Millrose Properties, Inc. (MRP) Earnings

Management highlights

- Overall Business Context & Demand Dynamics • High demand for Milrose's permanent capital land banking platform persists, as homebuilders navigate four consecutive years of mortgage rates above 6% and seek to improve capital efficiency, reduce on-balance sheet land holdings, and preserve long-term growth pipeline • The U.S. faces a structural multi-million unit housing shortage, with zoning and development approval delays creating long-term land scarcity that supports the value of Milrose's already entitled land holdings - Q2 2026 Operational Highlights • Invested capital reached $8.8 billion at quarter end; $1 billion in capital was recycled from builder takedowns and development loan repayments, and redeployed into $1.1 billion of new opportunities, with consistent underwriting standards maintained • Zero option terminations across the entire platform since inception, demonstrating the quality of underwriting and strength of builder counterparty relationships • Added two new counterparty relationships, including a first multifamily land banking partnership with JPI (a Sumitomo Forestry subsidiary), marking expansion into a new residential asset class • Announced intent to provide land banking capital to support DreamFinders Homes' proposed acquisition of Beezer Homes, establishing the platform's new role supporting capital-efficient industry consolidation amid accelerating M&A activity • Ended the quarter with 143,771 home sites across 877 communities in 30 states, serving 19 total counterparties - Financial Performance Highlights • Reported net income of $125.9 million ($0.76 per diluted share), AFFO of $127.6 million ($0.77 per diluted share); run rate AFFO at quarter exit hit $0.80 per diluted share, at the high end of prior guidance • Recurring option fee income totaled $195.4 million, with $1.5 million in additional development loan income • Maintained a conservative 30% debt-to-capitalization ratio, with $1.4 billion in available liquidity and a strong balance sheet • Declared the sixth consecutive quarterly dividend increase, raising the dividend to $0.77 per share (fully supported by recurring AFFO, with an 8.8% annualized yield on book equity) - Risk Management Approach • Proprietary, deal-by-deal underwriting using large-scale local market and land pricing data, rather than broad market average assumptions, to account for the market's bifurcation by submarket, price point and product type • Focus on lower-complexity, higher-quality opportunities with greater margin of safety to strengthen recurring income durability; option rates are floating with contractual floors that protect yields if benchmark rates fall

Guidance

- Exit run rate AFFO reached $0.80 per diluted share at quarter end, hitting the high end of the company's previously provided guidance range • Prior full-year net capital deployment guidance set two scenarios: $1 billion net increase if constrained by existing leverage limits, $2 billion net increase if unconstrained by capital. The underlying pipeline remains strong, with organic deployment tracking a $400 million per quarter pace, and $500 million per quarter including potential M&A opportunities, so the $2 billion unconstrained target remains achievable if leverage constraints are adjusted • Management is re-evaluating its 33% maximum leverage cap, given lower-than-expected average duration on non-Lennar deals and faster cash flow generation than initially projected; no changes to the cap have been announced, but the company is open to temporarily exceeding 33% to support high-quality M&A opportunities, given the quick-deploying nature of these assets that allow rapid debt paydown if needed • Investment-grade credit rating remains a strategic priority, and the company's consistent operating performance puts it in a strong position to pursue this, but management will prioritize maintaining financial flexibility over hitting arbitrary leverage targets for a rating

Segment performance

Milrose Properties has two primary segments: 1) Lennar Master Program Agreement: This foundational segment accounted for 68% of total invested capital ($8.8 billion at quarter end, so ~$5.984 billion), providing stable recurring earnings. 2) Other Counterparty Agreements: This growth-oriented segment represents 32% of total invested capital (~$2.816 billion), generated a weighted average yield of 10.6% in Q2 2026, a 10 basis point tick down from the prior quarter driven by a mix shift to higher-quality, lower-risk opportunities.

Risks & headwinds

- Cyclical headwinds from elevated mortgage rates and affordability constraints, particularly impacting the first-time homebuyer segment, which could soften overall housing demand • Multifamily expansion carries incremental new market risk, though management structures deals identically to existing single-family land banking with the same downside protection guardrails • Even with zero terminations to date, a market downturn could lead to future builder option terminations, though the company maintains contingency plans including alternative uses for land and securing new counterparties if needed • The timing of potential M&A opportunities is uncertain, creating variability around full-year capital deployment outcomes

Analyst Q&A

• Q: What are the yields for new multifamily land banking deals, and will the company pursue more of these opportunities? /

  A: Yields on multifamily deals are consistent with other non-Lennar land banking deals, so they are accretive to overall AFFO. Management will evaluate additional multifamily opportunities that meet underwriting and return requirements, with a focus on capital protection first, as part of expanding use cases for the platform, but it is not a full core strategy shift at this point.

• Q: Is the company reserving capital for the DreamFinders-Beezer deal, and would it be willing to exceed its 33% leverage cap for this or other opportunities? /

  A: The company is prioritizing the DreamFinders opportunity in its capital deployment planning, and is re-evaluating its 33% leverage cap in light of actual portfolio performance: non-Lennar deals have shorter average duration and faster cash generation than initially projected, so management is open to exceeding the 33% cap temporarily for M&A, while maintaining a focus on downside protection and balance sheet stability. No changes to the cap have been finalized.

• Q: What is the status of the full-year capital deployment target, and how strong is the current pipeline? /

  A: The original $1 billion (constrained by leverage) and $2 billion (unconstrained) guidance framework remains in place. The pipeline is still very strong, with organic deployment running ~$400 million per quarter, rising to ~$500 million including potential M&A. There is more demand for capital than available capacity, allowing management to remain selective, and the $2 billion target is still achievable if leverage constraints are adjusted.

• Q: How would Milrose handle a potential option termination if the market weakens, given zero terminations to date? /

  A: Management plans for contingencies (Plan B/C/D) on every deal, starting with conservative underwriting of the land itself, and accounts for alternative counterparties or uses if the original builder walks away. Local market insight, 20%+ underwritten gross margins, and existing deposits provide downside protection, and the structural scarcity of approved development land supports land values even if a termination occurs.

• Q: Has the recent rise in mortgage rates changed builder demand for Milrose's services or underwriting standards? /

  A: Higher, more volatile rates primarily impact the first-time buyer segment, but paradoxically increase demand for Milrose's off-balance sheet land banking: builders still need to secure long-term land pipeline to support future production, but want to avoid tying up more capital on balance sheet amid near-term uncertainty. This dynamic has not changed underwriting standards, which remain consistent.