Millrose (MRP) Q4 2025 Earnings Call Transcript

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DATE

Feb. 26, 2026, 10 a.m. ET

CALL PARTICIPANTS

• Chief Executive Officer and President — Darren Richman
• Chief Operating Officer — Robert Nitkin
• Head of Market Research — Steven Hensley
• Chief Financial Officer — Garett Rosenblum

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TAKEAWAYS

• Investment Balance (ex-Lennar Agreements) -- $2.4 billion at year-end, surpassing the $2.2 billion stretch target due to expanded builder adoption.
• Total Homesites Delivered -- Over 31,000 homesites provided during the year, at average home prices approximately 20% below the national new home average.
• Run-Rate AFFO per Share -- Exited the year at $0.77, exceeding prior guidance, with $0.76 recorded for Q4 and projected increase to $0.78-$0.80 by exit of Q2 2026.
• Net Homesite Sale Proceeds -- $3.4 billion generated, demonstrating high capital cycling velocity within the business model.
• Total New Land Acquisition and Development Funding -- $5.5 billion deployed across 142,000 homesites in 933 communities spanning 30 states.
• Book Value per Share -- $35.28 as of year-end, which management identified as the threshold for any potential equity issuance.
• Debt to Capitalization Ratio -- 26% at year-end, well below the 33% stated maximum policy, giving substantial incremental funding flexibility.
• Total Liquidity -- $1.3 billion available at year-end to support the 2026 investment pipeline.
• Dividend per Share -- Q4 dividend of $0.75 per share, reflecting an annualized yield of 8.4%, with commitment reiterated to distribute 100% of AFFO.
• Counterparty Diversification -- 15 builder relationships at year-end, nine among the U.S. top 25 homebuilders; added three new counterparties during the quarter, with most capital deployment coming from existing relationships.
• Yield on New Deployments -- Recent investments averaging approximately 11%, with cost of debt at 6.3%, contributing to accretive spread and AFFO growth.
• Cross-Termination Pooling -- 96% of portfolio investment balance includes pooling structures, designed as an economic disincentive for builder withdrawal but not eliminating builder option contract flexibility.
• Forward Investment Pipeline Growth -- Base case guidance targets an additional $2.0 billion growth in invested capital outside Lennar agreements, aiming for $10.5 billion total invested capital with over 40% from third-party partners.
• Management Fee -- Full year management fee expense of $87.8 million, transparently set at 1.25% of gross tangible assets.
• Interest Expense -- $91.8 million for the full fiscal year, supporting risk-managed capital structure.
• Strategic Funding Clarity -- "we will not issue equity below book value," but management left open the possibility to temporarily exceed the 33% debt target in exceptional situations with high visibility to near-term deleveraging.
• Valuation Commentary -- Management noted the "current AFFO multiple implies a meaningful discount to the competitive set of REITs," citing contractual income streams, lower leverage, and strong AFFO growth projections as justification for potential future revaluation.
• Geographic Portfolio Mix -- Operations diversified across 30 states, mitigating risk from individual market fluctuations and positioning the portfolio to benefit from "strengthening" regions such as Charlotte and the Southeast.
• Homesite Sale Transaction Infrastructure -- 2025 activity included closing over 31,000 property transactions involving title, deed, and state-specific processes, supported by a proprietary technology platform automating critical workflows.

SUMMARY

Millrose Properties (NYSE:MRP) delivered results above its own guidance benchmarks, closing out its inaugural public year with record investment balances, stronger AFFO run-rate per share, and robust capital deployment. Management's strategy emphasizes a permanent capital model, strict leverage limits, and capital-efficient relationships with major U.S. homebuilders, all producing a contractual, recurring income stream insulated from direct home price and land value exposure. The company's significant liquidity and disciplined funding approach underpin guidance for continued double-digit AFFO per share growth in 2026, with half of target pipeline growth already visible through existing relationships and contracts. Technology-enabled operational execution supported large-scale transaction processing and ongoing counterparty diversification, including recent new builder additions and advanced risk pooling structures. Management's commentary highlighted a perceived valuation mismatch versus comparable REITs, banking on continued execution to close this gap and enable accretive equity issuance in future periods.

