Real Estate Investing School Podcast

Episode 136: REAL DEAL – The Ultimate Guide to Buying a Mall

Date: February 29, 2024
Host: Brody Fawcett
Guest: Jay Borgana

Overview

In this “Real Deal” episode, host Brody Fawcett interviews Jay Borgana about his recent purchase of a Minnesota shopping center (“mall”)—a complex but lucrative investment that illustrates the skills, mindset, and strategies required to acquire large commercial properties. The discussion covers everything from finding the deal and navigating environmental challenges, to negotiating financing, optimizing operations, and the critical role of building relationships with brokers and banks. The episode serves as an in-depth, actionable guide for real estate investors looking to scale into bigger deals.

Key Discussion Points & Insights

1. Deal Overview & Initial Challenges

(02:22–05:18)

• Jay acquired a shopping center in Minnesota, about two hours from Minneapolis.
• The property had languished on the market for 150+ days, mostly due to environmental clearance issues stemming from an old gas station.

  “The deal became like…too good to be true…But we dug into it and found the biggest issue was environmental clearance.” (02:44–03:07, Jay Borgana)

• Jay hired a consultant, confirmed the clearance was just a paperwork process (~$25K cost; 6-12 months), negotiated with the seller to hold $50K in escrow for this purpose, and secured an $80K seller credit for roof repairs.

2. Deal Metrics and Outcome

(05:18–06:02)

• Purchase Price: $1.65 million
• Down Payment: About 20% (~$323K to $340K, with cash-to-close even lower due to credits)
• Current Value: $3 million post-clearance and stabilization

3. How Jay Found the Deal

(06:04–08:14)

• Found on Crexi (commercial property platform, like Zillow for commercial).
• Deal was listed with a broker—a “young hustler” motivated to close, providing Jay with key insights and help.

  “It wasn’t an experienced broker, it was just a young guy…driving two and a half hours away to get this deal done. He really wanted this to close.” (07:22–07:55, Jay Borgana)

Brody’s Reflection:
Deals can sit for months and still be great opportunities. Not all good deals are snapped up instantly. Build relationships and look beyond “off-market” myths.

“We have this misconception that all of the good deals get snatched up right away…That’s awesome.” (06:29–07:07, Brody Fawcett)

4. Finding and Evaluating Deals: Pattern Recognition

(08:50–10:25)

• Jay’s tip: Set up online searches, reach out to brokers, always ask for info and financials; each rep builds your pattern recognition.

  “I think that’s the biggest thing is developing pattern recognition. So when you see the great deal, you recognize it…those reps over a period of time…give you that ability.” (09:13–10:25, Jay Borgana)

5. Financing: Tactics, Relationships, and Negotiations

(10:59–21:45)

• Financing: Conventional, 20% down, local bank, 25-year amortization, 5-year rate resets.
• Jay’s advantage: Previously worked with the bank’s loan officer, built rapport, which later transferred to working with the bank president.

  “I had history with that person, so it kind of transferred. And number two, I got to spend time with these guys and prove I’m a good operator…so I built a lot of trust, which made it a lot easier transaction.” (13:36–14:03, Jay Borgana)

• Brody’s Insights: Build banker relationships in person, ask lots of questions about their lending policies rather than pitching yourself—a strategy to build trust and control the conversation.

  “Most people think the opposite…‘I need to talk about myself so they realize how qualified I am.’ No, no, no.” (16:08–16:20, Brody Fawcett)

6. Commercial Loan Flexibility and Negotiation

(19:19–21:45)

• Local and portfolio lenders have more flexibility on terms (amortization, rates, LTV) than big national banks.
• Shop widely: “Talk to 5, 10, 15, 20 banks…just keep talking to as many as possible.” (19:19–19:29, Jay Borgana)
• Jay uses competing bank offers as leverage (“Bank A will do X, can you match?”), arming loan officers to advocate for you internally.

