S2 Capital - Scott Everett
Many of you may not have access to the full article, but you can catch Scott Everett on the Powers Podcast, it's a fascinating listen seeing the predicament he's currently in. I broke it down below for you.
S2 Capital — a Dallas firm that acquired 51,000+ units and raised $13 billion, just formally wound down its $400M multifamily fund. ~150 investors are walking away with zero return.
What went wrong:
• Launched the fund in Sept 2022 — right as the Fed started hiking aggressively
• Loaded up on floating-rate debt — when rates surged 50%+, so did interest payments
• Bet heavily on Sun Belt workforce housing — demand was supposed to be fueled by immigration
• Trump reversed immigration policies → demand collapsed just as record new supply hit the market
• Result: 20-30% rent declines, crushed occupancy, underwater properties
They tried everything — sold assets, modified loans, shopped for 9 months with a capital placement agent. Still failed.
The takeaway for you:
1. Floating rate = loaded gun. If your deal only pencils because you're betting on rates coming down, that's not a deal.
2. Demand assumptions are not guarantees. S2 underwrote to immigration-driven demand. That policy flipped. What are your assumptions and what happens if they're wrong?
3. Supply kills markets. Sun Belt got hit with 40-year record supply. Know your market's pipeline before you buy.
4. Size doesn't equal safety. $13B raised, still zero return. Operators at every level get wiped by bad leverage + bad timing.
Cash flow first. Stress test everything. Know where your rents are actually coming from.
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S2 Capital - Scott Everett
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Real estate investing from the ground up. Multifamily deals, property management, and building wealth.
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