Developer Tim Majors faces lawsuit alleging tenant fraud in Medical Village project

In the spring of 2017, Australian-born businessman Tim Majors was on top of the world, greeting reporters and VIPs at the opening of his new downtown Orlando rooftop bar, M Lounge.

The bar atop his corporate headquarters building in Ivanhoe Village, a two-story wine cellar and museum on the ground floor displaying his private collection of more than 60 classic cars are all “passion projects” made possible through the success of Majors Investments and its commercial real estate development.

Now Majors is at the center of a bitter legal dispute over charges of tenant fraud that threatens his business empire and the image he spent years to cultivate.

“I’ve been involved in approximately 40 substantial real estate transactions in the past seven years and this is the first lawsuit against me or any of my companies,” he told GrowthSpotter.

While the company owns multiple brands and investments, ranging from the nightspots to a charter yacht to a castle in Italy and even a charitable foundation, Majors Development has been its financial engine. 

Majors found a niche in Orlando’s office market and exploited it with the rapid acquisition, renovation and sale of his “Medical Village”-branded properties. His company has converted more than a dozen distressed properties into Class A, multi-tenant medical offices, many of which were sold to institutional investors and healthcare real estate investment trusts (REITs) for anywhere from $5 million to over $20 million.

The Medical Village of Mount Dora was one such property. Majors Investments bought the bank-owned, 50,000-square-foot building through an affiliate in 2013 for $1.3 million.

After converting it to Class A medical office space, Majors sold the property two years later to a healthcare REIT operated by California-based Griffin Capital and American Healthcare Investors for $16.3 million. At the time, it was purported to be 97 percent leased.

Griffin-American is now suing Majors and his long-time business partner, Jeffrey Cannon, accusing the two of fabricating tenant leases to facilitate sale of the property. The allegations, if true, are devastating.

Many of the so-called phantom tenants were solely owned or controlled by Cannon or members of his family, according to court records. Cannon owns a consulting company but has no medical degree.

At the time, Cannon’s consulting company and Majors maintained offices in the same building at 2106 N. Orange Ave. In the lawsuit, Griffin-American said that when it began making demands for back rent from delinquent tenants in 2016, numerous checks “came pouring in” all signed by Cannon or his brother-in-law, all drawn from different accounts at the same bank, and all with the same 2106 N. Orange Ave. address.

The lawsuit describes a scheme to defraud that was so elaborate Cannon and Majors staged at least five suites with furniture in the lobbies and front office, “but there was little or no medical equipment, patient records or other signs of occupancy.” 

All of the parties filed a joint motion in May 2017 saying they had reached a settlement, and the case was dismissed without prejudice. But Griffin-American filed a new lawsuit six months later.

Majors says the charges are baseless.

“In the spring of 2015, I sold and delivered a freshly and completely remodeled, converted and leased up Class A medical office building to the Plaintiff,” he said. “I think I have been unfairly targeted by an absentee California landlord looking for a scapegoat.”

Cannon did not respond to multiple requests for comment. In their legal pleadings, Cannon and Majors argued that the buyer’s due diligence was so lax as to be incompetent. 

Griffin-American‘s portfolio is valued at approximately $3 billion. The Mount Dora property was one of 18 acquisitions the REIT made in the second quarter of 2015 for a total of $311 million.  

“Plaintiff and its agents did not perform any known legal due diligence and almost no accounting due diligence and were negligent in their entire due diligence investigation,” Majors’ attorney wrote in his response to the complaint.

Over the last six months, Griffin-American has sued 12 of the original 18 Mount Dora tenants for eviction and payment of back rent. Those include several of the companies owned by Cannon and members of his family. The REIT won eight of those cases, most by default because the defendant never bothered to respond to the complaint.

Two of the defendants, Vista Clinical Diagnostics and dermatologist/osteopath F. Christopher Manlio, did file defenses. Both asserted in their case filings that they never leased office space in the Mount Dora Medical Village, and that their signatures had been forged on both the leases and estoppel certificates.

Vista Clinical CEO Davian Santana said in court documents that he had been negotiating a lease with Majors in late 2014 but decided not to execute the contract because “the property appeared to be largely vacant.”

