NexPoint Submits Revised Proposal for UDF IV, Seeks Engagement with Board for Shareholder Benefits

NexPoint Submits Competing Proposal for UDF IV

In a significant move for shareholders, NexPoint Advisors, L.P. has announced that its subsidiary, NexPoint Real Estate Opportunities, LLC, has put forward a new proposal to the Board of Trustees of United Development Funding IV (UDF IV). This proposal arrives just ahead of the scheduled Special Meeting of UDF IV shareholders on March 4, 2025, where a crucial merger with Ready Capital is set to be voted on.

Improved Shareholder Economics

the freshly submitted proposal by NexPoint closely resembles the proposed merger with Ready Capital; however, it stands out by offering notably superior terms for UDF IV shareholders. Key improvements include increased distributions from the balance sheet, full access to Contingent Value Rights (CVR) loan proceeds, and substantial indemnification reimbursements. Notably, the proposal also guarantees a higher pre-closing dividend to shareholders than what the Ready Merger offers, positioning NexPoint’s bid as beneficial for investor interests.

NexPoint asserts that shareholders will receive 100% of the net principal and interest recovered on CVR loans under their terms. In contrast, the current Ready Merger allocates the first $13.3 million of the CVR recoveries solely to Ready Capital, thus impeding shareholders’ financial outcomes. After that threshold, only 60% of additional recoveries are credited to UDF IV investors, which could total up to $20 million according to estimates.

Calls for Engagement and Delay

In light of these pivotal developments, NexPoint has urged the UDF IV Board to postpone the upcoming Special Meeting. The plea is to allow adequate time for the board to thoughtfully consider NexPoint's proposal, which they believe addresses ongoing governance flaws within UDF IV. NexPoint points to previous issues such as fraud and disclosure violations as reasons for the board's careful review process.

“Due to the evident lack of engagement from UDF IV's Board with one of its largest stakeholders, we are urging skepticism towards the upcoming vote and asking for a one-month delay. We genuinely believe our proposal not only promises better terms for shareholders but also seeks to address a history of governance failures,” stated a representative from NexPoint.

The call for a postponement emphasizes NexPoint's intention not to cast a vote at the Special Meeting unless there is a thorough evaluation of their proposal. NexPoint also encourages shareholders who have already voted to consider withdrawing their votes until a comprehensive assessment is made.

Looking Ahead

As this corporate narrative unfolds, NexPoint continues to engage with shareholders, advocating for transparency and an improved governance structure within UDF IV. Stakeholders are encouraged to visit the dedicated accountability site for ongoing updates about the merger and competing proposals, ensuring they remain informed.

NexPoint Advisors operates under the umbrella of NexPoint Diversified Real Estate Trust, Inc. (NYSE: NXDT), representing a diversified range of real estate strategies. Given the implications of this proposal and the decision at the forthcoming meeting, both UDF IV and NexPoint will face a critical time ahead as they navigate these options and assess their impact on shareholder value.