IN-DEPTH GUIDE · DEVELOPER

Forward funding — guide for developers and investors

Forward funding is one of the most attractive financing structures for Danish residential projects. Investor enters early, finances construction and acquires the finished asset. Gives developer liquidity and investor attractive pricing. Here is the full flow.

What is forward funding?

Forward funding means an institutional investor (typically pension fund, fund or family office) entersbefore construction starts and finances the project through the build phase in exchange for acquiring the property on completion. Differs from traditional development, where developer self-finances and sells on completion.

Structure

1. Contract signed before or early in build phase — typically after local plan approved
2. Investor pays milestones during construction (typically 10-20 % at contract, 30-40 % at roof-on, 40-50 % at occupancy)
3. Developer acts as bygherre with full project responsibility
4. Contractor guarantees completion via performance bond or bank guarantee
5. Price is locked or follows agreed price formula
6. Handover at practical completion or occupancy

Benefits for developer

• Liquidity through the project — no need for full construction loan through entire period
• Price secured at contract — no sales risk after completion
• Less capital tied up — can start multiple projects in parallel
• Less exit risk — investor committed from start
• Institutional counterparty — professional buyer

Benefits for investor

• Attractive entry pricing — typically 5-10 % below market for finished comparable assets
• Product control — influence on specifications and quality
• Secured pipeline — capital allocation over build phase
• No competitive bidding — often no competing bids at completion
• Forecast cash flow — first rental income from day 1

Typical terms

Risk allocation