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Tuesday 26, September 2017 by Nabilah Annuar

Crossing boundaries

Alande Mustafa Safi, Managing Director of Paragon Business Group, talks about the burgeoning potential down under and his vision for 2018.

Paragon Business Group is the parent company and the founder of Paragon Premier Investment Fund (PPIF). PBG has had 16 years’ experience in this field and currently manages AUD 1.06 billion in residential mortgage and AUD 284 million under management of the Federal Government Approved Investment Stream. This journey has enabled PPIF to come to fruition.

Bring us through the inception of Paragon Premier Investment Fund.

Paragon Premier Investment Fund was established in May 2016. It is a regulated fund that holds an Australian Financial Services licence No. 483118. PPIF is a development investment programme in Australian real estate and mortgage assets. The fund is dedicated to building homes, factories, and development projects that we see feasible for the Australian community, to supplement the growth of the population in the country. Our product is capital guaranteed, as all investments are backed by First Mortgage with step-in rights, as the Principal Guarantee in the form of Title Deeds to the investors.

As a foreign investor you will not only be supporting the Australian economy, but also create jobs and aid the local community whilst receiving a minimum return of six per cent per annum. Some of our projects can deliver returns of 11 per cent per annum—these investments have a minimum investment term of between three to five years.

How has the fund performed thus far?

Whilst the fund was established in May 2016, the parent company PBG, has had an Australian Credit licence for over 16 years. PBG has managed over AUD 1.06 billion in mortgage management in Australia and AUD 284 million for five years in foreign investment with Paragon’s two approved federal government investment streams called the 188 A and C Significant Investment Visa Streams. In 2016 Paragon managed to present investment opportunities worth over AUD 311 million.

What are the challenges involved in growing the fund?

Many investors are not aware of the potential of investing in Australia. It is our job to educate prospective investors and show them the attractive returns they can achieve in a secured development portfolio. Being a resilient nation and steering clear of global financial crisis that affected most financial markets, Australia was the least affected developed economy.

The current population growth and rapid rise of the housing market is an optimum factor for the speedy growth of Australian real estate. The Paragon Premier Investment Fund team has a very prestigious and knowledgeable Board of Directors which enhances the solutions to investors, synergising our resources with major land holders, developers and building industry leaders to provide a premium and exclusive investment solution to our global investors.

Describe PPIF’s international presence.

Paragon Business Group has been trading in Melbourne, Dubai, Shanghai, Los Angeles and Kabul. With the formation of Paragon Premier Investment Fund, it was inevitable to introduce it to existing markets.

We have affiliated and sub-funded our regulated licence further to private banks, private family wealth managers, sovereigns in New York, Washington DC, Paris, London, Geneva, Zurich, New Delhi and Mumbai to strengthen the scope of PPIF’s global investor pool and to further enhance our fund raising capabilities for the projects we offer and require funding for.

How did the fund make its foray into the Middle East?

Paragon Business Group, the parent company of PPIF, has an approved Federal Government of Australia Investment Stream Immigration Product [license] since the inception of the visa in November 2014 by the State Government of Victoria. I have been travelling to Dubai since then to promote this product.

Once I identified the gap in market—which was the reluctance of banks in Australia to lend to large scale developments—I came up with this product. We then applied for the Australia Financial Services (AFS) license in December 2015, enabling foreign investment into the property development fund. This is how the PPIF came about.

Our main focus in the region is to create awareness in the local market of lucrative development funds that invest in Australia’s real estate industry. This is to attract potential clients to invest in our products in Australia.

Being the hub for many South East Asian and European banks, financial advisors, and consultancy firms, it is a business advantage to have presence in Dubai and use this as a centre to meet and discuss opportunities within the financial diaspora that Dubai is well-known for.

PPIF provides investors a direct opportunity to tap into the Australian real estate market, particularly in Melbourne. Can you provide an insight into its progress and future potential?

Australia has a population of 24.6 million, and currently the population in Melbourne is 4.5 million with a four to six per cent growth per annum. The population in Melbourne is expected to double in 19 years. Therefore, Melbourne’s infrastructure and housing must also double to accommodate for this growth. Backed by a strong economy and reasonable cost of living, Melbourne has just been named the most liveable city in the world by Economist Intelligence Unit for the seventh year in a row.

Australian banks have stringent lending policies making it almost impossible for developers to borrow funds from the banks. This is where PPIF fills the gap, as the fund conservatively invests into the median residential property growth, which is a much needed requirement for the influx of the population growth and lack of funding from banks for such scale development projects.

What is currently in the pipeline for 2018?

We currently have a signed letter of intent from a capital partner to fund the third international airport in South East Melbourne worth $7 billion. This project is much needed to service Melbourne's booming South-eastern suburbs and the state's East. We have progressed to have an announcement of this project within 90 days.

What PPIF is seeing in the global market is the need for big ticket investors wanting to steer in a low return secured capital investment, not only to diversify their portfolios, but to also preserve capital in a global Government-approved infrastructure investment. It is with this known pattern evolving in the global investors market that PPIF has established a sub-fund product to specifically suit such investment, globally.

Only those who have been living under a rock would not be aware that the world has attracted institutional capital for infrastructure investments since the 1990s. This is why governments began privatising the utility sectors as well as other infrastructure assets like toll roads, communication and airports. Despite the industry’s perceived maturity, the continued wave of privatisation has resulted in an uninterrupted pipeline of transaction opportunities.

In light of many big ticket transactions, there was an interesting debate between diverse panels of asset managers as to whether or not the level of global infrastructure investment opportunities were sustainable. In short, the consensus was yes, but the panellists agreed that there would be significant product development, like new assets and strategies falling within the infrastructure scope.

However, it was still widely acknowledged that this was not really hindering demand, and that there is much more capital chasing fewer infrastructure assets, resulting in very high valuations and greater risk of compressed returns.

According to Preqin data from Q1 2016 to Q1 2017, the majority of capital for unlisted infrastructure is still raised in North America ($50 billion), followed by Europe ($26 billion), Asia ($9 billion) and rest of the world ($6.6 billion). However, the lion’s share of this capital is going to an increasingly smaller number of managers, raising mega funds.

According to PEI Infrastructure Investor H1 2017 Fundraising Review, 13 funds reached a final close in Q2 2017, with an aggregate raised capital of $6.6 billion, and 29 funds closed in H1 2017, raising $36.2 billion. The largest five funds closed during the period accounted for 73 per cent of total capital raised. This potentially argues the reversal of an earlier trend of limited partners investing directly and reverting back to managed vehicles. This may also be the catalyst for a new trend of smaller funds with more specialised strategies. 

This point has been well perceived to be the point that was no longer deal-origination driven, but increasingly focused on their asset management capabilities. Based on this, Paragon Premier Investment Fund now has a structured product and provides the ‘platforms’—which are generally more asset-specific, targeting certain projects and on more bespoke terms than a fund—giving the limited partner greater flexibility and the reassurance of partnering with an experienced manager. 

Paragon Premier Investment Fund currently has over $38 billion to source and introduce secured infrastructure investment opportunities worldwide, whilst our Australian development-focused fund management has currently over AUD 700 million to manage from our global investor portfolio.