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Milrose Properties, the company just reported its first earnings since spinning off of Lennar back in February and joining us for more is the CEO and President of Milrose, Darren Richmond. Darren, thanks so much for being here. It's good to see you.

Julie, it's always great to see you. Thanks for having me.

So Darren, um, you guys just reported your first earnings, as we said, you spun off from Lennar recently. And your structure is pretty unique within the home builder industry. So first of all, just sort of outline for us what it is you guys do and then your relationship with the home builders.

Sure, we're the first publicly traded land bank. Uh, we provide home builders with reliable and efficient capital. And our, our platform generally allows home builders to scale their own businesses and to uh, reorient themselves around higher asset returns, which in general should lead to a rerating.

And so you guys basically hold land until these home builders say, okay, we're, we're ready to buy. I guess, I guess the model has been for a home builder, they buy a bunch of land and they hold it for a while until they are ready to build. But that means they have to hold the assets on the balance sheet, presumably for a while, if they're not yet ready to build. This gives them sort of an option to buy the land when they are ready to build.

You're exactly right. Um, a home builder really is two companies in one. It's a, um, it's a land development business, which is their property business. And then it's, there's an operating company, which is really oriented around uh, consumer brand and the, the products that they plan to build for the benefit of those consumers. And there's a, there's a different cash conversion cycle when you're looking at the propco, which could be many, many years in the making. And their operating businesses have a very quick cash conversion cycle where they're buying the home site on a just in time basis, putting up a house and delivering that house really within three to nine months. So by separating the two, um, what they're really doing is allowing these two businesses to be in the hands of those investors that are going to value the discrete parts the highest. They're not the first to do this. We've seen, you know, in the uh, in the hospitality sector, the gaming sector and the tower sectors, a, a split of their operating businesses and their property development businesses.

And Darren, who, who is your, who's your customer right now? Is it just Lennar or is it multiple?

Yeah, our, our customer started out as for Milrose, um, uh, as being Lennar. They spun us off with about $6.5 billion of assets. What that really allowed us to do was have a very consistent revenue stream, earnings profile, and, and a very uh, robust dividend. And that created the backbone for us to grow accretively with third parties. And so, um, we've done business as Kennedy Lewis with about 17 different home builder counterparties. We're now exporting those relationships from Kennedy Lewis into Milrose. As part of our earnings report last week, we announced that we had five strategic partnerships that we had signed up with household names in terms of builders that, that you all would know. And so we're very quickly diversifying our business away from Lennar, not that that's a bad thing. We, we love our relationship with Lennar, but this was very consistent with the profile when we were spun out of Lennar, that we would grow with third parties.

And Darren, where are you guys seeing the opportunity right now in terms of, of location? I was talking with our housing reporter and she said you could argue that in some places they've overbuilt, maybe a Florida or Texas. And the places that really need housing supply, a place like New York or California maybe, it's really hard to find land to even buy in those places. So how are you guys approaching that geographic puzzle?

Yeah, our distribution is, is definitely uneven. What we're looking for is a demonstrable imbalance in housing supply relative to job growth. And so, um, and, and so we are looking for those markets where there's a lot of in-migration, uh, and job growth relative to uh, housing. And so I would, I would beg to differ a little bit. Um, you know, you're painting Florida and Texas maybe with a broader brush. Um, certainly there are parts of Florida, parts of Texas where there has been overbuilding. But by and large, uh, the markets that we operate in are really the markets that continue to show uh, real demand. And, and let's step back. There's a shortage in America of roughly three to five million houses. And the only way we're going to make up that shortage is really through the new home market. The new home market continues to pick up market share from the existing home market. And, and so we, we have a lot of tailwinds, uh, for us and for our home builder clients.

Darren, I, I was reading there's a comparable company that does what you all do, Four Star Group, uh, which I guess was taken public, Darren, by, by DR Horton. I'm just, I'm curious what do you do, how it all compares and contrasts to what they do.

Yeah. Thank you. It's a great question. Um, Four Star really is a, a land developer versus a, a, um, uh, a land bank counterparty. They don't necessarily know who their customer is when they set upon buying a parcel of land. They don't know what the development costs are going to be when they buy that. They don't know what the timing of that land is going to be. And for us, we know exactly who our client is. Um, these are the, these are the people that have taken the parcel of land to us. We know uh, who the client is. We know what the costs are going to be because all of our land uh, has cost overruns with our home builder clients. We know what the timing is going to be because we have uh, takedown schedules as part of our option and development agreements with those builders. And so we have a lot of visibility on who the client's going to be, the timing of the cash conversion cycle, the margins that we're going to make because our costs are, are known, um, upfront. And so we are, what we've really done is taken a Four Star and maybe taken it one step further where we've unlocked, we've separated our income statement from our balance sheet, where our balance sheet is constantly cycling from land to land development to uh, home site to cash. And then our income statement is really just our option rate times our investment balance divided by 12. And so we've created a lot of consistency and visibility in our go-to-market strategy. And that's really what's appealed to um, shareholders. Um, you know, we, we've, we, we've, we've really performed quite well since coming, since spinning off from Lennar. And I think it's really the visibility around and the consistency around our revenue stream as well as the growth that we've been able to demonstrate.

Darren, thanks for being here. Appreciate it.

Thank you very much for having me.