DATE: November 1, 1992 TO: All Valley of Lakes Property Owners FROM: Frank M. Cedrone, Managing General Partner C.B.G. Limited SUBJECT: Current Status Report On Saturday, October 24, 1992, I attended a meeting of Valley of Lakes property owners, that was hosted by a group of property owners identified as "Friends of the Valley". 1. The group hosting this meeting, had already proven themselves to be true and dedicated individuals, who were sincerely interested in helping maintain both the existing quality of life in the Valley and in helping the development achieve its maximum potential. To help achieve those goals, they have given of themselves unselfishly (time, labor and even their own money) and have attempted to foster a caring and friendly relationship among all Valley property owners, both resident and non-resident. This group provides its services and hosts "Town Meeting" style gatherings, which are open to "all property owners" without being required to pay a fee, dues or admission charges. Any property owner may participate. The Board of Directors does not conduct "secret meetings" and they enjoy an open line of communication with my office (the developer) and have been given access to all of my department heads. They enjoy our full cooperation. (a copy of their Agenda and Mission Statement are attached). 2. I accepted the invitation to address this meeting and even offered Eagle Rock Lodge as the meeting facility, in order to give an up to the minute status report on the current condition of the developer and its progress towards emergence from Chapter 11 status. I announced that C.B.G. had reached an agreement with First Eastern Bank, its prime lender with the approval of Judge John T. Thomas, the presiding judge of the Federal Bankruptcy Court in Wilkes Barre. The agreement had the concurrence of the first position secured lien holder, J.L. Wolgin and no objections were registered by any creditor. (The details of that agreement are attached) 3. I felt it was necessary to give full factual information, concerning past, present and ongoing activities of certain individual property owners, whose manipulation and use of a community organization, have November 1, 1992 All Valley of Lakes Property Owners Page 2 helped foster and spread rumors, distortions and outright lies. Their actions place in serious jeopardy, not only the development itself, but they also threaten the fortunes of every property owner, their investment in the Valley, the quality of life in the Valley and Eagle Rock Resort, as well as its future promise to emerge as one of the finest residential/resort communities in the U.S. (The information on this group is attached) EMERGENCE FROM CHAPTER 11 STATUS: C.B.G. Limited is presently conducting serious negotiations with a variety of prospective lenders, prospective equity partners and prospective joint venturers. At the Property Owners Meeting, I introduced a Vice President from the Investment Banking Division of Mellon Bank, with whom we have an Agreement allowing them to represent C.B.G. in its search for new financing. This Agreement was approved by Judge Thomas of the Federal Bankruptcy Court. I also introduced an individual member of an English group who are interested in providing funding for C.B.G. Limited. This individual spent two full weeks at the Valley of Lakes conducting due diligence on behalf of his group. He has toured the property, met with all members of my management team and reviewed all financial details and other pertinent data requested. He has also met with property owners, our attorneys and representatives of our bank. He is highly enthusiastic with the prospect of his group's possible participation and flew home to England to accelerate processing, this past weekend. OTHER SOURCES: We have had visits and tours from no less than four separate potential funding sources within the past two weeks and are scheduled for at least five other visits from additional sources within the next two weeks. We now have a wealth of opportunities for a full and complete financial reorganization, that will pay off all debt and provide ample funds to move full steam ahead on all phases of our development. We are currently negotiating with groups from Philadelphia, Baltimore, D.C., North Carolina, Georgia, Pennsylvania, New Jersey and Florida, here in the United States. Abroad, we are conducting negotiations with interested parties in Germany, England (2), Switzerland, Scotland, Hong Kong, Japan, Korea, Australia and Indonesia. While all are seriously interested, the enormity of the task of fulfilling the requests for financial and legal documentation, engineering data, planning, zoning and other regulatory agency information, as well as marketing data, construction cost data and the future proforma proposals and projections are being handled by myself and a severely limited staff. The agreement November 1, 1992 All Valley of Lakes Property Owner Page 3 reached with First Eastern Bank allows us seven months to complete this task, with certain conditions. a. Their contribution towards meeting any cash flow "shortfalls" is infinitesimal for a property as complex as the Valley of Lakes, with all of its operation. Therefore, we MUST exert maximum legal action to collect all outstanding delinquencies in Maintenance, Water and Sewer Fees. Legal actions are already being filed in the various courts in four townships, i.e. East Union, North Union, Black Creek and Hazle. Filing fees, court costs, lawyers' fees will add serious additional costs to the amounts owed by delinquent property owners. All of the suits are being handled by MLA