7. Reputation and Local Networks Matter

(21:45–22:19)

• Jay and Brody stress: In small communities, a good reputation among lenders and community members paves the way for smoother transactions and approvals.
• “Don’t screw anybody over. It’ll come back to get you.” (22:15–22:19, Brody Fawcett)

8. Prospecting for Banks as Diligently as for Deals

(22:25–25:10)

• Jay treats lender outreach as prospecting. Bank rejections are never final—circumstances and leadership change; keep checking in regularly.

• Find out why a deal was rejected and use that info to refine future pitches or return later.

  “Do not take a no as a permanent no, it’s a temporary no.” (24:03–24:07, Jay Borgana) “You have to prospect lenders just like you prospect deals.” (24:14–24:17, Jay Borgana)

9. How Jay “Forced” the Deal (Value Add Strategies)

(26:20–29:57)

• Environmental Solution: Solved paperwork and compliance issues blocking the deal.
• Lease Restructuring: Standardized and cleaned up a variety of bespoke/legacy lease arrangements, shifting utilities and expenses to tenants, improving operations.

  “He didn’t have a simple structure for his leases…some people were triple net, some were gross…It was a mess. So we had to go through, clean that up, put them all on the same terms…that’s the second thing.” (27:27–28:34, Jay Borgana)

• Operational Improvements: Installed professional property management, focused on expense reduction and clear tenant communication.
• Negotiation: $80,000 seller credit for roof repairs was applied directly to reduce cash needed at closing—a flexibility more common in commercial than residential deals.

10. Takeaway Mindsets and Actionable Lessons

(29:57–31:14)

• Relationships and trust with both brokers and banks are as important as deal analysis.
• Regular outreach and smart questioning with lenders uncover better financing.
• Operational improvements (leases, management, utilities) compound deal value after closing.
• The skills to scale up are fundamentally the same as smaller deals—just with higher stakes and more zeros.

  “We just might put a one or a two more zeros on the end of it…It’s the same type of stuff.” (01:38–01:54, Brody Fawcett)

Notable Quotes & Memorable Moments

• “I’m retiring from a retirement.” (01:27, Jay Borgana)
• “We just realize it’s the same type of stuff, we just might put a one or a two more zeros on the end of it.” (01:38–01:54, Brody Fawcett)
• “It was too good to be true…but we dug into it and found the biggest issue was environmental clearance.” (02:44–03:07, Jay Borgana)
• “Pattern recognition…when you come across a really good deal, you’ll recognize it. Those reps over a period of time are the ones that give you that ability.” (09:13–10:25, Jay Borgana)
• “Don’t screw anybody over; it’ll come back to get you.” (22:15, Brody Fawcett)
• “Do not take a no as a permanent no—it's a temporary no.” (24:03, Jay Borgana)
• “You have to prospect lenders just like you prospect deals.” (24:14, Jay Borgana)
• “He didn’t have a simple structure for his leases…It was kind of a mess. So we had to go through and clean that up.” (27:27–28:05, Jay Borgana)

Timestamps for Important Segments

• 02:22 Deal overview and discovery of environmental clearance issues
• 05:18 Purchase price and capital raised
• 06:26 How the deal was found (time on market, broker)
• 09:13 Jay’s approach to pattern recognition in evaluating deals
• 11:12 Financing structure and importance of lender relationships
• 16:08 Building trust with bankers through inquisitive questions
• 19:19 Negotiating commercial loan terms using leverage and information
• 22:25 Prospecting for banks and not accepting “no” as final
• 27:27 Value-add strategies: leases, management, and expense control
• 29:13 Negotiating seller credits to lower cash-to-close
• 30:20 Where to find Jay Borgana online

Connect with Jay Borgana

• Instagram: @jborgana
• Specialty: Business acquisitions, turnarounds, and investments (returns often higher than traditional real estate)

This episode is packed with real strategies, mindsets, and tactics for taking down big deals—even if you haven’t done one before. Jay and Brody break down barriers and demystify the process, emphasizing that trusted relationships, continuous learning, and operational diligence are key to success at every scale.