In one sentence
A reserve for tenant improvements and leasing commissions, funding the cost of re-tenanting space as leases roll.
The longer version
On office, retail, and industrial deals, keeping space leased costs money: build-outs for new tenants and commissions to brokers. The TI/LC reserve pre-funds that cost so re-leasing does not strand the property.
Reserve releases track to actual leasing activity, which ties servicing back to the rent roll and the underlying leases.
Common questions
- What is a TI/LC reserve?
- A reserve funding tenant improvements and leasing commissions, so money exists to re-lease space when tenants leave or leases roll.
- How is a TI/LC reserve sized?
- From the lease rollover schedule and market tenant improvement and commission costs, sometimes as an upfront deposit plus monthly contributions.
- Is a TI/LC reserve required on every loan?
- It is common on office, retail and industrial loans with meaningful lease rollover. Multifamily loans typically do not need one.
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