[caption id="attachment_21965" align="alignright" width="324" caption=" Oak Grove Apartments"][/caption]
NOVATO – A Southern California real estate investment group made its first Bay Area acquisition with the purchase of the 88-unit Oak Grove Apartments for $16 million.
San Diego-based Davlyn Investments, acting as Dav-J Crooked Oak LLC, acquired the 12-year-old complex, located at 130 Cielo Lane in Novato on May 28.
Davlyn started in 1993 but had been searching for properties in the Bay Area only recently, according to Brad Pennington, a Marcus & Millichap agent who brokered the deal. The firm had an acquisitions office in San Francisco briefly before the recession started.
"They're trying to get a foothold in the market," he said.
Meanwhile, the local family that owned Oak Grove was facing an approaching maturity date for the existing financing and had to decide whether to refinance the property and hold it longer to eke out return on investment or sell it to trade into a single-tenant commercial property that required less management, according to Mr. Pennington.
"It had 10 offers, but the highest offer was lower than what it traded for 10 years ago," he said.
The property was on the market just about a month, and the deal closed within about 30 days.
"There is high demand for properties with sellers who are willing to sell to meet the market," Mr. Pennington said. "That's been the hardest part in this market for a long time now."
Davlyn plans to start upgrading the property with a new paint scheme, marble countertops and stainless-steel appliances to upgrade the revenue potential from B-plus-grade to A-grade to match features such as the location next to protected oak woodlands and one-car garages for each unit, he said.
Two-bedroom, two-bathroom units in the development have been renting for $1,550 to $1,790 a month. The property had no vacancy or availabilities of a few percent during escrow.
Five to 10 units will be upgraded at a time as tenants move.
Marin County apartment rents this spring generally were 2 percent higher than they were last fall, according to Scott Gerber, president of NorCal Commercial in San Rafael. The vacancy rate decreased to 3.2 percent from 4.2 percent in that time period.
Comparatively, Sonoma County rents registered no change from fall to spring for nearly 11,000 units NorCal surveyed, yet promotions jumped from 45 percent of vacant units in spring from 18 percent in fall. That helped push down the vacancy rate to 3.9 percent in spring from 5.0 percent.