CS1031 Zero-Coupon DFW Hospitality DST Overview
CS1031 Zero Coupon DFW Hospitality DST is a zero-cash-flow, highly leveraged Delaware Statutory Trust sponsored by Capital Square. The Trust owns the fee-simple land, the ground-landlord interest in a 99-year ground lease (commenced November 2021), and the reversionary interest in the improvements at 815 Commerce Street in downtown Fort Worth, Texas, the site of the Le Meridien Fort Worth, a 14-story, 188-room upper-upscale full-service Marriott-franchised hotel (254,778 SF, near Sundance Square). The Trust is the ground landlord only; the ground tenant (815 Commerce LLC) and operator are controlled by Ashford Hospitality Trust (NYSE: AHT), with Remington managing the hotel under a Marriott franchise. The Trust acquired the Property for $37,145,000 ($4,845,000 cash plus a $32,300,000 UMB Bank senior mortgage at a 5.82% blended initial rate maturing in 2061), for a total investment cost of $41,530,000 and a 77.78% loan-to-cost. By design, the fixed ground rent (~$1.63M Year 1, growing 2% annually) approximately equals debt service, so the Trust produces no distributions during the ~15-year hold; investor return accrues solely through loan amortization (equity buildup) and the reversionary interest, with a discretionary Section 721 UPREIT exit available. Notably, because the Trust owns land and a reversion rather than depreciable improvements, the structure provides no depreciation shelter; its primary utility is replacing high relinquished-property debt for 1031 exchangers without additional equity.
Highlights
The defining feature is debt replacement: each 1% interest carries ~$323,000 of attributed nonrecourse loan (86.96% of purchase price), allowing 1031 exchangers whose relinquished property carried high leverage to satisfy their equal-or-greater-debt requirement without contributing additional equity. This makes the offering a specialized tool for a narrow investor profile rather than an income vehicle; the trade-off is that the same high leverage (77.78% loan-to-cost, rising toward ~80% mid-hold under negative amortization) leaves minimal equity cushion.
The Loan is structured so monthly debt service approximately equals the fixed ground rent, producing zero distributions for the entire ~15-year hold; the investor yield comes exclusively from principal amortization that retires the loan to a zero balance by 2061 plus the reversionary interest in the hotel. An irregular schedule includes negative amortization for the first ~101 months (interest exceeds rent, growing the balance to ~$33.2M before it declines), so equity buildup is back-loaded and largely deferred to the latter half of the hold.
Income is contractual ground rent with fixed 2% annual escalations under a 99-year ground lease, providing predictable, bond-like cash flow to service the self-amortizing loan and insulating the Trust from hotel operating volatility at the rent line. The qualification is that the rent payer is a single ground tenant controlled by Ashford Hospitality Trust, a highly leveraged, non-investment-grade hotel REIT, so the durability of that contractual stream depends on a weak-credit counterparty whose rent obligation nearly equals the Trust debt service.
The underlying asset is a modern full-service Le Meridien in downtown Fort Worth, a high-growth market, steps from Sundance Square and the convention district, providing demand support for the hotel and, by extension, the ground tenant ability to pay rent. The reversionary interest gives the Trust eventual claim on the improvements; however, a special-purpose 188-room hotel carries meaningful re-leasing or repositioning cost and uncertain residual value, and the ground tenant holds a Year-35 purchase option that can cap upside.
The senior mortgage carries a sub-6% fixed blended rate (5.82%) locked through a 2061 maturity and fully self-amortizes to a zero balance, eliminating refinancing and rate risk over the hold and converting contractual rent into equity over time. The structural cost is that the high leverage and matched rent/debt-service design leave a ~1.0x DSCR with no margin for rent interruption, so a ground-tenant payment shortfall translates directly into loan-default risk.
Analysis of CS1031 Zero-Coupon DFW Hospitality DST
Insights
This is not an income investment but a debt-replacement and defeasance instrument: its reason for existing is to absorb roughly 87% attributed nonrecourse leverage on behalf of 1031 exchangers exiting a highly levered relinquished property, with return manufactured over a ~15-year hold through self-amortization of a sub-6% fixed loan (5.82%) and a reversionary claim on a downtown Fort Worth hotel rather than through cash yield or appreciation. Judged as income it sits at the bottom of its sector — the headline yield is a literal zero against a hospitality-DST average near 3.2% — and every dollar of return is deferred and back-loaded, since an irregular schedule runs negative amortization for the first ~101 months and pushes loan-to-value toward ~80% mid-hold before equity builds. Against that, investors pay a heavy ~10% total load up front, steep for a vehicle that distributes nothing and whose payoff is retiring someone else's mortgage, so a real slice of the eventual equity is consumed at the door. The 2% contractual ground-rent escalator and the matched, fully-amortizing loan lend a bond-like veneer, but the substance is thin: rent approximately equals debt service, leaving a ~1.0x coverage cushion resting on a single non-investment-grade payer (a ground tenant controlled by Ashford Hospitality Trust), so the downside is closer to binary than bond-like. The outcome hinges on the multi-decade solvency of that one tenant and the terminal value of an aging, special-purpose 188-room hotel reversion — neither captured by the zero distribution rate, nor well-proxied by the sponsor's full-cycle record, which is built on ~5-year holds rather than a 15-year zero-coupon structure. Note too that, unlike a conventional DST, the Trust owns land and a reversion rather than depreciable improvements, so there is no depreciation shelter, and amortization raises the prospect of phantom taxable income in later years. Net: a purpose-built fit for the exchanger who specifically needs debt replacement plus estate-planning utility and can hold to maturity on after-tax terms — and a clear pass for anyone seeking current income, liquidity, diversification, or a depreciation shield.
