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Second Quarter 2014 and Recent Highlights – as compared to the prior year quarter:

– UDF IV shares began trading on NASDAQ Global Select Market (NASDAQ) on June 4, 2014 under the ticker UDF

– Completed tender offer of $35 million for approximately 1.7 million shares at $20.50 per share in July, 2014

– Net interest income after provision for loan losses increased 59% to $16.8 million

– Net income increased 86% to $11.4 million

– Earnings per share increased 52% to $0.35

– Investments in loan participation interest and notes receivable increased 51% to $560.6 million

– Balances drawn on lines of credit increased to $73.2 million from $12.3 million

GRAPEVINE, Texas, Aug. 12, 2014 /PRNewswire/ — United Development Funding IV (“UDF IV” or the “Trust”) (NASDAQ: UDF) today reported net interest income after provision for loan losses for the second quarter ended June 30, 2014, of $16.8 million, an increase of 59% as compared to $10.6 million in the prior year quarter.  Net income for the second quarter was $11.4 million, or $0.35 per share, an increase of 86% as compared to $6.1 million, or $0.23 per share, for the prior year quarter.

Net interest income after provision for loan losses for the six months ended June 30, 2014, was $32.9 million, an increase of 64% as compared to $20.0 million in the same period of fiscal 2013.  Net income for the first six months of fiscal 2014 was $23.2 million, or $0.72 per share, an increase of 79% as compared to $13.0 million, or $0.57 per share, for the year ago period.

The current quarter and the six month period ended June 30, 2014, included approximately $5.0 million of costs associated with listing the Trust’s shares on the NASDAQ and the related tender offer. The current quarter and the six month period ended June 30, 2014, also included a $3.2 million reduction in general and administrative expense – related parties from the reversal of an accrued liability for acquisition and origination fees that will no longer be paid to the Trust’s advisor.

The portfolio of loan participation interests and notes receivable, net of the provision for loan losses and unamortized commitment fees, increased 51% to $560.6 million (126 loans) at June 30, 2014, from $371.9 million (89 loans) a year ago.  Leverage on the balance sheet increased, moving from a net cash position (cash less lines of credit) of $143.6 million at June 30, 2013, to a net debt position (lines of credit less cash) of $54.8 million at June 30, 2014.  Net debt to total capitalization ratio (calculated as debt less cash divided by debt less cash plus equity) at June 30, 2014, was 9.3%, well below the Trust’s target range of 30% to 35%.

Subsequent to quarter end and in conjunction with listing its shares on NASDAQ, the Trust completed a tender offer of $35 million for approximately 1.7 million shares at $20.50 per share.  The Trust financed the tender by entering into a $35 million term loan with a maturity date of July 2, 2015, which it may extend to December 31, 2015.

On July 2, 2014, the Trust announced that it would pay a monthly distribution of $0.1367 per share on August 25, 2014 and September 25, 2014, to shareholders of record at the close of business on August 15, 2014 and September15, 2014, respectively.

The Trust expects to earn between $1.75 and $1.80 per share for the twelve-month period beginning July 1, 2014, and ending June 30, 2015.  In addition, the Trust expects to add between $30 million and $50 million of additional leverage against its investment portfolio by the end of 2014, in addition to the $35 million loan to finance its tender offer.

The Trust will host a conference call today (Tuesday, August 12, 2014) at 11:00 a.m. Eastern time.  The dial-in number is 1-888-317-6016, and the call will also be webcast from the Trust’s website at www.udfiv.com.

Hollis M. Greenlaw, CEO and Chairman, said, “Our results this quarter demonstrate the strength, depth and scalability of our UDF platform, our ability to invest capital effectively in the area of single-family residential finance, and our ability to grow our earnings and our distributions.  We are uniquely positioned to provide capital solutions to developers and homebuilders.  We see significant opportunities for increasing our lending and investment portfolio during this gradual and protracted residential housing recovery.  We continue to grow our Texas investments while evaluating opportunities in other markets and states.  We recently entered the Tampa, Florida and South Carolina markets, and we expect to continue to close transactions in Texas, Florida, South Carolina and North Carolina in the second half of 2014.”

