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Eron Lenders
Subject: Goodridge Peninsula, 2nd mortgage
Lender update
28 August 1998
Further to our letter dated December 18, 1997 we are writing to update you on the status of the above noted mortgage.
Project Status
This second mortgage matured on July 14, 1998. The Judicial Trustee made a formal written demand for repayment of the balance outstanding, to which the borrower did not respond. Prior to the mortgage maturing, the Judicial Trustee had been receiving monthly interest payments from an interest reserve held by the borrower's lawyer. The total interest received of $367,917 is being held by the Judicial Trustee until direction has been received from the Court on lender distribution issues.
The Judicial Trustee commissioned a summary appraisal of the Goodridge Peninsula property in November 1997. The appraisal concluded that the market value of the property, excluding any necessary remediation costs, is $1,587,000. A first mortgage exists which secures the sum of $2,200,000, therefore even if the property was assumed to be clean (such that development was permissible) there appears to be no equity for the second mortgage holder. Our appraisal estimated the costs of fully remediating the site to be anything from $2,200,000 to $8,800,000. These costs would have to be incurred prior to any development.
At the present time we are uncertain as to the exact status of the remediation work which has been performed on the property. We requested information on the status of the remediation exercise from the borrower but have received no reply. However, from our general enquiries we believe that a minimal amount of remediation work has actually been done.
When consideration is given to the uncertainty surrounding the time and costs to complete the remediation work, as well as the appraised market value assuming the site was clean, there appears to be little, if any, chance of recovering any of the outstanding lenders' funds. As a consequence of this, the Judicial Trustee is of the view that there is no benefit in commencing a foreclosure action against the borrower.
Lender Communications
We have 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. 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 PwC Inc. in the most cost-effective manner we have available.
If you have any specific questions or information concerning this project please contact us in writing at the Price Waterhouse Centre, 601 West Hastings Street, Vancouver, BC, V6B 5A5 or by fax at (604) 688-6128 marked to the attention of Goodridge Peninsula - Project Lead.
Yours truly
Judicial Trustee
Eron Lenders
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