• The company projects total invested capital will reach approximately $10.5 billion, driven by a deep and selective pipeline that currently exceeds available funding capacity, positioning equity optionality as a shareholder upside.
• Operational scale is evidenced by management of approximately 142,000 homesites and 933 communities, with proprietary underwriting and diligence tools expediting new deal evaluation and ongoing portfolio risk monitoring.
• Dividend progression reflects a near 80 basis point increase from the first to fourth quarter, directly tied to the accretive impact of redeployed capital and expansion of third-party agreements.
• Market and portfolio risk are actively managed by combining geographic, counterparty, and contractual diversification, informed by both technology-driven data and local underwriting discipline across all target regions.
• Management states, "without a single builder terminating or threatening to terminate an option agreement," emphasizing the platform's reliability during industry headwinds and supporting future investor confidence.

INDUSTRY GLOSSARY

• Homesite Option Purchase Platform (HOPP'R): Millrose’s business model enabling homebuilders to acquire lots via contractual options, rather than direct land acquisition, for capital efficiency and balance sheet flexibility.
• Cross-Termination Pooling: Legal mechanism grouping multiple sites or agreements into a pool so that terminating one triggers contractual consequences across the group, strengthening builder-platform alignment.
• Forward-Flow Agreements: Programmatic partnerships granting homebuilders large, replenishable buying power allocations for future land takedowns, providing Millrose with predictable capital deployment visibility.

Full Conference Call Transcript

Darren Richman: Thank you, Jesse, and good morning, everyone. I am pleased to discuss our results for the fourth quarter and full year 2025, our first year as a public company. For years, we have seen a clear opportunity: a housing market defined by persistent undersupply and builders seeking greater balance sheet efficiency. Even as the industry faced meaningful headwinds—affordability challenges, elevated rates, and macro uncertainty—the structural need for housing capital remained unchanged. If anything, the industry shift toward capital efficiency has only accelerated, and Millrose Properties, Inc. was designed for exactly this moment. Our permanent capital model provides builders with a just-in-time home site delivery system.

We acquire and fund development under option agreements, builders take down homesites on a predetermined schedule, and our shareholders receive predictable, recurring income underpinned by U.S. housing demand. That income is not tied to home prices, land values, or the pace of home sales. We generate contractual monthly option payments that span multiyear contracts and are owed regardless of market conditions. We do not speculate on land appreciation, take entitlement risk, or participate in homebuilding margins. Our capital is structurally insulated from the cyclicality of our builders’ operating businesses. That is a fundamental distinction from every other land-based real estate business in the public markets today. And it is the foundation on which 2025 was built.

2025 was a defining year for Millrose Properties, Inc. Despite a cautious homebuilding environment, we were embraced across the industry with reception that exceeded even our own expectations, validating both the concept and our team's execution. Our investment balance outside the foundational Lennar master program agreement finished the year at approximately $2.4 billion, surpassing the $2.2 billion stretch target we had previously discussed. That outperformance reflects something important. Builders were not just willing to work with us—they sought us out, both initiating new relationships and deepening existing ones. In a year when builders were exercising appropriate caution on an activity level, Millrose Properties, Inc. was aggressively taking share and pioneering new use cases for land banking capital. That is a direct reflection of what we offer: an experienced, trusted partner with deep operational and technological integration; the ability to transact rapidly and at scale; and a national team that understands the homebuilding business from the ground up.

That accelerating pace of adoption translated directly to financial outperformance. We had previously provided a year-end run-rate AFFO guidance range of $0.74 to $0.76 per share. Our 4Q AFFO came in at the top end of that range at $0.76, but the growth we delivered over the course of the quarter puts our normalized year-end run-rate at $0.77, ahead of where we expected to be. We also demonstrated the uniquely cash generative, capital recycling nature of our business model, with $3.4 billion of net homesite sale proceeds generated in 2025. Beyond the financial implications of that liquidity, we are proud of the real-world impact embedded in this number.

Over the course of 2025, we delivered more than 31,000 homesites to builders across the country, projects with an average home selling price of approximately 20% below the national average for newly built single-family homes. Housing affordability remains one of the defining challenges facing the American housing market, driven in large part by the scarcity of entitled, well-located land. What we do is not just financially compelling—it is genuinely additive to the housing supply where it is needed most.

