S2 Capital has expanded its footprint in the Sun Belt with the acquisition of a multifamily portfolio with 1,768 units facing foreclosure in Dallas and Knoxville and Nashville, Tennessee. The transaction was sourced off-market.
According to S2 Capital, it invested $60 million of rescue capital in a new joint venture with the existing limited partner through a structured preferred equity investment and secured a new five-year $170 million senior loan through ACORE Capital. S2 Capital, a national multifamily investment manager based in Dallas, will take over as the general partner of the five communities with full property, asset, and construction management operational control and decision rights to protect the preferred equity investment.
“This transaction is a great representation of how S2 is taking advantage of targeted distress in today’s market,” said Ryan Everett, managing director and head of acquisitions at S2 Capital. “Our vertically integrated operating platform, in tandem with our discretionary capital, positioned us as the preferred partner to step in as the new GP and programmatically address the in-place operating issues through the implementation of a new business plan.”
The five properties acquired are in markets with strong demand and limited new supply in Tennessee and Texas:
- Hickory Highlands in Antioch, Tennessee, a suburb of Nashville;
- Landmark at Gleneagles in Dallas;
- North Park Apartments in Knoxville;
- The Park at Fountain City in Knoxville; and
- Stone Ridge in Antioch.
“This investment allows us to expand our geographic footprint to Tennessee, where we have planned to invest in the Nashville and Knoxville markets for several years,” added Everett. “Our internal data analytics platform projects southeast Nashville to be a top quartile submarket for investment, given the continued year-over-year demand growth of 11%, while supply and permits have plummeted by 80% to less than 2.5% of inventory, coupled with expected strong household formation and in-migration.”
Since its founding in 2012, S2 Capital, which specializes in value-add and core-plus transactions, has acquired over 49,000 units through 145 acquisitions across high-growth markets.
