Two Chagrin Highlands office buildings sell for $39 million

An incorrect price for the properties was corrected at 5:36 p.m. Wednesday, April 6. Sources familiar with the transaction say the $19.5 million price reported for both buildings in computerized Cuyahoga County property records was incorrect as that was the price paid for each structure.

The Chagrin Highlands I and II office buildings in Beachwood were acquired Tuesday, April 5, by an Aventura, Florida, investment firm for $39 million, according to sources familiar with the transaction..

The buildings were shed by Shelbourne, a Brooklyn, New York-based company that has a substantial portfolio of buildings in the Cleveland suburbs.

Shelbourne also did well in the sale to GLF Ohio LLC, an affiliate of Kawa Capital Group, an independent real estate asset adviser and capital services provider with more than $1.8 billion in assets under management, according to its website.

County land records show that Shelbourne shelled out $14 million to acquire them in 2017 from an affiliate of Jacobs Real Estate Services of Westlake. The firm of the late Richard and David Jacobs developed them as multitenant properties in the Chagrin Highlands corporate center.

In a phone interview, Rafi Lipschitz, an investment manager at Shelbourne, said, “I think this is a good deal for the buyer. They recognized the value of creditworthy tenants in two buildings that have a blended occupancy of 94%.”

The structures had 90% occupancy when Shelbourne bought them, and it invested substantially in the structures with updated lobbies and other improvements to keep them competitive in the post-COVID-19 environment. The buildings, at 2000 and 3000 Auburn Drive, have a total of 224,133 square feet of office space.

The structures date, respectively, from 1999 and 2002.

Rico Pietro, a principal at Cushman & Wakefield Cresco realty brokerage in Independence, represented Shelbourne in the sale. He said he was “pleasantly surprised” at the number of suitors for the buildings from the tristate area surrounding New York City.

“We had some local groups look at the buildings, but half the (prospective) buyers put boots on the ground from out-of-town to study the properties and the east suburban office market,” Pietro said. “It’s great for the market.”

He also argued the premium sale price shows that well-located, updated office buildings have a continuing future, even in the work-from-home era that developed overnight during the pandemic.

Russell Rogers, a senior vice president in the Colliers International Cleveland office, said he considers the structures trophy properties. He noted such a premium price will be good for the office market generally.

Shelbourne’s Lipschitz said the firm plans to use some of the proceeds from the sale to update other office buildings that remain in its portfolio in Northeast Ohio. Shelbourne continues to own nine other buildings here, part of a portfolio of 8 million square feet around the country.

Kawa did not return a voicemail left with Daniel Ades, its managing partner, by 4:10 p.m. Wednesday, April 6.

BTG Pactual, a Sao Paulo, Brazil-based financial services and investment banking firm, acquired an undisclosed stake in Kawa in 2021.