VALLEY OF LAKES AND EAGLE ROCK RESORT
_____________________________________
A Four Seasons Residential/Resort Community
Developed by C.B.G. Limited
DATE: September 9, 1992
TO: All Property Owners - Valley of Lakes/Eagle Rock
FROM: Frank M. Cedrone, Managing General Partner
SUBJECT: Current Status Report
Please read carefully, the contents of this report. It may well
be the most important communication you will ever receive from my
office. Most certainly, the information concerns each and every
one of you, our property owners.
In this report, I have attempted to give you a complete and up to
the minute status of C.B.G., our funding potential, our present
strategy in conjunction with our bank and other pertinent infor-
mation, which is designed to provide you with factual data,
instead of misleading rumors or gossip from ill-informed and/or
ill-intentioned persons. For the benefit of those newer property
owners , I have included a brief historical summary.
I will welcome any comments, critique, advice or other input you
wish to offer and would appreciate hearing from you. Your con-
tinued support is important to the achievement of our goals.
I will (as time permits) attempt to respond to each letter in the
chronological order in which they are received.
* * * PLEASE TAKE THE TIME TO READ THIS COMMUNICATION NOW * * *
T A B L E O F C O N T E N T S
_________________________________
1. WHAT RESEARCH, PLANNING & METHODOLOGY DID C.B.G. LIMITED USE
AS A NEW, INCOMING DEVELOPER OF THE VALLEY OF LAKES? Page 2
2. WHAT HAS C.B.G. LIMITED ACCOMPLISHED TO DATE ? Pages 3,4,5
3. WHAT CAUSED C.B.G. LIMITED TO GET INTO FINANCIAL DIFFICULTY
WHEN ALL SEEMED TO BE GOING SO WELL ? Page 6
4. WHAT IS A CHAPTER 11 FILING AND HOW DID IT HELP ? Pages 7,8
5. WHAT POTENTIAL FUNDING SOURCES ARE WORKING WITH C.B.G. AT THE
PRESENT TIME AND HOW VIABLE ARE THEY ? Page 8
6. WHAT STEPS ARE C.B.G. TAKING PRIOR TO FULL FUNDING ? Page 9
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WHAT RESEARCH, PLANNING & METHODOLOGY DID C.B.G. LIMITED USE,
AS A NEW, INCOMING DEVELOPER OF THE VALLEY OF LAKES?
This is best described by knowing how we viewed our obligations
as a new incoming developer back in 1986.
1. Recognizing the problems created by prior developers who were
"Absentee Owners", I made a positive decision to live here and
be present at all times, not only to supervise development,
but to learn on a first-hand basis, the real needs of the
community and its people. This has proven to be invaluable.
2. On the very day that we purchased and closed on the property,
we also purchased the delinquent "Accounts Receivable" held
by the selling bank. This was done to prevent the bank from
instituting legal actions against 500+ property owners. This
they announced at the closing table they were prepared to do.
We protected the property owners from this very real threat.
3. I personally moved up here the day after closing and lived a
Spartan existence in one room of a boarded-up motel, for two
years, while we completed major restoration work and massive
improvements to the property, before buying a home in the
Valley, where I have lived for the past four years. I have
been in the Valley full time since our acquisition.
4. I met with property owners and learned of the sins of the past
so that we could correct them. We have mad every effort to do
just that.
5. I met with representatives of regulatory agencies, governmen-
tal bodies, area financial institutuions, local businessmen,
former suppliers and contractors and learned of the failures
of the past, so that we could attend to them. We have always
tried to be the best in planning, development,quality control
and protection for our community and its property owners. We
have kept the financial benefits loccal, utilizing local
suppliers, contractors and financial institutions. We have
also rigidly adhered to the highest standards imposed by
every regulatory agency and in most cases, surpassing them.
6. I met with executives of the various Chambers of Commerce and
Economic and Industrial Development Boards. I met with members
of Utilities Commissions and Town Councils. From all of them
I gained insight into their present and future needs, so that
we could help address them. We have responded to every call.
