How to Read an OM
An OM, short for offering memorandum, is the marketing document brokers create to sell commercial properties. It pulls together financials, market data, property details, and rent rolls into a single package designed to attract buyers. Learning how to read one carefully is one of the highest leverage skills a Salt Lake City commercial investor can develop, because the OM is also designed to make the property look as appealing as possible, and the gap between the marketing pitch and the underlying reality is often where deals get won or lost.
Start with the executive summary, which is usually one or two pages at the front. It includes price, asking cap rate, square footage, occupancy, and headline selling points. The numbers here are the ones the broker wants buyers to remember. They are not lies, but they often represent the most optimistic interpretation of the data. A 7.5 percent advertised cap rate might be calculated on pro forma rents rather than actual rents in place. A 95 percent occupancy figure might exclude a tenant on a month to month lease about to leave. Treat the executive summary as a hypothesis to verify, not a fact to accept.
The rent roll deserves close attention. Look for tenant names, suite sizes, lease start and end dates, monthly rent, and any escalation clauses. Calculate weighted average lease term across all tenants. A building with 70 percent of income rolling over in the next 24 months is much riskier than the same building with leases averaging seven years remaining. Across the Wasatch Front, single tenant NNN properties with credit tenants and long lease terms trade at meaningfully lower cap rates than multi tenant buildings with short term local leases, and the rent roll reveals which category a property really belongs to.
The financial section typically includes a trailing 12 month statement and a pro forma projection. The trailing 12 reflects actual recent performance. The pro forma reflects what the seller thinks the property can do under different conditions. Reasonable pro formas include modest rent growth and slight expense increases. Aggressive pro formas assume rent jumps of 20 percent or more, vacancy magically dropping, and expenses staying flat. Realistic investors anchor on the trailing 12 and treat the pro forma as upside scenarios.
Check the expense line carefully. Property management fees should appear at 3 to 5 percent of gross rent. Capital reserves should be present, typically $0.25 to $1 per foot. Property taxes should reflect what the buyer will pay, not what the seller is paying. Utah resets taxable value to market at sale, which often pushes tax bills up sharply for new owners. An OM that uses the seller’s tax bill in pro forma is overstating NOI by a meaningful margin.
Photos and location maps are designed to highlight strengths and minimize weaknesses. A drone photo at golden hour makes any property look great. The honest evaluation comes from a site visit at multiple times of day. Traffic patterns, parking utilization, surrounding land uses, and the condition of neighboring properties all show up in person but rarely in the OM.
The disclaimer language at the back of the OM is worth reading too. It typically states that the broker has not verified the information and that buyers should conduct their own due diligence. That clause exists for good reason. The OM is a starting point, not an ending point.
Omada Commercial, recognized as top commercial realtors in Salt Lake City, helps buyers work through offering memoranda critically and rebuilds the underlying numbers using realistic Wasatch Front assumptions. Reading an OM well separates investors who avoid bad deals from those who get burned by them.
