The crunch of high interest rates is bearing down on Tides Equities, a Los Angeles-based multifamily investor that said it would likely have to start calling certain partners in search of funds to help cope with its debt load.

Real Estate Alert reported last week that Tides Equities sent a letter to investors telling them that the company would likely tap limited partners for funds soon as the firm is feeling the squeeze of interest rates and struggling to pay its debt.

“As of today, we have a 100% perfect track record of on-time mortgage payments,” the letter read. “Being current on our mortgages gives us many more avenues to negotiation with lenders and keeps windows of opportunity open. That said, as cash shortages persist, this may become more of a challenge in the months ahead.”

Ryan Andrade, one of the firm’s co-founders, told Real Estate Alert that as much as 20% of Tides’ portfolio could require capital calls. Andrade also emphasized that this was not a problem unique to his firm but one that was bearing down on many in the multifamily industry who bought with floating rate debt and are seeing those rates float way up.

“We’re not alone in this,” Andrade told REA.

There’s potentially more trouble on the horizon. Tides Equities has 47 loans accounting for approximately $1.5B due by the end of 2025, an analysis of data from DBRS Morningstar done by The Real Deal revealed.

To fill in funding gaps for the time being, Tides is using its own funds to help make mortgage payments. The firm told investors that handing back the keys to lenders in some cases was “a possibility,” TRD reported.

Multifamily owners who secured floating-rate financing are already feeling the pain and are facing a rough road ahead, experts told The Wall Street Journal last month. In October of this year alone, more than $4B in commercial mortgage-backed securities loans associated with multifamily properties will come due, Gray Capital told Bisnow this week. November's total will be nearly $4B. Neither of those figures include non-CMBS loans, meaning the actual total is much higher.

This problem is perhaps exemplified in Tides, which aggressively bought in the Sun Belt over the last two years, spending more than $6.5B on apartments in 2021 and 2022, TRD reported. As of April, Tides Equities' portfolio included more than 31,500 units across markets including Phoenix, Dallas, Austin and Las Vegas, earning it the No. 37 spot on the National Multifamily Housing Council’s Top 50 Apartment Owners list.

But that growth is now a pain point. “Properties that had previously been positively cash flowing” during renovation periods “suddenly became strapped for cash, as the operating revenues increasingly went towards the rapidly rising mortgage payments,” the letter to investors read, according to TRD. Some properties are cash-flow negative, the letter noted.