Tides Equities' Looming Cash Calls Could Fall Heaviest On Texas

Tides Equities has joined the league of multifamily investors in Texas that got in while the going was hot and are now suffering the consequences of the market’s precipitous decline.

The firm is calling on its limited partners to inject equity into its portfolio as falling values and soaring debt payments stymie profits. More than half of the firm’s 43 properties are in North Texas, while another three are in Austin, according to The Real Deal.

Tides went on a buying spree during the pandemic, amassing an apartment portfolio of $6.5B, mostly throughout the Sun Belt, where double-digit rent growth and strong in-migration attracted a wave of investment.

Now, as maturities loom on 47 loans comprising $1.5B, executives said some of its holdings are in negative cash flow territory. One of those properties, Tides at Lewisville, has a debt-service coverage ratio of less than 1, per TRD. Tides on North Plaza and Tides on Copper Creek, both in Austin, are in the same boat.

Tides is among the slew of apartment buyers that used bridge financing to acquire properties in 2021 and 2022. Many have seen mortgage payments skyrocket amid a series of interest rate hikes totaling more than 500 basis points. 

“Increased costs on the bridge loan are almost doubling our mortgage, which is by far our largest expense,” Shakti C'Ganti, founder and CEO of Dallas-based multifamily investment firm Ashland Greene, told Bisnow in a previous interview. “You’re having a cash crunch at all properties.”

That pain will likely lead to a spike in defaults in the coming months as owners of floating-rate debt struggle to refinance, leaving many to choose between selling or handing the keys back to the bank.

Close to 40% of the $2.6T of loan maturities scheduled through 2027 are concentrated in the multifamily space.