Tides and AMC find lifeline in Texas, then lose it

Syndicator’s largest investor says it found “no evidence of wrongdoing” by Tides

RPM Living’s Jason Berkowitz (middle) with Tides Equities’ Ryan Andrade (left) and Sean Kia (RPM, Tides)

Isabella Farr

Jul 28, 2023, 3:49 PMUpdated Jul 28, 2023, 5:11 PM

Tides Equities and AMC Investments thought they found a lifeline in Texas. But just as quickly, a key part of it slipped away.

Austin-based multifamily investment firm RPM Living agreed to invest about $12 million into some of Tides and AMC’s cash-strapped properties, according to a letter AMC sent out to investors on June 20 that was reviewed by The Real Deal. RPM, run by Jason Berkowitz, also agreed to take over managing all properties jointly owned by Tides and AMC — at least 50, according to AMC’s website.

But the preferred equity investment appears to have fallen through. RPM is no longer putting that money into Tides, according to Tides principal Sean Kia and RPM chief operating officer Josh Kahn.

The June 20 correspondence came six days after AMC warned its investors that more money needed to be injected into Tides-run deals to avoid default. Tides provided TRD with the June 20 letter after TRD published a story on the previous correspondence. AMC principal Jim Hopper confirmed the veracity of the letters in a subsequent email but declined to comment further. The company has invested north of $300 million in Tides deals, according to investor documents.

In its June 20 letter, AMC said it had not found any evidence of “wrongdoing or illegal activity” by Tides. AMC had earlier accused Tides of concealing property performance and fumbling initial projections on contractor repayments.

“There is no evidence to suggest that Tides has acted in bad faith or intentionally caused harm to the assets or the investors,” AMC wrote.

Over the past few months, Tides, which funded its multifamily empire primarily through floating-rate debt, has struggled with ballooning debt payments as the Fed has hiked rates.

Tides had warned investors that they would need to kick in more capital. And at least one firm, RPM, answered the clarion call.

The firm initially agreed to pump preferred equity into 18 properties, located from Arlington, Texas to Mesa, Arizona, according to the letter.

The rescue would have been expensive: RPM was to receive a 15 percent preferred return every year — much like investors in AMC’s second “capital infusion” fund set up to invest in Tides’ properties, AMC said. RPM was also to get a “significant percentage” of both Tides’ manager profits and its asset management fees.

The property management part of the deal remains intact.

Tides has already spent $21 million to cover operating costs, mortgage payments and other expenses across the AMC-Tides portfolio and agreed to forego any returns on this funding.

Tides is not RPM’s first dance with a multifamily syndicator. RPM has also managed apartments in Florida’s Palm Beach County owned by controversial showman Grant Cardone. An investigation by the Palm Beach Post found tenants at the property were routinely overcharged for rent and many workforce housing units were left vacant.

Even if RPM’s injection had come through, a large void at the Tides-AMC portfolio would have remained. AMC had said it would still need to raise $8.5 million “to get us through” the year.

Tides and AMC are also in talks with lenders to reduce the interest rate on some of its loans or make some other modification.

One of the properties RPM has agreed to invest in is Tides on 51st, a Phoenix apartment complex that reportedly had an anemic debt service coverage ratio of 0.55 in December, according to Morningstar. That means Tides’ income from the property fell well short of meeting debt payments on the loan, which had a rate cap of 5.4 percent.

When Tides bought the property, it was 97 percent leased. Occupancy is down to 79 percent, and the $26.2 million loan from Ready Capital matures next year.

AMC said it has two options.

One is to tell its lenders that it can no longer make payments on the struggling properties’ loans and that it plans to sell. In this scenario, the properties would likely be offloaded at a loss, AMC said.

“We really do not know whether the sale price will yield enough to pay the lender in full,” AMC wrote.

Its preferred option would be to ask the lender to “extend and pretend” — push out the maturities of the loan and work to reduce interest rates.

But AMC sent out its letter to investors before the Federal Reserve this week hiked the benchmark federal funds rate to between 5.25 and 5.5 percent, a 22-year high.

This article has been revised to reflect updated terms of RPM’s deal with AMC Investments and Tides Equities.

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