Place the warm milk and yeast in large mixing bowl. Let sit for 10 minutes, until it starts to get foamy. Add the sugar, butter, egg, egg yolk and salt; whisk to combine.
Add bread flour and knead with electric mixer for 8 minutes. At this point, you should have a soft dough ball. If it is still quite sticky, add more flour, approximately 2 tablespoons at a time.
Transfer to a well-greased bowl and cover with a towel. Place in a warm area and let rise until doubled, about 1 ½ hours. I usually turn my oven on for a few minutes until it’s warm, turn it off, and stick my dough in the slightly warm oven.
Once it has doubled in size, place it on a well-floured surface. Roll out into a large rectangle that is approximately 10 x 18 inches.
Spread 3 tablespoons of the softened butter onto the rectangle, then sprinkle with 2 tablespoons of brown sugar.
In a small skillet, add the remaining 2 tablespoons of butter, shredded apple, cinnamon and nutmeg. Sauté until apple is softened, about 5 minutes.
Sprinkle apple over dough. Roll the dough tightly so you have one long roll. Cut roll in half, and then into quarters. Cut each quarter into 3 even cinnamon rolls.
Place cinnamon rolls into a greased 9×13-inch baking dish. Cover with a towel and let sit at room temperature for 30-45 minutes.
Heat the oven to 350 F. Bake cinnamon rolls for 25-30 minutes, until golden on top.
Make the caramel cream cheese frosting by beating cream cheese, butter and caramel sauce in a bowl with electric mixer until combined.
Spread caramel cream cheese frosting over the warm cinnamon rolls. Serve and enjoy!