Eron Lenders
Project Name: Valleyview Heights
Lender update

March 6, 1998

Further to our letter dated December 22, 1997, we are writing to provide you with a further update on the status of the above noted mortgage.


Project Status

As we advised previously, we entered into an agreement with the borrower whereby lots which had been developed were to be sold with the proceeds to be used to satisfy lien claims which had been filed against the lands by suppliers whose accounts had not been paid. This agreement was ratified and developed into an Order approved by the Court, subsequently entered on December 30, 1997. In the normal course, as subsequent lots were sold, and the liens were discharged, proceeds would then flow to the Judicial Trustee to be used to pay down the Eron Loan.

We have been approached by the borrower who has arranged a bulk sale, for cash, of 12 lots. The bulk sale is at a 10% discount to the regular lot sales prices. According to the agreement in place, the proceeds would be sufficient to repay the lien charge, with approximately $300,000 which would then be applied to the Eron Loan. The sale of these lots appears to be beneficial to all concerned, and we have conveyed our approval of the sale.

The proposal which the borrower has made to us is that he be permitted to use sufficient cash being generated from the bulk sale and from other lot sales in phase 2 to complete the development of phase 3. This would bring a further 20 lots to the market. The borrower projects that the development of phase 3 should be completed by July, and that sale of those new lots plus disposition of the lots remaining in phase 2 will generate close to $1.1 million to be available to pay down the Eron loan, or alternatively some portion may be required to finance further development of the property. We are at present considering this proposal.

At present we are working closely with the borrower and your Lender's Committee. Our focus is to maximize recovery as quickly as possible. We will continue to keep you informed of developments.


Price Waterhouse Fees and Disbursements

We previously advised that there are two components of PWL's fees and disbursements on each individual project, direct costs and an allocation of indirect costs.

At January 31, 1998 the direct fees incurred on this project totaled approximately $23,000. In addition we have incurred legal fees in connection with this project of approximately $20,000.

The Judicial Trustee is unable to estimate the indirect Judicial Trustee fees that will be allocated to Valleyview as the indirect fees will be allocated to projects based on the level of direct fees incurred on all projects.


Lender Communications

As previously discussed, to facilitate communications with lenders we have established a voice mail information system with separate voice messages for several projects or groups of projects. By dialing one of the following three numbers (604) 878-4201, (604) 878-4244 or (604) 878-4248 and selecting mailbox number 2177 you will hear a brief report on the status of the project. These mailboxes are being updated as relevant information becomes available.

We also refer you to our 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 voice mail information system or web site so that you can receive first hand current information from PWL in the most cost effective manner we have available.

We will issue another letter as soon as we have significant new information to report. In the meantime, if you have any specific questions or information concerning the project please contact us in writing at 500 - 1380 Burrard Street, Vancouver, BC, V6Z 2H3 or by fax at (604) 688-6128 marked to the attention of Valleyview Heights - Project Lead.


Yours truly

Judicial Trustee

Eron Lenders





BACK