🏢 Trust Betrayed: The $10M Colliers Property Fraud Scandal 🏢

🏢 Colliers Lawsuit Shakes CRE Market: Key Insights 🏢

In the world of commercial real estate, trust and transparency are the cornerstones of any successful investment. But what happens when those cornerstones crumble? A recent lawsuit against Colliers and associated parties has rocked the industry, revealing a tangled web of alleged deception that left 17 investors, many of them retirees, facing significant financial losses.

The Investment That Wasn’t 🌟

The story centers around a $10 million medical office property in South Jordan, Utah. Marketed as a lucrative investment opportunity, the property was sold as having a long-term anchor tenant and promised monthly passive income ranging from $1,430 to $8,170, depending on ownership share. Investors were told this was a safe, hands-off investment, backed by the reputable Colliers name and branding.

But according to the lawsuit, the reality was starkly different. The property’s true valuation was $2.6 million, a far cry from the advertised $10 million. The promised anchor tenant, Neuragenex, never moved in and later filed for bankruptcy—leaving the investors with little to no income and mounting frustrations.

How It Unraveled 🕵️‍♂️

The lawsuit, filed in the U.S. District Court for the District of Utah, accuses Colliers, five of its current or former brokers, and other entities of inflating property values and misleading investors. Using funds raised from new investors to cover payouts to existing ones, the defendants allegedly concealed the property’s financial struggles.

This isn’t the first time these players have come under fire. The same group is named in a separate lawsuit in Texas, involving another alleged property scheme with similar tactics.

The Personal Toll 💔

Among the affected investors is Cheryl Tomac, a 75-year-old former family law attorney forced into retirement after a stroke. Tomac had invested nearly $326,000 from the sale of her legal practice’s property, expecting the passive income to cover living expenses and support her husband, who has dementia. Initially, she received $1,700 per month as promised. But after Neuragenex filed for bankruptcy, her payouts dwindled to just $200—devastating her carefully planned retirement.

Tomac’s story isn’t unique. Court records show that most investors involved in this deal are over 65, highlighting the vulnerability of retirees in high-stakes investments.

The Accused 🎭

Key players in the alleged scheme include Utah-based Millcreek Commercial Properties, which has since ceased operations, and its founder, Kevin Long. The suit also names his son, Jerald Adam Long, a former chief operating officer at Colliers, along with other high-ranking Colliers officials like Utah CEO Lew Cramer and co-owner Brandon Fugal.

Interestingly, the lawsuit alleges that Millcreek’s operations have continued under a new company, KGL Advisors, with Long still at the helm—a claim that raises questions about accountability in the industry.

Legal Fallout ⚖️

The Utah investors are seeking damages for emotional pain and suffering, as well as the return of all funds. The suit lists 18 civil infractions, including elder abuse and the sale of unregistered securities. Both the Securities and Exchange Commission (SEC) and the Department of Justice (DOJ) are reportedly investigating the case, signaling potential criminal charges ahead.

Settlement talks are underway, but no defendants have formally responded to the allegations. Meanwhile, the legal and financial impacts of this case could set new precedents in how the industry handles fractionalized ownership and investor protections.

What This Means for CRE Investors 📈

This case serves as a stark reminder of the importance of due diligence in commercial real estate. While passive income investments can be attractive, investors must:

1. Verify Property Valuations: Cross-check appraisals with independent sources.

2. Understand Tenancy Agreements: Confirm tenant commitments and financial health.

3. Research the Players: Look into the track records of brokers, managers, and developers.

4. Consult Professionals: Work with trusted financial advisors and attorneys to vet deals.

Moving Forward 🛠️

The Colliers lawsuit is a cautionary tale that underscores the need for increased transparency and regulatory oversight in CRE. As the legal battle unfolds, it’s clear that the stakes go beyond financial losses—they affect the trust and integrity that form the foundation of the real estate industry.

For now, all eyes are on Colliers and its co-defendants as the courts determine accountability. In the meantime, let this serve as a lesson to approach every deal, no matter how reputable the source, with a healthy dose of skepticism and a commitment to thorough investigation.

💬 What’s your take on this case? Have you experienced anything similar in your real estate ventures?

I’m an experienced Commercial Real Estate Mortgage Broker, please feel free to reach me at 281-222-0433.

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