After spinning out of Lennar and entering the public markets, Millrose Properties has positioned itself as a new kind of capital partner for the home building industry. The company has positioned itself to help solve a persistent constraint: access to reliable, scalable land capital.
In its first year as a public real estate investment trust (REIT), the company delivered a 9.2% portfolio yield while surpassing its $2.2 billion stretch target to reach $2.4 billion in invested capital outside of its foundational Lennar relationship. Millrose acquires land and funds development, builders pay monthly option fees, then take down homesites on a just-in-time basis.
In a market still grappling with structural undersupply and tighter capital discipline, Millrose’s first full year served as proof of concept at scale—highlighted by zero option terminations across its portfolio.
Ahead of the company’s first quarter earnings report, CEO and president Darren Richman and chief operating officer Robert Nitkin spoke with BUILDER about Millrose Properties’ first year as a public company, the Millrose model, and the state of land banking.
Millrose Properties has completed its first five quarters as a public company, can you comment on how the model has performed against market conditions?
Richman: What we’ve said consistently is that there were three proof points that we felt we needed to demonstrate for Millrose. This is a reasonably new concept for the public markets, even those home builders that have been using land banking and land banks, it’s very opaque in terms of how they work. To be able to see this live in the public markets has been unique for many investors. There were three things that we thought would define our success.
One was proving our relationship with Lennar that there was a flywheel of buying new land on their behalf, cycling through the land they spun us off with. That flywheel would be proven out. This wasn’t some bad land they saddled us with and it was going to be stuck on our balance sheet for an extended period of time. That certainly over the past number of quarters where we have been a public company proved to be true.
The second concern or point of skepticism was would we be able to grow our business with third parties. There was skepticism up front that we were just with Lennar and got a sweetheart deal and we would not get a third party to agree to join Millrose. We obviously dispelled that. We had a lot of confidence that we would grow with third parties, and I think the markets have responded favorably not only to the number of parties we do business with, the size of our balance sheet that we’ve grown with third parties, but the rate has maintained itself. The quality has continued to grow, as judged by the number of third parties that are willing to pool their land together.
One point on the pooling. The pooling does not mean a home builder cannot walk away. The pooling is the builder saying, ‘We’re so confident we’re going to buy this land back that we don’t mind taking a number of communities and tying them together because we don’t plan to walk away from this land.’ They get other benefits from doing that. In some cases, it’s lower rates, in others it’s lower deposit needed. All it’s doing is potentially adding to the breakage cost should they walk away, not can they or can’t they [walk away]. We really view it through the lens of what type of relationship the home builder wants to have with us. If they’re willing to pool upfront, it says they are looking to be a partner and not just use us as a risk mitigation tool.
The third thing since going public: We always said the real way to judge Millrose and the stability of the platform is how does this collateral perform in a down cycle. Given that by some estimates we have been in a down cycle for two years now, not one home builder has walked away or threatened to do so. That’s really added to this story to the quality of the portfolio, the stability of Millrose as a platform, and the flywheel of the consistency of the earnings and revenue that we produce.
Can you comment on the appetite of builders for a land banking approach. Why do you believe it is more a strategic, permanent shift than a temporary change in strategy?
Richman: If you look at the number of builders who are now using land banking in some form, relative to what it was two or three years ago, it’s up and to the right. You had the early adopters, but now you have even those that were fence sitting saying we are going to diversify our business. It’s not surprising to see that. All the builders are trying to control more land because they want to maintain community count. This becomes the discipline between the land that they control and maintaining community count without necessarily tying up their own balance sheets to maintain that.
Nitkin: The key fact that exists in any cycle is that a home builder should be using their capital in the way that is most accretive to its shareholders. I think an environment like this over the past couple years emphasizes that, whether it’s market volatility or valuations, that only puts more scrutiny on the use of capital by the home builder. Making sure it is used most accretively. In this environment, what it is reemphasizing to builders and their boards, is that rarely is the most efficient use of capital on a home builder’s balance owning an asset that is not producing and is an investment for the future. Just like many industries have gone, it’s effectively outsourcing of that capital. Importantly, an outsourcing of the land ownership to party that underwrites every deal, understands the business, and can time the delivery of those home sites in a just-in-time pace that is perfectly in line with the home builder’s operating model, which is a unique value add relative to other forms of capital like straight debt.
Looking at the housing supply shortage through the lens of capital access, what specific breakdowns in the traditional capital stack are preventing builders from scaling today? How does a model like Millrose’s help to alleviate these challenges?
Richman: When you talk about the housing shortage, what you’re talking about is the difficulty of getting land approved for development. We are talking about entitlements and approvals at the local and municipal level. The only real critical shortage in housing today is not labor, materials, supplies, it is land. It is land that can be transitioned from whatever its initial use was to housing. Even in places that used to be relatively easy, like Florida and Texas, it’s becoming more difficult to get land approved for development.
By anecdote, the closest analogy that I can think of is the automobile production sector. There was a time when they controlled all the elements of production from steelmaking through [final product]. Ford used to own a steelmaker, they owned metal fabrication plans, and metal benders, and chassis producers. Today, the automobile companies have outsourced all of that and they have focused on being consumer facing businesses. Building automobiles that consumers want and figuring out at what price and how to control the cost of production. I think builders are now facing something similar. Almost every element or production for housing has been outsourced to somebody else. There is margin that they are giving up, but they are gaining a lot in terms of de-risking their business and increasing their asset returns. Land is the last component of the business to be outsourced.
