An offering memorandum is a marketing document
That is not an accusation, it is the job it was written to do. The question worth ten minutes is whether the cap rate on the cover is computed on income the rent roll behind it actually supports.
Their number, your number, and the distance
Both cap rates on the same asking price, with the income lines behind yours so the comparison can be checked rather than believed.
- Stated against derivedThe figure the OM publishes, beside the one your rent roll and the real operating expenses produce, with the gap in basis points.
- The waterfall under itBase rent, reimbursements, credit loss, operating expenses, NOI. Five lines you can add up yourself, which is the only reason to trust the number on top of them.
- Their claims kept separatePrice, stated cap rate and pro-forma NOI are captured and displayed, never used as inputs — which is what leaves them independent enough to compare.
Variance check
The seller states
8.25%
On stabilized pro-forma NOI
The rent roll supports
7.22%
On $1,209,604 of year-one NOI
1.03 points worse than advertised at the asking price. The seller’s number lets the dark 22,500 SF from day one at market; yours lets it after the downtime and free rent this deal actually assumes.
- Base rent
- $1,315,139
- Reimbursements
- $405,471
- Credit loss
- ($17,206)
- Operating expenses
- ($493,800)
- Year-one NOI
- $1,209,604
Base rent is the three signed leases plus the vacant suite’s modelled lease-up. Reserves and leasing costs sit below this line, not inside it.
What usually explains the gap
In the common case, nothing sinister. A pro forma shows the asset stabilized — fully leased, at market, with the vacancy already absorbed — and that is a legitimate way to present a building.
The differences worth finding tend to be omissions rather than errors: no vacancy allowance, no replacement reserve, or rent presented in the same column whether the lease runs another eight years or expired last spring. A rent roll can be entirely truthful line by line and still leave you with that last impression.
Check the document’s own arithmetic first. If effective gross income minus expenses equals the stated NOI, and that NOI over the price equals the stated cap, then there is no maths error to find — and what remains is what has been left out, which is the more interesting question anyway.
One thing this page will not do is tell you how often offering memoranda overstate. We have not measured that across a representative sample, so we are not going to publish a number for it.
Read the expiry dates against the document's own date
It needs no assumption from you and no correction of theirs. Just their dates against the day they published — and it is the single fastest way to find out whether the income column means what it appears to mean.
- Rent on leases that already endedPresented beside leases with years left on them, in the same column, with no marking. Contractual term income and month-to-month income are not the same asset.
- It is a share, not an anecdoteWhat matters is what percentage of base rent sits on expired terms, which is a number you can put to a broker.
Variance check
Offering memorandum
8.25%
On stabilized pro-forma NOI
Your underwriting
7.22%
On $1,209,604 of year-one NOI
103 basis points. Not an error on their side and not a correction on ours — the difference is what each figure assumes about 22,500 SF of dark space.
- Base rent
- $1,315,139
- Reimbursements
- $405,471
- Credit loss
- ($17,206)
- Operating expenses
- ($493,800)
- Year-one NOI
- $1,209,604
Base rent is the three signed leases plus the vacant suite’s modelled lease-up. Reserves and leasing costs sit below this line, not inside it.
Questions people ask
What should I check first in an offering memorandum?
Whether the stated cap rate is computed on income the rent roll actually supports. Almost everything else follows from that: a pro-forma NOI with no vacancy allowance, no reserve, or rent on leases that have expired will produce a perfectly arithmetically correct cap rate that describes a building you cannot buy.
Is a gap between stated and derived cap rate a red flag?
Not by itself. A pro forma showing the asset stabilized is doing what a pro forma is for. What matters is what explains the gap — a reserve every lender would apply is ordinary; rent sitting on leases that ended two years ago is a different conversation.
What does DealWise do with the numbers in the OM?
Captures and displays them, and never uses them as inputs. Price, stated cap rate, pro-forma NOI, market rent and growth are all transcribed and shown beside your deal. Keeping them out of the model is precisely what makes them checkable against it.
How long does this take?
Upload the OM and the leases and you have a comparison in minutes. Doing it by hand means rebuilding the rent roll from the document first, which is the afternoon most people are not going to spend on a deal they have not committed to.
What if I only have the OM and no leases?
You still get a check, based on the rent roll as the OM presents it — which is worth doing, because it catches internal inconsistency and expired leases without needing anything else. It gets considerably stronger once the actual leases are in.
Where this goes next
How the check works
The mechanism, and why discarding their numbers is what enables it.
How to read an OM
The document itself, section by section.
What is cap rate?
What the gap is measured in.
Cap rate calculator
Run one by hand. Free, no signup.
Decide whether to buy
The full job this is one step of.
All capabilities
Everything the product does.
Check the next one before you spend a week on it.
Upload the offering memorandum with whatever leases you have. DealWise builds the rent roll, derives the cap rate the income supports, and shows the gap against what was printed. Free plan, no credit card.