UDF IV's Plan "Not to Reconvene the Annual Meeting" is Unacceptable Outcome for Shareholders
NexPoint Urges UDF IV to Reconvene Meeting Following Full Disclosure of Ready Capital Transaction Details and to Disclose Amount of Shareholder Funds Used on Advisors for an Annual Meeting it has Failed to Hold
DALLAS, Dec. 12, 2024 /PRNewswire/ -- NexPoint Real Estate Opportunities, LLC (together with its affiliates "NexPoint") today issued a statement regarding the "adjournment" of the United Development Funding IV ("UDF IV" or the "Company") Annual Meeting of Shareholders ("Annual Meeting") due to a lack of quorum and the Company's statement that it will not reconvene the Meeting.
NexPoint provided the following comment:
"We are deeply alarmed by UDF IV's announcement that it will not reconvene the Annual Meeting after failing to meet the quorum threshold. This decision exemplifies UDF IV's governance failures and unwillingness to engage with shareholders. This outcome also raises serious concerns about the current Board's ability to protect shareholder interests in the context of the proposed acquisition by Ready Capital (NYSE: RC). UDF IV's decision appears predicated on the assumption that the Ready Capital deal will close before the next Annual Meeting, suggesting they may seek to avoid holding its first contested annual meeting and Trustee election in nine years.
"We call on UDF IV to reconvene the Annual Meeting in accordance with the Company's bylaws within 120 days after the record date, but only after providing shareholders with the disclosures necessary to assess the proposed transaction, including previously omitted disclosure schedules, recent financials, the proxy statement and many other material details. We also call on UDF IV to obtain a non-objecting beneficial owners (NOBO) list to ensure greater shareholder oversight and engagement."
As stated, NexPoint declined to appear at the Annual Meeting due to concerns over the Company's last-minute announcement of the proposed Ready Capital merger, which appeared to be an attempt to sway the Annual Meeting's outcome without providing shareholders the necessary information to evaluate the proposed transaction. NexPoint would support the acquisition if full disclosure is presented, including current financials, and the transaction terms are fair.
Independent proxy advisory firm Glass Lewis shares NexPoint's concerns about UDF IV's disclosure deficiencies and the Ready Capital deal:
"While we understand a transaction of this nature could be viewed as something of a panacea for investors dissatisfied with the Trust's longstanding lack of liquidity and poor corporate governance, we believe shareholders have ample cause to question the timing of the transaction, the absence of key disclosures and, most fundamentally, the board's ability to credibly negotiate and secure a transformative transaction of this nature. That such an agreement would be executed less than two weeks prior to the Trust's first substantive election of directors in nearly ten years is more alarming still, and, in our view, further stokes concern about the board's true commitment to good governance and shareholder feedback." 1
NexPoint believes the Annual Meeting vote was a dead heat – certainly much closer than reported by UDF IV – demonstrating significant shareholder dissatisfaction with UDF IV's leadership. The Company exploited the purpose of the Annual Meeting and positioned it as a referendum on the merger to sway votes, which indeed caused some shareholders to change their vote in favor of the Company just days before the election.
Glass Lewis states:
"With the first meaningful board referendum in nearly a decade on the near-term docket — in this instance, seemingly only as a result of legal action in Maryland by NexPoint — UDF has notionally elevated the stakes by announcing a prospective acquisition of the Trust by Ready Capital in a partially contingent cash, stock and CVR transaction executed just eight days prior to the forthcoming AGM."1
UDF IV has actively suppressed shareholder engagement, refusing any constructive dialogue with NexPoint. To avoid accountability, the Company first spent significant shareholder funds to prevent this meeting from occurring. Then, once a Maryland court ordered it to hold this meeting, it took no steps to obtain the NOBO list representing approximately 24 million of UDF IV's 30 million shares, which would have enabled them to advise those shareholders directly about the first election of independent trustees in nine years. They later fought NexPoint's efforts to obtain such a list, but spent significant shareholder funds on high-priced attorneys and public relations firms to advance their agenda. NexPoint now calls on UDF IV to disclose the costs borne by shareholders related to the Annual Meeting (and efforts to avoid it) the Company now suggests it may never hold.
Shareholders are entitled to information from UDF IV to make their own decisions about the current Trustees and the proposed merger and deserve the opportunity to hold the Trustees accountable for years of value erosion and lost trust in favor of NexPoint's independent nominees. We encourage UDF IV shareholders to contact the Company to demand they reconvene the shareholder meeting, publish information on the merger, then meaningfully engage with NexPoint and other shareholders to answer their questions.
(1) Glass, Lewis & Co., LLC.: United Development Funding IV. December 6, 2024.
About NexPoint
NexPoint Real Estate Opportunities, LLC is a wholly owned subsidiary of NexPoint Diversified Real Estate Trust, Inc. (NYSE: NXDT), an affiliate of NexPoint Advisors, L.P.
NexPoint Advisors, L.P. is an SEC-registered adviser on the NexPoint alternative investment platform. It serves as the adviser to a suite of funds and investment vehicles, including a closed-end fund, interval fund, business development company, and various real estate vehicles. For more information visit www.nexpoint.com
IMPORTANT INFORMATION
NexPoint Real Estate Opportunities, LLC ("NexPoint") has delivered a proxy statement with respect to its solicitation of proxies for nominees to be elected to the United Development Funding IV ("UDF IV") Board of Trustees at the Annual Meeting of Shareholders of UDF IV. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE NEXPOINT PROXY STATEMENT (INCLUDING ANY AMENDMENTS OR SUPPLEMENTS THERETO) IN ITS ENTIRETY. Copies of the documents are available free of charge from NexPoint by accessing the website www.udfaccountability.com.
NexPoint, its affiliates, their directors and executive officers and other members of management and employees may be participants (collectively "Participants") in the solicitation of proxies by NexPoint. Information about NexPoint's nominees to the UDF IV Board of Trustees and information regarding the direct or indirect interests in UDF IV, by security holdings or otherwise, of NexPoint, the other Participants and NexPoint's nominees will be available in the proxy statement. NexPoint's disclosure of any security holdings will be based on information made available to NexPoint by such Participants and nominees. UDF IV is no longer subject to the reporting requirements of the Securities Exchange Act of 1934, as amended. Consequently, NexPoint's knowledge of significant security holders of UDF IV and as to UDF IV itself is limited.
NexPoint has neither sought nor obtained consent from any third party to use previously published information in this press release, including any quotes used in this press release.
CONTACT INFORMATION
UDF IV Investor Contacts
Chuck Garske / Jeremy Provost / Theo Caminiti (Okapi Partners):
