Posts Tagged ‘trends’

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Housing Has Bounced Back, but Capitol Hill Holds the Key to a Sustained Recovery

Friday, May 3rd, 2013

Houseforsale

The following article was reposted from Knowledge@Wharton

Published: April 30, 2013 in Knowledge@Wharton

The U.S. residential real estate industry is showing signs of a recovery. Demand for homes is growing stronger, driven by historically low interest rates and government subsidies. Job growth would, of course, accelerate that rebound. However, for a sustained recovery, housing supply must increase with both new construction and regulatory reforms that could bring to market homes that are “under water,” or those whose market prices are lower than their outstanding loans. Those were the main highlights from a panel discussion on real estate industry trends at the Wharton Economic Summit 2013, held in March in New York City.

A crucial element of the legislative reforms is to find ways to shield the federal government from home financing losses, the panelists said. The government ended up becoming the country’s biggest home financier after the 2008 housing collapse, when it bailed out secondary mortgage finance agencies Fannie Mae and Freddie Mac at an estimated taxpayer cost of up to $360 billion. Bipartisan political consensus holds the key to the reforms, panelists stressed.

The panel included Jeff Blau, CEO of Related Companies, a New York City-based real estate development firm; Jonathan D. Gray, global head of real estate at New York City-based financial advisory firm Blackstone; Jim Millstein, chairman and CEO of New York City-based financial advisory firm Millstein & Co.; and Richard A. Smith, chairman, CEO and president of Realogy Holdings Corp., a New Jersey-based real estate franchising and services company. Joseph Gyourko, Wharton professor of real estate, moderated the discussion.

Unexpected Recovery

“The metrics certainly indicate a much stronger interest in residential housing than it seemed in the previous six years,” said Smith. His firm Realogy operates in all 50 U.S. states and 102 countries and has a 26% market share of the U.S. housing market in sales volume. The recovery has gathered pace since the first quarter of 2012 and is “completely unexpected,” he added.

Consequently, home prices have strengthened and the overhang of unsold homes is bottoming out, but something “much more dramatic” is occurring, according to Smith. “We literally have markets where we have no supply, no inventory,” he said, citing New York City as an example of this phenomenon. He saw that across the country — a week’s supply of homes in San Francisco, no inventory to sell in Miami and an outpouring of open houses “in every market” where Realogy operates. “We feel very strongly that this is a strong recovery and it is sustainable.” In Phoenix, home prices are up 25% and they have risen in the “very high double-digit percentages” in Southern California, added Blackstone’s Gray.

Smith said the housing recovery is occurring despite impediments. He cited two issues relating to the 2010 Dodd–Frank Wall Street Reform and Consumer Protection Act. One is a decision on what constitutes a “qualified residential mortgage,” or QRM, because that would set the criteria for the down payment for home loans that underwriters require. A related second issue is whether a decision about QRM could encourage developers to resume homebuilding.

Increased housing inventory is critical for a sustained recovery, Smith argued. A resolution to the QRM issue could release some of the 10.8 million homes that are under water, he explained. “If we do not have the increase in inventory, then we will still have a recovery, [but] that will be anemic.”

Since 2009, underwriters have been wary of risk and are lending only to “the highest possible standard” of borrower creditworthiness, Smith noted. He called for a speedy resolution of the matter and hoped the new debt-to-income criteria would be less onerous than people fear they might be. He clarified that he did not expect underwriting standards to become more lax. He only wanted to get back to the “pre-bubble” days, when underwriters required credit scores about 100 basis points lower than current expectations of about 750, he said. (Credit rating agencies award scores from 300 to 850.)

