Tides of Trouble: Principals Face Mounting Lawsuits and Personal Liability
The debt fund Electra Capital has filed a lawsuit against Sean Kia and Ryan Andrade, the beleaguered principals of Tides Equities, alleging they triggered recourse guarantees on two mezzanine loans backed by Texas apartment complexes. This marks the fourth complaint to name the duo personally for alleged damages.
A Pattern of Default and Negligence
The lawsuit claims that Kia and Andrade defaulted on the debt, totaling $8 million, and Electra Capital was forced to foreclose. However, upon assuming ownership, Electra discovered a plethora of issues, including hundreds of thousands of dollars in outstanding accounts payable, mechanics liens, judgments, and lawsuits, as well as millions in uncompleted renovations and repairs.
Breach of Contractual Obligations
Electra Capital alleges that Kia and Andrade failed to address these issues, despite signing guaranties pledging to do so. The lender accuses the principals of “gross negligence, mismanagement, and self-dealing,” including the misappropriation of rents. Electra is seeking $6 million from Kia and Andrade personally for allegedly breaching guarantees, plus attorney’s fees.
A Growing List of Lawsuits
This lawsuit is just the latest in a string of complaints filed against Kia and Andrade. Starwood Mortgage Capital, Acres Capital, and Rialto Capital Advisors have all filed suits in recent months, putting the principals on the hook for a combined total of $68 million. Observers are now questioning whether the personal liabilities of Tides principals could be high enough to bankrupt them.
A Shift in Outlook
Just a few weeks into the new year, the tide seems to be turning against Kia and Andrade. Despite their optimistic outlook at The Real Deal’s LA Forum in September, the mounting lawsuits and personal guarantees are piling up. The recent foreclosure of Tides on Haverwood in Dallas, which resulted in a $61 million credit bid, has only added to the pressure.
Uncertainty Ahead
As the lawsuits continue to mount, one thing is clear: the personal liabilities of Tides principals are reaching critical levels. Whether they will be able to weather the storm remains to be seen. One thing is certain, however: the troubles of Tides Equities are far from over.
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