Dream Finders closed its $2.2 billion Beazer deal with $1.1 billion from Millrose

Dream Finders Homes founder and CEO Patrick Zalupski closed the purchase of Beazer Homes on Oct. 20, paying $33.50 a share in cash in a deal with an enterprise value of about $2.2 billion ^[1]. It is Dream Finders’ ninth acquisition since its 2021 IPO and its largest ^[1].

Millrose Properties, the land bank Lennar spun off ^[6], supplied about $1.1 billion of capital support, including about $488 million of preferred equity in Dream Finders with a 12% dividend ^[4].

Beazer added four states and about 24,500 lots

Zalupski said the deal takes Dream Finders “into new markets where Beazer was already proficient” ^[1]. The combined company adds California, Nevada, Indiana and Delaware, and it gets bigger in Texas, Florida and four other states where both builders already operated ^[1].

At the end of June, Dream Finders controlled 54,091 lots and Beazer 24,489, according to The Builder’s Daily ^[5]. Beazer owned about 40% of its lots while Dream Finders owns almost none, so we calculate that roughly 9,800 owned Beazer lots came with the deal at that point ^[5].

Millrose holds the land and Dream Finders buys the lots over time

Under the plan Millrose announced in August, it buys homesites from the combined company, and Dream Finders keeps options on them, pays option fees during development and buys finished lots over time ^[3]. Millrose CEO Darren Richman called it “a compelling example of the flexibility and value of our permanent capital platform” ^[3].

Millrose funded $171 million of the preferred equity on Sept. 14 and $317 million at closing ^[4]. At 12%, we calculate that $488 million of preferred stock costs Dream Finders about $59 million a year in dividends, before any land banking fees ^[4].

Dream Finders earned less per home before the deal closed

Zalupski said “margins remain under pressure” as Dream Finders reported its third quarter ^[2]. Net income fell to $6.7 million from $47.0 million, a figure that includes $23 million of Beazer transaction costs ^[2].

How to use this

For land and lot sellers in Beazer’s markets

1. Plan for an offer that pairs a sale to a land banker with an option for the builder, since that is how Millrose set up the Beazer homesites ^[3]. Ask who will hold title, who pays the option fees during development and what happens if the builder stops buying lots.
2. Use Dream Finders’ own deposits as your opening ask. It held $490.2 million in lot deposits at Sept. 30 against 52,574 controlled lots ^[2], which we calculate at about $9,300 a lot.

For buyers of new homes

1. Ask the sales office in a former Beazer community to confirm in writing that your price, incentives and closing date carry over. Dream Finders expects more one-time costs and deal abandonment charges in the fourth quarter as it combines the two companies ^[2].
2. Bring the price trend into the negotiation. Dream Finders’ average closing price fell about $17,800 in a year to $459,148 ^[2], which suggests the company is already giving ground on price.

For investors and lenders

1. Hold management to its debt target. Total debt was 54.3% of total capital at Sept. 30, before the deal closed ^[2], and the company says it can return to current leverage metrics within 18 to 24 months ^[1].
2. Set the savings against the cost of the money. Dream Finders expects more than $100 million a year in cost savings ^[1], compared with the roughly $59 million a year of preferred dividends we calculate from Millrose’s terms ^[4].