As Tides Equities hunts for capital to patch its cash-strapped apartment portfolio, cracks in the debt on those properties have deepened.
Ten more loans totaling $352 million and backed by Tides buildings in Texas, Nevada and Arizona have landed on servicers’ watchlists in the past month, according to Trepp.
All told, nearly $1 billion in mortgages securing 27 multifamily properties has been watchlisted, an analysis of Trepp and Morningstar data shows.
Servicers can watchlist real estate loans for any number of reasons, from something “most people would call benign” like cracked sidewalks to more serious risks of default, such as a low debt service coverage ratio, said Trepp’s head CMBS researcher, Manus Clancy.
But the Tides properties appear to be struggling financially. Of the 19 watchlisted loans with updated financials, 14 are on properties where cash flow did not cover monthly debt service.
Susan Saelee, Tides’ director of transactions, said the watchlisted deals weren’t an area of “grave concern.”
“We intentionally take units offline to renovate them resulting in temporary blips in DSCR along the way,” she wrote in an email.
That’s only half the picture. Tides co-founders Ryan Andrade and Sean Kia told investors in June that rising rates on its floating-rate debt had caused a cash flow crunch and warned that a capital call could be imminent.
This month, the firm rolled back that request, telling investors it would first explore loan workouts, preferred equity and funds from its largest backer, AMC Investments.
A number of companies are struggling after raising money from investors and taking out floating-rate loans to buy and fix up apartment complexes. Interest rates have since shot up and some improvements necessary to raise rents have been delayed.
Tides did not comment on whether it has since secured more capital. However, Saelee added that Tides “has well-capitalized partners that understand the business plans and the higher interest rate market that we are in.”
“We feel confident that we will be well above the required DSCRs in due time,” she added.
Despite the warning signs, Tides is current on most of its portfolio’s debt. Just three loans are marked past due, according to Trepp and Morningstar, and all for fewer than 30 days: the debt backed by Tides on North Paradise in Last Vegas, Tides on Gilbert West in Mesa, Arizona, and Tides on Oakland Hills in Fort Worth, Texas.
Saelee countered that all three of the loans are current.
When property owners are strapped for cash, they typically pay lenders first. Property tax payments and maintenance are put off instead.
Google reviews show Tides is having difficulty keeping up with service requests at the buildings.
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“Horrible place to live… it’s been about 4 days without hot water,” Alexis Calderon posted about Tides on Duneville in Las Vegas last month.
“I’ve been having problems with sewage flooding my home since mid December, so I haven’t been able to stay in my home since,” a resident of Fort Worth’s Tides on Post Oak commented early this year.
The owner apologized, as it has for nearly all negative reviews. “We pride ourselves on our service and would like to make things right,” Tides wrote. “To discuss what happened and how we might make it up to you, please call us.”
One tenant responded, “[These] people will act like they care by saying contact the leasing office but they don’t even pick up!”