Offering Memorandum (OM)

The offering memorandum is typically the first detailed document an investor receives when evaluating a commercial real estate acquisition opportunity. It serves as both a marketing tool and an information package, providing the property overview, location analysis, tenant information, financial statements, rent roll, photographs, site plan, and investment thesis. Well-prepared OMs from institutional brokerages (CBRE, JLL, Cushman & Wakefield, Newmark) can be 50-100+ pages and include detailed market research and financial modeling.

While OMs contain valuable information, investors must approach them with appropriate skepticism because they are marketing documents designed to present the property in the best possible light. Pro forma projections in OMs often assume aggressive rent growth, below-market vacancy, and optimistic expense assumptions. Common tactics include projecting to a stabilized NOI that assumes all vacant space is leased at above-market rents, using trailing NOI from an unusually strong year, or excluding non-recurring expenses that actually recur regularly.

Experienced investors use the OM as a starting point for their own independent analysis, not as the basis for their underwriting. Key items to verify during due diligence include: actual versus reported occupancy, in-place rents versus market rents, historical operating expense trends, capital expenditure history and upcoming needs, lease expiration schedule, tenant creditworthiness, and environmental condition. The OM provides the seller's narrative; due diligence reveals the reality.