One of the largest commercial real estate firms in the state was recently named in a lawsuit accusing brokers of misleading elderly investors and violating securities laws.
The lawsuit, filed in Utah’s federal court in early March, accuses Colliers and other entities of lying to investors with what it was doing with their money and taking advantage of its investors’ lack of experience.
The scheme, the plaintiffs allege, involved dozens of properties across the country and effected hundreds of people, many of them retirees. The lawsuit focuses on properties in Draper and Lehi in Utah along with Arkansas and Texas, which the plaintiffs said followed the same pattern.
Largely the lawsuit focuses on Tenant in Common investments, or TICs, and 1031 exchanges. TICs allow multiple investors to have ownership interests in a piece of property, and 1031 exchanges refers to Section 1031 of federal tax code that allows investors to sell one real estate investment and immediately reinvest those funds to another piece of real estate, which allows people to defer their capital gains taxes.
According to the lawsuit, 1031 exchanges are an attractive type of investment for retirees, as the deal allows investors to profit from their investment and defer their capital gain taxes, “typically upon the death of the investor.” The lawsuit says that named plaintiffs invested at least $4.7 million in the TICs.
The lawsuit alleges that Colliers and Millcreek Commercial, a real estate investment firm founded by Kevin Long that ceased operations in 2024, convinced elderly and inexperienced investors to invest their savings in TICs.
But instead of gaining a capitalization rate of 6-9 percent over the term of a 20-year lease as investors were advertised, investors lost thousands of dollars after tenants defaulted on their leases, according to the complaint. With each purchase of TICs, Colliers and Millcreek received commission payments, the lawsuit says.
“The tenants at each of the properties turned out to be shell companies with no assets and no realistic ability to meet their lease obligations,” the plaintiffs alleged. “Of course, none of the corporate guarantors honored their obligations to cover the payments, and themselves also turned out to be shell companies with no assets like the tenant companies they supposedly backed.”
When reached, Colliers declined to comment on the lawsuit, saying, “We do not comment on active litigation.”
A message to KGL Advisors, which is also a named defendant in the lawsuit and Long’s current company, was not returned.
The lawsuit alleges Millcreek Commercial and other named parties in the suit executed, “a sophisticated scheme to fraudulently induce vulnerable, often elderly investors to purchase TIC investments in commercial properties located throughout the United States at grossly inflated prices.”
For example, the lawsuit alleges one property in Lehi was marketed as being worth over $100 per square foot, when market value was closer to $32 per square foot.
Investor funds were used to pay for the development of medical offices and space for other businesses, with developers allegedly telling investors the offices already had secured tenants in long-term leases.
However, the lawsuit alleges that many of these companies quickly defaulted on payments, and a handful of tenant companies declared bankruptcy in the months following. Money set aside for expensive medical equipment would also go missing, the lawsuit says. In one instance, the lawsuit says a facility in Draper was, “missing $2.5(million) of promised surgical equipment.”
The lawsuit was filed on March 4. Defendants in the case have yet to file a written response to the allegations. No court dates have been scheduled in the case.
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