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Someone correct me if I am wrong because I haven't bothered with further analysis but I know PDM raised billions of dollars throughout the early 2000's - a good time to invest, not the heights reached in '07 and '08 - and bought great, institutional grade properties in great markets. Yet after 10+ years the investors have averaged a 5% or 6% annual dividend and their current value is about 70 cents on the dollar (trading at $17, basis at $25/share)? Am I missing something or does this prove that these structures are guaranteed losers?
They are not guaranteed to be losers but are very likely to be losers. Piedmont operates according to the Wells model, where retail money gets raised at a stated share price. Enormous fees get taken out, then real estate is purchased. More fees get taken out for property management. So the real estate has to appreciate by 20% in value just for you to get back your investment. That idea worked, but only until 2007.
Crabs, they are certainly guaranteed losers if they sell their shares. My greater point is that all the conditions were favorable for what should have been a very successful investment yet the structure assured it couldn't be. It is amazing that BDs continue to pour money into these things without addressing the issues mentioned in my prior posting "Just Say No."crabsofsteel wrote:They are not guaranteed to be losers but are very likely to be losers. .