Millrose Properties - Q4 2025

Transcript

Operator (participant)

Ladies and gentlemen, thank you for standing by. At this time, I would like to welcome everyone to Millrose Properties' Fourth Quarter and full year 2025 earnings results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I will now turn the call over to Jesse Ross, Millrose, Head of Financial Planning and Analysis. Jesse, you may begin your conference.

Jesse Ross (Head of Financial Planning and Analysis)

Good morning. Thank you for joining us. With us today to discuss Millrose Properties' fourth quarter and full year 2025 results are Darren Richman, our Chief Executive Officer and President; Robert Nitkin, our Chief Operating Officer; Garett Rosenblum, our Chief Financial Officer; and Stephen Hensley, our Senior Market Risk Analyst. Before we begin, I'd like to remind everyone that today's call may include forward-looking statements and references to non-GAAP financial measures. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied. Please refer to our fourth quarter and full year 2025 earnings release and investor presentation, both available on our website under the Investor Relations heading, for a discussion of these matters and a reconciliation of non-GAAP measures. With that, I'll turn the call over to Darren.

Darren Richman (President and CEO)

Thank you, Jesse. Good morning, everyone. I'm pleased to discuss our results for the fourth quarter and full year 2025, our first year as a public company. For years, we have seen a clear opportunity in a housing market defined by persistent undersupply and builders seeking greater balance sheet efficiency. Even as the industry faced meaningful headwinds, affordability challenges, elevated rates, and macro uncertainty, the structural need for housing capital remained unchanged. If anything, the industry shift towards capital efficiency has only accelerated, and Millrose was designed for exactly this moment. Our permanent capital model provides builders with just-in-time homesite delivery system. We acquire and fund development under option agreements. Builders take down homesites on a predetermined schedule, and our shareholders receive predictable, recurring income underpinned by U.S. housing demand. That income is not tied to home prices, land values, or the pace of home sales.

We generate contractual monthly option payments that span multi-year contracts and are owed regardless of market conditions. We do not speculate on land appreciation, take entitlement risk, or participate in home building margins. Our capital is structurally insulated from the cyclicality of our builders' operating businesses. That is a fundamental distinction from every other land-based real estate business in the public markets today, and it is the foundation on which 2025 was built. 2025 was a defining year for Millrose. Despite a cautious home building environment, we were embraced across the industry with a reception that exceeded even our own expectations, validating both the concept and our team's execution. Our investment balance outside the foundational Lennar Master Program Agreement finished the year at approximately $2.4 billion, surpassing the $2.2 billion stretch target we had previously discussed. That outperformance reflects something important.

Builders weren't just willing to work with us, they sought us out, both initiating new relationships and deepening existing ones. In a year when builders were exercising appropriate caution on an activity level, Millrose was aggressively taking share and pioneering new use cases for land banking capital. That is a direct reflection of what we offer: an experienced, trusted partner with deep operational and technological integration, the ability to transact rapidly and at scale, and a national team that understands the home building business from the ground up. That accelerating pace of adoption translated directly to financial outperformance. We had previously provided a year-end run rate AFFO guidance range of $0.74-$0.76 per share.

Our Q4 AFFO came in at the top end of that range at $0.76. The growth we delivered over the course of the quarter puts our normalized year-end run rate at $0.77, ahead of where we expected to be. We also demonstrated the uniquely cash-generative capital recycling nature of our business model, with $3.4 billion of net homesite sale proceeds generated in 2025. Beyond the financial implications of that liquidity, we're proud of the real-world impact embedded in this number. Over the course of 2025, we delivered more than 31,000 homesites to builders across the country, projects with an average home selling price of approximately 20% below the national average for newly built single-family homes. Housing affordability remains one of the defining challenges facing the American housing market, driven in large part by the scarcity of entitled, well-located land.

