Lennar's $5B Reit to Take Off in 2025

Lennar Corp. announced plans to separate its land holdings into a new public entity named Millrose Properties Inc. The company aims to structure Millrose as a real estate investment trust (REIT). This transition involves contributing approximately $5 billion to $6 billion in land assets, a homesite option purchase platform, and up to $1 billion in cash.

Ownership Structure and Initial Operations

Lennar will distribute 80% of Millrose’s shares to its current Class A and B shareholders, with plans to later dispose of the remaining 20% through various transactions. Millrose’s primary role will be acquiring and developing land and providing prepared sites to Lennar on a just-in-time basis. Initially, Lennar will be its sole customer, though Millrose intends to expand its client base in the future.

Advancing Lennar's "Asset-Light" Model

The spinoff aligns with Lennar’s long-term goal of transitioning to an asset-light construction model. By shifting land ownership to Millrose, Lennar will reduce balance sheet risk, free up capital for homebuilding operations, and avoid the need to stockpile land. This strategy supports Lennar’s vision of becoming a streamlined home manufacturing company.

Strategic Management and Market Position

Goldman Sachs-backed Kennedy Lewis Investment Management, will manage Millrose after the spinoff. Analysts, including Bloomberg’s Drew Reading, emphasize the benefits of Lennar accessing land through off-balance-sheet arrangements, which mitigates risks associated with development in volatile markets.

Land Acquisitions and Financing Plans

Millrose plans to allocate $900 million to purchase land from Rausch Coleman, a homebuilder that Lennar is set to acquire. Additionally, Millrose is negotiating a $1 billion revolving credit facility and may explore other debt financing opportunities.