Glossary definition
Forward Funding
An arrangement where an institutional investor acquires a development site and funds the construction costs directly, with the developer retained under a development agreement to deliver the scheme. The investor takes on the funding risk in exchange for acquiring the completed asset at an agreed yield, while the developer earns a development management fee and profit share.
Definition
An arrangement where an institutional investor acquires a development site and funds the construction costs directly, with the developer retained under a development agreement to deliver the scheme. The investor takes on the funding risk in exchange for acquiring the completed asset at an agreed yield, while the developer earns a development management fee and profit share. Forward-funding is commonly used for BTR, PBSA, and large-scale commercial schemes, and can significantly reduce the developer's equity requirement.
See also
Closely related terms.
Build to Rent (BTR)
Purpose-built residential accommodation designed specifically for the private rental market rather than individual sale, typically held as a single investment by an institutional owner.
PBSA (Purpose-Built Student Accommodation)
Residential accommodation designed and managed specifically for university students, typically comprising en-suite cluster flats or self-contained studios with shared amenities.
Cap Rate (Capitalisation Rate)
The ratio of a property's net operating income to its current market value, expressed as a percentage and used to value income-producing assets.
Equity
The developer's own capital contribution to a project, sitting at the top of the capital stack and bearing the highest risk but also receiving the residual profit.
Further reading
Guides that touch this term.
Guide
The Capital Stack in Property Development: How to Structure Your Funding
A comprehensive guide to understanding and structuring the capital stack in UK property development, from senior debt through mezzanine to equity contributions.
9 min read readReadGuide
How Does Development Finance Work? A Complete Guide for UK Developers
A ground-up guide to how development finance is structured in the UK, covering loan mechanics, drawdown schedules, monitoring surveyors, and what lenders look for in your application.
5 min read readRead
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