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Eron Lenders
Project Name: Discovery Ridge #1168
Lender update
May 4, 1998
Further to our letter of December 18, 1997 we are writing to update you on the status of the above noted mortgage.
Project Status
The borrower has exercised the option to extend the mortgage for six months to July 31, 1998. An extension fee of 2% of the outstanding mortgage balance of $4,621,501 at December 31, 1997, has been received. Commencing January 1, 1998, interest is no longer added to the note and has been paid current to March 31, 1998.
Early in February 1998, we met with the borrower and your lenders' committee. The borrower outlined a proposal which included freezing the mortgage loan amount at $4,300,000; subordinating the mortgage loan to new development financing, the secured debenture holders and the final balance due on the land purchase; and a request to agree to a repayment plan based on a percentage of net lot sales over a five year period. The proposal was not considered acceptable by the Judicial Trustee. The lenders' committee agreed with the Judicial Trustee's position.
The proposed residential development has changed since the mortgage loan was initially granted. The planned golf course has been deleted and the golf course lands will now be used as a park. The number of single family units has been reduced with more multi-family units planned.
Development has been delayed approximately nine months as a result of the overall planning approval process. The Calgary Planning Commission approved the community plan on March 25, 1998 and phases 1 and 2 were approved on April 8, 1998. On May 20, 1998 the borrower expects the outline plan, conditions of development including servicing and landscaping to be approved. City Council will meet on June 15, 1998 to review the Community Plan and if approved, construction of off site and on site utilities will commence in July and August with house construction starts beginning August 1998.
Over the next several months, the borrower will be finalizing their financing requirements to cover construction of utilities costs and approximately $7,000,000 which will be required under the land option agreement.
Given the financing requirement of $7,000,000, we expect the borrower to continue efforts in restructuring its loans. This restructuring will involve discussions regarding our first mortgage.
Distribution Issues
Now that we have received funds with respect to the extension fee and interest 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.
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.
While 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. In addition, we are in frequent contact with your lender lead Ms. Bridgit Dunbar who monitors progress closely on your behalf. You can contact Ms. Dunbar at 604-572-9699 for project updates.
We plan to issue another letter as soon as we have significant new information with respect to the distribution and the project. 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 Discovery Ridge - Project Lead.
Yours truly
Judicial Trustee
Eron Lenders
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