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To the Lenders currently identified in Project #1197
Petrochem Building
Borrower: 708804 Alberta Ltd.
November 17, 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 consists of 9 storeys with a net rentable area of 72,800 square feet. The building was constructed in 1956 with a further 5 floors added in 1958. The building is undergoing renovations; therefore, only several floors are leased. The mortgage is currently in arrears and payment has been demanded.
How much was supposed to be raised for the project ?
$1,900,000.
According to Eron's records how much was actually raised for the project ?
Approximately $2,158,986.
According to Eron's records how much was advanced to the project ?
Approximately $1,606,435.
What happened to the rest of the money ?
According to Eron's records it was used by Eron to pay commissions and fees of approximately $295,000.
What security was taken on the project ?
A 1st mortgage in the amount of $1,900,000.
Are there any mortgages or other loans in priority to the project security ?
It would appear that there are no prior claims on the property.
What is the value of the project ?
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 ?
Yes, the following additional security would appear to be available:
- Assignment of Rents and Leases
- Continuing Unlimited Guarantee of 708804 Alberta Ltd., with 570 Dunsmuir as a Guarantor
- General security agreement registered under P.P.S.A.
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 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.
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, clearly marking your correspondence as relating to the "Petrochem Building Project".
Yours truly
Price Waterhouse Limited
Judicial Trustee
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