What we do isn't just financially compelling; it is genuinely additive to the housing supply where it is needed most. Looking ahead, we enter 2026 with a pipeline that gives us real confidence in our growth trajectory. Based on the transaction volume we demonstrated in 2025 and the depth of our current opportunity set, our base case expectation is that we can grow invested capital outside the Lennar Master Program Agreement by an additional $2 billion, bringing total invested capital to approximately $10.5 billion, with over 40% of that balance outside the foundational Lennar relationship. That would represent a meaningful milestone in the diversification of our platform. I want to be transparent about how we think about funding that expansion, because growth for its own sake has never been part of our objective.

We remain committed to a conservative leverage policy with a current target of 33% debt to cap, and we will not issue equity below book value, which currently stands at $35.28 per share. On that basis, we can point with confidence today to funding approximately half of that $2 billion demand increase through existing debt capacity. We expect to deploy that $1 billion in invested capital growth by approximately mid-year, exiting Q2 2026 with a quarterly AFFO per share run rate in the range of $0.78 - $0.80 a share. For the second half of that pipeline, we are being highly selective by design, concentrating capital toward the strongest counterparties, the most durable structures, and the best located underlying properties. The opportunity set exceeds what we can fund today, and that is a position of strength, not a constraint.

The equity optionality we retain is upside for existing shareholders, not a bottleneck to our business. On evaluation, our current AFFO multiple implies a meaningful discount to the competitive set of REITs. At GAAP, we believe it's difficult to justify, given our lower leverage, our contractual income structure with high-quality counterparties, and the projected 10% annual AFFO per share growth implied by our $2 billion growth expectation, as described on page 14 of our earnings presentation. Here we've laid out an illustrated bridge from our current AFFO run rate to year-end 2026. At the low end, deploying $1 billion of net new capital at current yields would drive more than 7% growth in AFFO per share.

Executing on this $2 billion opportunity set we see in front of us, funded with a prudent mix of debt and equity consistent with our stated leverage targets, implies a 10% growth in AFFO per share. We believe that this valuation discount to our peers reflects the market still getting comfortable with a business model that is genuinely new to the public markets, and that is a fair and reasonable dynamic. One we expect to resolve itself as we continue to demonstrate consistent execution. We operated through a challenging home building environment in 2025 without a single builder terminating or threatening to terminate an option agreement. As that track record compounds, we expect investor confidence and our valuation to follow.

We are optimistic that a re-rating is coming, and that we will be able to raise equity above book value in 2026, which would allow us to fully capture the pipeline in front of us. Finally, the macro backdrop entering 2026 is the most constructive that we have seen since our spin-off. In many markets, the supply and demand imbalance that weighed on builder activity through much of 2025 is showing early signs of rebalancing. Lower housing starts have begun to work through excess inventory, and moderating mortgage rates are supporting a gradual return of prior demand. Against that backdrop, land values have proven remarkably resilient. According to a recent survey from John Burns Research and Consulting, one of the most respected voices in the residential housing market, land prices remained stable through 2025 and continued to increase in many markets.

For Millrose, that is an important data point. It affirms the unique character of our entitled homesite assets, irreplaceable, non-depreciating, perpetual options on U.S. home values, and confirms that our portfolio is well-positioned as the market continues to recover. 2025 proved the model. 2026 is where we intend to begin showing its full potential. We believe we have the platform, the pipeline, the partnerships, and the track record, and we are just getting started. With that, I'll turn the call over to Robert.

Robert Nitkin (COO)

Thank you, Darren. I want to spend a few minutes on what it actually takes to operate this platform at the scale we've described. The numbers deserve context. As of year-end, Millrose manages approximately 142,000 home sites across 933 communities in 30 states, serving 15 distinct counterparties, 9 of which rank among the top 25 home builders in the country. During 2025, we deployed $5.5 billion in new land acquisitions and development funding and received $3.4 billion in takedown proceeds. Transaction volume of this magnitude is made possible by significant operational infrastructure, working in sync with a large and experienced team. Every home site takedown we process is a real estate transaction, not just a wire transfer or a ledger entry.

