How do you read an offering memorandum fast?
An offering memorandum (OM) is the marketing package a broker prepares to sell a commercial property. To read one fast, skip the glossy photos and go straight to the numbers: the asking price and cap rate, the rent roll, the trailing financials (T-12), and the pro forma — then check whether the broker’s assumptions are realistic.
First, remember what it is
An OM is a sales document, prepared by the listing broker to present the property in its best light. It’s useful and information-rich — but it’s advocacy, not an appraisal. Read it to understand the deal, then verify everything independently.
The five-minute read order
- 1. Deal summary. Price, cap rate, size, location, and property type — the 30-second snapshot.
- 2. Rent roll. The actual leases: tenants, rents, term lengths, expirations, and current vacancy. This is the income engine.
- 3. Trailing financials (T-12). The real, actual income and expenses over the last twelve months — not projections. This is your ground truth.
- 4. Pro forma. The broker’s projected or “stabilized” numbers. Read it, but scrutinize every assumption — rent bumps, expense cuts, occupancy gains.
The number to distrust
Brokers often lead with a pro forma cap rate — a return based on rents and occupancy the property hasn’t achieved yet. Always find the actual, in-place cap rate on the trailing numbers and compare:
| In-place NOI (actual, T-12) | $140,000 |
| Actual cap rate at $2.0M price | 7.0% |
| Pro forma NOI (broker projection) | $170,000 |
| Pro forma cap rate | 8.5% |
The 8.5% is the number on the cover; the 7.0% is what you’re actually buying today. The gap is the broker’s story — your job is to decide whether it’s achievable.
Common red flags
- Aggressive rent growth or a large “market rent” gap with no plan to close it.
- Expenses that look too low — property taxes that will reset on sale, or management shown at zero.
- Deferred maintenance or capital needs glossed over.
Pull your own comps, confirm the reassessed taxes, and demand actuals in due diligence. The OM starts the conversation; your independent analysis ends it.