Looking ahead, we enter 2026 with a pipeline that gives us real confidence in our growth trajectory. Based on the transaction volume we demonstrated in 2025, and the depth of our current opportunity set, our base case expectation is that we can grow invested capital outside the Lennar master program agreement by an additional $2.0 billion, bringing total invested capital to approximately $10.5 billion with over 40% of that balance outside the foundational Lennar relationship. That would represent a meaningful milestone in the diversification of our platform. I want to be transparent about how we think about funding that expansion, because growth for its own sake has never been part of our objective.

We remain committed to a conservative leverage policy with a current target of 33% debt to cap, and we will not issue equity below book value, which currently stands at $35.28 per share. On that basis, we can point with confidence today to funding approximately half of that $2.0 billion demand increase through existing debt capacity. We expect to deploy that $1.0 billion in invested capital growth by approximately midyear, exiting Q2 2026 with a quarterly AFFO per share run-rate in the range of $0.78 to $0.80 per share. For the second half of that pipeline, we are being highly selective by design, concentrating capital toward the strongest counterparties, the most durable structures, and the best located underlying properties.

The opportunity set exceeds what we can fund today, and that is a position of strength, not a constraint. The equity optionality we retain is upside for existing shareholders, not a bottleneck to our business.

On valuation, our current AFFO multiple implies a meaningful discount to the competitive set of REITs, a gap we believe is difficult to justify given our lower leverage, our contractual income structure with high-quality counterparties, and the projected 10% annual AFFO per share growth implied by our $2.0 billion growth expectation. As described on Page 14 of our earnings presentation, here we have laid out an illustrative bridge from our current AFFO run-rate to year-end 2026. At the low end, deploying $1.0 billion of net new capital at current yields would drive more than 7% growth in AFFO per share.

Executing on this $2.0 billion opportunity set we see in front of us, funded with a prudent mix of debt and equity consistent with our stated leverage targets, implies a 10% growth in AFFO per share. We believe that this valuation discount to our peers reflects the market still getting comfortable with a business model that is genuinely new to the public markets, and that is a fair and reasonable dynamic, but one we expect to resolve itself as we continue to demonstrate consistent execution. We operated through a challenging homebuilding environment in 2025 without a single builder terminating or threatening to terminate an option agreement. As that track record compounds, we expect investor confidence and our valuation to follow.

We are optimistic that a rerating is coming, and that we will be able to raise equity above book value in 2026, which would allow us to fully capture the pipeline in front of us.

Finally, the macro backdrop entering 2026 is the most constructive that we have seen since our spin-off. In many markets, the supply-and-demand imbalance that weighed on builder activity through much of 2025 is showing early signs of rebalancing. Lower housing starts have begun to work through excess inventory, and moderating mortgage rates are supporting a gradual return of prior demand. Against that backdrop, land values have proven remarkably resilient. According to a recent survey from John Burns Research and Consulting, one of the most respected voices in the residential housing market, land prices remained stable through 2025, and continue to increase in many markets. For Millrose Properties, Inc., that is an important data point.

It affirms the unique character of our entitled homesite assets—irreplaceable, nondepreciating, perpetual options on U.S. home values—and confirms that our portfolio is well positioned as the market continues to recover. 2025 proved the model. 2026 is where we intend to begin showing its full potential. We believe we have the platform, the pipeline, the partnerships, the track record, and we are just getting started. With that, I will turn the call over to Rob.

Robert Nitkin: Thank you, Darren. I will spend a few minutes on what it actually takes to operate this platform at the scale we have described, because the numbers deserve context. As of year-end, Millrose Properties, Inc. manages approximately 142,000 homesites across 933 communities in 30 states, serving 15 distinct counterparties, nine of which rank among the top 25 homebuilders in the country. During 2025, we deployed $5.5 billion in new land acquisitions and development funding, and received $3.4 billion in takedown proceeds. Transaction volume of this magnitude is made possible by significant operational infrastructure working in sync with a large and experienced team.

Every homesite takedown we process is a real estate transaction, not just a wire transfer or a ledger entry. As Darren mentioned, in 2025, we executed over 31,000 of those closings. Each involved title work, deed transfer, and state-specific closing requirements on a schedule that cannot slip because builders are running construction timelines that depend on us. What makes that reliability possible is our technology, a platform that gives builders real-time lot selection capability, with every selection triggering automated portfolio updates, title tracking, and closing workflows. Technology alone does not close real estate transactions.

Equally important is an experienced team of underwriters, servicers, and asset managers with deep multiyear operating relationships with our builder partners, and the willingness to pick up the phone and work through any time-sensitive request or transaction nuance.

