Check an offering memorandum against the rent roll and T-12
A broker's OM presents the best case. How to tie its occupancy, rents and NOI to the rent roll, T-12 and leases before you underwrite a property.
Key takeaways
- The offering memorandum is marketing. The rent roll, T-12 and leases are the evidence.
- Check how occupancy is defined: physical, leased and economic occupancy can differ a lot.
- Separate in-place rents and actual NOI from pro forma figures.
- Tie the largest tenants to their leases, including options, expirations and concessions.
An offering memorandum is written to sell a property. Its numbers are usually not wrong so much as chosen: the best occupancy definition, the most favourable twelve months, pro forma rents next to in-place ones. Before underwriting, every headline figure should be tied to the documents behind it.
The documents behind the OM
- Rent roll: every unit or suite, tenant, lease dates, rent and status, as of a date.
- T-12: the trailing twelve months operating statement, with actual income and expenses.
- Leases and amendments: the legal terms behind each rent roll line.
- Estoppels, later in the process, where tenants confirm their lease terms.
The tie-out checklist
- Occupancy. Is the OM figure physical occupancy, leased occupancy including signed tenants not yet in place, or economic occupancy after concessions and bad debt? Recompute it from the rent roll.
- Rent. Separate in-place rent from market or pro forma rent. Check free rent and other concessions.
- Income. Tie gross potential rent, vacancy and other income to the T-12, and look for one-time items.
- Expenses. Check that management fees, reserves and insurance are included, and consider property tax reassessment after a sale.
- NOI. Reconcile the OM's NOI to the T-12, and identify every adjustment.
- Lease rollover. List expirations over the next two years and the options tenants hold.
- Major tenants. Tie the largest tenants' rent, term, options and co-tenancy rights to their leases.
A worked example: occupancy three ways
Take an illustrative 100-unit property with gross potential rent of $100,000 a month. 94 units are occupied, and 3 more are leased to tenants who have not yet moved in. This month, vacancy costs $6,000 of rent, concessions $2,000 and bad debt $1,000.
| Measure | Calculation | Result |
|---|---|---|
| Physical occupancy | 94 ÷ 100 units | 94% |
| Leased occupancy | (94 + 3) ÷ 100 units | 97% |
| Economic occupancy | ($100,000 − $6,000 − $2,000 − $1,000) ÷ $100,000 | 91% |
All three are accurate. An OM quoting 97% is not wrong, but underwriting on it overstates the income the property produces today by six points.
Common gaps between the OM and the evidence
- Occupancy that counts tenants who have signed but not opened.
- "Current" rents that include increases not yet in effect.
- NOI that excludes a management fee or replacement reserves.
- A rent roll dated months before the OM.
- Tenant options to terminate or reduce space that the OM does not mention.
Running the tie-out with CiteLLM
Attach the OM, the rent roll and the T-12 as PDFs, and list the OM's headline claims to check. With CiteLLM in ChatGPT or Claude, each claim comes back supported, calculated or contradicted, with the rent roll line or T-12 row highlighted.
- Recomputed occupancy and NOI show the formula, with every input highlighted in its source.
- A claim that conflicts with the rent roll shows the line that disagrees.
- Major leases can be added to the same review, up to 20 PDFs.
Frequently asked questions
What is a T-12?
A trailing twelve months operating statement: the property's actual income and expenses for the most recent twelve months, usually month by month.
What is the difference between physical and economic occupancy?
Physical occupancy is the share of space occupied. Economic occupancy is the share of potential rent actually collected, after vacancy, concessions and bad debt.
My rent roll is in Excel. Can I still check it?
CiteLLM works with PDFs. Export or print the rent roll to PDF so each line can be found and highlighted.