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Section 1: SC 14D9 (SC 14D9)

 

 

 

As filed with the Securities and Exchange Commission on March 31, 2017

 

 

 

UNITED STATES 

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

 

SCHEDULE 14D-9

 

SOLICITATION/RECOMMENDATION STATEMENT 

UNDER SECTION 14(d)(4) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

 

United Development Funding IV

(Name of Subject Company)

 

 

 

United Development Funding IV 

(Name of Person(s) Filing Statement)

 

 

 

Common Shares of Beneficial Interest, $0.01 par value per share

(Title of Class of Securities)

 

910187103

(CUSIP Number of Class of Securities)

 

Hollis M. Greenlaw

Chief Executive Officer

1301 Municipal Way, Suite 100

Grapevine, Texas 76051

(214) 370-8960 

(Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications 

on Behalf of the Person(s) Filing Statement)

 

With Copies to:

Lauren B. Prevost

Seth K. Weiner

Morris, Manning & Martin, LLP

1600 Atlanta Financial Center

3343 Peachtree Road, N.E.

Atlanta, Georgia 30326-1044

(404) 233-7000

 

 

 

 

¨ Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer.

 

 

 

 

SCHEDULE 14D-9

 

This Solicitation/Recommendation Statement on Schedule 14D-9 (the “Schedule 14D-9”) relates to the cash tender offer by SCM Special Fund 3, LP, Lemon Creek Advisers, LP and MacKenzie Capital Management, LP (collectively, the “Offerors”), to purchase up to 1,550,000 common shares of beneficial interest of United Development Funding IV, a Maryland real estate investment trust (which we refer to herein as the “Trust,” “we,” “our” or “us”), at a price of $1.25 per share (the “Offer Price”).

 

As discussed below, the Trust’s Board of Trustees expresses no opinion and remains neutral regarding whether the Trust’s shareholders should accept or reject the tender offer by the Offerors to purchase their common shares of beneficial interest.

 

Item 1. Subject Company Information.

 

(a) Name and Address. The name of the subject company is United Development Funding IV, a Maryland real estate investment trust. The address and telephone number of the principal executive offices of the Trust are 1301 Municipal Way, Suite 100, Grapevine, Texas 76051 and (214) 370-8960.

 

(b) Securities. The title of the class of equity securities to which this Schedule 14D-9 relates is common shares of beneficial interest (the “Shares”), par value $0.01 per Share. As of March 30, 2017, 30,685,914 Shares were outstanding.

 

Item 2. Identity and Background of Filing Person.

 

(a) Name and Address. The Trust is the filing person. The name, business address and business telephone number of the Trust are set forth in Item 1(a) above, which information is incorporated herein by reference.

 

(b) Tender Offer. This Schedule 14D-9 relates to the cash tender offer by the Offerors to purchase up to 1,550,000 Shares at a price of $1.25 per Share, subject to the conditions set forth in the offer to purchase dated March 20, 2017 (the “Tender Offer”) and the related assignment form, as set forth in the Offerors’ Tender Offer Statement on Schedule TO (the “Schedule TO”), as filed with the Securities and Exchange Commission (the “SEC”) on March 20, 2017.

 

The Offerors filed the Schedule TO; however, the Schedule TO provides that MacKenzie Capital Management, LP is named therein because it is deemed to control SCM Special Fund 3, LP and Lemon Creek Advisers, LP, but is otherwise not participating in the offer described therein. According to the Schedule TO, the principal address of the Offerors is 1640 School Street, Moraga, California 94556, and their telephone number is (800) 854-8357.

 

Item 3. Past Contacts, Transactions, Negotiations and Agreements.

 

As of the date of this Schedule 14D-9, there are no material agreements, arrangements or understandings or any actual or potential conflicts of interest between the Trust or its affiliates and the Offerors and their respective executive officers, directors or affiliates.

 

As of the date of this Schedule 14D-9, there are no material agreements, arrangements or understandings or any actual or potential conflicts of interest between the Trust or its affiliates and the executive officers, trustees or affiliates of the Trust that are material to the Tender Offer.

 

Item 4. The Solicitation or Recommendation.

