How to Read a Net Lease OM: The 12-Point Diligence Checklist

What an OM Is — and Is Not The Offering Memorandum is the marketing package the listing broker prepares to sell the deal. Its job is to highlight strengths and downplay weaknesses. Your job as a buyer is to extract the underlying truth. Here is the 12-point checklist the institutional buyers run every time. 1. Read the Lease, Not the Bullet Points The OM summarizes the lease. The actual lease document — usually 40–80 pages — controls. Common gaps between summary and reality: - "NNN" in the OM but landlord still owns roof and structure in the lease - "10-year term" but tenant has a kick-out at year 5 - "10% bumps" but only in option periods, with flat rent in primary Always read the actual lease before LOI. 2. Verify the Rent Roll vs Bank Statements Ask for 12 months of rent deposit statements. Confirm the rent the OM advertises actually hit the seller's bank account on time. This catches: - Free rent periods still running - TI/CAM disputes not disclosed - Rent concessions not in the marketing 3. Check Tenant Credit Independently Do not trust the credit summary in the OM. For public tenants, pull current S&P/Moody's ratings yourself. For private tenants, ask for: - Audited financials of the guarantor - 4-wall EBITDAR for the unit - Bank references and trade references 4. Pull the Title Commitment Early Title issues kill more deals than anything else. Pull the title commitment in the first week of due diligence. Look for: - Easements that affect parking or access - Outstanding mechanic's liens - Unrecorded leases or option agreements - Drainage or utility easements through the building footprint 5. Order the Phase I Environmental issues are catastrophic. Always order a Phase I ESA. For gas stations, car washes, dry cleaners, auto repair, and industrial historic uses — budget for a Phase II. 6. Verify the Survey The ALTA survey reveals: - Encroachments onto the property - Building over easements - Parking count vs zoning requirement - Setback violations 7. Confirm the Estoppel The estoppel certificate is the tenant's signed statement of lease facts. Always require an executed estoppel from the tenant prior to closing. The estoppel should confirm: - Rent amount and next due date - No defaults by landlord - No outstanding TI obligations - Lease document is unmodified except for amendments listed 8. SNDA — If You Have a Lender A Subordination, Non-Disturbance, and Attornment agreement protects the tenant from lender foreclosure. Lenders require it. Tenants sometimes drag their feet. Build the SNDA timeline into the closing checklist. 9. Roof and Parking Lot Inspection Even on absolute NNN, you want to know what you are inheriting. Order a roof inspection and a parking lot inspection. Both have 15-20 year useful lives — knowing where you are in the cycle informs your reserve assumptions. 10. HVAC and Mechanical If the lease leaves HVAC with the landlord, get a mechanical inspection. If HVAC is tenant's responsibility, you still want to know its condition for re-tenant scenarios. 11. Local Market Reality Check Pull traffic counts, demographics, and competition independently. Do not rely on the OM's demographic page. The good ones use STI:PopStats or Esri data. The bad ones are five years stale. 12. Comps — But the Right Comps The OM's comps section is usually cherry-picked. Pull your own using CoStar, CompStak, or broker relationships. Focus on: - Same tenant or comparable credit - Same lease term remaining - Same MSA tier - Closed within the last 12 months The 5 Red Flags That Should Kill the Deal 1. Seller refuses to provide a rent roll or bank statements 2. Tenant will not sign an estoppel 3. Title commitment shows undisclosed easements through the building 4. Phase I recommends a Phase II that seller refuses to fund 5. Lease has a landlord-funded TI obligation not disclosed in the OM Where Net Lease World Fits Every <a href="/deals">listing</a> on Net Lease World is verified at intake — cap rate, lease term, tenant, and pricing a…