During its third quarter earnings call, Lennar executive chairman and co-CEO Stuart Miller outlined the company’s plans for a land banking spinoff.
The spinoff, to be called Millrose Properties Inc. and expected to qualify as a Real Estate Investment Trust (REIT), will acquire and develop land for Lennar and other home builders and will deliver fully-developed homesites under a land option contract.
The spinoff underscores Lennar’s shift toward an asset-light, land-light business model, a direction the home builder has been moving since 2020. While still going through a confidential review process with the U.S. Securities Exchange Commission (SEC), Miller shared plans for Millrose during the earnings call as well as how it will affect Lennar.
Miller said Lennar expects to contribute land and cash to Millrose with a book value between $6 billion and $8 billion and that Lennar “expect[s] that Millrose will seek to enter into land transactions with other builders as well as an independent company.” Miller said that since the land and cash contributed to Millrose will be debt-free, the REIT will be completely independent as a company with “zero Lennar ownership.”
“The acquisition, development, and delivery of homesites will be similar to other partners. The REIT structure, however, is unique and will be detailed in the S-11 SEC registration statement when it is made public,” Miller said during the call. “We are going to contribute to Millrose in exchange for its stock, essentially all of our undeveloped, partially developed, and some of our fully developed land along with cash. The stock will be distributed as a stock dividend of Millrose to Lennar shareholders and it will accordingly reduce inventory on Lennar’s books.”
During the call, Miller clarified that as Lennar contributes its assets to Millrose in exchange for Millrose stock, Lennar will not hold that Millrose stock; the stock will be a stock dividend that is distributed to Lennar’s shareholders.
“Millrose will be responsible for advancing the capital for developing the land contributed, using Lennar as a contractor for consistent execution, and Lennar will have option contracts entitle it to repurchase finished homesites on a just-in-time basis and as needed,” Miller said. “Proceeds from the repurchased finished homesite will be reinvested by Millrose in new land and development transactions for Lennar.”
Millrose, unlike traditional private equity-based land banking funds, will not be required to distribute or return invested capital to investors, Miller said.
“Instead, Millrose will repeatedly reinvest the invested capital as it is returned in future land transactions. Therefore, Millrose will be for Lennar and other home builders a self-renewing permanent source of land acquisition and development capital,” Miller said.
More information about Millrose Properties, including its REIT structure, will be detailed in S-11 SEC registration statement, which Miller said will be made public in the near future.
