Silver Bay Realty Trust, a new corporation formed to acquire, renovate and lease single-family homes, filed plans to raise $287.5 million through an initial public offering this week.
The bold step affirms the REIT's plan to capitalize on the investment-in-rentals trend sweeping the nation in the wake of the credit crunch. Plans for the REIT were announced earlier this year.
The Minnetonka, Minn.-based REIT will give Two Harbors Investment Corp. (TWO) shares in its IPO for control of Two Harbors' real estate portfolio, according to IPO analytics source Renaissance Capital.
Credit Suisse is serving as sole bookrunner on the deal.
Tapping into Two Harbors property portfolio gives Silver Bay potential access to rentals in the key markets of Phoenix, Tampa, Atlanta, Las Vegas, Tucson, Orlando and Northern and Southern California.
Two Harbors acquired 700 single-family homes in those cities for $71.8 million, according to Silver Bay's SEC filing. In July and August alone, Two Harbors acquired more than 300 properties.
The company will be externally managed by PRCM Real Estate Advisors LLC, according to securities filings. PRCM is described in SEC filings as a joint venture between Pine River Domestic Management LP and Provident Real Estate Advisors LLC. In addition, a Pine River affiliate currently serves as the external manager for Two Harbors Investment Corp.
Silver Bay intends to be taxed as a REIT, which means shareholders will be restricted from owning more than a 9.8% stake in the REIT either by value or number of total shares.
The new REIT is just one of the business entities sensing opportunity in today's anemic real estate recovery where a slew of sitting properties are ripe for conversions into rentals that can produce yield.
"While single-family properties may not always be as inexpensive to acquire as they currently are, we believe our strategy of building our portfolio and revamping operational capabilities now will create a cash flow-generating asset base that will increase in value over time," Silver Bay said in its SEC filing.