Lennar Corporation (NYSE: LEN and LEN.B, “Lennar”) and Millrose Properties, Inc. (NYSE: MRP, “Millrose”) have completed a successful taxable spin-off of Millrose from Lennar through a distribution of approximately 80% of Millrose’s stock to Lennar’s stockholders. As of the completion of the spin-off, there are currently 120,980,401 shares of Millrose class A common stock outstanding and 11,819,811 shares of Millrose class B common stock outstanding, distributed to Lennar stockholders (representing approximately 80% of the total outstanding shares of Millrose common stock).
In connection with the spin-off, Lennar has contributed $5.5 billion in land assets and $1.0 billion in cash to Millrose, resulting in a book value of equity for Millrose of approximately $5.8 billion as of December 31, 2024. Following the distribution, Millrose will have availability of approximately $1.3 billion under its revolving credit facility, with potential to increase to $2.0 billion in the future. Millrose intends to qualify as a real estate investment trust (“REIT”) for federal income tax purposes.
Lennar will temporarily retain and not vote 33,200,053 shares of Millrose class A common stock (representing approximately 20% of the total outstanding shares of Millrose common stock), which it expects to dispose of through subsequent transactions.
Millrose engages in land purchases, horizontal development, and homesite option purchase arrangements for Lennar and potentially other homebuilders and developers. Lennar’s acceleration of its land-light strategy has seen a significant transformation in its land strategy, increasing the percentage of controlled homesites from 19% at the end of 2013 to 82% at the end of 2024.
The spin-off transaction accelerates Lennar’s longstanding strategy of becoming a pure-play, asset-light, new home manufacturing company. Lennar’s return profile is expected to be significantly improved by increasing its cash flow conversion and return on equity.
Millrose is externally managed by Kennedy Lewis Land and Residential Advisors LLC, an affiliate of Kennedy Lewis Investment Management, with over $25 billion in assets under management. Darren Richman, CEO and President of Millrose Properties, Inc., stated that Millrose expects to immediately begin executing and closing accretive third-party deals, leveraging its financial expertise and industry relationships.
With the completion of this spin-off, Lennar and Millrose have taken significant steps to advance their respective strategies, and the market will be closely watching to see how these changes impact their financial performance and shareholder value in the future. The market has reacted to these announcements by moving the company's shares -4.0% to a price of $122.2. For the full picture, make sure to review Lennar's 8-K report.
