Millrose Properties Completes Acquisition of Rausch Coleman Homes Land Assets

Rhea-AI Summary

Millrose Properties (NYSE: MRP) has completed the acquisition of approximately 24,000 homesites from Rausch Coleman Homes for $900 million in cash. The transaction, funded using Millrose's cash on hand, was executed simultaneously with option agreements with Lennar on all acquired homesites. Following the closing, Millrose maintains approximately $1.3 billion in available funding capacity under its revolving credit facility.

Millrose operates as a Homesite Option Purchase Platform (HOPP'R), purchasing and developing residential land to sell finished homesites back to builders through option contracts. While Lennar is currently its sole customer, Millrose aims to expand its platform to other homebuilders. The company is externally managed by Kennedy Lewis Land and Residential Advisors , which has over $25 billion in assets under management.

Positive

• Completed major acquisition of 24,000 homesites worth $900 million
• Maintains strong liquidity with $1.3 billion in available credit facility
• Secured immediate option agreements with Lennar for all acquired homesites
• Potential for revenue expansion through new homebuilder partnerships

Negative

• Heavy reliance on single customer (Lennar) for current business operations
• Significant cash outlay of $900 million for the acquisition

Insights

Financial Analyst

The $900 million acquisition of 24,000 homesites marks a transformative moment in residential real estate development financing. At approximately $37,500 per homesite, this transaction introduces an innovative capital-efficient model that could reshape how homebuilders manage their land assets.

The deal's structure is particularly noteworthy for three key reasons:

• It enables Lennar to pursue an asset-light strategy while maintaining access to prime development locations
• Millrose's "just-in-time" finished homesite model reduces capital intensity and development risks for builders
• The recurring income from monthly option payments creates a predictable revenue stream, enhancing financial stability

With $1.3 billion in available funding capacity, Millrose is well-positioned to expand beyond its current exclusive relationship with Lennar. This financial flexibility, combined with Kennedy Lewis's $25 billion AUM backing, provides substantial leverage for future growth.

The HOPP'R platform represents a potential paradigm shift in residential development financing. By separating land ownership from homebuilding operations, it creates a more capital-efficient model that could attract other major builders looking to optimize their balance sheets. The platform's focus on finished homesites with predetermined costs and takedown schedules effectively transforms traditionally illiquid land assets into a more dynamic inventory management system.

Real Estate Development Expert

This transaction introduces a sophisticated land management strategy that fundamentally alters traditional development risk profiles. The model's brilliance lies in its ability to transform land holdings from static assets into dynamic inventory through structured option agreements.

The operational advantages are compelling:

• Development timing can be precisely aligned with market demand, reducing carrying costs and market exposure
• Risk is effectively distributed between land holder and builder through the option structure
• Capital efficiency is maximized by eliminating the need for builders to carry land on their balance sheets

The scale of this transaction - 24,000 homesites - provides significant operational leverage and economies of scale in development. The model's focus on finished homesites rather than raw land significantly reduces entitlement and development risks, typically the most volatile aspects of residential development.

This structure creates a repeatable, scalable platform that could become increasingly attractive as builders seek to optimize their capital structure while maintaining control over their pipeline. The potential to expand beyond Lennar to other builders could create a network effect, potentially establishing Millrose as a important intermediary in residential land development.

MIAMI--(BUSINESS WIRE)-- Millrose Properties, Inc. (NYSE: MRP, “Millrose”), a “first-of-its-kind” Homesite Option Purchase Platform for residential homebuilders (HOPP’R), announced today that it has completed the previously announced acquisition of approximately 24,000 homesites from Rausch Coleman Homes (“Rausch Coleman”), and simultaneously executed option agreements with Lennar Corporation (“Lennar”) on all acquired homesites.

Millrose acquired the Rausch Coleman homesites for approximately $900 million in cash, which is net of option deposits funded by Lennar and other holdbacks. The transaction was funded using Millrose’s cash on hand. After the closing, Millrose retains approximately $1.3 billion in available funding capacity under its revolving credit facility.

