Jay Morrison & The Tulsa Real Estate Fund (Official Thread)

[☑︎#VoteDemocrat]

 

[L&HH]

Why not trust him, he has not done wrong

So we just going ignore all the videos from ppl who says he’s wronged them and doesn’t know what the fukk he’s doing?

 

[theworldismine13]

So we just going ignore all the videos from ppl who says he’s wronged them and doesn’t know what the fukk he’s doing?

yeah, because nobody has lost any money and all the paperwork is straight

 

[L&HH]

yeah, because nobody has lost any money and all the paperwork is straight

So what about promoting yourself as this real estate guru yet asking other people to borrow their houses to pretend like they're yours? Going out to eat with people and running off before the check comes?

 

[Conjiggle]

yeah, because nobody has lost any money and all the paperwork is straight

You keep saying this but the math isn’t adding up. If the fund has lost $3 million of investor (donation) money….. then how has nobody lost any money??

You do realize that if the fund was dissolved today that means there would not be enough money to give each investor back their initial investment, correct?

Again, this is a real estate fund, apparently managed by a real estate guru, that has somehow not made a single dollar in profit during one of the most favorable markets for property owners in history. And yet you have people continuing to blindly follow and champion this guy. Wow.

 

[invalid]

You keep saying this but the math isn’t adding up. If the fund has lost $3 million of investor (donation) money….. then how has nobody lost any money??

You do realize that if the fund was dissolved today that means there would not be enough money to give each investor back their initial investment, correct?

Again, this is a real estate fund, apparently managed by a real estate guru, that has somehow not made a single dollar in profit during one of the most favorable markets for property owners in history. And yet you have people continuing to blindly follow and champion this guy. Wow.

I've already did an expose on Jay Morrison and have came to the conclusion that he is no good but you guys are not understanding how investment funds work.
Its not an accurate picture to just look at an income statement, see a loss, and then proclaim that the fund has lost money.
Real Estate is an asset. And you make your biggest gains on real estate from appreciation.
And your gain on appreciation is not crystalized until after you sell the property.
And gain on appreciation is presented on the balance sheet.
Most of these guys have been going to the income statement and zeroing in on operating expenses.
But that's not the whole picture.
He can have expenses that incurred an operating loss of $3 million.
But if his real estate appreciated by $5 million, his fund would've grown by $2million after you deducted all relevant expenses during the time period.
That $2 million is the return that will be allocated back to the investors.
So folks have to wait and see until Morrison sells the real estate if he's able to glean any return on the investment.
To be sure, high expenses (from the income statement) will cut into the quality of earnings that investors will receive.
For instance, in the above example, if expenses and therefore the operating loss, were only $500k, then investors would be getting a higher return of $4.5 million instead of just $2 million. But the sheisty way that Jay has the fund set up, he's taking 50% of the profits which is absolutely ludicrous, so they would actualy only be getting back $2.25 million while he pockets the other.

 

[invalid]

@theworldismine13 watch this video to completion and stop trolling in here

I just partially watched these two videos and I commend this brother, as a fellow CPA, because he's doing good work.
However, his analysis of Tulsa is not all the way on point (I only watched about three quarters of the first video).
To his credit, in the second video, when he his critiquing the CPA that put out that info on how to write off the G Wagon, he makes a good point on how CPA's specialize in different things. Some in tax, some in financial analysis, some in audit, some in bookkeeping, some in cost, and so on.
It's apparent that his specialization is in tax and personal financial planning. It's also apparent that his specialization isn't in investment financial analysis or audit.
I launched my own professional career in audit, investment analysis, and financial reporting of investment management and hedge funds so I have a bit more knowledge with respect to investment funds and how they operate.

First thing he says, that is not wholly inaccurate is that Jay paid himself around $1.7 million from the fund. He took this by looking at the marketing and admin fees line item on the income statement.

Jay actually paid himself more. Pocket watchers didn't include the management fees which was another whopping $500k.

Fund managers pay themselves from management fees. But since Jay has no staff, he's also paying himself for other roles (that he's not doing btw) and so the total amount he's actually paying himself is $2.3 million.

