Home Rental Operator Hits IPO Market

The REIT is backed by a major private equity player

   

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.

generic calendar page 630 200x200 Home Rental Operator Hits IPO Market
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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.


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