Scott Everett’s S2 Capital Faces $79M Foreclosure

S2 Capital’s effort to avoid the fate of its belly-up syndicator peers is unraveling.

Scott Everett’s Dallas-based multifamily firm is facing foreclosure on The Republic Apartments, at 241 East I-30 in Garland, after allegedly defaulting on a $78.6 million loan tied to the property, according to Roddy’s Foreclosure Listing Service. Benefit Street Partners provided the loan in 2021.

Everett told The Real Deal in an email that the property is under contract to sell in the next 30 days. The foreclosure auction is scheduled for Tuesday.

The distress comes as S2 Capital’s real estate investment trust — formed to shield properties from floating-rate debt — faces financial challenges. Trinity Investors, the feeder fund that helped launch the REIT, isn’t expecting to get anything out of the trust, and warned: “equity investors should expect a full loss of capital.”

The ‘80s-era property heading to auction consists of two communities, Republic West and Republic East, which have a total of 1,033 units. The debt works out to about $76,000 per unit.

S2 used the “traveling” housing finance corporation loophole to get tax breaks on the property in 2025, deed records show. The firm completed a sale-leaseback of the property with Pecos Housing Finance Corporation, an affordable housing organization more than 400 miles from Dallas.

The program intended to boost affordable housing in Texas became a cost-cutting measure for struggling multifamily investors, who secured tax exemptions by partnering with far-flung affordable housing groups, and removed properties off tax rolls without local approval. House BIll 21, which Gov. Greg Abbott signed in May 2025, closed the loophole.

S2 Capital was one of the multifamily investors that swept through Texas when interest rates were low, buying up old apartment complexes with floating-rate debt and plans to renovate, raise rents and sell at a profit. But, ballooning interest rates and a deluge of new apartment supply turned the value-add plan on its head. Everett’s 2024 move to roll his multifamily properties into a REIT served to buy time for interest rates to fall, but two years later, they’re still stubbornly high, allowing distress to creep into the portfolio.

The firm issued a capital call earlier this year, asking for $70 million in preferred equity. Without the funds, the firm said it would have to sell off properties at an estimated 5.5 percent cap rate, meaning investors would lose between 60 percent and 75 percent of their equity, The Promote wrote in January.

S2 ended up raising $30 million, which will provide a “short runway to complete an orderly wind down of the REIT,” according to Trinity Investors.

The REIT owns over 9,000 units in North Texas, Houston and Phoenix.