IC Memo Best Practices for Net Lease Acquisitions: Structure, Sourcing, and a Template

An investment committee memo for a net lease acquisition has one job: give the people who approve capital enough verified information to make a decision, in the time they will actually spend reading. For most single-tenant deals, that fits on two pages. Longer memos usually signal one of two problems: the author has not decided what matters, or the deal has issues the author is hoping volume will cover.

This guide sets out a two-page structure built for net lease, the questions committees reliably ask, a sourcing standard for every number, the mistakes that most often send a memo back, and a template outline you can adapt.

Why two pages works for net lease

Net lease deals have a narrow set of value drivers. The committee needs to understand who pays the rent and how reliably, how long and on what schedule, what the landlord is responsible for, what the real estate is worth without the tenant, and whether the price is right against comparable trades. Each of those can be stated in a short section with a few numbers. Supporting material, such as the full lease abstract, the rent schedule, the credit file and the comps, belongs in an appendix or a linked deal file, not in the body.

The discipline of two pages also forces a recommendation. A memo that cannot state its case in that space usually is not ready for committee.

The structure

1. Deal snapshot

A compact table at the top of page one. A committee member should be able to read it in thirty seconds and know what is being bought.

2. Recommendation and ask

Two or three sentences. State what you want approved: price, deposit, diligence period, and any conditions. If you are asking for authority to go to a higher number in a best-and-final round, say so here and give the ceiling.

3. Investment thesis

Three points at most, each one falsifiable. “Strong tenant” is not a thesis. “Parent guaranty from an investment-grade obligor, on a store whose reported sales put rent at a low share of revenue” is a thesis, because diligence can confirm or refute each part.

4. Tenant and credit

Name the legal tenant, the guarantor, and the terms of the guaranty. Give the obligor’s rating or financial summary, and the source. Include store-level performance if available. State plainly what is not known.

5. Lease

Firm term, rent schedule, options and how option rent is set, landlord obligations, and any provisions that weaken the income: early termination, go-dark rights, co-tenancy, assignment rights without release, purchase rights held by the tenant. One short paragraph and, if needed, a small table.

6. Real estate

Location, access, parcel and building facts, condition of landlord-responsible components, and an estimate of value if the tenant left. Committees respond well to a single line such as: “Dark value estimated at $1.6M–$1.9M: replacement rent of $14–$16/SF at a 7.5% cap, less 18 months of downtime, carry, and $35/SF in re-leasing costs.” The numbers in that line are illustrative; your memo’s should be sourced.

7. Pricing and returns

Going-in cap rate, average yield over the hold, and unlevered IRR, each with its assumptions. Show three to five comparable sales, matched on credit, guaranty, remaining term and escalation structure, and explain why the price is defensible against them. Include one compact sensitivity table, usually exit cap against the variable that matters most for this deal. If the deal will be financed, show levered returns separately and state the debt terms assumed.

8. Risks and mitigants

List the three to five risks that could actually change the outcome, each paired with what you have done or will do about it. If there is no mitigant, say so. A risk without a mitigant is still worth stating, because the committee will find it otherwise.

9. Diligence status and open items

What has been verified, what remains, and the dates by which it must be resolved. Tie the open items to the PSA timeline: the diligence period expiration, the date the deposit goes hard, and any estoppel or SNDA delivery requirements.

The questions an investment committee asks

Committees differ, but net lease questions cluster predictably. A good memo answers most of them before they are asked.

On the tenant

• Who exactly signed the lease, and who guarantees it? Is the guaranty capped or time-limited?

• What happens to this store if the tenant reorganizes? Is it one the tenant would keep?

• How does this location perform relative to the tenant’s other stores?

On the lease

• How much firm term remains at closing, and at our assumed sale date?

• Why would the tenant exercise its options? Is option rent above or below market?

• What is the landlord on the hook for, and when will it cost money?

• Are there any rights that let the tenant leave, stop operating, or buy the property?

On the real estate

• If the tenant left tomorrow, who would take this building and at what rent?

• What is the land worth? How does our price per square foot compare to replacement cost?

On price and returns

• Why is this the right cap rate against the comps? Which comp is closest, and how do we differ?

• What exit cap is assumed, and why? What happens to returns if it is 50 or 100 basis points higher?

• How much of the IRR comes from the exit?

On process

• When does the deposit go hard, and what must be confirmed before then?

• What did we learn from the broker, and what has the seller refused to provide?

• What would make us walk?

Source every number

The fastest way to lose a committee’s confidence is a number that cannot be traced. The fastest way to earn it is a memo in which every figure has a source a reader could open.

