Investors Sue Colliers, Claim Brokerage Hid Property's Red Flags
A group of investors sued Colliers, accusing the brokerage of targeting wealthy individuals in the sale of risky, unregistered securities associated with a medical office.
The suit, which also names the property's seller and specific brokers as defendants, alleges that the investors were harmed by the defendants' failure to follow fiduciary duties through a series of misdeeds and misrepresentations over the fractionalized sale of the property in Crockett, Texas.
The defendants, who invested in the property with a long-term tenant promised to be in place, are seeking to recover their lost cash along with additional damages.
“My elderly, vulnerable clients were deceived by promises of safe and secure investments that Colliers and its agents made guarantees would provide a stable stream of income and protection of their retirement nest eggs,” Brandon Reif, an attorney representing the investors, said in a statement to Bisnow. “But what we found through our investigation was that they sold my clients snake oil investments from dishonest people.”
Investors in the Crockett property at 2000 Renaissance Way say they were told the property was valued at $9.5M when they invested funds between 2022 and 2023. The property is listed for sale at $1.9M after the tenant backed out of its lease for a planned surgery center, but not before the landlord gave the now-bankrupt tenant $2M for equipment and startup costs.
The $2M loan wasn't disclosed to investors until April, when the defendants sent a letter outlining the obligations that the incoming tenant, Pulse Physician Organization, had yet to fulfill. The surgery center had never opened, and Pulse filed for bankruptcy in June.
“It was just a whole scam — I felt like it was a Ponzi scheme,” plaintiff Russell Chadwick McAllister told The Real Deal, which first reported on the allegations.
The suit, filed in the U.S. District Court for the Central District of California, lists five individuals and their associated investment funds as plaintiffs. Chadwick told TRD the site attracted about 20 investors in total.
The suit, filed Dec. 18, also names Utah-based companies Millcreek Commercial Properties, Millrock Investment Fund 1, Mountain West Commercial, KGL Advisors, Cams Realty and five real estate brokers as defendants.
“As this matter is with the courts, we have no comment at this time,” a Colliers spokesperson said in an email.
Millcreek is accused of failing to disclose missed rent payments from Pulse and of misleading the investors about other missing funds. In one instance cited in the suit, a Millcreek employee blamed payment issues on the sudden death of the firm’s chief financial officer. In another, it said there were issues with the tenant’s billing systems.
Millcreek ended operations on Dec. 3, according to the suit, posting a message to its website that “we appreciate the trust our clients and partners have placed in us over the years.” The site directs users to another firm, KGL Advisors, to which former Millcreek agents moved.
“KGL Advisors was created to obscure the assets of Millcreek Commercial from pending lawsuits, while continuing substantially similar operations,” the suit says, highlighting that the company website had identical blog posts to those that had been on the Millcreek site.
The suit says the investments totaled millions of dollars and accuses Colliers of selling fractional ownership shares without the proper licenses, mismanagement and neglect of the property, and making misrepresentations to investors about the property’s status.
“The economic damages and emotional harm are almost immeasurable,” Reif said. “It is millions of dollars in money losses and then some in emotional distress damages.”