 

(a) Recommendation. The Trust’s Board of Trustees expresses no opinion and remains neutral regarding whether the Trust’s shareholders should accept or reject the Tender Offer. The information set forth in the letter to the Trust’s shareholders, dated March 31, 2017 (the “Letter to Shareholders”), a copy of which is filed as Exhibit (a)(1) to this Schedule 14D-9, is incorporated herein by reference.

 

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(b) Reasons. The information set forth in the Letter to Shareholders, a copy of which is filed as Exhibit (a)(1) to this Schedule 14D-9, is incorporated herein by reference.

 

(c) Intent to Tender. After reasonable inquiry and to the best knowledge of the Trust, neither the Trust nor any of the Trust’s executive officers, trustees, affiliates or subsidiaries intends to tender or sell Shares held of record or beneficially owned by them pursuant to the Tender Offer.

 

Item 5. Persons/Assets, Retained, Employed, Compensated or Used.

 

To the knowledge of the Trust, neither the Trust nor any person acting on its behalf has, directly or indirectly, employed, retained or compensated, or intends to employ, retain or compensate, any person or class of persons to make solicitations or recommendations to the shareholders in connection with the Tender Offer.

 

Item 6. Interest in Securities of the Subject Company.

 

Based on the Trust’s records and on information provided to the Trust by its trustees, executive officers, affiliates and subsidiaries, during the past 60 days prior to the filing of this Schedule 14D-9, no transactions with respect to the Shares have been effected by the Trust, its executive officers, trustees, affiliates or subsidiaries.

 

 

 

Item 7. Purposes of the Transaction and Plans or Proposals.

 

(a)  Except as set forth in this Schedule 14D-9, the Trust is not undertaking and is not engaged in any negotiations in response to the Tender Offer that relate to a tender offer or other acquisition of the Shares by the Trust, any subsidiary of the Trust or any other person.

 

(b)  Except as set forth in this Schedule 14D-9, the Trust is not undertaking and is not engaged in any negotiations in response to the Tender Offer that relate to, or would result in: (i) any extraordinary transaction, such as a merger, reorganization or liquidation, involving the Trust or any subsidiary of the Trust; (ii) any purchase, sale or transfer of a material amount of assets of the Trust or any subsidiary of the Trust; or (iii) any material change in the present distribution rate or policy, or indebtedness or capitalization of the Trust.

 

(c)  Except as set forth in this Schedule 14D-9, there are no transactions, board resolutions, agreements in principle or signed contracts entered into in response to the Tender Offer that relate to one or more of the matters referred to in this Item 7.

 

Item 8. Additional Information.

 

Cautionary Note Regarding Forward-Looking Statements

 

Certain statements contained in this Schedule 14D-9 other than historical facts may be considered forward-looking statements.  These forward-looking statements are predictions and generally can be identified by use of statements that include phrases such as “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “foresee,” “looking ahead,” “is confident,” “should,” “will,” “predicted,” “likely” or other words or phrases of similar import. Similarly, statements that describe or contain information related to matters such as the Trust’s intent, belief or expectation with respect to its financial performance, investment strategy and portfolio, cash flows, growth prospects, liquidity options and distribution rates and amounts are forward-looking statements. These forward-looking statements often reflect a number of assumptions and involve known and unknown risks, uncertainties and other factors that could cause the Trust’s actual results to differ materially from those currently anticipated in these forward-looking statements. In light of these risks and uncertainties, the forward-looking events might or might not occur, which may affect the accuracy of forward-looking statements and cause the actual results of the Trust to be materially different from any future results expressed or implied by such forward-looking statements.

 

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Shareholders are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date this Schedule 14D-9 is filed with the SEC. The Trust makes no representation or warranty (express or implied) about the accuracy of any such forward-looking statements contained in this Schedule 14D-9, and the Trust does not intend to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

 

Item 9. Exhibits.

 

The information under the heading “Exhibit Index” appearing after the signature page of this Schedule 14D-9 is incorporated herein by reference.

 

 

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SIGNATURE

 

After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

 

  UNITED DEVELOPMENT FUNDING IV
   
Date: March 31, 2017

/s/ Hollis M. Greenlaw

  Name: Hollis M. Greenlaw
  Title: Chief Executive Officer

 

 

 

 

 

 

 

Exhibit Index

 

 

 

Exhibit No.  