Also Pocket Watchers is also using the language that the fund lost money. The fund had an operating loss, which is correct, but it is not indicative of whether the fund lost it's investors money. I don't like that language because Pocket Watchers is not looking at the broader picture with respect to gain on the real estate investment, which comes in the form of appreciation, which is found on the balance sheet. From what I've seen of the video, Pocket watchers didn't do an analysis of the balance sheet which is where you will find gain on the property held for investment.

I broke this down further in the post above this and in the quoted post below from the analysis that I did in one of the other threads.

So here are my opinions on TREF after looking at the audited 1k. For the record, I'm a former auditor of PwC and have both audited and prepared financials for investment banks and hedge funds.

Is Jay running a scam. No.
Is Jay running a finesse job. Yes. But not in the way that everyone thinks.

Firstly, because @Booker T Garvey is posting bits of information from legal financial documents, information that he doesn't even understand, I would disregard anything that he says on the subject

Secondly, from doing a bit of research the past hour, I've noticed a few criticisms levied against TREF from different places that I would like to address. Many of these criticisms I think contributed to the SEC investigation by "whistleblowers". I am going to address three of these specifically from this MinorityReport TV Show website found here: https://www.minorityreporttvshow.com/single-post/tulsarealestatefund

3 Criticisms

1. You can't withdraw or sell your shares for 1 year. It is not out of the ordinary for funds to have what's called a "lock-up period". A lock-up period, is a period where investors in a fund can not redeem their positions until after a certain period of time has elapsed. This is typically due to the nature of the underlying investments and the degree to which those investments are "liquid". Typically, in order for a fund to redeem an investor's position, they have to sell off portions of their underlying investments. If TREF was a fund where the underlying investments were shares of stocks, the fund would have to sell off some shares so they can pay back an individual investor. However, since TREF is a real estate fund where the underlying investment is real estate, real estate is not liquid, so you can't just sell off a piece of real estate at the drop of a dime when an investor wants to redeem. The lock-up period of a year gives the fund time to sell off investments in the instance investors want to redeem. If you want to learn more about lock-up periods, go here: What Is a Lock-Up Period?

2. You also can not receive any information about investment properties prior to investing. This is an investment fund managed by a fund manager. It is the manager that makes the investment decisions guided by the investment strategy the fund manager set at the outset of the fund. An investor in the fund does not get to review investments before the fund manager enters into them. THIS. HAPPENS. NOWHERE. Investors buy into funds based off the funds strategy. Jay's strategy was to "buy back the block". So investors bought into the fund based off that strategy. Investors then pay the fund manager to make the investment decisions as long as those decisions are guided by the strategy. If Jay is making investment decisions that are outside of his "buy back the block" strategy, then his investors can challenge his decisions. From what I've seen, he hasn't done that yet.

3. The founders also made no investments of their own prior to creating the fund; they are gambling with other people's money. Some fund managers have positions within the funds they manage, some don't. Finance is guided by what's called OTM "Other People's Money". That's the beauty. That you get to use other people's money to make money without having to put up your own. There is nothing special about TREF in that regard.

All of these criticism are actually non-issues that any investor that had a modicum of experience would already know. However, since Jay's fund is funded by a novice investing demographic, in their ignorance, they are making much ado about nothing, or at least, levying criticisms, where there is nothing worthy of critique.

Let's get to the actual fund.

@Booker T Garvey is keep posting this language from TREF financial documents.



He thinks it means investors will not get their money back or at least not see a return on their original investment. If you are not familiar with financial statements or financial concepts in general, you may think the same thing. However, that's not what it means.

Profit aka Profit & Loss (PnL) relates to the Income Statement (IS). It relates to the operating income and operating expenses incurred by the fund. In fact, profit and loss is calculated from subtracting income from expenses (Inc - Exp = PnL) This is not the same thing as the return on investment (ROI). In the case of real estate funds like TREF, the return will be the gain in appreciation of the underlying real estate property. Gain in appreciation will be presented on the funds Balance Sheet (BS) not the Income Statement (IS).

This is what Investopedia has to say about real estate funds:

"Real estate funds gain value mostly through appreciation and generally do not provide short-term income to investors the same way that REITs might."

REIT vs. Real Estate Fund: What's the Difference?

What this means is that real estate funds typically do not generate operating income. However, there are still expenses to operating the fund. Expenses like paying the people that manage the fund, paying 3rd party services that help operate the fund, or general operating cost that cover everything from administration to marketing.

