National multifamily investor Tides Equities this week told its investors to expect capital calls as it faces a cash crunch.
That arose as questions have grown about the financial stability of many Sun Belt multifamily portfolios, which have faced pressure from rising rates and slowed rent growth. Tides, one of the biggest multifamily players in Texas, is facing the most significant test of its mettle yet, with thousands of units across the Lone Star state in the balance.
Drawing on data from Property Shark, county records and Tides’ website, The Real Deal compiled Tides’ Texas portfolio into the map below, illustrating the scope of the firm’s reach in one of the hottest states for multifamily investment in the country.
Some 25 of the firm’s 43 documented properties are in Dallas or Fort Worth, with a handful of others sprinkled across smaller cities in the metroplex, like Euless and Irving. Another three are in Austin.
In all, the portfolio spans at least 14,990 units across 8.9 million square feet. Together, they carry an appraised value of more than $1.3 billion, likely a severe undercount of actual value, given Texas’ murky appraisal system.
Tides snapped up larger, aging apartment properties across the region during the pandemic, acquiring some $6.5 billion worth of apartments across Sun Belt markets in 2021 and 2022. The firm conducted “assembly line” renovations to the properties, drawing discounts by working in bulk with contractors and suppliers, and raised rents to cover debt payments.
Many of those properties saw double-digit rent growth in that time, but were bought with floating-rate loans. As rates have risen, so have their debt payments. And the very cities that saw explosive rent growth a few years ago have now seen rates stagnate, or in some cases, even decrease as supply grows.
Some properties “suddenly became strapped for cash, as the operating revenues increasingly went towards the rapidly rising mortgage payments,” Tides said in its letter. “Many properties entered negative cash flow territory.”
Problem properties include Tides at Lewisville, the 404-unit comples at 201 East Round Grove Road. There, Tides’ reported debt service coverage ratio is less than 1, meaning the firm is not pulling in enough money to meet debt payments. The firm faces similar shortcomings at Tides on North Plaza in Austin, a property last appraised at $51.5 million. and Tides on Copper Creek, a 636-unit complex also in the capital city, according to data from DBRS Morningstar.
Tides did not immediately respond to a request for comment.
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