A note to Insiders: The most important skill in the CRE game is survival. Many of the players now considered legends – from Steve to Harry & beyond – have at one time or another faced a total wipeout. Whether through restructuring, bankruptcy, a Hail Mary investor, or sometimes a combination of the 3, they figured it out and lived to fight another day. The Sunbelt multifamily boom/bust is the latest test of sponsor mettle – is there a way out of the floating-rate morass? We look at one of the more notable cases today, that of S2’s Scott Everett. We also have deets on our next Insiders-only conversation, w/ Naftali CIO David Hochfelder. Enjoy the read, and if you know someone who would benefit from reading this and might want to become an Insider, forward it along – they can get 10% off here. - HS

“If I only had a little humility, I would be perfect.” - Ted Turner, RIP

While his Sunbelt syndicator peers were hemorrhaging apartments left & right in ‘24, Scott Everett devised an audacious escape hatch: The S2 Capital boss somehow convinced many of his investors to let him roll up a big chunk of the portfolio – ≈ 10K units x 26 properties – into a private REIT. The gist: buy S2 time to improve liquidity and refi pricey bridge debt (the kamikaze fuel of the Sunbelt boom) via a Fannie credit facility. Not all investors were thrilled, complaining about a lack of justification for the maneuver and instant dilution. The Promote wrote at the time: “Everett will have to execute the reno and rent raising plan to perfection, continue the aggressive acquisitions, hope rates keep falling and convince investors that he can lead them to the promised land. A high-wire act that’ll be fun to watch. 🪂”

The reason one can’t look away from high-wire acts is because occasionally, the wire snaps. 👇