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To the Lenders in Project # 1144
4th Mortgage on 1107 Pacific Drive, Tsawwassen
October 29, 1997
As indicated in our letter to lenders dated October 22, 1997 we will be providing information to lenders through regular project updates. Unfortunately, due to the poor quality of Eron's accounting and lender records we are presently unable to answer all the questions you may have. However, based on our initial findings we can address the frequently asked questions set out below. We stress that the information available to us is subject to verification and accordingly our findings are subject to change as more information becomes available.
Eron was paying me a good rate of return on my money, why was it closed down ?
In many instances payments to lenders were being financed by money received from new lenders or lenders to other projects. Few of Eron's projects were actually producing a return on investment. Our investigations to date indicate that many lenders will incur substantial losses because of these practices. Clearly this situation could not be allowed to continue.
What is the current status of the project?
This is a fourth mortgage on a residence occupied by Mr. and Mrs. Schiel.
The mortgage was purchased from Prenor Trust RRSP for David Patriquin by Eron Mortgage Corporation, as trustee for the lenders, in March, 1994. No payments have been received from the borrower since October, 1996. The present principal and interest outstanding on the mortgage is calculated to be approximately $182,569 as at October 3, 1997.
What security was taken on the project ?
A 4th mortgage in the amount of $65,000. The Prenor mortgage was registered in land titles under registration number BG117164 and transferred to Eron Mortgage Corporation under registration number BH85575.
Are there any mortgages or other loans in priority to the project security ?
The following mortgages appear to have priority:
- A 1st mortgage held by CIBC Mortgage Corporation. We are advised the amount outstanding at October 1, 1997 was $533,916.
- A 2nd mortgage in favour of 505890 BC Ltd. (an Eron trustee) of approximately $402,641.
- A 3rd mortgage in favour of Eron Mortgage Corporation (as trustee for a group of lenders) in the approximate amount of $303,536.
What is the value of the project ?
We understand the BC Assessment Authority assessed the value of the property at $1,019,000 in August, 1997. We will be commissioning a valuation report of the property, which is to be received by the end of November, we prefer not to speculate on the value, rather we will advise you of the result of this report.
Are there any other security or guarantees which might increase recovery on the project ?
The amount owed under the mortgage is guaranteed, without security, by Adolf Schiel and by A Schiel Construction Ltd. (with security of a mortgage registered against the Cloverdale Mall under land titles registration no. BG117164) and by Bear Creek Sales Ltd. (with security of a mortgage registered against the Nanaimo Business Centre under land titles registration no. EG41611).
The value of these guarantees is not known. We anticipate gathering more information by the end of November.
Will I get my money back ?
In November, 1996, the Schiel group filed an action in the Supreme Court of British Columbia seeking an injunction against Eron to restrict any recovery or enforcement action and seeking a declaration that the loans were unenforceable on the basis that the charges were in excess of those permitted under the Criminal Code.
It is too early to tell definitively how much of your money will be recovered. However, at this early stage it appears unlikely that full recovery will be realized.
When will I get any money back ?
It is likely to be many months before any money is available to investors.
We caution you that the information available to us is still incomplete and limited in scope. Nothing in the foregoing should be construed as guaranteeing any return of funds. We will keep you informed on a regular basis and will issue a further project update on or about November 30.
In the meantime if you have any further questions or information concerning the project please contact us in writing at the above noted address or by fax at (604) 688-6128.
Yours truly
Price Waterhouse Limited
Judicial Trustee
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