What Is an Offering Memorandum (OM) in Real Estate, and How to Read One in Ten Minutes

What an offering memorandum is

An offering memorandum (OM) is the document a listing broker sends to prospective buyers to market a property for sale. It describes the asset, presents its financials, makes the case for a price and sets out the bid process. Most OMs arrive as a 40- to 80-page PDF after you sign a confidentiality agreement, with a teaser or executive summary sent ahead of it.

An OM is a sales document. The broker who prepared it is usually paid a percentage of the sale price, and the seller has reviewed and approved its contents. It presents the property in the best possible light, so read it the way a lender reads a borrower’s business plan.

This guide is for the person receiving the OM: the analyst or associate who gets 20 of them a week by email and has to decide quickly which few deserve a full model.

The standard sections of an OM

Almost every OM follows the same outline. Knowing it lets you go straight to what matters.

• Executive summary. The pitch in two pages: the asset, the price or pricing guidance, the headline cap rate and the investment thesis (for example, “value-add opportunity in a supply-constrained submarket”)
• Property description. Address, year built, site area, unit mix or tenant roster, construction, parking, recent capital work, photos and aerials.
• Financial summary. In-place income and expenses, usually a summarized T12, next to a pro forma showing year 1 under new ownership. Often includes a 5- or 10-year projection.
• Rent roll summary. For multifamily: unit mix, average in-place rent and the broker’s market rent by floor plan. For commercial: tenants, square footage, lease start and expiry dates, current rent and options. The full rent roll is usually provided separately, if at all.
• Market overview. Submarket narrative, demographics and the supply pipeline. Much of it is general and reused across OMs.
• Comparables. Recent sales and lease comps, selected to support the asking price and the pro forma rents.
• Offering terms. Pricing guidance or a note that the deal is unpriced, the bid date, tour dates, any assumable debt and the broker’s contact details.
• Confidentiality and disclaimers. The section stating, in legal language, that nothing in the OM is guaranteed. It’s worth reading once, because it confirms that every figure in the OM still needs verifying.

The ten-minute read, in order

Don’t read the OM front to back. The broker ordered it to build a case. You’re reading it to find the few facts that decide whether the deal deserves a model.

Minute 1: pricing guidance. Find the price. If the OM is unpriced, find the whisper price, which the broker usually shares by phone or in the cover email. Divide the in-place NOI by that price to get the going-in cap rate. It’s the first number anyone at your firm will ask about.

Minutes 2 to 3: asset basics against your buy box. Check property type, market, size, vintage, price range and occupancy. If two or more fall outside your criteria, stop. Log the deal as a pass and move on. You’ve spent three minutes.

Minutes 4 to 5: in-place NOI vs. pro forma NOI. Put the two side by side and look at the gap. Take a 120-unit multifamily property with pricing guidance of $19,500,000. The OM shows trailing NOI of $1,116,400, a 5.7% cap rate, and pro forma NOI of $1,343,200, a 6.9% cap rate. The pro forma gets there by raising rents 10% to $1,650 per unit per month, cutting vacancy to 5% and holding expenses flat. Each of those assumptions is something you’d have to deliver after you buy. The 5.7% is what you’re paying for. The 6.9% is what the broker says you could achieve.

Minutes 6 to 7: the rent roll. For commercial assets, check:

• the weighted average lease term (WALT)
• the rollover schedule, meaning how much income expires in each of the next 3 years
• the top 3 tenants’ share of total rent

A WALT under 3 years with 40% of income expiring in year 2 is a very different deal from the one described on the cover. For multifamily, compare in-place rent with the broker’s market rent by floor plan, and check whether the comps actually support the loss to lease the broker is pointing to.

Minutes 8 to 9: the expenses that are missing or understated. Scan the expense list for common gaps:

• no management fee on a self-managed property
• no replacement reserves
• taxes based on the seller’s assessment when a sale will trigger reassessment
• insurance at last year’s premium

On the 120-unit example, three adjustments move NOI from $1,116,400 to $1,022,400 and the going-in cap rate from 5.7% to 5.2%:

1. Add back a one-time roof repair.
2. Add $300 per unit in reserves.
3. Recalculate taxes at the post-sale assessment.

A lower NOI also means a smaller loan. Our debt yield guide works through that on the same building.

Minute 10: the comps the broker chose. Check the date, distance and vintage of each sale comp. Three sales from 2 years ago in a stronger submarket aren’t a reliable basis for pricing. Then check the rent comps behind the pro forma. Are they newer buildings, renovated units, or genuinely comparable product?

After ten minutes, you know the price, the realistic yield, the main assumption driving the pro forma and what’s missing. That’s enough to decide whether the deal gets a model.

What to trust and what to verify

Some of the OM is fact. Some of it is forecast presented as fact.

Trust provisionally: the address and legal description, unit count and square footage, year built, lease start and expiry dates, tenant names, photos and the list of recent capital projects. Brokers rarely get these wrong, and they’ll be confirmed in diligence.

Always verify:

• pro forma rents and the market rent used to support them
• the expense ratio and any expense line that looks low
• the cap rate the broker quotes, which is often based on pro forma NOI
• any comp described as “market”
• occupancy, which is only accurate as of a specific date. Find that date. “95% occupied” in a summary written in June may reflect April.

A simple rule: if a number could change between now and closing, treat it as a projection, whatever the OM calls it.

A careful read also protects you later. A number you accept at face value now and find to be wrong in diligence becomes a retrade request, and brokers remember which buyers retrade.

Questions to send the broker after the read

Keep the list short. Brokers answer short lists.

1. Can you send the full rent roll as of the most recent month, including lease dates and concessions?
2. Can you send the T12 as an export from the accounting system, with monthly columns?
3. What is the current tax assessment, and does the jurisdiction reassess on sale?
4. Is the property self-managed? If so, what management fee did you assume in the pro forma?
5. What’s the whisper price, and where are the seller’s expectations relative to guidance?
6. Are there any leases, amendments or side letters not reflected in the rent roll summary?

Ask the first two every time. Ask the rest when your ten-minute read raises the issue.

The handoff: what goes into the deal record

Whether you pass or pursue, record the same information.

From the OM: address, property type, units or square footage, year built, pricing guidance and whisper price, in-place NOI, pro forma NOI, occupancy and its date, the broker and the seller. Recording these fields turns every passed deal into a data point in your comps database. Six months later, when you’re evaluating a nearby property, that data is ready to use.

Then request: the full rent roll, the T12, leases or lease abstracts for the largest tenants, the tax bill and the insurance policy. Once those arrive, the deal moves from screening into underwriting, and our underwriting guide picks up from there.

The step most teams skip is recording the deals they pass on. Those OMs stay in email, the numbers never get logged, and when someone needs a comp, they end up searching an inbox for a PDF.

What Altrio does with the OM

Altrio connects to your Gmail or Outlook inbox and extracts the data brokers send you about each deal, including everything in the OM. The pricing, in-place and pro forma NOI, rent roll summary and expenses you’d otherwise spend ten minutes finding are already pulled out and saved to the deal. You can make a go or no-go decision in a fraction of the time. This is where deal sourcing and screening starts, and where the path from OM to IC memo begins.

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