Description 

(a)(1)

 

  Letter to Shareholders of the Trust from Hollis M. Greenlaw, Chief Executive Officer of the Trust, dated as of March 31, 2017.

 

 

 

 

 

 

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Section 2: EX-99.(A)(1) (EXHIBIT (A)(1))

 

Exhibit (a)(1)

 

 

March 31, 2017

 

Dear Shareholder:

 

As you may be aware by now, SCM Special Fund 3, LP, Lemon Creek Advisers, LP and MacKenzie Capital Management, LP (the “Offerors”) initiated an unsolicited tender offer to buy up to 1,550,000 common shares of beneficial interest (the “Shares”) of United Development Funding IV (the “Trust”) for $1.25 per share in cash (the “Tender Offer”). You should be aware that the Trust is not in any way affiliated with the Offerors and the Trust’s Board of Trustees (the “Board”) makes no recommendation, expresses no opinion and remains neutral regarding whether you should accept or decline the Tender Offer. 

 

As stated in the Offerors’ letter, the Offerors are making this offer “with the intention of making a profit from the ownership of the Shares.” Further, the Offerors state that they “are motivated to establish the lowest price which might be acceptable to [you] consistent with the [Offerors’] objectives.”

 

The Trust is required by the Securities Exchange Act of 1934, as amended, and the rules and regulations under it, to inform you of the Board’s position, if any, with respect to the Tender Offer. As a result, the Board: (1) reviewed the terms and conditions of the Tender Offer; (2) considered other information relating to the Trust’s historical financial performance, portfolio of assets, current financial condition and future opportunities; and (3) evaluated various other factors it deemed relevant in light of its knowledge of the Trust’s business, financial condition, portfolio of assets and future prospects.

 

The following are the material factors considered by the Board in evaluating the Tender Offer:

 

·The Offerors are making the offer for investment purposes and with the intention of making a profit from the ownership of the Shares by purchasing them at a low price, and shareholders who tender their Shares pursuant to the Tender Offer may be deprived of the potential opportunity to realize the long-term value of their investment in the Trust.

 

Specifically, the Tender Offer price of $1.25 per share is significantly less than the 30-day OTCMarkets.com price range of $2.25 to $2.85 per share referenced in the Offerors’ Tender Offer materials. Therefore, the Offerors acknowledge that the Tender Offer price was established based on the Offerors’ own objectives (i.e., to make a profit) and not based on what is in the best financial interest of you and the other shareholders;

 

·The Offerors acknowledge that they “have not made an independent appraisal of the Shares or the [Trust’s] assets and are not qualified to appraise real estate”;

 

·The Trust was unable to timely complete its annual financial statements for the years ended December 31, 2015 and December 31, 2016 or its quarterly financial statements for the quarters ended March 31, 2016, June 30, 2016 and September 30, 2016 because its independent accounting firm elected not to stand for reappointment in November 2015;

 

 

 

 

·In June 2016, the Trust announced that it engaged EisnerAmper LLP as its independent accounting firm, and the Trust intends to file its required financial statements as soon as possible. The Trust is not currently able to indicate when the audit of its financial statements will be completed or when the Trust will file periodic reports with the Securities and Exchange Commission (“SEC”) for periods subsequent to September 30, 2015;

 

·In December 2016, the Trust announced the total owed by the Trust to institutional lenders and commercial banks under lines of credit and notes payable had been reduced from approximately $170.9 million at September 30, 2015 to approximately $18.4 million as of December 30, 2016.

 

·The Trust and certain trustees and members of management have received a “Wells Notice” from the staff of the SEC’s Division of Enforcement stating that the SEC staff has made a preliminary determination to recommend that the SEC file an enforcement action against the Trust and certain individuals alleging violations of certain specific provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. A Wells Notice is not a formal allegation or a finding of wrongdoing, but is a preliminary determination by the SEC staff that it may recommend to the SEC that a civil enforcement action or administrative proceeding be brought against the recipient. The Trust responded to the Wells Notice in December 2016 and requested that the SEC reject the staff’s recommendation and not authorize an enforcement action against the Trust, as the Trust continues to believe that it has complied with all applicable laws and regulations. The Trust is unable to predict how long the SEC process will last, the outcome of the SEC’s investigation or any action that the SEC may ultimately decide to pursue, or any impact on the Trust as a result of the proposed or any actual enforcement action.

