Millrose Properties Acquires Rausch Coleman Homes Land Assets
Millrose Properties, Inc. (NYSE: MRP, “Millrose”), a leading innovator in the Homesite Option Purchase Platform for residential homebuilders (HOPP’R), announced the successful completion of its previously disclosed acquisition of approximately 24,000 homesites from Rausch Coleman Homes (“Rausch Coleman”). Simultaneously, the company executed option agreements with Lennar Corporation (“Lennar”) for all of the acquired homesites.
This significant milestone marks another step in Millrose’s strategy to advance its growth and expand its business model within the residential real estate sector.
Transaction Overview
Millrose acquired the Rausch Coleman homesites for roughly $900 million in cash, which accounts for the net amount after option deposits funded by Lennar and other holdbacks. The funds for this transaction were primarily sourced from Millrose’s cash reserves. After the deal’s closing, Millrose retains a strong financial position, holding approximately $1.3 billion in available capacity under its revolving credit facility.
The acquisition follows a previously announced agreement between Lennar and Rausch Coleman, where Lennar acquired Rausch Coleman’s homebuilding operations. This transaction aligns with Millrose’s continued commitment to optimizing its portfolio of residential land assets.
Focus on Accretive Growth
Darren Richman, CEO and President of Millrose, shared, “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’s growth strategy revolves around its innovative business model, which involves the purchase and development of residential land for sale to homebuilders via option contracts. The company plans to grow its relationships with various homebuilders, which will increase its market reach and provide steady, recurring revenue streams. Lennar remains Millrose’s primary customer, but the company anticipates that other homebuilders will also find value in its approach.
Strategic Partnerships and Financial Strength
Millrose operates with the backing of Kennedy Lewis Land and Residential Advisors LLC (“Kennedy Lewis”), a prominent affiliate of Kennedy Lewis Investment Management. The latter is an institutional alternative investment firm managing more than $25 billion in assets. Kennedy Lewis provides Millrose with unparalleled financial expertise, operational support, and access to an extensive network of homebuilder relationships.
Kennedy Lewis’s involvement is integral to Millrose’s ability to acquire land, develop residential communities, and deliver completed homesites to homebuilders with minimal risk. The collaboration ensures that Millrose remains positioned for significant long-term growth.
Unique Business Model
Millrose’s business model stands out within the real estate sector as it operates on an innovative, asset-light platform. The company purchases land, develops homesites, and sells them back to homebuilders, such as Lennar, under option contracts. These contracts come with predetermined prices and scheduled takedowns, allowing homebuilders to access finished homesites when they are ready for construction.
Unlike traditional land banks, Millrose’s assets behave more like work-in-process inventory, allowing for greater flexibility and reduced entitlement and development risk. This model enables the company to recycle capital into future land acquisitions, ensuring a steady stream of available homesites for its customers.
Millrose’s approach to land acquisition and homebuilding offers homebuilders the ability to manage capital more efficiently, as they can purchase developed homesites on-demand, eliminating the need to maintain large land inventories.
Long-Term Growth and Profitability
Millrose’s innovative land option model is designed to generate recurring income through monthly option payments made by Lennar and potentially other homebuilders. These payments are based on purchase option contracts, which provide a steady stream of revenue while allowing Millrose to recycle its capital into additional land purchases. As a result, Millrose anticipates that its platform will not only attract more customers but also produce significant returns as the demand for new residential properties remains strong.
Millrose’s business model offers several advantages over traditional land banking strategies, including reduced financial exposure, the ability to scale more effectively, and consistent revenue generation. As the company continues to expand its customer base and develop additional partnerships, it is well-positioned for sustained growth and profitability in the future.
About Millrose Properties, Inc.
Millrose Properties, Inc. is a pioneering company in the residential land acquisition and development space. The company specializes in acquiring and developing residential land, then selling finished homesites to homebuilders through option contracts with predetermined prices and schedules. Currently, Lennar is Millrose’s primary customer, but the company plans to expand its relationships with other homebuilders to grow its platform further.
Millrose’s unique business model reduces the risk associated with traditional land banking while ensuring that homebuilders have access to the land they need to meet growing demand for new homes. With strong financial backing from Kennedy Lewis and a commitment to providing homebuilders with a reliable source of land, Millrose is poised for continued success in the residential real estate market.