7. Finally , we met with the area people. We learned of needs and
desires, their hopes and ambitions and resolved to help them.
Our record in civic, fraternal, religious and charitable work
is something of which we can be justifiably proud.
2
WHAT HAS C.B.G LIMITED ACCOMPLISHED TO DATE ?
1. We first made habitable and secure the living environment for
those persons that were then living in the Valley. We attended
to their needs first.
2. We next installed roads, water and sewer lines to those areas
where lots were sold years earlier but owners were unable to
build because they lacked infrastructure. We attended to their
needs next.
3. Simultaneously, we corrected violations that had existed for
years, prior to offering any properties for sale.
4. Since that time, we have installed more than 18 miles of paved
roads, water lines and sewer lines.
5. Ten (10) additional miles of roads have been cleared, graded
and shale paved. Miles of other roads have been cleared and
rough cut.
6. We have drilled new wells, increased water storage capacity
and built new treatment facilities. We built and operate our
own laboratory and test facilities.
7. We have built the first stage of a new 1,000,000 Gallon Per
Day Sewerage treatment plant. 250,000 G.P.D. is now in full
operation.
8. A new state-of-the-art Commercial Operations Building is 2/3
complete. When completed, it will serve as the nerve center
for all operations of the entire property.
9. A totally new ski area has been built, with illumination for
night skiing, beautiful new lodges at the top and bottom of
the mountain, computerized ticket building, upper and lower
parking lots, new electric power facilities, all new snow
making facilities. The ski area is rated one of the best
of its size in Pennsylvania. Property owners receive reduced
rates at the ski area.
10. Other totally renovated or brand new amenities include: A
Swim and Tennis Clubhouse, Heated In-Ground Pool, Doubles
Tennis Courts, Children's Playground, Stables, 3-1/2 acre
Corral, Indoor Equestrian Arena, Storage and Maintenance
Buildings, Archery Range, Sports Core Area with Shuffleboard,
Bocce Lanes, Horse Shoe Pits, Basketball, Volley Ball, Lawn
Croquet, Outdoor Pavillion, Lakefront Beaches with Restrooms.
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12. The first 9 Holes of an Arnold Palmer designed golf course
have been cleared and graded, surveyed and staked, sand traps
cleared, graded and shale paved.
13. A new 16,000 pair telephone service has been installed from
the entrance at Route 924 down to Walden Drive and has been
accompanied by a new fibre optics cable TV system. This we
plan to extend throughout the property, eventually elimina-
ting all poles and overhead electric power and TV cable.
14. Eagle Rock Lodge has undergone a total transformation into a
fine dining facility and hosts numerous weddings, banquets
and other group functions.
15. We have installed an Architectural Control Committee with
strong building and inspection controls, coupled with maximum
Buyer Protection Plans.
16. We have made large strides in cleaning up the environment,
protecting and improving water quality, both in-ground and
surface.
17. We have helped to attract business and industry and even spur
a move back into the area of former residents who had moved.
18. We have helped instill a new sense of pride in the people of
the region and the mindset that " It can be made better " We
can be the best. This is our proudest achievement and can
never be reversed.
19. You should be made aware that every single dollar of invested
capital, loan proceeds and income from sales, has been plowed
back into the development. Not one cent has ever been distri-
buted to any of our partners.
20. Today, Valley of Lakes and Eagle Rock Resort is regarded as
"The" premier planned residential/resort in the Northeast.
Tours and inspections by reporters from all major media have
resulted in glowing reports praising the creative planning,
quality development and commitment to excellence shown by
the developers, C.B.G. Limited.
21. Editorials in The New York Times, Real Estate Review, Hazle-
ton Standard-Speaker, Wilkes-Barre Times-Leader and other
local and major market news media, have all highly praised
the community.
22. The property has been featured in such leading publications
as Time, Newsweek, U.S. News & World Report, Sports Illus-
trated, Golf Magazine and Philadelphia Magazine.
