After being largely vacant from commercial property sales at the height of the economic recession, investors in North Bay multifamily complexes are moving back into the market.

[caption id="attachment_69317" align="alignleft" width="315"] Broll Investments purchased 35-unit condominium-style Cedarwood Apartments north of Santa Rosa for $4.1 million in August at a significant discount. (image credit: Cassidy Turley)[/caption]

After value-add buyers started buying back into San Francisco Bay Area multifamily properties at the bottom of market activity in 2009, institutional investors such as real estate investment trusts, pension funds and insurance companies started dipping their toes back into investments in 2010 for the best 100-plus-unit properties.

"People have realized it's safe to invest again," said Scott Gerber of Cassidy Turley. "Clouds are parting, the economy is starting stabilize, and rents are starting to gain stability and improve."

[caption id="attachment_69318" align="alignright" width="162"] Scott Gerber[/caption]

North Bay complexes enjoyed a resurgence of sales starting early last year, according to local real estate experts. Now, syndicators or sponsors of real estate investment groups are stepping up their purchases of North Bay properties.

"We saw a lot of properties close escrow in the latter part of last yera, but there remains tremendous demand for apartment properties, particularly in Marin County, because of a lack of areas where you can build new properties," said Ron Giannini of Keegan & Coppin.

[caption id="attachment_69319" align="alignleft" width="180"] Ron Giannini[/caption]

That brokerage tracked 22 sales of Marin complexes larger than five units in 2012, totaling 421 units and $87.7 million in value. That's about the same number as the 21 Marin sales with 800 units in 2011, but the dollar volume was much higher $196.8 million.

Average price was $208,400 a unit last year, down from $246,000 in 2011. The average gross rent multiplier -- how the sale price compares to rental income -- was 11.3 and 11.7 for the past two years.

The low point in Marin was seven property sales with 319 units in 2009, totaling $44.4 million in value. Average price was $139,300 a unit and 10.8 times gross rents.

Sonoma County had 18 sales of 10-plus-unit properties, totaling 789 units and $93.6 million. Average price was $118,700 a unit and 8.9 times rents. That's up from eight to 10 sales a year, but

Syndicators or sponsors of real estate investments are becoming more active again, according to Mr. Gerber.

One active North Bay apartment investor group is managed by Fairfax-based Broll Investments, Inc. The group has a few primary investors and a pool of 10 to 30 others who participate on deals in the $5 million to $15 million range for properties that need work. Broll is scheduled this week to purchase its third North Bay property since August, a 34-unit complex in the Roseland community of southwest Santa Rosa that has had 50 longstanding maintenance work orders, according to Brandon Broll, managing member of the group's investments.

"Rents are stabilizing and starting to increase," he said. "My investors like hard assets, as opposed to being in the stock market, and decent yields."

Building on his experience with purchasing, renovating, managing and selling more than 3,400 units over the years, Mr. Broll looks to buy properties -- many of which in the North Bay are entering their fourth or fifth decades -- at $80,000 to $130,000 per unit, put in $10,000 to $20,000 a door in maintenance and upgrades and still be below the cost to build new market-rate units. The goal is to take advantage of currently low loan interest rates in the 3 percent to mid-4 percent range to have more than 5 percent cash-on-cash returns and long-term returns of 15 percent to 20 percent from rents and sale proceeds.

"I take a lot of renovation risk," Mr. Broll said, referring to correctly estimating the cost of renovations, such as a new roof, windows or appliances.

Broll investors purchased the 35-unit Cedarwood Apartments on College Avenue in August. The strategy to get the property back to positive cash flow involves evicting eight tenants for nonpayment and tracking down an illegal marijuana-growing operation in a garage that added $1,450 to $2,350 a month to the common-area electricity bills.

Rents on average rose 8.6 percent last year in Marin and 4.6 percent in Sonoma County, but improving prospects for the single-family home market showed signs of easing fourth-quarter demand for apartments, according to Novato-based multifamily market data firm RealFacts.

Yet, there is room for rents to increase in the North Bay and could go up another 5 percent to 8 percent, according to Mr. Gerber. He pointed to average rent of $1.60 a square foot in Santa Rosa, while the cost to build is well north of $2 a square foot.

"We won't see new apartment construction until rents go up another 20 percent and/or local governments get more reasonable on entitlement and permit costs," Mr. Gerber said.