Overview
CS1031 Texas Active Living Portfolio I, DST (sponsored by Capital Square) is a debt-free, all-cash offering of $39,300,000 of beneficial interests (100% equity, 0.0% LTV) in a 76-unit portfolio of two boutique, age-restricted (55+) build-for-rent cottage communities in Texas: the 44-unit Emerald Cottages of McKinney (2551 Alma Road, delivered 2016) and the 32-unit community at 2412 Marketplace Drive, Waco (built 2018). The single-story cottages average 1,350 SF (all two-bedroom) with private entrances, oversized attached garages, clubhouses, and upgraded interiors (granite, custom cabinetry, stainless appliances, walk-in closets) configured for low-maintenance living. The Trust acquired the Properties on March 3, 2026 for a $32,225,000 unloaded price within the $39,300,000 offering, with no mortgage debt. Both communities were 100% occupied as of March 1, 2026 with a combined 30-resident waitlist ($1,000 deposits), zero bad debt, no concessions, and trailing retention of 86% (McKinney) and 78% (Waco); average rents are $3,536 (McKinney) and $3,334 (Waco). The Properties are net-leased to two affiliated master tenants (McKinney and Waco), with management by a Capital Square affiliate subcontracting to operator Carbon Shepherd. The forecast assumes 3% annual rent growth over a 10-year hold to a projected March 2036 sale, targeting cash-on-cash distributions rising from 4.50% to 5.59% (4.93% average) and a 1.51x-1.61x equity multiple; the sponsor disposition fee is fully subordinated to investors' return of capital, and an optional Section 721 UPREIT contribution provides a potential tax-deferred exit. Securities offered through WealthForge Distributors, LLC.
Highlights
The offering is entirely unleveraged: the Properties were acquired on an all-cash basis with no mortgage debt (0.0% LTV), eliminating refinancing, interest-rate, balloon-maturity, and lender-foreclosure risk and removing any Section 1031 requirement to replace debt at the investor level. Distributions, projected at 4.50% rising to 5.59%, are funded directly by in-place net rent and 3% contractual rent growth rather than by financial leverage, positioning the portfolio as a stabilized current-income vehicle.
Both communities were 100% occupied as of March 1, 2026, with a combined 30-prospect waitlist (each backed by a $1,000 deposit), zero bad debt, no concessions, and trailing-twelve-month retention of 86% in McKinney and 78% in Waco. The active-adult (55-plus) build-for-rent cottage format of single-story, private-entrance homes with attached garages serves durable, needs-based demand from an aging demographic and has demonstrated stable, healthy tenancy.
The portfolio targets two high-growth Texas markets. McKinney sits in Collin County within the Dallas-Fort Worth metro (the sixth-largest U.S. metro at 8.3 million), a fast-growing, high-income city (~$120,000 median household income; home values up ~37% over five years) where four planned build-for-rent communities reportedly target none of the active-adult segment, reinforcing differentiated positioning. Waco, along the I-35 corridor between DFW and Austin, is anchored by Baylor University (~20,000 students) and a population of which roughly 26.8% are age 55-plus, supporting sustained demand for age-restricted housing.
The sponsor, Capital Square, is a vertically integrated national real estate firm specializing in tax-advantaged vehicles (Delaware statutory trusts, qualified opportunity zone funds, and a REIT) and an active developer and manager of housing. Investor alignment is reinforced by a fully subordinated disposition fee, with the sponsor's 2.95% disposition fee subordinated to investors' return of capital, and by funded reserves including a $912,000 capital-expenditure reserve and $297,307 of investor reserves returned at disposition if unused.
The structure provides exit optionality beyond an outright sale: the Signatory Trustee may elect to facilitate a Section 721 UPREIT contribution, under which beneficial owners could exchange their interests for operating-partnership units at fair market value, offering a potential tax-deferred continuation path. The base-case business plan nonetheless targets a sale at the end of an approximately ten-year hold (projected March 2036), with a forecast 1.51x-1.61x equity multiple and 5.03%-5.75% IRR across the disclosed terminal-value sensitivities.