Management Associates, Inc. This is a company I was forced to employ, if I wanted to come to terms with First Eastern Bank. While the employment of this firm will add serious additional costs to our "bare bones" operating budget, it will be sustainable for the short term required to obtain our re-financing, PROVIDING arrearages are made current. Therefore, I implore all property owners, whatever your real or imagined grievances may be, to bring your account current immediately. I will promise to absorb all legal fees and costs for suits already filed, providing payment reaches my office within the next ten (10) days. Simultaneously, we are negotiating a small bridge loan in the amount of $500,000.00, which amount will allow us to do the following: 1. Discharge the MLA Team (their costs for a year will exceed the total annual income from both our water and sewer utilities and could, in itself, create a default under the Terms and Conditions of our Agreement). If we can prove that we can sustain ourselves minus any financial assistance from First Eastern Bank, they will allow is to tear up the MLA Management agreement. $500,000.00 is the figure we agreed on. 2. Guarantee the opening of the Eagle Rock Ski area this season. Otherwise, it will have to be closed down and all facilities boarded up and winterized as the bank has requested. In the alternative, we are exploring the possibility of leasing out or co-leasing both the ski area and all three food and beverage facilities, i.e. Eagle Rock Lodge, Panorama Lodge and Fireside Lodge. November 1, 1992 All Valley of Lakes Property Owners Page 4 AGREEMENT WITH FIRST EASTERN BANK: Reaching this agreement was no easy task. There were hard and diametrically opposed positions that had to be reconciled, coming from two different viewpoints with totally different goals in mind. On the one hand, you have a bank that has serious problems with a portfolio of defaulted loans and is in dire need of raising its cash balance to levels dictated by the office of the Controller of the Currency. That means calling in Lines of Credit to raise cash. It may mean sales of certain assets and/or subsidiaries to raise cash. It definitely means using every tool at their disposal to collect delinquent accounts receivable. It also means that they are not the least bit interested in continuing real estate development lending, nor are they about to fund normal operations of our properties. What would make First Eastern Bank most happy, would be a rapid disposal of the entire property. Whether it remained as one entity of whether it had to be split up among a variety of owners is of no concern to them. Their only interest is in bringing in the cash that a sale of the assets would be certain to accomplish. Naturally, there are far more prospective buyers for component parts of the project and their separate and distinct profit centers, than there are for the entire development. The reasons are obvious: 1. There are large numbers of prospects who are highly interested in acquiring the following entities, especially as they are located in private communities, wherein no competition for these businesses exist. a. Oneida Water Company - Water Utility b. Valley Utilities Co., Inc. - Sewer Utility c. Ravens Run Equestrian Center - Horse Facility d. Recreational Facilities and Community Roads - Amenities (Roads, Parking Areas, Lakes, Beaches, Sports Core, Green Belts, Pavilions, Community Lighting, Open & Undeveloped areas planned for future recreational development) Fireside Swim & Tennis Clubhouse, Pools, Tennis Courts and Parking Lot, together with Holiday Park Childrens Playground. e. Maintenance Buildings f. Eagle Rock Ski Area & Parking Lot g. Eagle Rock Lodge & Parking Lot h. Panorama Lodge i. Fireside Lodge & Parking Lot j. Eagle Rock Golf Course - West (the Palmer Course) k. Eagle Rock Golf Course - East (planned to be by Lee Trevino) 1. Weston Hills Golf Course - (planned to be by Jack Nicklaus) m. Commercial Operations Office Building & Parking Lot November 1, 1992 All Valley of Lakes Property Owners Page 5 n. 50+ acres of highway frontage on Route 924 o. 100+ acres held in reserve for future development at the south end of the community - upper level and lower level - both sides of the county road. p. Bulk sales of existing recorded and planned and platted homesites, single family detached (Valley & Eagle Rock area, including those surrounding all golf courses and the ski area) multi-dwelling and condo sites (golf courses and ski area) as well as time sharing sites. q. Eagle Rock Motel r. The site for the planned hotel/convention center With a properly conducted, world wide advertising campaign conducted by selected major real estate brokerage houses, that specialize in properties of this nature and have representation here and abroad, hundreds of prospective buyers could be developed for individual components of the community, as described above. They could buy, own and operate their businesses with absolutely no obligation to property owners of the Valley, except as it applies to their own operation. Conceivably, this method of disposal would provide the highest rate of return, pay off all debts 100 cents on the dollar and give C.B.G. a handsome return on its investment. I personally fought AGAINST this scenario and fought for seven months which I feel are adequate to gain re-financing required to complete the original masterplan under one ownership, one responsibility, with full obligation to all of our property owners. The total community concept I dreamed of is and can be possible. We have magnificent potential and breathtaking plans