NexPoint Raises Concerns About UDF IV Board Allowing Millions in Management Fees to Enrich Former UDF Executives Imprisoned for Fraud

In This Article:

  • Current Trustees Continue to Protect the Interests of the Board, UDF Management, and the Largest Borrower at Shareholders' Expense

  • Shareholders Should Not Be Misled by UDF IV's Ongoing Attempts to Deflect from the Board's Egregious Actions

DALLAS, Nov. 6, 2024 /PRNewswire/ -- NexPoint Real Estate Opportunities, LLC (together with its affiliates "NexPoint") today provided an update on United Development Funding IV ("UDF IV" or the "Company"). NexPoint notes that UDF IV's current Board of Trustees continues to deflect attention from the Board's egregious actions and the Company's underperformance by pushing false and misleading narratives about NexPoint. Shareholders should instead focus on the ongoing conduct of this Board and recognize the need for wholesale change; otherwise, questionable actions by UDF IV management, the Board, and the Company's largest borrower, Mehrdad Moayedi, are unlikely to be investigated and remedied.

NexPoint nominated four highly regarded real estate and finance industry professionals to replace the current independent Trustees on the UDF IV Board. These accomplished individuals bring relevant industry expertise and governance experience at both public and private companies to their candidacy. If elected, NexPoint's nominees are committed to working on behalf of shareholders to enact critical change, establish accountability and transparency, and recover value and liquidity at UDF IV. This includes thoroughly investigating any improper transactions and, where available, pursuing recoveries of misused funds for the benefit of all shareholders.

Shareholders Should Note Major Red Flags from Current Board of Trustees:

  • UDF IV's current Board of Trustees does not want you to know that the management fees it continues to approve for UDF's advisor—over $10 million in the last two years—enrich former UDF executives who are currently in federal prison for committing fraud against UDF IV shareholders. Not only do the convicted felons inordinately profit from UDF IV's advisory agreement, but the advisory fees appear even more unfounded considering the deficiencies in portfolio management (one of the advisor's primary responsibilities) that were revealed in the Company's latest financials. Meanwhile, shareholders suffer without liquidity, brought on by years of disclosure violations that led Nasdaq to delist the stock and the SEC to revoke the Company's registration altogether. This all occurred under the oversight of three of the four trustees who are up for election.

  • UDF IV's Board of Trustees has permitted the Company to use shareholder funds for former executives' personal disgorgement and legal defenses. Upon information and belief, the Company advanced legal fees totaling more than $65 million, and a significant portion of those advancements may have been improper. For example, the current Trustees authorized the Company to pay millions in legal fees and indemnification expenses for former management's criminal trial, despite the clear language in the advisory agreement prohibiting indemnification when the expense arises from "an alleged violation of federal or state securities law." Prior to that, the Board allowed UDF IV to pay former executives' SEC disgorgements (totaling $7.2 million with pre-judgment interest), which were obligations of the individuals, not the Company.

  • UDF IV, under the Board of Trustees' oversight, has permitted the Company to amass over 98% of UDF's unaffiliated debt with a single borrower, Mehrdad Moayedi and affiliates of Centurion American, a developer with a history of failed projects. Inexplicably, the Company appears to have released Mr. Moayedi from significant personal guarantee liability.

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