Anchor tenant never paid rent, yet firms allegedly continued to accept investments, complaint says
A group of local investors is accusing several real estate investment firms of orchestrating a multimillion-dollar fraud involving a commercial medical property in South Jordan, Utah.
In a federal lawsuit filed on Oct. 14, 2024, 17 plaintiffs claim they were duped into investing a total of $10.3 million into a property that soon became financially unstable after its primary tenant went bankrupt.
The suit names Millcreek Commercial Properties, Millrock Investment Fund, and Colliers International as defendants. At the heart of the complaint is the allegation that the firms misrepresented the property's anchor tenant and the return potential, offering what appeared to be a passive, worry-free investment.
“What made it attractive is they promised no headaches, no tenant hassles. It was really a passive [income], just a check in your mailbox,” said plaintiff Liz Carlston in an interview with ABC4.com.
Carlston initially received monthly payments of $1,630 but said those payments stopped shortly after the anchor tenant, identified as healthcare company Neurogenex, filed for bankruptcy.
“It’s been pretty devastating to our family,” she said, noting that her investment included part of her parents’ inheritance.
Broken promises
Investors allege they were led to believe that Neurogenex, described by the firms as “the nation’s fastest growing healthcare brand,” had signed a 20-year lease that would yield a 6.5% return annually.
But according to the complaint, the company never paid rent on the South Jordan property before filing for Chapter 11 bankruptcy in Arizona in January 2024.
The lawsuit further claims that initial payments to investors were not from rental income, but instead came directly from their original investments, a red flag that the deal may have operated more like a Ponzi scheme than a genuine real estate venture.
Inflated prices
Plaintiffs said that the property itself was dramatically overvalued. According to the lawsuit, investors unknowingly bought the South Jordan Medical property from Millcreek Commercial Properties for $10.3 million, even though its market value was just $2.6 million at the time of the transaction.
Lynn Kneedy, a 74-year-old investor from West Point, said he was promised a 6.5% return, with an increase to 9% in 10 years.
“It really looked good, and so they had me sign a purchase and sales agreement,” Kneedy said.
But soon after, he checked county records and discovered the land was valued at only $2.3 million. When he questioned the discrepancy, his sales agent reportedly told him that the price of the building had no bearing on the investment, and that the anchor tenant’s lease was the real value driver.
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Kneedy and other investors say the firms continued to accept money even after it was known that Neurogenex was heading toward bankruptcy—a decision they believe shows deliberate deception.
“We aren’t in the business of leasing, we bought a passive investment,” Carlston said.
The case is currently being litigated in federal court, with the plaintiffs seeking to recover their full $10.3 million investment. Carlston also indicated that nine other lawsuits alleging similar misconduct involving the same firms are currently in the legal pipeline.
The property in question remains half-vacant, leaving investors concerned about future losses.
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