What this looks like on the Income Statement is this -

(Inc - Exp = PnL)

Income $0 <----- Because real estate funds typically don't generate income
Expenses
Mgt. Fee ($100)
Marketing ($100)

($0 -$100 -$100) = ($200)

Operating Loss of ($200)

So when the legal financial language says:

"We are an emerging growth company organized in July 2016 and are currently operating at a loss. There is no guarantee we will ever generate a profit"

First of all, this is an income statement issue. It means, on the income statement, income may not be reported (because of the nature of the industry) but we will regularly accrue expenses (which are the expenses needed to run the fund) that of which will net an operating loss and thus no profit may never be generated.

LET ME SAY THIS AGAIN, THIS IS NOT THE SAME AS THE APPRECIATION OR GAIN ON INVESTMENT.

Having audited many funds, operating losses are the norm 50% of the time. It is not the determinant of the gain on investments. However, it plays a role in determining the earnings an individual investor will receive once they redeem.

This role could be illustrated by the formula that is used to actually value a fund or calculate the NAV (net asset value) as it's called.

NAV = Beginning NAV + Beginning Capital Activity (Subscriptions/Redemptions) + PnL + Ending Capital Activity (Subscriptions/Contributions) = Ending NAV

To illustrate with numbers:

A new fund will have no beginning NAV, so that would be $0.
Beg. Capital Activity (New Subscriptions into the fund) = $10 million
PnL for the year = $100,000
Ending Capital Activity (None, since there is a lock up period or a period where investors can't redeem their positions).

So the formula is...

Beg Nav Subscriptions PnL Withdrawals End. Nav
$0 + $10,000,0000 + $100,000 + $0 = $10,100,0000

The ending NAV is the value of the fund.

NAVs are typically calculated on a month to month basis. So ending NAV of month 1 becomes the beginning NAV of month 2.
Let's make an assumption that there is a subscription into the fund every month of $1 million and an operating loss of $100,000.

Beg Nav Subscriptions PnL Withdrawals End Nav
$0 + $10,000,000 + $100,000 + $0 = $10,100,000 January
$10,100,000 + $1,000,000 + ($100,000) + $0 = $11,000,000 February
$11,000,000 + $1,000,000 + ($100,000) + $0 = $11,900,000 March
$11,900,000 + $1,000,000 + ($100,000) + $0 = $12,800,000 April

YOU CAN CONTINUE TO SUSTAIN AN OPERATING LOSS AND NOT GENERATE PROFIT, IT DOES NOT MEAN THE VALUE OF THE FUND WILL NOT GROW.

The kicker about the above calculation, is that the assumption is not taking into consideration real estate appreciation. This is a real estate fund and the above calculation is just the principal amount.

Let's say in April, we do an appraisal on the $12.8 million portfolio and we see that it is now worth $15.8 million. If we sold the real estate in April, we will have crystallized a gain on our real estate of 3 million which is the return on the original principal.

So now our portfolio is worth $15,800,000 even after sustaining operating losses.

Now, lets say instead of incurring a $100,000 loss, we incurred a $100,000 profit February - April.
The value of the fund will be $15,800,000 + $300,000 = $16,100,000.

So, the ability to never generate a profit doesn't mean the value of your fund won't grow and that investors won't receive a return.
However, it does mean the loss will cut into the earnings the investors will receive otherwise.

Now that posters can understand that you can "never generate a profit" and still generate a considerable return on investment through appreciation, because those are, in fact, two different things, and operate on two different financial statements, now I'm going to talk about Jay's specific financials.

To be continued........

Although, I don't work in an accounting function much these days, this guy pocket watcher, has opened my eyes.
If I was a slimey m'fer, I could EAT off of LLC twitter and all the scamming that has been happening in the black community the past few years.
I'm talking about finessing the fukk off of these scammers like the CPA he highlighted in his second video.

EAT ya hear me !!

