An offering memorandum, or OM, is the document a broker prepares to market a commercial property for sale. It presents the property, the income and the opportunity in the way the seller wants it read.
What it contains
- Executive summary. The property, the price guidance and the investment case.
- Property description. Location, size, age, unit mix or tenancy, condition and any capital improvements.
- Financials. Rent roll summary, operating history and a pro forma, often with a stated NOI and cap rate.
- Market overview. Demand, supply, rents and demographics for the area.
- Sale comparables and lease comparables. Evidence for the pricing and the rent growth assumed.
- Offering process. How to bid, deadlines and what the seller requires.
How to read it critically
An OM is a sales document, so it shows the property in its best defensible light. The figures to test are the ones the price depends on: the NOI (in-place or pro forma), the rent growth, the vacancy and the expense assumptions.
What to verify
- The unit count, occupancy and average rent against the rent roll.
- The stated NOI against the trailing twelve months.
- The expense lines for taxes and insurance, which often change after a sale.
- The bridge from in-place to pro forma NOI and what it assumes.
- The comps: dates, sizes, and whether the properties are truly comparable.