Tulsa Real Estate Fund

Miami, FL · Member since 2018 · 41 posts · 13 votes

Hi, I’m new to the Bigger Pockets Forum so I apologize if I posted this incorrectly.

I was wondering if anyone heard about the Tulsa Real Estate Fund spearheaded by Jay Morrison.

He’s trying to raise $50 million in a syndication deal to develop properties in urban areas. The minimum investment is $500 and you do not have to be an accredited investment.

Here is the link http://www.tulsarealestatefund.com/

I would love any thoughts about this deal. Good opportunity, stay away. Invest small, any insight would be nice.

Thank you.

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Jillian Sidoti

Professional · Murrieta, CA · Member since 2013 · 405 posts · 458 votes

@Ian Ippolito - I wrote Tulsa Real Estate Fund. Yes, 5.5 is higher than normal, but the fund isn't taking any other fees other than that fee - no acquisition, no disposition, no asset management, no refinance - nothing.

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Callum K.
Rental Property Investor · Tulsa, OK · Member since 2012 · 291 posts · 102 votes
8y
I guess I'll be the first to chime in. First thoughts.... yikes.
In my opinion, if you are going to make an investment as small as $500, you might as well put it in the stock market. If you are going to do several thousand dollars, it might be better to look at how people on BP are operating and buying properties. I know they often have a preferred return and then share the profit, but the profit can effectively become whatever the fund wants it to be, which I would assume would more often than not, be nothing. This results in you basically lending the fund money at an 8% rate which (especially in increasing interest rate environments) could soon be relatively cheap money. I don't have any issues with these people, and I don't know anything about them, I just am more of an advocate to learn about what you are putting your money into versus giving it to someone else and trust them to do it. If you are going to do that, then at least put it in something that's established, reputable, and well regulated like the stock or bond market.
5 Reply
James NiemeyerPro Member
Rental Property Investor · Tulsa, OK · Member since 2017 · 60 posts · 36 votes
8y
From the FAQ:
We plan to launch initially in Atlanta and grow to these markets and beyond.
Atlanta GA
Detroit MI
Baltimore MD
Chicago IL
Newark NJ
Oakland CA
New Orleans LA
There's nothing "Tulsa" about this at all. Ironic because we were the location of "Black Wall Street."
3 Reply
Callum K.
Rental Property Investor · Tulsa, OK · Member since 2012 · 291 posts · 102 votes
8y
Good catch @James Niemeyer . I didn't see that and assumed the money raised would likely be reinvested in Tulsa. That's unfortunate.
2 Reply
Bryan Korf
Investor · Bixby, OK · Member since 2013 · 20 posts · 1 vote
8y
They have the same advertisement in the St. Louis market as well. I was listening to a Cardinals game on KMOX radio and they were airing the exact same commercial there. I don't know anything about that deal but i would be skeptical.
1 Reply
Maurice Lightner
OP
Miami, FL · Member since 2018 · 41 posts · 13 votes
8y
I’ve been researching syndication deals and came across this. 8% preffered isn’t a lot, but most syndication deals you make your money 5-10 years down the road when the property is sold, but their answers was very vague on this topic.
I also thought it was illegal to advertise syndication deals and they are doing a lot of that.
1 Reply
Bill F.
Investor · Boston, MA · Member since 2015 · 1k+ posts · 3k+ votes
8y
@Maurice Lightner This isn't a security that has a Reg D exemption, but a Reg A+ Crowdfunding offering, so the rules are different for advertisement and type of investors.
I have no practical experience with crowdfuding, but the 5.5% fund fee seems high, especially since they get paid first. I couldn't find any offering docs on the website that would lay out the details, so I could be wrong.
Number of Shares: 1,000,000
Price per share: $50
Minimum Investment: $500 or 10 Shares
Dividend: Quarterly after 12-month lock up
Financial Reporting: Quarterly
Net Asset Value Calculation: Annual
Preferred Returns: 8%
Fund Fees: 5.5% taken out of initial raise before 8% preferred returns. Then 50% of amount above 8% preferred return.
Broker Dealer: No
Management Company Structure: LLC
They also seem light on plans for what type of properties they will focus on.
"We will invest in real estate projects that are: impactful to the community, deliver a moderate return to investors, and reinvests into target communities"
If that SFRs, Small apartments, block by block redevelopment, mixed use?
5 Reply
Account Closed
Lender · Pensacola, FL · Member since 2017 · 658 posts · 626 votes
8y
Impact investing is a hot category right now in the investing world ("do well by doing good").
With low-minimum crowdfunding sites, I can toe-dip to get a feel for whether I want to add more money down the road. My strategic reason for doing so is to diversify my portfolio beyond global publicly-traded businesses.
For example, I have a small amount of money invested on CNote, which pays a 2.5% return from lending money to CDFIs (https://www.cdfifund.gov/), and Calvert Impact Capital, which pays me a 1% return on my investment.
I use a donor-advised fund to make anonymous donations to local 501(c)(3) charities because I live in the area and want to "invest" in the quality-of-life of my community. With a DAF, my financial return comes from the deduction for charitable donations on my tax return.