As Darren mentioned, in 2025, we executed over 31,000 of those closings, each involving title work, deed transfer, and state-specific closing requirements on a schedule that cannot slip, because builders are running construction timelines that depend on us. What makes that reliability possible is our technology, a platform that gives builders real-time lot selection capability, with every selection triggering automated portfolio updates, title tracking, and closing workflows. Technology alone doesn't close real estate transactions. Equally important is an experienced team of underwriters, servicers, and asset managers with deep, multi-year operating relationships with our builder partners, and the willingness to pick up the phone and work through any time-sensitive request or transaction nuance. Growth amid this volume of activity required the same level of discipline on the deployment side.

Expanding from 1 counterparty to 15 required demonstrating both home site delivery reliability and new deal underwriting capacity, the ability to evaluate, diligence, and close at high volume on externally driven deadlines. Our proprietary dataset and underwriting tools, built from years of trends and acting across every market we operate in, allow our underwriting team to rapidly form a view on new opportunities before passing to our real estate diligence teams for legal and development review. These tools also provide real-time signals on local market dynamics, and you'll hear more on what we're currently seeing from Stephen Hensley in a moment. Combined with close coordination between our underwriters and builder partner land teams, our diligence is both rapid and rigorous. That speed of execution, alongside the unique reliability and permanence of our capital, is a competitive advantage builders notice and consistently cite.

Every new builder relationship benefits from our track record of efficient execution at scale, first with Lennar and now with 14 additional partners, as well as the institutional credibility our team built at Kennedy Lewis in the years before Millrose launched. That combination of platform history and team pedigree creates a level of credibility that cannot easily or quickly be replicated. We also bring to these relationships market insights and intelligence from our operations across 30 states that most individual builders simply don't have access to. We believe sharing that perspective makes us a more valuable partner and deepens relationships. The expanding share wall that Darren referenced isn't just a financial outcome, it's a reflection of the compounding spirit of partnership we are committed to building across the industry.

I also want to elaborate on our cross-termination pooling structures, present on 96% of our portfolio by investment balance, because pooling is more than a negotiated legal protection. It is first and foremost a relationship-defining mechanism. When a builder agrees to a pool, they are self-identifying as a partner seeking capital efficiency, not risk mitigation, and that distinction matters. These are builders who understand our model, embrace the off-balance sheet structure, and are committed to a long-term programmatic relationship. It is worth being clear-eyed about what pooling does and does not do. It does not prevent a builder from walking away from an option contract. What it does is raise the cost of doing so, creating a meaningful economic disincentive that protects the integrity of the relationship without eliminating the builder's optionality.

That balance is intentional and is part of what makes pooling a durable alignment tool rather than a blunt legal instrument. Beyond that initial alignment function, pooling is also a live risk management discipline. We maintain a real-time pooling analysis that tracks every pool by geography, duration, and risk exposure as communities advance through their life cycle. Enabled by our technology platform, we monitor shifts in each pool's risk profile continuously, directly informing go-forward deal allocation. This active management is what keeps pools meaningful over time, and it is a capacity that we believe is genuinely difficult to replicate without the scale and systems we have built. Looking ahead, the opportunity in front of Millrose is both substantial and highly actionable. Our pipeline is deeper, more diversified, and more geographically balanced than at any point since launch.

We are seeing increased engagement from existing partners and meaningful interest from new builders looking to shift more of their land strategy into off-balance sheet structures. As Darren described, we are being selective, but the pipeline gives us the luxury of that selectivity, and we are confident in the quality of what we are choosing to pursue. To fully capture this opportunity, we continue to build incremental capital and liquidity to enhance balance sheet flexibility and reinforce confidence for our counterparties. We are currently working with our bank group on additional floating-rate debt capacity, both to diversify our fixed-rate bond structure and to better match the floating-rate nature of a portion of our option payment income. 2025 was the year we built and stress-tested the infrastructure of this platform, the technology, the team, the processes, and the capital relationships required to scale across the industry.

