Figure Technology Solutions Acquires Kiavi for $717M

Figure Technology Solutions has announced a $717 million acquisition of Kiavi, aiming to expand its presence in the real estate investor loan sector. This strategic move integrates Kiavi's RTL platform and DSCR rental loans into Figure's existing services, specifically Figure Connect and Democratized Prime. The deal also involves a joint venture with Sixth Street to acquire Kiavi’s balance-sheet assets and market loans via Figure Connect, a development that positions Figure to capitalize on increasing demand in the first-lien mortgage market.

In financial terms, the acquisition is backed by a $600 million issuance of senior unsecured notes from Figure, contributing $538 million to the acquisition. Sixth Street will provide the remaining $179 million and an additional $3 billion in forward purchase commitments. This arrangement will result in an estimated pro forma corporate leverage of around 2x, according to analyst Ryan Tomasello from Keefe, Bruyette & Woods. Following the transaction, Kiavi will bring over $7 billion annually in new first-lien volume to Figure's marketplace, enhancing its on-chain warehouse platform by more than $100 million monthly.

The acquisition is strategically relevant as it aligns with Figure’s ambition to deepen its engagement in the first-lien mortgage products and investor-focused credit markets. With the aging housing stock and constrained property inventory driving the renovation and rental sectors, Figure seeks to capture the growing demand for short-term transition financing and permanent upkeep loan products. Figure CEO Mike Cagney emphasized the importance of making bold moves to incorporate entire asset classes onto the on-chain ecosystem.

The broader mortgage market is in flux due in part to Figure's increasing share in real-world asset transactions, currently about 75%. By scaling its operations through the Kiavi acquisition, Figure intends to enhance its footprint in the expansive first-lien market, a segment it believes vastly exceeds the size of second-lien assets. The transaction is expected to be accretive to earnings per share with a medium-term EBITDA margin target of approximately 60% and an unlevered cash payback within four years.

Regulatory approval will be a focus in the coming months, and Figure anticipates integrating Kiavi’s operations seamlessly, with Kiavi's CEO transitioning into the role of Chief Business Officer at Figure. There is optimism that this acquisition will significantly enhance Figure's product offerings and market share in the nascent on-chain capital markets, facilitating an expanded role in mortgage financing and related services.