NexPoint Expresses Views on UDF IV's Proposed Acquisition by Ready Capital

NexPoint Comments on the Proposed Acquisition of UDF IV by Ready Capital

NexPoint Real Estate Opportunities, LLC, along with its affiliates, has released insights regarding the proposed acquisition of United Development Funding IV (UDF IV) by Ready Capital Corporation, a multi-faceted real estate finance company. This commentary follows years of advocacy and engagement from NexPoint aimed at ensuring that the interests of UDF IV shareholders are at the forefront of strategic decisions.

The Texas-based real estate investment trust, UDF IV, has been under scrutiny, primarily due to historical performance issues and transparency concerns. In the proposed transaction, NexPoint has marked some critical observations. Firstly, while the offer presents a capped value of $5.89 per share, this is significantly lower than the reported book value of $9.47 per share from UDF IV’s latest financials. This disparity raises alarm bells for shareholders who expect not just liquidity but also a return reflecting their investments' actual worth.

A substantial part of the acquisition offer hinges on $75 million in contingent cash distributions, which represents over 40% of the potential value. However, NexPoint highlights that these distributions do not guarantee real value creation; rather, they may suggest a mere return of capital, which many shareholders might perceive as inadequate. The merger agreement indeed allows UDF IV to distribute cash 'up to' that mentioned amount but does not ensure these distributions will be met, raising doubts regarding the likelihood of achieving the planned returns.

NexPoint’s concerns extend into the governance of UDF IV, where a lack of accountability under the current Board has been noted. The Board is comprised of Trustees that have overseen significant issues, including frequent disclosures of fraud and sustained illiquidity that have plagued shareholders for years. These concerns emphasize the pressing need for a change in leadership to restore faith in the management of UDF IV.

NexPoint aims to better the situation by pushing for their nominees to be elected to the UDF IV Board. This effort is pivotal as an annual meeting is scheduled for December 10, 2024. Here, shareholders have a crucial opportunity to vote on Board representatives. NexPoint urges shareholders to support Paul S. Broaddus, Edward N. Constantino, John A. Good, and Julie Silcock, individuals they believe can drive accountability and potentially enhance shareholder value.

The upcoming meeting is not just about electing Board members but represents a chance for shareholders to have their voices heard after years of non-transparency and inadequate governance. NexPoint emphasizes that accountability is essential to maximize value and regain shareholder trust.

In conclusion, while the proposed acquisition by Ready Capital has the potential to bring liquidity to UDF IV, many concerns shall remain until shareholders can be assured of meaningful returns and genuine accountability. NexPoint reaffirms its commitment to pursuing the best possible outcome for shareholders and pushes for their nominees to lead this endeavor effectively. With ongoing assessments and strategic actions, there is hope for a brighter future for UDF IV’s stakeholders.

For further details and updates about the UDF IV situation, interested parties can refer to udfaccountability.com.