Eron Lenders
Project Name: Gateway Power Centre Project #1137
Borrower: Gateway Developments (Alberta) Ltd.
Lender update

December 19, 1997

Further to our letter dated November 10, 1997 we are writing to update you on the status of the above noted mortgage.


Project Status

At the time of our last writing, we were negotiating the completion of additional financing to re-start and complete Phase 1 of the project. We are pleased to report that this additional financing was completed in the amount of $4.0 million from Paragon Properties (Finance) Ltd. In addition, Manulife has advanced a further $2.3 million of its previously approved funding. These additional monies have been used for the most part, to retire direct outstanding construction related creditors of the project. All such costs, liens and claims were subject to independent review and approval before payment.

Prior to obtaining final approval of the additional financing, we were also successful in completing two other key matters. First, we made alternate arrangements with one of the paving contractors to complete certain paving on the project before winter weather conditions set-in and which will allow us to immediately complete arrangements with specific tenants in Phase 1. Second, we were able to secure the transfer of all remaining shareholdings in Gateway Developments (Alberta) Ltd. (Gateway) to 484171 B.C. Ltd, the holder of the $20 million mortgage on the project. In this manner, Price Waterhouse Limited, in its capacities as Judicial Trustee of 484171 B.C. Ltd. and as Court Appointed Receiver of Eron Financial Services Ltd. [484171 B.C. Ltd. and Eron Financial Services being all of the shareholders of Gateway], now controls all of the shares of Gateway.

We are encouraged by the interest shown by certain of the larger pension funds and Real Estate Investment Trusts in the prospective purchase of at least initially, Phase 1 of the project. In fact, we are currently in negotiations with a major institutional buyer. Once these matters have progressed further, we will meet with your investor steering committee and provide details and our recommendation and the estimated recoveries arising from same. Our objective throughout, has been to protect and maximize the ultimate realization from this project for the ultimate benefit of the investors. In this regard we are also continuing to oversee the leasing of new and additional portions of the project with a variety of tenants including national tenants.

We appreciated the opportunity accorded us by your steering committee under the leadership of Mr. Gary Forde to attend the meeting of investors held on the evening of December 11, 1997. At that meeting, Mr. David Nairne of Cedaridge, Mr. Mitch Mahan, our independent consultant and Mr. Ralph Peterson of our firm presented an overview of the current status of the project, our activities to date and responded to questions from those in attendance.

We have conducted the activities, set out above, based on the information presently available.

Price Waterhouse Limited ("PWL") Activities

In previous communications we have noted the incompleteness and deficiencies in Eron's mortgage and accounting records. During the past several weeks we have been sorting and analyzing these records which are essential to the recovery and distribution of funds.

A significant portion of the accounting and sorting of mortgage records will be completed by the end of December. The final accounting and determination of accurate lender listings cannot be completed for the project until the accounting is completed for all projects due to the numerous inter-project transfers. We are using the information provided to us by lenders to cross check accounting records. We therefore request that you return to us the Lender Confirmation form enclosed with our October 6, 1997 letter, if you have not already done so.

We are minimizing costs while seeking to maximize your recovery. In certain instances this goal is best served by using staff who are not PWL employees. Accordingly, we have retained the services of short term contract staff at rates significantly lower than PWL hourly rates to assist us as appropriate. In the case of Gateway, we have engaged the services of an independent consultant with direct experience in the management and leasing of development projects as well as senior lending and recovery experience.

Price Waterhouse Fees and Disbursements

There are two components of PWL's fees and disbursements on each individual project, direct costs and an allocation of indirect costs. Direct costs will include costs specifically related to the project, such as, legal fees, time spent by the PWL/contract staff analyzing the project and devising a strategy to maximize recovery and creating project accounting records. Indirect costs will include such items as general lender communications, analysis and creation of non- project specific accounting records and all other costs which cannot be directly attributed to specific projects.

We are also incurring costs such as rent, utilities, insurance, appraisal fees and other costs. Certain of these costs will be direct costs to the project (e.g. appraisals) while others will be indirect (e.g. utilities). We have not discussed these costs in this letter.

At November 30, 1997 the direct fees incurred on this project totalled approximately $63,800 excluding legal fees. We are unable to estimate the future direct costs for the project with any degree of certainty. However, we estimate that early in the new year, the future monthly direct costs will significantly be reduced for the remainder of our engagement. This is particularly pertinent to the Gateway project now that we have fully identified the key project issues, funding requirements and have made arrangements for the day to day project management of the build out of the site. Our key time will now be directed to securing the sale(s) of the project or parts thereof.

At November 30, 1997 the indirect fees totalled approximately $851,000 for the 69 projects. These indirect costs have been incurred as follows: 31% lender communications; 25% engagement planning management; 14% office, record and employee management; 11% general project matters; 10% preparation for and attendance at court; 7% banking and accounting matters; and 2% meetings with regulators.

Ongoing indirect costs will be significantly reduced as we now have a framework for the administration in place, can increasingly shift administrative tasks from PWL staff to less expensive contract staff and have established low cost methods of communicating with lenders, such as the web site and voice mail information system discussed below. Our goal is to reduce the indirect costs to a level of approximately 20% of the total costs of administering the projects by December 15, 1997.

The method of allocating the indirect costs has not yet been determined, however, an allocation method based on the project's direct costs is considered to be an equitable method. We will seek Court approval of the selected allocation method at a later date.


Lender Communications

To facilitate communications with lenders we have established a voice mail information system with separate voice messages for several projects or groups of projects. By dialling one of the following three numbers (604) 878-4201, (604) 878-4244 or (604) 878-4248 and selecting mailbox number 2167 you will hear a brief report on the status of the project. These mailboxes will be updated regularly by the project lead. A list of mailbox numbers is attached to this letter. Please note that certain projects will not have a specific mailbox and any enquiries with respect to those projects should be directed to our general voice mail box by dialling (604) 669-5087. We have also now established a web site at http://www.eron-pwl.com. On this site you will find project specific updates as well as related court orders.

During November, as you may be aware, the Eron Lenders' Committee ("ELC") held an election to select ELC representatives. Approximately 30% of the Lenders in the Eron projects voted in this election with the significant majority voting in favour of establishment of the ELC. The ELC has been instrumental in establishing individual project committees. We have now met with most of the individual project committees and we intend to maintain regular communication with them.

We will continue to communicate directly with all lenders. We urge you to take advantage of the voice mail information system and web site so that you can receive first hand current information from PWL in the most cost effective manner we have available.

We will issue another letter as soon as we have significant new information to report. 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 Gateway Developments - Project Lead.


Yours truly

Price Waterhouse Limited

Judicial Trustee





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