Analysis
Insights
The risk-adjusted profile is a stabilized, income-first active-adult housing DST, appropriately Core given full occupancy, an all-cash structure, and the absence of any value-add or lease-up program; return is a function of rent durability and the exit rather than leverage or repositioning. The all-cash capitalization is the defining feature: with no mortgage there is no refinancing or rate risk, but the absence of leverage also caps return potential, so the projected 4.50%-to-5.59% distribution ramp rests on the 3% contractual rent-growth assumption and on the niche's demographic tailwind (an aging population and, in McKinney, build-for-rent competitors that reportedly avoid the active-adult segment). The central tensions are scale and basis: 76 units across two markets is a concentrated, illiquid position, and the roughly 11.35% load plus the gap between the $32.2 million purchase price and the $39.3 million offering means investors enter above the underlying real estate value and must earn it back over the hold. Exit sensitivity is explicit; the sponsor's own disposition analysis shows IRR ranging 5.03% to 5.75% and the equity multiple 1.51x to 1.61x across the disclosed exit-pricing range, so terminal value drives outcomes. Genuine supports include strong alignment (a fully subordinated disposition fee), funded reserves, an institutional tax-advantaged sponsor, and meaningful exit optionality: unlike a sale-only structure, the optional Section 721 UPREIT contribution offers a potential tax-deferred roll into operating-partnership units, though it is at the Signatory Trustee's discretion and not investor-controlled.
Advantages
On a micro level, the portfolio offers stabilized, fully occupied (100% as of March 2026) active-adult build-for-rent housing with embedded demand support, including a combined 30-resident waitlist, zero bad debt, no concessions, and 78%-86% retention, across two growing Texas markets: McKinney (high-income Collin County / DFW, where competing build-for-rent supply reportedly does not target the active-adult niche) and Waco (a Baylor-anchored I-35 market with ~26.8% of residents aged 55-plus). The cottage product of single-story, private-entrance, attached-garage homes serves durable, needs-based demand from an aging demographic. On a macro and structural level, the all-cash, debt-free capitalization removes interest-rate, refinancing, and balloon risk entirely and delivers a clean current-income profile (4.50% rising to 5.59%, 4.93% average) funded by 3% contractual rent growth, with strong investor alignment via a fully subordinated disposition fee, funded capital-expenditure and investor reserves, an institutional tax-advantaged sponsor in Capital Square, and an optional Section 721 UPREIT exit alongside the base-case sale.
Concerns
The risks concentrate in scale, concentration, and a full going-in basis rather than leverage. The portfolio is small and undiversified at only 76 units across two single-story communities in two Texas markets, so localized supply, demographic, or operating shifts (or weather and insurance events) would have an outsized effect, and Texas real estate taxes and insurance are sizable, growing expense lines in the forecast. All distributions flow through two affiliated master tenants whose capitalization is supported solely by underlying tenant lease cash flow, with the sponsor under no obligation to contribute capital, so a shortfall in property cash flow would directly pressure rent payments to the Trust. The going-in basis is full for the asset class, with the entry yield compressing materially once the approximately 11.35% upfront load is layered on (9.65% selling/offering plus a ~1.70% acquisition and due-diligence fee), and the $39,300,000 offering price embeds a meaningful premium to the $32,225,000 property purchase price, so early-year yield is modest (4.50%) and total return depends on realizing 3% annual rent growth and a favorable exit. The disclosed disposition analysis shows IRR falling to roughly 5.03% and the equity multiple to 1.51x if the terminal value expands to 5.84% (versus the 5.58% entry), underscoring exit-pricing sensitivity over the ten-year hold, and the interests remain illiquid with no investor control over operations or the timing of a sale or 721 election.
