ex10-4.htm


    
      Exhibit
        10.4



    


    


    


    


    


    


    


    


    


    


    


    CONSULTATION
      REPORT OF

    


    UDF
      X

    The
      Fairness of the Financing Terms

    Between
      United Development Funding III, L.P.

    and
      United Development Funding X, L.P.,

    Dated
      October 1, 2007

    


    


    


    Prepared
      For:

    


    Mr.
      Hollis Greenlaw

    President

    UMTH
      Land Development, LP

    1702
      N. Collins Boulevard, Suite 100

    Richardson,
      TX  75080

    


    


    


    


    


    


    


    Prepared
      By:

    


    JACKSON
      CLABORN, INC.

    Real
      Estate Consulting and Appraisal Services

    5800
      W. Plano Parkway, Suite 220

    Plano,
      TX 75093

    



    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    
      	
              Jackson
                Claborn, Inc.

            


    

    ·
      Real Estate
      Consulting and Appraisal Services ·

    ·
      Plano, Texas · Southlake,
      Texas
·

    www.jacksonclaborn.com

    Jimmy
      H.
      Jackson, MAI David Claborn, MAI

    Allen
      W.
      Gardiner, SRA Dod W. Clapp, SRA

    


    October
      1, 2007

    


    Mr.
      Hollis Greenlaw

    President

    UMTH
      Land
      Development, LP

    1702
      N.
      Collins Boulevard, Suite 100

    Richardson,
      TX  75080

    


    
      	
              RE:

            	
              A
                consultation report of, UDF X, the fairness of the financing terms
                between
                United Development Funding III, L.P., and United Development Funding
                X,
                L.P., dated October 1, 2007; our file number
                710008

            


    

    


    Ladies
      and Gentlemen:

    


    At
      your
      request, we have performed a consulting assignment regarding the
      above-referenced agreement as of October 1, 2007, subject to certain assumptions
      and limiting conditions that are attached. Our employment was not based upon
      an
      appraisal producing a specific value or a value range and it should also be
      noted that this assignment should not be considered to be an appraisal report
      as
      we are not providing our opinion as to the sales price of the subject property,
      but only providing our opinion as to the fairness of the financing terms.
      Furthermore, we have not inspected the subject property of the above-referenced
      agreement.

    


    You
      have
      requested our opinion as an independent advisor (as that term is defined in
      the
      Prospectus of United Development Funding III, L.P. dated May 15, 2006) as to
      the
      fairness of the terms of that certain note to be dated effective as of October
      1, 2007 amongst and between United Development Funding III, L.P., a Delaware
      limited partnership (“UDF III”) as Lender and United Development Funding X,
      L.P., a Delaware limited partnership (“UDF X”) as Borrower. Pursuant to the
      terms of this note (the “UDF X Note”), UDF III will advance to UDF X the amount
      of up to $70,000,000 at an annual interest rate of 15.0%, which amount shall
      be
      due and payable along with accrued and unpaid interest on September 30, 2012.
      The Borrower will be charged a fee equal to 3% of the note amount that will
      be
      payable concurrently with each initial advance, but not for any
      re-advance.  The credit facility shall revolve allowing for interest
      to accrue on a monthly basis which shall be compounded on an annual basis if
      not
      paid in full on each anniversary date.  The security for the loan
      shall be all the assets and receivables held in UDF X, including without
      limitation, the assignment of any liens and entity equity interests pledged
      to
      UDF X in the course of its business.

     


    
      
        
          	
                  Headquarters:
                    5800 W. Plano Parkway ·
                    Suite 220
                    ·
                    Plano,
                    Texas 75093 ·
                    (972)
                    732-0051 ·
                    FAX (972)
                    733-1403

                
	
                  Branch
                    Office: 1560 E. Southlake Blvd. ·
                    Suite 220
                    ·
                    Southlake, Texas 76092 ·
                    (817)
                    421-3833 ·
                    FAX (817)
                    421-3844

                


        

      

      
        
        

        
          

        

      

      
        
        

      

    


    UMTH
      Land
      Development, LP

    Page
      Two

    October
      1, 2007

    


    


    The
      transaction will be further secured by a UCC-1 filing evidencing the security
      interest retained by for UDF III and an unconditional and unlimited guarantee
      from UMTH Holdings, L.P., a Delaware limited partnership (“Guarantor”) and
      parent company of UDF X.  With respect to the Guarantor, UMTH is a
      financially sound, well diversified entity of substance that is capitalizing
      on
      a business model of underwriting real estate finance transactions in markets
      with strong underlying demographics, appropriate supply/demand ratios and
      growing economics. In just a short period of operations, UMTH has demonstrated
      an impressive record of success. As of YE 2006, UMTH had net earning of $2.4M
      with $2.3M in net earning through YTD July 31, 2007 which is on target for
      achieving their projected YE 2007 net earnings of $9M.

