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Eron Lenders
Project Name: Desert Springs
Lender Update
April 1, 1998
We are writing to update you on the status of the above noted mortgage.
Project Status
The project is a 41 residential lot subdivision in north Scottsdale, Arizona. The lots are finished and ready for home development. A total of US$2,424,000 was advanced to the borrower to be used to close the purchase of the property, set up an interest reserve and construct two show homes. Security was a second mortgage on the property behind a first mortgage of US$2,485,000. An appraisal of the property dated January 29, 1998 placed a value of US$2,200,000 on the lots.
On December 30, 1997, the borrower, Desert Springs Holdings, LLC entered into an escrow arrangement with a buyer for the lots at US$3,000,000. This transaction finally closed on March 27, 1998 after several postponements.
At the time of closing, the first mortgage was in default and entitled to default interest and late payment fees and penalties totalling US$84,000. The Judicial Trustee was successful in negotiating a 65% reduction in the interest, fees and penalties owing to the first mortgage holder. In addition, the Judicial Trustee successfully negotiated a reduction in the real estate fees payable from 6% to 4%. The gross amount available to the Eron lenders second mortgage was US$365,000 after payout of the first mortgage, real estate fees and closing costs. This represents an approximate 16% recovery of the funds advanced to the borrower.
Distribution Issues
Now that we have received funds with respect to Desert Springs we anticipate that you are wondering when you will receive your funds. We are required to make an application to the Court to make a distribution to you, this process is currently underway, however we anticipate that it will take as much as six to eight weeks to be resolved.
Approximately $886,000 of the funds from investors in Desert Springs were assigned from Eron Investment Corporation ("EIC") and the distribution issues will not be finalized until such time as the EIC issues are ruled upon by the Court.
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 PWL 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 Desert Springs - Project Lead.
Yours truly
Price Waterhouse Limited
Judicial Trustee
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