How to fund the lease-up period
A finished asset earns little until it lets, but the debt still costs money every month. This guide explains how the lease-up period is funded and how the interest carry is structured.
The lease-up period is funded with a stabilisation facility that carries the asset from completion to a stabilised income, with the interest handled in one of three ways: rolled up and settled at exit, retained as an interest reserve held back from the advance, or part-serviced from the early income of the units already let. Most facilities combine them, rolling or retaining interest while the asset is empty and shifting to part-serviced as occupancy grows. The facility is structured around the lease-up curve so the carry is funded until the income covers it. We arrange it; we do not lend.
At a glance
- What is fundedThe interest carry across the ramp
- Rolled upInterest added to the loan, settled at exit
- RetainedInterest reserve held back from the advance
- Part-servicedEarly income services some interest
- Most facilitiesCombine these as occupancy grows
- Structured aroundThe lease-up curve
The problem the lease-up funds
A property reaches practical completion finished but largely empty. It earns little or nothing until it lets, yet the debt on it accrues interest from day one. The lease-up funding solves this: it funds the interest carry across the income ramp so the sponsor is not feeding the asset from outside cash while it fills. The facility that does this is stabilisation finance, set out at /services/lease-up-finance/ and /services/stabilisation-bridge-finance/.
This is commercial property lending. It is unregulated and sized on the asset.
Three ways to carry the interest
There are three mechanisms for funding the interest during lease-up. They are not mutually exclusive, and a well-structured facility usually moves between them as the income builds.
| Method | How it works | Best when |
|---|---|---|
| Rolled up | Interest is added to the loan and settled at exit | The asset is empty or very lightly let |
| Retained | An interest reserve is held back from the advance | The lender wants the carry funded up front |
| Part-serviced | Early income services some of the interest | Occupancy is building and producing rent |
Rolling interest keeps cash in the sponsor's hands during the empty months, but the interest accrues on a rising balance, so the cost compounds the longer the ramp runs. A retained reserve has the same effect on the day-one advance. The discipline is to set the term against the real lease-up curve, not an optimistic one, so the carry does not outrun the plan.
Structuring the facility around the ramp
The carry is only as expensive as the ramp is long, so the facility is structured around the expected lease-up curve. A scheme that fills fast across a single window needs a short carry; one that ramps over years needs a longer, more carefully reserved facility. The shape of the carry should follow the income: roll or retain while the asset is empty, then part-service as the units let and produce rent.
- Estimate the lease-up curve: how fast occupancy and income build for this asset and sector.
- Set the facility term against that curve, with a margin if lease-up runs slow.
- Roll or retain the interest while the asset is empty or lightly let.
- Shift to part-servicing as occupancy and rent grow through the ramp.
- Repay the rolled or reserved interest at the take-out refinance or sale.
You can model the cost of the carry against the value the ramp delivers at /calculators/stabilisation-gap/, and size the facility itself at /calculators/loan-sizing/.
How the ramp differs by sector
How long the carry runs depends on the sector. A build-to-rent block or a logistics unit leases up over 6 to 18 months, so the carry is short. A self-storage store fills over roughly three to five years, so the carry is long and the reserve has to be sized for it. PBSA is the sharp case: a scheme must let across one concentrated September intake, so the carry is sized to reach the next intake if the window is missed. The deep short-term lending market supports all of these: the BDLA put the UK bridging and development loan book at a record 13.7 billion pounds as at Q3 2025.
How we structure the carry
We structure the interest carry around the real lease-up curve, rolling or retaining while the asset is empty and shifting to part-servicing as it fills, so the funding holds without forcing outside cash into the asset. We are an arranger, not a lender, and we place the facility with the funder whose terms fit the ramp. The facility sits at /services/lease-up-finance/.
How to fund the lease-up period: common questions
How is the lease-up period funded?
With a stabilisation facility that carries the asset from completion to a stabilised income and funds the interest across the ramp. The interest is rolled up and settled at exit, retained as a reserve held back from the advance, or part-serviced from the early income, usually a combination that shifts as occupancy grows.
Should I roll up or service the interest during lease-up?
Roll up or retain the interest while the asset is empty or lightly let, to protect cash flow, then shift to part-servicing as the units let and produce rent. Rolling keeps cash in hand but compounds on a rising balance, so set the term against the real lease-up curve rather than an optimistic one.
What is a retained interest reserve?
It is an amount the lender holds back from the advance to cover the interest during lease-up, so the carry is funded up front rather than rolled onto the balance. It has the same effect as rolling on the day-one advance, and it is settled or released as the asset stabilises and the facility is refinanced.
How long does the interest carry last?
As long as the lease-up curve: 6 to 18 months for a build-to-rent or logistics scheme, a single September window for PBSA, and roughly three to five years for self-storage. The facility term is set against that curve with a margin, so the carry is funded until the income covers it.
Can early rental income cover the interest during lease-up?
Increasingly so as occupancy grows. A well-structured facility part-services the interest from the income of the units already let, with the balance rolled or reserved while the asset is still filling. The shift from rolled to serviced tracks the income ramp, so the carry follows the rent the asset is actually producing.
Funding a student accommodation scheme?
Send us the scheme and the operator and we will come back with a view on fundability and likely terms within one working day.