S2 Capital, the Dallas-based apartment owner founded by Scott Everett, is dealing with a $78.6 million foreclosure on a Garland, Texas complex, roughly $558 million in loans transferred to special servicing across a dozen properties, and the collapse of a private real estate investment trust whose equity investors have been warned to expect a total loss. The firm’s property management arm, S2 Residential, has also drawn tenant complaints and been sued in federal court by a former employee. Here is what the record shows on each front.
The $78.6 Million Foreclosure on The Republic Apartments
On May 27, 2026, S2 Capital was hit with a $78.6 million foreclosure filing on The Republic Apartments, a 1,033-unit complex in Garland, Texas. The loan, originated in 2021 by Benefit Street Partners, was in default, and a foreclosure auction was scheduled for late May or early June 2026.1The Real Deal. Scott Everett’s S2 Capital Faces $79M Foreclosure
As of June 1, 2026, Everett said the property was under contract to sell within 30 days and that he was working to avoid the foreclosure through a last-minute sale. Whether that sale closed is not confirmed in the available reporting.2The Real Deal. Texas’ Biggest Loans Headed to Foreclosure Auctions in June
$558 Million in Loans Transferred to Special Servicing
The Republic is not an isolated problem. By late May 2026, twelve S2 Capital properties carrying a combined outstanding loan balance of nearly $558 million had been transferred to special servicing, the process in which a distressed loan is handed to a specialist to work out the default or restructure the debt. The loans were Freddie Mac floating-rate commercial mortgage-backed securities, and each property had failed to generate the cash flow the original underwriting assumed.3CoStar. S2 Capital Founder Opens His Own Wallet To Reclaim 12 Apartment Properties
Some of the shortfalls were severe. The Sophia Apartments in Dallas was underwritten for $2.8 million in annual net cash flow but generated only $686,000 in 2025. The Jerome in Glendale, Arizona was underwritten at $5.1 million and produced $2.9 million, with occupancy at 83 percent by year-end 2025. The Loren Apartments in Dallas fell from an underwritten $2 million to $810,700, and Mark at 2600 in Arlington dropped from $1.7 million to $764,500.4Multifamily Dive. S2 Capital Apartment Distress Special Servicing
Other affected properties include The Kace in Grand Prairie ($92.2 million loan), The Weston Medical Center Apartments in Houston ($84 million loan), Hyde Park at Valley Ranch in Irving, The Felix in Arlington, The Landing at East Mil in Orlando, and properties in Charlotte and Raleigh, North Carolina.5The Real Deal. S2 Capital CMBS Loans Flagged for Special Servicing Morningstar Credit attributed the distress to rising taxes, utility costs, and persistently high interest rates.4Multifamily Dive. S2 Capital Apartment Distress Special Servicing As of early June 2026, none of the twelve properties had exited special servicing.
The REIT Collapse and Warning of Total Investor Loss
In 2024, S2 Capital formed a private real estate investment trust to consolidate roughly 10,000 apartment units across 26 properties into a single vehicle. The goal was to refinance expensive floating-rate bridge loans through a Fannie Mae credit facility. The strategy was a bet that interest rates would come down. They didn’t.6The Promote. S2’s REIT Reckoning
Trinity Investors, a Southlake, Texas private equity firm led by Dan Meader and Sanjay Chandra, helped form the REIT and served as a feeder fund channeling outside investor capital into it.7The Real Deal. Feeder Fund for S2 Capital’s REIT Predicts Loss By the end of 2025, common equity in the REIT had lost roughly 90 percent of its per-share value.8The Real Deal. Scott Everett In January 2026, S2 Capital issued a capital call seeking $70 million in preferred equity to keep the REIT afloat and raised only $30 million.
On May 8, 2026, Trinity Investors told its investors: “Equity investors should expect a full loss of capital.” Trinity described the $30 million raised as providing only a “short runway to complete an orderly wind down of the REIT” and said S2 Capital was now focused on “maximizing value for mezzanine investors,” meaning equity holders, who sit below mezzanine lenders in the repayment order, would likely recover nothing.7The Real Deal. Feeder Fund for S2 Capital’s REIT Predicts Loss
Everett, asked about the Trinity warning, called it “old news,” saying investors had been notified back in November 2025.9Bisnow. S2 Capital Launches Sun Belt Development Platform
Tenant Complaints Against S2 Residential
S2 Residential, the property management arm, has accumulated a record of tenant complaints. Its Better Business Bureau profile (listed under S2 Capital in Dallas) shows 57 complaints filed over a three-year period, with 51 marked “unanswered,” meaning the company never responded.
