Gotta Pay the Piper

Sean Kia & Ryan Andrade owe Starwood a lot of money. Not in a cocooned by LLCs, OPM way, but personally. The Tides Equities’ principals, among the most prominent mascots of the multifamily syndication boom-bust, lost key court battles against the lender in recent weeks over 2 deals gone bad. Starwood came after them in December over their PGs (Carry Guaranty, Recourse Guaranty, Equity Funding Guaranty, Springing Recourse), and a judge has now ruled in the lender’s favor.

The rulings are likely to be savored by debt funds (see Capital, Ready or 1, MF) who made disastrous bets on syndicators, and now, after a long & uneasy stalemate w/ the naughtiest sponsors, are ratcheting up the legal heat.

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Starwood - Tides (Cont.)

“Simply put, there are no questions of fact about the Guarantors’ liability under the Recourse Guaranty,” the judge ruled in the matter of Tides on Trinity, which Starwood took over in a $76M credit bid in Nov. Starwood, the judge added, was able to show both that the Tides’ principals triggered the PG and provide a reasonable breakdown of the damages incurred. At that property, Kia & Andrade were found personally liable for $14.5M, plus interest & fees. At Tides on Chadwick, which Starwood took over in a $45M credit bid, Kia & Andrade were personally ordered to pay $12.6M (incl. pre-judgment interest & attorneys’ fees). So that’s $27M+ already, and there’s at least one more case pending, Tides on 44th in Phoenix, where Starwood is making a near-identical argument on a $24M Recourse Guaranty. “If you treat [lenders] with respect, like the age-old saying, treat people with respect, and how you want to be treated, it actually works, right?” Kia said in Sept., vowing that going forward, the go-to mantra at Tides was total transparency. But at least w/ Starwood, this did not work. 🖖 

Starwood isn’t the only boogeyman the Tides bosses have to deal with. Andrade is also being pursued by Rialto at an Austin property known as Tides on Copper Creek, alleging his failure to buy a new rate cap puts him on the hook for nearly $4.9M. Mark Fogel’s Acres Capital is suing both Andrade & Kia for defaulting on a basket of PGs. The judgments in the Starwood saga will likely be legal catnip for these lenders, as well as others who are pursuing Tides’ peers over various deals gone bad – and there’s a whole graveyard of those, w/ the Benefit Street action against GVA’s Alan Stalcup probably the most theatrical of the lot. We broke it down as well as did a handy overview of the various PGs in our inaugural episode of The Promote Podcast back in March - listen below 👇️ 

SF Multi Monopoly: Caisse Out, PCCP In

The Caisse, the Quebecois pension fund that bankrolled some of CRE’s splashiest (and often ill-fated) deals, is calling time on one of its biggest West Coast multifamily bets: Ivanhoé Cambridge, the fund’s soon-to-be-defunct subsidiary, has sold a 1,770-unit portfolio in SF & Oakland for $541M, or about $305K/ 🚪. That’s a 30% haircut from what Ivanhoé, in partnership w/ Yat-Pang Au’s Veritas, paid to amass the 76-building package over the years, per the SF Business Times. The buyer here is PCCP LLC, an LA-based investor ($25B AUM) run by Donald Kuemmeler, Aaron Giovara & William Lindsay that plays all across the capstack. PCCP landed $430M in acquisition financing from Deutsche Bank subsidiary German American Capital Corp. Another sign that the vibes in SF are improving: more capital is flowing into the city’s multi sector, notably from players such as Fortress & Artemis.

PCCP has tapped Veritas to stick around & manage the portfolio, a win of sorts for the firm after a season of heavy losses – you’ll recall that Veritas forfeited a 2,100-plus unit portfolio to Brookfield & Ballast last year – the unraveling of that deal has all the elements (dynasties, edgy hedgies, CMBS defaults, special servicer holdbacks) that make the biz so interesting – def check out that rundown.

Un peu de context on the Caisse: The $52B fund (-10.8% return in ‘24) decided at the start of ‘24 to simplify things by folding its equity (Ivanhoé) & credit (Otéra) arms into one org., and tapped Otéra’s Rana Ghorayeb to run the whole thing. Ghorayeb did an interesting sit-down w/ PERE last month, in which she talked about prioritizing scalable JVs over holding big stakes in individual deals. The shift, she said, would be from investor-operator to “pure investor.”

Hitting Pause on the Trade War

The US & China have agreed to temporarily reduce the crushing tit-for-tat tariffs that threw the construction market into disarray, body-checked CMBS, and had investors across the board playing the wait-and-see game. “The consensus from both delegations is that neither side wanted a decoupling,” Treasury Sec. Scott Bessent said over the weekend. Both sides slashed their tariffs on each other to 10% – that mind you, is from 125%. It’s too early & the situation is too volatile to say whether this will restore a sense of normalcy for builders, but here’s hoping. To get a sense of the confusion it did unleash, check out our pod from April where we dive into it.

Quickies

• Wasta capitalism: Trump fam rapidly striking deals all over the Gulf 🤝

• The tangled web of Josh Schuster (who was just released on $2M bail)

• Fortress/Eyal Ofer/Madison refi 15 CPW’s distressed retail

• Unholy alpha: The sordid tale of the NOLA Archdiocese’s Sec 8 portfolio 📿 

• Persian rugs to riches: Carpet merchant takes full control of NoMad office

• NYC taps developers for city’s largest mass timber resi project 🪵 

• Adam Neumann’s playing a different game than the rest of you strivers 🎙️

• We’re still hella confused about the pricing on the RFR-Amazon deal: $456M for just the office seems off, and RFR did take control of the retail from Deka/Ashkenazy at the time of the deal… More to emerge probably but wouldn’t trust the office number as-is 👀 

• This headline would survive a nuclear holocaust

Unquotable Quotes