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To the Lenders in Project #1157
Shuswap Falls Development Ltd.
November 5, 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?
This project is a recreational vehicle development site in the town of Enderby, B.C. on the banks of the Shuswap river.
The Regional District of North Okanagan has issued building permits for 126 R.V. sites. The sites are to include satellite TV connections, phone lines, 30 and 50 amp service, a BBQ centre, public washrooms, laundry facilities, and a swimming pool. It was expected that the lots would sell for an average of $65,000, giving a value before commissions of approximately $8,190,000.
The developer of this site is Shuswap Development Ltd. Company, the beneficial owners of which are Brian Slobogian, Wes Biller, and Frank Biller.
How much was supposed to be raised for the project?
$2,000,000.
According to Eron's records how much was actually raised for the project?
Approximately $4,849,660.
According to Eron's records how much was advanced to the project?
Approximately $1,667,620.
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. Based on our review to date we are aware of the following uses of funds:
- Brokers Fees: $1,464,568.
- Finders Fees: 240,000.
- Lender's Interest: 1,085,550.
- Lender Fees paid: 51,405.
- Inter mortgage advances: 726,784. (to several other projects)
- Total: $3,586,307.
When will you know where my money went?
It will be at least two months before we are able to fully account for all funds received by Eron.
What security was taken on the project?
A 1st mortgage in the amount of $2,000,000.
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:
- Personal guarantees of Brian Slobogian and Frank Biller
- Corporate guarantee of Eron Mortgage Corporation
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 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 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.
Yours truly
Price Waterhouse Limited
Judicial Trustee
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