NexPoint Comments on United Development Funding (UDF IV) Bylaw Change and Litigation

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Feb 08, 2024, 08:30 ET

Will Continue to Push for Fair Election for UDF IV Board of Trustees and Other Shareholder Rights;
Encourages Shareholders to Contact NexPoint to Help Rectify Continuing Injustices at UDF IV

DALLAS, Feb. 8, 2024 /PRNewswire/ -- NexPoint Advisors, L.P., (together with its affiliates "NexPoint"), a Dallas-based alternative investment firm, today commented on recent corporate bylaw amendments enacted by United Development Funding IV ("UDF IV" or the "Company"), a real estate investment trust in which NexPoint is a significant shareholder, and on ongoing litigation between the parties. The changes to UDF IV's bylaws include the removal of indefensible restrictions that the Board of Trustees previously enacted, which limited the ability of shareholders to propose nominees to the Board.

"NexPoint continues to pursue remedies on behalf of UDF IV shareholders for the Company's ill-conceived entrenchment tactics, lack of liquidity and extreme deficiencies in transparency, which have been perpetuated by the Board of Trustees and continued even after the Company's executives were convicted and incarcerated for fraud.

"NexPoint seeks to rectify the harm that shareholders have endured for years, and our legal actions are already making an impact – in December, UDF IV finally held its first Annual Meeting in eight years and since amended its bylaws to remove some of the onerous restrictions that disenfranchised its shareholders. NexPoint intends to continue to push for a full election of all independent trustees and to hold the investment manager and other parties accountable for their roles in harming shareholders.

The latest example of shareholder mistreatment arises from the 2018 SEC settlement with certain executives of UDF IV's external advisor, including Hollis Greenlaw. The settlement required those executives, and not the Company, to disgorge $7.2 million of profit the executives improperly received as a result of securities laws violations alleged in the SEC's complaint. The amount was to be deposited into a "Fair Fund" and distributed to investors who owned shares between 2011-2015. The Company and its Board failed to disclose that these "disgorgement payments" were actually paid by the Company, not the individuals as required by the settlement. The eligible shareholders who recently received their Fair Fund distributions mistakenly believe these funds were disgorged by the advisor's executives. The disgorgement payments represent further misconduct and the continued failure by the Company and Board to protect shareholders' interests.

"UDF IV's unconscionable actions have led to defrauded shareholders effectively funding their own settlement payments. This improper disgorgement payment was expressly approved by the Board of Trustees, and, amazingly, was not disclosed even at the time of payment. The recent distribution is not a remedy for defrauded shareholders, but merely a misdirected and undisclosed return of capital that further erodes UDF IV enterprise value. For those who bought shares after 2015, the value erosion is more pronounced, as they were ineligible to receive any distribution, yet bore the cost of the misuse of funds, resulting in further NAV depletion. NexPoint continues to seek recovery of these and other improper indemnification payments through litigation in Texas.

"Sadly, but unsurprisingly, UDF IV and its Board continue to obstruct NexPoint's efforts for transparency and accountability, attempting to narrow the scope of litigation and restrict discovery to the detriment of all UDF IV shareholders. The Company's ongoing efforts to stymie shareholder empowerment and obfuscate their improper behavior cannot continue."

If you are a UDF IV shareholder and would like more information regarding NexPoint's efforts to rectify the issues that continue to plague UDF IV, including information about NexPoint's litigation against the Company, please email [email protected].

About 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

Media Contacts

Lucy Bannon
Chief Communications Officer
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Paul Caminiti/Pamela Greene
Reevemark
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SOURCE NexPoint Advisors, L.P.