That foundation is now firmly in place. With a pipeline that reflects deepening builder engagement and an improving broader market, we enter 2026 with a conviction in the further expanded accretive growth opportunity for Millrose and our shareholders. With that, I'll turn it over to Stephen to share what we're seeing across our markets and why we're optimistic about the macro landscape ahead.

Stephen Hensley (Senior Market Risk Analyst)

Thank you, Robert. As we enter 2026, we're seeing encouraging signals that the spring selling season could look more like a normal, healthy market. I want to walk you through both the macro picture and what our proprietary data is telling us on the ground. At the macro level, a resilient consumer and broader economic stability provide near-term optimism for steady demand. Affordability is also moving in the right direction, supported by rising incomes, moderating home prices, and lower interest rates, creating a constructive backdrop heading into the spring. These are not dramatic reversals, but they are consistent, reinforcing trends, and that consistency matters. Operationally, the signals are similarly positive. Home builders demonstrated strong discipline through the second half of 2025, proactively reducing starts to align with demand and working down standing inventory....

They've also made meaningful progress lowering construction costs, easing margin pressure, and improving cycle times, giving them greater agility to respond across a range of demand scenarios this spring. The shift toward more to-be-built sales and fewer spec homes is keeping inventory in check while supporting healthier margins. Taken together, the industry enters the spring selling season on solid footing and better positioned than it was 12 months ago. Turning to our proprietary MSA monitoring system, the data reinforces a mixed but improving landscape with some important distinctions by market. Last summer, we highlighted a handful of markets undergoing recalibration, particularly certain secondary coastal markets in Florida and parts of Texas. In Florida, inventory levels moderated meaningfully through the back half of the year, with months of supply now below year-ago levels in most markets.

That is a notable improvement and reflects the builder discipline I just described playing out in real time. Texas continues to work through elevated supply and affordability challenges. We expect that normalization to remain a 2026 story, and our underwriting reflects that patience. Las Vegas is another market where our model is signaling caution. Softer sales activity in the second half has led to rising supply pressure, and we are monitoring it closely. Conversely, we are seeing clear and broad-based strength across much of the Southeast. Charlotte remains one of the top-performing markets in our coverage, supported by strong employment growth and relatively tight supply. Our model is also picking up notable performance in several smaller Southeast markets, including Greenville, Columbia, Charleston, and Myrtle Beach, where solid job growth, low supply, and comparatively affordable housing are creating healthy, durable demand. These are not flash-in-the-pan dynamics.

They reflect structural, demographic, and employment trends that we expect to persist. Overall, we believe these signals point toward a more typical spring selling season and reinforce our positive long-term view of the housing market. The geographic diversity of our portfolio, spanning 30 states and 933 communities, means we are not dependent on a single market's performance. We are well-positioned to benefit from the markets that are strengthening now, while our underwriting discipline protects us in the markets that are still normalizing. With that, I'll hand the call over to Garett to walk through our financial performance.

Garett Rosenblum (CFO)

Thank you, Stephen. Good morning, everyone. I'm pleased to walk you through our fourth quarter and full year 2025 financial results, which continue to demonstrate the cash-generating power of our business model and the direct translation of capital deployment into shareholder returns. For the fourth quarter, we reported net income of $122.2 million, or $0.74 per share, driven by $179.5 million in option fees and $10 million in development loan income. For the full year, we reported net income of $404.8 million, or $2.44 per share. Our first fiscal year as a public company, and one that delivered on every financial commitment we made at the outset.

