morrison, that they're putting a lot of effort and capital behind. So it functions exactly the same way. We have, just as much much, if not more so, confidence in the counterparty to to buy back, you know, the asset here.

[Robert Nitkin, COO at Millrose Properties]

And we feel really good, as Darren said, about the yield that our shareholders are getting relative to a really high quality counterparty in asset.

[Eric Wolfe, Director at Citi]

Got it. Makes sense. And then I guess last, last one, Taylor Morrison. If you get the majority of that, and Morris gets the majority of that, I think it'll be close to your sort of total leverage and investment capacity based on that sort of leverage constraint. Do you feel like the stock is at a spot now where it maybe makes sense to issue equity?

[Eric Wolfe, Director at Citi]

Or do you think it needs to be closer to book value? I think even at today's level, the investment spreads versus your cost of capital is pretty accretive. Obviously, it'd be a little bit of dilution to book value. So just curious how you're thinking about the trade off there.

[Darren Richman, CEO & President at Millrose Properties]

Yes. Priority right now is optimizing the balance sheet with debt. And we'll see where we end up as we put those debt structures in place with the equity. We've been very consistent. We have no plans of issuing dilutive equity.

[Darren Richman, CEO & President at Millrose Properties]

And we're reasonably pleased that the story has gained traction. And so let us kind of execute continue to execute on our strategy, prioritize the debt part of the capital structure and then we'll pick our heads up and see where we're at.

[Eric Wolfe, Director at Citi]

Makes sense. Then just last question, promise. On the deals that you closed in the second quarter, sort of a follow-up to Julian's question. Can you just talk a bit about the credit enhancement that you got with those? Because I think one of the most frequent questions I get is sort of what does the credit enhancement look like, on those deals outside of the Lennar master program agreement?

[Eric Wolfe, Director at Citi]

So what's the level of option deposit, option termination? Effectively, just trying to understand the potential downside risk on these deals, which, you know, in turn requires an understanding of how much equity is invested or credit enhancement you have?

[Darren Richman, CEO & President at Millrose Properties]

Yeah. I mean, I'll start. I'd really hesitate to provide, kind of contract level information on our counterparties to the market. You know, we've been very clear that we're not gonna talk about counterparties, more specific terms. The reason why we're comfortable talking about New Home and Taylor Morrison is because they've revealed themselves to be clients of ours.

[Darren Richman, CEO & President at Millrose Properties]

But suffice it to say that there are cross termination provisions with NewHome and, by extension, the assets that we purchased from Landsea. And the contracts look very similar in structure and form overall to the other to every other contract that we have. So we feel very, very good about the portfolio and the protections that we put in place and the high barriers for a homebuilder to just walk away. And even you know, it's not just it's not just those credit protections, but the reason why we brought Steven on is because we wanted to really provide, comfort that there's a real disciplined approach to our underwriting and to, the geographic geographies that we'll go into and the homebuilders that will serve and product types. And even as Steven said, in the kind of hot button, communities, MSAs that are out there, we have very minimal exposures.

[Darren Richman, CEO & President at Millrose Properties]

Any any exposures we do have are are cross pulled. And I will say overall, maybe as a data point, no one MSA represents more than 6% of our portfolio. And so that should give the market a good sense for how diversified this portfolio is in addition to the credit enhancements that sit on top of it.

[Eric Wolfe, Director at Citi]

Got it. Thanks for the time.

[Darren Richman, CEO & President at Millrose Properties]

Thank you.

[Operator]

All right. At this time, I do want to remind you all, please press star followed by the number 1 on your telephone keypad to ask a question during today's call. I'm going to take a brief pause to see if there are any additional questions. All right. It looks like I'm going turn it back over to you, Darren Richmond, for closing remarks.

[Darren Richman, CEO & President at Millrose Properties]

Yes. Thank you, and thanks to everybody for joining us this quarter. We're very, very pleased with our results. We're very pleased with the quality of the portfolio that we're putting together even in the face of what we think is a recalibration in the housing market back to pre COVID levels. As the market recalibrates, we're still building our portfolio through any of those headwinds.

[Darren Richman, CEO & President at Millrose Properties]

And we do think there are real entrenched tailwinds to our product adoption and we look forward to speaking with all of you on our next quarter conference call. Thank you.

[Operator]

Thank you all for joining. That concludes today's call. You may now disconnect.

Participants

Executives

• Darren Richman, CEO & President
• Robert Nitkin, COO
• Stephen Hensley, Senior Market Risk Analyst

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, VP - Real Estate Investment Research at Goldman Sachs
• Eric Wolfe, Director at Citi