The Case for Private Credit
in Residential Real Estate

How are Arixa’s
debt funds performing
in today’s market?

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As interest rates remain elevated, many investors are considering a larger allocation to fixed income strategies, including private credit, to optimize their portfolios. In this environment, private credit stands out by offering the potential for attractive returns with low volatility—even as traditional bonds and other credit investments have lost value.1

Arixa’s private credit funds have consistently outperformed the bond market, even in the volatile interest rate environment of the past two years. As seen below, our retail funds have delivered higher returns than the Bloomberg Aggregate Bond Index in this period.2

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Arixa Capital’s funds are only open to accredited investors as defined by the Securities Act of 1933 under Rule 501 of Regulation D. In general, an accredited investor is an individual who individually, or jointly with a spouse, has a net worth that exceeds $1 million, excluding the value of their primary residence. A person may also qualify as an accredited investor if their income exceeds $200,000, or $300,000 jointly with a spouse, for each of the two most recent years and they have a reasonable expectation of the same level of income in the current year.

Arixa Funds Outperform Bond Index as Rates Rise2,3

(Relative Performance of Compounded Net Returns)

Even as we deliver attractive returns, Arixa remains committed to preserving investors’ principal. Investors have experienced no losses in the 14 years since the start of our retail funds as Arixa has achieved over 99% loan repayment (or recovery on foreclosed properties).4

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What’s Arixa Capital’s
game plan?

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How is Arixa capitalizing
on recent credit market
trends?

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The Opportunity

There are many varieties of private credit. At Arixa Capital, we specialize in financing residential real estate development and construction projects, including single family and multifamily homes. Banks have historically struggled to meet the needs of residential developers, and the recent regional banking crisis has further limited banks' real estate exposure, exacerbating these challenges.  

This dynamic has created a multi-billion-dollar opportunity for private lenders to step in and fill the gap. Arixa Capital recognized this golden opportunity and launched its first private credit investment fund in 2010. Today, Arixa is a leading private real estate lender, with more than $4 billion in loan originations since inception.

Our Proven Playbook

Arixa has developed an integrated lending platform that manages all aspects of the loan process in-house. This approach provides us with full control to ensure a best-in-class experience for our borrowers. Despite charging premium rates of 10.5%–11.5%, our borrowers remain highly satisfied and nearly 90% of Arixa's loan volume in 2023 came from previous borrowers and their referrals.1,5

What Does this Mean for Investors?

We believe Arixa’s lending platform effectively limits investment risk by controlling core processes—sourcing, underwriting, servicing, and funds control—while enabling near-time monitoring of loan performance. This hands-on approach helps ensure exceptional service for our borrowers and cultivates strong, lasting partnerships. We believe there's no better risk mitigant than lending to satisfied, repeat clients who consistently repay their loans. The success of our borrowers directly drives our ability to generate attractive income for our investors while safeguarding their capital.

The results are clear:

  • The Arixa Secured Income Fund, our first retail fund launched in 2010, has delivered 171 consecutive months of positive returns.
  • The Arixa Enhanced Income Fund, our leveraged retail fund, has generated 125 continuous months of positives returns since launching in 2014.

Source: Arixa Capital. Data as of June 30, 2024.

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Earn Consistent Income with Limited Volatility: Arixa’s Private Credit Funds

Historical Returns Investment Strategy

Historical Returns (As of 6/30/24)

For over 14 years, Arixa Capital has consistently generated attractive income with low volatility. We offer two liquid, open-ended funds for accredited investors: Arixa Secured Income Fund (ASIF) and Arixa Enhanced Income Fund (AEIF).

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Arixa Secured Income Fund

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Arixa Enhanced Income Fund

Arixa Capital’s funds are only open to accredited investors as defined by the Securities Act of 1933 under Rule 501 of Regulation D. In general, an accredited investor is an individual who individually, or jointly with a spouse, has a net worth that exceeds $1 million, excluding the value of their primary residence. A person may also qualify as an accredited investor if their income exceeds $200,000, or $300,000 jointly with a spouse, for each of the two most recent years and they have a reasonable expectation of the same level of income in the current year.

