Las Vegas Lender Eyes Higher-Stakes Game

Sunderland Corp., a little-known Las Vegas real estate lender, is trying to become a national player in commercial and residential mortgages.

"We want to be a Heller Financial or a Finova," said Michael V. Shustek, chairman and chief executive officer. "We want to do over $1 billion a year in loans." Last week the company - which plans to rename itself Vestin Group - announced a couple of steps toward that goal.

On Monday, Sunderland said it had signed a deal to buy Mortgage Source, a two-year-old residential lender in Las Vegas that makes conforming and subprime home mortgages. Financial terms of the deal, which Mr. Shustek said is expected to close in early August, were not disclosed.

Then on Tuesday, Sunderland announced that it had obtained a $3 million line of credit from Silver State Bancorp. In a press release, Sunderland said it has more than $10 million of credit facilities from other institutions.

Sunderland said Mortgage Source is licensed in 13 states and plans to be licensed in all 50 and to open offices in Utah, Idaho, and two other locations in Nevada by yearend. Mortgage Source originated $65 million of conforming and subprime loans last year.

Another Las Vegas unit of Sunderland, Del Mar Mortgage, makes one-year construction loans to builders and buyers of homes. Mortgage Source was a natural fit with Del Mar, Mr. Shustek said, because when construction loan borrowers have to take out residential mortgages, Sunderland can keep their business through Mortgage Source rather than lose it to competitors.

Del Mar also lends against commercial properties, including casinos. In December Sunderland bought two companies: DM Mortgage Advisors Inc., a Phoenix commercial lender that makes the same types of loans as Del Mar, and DM Financial Services Inc., a Las Vegas broker-dealer.

Lance Bradford, Sunderland's chief financial officer, said the company plans to use DM Financial to raise $100 million from investors around the country for a real estate-secured lending fund. It would be somewhat similar to a mutual fund in that it would invest in a diversified portfolio of loans secured by different types of properties; it would fund construction, land development, and bridge loans.

Mr. Shustek is also counting on L.L. Bradford Co., a Las Vegas accounting and consulting firm that Sunderland acquired in April, to boost Sunderland's profile.

Bradford will help Sunderland's clients with tax planning, and will help Sunderland itself by auditing and performing due diligence on future acquisitions, Mr. Shustek said. He wants to add 10 to 15 more companies to his empire by the end of 2001.

Sunderland places its loans with individual investors, much as subprime mortgage and home equity lenders did until the advent of securitization in the mid-1990s. The company has 4,500 such investor clients - Mr. Shustek calls them "ma's and pa's." He said he would like to have 30,000 by the end of next year.

In Thursday's statement, Mr. Shustek said Sunderland plans to change its name to Vestin Group.

Finova would appear to be an odd choice for a model. Once a strong niche lender, the Phoenix finance company has been looking for a buyer since May after suffering big loan losses in the first quarter, and its stock has dropped 70% over the last year.

Mr. Shustek said that unlike Finova, he "will make sure we do good loans." He added that his company has not lost a cent on its loans.

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