Earnings call transcript: Millrose Properties beats Q3 2025 revenue estimates

Millrose Properties Inc. reported strong financial results for the third quarter of 2025, surpassing revenue expectations and maintaining a robust market position. The company achieved earnings per share (EPS) of $0.63, aligning with analysts’ expectations, while revenue reached $179.26 million, significantly outpacing the forecasted $150.29 million. According to InvestingPro analysis, the stock appears slightly overvalued at current levels, with a Fair Value assessment based on comprehensive financial modeling. Despite the positive earnings report, Millrose’s stock experienced a slight decline in pre-market trading, down 1.15% to $32.65.

Key Takeaways

• Millrose Properties exceeded revenue expectations by 19.28%.
• The company’s technology platform and capital deployment strategy continue to drive growth.
• Despite strong earnings, the stock saw a minor pre-market decline.

Company Performance

Millrose Properties demonstrated solid performance in Q3 2025, leveraging its proprietary technology platform to manage 139,000 home sites and process 3,500 land and development transactions. The company continues to expand its footprint, now spanning 876 communities across 30 states. Millrose’s focus on capital efficiency and technological integration with builder partners has positioned it as a leader in the institutional land banking sector.

Financial Highlights

• Revenue: $179.26 million, up from the forecasted $150.29 million.
• Earnings per share: $0.63, matching expectations.
• Adjusted Funds from Operations (AFFO): $122.5 million ($0.74 per share).
• Quarterly dividend: $0.73 per share, yielding 8.2%.
• Total assets: $9 billion; Total debt: $2 billion.

Earnings vs. Forecast

Millrose Properties reported a revenue surprise of 19.28%, with actual revenue of $179.26 million surpassing the forecasted $150.29 million. The EPS of $0.63 met analysts’ expectations, reflecting stable profitability. This performance marks a significant achievement compared to previous quarters, highlighting the company’s effective operational strategies.

Market Reaction

Despite the earnings beat, Millrose’s stock declined by 1.15% in pre-market trading, settling at $32.65. This movement contrasts with the company’s 52-week high of $36 and low of $19. InvestingPro data reveals impressive year-to-date returns of 58.54%, with analyst price targets ranging from $34 to $40. The slight dip may reflect broader market trends or investor caution despite the positive earnings report.

Outlook & Guidance

Looking forward, Millrose Properties has raised its full-year 2025 new transaction funding guidance to $2.2 billion and increased its AFFO quarterly run rate guidance to $0.74-$0.76 per share. The company remains committed to maintaining a conservative debt-to-capitalization ratio of 33% and aims to distribute 100% of AFFO to shareholders.

Executive Commentary

CEO Darren Richman emphasized Millrose’s pioneering role in institutional land banking, stating, "Millrose Properties is pioneering a new era in institutional land banking." CTO Adil Pascha highlighted the competitive advantage provided by the company’s technology platform, noting, "Our technology platform provides a durable competitive advantage."

Risks and Challenges

• Housing affordability remains a significant challenge, potentially impacting demand.
• Economic uncertainties could affect builder activity and capital deployment.
• Competitive pressures from other land banking solutions may influence market share.

Q&A

During the earnings call, analysts inquired about potential changes in builder behavior and liquidity management. Management assured that no significant changes in takedown patterns were observed and highlighted ample liquidity of $1.6 billion for future opportunities. Additionally, the company noted its rigorous risk monitoring practices, which led to passing on substantial deals.

Full transcript - Millrose Properties Inc (MRP) Q3 2025:

Speaker 1: Ladies and gentlemen, thank you for standing by. At this time, I would like to welcome everyone to the Millrose Properties third quarter 2025 earnings results conference call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question and answer session. If you would like to ask a question during that time, press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. I will now turn the call over to Jesse Ross, Millrose Head of Financial Planning and Analysis. Jesse, you may begin.