A source hierarchy

Not all sources are equal. A workable order, from strongest to weakest:

1. Executed lease, amendments, and guaranty

2. Tenant estoppel certificate

3. Title commitment, survey, and third-party reports

4. Public filings of the tenant or guarantor

5. Seller-provided rent roll, operating statements, and financials

6. Offering memorandum

7. Broker emails and verbal statements

When sources conflict, the stronger source controls and the conflict goes on the open-items list. A memo that cites the OM for rent after the lease has been received is a memo that has not been finished.

A citation convention

Choose a light convention and use it consistently. Footnotes work well in a two-page format, for example: “Rent: $436,600 (Lease §4.1, p. 6; First Amendment §2).” Give each fact an “as of” date where it can change, such as credit ratings, sales figures and comps. Label estimates and assumptions as such, and keep them visibly separate from facts. “Exit cap 6.75% (assumption)” is honest. An unlabeled 6.75% in a table of facts is not.

Facts, assumptions, and judgments

Every number in an IC memo is one of three things. A fact comes from a document. An assumption is a stated input to a model. A judgment is the author’s conclusion. The memo should make it obvious which is which. Committees are paid to challenge assumptions and judgments; they should not have to wonder whether a fact is real.

Common mistakes

• Writing the deal’s history instead of its case. How the deal was sourced and the timeline of the bidding rarely belongs in the body.

• Restating the OM. The broker’s highlights are the seller’s argument. The memo is yours.

• Describing credit by brand. Name the obligated entity and the guaranty terms.

• Counting options as term. State firm term and options separately.

• Quoting only the going-in cap rate. Show average yield and unlevered IRR, with the exit assumption visible.

• Exit cap equal to going-in cap with no explanation. In net lease, remaining term at sale drives exit pricing.

• Omitting dark value. The committee needs to know how much of the price depends on the tenant staying.

• Burying open items. Unresolved diligence items belong on page two, with dates, not in an appendix.

• Unsourced numbers. One untraceable figure invites doubt about the rest.

• No stated walk-away conditions. Approval without conditions leaves the team without guidance if diligence turns up a problem.

A template outline

Approximate word budgets assume a two-page memo of roughly 900 to 1,100 words plus tables.

1. Header: property name, address, date, author, deal stage. (One line.)

2. Deal snapshot table: property, tenant and guarantor, lease type, remaining term, rent and escalations, options, price and cap rate, base-case IRR, key dates.

3. Recommendation and ask: approval sought, price, deposit, diligence period, conditions. (50–80 words.)

4. Investment thesis: up to three falsifiable points. (80–120 words.)

5. Tenant and credit: obligor, guaranty terms, rating or financial summary, store performance, unknowns. (120–160 words.)

6. Lease: term, rent schedule, options, landlord obligations, weakening provisions. (120–160 words.)

7. Real estate: site, building, condition, re-use, dark value. (100–140 words.)

8. Pricing and returns: cap rate, average yield, unlevered IRR, assumptions, comps table, one sensitivity table. (120–160 words plus tables.)

9. Risks and mitigants: three to five pairs. (120–160 words.)

10. Diligence status and open items: verified, outstanding, deadlines tied to the PSA. (80–120 words.)

11. Walk-away conditions: the findings that would cause the team to terminate. (30–60 words.)

12. Sources and appendix references: footnotes and links to the lease abstract, rent schedule, credit file, comps, and third-party reports.

Before the meeting

Circulate the memo early enough that it is read before the meeting rather than during it, and send the supporting files with it: the lease abstract, the rent schedule, the model, and the comps. Committee time is best spent on questions, not on a walkthrough of page one.

Ask a colleague who has not worked on the deal to read the memo cold and list the first three questions it raises. If those questions are not already answered in the body, revise. Then reread every footnote against its source one last time. Late changes to price or terms during negotiation are the most common reason a memo’s snapshot table no longer matches its returns section.

Finally, keep a record of the committee’s questions and the answers given. Patterns in those questions over a year of deals are the best guide to what your next memo should address up front.

After approval

An approved memo is also a baseline. When diligence closes, compare what was assumed with what was found: the estoppel against the lease, the third-party reports against the condition assumed, the final rent schedule against the one modeled. Recording those differences, and carrying the critical dates and obligations from the memo into asset management after closing, is how the memo continues to be useful after the committee meeting.

Where Rets fits

Rets exports a two-page IC memo to Word, built from the deal’s own extracted data: price, NOI, rent schedule and lease terms, each cited to the page it came from, with the rent schedule and returns built from the lease. Diligence runs on the PSA clock with the Net Lease Sprint checklist and hard deadlines, and estoppels are compared to the lease. After close, Rets tracks critical dates, rent and debt.