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. [Operator Instructions] I will now turn the call over to Jesse Ross, Millrose Head of Financial Planning and Analysis. Jesse, you may begin your conference.

Good morning, and 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 Steven 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.

Thank you, Jesse, and 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 spend multiyear contracts and are owed regardless of market conditions. We do not speculate on land appreciation, take entitlement risk or participate in homebuilding 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 homebuilding 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…

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 because the numbers deserve context. As of year-end, Millrose manages approximately 142,000 homesites across 933 communities in 30 states serving 15 distinct counterparties, 9 of which rank among the top 25 homebuilders 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 homesite 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 time lines 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. But technology alone does include real estate transactions. Equally important is an experienced team of underwriters, servicers and asset managers with deep multiyear 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 amidst this volume of activity required the same level of discipline on the deployment side, expanding from one counterparty to 15 required demonstrating both homesite delivery reliability and new deal underwriting capacity, the ability to evaluate, diligence and close with high volume on externally driven deadlines. Our proprietary data set and underwriting tools built from years of transacting across every market we operate in allow our…

Thank you, Rob. As we enter 2026, we're seeing encouraging signals that the spring selling season could look more like a normal healthy market. And 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 provides near-term optimism for steady demand. Affordability is also moving in the right direction, supported by arising 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. Homebuilders 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 to the 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 position 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…

Thank you, Steven, and 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 to $0.76 per share. But as Darren noted, the invested capital 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 the 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 at 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…

Thanks, Garrett. I want to leave you with a few thoughts before we open the line. 2025 was not an easy year for the homebuilding 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 homebuilder partners, your trust is the foundation of everything we do, and we do not take it lightly. And 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 Instructions] Your first question comes from the line of Julien Blouin with Goldman Sachs.

Well, congrats on the strong quarter team. Just given the strong pace of deployment and the clear demand from homebuilders, 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?

Julien, that's a good question. This is Darren. Thank you. Thanks for your time today. Look, we're going to adhere to the -- we don't want to hem ourselves in too much on the leverage target. In the context of maybe 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. And 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 volatile assets. And the reality is that we cycle through about 1/3 of our balance sheet every year in the ordinary course. And 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. So to answer your question, there may be circumstances where for a brief period, we feel 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.

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. And 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 comps? Why do you view them as your most relevant comps? And then how do you view your current valuation relative to that comp set?

I think you've given me the easy question. This is some meat all the question for you, Rob, to answer.

Yes. Thank you, Julien. I mean people just ask us a lot, particularly for a somewhat new business model in the public forum with this homeside option purchase platform, who are your comp set? And how should we value you? And it's not our job to debate the academics of our price AFFO multiple. But 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. And you and others have heard us say out loud that we think ourselves more of a triple net or infrastructure-related equity REIT, which is what we believe. But 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 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, 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 REIT, at least in our eyes in the industry, which we feel good about. And honestly, that was a lot of what we are so excited about 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 and therefore, the total return that we afford our shareholders with low leverage. And on top of that, lastly, I would just say it's worth pointing out that while we have low duration, and that's another 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 our portfolio from a risk perspective. But at the same time, we've signed up to these repeatable operationally integrated relationships with our builders' counterparties. So it's not as if we have a brand-new cost of origination on each individual deal. 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. So that's what we wanted to point out.

Yes. And I might add to that, obviously, to everything Rob just said. But to add to it, these are mission-critical assets as we talked about. Not only are they mission-critical, but 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. And so we're financing those assets that are in short of supply. And then the other items I'd add is we're doing this against the backdrop of a housing shortage. And maybe lastly, I'd add that these assets don't require any capital enhancement from like a CapEx perspective to refresh. And so this is all contractually related. So 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 $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. So 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. And 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. So we do think, ultimately, we will trampoline ahead from a valuation perspective.

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

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

Yes. And I'll start, Eric. This is Darren, and Rob will jump in. 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 bank 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. And so we've talked about that. That 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. So some of that $9 billion will go into replacing those assets. And then -- and so the point is we have a lot of visibility and a lot of confidence around it. Some of those deals ultimately fall away because, obviously, our due diligence process will kick out deals that we don't want to be financing. So as we kind of distill down that forward flow quantum, we feel very comfortable with the guidance that we put out. And we want to be very thoughtful about guidance we give to make sure that we can achieve that.

Yes. And I might just add, as you know, Eric, there's also built into our existing $2.4 billion of other agreements and investment balance, the future development funding commitments that we've already signed up for, and we're including in that $1 billion projection. And so that will do a decent amount of the work for us. And so you asked the question, does that require any new counterparties. Based on the existing baked-in development funding projections, even net of homesite takedowns as well as that the aggregate of those $9 billion forward flow relationships Darren alluded to, if you said 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.

That's helpful. And then you also mentioned that you are working with your banking partners to access floating rate debt to hedge out your -- not hedge out, but just 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? And I guess, given expectations that Fed will cut multiple times next year, is it becoming more of a sort of popular agreement with homebuilders to try to do more floating rate type deals?

Yes. 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 subject to resets on forward deals as has been publicly disclosed. And our other agreements bucket is vast majority floating subject to a floor. So while there's not infinite downside of rate cuts, there is some volatility, and that's the reason that our existing credit agreement, use of that with the floating rate mitigates any movement there, and we made the comments that you alluded to on additional floating rate debt. And then that's been -- I would add, that has not -- there hasn't been a change in fixed versus floating 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 since before we launched Millrose, I would say.

Got it. Maybe just to be illustrative, like the 11% you're signing today, I guess, 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 meaningfully on that.

Yes, floor is probably between 50 and 200 basis points below sort of where that rate is.

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

I see you added 2 counterparties this quarter. Were they the primary driver of the $690 million funded this quarter from third parties? Or are you seeing additional demand from your existing counterparties?

No. So it was 3 additional counterparties went from 12 to 15 this quarter, and the majority of the growth was from existing counterparties. And so the addition of new counterparties, we started to do initial deals with them and those initial deals with those incremental 3 counterparties were not the majority, but we've now brought them onto our platform. We onboarded them. We've negotiated docs with them, and it's our expectation that they'll continue to grow as we get more operationally integrated as a partner.

Okay. Great. And 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? And when we think back to last year, you came out and were looking to close $1 billion when you first spun out of Lennar. We saw stretch targets throughout the year. Is that a potential just given the demand in the market?

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. I'll remind you, last year, the volume was enhanced through M&A. And while we're aware of discussions that are out there from an M&A perspective, those are always difficult to model. And so none of that would be included in our forecast. So this really is our best estimate here and now. And I'll acknowledge one other thing that month-to-month, quarter-to-quarter, it's not -- it won't be a straight line in terms of that volume filling in, but we feel very confident given the pipeline and given the relationships that we will meet that year-end target of $2 billion.

Okay. That's helpful. In the press release, you made have mentioned that you're delivering homesites to builders at an average sales price of 20% below the national average for new homes, which are predominantly Lennar homes just given that they've been closing the vast majority. But 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?

Yes. I don't -- we're not going to go that deep into the guts of the operation at this point.

Okay. Fair enough. Just one more for me. You made it clear that you want to issue equity below book, and you've got a debt target of 33%. You mentioned earlier, you might go a little above that. But given that the market is going to 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?

It's not our preference to do that. As you would imagine, we're -- 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.

[Operator Instructions] I will turn the call back over to Darren Richman, CEO and President, for closing remarks.

Yes. I'd like to thank everybody again for joining us this morning. We're around if people have follow-up questions. 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. So I want to thank everybody.

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