The overhead is mostly the expenses that are required in order to move the land forward
through permits etc. the theory of land development is that the value of the land increases
as the land gets closer to building / development.
As land gets closer to building and development happens, the amount of money spent
increases. later MUD spending gets returned, but first you need to put down the money
into the project.
The main reason why Buffington collateral was sold for $40M and not more, was because
a lot of the spending was to yet to done while revenue phase was still not close. the idea
of fund V was to finance the final stages of development all the way to building and sales
of the collateral which started as mere low value farm land at funds I & II.
The problem that UDF always had is that regular people investing their hard earned money
would not go and take such risks with their money. the UDF solution was to promote
their funds using professional promoters paid huge fees WITHOUT disclosing the huge
risks involved to the unsuspecting investors.
The sad part of the story is that the UDF thesis was correct and the price boom happened,
but having to create liquidity caused probably $70M+ of realized losses (in order to pay
back the debt incurred in effort to increase asset / loans base) and I do not know exactly
the legal fees amounts that the managers used IV to pay for.
This was never a ponzi scheme, but the managers were completely irresponsible, rackless
and never told the investors the true nature of their business. its a true business, just not
even close to what investors were told.
Mr Bass did A LOT of illegal stuff here and threw a lot of lies in order to promote his
short thesis. if he stuck to the true issues here, he could have probably also benefitted
and not drive up the borrowing costs of himself. my guess is that HE could have taken
over the fund management and made even more money than he did. instead the FBI
might punish him for making them look like fools that work for short sellers who employ
ex FBI people.
Nexpoint have a decent chance in taking over management as well (because it was
Highland and not them who were part of the original Bass plan to short and buy cheaply
the assets).