Investment Strategy

Arixa Capital provides senior secured, short-term loans to professional real estate investors, builders, and developers to finance the acquisition, renovation, and/or construction of their investment properties. We believe our lending platform delivers exceptional service to borrowers, allowing Arixa to deploy significant capital, carefully manage risks, and deliver attractive returns for investors.

Arixa Generates Consistent Income Through:

Loan Size: Arixa specializes in making loans from $1MM-$15MM, earning competitive rates as this segment is underserved.

Fixed Rates: Loans currently written from 10.5%-11.5%.5 Arixa’s rates are fixed, so current loans will pay at these higher levels until maturity, even if the Fed reduces rates.

Exceptional Service: Borrowers pay a premium for Arixa’s speed, reliability, and exceptional service.

Experienced Borrowers: Arixa works with professionals who have a track record of creating substantial value with their real estate investment projects.

Source: Arixa Capital. Data as of June 30, 2024.

Arixa Helps Preserve Principal Through:

Loan Seniority: All loans are first lien, secured by real estate.

Conservative Loan-to-Value: Arixa builds a robust margin of safety into each loan, with average LTVs under 66% at payoff.7

Diversified Portfolio: ASIF holds 55 active loans in its $197MM portfolio, while AEIF has 146 active loans in its $467MM portfolio.

Markets: Arixa focuses on residential real estate in Western U.S. markets, where the growing population, pro-business environment, nonjudicial foreclosure rights, and enduring housing shortage create opportunities for developers.

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About Arixa Capital

Founded in 2006, Arixa Capital is a leading private real estate lender and alternative investment manager with over $4.3 billion in originations completed since inception and over $1.3 billion of assets under management as of 6/30/24. As an independent, employee-owned firm, we are personally invested in the success of our borrowers and investors. Our reputation for reliability, transparency, and exceptional service inspires long-term relationships and is the foundation of our growth and success.

ENDNOTES

1The information provided is for informational and illustrative purposes only and reflects Arixa Capital’s beliefs and perspective, which may be incorrect. There is no assurance that any trends described herein will continue or events will transpire as described herein. No investor should place undue reliance on such information.

2The Bloomberg Aggregate Bond Index (hereafter, “Index”) tracks the performance of U.S. fixed rate corporate debt rated as investment grade and is used to measure the performance of the US bond market. Investors are cautioned about the benchmarks used herein or comparisons to public indices or composite indices. The private debt fund industry lacks both a comprehensive set of generally accepted rules for calculating and presenting rates of return and other elements of financial performance, and a comprehensive system for collecting and analyzing information from all funds, and such benchmarks may suffer from a variety of deficiencies. The Fund’s strategy differs from the Index in material respects, including liquidity and type of investments. The results of the Fund and the Index over a different period of time could differ materially from the information presented. Undue reliance should not be placed on comparisons to the referenced public Index.

3Net returns reflect the deduction of management fees, incentive fees where applicable, and other Fund expenses. Returns are time weighted and calculated based on the capital contributions received from limited partners, assuming re-investment of interest income for the Arixa Secured Income Fund and Arixa Enhanced Income Fund. The time weighted returns for limited partners who invested after 12/31/2021 may be lower. The performance information contained herein is provided for informational and discussion purposes only. Arixa Capital makes no representations, and it should not be assumed, that past performance is an indication of future results. There can be no assurance that the Fund will be able to achieve the rates of return indicated herein. Indeed, wherever there is the potential for profit, there is also the possibility of complete loss.

4Arixa Capital makes no representations, and it should not be assumed, that past performance is an indication of future results. Prospective investors should carefully evaluate the information presented in their analysis of any investment opportunity.

5Lending rates are subject to change. Current lending rates charged by Arixa are not necessarily indicative of future rates.