Follow this link to read the rest of the article:  http://knowledge.wharton.upenn.edu/article.cfm?articleid=3243

 

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Posted in Economics, Government Policy, Industry News, Real Estate Trends, Residential Real Estate | No Comments »

Five Real Estate Tips from Warren Buffet

Friday, April 26th, 2013

home-for-sale

Spring is finally here and the housing market appears to be making a comeback.  With prices that are still historically low and mortgage rates in the 3% to 4% range, owning a home has never been more affordable.  That being said, there are still some basic principles that potential home buyers should keep in mind.  In the articel below Tara-Nicholle Nelson list 5 real estate buying tips offered by Warren Buffett.

Article by Tara-Nicholle Nelson of Daily Finance

Billionaire. Oracle of Omaha. The most successful investor in the world. All of these are used frequently — and accurately — to describe Warren Buffett, Chairman of Berkshire Hathaway, a holding company with upward of $130 million. Though his stock in trade is, well, stock and trade, over the years, Buffett has actually spun quite a bit of wisdom on real estate, and much of the advice he has given to investors in traded assets would also stand the average American homeowner in good stead.

Looking for some wisdom on the best approach to owning a home? Here’s a sampling of real estate tips from Buffett, right, the third richest human being on the planet.

1. The Basic Premise of Home Ownership — That Homes Increase In Value Over Time — Is Sound

Last spring, the Congressional Financial Crisis Inquiry Commission called Buffett in for an interview. He was asked to explain some of his bubble-era investment decisions, as well as to give his take on what in the heck had happened to the economy. In the process, Buffett expressed his belief that the housing bubble was inflated by an irrational, widespread belief that home prices would only ever go up — an extreme corruption of a generally valid premise. “It’s a totally sound premise that houses will become worth more over time because the dollar becomes worth less,” Buffett declared.

The sound premise, Buffett explained, got distorted and eventually caused the housing crisis when Americans started buying multiple homes to cash in on what they assumed was guaranteed appreciation, taking out “liar’s loans,” buying homes with no down payment and with unaffordable monthly payments — and lenders let them — all because of the assumption that prices could never go down.

Clearly, this assumption was wrong. As Buffett said in an earlier shareholder’s letter: “A pin lies in wait for every bubble.”

2. Buy Low (And Now Would Be a Good Time for That)

Buffett writes a letter to Berkshire Hathaway’s shareholders every year that is chock-full of his review of the company’s fortunes (literally) over the preceding year, his analysis of the stock market and the economy in general, and his smart, plain English tips on life and money and on life.

In last month’s annual shareholder letter, Buffett addressed the industry-leading 2010 performance of one of his company’s holdings, which sells and finances manufactured homes. During that discussion, the money maven declared that now would be a sensible time to buy a home, in light of record-high affordability: “Home ownership makes sense for most Americans, particularly at today’s lower prices and bargain interest rates.”

And Buffett didn’t stop there. He pointed out his own tenure as a homeowner as an example. “All things considered, the third-best investment I ever made was the purchase of my home, though I would have made far more money had I instead rented and used the purchase money to buy stocks,” he wrote. Then, to clarify for the readers who’d want to know what numbers one and two were, Buffett elaborated: “The two best investments were wedding rings.”

3. But Don’t Wait Too Long To Take Advantage of Low Prices

Buffett wrote a 2008 Op-Ed in the New York Times, explaining that buying while prices are low is stressful, because economic markets are volatile and impossible to predict in the short term, even for him. So, when conditions make an investment — in stocks or in a home — particularly advantageous, Buffett says not to hesitate too long. Painting a vivid verbal image to illustrate the likelihood that market prices “will move higher, perhaps substantially so, well before either sentiment or the economy turns up,” Buffett warned: “if you wait for the robins, Spring will be over.”

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Posted in Economics, Industry News, Real Estate Trends, Residential Real Estate, Twin Cities Real Estate, Uncategorized | No Comments »

AIA: Architecture Billings Index increases, Strongest Growth since 2007

Wednesday, April 24th, 2013

In another sign of improvement in commercial real estate the Calculated Risk blog in a recent posting notes a continuing increase in the AIA Architecture Billings Index.  When architects get busier that usually indicates an increase in new construction is not far behind.

