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

May 29, 1998

Further to our letter dated December 19, 1997 we are writing to provide you with a further update on the status of the above noted mortgage.

Project Status

Further to the most recent meeting of the Gateway lenders, we are pleased to advise that the sale of Gateway Power Center to Real Fund was approved by the Court on May 5, 1998. This sale has been completed at a very attractive capitalization rate and with the second largest Real Estate Investment Trust in Canada. The total sale will close in three phases as we complete and lease further building activity.

The sale of Phase 1 recently closed as of May 15, 1998. This closing on the existing buildings completed at this time, represents a total sale price of $13,164,000. A second closing is expected to be completed by late June 1998 for an anticipated sale price of $2,500,000. A third closing is expected before year end for a sales price estimated at $16,450,000.

As discussed at the meeting of lenders in March, we are continuing to build on the site, to accommodate new leasing activity so that the investors can recoup for their financial benefit, the difference between the cost of the construction and the sales value calculated on capitalization rates of 10% and 10.25%. We are also pleased to advise the substantial portion of the financing required to complete this construction was successfully negotiated as part of the sale transaction so that Real Fund is providing such financing at very competitive rates. This will reduce our need to look to external sources of financing and will also allow us to complete this constriction without delay. The completion of London Drugs, Future Shops, etc, which are the buildings which will be financed by the purchaser, are expected to close late in fall 1998.

To date, the minimal residual funds generated from the first closing (those funds available after debt retirement) have been used to start the balance of the underground servicing as well as for the soft costs currently underway (architectural, legal, commission, deposits with the City of Grande Prairie, etc.) for the additional building activity.

Once all of the construction is completed and the sale of the three phases has been completed to Real Fund, the only land remaining will be the residual land. This total land approximates 58.7 acres. In terms of the realization of this additional land, we currently have three unconditional offers for some of this residual land.

We are currently preparing Court applications for approval of these offers and the notice concerning the timing of these applications will be posted on the Internet before June 15, 1998.

Servicing of these sites is being completed. It is expected with the current activity in Grande Prairie, that we will obtain more offers on the balance of the residual lands as the summer progresses.

At the lenders meeting in March, we estimated that the eventual gross monies available to meet the indebtedness of the lenders should be in excess of $9M. We believe we are on track and anticipate that with the timing of the further construction and the sale of the residual lands, no monies will be available for payment to the lenders until 1999, and after the sale of the remaining lands is completed.


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 information from Price Waterhouse Limited in the most cost effective manner we have available.

We plan to 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 Power Centre - Project Lead.


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