Jesse Ross, Head of Financial Planning and Analysis, Millrose Properties: Good morning. Thank you for joining us. With us today to discuss our third quarter 2025 results are Darren Richman, our Chief Executive Officer and President, Robert Nitkin, our Chief Operating Officer, Garett Rosenblum, our Chief Financial Officer, Adil Pascha, our Chief Technology Officer, and Stephen Hensley, our 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 third quarter 2025 financial and operational results announcements, as well as the third 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, Chief Executive Officer and President, Millrose Properties: Thank you, Jesse, and good morning, everyone. I’m pleased to report that Millrose delivered another strong quarter, demonstrating the effectiveness of our disciplined capital deployment strategy and the growing demand for our home site option platform. Our approach centers on recycling home site sale proceeds and investing newly raised capital to maximize returns for our shareholders. This quarter, we generated $852 million in net cash proceeds from home site sales, including $766 million from LENR, and redeployed $858 million in new land acquisitions and development funding with LENR. We also saw $770 million in funding outside the LENR Master Program Agreement, which underscores the broad-based market demand and scalability of our platform. As we continue to expand our home builder relationships, we now partner with 12 distinct counterparties.

Our invested capital outside LENR reached $1.8 billion, with home site inventory and other related assets totaling $2 billion at a weighted average yield of 11.3%. Our portfolio now spans approximately 139,000 home sites across 876 communities in 30 states, reflecting our national reach and operational excellence. A key differentiator for Millrose is our proprietary technology platform. This strategic asset enables us to manage nearly 140,000 home sites, automate transaction management, and leverage AI for unique market insights and operational efficiency. Our technology allows us to scale faster, integrate acquisitions seamlessly, and deliver unmatched agility to our builder partners. It also provides early warning indicators in real time when we see pace and price failing to meet underwriting expectations. This allows us to constantly recalibrate our due diligence monitors using real-time information.

We have Adil Pascha, our Chief Technology Officer, on hand to profile our systems and the strategic moat that it represents. Our disciplined underwriting and risk management are central to our business model. By structuring transactions with meaningful deposits and cross-termination pooling mechanisms, we continue to mitigate risk and maintain prudent standards even as we grow. We further strengthened our balance sheet this quarter by completing $2 billion in senior note offerings, replacing short-term bridge capital with long-term debt at favorable rates. With approximately $1.6 billion in total liquidity and a conservative debt-to-capitalization ratio of 25%, Millrose is well positioned for continued growth and capital efficiency. Millrose Properties is pioneering a new era in institutional land banking, offering a scalable asset-light capital solution for home builders. As the only national public platform dedicated solely to residential home site capital, we provide certainty and reliability that private capital sources cannot match.

Our partners consistently tell us that this certainty is a key reason they choose Millrose Properties. Despite ongoing market challenges, our business model resilience and risk mitigation features have enabled us to deliver strong performance and expand our partnerships. We maintain high conviction in the long-term housing market and are confident that Millrose Properties is exceptionally well positioned to capture accelerated demand as conditions improve. Our platform is helping builders navigate affordability pressures and inventory challenges, providing flexible capital solutions that support their growth and operational efficiency. It is important to highlight that we are quickly approaching the point of terminal velocity, where shareholders will benefit from the optimization of our balance sheet for an entire fiscal period.

As our capital structure reaches its most efficient state, we anticipate that shareholders will increasingly realize the benefits of our scale and disciplined approach, enabling us to reinvest in higher return opportunities and maintain robust liquidity, all while supporting our competitive position in the sector. With these advantages, we are confident that we can continue to deliver value for our partners and stakeholders as we pioneer new solutions in institutional land banking and further solidify our leadership in the market. Our strong operational results enabled us to increase our quarterly dividend to $0.73 per share, representing an 8.2% dividend yield based on our book value. Based on our momentum, we are raising our guidance for year-end AFFO run rate to $0.74 to $0.76 per share and increasing our full year 2025 new transaction funding target under other agreements to $2.2 billion.

We are pleased to note that this target is above our reach goal of $2 billion. We remain committed to distributing 100% of our AFFO to shareholders, reinforcing our alignment with shareholder interests. In closing, our third quarter results demonstrate that our capital redeployment strategy is working effectively across all aspects of our business. We look forward to continuing this momentum and sharing our progress next quarter. Thank you for your continued support, and with that, I’ll hand the call over to Rob. Thank you, Darren, and good morning, everyone. I’m pleased to report on the operational progress we achieved in the third quarter and to share how we believe these initiatives position Millrose for continued success. Q3 was an active and productive quarter for Millrose.

