Key Takeaways
- • A lawsuit filed October 14, 2024, alleges that Millcreek Commercial Properties, Millrock Investment Fund, and Colliers International defrauded 17 investors of $10.3 million in a South Jordan, Utah commercial real estate investment scheme.
- • The defendants promised investors a passive 6.5% annual return on a medical office property anchored by Neurogenex, a healthcare company marketed as the nation's fastest-growing healthcare brand, but Neurogenex never paid rent and filed for Chapter 11 bankruptcy in January 2024.
- • Initial distributions to investors were allegedly funded by the investors' own capital rather than legitimate tenant rental income, creating a Ponzi-like structure that collapsed when the anchor tenant became insolvent.
- • Lead plaintiff Liz Carlston and co-investor Monika Hansen each received only eight rental checks before the investment deteriorated, with both investors reporting significant financial hardship including the need for additional employment.
- • The scheme targeted retirement funds and inheritance capital, marketing the investment as a "no headaches" passive income vehicle with promises of a 20-year lease guarantee that failed to materialize.
Summary
Seventeen investors have filed a civil fraud lawsuit against three entities—Millcreek Commercial Properties, Millrock Investment Fund, and Colliers International—alleging a $10.3 million investment scam centered on a commercial medical office property in South Jordan, Utah. Filed on October 14, 2024, the lawsuit claims the defendants systematically misrepresented the investment's financial viability and tenant stability to lure capital from retirement accounts and family inheritances.
The investment was structured around South Jordan Medical, a commercial property allegedly anchored by Neurogenex, described in marketing materials as the nation's fastest-growing healthcare brand. Defendants promised investors a 6.5% annual return with a purported 20-year tenant lease and marketed the opportunity as a low-risk, passive income vehicle requiring no active management. However, according to the lawsuit, Neurogenex never paid rent on the South Jordan property despite being positioned as the primary revenue-generating tenant. Neurogenex subsequently filed for Chapter 11 bankruptcy protection in Arizona in January 2024, triggering the collapse of the investment thesis.
The lawsuit alleges a fundamental structural fraud: initial distributions paid to investors were drawn from their own capital contributions rather than from legitimate tenant rental income. This mechanism—using new investor capital to pay earlier investors—creates a Ponzi-like dynamic that masked the underlying insolvency until the anchor tenant became insolvent. Lead plaintiff Liz Carlston reported receiving only eight checks before distributions ceased, despite having invested portions of her parents' inheritance. Co-investor Monika Hansen, from Murray, Utah, experienced similar circumstances and stated the investment failure forced her to seek additional employment to offset losses.
The case represents a significant cautionary example for institutional and family office investors regarding commercial real estate syndication risks, particularly investments marketed with explicit tenant guarantees and promise of passive yield. The involvement of Colliers International, a global commercial real estate services firm, adds a layer of professional responsibility questions regarding due diligence and investor suitability assessment in the transaction.
The investment was structured around South Jordan Medical, a commercial property allegedly anchored by Neurogenex, described in marketing materials as the nation's fastest-growing healthcare brand. Defendants promised investors a 6.5% annual return with a purported 20-year tenant lease and marketed the opportunity as a low-risk, passive income vehicle requiring no active management. However, according to the lawsuit, Neurogenex never paid rent on the South Jordan property despite being positioned as the primary revenue-generating tenant. Neurogenex subsequently filed for Chapter 11 bankruptcy protection in Arizona in January 2024, triggering the collapse of the investment thesis.
The lawsuit alleges a fundamental structural fraud: initial distributions paid to investors were drawn from their own capital contributions rather than from legitimate tenant rental income. This mechanism—using new investor capital to pay earlier investors—creates a Ponzi-like dynamic that masked the underlying insolvency until the anchor tenant became insolvent. Lead plaintiff Liz Carlston reported receiving only eight checks before distributions ceased, despite having invested portions of her parents' inheritance. Co-investor Monika Hansen, from Murray, Utah, experienced similar circumstances and stated the investment failure forced her to seek additional employment to offset losses.
The case represents a significant cautionary example for institutional and family office investors regarding commercial real estate syndication risks, particularly investments marketed with explicit tenant guarantees and promise of passive yield. The involvement of Colliers International, a global commercial real estate services firm, adds a layer of professional responsibility questions regarding due diligence and investor suitability assessment in the transaction.
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