Tides Equities is set to lose operational control of one of its largest Texas assets — a sprawling apartment complex that marked the syndicators’ expansion into the Austin market.
Tides defaulted on a $103 million loan backed by the 636-unit Tides on Copper Creek, according to a petition filed by its lender Rialto Capital Advisors.
Rialto has asked the court to expedite the appointment of a receiver because Tides “is either unwilling or unable to pay its property manager… multiple mechanic’s liens … and ongoing operating expenses.”
The multifamily firm, led by Sean Kia and Ryan Andrade, defaulted on four fronts, Rialto claims.
It failed to make its April and May loan payments or obtain a new interest rate cap, a protection against rising rates, after its existing cap expired in January. Tides also racked up nearly $350,000 in liens and quit paying its property manager RPM Living, the petition alleges.
Kia said Tides is “working with Rialto on a loan modification here and part of the process is getting a receiver in place.”
“We agreed to it,” Kia added.
Rialto declined to comment. RPM did not respond to a request for comment.
While negotiations are ongoing, Kia said Rialto has “full control of the asset,” and all funds from the property are being “swept” to the lender, which has released those funds to pay RPM.
Still, the petition speaks to a rescue plan gone awry for an owner scrambling to shore up dozens of assets.
RPM stepped in last summer to manage at least 50 Tides properties after correspondence between Tides and partner AMC Investments revealed the multifamily firm was hunting for capital to stave off defaults.
By April, RPM was threatening to abandon Tides on Copper Creek, Rialto’s petition alleges, claiming Tides owed the property manager $1 million, in default of their management agreement.
Rialto alleges it advanced $1.1 million to RPM in late April, to “protect its collateral and keep tenants from abandoning the property.” The complex was plagued by essential safety issues — rusted-through stairwell supports, broken railings and cracking concrete stairs, Rialto claims.
The next month, the lender learned the “emergency” infusion wasn’t enough to cover the bill. Tides owed more than $2 million, all told, according to the petition.
“Lender is also aware of an alarming amount of aged payables at the property,” Rialto Executive Nick Powell wrote Kia and Andrade in a May 20 email.
Powell asked the principals to either confirm Tides would pay RPM by the end of the week and remain current on its bills, or consent to a petition the lender had drafted to appoint a receiver.
“Unfortunately, funding for the site has dried up,” Kia responded the next day. “Given the current interest environment, the continued funding needs for this property are unsustainable.” Kia signed off saying that the firm is “eager to come to the table to discuss options for a path forward that is beneficial for all parties involved.”
If Tides on Copper Creek enters receivership, Rialto can release funds to cure Tides’ defaults with RPM and keep operations running, according to the petition.
RPM has not sued Tides for defaulting on its management agreement for Copper Creek. But the firm has filed petitions alleging that various entities tied to Tides (Tides at Cheyenne and Tides at West Cheyenne in Las Vegas; Tides at North Dallas; and Tides on North Collins in Arlington, Texas) failed to pay management fees and breached contracts.
RPM alleges the properties’ unpaid bills total $633,339.
“The properties are working on capital injections to pay RPM in full,” Kia said in an email, adding that the firm maintains a “great relationship with RPM as they still manage dozens of our assets.”
Andrade detailed that the lack of funds stems from the “mechanics of the deal[s].”
“All funds received at the site are first sent to the lender and therefore could not be used to pay RPM in a timely manner,” Andrade wrote in an email.
“We are still working with RPM on finding a mutually acceptable solution here,” he added.
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