On February 2, 2018, the Tulsa Real Estate Fund (“Tulsa”) received its Notice of Qualification as a Regulation A+ Tier 2 crowdfund becoming the first African American owned crowdfunding platform focused on “buying the block.”
SEC qualification does not mean approval in the ordinary sense. The SEC has not, and will not, assess the merits, accuracy, or completeness of the Company’s information in its Offering Circular. Qualification means Tulsa met the legal disclosure and regulatory requirements under Regulation A+ to begin selling its units to the public. Under the law, SEC is only required to ensure that the Company tells investors everything. Admittedly, an investor interpreting “everything” to determine if an investment is a good fit, can be hard. Here’s a link to the Offering Circular. But here’s five things I think you need to know before investing.
This is not the IPO that you are used to
In 2012, President Obama infused new life into the investment world by signing the Jumpstart Our Business Start-Ups Act (the JOBS Act). The Act created a less cumbersome path for small and large businesses under $1 billion to obtain funding. It increased the amount of money that small businesses could raise from $5 million to $50 million. It also provided provisions for non-accredited investors, who are normally excluded from this process, to get involved through crowdfunding. The act’s rule, Regulation A+, essentially created a “mini IPO” process for small businesses.
Many investors are familiar with JOBS Act facilitated IPOs such as Snapchat, Dropbox, and Blue Apron. However, potential Tulsa investors need to understand they may not be able to sell their units because “no public market exists” and that their ability to transfer the units are limited. To withdraw, a member who has been in the investment for at least 12 months, must contact Tulsa directly.
The Specifics of the Investments are unknown
As of the date of the Offering Circular, Tulsa had not identified the assets it intended to acquire. Members will not have the opportunity to evaluate Tulsa’s investments before they are made which, as Tulsa disclosed, makes the investment more speculative. Although Tulsa’s name pays homage to the infamous Black Wall Street which was located just outside of Tulsa, Oklahoma, Tulsa will be investing in single family, multi-family and commercial properties throughout the United States in urban neighborhoods.
Tulsa Real Estate Fund is not a $50 Million Real Estate Fund
As of the date of its Offering Circular, the Company had $0 in cash and total liabilities of $15,350. The fund is authorized to raise up to $50 million over a twelve-month period as a Tier 2 Real Estate crowdfund. Generally, the average fund raises $18.2 million.
The independent auditors noted substantial doubts that Tulsa will be able to continue operations for the foreseeable future without needing to liquidate to fulfill its financial obligations. Management’s plans to reduce or minimize the auditors’ doubts report were insufficient to modify their opinion. Therefore, it seems unlikely that the fund will be able to meet its strategy of paying a preferred annualized return of 8% or realize a profit to distribute to its members.
The offering price is arbitrary
The company’s offering price of $50 per unit is “arbitrary and does not reflect book value of [the] Class A interests.” Currently, the Tulsa does not own any assets; it has not “conducted any revenue-generating activities” nor has it “generated any revenue since inception.” As a result, the per unit offering price is solely a function of raising capital, 1,000,000 units at $50 per unit, not a true reflection of the company’s value.
Once you’re in, you’re locked in for at least a year.
Tulsa is a long-term investment. The minimum investment is $500. However, subscribers may start to fund their investment account with $50; they have 180 days to become a member.
However, once an investor becomes a member of Tulsa, they are locked in for 12 months. After twelve months have passed and a member wishes to withdraw, Tulsa will use its best efforts to return the member’s money. In the event Tulsa does not have sufficient cash available, it will not liquidate assets and will distribute the cash available on a pro rata basis.
Final thoughts
The Tulsa Real Estate Fund is an excellent concept to help combat gentrification in African American communities. If I were not solicited on multiple occasions about the merits of the investment, I would have reserved comment.
This company has been in existence since July of 2016 but has yet to purchase any real estate. It is impossible to determine the company’s ability, regardless of the manager’s experience, to sustain itself let alone provide its stated annualized return. There is a strong possibility, as noted in the Tulsa’s Offering Circular, that investors could lose “their entire investment.” I have an additional concern regarding the ability of novice investors to manage their expectations regarding the company’s performance and return.
At this point, Tulsa is a purely speculative investment. It should only be considered as an option for a sophisticated investor who can withstand the loss of their entire investment and fully appreciate and withstand the risks that accompany investing in this type of offering.
Thank you for providing a professional and honest review.
Thank you for commenting Char!
What get me is the first investments is a korean church don’t know abiut that
Is it? Forreal?!?
