Millrose Properties, Inc. 2026 Q3 Earnings Call

Jesse, please go ahead. Good morning, and thank you for joining us to discuss Millrose Properties' third quarter 2026 results.

Joining me on the call today are Darren Richman, our Chief Executive Officer and President, Robert Nitkin, our Chief Operating Officer, and Garett Rosenblum, our Chief Financial Officer. Before we begin, I'd like to remind everyone that today's discussion may include forward-looking statements and references to non-GAAP financial measures. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied. For a more complete discussion of these factors, as well as reconciliations of non-GAAP measures, please refer to our earnings release and investor presentation, both of which are available on our investor relations website. Given recent events, our prepared remarks today are more detailed than usual. With that, I'll turn the call over to Darren.

Thank you, Jesse, and good morning, everyone. I'll begin with our core business and our financial performance, and then spend some time addressing the recent attention surrounding Millrose and the steps we are taking to further enhance shareholder values. Let me start with the most important point. Our business continues to perform remarkably well in the face of a challenging housing market and elevated interest rates. We continue to have strong visibility into our cash flows, and as of 9/30, not a single Millrose customer has walked away from an agreement. That resilience is reflected in our financial performance. Earlier this month, we reached a major milestone in the diversification of our platform. On October 20, Dream Finders completed its acquisition of Beazer Homes, and in connection therewith, Millrose funded Dream Finders with approximately $1.1 billion of acquisition financing.

A land banking investment in roughly 7,000 homesites, more than half of them finished, and a 12% preferred investment in Dream Finders. Pro forma for that transaction, approximately 42% of our asset base is now invested outside the Lennar Master Program Agreement. We underwrote, documented, and closed Dream Finders transaction in a compressed timeframe alongside a public company merger. Rob will walk you through the details shortly. For the fourth quarter, we expect AFFO of approximately $0.82-$0.84 per share, and year-end AFFO annual run rate above the $3.30 per share guidance provided on our year-end 2025 earnings call. This represents another increase in our recurring earnings power, marks the sixth consecutive quarterly AFFO increase, and underscores the durability of the Millrose business model, even as the broader housing market continues to face significant affordability pressures.

During the third quarter, we funded approximately $1.3 billion in new investments and development funding, received approximately $800 million in net homesite takedown proceeds, and increased invested capital outside Lennar Master Program Agreement by over $500 million to $3.4 billion. We added three new counterparties in the quarter and now serve 22 distinct clients. We also continue to expand the reach of our platform across our growing base of homebuilder and developer counterparties. Garett will walk you through the financial and operating details shortly. But before turning to those results, I want to address the recent attention surrounding our business, provide context for the initiatives we have been developing, and discuss how we're going to think about capital allocation and shareholder returns going forward. Now, let me turn to something many of you have been reading about.

For a while, we've been working on an affordability initiative, and I want to begin by emphasizing that neither our concerns about housing affordability nor our efforts to develop new products should come as a surprise. We have been discussing the affordability challenges facing the homebuilder industry for some time. On our last earnings call, we specifically addressed the difficulties facing first-time homebuyers and the various tools builders have been using to address those challenges, including mortgage rate buydowns, incentives, and changes in product design. We have also consistently discussed our intention to expand the applications of our capital platform. In July 2025, we announced a $3 billion financing arrangement with Taylor Morrison to support its Yardly build-to-rent platform. At the time, I specifically described that transaction as an example of using our capital to help homebuilders address affordability challenges.

Taylor Morrison also expressed its hope that Yardly renters would eventually become Taylor Morrison homeowners. We have since expanded our platform into multifamily housing and vertical construction and used our capital to facilitate industry consolidation. On our last earnings call, we explicitly told investors that we were expanding our product suite and were already in the lab developing new products that would complement our existing business and deepen our relationships with homebuilders. So the idea that we were working on affordability, exploring the intersection of rental housing and homeownership, and developing additional applications for our capital is hardly new. We have been discussing these opportunities publicly for well over a year. The opportunity we've been working on to address is real. Every day, prospective homebuyers visit new home sales centers with the intention of purchasing a home, only to discover that they cannot qualify for a mortgage.