Arch. BillingsNote: This index is a leading indicator primarily for new Commercial Real Estate (CRE) investment.

From AIA: Architecture Billings Index Continues to Improve at a Healthy Pace

With increasing demand for design services, the Architecture Billings Index (ABI) is continuing to strengthen. As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lag time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the February ABI score was 54.9, up slightly from a mark of 54.2 in January. This score reflects a strong increase in demand for design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 64.8, higher than the reading of 63.2 the previous month – and its highest mark since January 2007.

“Conditions have been strengthening in all regions and construction sectors for the last several months,” said AIA Chief Economist, Kermit Baker, PhD, Hon. AIA. “Still, we also continue to hear a mix of business conditions in the marketplace as this hesitant recovery continues to unfold.”

• Regional averages: Northeast (56.7), Midwest (54.7), West (54.7), South (52.7)

• Sector index breakdown: multi-family residential (60.9), mixed practice (56.9), commercial / industrial (53.3), institutional (50.7)
emphasis added

This graph shows the Architecture Billings Index since 1996. The index was at 54.9 in February, up from 54.2 in January. Anything above 50 indicates expansion in demand for architects’ services.

Every building sector is now expanding and new project inquiries are strongly positive (highest since January 2007). Note: This includes commercial and industrial facilities like hotels and office buildings, multi-family residential, as well as schools, hospitals and other institutions.

According to the AIA, there is an “approximate nine to twelve month lag time between architecture billings and construction spending” on non-residential construction.  This index has been positive for seven consecutive months and suggests some increase in CRE investment in the second half of 2013.

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Posted in Commercial Real Estate, Development, Economics, Investment Real Estate, Multifamily, Office Real Estate, Real Estate Trends, Retail Real Estate | No Comments »

The “A” Lot Shortage and the Buying Frenzy Intensify: What’s a Builder to Do?

Sunday, April 21st, 2013

The historically low inventories of homes for sale is creating new opportunities for home builders. The number of housing starts has continued to increase when compared to the last several years. While the number of housing starts is still considerably below the levels seen in the early to mid 2000′s, the increase in activity is creating an acute shortage of build-able lots in good locations. This shortage is putting an upward pressure on the price of quality lots. Prices in some areas are nearing pre-crash levels. The article below by Brad Hunter illustrates what is happening in other markets around the country. Home builders in the Twin Cities are saying they are seeing the same trend in our market as well.

house construction

Posted in National Housing Market   Written by Brad Hunter

As the lot feeding frenzy builds, more and more builders are scratching their heads at the prices they are being asked to pay for homesites.  Builders have a strong motivation to increase their community counts, but they are having to pay near-peak prices for lots in order to do so.  Decisions made by builders in the next six to twelve months will be absolutely critical to their ongoing financial health.

Last fall, we conducted a special nationwide study of all the public homebuilders’ lot positions, and we found that most of the public homebuilders had seen an erosion of their Vacant Developed Lot count (VDL).  In that special study, we looked at the VDL’s that were associated with the builders, whether owned or optioned, for all of their communities within our footprint.  We found that most builders saw a reduction in their lot inventory, but many of them started going longer on lots at that time.

We discovered the following changes in lot count, year over year:

Meritage’s lot inventory was down 22.4% from mid-2011 through mid 2012.

Lennar was down 18.2%

Standard Pacific, known as a land-LONG builder, was only down 4.3%.

Toll was up.

MDC was down 21.7%.

Beazer was down 20.2%

As a group, the publics were down in lot supply by 15.9% year over year.

Since this time, many builders who found a need to be LONGer on land have made significant progress in shoring up their lot positions.

The problem that has arisen is that they have had to buy at much higher prices than prevailed 12 months earlier.  In many markets, lot prices have jumped by 50% in a year.

