UDF IV Issues Letter to Shareholders Highlighting the Board and Management’s Decisive Actions to Protect Shareholder Value
June 24 2024 - 8:30AM
United Development Funding IV (“UDF IV” or the “Trust”) today
issued a
letter to shareholders in response to
notice that NexPoint Real Estate Opportunities LLC and its
affiliates (collectively, “NexPoint”) have submitted nominations
for a controlling slate of dissident trustee nominees for election
ahead of the Company’s 2024 Annual Meeting of Shareholders.
The letter to shareholders and other important
information regarding the Trust’s commitment to value creation can
be found at UDFforShareholders.com.
The full text of the letter to shareholders
follows:
Dear UDF IV Shareholder,
Your United Development Funding IV (“UDF IV” or the
“Trust”) Board of Trustees and management team have acted, and
continue to act, to protect and promote the interests of the
Trust’s shareholders. Over the last several years we have navigated
extraordinary challenges and will continue to focus on safeguarding
the Trust’s assets and maximizing shareholder value while
building on the Trust’s long history of cash
distributions.
Despite our work to drive long-term value for
shareholders, NexPoint Real Estate Opportunities, LLC and its
affiliates (collectively, “NexPoint”), which have a track
record of acting against the interests of UDF IV
shareholders, submitted nominations for a controlling
slate of dissident trustees for election at the 2024 Annual Meeting
of Shareholders later this year.
NexPoint’s attempt to elect trustees to the UDF IV
Board is simply the latest step in its ongoing, self-interested
campaign, which is grounded in misinformation and, we believe,
aimed at derailing the continued operations of the Trust in an
attempt to extract value from the Trust at the expense of all other
shareholders. While the Trust’s Board and management team are
focused on protecting and enhancing shareholder value, it has
become overwhelmingly clear to us that NexPoint has no interest in
advancing these objectives. The Board of Trustees believes that
NexPoint taking control of the Trust would present serious risks
for UDF IV shareholders and the value of your investment in the
Trust.
For the last 5+ years, NexPoint has
attempted to take over management of the Trust, causing significant
disruption to the Trust’s operations and coming at the expense of
shareholders’ hard-earned dollars:
- NexPoint has launched numerous frivolous lawsuits against the
Trust – including a defamation suit – forcing the Trust to waste
resources that could otherwise be used for the benefit of
shareholders.
- In 2020, NexPoint launched a hostile tender offer, which it
extended 13 times, to purchase Trust shares at the bargain basement
price of $1.10 per share, or approximately a 90% discount to the
Trust’s book value per share at the time.
Beyond their nefarious actions against the Trust, NexPoint’s
principals – including its founder, James Dondero – have engaged in
a litany of actions that create considerable cause for concern
regarding their integrity, character and willingness to do right by
the investors they claim to represent. According to public
filings, Dondero and his affiliates have been found by a variety of
courts, arbitration panels, and administrative tribunals to have
breached their fiduciary duties to investors, and engaged in
intentional fraudulent transfers, willful misconduct and
self-dealing.
Over the next several months, you will likely continue to
receive materials from NexPoint with fictitious claims regarding
the Trust as well as our Board and management team. We expect that
NexPoint will continue to twist the facts and rehash old events in
an attempt to fearmonger and deceive you into supporting their
misguided and malicious campaign. These desperate tactics are not
new. NexPoint’s false rhetoric is intended to distract from the
actions we’ve taken to position the Trust to drive long-term value
for the benefit of all shareholders.
Despite NexPoint’s persistent attempts to undermine the Trust,
the UDF IV Board and management team have safeguarded the value of
our portfolio and continued to drive shareholder returns:
- The Board has declared cash distributions of approximately
$38 million, or approximately $1.24 per
share, to shareholders since reinstating distributions in
the third quarter of 2019 – far more than the $1.10 per share
NexPoint offered to pay shareholders for their Trust shares. Cash
distributions declared since inception total approximately $186
million, equating to approximately $6.06 per share.
- The Trust has continued to actively and professionally manage
its portfolio, including originating 9 new loans since 2020 for a
total commitment of over $70 million. Importantly, 8 of these new
loans funded new phases of projects for which the Trust has
existing loans in its portfolio. These new loans are expected to
accelerate the performance of such existing project loans. To date,
one of these 9 loans has already been paid in full, and another
loan is expected to be repaid in full within the next 30 days.
- The Trust engaged an independent accounting firm that audited
the Trust’s 2022 financial statements and is currently auditing the
Trust’s 2023 financial statements, which are expected to be made
available to Trust shareholders in the third quarter of 2024.
The UDF IV Board is committed to a high standard of
corporate governance and takes its fiduciary duties to shareholders
extremely seriously. Despite NexPoint’s track record of acting
against the interests of shareholders, the Board will thoroughly
evaluate NexPoint’s trustee nominees as we would any other Board
candidate.
UDF IV will be mailing proxy materials to
shareholders in due course, which will include the
WHITE proxy card and additional details regarding
the Board of Trustees’ recommendation of nominees for election to
the Board at the 2024 Annual Meeting of Shareholders. Please
discard any other color proxy card sent to you.
These proxy materials and other important
information related to the 2024 Annual Meeting of Shareholders will
be made available to shareholders at
UDFforShareholders.com.
We thank you for your investment and continued
support of UDF IV.
Sincerely,
The UDF IV Board of Trustees
UDF IV shareholders are not required to take any
action at this time.
About United Development Funding
IV
United Development Funding IV is a Maryland real
estate investment trust. UDF IV was formed primarily to generate
current interest income by investing in secured loans and producing
profits from investments in residential real estate. Additional
information about UDF IV can be found on its website at
www.udfiv.com. UDF IV may disseminate important information
regarding its operations, including financial information, through
social media platforms such as Twitter, Facebook and LinkedIn.
Forward-Looking Statements
This release contains forward-looking statements
relating to, among other things, the performance of loans in the
Trust’s portfolio and the Trust’s plans regarding the 2024 Annual
Meeting of Shareholders. These forward-looking statements are based
on management’s current expectations and are not guarantees of
future performance or future events. Such forward-looking
statements generally can be identified by our use of
forward-looking terminology such as “may,” “will,” “expect,”
“intend,” “anticipate,” “estimate,” “believe,” or other similar
words. Readers should be aware that there are various factors, many
of which are beyond UDF IV’s control, which could cause actual
results to differ materially from any forward-looking statements
made in this release. Accordingly, readers are cautioned not to
place undue reliance on these forward-looking statements, which
speak only as of the date of this release. Forward-looking
statements in this document speak only as of the date of this
release, and UDF IV undertakes no obligation to update any such
statements that may become untrue because of subsequent events.
Investor Contact:Investor
Relations1-800-859-9338investorrelations@umth.com
Media Contact:Mahmoud Siddig /
Lucas PersJoele Frank, Wilkinson Brimmer Katcher(212) 895-8668