Millrose Properties (MRP) Q2 2026 earnings call transcript

Good morning. And thank you for joining us to discuss Milrose property second quarter 2026 results. Joining me on the call today are Darren Richmond, our chief executive officer and president. Robert Nickkin, our chief operating officer. Garrett 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 discussion may include forward looking statements and references to non gap financial measures. These statements are subject to risk and uncertainties that could cause actual results to differ materially from those expressed or implied. For a more complete discussion of these factors, as well as reconciliations of non gap measures, please refer to our earnings release and investor presentation, both of which are available on our investor relations website.

With that, I'll turn the call over to Darren.

Thank you, Jesse, and good morning, everyone. Milrose delivered another strong quarter. We grew invested capital boosted recurring FFO deep and builder relationships and expanded the range of solutions our permanent capital platform provides demand for what we do has never been higher, even as builders continue to navigate a fourth consecutive year mortgage rates above 6% elevated incentives and a full year 2026 delivery guidance moving lower across the largest public builders.

In this environment, as we said before, builders are balancing for competing objectives simultaneously, maintaining sales pace through pricing and incentive strategies, protecting profitability and a more competitive selling environment, preserving and growing their future community in an account, and limiting capital tied up in long duration land ownership.

Those priorities have made capital efficiency a necessity and our permanent capital platform was created to respond to that very need. Home builders cannot simply stop their production activity because near term demand moderates. The communities that they expect to deliver in 2028 and 2029 require land acquisition and development decisions today. The Milrose platform allows builders to continue investing for long term growth while preserving balance sheet flexibility and improving capital efficiency.

We believe this is more than a cyclical response to today's market. It reflects a structural evolution and how builders think about capital allocation. That evolution is playing out visibly across the sector with public builders owned and controlled lot positions trending low for four consecutive quarters. Builders are not chasing land at any cost. They are right sizing land inventory to match demand and are now more regularly outsourcing ownership to third party capital providers like ourselves.

Turning to our second quarter results, our invested capital reached approximately 8.8 billion at quarter end. Importantly, we recycled approximately $1 billion during the quarter capital return from builder takedowns and development loan repayments and redeployed it into approximately 1.1 billion of new opportunities at unwriting standards that have not moved. That velocity of deployment held to a consistent underwriting bar is what a mature permanent capital platform is designed to produce.

There were no option terminations across the platform this quarter. And in fact, zero option terminations since the inception of Milrose platform. Every counterparty has honored every option contract as scheduled. Against a backdrop where several public builders have continued to record walk away charges on parcels they chose to abandon the durability of our portfolio reflects both the quality of our underwriting and the strength of our builder relationships. We now serve 18 third party counter parties, including several of the nation's largest home builders with approximately 32% of invested capital deployed outside of our founding Lenar master program agreement.

We added two new counterparty relationships this quarter. Among them is a new land banking relationship with JPI, a wholly owned subsidiary of Sumitomo forestry, which represents our first expansion into multifamily assets. This is a meaningful new use case for the platform and it opens additional runway across the residential housing ecosystem beyond expanding our counterparty set. We are also finding new ways to deploy capital across the platform. And may we announced our intent to provide land banking capital in support of dream finders homes proposed acquisition of these are homes.

While there is currently no agreement in place between those two parties, we believe the announcement illustrates a broader strategic role Milrose is beginning to play. Not just supporting organic growth at our counter parties, but facilitating capital efficient consolidation across the industry.

With M&A activity accelerating across the home building sector, we expect further opportunities to demonstrate that capability. FFO for the quarter was 127.6 million or 77 cents per diluted share driven by higher recurring option fee income on growing invested capital base. That figure absorbed a first day of quarter early repayment of approximately 284 million of development loans, which Garrett will unpack in more detail.

Our run rate FFO exiting the quarter was approximately 80 cents per share at the high end of our previously provided exit run rate guides.

At the same time we continue looking for opportunities to improve our business internally. Our technology platform and operating infrastructure have matured and we have turned increasing attention to how our business operates it at every level. We are focused on making sure every dollar of capital is working as hard as possible. And we expect to that focus to show up in our results over time.

