- S2 Capital sold two Dallas-Fort Worth apartment properties this summer, marking at least its third North Texas multifamily disposition of the year.
- Both sales came after S2 told investors in July that their equity in the firm’s value-add fund and multifamily REIT had been wiped out.
- S2 is now raising up to $130 million for a continuation vehicle to roll 26 assets forward, a plan facing scrutiny over leverage and conflicts of interest.
Scott Everett’s S2 Capital sold two apartment properties in the Dallas-Fort Worth area this summer, according to The Real Deal, as the beleaguered multifamily investor works to raise capital for another fund. The dispositions add to a string of North Texas sales this year as S2 works through a rocky stretch for its existing portfolio, one marked by wiped-out investor equity and mounting legal pressure on its founder.
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How It Started
S2 sold the Ellington, a 266-unit Plano property at 4701 Preston Park Boulevard built in 1996, to Red Summit Partners, a Dallas-based investment firm focused on distressed apartment properties, according to deed records. S2 had owned the Ellington since April 2022, when it financed the purchase with a $67.7 million loan.
The firm also sold Brixton Apartments, a 223-unit complex at 18959 North Dallas Parkway built in 1997, to New York-based Bhatia Development in a transaction that closed in January. Both properties trace back to acquisitions made near the top of the market, when S2 and peers across the Sun Belt were underwriting rent growth assumptions that elevated interest rates and softer demand have since undercut.
The Details
Red Summit financed the Ellington purchase with a $53.2 million loan from Starwood Property Trust, working out to roughly $200,000 per unit; the sale closed July 23. At Brixton, Bhatia Development assumed S2’s existing debt — a $35.9 million loan from NorthMarq Capital originated in 2024, or about $161,000 per unit.
The two deals bring S2’s North Texas dispositions to at least three this year, following the sale of Hathaway at Willow Bend, a Plano property that was facing foreclosure before it sold to Granite Tower Equity Group. Together, the sales point to a firm methodically trimming its footprint in the same suburban Dallas submarkets where it built much of its portfolio over the past several years.
Zooming Out
S2’s troubles trace back to a capital call earlier this year on its $400 million value-add fund. That was followed in July by news that investor equity in the fund was gone — the same message Everett had delivered weeks earlier to investors in the firm’s multifamily REIT, which he created in 2024 specifically to wait out elevated interest rates, a pattern that closely tracks the foreclosure pressure hitting other Dallas-area apartment owners this year.
Why It Matters
S2 hasn’t walked away from its remaining portfolio. The firm is now raising up to $130 million to roll 26 of those assets into a continuation vehicle — a structure that has drawn scrutiny over its high leverage and the inherent conflict of S2 acting as both buyer and seller of the same properties. Continuation vehicles have become a common workaround for sponsors sitting on underwater funds, letting them buy more time without forcing an immediate, lower-priced sale.
Everett is also facing a lawsuit from Capital One, which claims he’s personally on the hook for more than $11 million in guaranties following an $85 million default. The saga illustrates a broader reset underway across Sun Belt multifamily, where investors who bought at peak pricing on floating-rate debt are now working through losses, a dynamic also visible in discounted portfolio sales elsewhere in Texas.
What’s Next
Watch for how S2’s $130 million continuation vehicle is received given the conflict-of-interest concerns already raised, and whether more North Texas assets from the firm’s distressed fund and REIT head to market in the coming months as Everett works to stabilize the platform.
The outcome of the Capital One lawsuit will also be worth tracking, since a ruling against Everett personally could add pressure on S2 to accelerate additional dispositions beyond the properties already earmarked for the continuation vehicle.
