Henderson hard-money lender warns it may be unable to continue in business

Desert Capital Real Estate Investment Trust, a publicly reporting hard-money lender based in Henderson, says it may be unable to continue in business.

"Over the past two years, we have experienced substantial losses," the company said in a Wednesday report on first-quarter financial results.

"There is substantial doubt as to our ability to continue as a going concern," the company reported. "Because our portfolio of performing loans has decreased to $6.1 million, our recurring cash flow is not sufficient to cover our general operating costs."

Mark Taylor, senior vice president of Desert Capital REIT, said: "That's a worst-case scenario. I'm confident that we can continue."

Desert Capital REIT makes loans secured by commercial properties, construction projects and development land using investments from investors. Like other hard-money lenders, the company has struggled since Southern Nevada real estate values began collapsing in the wake of the subprime mortgage debacle two years ago.

Desert Capital REIT reported a net loss for $2.8 million to shareholders in the first quarter, compared with a $4.2 million loss in the same period last year. The loss per share was 17 cents, compared with 25 cents in the first quarter last year.

The REIT counted $80.2 million in total assets at the end of the quarter. It has four mortgage investments for a total of $14.4 million.

Nonperforming loans totaled $10 million, and it held $8.5 million in foreclosed real estate.

It has guaranteed a $13.7 million first mortgage loan on another property, and that loan is in default. The company has a $14.4 million loan, secured by the business of an unidentified Las Vegas "gentleman's club."

Desert Capital REIT agreed to forbbear on a $13 million loan to a related company.

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