We maintain a strong capital foundation with approximately 1.4 billion of available liquidity and a conservative balance sheet. Finally, we declared our sixth consecutive quarterly dividend increase, raising the dividend to 77 cents per share. The dividend is fully supported by recurring FFO and represents an annualized yield of approximately 8.8% on book equity. We believe the consistency of our dividend growth reflects the durability of our earnings model and our confidence in the platform's long term trajectory.

With that, I'll turn the call over to Rob for an operational update.

Thank you, Darren. Our platform had another strong quarter across capital deployment portfolio management and capital recycling. We remain focused on deploying capital into high quality opportunities while maintaining the underwriting discipline that defines our business and on making the platform more productive as it scales. We ended the quarter with approximately 143,771 home sites across 877 communities in 30 states, serving 19 counter parties after adding two new relationships during the quarter.

As Darren mentioned, we're excited about a new land banking relationship with JPI, a wholly owned subsidiary of Sumitomo Forestry, which represents another expansion of the use cases for the mill rose platform across the residential housing ecosystem. The continued diversification of the portfolio beyond our foundational and our relationship reflects the growing adoption of our permanent capital solution across the home building industry. Our counter parties continued to perform, and we again saw no option terminations across the portfolio amidst approximately $1 billion of net repayment proceeds in the quarter.

While it's easy to make broad statements about the national housing market, our continued strong performance is a reminder that housing is highly local and property specific housing brought profitability can vary widely by location, product type and land basis. That's why our data driven systematic approach to underwriting is so crucial.

As you'll hear further from Stephen Hensley, we track home sales in real time and benchmark against proprietary lot pricing data sets, adjusting for specific sub markets and lot sizes. That quantitative discipline is what underpins the durability of the portfolio and our confidence in it. Capital recycling was again a defining feature of the quarter. Roughly $1 billion came back to us from takedowns and development loan repayment.

We redeployed all of it and more into approximately $1.1 billion of new deals with the modest revolver draw funding the difference.

Operational execution remains one of our key differentiators. The combination of our technology platform experience team and discipline processes, let us evaluate a high volume of opportunities efficiently and proactively manage risk across a geographically diverse portfolio. As we scale, we keep sharpening those process to drive further efficiency and ultimately stronger returns for our shareholders. That scale continues to strengthen our competitive position.

Managing a portfolio of this size requires sophisticated systems, deep market knowledge and operating infrastructure built over many years. Capabilities that become increasingly valuable as builders seek experienced institutional capital partners. That same scale and infrastructure also position us to support capital efficient M&A across the industry. As Darren noted, the potential opportunity with Dreamfinder's homes is one example of how our platform can help facilitate strategic transactions. And with industry consolidation accelerating, we're optimistic about further opportunities to demonstrate that capability going forward.

Turning to portfolio composition, full and our master program agreement continues to provide a stable foundation representing approximately 68% of invested capital. The remaining 32% is deployed through our other agreements, which remain the primary driver of growth and diversification across counterparties and geographies. These other agreements generated a weighted average yield of approximately 10.6% during the quarter. In today's market, we've prioritized higher quality opportunities, stronger builders, less development complexity and a greater margin of safety.

A mix shift towards lower risk assets strengthens the durability of our recurring income. These options rates are generally floating and subject to contractual floors, which protect the yield on our invested capital if benchmark rates decline, while remaining poised to benefit in the event that benchmark yields increase going forward.

Looking ahead, our priorities are unchanged. Discipline capital deployment, food and portfolio management and expanding relationships with high quality counterparties. We continue to explore additional applications for the platform that meet our criteria for a FFO accretion. Our pipeline is active, our opportunity set continues to grow and we remain as focused on how the business operates as we are on the capital we deployed.

With that, I'll turn the call over to Stephen who will provide you an update in the housing market and why our constructive stance has not changed.

Thank you, Stephen, and good morning, everyone. Our second quarter results reflect what happens when permanent capital meets disciplined underwriting every dollar we deploy translates directly into recurring income for our shareholders. For the second quarter, we reported net income of approximately 125.9 million or 76 cents per diluted chair driven primarily by 195.4 million and recurring option fee income generated from our growing invested capital base. Together with 1.5 million in development loan income.

