(To read more on the multifamily market, click here.)
CLEVELAND-Paragon Real Estate Equity and Investment Trust has entered into an agreement to acquire 1,478 units in 10 properties in Texas and Ohio for $64.7 million, or $43,775 per unit. The locally headquartered company says it is exploring "a variety of capital raising alternatives" and expects that the acquisition will close in late 2005 or early 2006.
Along with the properties, Paragon intends to retain the 40-person management team that includes regional managers, property managers, leasing and maintenance personnel. Paragon also will acquire the accounting and management systems for the properties.
Paragon's game is buying class C apartment properties, upgrading them to class B properties and then waiting for the income stream to grow through higher lease rates and higher occupancy rates.
"Because our value-added strategy requires investors to be patient and willing to wait for the income stream to grow, few public companies are operating within this segment of the real estate markets," says Paragon chief executive James Mastandrea. "After spending considerable time and resources over the course of the last year or more reviewing and ultimately deciding not to purchase more than 60 apartment complexes…, we believe we have found assets that will solidify our platform and launch the growth of our company."
Last week, Paragon was notified by the American Stock Exchange that it is not in compliance with continued listing requirements due to shareholders' equity of less than $6 million and losses from continuing operations and net losses in its five most recent years. In addition, the letter noted that the company's stock price has been below $0.24 for the last 12 months and recommended a reverse stock split.
Paragon says it has been exploring various ways to maintain its listing. At its 2005 annual meeting of shareholders, Paragon obtained authorization for the board of trustees to effect a reverse split of its shares when appropriate. The company's share price ended Tuesday at $0.10 per share.
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