Zachary Suh
LinkedIn Chat Writings Cool Reads
The CRE Acquisition Lifecycle
May 12, 2026
Commercial real estate acquisitions, and finance generally, have always seemed pretty complicated to me. Today, I asked myself a few questions, like what a CRE acquisition really involves and what its normal lifecycle looks like. This is a super high-level overview of what I found: the CRE acquisition process is actually quite structured and fairly simple. —Zach
Step 1: Originating & Deal Sourcing
When a larger asset, such as real estate, is being sold by a seller to a buyer, the seller will typically use a broker, essentially the middleman. The broker usually creates an OM, or offering memorandumThe private market equivalent of a prospectus — highlights the property and presents the investment opportunity to potential buyers., which highlights the property and presents the investment opportunity.
Buyers can also find deals through proprietary relationshipsDirect relationships built with property owners, operators, or brokers — used to find deals before they hit the market. or off-market outreachProactively finding deals not publicly listed by reaching out directly to property owners.. The acquisition team reviews the OM, runs a back-of-the-envelope analysisA quick check on whether a deal makes sense at the asking price, covering revenue, vacancy, NOI, cap rate, and rough debt sizing., and decides whether the deal is worth pursuing.
Step 2: Initial Underwriting & IOI
The analyst builds an underwriting model in Excel. This usually includes pro forma, aka projected, NOI, net operating incomeIncome an asset generates after operating costs, but before debt service (mortgage payments)., cap rateNOI ÷ purchase price. Selling at a higher cap rate than you bought means you lost value, even if NOI didn't change. assessment, debt sizingEstimating how much a lender will loan on a property, using LTV and DSCR as the two determining tests., and projected IRR/equity multiple.
If the numbers work, the firm submits an Indication of InterestA non-binding signal sent to a seller with the price range you'd consider, after reviewing the deal at a high level., or a non-binding letter of intent, with a price range.
Step 3: Due Diligence
After going under contract, once the PSAThe legal contract governing the sale. Once signed, both parties are bound — the seller must sell, the buyer must buy. is executed, the data room opens. This is the most intensive phase.
The team reviews every document in the virtual data room: leases and all clauses, operating expense invoices vs. the pro forma, environmental reports, permits, and more. The analyst reconciles the source documents against the model.
Any material variance can trigger a re-trade, price renegotiation, or a deal kill.
Step 4: IC Approval
The team prepares an investment committeeThe firm's internal decision gate. Approves, conditionally approves, or kills deals based on thesis, underwriting, and risk. memo summarizing the deal thesis, underwriting assumptions, sensitivity analysis, key risks, and proposed hold strategy.
The IC can approve the deal, conditionally approve it subject to further DD or a price reduction, or kill the deal. This is the key internal decision gate.
Step 5: Financing / Debt Placement
Simultaneously or after IC approval, the team works with a debt broker or direct lenders to term out financing.
Lenders receive the same financials, such as T12, rent roll, and leases, and conduct their own underwriting. The loan terms, including rate, LTVCaps the loan as a percentage of the property's value — one of two tests lenders use to size debt., IO period, and recourse, feed back into the equity model.
Step 6: Closing
The title company coordinates closing. Legal counsel reviews the PSAThe legal contract governing the sale. Once signed, both parties are bound — the seller must sell, the buyer must buy., loan docs, and entity structure. Funds are wired. Asset management then takes over from acquisitions.
CRE — Single-asset acquisition lifecycle
& approval
Definitions
Back-of-the-Envelope Analysis / “Back of the Napkin”
Business analysts can't run a full Excel model on every OMThe private market equivalent of a prospectus — highlights the property and presents the investment opportunity to potential buyers. sent to them, so they do a BOE first. The goal is to answer: does this deal even make sense at this price?
Inputs include revenue, vacancy and credit loss, operating expenses, NOIIncome an asset generates after operating costs, but before debt service (mortgage payments)., implied cap rate, rough debt sizing, and cash-on-cashCash flow after debt service ÷ equity invested. Your annual return on your equity check while holding the asset..
Prospectus
A prospectus is a formal legal document required by the SEC for new security offerings, such as stocks, bonds, and mutual funds. It gives investors detailed information about an investment's risks, financial performance, and business strategy.
