Forward?
What is a forward in real estate and what is a put on a real estate transaction? Been hearing these terms thrown around
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1/2
A “forward” or forward purchase agreement, is a PSA structure that allows a buyer-seller to agree to a specified purchase price at a future point in time. These are typically used for development deals that haven’t been started but can be used for development deals that are on-going with a defined completion date. Most recently seen them pop up for single family rentals and garden multi family where there are clear and separate buildings being delivered. Buyers like them because you can theoretically limit development cost overruns and further incentivize a developer to stay within budget. Sellers like them because it locks in their sale price regardless of market conditions.
2/2 A “put” or put right, gives one party to a JVA the right but not the obligation to “put” or sell their interest to the other party to the JVA. If this right is defined in the docs, it is always given to the minority partner assuming 90/10% JV. This is defined under the liquidity provisions in a JVA, and allows one partner to exit the deal without outright selling the property.
Basically it gives developers a backdoor out of the deal. There are many forms of liquidity rights, this is just one.
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