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23. With a continual high-level advertising campaign that has
been conducted in newspapers, magazines, radio, television, di-
rect mail, billboard and special promotions, The Valley of Lakes
message has been carried throughout seven states and the District
of Columbia. News of this fine property has spread far beyond
its normal market area. Property owners now include buyers from
Europe, Asia and the Far East.
24. We have created substantial employment, not only in our own
companies, which include security, maintenance, recreation, engi-
neering, construction, food and beverage service, ski area, sales
and marketing, administration and accounting; we have also
created employment with homebuilders, contractors in all building
trades and with suppliers and vendors.
25. We have caused enormous increases in property values and real
estate ratables, which has resulted in substantial increases in
taxes collected by four townships and two counties, helping them
to provide sorely needed municipal services.
We expect to be able to provide even greater benefits in the
future.
5
WHAT CAUSED C.B.G. LIMITED TO GET INTO FINANCIAL DIFFICULTY WHEN
ALL SEEMED TO BE GOING SO WELL ?
1. Because of the deepening recession, which caused a large
number of real estate developers to default on their loan pay-
ments, our bank sustained serious losses. As a result, they
could not continue to provide funds needed needed for the contin-
ued development of our properties, that were necessary to bring
us to the point where we would have been self-sustaining. Nor
were they able to gain participation of other banks in providing
the required development financing, since virtually all banks
were placed in the same predicament. The collapse of the Savings
and Loans, the emergence of The Resolution Trust Corporation, the
Mid-East War, the incredibly hard line taken by Federal Bank
Auditors, all contributed to a severe cash crunk. This was an
extremely regretable occurance, because we were poised to make
the greatest strides ever, at that time.
2. Despite the severe strain on operating capital, which occured
in early 1990, we pushed ahead on the contruction of the golf
course properties, which could provide strong cash flow from lot
and housing sales, townhome sales, condominium sales and member
fees. The cash flow would not only allow us to service our debt,
it would also accellerate funding and completion of the remaining
infrastructure in the Valley and open up townhome sales in the
Arapahoe West section of the Valley.
3. While we continued to seek re-financing from more than 400
sources around the world, the recession worsened and we had to
cease work on the course.
4. In the midst of all this, a "bridge loan" was offered by a
lender at a high rate of interest that was designed to accomplish
two things:
a. To bring our interest payments current with our bank.
b. To provide C.B.G. Limted with working capital enabling us
renew our property registrations and continue with our
sales programs, while pursuing re-financing of our debt
and/or obtaining equity partners or joint venturers.
Unfortunately, the "bridge lender" severely breached the terms
and conditions of the loan commitment and never did provide the
working capital to C.B.G. A series of legal battles ensued and
while we were successful in defeating a takeover attempt, the
legal actions caused our registrations to lapse and as a result,
we have been unable to sell our properties for more than a year.
Without our major source of income (property sales) we could
neither continue development nor meet operating expenses. The
subsequent filing of a Chapter 11 was inevitable.
6
WHAT IS A CHAPTER 11 FILING AND HOW DID IT HELP ?
1. Under the Federal Bankruptcy Laws, a company may file a pro-
ceeding requesting that it be allowed time to reorganize, re-
finance or restructure its company and/or operations, thereby
enabling it to return to profitability. This is called a Chapter
11 Reorganization.
2. The immediate benefit is that once this proceeding has been
filed, the company is protected from its creditors and may conti-
nue to operate while it prepares its plan for reorganization,
providing it remains current in all " Post Petition" expenses.
(Expenses incurred after the filing)
3. On the last day of March and during the first week of April,
C.B.G. Limited and all operating affiliated companies filed for
Chapter 11 status.
4. Once the filing of our Chapter 11 proceeding became public,
new avenues for financing immediately opened up. Most were high
interest rate lenders, specifically seeking "Super Priority" lien
positions on highly valuable properties. Such liens place all
prior lien holders in a subordinate position. One such loan
commitment, which we had obtained in the amount of $3,500,000.00
was strongly opposed by both our bank and the "bridge lender" and
was subsequently not approved by the court.
