Published On: Thu, Jun 7th, 2018

Buy the Block: Should You Invest in the Tulsa Real Estate Fund

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Updated March 15, 2019 below.

The news went viral on Instagram: “First Black Owned SEC Regulation A, Tier 2 Real Estate Crowd Fund, Raises $6.5 Million In 40 Hours”.  The announcement was coupled with pictures of smiling, sharply dressed, attractive Black people, holding up glasses of champagne. We had just moved from renting the block to buying the block and social media was buzzing at this history-making power move.

The Tulsa Real Estate Fund (TREF for short) received so much website traffic that, according to its founder, its website crashed multiple times over the span of hours. On Instagram its founder, Jay Morrison stated, “Unfortunately, even after upgrading our servers TWICE, there was such overwhelming #support for our #TREF Initial Public Offering that we LITERALLY crashed the internet.” Clearly, we had moved on from chanting “Wakanda Forever” to actually supporting a business which promised to be a solution to urban gentrification by allowing individuals within these neighborhoods to participate in urban redevelopment and its resulting profits.

It’s no secret that Black buyers have traditionally faced barriers to homeownership. From straight-up racism to being steered to less desirable neighborhoods to subprime mortgages people of color have had a more difficult time than others on the path to homeownership. Michelle Singletary of the Washington Post wrote that comparing data from 1968 to 2015 shows that “black homeownership is as low as it was when housing discrimination was legal.”



According to the Census Bureau’s Housing Vacancies and Homeownership survey, at the end of 2017 home ownership rates for Non-Hispanic Whites was 72.3% while that rate was 42.3% for Blacks; a number below all other ethnicities. While this was an improvement over 2016 when the rate was 41.6%, it is below its peak of 49.1% in 2004. Income is a major source of this disparity in homeownership rates. The Census Bureau lists the 2016 median income for Non-Hispanic Whites as $65,041 and $39,490 for Blacks. This large difference means that home ownership might be out of reach for many people of color. This is why investing in the Tulsa Real Estate Fund (“TREF”) is so attractive. While requiring only a $500 investment, TREF extends the opportunity to at least own a brick within a building while receiving a potential minimum 8% return on investment.

Real estate appears to be a particularly attractive investment for African Americans. A joint study between Credit Suisse and Brandeis University’s Institute on Assets and Social Policy looked at what drove the wealth of African Americans with the highest 5% of net worth.  According to their research, “As a percentage of non-financial assets, real estate investments excluding primary homes account for 41% for the Top 5% of African-Americans and 22% for the white comparison group.” Clearly, even amongst the wealthiest of us, real estate is viewed as a pathway to wealth in a way that differs significantly from our White counterparts. The desire to own real estate extends beyond the building where your family lives into owning additional single family, multi-family and even commercial real estate holdings. TREF offers the opportunity to participate in an investment vehicle that the African American community holds dear to its heart by pooling crowd sourced funds from many investors into one fund.

This phenomenon of pooling resources is not new. Look to your immigrant friends who may pool resources to purchase a multi-family home where everyone lives together, sharing costs before moving on to purchase individual homes. What is new is the ability to do this with many others via the Internet.

With individual pages on Facebook, Twitter, Instagram, LinkedIn and YouTube, this particular fund has a significant social media presence. Marketed as an effort to “Save the Block” and “Buy Back the Block” its name pays homage to the Greenwood District in Tulsa, Oklahoma which was once called “Black Wall Street” because of its high concentration of Black-owned businesses and wealth during a time of segregation.

The neighborhood was ultimately burned to the ground in government-sanctioned riots and bombings by White residents and officials over the course of two days in 1921 causing damages totaling $31 million in today’s dollars.  Largely unreported, it would take a bipartisan group in Oklahoma’s state legislature to finally authorize a study on the race riots in 1996 before its lasting damage on the community was finally acknowledged and the death toll revised from 39 to 300 in 2001.  To be clear, TREF does not specifically seek to invest in the Greenwood District nor in Tulsa, particularly, but instead pays homage to the wealth that had previously been created there by people of color.

Through carefully curated and crafted videos, Instagram images, and even endorsements, TREF launched with much social media fanfare. It easily surpassed the initial minimum offering goal of $100,000 and is fast on its way to the investment cap of $50,000,000. Comments on social media posts by the fund encourage readers to tag three friends to buy shares and “rebuild Black Wall Street.” But what exactly are the users investing in?

