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Eron Lenders
Project Name: #1133 and1135
Borrower: A. Schiel Construction Ltd. and Bear Creek Sales Ltd. - Cloverdale Mall and Nanaimo Business Centre
Lender update
April 16, 1998
Further to our letter of January 15, 1998 we are writing to update you on the status of the above noted mortgage.
Project Status
Nanaimo
A receiver of rents was appointed by the Court in February, 1998. Mr. Dan Grimble, a chartered accountant and employee of the first mortgagee, is the Receiver and has been maintaining the building.
Revenue Canada Excise has issued Requirements to Pay upon all the tenants in respect of a large debt ($400,000+) due to them. As a result of the Requirements to Pay, all tenants have been paying their rents to Revenue Canada and the first mortgagee has been funding protective disbursements to maintain the project. We are presently preparing to petition Bear Creek Sales Ltd. into bankruptcy to stop the collection of rents by Revenue Canada and review the borrowers use of rents received.
On March 5, 1998 Price Waterhouse Limited, as Judicial Trustee, was awarded conduct of sale and the property is now listed with REMAX of Nanaimo at an asking price of $2.7 million. Given the large vacancies within the building, this will be a difficult sale. A leasing agreement has been entered into with the same realtor.
Cloverdale
After several adjournments, we were in Court on March 27, 1998 seeking the appointment of a Receiver of Rents and Order Nisi. The Court was not disposed to appoint a Receiver of Rents however we negotiated an Order requiring the borrower to account for all funds received since January 1, 1998. The initial report was to be provided to us by April 8 and at the time of writing, we have not received the information ordered to be produced. We shall deal with this in applications to the Court.
The Master, sitting in Chambers on March 27, would not rule on the Order Nisi application in the face of the borrower's allegations of the loans being usurious. We have provided detailed back up for each amount claimed and obtained an actuarial certificate indicating the yield on the loan is substantially less than any rate which would be considered usurious. Instead, the Master has referred this matter to a Judge who will hear the issue on April 27th. We are confident an Order Nisi will be issued on that date. The consequence of the Order Nisi will be to fix a redemption period and to consider our application for conduct of sale.
To deal with the accounting and usury issues raised by the debtor, the Court referred the matter to the Registrar of the Court who, on April 30, will hear our evidence and make a recommendation to the Court. To date, we have not received any evidence from the borrower that our accounting or calculations are incorrect and we are confident the Registrar will recommend our accounting be upheld for purposes of fixing the redemption amount under the 2nd mortgage.
We expect that we may be required, at a later date, to similarly take the accounting for the Cloverdale 3rd mortgage to the Registrar for his recommendation.
Lender Communications
As you are probably aware we have a web site at http://www.eron-pwl.com. On this site you will find project specific updates as well as related court orders and other general information.
We will continue to communicate directly with all lenders, we urge you to take advantage of the web site so that you can receive first hand current information from the Judicial Trustee in the most cost effective manner we have available.
We plan to issue another letter as soon as we have significant new information with respect to the distribution. In the meantime, if you have any specific questions or information concerning the project please contact us in writing at 500 - 1380 Burrard Street, Vancouver, BC, V6Z 2H3 or by fax at (604) 688 6128 marked to the attention of Cloverdale/Nanaimo - Project Lead.
Yours truly
Judicial Trustee
Eron Lenders
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