What Is an Offering Memorandum? (No Fluff Explanation)

Your broker says they’re “putting together the OM.”

That’s the offering memorandum. It’s the document that does most of the selling before a buyer ever walks your building.

Here’s what’s in it, how buyers get it, and the one section that can quietly hurt your sale.

The Short Answer

An offering memorandum (OM) is the full marketing package for a commercial property for sale. Your listing broker prepares it.

It tells a serious buyer everything they need to decide whether to make an offer:

• What the property is
• What it earns
• Who the tenants are
• What the market around it looks like
• What you’re asking, and how offers should be submitted

Think of it this way. The listing gets a buyer’s attention. The OM gets their offer.

What’s Inside an OM

Most OMs follow the same structure:

• Executive summary: the property, the asking price, and the investment highlights
• Property details: building size, site, construction, parking, systems, and recent improvements
• Tenant overview: who leases the space, lease terms, and credit strength
• Financials: rent roll, trailing 12 months of income and expenses, and often a projection
• Market overview: the submarket, demographics, nearby comparable sales, and competing properties
• Offer instructions: how and when to submit an LOI

The financials carry the most weight. Buyers will check every number against the documents from Article 5. If the OM and the T12 disagree, the buyer trusts the T12.

How Buyers Get It

An OM usually isn’t public. It comes in three steps:

• First, a teaser or listing: one page or less, enough to spark interest
• Second, a confidentiality agreement: the buyer signs before seeing your financials
• Third, the full OM: released to buyers who signed

According to SharpLaunch, an OM is aimed at qualified buyers who’ve signed a nondisclosure agreement and are actively considering a purchase. That’s why it can include rent amounts and tenant details you wouldn’t put on a public page.

Your listing is the first step. Details like building size, ceiling height, and loading docks belong there, because they’re how buyers decide whether to request the OM at all. On Hutfin, those are standard listing fields.

The Pro Forma Trap

Most OMs include a pro forma, which is a projection of what the building could earn. That’s fine, as long as it stays clearly labeled.

The trap is pricing your building on the pro forma instead of actual income.

Here’s the math. These figures are illustrative.

• Actual NOI from the T12: $140,000
• Pro forma NOI, assuming a vacant suite gets leased: $165,000
• Value at a 6.6% cap rate on actual NOI: about $2.12 million
• Value at a 6.6% cap rate on pro forma NOI: $2.5 million

That’s a $380,000 gap, built entirely on a tenant who doesn’t exist yet.

Buyers know this. Most will underwrite your actual numbers and treat the pro forma as upside they don’t want to pay you for. Price on the pro forma, and your building sits.

The better move: price on actual NOI, and let the pro forma explain why a buyer might pay toward the top of the range.

What an OM Is Not

Three things to keep straight:

• It’s not a contract. OMs carry disclaimers stating the information isn’t warranted, and buyers are expected to verify everything.
• It’s not an appraisal. It’s a marketing document, and buyers read it that way.
• It’s not a securities offering document. Some people use “offering memorandum” for a private placement memorandum (PPM), which is a disclosure document used when raising money from investors. When you’re selling a building, your OM is a sales package, not a PPM.

Recap

• An OM is the full marketing package your broker prepares for a commercial sale
• It covers the property, tenants, financials, market, and offer instructions
• Buyers usually sign a confidentiality agreement before receiving it
• Pricing on pro forma NOI instead of actual NOI can make your building sit
• An OM is a sales document, not a contract, appraisal, or securities disclosure

Final Word

A strong OM doesn’t oversell. It makes the buyer’s job easy: clear numbers, honest projections, and every claim backed by a document. Ask your broker to show you the draft before it goes out, and check the financials yourself.

See how commercial properties are presented before buyers request the details. Browse commercial listings at hutfin.com.