Key Highlights

  • Third-quarter net income was about $130 million, or $0.80 per diluted share, with AFFO of about $133.5 million, also $0.80 per share.
  • Fourth-quarter AFFO is guided to $0.82 to $0.84 per share, and the year-end annual run rate is expected above $3.30.
  • Recurring option fee income was $209.5 million, with development loan income of $1.5 million.
  • Invested capital outside the Lennar master agreement rose $521 million to about $3.4 billion, at a 10.8% weighted average yield.
  • The board raised the quarterly dividend to $0.79 per share, the sixth straight increase, and authorized a $250 million buyback.

Millrose Earnings: Did Non-Lennar Growth Push Third-Quarter AFFO Up Again?

Millrose Properties (NYSE:MRP) reported third-quarter results before the open on Tuesday, October 27, and held its call at 10:00 a.m. ET. Net income was about $130 million, or $0.80 per diluted share, while AFFO was about $133.5 million, also $0.80 per share. The screened EPS was $0.78 against a $0.77 estimate.

Management guided fourth-quarter AFFO to $0.82 to $0.84 per share, including about half a quarter of the Dream Finders deal, and expects the year-end annual run rate above $3.30. It was the sixth consecutive AFFO increase.

Option Fees and Interest Cost: What Drove the Quarter's Income?

Recurring option fee income was $209.5 million and development loan income was $1.5 million, which calculates to about $211.0 million of revenue.

Costs included a $30.3 million management fee and interest expense of about $47.1 million. Book value was $35.24 per share, and invested capital was about $9.2 billion.

Net homesite takedown and development loan repayment proceeds were about $800 million, against roughly $1.3 billion of new investments and development funding. The portfolio covers about 157,000 homesites in 834 communities, with no option terminations.

Lennar Mix and the Dream Finders and Beazer Deal: How Much Is Now Non-Lennar?

Invested capital outside the master agreement with Lennar (NYSE:LEN) rose $521 million to about $3.4 billion, excluding build-to-rent. The weighted average yield on those other agreements was about 10.8%, up from 10.6%.

The funding for Dream Finders Homes (NYSE:DFH) and its purchase of Beazer Homes (NYSE:BZH) closed on Tuesday, October 20. Millrose committed about $1.1 billion: about $580 million of land banking and $488 million of preferred stock. The land banking covers about 7,000 homesites, and the preferred carries a 12% dividend.

Pro forma, the non-Lennar share of the asset base is about 42%, which implies about 58% for Lennar as calculated from that figure.

Leverage, Dividend and Rental Pilot: Can Debt Come Back Toward 33%?

Debt to capitalization was about 36%, above the 33% target set at the spin-off. In September it issued $1 billion of senior notes at 6.50% and 6.75%. Management said shorter-duration portfolios support exceeding the target for now and that takedown proceeds would reduce debt.

The dividend rises to $0.79 per share, about $131.2 million in total, which management said is fully covered by AFFO. A $250 million buyback was authorized after quarter-end. While shares trade below book value, about 90% of earnings goes to distributions and 10% to buybacks, not funded with borrowed money.

A rental pilot of 1,233 homes cost about $333 million; management called it a pilot, about 1% of total assets, and is pausing to observe results.

What to Watch Next: Will Fourth-Quarter AFFO Land in the $0.82 to $0.84 Range?

Investors will track whether the Dream Finders contribution and the rising non-Lennar yield deliver the guided AFFO, how fast leverage falls from 36%, and how repurchases and rental leasing progress.