Millrose Properties, Inc. 2026 Q2 Earnings Call

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

Joining me on the call today are Darren Richman, our Chief Executive Officer and President, Robert Nitkin, our Chief Operating Officer, Garett Rosenblum, our Chief Financial Officer, and Steven Hensley, our Senior Market Risk Analyst. 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. With that, I'll turn the call over to Darren.

Thank you, Jesse, good morning, everyone. Millrose delivered another strong quarter. We grew Invested Capital, boosted recurring AFFO, deepened builder relationships, and expanded the range of solutions our permanent capital platform provides. Demand for what we do has never been higher, even as builders continue to navigate a fourth consecutive year of mortgage rates above 6%, elevated incentives, and a full-year 2026 delivery guidance moving lower across the largest public builders. In this environment, as we said before, builders are balancing four competing objectives simultaneously: maintaining sales pace through pricing and incentive strategies, protecting profitability in a more competitive selling environment, preserving and growing their future community count, and limiting capital tied up in long-duration land ownership. Those priorities have made capital efficiency a necessity, our permanent capital platform was created to respond to that very need.

Home builders cannot simply stop their production activity because near-term demand moderates. The communities that they expect to deliver in 2028 and 2029 require land acquisition and development decisions today. The Millrose platform allows builders to continue investing for long-term growth while preserving balance sheet flexibility and improving capital efficiency. We believe this is more than a cyclical response to today's market. It reflects a structural evolution in how builders think about capital allocation. That evolution is playing out visibly across the sector, with public builders' owned and controlled lot positions trending low for four consecutive quarters. Builders are not chasing land at any cost. They are right-sizing land inventory to match demand and are now more regularly outsourcing ownership to third-party capital providers like ourselves. Turning to our second quarter results, our Invested Capital reached approximately $8.8 billion at quarter end.

Importantly, we recycled approximately $1 billion during the quarter, capital returned from builder takedowns and development loan repayments, and redeployed it into approximately $1.1 billion of new opportunities at underwriting standards that have not moved. That velocity of deployment held to a consistent underwriting bar is what a mature permanent capital platform is designed to produce. There were no option terminations across the platform this quarter, and in fact, zero option terminations since the inception of Millrose platform. Every counterparty has honored every option contract as scheduled. Against a backdrop where several public builders have continued to record walkaway charges on parcels they chose to abandon, the durability of our portfolio reflects both the quality of our underwriting and the strength of our builder relationships.

We now serve 18 third-party counterparties, including several of the nation's largest home builders, with approximately 32% of Invested Capital deployed outside of our founding Lennar Master Program Agreement. We added two new counterparty relationships this quarter. Among them is a new land banking relationship with JPI, a wholly-owned subsidiary of Sumitomo Forestry, which represents our first expansion into multifamily assets. This is a meaningful new use case for the platform, and it opens additional runway across the residential housing ecosystem. Beyond expanding our counterparty set, we are also finding new ways to deploy capital across the platform. In May, we announced our intent to provide land banking capital in support of Dream Finders Homes' proposed acquisition of Beazer Homes.

While there is currently no agreement in place between those two parties, we believe the announcement illustrates a broader strategic role Millrose Properties is beginning to play, not just supporting organic growth at our counterparties, but facilitating capital-efficient consolidation across the industry. With M&A activity accelerating across the home building sector, we expect further opportunities to demonstrate that capability. AFFO for the quarter was $127.6 million or $0.77 per diluted share, driven by higher recurring option fee income on growing Invested Capital base. That figure absorbed a first day of quarter early repayment of approximately $284 million of development loans, which Garett will unpack in more detail. Our run rate AFFO exiting the quarter was approximately $0.80 per share at the high end of our previously provided exit run rate guidance. At the same time, we continue looking for opportunities to improve our business internally.