That’s false. Don’t put out inaccurate information. The building is potentially going to be co vetted to other use
Jake, thanks so much for providing clarity on this point!
This is an extremely well written article Queen. Would love to collaborate with you. It’s not fully accurate but I do appreciate you informing your audience and our community on investment risk and translating some of the terminologies in our subscription agreement etc.
This fund is very new and quite hinosyoy there has never been one like it in the history of America and even in the world 100% Black Owned and SEC “qualified” with a genuine mission for urban revitalization for urban people. There is risk in all investments but certainly in such a new, innovative, groundbreaking investment vehicle and socio-economic engine such as ours. That’s why we are asking for the talented 10th of us to support one another and contribute our gifts, talents and treasure to make it a success for the advancement of our people. Appreciate your brilliance and honest feed back.
Sincerely,
Jay Morrison
Fund Manager
TREF
Thank you for the compliment. Please feel free to share the inaccuracies! If I need to amend, I most certainly will. I pulled all of the information from Tulsa’s offering circular. I’m always open to collaborating with individuals interested in moving us forward!
Im glad you did this article. In my opinion tulsa is just a REIT commiting highway robbery and a get rich quick scheme. Financially it makes no sense. They’ve been in business since 2016 and acquired absolutely nothing prior to the crowdfund and have no blueprint on how this model will provide thousands of investors with an so called calculated 8% preferred return.
Any investor knows a common REIT does not charge upfront management fees that come directly from the pool of money and take 50% of profits. REITs let you invest and the investor makes their annual profit return and the REIT normally charges 1% or less annual expense ratios (management fees and all included). For example. Vanguard, Simon Property Group, and many others) because in the long run they are still making a killing off the intial investments (i.e. equity based pay). This is one simple reason why Tulsa will never be able to trade on the stock market because the market would not tolerate this type of robbery.
Now, lets do some simple math:
$500 investment while 5.5% immediately goes to them thats ($27.5) management fee/ (5.5%) immediate loss just from buying the shares leaving an investor with $472.5. From that $500 lets say the investor does get an CALCULATED 8% return ($40) not garaunteed because no investment is garaunteed, an investor will get back $512.5. From that $512.5 subtract $20 from the ($40) 8% preferred return because the fine print says they also will receive 50% of the profits after you receive your 8% preferred return. Remaining investor balance $492.5. In the long run every investment will take a loss because of their greed, point blank period.
This is exactly why in their offering circle they cannot get approval of being successful in the future and will need financing to stay alive. Their pockets will get fat but investors will contiously lose money and they will have no way to pay investors back. People will be outraged once they see this model is greed and will not work. Their management structure is a LLC for a reason. If and when this financial model doesnt work, nobody can be financially hurt because LLCs provide protection to the owner or managing member.
Good Job on the article, I believe every last word and yes your article is factual regardless of what they say. Dont let his response fear you, i garauntee 99% of people who invested didnt read the Offering Circle or fine print and think is just a waste of document and are uneducated in investing and just being blind sighted by what their calling a vision.
Wow! This is super helpful. I wanted to invest and support my community. But something didn’t add up for me. Although, I don’t have the financial knowledge or background to justify my doubt, somehow I couldn’t deny my gut feeling to hold off. Thanks for sharing.
I’m glad you found it helpful!
Please do correct any inaccuracies. It would be very helpful for those of considering investment to hear what properties will be acquired and how the initial price was determined. Thanks for taking this big step with its important mission and thank you Courtney for your perspective.
Thank you for your comment!
I tried to invest. I’m from the UK and I asked questions on the FB page but they were acting like I needed a solicitor or some accountant to invest. I just want to invest £500 how hard can it be. I really wanted to join!
King, will you clarify why there are no real estate purchases to date (or confirm any purchases)? We are genuinely interested in supporting our community and your vision but we need answers.
Great informative article and I even linked to it in my own article.
Just caught it! Great points!
Wow, I am not sure who the individual was that posted your link in the comments section of TREF but I thank them so very much. I was about to jump in head first, which is rare as I usually scrutinize anything involving my hard earned money. I will hold back for now, until more positive and realistic aspects of this new Black Wall Street group are shown as factual. Great job and very informative.
Side note, any suggestions on where to invest besides my 401k, for an individual with regular folks income? I mean besides opening a self managed E-Trade account online, which I don’t think is bad, but I would assume a lot of stock knowledge would be needed to ensure some type of positive returns. Mutual funds want minimum $5000+ etc, which the average person doesn’t have at their disposal.
