Tulsa Real Estate Fund manager gives tour of recent apartment complex acquisition

[Reality]

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 out period).

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.


To be continued........

Thank you. I don't come from an accounting background but in my line of work have read through a decent amount of prospectuses and nothing about the language @Booker T Garvey was pointing to was out of the ordinary. I just didn't take the time to lay it out in as detailed of a manner as you did, though I do think it will fly over heads.

The reason I mentioned the thread is cringe is because seeing the reactions to shyt which is actually pretty standard just comes across as "white man's ice is colder". You're more gracious than I am in chalking it up to novice investing.

 

[hashmander]

3:30 at least he admits that the whole stopping gentrification while making money bit was just nonsense. "re-tenant the asset and bring the rents to market value." that's what every landlord in an area that underwent gentrification said.

now please stop saying it in the future. you might not be a swindler, but that's the kind of double talk that swindlers specialize in. don't try to pretend this is something that it isn't. you have to make as much money as possible to bring your investors solid returns and the color of your tenants doesn't factor into that.

 

[Booker T Garvey]

Thread is cringe as fukk.

@Booker T Garvey and @Nicole0416 with all due respect, you're doing a lot of people lurking / browsing the thread a tremendous disservice by pursuing your arguments without very basic research.

I'm posting actual quotes from legal documents and posts from facebok from real people

you're in here telling us how I'm making you "feel".

 

[Booker T Garvey]

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 inform.

@Booker T Garvey posted the entire legal document ...I quoted a particular part for the sake of space and time FOR THIS FORUM, but I was the first person to post the document FROM LAST MONTH in here - I put it out there for people to read at their leisure, they don't need you to hold their hand, we're grown men.


i'm still waiting on you cowards to address my points:

A) The facebook post

B) The NFLPA warning it's players to avoid TREF

C) Has Jay Morrison ever publicly stated on camera that his business is operating at a loss and that investing his is business MAY not see you a return.

all this back and forth and none of you have addressed these points DIRECTLY without pointing me in a completely separate direction.

 

[invalid]

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.

To be continued........

 

[Booker T Garvey]

Thank you. I don't come from an accounting background but in my line of work have read through a decent amount of prospectuses and nothing about the language @Booker T Garvey was pointing to was out of the ordinary..

there's NOTHING out of the ordinary in saying repeatedly in a legal document that the way your business is set up, that it may not make any money!?! that's completely normal!?

please I beg of you just a yes or a no answer please....this is the most juelzing thread in the history of the coli, it has to be.

 

[invalid]

operating at a loss and that investing his is business MAY not see you a return.

Again, for the financially illiterate. Operating loss =/= Return.

I just did some calculations as examples.

And at this point, I'm not even addressing you anymore because you have no credibility as it relates to financials.

I'm posting these examples so other posters can have a sense of what's going on.

 

[Problematic Pat]

@Booker T Garvey posted the entire legal document ...I quoted a particular part for the sake of space and time FOR THIS FORUM, but I was the first person to post the document FROM LAST MONTH in here - I put it out there for people to read at their leisure, they don't need you to hold their hand, we're grown men.


i'm still waiting on you cowards to address my points:

A) The facebook post

B) The NFLPA warning it's players to avoid TREF

C) Has Jay Morrison ever publicly stated on camera that his business is operating at a loss and that investing his is business MAY not see you a return.

all this back and forth and none of you have addressed these points DIRECTLY without pointing me in a completely separate direction.

All those things were addressed by him in the videos you chose to ignore.
You are swimming way past your depth.
Just take your L and keep it pushing.
You are attempting to dissect something you clearly have no comprehension of and it's making you look bad. Now you got @Nicole0416 in here holding Ls with you.
Tone and Yvette know nothing about finances or how investing works.
Data means nothing if you can't interpret it properly.

 

[invalid]

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........

 

[Booker T Garvey]

Again, for the financially illiterate. Operating loss =/= Return.

I just did some calculations as examples.

And at this point, I'm not even addressing you anymore because you have no credibility as it relates to financials.

I'm posting these examples so other posters can have a sense of what's going on.

you can't answer a simple elementary yes or a no question, so now it's "i'm done w/you"

i'll school you though: i use to run a business that was a typical exchange of goods and services business

i've also dabbled in real estate/home flipping..i was never been contacted by the SEC/DOJ or anybody because I was legit

in fact, I don't know anybody that has been contacted by anyone that flips houses or is in real estate in my life...keep caping for this dude though, watch what happens.

