💡 Plain English Explanation

This clause protects the financial details of real estate transactions, including purchase price, capitalization rates, financing structures, and investment criteria. Financial terms are among the most sensitive information in any deal because they directly affect negotiating leverage and market positioning.

Knowledge of what a buyer is willing to pay, or what a seller will accept, fundamentally changes negotiation dynamics. Similarly, details about financing structures can reveal investment strategies that competitors could exploit or that could affect a party's other market activities.

Financial information typically protected includes:

⚠ Why This Clause Matters

For Sellers: If your asking price or minimum acceptable price becomes known, you lose significant negotiating leverage. Similarly, if the market learns you have accepted a below-market price, it could affect the value of your other holdings or future negotiations.

For Buyers: Your investment criteria, return requirements, and financing capabilities reveal your competitive strategy. Competitors could use this information to outbid you on future deals or to identify properties you are likely to pursue.

Market Impact: Real estate pricing information often becomes the basis for comparable sales analyses affecting entire markets. Premature or inaccurate disclosure of transaction terms can distort market valuations and affect third parties.

📄 Clause Versions

Balanced Version: Protects core financial terms while acknowledging that some disclosure to lenders and investors is necessary. Includes reasonable provisions for post-closing disclosure. 
"Financial Terms" means all non-public financial information relating to the transaction or the parties' investment criteria, including but not limited to:

(a) Purchase price, price per square foot, and any price adjustment mechanisms;
(b) Earnest money deposits, escrow arrangements, and payment schedules;
(c) Capitalization rates, discount rates, and yield requirements;
(d) Internal rate of return (IRR) targets and equity multiple expectations;
(e) Pro forma projections, cash flow analyses, and sensitivity analyses;
(f) Financing terms, including loan amounts, interest rates, amortization periods, and loan-to-value ratios;
(g) Lender identities, loan commitment letters, and financing contingencies;
(h) Equity structures, waterfall provisions, and promote arrangements; and
(i) Tax structuring, 1031 exchange plans, and cost segregation strategies.

Each party agrees to maintain the confidentiality of Financial Terms and to disclose such information only to:
(i) Representatives with a legitimate need to know for transaction evaluation;
(ii) Lenders and potential lenders in connection with financing the acquisition;
(iii) Equity partners and potential equity partners evaluating participation; and
(iv) Tax and legal advisors providing professional services.

Following closing, neither party shall publicly disclose the specific purchase price or other Financial Terms for a period of six (6) months, except as required by law, regulatory filing, or judicial process, or as mutually agreed for joint announcements.
Disclosing Party Favor: Maximum protection for financial details with strict limitations on disclosure. Includes extended post-closing confidentiality and approval requirements for any financial disclosure. Use when pricing sensitivity is paramount. 
"Financial Terms" means any and all financial information relating to the transaction, the Property, or either party's investment criteria, including without limitation:

(a) Any indication of price, value, or pricing expectations, whether expressed as a total amount, price per unit, capitalization rate, or otherwise;
(b) All financial projections, pro formas, budgets, and cash flow analyses, whether prepared by the Disclosing Party or the Receiving Party;
(c) All information concerning actual or target investment returns, including IRR, cash-on-cash, equity multiples, and similar metrics;
(d) All financing information, including existing debt terms, proposed financing structures, lender communications, and refinancing strategies;
(e) All information concerning equity structures, capital stacks, joint venture terms, and investor identities;
(f) All tax information, including assessed values, tax strategies, and structuring considerations;
(g) All information concerning the Disclosing Party's investment criteria, acquisition targets, and portfolio strategy; and
(h) The fact that negotiations are occurring and the status of such negotiations.

The Receiving Party shall not disclose any Financial Terms to any person or entity without the prior written consent of the Disclosing Party, except to the Receiving Party's legal counsel on a strictly need-to-know basis. Any disclosure to lenders or equity partners shall require advance written approval identifying the specific recipients.

The confidentiality obligations with respect to Financial Terms shall survive closing and continue for a period of two (2) years thereafter. Neither party shall include the transaction in any marketing materials, case studies, or deal announcements without mutual written consent. The Receiving Party acknowledges that breach of this provision would cause irreparable harm entitling the Disclosing Party to injunctive relief.
Receiving Party Favor: Narrower protection focused on specific disclosed financial metrics. Permits necessary disclosure to financing sources and acknowledges that transaction price typically becomes public through recording. 
"Financial Terms" means only the following specific categories of information as expressly disclosed by the Disclosing Party:

(a) The Disclosing Party's minimum acceptable price or maximum offered price, if expressly communicated as confidential;
(b) Proprietary financial projections prepared by the Disclosing Party (but not market projections or publicly available data);
(c) The Disclosing Party's internal investment criteria and return requirements; and
(d) Non-public terms of the Disclosing Party's existing debt financing.

Financial Terms expressly excludes:
(i) The ultimate purchase price, which the parties acknowledge will become public through deed recording and transfer tax filings;
(ii) Capitalization rates derivable from public rent rolls and the recorded purchase price;
(iii) General market financing terms and interest rates;
(iv) The Receiving Party's own financial analyses and projections; and
(v) Information required to be disclosed to the Receiving Party's lenders, equity partners, or investors.

The Receiving Party may disclose Financial Terms as necessary to:
(i) Obtain debt financing from any lender;
(ii) Obtain equity commitments from any investor or joint venture partner;
(iii) Satisfy regulatory or legal reporting requirements;
(iv) Respond to inquiries from taxing authorities; and
(v) Pursue or defend any legal proceeding.

Confidentiality obligations with respect to Financial Terms shall terminate upon closing of the transaction.

💬 Key Considerations