Growth amidst this volume of activity requires the same level of discipline on the deployment side. Expanding from one counterparty to 15 required demonstrating both homesite delivery reliability and new deal underwriting capacity, the ability to evaluate, diligence, and close at high volume on externally driven deadlines. Our proprietary dataset and underwriting tool, built from years of transacting across every market we operate in, allow our underwriting team to rapidly form a view on new opportunities before passing to our real estate diligence teams for legal and development review. These tools also provide real-time signals on local market dynamics, and you will hear more on what we are currently seeing from Steven Hensley in a moment.

Combined with close coordination between our underwriters and builder partner land teams, our diligence is both rapid and rigorous. That speed of execution alongside the unique reliability and permanence of our capital is a competitive advantage builders notice and consistently cite.

Every new builder relationship benefits from our track record of efficient execution at scale, first with Lennar and now with 14 additional partners, as well as the institutional credibility our team built at Kennedy Lewis in the years before Millrose Properties, Inc. launched. That combination of platform history and team pedigree creates a level of credibility that cannot easily or quickly be replicated. We also bring to these relationships market insights and intelligence from our operations across 30 states that most individual builders simply do not have access to. We believe sharing that perspective makes us a more valuable partner and deepens relationships.

The expanding share of wallet Darren referenced is not just a financial outcome—it is a reflection of the compounding spirit of partnership we are committed to building across the industry.

I also want to elaborate on our cross-termination pooling structures, present on 96% of our portfolio by investment balance, because the pooling is more than a negotiated legal protection. It is, first and foremost, a relationship-defining mechanism. A builder who agrees to a pool are self-identifying as partners seeking capital efficiency, not risk mitigation. That distinction matters. These are builders who understand their model, and, by choosing the off-balance sheet structure, are committed to a long-term programmatic relationship. It is worth being clear-eyed about what pooling does and does not do. It does not prevent a builder from walking away from an option contract.

What it does is raise the cost of doing so, creating a meaningful economic disincentive that protects the integrity of the relationship without eliminating the builder's optionality. That balance is intentional. It is part of what makes pooling a durable alignment tool rather than a blunt legal instrument.

Beyond that initial alignment function, pooling is also a live risk management discipline. We maintain a real-time pooling analysis that tracks every pool by geography, duration, and risk exposure as communities advance through their life cycle. Enabled by our technology platform, we monitor shifts in each pool's risk profile continuously, directly informing go-forward deal allocation. This active management is what keeps pools meaningful over time, and this is a capacity that we believe is genuinely difficult to replicate without the scale and systems we have built.

Looking ahead, the opportunity in front of Millrose Properties, Inc. is both substantial and highly actionable. Our pipeline is deeper, more diversified, and more geographically balanced than at any point since launch. We are seeing increased engagement from existing partners and meaningful interest from new builders looking to shift more of their land strategy into off-balance sheet structures. As Darren described, we are being selective, but the pipeline gives us the luxury of that selectivity, and we are confident in the quality of what we are choosing to pursue. To fully capture this opportunity, we continue to build incremental capital and liquidity to enhance balance sheet flexibility and reinforce confidence for our counterparties. We are currently working with our bank group on additional floating-rate debt capacity, both to diversify our fixed-rate bond structure and to better match the floating-rate nature of a portion of our option payment income. 2025 was the year we built and stress-tested the infrastructure of this platform: the technology, the team, the processes, and the capital relationships required to scale across the industry. That foundation is now firmly in place. With a pipeline that reflects deepening builder engagement and an improving broader market, we enter 2026 with conviction in the further expanded, accretive growth opportunity for Millrose Properties, Inc. and our shareholders. With that, I will turn it over to Steven to share what we are seeing across our markets and why we are optimistic about the macro landscape ahead.

Steven Hensley: Thank you, Rob. As we enter 2026, we are seeing encouraging signals that the spring selling season could look more like a normal, healthy market, and I want to walk you through both the macro picture and what our proprietary data is telling us on the ground. At the macro level, a resilient consumer and broader economic stability provide near-term optimism for steady demand. Affordability is also moving in the right direction, supported by rising incomes, moderating home prices, and lower interest rates, creating a constructive backdrop heading into the spring. These are not dramatic reversals; they are consistent, reinforcing trends, and that consistency matters.