Advantages
For its intended use, a 1031 exchanger needing to replace substantial relinquished-property debt without adding equity, the offering is purpose-built, attributing ~86.96% loan-to-purchase-price of nonrecourse debt while requiring minimal cash. Income to service the loan is contractual ground rent with fixed 2% escalations under a 99-year ground lease, insulating the Trust from direct hotel operating risk at the rent line, and the senior mortgage is locked at a sub-6% fixed blended rate (5.82%) that fully self-amortizes to zero by its 2061 maturity, removing refinancing and interest-rate exposure and converting rent into equity buildup over the hold. The underlying Le Meridien is a modern full-service hotel in a growing downtown Fort Worth market near Sundance Square, and Capital Square provides an institutional sponsor with a Section 721 UPREIT exit option.
Concerns
The structure produces zero distributions for the entire ~15-year hold, so all return is deferred to disposition and depends on loan amortization plus an uncertain reversionary value in a then-aged, special-purpose 188-room hotel. Leverage is high (77.78% loan-to-cost) and worsens early: an irregular schedule includes negative amortization for the first ~101 months that grows the balance toward ~$33.2M and pushes loan-to-offering-price to roughly 80% mid-hold, leaving minimal equity cushion and a ~1.0x DSCR with no margin for rent interruption. Critically, the contractual rent payer is a single ground tenant controlled by Ashford Hospitality Trust, a highly leveraged, non-investment-grade hotel REIT with a documented history of financial stress, and because rent approximately equals debt service, a ground-tenant or operator default would directly threaten loan default and the entire investment. Unlike a typical DST, the Trust owns land and a reversion rather than depreciable improvements, so there is no depreciation shelter, and the loan amortization raises the prospect of phantom taxable income in later years without corresponding cash. The ground tenant Year-35 purchase option may compress reversionary upside and limit the future buyer pool, and investors have no voting rights amid multiple Sponsor-affiliate conflicts and fees.
CS1031 Zero-Coupon DFW Hospitality DST — Complete Offering Data
Offering & Structure
Investment NameCS1031 Zero-Coupon DFW Hospitality DST
SponsorCapital Square
StructureDelaware Statutory Trust (DST)
Offering Type506(c)
StatusAvailable
Last Updated2026-08-11
Size & Availability
Total Offering$41,530,000
Equity$9,230,000
Debt$32,300,000
Available Equity$1,962,566 (21.3% of equity)
Minimum Investment$50,000
Total Load10.00%
Initial Reserves12.48%
Property
Property TypeHospitality
StrategyCore
LocationTX
Market TierTier 1
Income & Projections
Average Yield0.00%
Projected Yields (Y1–Y10)Y1 0.00% · Y2 0.00% · Y3 0.00% · Y4 0.00% · Y5 0.00% · Y6 0.00% · Y7 0.00% · Y8 0.00% · Y9 0.00% · Y10 0.00%
Tax-Adjusted Yield0.00%
Cap Rate Equivalent8.15%
Year 1 NOI$1,634,808
Financing
In-Place LTV77.78% LTV
LenderUMB Bank, N.A.
Loan TypeFixed
Interest Rate5.82% (Fixed)
Loan Term36 years
I/O PeriodNone
Amortization36 years
Y1 DSCR1.00x
Exit
Estimated Hold Period15 years
721 Exchange ExitOptional
Benchmarks (vs sector median)
Avg. Income0.00% vs 4.52% market
Growth— vs 17.70% market
Peak0.00% vs 4.83% market
Every data point Baker 1031 tracks for this offering, in one place. Figures are drawn from the offering’s private placement memorandum and sponsor materials unless noted, are summaries for convenience only, and are qualified in their entirety by the PPM. Tap the ⓘ icon next to any label for what it means and how it is calculated.