You’re probably thinking that this non-traded equity real estate investment trust (“REIT”), but it’s not quite that. Rather, this fund operates as something of a hybrid between a REIT and a private equity fund. Traditionally, REITs operate as an entity that develops, manages, rents and sells income producing properties. This allows investors to own a portion of the company that owns the real estate. REITs though, are required to distribute nearly 90% of the fund’s taxable income to its shareholders. TREF does not intend to distribute anything near that to its shareholders.

Much like a private equity fund, TREF is a private investment designed to maximize shareholder return and the fund manager is allowed a significant cut of any gains.  While hedge funds typically take a 2% administrative fee which usually covers all the costs of doing business, they also take a 20% cut of any gains. So, whether the fund makes money or not, the manager gets its 2% fee based on assets invested plus an additional 20% of any gains. TREF outpaces hedge funds costs as it lists an anticipated management fee of 5% plus 50% of any profits above an 8% hurdle rate and they continue to take additional fees.  This is more than double traditional hedge fund fees.

Confused? Let me explain it in detail. If TREF raises $10 million, the fund manager can take 5% or $500,000 off the top as its fee without ever making a move to make an investment.  The fund manager does state that they expect to take these fees from profits. If the company makes a profit, expect an 8% return on your investment – if the company gets to that threshold. If profits are not exhausted at that time, the manager will take 50% of the balance of the profits and the rest will be distributed to shareholders.

As I mentioned, TREF outlines additional fees above their administrative fees as well. The company expects to take a 1% acquisition fee based on the price of any assets acquired.  Buy a property for $1 million? The company will take an additional $10,000. In addition, expect operating costs, working capital plus legal and accounting fees to be deducted from the funds raised. Those costs plus any salaries are usually wrapped into the administrative fee but in this case, they are not.  Where is this information? As with all securitized products, TREF must file a prospectus with the U.S. Securities and Exchange Commission which allows you to evaluate the fund on its own merits, separate from its intriguing and compelling backstory and marketing.

If we compare TREF to Origin Fund III, a private equity real estate investment fund which also crowd funds its offerings, the potential cost to investors versus return can be quantified using their disclosures as well.  Origin charges a management fee of 1.5% of total capital minus any distributions paid to investors or 0.75% of total capital commitments, whichever is greater. By comparison, TREF charges more than double this rate at 5%. Origin charges a performance fee of 20% for returns above 9% which is less than half that of TREF which charges 50% for returns above 8%.  Origin does, however, charge a one-time 3% fee on committed capital. Currently, TREF charges a flat $25.50 processing fee.

Okay, let’s look at an example. Let’s say that you invested $500 in each fund (Origin does, however, require a minimum investment of $100,000) and the fund realized a 15% return. TREF’s fees would reduce your $500 investment to a maximum of $444.50 before returns are paid out.  Remember, we also have to pay legal and accounting fees which are not fixed and can not be quantified. With Origin your $500 would be either $481.25 or $477.50. Let’s say that each company will pay out your interest based on your $500 investment if we ignore your actual lower investment amount after all fees. TREF would pay you $57.50 and Origin would pay you $69.  

All registered offerings must disclose all of its anticipated estimated fees which can be viewed by the general public in its offerings circular. In the past, tighter regulatory rules required investors to be accredited – meaning that they had to meet specific requirements to be considered a sophisticated investor who is able to take on the risks associated with less regulated investments.  With the Jumpstart Our Business Startups or JOBS Act passed in 2012 by then President Obama, these regulations were loosened to allow for crowdfunding of small businesses.

Because of the risks involved non-accredited investors are limited in how much they are allowed to invest in a twelve-month period. According to Financial Industry Regulatory Authority (“FINRA”) if your annual income or net worth is less than $107,000, you can only invest “$2,200 or five percent of the lesser of your annual income or net worth.” Should both your income and net worth surpass the $107,000 level, “you can invest up to 10 percent of your annual income or net worth, whichever is less, but not to exceed $107,000”. While TREF’s site does not disclose this fact up front, it does have an accreditation statement that potential investors must certify to prior to investing.