This transaction follows a previously announced definitive agreement between Lennar and Rausch Coleman, under which Lennar acquired Rausch Coleman’s homebuilding operations.

Darren Richman, CEO and President of Millrose, stated, “Today, we successfully completed the previously announced acquisition of Rausch Coleman homesites, as detailed in the Registration Statement related to Millrose’s spin-off from Lennar. With this milestone achieved, we are now focused on advancing our accretive growth strategy and expanding our counterparties across the industry.”

Millrose is externally managed by Kennedy Lewis Land and Residential Advisors LLC (“Kennedy Lewis”), an affiliate of Kennedy Lewis Investment Management, an institutional alternative investment firm with over $25 billion in assets under management. Kennedy Lewis provides Millrose access to its deep financial expertise, extensive operational platforms and strong homebuilder relationships.

About Millrose Properties, Inc.

Millrose purchases and develops residential land and sells finished homesites back to Lennar and potentially other homebuilders by way of option contracts with predetermined costs and takedown schedules. While Lennar is currently Millrose’s only customer, Millrose anticipates that its “first of its kind” public vehicle will be attractive to other homebuilders seeking to implement an asset-light strategy and believes that becoming a capital source for other homebuilders will provide for accretive growth to the Millrose platform.

Millrose’s assets perform more like work-in-process inventory versus traditional land bank assets, with limited entitlement and development risk, and scheduled takedowns that allow homebuilders to purchase finished homesites just in time for home construction. As fully developed homesites are acquired, capital is recycled into future land acquisitions for Lennar and potentially other homebuilders, providing each customer with uninterrupted access to capital. Millrose expects to generate recurring income from monthly option payments pursuant to purchase option contracts with Lennar and potentially other homebuilders.

Forward-looking Statements

This press release contains forward-looking statements, including, in particular, statements about Millrose's businesses, plans, strategies and objectives, including the value of Rausch Coleman’s land assets. You can generally identify forward-looking statements by our use of forward-looking terminology such as "may," "can," "shall," "will," "expect," "intend," "anticipate," "estimate," "believe," "continue" or other similar words or the negatives thereof. Assumptions relating to these statements involve judgments with respect to, among other things, competitive and market conditions and future business decisions, all of which are difficult or impossible to accurately predict and many of which are beyond our control. There can be no assurance that these forward-looking statements will prove to be accurate and our actual results, performance and achievements may be materially different from that expressed or implied by these forward-looking statements. Important factors that could cause differences between anticipated and actual results include the risks and uncertainties described in Millrose’s filings with the Securities and Exchange Commission. These forward-looking statements speak only as of the date hereof and Millrose does not undertake any obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law. In light of the significant uncertainties inherent in these forward-looking statements, the inclusion of this information should not be regarded as a representation by us or any other person that our objectives and plans, which we consider to be reasonable, will be achieved.

View source version on businesswire.com: https://www.businesswire.com/news/home/20250210747562/en/

Benjamin Spicehandler / Stephen Pettibone / Adam Grossberg 

FGS Global

MillroseProperties@fgsglobal.com

Source: Millrose Properties, Inc.

FAQ

How many homesites did Millrose Properties (MRP) acquire from Rausch Coleman?

Millrose Properties acquired approximately 24,000 homesites from Rausch Coleman Homes.

What was the purchase price for MRP's acquisition of Rausch Coleman homesites?

Millrose Properties paid approximately $900 million in cash for the Rausch Coleman homesites.

How much credit facility remains available to MRP after the Rausch Coleman acquisition?

After the acquisition, Millrose Properties retains approximately $1.3 billion in available funding capacity under its revolving credit facility.

Who is currently Millrose Properties' (MRP) primary customer?

Lennar is currently Millrose Properties' only customer, though the company plans to expand to other homebuilders.

What is Millrose Properties' (MRP) business model?

Millrose Properties operates as a Homesite Option Purchase Platform (HOPP'R), purchasing and developing residential land to sell finished homesites to homebuilders through option contracts.