Forward Sale Or Purchase Agreement
1. If the company opts for a physical settlement, it exercises the right to sell shares to the futures buyer at the contracted purchase price. The buyer at the front then uses these shares to close his credit position. The forward sale is generally structured as a public offering, which is a transaction registered with the Securities and Exchange Commission. The IPO closes “regularly” as stock buyers start with insurers according to the usual schedule of T-2. If the transaction is not related to a simultaneous primary issue of the issuer, no shares are actually issued by the company at the time of the transaction. Instead, buyers of forwards of the transaction go to the market and borrow shares from points of view that are delivered to buyers as part of the registered IPO. A forward sale of common shares is an offer that is agreed today with a billing date in the future. Advance sales agreements allow companies to take advantage of current prices by blocking a price at which, in the future, they will be able to sell shares to a buyer in advance, usually an investment bank. Late issuance provides the issuer with flexibility without drag on performance measures (e.g.B operating resources) or shareholders who experience immediate economic dilution (i.e. dividends and earnings per share). These agreements are generally used to finance transactions in which the closing date or capital requirement is uncertain, including financing a transaction over time, unidentified acquisitions or future development opportunities.
Transactions can also be structured to allow for the repayment of bonds and for general purposes. In addition to the multiple opportunities to use forward selling, these agreements have a number of advantages that may be particularly attractive to REITs. These benefits are particularly useful for REITs, where the need to finance investments is generally done over time, as opposed, for example, to the one-time acquisition cost. In addition, these agreements protect REIT shareholders by mitigating the dilution of shares during periods when, otherwise, the capital associated with the issue would not be able to do so. In general, the promoter of the seller project transfers ownership of the land by a first step corresponding to the signing of the forward financing contract, or shortly thereafter, at the time of the realization of certain conditions. As a result, the buyer becomes owner before or at the same time as the construction of the property. The total purchase price is determined by the contracting parties before the work begins. Forward Funding Contract is a bilateral sale contract for a future building between a buyer-owner and an investor buyer, in which the seller of the property undertakes to build a building and sell it to the buyer, but with the peculiarity that the burden of financing the building must be borne exclusively by the investor, who must therefore bear all the construction costs associated with it.
However, in principle, the contracting parties set a ceiling (maximum payment). As sales of REIT shares are becoming more frequent for sellers to take into account the tax structuring of foreign investors, some sellers are beginning to structure their purchases in advance as advance purchases of REIT shares, resulting in additional complexity. The sale of a building under construction can be done through various contracts such as the futures contract or the futures contract, both of which are derived from Anglo-Saxon practice.