Paragon Announces Operating Results for Second Quarter and Six Months Ended June 30, 2005


CLEVELAND, Aug. 15, 2005 (PRIMEZONE) -- Paragon Real Estate Equity and Investment Trust (AMEX:PRG) announced operating results for the three and six months ended June 30, 2005.

Net loss attributable to common shareholders for the quarter ended June 30, 2005 was $228,000, or $0.01 per share, compared to a net loss of $213,000, or $0.01 per share, for the same quarter of 2004. For the six months ended June 30, 2005, the net loss attributable to common shareholders was $674,000, or $0.02 per share, compared to a net loss of $347,000, or $0.01 per share, for the first six months of 2004.

During the second quarter and first six months of 2005, Richton Trail Apartments performed at approximately the same level compared to last year. Paragon's general and administrative expenses increased by $14,000 for the second quarter of 2005 to $239,000, and for the six months of 2005, these expenses increased by $233,000 to $697,000 for due diligence undertaken mostly during the first quarter of 2005 on a large potential acquisition. James C. Mastandrea, Chief Executive Officer and President of Paragon, said, "During the second quarter, we also performed due diligence on two apartment portfolios, comprised of 20 properties and approximately 5,000 apartment units. We submitted bids on both portfolios, which were competitive because we were included in the final round of bidding, but in the end both sellers chose other bidders."

As previously reported concerning the increased general and administrative expenses for the first quarter, Paragon hired several highly experienced professionals as independent consultants and used other service firms to assist with due diligence on a large potential acquisition. The seller was an institution that was divesting its portfolio of affordable housing investments for non-economic reasons but decided to retain the portfolio.

Commenting further on Paragon's strategy of buying value-added multi-family apartment properties, Mr. Mastandrea noted, "The acquisition market has been fiercely competitive. Some even categorize it as 'overheated.' Since December 2003, we have done significant amounts of review and due diligence on eight portfolios of apartment assets, including more than 60 apartment complexes valued at $500 million and an affordable housing portfolio of over $1 billion invested in approximately 350 apartment communities. More recently, we have been raising our bid offers anticipating that we will be able to increase the value of the apartment properties over the medium-to-long term. Yet, other buyers have bid so high that if we paid those prices, our shareholders would not receive the returns they deserve. Therefore, while we continue to review new offerings of C-class apartment properties, we may begin to look at 'alternative value-added real estate investments,' such as development properties, where we also have significant experience. In doing so, we and our board of trustees remain committed to creating value for our shareholders."

-- Financial Statements Follow --

Forward-Looking Statements

Certain matters discussed within this press release may be deemed to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although Paragon Real Estate Equity and Investment Trust believes the expectations reflected in such forward-looking statements are based on reasonable assumptions, it can give no assurance that the planned implementation of a national real estate acquisition, development and re-development strategy will be completed in whole or in part. Factors that could cause actual results to differ materially from Paragon's expectations include changes in local or national economic or real estate conditions, the ability to meet competition, loss of existing key personnel, ability to hire and retain future personnel and other risks detailed from time to time in Paragon's SEC reports and filings, including its annual report on Form 10-K, quarterly reports on Form 10-Q and periodic reports on Form 8-K. Paragon assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.



   Paragon Real Estate Equity and Investment Trust and Subsidiaries
                 Consolidated Statements of Operations
                              (Unaudited)

                                                       For the
                                                  three months ended
                                                       June 30,
                                                ----------------------
                                                   2005        2004
                                                ----------  ----------
 Revenues
  Rental revenue                                  $150,014    $145,009
  Interest and other                                 9,780       9,300
 ---------------------------------------------------------------------
   Total revenues                                  159,794     154,309
 ---------------------------------------------------------------------
 Expenses
  Property operating, taxes, insurance              83,109      74,011
  Depreciation and amortization                     22,491      21,578
  Interest                                          40,739      41,485
  General and administrative                       238,819     224,769
 ---------------------------------------------------------------------
   Total expenses                                  385,158     361,843
 ---------------------------------------------------------------------
 Loss from operations before minority interests   (225,364)   (207,534)
 Income allocated to minority interests             (2,589)     (5,879)
 ---------------------------------------------------------------------
 Net loss attributable to Common Shareholders    ($227,953)  ($213,413)
 ---------------------------------------------------------------------
 Net loss attributable to Common Shareholders
  per Common Share: Basic and Diluted               ($0.01)     ($0.01)
 ---------------------------------------------------------------------
 Weighted average number of Common Shares
  outstanding: Basic and Diluted                33,899,956  32,775,781
 ---------------------------------------------------------------------

    Paragon Real Estate Equity and Investment Trust and Subsidiaries
                  Consolidated Statements of Operations
                               (Unaudited)
                                                      For the
                                                  six months ended
                                                       June 30,
                                                ----------------------
                                                   2005        2004
                                                ----------  ----------
 Revenues
  Rental revenue                                  $300,789    $295,611
  Interest and other                                20,401      27,457
 ---------------------------------------------------------------------
   Total revenues                                  321,190     323,068
 ---------------------------------------------------------------------
 Expenses
  Property operating, taxes, insurance             168,761     160,445
  Depreciation and amortization                     44,733      43,009
  Interest                                          81,225      83,152
  General and administrative                       697,495     464,362
 ---------------------------------------------------------------------
   Total expenses                                  992,214     750,968
 ---------------------------------------------------------------------
 Loss from operations before minority interests   (671,024)   (427,900)
 (Income) loss allocated to minority interests      (2,757)     81,017
 ---------------------------------------------------------------------
 Net loss attributable to Common Shareholders    ($673,781)  ($346,883)
 ---------------------------------------------------------------------
 Net loss attributable to Common Shareholders
  per Common Share: Basic and Diluted               ($0.02)     ($0.01)
 ---------------------------------------------------------------------
 Weighted average number of Common Shares
  outstanding: Basic and Diluted                33,655,808  32,678,378
 ---------------------------------------------------------------------


   Paragon Real Estate Equity and Investment Trust and Subsidiaries
                      Consolidated Balance Sheet
                              (Unaudited)

                                                         As of
                                                     June 30, 2005
                                                     -------------
 ASSETS

 Investments in real estate, net                       $3,869,286
 Cash and restricted cash                               1,215,840
 Marketable securities, net                                76,704
 Other assets, net                                        112,347
                                                       ----------
 Total Assets                                          $5,274,177
                                                       ----------

 LIABILITIES AND SHAREHOLDERS' EQUITY

 Liabilities:
   Mortgage loan payable                               $2,736,822
   Other liabilities                                      184,652
                                                       ----------
 Total Liabilities                                      2,921,474
 Minority interests in consolidated subsidiary          2,170,266
 Shareholders' equity                                     182,437
                                                       ----------
 Total Liabilities and Shareholders' Equity            $5,274,177
                                                       ----------

            

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