 

[L&HH]

I just partially watched these two videos and I commend this brother, as a fellow CPA, because he's doing good work.
However, his analysis of Tulsa is not all the way on point (I only watched about three quarters of the first video).
To his credit, in the second video, when he his critiquing the CPA that put out that info on how to write off the G Wagon, he makes a good point on how CPA's specialize in different things. Some in tax, some in financial analysis, some in audit, some in bookkeeping, some in cost, and so on.
It's apparent that his specialization is in tax and personal financial planning. It's also apparent that his specialization isn't in investment financial analysis or audit.
I launched my own professional career in audit, investment analysis, and financial reporting of investment management and hedge funds so I have a bit more knowledge with respect to investment funds and how they operate.

First thing he says, that is not wholly inaccurate is that Jay paid himself around $1.7 million from the fund. He took this by looking at the marketing and admin fees line item on the income statement.

Jay actually paid himself more. Pocket watchers didn't include the management fees which was another whopping $500k.

Fund managers pay themselves from management fees. But since Jay has no staff, he's also paying himself for other roles (that he's not doing btw) and so the total amount he's actually paying himself is $2.3 million.

Also Pocket Watchers is also using the language that the fund lost money. The fund had an operating loss, which is correct, but it is not indicative of whether the fund lost it's investors money. I don't like that language because Pocket Watchers is not looking at the broader picture with respect to gain on the real estate investment, which comes in the form of appreciation, which is found on the balance sheet. From what I've seen of the video, Pocket watchers didn't do an analysis of the balance sheet which is where you will find gain on the property held for investment.

I broke this down further in the post above this and in the quoted post below from the analysis that I did in one of the other threads.



Although, I don't work in an accounting function much these days, this guy pocket watcher, has opened my eyes.
If I was a slimey m'fer, I could EAT off of LLC twitter and all the scamming that has been happening in the black community the past few years.
I'm talking about finessing the fukk off of these scammers like the CPA he highlighted in his second video.

EAT ya hear me !!

I appreciate all your advice and expertise on this. I've truly learned a lot just reading your post (at least we're getting something out of this). With that said regarding to TREF's actual real estate holdings (and their potential appreciation) can you address the part where he claims they only had $3500 or so in rental income? Because if that's the case what value do these holdings even have if they can only generate $3500 rental income in a year?

 

[invalid]

I appreciate ally our advice and expertise on this. I've truly learned a lot just reading your post (at least we're getting something out of this). With that said regarding to TREF's actual real estate holdings (and their potential appreciation) can you address the part where he claims they only had $3500 or so in rental income? Because if that's the case what value do these holdings even have if they can only generate $3500 rental income in a year?

I haven't looked into his financials the past two years so I can't comment specifically.
But there could be a number of reasons.
First, ideally, if you could bring in operating income from rental income, that's great!
And that rental income (operating income) can, in theory, offset operating expenses so they don't cut into investors ROI.

When I did look at Tulsa's financials, first thing that I saw was that from the money that he collected, not all of it had been invested in real estate.
Only like $2 million or so had actually been used to purchase property at that time.
I think like $9 million had been raised by investors in total (at that time) so $7 million or so was still just sitting in cash.
That could be because he was still scouting for good investment properties.

Of the $2 million that he did have invested, the properties could have been empty, or partially inhabited.
For instance, if he bought an apartment complex, he may have only been able to rent out a few units after he bought the property before the end of the year, which could explain the low $3.5k in rental income.

$3.5k is a month's rent where I live so that would be indicative of only collecting one months rent on only one unit. So that's crazy to me but, again, I don't know what type of properties he actually purchased to make a final call.

There is also the very real (and the most likely) possibility that he made bad investment purchases which only yield rental cash flow of $3.5k. Again, not a good outlook on the actual underlying investments.

But I would need more information on the specific properties and when they were purchased to know for sure.

For all I know, that $3.5k could have just come from the Black House that he operates and may have not even come from the other properties that he purchased.

 

[Bunchy Carter]

So we just going ignore all the videos from ppl who says he’s wronged them and doesn’t know what the fukk he’s doing?

