Fund VII is a fund set up specifically to handle those deals that are slightly below direct investor thresholds. Fund VII typically handles transactions that generate between $1,000,000 and $3,000,000 in federal historic tax credits, though the Fund will look at smaller transactions at a developer’s request.

Fund VII utilizes a two-tier lease pass through structure to invest in the real estate and obtain the federal historic tax credits. This type of structure allows the developer to utilize the depreciation and losses generated by the real estate.

As with the Small Deal Fund, it is a goal of Fund VII to simplify the closing process as much as possible so as to keep legal and accounting fees to a minimum. Consistent with this goal, and as a service to developers placing projects in Fund VII, no legal fees will be charged to the developer by the Fund unless there is an extraordinary issue discovered in the due diligence process. The developer is only responsible for his/her own legal and accounting fees. Fund VII highly recommends the use of attorneys and accountants with tax credit experience as the learning curve for handling specialized tax credit transactions can prove costly.

Fund VII makes every effort to work from a set of standardized documents. This is another effort to minimize the developer’s legal fees.

The pricing on the federal historic tax credits for Fund VII transactions is negotiable and depends on several items:

• The size of the deal
• Timing of capital contributions
• Priority Return
• Exit Price

A typical Fund VII transaction has a 3% annual priority return based on invested capital contributions and a 15% to 20% exit price paid 61 months after the placed in service date.  Pricing for such a transaction would typically be between .90 and .95/1.00. If a developer were to choose a delayed pay in pricing may be higher.

Many states have historic tax credit programs that work in conjunction with the federal historic tax credit. If you are developing properties in Virginia, Maryland, Michigan, Rhode Island, Louisiana or Mississippi, Fund VII can separately arrange for the purchase of those credits as well. However, should your project be located in a state other than those listed it does not preclude you from using Fund VII for placement of the federal historic tax credits.