Out Fox The $treet

The latest results from Silver Bay Realty Trust ( NYSE: SBY     ) continue to highlight a concerning problem with the structure of the company. It is the prime reason that investors aren't interested in the company's stock despite it trading considerably below the net asset value that grows on a quarterly basis. Silver Bay Realty was created to exploit an opportunity to invest in attractive housing prices and the expanding single-family rental market. Prior to the financial crisis, mom-and-pop investors with a few rental homes dominated the sector. Silver Bay, along with other recently established companies like American Residential ( NYSE: ARPI     ) and American Homes 4 Rent ( NYSE: AMH     ) , rushed into the market. While a lot of the rental properties were purchased during the ongoing housing crisis at values below replacement costs, the firms still have the important task of...

Investors still aren't convinced that the single-family rental house market provides an investable opportunity, and for good reason. The cost for a corporation to build up a portfolio of rental houses, renovate them, and lease the properties continues to be expensive. Missed by the focus on cash flows, Silver Bay Realty Trust ( NYSE: SBY     ) continues to grow its net asset value (NAV) by seeing the valuation of its houses rebound. Fellow rental property owner American Homes 4 Rent ( NYSE: AMH     ) has seen similar stock weakness. Read the full article here . Disclosure: No positions mentioned. Please review the disclaimer page for more details. 

Numerous companies are attempting to take advantage of the previously weak housing prices and the surging demand for rental properties. So far, all of the models are unproven as the complexity of managing houses with individual characteristics at a corporate level faces many hurdles to reach an efficient scale. The traditional model has been to purchase distressed properties in housing markets hit by the financial crisis and turn the houses into rental properties. Altisource Residential ( NYSE: RESI ) purchases distressed mortgage loan portfolios with a strategy to work with borrowers to modify and refinance loans to either keep them in their homes or convert the unmodified loans into renovated rental properties. Read the full article here . Disclosure: No positions mentioned. Please review the disclaimer page for more details. 

After a lot of hype about the single-family rental market, the Silver Bay Realty Trust ( SBY ) IPO turned into a major bust. The REIT went public back in December at $18.50 and quickly shot up to over $22, but any investors buying that hype have felt nothing but pain in 2013. In fact, the stock now trades below NAV near all-time lows around $15.50. Could it finally be time to buy the REIT? Silver Bay focuses on acquiring, leasing, and maintaining a portfolio of single-family homes in select attractive markets in the U.S. It plans to operate under a REIT where substantially all of future income is returned to shareholders. For investors that follow Stone Fox Capital, a big warning was issued when the REIT started trading due to the expected weak financials and lack of an initial dividend. In the early days, investors were confusing bargain housing prices with operating profits Disclosure: No positions mentioned. Please review the disclaimer page for more details....

Next week, Two Harbors Investment Corp ( TWO ) is expected to distribute its remaining shares of Silver Bay Realty Trust ( SBY ) to shareholders via a special dividend. Two Harbors holds 17,824,647 shares or around 45% of the outstanding shares of Silver Bay Realty. While this move was expected after the IPO back in December, the doubling of the public float is the next step making Silver Bay Realty an investable REIT. The company plans to acquire, renovate, lease, and maintain a portfolio of single-family homes in select attractive markets in the U.S. It plans to operate under a REIT where substantially all of future income is returned to shareholders. While Silver Bay still sees favorable trends for purchasing single-family rental houses, some news suggests that the onslaught of private equity money in major markets might be placing pressure on rental rates. As the company moves to invest and stabilize the purchased homes, the abundance of competition to an unprov...

PRO As mentioned in the original analysis (see Two Harbors Provides Unique Residential REIT Opportunity To Pass On For Now ) on the formation of the spin-off of Silver Bay Realty Trust ( SBY ) from Two Harbors Investment Corp ( TWO ) the process would initially be ugly. The combination of pulling in housing assets from two entities and being the first public company to attempt the owning and renting of single-family houses made the stock impossible to value. On top of that, the majority of the owned assets were acquired in 2012 leaving limited data on the stabilization process and ability to lease the houses. The company plans to acquire, renovate, lease, and maintain a portfolio of... Read the full article on Seeking Alpha. (only available to non-PRO readers for 30 days) Disclosure: No positions mentioned. Please review the disclaimer page for more details.