Silver Bay, which is a real estate investment trust (REIT), plans to pull off its IPO this week. The lead underwriter is Credit Suisse (NYSE:CS) and the proposed ticker is SBY. The company plans to issue 13.3 million shares at a price range of $18 to $20.
Silver Bay’s financial structure is a bit convoluted. The company plans to purchase the portfolio of single-family homes from Two Harbors Investment (NYSE:TWO) and Provident Real Estate Advisors (the deal will be in stock). The properties — of which there are over 3,100 — have come from aggressive investments through short sales, foreclosures, online auctions and bulk purchases. The homes are concentrated in hard-hit areas like Arizona, California, Florida, Georgia, Nevada, North Carolina and Texas.
For the most part, the business model is to charge rents. They are still fairly minimal, though, coming to $8.4 million during the first nine months of 2012. The net loss was $16.5 million.
But Silver Bay does have a top-notch management team. The firm’s CEO, David Miller, was the Chief Investment Officer of the Troubled Asset Relief Program (TARP) and also an executive at Goldman Sachs’ (NYSE:GS) Special Situations Investing Group. At Silver Bay, he will also have the support of private equity firm Pine River, which manages more than $10 billion in assets.
It seems likely that Silver Bay will get lots of interest from IPO investors. After all, homebuilder companies like KB Home (NYSE:KBH), Ryland Group (NYSE:RYL) and Hovnanian Enterprises (NYSE:HOV) have seen returns of over 100% for 2012.
There are also other operators similar to Silver Bay that are backed by private equity firms like the Blackstone Group (NYSE:BX) and KKR (NYSE:KKR). So, if there is a strong reception for the IPO, expect these other firms to attempt offerings in 2013.
Tom Taulli runs the InvestorPlace blog IPO Playbook, a site dedicated to the hottest news and rumors about initial public offerings. He is also the author of “How to Create the Next Facebook” and “High-Profit IPO Strategies: Finding Breakout IPOs for Investors and Traders.” Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.
A long-time follower of the IPO scene, back in 1999 Tom started one of the first sites in the space called WebIPO. It was a place where investors got research as well as access to deals for the dot-com boom. Tom also wrote the top-selling book, Investing in IPOs. In it, he covers all the aspects of analyzing an IPO, such as reading the prospectus, detecting the risk factors and understanding some of the arcane regulations. But don’t worry — if that process is too intimidating for you, thankfully Tom will do the legwork for you right here in the IPO Playbook blog.
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