NexPoint Comments on Cancellation of United Development Funding IV (UDF IV) 2024 Annual Meeting

Rhea-AI Summary

NexPoint has issued a statement criticizing United Development Funding IV (UDF IV)'s decision not to reconvene its 2024 Annual Meeting of Shareholders due to lack of quorum. NexPoint expresses deep concerns about UDF IV's governance and its handling of the proposed Ready Capital acquisition. The company calls for UDF IV to reconvene the meeting within 120 days, but only after providing complete disclosure of the Ready Capital transaction details.

Independent proxy advisory firm Glass Lewis shares NexPoint's concerns about disclosure deficiencies and transaction timing. NexPoint believes the Annual Meeting vote was closer than reported, indicating significant shareholder dissatisfaction. The company criticizes UDF IV for suppressing shareholder engagement and spending substantial shareholder funds on legal and PR efforts while avoiding accountability.

Positive

• None.

Negative

• UDF IV failed to achieve quorum for Annual Meeting
• Company has not held contested trustee election in 9 years
• Lack of transparency regarding Ready Capital merger details
• Significant shareholder funds spent on legal and PR efforts
• 24 million of 30 million shares not directly contactable due to missing NOBO list

Insights

Corporate Governance Analyst

The cancellation of UDF IV's annual meeting amid a proposed Ready Capital acquisition represents a significant corporate governance issue. The failure to achieve quorum and subsequent decision not to reconvene raises serious concerns about shareholder rights and transparency. Glass Lewis's criticism of the timing and disclosure deficiencies surrounding the merger announcement, coupled with UDF IV's first board election in nine years, suggests potential manipulation of the governance process. The lack of access to the NOBO list, representing approximately 80% of outstanding shares, further impedes shareholder engagement. These actions could materially impact shareholder value and voting rights, particularly in context of the pending Ready Capital transaction.

M&A Specialist

The timing and execution of the Ready Capital merger announcement appear strategically positioned to influence the annual meeting outcome. The lack of critical disclosure materials, including financial statements and transaction details, hampers proper valuation assessment. The deal structure, involving cash, stock and CVR components, requires thorough scrutiny to determine fair value for shareholders. NexPoint's conditional support for the acquisition, pending full disclosure and fair terms, suggests potential deal risks. The close vote split indicates significant shareholder skepticism about both current management and the proposed transaction, which could affect deal completion prospects.

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):

Email: info@okapipartners.com

Phone: (212) 297-0720

For Additional Information/Updates on UDF IV

Website: www.udfaccountability.com

Email: udfinvestors@nexpoint.com

Media Contacts

Lucy Bannon (NexPoint): lbannon@nexpoint.com

Paul Caminiti/Pamela Greene (Reevemark): nexpointteam@reevemark.com

NexPoint Investor Relations

Kristen Griffith: ir@nexpoint.com

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SOURCE NexPoint Advisors, L.P.

FAQ

Why did UDF IV cancel its 2024 Annual Meeting?

UDF IV cancelled its 2024 Annual Meeting due to a lack of quorum and announced it will not reconvene the meeting, potentially avoiding its first contested trustee election in nine years.

What is NexPoint demanding from UDF IV regarding the Ready Capital merger?

NexPoint is demanding UDF IV provide complete transaction details, including disclosure schedules, recent financials, proxy statement, and other material information before reconvening the Annual Meeting.

What concerns did Glass Lewis raise about UDF IV's Ready Capital deal?

Glass Lewis expressed concerns about the timing of the transaction, absence of key disclosures, and the board's ability to negotiate a transformative transaction just before the first substantive director election in nearly ten years.

How many UDF IV shares are affected by the missing NOBO list?

Approximately 24 million of UDF IV's 30 million shares are represented in the NOBO list, which the company has not obtained, limiting direct shareholder communication.