5. Had the $3,500,000.00 interim financing commitment obtained by
C.B.G. Limited been approved by the court, C.B.G. believes that
these funds would not only have allowed us to remain current in
all of our Post Petition costs and expenses, it would have pro-
vided us with funds enabling us to re-register our properties,
commence advertising and marketing once again and resume constru-
ction activities. At the same time, we would have continued our
negotiations with several major funding sources, that could have
enabled us to emerge from Chapter 11 status sooner that antici-
pated.
6. You should be made aware that since the filing of our Chapter
11 Petition, more than five dozen letters of support for C.B.G.
have been received from leaders of business and industry, govern-
mental and political leaders, contractors and suppliers, property
owners and area residents, civil, fraternal and charitable orga-
nizations, chambers of commerce, economic development organiza-
tions and even children. Newspaper editorials have been written
in support of C.B.G.'s reorganization. Countless telephone calls
have been received by us and numerous personal visits to our
offices have been and continue to be made. These persons, with-
out exception, compliment us on our past performance and high
quality development, while simultaneously wishing us well in the
future and even offering prayers for our success. This outpour-
ing of support was one of the most gratifying turn of events we
have known during the very rough time we have experienced in the
past two years since our funding was cut off.
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7. In one of the strongest demonstrations of confidence, a number
of existing creditors continue to extend credit to C.B.G. on an
unsecured basis. In addition, a large number of property owners
have rallied to our assistance by helping to staff areas of
security, maintenance, recreation and good public relations. This
is simultaneously heartwarming, community beneficial and deeply
appreciated by the management and staff of C.B.G. Limited
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WHAT POTENTIAL FUNDING SOURCES ARE WORKING WITH C.B.G. LIMITED
AT THE PRESENT TIME AND HOW VIABLE ARE THEY?
1. Three (3) Investment Banking firms now represent C.B.G. Ltd.,
after first having been approved by the Bankruptcy Court Judge.
All of these firms have the following things in common:
a. They came to us, seeking to represent us, after hearing of
our development.
b. They have no affiliation, past or present, with C.B.G. or
any of it's partners.
c. There is no conflict of interest in their representation.
d. They are all regularly engaged in the business of provi-
ding investment banking services, mergers, acquisitions, joint
ventures, equity partnerships, refinancing, etc.
e. They receive no up-front payment of fees or expenses.
Their sole remuneration is based on performance, in accordance
with a signed agreement, reviewed and approved by the court,
prior to our signing.
f. Each of these firms agreed to represent C.B.G. Limited
only after being provided with all pertinent data to review and
after having inspected the property, conducting their own due
diligence interviews and having had discussions with our attor-
neys. All have highly recommended our property.
g. All are sheduled to make presentations during this month.
These firms, located in Philadelphia, suburban Philadelphia and
Baltimore are in addition to four (4) foreign lenders/equity
partners/joint-venturers with whom we are also having
negotiations.
8
WHAT STEPS ARE C.B.G. TAKING PRIOR TO FULL FUNDING ?
1. On Friday, September 4, 1992, we held a long and productive
meeting with our bank's representatives and their legal counsel.
The net result of that meeting, is that the bank has agreed to
work with us, in an attempt to solve our mutual problems. This
is an extremely important decision, since with the assistance of
our bank, C.B.G. Limited will have the financial stability to
maintain the property while it goes through the time consuming
procedures required to complete funding and reorganization.
2. We will enter into an agreement which will allow the bank to
oversee all expenditures to assure they are going to only pre-
approved and budgeted items.
3. We will receive financial assistance from our bank to meet any
shortfalls in overhead and operational expenses. These "bare-
bones" essentials will include, security, maintenance, utilities
and insurances. We will live a spartan existance. However, it is
not contemplated that there will be any hardships imposed on our
property owners or residents.
