The letter to shareholders and other important information regarding the Trust’s ongoing commitment to value creation and track record of delivering shareholder returns, including UDF IV’s proxy materials, can be found at UDFforShareholders.com. The Trust urges shareholders to support the Board that is enhancing the value of their investment by voting on the WHITE proxy card “FOR” the Board’s nominees – Steven J. Finkle, Lawrence S. Jones, J. Heath Malone and Phillip K. Marshall. The UDF IV shareholders should discard any green or other color proxy card sent by NexPoint.
The full text of the letter to shareholders follows:
Dear UDF IV Shareholders,
You face a critical decision regarding the future of your investment at United Development Funding IV’s (“UDF IV” or the “Trust”) upcoming Annual Shareholder Meeting (the “Annual Meeting”), which will take place in the fourth quarter of 2024.
Your Board of Trustees and management team are relentlessly focused on promoting the interests of the Trust’s shareholders and building on our long track record of delivering value to shareholders. Thanks to the Board’s decisive actions and oversight, UDF IV has paid cash distributions of:
- ~$38 million, or ~$1.24 per share, since reinstating distributions in the third quarter of 2019
- ~$185.7 million, ~$6.06 per share, since the Trust’s inception
We are continuing to build on the Trust’s long history of paying cash distributions as the Board recently declared a cash distribution of $0.13 per share for the third quarter of 2024.
We urge you to support the Board that is delivering significant returns by voting “FOR” ONLY the Board’s four nominees – Lawrence S. Jones, Phillip K. Marshall, Steven J. Finkle, and J. Heath Malone – on the WHITE proxy card.
Despite your Board’s work to enhance the value of your investment, NexPoint Real Estate Opportunities, LLC, an indirect subsidiary of NexPoint Diversified Real EstateTrust (NXDT), and its affiliates (collectively, “NexPoint”) continue to pursue a self-interested campaign at the expense of all UDF IV shareholders. To date, NexPoint has yet to present any viable plan to enhance shareholder value at UDF IV. This confirms our suspicions that NexPoint’s campaign is simply its latest ploy aimed at extracting the value of the Trust’s portfolio for its own benefit at the expense of shareholders.
NexPoint’s actions against the Trust and its leadership’s track record raise serious concerns regarding the detrimental implications for UDF IV shareholders should NexPoint’s campaign succeed.
NexPoint has attempted to take over management of the Trust for the past 5+ years, causing significant disruption to the Trust’s operations and undermining our shareholders’ investment.
- 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.
Given that NexPoint is seeking to take over management of UDF IV, it is only fair to ask, “How has NexPoint’s own fund performed?” The facts are clear – NexPoint has an abysmal track record of managing its own fund.
- A subsidiary of NexPoint Advisors is the advisor to NexPoint Diversified Real Estate Trust (NXDT), the NexPoint fund that owns UDF IV shares. Per NXDT’s Q1 2024 Investor Presentation, as of March 31, 2024, NXDT was trading at a 61.3% discount to its Net Asset Value (NAV).
- As of August 16, 2024, the trading price of NXDT shares declined by 69.02% during the prior two years, while the S&P 500 benchmark index increased 29.01% during the same time period.
Shareholders should have serious concerns relating to NexPoint’s business ethics and practices. Affiliates of James Dondero, NexPoint’s founder, have engaged in willful misconduct and breached their fiduciary duty, and James Dondero and his affiliates are alleged to have engaged in fraudulent transfer of assets and self-dealing.
- UBS Securities (“UBS”) filed a lawsuit in New York State Supreme Court against James Dondero and several of his current or previous affiliates, claiming he schemed to prevent UBS from collecting $1.3 billion in judgments UBS obtained against entities managed indirectly by Highland Capital Management, L.P. See UBS Securities LLC v. Dondero, New York State Supreme Court, New York County.
- The SEC issued an Order finding that Highland Capital Management LP, a now bankrupt investment firm co-founded by Dondero, willfully violated Section 206(3) of the Advisers Act. See Investment Advisers Act of 1940 Release No. 3939, Sept, 25, 2014.
- A JAMS arbitration panel found that ACIS Capital Management GP, LLC breached its fiduciary duty while James Dondero was an officer. See Terry v. Highland Capital et al, JAMS Arbitration No. 1310022713.
The future of your investment is at stake.
We ask that you vote “FOR” ONLY the Board’s four nominees on the WHITE proxy card today to enable the UDF IV Board to continue to advance your interests and prevent NexPoint from successfully implementing what we expect will be a self-serving, value-destructive agenda.
Thank you again for your continued support.
Sincerely,
The UDF IV Board of Trustees
If you have any questions or require any assistance with respect to voting your shares, please contact our proxy solicitor:
INNISFREE M&A INCORPORATED
Shareholders may call:
1 (877) 750-9496 (toll-free from the U.S. and Canada)
+1 (412) 232-3651 (from other countries)
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: UDF IV’s 2024 Annual Meeting of Shareholders and the work of UDF IV’s Board of Trustees and management team to promote shareholders’ interests and deliver significant returns. 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 including, among others, changes in general economic conditions in the real estate market and the credit market and changes in interest rates. 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 release speak only as of the date on which such statements were made, and UDF IV undertakes no obligation to update its forward-looking statements, whether as a result of new information, future events or otherwise.
Investor Contact:
Investor Relations
1-800-859-9338
investorrelations@umth.com
Media Contact:
Mahmoud Siddig / Lucas Pers / Dylan O’Keefe
Joele Frank, Wilkinson Brimmer Katcher
(212) 895-8668