He did, however, agreed to license the Vista Clinical name and logo to Majors for a separate, unrelated business called “Vista Florida LLC.”  When he began to receive collection notices from Griffin-American, Santana said he informed the company that he was not and had never been a tenant, according to court records.

He was scheduled to be deposed in December 2017, but Griffin-American canceled the deposition and dismissed the case against Vista.

The dermatologist Manlio, through his attorney, stipulated to the eviction, allowing Griffin-American to take possession of the office space on Jan. 24. He also accused the REIT of gross negligence for failing to verify the authenticity of the documents and then waiting more than a year to pursue economic relief.

“To be clear, the Defendant never tendered a single check to the Plaintiff,” the filing reads. “The Plaintiff’s failure to conduct their due diligence in a reasonably commercial manner or personally contact the Defendant so as to inquire why payments were not being made is grossly negligent thereby making the Plaintiff a negligent participant in the fraud.”

Several of the tenants have appeared in litigation related to other Medical Village properties.

Milwaukee-based Physicians Realty Trust, which owns Medical Villages in Kissimmee, Maitland and Leesburg, has won eviction cases against Prime Radiology, Resilience Counseling Center, Family Medicine and Podiatry Plus and has pending cases against West Orange Nephrology and Complete Pharmaceutics Laboratories.

Deeni Taylor, executive vice president for investments with Physicians Realty Trust, told GrowthSpotter in 2016 that his REIT had a “relationship” with Majors Investments and planned to acquire at least two more Medical Village properties. When contacted for this article, he said Physicians Realty Trust elected not to pursue any more properties even though the buildings “are well-occupied.”

“They are performing,” he said. “I can’t say if they’re meeting our expectations.”

He declined to elaborate.

Griffin-American also canceled two pending purchase contracts for medical villages in Winter Garden and Debary within months of the Mount Dora closing, according to the lawsuit. Those assets were later sold to Community Healthcare Trust, a Tennessee-based REIT.

The Mount Dora Medical Village today sits mostly vacant. Only three of the original tenants remain: Ankle & Foot Center of Central Florida, Transformations Weight Loss and Integrative Physical Medicine. 

Ophthalmologist Felipe Cetina, who had leased more than 3,200 square feet, died a month after the building was sold. His suites are still vacant.

Ankle & Foot’s Dr. Joanne Balkaran told GrowthSpotter she reached a settlement with the landlord after being sued for eviction. She was excited about the Medical Village concept when she signed her lease in early 2015, and the referral network seemed to be working in the first year.

She said Majors set up monthly meet-and-greets for new tenants. She remembers meeting a pharmacist, a dermatologist and a gastroenterologist. But none of them ever moved in. Other tenants moved out soon after the building was sold.

Now Balkaran said she’s stuck with a lease she feels is overpriced, in a building that has been in legal limbo for two years.

“I blame the seller because they created these leases and created a fantasy of what this medical village was supposed to be,” she said.

But she also blames Griffin-American for refusing to renegotiate her lease, even though the property falls well short of what was promised.

Colin Morrison with Colliers International manages the Mount Dora property’s leasing now. He said the Medical Village rental rates were well above market, even for medical space.

“That was the first thing we noticed when we started working on it,” he said. “It’s a nice building, but it’s not as if it’s prime medical location. It’s a 15-minute drive from Florida Hospital Waterman and 20 minutes from the new hospital in Apopka.”

The ongoing litigation has stymied their efforts to lease the building, especially when it looked like the case might settle.

“We’ve been in purgatory for two years and haven’t been able to properly market the property,” Morrison said. “For a long time, we couldn’t do anything to advance the leasing efforts because no one was sure how it might affect the lawsuit. They had some kind of settlement agreed to and it all fell apart. It’s a really bizarre situation, and it’s unfortunate for my client, the owner.”

Colliers has rebranded the property as the Mount Dora Professional Center. The new leasing brochure lists 10 available Class A office or medical suites for a combined total of 27,775 square feet.

“There’s only so much interest in medical space out there, so we figured we’d cast our net to a wider group,” he said.  “Most of them are move-in ready, they’ve barely been touched in the last two years.”

Have a tip about Central Florida development? Contact me at lkinsler@GrowthSpotter.com or (407) 420-6261, or tweet me at @LKinslerOGrowth. Follow GrowthSpotter on Facebook, Twitter and LinkedIn.

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