Thanks in advance.
There are apps such as robinhood, stash, betterment, acorns, and stockpile that let u buy small shares and are tailored to beginner investors. Also a simple strategy is to buy a vanguard index fund that tracks the whole US (or worldwide) economy, similar to a mutual fund but no minimum $ and less fees.
Thank you Ms Courtney for the break down. It is so needed for those of us looking to make an informed decision about how we will invest our hard earned money.
You are more than welcome!
My wife was on the verge of pilfering some of our savings for this…I told her “A business” that has been capitalized through equity crowdfunding arguably runs a greater risk of failure than one that has been funded through let’s say venture capital or other traditional means of start-up financing. This is because a crowdfunded business may not have access to the experience and guidance of seasoned venture capitalists and other professionals who can steer a start-up through the challenges of its development phase. The success of a business cannot be assured merely by funding. Without an adequate business plan and support structure, even very promising ventures can fail..An investor who invests through equity crowdfunding has an expectation of some return on investment in the future. However, return on equity crowdfunded ventures may take many years to materialize. In many cases, equity may not ever accrue to the investor. Management may deviate from the business plan, or could be out of its depth when trying to scale up the company. Over time, this may lead to capital erosion rather than wealth creation.Being that he has no legitimate history in deals of this magnitude and us being poor struggling black folk,i’d have to pass on the snake oil this time…Happy to see i’m not the only one apprehensive
Great points about planning, the bumpiness of a start up, and the need for stellar guidance!
I appreciate the insight!
Dear Courtney,
I had to stop by because I saw IVY in your site link. I’m glad to have found you! I’ve had quite a few people ask me to do a write-up on TREF, and you’ve saved me the time. My brow was raised several times while reading through their offering/qual docs.
I requested a copy of their pre-IPO prospectus last year, and unfortunately never received a reply.
Their fee structure is one area of significant concern, among several others.
I’ll be releasing a brief post hitting some of these points later this week. May I link back here as an additional resource for my readers?
I’m glad you found the write up informative! Please backlink
Great write up~~
Thanks Chris!
I really believed in this brother, but the more research I do the more I find that he’s basically profiting of the lack of financial literacy of his “people”. He does these corner classes to promote his academy. And the prices on the academy are just straight up disrespectful. And let’s not talk about his other company where uneducated people use their personal credit along with an llc to pretty much apply for multiple loans. He charges 10% of whatever you are approved for and a $1000 admin fee. This is a process that anyone with basic internet experience can do on their own for free. He use these corner classes and his videos as a switch and bait. He tugg on the heart strings of his people with his corner boy story, in which he has mentioned over a million times in attempt to “relate” and for his latest scam, he has the blackest of black faces on the Tulsa real estate fund videos, but fail to share with his people the Caucasian sec lawyer, by the name of Jillian Sidoti. He will reap what he sow and I pray that God has mercy on him. He has so many people that really believes in him and it’s truly sickening!
I am a professional trader and I would never encourage anybody to invest in anything with out doing research. If your living check to check or struggling to put food on the table this is not for you!!! Please do not invest your last that wouldn’t be a smart move on any type of investment Period!!! How ever if you have money SAVED and just sitting in a bank making crumbs why not , When you invest for the long term save a little here save a little there build up evaluate the fund progress, never just put your money up all at one time that’s what traders do and we you stop loss which we use for risk management. Save money over time then if you want invest into something like TREF your 500.00 won’t be as painful if you loose it. One thing I have noticed is that people are intentionally throwing false info about what TREF is all about and trashing Jay for doing something positive. As of today 10 million have been raised now for me I will save evaluate and then decide to put up another $500 . But if this does become successful which I pray that it does it will be quite amazing !!!!!
Good article topic. Notwithstanding the riskiness of the Tulsa fund, the discussion here brings up a good point: How exactly do we, as a community, create a financial mechanism to realize this vision of a ‘Black Wall Street’ in select black communities around the country? Can a REIT offering be the answer? If so, how would one get it off the ground?
Thank you John for commenting and providing a great question. Pooled resources via crowdfund is ideal. I would love to see hyper local projects because I think those would have the most impact
Being a resident of the Tulsa area, I find it interesting that in their FAQ they state they are not based in Tulsa, but Atlanta, and Tulsa isn’t even on the list of initial six target cities for projects. But that’s a small matter compared to the uncertainty behind this. I’m not a financial analyst, but even this sounds hinky to me. I worry they are going to use the name of my city, of real events in my city for their own gain only.