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To the Lenders in Project #1190
Castlegar
November 5, 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 project is a small strip shopping plaza in Castlegar, B.C., known as the Kootenay Crossing. To date approximately 55% of available space is leased. Construction on the plaza is planned to commence soon, and will take approximately six months complete. However, currently the developer of this project does not have a firm commitment for construction financing.
How much was supposed to be raised for the project?
$1,300,000.
How much was actually raised for the project?
The records of Eron indicate that approximately $1,299,216 was raised.
How much was advanced to the project?
We are currently unable to determine the amount advanced to this project.
When will you know where my money went?
It will be some time before we are able to account for all funds received by Eron.
What security was taken on the project?
A 1st mortgage in the amount of $1,325,000.
Are there any mortgages or other loans in priority to the project security?
It would appear that there are no prior claims on the property. However, if the project is to proceed to construction it will be necessary for Eron to postpone its 1st mortgage to the lender providing construction financing.
What is the value of the project?
An appraisal dated September 3, 1997 obtained by Eron indicates that the plaza when constructed and fully leased will have a value of $4.1 million. As discussed above at the time of this report, the plaza is 55% leased. In addition there are on going discussion with potential tenants for a further 40% of the space. Leasing reports have indicated that plaza should be fully leased prior to the completion of construction.
Are there any other security or guarantees which might increase recovery on the project?
In addition to the Eron 1st mortgage, there is the following security would appear to be available:
- Guarantee of Carter Properties Ltd., the developer.
- Assignment of rents deposit agreement.
- Assignment of contracts, plans, specifications, building permits, and cash funds.
Will I get my money back?
It is too early to tell definitively how much of your money will be recovered. We are currently evaluating the value to lenders which may be derived by completing construction on this project.
When will I get any money back?
It is likely to be many months before any money is available to lenders.
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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