The Future of Your Investment in UDF IV is at Stake– Vote on the WHITE proxy card TODAY to Protect Your Investment!

The Trust will hold its 2024 Annual Meeting of Shareholders on December 10, 2024, at 10:00 AM CST.

Vote FOR the four nominees proposed by the UDF IV Board on the WHITE proxy card to ensure the Trust can continue to build on its record of delivering advanced shareholder returns.

Ready Capital to Acquire UDF IV – Maximizing Value for UDF IV Shareholder

UDF IV shareholders may receive up to $5.89 per UDF IV share through a combination of: (i) pre-closing distributions of UDF IV’s own cash from its balance sheet valued at up to $75 million, or $2.44 per share, (ii) shares issued at closing by Ready Capital for UDF IV shares valued at $94 million, or $3.07 per share, and (iii) contingent value rights with estimated future value of up to $12 million, or $0.38 per share

Remember that only your latest dated proxy counts and that a vote on the green proxy card to “WITHHOLD” on the NexPoint nominees could revoke your votes “FOR” the UDF IV nominees on the WHITE proxy card. Please simply discard any green proxy card sent to you by NexPoint and vote every UDF IV WHITE proxy card you receive as you may hold your shares in multiple accounts.

Suburban Community

Your United Development Funding IV (“UDF IV” or the “Trust”) Board of Trustees and management team have acted, and continue to act, to protect and promote the interests of the Trust’s shareholders.

We have navigated extraordinary challenges and will continue to focus on safeguarding the Trust’s assets and maximizing shareholder value while building on the Trust’s long history of cash distributions.

Despite our work to protect your investment, NexPoint Real Estate Opportunities, LLC, an indirect subsidiary of NexPoint Diversified Real Estate Trust (NXDT), and its affiliates (collectively, “NexPoint”) continue to pursue a self-interested campaign at the expense of all UDF IV shareholders.

NexPoint has submitted nominations for a controlling slate of dissident trustees for election at the 2024 Annual Meeting of Shareholders, which will be held on December 10, 2024 at 10:00 AM CST. This is simply the latest step in NexPoint’s ongoing, self-interested campaign, which we believe is aimed at extracting the value of the Trust’s portfolio for its own benefit and to the detriment of all other shareholders. Their recent proxy materials confirmed our suspicions, as they do not present a single viable plan that we believe would enhance value.

We urge you to vote “FOR” ONLY the four nominees proposed by the Board of Trustees on the WHITE proxy card included in the enclosed UDF IV proxy materials.

NexPoint Has Attempted to Take Over Management of the Trust for the Past 5+ Years, Causing Significant Disruption to the Trust’s Operations and Undermining Our Shareholders’ Investment
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NexPoint has launched numerous frivolous lawsuits against the Trust – including a defamation suit – forcing the Trust to waste resources that could otherwise be used for the benefit of shareholders.
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In 2020, NexPoint launched a hostile tender offer, which it extended 13 times, to purchase Trust shares at the bargain basement price of $1.10 per share, or approximately a 90% discount to the Trust’s book value per share at the time.
Despite NexPoint’s Malicious Attacks on the Trust, the UDF IV Board and Management Team Have Safeguarded the Value of the Trust’s Portfolio and Continued to Drive Shareholder Returns
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The Board has entered into an agreement for UDF IV to be acquired by Ready Capital, delivering up to $5.89 per UDF IV share through a combination of: (i) pre-closing distributions of UDF IV’s own cash from its balance sheet valued at up to $75 million, or $2.44 per share, (ii) shares issued at closing by Ready Capital for UDF IV shares valued at $94 million, or $3.07 per share, and (iii) contingent value rights with estimated future value of up to $12 million, or $0.38 per share (read the press release for full details).