We deployed capital at scale, expanded partnerships with new counterparties, reinforced underwriting discipline, and our national team continued to leverage the Millrose technology platform to rigorously evaluate each transaction. We also strengthened our balance sheet, raising $2 billion of long-term debt at highly accretive rates. As Darren noted, our performance was fueled by accelerating transaction volumes and growing industry-wide adoption of our platform. Millrose was founded on the vision that a scaled national publicly traded home site capital solution could be an all-weather solution to deliver home sites on a just-in-time basis, and that vision is now being realized. Today, Millrose transacts with 12 distinct counterparties, and as we engage with our growing roster of home builder partners, we increasingly hear them highlight Millrose’s advantages over other private capital players.

With unmatched scale, a national team of industry experts, and a portfolio spanning 30 states and 876 communities, we can execute the broadest range of transactions with speed and deep sector expertise. As a permanent capital solution dedicated to serving as the industry solution for residential home site capital, our partners avoid the constraints of private fund lifecycles and the uncertainty of opaque capital sources. Builders consistently tell us that certainty and reliability of capital often matters more than cost. With $2 billion raised in the quarter and $1.6 billion of publicly disclosed liquidity today, we deliver that certainty. Finally, as you’ll hear from our Chief Technology Officer, Adil Pascha, our technology platform reduces the operational burden on counterparties’ land planning and finance teams by automating home site purchase coordination and processing. At the same time, it captures transaction data that provides unique market insights to strengthen our underwriting.

We believe that these structural advantages make Millrose the partner of choice for leading home builders. This is exemplified by large programmatic partnerships, such as our collaboration with Taylor Morrison’s Yardly build-to-rent brand, as well as our demonstrated experience as the first call for capital-efficient M&A. The strength of our platform is evident in our transaction terms and portfolio performance. We continue to generate compelling returns with a weighted average yield outside the LENR Master Program Agreement of 11.3% as of quarter end. We grew investments in this category by $770 million in acquisitions and development funding, bringing our invested capital to approximately $1.8 billion as of September 30th. Including LENR, our portfolio weighted average annualized yield rose to 9.1%, up 20 basis points from the prior quarter.

While growth is important, we remain laser-focused on underwriting discipline, and as our portfolio expands, we continue to enhance our risk monitoring systems. Each transaction is evaluated against real-time sales and pricing trends within our portfolio, with overlaid local market insights from our asset management team. Our asset managers are constantly engaging with counterparties across the country, interfacing directly with the individual local builder divisions of our home builder partners. Through these channels, we’ve been able to capture unique quantitative and qualitative insights about the operating environment across markets and leverage these insights to maintain prudent underwriting standards and monitor risk. We also continue to structure transactions to mitigate risk, securing meaningful deposits as a share of total project costs and employing cross-termination pooling mechanisms.

Importantly, given the demand we’ve observed, we also have the ability to remain selective in our partnerships, avoiding builders who view land banking as a tool for risk mitigation rather than capital and operating efficiency. This has helped to buttress our portfolio during the recent market stress. We are proud of our third quarter performance and grateful for the significant contributions of the entire Millrose team in driving our continued growth. With the strength of our pipeline, capital capacity, and competitive position, we remain highly optimistic going forward. With that, I’ll turn it over to Adil to share more on the Millrose technology platform.

Jesse Ross, Head of Financial Planning and Analysis, Millrose Properties: Thanks, Rob. I want to highlight a core component of our strategy, the proprietary technology platform that complements the operational excellence of our servicing and investment teams. We are not simply building a tool, but a strategic moat that enables us to manage a scale and complexity unmatched in the land banking industry. To put our operations into perspective, we manage a portfolio of nearly 140,000 home sites. We recycle approximately one-third of our book value annually, which means we are in a constant cycle of redeploying capital with speed and precision. Our transactions typically range from $10 million to $30 million each. We serve 12 distinct customers with more than 800 assets across diverse geographies and product types. Managing this business on spreadsheets would be impossible. Our technology platform provides three distinct strategic advantages. First, high-velocity transaction processing.

In the third quarter alone, we averaged 138 home site takedowns per business day and processed over 3,500 land and development transactions. Land banking relies on seamless technological and operational alignment with our builders. Our platform allows us to provide our builder partners with the operational flexibility they need to meet their goals, a level of agility that is simply unachievable with traditional systems and spreadsheets. Enhancing and expanding these integrations is a key priority, which we believe will unlock further growth and strengthen these critical partnerships. Second, a powerful data advantage. The sheer volume of our deal flow, transaction data, and builder sales reports has created a rich proprietary data set. This data moat gives us unique insights in underwriting transactions and monitoring market risk. We are also beginning to leverage AI to derive novel insights from this data set and further automate internal processes. Finally, unmatched M&A execution.

