Vestin Group will call a meeting of investors over the proposed restructuring of a mortgage loan fund, but spokesman Steve Stern doubted a majority of investors would attend in person or by proxy. This lack of quorum would prevent any action.

The company has proposed converting Vestin Funds I and II, which hold short-term mortgage loans or so-called trust deeds, into a real estate investment trust. REITs may hold real estate or mortgage loans as assets, and would hold mortgage loans for the Vestin funds. They trade similarly to common stocks but are required to pay most of their income to investors.

Vestin proposed converting the two funds into REITs so investors can liquidate their holdings, rather than waiting for years. The funds are established as partnerships, and the Internal Revenue Service would convert the funds into taxable corporations if more than 10 percent of the fund's assets are cashed out in any one year. As a result, Vestin has a long waiting list of investors seeking to redeem their investments, and some investors may be forced to wait for years to get their money.

As an alternative, Vestin proposed converting the funds into REITs.

Robert Leeper of Seattle has been trying to organize investors and force Vestin to let investors choose between liquidation and conversion of Fund II.

Fund II has about 5,000 individual investors, Leeper said. Fund II reported $340.6 million in assets as of June 30.

In a recent letter to investors, Leeper said he was unable to raise enough money from investors to conduct a proxy solicitation.

But on Wednesday, Leeper said he sent Vestin a resolutions signed by 1,082 investors representing 25 percent of the fund assets. The resolution calls for dividing Fund II assets into money for those who want to cash out and money for those who want their investments converted into REITs. At the meeting, Leeper proposes that investors vote on the resolution.

Vestin, however, said it doubted the meeting would attract investors (in person or by proxy) holding more than half of the outstanding units, which the operating agreement requires for a quorum at any meeting in which a vote is taken. Company business cannot be conducted without a quorum, Stern said.

"It is remarkably unlikely that without a proxy solicitation anywhere near that number would be present," Stern said. "So the meeting would be superfluous."

Nevertheless, Vestin said it will be forced to call a meeting at the fund's expense.

Leeper contended that a quorum is not needed to vote on having a vote on dissolving Fund II. Asked about the prospects for getting a vote on the alternative proposal, he said: "I never give up hope, but Vestin controls the playing field."

Leeper said he fears that conversion to a REIT would lead to a sell-off and that share prices would stay depressed because of investor dissatisfaction with fund management.

Stern said about 70 percent of the investors of the two funds attending earlier meetings favored conversion to a REIT.