Millrose Properties (MRP) Q1 FY26 earnings call: the analyst Q&A

Did adding a large top 10 builder impact yields, and are yields for larger builders typically lower?

No, the new builder did not impact yields. The decline in weighted average yield (30 bps) was solely due to the decline in SOFR base rates, which is naturally hedged by corresponding reductions in Millrose's floating rate credit facility.

“No, that wasn't an impact. In general, when you think about a newly added counterparty, we're going to be starting small and building on, sort of, the origination platform itself that's created when you have a new counterparty. So it certainly wasn't just that builder. It was that we tried to lay out in the earnings slides. It was just the impact of SOFR base rates.”

asked by Julien Blouin · answered by Robert Nitkin

What if Millrose becomes capital constrained, and are alternative capital options like JV capital being considered?

Millrose is not currently capital constrained, leveraging its revolver and balance sheet recycling. While alternative financing structures are considered for the future, the immediate focus is on existing debt capital until equity markets become more accommodating. The company will not walk away from business or clients.

“We are hopeful that we will trade at a level where we'll unlock the equity markets as a financing vehicle. But we're not going to walk away from business, and we're certainly not going to walk away from our existing clients and our new and growing relationships. So we'll have more to say in the coming months and quarters about that.”

asked by Julien Blouin · answered by Darren Richman

How close is Millrose to the average floor on its option rate agreements, given potential continued SOFR drops?

The average floor on option rate agreements is approximately 10%, providing a buffer.

“Yes. The average floor is similar to what it's been in past quarters, which is approximately 10%. So there's still a bit of a buffer there, but it does provide a good base as we approach it there.”

asked by Eric Wolfe · answered by Robert Nitkin

Will floating rate debt grow to match floating rate asset exposure as the company deploys another $1 billion?

Millrose plans to continue using floating rate debt, including its expanded credit facility, to match asset exposure and will consider other debt securities with similar tenor and accretive rates.

“Yes. As we talked about actually in the last quarter's call, we do plan to use floating rate debt for this reason going forward. And the way to think about it is that we could use our existing credit facility, which is now larger with the additional $500 million term loan.”

asked by Eric Wolfe · answered by Robert Nitkin

How is Millrose thinking about the Single-Family Rental (SFR) business given regulatory uncertainty, and has it affected project starts or partner desire?

While it's hard to forecast D.C. policy, there's no change in behavior for the existing portfolio. Prospectively, capital has cooled for financing build-to-rent, and builders are recalibrating production, potentially leading to less land brought into production for SFR.

“But for right now, we've seen no change in behavior as it relates to our existing portfolio. But we do suspect that prospective like already prospectively, the builders are kind of recalibrating their production [ to have ] that demand in the future.”

asked by Eric Wolfe · answered by Darren Richman

Did most third-party investment growth come from existing counterparties, and will new counterparties ramp up later?

Yes, growth primarily came from existing counterparties. New relationships start small and build quickly, with wallet share expanding as trust and operational integration grow.

“That is fair to assume. The nature of this business is that each relationship starts small but builds on itself, and build on itself quickly. And the ramp-up that we've seen this quarter and really over the past few quarters really speaks to having already secured a beachhead becoming operationally integrated with the land finance team, gain trust with the C-suite, the wallet share just grows within each [indiscernible] So each relationship builds on itself.”

asked by Craig Kucera · answered by Robert Nitkin

Is there increased M&A chatter in the industry, and could Millrose participate?

M&A discussions are ongoing, especially given current valuations and margin compression. Millrose is aware of discussions and is positioned as a tool in the tool belt for M&A in the sector.

“We are definitely aware of certain discussions that are happening. And -- and we're in a fortunate position to now be a tool in the tool belt for M&A in the sector. So it's hard to predict when a deal will be announced or consummated. But we are definitely in the middle of conversations that are occurring.”

asked by Craig Kucera · answered by Darren Richman