As we've discussed previously adjusted funds from operations or a FFO remains the best measure of the recurring earnings power of our business. A FFO for the quarter was approximately 127.6 million, where 77 cents per diluted chair reflecting continued growth and recurring option fee income on a higher average invested capital base. On the first day of the quarter, approximately 284 million of development loans were repaid early. We redeployed that capital during the quarter into new opportunities at our current underwriting standards. Because the repayment occurred at the start of the quarter reported a FFO reflects a partial period of reinvestment. Our run rate a FFO exiting the quarter was approximately 80 cents per share at the high end of our exit run rate a FFO guidance range and a better representation of the platform's underlying earnings power of the fully redeployed base.

Book value per share was $35 and 24 cents a quarter in management fee expense total 29.9 million calculated transparently at 1.25% of gross tangible assets. Interest expense was approximately 40 million and income tax expense was approximately 2.5 million. During the quarter, we declared our sixth consecutive quarterly dividend increase, raising the quarterly dividend to 77 cents per share or approximately 127.9 million in the aggregate.

The dividend continues to be fully supported by our recurring earnings and reflects our confidence in the long term cash generating ability of the platform. On the balance sheet, we ended the quarter with approximately 9.7 billion of total assets and approximately 8.8 billion of invested capital. Our debt to capitalization ratio remained approximately 30% and we are in the process of finalizing a deal with our lending partners to reduce the borrowing rate on a revolving credit facility by 25 basis points in exchange for a fee.

We ended the quarter with approximately 485 million outstanding under our revolving credit facility, 34 million of cash and approximately 1.4 billion of available liquidity, providing ample financial flexibility to support our active deployment pipeline.

With that, I'll turn the fall back to Darren.

Thanks, Garrett. Before we open the lineup for questions, I'd like to leave you with a few closing thoughts. This quarter reinforced what the numbers have shown every quarter since inception. Demand for our permanent capital solution remains robust. Our partnerships are durable. Our underwriting capability is differentiated by proprietary technology and institutional scale and the platform keeps growing. Those fundamentals continue to position us well, regardless of where we are in the housing cycle.

We are deeply engaged with our home builder counterparties. The quarter continued to demonstrate that there are ways to deploy our platform creatively in response to builder needs while generating returns that mean our standards.

We expect to continue finding those opportunities and fulfill an expanding role as a strategic capital partner to home builders. Before I close a word on the broader picture. The United States remains structurally short several million housing units and the process of moving raw land through zoning entitlement and development approvals has never been more difficult or more time consuming.

That scarcity is not cyclical. It is a durable secular tailwind. It supports the underlying value of the land that Millrose already owns. All of which benefits from all necessary entitlements and discretionary approvals.

It is one of the most important and most under appreciated features of this platform. Those secular tailwinds are offset in the near term by cyclical headwinds. Elevated mortgage rates and what is broadly labeled affordability. As Steven mentioned affordability is a composite statistic that obscures the ways the market is actually adjusting buyers are getting older homes are getting smaller and a substantial wealth transfer from older to younger generations is quietly supporting demand at the point of sale.

It is unquestionably a tough market, particularly at the first time buyer segment, but the builders are meeting it with the ingenuity and age old tools, including rate buy downs, product make shifts, community level incentives and floor plans that are right sized for current market conditions.

Looking ahead, we remain focused on discipline capital deployment, deepening our counterparty relationships and expanding the ways this platform serves the residential housing ecosystem. Our pipeline is active. Our opportunity set continues to grow and our underwriting standards remain unchanged. I'd like to thank our builder partners for their continued trust and our shareholders for their continued support. We have built something that did not exist before, and we are just getting started.

We appreciate your interest in bill rose and look forward to updating you on our progress next quarter. With that operator, please open the line for questions.

Yeah, sure. Rob, thank you for the question, Julian, and good morning, everyone. So to your first question, yes, the yields of that multifamily product are totally consistent with the rest of our other agreements, you know, land banking deals outside of the linar master program agreements. So certainly a creative to our yields. And as we said, something that we're really excited about to use a very similar structure and economics of our bread and butter land banking product to another certainly very large portion of the home building market. And then, you know, in terms of going forward, yeah, I think we're certainly certainly looking forward to, you know, potentially do more of that. And anywhere that we can get the yields and the earnings, you know, that's a creative to our FFO and help provide capital efficiency for residential developers.

