Scott Everett’s S2 Capital, a Dallas-based real estate investment firm, has issued a capital call for its private real estate investment trust (REIT) as it faces financial pressures. The move comes after the company shifted its 10,000-unit apartment portfolio into the REIT in 2024 to protect against floating-rate debt.
According to The Promote, if investors do not provide additional funds, S2 Capital may be forced to sell properties at an estimated 5.5 percent capitalization rate. This could result in investors losing between 60 and 75 percent of their equity.
The strategy to create a private REIT was seen by some in the industry as innovative. A LinkedIn account under the name CRE Analyst commented, “If this is what happened, S2 just showed other syndicators how to survive until ’25.”
S2 Capital managed to remain stable through 2025. It assisted GVA Property Management by becoming a general partner in a $60 million recapitalization involving 1,700 units across Nashville, Knoxville, and Dallas. In addition, S2 raised $343 million for its second value-add fund during the summer and acquired Fort Capital’s industrial portfolio totaling 11 million square feet in August. Later that year, S2 entered the Chicago market with the purchase of Ovaltine Court, a 344-unit property for $93.7 million.
Despite these efforts, rising interest rates have challenged expectations that conditions would improve by 2025. Some limited partners reported feeling pressured into converting their investments during the REIT transition. The portfolio also lost value with the launch of the REIT, dropping to about 93 cents on the dollar.
In the same month that S2 closed its second value-add fund, it lost ownership of a property due to foreclosure after allegedly defaulting on a $36 million mortgage from CBRE for Preslee Apartments in Arlington.
Founded by Scott Everett in 2012, S2 Capital currently manages approximately 130 properties throughout the Sun Belt region and ranks as one of the largest apartment landlords in the country with a portfolio of about 28,000 units.