All those things were addressed by him in the videos you chose to ignore.
.

which I asked you to time stamp them for me, which you refuse to do

I'm not about to watch hour long videos of this dude bragging on himself fam

^^^ notice how neither of these dudes addressed my 3 points, even though they quoted the points, they just flat out ignored them...

 

[invalid]

you can't answer a simple elementary yes or a no question, so now it's "i'm done w/you"

i'll school you though: i use to run a business that was a typical exchange of goods and services business

i've also dabbled in real estate/home flipping..i was never been contacted by the SEC/DOJ or anybody because I was legit

in fact, I don't know anybody that has been contacted by anyone that flips houses or is in real estate in my life...keep caping for this dude though, watch what happens.

You've never been contacted by the SEC because you never issued shares to the public. The SEC is a regulatory body that oversees the stock market and only deals with companies that offer ownership of their companies in exchange for cash.

The Role of the SEC | Investor.gov

Again. No credibility. You don't even know what you're talking about.

 

[Booker T Garvey]

You've never been contacted by the SEC because you never issued shares to the public. The SEC is a regulatory body that oversees the stock market and only deals with companies that offer ownership of their companies in exchange for cash.

The Role of the SEC | Investor.gov

Again. No credibility. You don't even know what you're talking about.

you're right, I don't know....what about the NFLPA, that dude from facebook and has Jay Morrison ever said any of this you're saying in here himself? on video publicly?

 

[invalid]

what about the NFLPA,

The NFL issued that warning because of the SEC investigation. An SEC investigation is a red flag. Huge red flag. So any credible organization that has a fiduciary responsibility to constituents that may be involved with an organization that the SEC is investigating is going to send out a warning to let them know to be careful. The NFL has a fiduciary responsibility to it's players, therefore the NFL was looking out for them.

that dude from facebook

Don't know who this is.

and has Jay Morrison ever said any of this you're saying in here himself?

Have no idea what Jay Morrison has said with respect to this fund. I just learned about this fund from this thread. And as all fund managers do, they communicate through their financial reports and earnings calls. Earning calls are privy only to the investors. And the financial reports are available to the public.

He does not need to address the public. If any intelligent investor is interested in his fund, they'll look at his financials.

Most funds don't even "market" to the public. So this talking to the public is something he must be doing on his own accord because this doesn't even happen any place else.

 

[Booker T Garvey]

The NFL issued that warning because of the SEC investigation.

Stopped here because you lied off the rip

the NFLPA released their findings in 2018 using paperwork and info filed with the SEC, but they weren't under investigation in 2018

Spoiler: NFLPA official document

https://nflpaweb.blob.core.windows....da9&esid=88b5fd47-4a9a-e811-a964-000d3a199997

They weren't under actual investigation until March of this year
tulsa_1u.htm

now, you'll respond angry at me but am I lying? wrong? making something up? let me know

you dudes are so hell bent of defending this dude that you'll flat out lie and ignore blatant softball questions to stay true to your narrative

but again, watch how this whole thing unfolds and yes I will be coming back to this thread to count the tumbleweeds

 

[invalid]

the NFLPA released their findings in 2018 using paperwork and info filed with the SEC, but they weren't under investigation in 2018

First of all, that was my guess. So ok? The NFL released that warning because of info filed with the SEC vs. an SEC investigation.

Whether it was before or after, the NFL took notice because the SEC was brought into the equation.

And in the finance world, anything that has the "appearance" of impropriety is just as bad as impropriety itself.

So the NFL was proactive. Kudos to them.

Why are you keep bringing up the SEC investigation when it appears that posters have posted proof that the SEC has concluded it's investigation and found no wrong doing?

In my original post, I stated that Jay, is in fact, finessing his investors, which I'm going to get to in a minute, but it's not a scam.
It's legal what he's doing.

But again, why our you keep bringing up the SEC? That's apparently done with. It's over.

EDIT:

That was apparently the DOJ. But the DOJ has it's own cadre of CPAs and Forensic Accountants so the SEC's finding (whom also have their own cadre of CPA's and Forensics) will not be much different from the DOJ.

Whether you believe the Feds were involved or not is irrelevant. Here is what the same document you've linked to says:

"As of July 29th, 2019 the Department of Justice concluded its criminal investigation with no findings. The Department of Justice has reported that there will be no further investigation at this time."

You've completely contradicted yourself by saying "they have no reason to investigate" and then saying "he was sending out red flags". They had every reason to investigate. Everyone was screaming scam, fraud, and Ponzi scheme. Those actions are crimes. Hence why the DoJ did a criminal investigation.