We'll certainly evaluate that, you know, within the constraints of all of our risk evaluations and underwriting. Yeah, I'd add, Julian, this, Darren, look, it's incumbent upon us to continue to disrupt ourselves, disrupt the market and develop new use cases for land banking. It all starts with making sure we're protecting capital. And we have additional, you know, margin of safety in everything we do. So making sure we're at first protecting capital and then getting the returns that we and our investors have come to expect.

But I would think in the next months and quarters, we'll continue to push out and find new structures and new use cases to deepen our relationships with our existing partners, as well as to find ways of targeting a new class of a partner.

Got it. Thank you. And then I was wondering, are you sort of setting aside deployment capacity for the proposed dream finders, these are deal or put another way if sort of another opportunity came your way. Would you be willing to sort of pivot to supporting that deal and sort of taking your leverage to, you know, the 33% or slightly above that sort of limit you've set.

Yeah, it's a good question. And, and quite, quite candidly, it's something that we as a management team continue to think through what is an appropriate leverage target we're not changing anything today on this call. But when we put the leverage target in place, it was very much into the unknown. We didn't know what the how the portfolio would behave.

We didn't know how our systems would function relative to the behavior of the portfolio. And we didn't know how the nonlinar, you know, third party deals would come together and what the duration of those deals would look like. And if you go into the prepared materials, the slides that we prepared, you'll see on page nine that the average duration. And associated with the nonlinar deals is certainly lower than the linar deals and we haven't had one builder walk away or threaten to do so.

So we have a lot more comfort in the consistency that we've always had comfort, but we have a lot more comfort in the consistency of the timing of the cash flows. So we are, we are definitely thinking through what is an appropriate target. We always thought about leverage in terms of downside protection and making sure we can inoculate our debt in the ordinary course, regardless of the market conditions.

And that, that isn't changed. You know, we want to make sure that we never put ourselves in a position where we're destabilizing our asset base because of leverage. But in view of kind of some of those facts that I just spoke about, we are thinking through, you know, what is an appropriate leverage target. In the ordinary course, we certainly feel more comfortable, which we've talked about in the context of M and A, taking our leverage target beyond the 33%. Because a lot of the land that we've acquired in Roush Coleman and in land C was much more developed quick turning. So we know that if we pause our purchases, we'll be able to generate cash rather quickly to pay down debt.

To answer your specific question about where we kind of husbanding cash, you know, reserving cash to make it available. That certainly is part of our priority of capital deployment. And so, so we're definitely thinking through an eye towards capital deployment for the entire year.

And what we've seen in other M and A, the timing isn't, isn't certain over any month, but, but over the year we have a high degree of predictability.

I don't know, Rob, what are you going to get at? No, I think just reiterating that, you know, we've had a billion dollars in head takedown proceeds, you know, including the development of payment this month. We've had, you know, similar sort of substantial takedown proceeds, you know, as we've talked about in the past, and you can see in the materials.

Since the founding of the company, I think we've seen as Darren alluded to, generally faster turning, more mature, faster velocity of cash generation. Across the portfolio, again, with no option terminations, then we initially thought we might encounter before the company existed. And so that's going to inform the way we think about capital planning and leverage going forward.

Okay, great. Thank you so much.

Yeah, sure. Eric, it's route. Happy to answer. So, so it is, you know, it's focused on, on the land and the horizontal improvements, right? So it is almost identical in structure to the rest of our, you know, land banking agreements. It's just obviously a different product with effectively rather than, you know, individual home sites. It's obviously single property more in structure. Think of it as like our yard lead business, you know, with tailmores, we described the past single tax lot.

Ultimately, where, you know, it includes, you know, many of the features you mentioned, just as all of our land bank contract to deposit, you know, a fixed option rate on the investment balance works exactly the same way. And ultimately, you know, just like in our, our single family, you know, bread and butter home building business, we're evaluating what the ultimate value of the community is, making sure there is enough, you know, development margin for the counterparty in that transaction such that they are financially incentivized to take down the land once it's fully developed from us. And if for whatever reason they don't, we make sure that net of the deposit we hold from the counterparty.

