Corporate Underwriting Criteria for Real Estate Capital Raising
The complete 24+ document checklist that institutional investors and lenders require for real estate M&A transactions. This is exactly what capital partners ask for.
Core Deal Documents
Executive Summary (2–5 Pages)
- Deal overview, including investment thesis and key highlights
- Asset description, including property type, size, location, and market positioning
- Capital stack summary, detailing layers of financing
- Use of funds, specifying allocations for acquisition, development, operations
- Target returns, such as IRR, equity multiple, and cash-on-cash yield
- Key risks and mitigants, with qualitative and quantitative assessments
Investment Memorandum (IM / PPM)
- Market analysis, including macroeconomic trends, local supply/demand dynamics, and competitive landscape
- Property overview, covering historical performance, current condition, and value-add opportunities
- Business plan, outlining operational strategy, tenant leasing, and capital improvements
- Financial projections, including pro forma income statements, balance sheets, and cash flows
- Exit scenarios, such as sale, refinance, or recapitalization
- Sensitivity analysis, testing variables like occupancy rates, cap rates, and interest rates
- Risk factors, including market, operational, and regulatory risks
Note: For institutional equity raises, this evolves into a full Private Placement Memorandum (PPM).
Sources & Uses Statement
- Breakdown of equity contributions (common and preferred)
- Senior debt details, including lender commitments
- Mezzanine debt or preferred equity components
- Fees, reserves, and contingencies (e.g., closing costs, operating reserves)
Financial Model (Excel-Based)
- Monthly cash flow projections, including revenue, expenses, and net operating income (NOI)
- Debt service calculations and coverage ratios (e.g., DSCR)
- Return metrics, such as internal rate of return (IRR) and equity multiple
- Reversion analysis for exit valuation
- Waterfall mechanics for distribution of proceeds among stakeholders
Equity Capital Documents
Marketing / Investor-Facing Documents
Pitch Deck
- Compelling deal narrative and investment story
- Sponsor track record and historical performance
- Team biographies, highlighting relevant experience and expertise
- Returns overview, including projected yields and benchmarks
- Timeline for investment, execution, and exit
Investor FAQ
- Details on capital calls, including timing and notice periods
- Distribution policies and preferences
- Exit timing and strategies
- Fee structure (e.g., management, acquisition, promote)
- GP co-investment commitments for alignment
Track Record Package
- Summary of prior deals, including asset types and outcomes
- Realized vs. unrealized returns analysis
- Loss history disclosure (essential for institutional scrutiny)
Legal / Compliance Documents (Private Placement)
Private Placement Memorandum (PPM)
- Comprehensive risk disclosures
- Offering terms, including minimum commitments and closing conditions
- Investor eligibility criteria (e.g., accredited investor status)
- Conflicts of interest declarations
- Subscription process and timelines
Subscription Agreement
- Investor representations and warranties
- Confirmation of accredited investor status
- Capital commitment details and payment instructions
Operating Agreement / Limited Partnership (LP) Agreement
- Waterfall provisions for profit sharing
- Governance structure and decision-making processes
- Voting rights and major decision thresholds
- Removal clauses for GP or key personnel
- GP economics, including carried interest
Side Letters (If Applicable)
- Most-favored-nation (MFN) clauses
- Fee reductions or waivers for select investors
- Co-investment rights and priorities
Sponsor / GP Documents
GP Entity Documents
- Articles of incorporation or formation
- Operating agreement for the GP entity
- Capitalization table showing ownership structure
Background Checks / Know-Your-Customer (KYC)
- Detailed sponsor biographies
- Criminal and financial background reports
- Office of Foreign Assets Control (OFAC) screening
Debt Capital Documents
Lender Underwriting Package
Prepared by sellers of the asset & buyer in conjunction with Raises.com LLC
Property Financials
- Trailing 12-month (T-12) operating statements
- Current rent roll, including tenant details and lease terms
- Accounts receivable (AR) aging report
- Lease abstracts summarizing key provisions
Appraisal
- Member Appraisal Institute (MAI)-certified appraisal
- As-is and as-stabilized property values