Continuing through its filing, TREF states, “We are an emerging growth company organized in July 2016 and have recently commenced operations, which makes an evaluation of us extremely difficult. At this stage of our business operations, even with our good faith efforts, we may never become profitable or generate any significant amount of revenues, thus potential investors have a high probability of losing their investment.”

Is this unusual? Not at all. This fund, while established in 2016, did not begin taking investors until its offering in June 2018.  You should note that the company had expected to begin taking investors in February 2018 with its first property purchase occurring in April 2018.  While its manager has Instagram posts which boast of “purchasing and developing an entire town” alluding to Greenwood, Tulsa, the fund actually has no assets, has no targeted states except the South and North East and listed liabilities of $15,350 which represented deferred operating costs related to “party advances”. This is likely seed cash by its manager, Tulsa Founders LLC.  In payment for this advance, the amount will be repaid and class B shares also issued to its manager.

While the goal of all investment opportunities is to make a profit, it is always fair to note that all investments, including start-up companies, carry a significant risk up to and including the loss of your investment. Investment opportunities which carry the lowest risks such as savings accounts and certificate of deposits carry virtually no risk but offer extremely limited returns.  In fact, according to the Motley Fool, most actively managed mutual funds fail to beat the returns of the S&P 500.

Continuing through its SEC filing the risk factors has one particularly troubling section. It states, “We are significantly dependent on Jay Morrison. The loss or unavailability of his services would have an adverse effect on our business, operations and prospects in that we may not be able to obtain new management under the same financial arrangements, which could result in a loss of your investment.”

The organization is stating, clearly, that they are wholly and completely dependent on Jay Morrison and his direction. Should he no longer continue in the business and they cannot replace him with someone of similar knowledge, you may lose your investment.  That is a significant risk as there appears to be no business continuity or contingency plan in the event that Mr. Morrison is unable to or chooses not to continue with the organization. His current roles within the management company are listed as Chief Executive Officer and Chief Financial Officer, Chief Operations Officer, and Chief Technology Officer. With the exception of the General Counsel position, he holds all of the executive officer positions and provides investment guidance and direction to TREF.

Since Mr. Morrison’s participation and ownership is so critical to the business, it is important to know more about Mr. Morrison, his history and his qualifications. Within the offering, Mr. Morrison lists his background as the owner of a real estate consulting firm, as well as a real estate investor’s school and mentorship program. He also lists his transformation from being a high school drop out and three-time felon to becoming a millionaire through real estate.  A quick internet search found even more background on Mr. Morrison detailing his life before discovering real estate.

Born Jermaine Dyshon Morrison in Somerville, New Jersey, Mr. Morrison grew up in a family where he observed his grandparents and parents selling drugs and went into the family business selling crack and cocaine as a teenager. Through multiple drug arrests including one for multi-state trafficking, Mr. Morrison came to realize that he could use his talents honed from the streets, including being impeccably dressed and outworking everyone else to be successful in real estate.  Much like Sean Carter – better known as Jay-Z – used stories of his drug dealing past to find success, Mr. Morrison does not hide his past and instead moved to marketing classes using hip-hop and drug references including “How to Beat the Trap.” In popular vernacular, the trap house is where drugs are sold and used.

Mr. Morrison’s Instagram account displays a mixture of images depicting community service, lectures being held on street corners, boycott marches, advertisements for his products and services, motivational quotes, media appearances, financial lessons, images of himself in sharply tailored suits (a lesson learned from his drug dealing days) and promotions for the Tulsa Real Estate Fund.  He also moves in social circles that include urban celebrities. In 2014, rapper Young Jeezy, through his Street Dreamz Foundation, donated $1 million to the Jay Morrison Academy which granted scholarship students the opportunity to take real estate investment courses for free for one month, along with additional benefits. Mr. Morrison had even once served as the face of a Rocawear urban clothing brand’s advertising campaign.





A recent interview with YouTube outlet VladTV, which typically interviews “urban artists, athletes, and cultural figures” shows Mr. Morrison explaining what TREF is and why he is focused on reaching the everyday person for this investment opportunity. When asked in the VladTV interview if he had personally invested into the fund, Mr. Morrison stated that he had not, however, he intended to invest just $10,000 into the fund. With hedge funds, managers are usually required to invest a significant stake within the company to ensure their participation in making the fund successful. A general number is 5% of the fund’s cap. A $10,000 investment represents just 0.02%.  With the absence of such an investment, Mr. Morrison has little downside risk with significant upside as his company will collect management and administrative fees with very little to no cash investment on his part. By comparison, Origin’s founders and fund managers invested a total of nearly 8% of the fund’s offering size with the same terms as all other investors.  This amounted to a total of $11.7 million.  