You know, we feel really good about our net land basis that we would own it free and clear in that scenario. So it's a great relationship. It's a great organization. We have a huge amount of respect and really enjoyed working with the JPI team. And we're looking forward to a lot of a lot of good things there, but yet totally consistent in structure with the rest of our business.

But Eric, it's there. This isn't maybe to your question. This isn't a one size fits all. It all starts with the land. It starts with the basis relative to the selling price of the units. It's part of our due diligence is like plan B, C, and D. What would we do with the land if we were to take it back. Who else could we bring in to transition that land to bring it to its intent, you know, the project to bring it to its intended use.

So we're going to be very, very selective as to what projects we consider in multifamily for many of the reasons that at least the thrust to your question would suggest.

Makes sense. And they're all for sale, not, not rental or you do consider rental as well.

No, they, they are rental. Um, that's, okay. Okay. Okay.

Yeah, the way to think about that is that's just the math of if you use, you know, the yield we're at today and our portfolio on the last day of the quarter right on June 30. If the portfolio just behaved exactly with those investment balances at those yield and that same cost of debt. And you realize that's, you know, that's where we're going forward, you know, that's where we're communicating sort of the quarter end run rate.

And so ultimately what that's really showing you is that the difference between the natural kind of linear ramp of the portfolio over the quarter, particularly with a little noise from that early. Development loan repayment gives you sense of where we are today and so it doesn't take into account any information or expectation about the third quarter so far or any changes.

Yeah, it's a really good question. The investment grade rating is important to us. It is among our priorities. We think the business itself and the consistency of the business justifies it. We're not here to front run the agencies and in terms of what their own opinions are and where they ultimately get to. But I do think as we continue to operate the business in the way we've operated it with the consistency that the business has shown with the debt levels that we're discussing.

It certainly puts us in a very good position to argue for investment grade. Having said that, as we said, making sure we have ample financial flexibility. To operate the business where we ourselves are learning how the portfolio behaves. You know, we now have five full quarters of watching the portfolio come together in terms of the existing linar land and how it's performed as well as building out our counterparty relationships.

Organically in the ordinary course and then through M&A. And so we have more insight today than we did at the time that we were spun out. And so we want to make sure that we're being very thoughtful, just like we are in terms of like the bottlenecking some of the some of the systems and processes inside of the company. We're thinking about making sure that we're being as optimal.

We're optimizing our leverage profile relative to the performance of the portfolio. So to answer the question, investment grade is important to us. It is a priority among a number of priorities. We're not going to do anything to jeopardize kind of the posture of the portfolio. We have no, we have no announcements to make today to push us outside of that 33% death cap. We're just, you know, being as transparent as we have been in the past in terms of re looking at our portfolio and rethinking our leverage target in view of the actual operating history we've had. And again, this, this operating history, the reason has occurred as Stephen talked about against a backdrop for the last two years of an uncertain and volatile housing market.

So we've gotten a chance to see how the portfolio behaves at a time when the markets have dealt us, you know, a number of the sector, a number of headwinds. So we've, we've been able to watch this portfolio behave under scrutiny.

Thanks for the detail.

Yeah, sure. Well, maybe just to reiterate the way we framed it is we sort of had two different scenarios we talked through in terms of our guidance. One was $1 billion of net increase, you know, assuming we didn't raise equity, you know, given given the leverage constraints that we set for ourselves. And then $2 billion, you know, with sort of the natural pipeline and what it would result in, you know, if we could. So if we were unconstrained, if we were unconstrained exactly by capital. But, you know, while on the one hand, we know we lived in a finite capital world, although thinking through that, you know, particular leverage perspective is there and alluded to.

Nothing's changed better expectations for the pipeline. You know, we certainly have some potential lumpy M&A opportunities that we're optimistic about. It's unclear if those are going to happen. But generally speaking, pipeline is still strong. We're seeing just seeing as much demand, you know, as ever from builders who need to maintain even in this environment, a good multi year land control pipeline and plan for years out and they're looking for a capital efficiency and doing so. And more and more see the value of a large institutional diversified public and transparent platform to be their partners. So nothing's changed about, you know, the general view of the pipeline.

It's just, you know, we continue to evaluate all the opportunities we're seeing in the context of in the context of our capital plan that we're thinking through.