We demonstrated this with the Millrose spin-off and the acquisition of Roush and supporting New Home in its acquisition of Lansing. Our ability to partner with builders to rapidly underwrite and integrate hundreds of communities is a direct result of our proprietary data platform, which automates the ingestion and management of all aspects of land banking data. Our capacity to close deals and provide immediate operational readiness for our builders is an unmatched capability in this market. Our technology is a core strategic asset. It allows us to scale faster, integrate acquisitions seamlessly, and operate with greater agility. We are confident this platform provides a durable competitive advantage that our competitors cannot easily replicate. We look forward to releasing a set of features to extend these efficiencies directly to our builder partners. We are excited to continue developing this platform to drive the future growth of Millrose.

With that, I’ll hand it over to Garett to talk through our quarterly financial overview.

Garett Rosenblum, Chief Financial Officer, Millrose Properties: Thank you, Adil, and good morning, everyone. I’m pleased to walk you through our third quarter 2025 financial performance, which demonstrates the cash-generating power of our business model and our disciplined approach to capital allocation. For the third quarter, we reported net income attributable to Millrose common shareholders of $105.1 million or $0.63 per share, driven by $179 million in option fees and development loan income. Our net income this quarter was negatively impacted by one-time expenses associated with our debt financing activities. These non-recurring expenses related to our debt transactions impacted our GAAP net income. These are one-time items incurred in connection with our business reaching scale and don’t affect the underlying cash-generating capacity of our business. Adjusted funds from operations, or AFFO, was $122.5 million or $0.74 per share, which provides the basis of our distributable earnings by adjusting for these one-time costs and other non-cash items.

As we discussed last quarter, AFFO offers enhanced transparency into the recurring distributable earnings power of our business. Our book value per share at the end of the quarter stood at $35.29. Our management fee expense was $25.9 million, which is calculated transparently at 1.25% of gross tangible assets. Interest expense was $43.7 million and income tax expense was $5.9 million. On September 22, we declared a quarterly dividend of $121.2 million or $0.73 per share, representing an 8.2% dividend yield based on book value per share that demonstrates our strong profitability and commitment to shareholder value. Millrose is committed to distributing 100% of our earnings to shareholders. Turning to our balance sheet and capitalization, we significantly strengthened our financial position this quarter through a strategic debt raise.

We successfully completed $2 billion in senior note offerings, including $1.25 billion of six and three-eighths senior notes due 2030 and $750 million of six and a quarter senior notes due 2032, both upsized due to strong investor demand. We used the proceeds to repay our $1 billion one-year term loan and reduced outstanding borrowings under our revolving credit facility by $450 million. These transactions eliminated near-term refinancing risk while securing attractive long-term financing, and combined with our $1.3 billion revolving credit facility, provide us with approximately $1.6 billion in total liquidity as of quarter end, which provides ample financial resources to continue to grow the business. As of September 30, we reported total assets of approximately $9 billion and total debt of $2 billion, with a debt-to-capitalization ratio of approximately 25%.

We continue to expect to adhere to a conservative maximum debt-to-capitalization ratio of 33%, underscoring our disciplined approach to capital management. Based on our strong performance and continued momentum in other agreements, we are raising our guidance for full year 2025 new transaction funding under other agreements to $2.2 billion, up from previous guidance. Accordingly, we are also raising our year-end AFFO quarterly run rate guidance to a range of $0.74 to $0.76 per share. We remain focused on delivering value to shareholders through consistent earnings growth, prudent capital allocation, and maintaining our conservative balance sheet while capitalizing on the significant opportunities ahead. With that, I’ll turn the call back to Darren.

Darren Richman, Chief Executive Officer and President, Millrose Properties: To close, our third quarter results demonstrate that our capital redeployment strategy is working effectively across all aspects of our business. From organic growth in other agreements to optimizing our capital structure and increasing shareholder returns, we continue to execute on our mission to redefine how capital flows to meet housing demand. Our business model’s resilience through challenging market conditions, combined with our strong liquidity position and growing pipeline of opportunities, gives us confidence in our ability to continue delivering attractive returns to shareholders while serving as an essential capital partner to the home building industry. We look forward to continuing this momentum and sharing our progress next quarter. Thank you again for your continued support, and with that, operator, let’s open the call up to Q&A.

