Two Harbors Investment Corp. (TWO), a real estate investment trust that focuses on mortgage-backed securities, plans to form a new entity that would be a publicly traded REIT for single-family rental homes.
Silver Bay Realty Trust Corp., the new company, is seeking to raise as much as $287.5 million in a U.S. initial public offering, the company said yesterday in a regulatory filing. It didn’t disclose how many shares it will sell or at what price. The amount is a placeholder number used to calculate registration fees and may change.
“We believe Two Harbors shareholders would benefit from the creation of a stand-alone, pure-play, single-family residential property REIT,” Thomas Siering, the chief executive officer of Minnetonka, Minnesota-based Two Harbors, said in a statement. “The current investment opportunity for single- family rental properties remains attractive and the proposed transaction would add additional scale and diversification to our existing portfolio.”
Investors are pouring money into single-family homes, seeking to take advantage of rising demand for rentals and real estate prices that have fallen more than 30 percent from their July 2006 peak. Firms including Blackstone Group LP (BX), Colony Capital LLC and Oaktree Capital Group LLC (OAK) plan to spend about $8 billion buying foreclosed properties to rent, according to company statements and interviews.
Silver Bay plans to use proceeds from the IPO to buy and renovate single-family units and collect rental income or capitalize on long-term appreciation, according to the filing.
Opportunities for investors in the single-family rental market may not last long enough to sustain a REIT, according to Tom Shapiro, chairman of GTIS Partners, a New York-based investment fund that plans to spend $1 billion on single-family homes over the next five years.
“I am not convinced that single-family residential will become a new real estate asset class,” Shapiro said in an e- mail. “I believe when credit and jobs come back that Americans will go back to buying houses and the opportunity for investors to own and rent single-family homes will vanish.”
Two Harbors plans to contribute assets to Silver Bay in exchange for common shares in the REIT, according to the filing. The initial portfolio that Silver Bay will acquire from Two Harbors consisted of 2,250 single-family homes in Arizona, California, Florida, Georgia and Nevada as of Aug. 31, the filing shows.
Credit Suisse Group AG is managing the offering.
Silver Bay’s CEO will be David Miller, a managing director at Pine River Capital Management LP and Two Harbors since 2011, according to the filing. Miller is a former U.S. Treasury official who served as chief investment officer of the Troubled Asset Relief Program, the federal bailout program created in the aftermath of the September 2008 Lehman Brothers Holdings Inc. bankruptcy.
Two Harbors is externally managed by Pine River.
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