Desert Capital REIT weighing whether to liquidate

Desert Capital REIT, a 6-year-old real estate investment trust that made short-term mortgage loans, is considering whether to liquidate, Chief Executive Officer Todd Parriott said.

Parriott made the comment Tuesday in an interview following an annual shareholders meeting at Santa Fe Station.

In its latest financial report, the company said it had $42 million in assets on Sept. 30, down from $83 million at the end of last year.

The company disclosed "substantial doubt as to our ability to continue as a going concern" as it continues to lose money. Already the company has foreclosed on many of the raw land parcels, office buildings and commercial centers that went into default during the recession, Parriott said.

The company doesn't intend to go through receivership or bankruptcy if it liquidates, Parriott said. Creditors, including the owners of $30 million in trust preferred shares in Desert Capital, are negotiating with the company, Parriott said.

Parriott said Desert Capital was formed in 2004 with the intention of getting listed on a stock exchange or being liquidated in a few years. The CEO said it's no longer feasible to seek a listing for the company. Desert Capital is a publicly reporting company, which files reports to the Securities and Exchange Commission, but its shares aren't publicly traded.

"The shares are worth a negative amount," dissident shareholder leader Ann Herget said. "They are worth less than nothing."

About 130 shareholders attended the annual meeting and many were upset. A security guard scanned shareholders for weapons at the door, and the company refused to allow a Review-Journal reporter to attend.

While many public companies routinely permit the news media to attend annual meetings, Parriott said Desert Capital REIT has always barred individuals who don't own shares of the company from shareholder meetings.

The meeting "got a little heated at times," Herget said. Shareholders are upset about "excessive fees" that Desert Capital has paid to Parriott and other companies he controls, she said. She also complained about loans Desert Capital made to Parriott.

She and other discontented shareholders tried to offer a slate of eight directors, but that effort was abandoned because of regulatory burdens involved, she said.

Instead, more than 80 percent of the shareholders voting approved a five-person slate of director nominees made by the company, Parriott said. He said more than half of the shares were voted.

Contact reporter John G. Edwards at
jedwards@reviewjournal.com or 702-383-0420.