NexPoint is Deferring its Vote, Encourages Shareholders to Take No Action on Merger Vote to Compel Board to Properly Review Any Competing Proposal
Calls for UDF IV Board to Postpone March 4 Special Meeting by 30 Days and Engage with NexPoint to Ensure Best Outcome for Shareholders
DALLAS, Feb. 21, 2025 /PRNewswire/ -- NexPoint Real Estate Opportunities, LLC (together with its affiliates "NexPoint") today provided an update on its intentions with respect to its investment in United Development Funding IV ("UDF IV" or "the Trust") ahead of the Special Meeting of UDF IV Shareholders (the "Meeting"), scheduled for March 4, 2025, to vote on the proposed merger of UDF IV with Ready Capital (NYSE: RC) (the "Ready Merger").
NexPoint has significant and growing concerns about the Ready Merger, which was first announced days ahead of the Annual Meeting and Board of Trustees election in December 2024. Since announcement of the Ready Merger, NexPoint's ongoing assessment of the transaction has amplified those concerns, leading to the conclusion that shareholders have no reason to believe that the self-interested and entrenched Board, after years of failing to protect shareholders' interests, would suddenly change its behavior in pursuing, negotiating, approving and recommending that shareholders vote to approve the Ready Merger.
NexPoint's conclusion mirrors the findings of Glass Lewis in its December 2024 report on UDF IV: "That the board claims its current members and management team are 'focused on protecting and enhancing shareholder value' is, in our view, confounding."
NexPoint's Intent to Submit Competing Proposal and Impact to Special Meeting:
Given NexPoint's fundamental concerns, which affect countless aspects of the Ready Merger, NexPoint intends to submit a competing proposal to the UDF IV Board of Trustees in advance of the Special Meeting.
NexPoint strongly urges the UDF IV Board of Trustees to protect shareholders by granting a short 30-day postponement of the Special Meeting, moving it from March 4 to April 4, 2025. This brief postponement would allow for the Board to adequately review a competing proposal and engage with NexPoint and other parties to deliver the best outcome for and maximize value to shareholders.
This change would accommodate proper review and engagement of a competing proposal, while ensuring the Ready Merger, if ultimately deemed superior by the Board, could still be consummated prior to April 15, 2025, the deadline for which the Ready Merger is required to be consummated under the merger agreement.
Voting Considerations:
While NexPoint urges the Board to consider the interests of its shareholders and postpone the Special Meeting to conduct this review, NexPoint's previous attempts to engage the Board have been either ignored or met with hostile public attacks. As such, NexPoint has not yet voted on the proposed Ready Merger and encourages shareholders to withhold their votes for the Special Meeting, or withdraw any previously submitted votes, to compel the Board to comply with this request and provide adequate consideration and engagement in the best interests of shareholders.
The Glass Lewis report further supports NexPoint's fundamental concerns: "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."
Significant Issues in Ready Merger:
Questionable Shareholder Economics:
UDF IV shareholders would receive a significant percentage of their consideration in RC stock, which has suffered from the portfolio's declining operating cash flow and resulting series of distribution cuts, which Wall Street forecasts have suggested may continue. The Ready Merger may create significant additional selling pressure on Ready common stock, further eroding the Ready Capital stock price and, consequently, the value received by UDF IV shareholders as UDF IV shareholders seek to exit their long-illiquid investment upon close.
Disproportionate Benefits to UDF IV Board and Other Insiders:
The Ready Merger provides significant benefits to the Board, current and former management, the adviser, and UDF IV's largest borrower that do not reflect the interest of UDF IV shareholders. Through indemnifications, litigation adjustments, and other terms, the Ready Merger provides a path for UDF IV leadership and other bad actors to "wipe the slate clean" and completely avoid accountability for almost ten years of harm caused to shareholders. In turn, because of extensive indemnification provisions in the Ready Merger Agreement, shareholders have limited ability to seek repayment of misused shareholder funds and pursue other potential recoveries, which could be in the tens of millions of dollars.
Limited Shareholder Recovery Rights:
NexPoint believes a superior proposal requires limited releases and indemnifications to protect shareholders' rights to defend their interests and hold accountable those responsible for the harm and value destruction experienced due to the fraud, mismanagement, and governance failures at UDF IV.
For More Information:
NexPoint encourages shareholders to visit udfaccountability.com for more information. Shareholders can complete the contact form on the site to receive ongoing updates about UDF IV, the Ready Merger, and any competing proposals.
About NexPoint
NexPoint Real Estate Opportunities, LLC is a wholly owned subsidiary of NexPoint Diversified Real Estate Trust, Inc. (NYSE: NXDT), a diversified real estate investment trust externally advised by an affiliate of NexPoint Advisors, L.P.
NexPoint Advisors, L.P. is an SEC-registered adviser on the NexPoint alternative investment platform. For more information visit www.nexpoint.com
IMPORTANT INFORMATION
This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements regarding NexPoint's intention to submit a competing proposal to the Ready Merger and other statements identified by words such as "expect," "intend," the negative version of these words and similar expressions that do not relate solely to historical matters. Forward-looking statements are based on NXDT's current expectations and assumptions regarding capital market conditions, NXDT's business, the economy and other future conditions. Forward-looking statements are subject to risks, uncertainties and assumptions and may be affected by known and unknown risks, trends, uncertainties and factors that are beyond NXDT's control. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. Important factors that could cause actual results to differ materially from those in the forward-looking statements include regional, national or global political, economic, business, competitive, market and regulatory conditions, and those described in greater detail in our filings with the Securities and Exchange Commission, particularly those described in NXDT's Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. Readers should not place undue reliance on any forward-looking statements and are encouraged to review the NXDT's Annual Report on Form 10-K and other filings with the SEC for a more complete discussion of risks and other factors that could affect any forward-looking statement. Any forward-looking statement made in this press release speaks only as of the date on which it is made. NXDT undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.