Speaker 1: We’d like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. We’ll pause for just a moment to compile the Q&A roster. Your first question comes from Julian Brown with Goldman Sachs Bank USA.

Thank you for the question. Your new deployment guidance of $2.2 billion implies just another $200 million of deployment in the fourth quarter, which is quite a bit below your year-to-date run rate. Is that a reflection of a pullback in activity you’re seeing from home builders, or is there some sort of normal seasonality where activity dips in the fourth quarter? Is it driven by conservatism? How should we sort of think about that?

Darren Richman, Chief Executive Officer and President, Millrose Properties: Yeah, sure. Thanks for the question, Julian. Just one quick correction. As of the end of the third quarter, our invested capital in this category outside of the LENR Master Program Agreement is $1.8 billion. Originally, our stretch target was $2 billion. It’s $1.8 billion as of the end of the third quarter. Our revised target is $2.2 billion, meaning that it’s not a $200 million increase. We’re guiding towards a $400 million increase. That’s our best guess based on still a very strong continued set of demand from the builders, certainly no slowdown. That’s our best guess based on where we are today. Does that make sense?

OK, I see. It’s $2 billion of home site inventory funded. That makes sense. I guess just as we think about where the stock trades today and how you’re thinking about equity issuance going forward, how should we think about that? Is it something where you would consider issuing equity as and when you trade at book value? Is it maybe something more like you could wait and see if the market ascribes some premium to book value? How do you balance those considerations against the risk of running out of deployable debt capacity, as you’re starting to push up against this 33% self-imposed debt-to-cap limit and potentially being stuck if you’re still trading below book value?

Jesse Ross, Head of Financial Planning and Analysis, Millrose Properties: Yeah, Julian, it’s Darren. We have ample runway. As we said in our prepared remarks, we have about $1.6 billion of firepower, which includes cash and room under the revolver. I think we’ve communicated in the past, and I’ll reiterate it today, our goal is really to optimize the balance sheet first before we pivot to equity issuances. We’ve had a couple of new equity initiations that are well above book value. Just as an editorial note, we buy into it. We definitely buy into the story beyond book value. As we had kind of communicated with you and others in the past, the goal isn’t just to get to book value and declare victory. We think that the ultimate returns that investors would expect and demand could result in this stock trading well above book value.

To answer your question, it really is about optimizing the balance sheet, using our debt capacity, and then seeing where we are as a company and where the stock is to then think about equity issuances.

Darren Richman, Chief Executive Officer and President, Millrose Properties: Got it. Thank you. Very helpful.

Speaker 1: Your next question comes from Eric Wolf with Citigroup.

Hey, thanks. Good morning. I know you’ve had very little, if any, credit loss since you launched the business. Is there a way that you internally think about long-term credit loss? If you’re getting, say, 11% to 12% on option rate, maybe that’s more like 10% to 11% after some assumption around terminations and your ability to recover value from that collateral. I’m just trying to understand internally how you think about sort of the total return profile of the business after credit loss.

Jesse Ross, Head of Financial Planning and Analysis, Millrose Properties: Yeah, this is Darren. I mean, I’ll start, and then Rob can jump in. In the history of our land banking experience, we haven’t had a home builder walk away. We haven’t had a home builder look to renegotiate a contract. It’s not to say that it won’t happen or it can’t happen, but I can only say, looking at using history as a guide, it hasn’t happened yet. I would argue that it really comes down to our underwriting standards, the use of technology that Adil spoke about, and the due diligence screening that we do as part of our overlay is really the glue that holds this all together. On top of that, we’re also looking for a counterparty that is really a partner. We’re looking for counterparties that are looking to do business for capital efficiency, not risk mitigation.

We know that because these are counterparties that are willing to sign up upfront to pooling agreements. Again, even the pooling agreements, investors, you know, home builders could walk away from those. I don’t want to suggest that even with pooling that folks couldn’t walk away. It really does become a self-selection opportunity for us to know what type of relationship the home builder is looking for. I don’t know, Rob, if there’s something you want to add.