Operationally, the signals are similarly positive. Homebuilders demonstrated strong discipline through 2025, proactively reducing starts to align with demand and working down standing inventory. They have also made meaningful progress lowering construction costs, easing margin pressure, and improving cycle times, giving them greater agility to respond across a range of demand scenarios this spring. The shift toward more to-be-built sales and fewer spec homes is keeping inventory in check while supporting healthier margins. Taken together, the industry enters the spring selling season on solid footing, and better positioned than it was twelve months ago.

Turning to our proprietary MSA monitoring system, the data reinforces a mixed but improving landscape, with some important distinctions by market. Last summer, we highlighted a handful of markets undergoing recalibration, particularly certain secondary coastal markets in Florida and parts of Texas. In Florida, inventory levels moderated meaningfully through the back half of the year, with months of supply now below year-ago levels in most markets. That is a notable improvement and reflects the builder discipline I just described playing out in real time. Texas continues to work through elevated supply and affordability challenges. We expect that normalization to remain a 2026 story, and our underwriting reflects that patience. Las Vegas is another market where our model is signaling caution.

Softer sales activity in the second half has led to rising supply pressure, and we are monitoring it closely.

Conversely, we are seeing clear and broad-based strength across most of the Southeast. Charlotte remains one of the top-performing markets in our coverage, supported by strong employment growth and relatively tight supply. Our model is also picking up notable performance in several smaller Southeast markets, including Greenville, Columbia, Charleston, and Myrtle Beach, where solid job growth, low supply, and comparatively affordable housing are creating healthy, durable demand. These are not flash-in-the-pan dynamics. They reflect structural demographic and employment trends that we expect to persist.

Overall, we believe these signals point toward a more typical spring selling season and reinforce our positive long-term view of the housing market. The geographic diversity of our portfolio, spanning 30 states and 933 communities, means we are not dependent on a single market's performance. We are well positioned to benefit from the markets that are strengthening now, while our underwriting discipline protects us in the markets that are still normalizing. With that, I will hand the call over to Garett to walk through our financial performance.

Garett Rosenblum: Thank you, Steven, and good morning, everyone. I am pleased to walk you through our fourth quarter and full year 2025 financial results, which continue to demonstrate the cash-generating power of our business model and the direct translation of capital deployment into shareholder returns. For the fourth quarter, we reported net income of $122.2 million, or $0.74 per share, driven by $179.5 million in option fees and $10.0 million in development loan income. For the full year, we reported net income of $404.8 million, or $2.44 per share, our first fiscal year as a public company and one that delivered on every financial commitment we made at the outset.

Fourth quarter adjusted funds from operations came in at $0.76 per share, at the high end of our guidance range of $0.74 to $0.76 per share, but as Darren noted, the invested capital growth we delivered over the course of the quarter puts our normalized year-end run-rate at $0.77 per share, ahead of where we expected it to be. This outperformance reflects exactly what our model was designed to do. Every dollar deployed in other agreements at average yields of approximately 11% against the cost of debt of 6.3% drives directly accretive AFFO growth and expanding dividend capacity. That spread—and our ability to sustain and grow it—is the engine of our earnings trajectory.

Book value per share at year-end stood at $35.28. For full-year context, interest expense was $91.8 million, income tax expense was $20.5 million, and management fee expense totaled $87.8 million. As a reminder, our management fee is calculated transparently at a fixed rate of 1.25% of gross tangible assets. Turning to the balance sheet, we ended the year with total assets of approximately $9.3 billion and total debt of $2.1 billion, resulting in a debt to capitalization ratio of approximately 26%, well inside our stated maximum of 33%. That headroom is intentional. It gives us meaningful capacity to fund the next phase of growth without compromising the conservative financial posture that underpins our investment-grade counterparty relationships and our dividend reliability.

We ended the year with approximately $1.3 billion in total liquidity, providing ample capacity to support our investment pipeline. And as Rob noted, we are working with our banking partners to further expand that capacity, and we expect to deploy approximately $1.0 billion in additional invested capital by midyear, exiting Q2 2026 with an expected quarterly AFFO run-rate of $0.78 to $0.80 per share.

