|
|
|
Eron Lenders
Project Name: 570 Dunsmuir Holdings Ltd.
Lender update
Overview
The Judicial Trustee is administrating a $8.5M second mortgage on a building owned by 570 Dunsmuir Ltd. ("570"). Eron Mortgage Corporation ("EMC") had raised approximately $10.5M in the numbered company which holds this mortgage. In addition to the funds which were forwarded for the acquisition and construction of the building owned by 570, funds were advanced to 570 and other related companies for other purposes, including but not limited to the purchase of buildings in Alberta.
There are a number of issues surrounding 570 and the way in which the funds were transferred has made the recovery of some of the funds unlikely. For example, no security was received from the borrower in certain cases when funds were advanced by EMC. EMC did not ensure that proper security and commitments to pay were in place on funds advanced and therefore recovery is unlikely.
Settlement with 570 Dunsmuir Ltd.
The majority of the funds which were raised were used to purchase the building owned by 570 and complete the renovations of this building. The agreement reached with the owners of 570 is for them to give title to the building and $250,000 in cash to the Judicial Trustee. We note that the building is the only asset of 570. In addition the Judicial Trustee will receive $2M worth of mortgages on certain Alberta buildings from the owners of 570 and 708804 Alberta Ltd. ("708804") (the owner of the Alberta properties).
The settlement of $2M arises from $1.5M in valid mortgages which are currently held and an additional $500,000. The additional $500,000 is for settlement of approximately $2M that was advanced to the owners of 570 and/or 708804, but no security was ever given. There are numerous reasons why the Judicial Trustee believes that the full $2M or potentially any part of it would not otherwise be recoverable. These reasons include the fact that others have claims which would rank in priority to the Judicial Trustee and the fact that there does not appear to be any equity in the property which was intended to secure the funds. Therefore we are of the opinion that a settlement of $2M on the Alberta properties is fair.
Lien Settlement
As you may be aware, on or about October 3, 1997 construction of the building ceased and many of the trades filed liens against the building. To date these liens total approximately $6.3M. We have negotiated a settlement of all but three of these liens for a total of $1.4M inclusive of GST. The only provision in this settlement is that the general contractor and sub trades must be hired to complete the building. It is generally agreed that no other contractor could complete the job as quickly or inexpensively as the existing contractor and so this stipulation was consistent with the best interests of the Judicial Trustee.
There are still three liens outstanding and we are entering into negotiations with the Companies to have them removed, we do not anticipate any problems in this regard.
Financing
We have sought and received the power to borrow the funds necessary to complete the building from the Supreme Court of British Columbia. The total funds required to complete the construction including paying out the liens and extinguishing the first mortgage are approximately $7.6M.
Timing
As stated earlier, we are moving forward and plan to have crews back working on the building in the near future. The building should be completed in May 1998 and we plan to market it for sale immediately thereafter.
Yours truly
Judicial Trustee
Eron Lenders
BACK
|
|
|