Darren Richman, Chief Executive Officer and President, Millrose Properties: I would just add that to come up with something like that would require ascribing some probability to not just the option termination, but an actual loss in the recovery value of the land that we own, fee simple, have underwritten net of the deposit we hold against it, which is obviously as a result of our work. It’s not a scenario we think is likely. Again, not to say it won’t happen, but there’s no clear methodology that would make sense to us to use for that.

Got it. I know it’s only $340,000, so not much, but there’s a small provision for credit loss expense on the income statement. It looks like maybe on development loan receivables. I guess, what is that and sort of how did you estimate that?

Garett Rosenblum, Chief Financial Officer, Millrose Properties: Hey, Eric, it’s Garett. That’s a GAAP required adjustment under what’s called CECL, or as far as the credit loss pronouncement, which basically requires us to estimate potential credit losses. It can’t be zero. We estimated it, and that could change as we go forward. This is merely a GAAP required estimate and not an indication of what we actually expect.

Got it. For the $770 million that you deployed outside of LENR, were those all with existing relationships, or were there some new relationships in there? I think you said 12, and I can’t remember what you said on last quarter’s call. Just curious if there’s some new relationships that were entered into the quarter and if they’re, you know, public home builders, regional builders, just the profile of the new relationships that you’re forming.

Darren Richman, Chief Executive Officer and President, Millrose Properties: Last quarter we mentioned we had 11 distinct counterparties. We added one this quarter, so we have 12 distinct counterparties. We did add that counterparty, but really a lot of this is most of that increase you mentioned is driven by just further penetration in the partnerships that we’ve set up. We’ve had a lot of success, just continued to integrate operationally and continue to do more business with our really high-quality builder counterparties.

Got it. Just last question for me. There have been a lot of headlines from the government and tweets about wanting to sort of improve housing affordability. I guess, are there any policies that you’re hoping for? You think it’s for more construction or be good for your business? Just curious if there are certain things that you’ve seen that have been proposed that you think could help your business.

A few things. One, we all know affordability is a real challenge. The fact that the administration is focused on making housing more available and more affordable certainly makes sense, makes sense to us. All of the headlines and the articles we’ve read would suggest that more production, it relates to more production. More production is obviously good for our business. It creates more certainty around the land that we own and gives us more confidence in the land that we own. Outside of that, I know that there are a lot of kind of conversations that are happening behind the scenes in the industry, and the industry is definitely working to do their part to come up with creative solutions to the challenges.

Got it. Thanks for taking my questions.

Speaker 1: Your next question comes from Craig Cacera with Lucid Capital Markets.

Yeah, hey, good morning, guys. Can you give us a breakout on how much of the third-party investment in the third quarter was affiliated with Yardly?

Darren Richman, Chief Executive Officer and President, Millrose Properties: We haven’t disclosed a specific volume by counterparty, but I will say that we have had a lot of success, that there is a decent portion of that number that is the penetration with Yardly, and that has ramped up and been a great successful partnership with the folks over at the Yardly team at Taylor Morrison. It is going really well. It has started to close, and we’re feeling really excited about it. Beyond that, we haven’t given any disclosure at this point.

OK, fair enough. You did have a breakout of the development loan receivables and income this quarter. Were those formally wrapped up in inventory and reported differently, or are those all sort of originating here in the third quarter?

Garett Rosenblum, Chief Financial Officer, Millrose Properties: Thanks for asking, Garett. They were grouped in with inventory at the beginning, and we felt it prudent to break it out going forward as this continues to be a significant part of our business.

Darren Richman, Chief Executive Officer and President, Millrose Properties: It is not a new line of business for us as being, you know, trying to serve the interests of our builder clients. This is how certain of our clients want to access our land banking capital, is through developer partnerships. This has always been part of our strategy and our product offering. It’s just, as Garett Rosenblum said, it got to a point where it’s now big enough and scaled enough that the accounts have asked us to break it out separately, but it doesn’t represent a new strategy for us.

Got it. I think in the queue, there’s a reference that that’s actually paid in kind interest. Is that the case here in the third quarter?

Garett Rosenblum, Chief Financial Officer, Millrose Properties: Yes, that is going to be the short answer there.

OK. Changing gears, some of the commentary from LENR on their third quarter earnings call referenced slowing down some of their volume and taking a pause to adjust to market conditions. Did that translate at all to LENR executing any of their pause periods with Millrose?