Fourth quarter adjusted funds from operations came in at $0.76 per share at the high end of our guidance range of $0.74-$0.76 per share. As Darren noted, the invested capital of growth we delivered over the course of the quarter puts our normalized year-end run rate at $0.77 per share, ahead of where we expected to be. This outperformance reflects exactly what our model is designed to do. Every dollar deployed in other agreements at average yields of approximately 11% against a cost of debt of 6.3%, drives directly accretive AFFO growth and expanding dividend capacity. That spread and our ability to sustain and grow it is the engine of our earnings trajectory. Book value per share year-end stood at $35.28.

For full-year context, interest expense was $91.8 million, income tax expense was $20.5 million, and management fee expense totaled $87.8 million. As a reminder, our management fee is calculated transparently at a fixed rate of 1.25% of gross tangible assets. Turning to the balance sheet, we ended the year with total assets of approximately $9.3 billion and total debt of $2.1 billion, resulting in a debt to capitalization ratio of approximately 26%, well inside our stated maximum of 33%. That headroom is intentional. It gives us meaningful capacity to fund the next phase of growth without compromising the conservative financial posture that underpins our investment-grade counterparty relationships and our dividend reliability. We ended the year with approximately $1.3 billion in total liquidity, providing ample capacity to support our investment pipeline.

As Rob noted, we are working with our banking partners to further expand that capacity, and we expect to deploy approximately $1 billion in additional invested capital by mid-year, exiting Q2 2026 with an expected quarterly AFFO run rate of $0.78-$0.80 per share. Our dividend performance reflects the quality and consistency of our earnings. For the fourth quarter, we paid a dividend of $124.5 million, or $0.75 per share, an 8.4% annualized yield on equity, roughly 80 basis points higher than our first quarter dividend. That progression over the course of a single year is a direct result of the accretive deployment of capital in other agreements, exactly the strategy we outlined when we became a public company.

Millrose remains committed to distributing 100% of AFFO to shareholders. We expect that commitment to compound meaningfully as our invested capital base continues to grow. With that, I'll turn the call back to Darren.

Darren Richman (President and CEO)

Thanks, Garett. I want to leave you with a few thoughts before we open the line. 2025 was not an easy year for the home building industry, and that is precisely what made it such a meaningful proof point for Millrose. We operated through affordability headwinds, elevated rates, and a cautious builder environment without a single option agreement terminated or even threatened. Our contractual income held, our capital recycled, our platform grew. That is not a coincidence. It is the design of this business working exactly as intended. What gives me the most confidence entering 2026 is not just the pipeline in front of us, but the flywheel nature of what we are building. Every community we deliver, every builder relationship we deepen, and every dollar of capital we recycle adds to the platform that becomes harder to replicate and more valuable to the industry over time.

We are still early in that process, and that is an exciting place to be. To the team, the execution you delivered in our first year as a public company was exceptional, and it did not go unnoticed. To our home builder partners, your trust is the foundation of everything we do, and we do not take it lightly. To our shareholders, we are committed to earning your confidence every quarter, not by telling you what this platform can be, but by showing you. Operator, let's open the line up for questions.

Operator (participant)

At this time, I would like to remind everyone, in order to ask a question, please press star, then the number 1 on your telephone keypad. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Julien Blouin with Goldman Sachs. Your line is open. Julien, your line is open.

Julien Blouin (Analyst)

Oh, so sorry, I was on mute. Well, congrats on the strong quarter, team. Just given this strong pace of deployment and the clear demand from home builders, I was wondering, as you start to come up against your internally set leverage cap, would you be comfortable going above that leverage cap for a brief time until your shares sort of reach book value, especially given your confidence that as you continue to execute your business plan, equity markets will eventually sort of catch up?

Darren Richman (President and CEO)

Julien, that's a good question. This is Darren. Thank you. Thanks for your time today. Look, we're going to adhere to the 30. We don't want to hem ourselves in too much on the leverage target. In the context of, maybe as something strategic, we might push it. In the ordinary course, we're really going to kind of adhere to that target. There may be circumstances where we might change that for some period, but that really is the threshold goal. Let's for those people who are kind of new to the story, the reason why we set it at that conservative level is these are still, you know, volatile assets. The reality is that we cycle through about a third of our balance sheet every year in the ordinary course.

