Tides Equities?

Just curious if anyone knows much about how these guys.  Guessing that they originally met through the Benedict Canyon/TruAmerica prior jobs (same office, same principal).  


Given the volume they are doing (I have heard a few brokers that have sold them deals refer to them as "ultra aggressive"), I am just curious if they have some secret HNW investor backing them, or some other creative way of acquiring north of $2B in asset value the past 5 years.  


 

Commenting because I'm interested as well.

I'm pretty sure they had a few Co-GP partners to get off the ground and help qualify for financing and raise capital, but I imagine the two principals are now able to carry that torch (both experience-wise & financially) on their own. 

Regarding the comments from brokers - not at all surprised to hear that folks who bought a swath of multi in Phoenix over the last 3 years have hot hands and are remaining aggressive. The debt fund/bridge lending market is insane right now - you can get 70-80% LTC financing at 315-325 over. That strategy depends on interest rates remaining low for their buyer's takeout, so it isn't without risk, but they seem to know how to get in & out of properties pretty damn quickly.  It will be interesting to see if they have longevity, or are simply a product of this never-ending "9th inning" business cycle we're in. 

 
Jmrunk

Commenting because I'm interested as well.

I'm pretty sure they had a few Co-GP partners to get off the ground and help qualify for financing and raise capital, but I imagine the two principals are now able to carry that torch (both experience-wise & financially) on their own. 

Regarding the comments from brokers - not at all surprised to hear that folks who bought a swath of multi in Phoenix over the last 3 years have hot hands and are remaining aggressive. The debt fund/bridge lending market is insane right now - you can get 70-80% LTC financing at 315-325 over. That strategy depends on interest rates remaining low for their buyer's takeout, so it isn't without risk, but they seem to know how to get in & out of properties pretty damn quickly.  It will be interesting to see if they have longevity, or are simply a product of this never-ending "9th inning" business cycle we're in. 

I am in this shit-mix currently and everything you said is spot on

 

Shit-mix being the bridge debt side or this sponsor in particular? I can't imagine what the guts of their operation look like, but their AM's must be worked to the bone.

A quick google search shows me that The Robinson Group manages a lot of their AZ properties. I've never heard of "The Robinson Group", but their website's "Team" page almost looks fake. 

https://robinsongroupre.com/team

 

Any specifics? Because based on just our pipeline (bridge lender), they are looking at a recap and bringing in CIM for a $100MM deal in Phoenix, a $100MM acquisition in NV, a $50MM acquisition in TX. LP's including institutional ones after doing their due diligence appear to be on onboard. And note we are just one lender and may not see every deal of theirs, so they appear to be not just be busy but also actually executing on deals. 

 

Maybe I am being a bit naive or ignorant, but both of the principals were probably late 20s/early 30s prior to them jumping ship from TruAmerica & Benedict Canyon (where they were likely being overworked and abused like most Acquisition Director-types at firms such as those types of shops).

Granted, I am showing that when they started buying under the Tides banner in 2017, their first 5-10 purchases were all Phoenix sub $10M, but then they almost overnight starting closing on $25MM+ transactions.  

Do either or both of these guys come from money?  Have an in with some uber high net worth LA guy who likes throwing money at real estate?  

Similarly, a couple of ex Benedict Canyon acq guys (operating under the APRA Capital) jumped ship and saw that they just closed on a $55M deal in Tucson AZ.  Again, WTF?!?  Is it as simple as pitching the shit out of any capital source until you find someone with enough liquidity and net worth to be a sugar daddy for a few deals and then just scale from there?

 

It was an aunt. I've met with them for potential JVs, but they overpay for everything.

 

Believe they also have a lot of junior underwriting staff incl offshore that helps them understand the market quicker and better than your typical value add shop with one or two analysts who handle all the grunt work. I can see if you're a broker with a seller who wants a pretty penny you go them them first and get an offer within 24 hours.

I also know they put up huge nonrefundable deposits on day one

 

Know some guys here. They run a cookie cutter (boring) model for every single deal they do that has worked relatively well. Not sure how they will fair over the coming months/years, but have crushed it with their phoenix holdings. They have rich family, can confirm. 

Also - they really don't get worked to the bone. I think they outsource work quite a bit (which seems to work so far). One of my friends who works there works relatively normal hours.