Yeah, and maybe that to just fill out what Rob said, there's, there's more demand for capital. Then there is capital available. So it allows us to be thoughtful and patient and deploying those dollars, but we are sort of on pace organically relative to the expectations that we set. I think, you know, we were just talking about this as the management team.

Organically, we're probably putting plus or minus $400 million to work per quarter. With M&A, that number is probably closer to 500.

And M&A has become part of our roster and of our backlog. So there's nothing that stops us from from achieving that $2 billion target. Again, unconstrained by capital that we've talked about. It really is just making sure that we are not overlapping our balance sheet and we're not going to do anything dilutive as we've talked about from a capital from an equity capital raised perspective.

I think we're being opportunistic, you know, I would hesitate to call it a core strategy at this point. I mean, we're continuing to be focused on being a holistic solution to home builders and the capital efficiency solution to home builders. What we are, you know, students and the hands of the single family residential for sale market right now. But, you know, we would be remiss if we didn't think about the entire residential opportunity as a way to use the structure we've created and the benefits we've created. You know, we really like this particular partner. We like the specific deal that we were able to come to with them and they found a lot of benefit in it.

It's highly accreted to us and earnings and also presents a really good risk-weighted return. We feel really good about the strength of their balance sheet, certainly their financial backing and their development aptitude. So I would say at this point, we're being opportunistic. We're certainly spending more time thinking about that large addressable market. But I wouldn't think of it as a wholesale strategy change in any way just yet.

We're seeing one last point we're seeing across the board. And this is in our land banking business as much as across the entire spectrum is there is more of a need for capital today with the banks pulling back and receding from the sector. And so it gives us a lot more opportunity to create structures that are downside protected and produce the returns that we're looking for. And I believe we're going to continue. I mean, I'm very optimistic about the what's ahead of us in terms of expanding our product set to deepen our relationships with our home builder counterparts.

And to make sure we're adding value where there is opportunity and using our footprint and our relationships to the benefit of our shareholders. So I think there's absolutely an expansion of our product suite. And, you know, we're in the lab tinkering today and hopefully we'll have more to say over the next months and quarters as to filling out a product suite that is complimentary to our existing business and also deepens our relationship with our home builder counterparts.

No, I think it's all very much within the residential real estate market. This was created as a permanent capital vehicle for the benefit of the residential, mostly single family. But, you know, there is an opportunity multifamily now, but it really is meant to be an extension of the of the markets and the customers that we're doing business with every day.

Going forward, I would say it's going to be the more normalized run rate. It was basically changes in allocation of taxable income. It was based on updated market assumptions and third party analysis.

Yeah, when we say like the bottlenecking and optimizing, you know, it includes every aspect of our business taxes, cash management. You know, we we are now in the process of refining all our processes, our systems, every element that sits on our balance sheet, making sure that our cash is working for us. As productively and optimally as possible, and taking a look at our tax reserve policy was was certainly included in that.

Yeah, that's right. And I would not, you know, I wouldn't draw any trends from that. You know, there's always going to be a little bit of volatility as the mix changes around in the portfolio. You know, 10 base points, one way or the other. So I wouldn't extrapolate the trend, but yeah, you have it great.

I spoke about this on the last call, but, but the, and we spoke about in our prepared remarks. The, the move in rates, which is having an impact on affordability is really having an impact at the first time segment of the market. This is where there's probably the most competition going on. And what, what is kind of paradoxically happening is that as there's more and more volatility in rates and it's impacting prices and demand, we're seeing more and more builders, not not in the last five weeks, but I'd say on a macro basis.

Deciding to use off balance sheet financing, rather than pulling this land under their balance sheet at such an uncertain time. That it's, it's causing them to want to tie down land because they don't want to make decisions today that are going to impact their community count three to five years from now. Is by using more and more off balance sheet third party solutions. So there's nothing to speak to in the last five weeks that has changed behavior.

Our own baseline view is that rates are going to be elevated. And that, you know, that that is watch will be wrong, but, but our own view, at least, you know, in terms of planning for our businesses that rates will be elevated. For the, you know, for the, in the into the distant future. I don't know, Stephen, if there's any you'd add.

Yeah, Stephen, actually, why don't why don't you start and I'll finish.

