Reserve Policy
Structured liquidity standards designed to preserve capital, protect lender position, and mitigate operational volatility.
Purpose
The Reserve Policy establishes minimum liquidity standards for property acquisitions and ongoing portfolio management.
The objective is to:
• Mitigate operating volatility
• Protect against temporary income disruption
• Support stable debt service coverage
• Preserve long-term asset performance
Minimum Reserve Requirements
Post-closing liquidity shall include:
Operating Reserve:
Minimum 3–6 months PITI equivalent.
Capital Expenditure Contingency:
Additional allocation when property condition or age warrants.
Stabilization Reserve (if applicable):
Allocated for properties requiring lease-up or minor operational improvement.
Reserve Determination Factors
Reserve levels may be increased based on:
• Asset age and deferred maintenance exposure
• Tenant concentration risk
• Vacancy history
• Insurance requirements
• Market stability
• Interest rate environment
Reserve determinations are documented during underwriting and confirmed prior to closing.
Reserve Management
Reserves are:
• Segregated from routine operating funds
• Monitored during monthly operating review
• Replenished if materially drawn down
• Evaluated annually for adequacy
Material reserve usage is documented and reviewed internally.
Prohibited Practices
The following practices are not permitted:
• Operating without defined reserve allocation
• Utilizing reserves for non-property purposes
• Reducing reserve levels below minimum thresholds without documented approval
• Structuring acquisitions without sufficient liquidity at closing
Liquidity preservation is a foundational risk control.
Lender Alignment
This Reserve Policy is designed to align with:
• Community and regional bank underwriting standards
• Conservative DSCR targets
• Long-term amortization structures
• Stable portfolio management principles
Reserve discipline strengthens debt coverage durability and reduces refinancing risk.
Summary
Algonquian Real Estate maintains formal liquidity standards to:
• Preserve capital
• Protect lender interests
• Support consistent cash flow
• Reduce exposure to short-term volatility
Reserve discipline is integral to long-term asset ownership and conservative portfolio growth.