Fund II is targeting distressed apartments in high-growth markets, including Texas, Arizona, Colorado, Florida, Tennessee, Georgia and the Carolinas. 

“Higher interest rates and elevated supply have introduced stress into the multifamily sector, and we’re leveraging our extensive relationships and operating capabilities to create value and drive performance,” said Patrick Connell, head of capital formation and investor relations at S2 Capital, in the news release.

More than 60% of Fund II has already been deployed across 14 assets in nine markets. “The current environment has created exceptional opportunities for disciplined, well-capitalized investors,” Connell said.

S2 said that Fund II garnered broad institutional backing from a diverse mix of U.S. and European investors, including global asset managers, public pension funds, family offices and wealth management firms.

S2, the No. 44 owner in the country, has a strategy of repositioning underperforming assets with targeted renovations and improving operational efficiencies. With approximately $11 billion in transaction volume, the firm has acquired over 50,000 units.

Earlier this year, S2 acquired a distressed portfolio of five properties in Dallas and Nashville and Knoxville, Tennessee, formerly owned by troubled Austin-based syndicator GVA Real Estate Group.

To take control of the five properties, S2 placed $60 million of rescue capital through a structured preferred equity investment in a new joint venture with the existing limited partner of the assets, Southlake, Texas-based private equity firm Trinity Investors. S2 also secured a new five-year, $170 million senior loan through New York City-based commercial real estate debt provider ACORE Capital.

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