Offering Memorandum / “OM”
An OM is the private market equivalent of a public company's prospectusA formal SEC-required document for public securities offerings, detailing investment risks, financial performance, and business strategy.. It contains information such as the business overview, investment opportunity, use of proceeds, financial statements, risk factors, and other key deal details.
Proprietary Relationships
Proprietary relationships refer to direct relationships a buyer or investor has built with property owners, operators, or brokers.
Off-Market Outreach
Off-market outreach is the proactive effort to find deals that aren't publicly listed, usually by reaching out directly to property owners.
Net Operating Income
Net operating income is the income an asset generates after paying operating costs, but before debt service. The idea is that it evaluates the revenue-generating capacity of a property before mortgage payments.
Implied Cap Rate
Implied cap rate = NOIIncome an asset generates after operating costs, but before debt service (mortgage payments). / Purchase price.
Cap rate expansion means you bought at one cap rate and sold at a higher cap rate. For example, if you buy at a 6.5% cap and sell at a 7% cap, you lost value even if NOI stayed flat.
Rough Debt Sizing
Debt sizing is the process of estimating how much a lender will loan on a property. Lenders usually use two tests: LTV and DSCRLenders require NOI to be at least 1.25x annual debt service, ensuring income covers mortgage payments with a cushion..
LTV caps the loan as a percentage of the property's value. DSCR makes sure the property's income is enough to cover the debt payments. The lower of the two determines the actual loan amount, which then tells you how much equity you need to bring.
DSCR / Debt Service Coverage Ratio
DSCR is how lenders check that NOIIncome an asset generates after operating costs, but before debt service (mortgage payments). covers the mortgage payments with a cushion. A 1.25x DSCR means NOI must be at least 1.25x the annual debt service.
Cash-on-Cash
Cash-on-cash = cash flow after debt service ÷ equity invested.
CoC is the year-one yield on your equity check. It answers: while I'm holding this asset, what am I getting paid annually?
Indication of Interest
An Indication of Interest is an earlier signal before serious diligence. The message it sends to the seller or broker is: we looked at your numbers at a high level, we're interested, and here is the price range we would consider.
Letter of Intent / LOI
The LOI is the later, more specific document. It comes after the buyer has done enough high-level diligence to have an idea of price and structure, but before the full due diligence deep dive and before the purchase and sale agreementThe legal contract governing the sale. Once signed, both parties are bound — the seller must sell, the buyer must buy. is drafted.
Purchase and Sale Agreement / PSA
A PSA is the legal contract between a buyer and seller that governs the sale of a property.
Before the PSA, everything is mostly conversation and negotiation. Once the PSA is signed, both parties are legally bound to the terms: the seller has to sell, and the buyer has to buy, subject to the agreed conditions.
Investment Committee
Who Sits on the IC
- Managing Partners / Founders— The most senior people at the firm. They have final say. They've typically been in the business for decades and have seen multiple market cycles. Their vote carries the most weight.
- Partners / Senior Managing Directors — Senior dealmakers who oversee specific deals or asset types. They sponsor deals to the IC, meaning they are the ones presenting and advocating for the investment.
- Chief Investment Officer / CIO— Not every firm has one, but when they do, the CIO is responsible for the overall investment strategy and portfolio. They focus on whether a deal fits the fund's broader thesis.
- Chief Financial Officer / CFO — Reviews the financial integrity of the deal, including fund-level implications, cash flow, fees, and fund structure.
- Head of Asset Management — Focuses on whether the business plan is actually executable. They have managed properties before and can spot unrealistic assumptions.
- Head of Risk — Reviews downside scenarios, such as what happens if the market turns, vacancy spikes, or interest rates rise. They make sure the firm is not taking on too much risk.
- Legal Counsel / General Counsel — Reviews legal risks, including title issues, lease structures, regulatory issues, and anything that could expose the firm to liability.
Who Presents to the IC, But Is Not a Voting Member
These are the people who do the work and bring the deal to the IC:
- Vice President / Director — Runs the deal process, manages the analyst team, and oversees the model.
- Associate — Assists with underwriting, due diligence, and the model.
- Analyst — Builds the financial model, reconciles due diligence findings, and runs scenarios.
The analyst and associate do the heavy lifting. The VP presents the deal. The IC asks hard questions and decides.