The Ready Capital transaction will provide shareholders with immediate value and potential long-term upside:
  • Meaningful Upfront Pre-Closing Cash Distributions. The transaction will facilitate significant cash distributions to UDF IV shareholders, estimated to be up to $2.44 per share before the transaction closes.
  • Provides Liquid Stock Consideration and Upside Potential. As owners of Ready Capital shares, UDF IV shareholders would own a NYSE-listed stock with a current 10-day average daily volume of 1.41 million shares and a current dividend yield of 13.6%.
  • Future CVR Potential. Provides opportunity for UDF IV shareholders to receive contingent consideration and aligns incentives to generate further value from selected assets in the UDF IV portfolio.
  • Enhanced Platform, Greater Diversification and Added Expertise. Enables UDF IV investors to benefit from ownership in a company with an efficient, scalable operating platform, a diversified business model, exposure to an existing broad pool of real estate debt investments, and access to the extensive expertise and resources of Ready Capital’s external manager, Waterfall Asset Management, an SEC registered investment adviser.
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The Board has paid cash distributions of approximately $41.9 million, or approximately $1.37 per share, to shareholders since reinstating distributions in the third quarter of 2019. Cash distributions paid since inception total approximately $189.7 million, equating to approximately $6.19 per share.
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The Trust has continued to actively and professionally manage its portfolio, including originating 9 new loans since 2020 for a total commitment of over $70 million. Importantly, 8 of these new loans funded new phases of projects for which the Trust has existing loans in its portfolio. These new loans are expected to accelerate the performance of such existing project loans.
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The Trust engaged an independent accounting firm that audited the Trust’s 2022 and 2023 financial statements. These audited financial statements were made available to Trust shareholders.
NexPoint has a poor track record of managing its own fund.
NXDT’s Stock Price has Declined Significantly
S&P 500 benchmark index increased 49.80% during the same time period
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A subsidiary of NexPoint Advisors is the advisor to NexPoint Diversified Real Estate Trust (NXDT), the NexPoint fund that owns UDF IV shares. Per NXDT’s Q2 2024 Investor Presentation, as of June 30, 2024, NXDT was trading at a 70% discount to its Net Asset Value (NAV).
Losses have mounted for nxdt
According to its own financial reports, NXDT has lost over $246 million since July 2022.12
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Since September 2023, NXDT has resorted to paying its common shareholders a quarterly distribution payable 80% in stock and only 20% in cash.
Despite this Performance, the Management Team has been Richly Rewarded...3
Since NXDT shareholders approved a long-term incentive plan on January 30, 2023, the Company granted 1,637,269 Restricted Stock Units to its trustees and officers and other employees of the Advisor (603,482 Restricted Stock Units in 2023 and 1,033,787 Restricted Stock Units in the first six months of 2024).
Affiliates of James Dondero, NexPoint’s founder, have engaged in willful misconduct and breached their fiduciary duty, and James Dondero and his affiliates are alleged to have engaged in fraudulent transfer of assets and self-dealing.
Dondero and Highland Capital Management Litigation Timeline
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UBS Securities (“UBS”) filed a lawsuit in New York State Supreme Court against James Dondero, and several of his current or previous affiliates, claiming he schemed to prevent UBS from collecting $1.3 billion in judgments UBS obtained against entities managed indirectly by Highland Capital Management, L.P. See UBS Securities LLC v. Dondero, New York State Supreme Court, New York County. Special Turnover Petition filed by UBS Securities LLC and UBS AG London Branch against James Dondero et al.*
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The SEC issued an Order finding that Highland Capital Management LP, a now bankrupt investment firm co-founded by Dondero, willfully violated Section 206(3) of the Advisers Act. See Investment Advisers Act of 1940 Release No. 3939, Sept, 25, 2014.
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A JAMS arbitration panel found that ACIS Capital Management GP, LLC breached its fiduciary duty while James Dondero was an officer.  See Terry v. Highland Capital et al, JAMS Arbitration No. 1310022713.
*UDF IV is not responsible, and accepts no liability, for the contents of the Special Turnover Petition filed by UBS Securities LLC and UBS AG London Branch against James Dondero et al. in the Supreme Court of the State of New York and makes no representations or warranties regarding its contents.

Importantly, the $1.37 per share in distributions to shareholders that we have paid since the third quarter of 2019 is far more than NexPoint was willing to offer shareholders for their Trust shares.

CONTACT US
White proxy papers

On August 8, 2024, UDF IV mailed proxy materials to shareholders, which include the WHITE proxy card and additional details regarding the Board of Trustees’ recommendation of nominees for election to the Board at the 2024 Annual Meeting of Shareholders. The Annual Meeting will be held on December 10, 2024, at 10:00 AM CST in a virtual-only format.

Shareholders have the opportunity to continue UDF IV’s work to protect and enhance shareholder value by reelecting the four independent Trustees- Steven J. Finkle, Lawrence S. Jones, J. Heath Malone and Phillip K. Marshall– who oversee our efforts to protect the value of your investment. We urge you to vote “FOR” ONLY the four nominees proposed by the Board of Trustees on the WHITE proxy card included in the enclosed UDF IV proxy materials.

UDF IV shareholders as of the close of business on November 12, 2024, the record date, are entitled to vote their shares at the Annual Meeting or to submit a proxy before the Annual Meeting.

You will likely continue to receive materials from NexPoint with fictitious claims regarding the Trust as well as our Board and management team. We expect that NexPoint will continue to twist the facts and rehash old events in an attempt to fearmonger and deceive you into supporting their misguided and malicious campaign. Please discard any green or other color proxy card sent to you by NexPoint as it may not include the accurate and complete information to which shareholders are entitled.