Our technology platform and operating infrastructure have matured, and we have turned increasing attention to how our business operates at every level. We are focused on making sure every dollar of capital is working as hard as possible, and we expect that focus to show up in our results over time. We maintain a strong capital foundation with approximately $1.4 billion of available liquidity and a conservative balance sheet. Finally, we declared our sixth consecutive quarterly dividend increase, raising the dividend to $0.77 per share. The dividend is fully supported by recurring AFFO and represents an annualized yield of approximately 8.8% on book equity. We believe the consistency of our dividend growth reflects the durability of our earnings model and our confidence in the platform's long-term trajectory. With that, I'll turn the call over to Rob for an operational update.

Thank you, Darren. Our platform had another strong quarter across capital deployment, portfolio management, and capital recycling. We remain focused on deploying capital into high-quality opportunities while maintaining the underwriting discipline that defines our business and on making the platform more productive as it scales. We ended the quarter with approximately 143,771 home sites across 877 communities in 30 states, serving 19 counterparties after adding two new relationships during the quarter. As Darren mentioned, we're excited about a new land banking relationship with JPI, a wholly owned subsidiary of Sumitomo Forestry, which represents another expansion of the use cases for the Millrose platform across the residential housing ecosystem. The continued diversification of the portfolio beyond our foundational Lennar relationship reflects the growing adoption of our permanent capital solution across the home building industry.

Our counterparties continued to perform. We again saw no option terminations across the portfolio amidst approximately $1 billion of net repayment proceeds in the quarter. While it's easy to make broad statements about the national housing market, our continued strong performance is a reminder that housing is highly local and property specific. Housing profitability can vary widely by location, product type, and land basis. That's why our data-driven, systematic approach to underwriting is so crucial. As you'll hear further from Steven Hensley, we track home sales in real-time and benchmark against proprietary lot pricing datasets, adjusting for specific submarkets and lot sizes. That quantitative discipline is what underpins the durability of the portfolio and our confidence in it. Capital recycling was again a defining feature of the quarter. Roughly $1 billion came back to us from takedowns and development loan repayment.

We redeployed all of it and more into approximately $1.1 billion of new deals with a modest revolver draw funding the difference. Operational execution remains one of our key differentiators. The combination of our technology platform, experienced team, and disciplined processes let us evaluate a high volume of opportunities efficiently and proactively manage risk across a geographically diverse portfolio. As we scale, we keep sharpening those processes to drive further efficiency and ultimately stronger returns for our shareholders. That scale continues to strengthen our competitive position. Managing a portfolio of this size requires sophisticated systems, deep market knowledge, and operating infrastructure built over many years. Capabilities that become increasingly valuable as builders seek experienced institutional capital partners. That same scale and infrastructure also position us to support capital-efficient M&A across the industry.

As Darren noted, the potential opportunity with Dream Finders Homes is one example of how our platform can help facilitate strategic transactions. With industry consolidation accelerating, we're optimistic about further opportunities to demonstrate that capability going forward. Turning to portfolio composition, the Lennar Master Program Agreement continues to provide a stable foundation representing approximately 68% of Invested Capital. The remaining 32% is deployed through our other agreements, which remain the primary driver of growth and diversification across counterparties and geographies. These other agreements generated a weighted average yield of approximately 10.6% during the quarter. In today's market, we've prioritized higher quality opportunities, stronger builders, less development complexity, and a greater margin of safety. A mix shift towards lower risk assets strengthens the durability of our recurring income.

These option rates are generally floating and subject to contractual floors, which protect the yield on our Invested Capital if benchmark rates decline, while remaining poised to benefit in the event that benchmark yields increase going forward. Looking ahead, our priorities are unchanged. Disciplined capital deployment, prudent portfolio management, and expanding relationships with high-quality counterparties. We continue to explore additional applications for the platform that meet our criteria for AFFO accretion. Our pipeline is active, our opportunity set continues to grow, and we remain as focused on how the business operates as we are on the capital we deploy. With that, I'll turn the call over to Steven, who will provide you an update on the housing market and why our constructive stance has not changed.