I agree. The original sentence is "Leider ist er zu groß".
"Leider er ist zu groß" would not be possible because the inflected verb always has to be in second position, as explained by quis_lib_duo. In German, you may change the word order in many ways, but the verb always has to be in second position in a declarative main clause (not a question, not some kinds of subclause).
The "legal" versions of the sentence would be: Er ist leider zu groß. Leider ist er zu groß.
I wanted to mention that "er" can be translated with "it", depending on the noun the pronoun "er" refers to. "He" can only be used for male persons. Examples:
Ich wollte ihm meine schöne Jacke schenken. Leider ist er zu groß. (I wanted to give him my beautiful cardigan. Unfortunately, he is too tall.)
Den Mantel kann ich nicht kaufen. Leider ist er zu groß. (I cannot buy the coat. Unfortunately, it is too large.)