About United Development Funding IV

United Development Funding IV is a publicly traded Maryland real estate investment trust listed on The NASDAQ Global Select Market.  UDF IV was formed primarily to generate current interest income by investing in secured loans and producing profits from investments in residential real estate.  Additional information about UDF IV can be found on its website at www.udfiv.com.  UDF IV may disseminate important information regarding its operations, including financial information, through social media platforms such as Twitter, Facebook and LinkedIn.

Important Notice Cautionary Note Regarding Forward-Looking Statements

This press release may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements may relate to anticipated financial performance, business prospects, outcome of regulatory proceedings, market conditions and other matters. We make these forward-looking statements in reliance on the safe harbor protections provided under the Private Securities Litigation Reform Act of 1995. All statements included in this press release that address activities, events or developments that we expect, believe or anticipate will exist or may occur in the future, are forward-looking statements. These forward-looking statements are based on management’s current intents, beliefs, expectations and assumptions and on information currently available to management that are subject to risks and uncertainties, many of which are outside of our control, and could cause future events or results to be materially different from those stated or implied in these forward-looking statements. Words such as “may,” “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “would,” “could,” “should” and variations of these words and similar expressions are intended to identify forward-looking statements.

Forward-looking statements that were true at the time made may ultimately prove to be incorrect or false. We caution you not to place undue reliance on forward-looking statements, which reflect our management’s view only as of the date of this press release. We undertake no obligation to update or revise any forward-looking statements made by us or on our behalf to reflect changed assumptions, the occurrence of unanticipated events or changes as a result of new information, future developments, subsequent events or circumstances or otherwise.  Factors that could cause actual results to differ materially from any forward-looking statements include but are not limited to changes in general economic conditions; changes in real estate conditions; development costs that may exceed estimates; development delays; increases in interest rates or decreases in residential lot take down or purchase rates or prices; our borrowers’ inability to sell residential lots; and the potential need to fund development costs not completed by the initial borrower or other capital expenditures out of operating cash flows. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, 2013 and in subsequent filings with the U.S. Securities and Exchange Commission.

UNITED DEVELOPMENT FUNDING IV

CONSOLIDATED BALANCE SHEETS

June 30, 2014 (Unaudited)

December 31, 2013

Assets

Cash and cash equivalents

$             18,337,666

$             33,565,191

Restricted cash

3,678,051

2,385,535

Accrued interest receivable 

22,432,151

12,747,047

Accrued receivable – related parties

2,716,274

2,607,292

Loan participation interest – related parties, net

42,858,322

32,909,958

Notes receivable, net

483,535,096

444,720,197

Notes receivable – related parties, net

34,214,542

30,854,000

Real estate owned

8,398,816

8,236,953

Other assets

2,188,047

2,836,044

Total assets

$           618,358,965

$           570,862,217

Liabilities and Shareholders’ Equity

Liabilities:

     Accrued liabilities

$               6,397,470

$               3,241,009

     Accrued liabilities – related parties

828,323

3,339,143

     Distributions payable

2,208,906

2,653,450

     Lines of credit

73,181,612

30,519,056

Total liabilities

$             82,616,311

$             39,752,658

Commitments and contingencies

Shareholders’ equity:

Shares of beneficial interest; $.01 par value; 400,000,000 shares authorized;

     32,644,383 shares issued and 32,325,458 shares outstanding at June 30, 2014, and

     32,115,232 shares issued and 31,902,325 shares outstanding at December 31, 2013

326,443

321,152

Additional paid-in-capital

571,611,708

562,442,028

Accumulated deficit

(29,880,040)

(27,395,968)

Shareholders’ equity before treasury stock

542,058,111

535,367,212

Less:  Treasury stock, 318,925 shares at June 30, 2014 and 212,907 shares at December 31, 2013, at cost

(6,315,457)

(4,257,653)

Total shareholders’ equity

535,742,654

531,109,559

Total liabilities and shareholders’ equity

$           618,358,965

$           570,862,217

UNITED DEVELOPMENT FUNDING IV

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

Three Months Ended June 30,

Six Months Ended June 30,

2014

2013

2014

2013

Interest income:

Interest income

$       15,682,807

$         9,592,776

$       30,673,181

$       17,977,852

Interest income – related parties

2,475,483

1,859,564

4,618,672

3,754,823

     Total interest income 

18,158,290

11,452,340

35,291,853

21,732,675

Interest expense:

Interest expense

613,071

382,296

976,102

856,677

Net interest income

17,545,219

11,070,044

34,315,751

20,875,998

Provision for loan losses

735,586

465,062

1,440,787

880,761

Net interest income after provision for loan losses

16,809,633

10,604,982

32,874,964

19,995,237

Noninterest income:

Commitment fee income

766,876

253,423

1,521,538

472,317

Commitment fee income – related parties

47,338

49,389

93,684

105,021

Real estate owned property sales income

1,698,137

3,888,137

     Total noninterest income

2,512,351

302,812

5,503,359

577,338

Noninterest expense:

Management fees – related party

2,604,189

1,834,678

5,304,070

3,476,245

Real estate owned property sales cost

1,698,137

3,888,137

Listing expenses

5,038,201

5,038,201

General and administrative

1,617,736

405,736

2,717,216

667,564

General and administrative – related parties

(3,024,884)

2,532,685

(1,758,825)

3,452,699

     Total noninterest expense

7,933,379

4,773,099

15,188,799

7,596,508

Net income

$       11,388,605

$         6,134,695

$       23,189,524

$       12,976,067

Net income per weighted average share outstanding

$                  0.35

$                  0.23

$                  0.72

$                  0.57

Weighted average shares outstanding

32,247,817

26,517,797

32,116,997

22,696,644

Distributions per weighted average share outstanding

$                  0.40

$                  0.43

$                  0.80

$                  0.85

UNITED DEVELOPMENT FUNDING IV

CONSOLIDATED STATEMENTS OF CASHFLOWS

(UNAUDITED)

Six Months Ended June 30,

2014

2013

Operating Activities

Net income

$           23,189,524

$           12,976,067

Adjustments to reconcile net income to net cash provided by operating activities:

     Provision for loan losses

1,440,787

880,761

     Amortization expense

476,981

303,824

     Share-based compensation

454,519

Changes in assets and liabilities:

     Accrued interest receivable

(9,685,104)

(3,986,736)

     Accrued receivable – related parties

(108,982)

(3,963,002)

     Other assets

171,016

(757,539)

     Accounts payable and accrued liabilities

614,476

(10,184)

Net cash provided by operating activities

16,553,217

5,443,191

Investing Activities

 Investments in loan participation interest – related parties 

(11,848,674)

(6,968,691)

 Principal receipts from loan participation interest – related
parties 

10,242,990

9,590,422

 Investments in notes receivable

(113,002,356)

(116,162,502)

 Principal receipts from notes receivable

64,403,989

37,928,106

 Investments in notes receivable – related parties

(6,464,808)

(7,972,364)

 Principal receipts from notes receivable – related parties

3,104,266

7,981,130

 Investments in real estate owned

(3,244,050)

 Receipts from real estate owned

3,113,352

Net cash used in investing activities

(53,695,291)

(75,603,899)

Financing Activities

Proceeds from issuance of shares of beneficial interest

272,879,903

Investor subscriptions receivable 

192,584

Purchase of treasury shares

(1,971,990)

(1,034,237)

Net borrowings on lines of credit

42,662,556

(16,434,813)

Payments on note payable

(5,095,523)

Distributions, net of shareholders’ distribution reinvestment

(17,483,501)

(12,054,585)

Restricted cash

(1,292,516)

Payments of offering costs

(35,338,458)

Deferred offering costs

5,050,715

Accrued liabilities – related parties

(5,360,509)

Net cash provided by financing activities

21,914,549

202,805,077

     Net increase (decrease) in cash and cash equivalents

(15,227,525)

132,644,369

     Cash and cash equivalents at beginning of period

33,565,191

23,225,858

     Cash and cash equivalents at end of period

$           18,337,666

$         155,870,227

Supplemental Cash Flow Information:

     Cash paid for interest

$                818,229

$                926,564

Supplemental Cash Flow Information – Non-Cash
Investing and Financing Activities:

     Shareholders’ distribution reinvestment

$             8,634,638

$             6,664,211

     Assignment of loans

$             8,342,680

$                            –

     Real estate purchased – earnest money

$                  31,165

$                            –

Logo – http://photos.prnewswire.com/prnh/20140812/135308

SOURCE United Development Funding IV