Jesse Ross, Head of Financial Planning and Analysis, Millrose Properties: Not outside of the contractual provisions that they’re allowed to. If you’re asking about the pause periods where they’re declaring a six-month pause, absolutely not. There are always adjustments, regardless of the period, related to certain communities. All of these, anything that was done was done within the contractual allowances for them and for others.

OK, that makes sense. Just a couple more for me. You know, you booked some rating agencies’ expenses this quarter. Can you give a sense of the time frame of what you might think you might get a rating and what it might mean to your debt costs relative to what you currently have, whether that’s what you issued in the quarter or, you know, the spread on your revolver?

We’re already rated, just to clear that up. We’re rated by Fitch, S&P, and Moody’s.

Darren Richman, Chief Executive Officer and President, Millrose Properties: Yeah, it’s worth reiterating, actually, one of the big achievements we’re quite proud of in the quarter is that going from a company without ratings to three ratings from those organizations, including an investment grade rating from one of them, and being able to access the deepest public credit markets to raise $2 billion of bonds at an interest rate that we think is highly accretive to our business has been a big win for us to strengthen our balance sheet. That’s part of what’s really opened up the $1.6 billion of liquidity that we have today heading into the fourth quarter. That really makes us optimistic about our ability to sort of attack the opportunity in front of us and becomes a really strong competitive advantage versus other players that we can just speak to that publicly available $1.6 billion of liquidity and the strength of our balance sheet.

Got it. Just one more for me. You know, a lot of the call you referenced risk monitoring. I know you closed $770 million of deals this quarter with third parties, but can you talk about the total dollar value of deals you underwrote and maybe elected not to move forward with?

Yeah, we haven’t disclosed the past portion, but there is certainly a substantial amount of past deals. Part of our risk underwriting is that we’re always, as we said, always evaluating a homebuilder’s assumptions around price and pace and ultimately the gross margin they project on those communities. In this quarter, just as in other quarters, we turned down a substantial amount of deals because we didn’t think they were set up for success and that our own unique independent data sources were not necessarily consistent with the builder’s underwriting. Anything to add, Darren?

Jesse Ross, Head of Financial Planning and Analysis, Millrose Properties: The only other thing I’d add is it’s a good question, and it’s a good point in the sense that there are counterparties that we have decided not to do business with because they’ve historically used land banking for risk mitigation. We know that, they know that, and again, we’d rather pass on those relationships than try to eke out a little bit more spread, but taking a lot more risk in times like we’ve experienced in the last year.

Got it. OK, appreciate the color. Thanks.

Speaker 1: Again, if you would like to ask a question, press star one on your telephone keypad. Your next question comes from Aaron Hike with Citizens Bank.

Hey, guys, thanks for having me on the call. Just wondering, in terms of the contracts that you currently have in place, how much more capital or how many more partners, clients can you sign up, given the schedule that they’ve provided and your assumptions underlying the cash inflows and outflows? I’m just trying to get a sense of how many more deals you can do or how the balance of your capital outstanding will trend just based on what’s expected to come in your contracts today.

Darren Richman, Chief Executive Officer and President, Millrose Properties: I would just say it’s part of our cash flow planning every day that we track our peak capital, including all the development funding against all of our commitments. We’re comfortable based on all the liquidity we have today and our capital pipeline that we can serve everything, and there does remain additional capacity to bring on new customers.

Jesse Ross, Head of Financial Planning and Analysis, Millrose Properties: Yeah, ample. I mean, that’s really the reason why we keep highlighting the $1.6 billion is because almost all of that is really meant for new third-party business. That’s exactly why we highlighted Adil and the work that he’s done, because given the scale and complexity of the business that we have and the fact that we do give up about a third of our book value every year, this constant recycling and planning is so important and vital to making sure that our balance sheet is optimized at all times and we’re not sitting on cash. We haven’t, on the other side, overcommitted cash and are not able to fund.

Yeah, I guess that’s what I was trying to get at. The inflows and outflows sound like they could get so complicated that there could be big fluctuations just based on the commitments that you have already. Second question around your data sets and the technology platform that you guys talked about. Is there any way to monetize that without giving up, you know, proprietary information for the Millrose shareholder, like data sets that you can provide to the general public on home building or whatnot? Just kind of wondering, any way to monetize that?

