New MN Firm Plans IPO, Will Buy And Resell Homes

Recently-formed Silver Bay Realty Trust Corporation, which will buy distressed properties for rental and resale, is hoping to raise between $238 million and $265 million through an initial public offering.

Newly-formed real estate investment company Silver Bay Realty Trust Corporation plans to go public and hopes to raise between $238 million and $265 million through an initial public offering (IPO), according to a Wednesday filing with the U.S. Securities and Exchange Commission (SEC).
 
Minnetonka-based Two Harbors Investment Corporation, which primarily invests in mortgage-backed securities, announced in September that it was forming Silver Bay as a real estate investment trust (REIT)—which will invest exclusively in single-family residential properties. REITs are companies or trusts that invest in real estate-related assets, including properties and mortgages. The new company, which hasn’t yet begun operations, will also be based in Minnetonka and will buy undervalued homes, renovate them, and then either rent them out or sell them, Two Harbors said.
 
Silver Bay disclosed in Wednesday’s regulatory filing that it intends to sell 13.25 million shares of stock, at $18 to $20 each, through its IPO. It declined to comment on when it expects the IPO to launch as it’s now in a “quiet period” because of the planned launch. Quiet periods often occur either 40 or 90 days prior to an IPO during which the SEC bans companies from promotional publicity.
 
Silver Bay said in the filing that once the IPO is complete, it will acquire an initial portfolio of more than 3,100 single-family residential properties from Two Harbors and Provident Real Estate Advisors, LLC, a private capital management firm. In exchange, Two Harbors will receive approximately 47.4 percent of Silver Bay’s outstanding stock, and Provident will receive approximately 16.4 percent of its outstanding stock and approximately $5.1 million in cash.
 
“We believe Two Harbors shareholders are best served by the creation of a stand-alone, pure-play single-family residential property [investment firm],” Two Harbors President and CEO Thomas Siering said in a statement.
 
Silver Bay plans to list its common stock on the New York Stock Exchange under the symbol “SBY.” It will use the net proceeds of the offering to purchase additional single-family properties, to renovate those properties, and for working capital, it said in its filing.
 
The company added that a large number of homes are currently available at distressed prices, which provides it with the opportunity to “accumulate a large portfolio of properties at attractive prices and to lease them to qualified tenants for attractive yields.”
 
“We believe that recent turbulence in the U.S. housing and mortgage markets has created a unique opportunity to launch a large-scale endeavor in the single-family residential rental industry,” the company said.