Yes.....so we are going to ingone that the SEC and the DOJ did not find anything wrong

 

[Conjiggle]

I've already did an expose on Jay Morrison and have came to the conclusion that he is no good but you guys are not understanding how investment funds work.
Its not an accurate picture to just look at an income statement, see a loss, and then proclaim that the fund has lost money.
Real Estate is an asset. And you make your biggest gains on real estate from appreciation.
And your gain on appreciation is not crystalized until after you sell the property.
And gain on appreciation is presented on the balance sheet.
Most of these guys have been going to the income statement and zeroing in on operating expenses.
But that's not the whole picture.
He can have expenses that incurred an operating loss of $3 million.
But if his real estate appreciated by $5 million, his fund would've grown by $2million after you deducted all relevant expenses during the time period.
That $2 million is the return that will be allocated back to the investors.
So folks have to wait and see until Morrison sells the real estate if he's able to glean any return on the investment.
To be sure, high expenses (from the income statement) will cut into the quality of earnings that investors will receive.
For instance, in the above example, if expenses and therefore the operating loss, were only $500k, then investors would be getting a higher return of $4.5 million instead of just $2 million. But the sheisty way that Jay has the fund set up, he's taking 50% of the profits which is absolutely ludicrous, so they would actualy only be getting back $2.25 million while he pockets the other.

Good breakdown. I understand how RE investment funds work. The thing is, from what I have seen, the fund doesn’t really own any property. They own that building in East Point, GA and from last check 1 or 2 multi family units out in the bushes. Not exactly prime real estate.

This is a real estate fund that lacks any real property as assets. He could have leveraged the money in the fund and invested in new construction homes in phase 1 of community development, held the homes until the development closed out and then flipped the property for a good profit. I have clients in the last 18 months that were up $30k+ by the time their contract went to closing.

Again, almost impossible to lose in this current market if you own property.

 

[invalid]

Good breakdown. I understand how RE investment funds work. The thing is, from what I have seen, the fund doesn’t really own any property. They own that building in East Point, GA and from last check 1 or 2 multi family units out in the bushes. Not exactly prime real estate.

This is a real estate fund that lacks any real property as assets. He could have leveraged the money in the fund and invested in new construction homes in phase 1 of community development, held the homes until the development closed out and then flipped the property for a good profit. I have clients in the last 18 months that were up $30k+ by the time their contract went to closing.

Again, almost impossible to lose in this current market if you own property.

no doubt.

not sure what properties he’s acquired as part of the Tulsa portfolio but if what you say is true then he will definitely lose these people’s money.

i used to work for a hedge fund that owned whole towns and all the properties within said towns as part of their portfolio.

there was just a thread posted on here a few days ago about how investment management firms are buying up property like crazy around Atlanta and they are using complex algorithms to identify investment properties.

jay is out of his league. doesn’t have the expertise, doesn’t have the track record to show he’s able to generate 8% returns a year, hasn’t demonstrated that he knows how to hire people who are smarter than him, doesn’t know shyt about algorithms, doesn’t have the technology to support an investment management vehicle. it’s just comical at this point.

 

[Conjiggle]

no doubt.

not sure what properties he’s acquired as part of the Tulsa portfolio but if what you say is true then he will definitely lose these people’s money.

i used to work for a hedge fund that owned whole towns and all the properties within said towns as part of their portfolio.

there was just a thread posted on here a few days ago about how investment management firms are buying up property like crazy around Atlanta and they are using complex algorithms to identify investment properties.

jay is out of his league. doesn’t have the expertise, doesn’t have the track record to show he’s able to generate 8% returns a year, hasn’t demonstrated that he knows how to hire people who are smarter than him, doesn’t know shyt about algorithms, doesn’t have the technology to support an investment management vehicle. it’s just comical at this point.

Its crazy bro. On the surface, it is a noble concept and one many of us would be intrigued to get behind and support. But like you said, this wasn’t something for Jay to lead. He has no experience and no clue what he is doing. He purposefully targeted a segment of the community that isn’t as aware of finances and real estate investment and sold them on the affinity aspect of the fund.

You know better than most that these funds out here are coming to the table with serious money as well as systems in place to identify areas, communities and properties to acquire for the short and long term. I have seen proof of fund statements from investor buyers this year with hundreds of millions in the bank.

With that said, $15 mil was still more than enough to start building a solid portfolio. Jay has, not surprisingly, failed to do that. Shame.

 

[beenz]

this grifter done linked up a with an OF model and pushing a new scam. JT and the pocketwatchers are clowning. spencer cornelia already made a video about this horseshyt as well.



here's spencer goin in on this scam as well.



JT even refers to the second video in his video.

 

[Bunchy Carter]