6Partial year returns are presented for the initial year of each Fund and for the first half of 2024. These are net returns which reflect the deduction of management fees, incentive fees where applicable, and other Fund expenses. Returns are time weighted, beginning with the launch date of each Fund (March 10, 2010 for the Arixa Secured Income Fund and January 27, 2014 for the Arixa Enhanced Income Fund) and calculated based on the capital contributions received from limited partners, assuming re-investment of interest income. The time weighted returns for limited partners who invested after the launch date of each Fund may be lower. The performance information contained herein is provided for informational and discussion purposes only. Partial year returns are considered hypothetical. Hypothetical performance results have many inherent limitations and there are frequently sharp differences between hypothetical performance results and the actual results subsequently realized by any particular investment strategy. Arixa Capital makes no representations, and it should not be assumed, that past performance is an indication of future results. There can be no assurance that the Fund will be able to achieve the rates of return indicated herein. Indeed, wherever there is the potential for profit, there is also the possibility of complete loss.

7The estimated final loan-to-value ratio is based on Arixa's internal analysis and diligence using several assumptions, data inputs and methodologies. The estimated LTV is provided for informational and discussion purposes only.

8The Fund may invest in investments that are smaller and larger than the average presented. The actual loan size may vary materially and is dependent on various factors.

IMPORTANT DISCLOSURES

The material on this webpage has been prepared by Arixa Management, LLC, the Managing Member of Arixa Secured Income Fund, LLC (“ASIF”) and the General Partner of Arixa Enhanced Income Fund, L.P. (“AEIF”), and is intended for informational purposes only. The information set forth on this webpage is confidential. Receipt and acceptance of this webpage shall constitute an agreement by the recipient that this information will not be reproduced, forwarded or used for any purpose, other than in connection with the recipient’s evaluation of an interest in ASIF or AEIF. Unless otherwise noted, all information is as of June 30, 2024.

The information contained herein has been prepared to assist prospective investors to evaluate a possible investment in ASIF or AEIF and does not purport to be complete or to contain all of the information a prospective or existing investor may desire. No representation or warranty, expressed or implied, is being made as to the accuracy or completeness of the information contained on this webpage, and nothing on this webpage is or shall be relied upon as a promise or representation or warranty whether as to the past or future results. This webpage contains preliminary information that is believed to be valid as of the date of this webpage, is subject to change, and may be superseded in whole or in part, at a later date. It does not contain certain material information about Arixa Capital Advisors, LLC (“Arixa Capital”) and/or any of its affiliates, including important conflicts, disclosures and risk factors associated with an investment in ASIF or AEIF. Neither Arixa Capital, nor any of its affiliates undertakes any responsibility or obligation to update the information contained herein. Prospective investors should be aware that an investment in ASIF or AEIF entails significant risk, including the possibility of loss of some or all of their committed capital.

This webpage is not intended to be, nor should it be construed or used as an offer to sell, or a solicitation of any offer to buy, membership interests in ASIF or AEIF. The information contained herein does not take into account the particular investment objectives or financial circumstances of any specific person who may receive it and is qualified in its entirety by the relevant Private Placement Agreement (the “PPM”). In the event of any discrepancies between the information contained herein and the PPM, the PPM will control. The information herein is not intended to provide, and should not be relied upon for, accounting, legal or tax advice or investment recommendations.

Neither the Securities and Exchange Commission nor any state commission has approved or disapproved of the investment or determined that this webpage is lawful or complete; any representation to the contrary is unlawful.

Arixa Secured Income Fund, LLC, is licensed with the California Department of Financial Protection and Innovation. In California, all loans in the Fund are made or arranged by Arixa Capital Advisors, LLC pursuant to a California Finance Lenders Law license No. 603L547 (NMLS ID No. 2318160).

Arixa Enhanced Income Fund, L.P., is licensed with the California Department of Financial Protection and Innovation. In California, all loans in the Fund are made or arranged by Arixa Management L.P., pursuant to a California Finance Lenders Law license No. 60DBO-73745 (NMLS ID No. 2318156).