Our dividend performance reflects the quality and consistency of our earnings. For the fourth quarter, we paid the dividend of $124.5 million, or $0.75 per share, an 8.4% annualized yield on equity, roughly 80 basis points higher than our first quarter dividend. That progression over the course of a single year is a direct result of the accretive deployment of capital in other agreements, exactly the strategy we outlined when we became a public company. Millrose Properties, Inc. remains committed to distributing 100% of AFFO to shareholders, and we expect that commitment to compound meaningfully as our invested capital base continues to grow. With that, I will turn the call back to Darren.

Darren Richman: I want to leave you with a few thoughts before we open the line. 2025 was not an easy year for the homebuilding industry, and that is precisely what made it such a meaningful proof point for Millrose Properties, Inc. We operated through affordability headwinds, elevated rates, and a cautious builder environment without a single option agreement terminated or even threatened. Our contractual income held, our capital recycled, our platform grew. That is not a coincidence. It is the design of this business working exactly as intended. What gives me the most confidence entering 2026 is not just the pipeline in front of us, but the flywheel nature of what we are building.

Every community we deliver, every builder relationship we deepen, and every dollar of capital we recycle adds to the platform that becomes harder to replicate and more valuable to the industry over time. We are still early in that process, and that is an exciting place to be. To the team, the execution you delivered in our first year as a public company was exceptional, and it did not go unnoticed. To our homebuilder partners, your trust is the foundation of everything we do; we do not take it lightly. And to our shareholders, we are committed to earning your confidence every quarter, not by telling you what this platform can be, but by showing you.

Operator, let us open the line up for questions.

Operator: At this time, I would like to remind everyone, in order to ask a question, please press star then the number one on your telephone keypad. Your first question comes from the line of Julien Blouin with Goldman Sachs. Your line is open. Julien, your line is open.

Julien Blouin: Oh, I am so sorry. I was on mute. Well, congrats on the strong quarter, team. Just given this strong pace of deployment and the clear demand from homebuilders, I was wondering, as you start to come up against your internally set leverage cap, would you be comfortable going above that leverage cap for a brief time until your shares sort of reach book value, especially given your confidence that as you continue your business plan, equity markets will eventually sort of catch up?

Darren Richman: Look, we are going to adhere to this. We do not want to hem ourselves in too much. On the leverage target in the context of maybe something strategic, we might push it. In the ordinary course, we are really going to adhere to that target. There may be circumstances where we might change that for some period. But that really is the threshold goal. And for those people who are new to the story, the reason why we set it at that conservative level is these are still volatile assets. And the reality is that we cycle through about a third of our balance sheet every year in the ordinary course.

And having that visibility and that cash in the ordinary course to be able to pay down our debt, or neutralize the debt with cash on the balance sheet is just very important for this company. So to answer your question, there may be circumstances where, for a brief period, we feel comfortable and we have line of sight to take it beyond 33%. But the long-term goal has really been purposefully set at 33% for the reasons I just cited.

Julien Blouin: That makes a lot of sense. You also mentioned in your opening remarks how you distinguish yourself from every other land-based real estate business in the public markets, and I think Rob was mentioning how the current AFFO multiple discount is sort of difficult to justify. I am just curious, in your own internal conversations, how do you view or who do you view as your most relevant comps? Why do you view them as your most relevant comps? And then how do you view your current valuation relative to that comp set?

Darren Richman: I think you have given me the easy question. This is some meatball question for you, Rob, to answer. Yeah. No. Thank you, Julien. I mean, people ask us a lot, particularly for a somewhat new business model in the public forum with this homesite option purchase platform: who are your comp set and how should we value you? And it is not our job to debate the academics of our price to AFFO multiple, but we did think after our first full year of results, now that we have more proof points, just to point out some of the differences versus the various REITs out there.

And you know, you and others have heard us say out loud that we think of ourselves more as a triple net or as infrastructure-related equity REIT, which is what we believe. But what is new this quarter is that we have just more proof points in terms of both our AFFO growth per share that we have demonstrated and that we are projecting in the forward scenario.

Robert Nitkin: Really afforded by just the math of our accretive spread investing, the yields we are able to invest at versus our cost of capital. Pointing out the low leverage—achieving those yields and those growth targets with the leverage that we have right now that, as we were just talking about, is pretty much below any other REIT, at least in our eyes, in the industry—which we feel good about.

And honestly, that was a lot of what we were so excited about, thinking back before we even launched Millrose Properties, Inc., why we were so excited to bring this business model into the public forum was to show the power of the yield, the growth, and therefore the total return that we afford our shareholders with low leverage.