4. We will continue to operate Eagle Rock Lodge and the Fireside
Base Lodge for weddings, banquets and other group functions, that
are both pre-scheduled and profitable.
5. The swim and tennis clubhouse will continue to be made avail-
able for property owner use, by those property owners who are
current in all fee payments, i.e. maintenance, water and sewer
and who are not in violation of any of the Rules and Regulations or
Covenants and Restrictions.
6. We hope to be able to accellerate the processing of existing
financing opportunities, now being presented by prospective len-
ders, equity partners, and joint-venturers, both domestic and
foreign. Hopefully, with the current status of interested finan-
cing sources, we should be able to accomplish this before the end
of the year. However, we are prepared to go further, if need be.
7. Every effort is being made to maintain the property under ONE
owner, ONE developer and ONE master plan for maximum benefit for
everyone. My personal objections to separate owners for differ-
ent operations of this property are listed at the end of this
communication. When you review my comments, I feel certain that
the majority of property owners would agree.
8. No one regrets the inconveniences being experienced by some of
our property owners located in areas where infrastructure is as
yet incomplete, more than I. I will do my utmost to have our
bank work with us in this respect. In the interim, for those
property owners whose building plans have been held up due to a
lack of utilities, i.e. Section EA, I have been able to gain
permission to allow transfers to available fully improved lots in
our current inventory.
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MY REASON FOR OBJECTING TO SALES OF DIFFERENT COMPNONENTS OF THE
PROPERTY TO SEPARATE BUYERS ARE LISTED AS FOLLOWS:
WATER AND SEWER UTILITIES: Presently, the rates charged by Oneida
Water Company and Valley Utilities Company, Inc., are less than
25% of rates charged by The Hazleton City Authority for their
customers. Now, HCA is seeking an additional 30% increase in its
rates. How would you like to pay an amount equal to six (6) times
your present billing. Instead of approximately $51.00 every three
months, you would be paying in excess of $300.00 per quarter. No
less than six separate utilities have now inquired. If it were
advertised "For Sale", there would be a flood of inquiries.
VALLEY AMENITIES: All of the amenities presently in the Valley
could be sold to a Recreational Amenities Operator, who could
invoke a pay per use fee or an annual "Recreation Fee" for the
use of amenities. Even if the amenities were gifted to the
property owners, their maintenance, usage, operation and ultimate
pleasure of use could be destroyed by petty bickering, lack of
proper staffing, lack of funds for insurances, professional mana-
gers, etc. There are far more buyers of amenity packages than of
entire developments.
EQUESTRIAN CENTER: This facility could easily be sold to a sepa-
rate owner/operator, not encumbered by Rules and Regulations,
property owner preferences, etc. There are far more buyers of
Equestrian Centers than of entire developments.
EAGLE ROCK SKI AREA: Without advertising, inquiries have come in
on buying and/or leasing the resort's ski area, as well as it's
Lodges, Motel, etc. With the excellent location, ease of access
and extremely high quality, brand new equipment, advertising this
fine facility would attract a host of prospective buyers.
EAGLE ROCK GOLF COURSE: This facility could be sold for use as
either a public or private course with absolutely no incumbency
on a new owner to offer memberships or discounts to property
owners, or even to allow them to play under any conditions.
ARAPAHOE WEST TOWNHOUSE SITES, VALLEY AREA HOMESITES, GOLF COURSE
HOMESITES: All could be sold at auction to individuals, a variety
of builders, etc. Not one would have any responsibility to do
anything except build and run.
COMMERCIAL SITES ON ROUT 924: Look at the commercial development
that has taken place on non-C.B.G. owned property, north of us.
Compare those disgraceful monuments of Junkyard Planning with the
beauty of the Commercial Operations Building at the entrance to
Eagle Rock (even in its unfinished state)
These are the reasons why "Component Sales" cause property values
to decline, community lifestyles to deteriorate and desireability
of ownership to evaporate and dissappear.
I SINCERELY HOPE YOU AGREE WITH MY THINKING - IF NOT, LET ME KNOW
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