The Minnetonka investment trust buys undervalued homes to be held for rental or resale.
Silver Bay Realty Trust Corp., a real estate investment trust that buys and manages single-family rental homes, has joined the growing number of firms nationwide that are buying undervalued single-family homes to be held for rental or resale. The company completed an initial public offering Friday that raised $245 million.
Silver Bay becomes the second Minnesota-based company to successfully complete an IPO in 2012. Maple Plain-based Proto Labs Inc., a quick-turn maker of custom-designed molded parts, completed a $70 million public offering Feb. 23. Silver Bay's is also the largest offering since Plymouth-based AGA Medical raised $199.4 million in a 2009 IPO.
The Minnetonka-based Silver Bay 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 stock, which trades on the New York Stock Exchange under the symbol SBY, dropped to $18.24 at the close of trading Friday.
Silver Bay went public as investment firms pour money into single-family properties, coinciding with an almost 30 percent drop in home prices from a 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 told Bloomberg News.
Led by Chief Executive David Miller, a former U.S. Treasury Department official and Goldman Sachs Group Inc. executive, Silver Bay was formed by Minnetonka-based Two Harbors Investment Corp. to buy, renovate, lease and manage single-family properties. It will be the largest public real estate investment trust concentrating on single-family homes.
Both Two Harbors and Silver Bay are externally managed by affiliates of Pine River Capital Management, a global asset management firm also based in Minnetonka. Pine River manages hedge funds, separate accounts and listed investment vehicles. According to regulatory filings, Two Harbors will be the largest owner of Silver Bay after the offering, controlling 47.7 percent of Silver Bay shares.
Silver Bay officials couldn't comment on the offering, citing the U.S. Securities and Exchange Commission's quiet period restrictions.
Credit Suisse Group AG, Bank of America Corp. and JPMorgan Chase & Co. led the offering.
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.
Bloomberg News contributed to this report.
Patrick Kennedy • 612-673-7926