Eron Lenders
To the Lenders in Project #1189
Morewood Project ("Morewood")
Borrower: North Shore Associates, a New York Limited Liability Partnership (the "Borrower")
Lender update

November 5, 1997

As indicated in our October 22, 1997 letter to lenders, we will be providing information to lenders through regular project updates. Unfortunately, due to the poor quality of Eron Mortgage Corporation's ("Eron") accounting and lender records, we are presently unable to answer all of the questions that 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 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 as a result of these practices. Clearly this situation could not be allowed to continue.


What is the current status of the project?

The Morewood Project on New York's Long Island is a planned, integrated life care community for seniors. Morewood will provide a variety of housing, including:

- 75 detached homes averaging 3,000 sq. ft., most with golf course frontage;
- 25 zero-lot line homes averaging 2,700 sq. ft.;
- 50 townhouse units averaging 2,400 sq. ft., with ocean and parkland views;
- 125 condominium units averaging 1,500 sq. ft. in a six story building.

The project will also have a 400 room Continuing Care Retirement Community (CCRC) containing independent living, assisted living and nursing care facilities.

The development is adjacent to a new 18 hole public golf course, a nine hole executive golf course, acres of parkland and other athletic facilities. The 42 acre site is in the Town of Port Washington, 32 km from downtown New York City.

As Eron is unable to meet future funding obligations, the completion of this project and the enforceability of lender security is dependant upon the Borrower securing access to financing and finalizing the land purchase. To date approximately $1,000,000 USD has been advanced toward the land purchase in the form of a non-refundable deposit, and approximately $1,686,000 towards miscellaneous project costs. We are currently considering several alternative strategies to deal with this loan. We have engaged US counsel and have initiated discussions with the Borrower.


How much was supposed to be raised for the project ?

$19,300,000 USD


According to Eron's records how much was actually raised for the project ?

Approximately $3,831,441 USD


According to Eron's records how much was advanced to the project ?

- Approximately $1,000,000 Land purchase deposit
- Approximately $1,686,150 Miscellaneous project costs
- Approximately $2,686,150 USD


What happened to the rest of the money ?

It was either used by Eron to pay commissions, fees or interest owed to other lenders. Some funds also appear to have been invested in other projects.


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 ?

The security on this project is an assignment of the land purchase agreement.


Are there any mortgages or other loans in priority to the project security ?

It would appear that at the present time there are no prior claims on the property.


What is the value of the project ?

We have commissioned a valuation report on the property, that should be completed by November 30, 1997. We will advise you of the result of the valuation report.


Are there any other security or guarantees which might increase recovery on the project ?

Yes, the following additional security would appear to be available:

- upon closing of the land purchase agreement, a 2nd mortgage on the property subordinate to approved construction financing;
- assignment of a fixed price construction contract and all completion Bonds;
- loan agreement and promissory note with the Borrower;
- personal and entity guarantees of the principals of the Borrower.

All guarantees attached to the loan agreement are conditional upon Eron fulfilling its funding obligations under the loan agreement.

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, if any, will be recovered.


When will I get any money back ?

It is likely to be many months before any money is available to lenders.

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, 1997.

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 via fax at (604) 688-6128.


Yours truly

Judicial Trustee

Eron Lenders





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