Silver Bay Raises $245 Million in Single-Family REIT IPO

Silver Bay Realty Trust Corp. (SBY), a real estate company that acquires and manages single-family rental homes, raised $245 million in its initial public offering after pricing the shares near the low end of the marketed range.

The Minnetonka, Minnesota-based company and shareholders sold 13.25 million shares for $18.50 each, according to data compiled by Bloomberg, after offering them for $18 to $20. The shares will start trading today, listed on the New York Stock Exchange under the symbol SBY.

Silver Bay is going public at a time when investment firms are pouring money into single-family properties as home prices have fallen almost 30 percent from their July 2006 peak. At the same time, there is growing rental demand from homeowners who lost property to foreclosure and are unable to buy, said Ray Huang, an analyst with Green Street Advisors Inc.

“Having the ability to go public and access the public markets, including the debt market down the road, will help companies grow,” Huang said in a telephone interview from his office in Newport Beach, California.

Led by Chief Executive Officer David Miller, a former U.S. Treasury Department official and Goldman Sachs Group Inc. executive, Silver Bay was formed by Two Harbors Investment Corp. (TWO) to buy, renovate, lease and manage single-family properties. It will be the largest public real estate investment trust concentrating on single-family homes.

Silver Bay will use the proceeds from the IPO to acquire more than 3,100 single-family properties, according to regulatory filings. Silver Bay’s portfolio consists of 2,540 single-family properties in Arizona, California, Florida, Georgia, Nevada, North Carolina and Texas.

Tax Benefits

Private-equity firms such as Blackstone Group LP and Thomas Barrack’s Colony Capital LLC are also making bets on single- family homes, and have raised about $8 billion to buy rentals, Huang said.

REITs are the most efficient model for taking single-family rental investments public because of their tax benefits and because the properties are similar to multifamily rentals, which already have a track record as REITs, Todd Eagle, a managing director at Goldman Sachs, said at a conference organized by Information Management Network last month in Scottsdale, Arizona.

REITs, whose primary income streams are from real estate, don’t pay federal income taxes. In exchange, they’re required by the Internal Revenue Service to distribute at least 90 percent of their taxable earnings to shareholders in the form of dividends.

To qualify as a REIT, a company must invest at least 75 percent of its assets in real estate and obtain 75 percent of its gross income from rents or interest on mortgages from financing property, according to the National Association of Real Estate Investment Trusts.

Credit Suisse Group AG, Bank of America Corp. and JPMorgan Chase & Co. led the offering.

To contact the reporter on this story: John Gittelsohn in Los Angeles at johngitt@bloomberg.net

To contact the editor responsible for this story: Kara Wetzel at kwetzel@bloomberg.net

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