AcquisitionsIndustrialDue DiligenceUnderwriting

Deal Memo Draft

by William Alcorn

000

What It Does

Generates a structured deal memo for internal review, investment committee, or LP presentation — covering the asset, thesis, risks, and recommendation.

Who It's For

CRE acquisition professionals, principals, and brokers preparing deal memos for investment committee review or partnership capital raises.

How To Use It

Provide property details, deal structure, financial metrics, and your investment thesis.
Be honest about the risks — the output will include a dedicated risk section.
Specify your audience (internal IC, LP update, partner briefing) — tone adjusts accordingly.

Before / After Example

Example Input

Property: 17984 Red Iron Rd, Schertz TX — 88,964 SF industrial
Structure: Sale-leaseback, Theis Distribution, 5-yr NNN at $8.25/SF, 3.5% bumps
Price: $9.17M at 8.0% cap
NOI: $734,000 (Year 1)
Equity required: ~$3.45M (62.4% LTV assumed)
Market: Schertz/I-35 corridor, re-lease rates $10/SF+
Risk: Metal building limits buyer pool at exit; tenant has one customer (HEB); HEB shifting distribution model
Partners: Grady Roberts (GWR Equities) providing capital, William Alcorn sourcing/executing
Audience: Internal partnership review

Example Output

DEAL OVERVIEW
Asset: 17984 Red Iron Road, Schertz, TX
Size: 88,964 SF single-tenant industrial (metal construction)
Tenant: Theis Distribution — food distribution to HEB
Structure: Sale-leaseback | 5-year NNN | $8.25/SF | 3.5% annual bumps
Purchase Price: $9,170,000
Going-In Cap Rate: 8.0%
Equity Required: ~$3,450,000 (assumes 62.4% LTV)

INVESTMENT THESIS
Theis Distribution is a motivated seller — owner is approaching retirement and seeking liquidity on a long-held asset. The I-35/Schertz submarket is experiencing institutional-grade demand, with re-lease rates currently at $10.00/SF+ vs. our in-place rent of $8.25/SF. We are buying below replacement cost with a built-in rent escalation schedule and meaningful re-lease upside at Year 5. The 8.0% going-in yield is materially above market for newer construction in this corridor, reflecting the vintage and building type — a discount we believe is manageable given the tenant profile and our hold strategy.

FINANCIAL SUMMARY
• Purchase Price: $9,170,000
• Year 1 NOI: $734,000
• Going-In Cap Rate: 8.0%
• Equity: ~$3,450,000 | Debt: ~$5,720,000
• Year 5 NOI (at 3.5% annual bumps): ~$869,000
• Exit assumption: sell at 7.5% cap on Year 5 NOI = ~$11.6M
• Projected equity multiple: ~1.8x over 5 years (unlevered basis; levered TBD pending financing terms)

MARKET CONTEXT
The Schertz/New Braunfels I-35 corridor is one of the highest-velocity industrial markets in South-Central Texas. Notable demand drivers include JBSA military complex proximity, Austin-San Antonio population growth, and $450M+ in institutional development activity in adjacent Cibolo. Current market vacancy is sub-4%. New construction lease rates for comparable product are $10.00-$11.00/SF NNN, providing meaningful upside at lease expiration.

RISK FACTORS
• Single-customer tenant concentration: Theis Distribution's sole customer is HEB. HEB's shift from DSD to warehouse-to-warehouse distribution may reduce Theis's space requirement at Year 3-5. If Theis vacates, we re-lease at market ($10/SF+), but re-leasing timeline creates cash flow gap.
• Metal building exit risk: Metal construction limits institutional buyer pool at disposition. Expect to sell to a private or regional buyer — may compress exit cap rate.
• Financing risk: Metal/older vintage may face stricter LTV requirements from conventional lenders. Need to confirm terms with lenders before IC approval.
• Lease structure uncertainty: 5-year NNN has not been executed — Bobby has indicated year-to-year is more likely initially. If we cannot lock a 5-year term, deal economics change materially.
• Partnership execution: GWR Equities capital role is not yet fully defined. Need clarity on Grady's commitment and timeline before proceeding.

RECOMMENDATION
Conditional Proceed — subject to: (1) confirming minimum 3-year lease term with Theis, (2) lender confirmation of financing terms on metal building, and (3) clear agreement with GWR on equity structure. If lease can only be structured year-to-year, re-evaluate with a re-leasing scenario model before committing.

The Prompt

You are a commercial real estate acquisitions analyst writing a deal memo for investment committee review. Based on the deal details provided, generate a structured memo covering:

1. DEAL OVERVIEW (property, size, location, asking price, structure)
2. INVESTMENT THESIS (why this deal, why now, what's the edge)
3. FINANCIAL SUMMARY (purchase price, cap rate, NOI, projected returns — use numbers provided)
4. MARKET CONTEXT (submarket dynamics, supply/demand, comparable transactions)
5. RISK FACTORS (3-5 honest risks, not softened — IC needs to know what could go wrong)
6. RECOMMENDATION (buy / pass / negotiate — and why)

Tone: Direct and analytical. This is an internal document — no marketing language. State assumptions clearly. Flag uncertainties.

Deal details:
[USER PROVIDES PROPERTY, FINANCIALS, MARKET CONTEXT, AND DEAL STRUCTURE HERE]

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