Southern Nevada real estate investment company Desert Capital REIT Inc. today posted another quarterly loss and warned it may have to shut down and liquidate because of an involuntary bankruptcy petition filed against the firm.
Henderson-based Desert Capital said it lost $1.947 million, or 12 cents per share in the first quarter.
This lifted the company’s accumulated stockholders’ deficit to $30.5 million, up from $28.5 million at Dec. 31.
The quarterly loss was caused by Desert Capital reporting $729,000 in interest expenses on its debt during the quarter while it received just $80,000 in interest income.
The company had a $35,000 gain on sales of investments and rental income of $216,000; but had $1.7 million in noninterest expenses.
At the end of the quarter the real estate investment trust reported liabilities of $55.7 million against assets of $25.1 million.
Investors saying they are owed $43.7 million filed an involuntary Chapter 11 bankruptcy reorganization petition against Desert Capital REIT on April 29.
Desert Capital has not yet addressed that filing in court, but in today’s financial report it warned: "so long as the Chapter 11 proceedings continue, we will be required to incur substantial costs for professional fees and other expenses associated with the administration of the Chapter 11 proceedings. A prolonged continuation of the Chapter 11 proceedings would cause our assets to become further devalued or worthless. If the company does not have sufficient liquidity to satisfy its needs during the bankruptcy proceeding, a liquidation of the company pursuant to Chapter 7 of the Bankruptcy Code will occur."
Desert Capital for years originated and financed short-term mortgage loans using borrowed funds and investors' funds – but has seen its results decline due to foreclosures and reduced property values tied to the recession.