An OM is an offering memorandum: the marketing package a seller's broker prepares to present a commercial property to prospective buyers. It describes the building, its tenants, its income and its market, and it tells buyers how to submit an offer.
The listing broker writes the OM from the owner's records, and buyers pass it to their partners and their lenders. A sale usually moves through four documents:
- Teaser. A one-page summary that goes to a wide list of buyers and leaves out the confidential details.
- Confidentiality agreement. The buyer signs it to receive the full package, which shows each tenant's rent.
- Offering memorandum. The buyer uses it to screen the deal and to decide whether to bid.
- Letter of intent. The buyer's offer, due on the date the OM sets.
An OM markets the property and binds neither side. The contract comes later: the purchase and sale agreement fixes the price, the deposit and the closing date. Our investing guide walks through the six steps of buying a commercial property.
The price in an OM is the seller's opinion of value, and a lender forms its own. For US banks, the Office of the Comptroller of the Currency (OCC) puts it bluntly: "A bank's use of a borrower-ordered or borrower-provided appraisal violates the agencies' appraisal regulations" (OCC handbook).
One caution on the name. A sponsor who raises money from investors to buy a building also hands them an "offering memorandum", and that one is a securities document. The last section explains how the two documents differ.
A commercial real estate offering memorandum includes an executive summary, a property description, a market overview, the rent roll, a financial summary, comparable sales and rents, the offering terms and a disclaimer. Each section makes statements that a record can confirm.
| Section | What it shows | What confirms it |
|---|---|---|
| Executive summary | The asking price, the cap rate and the reasons to buy | The financial summary |
| Property description | Age, size, construction and recent capital work | An inspection and a survey |
| Market overview | Local vacancy, rents and employers | Public data and competing buildings |
| Rent roll | Each tenant's space, rent and lease dates | The leases and tenant estoppel certificates |
| Financial summary | The trailing 12 months and a pro forma | Operating statements, tax bills and insurance invoices |
| Comparable sales and rents | Deals the broker selected | Deals the broker left out |
| Offering terms | The bid date and the form of offer | The seller's broker |
| Disclaimer | Who stands behind the figures | Your lawyer |
The rent roll lists every tenant with its space, its rent and its lease dates, and our leasing guide shows how to read a rent roll. A tenant estoppel certificate is a statement a tenant signs to confirm the terms of its lease.
Read the disclaimer first. It usually says that the seller and the broker do not guarantee the figures and that the buyer should verify them. That page tells you what the whole package is: the seller's presentation.
Pro forma NOI is the net operating income an offering memorandum projects for the coming year, after the rent increases, the new leases and the savings the seller expects a buyer to achieve. The asking price usually rests on it.
Net operating income (NOI) is a building's yearly income less its operating expenses, before any loan payment. A cap rate is NOI divided by price, and our cap rate guide explains what a cap rate is.
Take a 40-unit apartment building offered at $7,000,000. Every figure in this example is an assumption.
| Line | T12 (actual) | Pro forma (projected) |
|---|---|---|
| Average rent per unit, per month | $1,400 | $1,500 |
| Gross potential rent | $672,000 | $720,000 |
| Vacancy | 8%, or $53,760 | 3%, or $21,600 |
| Effective gross income | $618,240 | $698,400 |
| Operating expenses | $288,240 | $278,400 |
| NOI | $330,000 | $420,000 |
| Value at a 6% cap rate | $5,500,000 | $7,000,000 |
Gross potential rent is the rent the building would collect with every unit leased, and effective gross income is what remains after vacancy.
The asking price is the pro forma NOI at a 6% cap rate. On the income the building earned, the same price is a 4.7% cap rate. The $1,500,000 between the two columns pays for three forecasts: higher rents, fuller units and lower expenses. A buyer who pays it pays the seller for work the buyer has yet to do.
A T12 is the trailing 12 months: the statement of a building's actual income and expenses over the last 12 months. The T12 is the record, and the pro forma is the forecast. Read the two columns line by line, and ask who makes each change happen.
Vacancy is the easiest line to test. In the example, each point of vacancy costs $7,200 of income and $120,000 of value. Moving the pro forma from 3% to the building's own 8% removes $600,000.
