NexPoint Sends Letter to United Development Funding IV (UDFI) Board of Trustees, Renewing Request for Board Engagement
27 May, 2022, 08:34 ET
NexPoint Seeks to Engage with UDFI Board to Maximize Shareholder Value
DALLAS, May 27, 2022 /PRNewswire/ -- NexPoint Advisors, L.P., investment adviser to the NexPoint Diversified Real Estate Trust ("NXDT" and together with affiliated entities "NexPoint"), announced today that it submitted a letter to the Board of Trustees (the "Board") of United Development Funding IV ("UDFI" or the "Company") on May 24, 2022, requesting that the Board engage in a constructive dialogue with NexPoint with the goal of maximizing shareholder value for the benefit of all UDFI shareholders.
As the largest shareholder of UDFI, NexPoint has previously raised issues about the management of UDFI by UMTH General Services, LP (the "Advisor") and its principals, and oversight of UDFI by the Board, and sought to engage the Board in a dialogue that could result in steps to return the Company to a path toward value creation. The Board has ignored NexPoint's requests to date. The latest request, included in the letter dated May 24, 2022, renews NexPoint's appeal for Board engagement following the conviction and sentencing of several principal officers of the Advisor and new evidence of impermissible indemnification payments on behalf of such individuals in connection with violations of the US federal securities laws and UDFI's failure to disclose such indemnification payments.
A copy of the May 24, 2022 letter can be found here: NexPoint Letter to UDFI Board RE: Request for Board Engagement
On January 21, 2022, Hollis Greenlaw, Cara Obert, Ben Wissink, and Brandon Jester, each of whom was an officer and/or employee of the Advisor (with Greenlaw and Obert also being CEO and CFO, respectively, of UDFI), were convicted of fraud by a federal jury. The jury found the four officers guilty on all ten counts of the indictment, which included securities fraud, conspiracy to commit securities fraud, and conspiracy to commit wire fraud affecting a financial institution. A sentencing hearing was held on May 20, 2022, which resulted in the defendants receiving federal prison sentences ranging from three to seven years. The conviction and subsequent sentencing are the latest developments in a long list of charges and complaints surrounding UDFI and its Advisor and their respective leadership.
In the letter to the UDFI Board, NexPoint highlights, among other things:
- The Board's abject failure to cause the Company to provide its shareholders with material information for over six years;
- The Board's approval of using UDFI shareholder money to pay individual disgorgement, pre-judgment interest, and legal fees arising from SEC and criminal securities fraud cases against the UDFI and/or Advisor principals—despite a clear and unequivocal provision in the Advisory Agreement between UDFI and the Advisor prohibiting indemnification of amounts arising from securities law violations;
- The Board's failure to cause UDFI to disclose to shareholders and the markets UDFI's payment of $7.2 million of disgorgement and pre-judgment interest on behalf of individual executives and employees of the Advisor who were ordered by a Federal judge to pay those amounts individually; and
- The Board's failure to consider termination of the Advisory Agreement in the face of the multitude of bad acts alleged and proven that arose from the conduct of the Advisor and its principals in the management of UDFI's business.
In the letter, NexPoint also reminds the Board of shareholders' expectations that the Board will fulfill its statutory duties, protect assets, and abide by existing contracts.
In light of these recent developments, NexPoint is renewing its appeal to the Board to engage with NexPoint and return the Company to a path toward value creation for the benefit of all UDFI shareholders.
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.
SOURCE NexPoint Advisors, L.P.
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