    


    Based
      upon the information provided to us with respect to the Borrower, UDF X is
      a
      newly formed, wholly owned subsidiary of UMTH Land Development, L.P., a Delaware
      limited partnership (“UMTH-LD”) whose parent company is UMT Holdings, L.P., a
      Delaware limited partnership (“UMTH”).  UMTH-LD is the general partner
      of UDF III.  UMTH-LD and UDF X are each an affiliate of UDF
      III.  UMTH-LD has a .1% general partner, UMT Services, Inc., and a
      99.9% limited partner owned by UMTH.  UMTH-LD formed UDF X as a
      strategic business platform for the continuation of the UMTH Business Model
      which, in short, is the generation of income by originating, purchasing and
      holding for investment, for its own account, loans to and/or equity positions
      in
      entities that acquire, entitle, develop and sell land and/or lots for the
      construction of single-family residential homes. We understand the purpose
      of
      this note is to provide a credit facility to UDF X for the implementation of
      their business model as a real estate finance company.

    


    Since
      UDF
      X is an “Affiliated Party”, UDF III is required to obtain this fairness opinion
      with respect to the terms of the transaction.

    


    We
      are a
      full service real estate appraisal and consulting firm. As part of our real
      estate appraisal and consulting services, we are regularly engaged in the
      consultation with regard to real estate value and finance.

    


    We
      are
      acting as an independent advisor to UDF III in connection with the UDF X Note
      and will receive a fee for our services. The opinion fee is not contingent
      upon
      the conclusions of our opinion. In addition, UMTH Land Development, L.P. has
      agreed to indemnify us for certain liabilities arising out of our
      engagement.

    



    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    UMTH
      Land
      Development, LP

    Page
      Three

    October
      1, 2007

    


    


    In
      the
      course of performing our review and analysis for rendering this opinion, we
      have: (i) reviewed the details of the transaction with UDF X, (ii) reviewed
      the
      terms of the UDF X Note, (iii) reviewed materials provided to us by members
      of
      the senior management of UDF III with respect to the described transaction;
      (iv)
      conducted discussions with members of the senior management of UDF III with
      respect to the described transaction; and (v) conducted such other financial
      studies, analyses and investigations and considered such other information
      as we
      deemed appropriate.

    


    With
      respect to the data and discussions relating to the transaction, we have
      assumed, at the direction of management of UDF III and without independent
      verification, that such data has been reasonably prepared on a basis reflecting
      the best currently available estimates and judgments of UDF III. We have further
      relied on the assurances of senior management of UDF III that they are unaware
      of any facts that would make such information incomplete or
      misleading.

    


    In
      rendering our opinion, we have assumed and relied upon the accuracy and
      completeness of the financial, legal, tax, operating and other information
      provided to us by UDF III, and have not assumed responsibility for independently
      verifying and have not independently verified such information. We have not
      assumed any responsibility to perform, and have not performed, an independent
      evaluation or appraisal of any of the respective assets or liabilities
      (contingent or otherwise) involved in the contemplated transaction. In addition,
      we have not assumed any obligation to conduct, and have not conducted, any
      physical inspection of the property involved in the contemplated transaction.
      Additionally, we have not been asked and did not consider the possible effects
      of any litigation or other legal claims.

    


    Our
      opinion is subject to the assumptions and conditions set forth herein, speaks
      only as of the date hereof, is based on market, economic, financial, legal
      and
      other conditions as they exist and information which we have been supplied
      as of
      the date hereof, and is without regard to any market, economic, financial,
      legal
      or other circumstances or events of any kind or nature which may exist or occur
      after such date. We have not undertaken to reaffirm or revise this opinion
      or
      otherwise comment upon any events occurring after the date hereof and do not
      have any obligation to update, revise or reaffirm our opinion.

