CS1031 Texas Active Living Portfolio II is a debt-free, 64-unit active-adult (55+) portfolio comprising Emerald Cottages of Kerrville (Texas Hill Country) and Round Rock (Austin MSA), each a single-story, detached-cottage community of 2BR/2BA homes averaging 1,350 SF. Both assets are 100% occupied with 10-plus-resident waitlists, zero bad debt, and no concessions, pairing a recession-resilient active-adult niche with an all-cash structure that eliminates refinancing and rate-cap exposure. Operations run through Capital Square-affiliated master tenants and Carbon Shepherd on-site management, targeting a 5.65% Year-1 yield-on-cost stepping to 7.51% by Year 10 on ~3% annual escalations.
A 64-unit, two-asset active-adult (55+) portfolio comprising Emerald Cottages of Kerrville (32 units, vintage 2019, Texas Hill Country) and Emerald Cottages of Round Rock (32 units, vintage 2018, Austin MSA / Williamson County), each a single-story, cottage-style community of detached 2BR/2BA homes averaging 1,350 SF with attached garages, ADA-accessible step-free layouts, and clubhouse amenities. Both assets are 100% occupied with 10+ resident waitlists secured by $1,000 deposits, zero bad debt, and no concessions.
The thesis pairs a recession-resilient, demographically tailwinded niche — needs-based active-adult housing for an aging cohort (48% of the Kerrville zip is 50+) — with an all-cash, debt-free capital structure that eliminates refinancing and rate-cap exposure across the ten-year hold. 51% by Year 10 on contractual base-rent escalations averaging roughly 3% annually.
The properties are held free and clear with no mortgage, eliminating refinancing, maturity, rate-cap, and lender-foreclosure risk and removing the equal-or-greater-debt replacement requirement for 1031 investors. The structural trade-off is the absence of positive leverage.
The portfolio occupies the active-adult (55+) niche that sits structurally between conventional market-rate multifamily and licensed senior housing, capturing needs-based demographic demand without the operational intensity, regulatory overhead, or labor-cost volatility of assisted living or memory care. Demand is anchored by an aging-in-place cohort: 48% of the population within the Kerrville property's zip code is age 50+, and the Hill Country functions as a regional retirement destination. This positioning insulates rent rolls from the discretionary-move-out behavior that pressures conventional Class A multifamily during economic softening.
Both assets are 100% occupied with documented waitlists exceeding ten prospective residents each, every entry backed by a $1,000 deposit — a tangible, capitalized indicator of unmet submarket demand rather than aspirational lease-up assumptions. The trailing-twelve-month operating history shows zero bad debt, no concessions, and resident retention of 91% (Kerrville) and 81% (Round Rock), signaling sticky tenancy and minimal turnover frictional cost that underpins the forecast effective-gross-income stability.
The all-cash, no-mortgage-debt capitalization removes the single largest source of DST mid-cycle distress: refinancing risk and interest-rate-cap repurchase cost at loan maturity. With no debt service, the full NOI stream converts to distributable cash flow, the Year 1 yield-on-cost of 5.65% accretes to 7.51% by Year 10 on contractual escalations, and the asset can be sold or contributed into a 721 UPREIT transaction on the Sponsor's timing without lender consent, defeasance, or prepayment penalty constraints.
The Round Rock asset benefits from a demonstrably supply-constrained submarket: only 200 units of construction starts over the trailing two years, with submarket vacancy improving more than six percentage points in 2025 — the third-sharpest reduction among Austin submarkets. Sited within the Teravista master-planned community (18-hole golf course, fitness, pickleball, 10+ miles of trails) in a county that grew 19.4% from 2020–2024 with ~$108,000 median household income, the asset combines a high-growth metro with a near-term barrier to competitive new deliveries.
The Sponsor's full subordination of its disposition fee to investors' return of capital creates explicit co-investment alignment at the exit, deferring sponsor compensation until principal is recovered. Combined with the cottage-style, detached single-story product format — which carries lower turnover capital intensity than stacked-flat multifamily and appeals to a long-tenure resident base — the structure aligns sponsor economics with the durability of the forecast cash flows rather than transactional fee velocity.
The offering pairs a debt-free balance sheet with two fully stabilized, 100% occupied active-adult communities of recent vintage (2018/2019), eliminating leverage-driven refinancing and rate-cap exposure while delivering a forecast distribution profile that escalates from 4.50% to 5.70% over a ten-year hold on contractual base-rent growth. The niche captures durable, demographically supported demand from an aging 55+ cohort, with documented deposited waitlists at both assets evidencing real excess demand. Macro positioning is favorable: Round Rock sits in a high-in-migration Austin submarket (Williamson County +19.4% 2020–2024) with a constrained near-term supply pipeline, while Kerrville offers a low-cost, healthcare-anchored Hill Country retirement market with limited cyclical sensitivity. Operating fundamentals — zero bad debt, no concessions, high retention, and the lowest operating expenses within the Sponsor's broader cottage portfolio at the Kerrville asset — reinforce the credibility of the underwritten EGI.