The rebound in Phoenix home price and in lot prices is well known.  What is less well known is that NON-bubble markets like Houston and Dallas have also seen this kind of rebound.  In Texas, Fort Bend, Harris and Collin Counties have experienced a noticeable drop in available  supply of good lots relative to demand.  Here is a great case study:  In The Woodlands, in Houston, there has been a DOUBLING of lot prices in the past 12 months.  Lots in that community now run as high as $2,700 per front foot.

Even Atlanta, yes, badly over-developed and much-maligned ATLANTA, has seen a 30% increase in lot prices in the most desired neighborhoods.  That reflects the fact that the only lot transactions that are happening are in the “A” locations like South Forsyth.  We forecast that in another 18 months, there will be lot SHORTAGES in that submarket.  Many builders are jumping into Atlanta now, precisely because there are still some affordable lots there.

Lot prices in Naples/Ft. Myers have gone up 50%, and raw land values have doubled (and in some submarkets TRIPLED).  Of course, these percentage changes are based on low starting numbers, but the point remains that it costs a lot more to stay in the business in 2013 than it did in 2012.

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Fewer Retailers Kicking the Can Down the Road

Thursday, March 21st, 2013

Few real estate sectors are as uncertain as retail these days. Retailers hit hard by the economic downturn are simultaneously dealing with rapid shifts in consumer shopping trends due to technological change. Many companies have closed unprofitable stores, but strategic uncertainty remains with regards to marginal stores that could become unprofitable in the near future. This uncertainty has resulted in an explosion in the number of short term lease renewals in recent years.

Fewer Retailers Are Kicking the Can (Source: CoStar)

Fewer Retailers Are Kicking the Can, But Uncertainty Remains (Source: CoStar)

Analysis by CoStar shows that the percentage of retail leases renewed for terms of 1 year or less skyrocketed from less than 3% to 20% between 2006 and 2010.  Renewals for terms of 2 to 5 years (not pictured) fell from a whopping 80% of all retail lease renewals in 2006 to just 50% in 2010. These trends show an increasing focus on avoiding long term commitments as retailers seek the flexibility to be able to right-size their real estate footprint should sales decline. Even long term renewals were often not as long as they once where; renewals for 10 years or more fell below 5%, while there was a slight increase in renewals for periods of 5 to 10 years.

The good news for retail real estate is that in the past year these trends have started to reverse. Renewals for terms of 1 year or less fell to 16% of total renewals, well down from the peak of 20%. Renewals for 2-5, 5-10, and 10+ years have all increased since the first quarter of 2012. However, uncertainty remains and more rounds of store closings are on the horizon for major retailers. While there are signs of recovery, it seems unlikely that retail real estate will regain its pre-2007 foothold in the near future.

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Here are the “Missing” Construction Jobs

Wednesday, February 13th, 2013

I recently found an interesting article about construction jobs and the recovering housing market written by Trulia chief economist Jed Kolko, check it out below:

Construction jobs are a big part of how housing recovery lifts the broader economy. But the construction rebound, so far, appears to be jobless. “Residential construction” jobs, as reported by BLS, were up just 1% in December 2012 from their lowest level since the housing bubble burst – even though new home starts in December 2012 were twice as high as their low point in 2009. Overlaying residential construction employment (monthly, in thousands, left axis) and construction starts (monthly, in thousands, right axis) data suggests a jobless housing recovery, with jobs struggling to turn around even as starts climbed sharply in 2012:

Who is building all these new homes? If starts are now twice their lowest level, why aren’t residential building jobs also twice their lowest level, instead of up just 1%? The answer: this is the wrong way to look at construction jobs. It turns out that construction employment is approximately where it should be for the current level of construction activity. Here are three reasons why:

“Starts” aren’t the right measure of current construction activity. Units “under construction” is more relevant – especially now. The amount of construction activity this month depends not only on this month’s construction starts but also on construction starts in previous months. That’s because single-family construction takes 4-6 months between start and completion, and multi-unit-building construction takes 10-14 months, on average. Therefore, construction starts indicate what will happen to construction activity in the coming months – not necessarily where it is today. And, in this recovery, multi-unit buildings are an unusually high share of overall construction activity, so the typical new unit is under construction for longer, making starts an even-worse-than-usual proxy for current construction activity. Instead of starts, units “under construction” – also reported monthly by the Census – is the right measure of construction activity to compare with jobs. This changes the picture dramatically: while monthly starts in December 2012 were up 100% (that is, have doubled) since the bottom, monthly units under construction were up 32% from the bottom.

