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To the Lenders in Project #1179
Raven Patio Homes ("Raven")
Borrower: Ravenswood 32nd Partnership
November 18, 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 Mortgage Corporation's ("Eron") 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.
Provide a brief description of the project, and its current status.
The Raven project, located in Phoenix, Arizona, was planned as 127 unit patio home project along side the Raven golf course.
The units were to range from one to three bedrooms, and contain 1,300 to 1,800 square feet. The planned sale price range was $110,000 to $140,000.
Construction on the project was to begin in July 1997, on a pre-sold basis. However, as the Borrower has not secured construction financing, construction has yet to commence. The Borrower is currently soliciting construction financing, as well as equity to replace Eron's position.
How much was supposed to be raised for the project ?
$3,000,000 USD.
According to Eron's records how much was actually raised for the project ?
$2,431,460 USD.
According to Eron's records how much was advanced to the project ?
$2,077,038 USD.
What happened to the rest of the money ?
It was used by Eron to pay commissions and fees.
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 ?
A 1st mortgage in the amount of $3,000,000 USD.
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, a guarantee of the Borrower and its principals also appears to be available.
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 unlikely that full recovery will be realized.
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 December 8, 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 by fax at (604) 688-6128, clearly marking your correspondence as relative to the "Raven Project".
Yours truly
Price Waterhouse Limited
Judicial Trustee
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