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To the Lenders in Project # 1174
3rd Mortgage on Everbrite Ventures Ltd.
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?
The subject property is part of a residential project with the name of "Parkview Estates". It is the 3rd and final phase of an 85 lot subdivision at the north east corner of Hemer Road and Woobank Road in the Cedar district of Nanaimo Rural. We are advised that all lots in 1st and 2nd phase have been sold. The median selling price was $58,000 and the median days on market for all listings were 149 days. The 49 subdivision lots in the 3rd phase of the project have not yet completed.
How much was supposed to be raised for the project ?
$160,000
According to Eron's records how much was actually raised for the project ?
Approximately $160,000.
According to Eron's records how much was advanced to the project ?
Approximately $116,995.
What happened to the rest of the money ?
After paying $5,000 in lender fees and $16,000 in commitment fees, the balance of funds totalling $139,000 was paid to Lando & Company, Barristers & Solicitors, in Nanaimo, in trust, to fund the loan.
After deducting $2,373 as legal fees, Lando & Company then paid $5,000 as brokerage fees to Pro-Mor Investment Services Ltd. and retained $14,000 as interest reserve for the mortgage. There was also an interest adjustment for 8 days in the amount of $631. A net amount of $116,995 was advanced to Hunter Garrett Lobay who is the borrower's solicitor, in trust, for the borrower.
The present principal and interest outstanding on the mortgage is calculated to be approximately $166,310 as of October 3, 1997.
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 3rd mortgage in the amount of $160,000 in favour of Eron Mortgage Corporation (as trustee for a group of lenders). The mortgage was registered in land titles under registration number EL41676.
Are there any mortgages or other loans in priority to the project security ?
The following mortgages appear to have priority:
A 1st mortgage in the amount of $1,550,000 held by Olympus Mortgage Corporation, White Shore Investments Ltd., Highland-Pacific Mortgage Corporation, and Battle Enterprises Ltd.. The mortgage was registered in land titles under registration number EK37097. It was then modified by registration EL41643. We have written to this mortgagee to confirm amounts outstanding but have not yet had a response.
A 2nd mortgage in favour of Eron Mortgage Corporation (as trustee for a group of lenders) in the amount of $375,000. The mortgage was registered in land titles under registration number EK54915. The present principal and interest outstanding on the mortgage is calculated to be approximately $388,295 as of October 3, 1997.
What is the value of the project ?
According to the appraisal report done by Vancouver Island Appraisals on May 13, 1996, the estimated gross selling price of the lots on completion would be $2,993,000. The land value was $362,600 based on the land assessment in 1995.
We have commissioned a valuation report of the property, 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 ?
Unrestricted personal indemnity of Henry Unger, Everbrite Ventures Ltd.;
Corporate guarantee of Everbrite Ventures Ltd.;
A deposit agreement;
General assignment of contracts, warranties, licenses and permits;
The value of this collateral is not yet known, we anticipate gathering this information by the end of November.
Will I get my money back ?
It is too early to tell definitively how much of your money will be recovered. However, at this early stage it appears possible that a significant portion of funds invested in this project will be recovered.
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.
Yours truly
Price Waterhouse Limited
Judicial Trustee
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