Having that visibility and that cash in the ordinary course to be able to pay down our debt or neutralize the debt with cash on the balance sheet is just a very important asset for this company. To answer your question, there may be circumstances where, for a brief period, we felt comfortable, and we have line of sight to take it beyond 33%, but the long-term goal has really been purposefully set at 33% for the reasons I just cited.

Julien Blouin (Analyst)

That makes a lot of sense. You also mentioned in your opening remarks how you distinguish yourself from every other land-based real estate business in the public markets. I think Rob was mentioning how the current AFFO multiple discount is sort of difficult to justify. I'm just curious, in your own internal conversations, how do you view or who do you view as your most relevant comp? Why do you view them as your most relevant comps? How do you view your current valuation relative to that comp set?

Darren Richman (President and CEO)

I think you've given me the easy question. This is some meatball of a question for you, Rob, to answer.

Robert Nitkin (COO)

Yeah. No, thank you, Julien. I mean, people just ask us a lot, particularly for a somewhat new business model in the public forum, you know, with this homesite option purchase platform, who are your comp set, and how should we value you? It's not our job to debate the academics of our, you know, price to AFFO multiple. We did think after our first full year of results, now that we have more proof points, just to point out some of the differences versus the various REITs out there. You know, you and others have heard us say out loud that we think ourselves more of a triple net or infrastructure, you know, related equity REIT, which is what we believe. You know, what's new this quarter?

What's new this quarter is that we have just more proof points in terms of both our AFFO growth per share that we've demonstrated and that we're projecting, you know, in the forward scenario, really afforded by just the math of our accretive spread investing, right? The yields we're able to invest at versus our cost of capital. Pointing out the low leverage, you know, achieving those yields and those growth targets with the leverage that we have right now that, as we were just talking about, is pretty much below any other, you know, REIT, at least, you know, in our eyes, in the industry, which we feel good about. Honestly, that was, you know, a lot of what we were so excited about, you know, thinking back before we even launched Millrose.

Why we were so excited to bring this business model into the public forum was to show the power of the yield, the growth, you know, and therefore, the total return that we afford our shareholders with low leverage. On top of that, you know, lastly, I would just say it's worth pointing out that while we have low duration, and that's another so, you know, slightly differentiating item, you may say positive or negative from other REITs, we view it as a pure positive in that from a credit and risk management perspective, we're constantly refreshing the basis to contemporary market conditions and evaluating new assets that are sort of refilling, you know, our portfolio from a risk perspective. At the same time, we've signed up to these repeatable, operationally integrated relationships with our builders counterparties.

It's not as if we have a brand-new cost of origination on each individual deal. You know, our origination is not episodic. It's a self-refreshing relationship with these builders, which, again, from both a credit and origination perspective, we think is the best of both worlds. That's what we wanted to point out.

Darren Richman (President and CEO)

I might add to that, obviously, add to everything Rob just said, but, you know, to add to it, you know, these are mission-critical assets, as we talked about. Not only are they mission-critical, these are the exact assets that are in scarce supply. Having land that's already entitled, approved for development is the gating item to why we don't see more growth in volume. We're financing those assets that are in shortest supply. The other items I'd add is we're doing this against a backdrop of a housing shortage. Maybe lastly, I'd add that these assets don't require any capital enhancement from, like, a CapEx perspective to refresh. This is all contractually related.

I think when you put all these pieces together, plus the growth that we laid out, in this report, that even if we achieve just the $1 billion of in the ground, that's almost an 8% growth in AFFO on top of the already strong dividend that we're achieving. When you kind of put all this together, it creates what we think is a very unique package of baseline dividend plus growth, that to us, look, we're students of the market, we're obviously talking our book, but to us, should result in a much higher multiple. We, we do think we'll get there. This is still a young company. We're a year into it, and we're continuing to show proof points.

