|
|
|
Eron Lenders
To the Lenders in Project #1133
2nd Mortgage on Cloverdale Mall - 2nd & 3rd Mortgage on Nanaimo Business Centre
Borrowers: A. Schiel Construction Ltd. and Bear Creek Sales Ltd.
November 10, 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 pertains to the refinancing of a completed retail shopping centre (on leased land) in Cloverdale, B.C. and a completed commercial building in Nanaimo, B.C. Both properties were in receivership prior to the advances being made. Both properties are currently under the control and direction of the borrowers.
How much was supposed to be raised for the project ?
$1,250,000 for A. Schiel Construction Ltd. (Cloverdale Mall); $675,000 for Bear Creek Sales Ltd. (Nanaimo Business Centre)
According to Eron's records how much was actually raised for the project ?
The records of Eron indicate that approximately $1,925,000 was raised for the Cloverdale Mall and Nanaimo Business Centre 2nd mortgage.
According to Eron's records how much was advanced to the project ?
Our initial review indicates that advances were made to the borrowers or in respect of the borrowers' prior existing debt totalling $1,533,615. The money was advanced through the bare trustee (475634 BC Ltd.) pursuant to mortgages registered in the New Westminster Land Title office, registration no. BH294870 and the Victoria Land Title office, registration no. EH10272.
How much does Eron show as being owed by the borrower ?
Our initial review indicates the borrowers owe the bare trustee $2,556,089 as at August 1, 1997. The last payment by the borrowers on these mortgages was in May, 1996.
What happened to the rest of the money ?
While our review is not complete, it appears the balance was spent on lender fees, broker fees, legal fees and interest payments.
When will you know where my money went ?
It will be at least two months before we are able to account for all funds received by Eron.
What security was taken on the project ?
A second mortgage on the leasehold interest in the Cloverdale property and a second mortgage on the Nanaimo Business Centre.
Are there any mortgages or other loans in priority to the project security ?
There is a first mortgage of the leasehold interest in favour of MRS Trust Company. This mortgage matured on August 9, 1997 and we are advised has principal and interest outstanding of $2,249,146 (including arrears of $26,772) as at October 24, 1997. This mortgagee also reports the tax account of the borrower is in a deficit position of $47,031.
On the Nanaimo Business Centre, there are four prior mortgages registered in favour of MacKenzie Trust. We have written to obtain particulars but have not had a response.
What is the value of the project ?
We are commissioning a valuation report of the properties, 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 mortgage was guaranteed, without security, by Adolf Schiel and Endeavour Developments Ltd. A. Schiels Construction Ltd. and Bear Creek Sales Ltd. provided unsecured guarantees of the indebtedness of Bear Creek Sales Ltd. and A. Schiel Construction Ltd. respectively under these mortgages.
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. Much will depend on the lawsuits mentioned above and other legal actions currently under consideration. 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, clearly marking your correspondence as relative to "Cloverdale 2nd Mortgage".
Yours truly
Price Waterhouse Limited
Judicial Trustee
BACK
|
|
|