Forward purchase and forward funding are not the same thing
In a forward purchase, the buyer commits now and pays essentially on completion. The developer carries the construction financing and therefore most of the delivery risk. In a forward funding, the buyer funds construction in stages as it progresses, usually after acquiring the land.
The choice changes almost everything downstream: who carries cost overruns, who controls the contractor relationship, what happens on insolvency, what security the buyer holds and how the return is earned. It is a structuring decision, not a payment preference.
The permit is the foundation of the price
A forward deal priced on an expected permit is priced on an assumption. The status of planning permission, its conditions, any pending objections, appeal periods and the risk of modification determine whether the schedule is realistic at all.
A buyer who accepts permit risk should be paid for it in price or protected against it in structure. A seller who conceals uncertainty about it buys a short-term price and a long-term dispute.
Construction cost is a risk to be allocated, not assumed away
Fixed-price general contracts move cost risk to the contractor — but only as far as the contractor’s balance sheet reaches. Cost-plus or partly open structures leave more with the buyer or the developer. Escalation clauses, provisional sums and change-order mechanics decide where surprises land.
Serious buyers examine the contractor’s covenant, the guarantee structure and the realism of the schedule with as much attention as the rent roll of a standing asset.
Milestones make the money move
Payments in a forward structure are tied to defined, verifiable events: land transfer, building permit, construction progress certified by an independent monitor, practical completion, defect rectification, letting thresholds.
Each milestone needs an objective definition and a named party who confirms it. “Substantially complete” without a definition is not a milestone; it is a future argument.
Security: what happens if the developer stops
The buyer’s protection is a package rather than a single instrument: performance bonds, parent company guarantees, retentions, step-in rights, assignment of contractor warranties, and a clear position on land ownership during the build.
The right question is not whether security exists but whether it can actually be used in the situation where it is needed — usually one where the counterparty is under stress and speed matters.
Why marketing comes last
A forward opportunity taken to market before the structure is settled invites every buyer to design their own version of the deal. The result is bids that cannot be compared, a developer negotiating against four different frameworks, and a process that loses months.
The alternative is to fix the structure first — permit status, contract form, milestone logic, security package — and then approach the counterparties for whom that structure works. That sequencing is the substance of transaction structuring.
This article describes general market practice. It is not legal, tax or investment advice and does not replace an assessment of the individual case.
