The Promote doesn’t usually cover fundraises, but making an exception for this one given both the asset class in Q and the character at the heart of it: We’re told that Scott Everett’s S2 is finalizing the close of a Sunbelt multi-focused distressed fund, reeling in just shy of $400M from LPs. This is the vehicle through which S2 has been striding into other syndicators’ broken capstacks in recent months, w/ notable deals such as the Jan. takeover of a 1,768-unit GVA joint w/ a mere $60M pref investment.

The real estate industry is eating itself alive. Allocators are done playing single-stock picker. They got burned in office, retail, Sunbelt multifamily. Now they want the full "poo poo platter" (h/t Will Krasne) – diversified platforms that spread risk across strategies & geographies. They'd rather pick the 🐴 than make individual investment decisions that could tank their careers. In response, the biggest RE fund managers are gobbling up what they can’t build. So you get Barings-Artemis, Ares-GLP, Blue Owl-IPI, Sixth Street-L+M and so many more. Check out our short explainer on YouTube, and also listen to the pod where we get deeper into the Sixth Street-L+M deal.

It’s a tad larger than S2’s first fund of this ilk, which had $340M in outside commitments and $60M of co-invest. That first fund amassed 6,600 units; the 2nd one has picked up a few thousand units already, per sources familiar w/ the matter, largely in the form of rescue capital 🛟 . This fundraising news pairs quite hilariously w/ a headline last week in TRD, which asked: “Is the other shoe dropping for Scott Everett’s S2 Capital?” 🍷 🧀

S2 declined to comment. All this excitement is separate from Everett’s closely watched private REIT experiment, a high-wire act of investor persuasion, refis, rent-pushing, acquisitions and rate-praying. 🙏

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In other syndicator news ICYMI:

• Rise48’s founder is camping out on BiggerPockets to smack down LP concerns about the firm’s deals
• Devin Elder’s DJE is under FBI investigation and the US Att’y is moving to seize its land
• Swapnil Agarwal’s Nitya Capital landed a $700M fixed-rate CMBS refi (wish we had more deets, was told by source it was a slight cash-in refi & pricey to get what w/ all the various fees & rate buydown; still, “all things considered – [Swapnil] stuck the landing 🤸‍♂ “)
•PG debts for Sean Kia & Ryan Andrade to Starwood have broken the $50M threshold (more on Bad Boy Carveouts in the pod here)

Fortress is telling CMBS investors it’s likely to blow a July 15 deadline to refi an Amazon-leased industrial spread. The Mubadala-owned shop took out the $2B fixed-rate debt on the 11-property portfolio in ‘20. If it misses the summer deadline, the interest (currently at 2%) would leap and begin accruing, per investor comms seen by Bloomberg, which noted that the add’l payments could exhaust the cash flows from the warehouses 📦 . The $1.7B AA-rated tranche has an LTV of 75%, while the $340M A-rated tranche has an LTV of 90%, per an S&P Global report.

“Deals that were structured five years ago with high leverage and 1 - 2% coupons are not meant for today’s rate environment,” Income Research analyst Scott Hofer told the publication.

“We’re going to have roast spring lamb for dinner, but you didn’t consider it necessary to visit the slaughter-house.” - Upton Sinclair, Oil!

Houston is still very much an oil town, and the city’s office footprint illustrates that: The industry occupies about 1/3 of the city’s large office space, per CoStar data cited by Bloomberg. The problem? A wave of M&A (Chesapeake-Southwestern, Conoco-Marathon) and job cuts has put landlords under the cosh: the city’s office vacancy rate hit 28% in Q1 – second only to SF among major metros – and Big Oil has abandoned sprawling old digs in favor of tighter new builds. Worst-hit is the hulking 80s era stock developed during the oil boom; CushWake’s Eric Siegrist estimated that nearly a third of those properties are distressed. Due to Houston’s lack of zoning, development keeps pushing further out of the downtown core, which means new builds in new areas are favored over putting capex into or tearing down & rebuilding existing stock. “I don’t think that thing is ever coming back,” said Siegrist of the 45-story former Humble Oil HQ. “It may still be here when you and I have departed the Earth, just standing there.”

Most major markets rely on certain industries for much of their leasing juice. LA has entertainment, of course, while New York is a FIRE town as we recently riffed on in a Bloomberg guest column. But Houston’s reliance on the notoriously volatile oil industry makes landlording more akin to wildcatting. “When times are good and these companies are expanding, every developer is running with their shovel to find a piece of dirt and build something great,” Howard Hughes’ CEO David O’ Reilly told Bloomberg. “And sometime between when the shovel goes in the ground and when it’s fully leased, the music stops, and it becomes ugly.” 🎹 🛢

Good rundown here from TRD on the NYC developers still in the running for a coveted state casino license. Some highlights of the perks being offered:
• SL Green & Caesars hope to convert 1515 Broadway into a $4B extravaganza, and have thrown in a bit of an icky sweetener: Retail investors w/ just $500 can buy into the project. The man running that process is Ryan Williams, the “150 push-ups and 150 sit-ups” former head of CRE crowdfunder Cadre, which sold to YieldStreet in ‘23 for a fraction (fitting, I suppose) of its peak $800M valuation – potentially for even less than it raised in VC $.
• Soloviev & Mohegan want their casino on a UN-adjacent site along the East River and are teasing a community reinvestment fund that would get 2% of the gaming profits
• Silverstein & Rush Street Gaming want theirs at 41st/7th, and just announced it would fund 2K office-resi conversions as part of its bid

PSA: Wednesday’s pod 🧃dives deep into Carlyle’s REPE playbook, Barry Drillman’s Great Escape & the LVMH-Kering luxury brick war – plus a lil’ bonus segment you won’t want to miss. Subscribe now via Apple or Spotify to get it fresh 🛀