The complaints include mold, water intrusion, failure to return security deposits, maintenance requests marked complete when no work was done, and tenants breaking leases because units were uninhabitable. One resident reported $8,000 in veterinary bills after two emotional support animals were allegedly poisoned on-site.10BBB. S2 Capital BBB Complaints
Barnum v. S2Residential: Employment Discrimination Suit
In 2020, Casey Barnum, a former maintenance worker and groundskeeper, filed a federal employment discrimination lawsuit against S2Residential and S2 Capital in the U.S. District Court for the Middle District of Florida. Barnum, representing himself, alleged race, gender, and national origin discrimination under Title VII of the Civil Rights Act, and claimed wrongful termination, failure to promote, and retaliation.11CaseMine. Barnum v. S2Residential/S2 Capital LLC
The defendants argued Barnum had sued the wrong entities, saying he was actually employed by S2C FL Management, LLC (doing business as S2 Residential), and moved to compel arbitration under an employment agreement Barnum had signed with G&A Partners, a third-party HR firm that serviced their employees. The agreement contained a broad arbitration clause covering Title VII claims.
On February 25, 2021, Magistrate Judge Joel Toomey recommended granting the motion to compel arbitration. The court found that Barnum’s challenges to the contract, including fraud and duress claims, attacked the employment agreement as a whole rather than the arbitration clause specifically, so those issues had to go to an arbitrator. The court also rejected Barnum’s argument that the defendants had waived arbitration by not raising it during prior EEOC proceedings. Rather than dismissing the case, the court stayed it pending arbitration.12vLex. Barnum v. S2Residential/S2 Capital LLC
Everett v. Kostecki: Defamation Suit Filed by Everett
One prominent lawsuit involving S2 Capital’s founder runs the other direction: Scott Everett is the plaintiff, not a defendant. In 2024, Everett filed a defamation suit in the U.S. District Court for the Northern District of Texas against Jakub Kostecki, who operated an X account under the handle “LPWhisperer” and posted accusations that Everett had committed investor fraud, theft, and used business funds for a “luxury lifestyle.” Everett characterized the posts as part of an extortion scheme, alleging Kostecki suggested Everett “make an offer” to buy the account to stop the posts.13Midpage. Everett v. Kostecki
Kostecki was served but never appeared, and the clerk entered a default. On May 16, 2025, a magistrate judge recommended granting default judgment, finding the posts constituted defamation per se. The court denied Everett’s request for $82,500 in compensatory damages for crisis public relations costs, ruling that the expenses had been paid by S2 Capital as a corporate entity and that Everett lacked standing to recover them personally. The court awarded $2,000 in nominal damages instead.14GovInfo. Everett v. Kostecki, No. 3:24-CV-02226-K On July 14, 2025, the district judge adopted those findings and entered judgment.15ALM. Everett v. Kostecki Order, N.D. Texas The ruling did not adjudicate whether the underlying accusations about S2 Capital’s business practices were true; it treated them as legally defamatory because Kostecki defaulted.
What S2 Capital Says It’s Doing
Everett said he intended to use personal funds to pay down debt and resolve the loan defaults, and expected the twelve properties in special servicing to exit within 30 to 60 days of early June 2026. Separately, S2 Capital was moving to sell properties in Plano, Dallas, and near Atlanta to meet approaching loan maturity deadlines.3CoStar. S2 Capital Founder Opens His Own Wallet To Reclaim 12 Apartment Properties
On May 26, 2026, S2 Capital announced a new ground-up development platform for multifamily and industrial projects across the Sun Belt, naming Carl Starry, previously of Leon Multifamily and Trammell Crow Residential, as President of Development. Everett acknowledged that “financing remains challenging” but argued the firm had the balance sheet to proceed.16Multifamily Executive. S2 Capital Bets Supply Shortfall New Development Arm