For an apartment building, public data gives a second test. The US Census Bureau's rental vacancy rate was 7.3% in the second quarter of 2026 (FRED, rental vacancy rate). The lowest reading since the series began in 1956 is 5.0%, first reached in the first quarter of 1978. The pro forma's 3% describes a building fuller than the national rental market has been in any quarter on record.
Source: U.S. Census Bureau, Housing Vacancy Survey, rental vacancy rate in the United States, quarterly, via FRED (series RRVRUSQ156N), first quarter 1956 to second quarter 2026; the 3% line is the pro forma assumption of this page's example.
The series covers all US rental housing, so it tests an apartment pro forma and no other property type. One building in a tight neighbourhood can stay fuller than the country. The test shows that the assumption needs evidence, and the evidence is the building's own T12 and rent roll.
Lenders run the same test. The OCC tells its examiners to analyze "whether cash flow and NOI projections are reasonable and supported", and adds that "inadequately supported or questionable analysis should be challenged" (OCC, income-producing property). On vacancy, its handbook says the choice of a vacancy factor "should consider vacancies in comparable properties in the same market".
To test an OM, ask the broker for five records:
- The T12, month by month.
- The current rent roll.
- The leases, starting with the largest tenants.
- The property tax and insurance bills.
- A list of the capital work done in recent years.
Our valuation guide covers whether the seller's NOI is the one to capitalize, and our lending guide shows how lenders underwrite a commercial real estate loan.
A broker's offering memorandum sells a building, and a private placement memorandum (PPM) sells securities: shares or units in the company that buys the building. People call both documents an "OM", so first ask what the document offers.
The second kind appears in a commercial real estate syndication, where a sponsor pools investors' money to buy one property. The company that sells the securities is the issuer, and securities law governs its document.
| Broker's offering memorandum | Private placement memorandum (United States) | Offering memorandum under National Instrument 45-106 (Canada) | |
|---|---|---|---|
| What it offers | A property | Securities in the entity that buys the property | Securities in the issuer |
| Who prepares it | The seller's broker | The sponsor and its securities lawyer | The issuer, on a set form |
| Who receives it | Buyers and their lenders | Investors | Investors |
| What shapes its contents | The broker's practice | The exemption the sponsor uses and antifraud law | A form the securities regulators set |
| What follows it | A letter of intent, then a purchase and sale agreement | A subscription agreement | A subscription agreement |
In the United States, the Securities and Exchange Commission (SEC) says issuers "may provide a document called a private placement memorandum or offering memorandum that introduces the investment", and adds: "This document is not required" (Investor.gov, private placements). Such documents "typically are not reviewed by any regulator and may not present the investment and related risks in a balanced light". Private placements remain "subject to the antifraud provisions of the federal securities laws".
One rule does prescribe disclosure. An accredited investor meets one of the SEC's tests, such as an income test or a net worth test, and other investors are non-accredited. Under Rule 506(b), a company "must give any non-accredited investors disclosure documents that generally contain the same type of information as provided in Regulation A offerings" (SEC, Rule 506(b)).
In Canada, "offering memorandum" also names a prospectus exemption: a rule that lets a company sell securities without a prospectus, the full disclosure document a regulator reviews. The Canadian Securities Administrators describe the exemption, found in section 2.9 of National Instrument 45-106, as one that "was originally designed as a small business financing tool" (Canadian Securities Administrators notice). The regulators set the document's form. An issuer that is not a reporting issuer, in short a company outside the public markets, prepares it on Form 45-106F2, titled "Offering Memorandum for Non-Qualifying Issuers".
The notice says many issuers that use the exemption are real estate issuers or investment pools. In December 2022 the regulators published amendments that "set out new disclosure requirements for issuers that are engaged in" real estate activities. An issuer that owns property to lease is one example.
An investor who buys under the exemption "can sue the issuer and its directors" when the offering memorandum contains a misrepresentation, the Alberta Securities Commission explains (Alberta Securities Commission). The investor also has a two-day "cooling off period" to cancel.
A broker's OM carries neither a set form nor those rights. When someone hands you an "offering memorandum", ask whether you are buying a building or a share of one.