The “residential building” jobs category understates growth in residential construction jobs. The BLS “residential building” category covers general contractors and construction management firms but not subcontractors, which are covered under another category the BLS tracks, “residential specialty trade contractors.” Importantly, residential construction jobs have been shifting steadily from general contractors to specialty trade contractors throughout the boom, bust, and recovery, so the narrower “residential building construction” category understates recent growth in construction jobs. “Residential building” jobs in December 2012 were up just 1% from the bottom, while “residential specialty trade contractor” jobs were up 4%. The combined series is up 3% from the bottom. Of course, some construction workers might not be officially counted if they’re off the books, and others might work on both residential and non-residential projects and not fit neatly into one reporting category. Still, looking at both the “residential building” and “residential specialty trade contractors” gives a clearer picture than looking only at “residential building.”

Follow this link to read the entire article: http://www.calculatedriskblog.com/2013/01/kolko-here-are-missing-construction-jobs.html

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Posted in Development, Economics, Industry News, Real Estate Trends, Residential Real Estate | 1 Comment »

9 worst urban planning moves in Twin Cities history

Tuesday, January 22nd, 2013

block e wikipedia-thumb-250x187

This article came to my attention recently.  It was written by Marlys Harris and it appeared on December 18th, 2012 in MINNPOST.  I think it is an interesting look at what happened and what might have been.

Herb Tousley

 

 This coverage is made possible by grants from the Central Corridor Funders Collaborative and The McKnight Foundation. By Marlys Harris | 12/18/12

Since I began writing this column last spring, I envisioned two year-end pieces. One would itemize the worst things that planners, bureaucrats, politicians, developers and We the People have done to our Twin Cityscape; the second would list the best. My thought was that both might provide some lessons about what improves the urban environment and what doesn’t — though, such is life that sometimes even the best ideas turn into misbegotten messes — and vice-versa.

Over the last year, I’ve been asking practically every person I interview for his or her suggestions. And, I have added a few I’ve collected since moving back here two years ago. Herewith, the baddies, in no particular order:

No. 1: The destruction of the Gateway District.

Located near the Mississippi, this area stretches south to the library and from Hennepin to Third Avenue S. Once upon a time, it was a park with an elaborate pavilion that welcomed those arriving at the nearby train station. During the Depression, however, it became Minneapolis’ version of the Bowery, complete with flophouses, taprooms and sleazy hotels.

 By the 1950s, the city decided it had to do something. The buildings were dilapidated and supposedly impossible to renovate. So Minneapolis won a grant from the Feds and over the next six or seven years razed 200 buildings and leveled 22 blocks, leaving a third of downtown vacant. Among the casualties: the Metropolitan Building, a then 80-year-old landmark whose central atrium was adorned with incredible iron grillwork. Buildings have gone up in the area, but it has never become vital. Much of the acreage is still devoted to surface parking lots.

“It’s now a dead area between two neighborhoods,” says Sam Newberg, founder of Joe Urban, Inc., a market research company.

The takeaway: I see two lessons here. First, you don’t knock down buildings until you have something compelling to put in their place. Second, large-scale projects are blunt instruments that destroy the good along with the bad. Among the flophouses and taprooms probably existed salvageable small buildings and rooming houses that these days, with an infusion of dough, could be turned into a walkable neighborhood of interesting stores that would give us some relief from chains. When it comes to urban renewal, it’s probably always better to go small and see what happens.