We estimate that more than 30% of prospective customers are being denied at the mortgage qualification stage after conversations with our homebuilder counterparties. Importantly, credit quality has not deteriorated in a manner that would explain the magnitude of the problem. FICO scores have remained remarkably consistent. What has changed dramatically is the cost of financing a home. These are people who want to own a home. They are trying to achieve the American dream of homeownership, but the combination of home prices and mortgage rates has put the dream beyond their immediate reach. We thought that was a problem worth trying to solve in a manner accretive to Millrose's shareholders while reinforcing our core business model. Millrose has pioneered land banking as an institutional product. We have applied our platform to large-scale M&A, vertical construction, build-to-rent, and multifamily housing.

Given that experience, we believe we are well-positioned to develop an additional affordability solution. Specifically, we are working on a product designed to sit between the for-sale and for-rent markets, a bridge to homeownership. The concept was to allow prospective homebuyers who could not qualify for a mortgage today to occupy a home as a renter with the potential pathway to homeownership when the circumstances allowed. Before we could responsibly introduce such a product, we needed to establish that the underlying operating and financing infrastructure would work. There is another important consideration in understanding why we pursued this initiative. We believe build-to-rent is becoming an increasingly important component of homebuilder finance. It provides another channel of demand for our homebuilder customer, diversifies their source of offtake, and creates additional flexibility in addressing the affordability challenges facing the housing industry.

The FHA's recent decision to extend multifamily mortgage insurance eligibility to qualified build-to-rent communities is significant. By expanding access to government-insured construction and permanent financing, the FHA is recognizing the growing role of build-to-rent in expanding housing supply and addressing affordability. Importantly, it also creates another potential source of institutional capital to support this market. Build-to-rent does not represent a problem with homebuilder finance. It represents innovation in homebuilder finance. If you don't recognize build-to-rent as a crucial and growing component of the industry, then I believe you are materially underestimating the opportunity and value of the Millrose platform. For Millrose, every additional channel through which a homebuilder can sell a completed home expands the opportunity to finance its production, accelerate capital recycling, and increase the value of our platform.

There has been a disconnect between the growing importance of build-to-rent and the availability of capital to support it. Higher interest rates have sidelined significant amounts of institutional capital. The publicly traded single-family rental companies have been managing their own capital constraints and priorities, limiting their ability to expand. Uncertainty surrounding bipartisan housing legislation created an additional regulatory overhang until the legislative process was completed. Importantly, this retreat in capital has not necessarily reflected deterioration in the underlying assets. Both major publicly traded single-family rental companies continue to report positive blended rent growth, strong occupancy, and healthy renewal performance. Independent industry research has also pointed to improving rent growth as supply pressures moderate. So we have a market where the underlying assets continue to perform, but the capital available to support them has become constrained, and the consequences extend well beyond the rental housing market.

When institutional capital retreats from build-to-rent, homebuilders lose an important channel of offtake. That can translate into slower absorptions, higher inventories, and reduced construction activity. In other words, a disruption in the availability of capital for build-to-rent ultimately becomes a disruption in homebuilder finance. We believed it was important to understand that disconnect firsthand. Rather than simply wait for institutional capital to return, we wanted to see how the product performed ourselves. We wanted to understand leasing dynamics, resident retention, operating costs, asset management requirements, and financing alternatives. We wanted to determine whether the economics could support a scalable institutional capital market solution. That required us to own homes, albeit on a limited basis. We believe Millrose is particularly well-positioned to pursue this opportunity.

We already have deep relationships with homebuilders, visibility into their land pipelines and production needs, an established financing infrastructure, and a balance sheet capable of supporting innovative capital solutions. Our platform operates at the intersection of housing production and institutional capital, giving us a perspective that neither traditional rental housing operators nor standalone capital providers necessarily possess. Importantly, this initiative maps directly to our existing operating footprint. We are not entering unfamiliar markets to establish an entirely new business. We are evaluating another application of our capital within the same homebuilding ecosystem we already serve. We held discussions with banks to understand the securitization process and the portfolio characteristics and minimum scale necessary to access the market. That work informed both the size of our investment and the financing architecture we wanted to optimize around.