Henderson real estate trust hit with involuntary bankruptcy petition

Investors owed $43.7 million filed an involuntary bankruptcy petition Friday against struggling Southern Nevada real estate lender Desert Capital REIT Inc.

The filing was made in U.S. Bankruptcy Court for Nevada by Taberna Preferred Funding VI Ltd. and associated companies.

The filing is just the latest blow to Henderson-based Desert Capital, a real estate investment trust that originated and financed short-term mortgage loans using borrowed funds and investors' funds. Because of the recession, there is little demand for these types of loans now in Southern Nevada.

These loans typically were made to real estate developers and investors.

Last year, Desert Capital disclosed that in October it received a subpoena from the Securities and Exchange Commission "requesting certain information pertaining to payments and transactions with our related party," sister company CM Capital Services LLC.

CM Capital was formerly known as Consolidated Mortgage.

Desert Capital's loan servicing activities are provided by CM Capital.

Last month, CM Capital agreed to pay a fine of $200,000 for state lending violations.

Desert Capital has been tied up in litigation with investors and creditors including Taberna Preferred Funding VI, with Taberna claiming Desert Capital is in default on investment agreements involving trust preferred securities issued by Desert Capital.

Desert Capital said it lost $53.4 million in 2010 as property values declined and foreclosures hurt its portfolio.

That was on top of losses of $53 million in 2009, $37.5 million in 2008 and $21.8 million in 2007.

Headed by CEO Todd Parriott, Desert Capital has seen its business decline from $187 million in assets in 2006 to $27.5 million at the end of 2010.

A request for comment was placed with Desert Capital on the involuntary bankruptcy filing, which was a Chapter 11 reorganization petition.

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