Figure bolsters first-lien strategy with $717M deal for Kiavi

Figure Technology Solutions will acquire Kiavi in a $717 million deal that increases its exposure to real estate investor loans and the first-lien mortgage market, the companies announced Wednesday.

Under the deal, Figure will acquire Kiavi’s technology and operating platform, while a joint venture between Figure and global investment firm Sixth Street will purchase Kiavi’s balance-sheet assets.

Figure said the transaction will add more than $7 billion per year in new first-lien volume to its Figure Connect marketplace and more than $100 million in monthly volume to Democratized Prime, its on-chain warehouse platform. Kiavi’s products include short-term residential transition loans (RTLs) and long-term rental property loans known as debt-service-coverage ratio (DSCR) loans.

Following the close of the transaction, Kiavi CEO Arvind Mohan will join Figure’s executive team as chief business officer.

The deal deepens Figure’s push into first-lien products and investor-focused credit at a time when aging housing stock and tight for-sale inventory are driving demand for renovation and rental strategies. 

“The rental market is booming and many properties require short-term transition financing to cover renovation before they’re made rental-ready. Then, they’re often refinanced with DSCRs to cover permanent upkeep,” Figure CEO Michael Tannenbaum wrote in a blog post.

According to Tannenbaum, Figure’s first-lien business grew from 10% to 20% of its mix last year. It expects first-lien products to reach about 40% of its marketplace volume by the end of 2027. 

Deal financing

Figure plans to contribute $538 million to the acquisition via a $600 million issuance of senior unsecured notes. Ryan Tomasello, an analyst at Keefe, Bruyette & Woods, noted after the announcement that this will result in an estimated pro forma corporate leverage of about 2x. Sixth Street will contribute $179 million and is providing $3 billion in forward purchase commitments, he added. 

Figure characterized the Kiavi platform as high margin and asset light, and it reaffirmed its medium-term EBITDA margin target of roughly 60%. It expects the transaction to be accretive to earnings per share and to deliver an unlevered cash payback in less than four years.

The companies said the combination represents a roughly $200 billion annual addressable origination opportunity that Figure intends to move onto its tokenized rails. 

Figure said it currently accounts for about 75% of real-world asset tokenization. The Kiavi deal is meant to scale that foothold and accelerate its shift toward first-lien assets, a market it estimates is about 25 times larger than second liens.

Founded as LendingHome in 2013, Kiavi focuses on financing investors who buy, renovate, and rent or resell properties. It reported more than $250 million in revenue and more than $100 million in EBITDA last year, and it has funded more than $30 billion in loans to date, according to the announcement. 

“For the past 13 years, Kiavi has been focused on powering our data flywheel and proving what’s possible when technology and industry expertise converge,” Mohan said. “This transaction represents a massive leap forward for the asset class.”

Artificial intelligence

Kiavi’s loans will be the first use case for Adaptor, Figure’s new AI product aimed at automating agent-to-agent onboarding by normalizing originator data across assets on Figure Connect and Democratized Prime.

“Blockchain is a big idea, but the on-chain capital markets are in their infancy,” Mike Cagney, Figure co-founder and executive chairman, said in the announcement. “Figure needs to make bold moves to bring entire asset classes on chain.”

Barclays Capital Inc. served as exclusive financial adviser to Figure and Sixth Street, while Jefferies LLC advised Kiavi.

This article was written by Flávia Furlan Nunes and generated with the assistance of HousingWire Automation, then reviewed by a HousingWire editor before publication.