About Us

Paragon SA is a real estate firm which provides investment services to private and public equity vehicles focused on real estate and real estate-related endeavors principally in Switzerland. Paragon works with investment partners to identify, asset manage, and operate properties. We are a one-stop shop with expertise in finance, leasing, insurance, redevelopment, construction and building operations.

Paragon also specializes in tenant representation, third party asset management, and brokerage in commercial real estate. Paragon executives are multi-lingual and multi-national and benefit from an international approach to corporate culture combined with a local presence and expertise in local markets. In particular, through the experience of its chief executive, Paragon SA is able to transfer some of the successful approaches pioneered in the US real estate market to a European context.

Paragon's key strengths lie in distressed opportunities, underperforming and undervalued assets and value creation opportunities. Investments include single assets, portfolios, joint-ventures and real estate development, as well as real estate-related loans and debt instruments. We canvas retail, logistics, office, industrial, as well as senior and student housing opportunities.

Note from the CEO

Here we are at the end of 2021 and it’s that time of year for me to write my short statement recapping the events of the past year and looking forward to the next one with some projections of what might be in store for us. I must be honest and admit that it feels a bit like déjà-vu this time around.

Interest rates have been so low, for so long, that the implications are now fairly well understood. Will rates rise, when, and by how much is anybody’s guess, but most experts are predicting at least another year of a low interest rate environment. Our view is that if and when inflation and interest rates do rise significantly in Switzerland, it will happen suddenly and be a surprise to most; therefore, we have either secured long-term fixed rates where it makes sense, or we are provisioning to pay back some debt should the interest rates move in a significant manner against us at some point down the road. Real estate can also often act as a decent hedge against inflation as rents follow rates, so we try to lease to credit-worthy tenants who will hopefully grow with us into the future.

What about the strong Swiss franc? Will it depreciate versus the euro or the dollar? We do not claim to have a crystal ball that tells us the future, but it seems unlikely that demand for the Swiss franc will drop off a cliff anytime soon, so we are assuming that the Swiss franc will remain strong, if a bit over valued, at least for the following year. 

Keeping cash in Switzerland is expensive due to negative interest rates, and alternatives to cash are also expensive whether we refer to the stock market, real estate, commodities, gold, or even crypto-currencies. We are concerned about capital preservation as much as growth and try to protect ourselves in the face of so much uncertainty; this requires diversification and exposure to several non-correlated income streams.

Paragon has always tried to avoid the core, or institutional markets, as we prefer to attempt to create value rather than simply hope for cap-rate compression.  In the past, this meant shifting our focus to light-industrial and storage before it was as popular as it has become today. We also have been designing office space since the early 2000’s to accommodate flexible working patters and habits. There is clearly a need for new types of design and facilities to address the fundamental changes brought on recently by the covid pandemic.  

While there is a clear shift by investors away from retail and office, we believe that by being creative and flexible, we will still be able to unlock value in such assets if the going-in price reflects the challenge that lies ahead, and the location is attractive.

Notwithstanding the challenges of the past year, we are delighted to announce that Covid19 did not slow us down in 2021 as we managed to achieve and even surpass our strategic goals:

In 2022, we expect a strong performance with some new acquisitions. The real economy took quite a hit in 2020 and 2021 due to Covid (airlines, hotels, restaurants, the arts, ...) but most of the experts predict a bounce back and even a catch up in 2022. It is, however, increasingly difficult to buy quality assets at fair prices, especially in Switzerland. Even with growing scepticism regarding offices, there is still no vacancy in downtown Geneva and no office building can be purchased in the CBD for anything close to a reasonable price. Over the last several years, we have had a challenge in terms of acquiring new product and it is not getting any easier. Since it is so hard to buy centrally, even the core funds are now pushing themselves outside the cities and are starting to compete with Paragon on assets well outside of their normal target areas.

Furthermore, as investors, we are struck by the correlation in different markets and find it increasingly challenging to be well diversified across distinct asset classes, different geographies, and international currencies. We all have witnessed the correlation, be it with regards to bonds, stocks, gold, or even crypto-currencies...everything seems to go up or down together. I do not pretend to know why everything is so correlated, but it’s my responsibility to attempt to identify solutions that allow us to diversify and not have all of our proverbial “eggs” in the same basket.

It was with this in mind that Paragon decided several years ago to begin investing in euros and made its first foray into France by way of two projects in the area near Geneva.  Being exposed to other geographies and currencies rather than only focus on Switzerland and its CHF makes a lot of sense, even if its only for a small fraction of our activity and our capital.  Now that we have some exposure to the Euro, we also are seeking to make an acquisition in the UK, and to build a new business in Canada. 

The UK is experiencing the double-edged sword of Brexit and the Pandemic so could offer attractive medium to long term opportunities since the British pound is relatively weak. The Canadian project is exciting as our target market, Ontario, is booming. There is strong population growth due to immigration. The pressure on pricing in the city of Toronto as well as cultural changes accentuated by Covid, is pushing folks to live more and more outside the city centers. We have identified projects outside the greater Toronto area, specifically in the Kitchener/Waterloo area, that we believe offer sound fundamentals and great potential. We are also keen on developing accessible housing in trendy and up-and-coming areas as there is a clear need for housing that the mass market, or middle-income individual or family can afford. We are in discussions with the authorities/municipalities to identify suitable projects and are working with financial institutions including the CMHC (Canadian Mortgage and Housing Corporation) who are aligned with our values and risk appetite ensuring that we can do well by doing good, and manage our risk acceptably.

Canada is a lot like Switzerland in the fact that is often listed as one of the most desirable places on earth to live, both countries have excellent universities and a qualified work force, both enjoy stable politics and a very solid banking system, both countries enjoy a tolerant population with low crime rates and great diversity. Additionally, both countries are concerned about social impact and will offer incentives for environmentally sustainable investments.

The fundamental differences between these two nations lies in the fact that Canada, despite enjoying thriving IT and finance industries, is a resource-based country with its CAD tightly linked to commodities and natural resources;  Switzerland, on the other hand, is a unique country relying more on its stable politics, attractive tax policies, safe living, and excellent quality of life to attract wealthy foreigners, while internally continuing to grow its expertise in pharma, banking, IT and even block-chain.  Both countries are concerned about ecology and building housing for “average” people and there are compelling incentives in both countries to invest in a smart way for the future. 

By focussing on quality investments in these similarly stable economies where we can use our competitive advantage in asset management competence, we are taking an important step towards one of our most important goals which is diversification and the creation of additional non-correlated income streams backed by real estate.

Please come and chat with us about our projects and see how you can get involved or simply invest in something that makes not only money but good sense.

 

 

                        

                                                                                                                 Mike WOLFSON

About

Top