Bucking trend, Paragon Commercial to invest $500M in “neighborhood shopping centers”

As mall operators and retailers across the country struggle with sales, one local firm is going all in.

El Segundo-based Paragon Commercial Group will invest $500 million over the next 18 months in retail property acquisitions, the company announced in a release Tuesday.

Jim Dillavou, Paragon co-founder and principal, said the firm will focus on “neighborhood shopping centers” that typically have a grocery market. Each acquisition will range from $20 million to $80 million.

The retail development firm will invest alongside some of its existing partners, both institutional and private.

Out of the $500 million, about $200 million will be invested in Southern California properties while the remainder will go to Northern California properties. Dillavou said the firm has been looking to grow its portfolio in the northern half of the state.

Paragon’s portfolio includes a 79,400-square-foot retail property in Orange County, purchased through the Canyon Catalyst Fund, and Gelson’s Shopping Plaza in Manhattan Beach. The firm completed construction at the South Bay retail center last November, landing the high-end grocery chain Gelson’s to anchor the project.

In the Bay Area, the firm recently made headlines for selling the ground lease to an In-N-Out Burger located in San Jose. A private investor bought that property for $6.9 million.

While Paragon will invest in smaller shopping centers, landlords of large malls nationwide have dealt with big-box spaces going vacant after retail chain bankruptcies. In response, some mall owners have been redeveloping those empty spaces into residential developments, sprawling “country club”-like fitness centers, medical facilities and co-working spaces.