The National Trust Small Deal Fund
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The National Trust Small Deal Fund (SDF) is a tax credit fund that invests in projects that generate as little as $200,000 in tax credit equity (equaling total development costs of approximately $1.2 million). Projects of that size are typically overlooked by conventional tax credit investors despite the sheer number of them. In 2005, more than half of the 1,030 rehabilitations certified by the National Park Service earned less than $500,000 in credits.
Investments in these smaller deals are often considered undesirable because their transaction costs are typically just as high as larger projects yet the credit value is is much lower, making the investment’s cost-benefit ratio unattractive. The National Trust Small Deal Fund is structured to specifically address this issue. It uses standardized investment terms and documents, reduces its due diligence requirements, and keeps its closing costs very low. SDF uses a delayed equity pay-in model wherein the first major equity payment is deferred until the receipt of a cost certification and final (Part 3) project approval from the National Park Service.
SDF is capitalized by Chevron Texaco and managed by Tax Credit Capital, LLC. NTCIC supports SDF by referring deals through its national network of state and local historic preservation organizations, Main Street programs, Historic Hotels of America, and National Trust Regional Offices. To date, SDF has committed or closed on 59 projects totaling $30.5 million in rehabilitation tax credits.
SDF operates in all 50 states and is also able to purchase state historic credits in Virginia, Maryland, Rhode Island, Michigan and Louisiana. All types of properties are eligible, including boutique hotels, offices, restaurants, entertainment uses, cultural and nonprofit facilities, retail and mixed-use projects.
Transaction Terms and Conditions
| Terms | Typical Ranges and Options |
|---|---|
| Dollar Price Per Federal Tax Credit |
$.80 - $.85 |
| Pay-In Schedule | varies - typically 0 percent to 5 percent at closing, 80 percent at Part 3, 15 percent to 20 percent at performance benchmarks |
| Priority Return | 3 percent |
| Put Option | 15 percent |
| Developer Guarantees | Tax credit recapture, cost overruns and operating deficits. |
| Transaction Costs | $10,000 |
| Asset Management Fee | $1,000 |
| Audit Requirements | varies |