Darren Richman, Chief Executive Officer and President, Millrose Properties: Yeah, that’s a great question. It’s not something that we’re focused on right now. We’re really looking to use that data set to drive our operational underwriting efficiencies. We’re always evaluating kind of strategic partnerships in the home building space, where we could create a value chain that really complements our capital solution.

Jesse Ross, Head of Financial Planning and Analysis, Millrose Properties: This data is so important using it in our ecosystem to make real-time judgments. I mean, there was a question asked earlier about deals we passed on. Remember, every deal we pass on, in addition to the deals we do, we’re capturing all that data real-time. We’re ingesting it and using it to make informed judgments as part of our due diligence. We have Stephen Hensley here who oversees that analytics, making sure that we’re underinvesting in hot areas that are not performing well and finding ways to put money to work in areas that are performing well and will continue to perform well where there’s a shortage of housing relative to job growth.

Appreciate it, guys. Thank you.

Speaker 1: Your next question comes from Julian Brown with Goldman Sachs Bank USA.

Thank you for the follow-up. You’re clearly a really valuable partner to the builders. I’m just wondering, in terms of the current environment, is one of the ways you’re providing value to them by providing accommodations or allowing them to pause or slow down their takedowns per the agreements you have with them?

Jesse Ross, Head of Financial Planning and Analysis, Millrose Properties: Look, we haven’t really had to do so outside of what the builders are contractually entitled to. I’ve said this before, Julian, and you’ve definitely heard me say it. If a builder came to us in the ordinary course and said, "Hey, we were taking down four homes per community per month. The contract says we need to take down three. We’d like to take down two, and we don’t have additional needs for that capital." It probably means we’re going to slow down development as well. We’d rather the capital working for as long as we can keep it. We’re always thinking through accommodating any client request as long as we don’t have an additional need for that capital. Why would we cause somebody to buy back a home site at a time when it doesn’t work for them?

All we’re doing is losing book value on which we would earn our option rate. To answer the question very specifically, we haven’t had to make accommodations outside of what our builder counterparties are entitled to. We would definitely be open, if asked, making sure that we have the capital to do it.

Understood. I guess in terms of what they’re contractually entitled to, what is the sort of the flexibility they have within their current contractual agreements? How much are they exercising that flexibility maybe to currently sort of slow down their pace?

Darren Richman, Chief Executive Officer and President, Millrose Properties: Yeah, you can see, I mean, the LENR Master Program Agreement is publicly available. You can see some examples of a finite amount of quarterly takedown extensions, such that the final takedown cannot be extended. That’s an example of that kind of flexibility and one of the many reasons that builders look at this kind of capital partnership better than debt, which is less flexible for a variety of reasons. Generally speaking, even above that, the benefit is that we’ve individually underwritten every asset. We have the ability, and our team really can make a judgment call around pace and the right takedowns, particularly in the context of a business that had over $800 million of home site sale proceeds just in a quarter. We have such ample liquidity, and by that number, you can see the builders are still taking down their home sites largely on schedule.

That would be one example to answer your question.

Jesse Ross, Head of Financial Planning and Analysis, Millrose Properties: I just want to go to the point, maybe the heart of it, we really haven’t seen any change in our business. I think that’s what people are pulsing around, like, what are we seeing from builders? We really haven’t seen any change, any real change in their behavior that causes us any concern. We would highlight it, and we just haven’t seen it. It really has been sort of business as usual for us, which has been great. It’s not like we haven’t seen what’s going on in the backdrop. You’ve got to remember, we’ve underwritten all these assets. These are mission-critical assets. These are irreplaceable assets by and large. We would expect that the builders would continue to take them down almost regardless of what is going on in the backdrop.

I just want to make sure that we’re making the point that it really has been and continues to be business as usual for us.

Great. Thank you very much.

Speaker 1: At this time, there are no further questions. I’ll now turn the call back over to Darren Richman for closing remarks.

Jesse Ross, Head of Financial Planning and Analysis, Millrose Properties: Thank you. I just want to thank everybody once again for joining us today, for following the story. We’re all available should anybody have follow-up questions. Thank you again, and we wish you a great day.

Speaker 1: Ladies and gentlemen, that concludes today’s call. Thank you for joining. You may now disconnect.

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