Real estate:

Las Vegas-based investor willing to take $550 million gamble on distressed properties in Southwest

A foreclosed home is seen Thursday, April 28, 2011.

Las Vegas real estate investor Michael Shustek plans to bet big — $550 million — that he can profit off some of the hardest-hit markets in the country.

Through his new investment fund, MVP REIT, Shustek wants to raise up to $550 million from investors to buy commercial mortgage loans and commercial properties in Nevada, Arizona and inland California. He launched the fund in April and received clearance this week from the U.S. Securities and Exchange Commission to start selling shares.

The Southwest’s real estate sector likely won't fully recover any time soon, keeping sales prices low for the region’s bankrupt, foreclosed and other distressed properties. Certain real estate is undervalued, and borrowers still are having a tough time getting projects financed, regardless of the property's quality or the borrower’s financial strength.

Those same problems have created “unique opportunities” for people willing to invest in the markets, which MVP believes offer significant long-term growth.

“We hope to profit from such opportunities,” an MVP prospectus said.

Shustek, who has worked in Nevada real estate since 1990, is the founder and CEO of Las Vegas-based Vestin Mortgage, which invests in real estate-backed loans. His firm manages two publicly traded real estate investment trusts and a real estate investment fund, with total assets of about $135 million.

He has co-authored two books, “Trust Deed Investments” and “If I Can Do It, So Can You,” and is a guest lecturer at UNLV, where he has taught a course in real estate law and ethics. Without elaborating, the prospectus also said the 53-year-old is “involved in the horse racing industry.”

It further disclosed that the SEC investigated various funds and affiliates of Vestin Mortgage. The agency closed its inquiry in September 2006 by issuing an administrative order. The SEC said the Vestin funds and affiliates violated securities law in connection with a slideshow presentation to investors.

Shustek consented to the order without admitting or denying wrongdoing. He paid a $100,000 fine and agreed to refrain from associating with any brokers or dealers for six months. The order expired in March 2007.

With MVP REIT, Shustek could make substantial gains buying cheap property that could later rebound in value. However, the real estate market could recover slower than expected, and most of the fund’s borrowers “are likely to be higher-risk borrowers who are currently unable or unwilling to obtain credit at traditional banks,” the prospectus says. The fund’s managers could misjudge a property’s value or a borrower’s reliability.

“Our strategy inevitably involves significant risk,” the prospectus said.

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  1. Without risk there is no reward.