View of the State Capitol in St. Paul, 1974Minnesota Historical Society/Eugene Debs Becker

A view of the State Capitol from I-94, circa 1974.

No. 2: The slicing of downtown St. Paul in two.

The U.S. interstate highway system is considered one of the marvels of the modern age. On its broad lanes drivers can speed without interruption from city to city, almost as though they were in a tunnel. But those same concrete byways can and have blighted cities. Take St. Paul, which has a beautifully compact and navigable downtown. How much better would it be if I94 did not cut off the Capitol and its campus from the rest of the city?

“Separating downtown from the Capitol was obviously a terrible decision,” said Mayor Chris Coleman at a meeting of the Urban Land Institute a couple of months ago. Those lousy decisions, he added, can be with us for 100 years.

The takeaway: Freeways should transport people to cities, not churn through their guts. Highway engineers: Figure out a way to go around downtown, not through.

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St. Thomas real estate analysis: 2012 will be seen as the year the housing market finally hit bottom and began its recovery

Friday, January 11th, 2013

mortgages

 December’s median prices continue to show gains over last year; momentum is expected to continue into 2013.

With data from December now in, history will record that 2012 was the year the Twin Cities housing market finally bottomed out and began to recover.

 The market’s low point came in February 2012. Since then, the median sale prices recorded in 2012 have exceeded the 2011 levels every month, according to the Residential Real Estate Price Report Index, a monthly analysis of the 13-county metro area prepared by the Shenehon Center for Real Estate at the University of St. Thomas’ Opus College of Business.

 Each month the center tracks nine housing-market data elements, including the median price for three types of sales: nondistressed or traditional-type sales, foreclosures, and short sales (when a home is sold for less than the outstanding mortgage balance).

 The overall median sale price for all categories of homes in the Twin Cities peaked at $238,000 more than six years ago, in June 2006. That overall median price hit its low point in February 2012 at $138,250.

 Herb Tousley, director of real estate programs at the university, said housing data from December “continues to exhibit many of the positive market trends that have been observed for much of 2012.”

 The median sale price in December 2012 for all categories of homes was $168,404, a gain of 16.2 percent over December 2011 when it was $145,000.

 The median price of a nondistressed home in the Twin Cities peaked in June 2006 at $239,900 and reached its low point in February 2012 at $180,000. Since last February the median price for these traditional home sales increased steadily until peaking in August 2012 at $219,700.  The median price then began its seasonal, fourth-quarter decline, ending at $208,000 in December 2012. That was a 9.2 percent increase over December 2011.

 More details about the market can be found on the Shenehon Center’s website: http://www.stthomas.edu/business/centers/shenehon/research/default.html.

(more…)

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Why the Housing Market Is Poised to Enter a ‘Virtuous Cycle’

Thursday, September 27th, 2012

As the good news for the housing market continues to accumulate more people are asking the question “Is this recovery for real?” As was noted in the most recent University of St Thomas Residential Real Estate Index Housing Report for August, median home prices in the Minneapolis / St. Paul market are not only continuing to increase, but they also continue to remain higher than last year’s median prices. The percentage of distressed sales has moderated and the average time it take to sell a house is decreasing. 

(Link to the report http://www.stthomas.edu/business/centers/shenehon/research/default.html/)

These trends are being reflected in most of the major markets around the country. What makes this recovery period different from some of the false starts we have had in the past? What are the factors that are driving these trends?  The article below was recently published in Knowledge@Wharton. It provides an interesting analysis of the state of the housing market today.

Published: September 26, 2012 in Knowledge@Wharton

By the less-demanding standards of the past few years, the latest housing figures, like many from recent months, look pretty good.

