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.