How And Why Real Estate Documents Grow

The owner of a building in the New York suburbs (let’s call it the Julex Tower) opened negotiations with a possible buyer. As is customary, the owner and possible seller asked the possible buyer to sign a confidentiality agreement, agreeing not to share information about Julex Tower or the possible sale. Like most other confidentiality agreements, this one carved out an exception, allowing the buyer to share information with prospective investors.

A couple of weeks into negotiations, the possible seller was shocked to get a phone call from one of his neighbors about Julex Tower. The neighbor had received something from someone else, who had received it from someone else: an offering memo for Julex Tower. It presented the opportunity to invest in the purchase of the tower. It disclosed all the detailed rent roll and other financial information—including rents, lease expirations and renewal option terms—that the seller had delivered to the possible buyer. The offering memo declared that the seller had chronically undermanaged Julex Tower. The buyer planned to do a better job managing the building. He would undertake a strategic capital improvement program, exploiting opportunities that the seller had missed or ignored. The buyer said all of this would double the building’s net operating income. Buyers often say all of these things to prospective investors.