Problem loans hurt Vestin trusts’ results

Vestin Group Inc.'s real estate investment trusts continued to bleed red ink in the second quarter, as the amount of problem loan totals grew, reports filed with the Securities and Exchange Commission show.

Vestin Realty Mortgage II, which has $316.3 million in assets, reported a loss of $28.6 million, or $1.92 per share, in its second quarter ended June 30, reversing a profit of $4.4 million, or 29 cents per share, a year earlier.

The company makes short-term development loans that are secured by real estate.

Vestin attributed the increase in nonperforming assets to deterioration of the economy and credit markets.

"We expect that weakness in the credit markets and the weakness in lending will continue to have an adverse impact on our markets for the near future," the company said in the SEC report.

Vestin II's provision for loan losses was increased to $34.5 million from $12.8 million at year-end 2007. Real estate held for sale dropped to $21.7 million from $28.6 million at year-end.

The smaller REIT, Vestin Realty Mortgage I, reported a second-quarter loss of $4.8 million, or 70 cents a share, compared with earnings of $734,000, or 11 cents a share, a year earlier.

Nonperforming loans totaled $25.1 million in the REIT, which has $52.7 million in assets. The nonperforming loans includes loans for cemeteries and mortuaries in Hawaii, an apartment complex in Oklahoma City and several land parcels. Vestin I has set aside $9.3 million as a reserve for loan losses.

Vestin I shares fell 27 cents, or 10.38 percent, to close at $2.33 on the Nasdaq Global Select market Monday. Vestin II shares fell 60 cents, or 13.05 percent, to close at $4, also on the Nasdaq Global Select market.

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