Investors hit real estate company Millrose with fraud class action over undisclosed leases

Two stockholders claim the tangled financial relationship between homebuilding giant Lennar and its spinoff creates potential conflicts of interest.(CN) — In a class action filed in federal court, investors accuse Millrose Properties and two of its executives of misleading them about the Miami-based real estate company’s business strategy by quietly buying $200 million worth of homes from its former parent company, Lennar Corp., and renting them out at a potential loss.In the complaint, filed Friday in the Southern District of Florida, investors Leon and Sylvia Rubenstein claim Millrose and executives Darren Richman and Garrett Rosenblum made materially misleading statements about the company’s operations and prospects between Feb. 7, 2025, and Oct. 2.The Rubensteins, who brought the suit on behalf of other shareholders, say Millrose insisted it would focus on acquiring and developing residential land and selling finished homesites back to builders. They say the company also vowed it did not intend to hold lease agreements or have tenants on its properties.The investors cite from the company’s prospectus in the complaint: “We do not, and will not, have any lease agreements with respect to the transferred assets and the supplemental transferred assets, do not intend to enter into any lease agreements in the foreseeable future and do not, and will not, have any tenants or occupants on any of the properties in the real estate portfolio.”But Millrose later purchased at least $200 million worth of completed homes from its former parent company and began renting them out, the investors say.The accusations are based in part on an Oct. 2 report by Hunterbrook Media, which identified more than 700 purchases of Lennar homes by Millrose across at least 51 counties in 15 states. Millrose is renting the houses out at what appears to be a loss, according to an analysis by Hunterbrook.Lennar’s CEO, Stuart Miller, is the largest voting shareholder of Millrose, which spun off from Lennar last year. Lennar is one of the nation’s largest home construction companies.Millrose’s shares fell 8.5% after the report was published. The Rubensteins say they suffered losses because the company’s stock traded at artificially inflated prices because of misrepresentations and omissions.The investors, who are asserting claims under federal securities law, are seeking with their suit to represent others like them who owned Millrose stock during the proposed class period.Millrose, based in Miami, was spun off from Lennar in February 2025 and trades on the New York Stock Exchange under the ticker symbol MRP. It originally operated as a land-holding company for Lennar, which would repurchase the homesites as it prepared to build houses.Hunterbrook reported that Millrose and three Lennar subsidiaries amended an agreement on Aug. 27 to allow Millrose to acquire completed single-family homes and operate them as rentals. The report also said Millrose changed its management agreement to address the rental business and its operating expenses.In a follow-up story Thursday, Hunterbrook reported that Millrose told the investment firm Goldman Sachs that it purchased the homes from Lennar as part of a rent-to-own program, with tenants already lined up to occupy the properties.But reporters discovered dozens of the homes in Florida and Texas were unoccupied during visits. Representatives for a property management company hired by Millrose told the reporters they did not offer rent-to-own.The Rubensteins are raising concerns about Millrose’s relationship with Lennar in their suit. Lennar is Millrose’s largest customer and its CEO holds approximately 43% of Millrose’s voting power, the investors say, creating potential conflicts of interest.The suit seeks unspecified damages.Millrose did not respond to a request seeking comment.Subscribe to our free newslettersOur weekly newsletter Closing Arguments offers the latest about ongoing trials, major litigation and rulings in courthouses around the U.S. and the world, while the monthly Under the Lights dishes the legal dirt from Hollywood, sports, Big Tech and the arts.Additional Reads