Well, there, I don't know if you had anything else that on that. Yeah, I mean, our, we've been underwriting to this margin profile for as long as Millrose has been public and, and certainly longer for Kennedy Lewis. So this, this margin profile is something that we prioritize. So this isn't new and, and this seems no home price appreciation.

This is, this is kind of flat. The status quo, the existing environment in each of the markets that we, that we own land. So we wanted to make sure we were giving transparency into our underwrite into the quality of the portfolio into the margin profile. And the home builders themselves are reworking their own business lines to the bottleneck to bring costs down.

And there, there is, it's probably on the margin of margins where land values are correcting and the builders can take advantage of that. But mostly it's, they're taking advantage of cost deflation in other parts of their business.

Yeah, sure. Eric, well, we certainly considered and if you remember, as we talked through in the past, you know, our yard leave transact with Taylor Morris and that does include the vertical. So to the extent the builder uses a creative work, we're happy to evaluate that and do that. But yeah, on on JPI, it is multi family. We, you know, certainly spend a lot of time on the horizontal cost structure that's slightly unique to a single tax parcel multifamily property. But also, you're going to remember, it has the benefit that rather than relying on, you know, on a second order, an ultimate home buyer to come and buy it, you know, we ultimately look to the balance sheet of a really financially.

Strong counterparty for the takedown to buy that lot back from us and develop so that puts and takes either way. But we're definitely open to any way that we can get our capital to work. Again, accretively for us, whether that's vertically or just horizontally as JPI is only horizontal. But first, first goal is protect the capital, make sure that we're protected from the downside, but within those constraints maximize our yield in our creation.

I don't know exactly what you're referring to, but if you're saying like to sell off first lost pieces or to lever it, we, we're not going to do it on a one off basis. The leverage profile is really going to come from our balance sheet.

There may be opportunity to optimize our balance sheet in the future, but for right now. We're just, we're just using our revolver and the, and the notes that we've raised to provide that leverage profile.

Yeah, I mean, it, it, it, it's probably a really good reminder to everybody on this call that because it hasn't happened doesn't mean it won't happen. And we certainly think through, as I was saying in the context of JPI, but, but certainly for our more traditional business, you know, what is planned DC and D. If we do get terminations and it all starts with regardless of the credit enhancements that that may or may not exist. It all starts with the land itself.

It starts with the underwriting. It starts with our 45 person team, who is in the underwriting and the asset management part of the group. It starts with Stephen Hensley making sure that we have a full appraisal of the community that we're considering buying into. And again, we're using all of our real time indicators. So the nearly 300,000 home sites that we own as a company as Kennedy Lewis, not just millroads is giving us real time information in terms of sales, pace, pricing, margin.

We're underwriting to a 20 plus percent growth margin, which we talked about. And, and are we benefit from a deposit. Historically, that deposit was closer to 20 to 25% today in our portfolio. It's closer to 10. And really the difference is it's just credit enhancement. We're sort of agnostic as to if it's going to be a big deposit or people want to pull. It really depends upon how they do they want to sit with idle cash or not.

And so we've already thought through as part, maybe to get to your direct answer. Who builds adjacent? Who else could we bring in? If it's a mid-sized builder that walks away.

Almost unquestionably a bigger builder can build at a margin profile to make land work that maybe a mid-sized builder couldn't, couldn't make work. So we're constantly thinking about what is our contingency plan, including today, there's a whole world of BTR and scattered site rental. And all of which was carved out of the most recent regulation. So we feel very good about the quality of our portfolio. We feel very good about the basis. We feel good about the backdrop of how hard it is to get land approved for development. We've actively picked where our land is located, what communities we want to be invested in at what margin profile.

And who else we could bring in to the extent a builder did walk away for whatever reason that we could make that land work. Either with them on a modified schedule or with somebody else who comes in and merchant builds.

Great. Thanks so much. I appreciate it.

Yeah, I want to thank everybody for their participation today. I'll acknowledge that this call is probably the longest one we've had, which I think is great. It underscores the interest in our business and the nuances associated with the business. We're happy to provide as much information as people like on this call or feel free to get to any one of us after. We look forward to speaking with you in her quarter and in the next sports conference call. So thank you.