What it is
An offering memorandum, or OM, is the main narrative document in a commercial real estate transaction. In an investment sale, the listing broker sends an OM to prospective buyers. In a debt placement, the mortgage broker sends a financing memorandum, sometimes called a debt OM or loan request memo, to prospective lenders.
The two look similar but are written for different readers.
Sale OM versus financing memorandum
| Sale OM | Financing memorandum | |
|---|---|---|
| Reader | Buyers and investors | Lenders and credit teams |
| Goal | Maximize price | Get the right loan quoted |
| Focus | Upside, returns, growth story | Risk, coverage, sponsor, exit |
| Key numbers | Price, cap rate, IRR | Loan amount, LTV, DSCR, debt yield |
| Sponsor section | Often minimal | Essential |
A broker who reuses a sale OM as a financing memo usually ends up with the wrong emphasis. Lenders don't need to be sold on upside. They need to be convinced the loan gets repaid.
What a financing memorandum includes
- Executive summary. Loan request, purpose, property, sponsor and key metrics on one page.
- Property overview. Location, physical description, photos, occupancy.
- Market analysis. Submarket fundamentals, rent and sales comps.
- Financials. In-place NOI from the T-12 and rent roll, underwritten NOI, and a pro forma if the plan involves change.
- Sponsor. Bio, track record, real estate schedule, financial strength.
- Business plan and timeline. For bridge and construction deals especially.
- Risks and mitigants. The honest weaknesses and how they're addressed.
- Exit. How the loan gets repaid: refinance, sale, or amortization.
How lenders use it
Lenders use the memo to decide whether to underwrite the deal at all. If they're interested, they'll move to the supporting files and, eventually, issue a term sheet. A clear risks section often helps more than it hurts, because it shows the broker understands the deal the way the lender will.
Common mistakes
- Too long. Forty pages of market data with the loan request on page twelve.
- Too promotional. Superlatives in place of numbers.
- Out of sync with the spreadsheets. The memo says one NOI, the model says another.
In the package
The memorandum is the front of the loan package. Dori generates a DOCX investment memo and a branded PPTX from the same extracted deal record. See loan packages.