for a total lifestyle that would be second to none. We did not plan nor create the financial problems of our bank and the fact that they are unable or unwilling to help us. However, with the unstinting cooperation of our property owners, we can see this dream come to fruition. All I can ask is that you make an immediate effort to pay any delinquencies you may owe. If however, you have any special expertise and are willing to offer any advice or services to assist C.B.G. at this time, it will be warmly received and most appreciated. (I am enclosing a form Questionnaire designed to measure property owner responses to my message and assist me in making future decisions in keeping with the desires of our property owners. Please take the time to fill out and return at your earliest convenience. In return for the "Grace Period" granted by First Eastern Bank, I had to agree to give up several crucial options available to C.B.G. These options were: November 1, 1992 All Valley of Lakes Property Owners Page 6 1. C.B.G. granted First Eastern Bank relief from the court imposed Stay of Execution, that prevented First Eastern Bank and J.L. Wolgin from foreclosing on the property and disposing of it as they saw fit. (In return, First Eastern Bank agreed not to exercise this option for a period of seven months) 2. C.B.G. granted First Eastern Bank a General Release against any and all claims it could exert against First Eastern Bank for Lender Liability. (In return, First Eastern Bank agreed to fund a very minimal amount of cash shortfall, providing I allow their team to press legal collection of fees that are delinquent) 3. C.B.G. also agreed to employ MLA Associates, Inc. and pay those outrageous fees, providing the C.B.G. staff remained in place to provide the community services and property administration. I have also designated the Friends of the Valley as the responsible liaison team on behalf of the Valley of Lakes property owners. I am also delegating to the Friends of the Valley, the sole authority to staff and operate the Swim and Tennis Clubhouse for the benefit of all the property owners that are current in the payment of all fees (Water, Sewer and Maintenance), as well as any other recreational facilities they wish to make available for special functions, after due notice to and receipt of approval from my office. This is another facility that First Eastern Bank wanted to close down, secure and winterize. (In the event that I lost that portion of my negotiations with the bank, Friends of the Valley offered to lease the building and pay for electricity, phone and insurances. They are a fine group of people and I am proud to know them - I sincerely hope that you get to meet and know them for I feel you will share my feelings. First Eastern Bank also wanted to disconnect all community and sports core lighting and close down and winterize the Valley Administration Building. This would save electricity and other utilities and lower insurance and maintenance costs. If I had let First Eastern have their way, the Valley and Eagle Rock would resemble a Ghost Town in deep freeze. The only services that First Eastern is willing to provide are: water, sewer, security and road maintenance, as needed. They wanted ONLY ONE EMPLOYEE on the property 5 days a week, with outside contractors being assigned to respond to emergency requests for water shortages, sewer plant problems, snow removal, etc. Our total staff would have been terminated. The top of the mountain would be pitch black dark, because they wanted to totally cut off all power and winterize all buildings, i.e. lodges, motel, offices, ski buildings, etc. Our sales persons and myself are paying for the operations of the Valley Administration Building, including all utilities and phone. November 1, 1992 All Valley of Lakes Property Owners Page 7 I am scheduling a meeting of the Advisory Board and Friends of the Valley to have them review all of the correspondence and documents relating to the following: 1. Financing and joint-venture sources, proposals, etc. 2. Our negotiations leading to and the actual Agreement with FEB 3. Documentation of comments I have made relative to harmful activities of individual property owners. I would hope to be able to prepare and forward an updated Status Report every 4 to 6 weeks, in order to keep all property owners fully advised on our progress towards re-financing and a full resumption of all activities. During the interim period, I once again urge all property owners to become current in payment of all delinquencies in maintenance and utility fees. Within ten (10) days, a list of all delinquent property owners will be posted at all security gates, the Valley Administration Building and the Swim & Tennis Clubhouse. Denial of use of all recreational facilities will be enforced in full accordance with the Covenants and Restrictions and Rules and Regulations. Violators will be prosecuted for trespass. T his is a regrettable but necessary action if we are to survive this trying period. Your utmost cooperation in avoiding these actions would be appreciated. Once re-financing is assured, we will respond to those requests for assistance from some of our property owners whose plans to build have changed. Some have encountered financial difficulties. Others have made relocations due to job transfers. In any event, whatever the reason, we will do our best to accommodate your desire to dispose of your property. There are a variety of ways that this can be accomplished. We will examine each individual situation and make the best recommendation accordingly. Sincerely, Frank M. Cedrone FMC/va
|
|