Holes are forming in Scott Everett’s shield against the multifamily distress that’s consumed other syndicators.
His Dallas-based firm S2 Capital is facing foreclosure on an Arlington apartment complex, according to Roddy’s Foreclosure Listing Service.
S2 appears to have defaulted on a $36 million mortgage provided by CBRE for Preslee Apartments, at 2504 Ivy Brook Court. The 290-unit apartment complex was built in 1981. The loan works out to $124,000 per unit.
Without a deal to work out the default, the property will hit the auction block July 1.
Lambert used to handle the company’s media relations, but a representative said the firm no longer represents S2. There’s no contact information on S2’s website.
S2 peers, like Rise48 and Tides Equities, were flying high when rates were low, sweeping up aging apartment complexes in Texas with plans to renovate them and raise rents. When interest rates skyrocketed, the debt service on their floating-rate loans ballooned, leading to defaults, foreclosures and lenders coming for personal guarantees.
Everett had staved off the distress creeping into his multibillion dollar portfolio with a creative solution. Last year, he launched the biggest private REIT to shield his syndicated deals from the floating-rate debt that drowned others.
It wasn’t a perfect solution: plenty of his LPs felt coerced into the conversion, and his portfolio still took a hit with maneuver, coming out to 93 cents on the dollar. Plus, the firm is still burdened by the yoke of its promise of its value-add plan.
Everett then capitalized on his survivor status by taking a big bite of syndicator GVA’s distress mess. S2 joined as a general partner on a $60 million recapitalization deal.
The July 1 auction block could also see two properties from a syndicator in much more trouble.
As Tides deals with lenders knocking on their doors to collect personal guarantees, the distress train hasn’t let up.
The firm is facing foreclosure on two Far North Dallas apartment complexes: the 370-unit Tides on Esperanza, at 13450 Esperanza Road, and the 232-unit Tides at North Dallas, at 13250 Emily Road. Tides on Esperanza was built in 1982, and Tides at North Dallas was built in 1981.
Tides defaulted on a $44.8 million loan for the former and a $28.5 million loan for the latter. Both were issued in 2022 by Claros Mortgage Trust. Together, the loans work out to $122,00 per unit.