Prior to Millrose, there was no way to access capital at scale in the public markets with a permanent capital vehicle. Nobody had figured out how you decompose land and development with the consistency you need to be a public company. We spent time decomposing the balance sheet of Millrose and the flywheel of the balance of that land development from the income of Millrose. We took the option fee and turned it into a revenue stream for the benefit of renting our balance sheet and delivering returns to investors. We helped to modernize and helped to scale the builders.
Maybe some builders didn’t want to give up margin and some of them may have been afraid of putting all their eggs in the basket of private investment firms who may not be here in the future. Now that there is a Millrose and they can see transparently into our balance sheet and we are making commitments to them, builders know that is a permanent place for them to transition their balance sheet. All this is happening together, and you have had some early adopters join and you have some late bloomers who recognize they need to transition their business into this as well. It’s a fundamental re-orientation of the production cycle. When you are not spending all that time worrying about the five year transition of land and you can focus on the consumer product of building a house, the product type, you can focus on the cost to deliver that and the cycle time it takes to deliver that house versus the full cycle time of the land and the house.
If we look at 2025 as a proof of concept for the Millrose model and proof of the model’s success at scale, what does 2026 and beyond hold for Millrose?
Richman: It took a lot for us to build credibility with our investor group, with the builder clients that we serve, with Wall Street. We are not going to put out expectations that we can’t meet. 2026 for us is going to be about evolution versus revolution. In 2025, you saw us not only execute on something that was new and unique. We proved ourselves to be an innovator as well. We saw some M&A come through where we became a solution provider. You’ll see us continue on that. You’ll also see us pivot into new corners of the market where land banking becomes a tool in a toolbox of some group that is trying to transition property. For us, it is now about finding new and unique use cases for land banking at scale.
How did Q1 results reinforce or challenge expectations for the durability of the business model?
Richman: The first quarter has proven that the model works and the model is all weather. We’ve seen the builders pull back purchases and we’ve seen developments slow, not appreciably or anything that’s outside what is permitted in the contract. We’ve seen them work down inventories, but at no time have we seen them come to us to renegotiate or walk away. The model continues to distinguish itself no matter what the backdrop is.
When you think about the big builders, they are so big that they can’t worry about each and every home in each and every community. They are now controlling production machines weekly, monthly, quarterly, annually. What they can control is their costs, their profile, having the right people in the right positions. It’s not surprising that no builder has walked away or threatened to do so because the hardest part of their business now is finding land for development. We are the one funding the most mission critical asset and we get to cherry pick which parcels we are going to finance. They don’t come to us and say you are going to finance everything. We go and do due diligence on every single parcel so even if a builder is to walk away from a community or a pool, we are very comfortable with our underwrite and we are comfortable with the market dynamic.
It was one thing when NVR was the only land light builder and they had their pick of any land that was approved for development as a finished lot. Today, you have twenty builders who on the back of some sort of downturn will come out and say ‘We’d like to buy finished lots, do you have any finished lots?’ We’ll get at least our contractual return either by the builder who brought us the land or we are going to get a premium to what we would expect under the terms.
Nitkin: We focus a lot on how many counter parties we do business with to put numbers to one of the original statements Darren made about not just our anchor Lennar relationship but the rest of the industry adopting this business model with Millrose specifically. You’ll see we grew the number of counter parties that we do business with, including adding a top ten home builder that we hadn’t previously done business with. What’s driving that is the permanence of our capital and our structure. Because it gets back to the core thesis of why start a publicly traded REIT in this asset class. It’s because home builders require certainty and consistency and trust in a counter party that is going to be operationally integrated with them but own their most mission critical asset, homesites. They want a long-term, repeatable structure. It’s not just a commodity financial relationship. Us being able to say we are a permanent capital vehicle and we are not going anywhere. There is not a reallocation of money into some asset classes. That has been a driver in continuing to develop this into the industry solution that we always thought it could be.
Can you speak to the differentiators for Millrose relative to other land bankers in the space?
Richman: It’s the scale of our business, it’s the permanence of capital. We are not beholden to fund raising cycles with limited partners in terms of raising and returning money. It’s the technology system that we’ve created. When a home builder comes to us on a parcel of land, we are giving them as much information on that parcel of land as they are giving to us. We now have such a flywheel of information that when we say no to the financing and purchase of a community, they get the point. We must have information inside Millrose where we have better information than they do, in terms of the purchase of that land, what kind of margin it’s going to produce, and at what pace. That has become a key item for them to tap into. We are able to get into forward flow arrangements with home builders such that we can give any builder $1 billion commitment of buying land over the next 12 months, they know the terms, they know where the land is coming from. It’s a way more efficient conversation and decision to enter into something with us. Our capital is completely flexible. We are familiar with the other land bankers out there. There is a lot of structural nuance in some of those land banking terms because of the type of money they are accessing or they have raised. They can’t be as nimble in terms of providing a solution and doing so very quickly.
As builders prioritize speed to market, flexibility, and capital efficiency, how do you see their land strategies evolving over the next 12–24 months and where does Millrose fit into that transformation?
Richman: We are going to continue to see a tailwind of builders tapping into land banking capital as a way of becoming more capital efficient as organizations. You can see that in the number of builders that are now accessing land banking as well as just the percentage of land that is tied up under some form of option agreement. You are going to continue to see that tailwind, I think that is really good for us.
Builders are all looking to maintain community count. To do so in an uncertain world of demand, they are not buying land today because of decisions they are going to make in a quarter or two quarters. They are buying land today for the expectation of delivering homes three, four, and five years from now. The current volatility and uncertainty is giving them the permission to say maybe we should be getting a third party’s capital. The best path to growth while maintaining discipline would be to land bank assets.
