Tides Equities, which specializes in value-add multifamily deals, is having a cash flow problem. The Real Deal just revealed that it recently came into possession of an email from Tides Equities’ largest investor, AMC Investments, suggesting that Tides had negligently made mortgage payments by using money designated for paying vendor invoices. In an email in response to the article, Tides offered a bit of clarity on the situation, quoting a more recent email from AMC to Tides that read, in part, “Tides made decisions based on their best judgment and is now taking all necessary measures to support AMC in resolving the challenges we face and prioritize the best interests of AMC’s investors.” Those challenges amount to $12 million owed to companies that made renovations to Tides’ apartment properties, plus more than $14 million to fund other property needs through 2023. AMC is now pitching in to help with the formation of a fund, and Tides is calling on investors, even the independent ones, to come to the company’s aid with additional preferred equity.
Tides’ problem is a sign of the times. The company allegedly borrowed from Peter (in violation of regulations) to pay Paul or its lenders when it found itself low on cash. With any floating-rate loans, the company’s mortgage payments have certainly increased substantially with every hike in interest rates, which have climbed to their highest level in years. Many commercial real estate companies are struggling with loans in this unfriendly environment of high interest rates, decreasing property values, and stringent lending standards and are approaching their lenders in an effort to renegotiate loans or find a solution that doesn’t involve a default. Recently, however, multifamily investment firm RPM Living responded to Tides’ cry and committed to investing approximately $12 million into some of the properties co-owned by Tides and AMC. For Tides, should monetary assistance from its investors or any other contributors like RPM Living prove insufficient, a sit-down with the banks holding the company’s loans would probably be a good idea.
If AMC and Tides can find the funding to remain solvent, the question remains: who leaked the email and why? There is certainly dissension inside the companies that would compel someone to send an email like this to a publisher. There will likely also be distrust between the two companies, which will make getting this deal done even harder.