A Forward Purchase Agreement is a contract where an investor agrees in advance to purchase a completed property development at a predetermined price. Unlike a forward funding deal, the developer retains full construction responsibility and carries the financial risk during the build. These agreements are often used in UK property development finance to secure a future exit, especially for schemes with strong tenant covenants or in high-demand areas. They provide capital certainty for the developer and price security for the investor, aiding in funding negotiations and risk management.
In practice, a Forward Purchase Agreement is often viewed as a specialist form of Contractual Agreement that gives developers greater certainty over their disposal strategy before construction completes. It differs from a Forward Funding Agreement because the purchaser typically acquires the asset only once practical completion and agreed conditions have been satisfied, leaving development and delivery risk with the developer throughout the build period. The existence of a committed buyer can strengthen lender confidence and may support discussions around a Forward Funding Facility or other funding arrangements by providing a clearly defined exit route and valuation benchmark.
View glossary entry