Third-Party Reports
- Phase I Environmental Site Assessment (ESA); Phase II if environmental issues are identified
- Property Condition Report (PCR) assessing physical state
- American Land Title Association (ALTA) survey
- Zoning compliance report
Borrower Financials
- Personal Financial Statements (PFS) for key principals
- Net worth and liquidity verification
- Tax returns for the past 2–3 years
Entity Documents
- Borrower LLC formation documents
- Certificates of good standing
- Organizational chart depicting ownership and control
Loan-Specific Documents
Prepared with Raises.com LLC
Loan Application / Term Sheet
- Requested loan amount and purpose
- Interest rate and type (fixed/floating)
- Amortization schedule
- Financial covenants (e.g., DSCR minimums)
- Reserve requirements (e.g., TI/LC, debt service)
Debt Model
- Interest-only period projections
- Exit refinance or repayment analysis
- Debt Service Coverage Ratio (DSCR) stress testing
Sources of Repayment Memo
- Primary: Net Operating Income (NOI) from operations
- Secondary: Refinance proceeds
- Tertiary: Property sale
Closing Documents
Credit Agreement
Promissory Note
Mortgage / Deed of Trust
Guarantees (If Any)
- Completion guarantees for development deals
- "Bad boy" carve-out guarantees for non-recourse loans
- Carry guarantees for ongoing obligations
Hybrid / Structured Capital Documents
These apply to mezzanine or preferred equity structures bridging debt and equity.
Preferred Equity Agreement
- Current pay vs. Payment-in-Kind (PIK) provisions
- Control rights upon default
- Intercreditor terms with senior lenders
Intercreditor Agreement
- Senior vs. mezzanine/preferred equity priorities
- Cure rights for junior capital
- Standstill periods during disputes
Mezzanine Loan Documents (If Applicable)
- Similar to senior debt but subordinate in priority
Optional but Highly Credible Add-Ons
Market Study (Third-Party)
- Independent analysis of market trends and forecasts
Broker Opinion of Value (BOV)
- Preliminary valuation from a licensed broker
Construction Budget & Guaranteed Maximum Price (GMP)
- For development deals
Property Management Agreement
- Outlining third-party or in-house management
Exit Broker Opinion Letter
- Insights on marketability and potential buyers
Sensitivity & Downside Case Model
- Stress-tested scenarios for adverse conditions
Frequently Asked Questions
What documents do institutional investors require for real estate capital raising?
Institutional investors typically require an Executive Summary, Investment Memorandum (IM/PPM), Sources & Uses Statement, Financial Model, Pitch Deck, Track Record Package, and legal documents including the PPM, Subscription Agreement, and Operating Agreement. Third-party reports like appraisals, Phase I ESAs, and property condition reports are also essential.
What is included in a real estate Private Placement Memorandum (PPM)?
A real estate PPM includes comprehensive risk disclosures, offering terms with minimum commitments and closing conditions, investor eligibility criteria for accredited investor status, conflicts of interest declarations, subscription process details, market analysis, property overview, business plan, financial projections, and exit scenarios.
What financial documents are needed for real estate debt capital?
Lenders require trailing 12-month (T-12) operating statements, current rent roll with tenant details, accounts receivable aging report, lease abstracts, MAI-certified appraisal, Phase I Environmental Site Assessment, Property Condition Report, ALTA survey, zoning compliance report, and borrower financials including personal financial statements and tax returns.
What is a waterfall structure in real estate investment?
A waterfall structure defines how investment proceeds are distributed among stakeholders. It typically includes return of capital, preferred returns to investors, catch-up provisions for the GP, and profit splits. The waterfall mechanics are documented in the Operating Agreement or LP Agreement.
What third-party reports are required for commercial real estate acquisitions?
Required third-party reports include Phase I Environmental Site Assessment (ESA), Property Condition Report (PCR), ALTA survey, zoning compliance report, MAI-certified appraisal, and optionally a market study, Broker Opinion of Value (BOV), and exit broker opinion letter.
Need Help Preparing Your Capital Raise Documents?
Raises.com prepares institutional-grade documents for real estate M&A transactions. Our team handles everything from executive summaries to financial models to PPM drafts.