And on top of that, lastly, I would just say it is worth pointing out that while we have low duration—and that is another slightly differentiating item, you may say positive or negative from other REITs—we view it as a pure positive in that from a credit and risk management perspective, we are constantly refreshing the basis to contemporary market conditions and evaluating new assets that are refilling our portfolio from a risk perspective. But at the same time, we have signed up to these repeatable, operationally integrated relationships with our builders’ counterparties. So it is not as if we have a brand-new cost of origination on each individual deal. Origination is not episodic.

It is a self-refreshing relationship with these builders, which again, from both a credit and origination perspective, we think is the best of both worlds. So that is what we wanted to point out.

Darren Richman: Yeah, and I might add to that. Obviously, I echo everything Rob just said, but to add to it, these are mission-critical assets, as we talked about. Not only are they mission critical, but these are the exact assets that are in scarce supply. Having land that is already entitled, approved for development, is the gating item to why we do not see more growth in volume. And so we are financing those assets that are in shortest supply. And then the other items I would add is we are doing this against the backdrop of a housing shortage.

And maybe lastly, I would add that these assets do not require any capital enhancement from a CapEx perspective to refresh, and so this is all contractually related.

So I think when you put all these pieces together, plus the growth that we laid out in this report—that even if we achieve just a billion dollars of in-the-ground, that is almost an 8% growth in AFFO on top of the already strong dividend that we are achieving—so when you put all this together, it creates what we think is a very unique package of baseline dividend plus growth that to us—look, we are students of the market, we are obviously talking our book—but to us, should result in a much higher multiple. And we do think we will get there. It is still a young company.

We are a year into it, and we are continuing to show proof points. So we do think ultimately we will trampoline ahead from a valuation perspective.

Julien Blouin: Alright. Thank you, team. That is all for me.

Operator: Next question comes from the line of Eric Wolfe with Citi. Your line is open.

Eric Wolfe: You talked about $1.0 billion of new capital deployment by the middle of the year. How much visibility do you have toward that incremental $1.0 billion at this point? Is it based on deals you have already sourced and signed? And would those be new relationships or sort of continued growth among your current 15 counterparties?

Darren Richman: Yeah, and I will start, Eric. This is Darren, and Rob will jump in. We have talked about this in the past with these forward-flow relationships that we have, where the industry is really starting to coalesce around, rather than homebuilders looking at discrete parcels and trying to get them land banked and financed, entering into more programmatic relationships where they will come to us and say, we need a billion dollars of buying power or $500 million of buying power. And so we have talked about that. Those total about $9.0 billion across roughly 10 different counterparties, those forward-flow relationships.

We are going to naturally cycle through about $3.0 billion of our land portfolio in the next year that will need to be replaced. So of that $9.0 billion, we will go into replacing those assets. And the point is we have a lot of visibility and a lot of confidence around it. Some of those deals ultimately fall away because, obviously, our due diligence process will kick out deals that we do not want to be financing. So as we distill down that forward-flow quantum, we feel very comfortable with the guidance that we put out. We want to be very thoughtful about guidance we give to make sure that we can achieve that.

Robert Nitkin: Yeah, I might just add, you know, as you know, Eric, there is also built into our existing $2.4 billion of other agreements investment balance the future development funding commitments that we have already signed up for, which we are including in that billion-dollar projection. And so that will do a decent amount of the work for us. And so you asked the question, did that require any new counterparties?

Based on the existing baked-in development funding projections, even net of homesite takedowns, as well as the aggregate of those $9.0 billion forward-flow relationships Darren alluded to, if you said we were not going to add another counterparty next year—which I do not think is true—we would still feel pretty confident about that number.

Eric Wolfe: That is helpful. And then you also mentioned that you were working with your banking partners to access floating-rate debt to hedge your floating-rate option exposure. I guess, what percentage of your net invested capital at this point is sort of floating versus fixed? And I guess, given expectations that the Fed will cut multiple times through next year, is it becoming more of a sort of popular agreement with homebuilders to try to do more floating-rate type deals?

Robert Nitkin: Yeah. I would use—it is not perfectly precise in this way—but I would use the proxy that our Lennar master program agreement rate is fixed, which is true, and subject to resets on forward deals, as has been publicly disclosed. And our other agreements bucket is vast majority floating subject to a floor. So while there is not infinite downside of rate cuts, there is some volatility, and that is the reason our existing credit agreement—use of that with a floating rate—mitigates any movement there.

