Under law, the REITs must pay out 90 percent of their taxable income, but the announcement indicates that the REITs' income is being reduced by nonperforming loans, loan write-downs and the expense of defending the company in lawsuits.

Analysts say realty loan problems pervade the financial markets in Southern Nevada.

"The whole entire country, real estate, is having a tough time," said Mike Shustek, chairman and CEO of Vestin Group.

Shustek declined to predict when the dividends might be restored.

"That would be like me getting a crystal ball," Shustek said. "The economy just has to turn (up) a little bit."

Another executive seemed to agree.

"All the private lenders are hurting, and they are trying to work things out. Time will get us out of this (economic slump)," said Jeff Guinn, owner of $500 million-asset Aspen Financial.

In good times, private lenders look to community banks to refinance projects that initially relied on short-term, double-digit loans, but Guinn said banks have cut their real estate lending to a trickle.

The Vestin REITs have large concentrations of loans in Nevada. About 45 percent of Vestin II's loans and 30 percent of Vestin I's loans are in Nevada. The Vestin REITs do not have any loans to John Ritter's Focus Property Group or other well-known local real estate borrowers, Shustek said.

Shustek said he didn't know whether private lenders in Nevada are experiencing similar problems to his, because the Vestin REITs are the only two publicly traded mortgage loan funds.

Vestin II, the larger of the two REITs, has paid out more than 50 cents in dividends so far this year and Vestin I has paid about 20 cents, but the dividends have been declining.

Shustek said investors aren't necessarily investing for income. Some investors may consider Vestin REIT shares attractive because they are selling below their book value, he said.

The big fund closed Thursday at $6 on Nasdaq, down 3 cents, or 0.5 percent. Vestin II has a book value around $18 a share. Vestin II closed at $8.54 and has a book value of $18. Vestin I lost 26 cents or 9.4 percent to close at $2.50. Vestin I has a book value of $8.54.

Shustek said he has been investing about $40,000 a week in Vestin shares and is increasing the amount to $50,000. Over the last year, he estimated he has invested more than $2 million in the shares.

Vestin said its REIT boards will monitor operating results to determine when dividends can be reinstated.

The company, however, has personal guarantees on most of the loans and intends to sue, if necessary, to recover funds for shareholders.

Real estate professionals hope the area's real estate markets are hitting bottom and set to recover.

"I think we've gone through the worst, and we're on our way back (in real estate lending)," said Leo Davenport, owner of GDF Investments, another private lender.

Wall Street investors are starting to offer to buy problem loans and real estate in the valley at a discount, Guinn said.

"I think we've hit the bottom," Guinn said. "I think next summer is going to be OK (for real estate lenders)."

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