Description
Reserve provisions are of particular interest to the borrower because of their impact on loan proceeds disbursed at closing and the borrower's autonomy in managing its cash flow throughout the loan term. Reserves for taxes and insurance, capital expenditures/replacement, tenant improvements, and lease commissions, FF&E (required for hotels), or excess cash are usually cast as monthly deposits. Immediate repair, environmental, and earnout reserves are usually one-time deposits that are required at closing in response to issues uncovered by the lender in its property inspection or environmental report.
Borrowers want to minimize all of these reserves and often contest the way in which they are calculated, the timing of deposits, who shall be entitled to interest on the reserve accounts, and the conditions under which funds are released. Counsel should understand how these reserves are underwritten by lenders and the options that may be available to reduce the amounts required to be deposited into reserves (or the amount at which they should be capped) and streamline the conditions for release of funds to the borrower.
Listen as our expert panel discusses the types of reserves and how those reserves might be funded and disbursed under the loan documents. The panel will also discuss the different types of earnout reserves and seasonality reserves (for hotels), and how letters of credit might be used in lieu of cash.
Presented By
Mr. Fritz concentrates his practice on commercial real estate capital market transactions and general corporate counseling. He regularly advises national and multinational clients in the commercial real estate industry. Mr. Fritz has over 17 years of experience in handling complex and high-value transactions, such as acquisitions, dispositions, financings, and joint ventures. A large part of his practice is dedicated to representing developers, sponsors, investors, and other capital market participants. Mr. Fritz regularly handles the acquisition, development, and disposition of commercial real estate assets, mortgage and mezzanine financings, preferred equity investments, and the structuring of joint ventures. In his joint venture practice, he focuses on helping his commercial real estate clients structure joint ventures for both single asset and programmatic real estate investment strategies
Mr. Kupstis represents developers, sponsors, investors, financial institutions, and insurance companies on the acquisition, development, and disposition of commercial real estate assets, mortgage and mezzanine financings, preferred equity investments, and the structuring of joint ventures. He regularly advises sponsors and investors in connection with financing for multifamily and student housing projects through Fannie Mae and Freddie Mac.
Ms. Lewis’ clients include commercial banks, venture capital investors, real estate developers, private equity funds, tax credit financiers, and other senior and junior lending institutions, as well as emerging growth companies and other corporate borrowers. She handles a variety of commercial transactions on behalf of her clients, including formation, equity and debt financings, term and revolving credit facilities, construction financing, mezzanine financings, real estate joint ventures, mergers and acquisitions, dispositions, and general contract matters.
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This 90-minute webinar is eligible in most states for 1.5 CLE credits.
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Date + Time
- event
Tuesday, November 18, 2025
- schedule
1:00 p.m. ET./10:00 a.m. PT
I. Monthly reserves
A. Tax and insurance
B. Capital expenditure/replacement
C. Tenant improvement and leasing commissions
D. FF&E
E. Excess cash
II. Upfront reserves
A. Immediate repairs
B. Environmental
C. Earnout
III. Seasonality reserves (hotels)
IV. Points of negotiation—interest, triggers for deposits, caps, and conditions for release
V. Loan documentation relating to reserves
VI. Letter of credit as alternative to cash
VII. Practitioner pointers
The panel will review these and other key issues:
- What are the typical monthly reserves required for various types of commercial property, and how are they determined by the lender?
- How are engineering reports used to determine the repair reserve?
- When is an environmental reserve typically required, and how are Phase I and Phase II reports used to determine reserve conditions?
- What are the standard points of negotiation on the foregoing reserves—interest, expenditure caps, triggers, and conditions for release?
- How can letters of credit be used in lieu of cash reserves?
Related Courses
Reserve Provisions in Real Estate Loans: Funding and Disbursement Terms for Taxes, Insurance, Repairs, and More
Tuesday, November 18, 2025
1:00 p.m. ET./10:00 a.m. PT