Silver Bay Realty Trust Corp. Reports Third Quarter 2015 Financial Results

Silver Bay Realty Trust Corp. (NYSE:SBY) (“the Company” or “Silver Bay”) today announced its financial results for the quarter ended September 30, 2015.

Highlights

• Total revenue of $30.6 million for the third quarter of 2015, an increase of 53% compared to the third quarter of 2014
• Net operating income of $16.5 million for the third quarter of 2015, an increase of 65% compared to the third quarter of 2014
• Core Funds from Operations of $0.17 per share, an increase of 113% compared to the third quarter of 2014
• Sustained aggregate occupancy of 95% on portfolio of 9,074 single-family properties
• Estimated net asset value per share of $21.87, a 9.5% increase compared to the third quarter of 2014
• Achieved rental increases of 5.5% on new move-ins and 3.7% on renewals

“We are pleased with our third quarter results which demonstrate the steady progress we have made in refining our operational platform,” said David N. Miller, Silver Bay’s President and Chief Executive Officer. “We drove solid rental growth while maintaining high occupancy levels and our NAV per share continued to benefit from the strong housing price appreciation in our core markets. We will continue to position the Company to drive value creation for our stockholders.”

Financial Results

Silver Bay reported total revenue of $30.6 million for the third quarter of 2015, a 53% increase compared to total revenue of $20.0 million for the third quarter of 2014. This increase was due primarily to the increase in the number of leased properties generating rental income, and to a lesser extent, rental growth. The Company owned 8,610 leased properties as of September 30, 2015 as compared to 5,566 leased properties as of September 30, 2014. Net loss attributable to common stockholders for the third quarter of 2015 was $1.4 million, or $(0.04) per common share, compared to net loss attributable to common stockholders for the third quarter of 2014 of $44.9 million, or $(1.17) per common share. Included in net loss for the third quarter of 2014 is a one-time cost to internalize Silver Bay’s former advisory manager of $39.2 million, primarily related to the issuance of common units of Silver Bay’s operating partnership and to a lesser extent, certain transaction costs and assumption of certain liabilities.

The Company reported net operating income (“NOI”) of $16.5 million for the third quarter of 2015, a 65% increase compared to NOI of $10.0 million for the third quarter of 2014. Core Funds From Operations (“Core FFO”) for the third quarter of 2015 was $6.4 million, or $0.17 per share, a 113% increase on a per share basis compared to Core FFO for the third quarter of 2014 of $3.0 million, or $0.08 per share(1). NOI and Core FFO are non-GAAP(2) financial measures. Reconciliations of net loss to NOI and Core FFO are included in the financial and operating tables accompanying this press release.

(1) Per share means per weighted average common share and common units of the operating partnership.

(2) GAAP is defined in accordance with accounting principles generally accepted in the United States.

Portfolio Summary and Operating Metrics

Silver Bay owned a portfolio of 9,074 single-family properties as of September 30, 2015. The following table provides a summary of Silver Bay’s portfolio and operating metrics for the second and third quarters of 2015:

Estimated Net Asset Value

Silver Bay reported an estimated net asset value (“Estimated NAV”) per share of $21.87, based on an estimated fair market value (“Estimated Portfolio Value”) of the Company’s properties of $1.42 billion as of September 30, 2015. The Company’s book value per share was $14.80 as of September 30, 2015. The difference between Estimated NAV and book value per share is attributable to multiple factors, including aggregate home price appreciation in Silver Bay markets, purchasing at discounts to market prices, value created by the Company’s renovations in excess of the cost of the renovations, and the exclusion of accumulated depreciation in the calculation of Estimated Portfolio Value.

The Estimated Portfolio Value of the Company’s properties is calculated by Silver Bay’s proprietary automated valuation model (“AVM”) which estimates the value of the Company’s properties on an individual basis based on comparable sales in the residential real estate market, without reference to the intended use for the properties. Estimated NAV does not ascribe any value to in-place leases or to the portfolio as a whole (as compared to the sum of the values of the individual properties), nor does it consider cash flow or other yield metrics. Estimated NAV and Estimated Portfolio Value are non-GAAP financial measures. A reconciliation of book value to Estimated NAV is included in the financial and operating tables accompanying this press release.

Operating Metrics

Silver Bay reported an occupancy rate of 95% on both the stabilized and aggregate portfolio of properties as of September 30, 2015, which remained consistent with the prior quarter. A summary of Silver Bay’s occupancy rates is included in the financial and operating tables accompanying this press release.

Silver Bay reported an average monthly rent for the aggregate portfolio of $1,159 for the third quarter of 2015, compared to an average monthly rent of $1,183 for the third quarter of 2014. The change in average monthly rent is primarily due to portfolio mix related to The American Home portfolio acquisition (“the Portfolio”), which was slightly offset by rental growth.

