An offering memorandum (OM) is the marketing document a listing broker prepares to present a commercial property for sale. It compiles the property description, financials, rent roll, and market context into one package so prospective buyers and lenders can evaluate the opportunity from a single source rather than assembling it piece by piece.
What Is Included in an Offering Memorandum?
An offering memorandum includes a defined set of sections: an executive summary, property description, the investment opportunity, financial analysis, market overview, the rent roll, and photos. Per FNRP, most offering memorandums follow this same construction, and a full OM also anticipates common buyer requests such as environmental reports, floor plans, and tax histories. It is prepared by the listing brokerage.
The OM is a marketing instrument, written to present the property in its strongest light. Its financial analysis frequently leans on a pro forma projection rather than in-place numbers, and it carries disclaimers that the information is not warranted or audited. Per Ascendix and FNRP, the OM is typically prepared by the brokerage firm engaged to list the property, and access often requires a signed confidentiality agreement before financials are released.
Section | What it covers |
Executive summary | The offering, asking price, and investment highlights |
Property description | Location, size, construction, unit or suite mix |
Investment opportunity | The thesis, upside, and business plan the seller is marketing |
Financial analysis | Historical and pro forma income, expenses, and returns |
Market overview | Submarket demographics, comps, and demand drivers |
Rent roll | Tenant-by-tenant lease and rent detail |
Why the Offering Memorandum Matters
The offering memorandum matters because it is the seller's framing of the deal, and it sets the anchor a buyer must independently test. The financials in an OM are typically the seller's best case, often built on a pro forma rather than actuals, and the document disclaims accuracy. Treating the OM as marketing, not fact, is disciplined underwriting.
The operative point for a buyer is that the OM shifts the burden of verification onto them. Per Meyer Suozzi, NDAs delivered with confidential deal materials commonly include no-warranty and non-reliance provisions, which under New York law can preclude later fraud claims. The buyer is expected to conduct independent due diligence: verify the rent roll against leases, reconcile income to a T-12, and confirm expenses rather than accepting the memorandum's numbers.
Example
A brokerage markets a 50-unit apartment building. The OM headlines a $7,500,000 asking price and a stabilized pro forma net operating income of $450,000, which implies a 6.0% cap rate. A prospective buyer signs the confidentiality agreement, pulls the rent roll and T-12, and rebuilds the numbers.
Metric | OM (pro forma) | Buyer underwriting (actuals) |
Net operating income | $450,000 | $405,000 |
Asking price | $7,500,000 | n/a |
Implied cap rate at asking | 6.0% | 5.4% |
Value at a 6.0% cap | $7,500,000 | $6,750,000 |
The buyer finds in-place NOI of $405,000 once vacancy and actual expenses are used instead of the OM's stabilized projection. At the same 6.0% cap rate the property supports a $6,750,000 value, $750,000 below the asking price. The OM was accurate as a marketing document and misleading as a price, which is why the OM starts the conversation and the buyer's underwriting ends it.
Variations and Edge Cases
Offering memorandums vary by deal type and by who prepares them, and the label can mean different things. The table below separates the common variants so an analyst reads each for what it is.
Variant | Treatment |
Marketing OM | The standard broker-prepared package for a property sale, financials lean pro forma |
Confidential information memorandum (CIM) | The business-sale equivalent in M&A, released after an NDA |
Securities offering memorandum | A private-placement disclosure document governed by securities law, not a marketing flyer |
Broker opinion of value context | An OM asking price is a marketing number, not an appraisal |
Teaser vs full OM | A one-page teaser precedes the full OM, which is released only after a confidentiality agreement |
Offering Memorandum vs Pro Forma
An offering memorandum is often confused with a pro forma, though one contains the other. An offering memorandum is the full marketing package a broker prepares to sell a property, spanning the description, market, rent roll, and financials. A pro forma is the cash flow projection inside that package.
The OM is the document; the pro forma is one model within it. The distinction matters because a buyer accepts neither at face value: the OM frames the opportunity and the pro forma projects its upside, but both reflect the seller's assumptions and must be rebuilt from actuals during due diligence.
Frequently Asked Questions
Who prepares the offering memorandum?The offering memorandum is prepared by the brokerage firm engaged to list the property for sale. It is a marketing document written to present the asset in its strongest light, which is why buyers verify its figures independently rather than relying on them.
Is an offering memorandum legally binding?An offering memorandum is generally not legally binding and typically carries disclaimers that its information is not warranted or audited. Binding terms come later in the purchase and sale agreement, so the OM sets expectations rather than obligations.
What is the difference between an offering memorandum and a pro forma?An offering memorandum is the complete marketing package for a property for sale, while a pro forma is the forward-looking financial projection contained within it. The OM includes the property description, market, and rent roll in addition to the pro forma financials.
Related Terms
Pro Forma
Rent Roll
Net Operating Income
Underwriting
Due Diligence