 

Checked out their case studies below due to this thread and there seem to be insane returns (without construction costs) in a year or two and very active on the sale side. In some cases 20%+ IRR based on simple purchase/sale price timeline without cashflow (if any in some of these cases) and obviously I don't know renovation costs on each.

https://www.tidesequities.com/casestudies

 

Yeah and they are still getting 75% LTC non recourse debt. Institutional groups like CIM and Investcorp will be 95 or 97% of the equity on some of their deals but apparently according to the outsiders looking in, they are going to implode lol. Sure, Investorcorp, CIM and literally every bank is wrong, the smart ones here have it all figured out..... Especially during this time, the investment committees are putting everyone through the wringer and killing deals left and right. The fact that LP's and banks have signed off their deals must count for something. Dont get me wrong, deals can still go south (as it did for even some of the biggest names in the business in 09, that is par for the course) but given how deals are structured, it wont be Tides that is getting burnt lol there is a bigger fish to fry. 

 

The banks are fine.  People seem to equate rising rates to automatic deal implosions, this is only the case if these sponsors get caught in refinance squeezes.  I would imagine that most of them have been taking 10 year paper for the last 5 years so they should be able to ride the storm out even if it means their equity investors have to stay in longer than they were promised.  Paper losses in real estate are different than they are in the stock market.  Real estate generates income. 

 

Can confirm they have been taking expensive, short-term bridge debt.

 

i'd be curious to see the breakdown of debt maturities as my guess would have been 5-7 year maturities.

I disagree on the only problem being refinance squeezes. If you bought at a 3 cap and interest rates are now 5, you better have executed on that business plan because otherwise you're in the red and probably broke a few debt covenants along the way.

 

Most of their projects bank on appreciation more than cash flow, so with rates raising the way they have, they are having problems covering debt service. At least that's what i've heard.

 

Can confirm with some of these folks. They were extremely risk-on past two years. They bought total ~$2B worth of assets… from my understanding, they were the largest buyer in Texas from 2019-2022. 95% of their SREO is with bridge lenders. They are insanely over-levered.

If no one can come to rescue, I’d imagine they will be fucked…

Maybe it’s time for those seasoned blue-blazer sponsors to eat them up within a year or two… As majority of their bridge loans are set to mature….

 

Here's to 2023, the year Tides loans start to mature.

Word around town is they have a personally secured line of rescue capital to help them with debt service while trying to sell off deals everywhere. Northmarq alone has 1,000+ units in Phoenix and Texas trying to sell for Tides.

They are facing a wave of maturities, record supply deliveries, massive vacancies, falling rents, rising debt service, and a seemingly ignorant staff, yet they're maintaining this social media presence as if they are on top of the world. As soon as they lose one of the properties, the whole charade will be over.

 

So much of what happened with these people is just this:

biggest number

 

I have heard they are in deep water as well with the way rates have gone.. but crazy enough, it looks like they are hiring for multiple positions? Not sure what's going on there...

 

As I said above they are listing a bunch of deals at the end of the year in this market... Only a truly desperate seller does that. I bet someone big is definitely not happy and forcing their hand to sell now. Or maybe on the debt side, they are starting to break a bunch of covenants (though I doubt anyone at tides would be able to preemptively figure that out, the lenders probably just holding everything back). 

2023 is going to be a challenging year for them, but a great year for all their "friendly" brokers who will start selling their notes.

There is an article out saying they have $7.5B of assets - sounds like the next FTX.

 

I've kept quiet on this for a few years, but I'm increasingly confused by their decision making.  They closed on a portfolio of Class C assets in Dallas over the last 30 days as well as well above market prices.  No idea what their capital stack looks like on those deals or what capital partners are being told or thinking in those partnerships.  Would be very interesting to get an inside look.

 

https://www.entrepreneur.com/business-news/how-a-31-year-old-built-a-75…

This article in a non-real estate publication makes it sound like Tides invented multifamily value-add investing. As someone in the industry, the success of the company appears to be from a combination of luck, market selection, obscene risk appetite, and near perfect timing.

The thing about snowballing your money is that one bad deal wipes you out. I am extremely curious to watch this play out.

No matter how hot someone gets at a craps table, if they keep playing they eventually lose.