Disposition Activity

During the third quarter 2015 the Company sold its entire Houston portfolio, consisting of 122 properties, along with certain other properties for an aggregate sales price of $18.4 million resulting in an aggregate net gain of $2.1 million, which has been classified as net gain on disposition of real estate in the condensed consolidated statements of operations and comprehensive loss. Gross proceeds for the Houston portfolio were 99% of its Estimated Portfolio Value as of the date of the purchase agreement, and the Company received net proceeds of 96% of the Estimated Portfolio Value after factoring in transaction costs associated with the sale. In connection with these asset sales, certain debt repayments were made.

Dividend Declaration

The Company’s Board of Directors declared a quarterly dividend of $0.12 per share of common stock for the quarter ended September 30, 2015. The dividend was paid October 16, 2015 to common stockholders of record at the close of business on October 6, 2015.

Liquidity and Capital Resources

The Company's liquidity and capital resources as of September 30, 2015 consisted of cash and cash equivalents of $41.0 million, escrow deposits of $23.0 million and $55.7 million borrowing capacity on its revolving credit facility.

Conference Call

Silver Bay will host a conference call on November 5, 2015 at 10:00 a.m. EST to discuss third quarter 2015 financial results and business highlights. To participate in the teleconference, please call toll-free (888) 338-9509 (or (412) 902-4187 for international callers and (855) 669-9657 for Canadian callers) approximately 10 minutes prior to the above start time. You may also listen to the teleconference live via the internet on the Company's website at www.silverbayrealtytrustcorp.com in the Investor Relations section under the Events Calendar link. For those unable to attend, a telephone playback will be available beginning at 1:00 p.m. EST on November 5, 2015 through 9:00 a.m. EST on December 5, 2015. The playback can be accessed by calling (877) 344-7529 (or (412) 317-0088 for international callers and (855) 669-9658 for Canadian callers) and providing Conference Number 10073724. The call will also be archived on the Company's website in the Investor Relations section under the Events Calendar link.

Silver Bay Realty Trust Corp.

Silver Bay Realty Trust Corp. is an internally managed Maryland corporation focused on the acquisition, renovation, leasing and management of single-family properties for rental income and long-term capital appreciation. Silver Bay owns single-family properties in Arizona, California, Florida, Georgia, Nevada, North Carolina, Ohio, South Carolina and Texas. Silver Bay has elected to be taxed as a Real Estate Investment Trust (“REIT”) for U.S. federal tax purposes.

Forward-Looking Statements

This press release includes “forward-looking statements” within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Actual results may differ from expectations, estimates and projections and, consequently, readers should not rely on these forward-looking statements as predictions of future events. Words such as “expect,” “target,” “assume,” “estimate,” “project,” “budget,” “forecast,” “anticipate,” “intend,” “plan,” “may,” “will,” “could,” “should,” “believe,” “predicts,” “potential,” “continue,” and similar expressions are intended to identify such forward-looking statements. These forward-looking statements involve significant risks and uncertainties that could cause actual results to differ materially from expected results. Factors that could cause actual results to differ include: adverse economic or real estate developments in Silver Bay’s markets; defaults on, early terminations of or non-renewal of leases by residents; difficulties in identifying properties to acquire and completing acquisitions; increased time and/or expense to gain possession and renovate properties; increased vacancy, resident turnover, or turnover costs; Silver Bay’s ability to control or reduce operating expenses, including repairs and maintenance expense and other costs such as real estate taxes, homeowners’ association fees, insurance and other costs outside the Company’s control; Silver Bay’s failure to successfully operate its properties; Silver Bay’s ability to obtain financing arrangements; Silver Bay’s failure to meet the conditions to draw under the revolving credit facility; maintenance or capital improvement costs related to the Portfolio that exceed Silver Bay's assumptions, defaults among residents of the Portfolio that exceed Silver Bay's assumptions, difficulties with successfully integrating the Portfolio into Silver Bay’s existing portfolio; the Company’s ability to hire and retain skilled managerial, investment, financial and operational personnel; the Company’s ability to perform under the covenants of its revolving credit facility and securitization loan; general volatility of the markets in which it participates; interest rates and the market value of Silver Bay’s assets; the impact of changes in governmental regulations, tax law and rates, and similar matters.

Readers are cautioned not to place undue reliance upon any forward-looking statements, which speak only as of the date made. Silver Bay does not undertake or accept any obligation to release publicly any updates or revisions to any forward-looking statement to reflect any change in its expectations or any change in events, conditions or circumstances on which any such statement is based. Additional information concerning these and other risk factors is contained in Silver Bay’s most recent filings with the Securities and Exchange Commission (“SEC”). All subsequent written and oral forward looking statements concerning Silver Bay or matters attributable to Silver Bay or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements above.

Additional Information

Stockholders of Silver Bay, and other interested persons, may find additional information regarding the Company at the SEC's website at www.sec.gov or by directing requests to: Silver Bay Realty Trust Corp., Attn: Investor Relations, 3300 Fernbrook Lane North, Suite 210, Plymouth, MN 55447, telephone (952) 358-4400.

