Affinius Capital and Axonic Capital have announced a new strategic partnership aimed at providing first mortgage financing for mid-market construction and development projects. The collaboration will leverage Axonic's insurance platform as a funding source, creating a new capital stream for a sector that has faced financing challenges.
Key Takeaways
- Affinius Capital and Axonic Capital have launched a strategic partnership to offer construction loans.
- The initiative targets the mid-market development sector, which the firms identify as underserved.
- Financing will be provided through Axonic's insurance platform, offering a stable and flexible capital source.
- The collaboration combines Affinius's construction lending infrastructure with Axonic's expertise in structured finance.
New Financing for Mid-Market Construction
Two major financial firms are joining forces to inject new liquidity into the middle-market construction sector. Affinius Capital, with its extensive background in construction lending, and Axonic Capital, known for its proficiency in structured finance, have established a platform to originate new development loans.
The partnership is designed to address what both companies see as a significant opportunity in the current financial landscape. By focusing on mid-market projects, they aim to serve developers who may find it difficult to secure capital from traditional sources.
This initiative represents a direct response to evolving market conditions, where access to reliable construction financing has become a critical factor for project viability. The collaboration will fund first mortgage loans, which are the primary debt financing for a real estate project.
What is Mid-Market Lending?
In commercial real estate, "mid-market" typically refers to projects that are too large for small local banks but may not meet the scale required by major institutional lenders. This creates a financing gap that specialized partnerships like the one between Affinius and Axonic aim to fill.
Combining Specialized Expertise
The strength of the new venture lies in the complementary skills of the two firms. Affinius Capital brings over a decade of experience in building out its construction lending infrastructure and sourcing capabilities. This established network is expected to be a key driver for originating new loan opportunities.
On the other side, Axonic Capital contributes its deep knowledge of creating agile and complex financing structures. This expertise is crucial for tailoring loan products that meet the specific needs of individual development projects.
According to Matt Weinstein, Co-CIO of Axonic Capital, the synergy between the two companies is a natural fit.
"Axonic’s expertise in developing agile financing structures is a natural match with Affinius’ strong presence in construction lending."
This combination allows the partnership to offer what Weinstein describes as "creative, flexible financing solutions" to an area of the market showing strong potential.
Addressing a Gap in the Market
Leaders from both firms have highlighted a perceived void in the availability of construction loans for mid-sized projects. This partnership was formed specifically to fill that gap.
Michael Lavipour, Senior Managing Director and Head of Lending at Affinius Capital, commented on the search for a suitable partner to tackle this market segment.
"We have been seeking the right partner to help fill what we perceive to be a gap in the market for construction loans in the middle market space."
The sentiment is that while large-scale "trophy" projects can often secure financing, and smaller projects can rely on local banks, the middle tier is often left underserved. This new platform is structured to become a primary capital provider for this specific niche.
Strategic Funding Source
A key aspect of this partnership is the use of Axonic's insurance platform to fund the loans. Insurance companies often seek stable, long-term investments that generate predictable returns, making first mortgage real estate debt an attractive asset class. This provides a consistent and scalable source of capital for the lending platform.
Future Outlook and Scalability
Both firms have expressed confidence in the potential to grow this new platform significantly. The goal is not just to close a few deals but to establish a durable, long-term presence in the mid-market construction lending space.
Weinstein of Axonic Capital noted the shared ambition, stating, "we look forward to scaling this platform together." This indicates a long-term commitment to the strategy and the market segment.
By combining Affinius's deal flow and underwriting infrastructure with Axonic's flexible capital, the partnership is positioned to operate with speed and efficiency. For developers, this could mean more reliable access to the financing needed to get projects off the ground, potentially spurring new development in cities across the country.
The success of this venture could also serve as a model for how specialized financial firms can collaborate to address specific market needs that are not being fully met by more traditional lending institutions.
