Worked examples
Indicative structures, anonymised
The shape of a forward funding shows better in numbers than in prose. These examples use the Panel Investor convention: representative of real deals, but not any single transaction. Figures are indicative and date-stamped.
Example one
PBSA forward funding, 550 beds, regional university city
Counterparty: Panel Investor A (annuity-backed PBSA platform). Indicative GDV £62m.
| Line | Amount | Note |
|---|---|---|
| Land value at golden brick | £11.4m | Paid on transfer once foundations reach ground level |
| Construction cost | £41.2m | Funded in 22 monthly drawdowns against certified valuations |
| Professional and finance costs | £4.9m | Within the funded development budget |
| Developer return | £4.5m | Circa 8% on total development cost, paid on completion and let |
| Total development cost | £62.0m | Committed by the investor from golden brick |
| Stabilised net operating income | £3.35m | Year one, on nomination agreement with the university |
| Investment yield (net initial) | 5.25% | Price struck on the balancing date, Q2 2026 basis |
| Investor capital value | £63.8m | NOI capitalised at the agreed yield |
Reading the structure
The investor commits the full £62m development cost from golden brick and funds it in monthly drawdowns, so the developer carries no senior debt and no rolled-up interest. The developer return of £4.5m, roughly 8% on cost, ranks behind the investor’s committed yield and is paid on practical completion and lease-up.
The price is struck on the balancing date by capitalising stabilised net operating income at the agreed net initial yield of 5.25%. The gap between the £63.8m capital value and the £62m development cost is the margin that must cover the developer return and the investor’s development risk premium. If costs run over the funded budget, the developer return absorbs the overrun first: this is profit erosion, and it is why cost certainty matters more in a forward funding than in almost any other structure.
Compare this with the forward purchase alternative, where the developer funds construction and the investor pays a fixed price on completion, and read how the two structures price differently in the comparison.