SILVER BAY REALTY TRUST CORP.
DEFINITIONS AND RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
(AMOUNTS IN THOUSANDS EXCEPT SHARE DATA)

Estimated Portfolio and Estimated Net Asset Value

Estimated Portfolio Value and Estimated NAV are non-GAAP financial measures. Silver Bay provides the Estimated Portfolio Value and Estimated NAV and believes such metrics are useful as additional tools for investors seeking to value the Company. These metrics should be considered along with other available information in valuing and assessing Silver Bay, including the Company’s GAAP financial measures or other cash flow or yield metrics and should not be viewed as a substitute for book value, net investments in real estate, equity, net income or cash flows from operations prepared in accordance with GAAP, or as a measure of the Company’s profitability or liquidity.

A description of the Company’s AVM along with certain assumptions and limitations related to its AVM and its calculations of Estimated Portfolio Value and Estimated NAV can be found on the Company’s website at www.silverbayrealtytrustcorp.com in the Investor Relations section under the non-GAAP Reconciliations link.

The following is a reconciliation of the Company’s investments in real estate to Estimated Portfolio Value and book value to Estimated NAV:

Net Operating Income

Net operating income (“NOI”) is a non-GAAP financial measure defined by the Company as total revenue less property operating and maintenance, real estate taxes, homeowners’ association fees, and property management expenses. NOI excludes depreciation and amortization, the former advisory management fees, management internalization, portfolio acquisition expense, general and administrative expenses, share-based compensation, interest expense, net gain on disposition of real estate, ineffectiveness of interest rate cap agreements and other non-comparable items as applicable. Additionally, NOI excludes certain property management add backs, such as the former 5% property management fee payable prior to the management internalization because it more closely represents additional advisory management fee, expensed acquisition fees and costs, and certain other property management costs.

The Company considers NOI to be a meaningful financial measure when considered with the financial statements determined in accordance with GAAP. The Company believes NOI is helpful to investors in understanding the core performance of the Company's real estate operations.

The following is a reconciliation of the Company's NOI to net loss as determined in accordance with GAAP for the three and nine months ended September 30, 2015 and 2014 (amounts in thousands):

NOI should not be considered an alternative to net loss or net cash flows from operating activities, as determined in accordance with GAAP, as indications of Silver Bay’s performance or as measures of liquidity. Although the Company uses this non-GAAP measure for comparability in assessing its performance against other REITs, not all REITs compute this non-GAAP measure in the same manner. Accordingly, there can be no assurance that the Company’s basis for computing this non-GAAP measure is comparable with that of other REITs.

Funds From Operations and Core Funds From Operations

Funds From Operations ("FFO") is a non-GAAP financial measure that the Company believes, when considered with the financial statements determined in accordance with GAAP, is helpful to investors in understanding performance because it captures features particular to real estate performance by recognizing that real estate generally appreciates over time or maintains residual value to a much greater extent than do other depreciable assets. The National Association of Real Estate Investment Trusts ("NAREIT") defines FFO as net income (loss), computed in accordance with GAAP, excluding gains or losses from sales of, and impairment losses recognized with respect to, depreciable property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated on the same basis to determine FFO.

Core Funds From Operations ("Core FFO") is a non-GAAP financial measure that the Company uses as a supplemental measure of performance. The Company believes that Core FFO is further helpful to investors as it provides a more consistent measurement of performance across reporting periods by removing the impact of certain items that are not comparable from period to period. The Company adjusts FFO for expensed acquisition fees and costs, including those associated with the portfolio of properties acquired from The American Home, certain fees and expenses related to the securitization transaction, share-based compensation, write-offs of expenses associated with changes in debt structure, and certain other non-cash or non-comparable costs to arrive at Core FFO.

FFO and Core FFO should not be considered alternatives to net income (loss) or net cash flows from operating activities, as determined in accordance with GAAP, as indications of the Company's performance or as measures of liquidity. These non-GAAP measures are not necessarily indicative of cash available to fund future cash needs. In addition, although the Company uses these non-GAAP measures for comparability in assessing performance against other REITs, not all REITs compute the same non-GAAP measures. Accordingly, there can be no assurance that the Company's basis for computing these non-GAAP measures is comparable with that of other REITs. This is due in part to the differences in capitalization policies used by different companies and the significant effect these capitalization policies have on FFO and Core FFO. Real estate costs which are accounted for as capital improvements are added to the carrying value of the property and depreciated over time, whereas real estate costs that are expenses are accounted for as a current period expense. This impacts FFO and Core FFO because costs that are accounted for as expenses reduce FFO and Core FFO. Conversely, real estate costs associated with assets that are capitalized and then subsequently depreciated are added back to net income to calculate FFO and Core FFO.

FFO and Core FFO are calculated on a gross basis and, as such, do not reflect adjustments for the noncontrolling interests - Operating Partnership. The following table sets forth a reconciliation of the Company's net loss as determined in accordance with GAAP and calculations of FFO and Core FFO for the three and nine months ended September 30, 2015 and 2014. Also presented is information regarding the weighted-average number of shares of the Company's common stock and common units of the Operating Partnership outstanding used for the computation of FFO and Core FFO per share (amounts in thousands, except share and per share amounts):

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