We do think ultimately, we will trampoline ahead, from a valuation perspective.

Julien Blouin (Analyst)

All right. Thank you, team. That's all from me.

Operator (participant)

Your next question comes from the line of Eric Wolfe with Citi. Your line is open.

Eric Wolfe (VP and Equity Research Analyst)

Hey, thanks. Good morning. You talked about, $1 billion of new capital deployment by the middle of the year. How much visibility do you have toward that incremental $1 billion at this point? Is it based on deals you've already sourced and signed? Would those be new relationships or sort of continued growth among your current 15 counterparties?

Darren Richman (President and CEO)

I'll start, Eric. This is Darren, and Rob will jump in. You know, we've talked about this in the past with these forward flow relationships that we have, where the industry is really starting to coalesce around rather than homebuilders looking at discrete parcels and trying to get them land banked and financed, to entering into more programmatic relationships, where they'll come to us and say, "We need $1 billion of buying power or $500 million of buying power." We've talked about that. Those totals about $9 billion across roughly 10 different counterparties, those forward flow relationships. We're going to naturally cycle through about $3 billion of our land portfolio in the next year that will need to be replaced.

Some of that $9 billion will go into replacing those assets. The point is, we have a lot of visibility and a lot of confidence around it. Some of those deals ultimately fall away because, you know, obviously, our due diligence process will kick out deals that we don't want to be financing. As we kind of distill down that forward flow quantum, we feel very comfortable with the guidance that we put out in. We, you know, we want to be very thoughtful about guidance we give to make sure that we can achieve that.

Robert Nitkin (COO)

Yeah, I might just add, you know, as you know, Eric, there's also built into our existing $2.4 billion of, you know, other agreements, investment balance, the future development funding commitments that we've already signed up for, and, you know, we're including in that billion-dollar projection. You know, that will do a decent amount of the work for us. You asked the question, you know, did that require any new counterparties? Based on the existing base in, you know, development funding projections, even net of homesite takedowns, as well as that, you know, the aggregate of those $9 billion forward flow relationships Darren alluded to, you know, if you said, you know, we weren't going to add another counterparty next year, which I don't think is true, I would still feel pretty confident about that number.

Eric Wolfe (VP and Equity Research Analyst)

That's helpful. Then you also mentioned that you were working with your banking partners to access floating rate debt to hedge your floating rate option exposure. I guess what percentage of your net invested capital at this point is sort of floating versus fixed. I guess given expectations that Fed will cut, you know, multiple times through next year, you know, is it becoming more of a sort of popular agreement with home builders to try to do more floating rate type deals?

Darren Richman (President and CEO)

Yeah, I would use, it's not perfectly precise in this way, but I would use the proxy that our Lennar Master Program Agreement rate is fixed, which is true, and, you know, subject to resets on forward deals, as has been publicly disclosed. Our other agreements bucket is vast majority floating, subject to a floor. While there's not, you know, infinite downside of rate cuts, you know, there is some volatility, and that's the, that's the reason that our existing credit agreement, you know, use of that or the floating rate, mitigates any movement there. You know, we made the comments that you alluded to on additional floating rate debt. That's been...

You know, I would add that there's hasn't been a change in fixed versus floating, you know, in these agreements, since any recent rate cut cycles or anything like that. That's been the nature of the structure of these other agreements, you know, since before we launched Millrose, I'd say.

Eric Wolfe (VP and Equity Research Analyst)

Maybe just to be illustrative, like, the 11% you're signing today, I guess, you know, what would be like the floor on that? Just to help me understand sort of like how low that could go if rates came down, you know, meaningfully on average.

Darren Richman (President and CEO)

Yeah, the floor is probably between, you know, 50 and 200 basis points below, sort of where that rate is.