The cash-flow stream depends on master-lease performance by two Capital Square-affiliated master tenants whose capitalization is supported solely by underlying sublease rents, with no Sponsor obligation to fund shortfalls — a structural credit dependency that concentrates risk if resident-level rents underperform the forecast. The 64-unit, two-property scale offers limited diversification: a single-market (Texas) concentration with both assets exposed to Texas real-estate-tax dynamics, where the forecast carries real estate taxes escalating from $345,249 to $485,759 over the hold, a line item vulnerable to reassessment following the recent transaction. The Round Rock asset's reliance on the Dell/Amazon/St. David's employment base ties resident formation to Austin-metro economic concentration, and the active-adult format's narrow tenant profile constrains the prospective buyer pool at disposition relative to conventional multifamily. The forecast assumes uninterrupted ~3% annual rent escalation and improving vacancy despite Round Rock's TTM retention of 81%, leaving modest cushion if Hill Country or Austin-submarket demand normalizes.
The analysis below is Baker 1031's educational opinion — not investment, tax, or legal advice, a recommendation, or a guarantee, and it does not replace the offering's Private Placement Memorandum (PPM), which governs in all respects. Read the PPM and consult your own CPA and attorney before investing.
The risk-adjusted profile reflects a deliberate trade of leveraged return amplification for downside protection: the absence of debt caps the upside but removes the dominant failure mode in DST vintages exposed to the 2023–2025 rate regime, positioning the offering as a defensive, income-oriented allocation rather than a total-return vehicle. The ~5.00% average cash-on-cash and 5.65%-to-7.51% yield-on-cost trajectory are underwritten on conservative, contractually supported escalations rather than aggressive mark-to-market rent growth or cap-rate compression, lending credibility to the assumptions in a higher-for-longer environment. The active-adult niche aligns with secular demographic demand that is comparatively insensitive to the macroeconomic cycle, and the optional 721 UPREIT exit affords the Sponsor flexibility to time disposition into a liquidity event without refinancing pressure. The principal underwriting tension lies in master-tenant credit dependency layered on a thin 64-unit, single-state base; the feasibility of the forecast rests on sustained submarket demand and disciplined expense control, both of which the trailing operating history supports but neither of which is contractually guaranteed across a full ten-year horizon.
The analysis below is Baker 1031's educational opinion — not investment, tax, or legal advice, a recommendation, or a guarantee, and it does not replace the offering's Private Placement Memorandum (PPM), which governs in all respects. Read the PPM and consult your own CPA and attorney before investing.
| Metric | This Offering | Market Avg. | Assessment |
|---|---|---|---|
| Avg. Income | 5.00% | 5.12% | Meets Average |
| Income Growth | 26.67% | 44.55% | Below Average |
| Peak Income | 5.70% | 6.65% | Below Average |
Capital Square
Capital Square has evolved from a pure 1031/DST sponsor into one of the more vertically integrated platforms in the securitized exchange market, with over $6 billion in AUM and more than $7.5 billion in transaction volume since its 2012 founding by Louis Rogers. Beyond sponsoring DSTs across 175-plus assets for some 6,500 investors, the firm develops its own multifamily product, manages roughly 13,000 apartments through Capital Square Living, and diversifies into Qualified Opportunity Zone funds and a REIT. That control of the full lifecycle—and full-cycle results such as a cited 159% return of equity on a completed DST—make it a benchmark name for diligence-minded exchangers.
Learn More About Capital Square →Documents for this offering. Available to signed-in investors.
Securities offered through Aurora Securities, Inc. (CRD #46147 / SEC #8-51322), member FINRA / SIPC; Baker 1031 Investments, LLC is independent of Aurora Securities, Inc. and is not a registered broker-dealer or investment adviser. This is not an offer to sell or a solicitation of an offer to buy any security; any offer is made solely by the confidential private placement memorandum (PPM), which qualifies all information herein in its entirety. Delaware Statutory Trust interests are speculative, illiquid securities offered under Rule 506(c) of Regulation D and sold only to investors whose accredited-investor status has been verified; offering documents and subscription materials are provided only after that verification. They involve substantial risk, including possible loss of the entire investment.
Distributions, yields, the cap-rate equivalent, DSCR, occupancy, and benchmark figures are sponsor estimates or projections, are not guaranteed, and may differ materially from actual results. Any tax-adjusted yield assumes a 40% effective rate for non-1031 cash investors and is not tax advice. No tax, legal, or investment advice is provided — consult your own CPA and attorney. Past performance does not guarantee future results.