Long DUCs Don

People seem to wonder how S2 raised so much capital.... and this is why. Their 2012-2022 realized track record was insane... they perfected the sunbelt fix/flip/bridge-debt model and that was close to a 3x average gross return every few years on almost 50 deals with ZERO losers. It's fun to play monday morning quarterback but they did have a decade+ old platform that was printing money for them and their LPs. You can poke holes in the fees (but who cares on a 35%/2x net?), the nepotism, the wife, PJ, etc but at the end of the day, we're all out just trying to make money and it's hard not to look at a track record like this and not be intrigued.... Obviously the moral of the story is that there was a ton of embedded risk in the assets, markets, capital stack ("fixed rates is for suckers") and management.... but those are all easy to gloss over in real time when you think you're going to double/triple your money with zero work and buy your wife that Mexican beach villa you've been dreaming about.... 👀

S2 Capital / Trinity Investors saga continues... Over the past 24 hours I've spoken with additional LPs and industry participants. Several recurring themes are emerging.What we know: • The original S2 Multifamily Value-Add Fund PPM expressly contemplated the possibility of a future private REIT and stated that any REIT structure would be accompanied by supplemental disclosure. • The original PPM disclosed a significant fee structure, including a 1.5% management fee, 10% construction management fee, 3.5% property management fee, 2% asset management fee, and a 1% acquisition fee, before any carried interest/promote.What multiple LPs and industry participants are speculating (not established fact): • that Trinity Investors, acting as the purportedly independent manager, may have faced a conflict of interest when recommending participation in the REIT conversion; • that the conversion may have been motivated, at least in part, by a desire to remove or restructure personal guarantees (against the founder of S2) associated with certain assets; • that investors may have paid substantial additional front-end fees as part of the REIT transaction. Multiple sources have independently claimed the load may have been approximately 7% to Trinity and another 7% to S2, although I have not independently verified those figures; • that combining older, stronger-performing assets with later-vintage, deeply underwater assets effectively socialized losses across different investor groups. If Trinity was serving as an independent manager, one of the key questions is whether its recommendation was made solely in the best interests of each individual investor group or whether other considerations influenced that recommendation. That's ultimately a legal and factual question, not a conclusion. I'm still looking for the REIT offering memorandum, consent solicitation, exchange materials, fee schedule, and any investor communications relating to the conversion. If you have them, my DMs are open.

RT IF YOU STAND WITH ICE !!!!