Freedom Broker: Millrose real estate fund gains a new source of growth

Freedom Broker analysts maintained a “Buy” rating on Millrose Properties (MRP) shares and a target price of $35. At the current price of $29.76, this implies upside potential of about 17.6%. In the analysts’ view, the second quarter confirmed the resilience of the company’s cash flow, while entry into the multifamily segment expands the market for its land-banking model.

Millrose expands its model beyond single-family housing

Millrose Properties is a specialized real estate company that acquires, finances, and develops land parcels for residential construction, and then gives developers the option to purchase ready-to-build sites under long-term agreements. The company’s key partner remains Lennar, but Millrose is gradually increasing the number of third-party developers and diversifying its portfolio.

Freedom Broker believes the Q2 results overall aligned with the investment thesis: despite a slowdown in new capital deployment, the company was able to sustain AFFO growth through reinvestment of released funds. At the same time, expansion into the multifamily segment creates a new potential source of growth.

AFFO reached a record level

The company’s Q2 revenue totaled $196.9 million, up 1% quarter over quarter and 32.1% year over year, but came in slightly below Freedom Broker’s estimate of $202 million. Net cash proceeds from home sales totaled $1 billion.

The main source of income remains option fees: they amounted to $195.4 million, up 5.5% quarter over quarter and 38.5% year over year. At the same time, income from lending to developers fell sharply—to $1.5 million from $9.6 million in Q1—after one borrower repaid a $284.2 million loan early.

Despite this, AFFO (a metric reflecting the actual cash flow of real estate investment trusts) increased to $127.6 million, or $0.77 per share, from $125.9 million, or $0.76 per share, in the prior quarter. Year over year, the metric rose 10.9%. The result nearly matched analysts’ forecast of $128 million, or $0.77 per share.

New segment expands growth opportunities

Analysts cite Millrose’s first entry into the multifamily housing segment as an important development of the quarter. The company began a land-banking partnership with JPI, a subsidiary of Japanese construction company Sumitomo Forestry.

In addition, Millrose announced its intention to provide land-banking financing for the planned acquisition of homebuilder Beazer Homes by residential developer Dream Finders Homes. The deal between the developers has not yet been finalized, so its contribution to the company’s results remains uncertain.

The number of Millrose counterparties increased to 19 from 17 in the prior quarter. As of end-June, the platform covered 143.8 thousand lots across 877 residential projects in 30 states.

Capital is being deployed more slowly than planned

Millrose’s invested capital reached $8.8 billion, including $5.95 billion under the agreement with Lennar—in February 2025, Lennar Corporation completed the separation of Millrose Properties into a standalone business via a taxable spin-off—and $2.85 billion under other agreements. The portfolio’s weighted-average yield remained at 9.2%, while the implied income rose to $204 million per quarter.

At the same time, the pace of portfolio expansion slowed. Invested capital under agreements outside Lennar increased by only $117 million versus $365 million in Q1.

Management expects to deploy about $1 billion of net new capital in 2026 through additional debt. Theoretically, absent constraints, investment volume could reach $2 billion. However, Freedom Broker analysts are cautious about the timeline for executing this part of the plan: with the current debt-to-capitalization ratio at 30%, further funding solely through borrowings would bring the metric closer to the set limit of 33%.

First-quarter figures

In May, Millrose Properties reported results for Q1 2026 that came in below Freedom Broker analysts’ expectations. The company specializes in financing land parcels for residential construction and works with the largest U.S. developers, including Lennar Corporation. Freedom Broker maintained a “Buy” rating despite lowering the share price target from $40 to $35.

For the quarter, Millrose revenue totaled $194.9 million versus analysts’ forecast of $202 million. AFFO reached $125.9 million, or $0.76 per share, which was also below expectations of $130 million and $0.79, respectively. Portfolio yield remained stable amid falling interest rates.

Freedom Broker analysts noted that the main constraint on further scaling of the business remained the debt load. Management confirmed its plan to deploy up to $2 billion of new capital in 2026, but analysts considered it unlikely that the first $1 billion tranche could be absorbed quickly solely through debt financing.

Millrose continued to diversify its business: the number of builder partners increased to 17. The company also converted its credit facility to an unsecured structure and increased total available financing to $1.835 billion.

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