United Development Funding IV fka UDFI

[ofirm]

Here is a small mental exercise of trying to start with the 10-Q of q3 15
to q4 20:
links:
q3 2015 - https://www.sec.gov/Archives/edgar/data/1440292/000114420415063906/v423157_10q.htm
page 3 has the balance sheet.

q3 2015 activities in between q4 2020

cash and eqv. $27,741,677 $41,205,071

notes balance $584,458,367 -$496,000,000 $361,328,093
(includes accr. +$154,000,000
interest,
related party
etc.)

liabilities +$170,000,000
$173,901,030 $3,911,698

reducing assets:
dividends 4 x 0.065 x 30,685,915 = -$7,978,338

we know that $496,000,000 were repaid and out of it $182,300,000
were paid against the $170,000,000 of bank loans. that means that
$314,000,000 were net received by the trust. $154,000,000 were
either originated or advanced on existing loans in 2016 - 2020.
I will use $160,000,000 / 5 = $32,000,000 as average reduction in
net balances each year.

more activity:
2016 notes receivables interest and interest expense minus
management expenses
0.11 x $584,458,367 = $64,290,420
interest rates higher due to initial fees not for full loan period.
0.07 x $173,901,030 = -$12,173,000
management expense = -$16,000,000
debts paid back and loans monetized.
2016 - 2020 notes receivables interest income
assuming loan repayment paid for debt repayment and relatively
healthy cash position of $40,000,000 is maintained plus
$6,000,000 per year litigation expense is used (more than
relative portion of its share plus fines) -$6,000,000
------------
notes repayments (increase in cash) -$ 32,000,000
bank debt repayment -$182,000,000
2016 ending at: $400,575,787


2017 -
assume interest is lower on newer loans and portion of assets do
not have 13% interest ($65M related party assumed at 7%). jv
begins to happen.
interest income 0.11 x $400,575,787 = $39,473,120
management expense -$16,000,000
litigation and legal -$ 6,000,000
-------------
repayments (increase in cash) -$ 32,000,000
$390,639,123
2018 -
assume interest at 10% again.
interest income 0.11 x $390,639,123 = $42,970,303
management expense -$16,000,000
litigation and legal -$ 6,000,000
sec settlement -$ 8,200,000
class action settlement -$10,000,000
-------------
repayments (increase in cash) -$ 32,000,000
$361,409,426
2019 -
assume interest at 10% again.
interest income 0.11 x $361,409,426 = $39,755,036
management expense -$16,000,000
litigation and legal -$ 6,000,000
-------------
repayments (increase in cash) -$ 32,000,000
$347,164,463
2020 -
same assumptions $325,164,463
minus dividend -$ 8,000,000
-------------
repayments (increase in cash) -$ 32,000,000
final active assets: $323,352,554

According to this calculation (which I believe is on the conservative
side), starting point was $584M of active assts. $496M was repaid
over a 5 years period. $170M of which was done in 2016 and $182M
was repaid to the banks. $154M of new loans and advanced on existing
ones were made. using the assumption of only 11% interest rate (we
do not know anything about the rates for new loans or advances and
we do not know related party loans throughout the five year period),
a very generous $16M management expense each year, $6M litigation
and regulatory expenses each year and $32M net repayments each year
we should have had $160M of increase of cash from $27M. instead we
have only $41M. at the same time active assets are at $361M which
is $38M above my rollup (higher interest rate should explain that).
so: $27M (q3 2015 cash) + $160M (repayments) - $41M (q4 2020 cash) -
($361M - $323M) = $108M I do not know exactly how to account for.
we know there should be on top of that allowances for bad debt. they
used to be 1% of the loan portfolio.
as far as the $108M, are there much higher litigation costs than I
take into account? who knows.
if IV is paying for the litigation expenses of all the UDF family,
should there be somewhere a mechanism to repay the fund? IV has
a rather limited size of a claim (I estimate the trust to have
about $100M while loss of value of then shareholders is the big
one and UDF management itself having much higher than $100M).
mathematically, IV should carry only 10% - 15% of the legal fees.