The structures behind a funded exit

Forward funding is a development finance structure in which an institutional investor acquires a site and funds construction in stages, taking ownership from golden brick, in exchange for a committed forward yield.

Forward purchase is a structure in which an investor contracts to buy a completed development at a fixed price on practical completion, while the developer funds construction, transferring less risk to the investor than a forward funding.

Forward funding and forward purchase both pre-agree an institutional exit, but forward funding has the investor fund construction from golden brick while forward purchase has the developer fund the build and the investor pay only on completion.

Golden brick is the point at which a residential development reaches ground level, allowing the site to transfer to a forward funding investor as a zero-rated supply for VAT and preserving VAT recovery through the transaction.

An income strip is a long-dated, usually index-linked lease structure in which an institution buys the income and the occupier retains a right to reacquire the asset for a nominal sum at expiry, separating secure income from residual value.

A pre-let is an agreement for an occupier to take a lease on completion, and a pre-sale is an agreement to buy the completed asset, both of which de-risk a forward funding by securing income or exit before construction finishes.