PPM 101: A Guide For Multifamily Real Estate Investors

PPM 101: A Guide For Multifamily Real Estate Investors

When an investor begins their due diligence process for a new multifamily investment opportunity they need to be able to evaluate one deal against the next. For them to achieve this goal, they need to have a full understanding of the details of each investment. This includes information like the summary of offering terms, the risk factors, the sponsor’s track record and history, the use of proceeds, and the equity waterfall breakdown, among other factors. This can all be found in a single document called the Private Placement Memorandum (PPM). 

A PPM, also known as an Offering Memorandum, is a vital tool owners of privately held companies, such as multifamily real estate syndications, use to attract external investors. The PPM is tailored to these investors and serves as a detailed guide, providing essential information about the investment opportunity to help investors thoroughly understand the proposed investment. 

In this article, we break down the sections in a PPM to assist investors in navigating this extensive document. 

The PPM Outline


The first section of a PPM is the introduction. It begins with how to invest and who may invest. This section is a general overview of the offering. Usually, the following information is included: 

  • Description of the issuer, manager, and sponsor, along with a brief statement regarding the issuer’s business activities. For example: the acquisition of a 252-unit Class A apartment complex in New Braunfels, Texas, outlining the respective roles of each entity. 
  • Statement specifying the securities exemption the issuer uses, such as 506(b) or 506(c).
  • Description of the specific security being offered, specifically a debt or equity security, along with basic economic details to align with investors’ objectives.
  • Minimum and maximum offering amounts to protect all parties involved. 
  • Price per interest or unit being offered.
  • Number of member or limited partnership interests or units available for sale.
  • Minimum individual investment amount, with a provision allowing the issuer to accept amounts lower than the minimum investment.
  • Offering termination date, typically one year from the initial offering or upon reaching the maximum offering amount.
  • Information on fund handling, such as using an escrow agent, holding funds in a segregated account, or allowing funds to remain in investors’ bank accounts until the minimum amount is reached.
  • Indication of whether a broker-dealer or placement agent is involved in the sale of securities.


As a part of the introduction comes the disclaimer section. Below are key notices a PPM typically cover:

  • No registration; reliance on exemptions from registration.
  • Absence of a public market.
  • The degree of risk associated with the investment.
  • Restrictions on the transfer of securities.
  • Limitation on making representations beyond the offering materials.
  • Qualification of descriptions and summaries by actual documents within the PPM.
  • This is not legal, business, or tax advice.
  • Opportunity for investors to ask questions and receive information.

NASAA Uniform Disclosure

The NASAA Uniform Legend, included in a Confidential Private Placement Memorandum (PPM), notifies investors that the securities have not received endorsement from any federal or state securities commission or regulatory authority. Investors are encouraged to conduct their own assessment of the sponsor and the offering terms and to consider the associated merits and risks.

Forward-Looking Statements

Forward-looking statements remind investors that projections, estimates, and intentions may change, and cautionary notes highlight the risks and uncertainties of actual results compared to those outlined in the PPM.

The Executive Summary

The executive summary is a brief but thorough overview of the investment opportunity and the company involved. It is broken down into several sections. 

Below is the breakdown of what to expect to see in a Viking Capital, PPM: 

  • Introduction & Company Overview

Introduces the company the asset will be acquired by and the asset’s name and address.

  • The Offering

A breakdown of the number of investment shares available and to whom can invest.

  • The Property

A brief description of the property including, name, vintage, number of units, location, and business model. 

  • The Purchase Agreement 

Describes the terms for the purchase such as purchase price, closing date, and other conditions.

  • The Manager and Sponsor

A brief overview of the company, its key principles, and track record. 

  • The Property Manager 

States who the anticipated property manager of the asset will be.

  • Construction Manager

Indicates the sponsor’s intention to hire and use a construction manager for renovations and updates. 

  • Property Location

Highlights of the property’s location.

  • Project Cost & Capitalization

Outlines the total project cost and the plan to fund using secondary debt and loans. 

  • Anticipated Senior Loan

Outlines general loan terms and plans to obtain the loan.

  • Sources & Uses of Funds

A breakdown of debt and equity in numbers followed by how those funds will be utilized. 

