Every sponsor with three or more DST programs on Top1031 has a record card, and most of them carry a letter, A through F, or the label NR. The letter is called the Top1031 Grade. It is easy to misread a single letter as a stamp of approval. It is not one. It is the answer to two questions about the sponsor's history, and the record card under it shows the counts the answer came from.
The two questions
Has any of the sponsor's programs lost investors' money? A program is one DST investment. A program counts as a loss only when there is a public record to show for it: a foreclosure, a bankruptcy filing, a court putting someone else in charge of the property (a receivership), a loan default recorded in court or county files, or the sponsor's own published figure showing investors got back less than they put in. A news story or a lawsuit on its own is shown on the sponsor's page but does not move the letter.
Has the sponsor finished programs and reported the results? A program counts as reported when it was sold and the sponsor itself printed a number for how investors did, in its own brochure, offering documents or press release: total gain or loss, dollars returned per dollar invested, or average yearly return. A sale known only from a broker's website, or a "sold" label with no number, is shown on the page but not counted.
The one term to hold onto is counted outcomes: reported programs plus loss programs. "One loss in twenty counted outcomes" means one loss for every twenty programs that were either reported or lost. Programs still running, and sales with no reported number, are not in that count. Nothing is weighted, and nothing unknown is turned into a number.
The letters
The rules are read in order, and the first one that fits decides the letter.
Letter | The rule |
|---|---|
F | At least three loss programs, and they are half or more of the counted outcomes. Or a regulator or court has made a final finding of fraud or misuse of money connected to the sponsor's programs. |
D | At least two loss programs, and either two of them happened in the last three years, or losses are more than 1 in 10 of counted outcomes. |
NR | Not rated: fewer than three counted outcomes and fewer than three documented sales. Too little finished history to grade. |
C | A loss in the last three years. Or fewer than three reported programs. |
B | Three to nine reported programs and no loss. Or any number of reported programs with a loss that is three to five years old, or losses of more than 1 in 20 of counted outcomes, or a loss in a record of fewer than 20 counted outcomes. |
A | Ten or more reported programs, and either no loss, or losses that are no more than 1 in 20 of counted outcomes, all more than five years old, in a record of at least 20 counted outcomes. |
Two things follow from the order. Losses are checked before anything else, so a sponsor with two losses in three outcomes is D, not "too small to grade". And silence earns nothing: a sponsor that sells programs and never reports results cannot be graded above C, while a sponsor that reports everything, including its losses, can still reach A once those losses are old and rare.
One rule sits outside the table. A pending regulatory complaint against a sponsor or its owners is printed on the page and holds the letter at C or below until it is decided. A complaint alone never produces an F.
Not rated and pending verification
NR means Not Rated: the sponsor has fewer than three counted outcomes and fewer than three documented sales. There is not enough finished history to grade, usually because the sponsor started recently and its programs are still running. The record card still shows every program, and any loss found is still printed. NR is not a failing grade.
"Grade pending verification" is different. It means the counts are shown, but the letter waits for three checks on that sponsor: every match between its published performance table and its SEC filings is audited, its own publications are attached to each finished program, and court and county records are searched for every program it has run. The letter publishes when all three are done.
The record card
The letter never appears alone. Under it sits a short card: how many programs the sponsor has filed with the SEC, how many were sold with a result the sponsor reported, how many were sold without one, how many moved into a REIT instead of being sold, how many lost investors' money, and how many older programs are confirmed still operating or have no public outcome found. The lines add up to the programs on record. Each count links to the programs it was counted from, and each program links to the document that put it there.
A sentence beside the letter says which rule decided it, in the same words as the table above. When a count changes, the letter can change, and the change is dated on the page with the document that caused it.
What it cannot tell you
The Grade is a history score, not a forecast. It does not predict whether a current offering will perform, and it says nothing about a specific property, its debt, its fees, or whether it suits you; those still require the offering documents themselves. It does not measure how big the returns were: a program that returned $1.30 per $1 invested and one that returned $2.10 count the same, as a finished program whose result the sponsor was willing to print. And "no documented loss found" means the listed sources were searched and nothing was found. It is strong evidence, not proof.
The bottom line
The Grade tells you two things about a sponsor's past: whether any of its programs lost investors' money on the public record, and whether it finished programs and published the results. Read it with the record card beneath it, and use the offering's own filings and your own advisors for everything the Grade was never designed to answer.
Frequently asked questions
Does a higher Top1031 Grade mean a current Offering will perform well?
No. The Grade counts a sponsor's own program history: losses on the public record and results the sponsor published. It is not about any single current Offering. The Offering documents and your own advisors are still the source for anything about the deal in front of you.
What does NR mean on a Sponsor's page?
NR stands for Not Rated. It appears when a sponsor has fewer than three counted outcomes and fewer than three documented sales, meaning there is not enough finished history yet to decide a letter. NR is not a failing grade, and any loss found is still printed on the record card.
Can a Sponsor change or remove its own Grade?
No. A sponsor cannot pay for a Grade, improve one commercially, or opt out. Every letter comes from two counts on public documents: court, county and sponsor-published records of losses, and the sponsor's own published results. Evidence changes a Grade; a letter saying "trust us" does not.