And we made the comment that you alluded to on additional floating-rate debt, and that has been, I would add, there has not been a change in fixed versus floating in these agreements since any recent rate-cut cycles or anything like that. That has been the nature of the structure of these other agreements since before we launched Millrose Properties, Inc., I would say.

Eric Wolfe: Yeah, maybe just to be illustrative, like that 11% you are signing today, I guess, what would be the floor on that? Just to help me understand sort of how low that could go if rates came down meaningfully.

Robert Nitkin: On average, the floor is probably between 50 and 200 basis points below sort of where that rate is.

Eric Wolfe: Got it. Okay. Thank you.

Operator: Your next question comes from the line of Craig Kucera with Lucid Capital Markets. Your line is open.

Craig Kucera: Hey, good morning, guys. I see you added two counterparties this quarter. Were they the primary driver of the $690 million funded this quarter from third parties, or are you seeing additional demand from your existing counterparties?

Robert Nitkin: Yeah. So it was three additional counterparties—went from 12 to 15 this quarter—and the majority of the growth was from existing counterparties. And so the addition of new counterparties, we started to do initial deals with them, and those initial deals with those incremental three counterparties were not the majority. But we have now brought them onto our platform. We have onboarded them. We have negotiated docs with them, and it is our expectation that they will continue to grow as we get more operationally integrated as a partner.

Craig Kucera: Okay, great. And just given your commentary on sort of the $2.0 billion of guidance, I guess, is it fair to say that we should think about that as being more or less in the bag? And, when we think back to last year, you came out and were looking to close a billion dollars when you first spun out of Lennar, you know, we saw stretch targets throughout the year. Is that potential just given the demand in the market?

Darren Richman: This is Darren. It is a tough question to answer. We are not looking to sandbag anything. This is our best assessment at this point in time, given the deal flow that is ahead of us, and also given the need to raise additional capital. I will remind you, last year the volume was enhanced through M&A. And while we are aware of discussions that are out there from an M&A perspective, those are always difficult to model, and so none of that would be included in our forecast. So this really is our best estimate here and now.

And I will acknowledge one other thing: month to month, quarter to quarter, it will not be a straight line in terms of that volume filling in. But we feel very confident, given the pipeline, given the relationships, that we will meet that year-end target of $2.0 billion.

Craig Kucera: Okay. That is helpful. In the press release, you made a mention that you are delivering homesites to builders at an average sales price 20% below the national average for new homes, which are predominantly Lennar homes just given that they have been closing the vast majority. But as you look at the third-party agreements you have entered into, is there any way to give us a sense from a budgeting perspective whether or not those are more entry-level homes, maybe similar to Lennar, or higher-priced homes? Or is that too difficult at this point?

Darren Richman: Yeah. I do not—we are not going to go that deep into the guts of the operation at this point.

Craig Kucera: Fair enough. Just one more for me. You know, you made it clear that you do not want to issue equity below book, and you have a debt target of 33%. You mentioned earlier you might go a little above that. But given that the market is going to do what it does with your common stock, it would seem you could issue preferred that would be accretive to what you can deploy capital at. Is that a potential source of capital for you? Or do you view that as just more expensive debt?

Darren Richman: It is not our preference to do that. As you imagine, we ourselves are investors. We come from the credit landscape. We are very familiar with those types of products as well as converts and other arrangements that are equity-like. The goal here is really to keep the capital structure as clean as possible and as transparent as possible. Would we entertain them potentially? That is not our plan right now.

Craig Kucera: Okay. Thanks. That is it for me.

Darren Richman: Thank you.

Operator: Again, if you would like to ask a question, please press star and the number one on your telephone keypad. I will turn the call back over to Darren Richman, CEO and President, for closing remarks.

Darren Richman: Yeah. I would like to thank everybody again for joining us this morning. We are around if people have follow-up questions. Just in closing, really, what we are looking for is durable fundamental growth, not short-term glitter. We are looking to continue to build new relationships and develop new use cases for land banking capital. We are very excited about the prospects for the business, where we are today, and the reception we continue to get from our existing clients and new clients as well. So I want to thank everybody for your time today.

Operator: Ladies and gentlemen, that concludes today’s call. Thank you all for joining. You may now disconnect.

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