Silver Bay to Buy 2,460 Single-Family Houses in Bulk Sale

Silver Bay Realty Trust Corp. agreed to buy about 2,460 single-family rental homes in one of the nascent industry’s largest bulk purchases.

The real estate investment trust agreed to pay $263 million for the properties, which are owned by The American Home and located mostly in the southeastern U.S., according to a statement Wednesday. The houses are more than 90 percent leased, with average rents of $960 a month, Silver Bay said.

The transaction will help Silver Bay expand as the rental-home industry shifts focus to management and seeks to benefit from operating efficiencies. Wall Street-backed landlords already are enjoying higher rents for single-family homes in markets hit hardest by the housing crash, where they first started buying en masse.

“This clearly accelerates our growth from day one and, more importantly, in the geographic areas where we have a strong presence, so we get really great benefits of scale,” David Miller, chief executive officer of Minnetonka, Minnesota-based Silver Bay, said in a telephone interview.

The industry is being bolstered by increased demand for rentals, while tight lending standards limit homebuying. Investors including Silver Bay, the first single-family landlord to go public, have positioned themselves to house some of the former owners of 5 million homes lost to foreclosure since the real estate crash.

Southeast Cities

The majority of the houses Silver Bay is purchasing are in Atlanta, one of the firm’s largest markets, with homes also located in Charlotte, North Carolina, and Tampa and Orlando in Florida.

“Our priorities are to integrate these homes, and that should be very smooth, and then to drive operational efficiencies,” Miller said.

Corporate landlords have extended their buying even as property prices rise and low-cost foreclosures become harder to find. The costs of managing scattered rental properties and higher home values are pushing out smaller companies, accelerating bulk sales and consolidation.

“We view the acquisition positively as it should bolster Silver Bay’s scale and operating capabilities,” Jade Rahmani, an analyst with Keefe Bruyette & Woods Inc. in New York, said in a note to investors today.

The houses in Wednesday’s deal represent the entire single-family rental business of Atlanta-based The American Home.

Growth Attempt

“We tried to grow fast in 2012 and we couldn’t get to scale,” said Aaron Edelheit, CEO of The American Home. Edelheit said he would have needed at least 10,000 houses to operate most economically and efficiently.

“I’m a believer in the industry,” he said in an interview. “I just couldn’t get to the size we needed to make it work.”

The industry began consolidating last year. American Homes 4 Rent, the largest publicly traded U.S. single-family landlord, announced plans to buy Beazer Pre-Owned Rental Homes Inc. in July for about $263 million in debt and equity. The acquisition added more than 1,300 homes to the company’s holdings.

Starwood Waypoint Residential Trust was formed after Waypoint Homes was sold to an affiliate of Barry Sternlicht’s Starwood Capital Group LLC. Waypoint Homes, founded in 2009, was one of the first large-scale single-family rental operators.

Loans Owned

Starwood Waypoint, with Sternlicht as its chairman, owns or manages about 14,500 rental houses with an investment of $2.2 billion, according to a presentation prepared this month for a conference in Las Vegas. The Oakland, California-based company also owned non-performing loans on 4,695 properties as of Sept. 30.

Silver Bay’s acquisition will increase the number of homes it owns to about 9,000.

“We’re excited about future opportunities for consolidation, and this transaction puts us in a really strong leadership position in the industry,” Miller said.

Silver Bay rose 1.2 percent to $15.93 on Wednesday. The shares have lost 2.5 percent in the past 12 months.

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