3 Reply
Ian IppolitoBusiness Member
Investor · Tampa, FL · Member since 2015 · 1k+ posts · 1k+ votes
8y
The 5.5% upfront fee is, in my opinion, a yellow flag or red flag. Basically you're deliberately starting yourself off in the hole -5.5%, when you don't have to. It's the equivalent of paying a front end load on a mutual fund. Back in the day when all mutual funds required it, it was a cost of doing business. But why pay today when you don't have to and there are so many other choices?
There are plenty of other nonaccredited funds that either do not charge a front end fee, or the fee is significantly lower. Blackstone BREIT, stREITWise, Fundrise Income, realtymogul REIT 1, etc. Also, generally, a fund like BREIT can borrow much more cheaper, has a manager that is much more experienced, has much lower leverage, etc.
The Real Estate Crowdfunding Review
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11 Reply
Randall Kates
Philadelphia, PA · Member since 2014 · 129 posts · 29 votes
8y
This is a fund aimed at combating gentrification its dedicated and named after Tulsa because that is the location of the First Black Wall Street which was unfortunately destroyed by mass bombing with over 250 killed due to racism and bigotry! Now on to the company they are SEC regulated I believe Tier 2 or something to that affect $500 is the minimum. They are social impact and plan to invest in areas affected heavily by gentrification I am thinking of investing myself, For me much better than putting in a bank they are guaranteeing 8% plus 50% of profits amongst shareholders: This is crowdfunding private money.
15 Reply
Jillian Sidoti
Professional · Murrieta, CA · Member since 2013 · 405 posts · 458 votes
8y
@Ian Ippolito - I wrote Tulsa Real Estate Fund. Yes, 5.5 is higher than normal, but the fund isn't taking any other fees other than that fee - no acquisition, no disposition, no asset management, no refinance - nothing.
18 Reply
Jillian Sidoti
Professional · Murrieta, CA · Member since 2013 · 405 posts · 458 votes
8y
Also, the 8% return is NOT guaranteed - it is preferred. There are never guarantees in securities.
9 Reply
Bill F.
Investor · Boston, MA · Member since 2015 · 1k+ posts · 3k+ votes
8y
@Jillian Sidoti In your experience, is the one flat fee more common in the crowdfunding offerings than the traditional Reg D space? I know the Reg A+ have only been around since 2015 so there my not be the largest sample size, but I'm curious if you have seen any trends in the structure that differentiate crowdfunding from transnational syndication, other than the obvious required ones.
0 Reply
Ian IppolitoBusiness Member
Investor · Tampa, FL · Member since 2015 · 1k+ posts · 1k+ votes
8y
Thanks for clarifying @Jillian Sidoti and giving the complete picture. I hadn’t even considered that possibility, since it is so extremely unusual. It’s good to know, and definitely changes the equation on sponsor compensation. That would actually make it cheap...extraordinarily cheap. In fact I don’t think I know of a fund that cheap and it may raise other questions for some investors (depending on the situation.. which I have not looked into deeply and I’m just going off of the description on this thread).
Most investors like to see sponsors charge a fair price for the work they’re doing, because it enables them to keep the lights on (especially if there is a downturn). There are considerable costs to screening, acquiring, managing and selling $50 million worth of real estate (at least if a sponsor wants to do it well). Normally a sponsor charging fair fees (not making a profit) might charge 1 - 2% for acquisition, another 1% - 2% for disposition, 5-8% annually for a property management, and 1 to 2% annually for asset management. The 5.5% one time fee will not pay for all this activity.
Maybe the sponsor is putting in huge amounts of skin in the game/cash, in which case they are deriving income from that to keep the fund financially self sufficient. If so, I would personally consider that a huge plus because they would be extremely aligned with investors.
If they are not, then it may raise some questions. How do they keep the lights on, if say, new subscriptions dry up in a downturn? If the fund itself is not financially self-sufficient and requires another business to to fund it’s activities, then an investor may wish to take a close look at those other activities and make sure that they feel comfortable with that situation, should a worst case scenario happen (severe recession).
The Real Estate Crowdfunding Review
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3 Reply
Jillian Sidoti
Professional · Murrieta, CA · Member since 2013 · 405 posts · 458 votes
8y
The fee is based on the yearly Capital Account Balance. It is what keeps the lights on for the Manager (there are no other "Manager expenses" paid to the Manager). The 50% split is how the Manager makes actual money.
Please, no one take my commentary as investment advice.
4 Reply
Maurice Lightner
OP
Miami, FL · Member since 2018 · 41 posts · 13 votes
8y
Jillian Sidoti how much are each of the founding members like Jay Morrison are investing?
0 Reply
Jillian Sidoti
Professional · Murrieta, CA · Member since 2013 · 405 posts · 458 votes
8y
You would have to ask the founders and read the offer
2 Reply
Cornel Smith
Real Estate Agent · Queens Village, NY · Member since 2017 · 91 posts · 57 votes
8y
Originally posted by @Maurice Lightner:

Jillian Sidoti how much are each of the founding members like Jay Morrison are investing?
Believe jay said he put $10,000 into it (200 shares)
6 Reply
Julian Harrison
Rocky Mount, NC · Member since 2017 · 1 post · 2 votes
8y
@Maurice Lightner I did a little research on the fund. On a weekend I would take a thorough look at their SEC filing details. See below links.
https://www.sec.gov/Archives/edgar/data/1704303/00...
https://www.sec.gov/Archives/edgar/data/1704303/00...
2 Reply
Calvin Lipscomb
Brooklyn, NY · Member since 2016 · 316 posts · 130 votes
8y
Originally posted by @Maurice Lightner:

I’ve been researching syndication deals and came across this. 8% preffered isn’t a lot, but most syndication deals you make your money 5-10 years down the road when the property is sold, but their answers was very vague on this topic.
I also thought it was illegal to advertise syndication deals and they are doing a lot of that.
And, you think the SEC just overlooked this? There promotion is highly visible.
1 Reply
Calvin Lipscomb
Brooklyn, NY · Member since 2016 · 316 posts · 130 votes
8y
Originally posted by @Callum K.:
I guess I'll be the first to chime in. First thoughts.... yikes.
If you are going to do several thousand dollars, it might be better to look at how people on BP are operating and buying properties. I know they often have a preferred return and then share the profit, but the profit can effectively become whatever the fund wants it to be, which I would assume would more often than not, be nothing. This results in you basically lending the fund money at an 8% rate which (especially in increasing interest rate environments) could soon be relatively cheap money. I don't have any issues with these people, and I don't know anything about them, I just am more of an advocate to learn about what you are putting your money into versus giving it to someone else and trust them to do it. If you are going to do that, then at least put it in something that's established, reputable, and well regulated like the stock or bond market.
"In my opinion, if you are going to make an investment as small as $500, you might as well put it in the stock market." And, what is really the difference. If purchased GE 1 year ago where would you be today? I am not saying you are not should analyze what is best for you to do but, what you @Callum K. are capable of doing is not the same for everyone else.
5 Reply

Calvin Lipscomb

Brooklyn, NY · Member since 2016 · 316 posts · 130 votes

Originally posted by @Jillian Sidoti:

That is not accurate. "

The Manager may be paid up to 1% of the acquisition price of a property as an Acquisition Fee. The Manager may receive between $850 and $450,000 for this fee."

'The Manager may receive a 5.0% annualized asset management fee paid monthly to the Manager for its services related to asset management. The Manager may receive between an estimated $416 per month as an Asset Management at the Minimum Amount or as much as $187,500 per month at the Maximum Amount. These amounts, however, are not calculated in the Use of Proceeds table because although they are calculated against the amount of capital invested in properties, it is expected that the Asset Management fee will actually be derived from the revenues of the properties purchased by the Company."

3 Reply

Jillian Sidoti
Professional · Murrieta, CA · Member since 2013 · 405 posts · 458 votes
8y
Please read the 253b2 (prospectus) filing. The 1% was eliminated and changed to a 5.5% on cap accounts.
https://www.sec.gov/Archives/edgar/data/1704303/000147793218002783/tulsa_253g2.htm
3 Reply
Jillian Sidoti
Professional · Murrieta, CA · Member since 2013 · 405 posts · 458 votes
8y
Please read the 253b2 (prospectus) filing. The 1% was eliminated and changed to a 5.5% on cap accounts.
https://www.sec.gov/Archives/edgar/data/1704303/00...
0 Reply
Maurice Lightner
OP
Miami, FL · Member since 2018 · 41 posts · 13 votes
8y
Originally posted by @Cornel Smith:

Originally posted by @Maurice Lightner:
Jillian Sidoti how much are each of the founding members like Jay Morrison are investing?
Believe jay said he put $10,000 into it (200 shares)
Yes he donated $10,000 and posted it in his IG account in the name of his Jay Morrison Academy.
I’m going to pass because I’d rather invest in a deal like this when the project managers have more skin in the game. $10K when you are trying to raise $50 million is really not a lot when you think about it.
4 Reply
Callum K.
Rental Property Investor · Tulsa, OK · Member since 2012 · 291 posts · 102 votes
8y
@Calvin Lipscomb access to information is the difference. Established credibility and financial history is the difference. You can't honestly tell me that there is more transparency in a startup fund than a multi-billion dollar multi-national, publically traded company. Furthermore, GE is certainly a convenient selection to articulate your point. While GE is down 50% YoY, the S&P500 is up 12% which is a much better assessment of the market than GE. To select GE would be like me selecting Boeing, which is up 90% YoY. I do agree with you in that I am fortunate to have access to doing things others are not capable of, like taking risks and investing in funds like these. That's why I encouraged people with as little as $500 to invest it in the stock market or bonds instead. All the information they need can be found online.
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