Returning to the risk section of the SEC filing, independent auditors have “expressed in their report substantial doubt about our ability to continue as a going concern”. This concern was based on the company’s ability to raise enough capital to cover its future operations and any liabilities. This risk is generally the same for all start-ups unless they have significant cash reserves at its beginning.  Beyond the liabilities noted above which covered the costs of registrations and filings, the company has no assets. Due to the lack of assets and or even identified acquisition targets, the offering price of each share is an arbitrary number that does not reflect the value of any asset or interest because none currently exist. Each share could very well have been offered at $5 or at $5,000.

Returning to social media, reading the comments posted on each update of the amount that the fund has raised reveals a palpable excitement of the commenters.  From thanking God for the investment opportunity to tagging friends so that they too could invest, to pride at being able to invest in their own neighborhoods, it is clear that these investors are ready to follow a charismatic leader who has promised a unique investment opportunity but many do not appear to be sophisticated investors who understand even the basics of the risks that they are taking.

Prudential’s study, The African American Financial Experience notes that, “Uniquely, African Americans surveyed are more likely than their U.S. general population counterparts to want to engage with a financial professional if they offer information through social media (48% vs. 39% general population) or is supported by a community leader or a faith-based organization (61% vs. 43% general population).” As the charismatic and attractive face of the fund who is also an internet savvy marketer who is taking full advantage of social media, Mr. Morrison is uniquely positioned to reach an audience who is hungry for investment opportunities right where they gather – on social media but these individuals also need clear information on this offering.

Comments asking if the investment is FDIC insured (no security is), if a 401(k) can be rolled over into the fund (not usually advised), if checks can be post-dated until pay day or if they can invest using their credit cards (no), when the fundraiser is ending (it’s not a fundraiser), confusion on self-accreditation (chances are that they are not accredited), and negativity directed to those who question the investment abound.  It is clear that many have not read the prospectus but are investing on emotion and the viral nature of this offering. TREF will need resources to educate their investors or they could potentially be inundated with questions as their investors flood their lean operations with inquiries.

So, your question is, should I invest in the fund? My answer is simply this: as with all investments, do your research and never invest more than you can afford to lose. If you are interested in funding real estate ventures within your neighborhood or in specific neighborhoods that you would like to support, you should also consider looking at sites like and Both offer individuals greater visibility and control in their investments and clear information on returns, fees, and risks. As with all investments, caveat emptor; buyer beware.

Update March 15, 2019 12:00pm EDT

In a filing made public on March 7, 2019 The Tulsa Real Estate Investment Fund disclosed that it was served with a grand jury subpeona from both the
United States Attorney’s Office for the Northern District of Georgia as well as a civil subpoena from the Securities and Exchange Commission.

The filing related to the disclosure of those subpeonas can be found on the SEC website. The fund has retained counsel in this matter.

On March12, 2019 TREF announced that is would “pause for applause” as they update their annual filings. No new investors would be allowed into the fund but a waiting list would be opened for investors.

A note was also placed on their website annoucing this pause in allowing new investors into the fund as the fund continues to invest the funds already raised.

Sandy Smith
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About the Author

- Sandy Smith is the founder of the peer acclaimed personal finance blog, Yes, I Am Cheap where she shares winning strategies for reducing debt. You can find Sandy all around the internet taking about getting you out of debt and helping others establish small businesses. She is also the founder of Colorful Money Magazine.

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  1. CT says:

    TREF life!!! during the 2nd annual Black Wall Street ball TREF released some of there first investments in Florida, Atlanta, DMV, and New Jersey, umm I see the scam comments are starting to die off !!! Keep up the awesome work Jay and the 11 thousand and growing investors!!!!

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Did you know?

African Americans are significantly more likely to have some type of debt (94%) compared with the general population (82%). Credit card debt, student loan debt, and personal loans are all significantly higher in the African American community.

Source: Prudential’s 2013 "African American Financial Experience" study