Tides Equities Preferred Equity Deal Could Scrap Original Investors

Tides Equities said securing a preferred equity lifeline for 30 of its multifamily properties, which it's been chasing for months, could spark trouble for the portfolio's original investors.

The company is seeking $69M in preferred equity for its investment in a 7,300-unit portfolio across Nevada, Arizona and Texas, The Real Deal reported. If the company does secure the equity, 88% of the original equity in the deal could be scrapped.

Of the original investment, only $30M would be returned to the original limited partners, with some investors not seeing any return at all. This is because with preferred equity joining the capital stack, the preferred investors will get those proceeds first because they rank higher.

Tides said that without better terms from senior lenders, the properties would only produce enough cash for preferred investors.

“Scenarios do exist in which the math for existing equity does not work for preferred equity without significant improvement of terms from the senior lender,” Tides said in an emailed statement to TRD.

The company and equity partner AMC Investments went on a buying spree in 2021 and 2022, producing $6.5B worth of apartment complexes across the Sun Belt. The firm ran into issues as interest rates began to rise, causing monthly payments on its floating-rate debt to skyrocket.

This isn't the first time the group has needed to find alternative financing avenues for its debt. 

Last summer, Tides called on its limited partners to inject equity into the portfolio after the maturities of $1.7B in loans were coming due, but the firm was able to extend and recapitalize certain loans instead.

Multifamily investors who bought properties when rates were low are now running into similar issues and looking to alternative lenders as banks continue to distance themselves.