Hundreds face loss in Texas real estate

Global Paragon warns some 500 Israelis may lose NIS 35 million they invested in U.S. real estate, 

Some 500 Israelis may lose NIS 35 million they invested in U.S. real estate, Global Paragon, the company that organized the investment, warned them on Tuesday.

In an e-mail, the company said its unit in Israel and Houston were in dire financial straits. The e-mail said Global Paragon was closing its marketing office in Israel and would now confine its activities to managing its Houston assets.

However, the e-mail also stated that the company might to be able to continue managing these assets and advised investors to appoint representatives to decide whether to continue with the company or sell their positions.

"We failed as a company. The assets need to be sold off," Yaron Cohen, who ran the company's Israeli sales office, told TheMarker bluntly. He maintained that the company had nothing to hide and that investors were welcome to see its financial reports.

The investors may still be able to rescue some of their capital. TheMarker learned yesterday that the Hagshama Fund, which has NIS 300 million to invest in real estate, is offering to take control of Global Paragon at a valuation of $11 million to $14 million. It is also promising to invest another $7 million in renovating the Houston properties

In exchange, Hagshama wants a 5% management fee and rights to 25% of future profits.

The investment would require the consent of the 500 current investors, but one source said they were likely to approve it. "While we won't get the annual return of 22% we were expecting but more like 11% or 14% because of the stake being sought, that's still preferable to selling the assets off quickly and ending up with a loss," the source said.

Global Paragon is comprised of three different subsidiaries, including one in the United States and one that dealth with purchasing groups in Israel.

It began operations in 2007, advertising itself as "acting in the time and place that enables buyers to make successful purchases, while taking advantage of unprecedented opportunities due to the financial crisis and its effect on the U.S. real estate market." Investors could invest between $17,500 and $1 million.

The investment was managed by Alon Solomon, who represented himself as having extensive experience in the field, and David Mor, who was described as a member of the advisory committee, highly experienced in finance and asset management.

However, Mor told TheMarker that he never participated in any meetings or made any decisions related to investments, and was never consulted regarding transactions.

Several years ago, Solomon had asked to use Mor's name as an adviser to the company, but he doesn't sit on any committees and receives no pay, Mor said.

Source: http://www.haaretz.com/business/hundreds-face-loss-in-texas-real-estate.premium-1.481264