I invested in an office fund because the word diversified was in the name
Almost nothing I understood about this turned out to be true, so writing it down.
I put $40k into a fund that described itself as a diversified office income fund. My assumption, never checked, was that diversified meant many buildings in many places, so if one struggled the others carried it. What it actually meant was four buildings in two markets, all of them 1980s and 1990s suburban product, all leased to smaller professional tenants on gross leases.
So the diversification was across buildings that all fail for the same reason at the same time. Which they did. Remote work hit small professional tenants in older suburban buildings all at once, in the same two metros, and the four buildings did not offset each other at all. They moved together.
Distributions ran for about a year at a reduced rate, then stopped. Two years later the manager sold one building at a loss to pay down debt on another. My last statement showed an estimated value of about 41 percent of what I put in. I haven't received anything since 2024 and the wind-down language now says 2028 or later.
Second thing I got wrong: gross leases. I didn't know what that meant when I invested. It means the landlord absorbs the operating expenses, so when insurance and utilities and property tax went up, all of that came out of the fund and none of it went to tenants. I thought a lease was a lease.
What I'd do differently. I'd count the buildings, their ages, their markets, and their tenant types, and ask myself what single event would hurt all of them at once. If the answer comes fast, the fund is one bet wearing four coats. And I'd learn what kind of lease is in the buildings before I wire anything, because that determines who eats inflation.