Starwood has notched another judgment against Tides Equities’ troubled principals, pushing their personal liabilities to new heights and sparking bankruptcy rumors among insiders familiar with — and now sympathetic to — their plight.
The latest ruling — the third in Starwood’s favor — brings Sean Kia and Ryan Andrade’s lender IOUs to a whopping $50.5 million, The Promote first reported.
“Poor guys,” a source familiar with the syndicators’ struggles said. “This has got to be a very tough situation.”
“There is no way they can afford to pay the judgments,” said an investor who has tracked the partners’ epic rise and fall. “I see no way they do not eventually declare bankruptcy.”
Kia and Andrade declined to comment on the Starwood ruling or rumors about their solvency. When asked about other suits over personal guarantees, Kia said he and his partner are working with lenders on equitable solutions in good faith. He noted specifics are confidential.
Starwood is one of four firms to sue the sponsors personally over breached recourse guarantees — promises to complete renovations, run lien-free properties or maintain rate caps, for example.
The suits rolled in after foreclosure auctions of Tides properties failed to draw interested buyers and credit bids could not cover the debt due, court filings detail.
Speculation about the sponsors’ insolvency has swirled for the better part of six months. Back in December, when suits from Rialto, Acres Capital and Starwood put the principals’ collective liability at the $58 million mark, sources said the figure would bankrupt most.
The caveat: Lenders who sued may be open to workouts.
Rialto proved one such firm. After slapping Andrade, alone, with a $4.8 million filing, the parties settled in early May, court records signal.
But the Starwood cases show there’s not only a path to repayment in the courts, but some New York judges are not buying the Tides guys’ defenses.
“Simply put, there are no questions of fact about the guarantors’ liability under the recourse guaranty,” New York Supreme Court Judge Andrew Borrok wrote in one Starwood ruling, citing an earlier decision by another judge that also favored Starwood.
It’s unclear how those judgments might affect the five other open cases against Kia and Andrade, but experts say one lender’s win could embolden others to file their own suits or stay the course on cases already in the courts.
A filing Acres lodged a couple of days before Starwood’s three-suit siege was headed toward a workout last month. A proposal filed May 16 detailed that the Tides guys and Acres “expect to have a final settlement agreement in the next two weeks.”
Over three weeks later and no update has hit court records.
Electra Capital, which filed its first of three suits against Kia and Andrade in January, was considering “mediation” back in March, according to a preliminary conference court transcript.
“This is right now the only litigation that we have brought to date, but there are other transactions that we’re seeking to address in the negotiations,” Electra’s attorney Danielle Marlow of Moritt Hoff and Hamroff said.
There have been no other updates in that case, but Electra has since filed two more suits against Kia and Andrade over breached recourse guarantees. The suits went live after the Starwood wins.
All told, there are five open suits against the Tides guys — two from Acres, two from Electra — that seek a minimum of $60 million.
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Tides guys sued personally for $40M as investors pile onto lender suits