    Our
      opinion expressed herein is provided for the information and assistance of
      the
      senior management of UDF III in connection with the UDF X Note.

    


    Our
      opinion does not address the merits of the underlying decision by UDF III to
      undertake the UDF X Note, but solely addresses the fairness of the terms
      associated therewith.

    



    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    UMTH
      Land
      Development, LP

    Page
      Four

    October
      1, 2007

    


    


    Based
      on
      and subject to the foregoing, including the various assumptions and limitations
      set forth herein, it is our opinion that, as of the date hereof, that the terms
      of the UDF X Note are fair and at least as favorable to UDF III as such
      transaction with an unaffiliated party in similar circumstances.

    


    This
      consulting assignment conforms to the requirements of the Code of Professional
      Ethics and the Uniform Standards of Professional Appraisal Practice (USPAP)
      established by the Appraisal Institute and instituted by the State of Texas.
      If
      you have any questions regarding the contents of this report, please contact
      either of the undersigned.

    


    Respectfully
      submitted,

    


     

    /s/Jackson
      Claborn, Inc.

    


    JACKSON
      CLABORN, INC.

    



    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    CERTIFICATION
      - CONSULTATION

    


    


    We
      certify to the best of our knowledge and belief, that:

    


    
      	
               

            	
              The
                statements of fact contained herein and upon which the opinions herein
                are
                based, are true and correct, subject to the assumption and limiting
                conditions explained in the report.

            


    

    


    
      	
               

            	
              Employment
                in and compensation for providing this consultation are in no way
                contingent upon any value reported and we certify that we have no
                interest, either present or contemplated, in the subject property.
                We have
                no personal interest or bias with respect to the subject matter of
                this
                consultation report or the parties
                involved.

            


    

    


    
      	
               

            	
              This
                consultation report identifies all of the limiting conditions (imposed
                by
                the terms of my assignment or by the undersigned) affecting the analysis,
                opinions and conclusions contained in this
                report.

            


    

    


    
      	
               

            	
              The
                analysis, opinions and/or conclusions, if any, contained in this
                report
                have been developed in accordance with the Code of Professional Ethics
                and
                Standards of Professional Practice of the Appraisal
                Institute.

            


    

    


    
      	
               

            	
              The
                use of this consultation report is subject to the requirements of
                the
                Appraisal Institute relating to review by its duly authorized
                representatives.

            


    

    


    
      	
               

            	
              No
                one other than the undersigned prepared the analysis, opinions or
                conclusions concerning real estate that are set forth in this consultation
                report.

            


    

    


    
      	
               

            	
              No
                one at Jackson Claborn, Inc has personally inspected the property
                that is
                the subject of this report.

            


    

    


    
      	
               

            	
              We
                certify that this consultation assignment was not based on a requested
                minimum valuation, a specific valuation, or the approval of a
                loan.

            


    

    


    /s/Jackson
      Claborn,
      Inc.

     

    JACKSON
      CLABORN, INC.


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    ASSUMPTIONS
      AND LIMITING CONDITIONS

    


    This
      consultation is expressly subject to the following assumptions and limiting
      conditions:

    


    
      	
               

            	
              1)

            	 	
              No
                responsibility is assumed for matters of legal nature. It is assumed
                that
                title to the property is marketable and the legal description furnished
                us
                is correct.

            


    

    


    
      	
               

            	
              2)

            	 	
              The
                property is treated as though under responsible ownership and competent
                management and free and clear of all liens and
                encumbrances.

            


    

    


    
      	
               

            	
              3)

            	 	
              The
                described physical condition of any improvements is based on visual
                inspection only. It is assumed that there are no hidden or unapparent
                physical conditions affecting value such as the existence of hazardous
                materials such as asbestos or any other potentially hazardous materials.
                No liability is assumed for the soundness of structural members,
                equipment
                or soil conditions, since no engineering tests were
                made.

            


    

    


    
      	
               

            	
              4)

            	 	
              Improvements
                are considered to be within lot lines and in accordance with local
                zoning
                and building ordinances, as well as all applicable Federal, state
                and
                local environmental laws and regulations, except as noted herein.
                Any
                plats, diagrams or drawings provided are intended solely to facilitate
                understanding and aid to the reader in picturing the property and
                are not
                meant to be used as references in matters of survey, as no survey
                was made
                and no liability is assumed regarding questions of
                survey.

