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    MRP
    Earnings call· Mar 2026(Q1 FY26)

    Millrose Properties Q1 FY26 earnings call MRP

    May 6, 2026 Source

    Executive summary

    Millrose Properties Q1 FY26 — Capital Deployment and Diversification Drive Solid Results

    Millrose Properties delivered solid Q1 FY26 results, meeting expectations through disciplined capital deployment and expanding builder relationships. The company's model, which provides capital-efficient land solutions, is increasingly vital as homebuilders navigate margin compression and seek to grow community counts without balance sheet risk. Millrose strengthened its capital structure and continues to generate predictable, recurring cash flows, reinforcing its strategic position in a dynamic market.

    Highlights

    5

    • Invested capital increased to $8.7 billion, up from $8.5 billion at year-end, with 95% pulled.

    • Adjusted Funds From Operations (AFFO) for the quarter was $125.9 million, an increase from last quarter, or $0.76 per share.

    • Expanded counterparty relationships to 17, up from 15, with 31% of the portfolio deployed outside the Lennar master program.

    • Strengthened capital base by converting the credit agreement to unsecured and adding a new $500 million delayed draw term loan, bringing total unsecured capacity to $1.8 billion.

    • Declared a quarterly dividend of $0.76 per share, fully covered by AFFO, representing an annualized yield of 8.7% on book equity.

    Concerns

    3

    • Gross margins across public builders compressed 200 to 500 basis points year-on-year, increasing demand for Millrose's capital-efficient solutions.

    • The macro environment introduced near-term variability with higher interest rates and weakened consumer confidence.

    • Texas markets continue to be challenged by high inventory levels, expected to normalize throughout 2026.

    Operational metrics

    29
    Invested capital
    $8.7 billionup from $8.5 billion at year-end
    Q1 FY26

    invested capital increased to approximately $8.7 billion, up from $8.5 billion at year-end, of which 95% is pulled, reflecting continued discipline in deployment.

    Number of counterparties
    17up from 15 at year-end
    Q1 FY26

    We ended the quarter with 17 counterparties, up from 15 at year-end

    Invested capital outside Lennar master program
    31%
    Q1 FY26

    approximately 31% of our portfolio deployed outside of the Lennar master program agreement.

    Adjusted Funds From Operations (AFFO)
    $125.9 millionincrease from last quarter
    Q1 FY26

    AFFO for the quarter was $125.9 million, an increase from last quarter despite the first quarter 2 fewer calendar days... On a per day basis, AFFO was 2.5% higher versus last quarter.

    AFFO per day
    2.5%higher versus last quarter
    Q1 FY26

    On a per day basis, AFFO was 2.5% higher versus last quarter.

    Home sites under management
    143,000
    Q1 FY26

    We grew our total home sites under management to approximately 143,000 across 904 communities in 30 states

    Weighted average yield on other agreements
    10.7%declined approximately 30 basis points quarter-over-quarter
    Q1 FY26

    These investments are higher yielding and diversified across counterparties and geographies, currently generating weighted average yields of approximately 10.7% against an average cost of debt at Millrose of roughly 6%.

    Average cost of debt
    6%
    Q1 FY26

    against an average cost of debt at Millrose of roughly 6%.

    Development loan repayment
    $284 million
    Early April 2026

    In early April, we received a full payoff of approximately $284 million on a development loan, cross-collateralized by multiple Florida communities, principal accrued interest and fees paid in full.

    Public builder gross margin compression
    200 to 500 basis points
    Year-on-year

    Gross margins across the public builders have compressed 200 to 500 basis points year-on-year.

    Direct construction costs
    declining
    Year-over-year

    Several others reported direct construction costs declining year-over-year

    Cycle times
    improved by a month or more
    Compared to prior year

    cycle times improving by a month or more compared to the prior year.

    Community count growth target (public builders)
    3% to as high as 75%
    Year-over-year

    Across the builders, we track, community count growth targets range from 3% to as high as [ 75% ] year-over-year.

    Net order trends
    up to nearly 30%
    Year-over-year

    Net order trends were generally positive across the group [indiscernible] to nearly 30% year-over-year growth depending on the builder.

    Option fees income
    $185 million
    Q1 FY26

    driven by $185 million in option fees

    Development loan income
    $10 million
    Q1 FY26

    and approximately $10 million in development loan income.

    Management fee expense
    $28.2 million
    Q1 FY26

    Our management fee expense was $28.2 million, calculated transparently at [ 1.25% ] of gross tangible assets.

    Interest expense
    $39.2 million
    Q1 FY26

    Interest expense was $39.2 million

    Income tax expense
    $5 million
    Q1 FY26

    and income tax expense was $5 million.

    Quarterly dividend
    $0.76
    Q1 FY26

    On March 23, 2026, we declared a quarterly dividend of $126.2 million, or $0.76 per share, reflecting the direct linkage between our growing invested capital base, earnings generation and our capacity to distribute to shareholders.

    Book value per share
    $35.26
    Q1 FY26

    Book value per share at the end of the quarter stood at $35.26.

    Debt-to-capitalization ratio
    29%
    Q1 FY26

    Our debt-to-capitalization ratio stood at approximately 29% inside our stated maximum of 33%.