 

·The Offerors have engaged an affiliated depositary for the Tender Offer. As a result, there is no independent third party holding funds for the Offerors for payment of the Tender Offer price that can independently verify that such funds are available for payment, and the Offerors may have access to the Shares tendered by shareholders before all conditions to the Tender Offer have been satisfied and tendering shareholders have been paid;

 

·There is no guarantee that the Tender Offer can or will be completed as quickly as the Offerors contemplate in the Tender Offer. The Tender Offer does not initially expire until May 5, 2017 and this date may be extended by the Offerors, subject to compliance with applicable securities laws, in their sole discretion;

 

·In light of the Tender Offer, it is possible that in the near future other bidders may emerge and make offers to purchase the Shares at prices that may be higher than the price offered by the Offerors. In addition, the Offerors may choose to make one or more tender offers for the Shares in the near future at prices that may be above the current $1.25 per share offered in the Tender Offer. It is important to note that late last year certain affiliates of the Offerors filed documents for a tender offer for the Shares at a purported price of $1.50 per Share. Subsequently, the offer was amended to reduce the price to $1.00 per share. It is possible that the Offerors, or their affiliates, may in the future make additional tender offers at prices above $1.25 per share, or the Offerors may even amend the terms of this Tender Offer to substantially reduce the price payable to you. However, no assurances can be given at this time as to what actions the Offerors or third parties may take, including whether any other tender offers will be made or what prices the Offerors, their affiliates, or other bidders may offer in the future; and

 

·The Offerors’ statement that “[t]he lack of any public market for the sale of Shares means that Shareholders have limited alternatives if they seek to sell their Shares” may be intended to capitalize on recent events relating to the Trust and pressure shareholders into making hasty investment decisions without taking adequate time to consider all of the facts relating to the Tender Offer and the Trust.

 

 

 

 

The Trust notes that the Tender Offer expires May 5, 2017. Shareholders can only withdraw their tender of Shares until May 5, 2017 or, if the Offerors have not agreed to accept payment for Shares tendered pursuant to the Tender Offer, after May 19, 2017 until such time that the Offerors accept payment for such Shares. Except under these limited circumstances, the tender of Shares is irrevocable.

 

After evaluating the Tender Offer and information regarding the Trust as discussed above, because the Trust does not have current financial information available, the Board determined it is not in a position to express an opinion regarding whether shareholders should accept or reject the Tender Offer at this time. The Board urges each shareholder to make its own decision regarding the Tender Offer based on all of the available information, including the adequacy of the Tender Offer price in light of the shareholder’s own investment objectives and liquidity needs, individual tax and other circumstances as well as the shareholder’s own views as to the Trust’s prospects and outlook and the factors considered by the Board, as described above. Shareholders are urged to consult with their own financial, tax, accounting and legal advisors, and to exercise caution with respect to tender offers.

 

Please be aware that you are not required to tender your Shares to the Offerors. To reject the Tender Offer, simply ignore it; you do not need to respond to anything. If you have already agreed to tender your Shares pursuant to the Tender Offer, you can withdraw any tender of Shares up until May 5, 2017 (as described in the Tender Offer materials).

 

Sincerely,

 

United Development Funding IV  
     
By: /s/ Hollis M. Greenlaw  
Name: Hollis M. Greenlaw  
Title: Chief Executive Officer  

 

This correspondence contains forward-looking statements relating to the Tender Offer and United Development Funding IV that are based on the Trust’s current expectations and estimates, and are not guarantees of future performance or future events. Such forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “anticipate,” “estimate,” “believe,” or other similar words. Readers of this correspondence should be aware that there are various factors, many of which are beyond the Trust’s control, that could cause actual results to differ materially from any forward-looking statements made in this correspondence. Accordingly, readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this correspondence. A number of important factors could cause actual results or events to differ materially from the forward-looking statements contained in this correspondence. Forward-looking statements in this document speak only as of the date on which such statements were made, and we undertake no obligation to update any such statements that may become untrue because of subsequent events.

 

 

 

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