Eric Wolfe (VP and Equity Research Analyst)

Got it. Okay, thank you.

Operator (participant)

Your next question comes from the line of Craig Kucera with Lucid Capital Markets. Your line is open.

Craig Kucera (Analyst)

Hey, good morning, guys. I see you added two counterparties this quarter. Were they the primary driver of the $690 million funded this quarter from third parties, or are you seeing, you know, additional demand from your existing counterparties?

Robert Nitkin (COO)

Yeah, it was 3 additional counterparties, went from 12 to 15 this quarter, and the majority of the growth was from existing counterparties. The addition of new counterparties, you know, we started to do initial deals with them. Those initial deals with those incremental 3 counterparties were not the majority, you know, we've now brought them onto our platform. We've onboarded them, we've negotiated docs with them, it's our expectation that they'll continue to grow as we get more operationally integrated as a partner.

Craig Kucera (Analyst)

Okay, great. Just given your commentary on sort of the $2 billion of guidance, I guess, is it fair to say that we should think about that as being more or less in the bag? You know, when we think back to last year, you came out and we're looking to close $1 billion when you first spun out of Lennar. You know, we saw stretched targets throughout the year. Is that a potential, just given the demand in the market?

Darren Richman (President and CEO)

This is Darren. It's a tough question to answer. We're not looking to sandbag anything. This is kind of our best assessment at this point in time, given the deal flow that's ahead of us, and also given the need to raise additional capital. You know, I'll remind you, last year, the volume was enhanced, you know, through M&A. While we're aware of, you know, discussions that are out there from a, you know, M&A perspective, those are always difficult to model. None of that would be included in our forecast. This really is our best estimate here and now.

I'll acknowledge one other thing, that month to month, quarter to quarter, it won't be a straight line in terms of that volume filling in, but we feel very confident, given the given the pipeline and given the relationships, that we will meet that year-end target of $2 billion.

Craig Kucera (Analyst)

Okay, that's helpful. In the press release, you made a mention that you're delivering home sites to builders at an average sales price 20% below the national average for new homes, which are, you know, predominantly Lennar homes, just given that they've been closing the vast majority. As you look at the third-party agreements you've entered into, is there any way to give us a sense from a budgeting perspective, whether or not those are more entry-level homes, maybe similar to Lennar or higher-priced homes, or is that too difficult at this point?

Darren Richman (President and CEO)

Yeah, I don't we're not gonna go that deep into the, you know, guts of the operation at this point.

Craig Kucera (Analyst)

Okay, fair enough. Just one more from me. You know, you made it clear that you want to issue equity below book, and you've got a debt target of 33%. You know, you mentioned earlier you might go a little above that. Given that the market's gonna do what it does with your common stock, it would seem you could issue preferred that would be accretive to what you can deploy capital at. Is that a potential source of capital for you, or do you view that as just more expensive debt?

Darren Richman (President and CEO)

It's not our preference to do that. We you know, as you would imagine, we ourselves are investors, we come from the credit landscape. We're very familiar with those type of products, as well as converts and other arrangements that are equity-like. The goal here is really to keep the capital structure as clean as possible and as transparent as possible. Would we entertain them? Potentially, but that's not our plan right now.

Craig Kucera (Analyst)

Okay, thanks. That's it for me.

Darren Richman (President and CEO)

Thank you.

Operator (participant)

Again, if you would like to ask a question, please press star and the number one on your telephone keypad. I will turn the call back over to Darren Richman, CEO and President, for closing remarks.

Darren Richman (President and CEO)

I'd like to thank everybody again, for joining us this morning. We're around if people have follow-up questions. you know, just in closing, really what we're looking for is durable, fundamental growth, not short-term glitter. We're looking to continue to build new relationships and develop new use cases for land banking capital. We're very excited about the prospects for the business, where we are today, and the reception we continue to get from our existing clients and new clients as well. I want to thank everybody.

Operator (participant)

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.