Offering Memorandum (OM) Analysis

An Offering Memorandum (OM), sometimes called an offering package or investment memorandum, is a marketing document assembled by the seller or their listing broker to generate buyer interest and support the asking price. It typically includes property photos, a market overview, a summary of the rent roll, historical operating statements, and a set of financial projections. Because the seller's broker is compensated on a successful sale at the highest achievable price, the OM is fundamentally a sales tool — it is not an appraisal, not audited financial statements, and not an underwriting document, even though it often borrows the language and formatting of one.

That doesn't make an OM useless. It is usually the fastest way to get a first look at a deal's size, location, tenancy, and asking terms. The discipline is in treating everything the OM presents as a claim to be verified rather than a fact to be underwritten.

Every OM draws a line — sometimes clearly labeled, sometimes not — between in-place (or "trailing" or "current") financial performance and pro forma (or "stabilized," "projected," or "Year 1") financial performance. In-place numbers reflect what the property has actually collected and spent, usually shown as a trailing twelve months (T-12) or trailing three months annualized. Pro forma numbers reflect what the seller's broker believes the property could earn once assumed improvements — mark-to-market rent increases, expense reductions, lease-up of vacant space, or a management change — are realized.

The two figures can differ significantly, and the gap itself is informative. A pro forma that assumes rents will rise to "market" levels is only as credible as the comparable leases supporting that market rent, and an expense pro forma that assumes lower insurance or taxes than the property is actually paying today should be treated with particular skepticism, since real estate taxes are frequently reassessed upward after a sale closes at a higher price.

Certain patterns recur often enough in OMs that they are worth flagging every time they appear. The most common is a pro forma NOI that sits well above the trailing NOI with no clearly identified driver — for example, a pro forma NOI shown meaningfully higher than trailing performance, justified only by a vague reference to "upside potential" rather than specific, already-signed leases or a documented expense reduction plan. Other recurring red flags include cherry-picked comparable sales that don't match the subject property's age, condition, or location; expense figures that omit a line item (such as a reserve for capital expenditures) entirely; and occupancy figures measured at a single point in time rather than as a trailing average, which can mask recent turnover.

None of these issues necessarily disqualify a deal, but each one shifts work back onto the buyer and lender: verify the claim independently before it is allowed to drive the purchase price or the loan amount.

The right way to use an OM is as a map that tells you what to go verify, not as a source of record. Rent roll figures should be checked against actual signed leases; historical financials should be checked against the property's tax returns, bank statements, or audited financials where available; and any cap rate or valuation range presented in the OM should be checked against an independent appraisal and recent comparable sales rather than accepted at face value. Underwriting a deal off OM numbers alone — without reconstructing a verified trailing NOI — is one of the most common ways buyers and lenders overpay for or over-leverage a property.