Dallas-based S2 Capital on Tuesday launched a development vertical centered on multifamily and industrial projects in major Sun Belt markets.

The strategy aims to capitalize on a multiyear supply shortage in the Sun Belt, the company stated in a press release. The company named Carl Starry as president, development to lead the platform.

"We believe this is one of the most compelling development environments we've seen in the last decade," S2 Capital founder and CEO Scott Everett said in a statement. "Starts have collapsed, demand fundamentals across the Sunbelt remain intact, and deliveries three years from now will be scarce."

Popular Sun Belt markets like Austin, Dallas-Fort Worth, Atlanta and Houston have all seen negative rent growth year-over-year, according to a Yardi Matrix national multifamily report. A supply slowdown is expected to translate to a "meaningful reduction" in new deliveries nationally beginning late this year and extending into 2027, according to a Colliers report.

Everett said the company anticipates a challenging financing environment will further mute short-term supply pressures. He said developers who are able to get projects off the ground today will be rewarded.

Starry is set to lead the platform with over 20 years of multifamily development experience. He joins from Leon Multifamily, where he led the firm's development operations, delivering 24 projects across Texas, Arizona and the Carolinas.

S2 is launching its development arm following a tumultuous period for the multifamily REIT it launched in 2024.

Trinity Investors, which helped S2 form the REIT, told equity investors they should expect a full loss of capital, The Promote reported in early May. S2 was reportedly shifting its focus to maximizing value for mezzanine investors, according to the outlet.

Everett told The Real Deal in May the update was "old news" and that investors had been notified of it in November. The reporting came a few months after S2 issued a $70M capital call for the REIT.