            


    

    


    
      	
               

            	
              5)

            	 	
              It
                is assumed that all required private, Federal, state or local licenses,
                certificates of occupancy, consents or other legislative or administrative
                permissions required have been or can be readily obtained or renewed
                for
                any use on which the value estimate in this report is
                based.

            


    

    


    
      	
               

            	
              6)

            	 	
              Any
                information received from public or private sources is believed to
                be
                reliable; however, no warranty is given for its
                accuracy.

            


    

    


    
      	
               

            	
              7)

            	 	
              The
                authors shall not be required to give further consultation or testimony
                or
                appear in court, by reason of this consultation report with reference
                to
                the property described unless previous arrangements have been made
                to that
                effect.

            


    

    


    
      	
               

            	
              8)

            	 	
              Disclosure
                of the contents of this consultation report is governed by the Bylaws
                and
                Regulations of the Appraisal Institute. Possession of this consultation
                report or a copy thereof or any part thereof, does not carry with
                it the
                right of publication, nor may it be used by anyone but the party
                for whom
                it has been prepared without the previous written consent of the
                appraisers and, in any event, only with proper written qualifications
                and
                only in its entirety.

            


    

    



    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    
      	
               

            	
              9)

            	 	
              Neither
                all nor any part of the contents of this consultation report (especially
                conclusions as to value, the identity of the appraisers or the firm
                with
                which the appraiser is connected) shall be disseminated to the public
                through advertising, public relations, news, sales or other media
                without
                the prior written consent and approval of Jackson Claborn,
                Inc.

            


    

    


    
      	
               

            	
              10)

            	 	
              Any
                opinions of value stated herein are based on the purchasing power
                of the
                dollar as of the date of this report, except as otherwise specified.
                Therefore, the opinion of value is considered reliable only as of
                the
                stated date of valuation.

            


    

    


    
      	
               

            	
              11)

            	 	
              This
                consultation report is intended to be read and used as a whole and
                not in
                parts. Separation of any section or page from the main body of the
                consultation report is expressly forbidden and will be considered
                as
                invalidating the consultation.

            


    

    


    
      	
               

            	
              12)

            	 	
              Any
                allocation of value of this consultation report between land and
                improvements applies only to this consultation and must not be used
                as
                part of any other appraisal and is invalid if so used. The value
                reported
                for any portion appraised, plus the value of all other portions may
                or may
                not equal the value of the entire parcel or tract considered as an
                entity.

            


    

    


    
      	
               

            	
              13)

            	 	
              No
                responsibility is assumed for the accuracy of any descriptions of
                physical
                materials and conditions pertaining to the property or for any damages
                sustained in connection with actual or potential deficiencies or
                hazards
                such as, but not limited to, inadequacies or defects in the structure,
                design, mechanical equipment or utility services associated with
                the
                improvements; air or water pollution; noise; flooding; storms or
                wind;
                traffic and other neighborhood hazards; radon gas, asbestos, natural
                or
                artificial radiation or toxic substances of any description, whether
                on or
                off the premises.

            


    

    


    
      	
               

            	
              14)

            	 	
              The
                opinions of value and/or lease rates contained within this consultation
                report are estimates. There is no guarantee, written or implied,
                that the
                subject will actually sell or lease for the estimated value/lease
                rate.

            


    

     

    
      
        
          	
                   

                	
                  15)

                	 	
                  
                    The
                      Americans with Disabilities Act ("ADA") became effective January
                      26, 1992.
                      We have not made a specific compliance survey and analysis
                      of this
                      property to determine whether or not it is in conformity with
                      the various
                      detailed requirements of the ADA. Indeed, we have not been
                      supplied with
                      nor have we rendered a qualified opinion as to whether or not
                      there are
                      any "readily achievable" barrier removal items present. It
                      is possible
                      that a survey of the property together with a detailed analysis
                      of the
                      requirements of the ADA could reveal that the property is not
                      in
                      compliance with one or more of the requirements of the Act.  If
                      so, this fact could have a negative affect upon the value of
                      the
                      property.  Since we have no direct evidence relating to this
                      issue, we did not consider possible non-compliance with the
                      requirements
                      of ADA in estimating the value of the property.  Consequently,
                      the subject property has been valued assuming compliance to
                      ADA.  Should a professional survey prove non-compliance, we
                      reserve the right to re-evaluate the
                      property.