Offering Memorandum (OM)
Also called: OM, Offering memo, Marketing package
An offering memorandum is the marketing document a broker prepares to sell a commercial property, containing property details, financial statements, rent roll summaries, market data, and a proforma projection.
The OM is a sales document, not an underwriting document. Its proforma reflects the seller's business plan under the seller's assumptions, and its role is to establish the highest defensible price. That does not make it dishonest, it makes it advocacy, and it should be read as such.
The genuinely valuable content in an OM is the raw material: the rent roll, the trailing financials, the unit mix, the capital history, and the photographs. The projections are the part to rebuild from scratch. Experienced buyers extract the facts and discard the conclusions.
Rules of thumb
- Underwrite from the T12 and rent roll in the appendix, never from the proforma in the body.
- Note what is missing. An OM with no monthly detail, no rent roll, or no expense history is withholding something.
Related terms
- Trailing Twelve (T12)
A trailing twelve is an operating statement showing a property's actual income and expenses for the most recent twelve months, and it is the primary evidence base for underwriting a multifamily acquisition.
- Rent Roll
A rent roll is a unit-by-unit schedule of a property's leases showing unit type, square footage, current rent, market rent, lease start and expiration dates, and occupancy status.
- Letter of Intent (LOI)
A letter of intent is a short, generally non-binding document submitted by a prospective buyer that sets out the proposed price and principal terms of a transaction before a purchase agreement is drafted.
- Due Diligence
Due diligence is the contractual period after a purchase agreement is signed during which a buyer inspects the property, audits its financials and leases, and can typically terminate and recover earnest money.