Eagerness of commercial property investors to bet on North Bay multifamily real estate is seen in a number of recent deals.
Oak Coast Properties plans to finish in the next two months nearly $1 million in renovations to two Rohnert Park complexes acquired in June as part of nearly $200 million the Laguna Hills-based real estate investment company intends to invest in multifamily properties in the next 12 months.
Oak Coast, acting as RP Apts Investments, LLC, on June 28 acquired 100-unit Holly Manor at 400 Santa Alicia Dr. and 102-unit The Commons at 333 Enterprise Dr. for $22.9 million, or nearly $113,400 a unit. Since then, the company has been giving the properties a major exterior upgrade, and about another $1 million will go into upgrading the insides of the units as tenants move out in coming years.
[caption id="attachment_81007" align="alignleft" width="308"] The Commons[/caption]
The acquisition garnered local media attention in early July when 38 tenants receiving Section 8 housing assistance reported they received legal letters that their month-to-month leases were being terminated and had 90 days to move.
At that time, Matt Heslin, co-founder of Oak Coast, said 10 of those tenants had already negotiated new leases. About half the tenants in those complexes receive such assistance. Late last week, he said "a very high percentage" of existing tenants would be remaining.
Oak Coast is looking to acquire other North Bay properties because of Sonoma County's faster-than-most job growth, soon-to-open Rohnert Park casino with as many as 2,000 hires and a plan by Amy's Kitchen to hire around 800 for a expanded local food production, according to Mr. Heslin. Other target markets are western U.S. states plus Colorado and Texas.
"We think that’s a market we want to be in for the long haul," he said.
Holly Manor and The Commons are the model for what Oak Coast will be looking for in properties to acquire -- more than 200 units and in need of upgrades to become aesthetically and economically viable. Oak Coast's portfolio has 11 apartment communities and about 1 million square feet of retail space.
In one example of the hot multifamiliy market is the early August sale of the 56-unit Puerta Villa complex at 825 W. Ninth St. in west Santa Rosa for $6.325 million, or nearly $113,000 a unit. Two years ago, the property didn't sell because of its location in an economically challenged neighborhood and the required assumption of a loan with an interest rate of 5.5 percent, but this summer it received a handful of written offers, according to Brad Pennington, a Marcus & Millichap agent who represented seller Rockwell, LLC, led by Peninsula-based Acclaim Homes.
A Silicon Valley couple deployed funds from the sale of a home there to acquire the property in a tax-deferred exchange.
"The buyer was looking at this deal because it was 100 percent occupied and cash flow was better than other opportunities in the market," Mr. Pennington said.
A dozen offers came in for Marina Vista Apartments at 1095 Marina Dr. in Napa, a 42-unit complex that sold Aug. 15 for $5.8 million, on a capitalization rate of 6.8 percent, after just three weeks on the market, according to Vince Schwab, a Marcus & Millichap agent who represented seller Mike Zacopa. A Southern California syndicate beat out two other offers from that region as well as five from San Francisco and four from Napa and Sonoma counties.