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Mackenzie Affiliate Offers to Purchase 1.6 Million Shares of UDF IV

SCM Special Fund 3 And Lemon Creek Advisers, affiliates of Mackenzie Capital Management and Sutter Capital Management respectively, have offered to purchase nearly 1.6 million shares of United Development Funding IV for $1.25 each. The offer, which constitute 5.05 percent of the outstanding shares, expires on May 5th.

United Development Funding IV is a publicly traded REIT that was delisted from trading on NASDAQ in October 2016. The company, which is currently under investigation by the Securities and Exchange Commission, disclosed that it received a Wells notice from the SEC last year.

A Wells notice is not a formal allegation or a finding of wrongdoing, but is a preliminary determination that the SEC sends to individuals or firms when it is planning to bring an enforcement action against them.

Prior to its suspension, the company’s stock traded $3.20 per share on February 18th and had a 52-week trading range of $3.20-$18.31 per share. The company traded on the OTC markets for $2.25-$2.58 per share in the 30 days preceding the tender offer.

United Development Funding IV has not filed any quarterly financial documents since November 2015 and recently informed the SEC that it will not meet the deadline for filing its 2016 year-end report. The company said that its independent registered public accounting firm, EisnerAmper, is conducting an internal audit of the firm and is working to complete and file all of the necessary periodic reports.

The purchasers and their affiliates currently own 844 shares of UDF IV and will pay approximately $1.9 million if all shares in the current offer are tendered. UDF IV has 1,775 holders of record owning nearly 30.7 million shares.

Federal authorities raided UDF headquarters in February 2016 nearly two weeks after Kyle Bass, hedge fund manager and founder of Hayman Capital Management – which is shorting the company, publicly accused the real estate investment trust of operating a “Ponzi-like real estate scheme.” The outcome of the FBI investigation is pending.

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