Investor Lawyers Blog
Investors who purchased shares in United Development Funding IV (“UDF IV”) upon the recommendation of their financial advisor – pursuant to a misleading sales presentation or if the recommendation to invest lacked a reasonable basis or was otherwise unsuitable – may be able to recover their losses in FINRA arbitration. UDF IV is one of a number of successive funds offered by the real estate finance limited partnership, United Development Funding (“UDF”), headquartered in Grapevine, TX. UDF IV was formed as a Maryland REIT in May 2008. By December 31, 2012, UDF IV had issued 17,642,839 common shares in exchange for gross proceeds of approximately $352.5 million.
Unlike other non-traded UDF funds, UDF IV is unique in that, while it was initially distributed as a non-traded REIT, in June 2014 UDF IV went public and listed its shares (NASDAQ: UDF, now OTC: UDFI). UDF IV operates as a real estate investment trust (“REIT”), focusing on originating, purchasing, participating in, and holding investment secured loans for the acquisition and development of parcels of real property as single-family residential lots, as well as the construction of new homes and the development of mixed-use master planned residential communities.
By late 2015, following allegations of misconduct by a Dallas hedge fund manager, UDF’s share price suffered a severe decline. The allegations raised concerned the overall UDF business model and called into question whether the UDF enterprise was propping up poorly performing investments in earlier funds with new investor capital raised from later fund vintages.