  • Exit Strategy

The overall business strategy encompasses how the sponsor plans to sell the property at the end of the hold period. 

  • Confirmatory Due Diligence

Gives timing for when due diligence is expected to be complete. 

  • Organizational Structure Chart

A visual display of the ownership structure.

Summary of Key Terms

This section provides a concise summary of the key components of the offering, resembling a term sheet. It encompasses high-level details of the important aspects covered more extensively elsewhere in the PPM. Often, this section reiterates information presented in the introduction and overview. Some of the important key terms to note in this section are: 

  • Plan of Distribution
  • Investment Classifications and Potential Returns
  • Use of Proceeds
  • Management Fees
  • Distributions & Waterfall

Distribution Plan 

This section outlines the sales strategy and the parties responsible for promoting the offering to potential investors. If the issuer has engaged a broker-dealer or placement agent for sales, this information, including any compensation arrangements, will be disclosed here.

Investment Classifications & Returns

This section provides a breakdown of the tiered investment class offerings and presents the estimated distribution timeline.

Estimated Use of Proceeds

States that the proceeds will be used for the acquisition of the property and to uphold the business plan. In the PPM, the use of proceeds is itemized into project financing, affiliate compensation, and sponsor fees. 

Management Fees

Although having a well-structured business plan is vital for success, it is competent leadership that ensures effective execution. The fees charged by a company are usually indicative of the quality and expertise of its team members, as well as the number of people dedicated to contributing to the execution of the business plan. In this section, there will be an itemized list of fees and their uses. 

Distributions & Waterfall

Based on the investment classifications, this section details the amounts and the order of priority in which they will be distributed. It also outlines the rights and restrictions of payouts and the financial reporting process for investors.

Summary of Operating Agreement/ Limited Partner Agreement

Below is a list of what to expect in this portion of Viking Capital’s PPM: 

  • Sponsor Overview

Here you will find the background of Viking Capital LLC, including insights into our CEO and co-founder, Vikram Raya, and our COO and co-founder, Ravi Gupta.

  • Investment Overview

This section provides insights into our business plan, detailing our approach followed by general information about the residential and general markets for the property.

Transparency is key, this section details the potential risk factors involved in the investment. Risk factors are typically organized into general categories, including:

  • General Risks- associated with the company and compliance, lack of control, and economic conditions
  • Specific real estate risks, particularly in the specified offering. This includes construction delays, local competition, tenant dependence on revenue, operating costs, etc. 

Certain Legal Matters

This section addresses the government’s legal restrictions and rules for the offering. 

It covers the Investment Company Act of 1940, Investment Advisers Act of 1940, Securities Act of 1933; Other Securities Laws, Bad Actor Disqualification and Disclosure Provisions under Rule 506(d) and (e), Changes in Law; Regulation of Private Investment Funds, Anti-Money Laundering Regulations, Fiduciary Matters, The Plan Asset Regulations and Restrictions on Purchase of Units. 

Conflicts of Interest

The company and affiliates may have conflicts of interest, including involvement in other real estate funds or investments. Full disclosure of all potential conflicts is crucial. This section discloses any items that could even appear to be a conflict of interest to prospective investors. 

Investor Suitability 

The investor suitability section specifies the eligibility of investors permitted to purchase securities from the issuer, typically limited to “accredited investors.” Often restating the risk involved in making this investment. A detailed list of investor suitability requirements follows.

How to Invest

This section lays out the investment process in detail and should include: 

  • The subscription process and required documents and methods.
  • Accepted funding methods (e.g., wire or ACH).
  • Use of escrow accounts (if applicable).

Income Tax Considerations

The tax section of the PPM outlines the investor’s tax implications. Specific state tax requirements are not detailed and we encourage investors to consult their local tax accountant. 

It is categorized into General Investor, The Company’s, Basis of Interest, Distributions, Sale & Disposition, Expenses, and Audits. 

Subscription Agreement

Below the PPM is the subscription agreement. Only fill out this document once you have decided to move forward with your investment. 

Final Thoughts

The PPM may appear daunting due to its extensive detail and length. However, we aim to simplify these sections to assist investors in navigating and comprehending its complexities. To review an archived PPM from a previous deal, you can schedule a call with our Investor Services Manager, Amir Nassar. Click here to book a call.