    Drawn amount on revolving credit facility
    $425 million
    Q1 FY26

    We ended the quarter with approximately $425 million drawn on our revolving credit facility

    Cash on hand
    $49 million
    Q1 FY26

    and approximately $49 million of cash on hand

    Total liquidity
    $1.5 billion
    Q1 FY26

    biding ample liquidity of $1.5 billion to fund our near-term pipeline.

    Total unsecured credit facility capacity
    $1.8 billion
    Q1 FY26

    adding a new $500 million delayed draw term loan commitment, bringing our total unsecured capacity to approximately $1.8 billion.

    Invested capital in Lennar master program
    69%
    Q1 FY26

    Our Lennar master program agreement remains the stable foundation of the business representing approximately 69% of invested capital.

    Floating rate debt
    $400 million
    Q1 FY26

    Analyst-stated figure, not explicitly confirmed by management but implied as correct by subsequent discussion.

    Average floor on option rate agreements
    10%
    Q1 FY26

    The average floor is similar to what it's been in past quarters, which is approximately 10%.

    Deals & partnerships

    1
    LendersAmended and restated credit agreement, converting from secured to unsecured and adding a new delayed draw term loan.$500 million

    We amended and restated our credit agreement, converting it from a secured structure to an unsecured facility, and adding a new $500 million delayed draw term loan commitment, bringing our total unsecured capacity to approximately $1.8 billion.

    Risks & headwinds

    6
    Gross margin compression for public buildersYear-on-year

    200 to 500 basis points year-on-year

    Mitigation: Drives demand for Millrose's capital-efficient land solutions.

    Macro environment variabilityNear-term

    higher interest rates and weakened consumer confidence

    Mitigation: Millrose's contractual income is not affected by incentive levels or home pricing dynamics.

    Potential inflationary pressuresNear-term

    from tariffs and rising energy costs

    Mitigation: Not directly stated, but implied by Millrose's model being independent of home prices.

    Geopolitical uncertaintyNear-term

    tied to the Middle East

    Mitigation: Not directly stated, but implied by Millrose's model being independent of home prices.

    Texas market high inventory levels2026 story

    somewhat challenged by high inventory levels

    Mitigation: Millrose is being "appropriately selected in our Texas deployments while maintaining confident in long-term fundamentals of those markets."

    SFR bill/regulation uncertaintyGo-forward basis

    capital has definitely been cooled from entering the market to finance, build to rent and/or buying for-sale homes and turning them into a rental product.

    Mitigation: Builders are recalibrating production; no change in behavior for Millrose's existing portfolio.

    What to watch in Q2 FY26

    4

    Equity market access for financing

    Coming months and quarters
    CurrentNot currently accessible at attractive levels.
    TargetEquity markets become accommodating for financing.

    Why it matters

    Unlocking equity markets would provide a significant new financing vehicle for Millrose's growth and reduce reliance on debt.

    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.

    Q&A highlights

    7

    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

    2 min read5 chapters

    Detailed Narrative

    01

    Homebuilder Industry Dynamics

    Public homebuilders are currently balancing multiple competing priorities: maintaining sales pace through incentives, protecting balance sheets amidst margin compression, preserving and growing land pipelines, and restricting direct land ownership due to limited visibility. This tension, exacerbated by a 200 to 500 basis point year-on-year compression in gross margins, fundamentally increases the demand for Millrose's capital-efficient solutions, making capital efficiency a profit center rather than just a preference.

    02

    Millrose's Value Proposition

    Millrose solves the critical problem for builders who need to grow community count without tying up significant capital in land for years. The company's option agreements align precisely with builders' 3-5 year land investment horizons, providing a structural solution that enables growth without the balance sheet drag of outright land ownership. This model generates predictable, recurring cash flows that are independent of land price appreciation, home prices, or the pace of home sales.

    03

    Operational Excellence and Competitive Moat

    Millrose's robust infrastructure, proprietary technology, and refined processes enable efficient capital deployment, real-time portfolio management, and proactive risk mitigation across its portfolio of approximately 143,000 home sites in 904 communities across 30 states. This operational discipline, combined with a unique data-driven underwriting approach using proprietary lot pricing data, significantly widens its competitive moat, particularly in a more challenging market environment.

    04

    Capital Structure Enhancement

    During the quarter, Millrose significantly upgraded its capital structure by amending and restating its credit agreement. This involved converting the facility from a secured to an unsecured structure and adding a new $500 million delayed draw term loan commitment, which increased the total unsecured capacity to approximately $1.8 billion. This enhancement provides greater financial flexibility, better aligns the funding structure with the asset base, and positions the company to deploy capital more efficiently.

    05

    Market Observations and Geographic Trends

    The macro environment has introduced near-term variability, including higher interest rates and dampened consumer confidence, but long-term industry fundamentals remain intact. Builders are strategically pivoting towards build-to-order models and actively reducing speculative inventory. Geographically, the Carolinas, broader Southeast, and several Midwest markets show relative strength, while Florida markets have improved. Texas, however, continues to face challenges from high inventory levels, necessitating selective deployment.

    AI-generated summary of the company’s earnings call. Not investment advice.