On September 25, the Standard & Poor’s Case-Shiller Home Price Index showed a 1.2% price gain in July compared to a year earlier. Prices have risen for three consecutive months. The National Association of Realtors (NAR) reported on September 26 that sales of existing homes had risen by 9.3% in August, compared to a year earlier, and that the median price of existing homes sold was up 9.5% over the past year. (NAR and Case-Shiller use different methodologies.)

For the 12 months ended in July, sales of newly constructed homes were up about 25%, though the total was still only about half of the 700,000 units considered healthy. Experts are especially impressed that prices of the least-expensive third of homes lead the gains, going up a full 1% between June and July. Those homes had received the worst drubbing in the recent housing market collapse.

Is this the start of the long-awaited and elusive housing recovery — one that would bring a stronger economy overall? Or is the market just taunting us as it bumps along the bottom, perhaps only to plunge again?

“It’s for real. This is absolutely for real,” says Susan Wachter, professor of real estate at Wharton. The market, she says, is poised to enter a “virtuous cycle” where positive trends will spur more positive trends. “This market recovery will continue,” she says, predicting that rising prices will prod potential buyers to buy before prices go up more. That demand will nudge prices up, drawing in even more buyers.

“I have been optimistic about this market for six months or a year,” she adds, noting that the latest data supports an analysis of the market she offered in a recent paper co-authored with Mark Zandi, chief economist and co-founder of Moody’s Economy.com, and Moody’s analysts Celia Chen and Cris DeRitis. The paper, “Assessing the Housing Threat and the Appropriate Response,” was prepared for a recent Pew Charitable Trusts conference titled, “Strategies for Revitalizing the Housing Sector.”

A Sense That Things Are Getting Better

Though the average home is still worth 30% less than at the peak of the bubble in 2006, from January through July, prices rose 5.9%, the strongest performance in seven years.

Read the rest of the article:  http://knowledge.wharton.upenn.edu/article.cfm?articleid=3085

 

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Silver Bay Realty Files IPO To Be First Single-Family Rental REIT

Friday, September 21st, 2012
A recent report from CoStar written by Mark Heschmeyer indicates that a local company may be the first publicly REIT that invests in single family homes.
 
September 19, 2012 

Silver Bay Realty Trust Corp. is aiming to be the first firm out of the IPO gate to become a publicly traded REIT focused on the acquisition, renovation, leasing and management of single-family rental properties for rental income and long-term capital appreciation.

The proposed REIT won’t be alone in chasing deals in the distressed housing market as several private investors have also been raising money for such ventures.

The Minnetonka, MN-based Silver Bay filed a proposed initial public offering of its common stock looking to raise up to $287.5 million.

Two Harbors Investment Corp., a New York-based publicly traded mortgage REIT, will contribute its portfolio of some 700 single-family rental properties valued at approximately $75 million to help form the venture.

The contribution is intended to be part of a larger transaction in which Silver Bay expects to acquire two other large portfolios containing about 800 homes from Provident Real Estate Advisors LLC while concurrently offering its common stock.

Silver Bay will be externally managed by PRCM Real Estate Advisers LLC, a joint venture between a Pine River Capital Management affiliate and Provident Real Estate, a private capital management firm. An affiliate of Pine River also serves as the external manager of Two Harbors Investment.

In its IPO filing, Silver Bay called the large-scale, single-family residential rental industry a relatively new market in the U.S.

“Until recently, this industry has been fragmented in both its ownership and operations, consisting primarily of private and individual investors in local markets and managed by local property managers,” Silver Bay stated. As a result, the firm believes a compelling opportunity exists to accumulate a large portfolio of properties and lease them to tenants for attractive yields.

Read the rest of the article:  http://www.costar.com/News/Article/Silver-Bay-Realty-Files-IPO-To-Be-First-Single-Family-Rental-REIT/141622?ref=100&iid=298&cid=FC4C5ECBFF14BCA42CFC3FCF0353A739

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Posted in Industry News, Investment Real Estate, Property Management, Real Estate Trends, Residential Real Estate, Uncategorized | No Comments »

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